In previous posts I have talked about how to avoid bankruptcy(BK) and foreclosure (FC), however, life happens and some times there are no other options than BK or FC. If you find yourself in this situation, you are probably wondering how to re-build, re-establish, and get back on your feet.
The first step is to reflect on the past, and determine what was the cause of your financial problems and learn from your mistakes. While it may have been an unforeseen event such as job loss or family/personal emergency, was there any thing you could have done different to avoid BK or FC? I'm not talking about preventing the event itself, but did you have adequate savings that you could have used to pay your bills while you were trying to find a new job? Learn from the past, otherwise, you are doomed to repeat history.
The next step is to PLAN your financial future. There is no better time to develop a personal financial plan then when you have reached rock bottom. Create a budget for yourself and determine how much you can save on a monthly basis. Savings is the key, you must find a way to save at least a little every month. As with all plans, make sure you set dates to evaluate your plan and chart your progress. You will find that you need to make changes to your plan frequently in the beginning, I would suggest you do this every month or every other month for the first year and every 3-6 months after the first year.
Once you have a financial plan, now you need to work on re-building your credit...pull out the Advil and let's have some fun. First a quick piece of advice, if you are filing BK exclude at least 1 item from bankruptcy, this will help you re-build your credit quicker. If you have eliminated all of your debt through BK or all of your debt is currently is delinquent you will need to obtain new credit lines, in order to re-establish your credit.
There are a few ways you can do this, the first is by applying for new credit (credit cards, auto loans, pre-paid credit cards). When applying for new credit make sure the new credit will report to the credit bureaus, otherwise, it will not help you. Once you have new credit lines, make sure you keep your balances low on credit cards and that you make your payments on time. Another option, which will improve your credit quicker, is to become a co-signor or joint owner on a family or friend's credit card. Obviously, you want to be sure this person has perfect payment history and a low balance. This option will improve your credit quicker because it will report on your credit that you have had this account since the credit line was opened, providing you with a great credit history.
Next you will want to obtain a copy of your credit report, I would wait 2-3 months from the discharge of the BK or the completion of the FC. Many times, you will find that there are a lot of errors on your credit report. Items that were included in the BK are still reporting as open and/or your mortgage showing as active loan even though the FC is completed. You will need to dispute all of these items with the three credit bureaus. I would suggest you consult with a professional that is knowledgeable in credit repair (they will typically charge about $450) or contact us and we can provide guidance for free. It can take up to a year to clear your credit, but it is worth every penny and minute.
All of these steps are necessary to re-establish yourself and your credit, if you choose to only focus on 2 or 3 of these areas you will the road to recovery a challenging obstacle and you most likely will not be successful. If you have and questions or need a little help please feel free to contact us and we will be happy to assist you.
Prosperity Financial, LLC
Lafayette, CO
http://www.colomortgages.com/
http://www.myprosperityfinancial.com/
Your Mortgage Manger
Purchase - Refinance - Cash-Out - Debt Consolidation - Home Equity - Great Rates
Showing posts with label credit. Show all posts
Showing posts with label credit. Show all posts
Monday, December 17, 2007
Friday, December 7, 2007
How Much do you Know About Your Credit Cards
Every one I know has at least one credit and most people have multiple credit cards. Even though, we know we should only use them if we have the ability to pay them off quickly or in case of emergency, we find ourselves swiping the card for purchases that are not necessary and often for items that we can't afford. Why do we do this? How have credit cards become such a large part of American society? The ability to purchase an item now and paying for it later costs Americans billions of dollars. How much are you credit cards costing you???
On average Americans have over six credit cards with an average balance of $2,500 on EACH card, over $17,000 in credit card debt!!! In total Americans have over $9 BILLION in credit card debt!!!
If you make the minimum payment on a credit card with $2,500 it will take you over 20 YEARS TO PAY IT OFF!!! With a total cost of OVER $5,800!!! You borrowed $2,500 and you paid $5,865.51, and if you are the average person and have 6 credit cards you will pay $35,193 to pay off your credit card balances of $17,500...how does this make sense??? Would you be willing to pay $93.84 for a pair jeans, when the store is selling the same jeans for $40.00? No? This is exactly what you are doing when you purchase an item using your credit card and can't pay off the balance quickly. So next time when you think of purchasing an item (and you can't afford it), before pulling out the credit card, ask your self if you are willing to pay more than double for that item.
