If you have a lot of debt, especially unsecured credit card debt, it may seem like a good idea to consolidate all of those little loans into one big loan – and indeed, doing so can save you time and money. Be careful, though, because different debt consolidation plans can either help or hurt your credit. Choose a plan that will get you out of debt as quickly and easily as possible while protecting your credit profile as much as possible:

Consolidating debt with a debt consolidation loan

Debt consolidation loans are the most popular way to consolidate and pay off debt. Rolling all of your loans into one larger, consolidated loan (preferably with better terms and interest rate) can actually save you money by reducing what you pay toward those debts.

Be careful, though, because it’s not always easy to find a debt consolidation loan with good terms, especially if your credit history has taken a hit because of recent financial difficulties, and/or because you’re carrying a lot of financial debt.

There are options if you have difficulty getting these loans through traditional lenders, such as peer-to-peer lenders like Prosper.com and LendingClub.com. You can also check with your credit union or bank, or search for an online lender that offers consolidation loans at reasonable terms. Make sure you do your homework before you sign up, though; there are lots of scammers out there, so make sure you double and triple check the organization’s reputation before you take the plunge.

How does this affect your credit?

Using a debt consolidation loan to combine and then pay off your debt can actually help your credit, since taking one out may let you pay off credit cards that are near their credit limits. Used wisely, this is a great way to manage your debt and maintain or even improve your credit rating.

Consolidating debt with a formal debt management plan

The so-called “debt management plan” or DMP is offered through credit counseling agencies; with this type of plan, you sign up as a client with the credit counseling agency, make one payment to that agency, and then the agency makes payments to each of your creditors, usually in exchange for reduced interest and lower payments. Again, make sure the agency you are dealing with is reputable.

How does this affect your credit?

Unfortunately, your credit will take a hit because you must close all of your credit accounts while you’re working with one of these programs. But it’s also true that FICO doesn’t care that your debt is getting paid off with the help of the counseling program, just that it is. What that means is that yes, your credit will probably take a short-term hit simply because you have to close all of your accounts while you’re with the programs; the effect is relatively short-term and will ultimately improve your credit if doing so lets you pay off your debt, though.

Consolidating debt by transferring to a lower rate credit card

You can consolidate credit card debt by transferring it from higher interest credit cards to a lower interest rate credit card; this can indeed help you pay off your debt sooner because your interest rate and monthly payment will be lower. However, be careful to be very disciplined. Don’t simply transfer the debt to the lower interest card, only to have interest rates jump after the introductory period so that you’re back in the same bind as you were before the transfer. Pay off the debt before the interest rates jump.

How does this affect your credit?

In general, your credit scores will drop when you open up a new credit card account and use the available balance on a credit card to consolidate debt. However, it’s a relatively short-term drop and probably worth it if you’re disciplined enough to pay off that debt before your interest rate takes a jump. It’s worth it to take a small hit if doing the transfer means that you can pay your debt off and save money at the same time. In the long run, you’ll actually improve your credit scores over time if you do so.

The author who contributed this article is Chase Sagum, Financial and Business blogger. Check out more of his content at www.lexingtonlaw.com.

Share to Explore !!

Facebook

Digg

Pinterest

Twitter

Reddit

Linkedin

StumbleUpon

Tumblr

Print

email

Yummly

Buffer

Whether you are just out of college trying to buy your first home or you are refinancing after your children have grown and moved out, you should have a copy of your credit score. Knowing your score puts you ahead of the creditors. Knowing that your report is free of errors and that anything negative has been disputed, gives you peace of mind.

When shopping for a credit report it can be overwhelming. Commercials will advertise free reports. However, once you log on to obtain your report there is a catch. Do not let the business of credit reports get you. You can get a free credit report. In fact, you are entitled to one.

Fair Credit Reporting Act

The Federal Trade Commission has a mandate known as the Free Credit Reporting Act. In this act you are entitled to a free credit report once a year from the big three credit companies: Equifax, Experian and TransUnion. The FCRA mentions that you should only request your credit report through annualcreditreport.com.

Common Requested Information

When filing for a free credit report one worry can be that you will have to give out personal information. With all the stories about identity theft this is a tough issue. Under the FCRA you will have to give your name, address, social security number and date of birth. You do not have to give a credit card number. If a site asks you for a credit card number, be aware that this is a red flag for a scam.

Many sites will say that they are issuing a free credit report when you sign up for a free trial service. However, they will ask for your credit card number at the time you sign up. If you opt for this service make sure that you read the fine print and cancel the trial before the deadline or you may get charged.

Another Option for a Free Report

Under the FCRA if you are denied a loan or application of some kind, you are entitled to ask for a copy of your report within 60 days of said action. You should receive an Adverse Action Notice which will state that you were denied credit, the reasons why and that you are entitled to a free credit report.

