Paul Ferraresi

The new credit card law was signed into law in May 2009. This blog has previously written about the new terms that will dramatically affect you.

Now the credit card companies have until February 2010 to implement the new Government changes, but, each company can begin to change their programs starting immediately.

You must read every monthly statement and the T & C (terms and conditions). Many people are finding their credit lines are being cut, interest rates increased and payment cycles reduced. It is what it is, so, check your statements each month.

Other people are doing “plasectomies” with chainsaws on their cards. Keep in mind if you eliminate your cards, it will eventually negatively affect your credit scores with no activity. Also, the old adage holds true … it is better to have credit and not need it, than, need the credit and not be able to get it.

If you want to get back at the card company … charge things and pay them off in full immediately. They hate that!!!

A strong credit score can save you thousands in interest expense over your lifetime. There are many myths about how to maintain a strong score. A score of 720 or above will give you access to some of the best interest rates.

There are 3 credit rating agencies … Equifax, Experian and TransUnion. They all produce their own FICO Scores (developed from the Fair Issac Company) with various permutations and combinations of formulas. When you get all three company scores and if they are, say, 630, 721, and 752, then, the credit issuing company will use the middle score, in this case 721.

There are five components that go into your credit score and each makes up a percentage of your final score: Payment History (35%); amounts owed (30%); length of credit history (15%); new credit (10%) and types of credit (10%).

Some important thoughts to consider:
• The fastest way to ruin your credit score is with late payments
• Six months of on-time payments helps to build your score
• If you make a late payment, send a letter to the creditor and explain why it is late. Many times they will make an adjustment for you.
• Your payment history and amount owed is the most important items comprising 65% of your score
• Consistently pay more than the minimum due
• Keep the ratio of amount owed on the card to the credit line at no more than 40%. So with a $5,000 credit line never have the balance higher than $2,000. Yet, if you have a very low balance and you pay it off in full … it does you no good. Go figure!
• If you have a late payment history and pay off the entire balance, it does NOT clean up the late payments dings
• Credit history on a FICO score goes back 99 months (8¼ years for those with weak division skills)
• You can obtain 1 Free credit report per year per rating agency
• It takes 10 years for a bankruptcy to drop off and 7 years for adverse credit reports. Car loans and mortgages drop off in 4 years
• To rebuild credit get a gas card and/ or store charge, use it, but pay it off on time each month.

Well, I hope the information has been helpful. Now it is up to you. Do not fall into the trap to pay off your debts assuming that your credit score will improve (reread the articles). The damage done in the past must be repaired.

I have investigated hundreds of credit repair companies and have found only 1 that does it the right way. (Do not get trapped by those that want huge upfront fees and monthly charges). This company will take on your project and does not charge you until after the blemish is REMOVED from your account. They are VERY reasonable. Read the rest of this entry »

Improving Your Credit Score

Maybe you’re young and haven’t used any credit yet…

Maybe you’ve recently come out of a bankruptcy or a tough financial situation. You may be tempted to pay for everything in cash, not wishing to repeat your past mistakes.

Maybe you think that debt is bad and have always paid for everything with cash. Read the rest of this entry »

Cracking the code

If you are denied credit, you will receive four reason codes which indicate why you were denied. These codes appear in order of importance, below. The first code has the strongest impact, followed in declining impact by the second, third and forth reason.

A typical readout your lender might view follows. This particular readout presents information from all three credit agencies. In the example below, the individual failed to qualify for each credit agency and the reasons are listed in descending order. Read the rest of this entry »