What about the transfer game? I know a lot of people that think they have the credit card companies fooled, they transfer their balances to a low or no interest card to save money. However, this is what credit card companies want you you to do. They know most consumers don't read the small print and/or review their statements closely every month. Did you know, most of these offers require to use you card at least once a month (and the new purchases have a different, higher interest rate) just to keep the promotional rate? Or if you are even one day late they will charge you a much higher rate on your balance (18%-30%).
Even if you are able to maintain your great rate, you can still fall in to the credit card companies trap. Typically, they will lower your minimum payment to entice you to make a lower payment during your promotional period, therefore, paying off less of your balance. In addition to paying off less of your balance, the credit card companies know that a majority of us will use our credit cards more now that our monthly payments are lower, raising our balance and making them more money in the long term.
Like Vegas, the house always win, so don't play with your credit cards unless you can pay off the balance at the end of the month or it's emergency and you don't have any other options.
Prosperity Financial, LLC
Lafayette, CO
http://www.myprosperityfinancial.com/
http://www.colomortgages.com/
Your Mortgage Manager
Purchase - Refinance - Debt Consolidation - Cash Out - Home Equity - Great Rates
On average Americans have over six credit cards with an average balance of $2,500 on EACH card, over $17,000 in credit card debt!!! In total Americans have over $9 BILLION in credit card debt!!!
If you make the minimum payment on a credit card with $2,500 it will take you over 20 YEARS TO PAY IT OFF!!! With a total cost of OVER $5,800!!! You borrowed $2,500 and you paid $5,865.51, and if you are the average person and have 6 credit cards you will pay $35,193 to pay off your credit card balances of $17,500...how does this make sense??? Would you be willing to pay $93.84 for a pair jeans, when the store is selling the same jeans for $40.00? No? This is exactly what you are doing when you purchase an item using your credit card and can't pay off the balance quickly. So next time when you think of purchasing an item (and you can't afford it), before pulling out the credit card, ask your self if you are willing to pay more than double for that item.
What about the transfer game? I know a lot of people that think they have the credit card companies fooled, they transfer their balances to a low or no interest card to save money. However, this is what credit card companies want you you to do. They know most consumers don't read the small print and/or review their statements closely every month. Did you know, most of these offers require to use you card at least once a month (and the new purchases have a different, higher interest rate) just to keep the promotional rate? Or if you are even one day late they will charge you a much higher rate on your balance (18%-30%).
Even if you are able to maintain your great rate, you can still fall in to the credit card companies trap. Typically, they will lower your minimum payment to entice you to make a lower payment during your promotional period, therefore, paying off less of your balance. In addition to paying off less of your balance, the credit card companies know that a majority of us will use our credit cards more now that our monthly payments are lower, raising our balance and making them more money in the long term.
Like Vegas, the house always win, so don't play with your credit cards unless you can pay off the balance at the end of the month or it's emergency and you don't have any other options.
Prosperity Financial, LLC
Lafayette, CO
http://www.myprosperityfinancial.com/
http://www.colomortgages.com/
Your Mortgage Manager
Purchase - Refinance - Debt Consolidation - Cash Out - Home Equity - Great Rates
Monday, November 26, 2007
What's in your Wallet?
First of all, Happy Thanksgiving to all, I hope every one had a great Thanksgiving.
One of the most valuable assets we have is our credit, however, most of us don't know much about it and what we can do to improve our credit. There are many factors that play a role in how the credit bureaus determine your credit score. Most of know about that timely or late payments affect our credit we don't much about the other factors. Here is a little information on 3 major areas that have an impact on your credit.
Amount Owed: Next to your payment history the amount owed reporting on your credit has the biggest impact on your score and can be the most confusing. Having a lot of credit cards is not necessarily a bad thing, however, having a lot of credit cards that are maxed out is. Credit cards actually help your credit, but you want to try to keep your balances below 30% of the credit limit (If you have a $1,000 credit limit, keep your balance below $300). This is one reason why I don't recommend having a Capital One card and if you do have a Capital One card check your credit report frequently. Capital One is known to report your last month's balance as this month's credit limit (if you have a credit limit of $5,000 with Capital One and your balance last month was $2,000 and you paid $500, next month they will report your limit as $2,000 month with a balance of $1,500, even though your real credit limit it $5,000), which can have severe impact on your credit score. Also, try to stay away from department store cards and other high interest rate cards, they will not help improve your score. It is also important ot know when your credit card company reports to the credit bureaus. I know a lot people use their credit cards and pay off the balance every month. However, if your credit card company reports before you pay off the balance then it will appear to bureaus that your cards are maxed out or have a high balance every month. Typically, you want to have a few credit cards with small or no balances, auto loan, and mortgage (if you have one), is a good mix.
