September 29th, 2008 — Goal, Money, Personal Finance, bad debt, credit score
In our last post, we covered how to begin the process of restoring your FICO score, as well as how changes can affect this score. Now that you are ready to begin, there are a few steps that you will need to take. Many of these steps require diligence on your part and a little hard work. However, they can result not only in a higher FICO score, but also lower interest rates on loans, and a higher chance of getting approved for loans in the future. It is definitely worth the effort, since higher FICO scores can actually help you save money over the long term. So, let’s get started.
Since collections have one of the biggest impacts on a FICO score, let’s start there. If you do have any current collections on your credit report, you will need to work to get those removed. Before you open your checkbook, there are a few options that you should consider. First, remember that collection agencies purchase bad debt from original lenders at a fraction of the cost. This means that any money they receive is pure profit.
This also means that are usually willing to work out a settlement with you. This may not always be the case, but it is definitely worth a try. The first step to take is to send out what is called a Pay for Delete letter, or PFD. This is basically telling the collection agency that you will pay the debt, but only if they agree, in writing, to delete the record from your credit report. Do not take any further action on the matter until they have agreed to this in writing. Send your PFD letter certified so that you have a record of when it was received.
If you do not believe that the debt from the collection agency is legitimate, you can send them what is called a Debt Verification letter. This is a request that will ask the collection agency to provide you with proof that you did indeed open the account and that you are responsible for it. The more detailed questions you ask in your debt verification letter, the higher your chances are of having them remove the debt since it will require a good deal of legwork on their part.
A DV letter will give the collection agency 30 days to respond to your inquiry. Again, you will need to send this letter certified so that you have proof of when the collections agency received it. They will have thirty days to respond from the date that they got your letter. If after that time period has elapsed, you have not heard back (you will need to wait around a total of 45 days from the day you mail your letter to allow time for the mail) you can contact the credit reporting bureaus to have them remove the entry from your report.
There are also a few other ways that you can restore your FICO score, which we will cover in final part of this post.
Photo Credits: 1
Related Articles
Related Stores
September 25th, 2008 — Goal, Money, Personal Finance, credit score
While obsessing over a FICO score is not a good idea, this is a number that will have a lot of bearing in your life. This number determines whether or not you will be able to get a house, a new credit card, or in many cases, whether or not you will be able to rent an apartment. Lenders and businesses are relying on FICO scores more than ever, and it is have never been more important to make sure that your score is where it should be.
If you are just starting to build up your credit history, this is the perfect opportunity to watch your score and see how different variable affect it. Over time, with proper management, you have the ability to get your FICO score up over 800, but it will take some work. If you have already made some mistakes and your score is under 600, don’t despair. There are plenty of ways that you can restore your FICO score.
First, you need to know just how bad it is. You may even want to consider purchasing a subscription that will allow you to monitor your score over time. This helps you see what is happening with your credit and can provide you with advance notice if something is going wrong with your credit. We highly recommend monitoring your score, especially if you are getting ready to buy a house.
Once you have an idea of the number you are working with, it is easier to begin the process of restoring your FICO score. The average American has a score that is around 680, which is considered satisfactory. A score over 720 is considered good, and above 775 is considered excellent. However, scores under 620 are considered to be very bad and it can be difficult to get a loan.
The higher your score is, the less impact small good changes will have on it. For example, if you are already at 750 and keep making monthly payments, without opening any new cards, you probably won’t see much change. However, bad changes can have a very big impact on your score. For example, a collection can drop your score by as much as 20%, or a late payment may cause it to nosedive.
It is a lot easier to see more changes when you are working with a lower score, especially when you are rebuilding your credit. If it is in the low 500s, or even lower than that, making little changes can actually give your score a nice bounce. If you do decide to use a credit score monitoring service, these bounces are a great motivator to keep up the good work.
Now that you know what you are dealing with in terms of your credit score, it is time to work on putting together a plan that will help you restore it. Our next post will cover specific steps that you can take to get on the road towards a perfect score.
