Stay Credit Healthy

Supporting your healthy credit is a lot like supporting your healthy physical self. It would be a mistake as a consumer to assume that because you are making your monthly minimum payments on time every month that your credit is as healthy as can be. It’s almost like assuming that because a person is skinny that they are in peak physical health.

I will give you a couple of good examples of what I mean. An average male, height 5’9″, weighing 150lbs, may appear to be in great physical health to the naked eye. On second thought, if you did some homework about the background about that same individual you may find some things that can severely impact your perception of his health. Does that person have an eating disorder, that is causing him to lose weight? Is that person a smoker or does his family have a long history of heart disease? How’s his cholesterol level? See what I mean.
The same things applies to credit. If you assume that credit is more than the three digit score but rather an amalgam of different factors then you will agree that simply making the payments on time is not a clear indication of your actual credit health.

Credit in my opinion is a bridge towards borrowing money. Ultimately, credit is simply the ability to borrow money from a lender, bank, or broker. Many people mistake having a positive payment history for having credit. Let’s dig a little deeper. In today’s harsh economic environment banks, who are the gatekeepers of the money, so to speak, are evaluating your potential borrow-worthiness based on a whole host of factors.

Today banks want to ensure that you have a reliable income and a steady job. In other worlds, the banks would prefer you to be able to provide them with some type of verifiable income…a W-2…instead of being self-employed…where your true income can be a bit murky.
In addition, banks are more willing to lend you money if you have some type of collateral. Banks want to see that you are a homeowner, and furthermore, that you have equity in your home. In today’s lending atmosphere DTI (debt-to-income ratio) measures are being scrutinized more and more.

So, to determine if your credit is healthy by simply utilizing the measure of making payments on time is only half the story. That said, making payments on time to your creditors is a great indication of your future ability to pay back what you may eventually borrow. And, that’s important. Some ways in which you can ensure that your credit is healthy and that your payments are going to be made on time are the following…

Avoid late payments and late fees by setting up account alerts on your smart phone to remind you when your upcoming payments are due. Set-up auto-pay. Auto-pay sets up your payments on auto-pilot letting you schedule your payments months in advance. Choose your own due-date. Lots of creditors are much more flexible than they used to be and as long as you’ve demonstrated a good payment history they will let you set up the date that is most convenient for you. Finally, get with technology and download your creditor apps on your smartphone and use those mobile apps to make payments and check account balances.

Finally, stay credit healthy, it’s the only way to be.

How to get Approved for a Loan Modification

The downturn in both housing and financial markets in 2008 affected more than half of all American households in one form or another. As financial markets struggle to regain pre-bubble levels, the after-effects of the dramatic decline in home values are still being sorely felt all across this country.

Ask your neighbors, friends, and family just how much this decline in home prices has impacted their spending habits, buying power, and overall consumer confidence. The answers are sure to shake even the most hardened fiscal conservatives. Many homeowners in today’s economic environment are either upside-down in their mortgage or have very little equity in their property. Perhaps they have even witnessed their own block and/or neighborhood being littered with foreclosure signs or advertisements by brokers for short-sales or loan modifications.
If you are like many Americans you have been raised by your parents with many of the same values that we all universally share. One of those values pertains to paying your debts, and more specifically, paying your bills on time each and every single month.

But, what happens when you lose your job, your spouse loses his or her job, your small-business dries up, the factory that you have been dutifully employed at for many years folds, or better yet sends your job to a lower-skilled, lower-paid worker in China? What happens when you get hurt on the job, and have very little or very poor medical coverage? Or, no medical benefits whatsoever?

Unfortunately, these are all of the case scenarios the American family is faced with today! Sometimes paying your bills on-time is virtually impossible. It’s at that moment that as the head-of-household you are forced to make some very tough life-altering decisions. Do I pay my mortgage this month or stop paying because this is the biggest bill I have, and we need to buy groceries and gas? Do I skip paying my credit-card bills because after-all I will just use cash or debit? Credit Cards are a luxury, aren’t they?

Well, if you stop paying your mortgage and at least your minimum payments on your credit cards, on time, you can count on severely negatively affecting your credit score. Usually, if you are at the stage of “survival-of-the-fittest” then maintaining a good credit score takes a back-seat to getting through this economic downturn unscathed.

A few years ago the government created a program known as the “Home Affordable Modification Program” to assist homeowners who are behind in their mortgage payments, and at risk of having their home foreclosed upon. Essentially, the lender that provided the original loan to you is much more apt to consider modifying or refinancing your mortgage once you are well-behind on payments. The crux of what makes the modification work is that it is a well-known fact that your lender does not want to evict you from your home.

Contrary to popular belief, the lender does not want to take your home away for a variety of reasons. First of all, your home may not be in tip-top shape and it can be very expensive for the bank to fix-up or rehabilitate the property. Secondly, because markets in many parts of the country are still soft it would be a long-shot for the bank to kick you out, and then get good market value for your home. Thirdly, the pool of qualified potential home-buyers has evaporated because of extremely stringent lending requirements by the banks.

