Understanding Credit Utilization

How much you owe is an important factor in determining your FICO® Scores, making up 30% of the total calculation. One of the elements that FICO considers in this factor is your credit utilization ratio.

Your credit utilization ratio provides insight into how you manage your credit card debt. While it's a good idea to avoid using too much of your available credit, it also doesn't help if you're not using any at all.

If you're trying to figure out how your credit cards impact your FICO® Scores, here's what you should know.
 

What Is the Credit Utilization Ratio and Why Is it Important?

Your credit utilization ratio is the percentage of the available credit that you're using on a given credit card account, as well as across all of your credit cards.
 
For example, let's say you have three credit cards:
 
Card A has a $5,000 credit limit and a $1,000 balance.
Card B has a $10,000 limit and a $4,000 balance.
Card C has a $1,000 limit and a $750 balance.

To get your utilization ratio for each card, divide the balance by the credit limit, and you'll get 20% for Card A, 40% for Card B and 75% for Card C.
 
To get your aggregate credit utilization ratio, you'll add up the three balances and credit limits, then run the same equation. This would give you a total utilization ratio of roughly 36%.
 
Your credit utilization ratio is important because it provides creditors with an insight into how you manage your finances. Credit cards are generally used for everyday spending, and if you regularly max out your credit cards or get close to it, it could indicate that you're having a hard time managing your money without the use of debt.
 
This could spell trouble if you take on a new credit account and don't have the funds to keep up with all of your financial obligations.
 
As such, the more of your available credit that you're using at a given time, the more at risk you are of defaulting on a payment, which results in a lower FICO® Score.
 

What Should My Target Credit Utilization Ratio Be?

Some financial experts recommend keeping your credit utilization ratio below 30%. However, the data doesn't support the implication that your credit score will dip once your utilization ratio crosses the 30% threshold.
 
Just like every other factor in your FICO® Score, the impact your credit utilization ratio will have on your score will vary based on a number of factors.
 
That said, generally the lower your ratio is, the better. Generally, keeping it below 10% (and consistently paying bills on time) can help you build and maintain a good FICO® Score.
 
That said, you want to be careful about having a utilization ratio of 0%. This is because it signifies that you're not using your credit cards at all, giving FICO less information about how you manage your money. While a 0% utilization ratio won't cause your FICO® Scores to drop significantly, it can prevent you from achieving maximum points for the amounts owed score ingredient.
 

How to Lower Your Credit Utilization Ratio

Your credit utilization ratio is determined by two things: your reported credit card balances and your available credit. Keeping the former low and the latter high is key to maintaining a low ratio. Here are some quick tips to accomplish that goal:
 
Avoid spending too much: Avoid using your credit cards too often, especially if you have trouble overspending or if you have cards with low credit limits. Even a balance of $200 on a card with a $300 limit (e.g. 66% utilization) could negatively impact your FICO® Scores.
 
Hold onto old credit cards: Closing a credit card takes away its available credit, which could increase your overall credit utilization ratio. As a result, it's best to avoid closing credit cards unless you're at risk of overspending and getting into credit card debt or there's an annual fee or security deposit, and you no longer use the card.
 
Make your payments strategically: Credit card companies typically report card balances to the credit reporting agencies based on your balance each month when your statement closes. Making a payment before that date could drop your utilization ratio enough to keep it at a satisfactory level. Alternatively, you could make multiple payments throughout the month to keep it low at all times.
 
Make paying off credit card debt a priority: If your credit utilization ratio is chronically high because you have a lot of credit card debt, make plans to pay down your balances as quickly as possible. Pay down your balances can not only benefit your FICO® Scores by lowering your utilization ratio, but it can also have a positive impact on your budget and overall financial health.
 

The Bottom Line

Your credit utilization ratio is an important factor in your FICO® Scores, so it's crucial that you know where you stand and take steps to maintain a low ratio every month.
 
Depending on your situation, this can take time, but the good news is that, as soon as you lower your ratio, your FICO® Scores will respond accordingly— you won't see lingering negative effects as you would with late payments and other negative items.
 