Length of Credit History: The longer your credit history is the better. That means if you have a credit card that has been opened for 20 years but you don't use it and were thinking of canceling it, DON'T. If you cancel the card and close your account your credit score will drop. This also explains, why some times a person's score when drop when they pay off a collection account that has been opened for years (I know it doesn't make sense).
New Credit: Ahhh, I hear this all the time, I don't want my credit pulled because my score is going to drop. While, credit inquiries can have a slight and very temporary impact on you score, they typically don't affect your score. However, when you obtain new credit (credit card, auto, installment loan) your score will be drop for a short time (3-6 months). This is caused because the credit bureaus are unsure of your ability to make the new payment along with your other payments. Once you have proven that you can continue to make timely payments your credit score will rebound and in most cases will be higher than it was before.
If you have any questions regarding your credit or want to know how you can improve your score up to 100 points with in 3 months please feel free to go visit us online at, http://www.myprosperityfinancial.com/ or call us at, 303.666.6550.
Prosperity Financial
Mortgage Manager
Lafayette, CO
Purchase - Refinance - Cash-Out - Home Equity - Great Rates
The best choice for a Mortgage Manager in Colorado
One of the most valuable assets we have is our credit, however, most of us don't know much about it and what we can do to improve our credit. There are many factors that play a role in how the credit bureaus determine your credit score. Most of know about that timely or late payments affect our credit we don't much about the other factors. Here is a little information on 3 major areas that have an impact on your credit.
Amount Owed: Next to your payment history the amount owed reporting on your credit has the biggest impact on your score and can be the most confusing. Having a lot of credit cards is not necessarily a bad thing, however, having a lot of credit cards that are maxed out is. Credit cards actually help your credit, but you want to try to keep your balances below 30% of the credit limit (If you have a $1,000 credit limit, keep your balance below $300). This is one reason why I don't recommend having a Capital One card and if you do have a Capital One card check your credit report frequently. Capital One is known to report your last month's balance as this month's credit limit (if you have a credit limit of $5,000 with Capital One and your balance last month was $2,000 and you paid $500, next month they will report your limit as $2,000 month with a balance of $1,500, even though your real credit limit it $5,000), which can have severe impact on your credit score. Also, try to stay away from department store cards and other high interest rate cards, they will not help improve your score. It is also important ot know when your credit card company reports to the credit bureaus. I know a lot people use their credit cards and pay off the balance every month. However, if your credit card company reports before you pay off the balance then it will appear to bureaus that your cards are maxed out or have a high balance every month. Typically, you want to have a few credit cards with small or no balances, auto loan, and mortgage (if you have one), is a good mix.
Length of Credit History: The longer your credit history is the better. That means if you have a credit card that has been opened for 20 years but you don't use it and were thinking of canceling it, DON'T. If you cancel the card and close your account your credit score will drop. This also explains, why some times a person's score when drop when they pay off a collection account that has been opened for years (I know it doesn't make sense).
New Credit: Ahhh, I hear this all the time, I don't want my credit pulled because my score is going to drop. While, credit inquiries can have a slight and very temporary impact on you score, they typically don't affect your score. However, when you obtain new credit (credit card, auto, installment loan) your score will be drop for a short time (3-6 months). This is caused because the credit bureaus are unsure of your ability to make the new payment along with your other payments. Once you have proven that you can continue to make timely payments your credit score will rebound and in most cases will be higher than it was before.
If you have any questions regarding your credit or want to know how you can improve your score up to 100 points with in 3 months please feel free to go visit us online at, http://www.myprosperityfinancial.com/ or call us at, 303.666.6550.
Prosperity Financial
Mortgage Manager
Lafayette, CO
Purchase - Refinance - Cash-Out - Home Equity - Great Rates
The best choice for a Mortgage Manager in Colorado
Subscribe to:
Posts (Atom)
