Debt Consolidation Vs. Debt Management  For Better Credit Rating

A debt consolidation plan, to improve credit rating, consists of taking out a new all inclusive loan to pay off several existing loans in order to make payments more feasible. An example would be taking out a second home mortgage or a home equity line to pay off say an existing mortgage, a vehicle loan and a student loan. However, you must remember that the debt consolidation plan does not reduce your initial balance, it just consolidates it.

A debt management plan is usually devised by debt management services who negotiate the loan terms with your creditors and attempt to reduce your interest rates and payments. However, if you apply for a new credit line later, you might have some trouble. In most cases, using a debt management plan is treated the same as filing for chapter 13 bankruptcy. Creditors become wary of lending more money to you as they perceive you to be overburdened already. While the debt management plan might help you lower your debt, it comes at a price.

Debt Consolidation Loan To Improve FICO Credit Rating

A debt consolidation loan does nothing to harm or improve your FICO credit rating in the short run as the credit agencies look at your entire credit line as a whole which remains unaffected.  However, if you make payments on this new loan consistently then eventually the debt consolidation plan will help you improve your credit rating. Besides improving your FICO credit rating score, a debt consolidation loan reduces the number of payments you need to make and groups them into one single payment. Thus it becomes easier to keep track of and make the payments on time.

Debt Management Without Debt Consolidation Loan

Debt management is possible without having to apply for a debt consolidation loan. In such a case, a debt settlement might be reached with the creditors in order to decrease your debt. It may reduce your Interest rates, minimum monthly payments and future late fees. In some cases this leads to a major setback to your credit rating score but unlike a debt consolidation plan or loan, you do not take on further debt to do so. It eventually helps you to pay off your debt much faster and pay lesser than you owe currently.

Improve Credit Rating Score With Debt Settlement

A debt settlement or debt consolidation plan can be beneficial to one in many ways in order to improve your FICO credit rating score. The main aim of these service providers is to help you lead a debt free life eventually. A Debt settlement/Debt consolidation plan could help you rebuild your credit rating score by:

• Decreasing interest rates drastically for the balance owed
• Eliminating future late fees
• Creating one easy payment making it easier to keep track of
• Paying off your debt faster.

Even though Debt Consolidation/Debt Management  plans come with their pros and cons, if chosen correctly they might prove beneficial to you to become debt free and eventually improve your credit rating and create a good credit report.

Get Free Credit Report – Quick Consumer Credit Guide

Every US citizen is entitled to free copy of their annual credit report from each of the three credit bureaus. This can be done in three ways:

1.      ONLINE: Visit the website www.AnnualCreditReport.com. Please be aware that this is the only authorized website through which consumers can access their credit report for free and others are likely to be “free” credit report scams.

2.      PHONE: You can call the hotline at 1-877-322-8228. However please bear in mind that free annual credit report requests over the phone take about 15 days to process.

3.      MAIL : If you wish to order your credit ratings history by mail, complete the Annual Credit Report request brochure and mail it to Annual Credit Report Request Service, PO BOX 105281, Atlanta GA 30348-5281

Please remember that consumers are entitled to only one free credit report each year and each additional request incurs a charge of about $10.00. In addition to this, please also keep in mind that approaching a consumer credit agency directly will also incur a charge.

Order Free Consumer Credit Report – Advantages

Even though it is free, many consumers do not order their free consumer credit report because they believe it is pointless. However, regularly checking one’s credit rating history has several advantages, some of which are:

• Credit Report Errors: Viewing your free annual credit report regularly will allow you to pick up on any discrepancies and credit report errors that might have crept in to your credit report such as:- Payments not being credited to your accounts
  - Incorrect defaults shown on your account
  - Credit applications or enquires not applied for
  - Incorrect bank judgments and defaults, etc

• Viewing your own Credit Ratings Score: Obtaining your own credit ratings history enables you to view your own credit score and thereby see your credit standing

• Identity Theft : Viewing your annual credit report frequently could protect you against identity theft. Identity theft has been growing at an alarming rate in the country and it might be a good idea to ensure that you are not a victim. In fact, identity theft victims legally qualify for free credit reports at any time of the year.

Adverse Circumstances – Obtain Free Consumer Credit Ratings History

Apart from identity theft, certain other adverse circumstances qualify a consumer for a free credit report which can help them view and if necessary, improve their consumer credit history.

• Negative Outcomes: If you have been denied credit or employment based on adverse comments in your credit ratings report, you can obtain a free credit report within 60 days of receiving notice of the action.