If you're not sure what your utilization ratio is, sign up for a credit monitoring service and keep track of where you stand. If you want to reduce your ratio, start taking steps now to reduce your credit card debt and maintain a low level going forward

Planning for a Credit Worthy Future

 

Credit seems like a complicated fickle thing when you don’t understand it. There are many unforeseen and preventable things that can come about and bite you in the rear leaving you in a credit mess when you are not aware of the ground rules to good credit. 

The best way to avoid those messes or recover after coming out of a financial mess is to plan your financial future and set some boundaries for yourself for a better, more solid financial future.

Planning for your future can look like a lot of things and should involve many different aspects, like living within your means, things you want to accomplish financially, what you want out of your future credit, how you will build and maintain your credit and how you will set guidelines for yourself to avoid making common credit and financial mistakes. This blog post will briefly touch on each one of these to offer readers, regardless of age and current situation some insight into how to plan ahead for a credit-worthy future.

Living Within Your Means

What does this mean exactly, well it means not spending more than what you make each month. This is one of the hardest things for most American families to do, especially when your household expenses exceed your income. 

Ideally, you need to be able to pay all your bills on time each month and still be able to buy amenities like food and clothing, while also putting aside 20% to 30% of your income for savings. To live within your means can be making choices between eating out or learning to cook and eat home cooked meals most of the time, including taking lunch to work from home. 

There are lots of ways to creatively shrink your monthly expenses and live within your means.

What Do You Want to Accomplish Financially?

This is a big part of living within your means, because if you are just distraught over the situation and want to have more luxuries in life, then you simply need to earn more money. You should look at the life you would like to live and then estimate what it would take monthly to make that life happen.

Put together a plan to meet those needs before you start living that way. That could be as simple as seeking out additional training in your industry, working towards a job promotion or asking for a raise, changing jobs or taking a second job. The important thing is to always stay within your current means, even if you are looking for a way to increase your income. 

Until you are making that higher income, it is not available to you.

What Do You Want Out of Your Future Credit?

Most will answer buy a house, buy a car, vacations, college for the kids and retirement. These are all valid reasons and should be part of your goals depending on your family and personal situation, but all these things and many like them require decent to good credit and some careful planning to obtain in a secure, responsible way.

Think about the types of things you want in these areas and speak with professionals in those industries to get a clear picture of what it would look like on paper. This will give you a realistic look at what it takes to get both your credit and savings healthy enough to help you afford and finance the things you want. 

Build and Maintain Your Credit

To build and maintain a good credit score you need to stick with the guidelines surrounding the living within your means section and that also includes paying your bills on time consistently month after month, year after year.

This is not always possible but it's what everyone should strive towards. If you have setbacks beyond your control in this area you should work towards getting back on track as quickly as possible building and maintaining good credit because bad credit also increases the interest rates you pay for credit and insurance!

Set Guidelines for Yourself

It’s important to set some spending rules and good habits for yourself. Don’t completely deprive yourself because that will only lead to failure and can have catastrophic results for your finances and future. Instead, set some ground rules with occasional indulgences and stick money aside in savings for the big rewards.

•  Smart money practices will always win out over excess in the long run.

MyCreditSystem is not just a DIY credit repair system for those already in trouble it is a Credit Education Program that helps you repair your credit yourself and also empowers you with the knowledge to keep a good credit score and maintain your credit rating. 

It's a great gift for High School Seniors and College Students so that they learn early one how to avoid the pitfalls of credit recklessness and also how to get out of it if they need to. They can also build a business around it! Who knows maybe your teenager or young adult is the one that fixes everyone's credit in the family or your neighborhood?

To learn how you, your teenager or young adult can build their own business helping their friends and family fix their credit sit with them and watch this video  
 

7 Credit Score Destroyers

Your credit score not only determines whether or not you can  get credit cards, cell phones, utilities, a rental apartment, auto loan, auto insurance and even job security clearance or the job itself and a mortgage to buy a home, it’s also a critical factor in determining the interest rates you have attached to all those items. 

A low credit score can cost you a lot of money over your lifetime.

