1. Create a budget: It hardly needs mention but yet it should be
emphasized that a budget is perhaps the most important way to avoid falling
into the debt hole. The rising consumer debt in America implies the lack of
budgeting habit among them. You should primarily figure out how much money
you save each month in order to makes sure how much can be dedicated in
paying off your financial obligations. Keep a track on your monthly income
and expenses so that you can supervise your monthly savings. Try to save
money in order to keep aside more money that could be paid towards your
unpaid credit card bills.

2. Pay more than the minimum amount: You must be aware that you’re

required to make the minimum payments towards all your credit cards in a
particular month so that you can get rid of debt fast. But you should change
the habit of paying just the minimum amount. As you save money, start making
more monthly payments towards your credit cards. This way you can reduce the
principal loan amount as well as save loads of money on accrued interest
rates.

3. Do not go for balance transfers: When consumers are knee deep in

debt, they frantically look for debt consolidation options and one among
them is the balance transfer method. However, debt experts always recommend
that one should never go for balance transfers as this is another way of
trapping financially distressed consumers in the ferocious cycle of debt.
All credit cards with low interest rate have a particular introductory
period within which the interest rate remains low. After the completion of
this period, the rate shoots up, making it impossible for the debtors to pay
off their debts.

4. Take out a home equity loan: You can also take out a home equity

> loan if you want to get rid of debt. This would be a good option for those
who are cash poor but house rich. You can easily combine all your unsecured
debts into a single secured loan. With a home equity loan, you can reap the
benefits of low interest rates and longer repayment term. But you need to be
careful that you are able to make the payments towards the home equity loan
lest you lose your home to foreclosure.

Therefore, if you’re up to your eyeballs in debt, you can resort to the
above mentioned options. Get rid of debt and lead a stress free life to
secure financial freedom.

If you already have a large amount of debt, it’s even more important to keep a good credit score. First, if you are planning to refinance some of the higher interest debt, the new lender will undoubtedly want to see that you’ve maintained a good credit score. And some creditors can and will lower your credit limit or even cancel your accounts if your credit score drops below a certain level. This can cause many other problems that can add to the burden of debt.

One good method to keeping the highest credit score possible is to pay down accounts with the lowest balances first. The reason for this is that a large part of credit scores is determined by the balance relative to the credit limit. So paying accounts down to 50% of their respective credit limits tends to increase your score. But that’s not to underscore the common sense of paying down accounts with the highest interest rate as well since that will improve your overall cash flow. Sometimes it’s a better idea to worry more about cash flow and overall savings than to worry about your credit score.

Making good financial decisions is the key to overall financial health. If paying off higher balance accounts means your credit score might not be as high as possible, don’t worry too much about that in the short term since credit scores are rescored quite often. It’s always a better decision to think about the long term outcome versus keeping your credit score high in the short term, especially if you are struggling to make payments anyway.

Some people who are caught in this trap may choose to explore more aggressive options to eliminating debt, such as debt settlement, credit consolidation, credit counseling or even bankruptcy. While careful consideration should be given to each of these options, make sure you obtain competent professional advice before making a decision. Some of these actions could hurt your credit score, but take comfort in the fact that credit can be rebuilt and reestablished over time, which is less important than overall financial well being. Settling and/or consolidating debt, seeking the services of a credit counselor, and even bankruptcy do not have to mean your credit score is destroyed forever. Unfortunately, far too many people put off aggressive action that may produce real results because they fear what will happen to their credit score. This is the wrong approach to take if you are in serious financial trouble.

To apply online for a mortgage or to view your credit report and scores, visit 4bestrate.com

A CREDIT FREEZE means that NOBODY can access your credit report, NOT EVEN YOU. This will literally prevent the credit bureaus from allowing anyone to view your report at all. While this is undoubtedly the most effective level of protection possible, it can also cause some problems. For starters, you will have to start the process of removing or “thawing” the credit freeze if a situation arises that a company will need to view your credit report. Many people either forget or simply don’t realize that there are many entities that may require a credit report, such as insurance companies, investment firms, landlords and even employers. Imagine applying for a job or a loan and getting denied because the employer could not access your credit report! So be prepared to deal with some red tape once the credit freeze is activated. The credit bureaus can take more than three business days to add or remove a credit freeze. And once a freeze is activated, the credit bureaus will give you a PIN number that you must have in order to remove it, and if you lose this, you will have to obtain a new one, which will cost even more money and take even more time.