• Unemployment: In case of unemployment, consumers are entitled to a free credit report within 60 days from the date that they lose their job. Under these circumstances you are only allowed one per year.

It is recommended that consumers review their credit reports quarterly or half-yearly as it has been found almost a quarter of all consumer credit ratings reports contain errors. By regularly obtaining and viewing your free annual credit report, you can prevent and rectify errors in your credit ratings history to improve your personal credit ratings history and maintain a healthy credit standing.

Alison had a credit card with a credit institution. Although Alison had been very regular with her payments, owing to a system error, her payments were not recorded and were being credited to another account. Her account showed defaults for over two and half months. Alison was completely unaware of this, till she applied for a mortgage. Her application was rejected owing to her repayment history.

She eventually took this up with her credit card company and had the issue resolved, but was unaware that the credit card company had not informed the credit bureau and these listings stay on your report for a five year period.

Credit Report Error Examples

Alison’s credit report error story is not an isolated one. Some common examples of credit errors are:

• Payments not credited to your accounts.
• Default interest wrongly charged to your accounts.
• Incorrect account set-ups there by causing payments to come out early and placing your account in arrears.
• You do not have any dealings with the lender listed.
• The listing on your credit report was over 5 years ago.
• The same credit default has been recorded multiple times.
• The debt default listed had nothing to do with you and you have not acquired the debt.

These are just some examples of the kind of credit errors that may creep into your credit report.

Improve Your Score with Correct Information

In addition to the five elements such as payment history, balances owed, new credit applied for, types of credit and length of credit history, your credit report also records the following:

1.       Your name (including previously used names)

2.       Your address (including previous addresses)

3.       Court judgments.

4.       Dishonored cheques.

5.       Bankruptcy orders etc.

To improve your score the first thing you must do is ensure all the information on your credit report is absolutely accurate. Also it is important to know what is included in your score and which companies report to credit bureaus before you wage a battle with creditors and credit bureaus because sometimes what might seem like a credit error to you might actually be a rent default you had forgotten about.

Credit Report Repair – Get Rid of a Credit Error

The next issue is to solve any credit report errors that might have occurred on your score. Follow some of the steps below to improve your score and repair your credit report.

• Obtain a copy of your credit report regularly (as often as six months if need be) to ensure that no unwanted listings and credit errors have occurred.
• In the event that there is a listing that has wrongly appeared on your credit report, get in touch with your credit provider disputing the credit error and question the credit report error immediately.
• In certain cases the credit provider might have an external resolution system and in that case you might to file a credit error complaint with them to improve your score.
• Finally if none of the other avenues work, talk to the appropriate credit bureau and raise the issue with them by lodging a formal complaint about credit report errors and how it is affecting your score.
• The Federal Trade Commission regularly handles complaints about credit errors so you could complain to them to restore your score.
• Be prepared to fight a legal battle if necessary. This is your credit report and you should not take credit errors lying down. If a creditor will not fix a credit report error, inform them you are willing to hand over the matter for your solicitors to manage.
• If you are unable to repair your credit report alone, seek advice from a credit repair company but be careful as there are several scams out there.

For poor credit rating customers, getting a good credit interest rate is becoming a bigger problem during the recession. One fact to remember is that your individual FICO credit score has a directly proportional relation to the credit interest rate that will be offered to you (i.e. the better your FICO score the better the credit interest rate).

Getting the Best Interest Rate For Poor Credit Rating Consumers

Every consumer wants to get the best interest rate but for poor credit rating consumers, sometimes this becomes hard. It is therefore important to understand how much your FICO credit score affects your credit interest rates.

Every credit contract contains a certain element of risk within it. There is the risk that the customer will not repay the contract. In order to compensate this risk, lenders/financial institutions charge a higher credit interest rate to customers with a low FICO score. The philosophy behind this is that, clients with bad credit and lower FICO credit scores tend to carry a default risk.

FICO scores usually range from about 500-850, needless to say 850 being the best and 500 the worst. The chart below shows the relative credit interest rates you might be charged on a basic mortgage corresponding to your FICO credit score.

Bad FICO Credit Scores, High Credit Interest Rates

In the wake of the global financial crisis financial institutions are tightening credit policies like never before. They are lending less money even to those consumers who have good FICO credit scores making it harder for poor credit rating consumers to get the best interest rates. Financial institutions are now looking at things like default percentages corresponding to your FICO credit score. For example an accepted industry statistic is that consumers with a credit score of 750-760 usually have a default / arrears rate of 0.18%-0.20%. On the other hand for poor credit rating consumers with a FICO score of 540 or below the chances of a default are significantly higher as they stack up at nearly 20% or in other words nearly one out of five consumers with bad credit are likely to default on their payments. This is known as the risk rate and since consumers with bad credit are likely to have a higher risk rate, they usually end up paying higher credit interest rates as well.