Not everyone is aware of the many factors that determine a credit score. It’s easy to make assumptions that seem logical but are actually false. Acting on incorrect information is a sure way to make critical mistakes.

Save yourself money and make your financial life easier by avoiding these seven credit destroyers:

 1.     Carrying a big balance on your credit cards. While having a lot of debt is never a good idea, using more than 30% of the available credit on your credit cards hurts your credit score.

• For example, if your credit limit is $10,000, your score drops if your balance is over $3,000. This is commonly referred to as the “utilization ratio.” Keep your credit utilization to no higher than 30% of your available credit limit.

2.     Paying late is a huge factor in your credit score. Experts estimate that 35% of your credit score is determined by your payment history. Any late payments will lower your score.

3.     Closing credit cards is a credit score killer. This is related to your utilization ratio. By closing a credit card, you lower the amount of credit that’s available to you because your credit score is also sensitive to the length of your credit history.

4.     Defaulting is an obvious credit score mistake. When you fail to pay back a loan you owe to a lender, you can lose as much as 100 points from your credit score. Make every effort to pay back your loans and to do it on time.

• If you’re struggling making loan payments, no matter the type of loan, contact the lender and try to negotiate other payment arrangements. They can be very flexible if failing to do so means not getting their payments at all.

5.     Applying for too much credit. Everyone needs to have some credit but applying for too much credit does have a negative impact on your score.

• Each time you apply for more credit, your potential lender makes an inquiry of your credit history. 

• Each one of those inquiries lowers your credit score.

• Avoid accepting every credit card offer that shows up in your mailbox.

6.     Not having a credit card at all. Many people are getting rid of their credit cards in an effort to avoid debt. Unfortunately, this does nothing to help your credit score.

• Experts believe that the ideal credit score includes 2-3 credit cards. 

• Credit diversity can account for as much as 10% of your credit score.  

• Credit cards help to keep your credit history current. 

7.     Co-signing a lease or a loan for someone else can be a huge mistake because if they fail to make on time payments can destroy your credit score.

• When you co-sign a loan or lease you are equally responsible for that debt, so any late payments, defaults or even repossesions will show up on your own credit report as if they were yours.

• You can even be subject to collections and lawsuits. If a lender won’t do business with them, you might want to reconsider before co-signing.

By avoiding these common mistakes, you can protect your credit score and a good credit score guarantees you the lowest interest rates. And don't worry even if your credit score is poor now it is possible to repair your credit and boost your credit score with a good DIY credit repair system. 

Give your credit score the amount of attention it deserves. It makes life a lot easier! If you or someone you know would like more information about MyCreditSystem click on the link. 

You can also follow me on Facebook 💙 Instagram   See You There!

8 Good Reasons to Use a Credit Card

 

Personal finance gurus spend a lot of time and energy attempting to prevent us from using credit cards, usually for very good reasons.

Credit cards are frequently abused and are the cause of a lot of personal debt. However, credit cards bring you a lot of advantages as long as you use them wisely. In fact, credit cards are frequently a better way to pay for things.

Consider these benefits:

1.) Sign-up bonuses. Many credit cards offer significant rewards when used responsibly. For example, consumers with good credit can be approved for credit cards that offer signup bonuses. These bonuses can be worth $50 to $250 or even more. Some credit cards provide reward points that can be used to redeem things like gift cards or airline tickets and much more!

2.) Cash back. With the right credit card, you can earn from 1-5% back on all your purchases. Depending on how much you use it, that can be like getting a raise at work!

3.) Investment rewards. Some credit cards, such as the Fidelity Investment Rewards Card, give a higher rate of cash back. However, that cash back must be deposited directly into an investment account. This is also nice because it encourages you to invest and save.

4.) Frequent-Flyer miles. Nearly every airline has at least one credit card offering. The ultimate value of these cards is really determined by the specifics of the card and the airline tickets you actually receive and use. The details can vary so shop around.

5.) Safety. Using a credit card makes it a lot easier to avoid financial losses due to fraud or unfortuna timing on automatic payments.

For example, if you pay your bills with automatic payments directly out of your checking account, these automatic drafts can also potentially result in insufficient funding fees and late payments, which will have a negative effect on your credit score.