Also, it costs money (usually $10 per bureau) to both add and remove a credit freeze. The laws that govern credit freezes are set by the individual states, so check to see what the laws are in your state before you begin the process.

A FRAUD ALERT is simply a statement that’s added to your credit report that requires creditors to call you at a phone number that you designate before they will extend you credit. It is free to add a fraud alert to your credit report, and you can do so by calling one of the three credit bureaus and having it added. You only have to call one bureau, and they will automatically notify the other two for you. But a fraud alert only stays on your credit report for 90 days, so you will have to call back and add it again after 90 days if you want it to remain.

The easiest way to keep an eye on the activity on your credit is with a credit monitoring service that notifies you of any new activity on your credit report. Aside from this convenient service, most credit monitoring services also allow you access to a copy of your credit report from all three bureaus online, as well as your credit scores.
So make sure you evaluate all the pros and cons before you choose between a credit freeze and a fraud alert. And monitor your credit regularly to ensure that you’re not a victim!

Get a copy of your credit report and credit scores from all three bureaus!

At one point in time, a borrower simply had to have a 700 middle credit score and they were virtually guaranteed a loan without having to show any proof whatsoever that they had a job or any type of real ability to repay the mortgage. This was called a “no-doc” loan, but was also referred to as a NINA, NINJA, or a host of other marketing acronyms the banks could come up with.

In the beginning, reduced documentation loans were created as a way to save paperwork for only the most creditworthy of borrowers. But that concept quickly grew out of control As the investment banks began to create more The stated income loan eventually grew into the SISA loan (stated income and stated asset), and eventually the investment bankers created the NINA (no income/no asset) loans. Many buyers flocked to these loans, and the rates were, in many cases, almost the same as rates for buyers who could actually prove their ability to repay the loan.

But the result of the elimination of these products has meant that many very creditworthy individuals who don’t report enough income to meet lenders’ debt-to-income ratio guidelines are being denied. Stated income and no income verification loans are still available, but they are only offered by private investors in the form of a “hard money” loan. These investors consist of small to medium sized banks and even wealthy individual investors and partnerships that are looking to make a higher than market rate of return by investing in real estate notes. But these investors will demand a premium for the loan since . Many buyers can expect to make large down payments (20-30%) and pay much higher interest rates (7-14%). And they don’t always offer 30 year fixed mortgages either. Some may amortize the payments over a 15 or 30 year schedule, but require a balloon payment in a shorter amount of time (perhaps 5-10 years).

So the real question that many people are asking is whether or not reduced documentation loans will make a comeback in the “mainstream” mortgage market (meaning loans at affordable rates that are available nationwide through large banks and entities such as Fannie and Freddie). Nobody knows the answer to this question for sure, but almost everyone agrees that three things must happen for them to make a “comeback”, so to speak:

• Real estate values will have to stabilize for a period of at least one to two years.

• Large financial institutions and banks will have to stabilize and return to a profitable state without having to solicit help from the Federal Government and/or the Federal Reserve just to survive.

• Foreign investors will have to regain confidence in Wall Street’s ability to accurately manage and price the risk of reduced documentation loans.

This last one might prove to be the hardest part. The problem with the last few years is that investors thought they were purchasing good quality mortgage securities when, in fact, they were buying very high-risk reduced documentation loans. Wall Street pulled the wool over investors’ eyes. The risk was not priced accurately, and investors lost their shirts. Now many of these foreign investors that were so willing to dump billions and even trillions of dollars into the U.S. mortgage market are choosing to put their money into safer investments. Quite simply, THEY DON’T TRUST THE ABILITY OF AMERICAN FINANCIAL INSTITUTIONS TO ACCURATELY PRICE RISK. And everyone knows that trust is not something that you can set a timetable for. If you ask me, it will be at least two or three years before any reduced documentation loans are available at large financial institutions.

If reduced documentation loans are ever to be available again, lenders will have to reconstruct their underwriting models in a way that accurately prices the risk (and therefore the retail rates and terms) of those mortgages. There are plenty of self-employed individuals with higher net worths that certainly deserve to get a loan at a fair market rate, but there are simply no large institutions that offer these loans because the underwriting models of the last several years have proven to be faulty. Unfortunately everyone has to suffer because of the mistakes of Wall Street.

For now, buyers who can’t prove their income will have to settle for loans with large down payments and higher interest rates.

