Student Loan Directive

      

Student loans are something a large percentage of americans may turn to when looking to further their education and increase their earning potential and job possibilities.  Student loans are a great way for those unable to save enough to pay for college or those that have other financial obligations that cannot be put off. Unlike other types of loans or lines of credit student loans can be put off for a period of time while attending school and for a term after to allow you to begin to repay after you have secured work in the field of study you chose instead of burdening you with the responsibility of repayment when you are in a position where default is the most likely scenario.  President Obama in an attempt to aid students struggling to repay student loans signed a directive that puts a cap on the amount students can be required to repay on an annual basis to 10% of their total income.  This was done to reduce the number of defaulted loans and to encourage potential students to apply and utilize student loans without fear they may bot be able to repay them after they have graduated. This all sounds good at first but now lets look at the possible negative impacts this directive may introduce that were not even possible before.  President Obama was almost immediately publicly criticized for the action on the basis that he is encouraging non payment by allowing forgiveness after 20 years and capping the amount student can be required to repay to 10% of their total income annually. 

Credit Repair

Many companies out there advertise that they can help you with credit repair, but the quality of these services - not to mention what they offer - varies widely. Some companies really can help you with credit repair while others are actually under investigation for suspect business practices. If you decide to seek help from a credit repair company, be sure that the company is legitimate and offers you viable services.  In general, you should be looking for non-profit credit counseling services rather than credit repair companies (some of which are really just lenders offering home equity loans anyway, which are of limited use to you if you want to improve your credit).

Check to make sure that the company has good standing with the Better Business Bureau and clients who are happy with the credit repair services they received from the company. Always read the paperwork carefully before you sign and make sure that you understand how much you are paying for and how much you are paying.

Before deciding to seek help from a credit help or credit counseling service, be sure that the problem cannot be resolved on your own. Indications that you may need credit counseling include:

-You cannot pay your bills and avoid the necessities of life.

-You avoid the phone, the mail, and the door because you are being harassed by collection agencies.

-You have avoided going out because you feel terrible about your financial state.

-You have no idea how you will repay your bills and loans - you do not know where to start.

Fixing Errors on Your Credit Report

Traditionally fixing errors found on your credit report had been a difficult and confusing with the old complaint systems made available by the credit bureaus.  Recently Experian, Equifax & TransUnion have all updated their error dispute systems to make it easier for consumers to submit complaints regarding the fixing of errors on their reports and have included features within the new systems that also make it easier for the credit bureaus to make a determination regarding the item being disputed and how it will be addressed. 

    Some of the new features of the new error complaint systems include the following.

• Allows the attachment of supporting documents
• Provides a section where the consumer can state full details of the case

The changes to the previous error reporting and dispute systems once used by the consumer credit bureaus was prompted by new legislation presented to congress known as  The "Stop Errors in Credit Use and Reporting (SECURE) Act"

The "Stop Errors in Credit Use and Reporting (SECURE) Act" would require credit bureaus to perform a more diligent investigative and take corrective actions.  

The legislation states that the credit bureaus would now be required to :

• Better investigate consumer error complaints
• Review all new information submitted by consumers regarding the dispute
• Submit all supporting documentation provided by the consumer to the lenders involved in the disputed information
• Provide a free credit score annually to consumers when they request their free credit report
• Gives consumers the ability to take the credit bureaus to court when errors have not been fixed

Paying Bills on Time

    When we go on vacation, of course we want to get away from it all, but when we forget to pay our bills while away, we risk getting dings on our credit that can affect our credit risk rating.  Make it part of your vacation practice to pay bills in advance or to arrange someone to pay your bills while you are away. Similarly, while you are ill, arrange to have bills paid so that bills don’t pile up and so that you don’t get marked as a “non-payer.” It is frustrating to be trying to improve a credit score only to suffer a setback over a small oversight.