One resource you should be sure to check out is the blog at Credit Karma. At Credit Karma, not only can you get a free credit score and offers from partners with a pro-consumer vision, but also find extremely relevant information about your credit score or credit cards such as: Relationship Between Age and Credit Scores, How Often Does Your Credit Score Change?, or How A Credit Card Limit Is Determined.
Photo Credits: 1
Related Articles
Related Stores
September 18th, 2008 — Debt, Personal Finance, bad debt, credit score
Whether you’ve lost your home or your job, or your money management skills over the years have left you severely in the hole, it is never to early to start turning things around. You can bounce back from financial trauma, but it will take some effort and dedication on your part. Here are some tips to get you back on the road to financial stability.
First, you’ll need to pull your credit report and see just how bad things are. This will help you get an idea of which creditors to handle first and will help you spot any potential errors. Remember, many creditors are willing to work out not only payment plans, but they may be willing to reduce your overall debt in exchange for a partial payment. It does not hurt to ask, and the worst thing they can tell you is no.
If your credit rating has already suffered, don’t despair. Assuming you have taken care of any collections and creditors, it is time to start rebuilding your credit. You can start by getting a secured credit card. This will require a small deposit of cash on your part, but this will go a long way towards building your credit history back up and repairing the damage that has been done. If you are facing creditors, make sure that you read the Fair Debt Collections Protection Act for consumers and know your rights.
The key is to learn from your mistakes. Once you have your secured card, remember that it is not free money. Instead of charging up to the full balance, use your card once a month for something inexpensive. Pay off the entire balance every single month, or at the very least, pay more than the minimum balance before the due date.
This will help establish a good payment history and this will factor in to how your lenders see you. Once you have been making payments on this card for six months, you should be able to apply for a “bad credit” or high risk credit card. Again, keep those balances low and use it only to show that you can be trusted to make your payments on time every month.
Next, you will need to start putting money aside. An emergency fund is essential and can help prevent another financial trauma from occurring. Aim towards putting three months of your salary away into your fund, or at least try to put a good sized portion in. Building up a savings account over time, even with small deposits, will pay off over the long term.
Now, it’s vital to take a look at why your initial financial trauma occurred. Was it due to circumstances beyond your control or are you to blame? By taking a hard look at the way you spend and how you view your money, you can help prevent any future financial traumas from occurring. After you are back on your feet, you can learn from these mistakes and start fresh.
Photo Credits: 1
Related Articles
Related Stores
July 10th, 2008 — Income Streams, Money, P2P Lending, Personal Finance, passive income
In the past, creating multiple streams of income required a lot of footwork and there were few passive stream opportunities available. However, thanks to the Internet, it has never been easier to create multiple streams of income online and many are passive! Let’s go into a few ideas that you can use to start your own income streams right now.
1. Blogging –
This is far from passive, but if you’ve got something to say, you can make money at it. It has never been easier to create a solid stream of income that can bring in a few hundred dollars a month or even more. Programs like Google AdSense can easily bring in that much and you never have to lift a finger (other than writing and networking like a madman). While there will be some expense involved, especially for marketing your new blog, it is minimal and much less than you would pay for other opportunities.
And why stop at one blog? If you’ve got a lot of interests, you’re just full of untapped potential. Start a blog for each one and take the time to build up your audience. You can easily turn than few hundred dollars into a few thousand dollars a month. For some people, that may be more than they make at their full time jobs.
Your opportunities don’t stop with advertising. You can join affiliate programs, set up your own products or keep branching out. The sky really is the limit when it comes to this type of income stream; however, passive it is not.
2. Peer to Peer Lending –
This is an interesting and potentially great way to make money online. Depending on your particular lending strategy it can even be fairly passive. There are numerous peer to peer lending sites that are seeking lenders and investors. You don’t need to be a bank – all you need is some cash and the stomach to take a little risk. Be sure to follow my tips at Making extra money with peer-to-peer lending.