Get the latest information about credit reports, credit scores, mortgage credit tips and credit repair, visit our site at www.4bestrate.com

All personal bank deposits in the United States are insured up to $100,000 by the Federal Government. Despite the recent turmoil in the U.S. banking system, not one depositor with deposits of less than $100,000 has lost a dime at any bank in the United States.

Having a good credit history is one thing that’s essential to living the “American Dream”. Your credit score and credit report is looked at by more than just lenders. Many insurance companies, employers and landlords will use information obtained from a credit report, including your credit score, in order to determine your eligibility for products, services and employment. Opening a bank account is the first step towards building a good credit and banking history. The next step will be simply paying your bills on time and learning how credit scoring works.

Here are some facts about banking and credit in the United States that might be of interest to new immigrants:

• If you are a foreign national without a social security number, you can open a bank account in the United States. It’s a common misconception that you have to have a social security number to have a bank account here. That is not true.

• And believe it or not, you don’t have to have a social security number to start building a credit history either. Credit bureaus can use names, addresses and dates of birth to link information to individuals. Of course, many creditors may not extend you credit without a valid social security number.

• The social class system does not have any effect on how you will be treated by a bank or a creditor. There are many State and Federal laws that protect individuals from discrimination based on race, gender, national origin and sex.

Despite the fact that you don’t have to have a social security number to open a bank account or to start building a credit history, you will have to have, at the very minimum, a valid work visa with a taxpayer I.D. number in order to obtain a mortgage. Over the past few years, the few mortgage lenders that allowed undocumented workers to obtain mortgage loans have all but ceased to originate loans.

But having said that, you should make a special effort to open a bank account and build whatever kind of credit history you can so that when you finally get a work visa, you can be one step ahead of the game if you want to purchase a home. Mortgage lenders look at much more than just your credit score. You will typically have to have cash verified in your bank account for at least two months for it can be used as a down payment on a home.

It’s important to realize that you aren’t considered “subprime” just because you don’t have any credit history in this country, even though many lenders may deny you credit because you don’t have a credit history. Having no credit is way better than having bad credit. But since many lenders will not extend credit without a credit history, you must first learn how to establish credit without actually having any to begin with. The easiest way to do this is to get a secured credit card. Secured credit cards require a savings deposit equal to the amount of the credit line. They are very easy to get approved since the bank essentially has no risk.

Once you establish a secured credit card, you should have an actual credit score after about six months. The credit bureau scoring model requires at least one account with a six month history in order to generate a credit score.

For more information about credit reports and scores, visit our main site at http://www.4bestrate.com

First off, there’s no truth to the rumor that marrying someone with bad credit will automatically ruin your credit. There is an exception to this, though: If your spouse happens to have a tax lien or a judgment against them, it’s possible that lien or judgment may become a problem for you down the road, especially if you buy property together. This is especially true in community property states because they require the homestead of the couple to be titled in both names.
So even if your spouse isn’t actually obligated on the mortgage itself, they will be in title to the property. Once the IRS discovers this, they can attach the lien to that property and you will have major issues to deal with. The same holds true for some judgments and other forms of tax liens, but the laws governing these vary from state to state, so check with an attorney if you aren’t sure.

But it’s still important to know your spouses credit and financial situation before you tie the knot. I’m no psychologist, but it’s a documented fact that over 50% of marriages end in divorce, and financial problems are the #1 specific reason why couples split up. There is no way to predict the future, but there is a way to plan and be prepared for your financial life together.

For starters, each of you should show the other their credit report and credit scores. And discuss your long term financial plans and goals. Are you both conservative? Or does one of you crave a 70K BMW while the other will be happy riding the bus to work? These things are important.

In addition, you should discuss any major financial setbacks in your life, ESPEICALLY judgments, tax liens, bankruptcies and foreclosures. Since those can do the most damage to your ability to borrow (and possibly cause major problems with future purchases and finances), they should be the first things that are openly discussed.

You should also mention whether or not either of you have co-signed any loans for friends or family and how this might affect your credit down the road. Are they short term loans? Or did one of you co-sign on a 30 year mortgage? Again, these are important things to discuss.

And last but not least, consider keeping the majority of your accounts separate once you do get married. If you have joint credit and go through a divorce, a divorce decree will not absolve you of responsibility or liability on joint accounts. Unless those accounts are closed or refinanced, they will continue to show on your credit report. If you do get a divorce, make sure you get an attorney that understands credit very well. Also, remove yourself from any “authorized user” accounts if you have them with a spouse, and remove your spouse as an authorized user from any of your accounts. An authorized user can be removed from an account relatively easy, whereas a joint account usually must be closed or refinanced in order to release the liability.