    Consider online banking or telephone banking to make bill payment easier.  If you have trouble getting your payments in on time, consider online or telephone banking. This simple system is now available from virtually revery bank and can help you pay your bills in minutes - at any time of the day or night. If you travel a lot, on line or telephone banking can be a real life-saver as it will allow you to pay your bills no matter here you are.  Plus, you get instant confirmation of the paid bill and your payment is counted instantly. You no longer have to worry about payments getting lost in the mail or getting lost in a bureaucratic shuffle - the record of the payment is right on your bank account statement.  If you lead a busy lifestyle and have several late payments of bills simply because you can’t quite keep up with the errand of paying bills, online or telephone banking can be the solution that can help your credit rating by effectively putting a stop to late or unpaid bills. With these two very convenient and quick payment options, there really is no excuse for unpaid accounts.

Credit Inquiries

    Make sure you know who is looking at your credit report and why.  Many inquiries look bad on your credit report, but more than that you likely want to know who can see your personal financial information, now that you know that your personal information is stored in a credit report. If you sign a document with a lender or apply for credit online, you can be sure that someone is looking at your credit report.  However, you may want to look over other documents in order to see who is taking a peek. Insurance agents will often look at your credit report, for example. Some landlords and potential employers will, too. You need to be careful about online sources, too. In general, when you provide someone with your social insurance number, you may be giving permission to look at your credit report. You shouldn’t bar people from looking, but knowing who is looking is good financial practice.  

    Know the difference between soft and hard inquiries.  When you pull your credit report to look at it, it is counted as a “soft inquiry.” Only “hard inquiries” from lenders will affect your credit score dramatically. Although checking your credit score too often is an expensive habit, you should not avoid checking your credit report because you fear it will make your credit rating worse.

Understanding Your Credit Score

    If you are going to improve your credit score, then logic has it that you must understand what your credit score is and how it works. Without this information, you won’t be able to very effectively improve your score because you won’t understand how the things you do in daily life affect your score.  If you don’t understand how your credit score works, you will also be at the mercy of any company that tries to tell you how you can improve your score - on their terms and at their price.  In general, your credit score is a number that lets lenders know how much of a credit risk you are. The credit score is a number, usually between 300 and 850, that lets lenders know how well you are paying off your debts and how much of a credit risk you are.  In general, the higher your credit score, the better credit risk you make and the more likely you are to be given credit at great rates. Scores in the low 600s and below will often give you trouble in finding credit, while scores of 720 and above will generally give you the best interest rates out there. However, credit scores are a lot like GPAs or SAT scores from college days - while they give others a quick snapshot of how you are doing, they are interpreted by people in different ways. Some lenders put more emphasis on credit scores than others.  Some lenders will work with you if you have credit scores in the 600s, while others offer their best rates only to those creditors with very high scores indeed. Some lenders will look at your entire credit report while others will accept or reject your loan application based solely on your credit score.  

    The credit score is based on your credit report, which contains a history of your past debts and repayments. Credit bureaus use computers and mathematical calculations to arrive at a credit score from the information contained in your credit report.  Each credit bureau uses different methods to do this (which is why you will have different scores with different companies) but most credit bureaus use the FICO system. FICO is an acronym for the credit score calculating software offered by Fair Isaac Corporation company. This is by far the most used software since the Fair Isaac Corporation developed the credit score model used by many in the financial industry and is still considered one of the leaders in the field.  In fact, credit scores are sometimes called FICO scores or FICO ratings, although it is important to understand that your score may be tabulated using different software.  One other thing you may want to understand about the software and mathematics that goes into your credit score is the fact that the math used by the software is based on research and comparative mathematics. This is an important and simple concept that can help you understand how to boost your credit score. In simple terms, what this means is that your credit score is in a way calculated on the same principles as your insurance premiums. 

     Your insurance company likely asks you questions about your health, your lifestyle choices (such as whether you are a smoker) because these bits of information can tell the insurance company how much of a risk you are and how likely you are to make large claims later on. This is based on research.  Studies have shown, for example, that smokers tend to be more prone to serious illnesses and so require more medical attention. If you are a smoker, you may face higher insurance premiums because of this.  Similarly, credit bureaus and lenders often look at general patterns. Since people with too many debts tend not to have great rates of repayment, your credit score may suffer if you have too many debts, for example. Understanding this can help you in two ways:  

1) It will let you see that your credit score is not a personal reflection of how “good” or “bad” you are with money. Rather, it is a reflection of how well lenders and companies think you will repay your bills - based on information gathered from studying other people.  