If your debit card is used fraudulently, your money is taken out of your account instantly. It can also take some time to get your money back. By comparison, when your credit card is used fraudulently, you don't lose any money; you simply notify your credit card company and you don't have to pay for those transactions.

6.) Grace period. Credit card usage gives you time to pay, usually a couple of weeks on the average before any interest kicks in. With a debit card, the money is gone instantly. If you have your money in a high-interest checking account, the amount of interest you will earn can be significantly more over time by paying for your purchases with a credit card.

When you put your purchases on your credit card, your money will spend more time in your checking account, where it's earning money for you. If you use a debit card for your purchases, the money is in your account for a much shorter length of time, thus earning less interest. 

7.) Insurance. Most credit cards include a plethora of consumer protections that most people aren't aware of. This includes things like rental car insurance and travel insurance. Some product warranties are also made more advantageous when you pay for the item with your credit card. 

8.) BUILDING CREDIT

If you don't have a credit history or if you need to improve your score, a credit card can help raise your credit score. Obviously, this assumes that you use your card wisely. Debit cards do nothing to help your credit score.

As you can see, credit cards aren't bad provided you use them responsibly. In fact, credit cards have a lot to offer. So dust off that credit card and put it to good use; just be sure to pay it off in full every month or as close to it as you can to maintain a good credit score.

One Quick Way to Boost Your Credit Score

There are many different factors that go into your credit score, also known as FICO score. Your FICO score is calculated based on your credit report by a formula created by the Fair Isaac Corporation. However, FICO does not actually disclose its exact formula. 

Though nobody knows exactly how important each factor is in calculating the credit score, one known factor that plays a large role is your utilization rate. 

Your utilization rate is basically "how much of your available credit are you using?" 

The theory is that if someone has credit lines of $10,000 and they're using $9,500 of that credit, they're a much bigger credit risk than someone who's only using $1,000. Therefore, their credit score would be lower. 

However, there are a few things about the way FICO calculates your utilization rate that are a bit strange. One small loophole in particular can result in you being able to quickly boost your credit score without actually having to reduce your credit balances. 

The Odd Thing about Credit Utilization 

Rather than measuring your average utilization rate, FICO chooses to measure your score based on your highest utilization rate. 

For example, let's say you have two credit cards. Both of them have a $5,000 limit. One card is maxed out, while another card has a balance of zero. 

In this case, your maximum utilization rate would be 100%. In this case, your credit score will be severely negatively impacted. 

On the other hand, if you had distributed your credit balance half and half over the cards, your maximum utilization would be only 50% each. 

Another example would be if you had one card with a $1,000 limit and another card with a $5,000 limit. If you had to charge $800, it's a much better idea to charge it to the $5,000 card. 

A Few More Things to Know about Utilization Rate 

The ideal utilization rate is 35% or under on all your cards. Having even one card above 35% will drag your max utilization up. 

In an independent study of 70,000 different credit scores, researchers found that people with 720 or higher credit scores tended to have utilization rates of 20% or less. 

However, people who had a zero percent utilization rate often had very low credit scores. That's because their credit scores were so low, they couldn't even get a credit card. 

The ideal is not to have a zero percent utilization rate. If you're not using your credit cards at all, you're not demonstrating creditworthiness. Remember - creditors want to know that you'll pay off loans you take out, not that you don't take out loans. 

So try to get your utilization rate between 1% and 35%. If you have a low balance on one card and a high balance on the other, try balancing your cards out to get your maximum utilization rate down. This one technique can very quickly give you a credit boost, literally in just a few days.

Post-Bankruptcy Credit Improvement

 

So you did that dreaded thing people call reputation suicide and you filed for bankruptcy now your credit is likely as low as it's ever been. But it doesn't have to stay that way. The moment you declare bankruptcy, there are actions you can take to immediately start rebuilding your credit. 

You are getting a fresh start and it's important to build a solid foundation of knowledge so you can avoid the pitfalls that led you to bankruptcy in the first place if it was poor personal financial management that led to bankruptcy in the first place. 