Best Interest For Poor Credit Rating Consumers

Therefore, in order to improve your FICO credit score and become eligible for better credit interest rates you could take some of the following steps:

• Make sure you keep up with your credit contract repayments and make them on time.

• Get credit only if you need it and make sure that you do not accept any and every credit card limit increase that is offered to you.

• Keep you credit card and store card balances low as this can hugely affect you FICO credit score.

• Try and reestablish your credit worthiness if you are a poor credit rating consumer. Catch up on your missed payments and defaulted accounts, should you have any. Reestablishing your FICO credit score can go a long way in getting you the best credit interest rate possible.

A few simple steps can help vastly improve your FICO credit score and translate to getting you a better credit interest rate which in turn will save you a lot of dollars as far as far as repayments are concerned. When you start improving your FICO credit score, you automatically become a less risky customer and this will enable you to get the best interest rates on any credit contract.

If you have anything less than a perfect credit rating and credit score then your chances of getting credit of any kind will be next to impossible. You will probably have made the mistake of applying to many different lenders with the hope that one will say “yes”, however this will have only made matters worse when it comes to affecting your credit rating. However bad and for whatever reasons your credit rating is in trouble there are ways that you can mend it and put it right so you score higher. Your credit rating and score is what are taken into account every time you apply for a loan, mortgage or credit card, even a store card and you have to score a certain amount otherwise you will be seen as a bad risk and as such will be turned down for the loan. If you have a low rating you could still be offered a loan but you will be paying way over the odds when it comes to the rate of interest.

There are companies that claim to specialize in repairing your credit rating but these can do nothing for you that you cannot do yourself. When it comes down to setting your credit rating back up then the simplest and easiest way without it costing you a penny is to do it yourself.

The first step you should take is to obtain a copy of your credit report, this way you can see for yourself the state it is in and also what the lenders see when you apply for a loan. Sometimes there are mistakes which are no fault of your own on the report but which affect your credit rating and of course these should be dealt with and you should get the corrected as quickly as possible in order to start building back up your credit rating. This will cost you money and it does vary from state to state but on average it shouldn’t cost more than $10 for you to see what others see about you. The next step to take to bring back your credit rating is to ensure that all payments for debt that you currently have are brought back up to date immediately. If you are having serious problems with paying off your debt then it is essential that you contact the lenders and see if you can come to some sort of agreement for making reduced repayments. As long as you are paying and are seen as doing everything to take steps to clear your debt then this will go a long way in your favor.

If you have credit cards then cut them up, this will stop the temptation to use them and add more debt, the more debt you accumulate the more is shown on your credit report and this is exactly what you don’t want when trying to rebuild your credit rating and score.

Repairing your credit will take time, it won’t happen overnight but you can do it if you use some common sense and are determined to break free of debt.

If you have a low credit score and bad credit rating then you probably have realized by now how hard it is to get credit of any kind. The chances are that you have applied time and time again and will have been turned away from every single lender; if this is the case then you could be tempted to shell out even more cash in return for your credit rating to be repaired.

There are now more companies than ever online who claim that for a “small” fee they can repair your credit rating and so make it much easier to get yourself a loan. However one thing you should remember is that no matter what a company such as this claims that it can do, no matter how much money you pay them they cannot do anything that you yourself cannot do. When it comes to repairing damaged credit ratings then this much is true but this is the only thing that is true and better yet you can do the same things without having the need to pay someone else to do it for you. All that a company does that offers you the chance of repairing your credit rating is preying on your vulnerability, the worst of these types of companies will even charge you thousands of dollars and they simply cannot the impossible no matter how much they charge or claim they can. For instance if you have got CCJ`s on your credit rating record then these cannot just be removed, anything else can be improved but it takes time and you can take the steps that are needed yourself to bring your credit rating back up to scratch. If anything by going with such a company you will only be shelling out money that you can ill afford to do and even get into more debt in the process.

A far better solution to get your credit rating and score back up where it belongs it to try and improve your rating yourself along with taking advice from a credit counselor. A credit counselor is totally different and they can give you excellent advice on debt matters and ways of bringing your credit rating back up. There are some that will charge you a fee for doing this but then there are some free one around so it essential that you shop a round and find one that provides quality advice but which wont cost you a penny.