2) It will let you see that if you want to improve your credit score, you need to work on becoming the sort of debtor that studies have shown tends to repay their bills. You do not have to work hard to reinvent yourself financially and you do not have to start making much more money. You just need to be a reliable lender. This realization alone should help make credit repair far less stressful!
     
     Credit reports are put together by credit bureaus, which use information from client companies. It works like this: credit bureaus have clients - such as credit card companies and utility companies, to name just two - who provide them with information.  Once a file is begun on you (i.e. once you open a bank account or have bills to pay) then information about you is stored on the record. If you are late paying a bill, the clients call the credit bureaus and note this. Any unpaid bills, overdue bills or other problems with credit count as “dings” on your credit report and affect your score.  Information such as what type of debt you have, how much debt you have, how regularly you pay your bills on time, and your credit accounts are all information that is used to calculate your credit score.  Your age, sex, and income do not count towards your credit score. The actual formula used by credit bureaus to calculate credit scores is a well-kept secret, but it is known that recent account activity, debts, length of credit, unpaid accounts, and types of credit are among the things that

Investing

    Being an entity that provides a varied platform of services from stock broking to trading in other securities the stock market can be and usually is very volatile in its dealings.  There are several ways individual can scout and capitalize on opportunities available through the stock market. The following are some tips on how the shock market can be an opportunity providing platform:  Keep the focus on quick and small gains rather than trying to get rich overnight. Most people make the mistake of not knowing when to buy and when to sell. Though buying is generally based on the sentiments of the time and some knowledge, selling is mostly based on individual perception.  When the stock price seems to be climbing there is always the temptation to see it climb higher before deciding to sell. This is a very destructive line of thought as the stock price can fall just as easily as it went up, causing incredible negative consequences.  Therefore a limit should be set very early on in the buying stage so that when this pre set limit is met the stock can be sold without hesitation thus minimizing any possible losses. 

    Invest conservatively and ensure one is well informed of the company’s background before making the decision to invest. Avoid chasing a seemingly upward trend without the relevant backing knowledge of the company.  In every case the bigger investors will start cashing in first and as their investments are instrumental in the climbing stock price, it will also be instrumental in its decline.

    Prepare for financial emergencies
Few of us think about what would happen if we lost our jobs or suddenly became too ill to work. The thought is simply too terrible to contemplate in many cases, especially if we are living paycheck to paycheck with a job as it is.


    The fact is, though, that financial emergencies happen to almost everyone at some point and they can have devastating impact in your credit. In fact, most people who declare bankruptcy do so because of a huge financial disaster such as sudden unemployment, huge medical bills, a lawsuit, or divorce. Despite this, few people plan for these problems, even though they can happen to anyone.  If you want to keep your credit score in good trim, you should know exactly what you would do in case of an emergency. Developing an actual written plan can help you by letting you take action to save your credit as soon as an emergency occurs. Some items that could be on your financial emergency plan could include:

1) A list of all assets you could liquidate if you had to.

2) A list of all extras or luxuries you could cut out of your life right away if there was a problem (i.e. newspaper subscriptions, cable television, water delivery service, Friday nights at the movies).

3) A list of any resources you have that could help you in case of an emergency. Maybe you know a lawyer who deals in financial facets of the law. Maybe you have insurance that could help you. Maybe your employer offers a severance package. Whatever it is, write it down. Keeping a list of these resources will make them easier to access in case of an emergency.

4) Other ways you could get money if you had to - jobs you could take, things you could rent out to others.

Dealing With a Credit Score after a Big Problem

    If you have bad credit, establish better credit by taking out credit and repaying it quickly
If you have terrible credit following a bankruptcy or other major financial upheaval, you may need to get back into a good credit rating by taking out a loan you can handle. Make an appointment to see your bank or bad credit lender a few months or years after the problem in question and arrange for a small loan.
You should have enough savings to pay for the loan before you do this. Pay back the loan quickly. It will not hugely boost your credit score but it will show lenders that you are having an easier time paying your bills. Taking out a small loan you can repay is part of the slow process of reestablishing good credit following a big financial problem.

    Try secured credit if you cannot qualify for other types of credit Secured credit is credit or a loan which uses something as collateral. In some cases, this could be an asset like a house. In some cases, this collateral could be money frozen in an account by the bank for just such a purchase.