Here's how to start improving your credit score right after a bankruptcy event. 

Do a Careful Credit Report Check

 

Look over your credit reports. All three of them, Experian, TransUnion and Equifax. Then look them over again. Carefully check that each and every existing account is being reported properly in all three credit bureaus.

Old debts that were wiped out by bankruptcy should indicate a "BK" status. Debts that aren't reported properly can continue to damage your credit score, so make sure that any debts included in your bankruptcy filing are now "cleared debts" are indeed being reported properly.

 Pay Your Mortgage and Rent On Time

 

If you managed to keep your house in the bankruptcy process, make sure you do everything in your power to pay your mortgage on time. 

Your mortgage has a bigger impact on your credit than anything else. If you can manage to keep it current, that'll really help your credit score. If you go delinquent on your mortgage, the rest of the techniques in this article won't help all that much. 

If you are still struggling to make mortgage payments call your loan holder and try your best to refinance your mortgage loan. It's possible to refinance a mortgage after bankruptcy. If you are living in a rental PLEASE do yourself a favor and pay your rent on time! Your rental payment history can now be used to boost your credit score. 

Get a Secured Credit Card 

Get a secured credit card as soon as possible to start building up your post-bankruptcy creditworthiness. 

A secured credit card entails you putting down a small deposit, usually between $300 and $1,000, to open a cash-backed account. Your money will be held as collateral. You can then use your card as a credit card. Pay it off every month, on time, to start rebuilding your credit.  

Do your research and make sure that Secure Credit Card payment history is being reported to all three credit reporting agencies. 

Cutting Your Spending 

Having to file bankruptcy means that at some point in your life, you spent more money than you really had. In order to prevent that from happening again, you need to make sure that you're regularly making more money than you're spending. 

Any additional cash you earn can be used to improve your financial situation. It can be used on improving credit, paying off debts that weren't wiped out during bankruptcy, or building savings. 

Start by cutting back on auxiliary spending. Move into a smaller house or apartment if you can. Try to save 10% to 20% of your income every month. There is a whole other blog post on that coming soon. 

Make a Small Installment Purchase 

An installment purchase is treated differently on your credit report than revolving credit (e.g. credit cards). They're treated with more weight. 

An installment purchase includes car loans, home mortgages or even furniture purchases that are paid off in installment form. 

Make sure that any installment purchase you make is reported to all three credit reporting agencies. Getting installment loans and paying them off on time can do a lot for rebuilding your credit. 

Don't misunderstand me here, one loan at a time pay it off and then do another. You are rebuilding your credit worthiness not digging another grave.

If you apply these techniques, your after-bankruptcy credit can improve to the point where you can open new unsecured accounts within 2 or 3 years.

GOOD LUCK! 

The Basics of Credit Clean Up

Credit can be a fickle thing and if you don’t know much about credit, your credit report or score and how credit works it can seem overwhelming to try and find ways to fix or clean it up.

As overwhelming as credit practices may seem there are ways to clean up your credit and plan for a better financial future with smarter spending and borrowing practices.

There are four main ways to clean up your credit and the more cohesively you use them together the better the result at the end. This article will briefly go through the four areas and how to take part in them. Through your research you are likely to come across more in-depth information that will play a part in working with the information provided here to give you the best results in cleaning up your credit.

The first way to start your journey toward better credit and a higher credit score is to review your credit report for errors, dispute and/or demand that all inaccuracies be removed immediately and any collections or accounts you do not recognize be validated. To do this you need to get all three of your current credit reports and lay them out in front of you. 

Take your time reviewing the credit reports and use different color highlighters to highlight all the accounts that are currently open and have a balance, collection accounts and credit report errors. Some of your the accounts are likely past due, while others may not be. To get a complete look at what you need to pay off, you need to color code and highlight them all. 

Remember NOT to include your monthly living expenses like utilities or rent that may be listed on your credit report. Highlight only the debt you need to get out from under, credit report errors and accounts you want to dispute or that need validation. Once you do that the next step to forming a debt pay off plan for your open accounts is to consider the highest balances or highest interest rates first since these are more harmful to your credit, though the smaller accounts may be easier to pay off. 

