Vishenda's Personal Finance Blog

by: Todd Disraeli

Millions of Americans suffer because of bad credit these days, and almost all of these people turn to the Internet for help. In the past 5 years hundreds of ‘internet-based’ credit repair services have sprung up , preying on consumers in need of real help. Most of these companies have built less than desirable reputations by over-promising and under-delivering; all the while taking millions of dollars from those in need.

For this week’s article I am going to compare ‘internet based’ credit repair services to repairing your credit yourself using a system like Loan Saver PRO: for Consumers; you can learn more about their system here - http://www.loansaverpro.com/index-1.html. Hopefully I will open your eyes to the fact that you can do everything they can do, for far less money, and achieve even better results in far less time.
Cost Comparison
Credit Repair Service – Almost every credit repair company found on the internet charges a set-up fee of at least $60 and an ongoing monthly fee of at least $49. They initially tell you that your credit repair work will probably take around 3 months to complete. In reality, your credit repair work ends up taking close to a year or more and now you’ve paid them at least $600. The goal of most credit repair services is to take their time repairing your credit so they can keep debiting your bank account.

Do-It Yourself Credit Repair – There are several ‘do-it-yourself’ credit repair systems found on the internet. Most of these systems cost no more than $40, which is less than the set-up fees for most credit repair services, plus there is no monthly fee. Some of these products are good and some are bad—whichever one you choose, don’t use a ‘do-it-yourself’ system that uses ’pre-made’ letters to launch disputes; I’ll explain this in more detail below.

Dispute Letters

Credit Repair Service – Almost every ‘internet based’ credit repair service, and some ‘do-it-yourself’ credit repair systems, use ‘pre-made’ attorney letters to dispute information on your credit report. Using these types of letters often raises major red flags at the credit bureau level and may result in your dispute request being denied. How do you know if your dispute has been denied? You’ll know when you receive a ‘Will Not Take Action’ letter from the credit bureaus.

Do-It Yourself Credit Repair – There are two primary ways you can dispute negative items on your credit report. One way is to write several original letters to the credit bureaus, which can take several hours to complete and adds weeks onto the credit repair process.

The second and easiest way to dispute negative items on your credit report, is to launch your disputes online. The credit repair system that I helped develop, Loan Saver PRO, shows you step-by-step how to order the right credit reports (yes, there are some wrong ones), launch effective online disputes, and manage the whole credit repair process.

Results

Credit Repair Service – If it sounds too good to be true, it probably is. To get your scores into the 800’s would take over 10 years of perfect credit, so don’t believe it. ‘Internet based’ credit repair services will also try to tell you where your score will be in 30-60 days and that’s impossible to predict. Also, any credit repair service that promotes pipe dreams of a new car and a new house is not to be trusted; unless of course they plan on loaning you the down payment.

Do-It Yourself Credit Repair – A reputable ‘do-it-yourself’ credit repair system should never promise a certain score. However, I will promise that if you decide to use a reputable ‘do-it-yourself’ credit repair system, and are patient, your scores will increase significantly. On average, I have seen the Loan Saver PRO credit repair system raise scores into the high 600’s and low 700’s. With those scores, you can likely get any loan or credit card you desire, and at the best rates possible.

Again, I hope the above information will help you make a better decision when deciding what to do regarding your credit situation. If you still decide to work with an ‘internet based’ credit repair service, make sure you do your research, and don’t say I didn’t warn you.

Imagination is the key

To be or not to be alone

Your own unique path

courtesy of deviantart

Secured vs. Unsecured Credit Cards
The basic unsecured Credit Cards 101 is that a secured card is linked to a bank deposit that literally "secures" your line of credit. Offers for unsecured credit cards require no such deposit. Your credit limit is tied to the company"s opinion of your credit-worthiness, not a bank account.

Of course, a secured credit card can be a gateway to the world of unsecured credit cards. As long as you have the money to keep in the secured account, you can be the worst credit risk in the world and still get offers for secured credit cards. But if you do well with your secured card over an extended period of time, the credit card company might re-evaluate you, and offer you an unsecured card.

No matter what kind of credit card offer you choose, the key is to do your homework first. By going online and comparing what different companies have to offer, you can truly make the most out of your credit card. Look for a low APR, no annual fee, and whatever perks will most benefit you, and you"ll be amazed by how happy you"ll be with your credit card.

Credit card and Identity theft are a great cause for concern for anyone who has a good credit rating and/ or is working on improving their credit. Often thieves will steal someone’s identity and then

go on to run up a host of bills in that person’s name. By the time a person realizes what has taken place, it is often too late to do much about it. So the real question is how can you fight back against these criminals and keep your good name intact as well as your credit and money.

Recently the right to freeze credit reports and stopping credit from being issued in a person’s name has become available. By locking down your credit, nobody can get your credit file or details to run up credit in your name leaving you to deal with the bill.