Also, there is often no need to have everything in both of your names anyway. There are actually some other major advantages to this (besides the fact that it will be easier to split things up if a divorce ever happens). For starters, it may help reduce your individual debt-to-income ratios, which may come in very handy if you plan on purchasing a home in the future. Mortgage lenders do not always consider the debts from both spouses if both of their incomes are not used to qualify for the loan. And also, if a financial hardship occurs down the road, it might be smarter to keep paying the bills that are in one spouses name while the debts in the other spouses name are paid late. This way, at least one of you will keep a good credit score. If your car payment is in both of your names, then both of your credit scores will drop if the car payment is ever late. Then you both have problems. Why have a financial setback drag you both down if you can manage to still pay half of them on time?

In addition to these suggestions, you should also evaluate your long term financial goals and plans. It doesn’t make much sense to enter into a lifelong commitment without at least an idea of what you want to accomplish financially in your lifetime. This doesn’t mean you both have to have dreams of becoming filthy rich, but having a plan on how to maintain your standard of living once you reach retirement age is a must for anyone over 30 years old. With the projected budget deficits in Medicare and Social Security over the next 20-30 years, there is a good chance that they will have to endure some drastic cuts at some point to keep the U.S. from defaulting on the national debt. This is not a popular topic with many people right now, but it’s certainly going to have to be dealt with in the lifetimes of people that are in their 30′s right now. You might want to opt for skipping that fancy BMW in exchange for some aggressive, early retirement planning and hardcore money management.

Please visit 4bestrate.com for more information on how credit scoring works and how to obtain your 3-in-1 credit report and credit scores.

One of the most misunderstood pieces of the credit scoring puzzle is how credit card balances affect the credit score. The credit bureaus typically add and subtract points based on the total balance relative to their respective credit limits. In other words, the percentage of the credit limit used is often more important than the actual amount owed on the account. The credit bureaus tend to add or subtract points based on a tiered scale that changes whenever the balance goes over or under 25% incriments. So having a credit card with a balance over 25%, 50%, 75% or 100% of the limit will trigger changes in the credit score.

As an example, let’s assume you have a credit card with a balance of $600 and a limit of $1000. The balance is 60% of the credit limit. Since that’s over 50%, it will tend to lower your score. Suppose you pay $200 on the account, dropping it to below 50% of the credit limit. This would raise your score, and probably quite a bit in most situations (credit scoring models take many different factors into account, and the amount of the increase will depend on other factors). However, if you piad $400 on this account, the credit limit would drop to below 25% of the credit limit, which would raise the score even more than just paying it down to 40% since you’ve dropped it below another one of the 25% benchmarks.

On the other hand, if you ran up the balance to $800, that would tend to lower your score even more since you pushed the balance above the 75% mark. And if you maxed out the card to over the limit? That could cause your credit score to drop substantially.

So the bottom line is that you need to make an effort to target the balance where it’s under 75%, 50% or 25% of the credit limit. The lower, the better.

HERE’S ONE IMPORTANT THING TO REMEMBER!
Don’t assume that paying off your credit cards every month will mean the credit bureaus calculate your score with a zero balance. Credit card companies only report to the credit bureaus once a month, and this tends to be at times when the balance is at or near the high point of the month (close to or on the day the billing cycle ends). So if you happen to run the balance of your credit cards over 50% of their limits in any given month, there’s a good chance that balance will be the one that is shown in your credit file. So it’s a good idea to ALWAYS try to keep the balance at or below 50% of the credit limit, even if you plan to pay down the balance when the bill comes. Quite simply, you have no control over when your credit card company will report the balance to the credit bureaus.

Credit card balances are just one of the many factors that determine your credit score. The most important factor is your payment history, so don’t ever miss a payment on an account in order to pay a large payment on another account in hopes that this will raise your score. The damage caused by the late payment can be far greater than any improvement you will see from paying down a credit card.

Visit 4bestrate.com for more information about credit reports, credit scores and how they affect your ability to get a mortgage.

Mortgage money is extremely cheap right now, and rates may never be this low again. Of course, much of the public has likely become conditioned to believe the low interest rates are normal. After all, there have been thousands of radio, television and internet advertisements proclaiming “record low” rates for the last several years.

