Financial Future

Having good credit is essential in today’s world. Acceptable credit will generally get you what you want, but bad credit can be the kiss of death. If you want a house, you need a mortgage. If you want a car, you’re likely going to take out a loan. Anytime you apply for credit, the lender is going to pull your credit report to determine whether or not you are a good credit risk. Not everyone is a good credit risk—but there is something you can do to make sure you become one.

Millions of Americans have poor credit, and many are in debt because of high interest credit cards. Credit card companies often target low-income families by providing them with high interest credit cards, but they aren’t the only ones to fall in debt’s trap. In fact, one million Americans file for bankruptcy each year. Bankruptcy isn’t the answer for everyone, but there are several things you can do to get your credit healthy again.

First, make a budget and stick to it. Save money by clipping coupons, buying items on sale and not eating out as much. Don’t buy something on a whim. Go home and think about it first. Chances are you’ll never go back. Remember, buy only what you need.

The money you save can be used to pay back debts. If you have problems paying your bills, you should call the creditor immediately. If you ignore your mortgage bills, you can face foreclosure and the loss of your home. Most lenders will work with you to help you get caught up on your bills and allow you to keep your home. However, if you default on your car payment loan—even if it’s late on a given month—the lender has the option to just repossess the car. Staying on top of your debts will help you on the path to good credit.

You also want to get a copy of your credit report from one of the three major credit bureaus: TransUnion, Experian and Equifax. Your credit report includes your personal information, your accounts, your credit history and whether or not you’ve defaulted on an account. Review the credit report carefully, looking for any errors pertaining to your personal information. Also, look at each of the financial statements to determine if there’s a credit card you’ve already closed, a debt that shouldn’t be there or any other mistake. Contact the credit bureau immediately if you do spot any errors.

A lender determines if you’re a good credit risk by looking at your credit report and analyzing your credit score. Most people have a credit score anywhere from 300 to 750. Anything 650 and higher is considered good credit. Anything below means you’re on shaky ground.

Remember the key to creating and maintaining good credit is to pay your bills on time, and always call the creditor if you find yourself unable to pay the total bill to see if they can help you work out a plan to help you get back on track.

Because credit is something that is so important, but also sometimes confusing, we are going to lay everything out for you, in simple terms.

We’ll also show you how to get the credit you deserve, how to make the most of your credit, and ways to improve your overall credit rating, no matter where it is now.
For years, the conventional financial wisdom was “credit cards are bad.” We were told that cutting up our credit cards was the only way to free ourselves from debt-ridden indentured servitude. People needed to “live within their means,” and if credit cards were ever to be used, it should be “only in the case of an emergency.”

This conventional “wisdom” turned out to be not only untrue, but hurtful to those who listened to it. The truth is that credit cards are our friends. They are our allies in building credit. How easy do you think it is it to qualify for a home loan when you’ve never even had a credit card? Responsible credit card usage shows potential lenders that you’re able to manage your finances. What’s more, an intelligent credit card user turns the interest game on its head, and actually uses his credit cards to give himself interest-free loans.

Use Your Credit Cards to Earn Money For You

In order to get the most out of your credit cards you need to use them, and use them frequently. If you have two cards with $500 limits, you might want to nearly max them out each month. Set one card up to pay your recurring monthly bills (cable, cell phone, auto insurance, etc.), and use the other one for gas and grocery purchases. If you have cards with much higher limits, say $5,000 or $10,000, then maxing them out each month probably isn’t a good idea, but you should use your credit cards to the fullest extent possible – and you should pay them in full every month.

Say you have a $90 cable bill due on the 3rd, a $110 cell phone bill on the 12th, and $150 in auto insurance premiums due on the 15th of each month. You “pay at the pump” using your credit card on the 4th, 11th, 18th, and 26th, spending a total of $165. That’s a total of $515. But here’s the beauty – your credit card company sends your statement on the 1st, but doesn’t require payment until the 15th. This means that the charges of $515, some of which date back to the third day of the previous month, aren’t due until the 15th of the next month. Since interest is only charged on the unpaid portion of your monthly balance, this represents a month-and-a-half interest-free loan! If you have a $1,000 credit limit (or two $500 credit cards), you can continue charging on the card into the second month before ever paying for the first month’s charges.

What’s the big deal? Well imagine you had $1,000 sitting in a money market savings account yielding 5 percent. Your money would be earning interest for you. In essence, you would be earning money each time you used your credit card.