Who can freeze their credit?
Almost anyone can initiate a credit freeze. Since 2003, when California allowed its residents to lock down their credit reports, other states have began to follow suit including New Jersey, Louisiana, Nevada, Connecticut, Maine, North Carolina and Colorado. Other states such as Texas, Illinois, Vermont, and Washington will only allow victims of identity theft or those who have fallen victim to a security breach to freeze their credit reports. If your area is not listed here, then by inquiring at any one of the three major credit-reporting agencies you should be able to find out what your state allows.

Anyone can ask the major credit reporting companies to place a fraud alert on a credit report. How this benefits you is that the company is SUPPOSED to alert you when credit is requested and you are asked permission to proceed with the credit. There is one problem with this method and that is creditors are not required to check the alert or even ask your permission.

A credit freeze takes the next step in security enforcement. With a credit freeze nobody can open any type of credit line under your name or even gain access to your credit file. What this means is that your credit details are off limits to everyone even credit lenders, insurance companies and potential employers.
How does a credit freeze work?
Credit freeze is quite simple really, but very effective. What happens is, when credit is requested, for example a credit card, cell phone or even a personal loan, the company that is considering giving the credit will call one of the three credit reporting companies to ask for access to your credit file. If you have already requested a freeze on your file then the credit reporting company will tell the creditor that they don’t have access to the file as it is frozen. You can just about guarantee that no creditor in their right mind will proceed with a line of credit that has a frozen file.

What if I want credit?
If you want credit or you need a background check for a potential employer, it is not a problem at all. What actually happens is that the three major credit reporting companies give you a personal identification number, or a PIN, that allows you to freeze and unfreeze your credit report when you need to.

If a criminal manages to get your name, address, social security number and even your birthday, with the protection of a credit freeze they don’t stand a chance at getting credit, no matter how good they are.

Often when a consumer is up to their ears in debt and toying with the idea of filing for bankruptcy, but either can’t file or doesn't want to, there are other options. Were you aware that the consumer can negotiate with their creditors and end up paying a significantly smaller amount than what is owed?

Depending on many factors, a consumer can negotiate their debt down. Some of the factors include the age of the debt, the date a payment on the debt was last paid and the amount of interest and fees that have been added to the debt owed. Sound interesting? Read on it gets better.

Before going any further it is important to mention that this path is not easy, creditors are often not nice to deal with at the best of times. When you are the object of their attention, you can be inundated with rude and threatening phone calls, nasty letters and many other tasteless tactics used by some companies to get money out of you.

If you can learn to be un-swayed by these tactics and remain calm and level headed through out the whole process, you are well on your way to sorting out your debts and paying much less at the same time. The reason that creditors resort to these sorts of tactics is that it is about all they can do to get the debts paid to them. Medical bills, store cards and credit cards are called unsecured loans. This means that they have no collateral tied to them.
The Problem

When a consumer stops paying their bills, the creditor has a few options. They can try bullying you into paying the debt or they can take you to court and hope that they receive a favorable ruling in order for them to come to your house and remove possessions to cover their bills. The latter is not commonly practiced as the risks of getting an unfavorable verdict from the judge are considerable. Besides that, it is probably hardly worth the trouble since these types of debts are usually considerably smaller than secured loans, such as houses and cars.
Where To Start Your Negotiations

So how much can you offer a debtor and have it accepted? There is no set figure or sum and no guarantee that a company will accept your terms. However, if they have a choice between being paid something or nothing, they are going to choose some of the money any day. A good guide to begin your negotiation is 25% or less for debts that have recently been charged off. Often you can offer much less if the debt is older and the company has added a host of other fees and charges to the debt.

Ok so you are ready to negotiate? Hold on a minute, there are a few more things that you need to arm yourself with before going off to credit battle. Remember the best defense that you can have is to know exactly how your opponent works and what you can and can’t do.


* Never negotiate over the phone, in fact, if a creditor contacts you by phone- hang up. All of your correspondence should be conducted by mail.
* Record everything; keep letters, numbers and dates. Never expect that an agency will remember what was agreed on or keep their word without proof.
* Keep copies of every letter that you send to the credit agency and make sure to use registered mail, or mail that has to be signed for. That way you have proof that the other party has received your correspondence.
* Never seem to be too eager to settle the debt too soon, never accept the first or second settlement offer and above all, never let the agency think that it has the upper hand.

Another useful approach is the good old threat of bankruptcy. While its not as easy as it once was to file bankruptcy.

Tip - Here is an article on the new bankruptcy requirements you must meet in order to file, read it so if you pull this trick, you sound knowledgeable)

If the creditor believes that you are about to file for bankruptcy, they will often be more than willing to settle for anything they can before you file and they loose all hope of ever getting anything out of you. But proceed with caution if you acquire any more debt after telling a creditor this. Then you may not be able to get rid of this debt should you file for bankruptcy.