Never be conned into thinking that anyone can remove any negative factors from your credit rating report, any claims that they can do so are pure lies. Shady companies such as these have been under investigation and while they aren’t all to be classed as charlatans they certainly cannot work miracles and repair your credit rating instantly as some claim they can.

To avoid falling prey to one of the scams then do things the right way and do it for yourself.

Your credit report is what determines how successful you will be when it comes to applying for and getting credit and there are many different factors which can all make a huge difference to your credit rating, including major events that have happened in your past. In fact almost any major event that has happened in your life can have an effect be it a positive or a negative one on your credit report and rating.

When it comes to your credit rating it can certainly seem like big brother is watching over your every move, factors and events that affect your credit rating include the places that you have lived, a marriage, a divorce and the ways that you have spent your time. Having an excellent credit rating is essential and once it has fallen it can take a lot of time to get it back on an even keel, so all major factors in your life have to be taken into account.

If you get married then this can have an adverse effect on your credit rating, particularly if you are the woman and will be making a name change. Unless you inform both the credit bureaus and those that have loaned you money you will lose your credit history altogether and has to rebuild from fresh. If you plan on joining forces when it comes to getting credit after you are married, then you would also be wise to keep individual lines of credit and thus separate credit ratings. If you do decide to join together for loans remember that you are both responsible for repaying the loan and your credit ratings will be affected.

If for whatever reason you should divorce then you will have to let the credit bureau and creditors know of this decision. This will ensure that the integrity of your credit report remains intact after the divorce is finalized and it is imperative that all loans are paid off that were took out together or that an amicable agreement has been reached between both parties regarding the repayments to stop this negatively affecting your credit rating.

Other major life events that can severely affect your credit rating include buying a home, a mortgage will significantly increase the total amount of debt that you have on your credit rating and if you should make late repayments or get behind on mortgage repayments then this has a devastating effect on your credit rating that can take years to rebuild.

Having a baby will also put a huge strain on your finances and affect your credit rating on the negative side as the amount that you pay out will increase. The death of a loved one can also affect your credit rating especially if you share a joint account and line of credit. In the majority of cases you will have to rebuild your own line of credit from scratch and until this happens you could find yourself turned down when applying for credit.

As no one knows what the future offers it is essential that you take into account major life changing events as you are very likely to face one sometime down the road. It is always harder to repair your credit rating than it is to lose it and this is something that needs to be given some serious consideration.

Beware of anyone who claims that they are “in” with the credit bureau and that for hundreds of dollars of your hard earned cash can wipe the slate clean for you and bring your credit rating up to scratch in the blink of an eye. Your credit rating can be repaired but it cannot be done this way, it takes time to repair your credit rating and score and the bureau will not take a “back hander” from anyone.

Another scam that is widely used is the promise that if you part with your hard earned cash then the company can convince the creditor that you really don’t owe them the money at all. While it would be nice if we could wave a magic wand and make the debt go away in reality we know that this simply isn’t true, however it can tempting but you should avoid the temptation of this scam.

“Not only can we clean your credit record but we can also get you a loan quickly and easily by using our contacts”. This unfortunately one of the newest and also the more costly of the many scams that is travelling around at the moment, as the unsuspecting person is so desperate to get a loan they will often fall for the promise that not only will they be able to get the loan after being turned down elsewhere but also that their credit rating will be cleaned and they can start from fresh. The majority of these are nothing but conmen who will take your money upfront not only for the promise of repairing your credit but also take part of the money for the promise of a deposit on a loan.

Beware of those companies that if you call their special 900- number you will be able to get your credit rating fixed by taking their essential information that no one else but them knows. The truth of the matter is that this number is often a huge amount of dollars per minute and the person on the other end will offer you information is nothing more than you would be able to find yourself quickly and easily online while racking up a huge amount of money on the phone call.

Your credit rating can be repaired but you can do it yourself and the only thing that costs you will be the fee for your own credit report.

On the other hand your credit score is a number which is assigned to you that shows a lender how big a risk you are determined to be when applying for such as a loan, mortgage or credit card. The higher the number then the less of a risk you will be seen and you stand a better chance of being approved and the lower the number the chances of you getting credit are very slim until you take steps to repair your credit score. Your credit score is just as essential when it comes to the difference between you being granted or rejected for credit as this is a quick and easy method for the lender to assess how big a risk you are. Credit scores are generated by a computer based on the factors of your credit report and is based on the fact that your past can predict your future. If you are going to be applying for credit then it is essential that you have a high credit score so it is essential that you are familiar with both your credit score and your credit rating to improve your chances and not have the uphill struggle of repairing your credit rating.