3. Informational Products -
If you’ve got an idea or expertise in an area that is popular, write an ebook and start selling it online. You’ll never really have to do much work after it’s written and marketing costs are usually quite low. Your book will just keep bringing in money month after month. What is more – you’ll be building up an audience for future books to make even more money.
If you don’t want to write your own, there are numerous pre-written ebooks on every subject under the sun. You can purchase the resale rights and start making money right away. This is perfect if you want a nice little stream of passive supplemental income. Just remember to keep offering new books so that your market doesn’t stagnate.
4. Bonus Tip -
Combine tips 1 and 3… By adding an eBook to your blog you can potentially super charge your readership growth. Here are 2 examples of blogs trying to do just that… SF Boater with the free eBook Fishing in California, and Handyman Fix Home Repair with the free eBook The DIY Handbook.
These are just four ideas that can start bringing in income right now. There are countless others that are just as easy to implement. If you want to start making more money, the web is the first place to start.
Photo Credits: 1
Related Articles
Related Stores
June 25th, 2008 — Banking, Income Streams, Investing, Money, P2P Lending, Personal Finance, credit score
Peer to Peer lending is quickly becoming one of the hottest new ways to create multiple streams of income. While there is risk involved, there are various methods that can reduce the risks that individual investors face and provide protection against non-payments. If you’re looking for an potential way to make extra cash every month, P2P lending is definitely worth consideration.
If you’re not familiar with how P2P lending works, it’s actually quite simple. Instead of going to a traditional bank for a loan, a person will visit one of the many P2P sites that are in existence right now (Prosper for all loans and Fynanz for student loans are the only one for p2p lenders at the exact moment but Lending Club may reopen soon and Loanio has been in beta for some time…). They’ll post their loan request and the lenders in that P2P community can go over it. Sites will run the credit rating of posters to determine how risky they are, be careful of borrowers with bad credit or even good, but unusual credit. You are looking for very clean borrowers with 5 years of credit history, no public records, 0-2 inquires in the last 6 months, for reasonable loans amounts, with a story that makes financial sense.
After the loan opportunity has been posted, lenders or investors will browse through and see if they want to take that risk. Most of the current P2P sites allow sharing of loans so that the risk is spread around. For example, if someone needs a $9000 loan, instead of one lender offering the whole amount, thirty lenders may each provide $300. The interest rate payments will be equally divided among those lenders based on much of the loan they purchase. As with everything make sure you diversify, ideally you would want AT LEAST 30-50 separate loans.
The claimed returns on the Prosper Select Index as of May 2008 was 7.87%. There is a bunch of fine print that goes along with that number which is why it is essential to diversify and stick to very clean loans. While possible I wouldn’t trust anyone that claimed it was easy to earn out sized returns (15+%) on these marketplaces. Still, 7% is better than most savings accounts, especially since the rates are currently dropping. While it is a bit more risky than a certificate of deposit, it’s a lot nicer to earn two to four times the amount of interest on your investment.
When you’re shopping around for a P2P community it is important to find one that will provide you with the tools that you need to succeed. For example, they need to have a system in place for debt collections if someone defaults on a loan and they need to be able to provide you with an accurate assessment of the risks involved in making that loan. Currently the sites will not allow loan requests from those with credit ratings lower than 540 on Prosper, which can greatly reduce your amount of total risk, but even then you should stick to the higher credit grades (AA-C). Once you get 12 months of experience you might consider expanding beyond that range… personally I am not.
While there is no magic bullet when it comes to easily making money with P2P lending; however, you can easily make a nice little return on a small investment and you’ll have the benefit of being able to create multiple streams of income. If you’ve only got a small amount to invest and you don’t want to tie it up in a CD, consider giving P2P lending a try.
Keep in mind that any venture has its risks, but the benefits of P2P lending might outweigh them. By picking the right kinds of loans, you can reduce your own risks and manage your investments. Start out small and as you start to get larger returns you can invest more money. Overall, P2P lending is fun and lucrative, when managed properly.
I have read that P2P lending is addictive because it is like financial voyeurism. Funny, but true analogy.
Photo Credits: 1
Related Articles
Related Stores