Remember, while you are paying off larger debts with larger payments, you must still maintain the minimum payments on monthly accounts and living expenses to keep from worsening your debt.

The next step in the credit cleanup process should be to consider the good accounts you have and work hard to keep them in positive standing. These accounts will help to steady and improve your credit when you get the "bad accounts" paid off or removed from your credit reports through disputes or debt validation. 

When you have paid off or removed "the bad" and past due accounts, you can consider adding a good or small account to keep in good standing, but don’t consider adding anything until you have dug yourself out of the hole you are currently in.

Next, you want to make sure you check over your credit report for errors at least once a year. This can happen by accident or through the presence of identity theft. Either way you need to find it and dispute it in a timely matter. 

Each credit reporting agency has their own dispute policies and procedures. Often times this information will print at the end of your credit report and should be readily available on the agency web sites as well however, never dispute anything on your credit report online. 

Always submit your credit disputes and debt validation requests it in writing via certified mail, return receipt requested so that you have proof of your dispute/debt validation requests so that the credit bureaus are obligated to follow through within the Federal and State Consumer Protection Laws.

When you dispute credit errors online you loose a lot of the protections and safeguards in place that benefit you!

The last and probably most important thing to consider when working to clean up your credit is to form and set up a plan for future financial success. You need to be able to handle money in a smart way and avoid getting back into the same situation or having to work so hard again. To do so you need to learn to live within your means and learn the difference between need and want. This can be especially hard if you’ve become accustomed to a certain standard of living or have friends with a higher standard of living than you can afford. 

You need to be honest with yourself and with others about the life you can currently have, this will help you be about to reach the life you want in the future. Realistic budgeting is a discipline that will take time to master but is essential to good credit and your financial future.

I have learned a lot about personal financial management and how to clean up my credit myselt thanks to   myCredit System - myEcon  membership which includes myCashFlowManager  it has been a game changer that opened the door to better credit and better personal financial management for me and my family. 

Top 10 Ways to Get Your Student Loans Forgiven

With the climbing cost of education, student loan debt is becoming a bigger burden with each graduating class. Luckily, however, there are a few ways to reduce, or even eliminate, your student loan debt. 

Consider these career strategies to shrink your student loan debt: 

1.     Join the military. Serve Uncle Sam and you can eliminate up to 100% of your student loans. The amount of forgiveness depends on the type of student loan and where you’re stationed. If you’re considering joining the military, speak to a recruiter and ask for more information.

2.     Become a nurse. Due to the demand for more nurses, nurses are eligible to receive 100% forgiveness for Federal Perkins Loans. Nurses also enjoy high salaries, especially considering that it only requires two years to learn become a registered nurse.

3.     Work with the disabled. Many organizations offer this student loan forgiveness program. If you provide early intervention services to the disabled, you may qualify for up to 100% forgiveness of your Federal Perkins Loans. 

4.     Become a faculty member at a Tribal university. The government has labeled a few colleges and universities as tribal schools. These primarily serve Native Americans or Alaskan Natives. If you teach at one of these schools, you can have up to 100% of your Perkins Loan forgiven.

5.     Join the Peace Corp as a volunteer. You can have a great experience in a new country, help others, and reduce your student loan debt at the same time. You can earn up to 70% forgiveness of your Federal Perkins Loans.

6.     Join AmeriCorps VISTA. This is similar to the Peace Corp, but serves challenged areas of the U.S. Again, loan forgiveness can be up to 70%. Perhaps not exotic as the Peace Corp, but you can potentially stay close to home.

7.     Become a teacher. There are many places in the U.S. in desperate need of teachers. Most of these areas serve lower-income neighborhoods. Teach for five years and you can eliminate up to $17,500 worth of Federal Stafford loans. However, Plus Loans are not eligible.

8.     Become an educator. This program is much broader than the program aimed solely at teachers, and will forgive up to 100% of Federal Perkins Loans. You can be a speech pathologist, school librarian, staff member at a pre-kindergarten program, or even a teacher. Other professions can also qualify.  