If you were approved for a loan, but your credit score affected the rate at which your loan was given in a negative way, as compared to other consumers, you will receive a Risk-Based Pricing Notice. If you do receive this you will find information about your score and what factors contributed to the negative risk that is associated with you as a client. Additionally, you will receive information on how to obtain a free credit report.

Some companies will send out a Credit Disclosure Notice, which will give you information about your credit score and how it was used in the approval process of your credit application.

Knowing Credit Score Factors

Your credit may change every day. Some of the items that affect your credit score are:

• How often you move
• How often you r payments are on time or late
• How often creditors or banks pull your credit report
• Whether you have disputed items

With these factors in mind it is important to know your score when you are looking for a loan or applying for a job. CreditKarma.com is a website that provides your score free. This site bases the score off of your TransUnion credit report. They will not charge for this service and you can keep an eye on your score.

What About the FICO Score?

There is one other score that may be looked at when you apply for credit or a mortgage, which is the FICO score. This score was once the do all to end all score. This is no longer the case. The FICO score is actually one of many scores that a company may or may not look at. It appears as if companies are now looking at your VantageScore, your credit report and other factors they determine in house.

When struggling with credit issues, know that you are entitled to a free credit report.

The author who contributed this article is Chase Sagum, Financial and Business blogger. Check out more of his content at www.lexingtonlaw.com.

Share to Explore !!

Facebook

Digg

Pinterest

Twitter

Reddit

Linkedin

StumbleUpon

Tumblr

Print

email

Yummly

Buffer

There are many questions that you are assuredly going to be confronted with when applying for a credit card. These questions are important to answer, and answer honestly because of the credit card companies need for accurate information. The information that you provide will help them to determine what credit card is right for you and what financial offerings they can provide you through their institution. Lying about this information is not only problematic but also fraudulent. Whether you are applying for credit through a large institution, such as would be the case if you were applying for a Lloyds TSB or Barclays credit card for example, or are just looking for more data for a future application, the following is some of the common information that you will most likely be asked during this process.

Income

Though personal, a credit card will assuredly be asking you what your income level is. They will want to know what your annual take home is and may want to know what the monthly is as well. This information is important to a credit card company for many different reasons. First, it will help to determine how much financing and credit they can provide you with. They do not want you to be at risk of being unable to pay so knowing how much disposable income you have can allow them to provide you with an appropriate amount of financing. They will also want to know what income bracket you fall within to better help determine the type of credit card that is right for you. An individual with a high level of income may be eligible for a bonus or rewards card, while those with less monthly income or annual revenue may not. This serves as a protection to both the credit account holder and the lending institution.

History

Before issuing a line of credit to an individual, the financial history of that individual will be assessed. This is done by doing a credit report. The individual applying will have to provide information on application that agrees to this assessment. If not, they may not be able to move forward in the application process. A bank or credit card company wants to know that their risks are worth it. If an individual does not have an established credit history or has one that is highly flawed, this can reduce the chances of them issuing a card. If the individual has a stellar report, they may be more inclined to accept the application and even to increase the amount of credit that is issued. Either way, it will be unlikely when applying for a credit card that you will be able to move forward without answering questions regarding your credit history.

Employment

Another way in which a bank or financial institution will seek information on an application for a credit card is to ask for your employment history. This is important because it shows whether an applicant has a consistent source of annual income as well as how stable their career is. This section may or may not be included on the main application, but you should be prepared to answer it just in case.

Laura was getting ready to apply for a Lloyds TSB credit card. To prepare, she wanted to gather all the information that she may have needed before beginning the process.  Then she created the above list to help others.

Share to Explore !!

Facebook

Digg

Pinterest

Twitter

Reddit

Linkedin

StumbleUpon

Tumblr

Print

email

Yummly

Buffer

Do you feel like your drowning in debt? If you answered yes, one of the most effective ways to get to the root of the problem is seek the guidance of a debt counselor. It is very difficult to look at your spending with an open mind when you are trying to take control of the spending and the debt without an unbiased professional’s help. The first step identifying where the problem lies is to schedule a debt consultation. During your appointment, an experienced debt counselor will help you come up with a plan to tackle your debt, but you must be prepared if you want the appointment to go right.

How to Prepare for Your Upcoming Debt Consultation

When you are being counseled about your debt, the counselor will give you personalized advice that is tailored to help guide you out of your current situation. To give you advice, the counselor needs to know exactly how much pay you take home, how much all of your living expenses cost, and how much you owe all of your creditors. Only you know who you owe money to and how serious your situation has become. While it is only natural to try and downplay the situation in your own mind, you should never try and downplay your debt to your counselor. Here are some things you can do to prepare for your consultation so that you have everything you need to come up with a feasible debt reduction plan:

• Do not accept any new credit card offers or loans. The key is to stop digging yourself into debt, and taking out new lines of credit will not help the situation.