Balance Transfers – Another Way to Turn the Credit Card
Game on its Head

If you have a higher credit limit, credit cards can be used for the short-term financing of larger purchases. Say you had a $10,000 credit limit and you wanted to buy a new sofa for $2,500. The financing options at furniture stores are normally rip-offs, so why not finance the purchase yourself? You could have an interest-free loan for up to 45 days (maybe 60, depending on your credit card’s “grace period”), during which time you could save the money to pay off the entire amount, or at least a portion. And the best thing about your mailbox being constantly flooded with credit card offers is that oftentimes you can transfer existing credit card balances to new cards with introductory interest rates of 0 percent!

For example, imagine you purchased a used car for $9,000 – completely on your credit card. Conventional wisdom would say this was a terribly foolish thing to do, but you know better. You have already been offered and approved for an additional card with a $10,000 credit limit, and an introductory interest rate of 0 percent for one full year. After making one payment on your existing card’s balance, you transfer $8,500 to your new card, where you can pay it off in full with 12 payments of $708 – all principal, no interest. After that, you’ll own the car, debt-free.

If the $708 was too much for you, you could pay less each month, of course. An even riskier, but potentially rewarding strategy would be to pay as little as possible on the new card, and then hope for another 0 percent introductory offer coming in the next year. There’s nothing illegal or even unscrupulous about playing the credit card game this way – it only makes financial sense. Credit card companies exist to make money from your mistakes, but if you’re a vigilant consumer, you can invert the game and make money for yourself! What’s even better, if a bit strange, is that the credit card companies will find you all the more desirable. So the next time you read an article in which the financial guru tells you to tear up your credit cards, do yourself a favor and tear up the magazine instead.

James
http://www.CC-YES.com

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When you receive a credit card, you will want to carefully follow an outlined budget for your entire household. Yes, this is easier said than done, however, if you fail to follow a strict budget and do not carefully plan the expenses of your credit card then you could fall into the same trap that many all over the world have fallen into, and become in serious financial debt. If you use a credit card as it was intended for use, for emergencies or traveling, then you may find it much easier to maintain financial stability. However, if you choose to use a credit card as a personal ATM or for every purchase large or small, you could find yourself in deep trouble. Here are some tips you can use to budget and protect yourself against falling in the large hole of credit card debt.

No matter if a person has a credit card or not, it is a wise suggestion to never spend more than they can afford. The best advice anyone can offer is to use your credit card as if it were cash. This is because no matter how much you charge, you will still have to pay it back with additional fees. Many people have begun to use their credit cards for shopping at the grocery store, in addition to using them to buy things they really could not afford to with cash. This is where many begin the downfall into financial debt, even with all the excellent deals and promotions that appeal to you, with the interest rates the credit card charges you will not be getting those deals and likely end up paying more.

All credit card companies issue you a credit limit; it is common that people see this as their money and the amount they can spend on a monthly basis. It is wise to think of the credit card limit as a short-term loan and that you have to repay at the end of the month. This is a great piece of advice because if you let the balance roll over you will have a good deal of interest piling up and therefore that credit limit that you maxed out will come a good deal higher when you really have to repay it..

Making wise and informed choices is the best defense you have against falling into a large hole of financial debt. Create a budget and stick to it, repay the credit card balance on an every month basis and never spend more than you can afford in cash.

Bad Credit? Lose The Shame, Take Responsibility, and Begin Rebuilding

According to the research firm Sherbrooke and Associates, 43 percent of American households are “credit constrained.” This is probably because they carry too much current debt, or they were forced into making poor choices with their credit in the past. With interest rates rising and the housing market cooling, the number of credit constrained households is likely to increase. If you find yourself in a such a situation, know that you’re not alone.

Having excess debt and bad credit is a source of shame for many, and it has even been known to break up otherwise loving marriages. Many people who are credit-constrained feel there is no way out – particularly now that bankruptcy laws have been changed to make filing for bankruptcy more difficult for people with even average incomes. The truth, contrary to what most bankruptcy lawyers will tell you, is that bankruptcy is rarely the answer. You can dig yourself out of debt and repair your credit – all that it takes is commitment, discipline, and most of all, a new attitude.

Step #1 – Let Go Of Your Shame

Unless you fraudulently charged items that you had no intention of paying for, you need to let go of all shame related to your bad credit and debt. After all, the credit system is set up with the understanding that some people will be unable to pay their debts – that’s why lenders are paid interest, to compensate them for risk. If you buy a corporate bond and the company goes under, nobody feels sorry for you, so don’t let your creditors make you feel sorry for them. Just like buying a bond, your creditors took a financial risk by lending to you, and they didn’t do it out of the kindness of their hearts – they did it to make money. So long as you had every reason to believe that you’d be able to pay for your debts, you have nothing to feel guilty about.