·       Depending on the position, you may have to work for a certain number of years or have an advanced degree.

9.     Become a firefighter. If you’ve considered becoming a firefighter, there’s good news. You can receive up to 100% forgiveness of your Federal Perkins Loans after serving a few years.

10. Become a police officer or corrections officer. The firefighter plan also applies to police officers and corrections officers.

Many career options offer partial or complete student loan forgiveness. There’s a common theme to these programs: you must be providing an important service to those in need. You can gain valuable experience and enjoy the knowledge that you’re helping to improve the lives of others while you get rid of your student loans.

You can also use the DYI Credit Repair Program Template Letters in MyCreditSystem to have most if not all your student loan debt wiped out. 

What to Look for in a Contract with a Credit Repair Agency

Your most important tool against bad credit repair deals is your credit repair contract. Before you sign any kind of contract with a credit repair agency, you need to make sure you're protected.  

Most contracts are written by the credit repair agency and are naturally written more for their benefit than yours. That said, if you know what to look for, you can make sure that everything you need is covered in the contract. 

Here are the most important clauses to look for in any credit repair contract. 

What They're Agreeing to Do 

• The contract should explicitly state exactly what the credit repair agency will do for you. 

For example, they might commit to sending X letters to X agencies to help you remove items from your report. They might agree to follow up with those companies, as well as to advise you on lawsuit opportunities. 

• If you're having them also take on a debt consolidation role, make sure you also cover all your bases there. The agreement should spell out explicitly how the consolidation process is handled and what kind of support you'll have during the process. 

The Cost Structure 

• The contract should contain details on how the program is priced. Any implied verbal guarantees should be written into the paperwork. There should be no additional costs that you don't understand, no fine print with extra fees. 

• Different credit repair agencies charge differently. Some require an upfront fee, others don't. Some charge a percentage of debt and some charge a flat fee. 

• If you're just having the repair agency remove items from your credit report for you, usually the payment will be made in the form of a "per item" fee. For example, an agency might charge $250 for each item they can remove from a credit report. 

Make sure you understand the cost structure and any additional costs before signing the paperwork. 

How Long before You Can Expect Results 

• The contract should have a set duration. Six months to one year is a good period of time for an extensive credit repair project. 

• If a contract doesn't have a set duration, make sure you have a crystal clear cancellation period. After all, if you've seen no results for six months, you want to make sure you can back out and find someone else to help you. 

These are some of the most important things you should look for in a credit repair contract. Before you sign anything, make sure you read over every line and fully comprehend everything you're signing. If the contract accurately represents everything that you talked about verbally and you believe it's a good deal for you, then sign the paperwork.

Debt Consolidation to Raise Your Credit Score ?

Debt consolidation is a form of debt management that allows you to find a way out from under debt while still avoiding bankruptcy, garnishment and other extreme financial measures. 

Debt consolidation allows for you to use one loan to a pay off all other accounts and loans you have leaving you with one monthly payment and interest rate. 

The way this can help your credit score is by allowing your current accounts, regardless of status, to be considered paid and in good standing. You also open another loan account which shows a certain level of good credit and it then becomes your responsibility to pay the payments on time to keep the debt consolidation as a positive loan in good standing.

There are many debt consolidation companies and with any consumer driven industry there are fly-by-night scam companies to watch out for. When looking for a debt consolidation company and loan take the time to do a little research and learn as much as the company and the people who work for that company as you can. You should also ask for references to talk with real people who have experienced the company and staff members you are considering. The company and employees should be trained and certified to work on debt consolidation cases and offer debt consolidation loans that are reputable and quality.

Before contacting a debt consolidation company you should take the time to get your debt in order. This includes making a list of all the debt you want to include in the debt consolidation. For each of the items you include on the list, the following things should be included: creditor, creditor contact information, monthly payment, interest rate and current balance. This will give you an idea of the debt you have and the basic information about each one. You also need to total it all up and write it in big numbers on top of the list. This is often one of the hardest parts of debt consolidation, as you have to look at the whole picture and if you haven’t been keeping track along the way, it can be overwhelming. But, this is among the first steps to taking control of your debt, instead of letting it control you.