There are several reasons that interest rates have stayed so low for so long. The U.S. Treasury and the Federal Reserve began “manipulating” mortgage rates in late 2008 by purchasing mortgage-backed securities in the open market in an effort to reduce the supply, and thus lower rates. They did this in an effort to lower the borrowing costs for Americans purchasing homes to help buy up the oversupply of properties on the market due to the mortgage crisis. However, this program was recently ended on March 31, 2010, so rates may be going up soon. It was estimated that the government was purchasing more than 80% of the mortgage bonds on the open market.

Also, many other government programs, such as the program to purchase Treasury securities, have kept other interest rates low as well, which has trickled down to mortgage rates.
The fact that many institutional investors have also chosen to park their money into bonds instead of risking it in the highly volatile stock market has also helped to keep interest rates low over the course of the last two years. But many investors are starting to move their money back into other investments, such as stocks and commodities, as the larger investment community seems to feel that a bond bubble may be taking shape.

The fact is that interest rates will not stay this low forever. And consumers that are “sitting on the fence” waiting for the possibility that home prices will continue to fall should consider the fact that higher mortgage rates may negate any possible savings they may get if values do continue to fall. And home buyers in the Dallas Fort Worth area might be surprised to hear that home values have only dropped in their area by a few percentage points compared to 2006, which was the height of the real estate boom. The D/FW market is remarkably stable compared to many other areas of the country and many economists feel the likelihood that values will fall much more in D/FW is unlikely.

Visit 4bestrate.com for the most up to date information on credit scoring, credit reports, mortgages and other helpful articles about how your credit score may affect your mortgage rate.

The credit requirements for “major purchase” loans (cars, mortgages) are becoming stricter every day, so it’s important to establish a solid credit history with smaller accounts like credit cards. But make sure you avoid making these mistakes:

Once again, we strongly recommend building your credit history with a secured credit card. Opening a new credit card may initially lower your credit score, but once a payment history begins to develop, the score will increase over time.

Visit our main page for the straight dope on credit scores, credit reports, home loans and secured credit cards!

Credit card companies will usually not tell you what their minimum credit score is, but keep in mind that they may base their decision on other factors besides just your credit score (such as income, job history, and the balances you have on other credit cards)

Secured Credit Cards Versus Unsecured Credit Cards

If your credit is bad or you just don’t have any credit history at all, you will probably only be able to get approved for a secured credit card. But don’t worry, secured credit cards are just as good (if not better, in many ways) than unsecured cards.

For starters, virtually anyone can be approved for a secured credit card since the card is secured with a cash deposit. And secured cards function just like regular credit cards. In other words, the word “secured” is not printed on the card, so nobody but you and the credit card company will ever know it’s secured.

Also, they often carry lower interest rates than unsecured credit cards. And if your goal is to viagra your credit history and obtain an unsecured credit card one day, then you’ll need to build a good credit history in order to do that.

Secured credit cards typically report to all three credit bureaus, which is imperative if you want to build a good credit history. Debit cards and prepaid credit cards do not usually report to the credit bureaus, so don’t assume they will help your credit score at all.

Department Store Credit Cards

Most department stores and retail stores require that you have at least one major credit card before they will approve you for one of their cards. In addition, they will typically require a certain minimum credit score, often between 620 and 700. Be careful not to acquire too many department store credit cards. They usually only come with small credit limits, and it’s easy to run those up which may inhibit your ability to obtain other types of credit and even lower your credit score. Start with a major credit card, and if you can’t get approved for one, get a secured credit card.

Finance Company Accounts

These can be very tempting to get because the credit requirements are typically lower. But the credit bureaus know this, and as a result, they may penalize you for obtaining too many finance company accounts. They really don’t help your credit history nearly as much as having a major credit card (secured credit cards fall into the category of major credit cards). If you really need something from a finance company (new furniture, etc), it’s best to charge those purchases on a major credit card (or just pay cash if you can!).

Finance companies, such as rent-to-own stores and other companies that may provide title loans, typically charge outrageous interest rates, and it may be very hard to deal with them if you have a billing dispute because they control both the product and the financing. If you make a purchase on a major credit card and have a problem with the merchandise (damaged, not delivered, or doesn’t work properly), a credit card company will usually remove the charge and handle the dispute on your behalf. The process with finance companies is usually more difficult.

For more information, visit our credit cards section.