In a nutshell, if you are behind on payments, and can establish a legitimate argument to the bank as to why they should indeed modify your mortgage, you have a strong chance at getting approved. Most banks will want to speak to you directly; and have underwriters that will want to get a sense of your personal commitment to wanting to retain your home. The banks will read a hardship letter that they will provide to you. That letter is a blank canvas that you have to fill-in with a heartfelt strong, and well-articulated reason as to why they should help you.

Finally, the government is investing in our banking infrastructure by reimbursing banks that help their clients…you the consumer. So, in essence, their is very little risk on behalf of the banks. The banks are therefore more inclined to help you stay in your home because their executive teams know the government will step in to help “them.” However, if you are in financial trouble, and at risk of losing your home, don’t wait around and do nothing. Be pro-active…help is available to you.

How to Rebuild your Credit by Adding Positive Trade Lines

Our clients enroll into a debt settlement program for one basic reason. It is because they seek immediate relief from the requirements of having to pay extremely high monthly minimum payments on their credit cards.
The requirements of having to make minimum payments on credit cards that are rendered virtually useless because of being at or near their limit or due to high interest rates has proved to be a huge burden on the public.
Inherently when the public suffers through some type of financial hardship they become unable to pay, and get reported to each of the credit bureaus as delinquent. A 30 day, 60 day, 90 day, and 120 day late payment can do a lot of damage to your credit score.
At some point things usually change for the better with time and in particular after enroll ling into a debt settlement program that will lower your monthly bills. Then, it is time to figure out a way to repair your credit. This article explains how.
The way to build credit is to essentially prove to a future lender that you are a worthwhile borrower. As they say, past performance is indicative of future results. In other words make your monthly payments by paying your bills on time without fail, no excuses. A good payment history is the single most important thing you can do to increase your credit score.
The positive payment history gets positively reported to the credit bureaus and that will go a long way towards increasing your score.
One of the easiest way to ensure a good payment history is to apply for and open up a secured credit card. A quality secured card will allow you to deposit a set amount of money onto your card similar to how a pre-paid or debit card works. For example, you deposit $200 on to your card and that becomes your limit. Every time you participate in a transaction using your own capped amount of money it will get reported positively to the credit bureaus by the creditor. That is a great way to get started repairing your credit.
Another way to increase your credit score by obtaining positive trade lines is to request to be added as an authorized user. Seek out a family member or friend who has good credit and who trusts you. Build their trust by demonstrating a capability to be responsible in other areas of your financial life. If that person contacts their creditor and adds you to their credit card as an authorized user every time they make a payment on time on that card it gets reported positively for you as well.
I won’t kid you at all…repairing your credit score is a long and arduous task that requires time and patience. The two ways I described above are certainly the best first steps.

Wheel of Misfortune

Recently our team worked with a client who had at one point won a large sum of money on a very popular game-show. As it turns out, several years ago, our client won a grand total of $85,000 after taxes, after successfully competing as a contestant on a hit game show.
Well, what exactly did the client do with his newfound treasure? How did he end up over his head in debt with his credit card companies?
For one thing, only about $5,000 – $10,000 of his winnings were ultimately put away for actual savings. And, when we say savings, we simply mean the cash was set aside in a checking account with no real interest earned, and with no advice on what to do with it from any kind of Financial Planner.
The rest of his money was allocated to paying back taxes, old debts, and new bills. Everybody needs a brand-spanking new BMW after so-called striking it rich on TV. I say that truly in jest.
Oh, and some of the funds were shall I say invested in poorly timed business ventures.
Why did this happen to a fairly educated, hard working family man? Well it is certainly a complex answer that has to do as much with emotion as it does finance. Truthfully, the two go hand in hand with one another. So here goes…
As a young boy, I was told, his parents never ever educated him about money. They never talked about money at the dinner table, never discussed what it means to invest, and never taught him how to manage it. It all really started there. Never having had a serious conversation with his parents about how to handle and budget money led to a lifetime of earning – spending – earning – spending.
As he grew older that pattern of never saving and never really having respect for a dollar strengthened. By the time he made it past the qualifying rounds and hit the small screen running he was already up to his eyeballs in back payments, harassing phone calls from creditors, and a trail of late payments being reported to all the credit bureaus.
Winning the grand prize on television in front of millions of people was an instant high that only elevated his sense of detachment from the value of a dollar. Couple that with using a chunk of the winnings to pay back old scores and catch up on new debt and its not hard to see how quickly the money went bye bye. It’s sort of the same thing you hear from big lottery jackpot winners. After having paid everything off that needed to be paid a few less than savvy friends suggested a few less than quality business ideas that ended up belly flopping.
Today, he is an enrolled client. Years of financial misfortune have cost him to be up $85,000 a few years ago to in debt nearly twice that much today.
I think the moral of the story here is that having an open honest talk with your children, your spouse, or yourself about the importance of financial planning and money is vital to your financial survival. Don’t be so quick to buy a vowel so to speak until you know all about it, it’s worth, and can afford it in the first place. That was a bit tongue and cheek but hopefully you get the idea.