If the process seems a little difficult for you to handle or you feel that you would be eaten for breakfast by a hungry credit agency, you maybe right. You can either:

A. If you have a trusted family member that is good at negotiating you may ask them for help. Keep in mind, some companies will not speak with them unless you fax them a power of attorney letter stating your friend or family member has the authority to speak for you.

or

B. There are options available for dealing with these agencies. A debt negotiation company can provide you with advice and they can negotiate settlements with the agency for you. The Debt negotiation company will help you set up a savings fund to start collecting money to pay your debts. They can also help shed some light on how to begin living a debt free life.

Acknowledgement:
ezcreditrepairsolutions.com.

by: George A. Parker
In his 1968 seminal novel, 2001: A Space Odyssey, Arthur Clark introduced HAL, a spaceship computer with artificial intelligence. Mission engineers designed HAL to carry out an array of technical orders to safeguard the ship’s mission. HAL operated flawlessly until it reported the failed operation of a ship system that was operating perfectly. Rather than correct the mistake, HAL’s logic dictated that it would be more efficient to kill the ship’s crew. Ever the polite computer, HAL killed quickly and quietly until it was unplugged by the sole remaining crewmember, Dave Bowman.

Many small business owners believe that HAL’s progeny are carrying out HAL’s murderous mission in the small business credit arena. Computers now make important credit decisions for major banks and financing companies. Each day in the U.S., computers with fancy algorithms score thousands of small business credit transactions. Though credit-scoring models work well for most small companies, many believe these systems, like HAL, have run amuck. Routinely, transactions with low scores are turned down and applicants are notified of the decision by computer-generated rejection letters.

By gaining a better understanding of the credit scoring process, you may be able to help your firm maneuver in the new world of credit scoring. Here are some key points about business credit scoring worth noting:

1. Credit scoring automates the credit evaluation process. Credit providers use these systems to speed up loan processing, to cut processing costs, to quickly adjust rates and terms to match credit risks, and to add a high degree of objectivity to credit decisions.

2. Credit scoring is a predictive system based on statistical modeling. Scoring systems are designed to forecast whether borrowers will be successful in repaying loans. Many systems use up to 20 factors to evaluate credit worthiness.

3. Many lenders and leasing companies use credit scoring for business transactions under $100,000. Over 90% of major credit providers use credit-scoring systems on transactions below $ 50,000.

4. A pioneer and leading credit scoring service, Fair Isaac and Company, researched statistical credit modeling in the 1980s. They determined that the personal credit behavior of a company’s key principals/owners is a strong predictor of their business credit behavior. Simply stated, a business owner who pays personal bills on time generally will cause his/her company to pay bills on time.

5. The Fair Isaac scoring model produces business credit scores ranging from 50 to 350. Credit providers usually consider a business credit score above 220 to be a good risk. They consider a score of less than 175 to be a high risk.

6. The overriding factor in business credit scoring is the credit history of the business owners or the key principals. In addition, there are other factors related to the owners’/principals’ personal credit profiles used to score small business transactions

7. Business-related credit factors scored include: the company’s time in business; company size; industry; form of company organization; history of paying bills on time; business net worth; average bank balances; ratio of debt service to cash flow; and recent judgments, bankruptcies or agency collections.

8. Many large lenders, such as Well Fargo Bank and Bank of America, have developed their own predictive business credit models. Several have even fine-tuned the Fair Isaac model to better meet their needs and preferences.

9. If your firm is rejected for credit based on a scoring model, ask the lender to explain the rejection. Some lenders will reconsider if requested, but may require additional credit information.

10. Some lenders have special pools for higher risk credits. They usually charge higher rates and offer terms that are less advantageous than for high-scoring transactions. Others may ask for credit enhancements to grant approval, such as additional collateral or outside guarantees.

11. Here are ten ways to improve business credit scores:

* Improve the credit habits and profiles of the key principals or business owners

* Pay all back taxes

* Settle outstanding liens and judgments

* Pay bills on time and be consistent with payments

* Eliminate supplier disputes by settling with any suppliers or former employees

* Sell or factor accounts receivable to improve cash flow

* Establish your firm’s credit record by registering with the Secretary of State where your business is incorporated

* Try to improve individual and company credit for at least twelve months

* Buy from vendors who report activity to the major credit bureaus

* Set up automatic account debiting with creditors to help eliminate the possibility of paying slow

Credit scoring is not designed to predict individual loan performance with certainty. Rather, these systems do a great job of quantifying risks for groups of borrowers with similar characteristics. A disadvantage of credit scoring systems is that they are easy to misapply. If the lender’s customers don’t share characteristics and behavior patterns with the model’s underlying base group of credits, then reminiscent of HAL, many transactions with great potential may be eliminated.

If your firm doesn’t score well under a scoring model used by a major lender, you may face an uphill battle for credit approval. Some smaller credit providers try to differentiate themselves by not using scoring models. Instead, they actually listen to borrowers, sort out unusual circumstances and use old-fashion human judgment to make credit decisions. One of these lenders might make sense for your firm.