Letting go of your guilt and shame is not the same as abdicating all responsibility. To one degree or another, you are responsible for your situation. To another degree, externalities – things in the outside world – are responsible. Take responsibility for your actions, but do not let anyone make you feel guilty or they will wield that guilt as a weapon against you.

Step #2 – Contact Your Creditors

Once you’ve let go of your shame and have committed to taking responsibility, it will be much easier to face your creditors. Explain to them that you’re over your head in debt, and while you want to honor your commitments, you would appreciate it if they would work with you to make doing so easier. Most of the time, your creditors will be more receptive than you would imagine – after all, they’re used to people in your position ducking under a rock and ultimately sticking them with the bill.

Your creditors may offer to let you skip a payment or two in order to help you get back on your feet, or they might offer to lower your interest rates. If you still have your accounts open, they might offer to suspend your credit while you pay off the balance in principal only at regular monthly intervals. Finally, they may offer to settle your accounts at less than the full amount due if you pay in one lump sum.

Step #3 – Begin Rebuilding Your Credit

While restructuring your payment terms, by all means, stop abusing credit. You need to work out a budget that will prevent you from finding yourself in this situation again. If you still have credit cards that haven’t been canceled, you should continue to use them – but make absolutely sure that you can pay for everything you’ve charged that month when the bill comes due. By doing this, you’ll keep a credit account active, which is good for your credit.

Many of these negotiated payment plans will adversely affect your credit – particularly settling for less than the total amount due, which will be a black mark on your credit report for up to seven years. The fact is that negotiated settlements may still may be superior to falling deeper and deeper into debt, which could ultimately destroy your credit and lead to legal action being taken against you.

Once you’re back on your feet, be sure not to repeat the same mistakes you made in the past, but don’t swear off credit altogether, either. Just because you’re in bad shape now doesn’t mean that you always have to be. Open up a small credit account and pay your bills in full and on time, and in a matter of just a few short years, your credit can be just as good as anyone else’s. The sooner you start rebuilding after a near credit meltdown, the sooner you’ll be able to experience the security and peace of mind that the other 57 percent of Americans enjoy.

Stay safe.
From: James’ Desk

Many homebuyers choose adjustable rate mortgages for the initial financing on their home purchase. Rising interest rates and other terms can be confusing to the borrower.

Adjustable rate mortgages (ARMs) are loans in which the rate varies. Adjustable rate mortgages loans will follow how interest rates rise and fall. There are many reasons why a consumer might choose an ARM, but they can be risky loans.
One reason a consumer might choose an adjustable rate mortgage is the rates are generally lower in the beginning than a fixed rate loan. If you expect to be in your property for a short time, say for 5 years, then an ARM with the first 5 years fixed can be a good choice.

There are three main types of ARM loans offered by lenders. They include:
A 5/1 ARM loan is where the payment is fixed for 5 years adjusting for the remaining 25 years.
When you get a 3/1 loans payments are fixed for three years and adjust for 27 years.
The 2/1 ARM is fixed for two years and adjustable for 28 years.

An adjustable rate mortgage works like this. It is usually fixed for a certain amount of time initially, anywhere from 1 month, 5 years or something in between. After this period the loan then becomes adjustable according to the published “index”, such as LIBOR Prime rate, Cost of Funds Index, or other index plus a margin, which is the lender profit. If the index rises, your rate rises. If it lowers, your rates should fall. There is a lifetime cap on the amount interest can increase over the life of the loan.
What happens when there is a sudden higher mortgage rate?
You have some options when it comes to dealing with higher rates.

The most common is to refinance to a mixed rate mortgage. If you have enough equity built up and can afford the higher payments this is a good option. Watch out for prepayment penalties in your current mortgage. Be sure to know what the costs of refinancing are and how they will affect your loan.

Another option is the talk to a reputable credit counselor. They may be able to help you lower your payments, deferring the unpaid interest. This will increase your loan balance though. On other debts try to work out a lower payment plan to offset the higher mortgage payment. Or persuade your lender to agree to forbearance or have them postpone the increase to a future time when you will be able to pay.

You can also sell your home. List it with a real estate agent if you have the equity to pay commissions and costs of the sale. Or sell it yourself. Deed your house to the lender in a deed-in-lieu-of-foreclosure agreement. You will receive no money for your equity and your credit will be adversely affected.

Of course foreclosure is an option, but it’s not desirable. The worst thing to do is to do nothing.
When choosing an adjustable rate mortgage, be aware that rates could increase over the life of your loan. Your payments can rise and you may need to make adjustments in your other debt. If you plan on living in the home for only a short time, an ARM might be the best option in financing your new home.