Debt consolidation can also be followed by other debt management tactics, like debt negotiation, that can help to minimize the debt to allow you to take out a smaller loan and save you more money in the long run. Many credit counselors are trained in the art of debt negotiation and should offer that as a service with your debt consolidation. When you negotiate your current debt you have the opportunity to settle at a lower amount than the current balance, which helps your debt consolidation loan and your repayment over the life of the loan.

If you are looking for a way to get out from under debt and help your credit rating and score, debt consolidation could be the right choice for you. Debt consolidation is a smart way to get rid of debt while still preserving integrity on your credit report and can boost your credit rating. When all your debts are paid, this changes the status of the account and when your credit score is recalculated it should reflect this new positive status and boost your credit score. This can bring you hope and instant success in getting your debt under control if and only if you are able to get a loan for debt consolidation. 

If you are struggling with your debt, paying bills and need to repair your credit score before you can get another loan I recommend a DYI credit repair program like MyCreditSystem which can save you thousands of dollars and may even help you remove those collection accounts from your credit report without paying them. 

What Debt Collectors Can and Can't Do

Debt collectors are like mosquitos. They can be annoying and they’re hard to dissuade. Fortunately, there isn’t a whole lot a debt collector can do besides call you and send you mail. The Fair Debt Collection Practices Act (FDCPA) spells out the actions that a debt collector may and may not undertake in the process of collecting a debt. 

Your state has additional laws that may limit debt collectors even further. It’s worth investigating these laws, so you understand the rules and can play the game accordingly. 

What Debt Collectors can do: 

1.  Call you directly between the hours of 8 am and 9 pm. However, you have the right to request not to be contacted by phone again in the future. This request must be done in writing. You can also insist that the debt collector only contact your attorney instead. 

2.   Contact you via mail. However, it can’t be obvious to someone looking at your mail that the correspondence is from a debt collector. Postcards aren’t permitted, since the nature of the correspondence would be obvious. 

3.  Take you to court. The details are very state specific, but your creditors can certainly take you to court. For smaller debts, this rarely happens. If you had the money, you’d have already paid it. If it you don’t have it, an expensive legal proceeding isn’t worth the effort. 

4.   Request postdated checks. This is allowed under the FDCPA but may not be permitted under your state’s debt collection laws.

5.  Report your payment delinquency to the credit bureaus. Paying your bills on time is an important part of your credit score.

6.  Accept less than the full amount as payment in-full. This can be a great option to get the collection agency off your back. The debt may appear as “settled” on the credit report, which harms your score. You may also have to pay taxes on the amount of the debt that was forgiven. 

Debt collectors must follow the laws provided by the FDCPA and your state of residence. If you owe money, it’s reasonable to expect that your creditor will try to collect that debt. However, there are limitations. Many collection practices are illegal. 

What Debt Collectors Can’t Do: 

1.  Call you on a Sunday. Monday through Saturday is fair game, but even debt collectors have to take a break on Sundays.

2.  Call you after 9 pm or before 8 am. They only way debt collectors can call you outside these hours is with your permission.

3.  Contact your employer. Unless the debt is related to non-payment of child support, your employer is off limits. They also can’t contact you at work if they know you don’t want to be bothered there.

4.  Contact your friends, family, or neighbors regarding your debt. They can, however, contact these people to determine your address or phone number. It cannot be revealed that you owe money.

5.   Use threatening language over the phone. Vulgar language or the threat of prison or loss of reputation isn’t permitted.

6.  Call you repeatedly in a short period of time. This is open to interpretation. But if you’re constantly receiving calls, it can be considered harassment under the FDCPA. You can sue the debt collector in this case.

This is the short list of items that many debt collectors have been known to violate. Familiarize yourself with the FDCPA for additional restrictions. Remember that these rules only apply to debt collectors and not the in-house collection employees of your creditor. See your state laws for additional guidance. 

Debt collectors may be annoying, but they are required to follow the law just like everyone else. Each violation of any of the rules can carry a $1,000 fine and debtors have been very successful collecting these fines in court.