If you need credit following a big problem with your credit score, secured credit may be something you can qualify for. You can use this secured credit to reestablish a good credit rating so that you will qualify for other loans in the future. You may have to pay slightly higher interest if your credit score is quite low, but in the long term repaying this type of loan can improve your credit score after you have repaid your debts and resolved the problem.

In fact, major problems such as a bankruptcy will remain on your credit report for seven or ten years, affecting your credit score. Even if your credit problems stem from simply not paying bills on time, it will take some time for the mark to fade from your credit report and for your credit score to reflect your better repayment.

Paying off your debts and resolving problems will help your credit score (since overdue accounts will be marked as “paid” on your credit report), but only time will remove the mark of the problems from your record entirely.

Consumer Credit use Falls

According to recent Gallup suerveys the average number of credit cards owned by consumers is 2.6 opposed to 2.9 from surveys six years ago and has not been this low since 2001.  Some other interesting statistics are below.

29% of consumers do not have a credit card at all

48% claim that they pay their balances in full monthly

Interest Rates

These days interest rates for the various types of credit such as credit cards, mortgages and auto loans are offered with largely different cost associated with them in the way of interest rate.

Credit card interest rate are currently significantlly higher than the interest rates of home loans with the average consumer credit card interest rate around 21% for individuals with fair credit according to research surveys.  With all the economic stimulus and relief programs offered by the government to assist in these arduous economics time why are the creditor not passing along this relief to consumers struggling to make their monthly credit card payments?  The reason is because unlike other types of debt credit card debt is not secured by any type of collateral so it is much more risky and therefore more expensive.  But thats not the only thing that has led to very high interest rates on credit cards.  The second cause of high interest rates is the 2009 credit card law designed to protect consumers by capping penalty fees has reduced creditor profits and in response creditors raised interest rates to recoup the lost income.    

Steps to Establishing Credit

Establishing Credit

With the substantial impact your credit score has on your financial flexibility,  buying capabilities and the cost of borrowed money its critical to meticulously establish, develop and maintain your credit history and its corresponding credit score.  Establishing your credit profile is the first step to building a stable and prosperous financial future.

1.)  The first step to establishing your credit is to create banking relationships by opening a checking and savings account and by maintaining these accounts in good standing it will then exhibit to lenders that you are responsible and capable of managing your money.

2.)  The next step when establishing your credit history is to then apply for a secured credit card which is a credit account with the credit line that is determined by the amount of your collateral deposit.  After obtaining a secured credit card most card issuers will then evaluate your account periodically and based on the accounts history offer to upgrade the account to an unsecured credit line. 

3.)  Once you have progressed to unsecured lines of credit it is best to start with retail store charge accounts since they tend to be fairly easy to get approved for.  Retail store such as Sears, Macy's, Home Depot, Walmart, Jcpenny's, TJMaxx and Lowes all offer easy to acquire charge accounts typically with a line of credit of $300 to start.  I would recommend obtaining at least 2 charge accounts and upon receiving your new card make an initial small purchase that you can payoff when the first statement arrives.

One critical mistake most make when establishing credit is closing old accounts when new ones have been opened.  A heavily weighted factor used to determine your credit score is the age of your oldest active credit account.  Most feel that when a new account with lower interest and better incentives is opened that they should close an account with high interest and few incentives since it will most likely no longer be used. However in doing so you then change the age of your oldest active account which will in effect significantly lower your overall score.

4.)  Once you have upgraded from a secured credit card to an unsecured credit card and acquired 2 retail store credit accounts the next step is to be patient and wait about 6 months before applying for any new credit accounts and alloow your history to age.  While doing so ensure all your payments are made on time and you are not utilizing more than 25% of your usable credit.

5.)  After you have allowed for some time for your credit history to age you can then look into applying for a credit card with the best interest rate or best rewards depending on what benefits you most based on your credit card usage. Upon obtaining the credit card of your choice you will need to then wait another 6 months to 1 year and again apply for a well suited credit card account.

6.)  Once you have successfully completed the previously defined process your credit score should be somewhere between 750 and 800 and you can then begin to explore more significant purchases such as a mortgage to purchase a home or auto loan to purchase a new car.

At this point your credit will be well established and how you manage it will determine its progression over time.