7 Essentials of Building Good Credit

Establishing good credit is a financial necessity. Good credit will allow you to make large purchases, acquire a home loan, rent an apartment, and buy a car. You will also save thousands of dollars with a lower interest because of a high credit score. But where do you begin and how do you maintain good credit? Here are 7 essential ways to build good credit:

1. Establish credit by borrowing money or getting a credit card
2. Limit purchases to what you can pay off each month
3. If you have a balance, make payments on time
4. Avoid too many lines of credit
5. Do not max out your card
6. Check the three major credit bureaus to see if you’re credit is reporting correctly
7. Keep all documents concerning credit in a safe place to avoid identity theft

Establishing Credit

The first place to start building good credit is to obtain a loan or credit card. It seems rudimentary, but some people think by avoiding credit cards they are somehow being financially sound. True, you won’t accumulate debt if you don’t have any form of credit. However, unless you can pay cash for a home, car, or other large purchase, you’re going to need good credit. Even purchases you can afford with cash can be restricted or denied if you don’t have credit, like renting an apartment or certain types of insurance.

Within Your Limits

Now that you have a credit card, do not assume it is simply free money you can use without consequence. You should plan ahead and make sure you have enough money, typically in a savings account, with which to pay off your purchases. You may even earn rewards by buying gas, clothing, or hotel rooms with your credit cards.

Payment History

If you must carry a balance on your credit card, do it wisely. Even a relatively low interest rate for a credit card can still cost you thousands if you accrue a large balance. A $5,000 balance at 18% will cost you approximately $7,000 alone in interest of you only make minimum payments. Nevertheless, making payments on time will reflect well on your credit report.

Lines of Credit

Accumulating too many credit cards will make using them extremely tempting. When you amass debt and your income stays the same, your debt-to-income ratio suffers. Also, lenders look for new lines of credit when you apply for a loan. If you have recently acquired several credit cards, the lender may consider that risky behavior and deny you for the loan.

Maxing out your Credit Card

Another criterion lenders look for is the total debt you have compared to available credit. Maxing out your credit cards shows you not only have more debt but are in danger of overspending; subsequently, resulting in the inability to repay that which you owe or possibly lead to bankruptcy.

Credit Bureaus

Think of your credit report as a car. Your car needs routine check-ups to make sure it’s running properly or you could break down unexpectedly. The same applies to your credit. Allowing even a seemingly trivial mistake or idiosyncrasy to go unexamined on your credit history could cause major problems down the road. The three major credit bureaus you should routinely check are Experian, Equifax, and TransUnion.

Keep Yourself Safe

It is estimated that over the last five years identity theft has cost nearly 27 million consumers over 5 billion dollars. Thus, it is imperative you protect your confidential information from falling into the wrong hands. Trying to prove your innocence and expunge the detrimental effects of identity theft can cost a great deal of time and money. Unfortunately, you are guilty until proven innocent when it comes to credit.


You truly can control your financial future by building good credit and maintaining a good credit score. The benefits will save you thousands and make important purchases available to you. However, if you suffer from exceedingly high debt, you need to seek professional help. Waiting merely another month can cause your plummeting finances to crash. Due diligence and discipline are required to find and implement a successful financial plan, but a debt free life is in reach.

6 Signs You Need Debt Settlement

Credit card debt is not uncommon in America today, but how do you know when your debt is out of control? Here are six warning signs your debt is a major problem.

• You consistently make only minimum payments on your credit cards


• You receive demanding letters and phone calls from creditors


• You have depleted your savings account to pay credit card bills


• You hide your spending from your spouse and familiy


• You have made three or more late payments in the past twelve months


• You consider bankruptcy as a solution to your debt

Minimum payments on Credit Card Debt

Credit card debt can be very misleading since your monthly payment can be very low compared to your overall debt. For instance, the minimum payment for $20,000 of debt is only around $400 per month. This can allow you to make large purchases and only pay a small portion of the debt. However, if you only make minimum payments on your credit card debt, that $20,000 debt will take you more than 30 years to repay. You'll also pay double or triple the borrowed amount in interest charges alone. Only paying the minimum payments on credit card debt will slowly but surely drain you financially.

Demanding letters and Phone Calls from Creditors

Banks and credit card companies often use demanding letters and phone calls to collect late payments and fees. If you are the receiving these threatening letters and phone calls, you are not only in serious debt but your credit score is in jeopardy. Creditors report every missed or late payment you make, and an excessive amount of absent payments is extremely detrimental to your credit rating.

Depleted Savings Account

A savings account is used to build for the future, but you are in financial danger if you constantly tap into your future reserves to pay credit card bills today. A portion of your income should go into some form of savings. A sign you have over stretched your budget is if you have not only stopped saving, but use your current savings just to make minimum payments on credit cards.