• Gather documentation that the counselor will need to review your current situation. These documents may include: billing statements, past due invoices, recent receipts, judgments, all letters from your creditors, titles to your cars, property deeds, and credit card statements. If you do not have any of these on hand, access your accounts online and print the account summary page.

• If you love to make work easier for everyone involved, make a list of all of the credit cards you have. In the spreadsheet, you can put the current account balance and credit limit. This will help your counselor see which cards need to be tackled first to repair your credit.

• Bring pay stubs from the last two pay periods. If your income varies, try bringing at least three months worth of cancelled checks. This will help the counselor assess how much you are taking home and what percentage of your income can be used to payoff debt.

Debt counselors can help you choose the best debt relief option for your situation. What is right for one person may not be right for the next. Bring everything that you need to help your counselor assess your situation. With all of the right documentation and the right mindset, you can pay your debt down and put your mind at ease.

This post was provided by Heather Graham, a personal finance expert. He recommends the consumers proposal process for those facing dept problems. André Gabbay et Associés Inc. can help with debt consulations.

Share to Explore !!

Facebook

Digg

Pinterest

Twitter

Reddit

Linkedin

StumbleUpon

Tumblr

Print

email

Yummly

Buffer

The economy over the past few years hit millions of consumers hard and as a result, many are trying to fix the damage that was done to their credit reports. Without a good credit score, it can be nearly impossible to rent an apartment, get a checking account or even find a job.

Before you agree to work with any credit repair agency, there are five facts that you need to know.

Do Your Research on Credit Repair Firms

Be wary of any credit repair company that solicits you, whether it’s through email, direct mail or by phone. This is a multi-million dollar industry and unfortunately, you can’t automatically give a company your trust simply because they sound legit.

It is vital to do your own research on a credit repair firm before proceeding. First and foremost, you should never have to pay for this service until the promised work has been done. Avoid any company that requires you to make an upfront payment in order to “fix” your credit. Even if they claim they will be incurring expenses on your behalf in order to contact your bill collectors and the credit bureaus, you don’t have to pay anything before they do the work. In fact, the Credit Repair Organization Act has made it illegal for these companies to charge you in advance.

Another red flag to look for is a credit repair company that encourages you not to contact the three main credit bureaus, Experian, Equifax and Transunion. Under the Fair Credit Reporting Act, you, the consumer, have every right to contact the bureaus and dispute any information that may be invalid.

Understand Your Rights

Before you work with a credit repair agency, it is vital to fully understand your rights as a consumer. The Fair Credit Reporting Act and the Credit Repair Organization Act both contain information that you need to know in order to protect yourself, both from debt collectors and from shady credit repair companies.

The CROA states that credit repair agencies must provide you, in writing, your legal rights and how they will go about repairing your credit, the amount of time they estimate it will take to accomplish this, and how much you will have to pay to complete the work. Any guarantees they make must be made in writing.

Promises They Can’t Keep

If a credit repair agency tells you that they can remove all of the negative information from your credit report, this tells you that they are not being honest with you. Only negative information on your report that is invalid can be removed. Even if you pay off your debt, the entry will remain on your credit report for a period of up to 10 years.

The dispute process provided by the three main credit bureaus is designed to ensure that all of the information on your credit report is accurate, whether or not it is positive or negative to you. You cannot dispute a debt that is legally yours and have it removed from your credit report. If this was true, no one would have any negative entries on their credit reports.

Creating a “New” Identity

Another common “promise” you may run into with some credit repair agencies is that you can create an entirely new credit identity and you won’t have to worry about your past mistakes. This is completely false and fraudulent and you may end up facing prosecution as a result of this tactic.

If a credit repair agency urges you to apply for an Employer Identification Number (EIN) or encourages you to falsely claim identity theft in order to get a new social security number, this is your best indication that you are dealing with a scam artist. Unfortunately, many consumers find this out the hard way, after they are already in legal problems due to lying on loan applications or misrepresenting their social security number.

Understand Your Options

Don’t get disheartened. Just because there are a lot of wolves in sheep’s clothing doesn’t mean that all credit repair options are bad. There are reputable credit counselors out there who can assist you in legally repairing your credit and getting your life back on track.

The author who contributed this article is Chase Sagum, Financial and Business blogger. Check out more of his content at www.lexingtonlaw.com.

Share to Explore !!

Facebook

Digg

Pinterest

Twitter

Reddit

Linkedin

StumbleUpon

Tumblr

Print

email

Yummly

Buffer