Hiding Your Spending

Money is one of the top five reasons people give for divorce. Many people hide their overspending from their partners because they feel embarrassed and want to avoid conflict. Yet, marriage ideally is a partnership, and when one spouse discovers hidden purchases, trust is broken. If you find it necessary to keep spending habits secret from your significant other, you have a dangerous amount of debt.

Late Payments

Your payment history constitutes approximately a third of your credit rating. If you make three or more late payments in a year, your credit rating will significantly suffer. Nevertheless, the cause of late payments gives more rise for concern that the effects. If you are living paycheck to paycheck, unforeseen events can cause you to miss a payment. You cannot overcome debt while incurring late penalties, especially when you're only making the minimum payments on credit card debt.

Considering Bankruptcy

Bankruptcy is a decision that will destroy your credit for seven to 10 years and permanently change your life. Some people make the mistake of filing for bankruptcy without first considering the alternatives. Debt consolidation is a debt-relief method that involves combining your debts and lowering interest rates. Debt settlement is another debt-relief option, but debt settlement actually reduces your overall debt instead of merely combining balances.

If any or all of these warning signs are applicable to your financial situation, you need to act quickly before debt ruins your life. Millions of Americans suffer from the unwanted stress debt produces. The first step in conquering debt is overcoming the fear of letting someone help you. A reputable company with a proven debt-relief method, such as debt settlement, will guide you toward a debt-free life. The choice to become debt-free will be the best financial decision you ever make.

Payday Loan Cap for Military Personnel

The Talent-Nelson amendment to the Defense Authorization Bill, which takes effect October 1, 2007, is a response to reports that predatory payday lenders exploit military personnel. The amendment caps the annual interest rate on payday loans for military personnel at 36 percent; prohibits the use of a personal check to access the borrower's bank account; and forbids the use of a vehicle title as collateral for payday loans.

Payday loans are popular among military families because unexpected deployment, financial inexperience, and costs abroad make cash advances extremely appealing. However, the Pentagon reported that predatory payday lenders were burdening military personnel and comprising military readiness. Some military families have sought debt consolidation and debt settlement as a means to escape financial hardships caused by payday loans.

The amendment could be a precedent used by Congress to legislate and restrict the general practice of payday loans. Borrowers can pay up to 400 percent interest on payday loans due to excessive fees and interest spikes. A national usury cap for predatory payday lending may be on the horizon. For now, military families will be the first affected by such legislation.

Protect Your Home’s Equity

Your greatest investment and largest asset is your home. Why then to millions of home owners fritter away their home’s equity?

Home equity loans are potential financial pitfalls. The foremost danger of these loans to consolidate credit card debt is collateralizing your home. Home ownership can provide security and a stable environment for your family. However, adding unsecured debt to your home jeopardizes its security. Creditors may sue if you fail to repay your credit card debt, but lien holders will take your home if you fail to pay your mortgage.

Dangerous Interest Rates for Home Equity Loans

Teaser interest rates for home equity loans are also extremely dangerous because they dupe home owners into thinking they can afford to refinance their home. When the variable interest rate increases, the home owner is often times already financially stretched and cannot afford the higher monthly payment. If the home owner defaults on their mortgage payments, the lien holders can foreclose on the home. Unfortunately, over 1.2 million homes were foreclosed upon in 2006 and 2007 will most likely top that number.

Home Equity Lines of Credit

Home equity lines of credit (HELOC) are another financial hazard. A home equity line of credit usually works similar to a credit card, only at a lower interest rate. The inherent danger is that ability to fritter away your home’s equity. Even if you pay off your credit cards with the money, you’re only transferring the debt to a longer term debt. The result is you will pay thousands more in interest even with the lower rate because you’re extending the repayment of the debt over 15 to 30 years.

Cash-Out Home Equity Loans

Cash-out home equity loans have become popular in recent years as a quick way for home owners to get cash. A cash-out loan works like this, you owe $100,000 on your current home but you want $15,000 in cash. You can refinance your home for $115,000 and get a check for $15,000. The cash-out loan may offer a lower interest rate but there’s a catch. Typically you pay the bulk of your interest in the beginning of your loan, thus taking another first mortgage on your home means you’ll be paying the initial interest all over again. In the latter years of mortgage payments, the bulk of the payment goes toward the principal and you accumulate more equity in your home. But if you refinance, especially in the latter years of your loan, the majority of your payment will be going toward interest, not equity.

Refinancing your home to alleviate your credit card debt is a poor solution to your problem. Trying to borrow your way out of debt can result in paying thousands of dollars more over a longer period of time. If you struggle with debt and need relief, you need to examine all your options and see which is most beneficial for your situation. Debt settlement may be a viable alternative to home equity loans, debt consolidation. The primary advantage of debt settlement is it can reduce the principal balance of your debt and usually eliminates debt within three years.

Congress Acts Against Credit Card Practices

Congress May Prohibit Unfair Credit Card Practices

Millions of Americans suffer from overwhelming credit card debt and it’s not entirely their fault. Unfair credit card practices have been going unchecked for several years. These practices cost consumers exorbitant amounts of interest, fees, and even interest on fees. However, there is hope that legislation could end the unscrupulous practices of credit card companies.

Senator Carl Levin (D-MI) and Sen. Claire McCaskill (D-MO) introduced the Stop Unfair Practices in Credit Cards Act on May 15, 2007 to counteract the systemic problem of debt in America. The average American credit card holder is estimated to be over $8,500 in debt. This piece of legislation proposes the following 14 actions:

1. No Interest on Debt Paid on Time - Prohibit interest charges on any portion of a credit card debt which the card holder paid on time during a grace period.
2. No Trailing Interest - Prohibit added interest charges on credit card debt which the card holder paid on time and in full.
3. Limits on Penalty Interest - Prohibit interest rate increases on a credit card account unless the card holder agrees to them at the time, and, in any event, limit penalty interest rate hikes to no more than a 7% increase.
4. Apply Interest Rate Increases Only to Future Debt - Require increased interest rates to apply only to future credit card debt, and not to debt incurred prior to the increase.
5. No Interest on Fees - Prohibit the charging of interest on credit card transaction fees, such as late fees and over-the-limit fees.
6. Restrictions on Over-Limit Fees - Prohibit charging repeated over-limit fees for a single instance of exceeding a credit card limit, and allow such fees to be charged only when a card holder’s action, rather than a penalty, causes the limit to be exceeded.
7. Fixed Credit Limits - Require card issuers must offer consumers the option of operating under a fixed credit limit that cannot be exceeded.
8. No Pay-to-Pay Fees - Prohibit charging a fee to allow a credit card holder to make a payment on a credit card debt, whether payment is by mail, telephone, electronic transfer, or otherwise.
9. Reasonable Currency Exchange Fees - Require currency exchange fees to reasonably reflect the credit card issuer’s actual costs.
10. Prompt and Fair Crediting of Card Holder Payments - Require payments to be applied first to the credit card balance with the highest rate of interest, and to minimize finance charges. Prohibit late fees if the card issuer’s actions caused the delay in crediting the payments.
11. Prime Rate Reference - Require interest rates linked to a “prime rate” to use the prime rate published by the Federal Reserve Board.
12. Annual Audit - Require the credit card issuer’s primary regulator to perform annual audits to ensure compliance with credit card requirements and prohibitions.
13. Improved Data Collection - Improve existing data collection efforts related to credit card interest rates, fees, and profits.
14. Transition Period - Allow credit card issuers six months to implement the bill’s provisions.

The Stop Unfair Practices in Credit Cards Act is aimed at preventing credit card companies from using abusive practices that keep American consumers in debt. Yet the bill will, ultimately, not alleviate consumers’ current debt. If you need help reducing the principal balance on your credit cards, consider debt-relief options such as debt settlement or debt consolidation.

14 Ways to Save Money Year Round

Your home is your greatest investment and also your largest expense. The average family spends $1,400 a year on energy bills and nearly half that is spent on simply heating and cooling their home. These helpful suggestions can save you money and make those mortgage payments a little more bearable.

During summer months

• Set your thermostat to around 80 degrees and make sure you raise the temperature at least four degrees when you leave for a few hours or more. However, you don’t want to raise the temperature too high because it will cost more to re-cool your home.


• Open your windows and use portable fans to help cool your home.


• Remove lamps, TV’s, and appliances from near your thermostat because they produce heat that will make your air conditioning unit run longer.


• Make sure your attic is well ventilated and isn’t unnecessarily trapping heat.


• Shade your windows with white drapes, curtains, blinds, or install awnings.


• Plant trees and shrubbery around your house since they can greatly reduce the amount of heat your home absorbs.


• Use energy efficient light bulbs such as fluorescent light bulbs
• 
  

During winter months

• Make sure there are no cracks around your windows and doors shut snuggly.


• Make sure if you replace old heating equipment you don’t go too big, you’ll end up paying much more in energy costs.


• Check to see if your air ducts have any holes or leaks, especially check the duct leading outside. You also want to make sure no vents are obstructed.


• Check with your local utility provider and see if there are any rebates or specials on heating equipment.


• If your heating unit is more than 10 years old, you may want a professional inspection to see if it needs to be replaced. An individual contractor should be able to give the most unbiased opinion, since they’re not trying to sell something.


• Set your thermostat to a lower setting, 68 is efficient and still comfortable. As in the summer, you’ll want to make sure you lower the temperature when you leave but not drastically.


• Make sure your walls are properly insulated. You can also insulate wall outlets to completely insulate your home from the elements. Try asking a professional at Home Depot or Lowes to see what might work best in your home.

If you are spending more on your biggest expense than necessary, it may be costing you thousands. You can prevent needlessly frittering away your hard earned money by doing just a few simple things around the house. For more money saving tips, click here.