Your credit report contains all information regarding your financial health. It is the report that is being looked at by the creditor everytime you apply for a loan. Hence it becomes important for you to learn to analyze your report. The credit report can be divided into the following sections.

Personal information: This section serves the purpose of identification; contains your name, alias, address, current and previous employers and SSN (Social Security Number). It may so happen that you find more than one spelling of your name. That is because it has been reported that way by the creditor.

Payment history: This section would contain information regarding the type of accounts both revolving and/or otherwise, names of the creditors and most importantly your payment pattern. This section is the most important part of your report because this is the part the creditors would look into. You may find the following categories listed in it.

• Creditors names: This section would list out the lenders, the credit card companies, banks, mortgage and auto loan lenders , who are reporting your payment history to the credit bureaus.
• Account number: Of course, the account numbers would be listed beside the creditors. You may have more than one account with a certain creditor. This section would also list the nature of the account, such as-
  

  I – Individual
  U – Undesignated
  J – Joint
  A –Authorized user
  S – Shared

• Account details: The account detail section would include information like,
  

  Date when the account was opened
  Status of the account- open, revolving, installment etc.
  Delinquencies
  Derogatory/ charge-offs
  Balance
  Credit limit
  Terms for installment loans and
  Period reviewed in the report

• Collection activities: Next which comes in line is information regarding collection activities. This section lists out the accounts that have been with the collection agencies and reported by them to the credit reporting agencies over 7 years.
• Public information: This section comprises of the those items which can cause the most damage to your financial future. It contains information on bankruptcy, judgment and liens. So, you may take utmost care to keep this section clean.
• Credit inquiries: The credit report also includes information on credit inquiries. There are 2 types of inquiries visible on your report.
  

  1. Hard inquiries – Inquiries that are made by creditors with whom you have applied for loans.
  2. Soft inquiries – These are made by companies that want to send you promotional information or pre approved offers.

You may be have heard that too many inquiries within a short period affect your score negatively but it mayn’t happen always. In fact the FICO doesn’t take into consideration many of these inquiries made. Also, multiple inquires made within a 14-day period would be considered as one inquiry. Hence, you might not have to worry too much about the inquiries made by lenders.

With changes in the law, every consumer can now ask for one free credit report from all the three reporting agencies once a year. The centralized source to obtain credit report is www.annualcreditreport.com . You can also request the same from the credit bureaus directly. You may get reports from all the three agencies to compare the information since any one report mayn’t contain all information; this is because not all creditors would report your credit information to the same bureau.

Click here to view sample credit reports.

We often run into debt problems because of our spending habits. Most of us don’t bother to plan our expenses and thus easily lose track of it. Though it’s important to practice the habit of budgeting from young age, we hardly do it and let our spending spree to take the driving sit of our finances. Anyway, it’s never too late to start.

Now, how do you prepare a budget?

Make a note of all your expenses: Write down your expenses for a month in a piece of paper. List them according to their priorities by keeping the most important ones at the top of the list.

Determine your total income: Identify all your sources of income to get total income for a month. It’s important to know how much you can actually spend.

Assess your budget: Once you have all information regarding your expenses and income its time to check the viability of your budget, i.e. whether or nor it’s possible to stick to it. At the end, the column with expenses should have a lower value than the income column. If it’s not happening, identify the areas where you can curtail your expenses. You can then set aside the extra fund towards your debt elimination goal.

Benefits of making budget

• You’d be able to keep track of your expenses. Therefore, chances are less that you’d overspend.
• The budget can become an important tool of saving.
• It’ll save you from piling up credit card debts and payday loans.
• It’d help you in building a fund for emergency purposes.

Stick to your budget

It’s important that you take the budget seriously. It’d be of no use to prepare a budget if it is not followed. However, it is also important to review your budget time to time to make necessary adjustments to it. There are budgeting software like, YNAB (You Need A Budget), Quicken, SimpleD, AceMoneyLite and others available to help you in preparing a budget. You can even get any of these downloaded in your computer for better management of your budget.

Budgeting would prevent you from running into debt problems. If you know beforehand about the areas that you need to spend on, you can accommodate those accordingly. This way you’ll know the important bills that you need to pay before spending on less important items. It’ll make the sudden requirements for loans less frequent and would help you in learning to live within your paycheck. If you want to maintain the lifestyle that you’re maintaining now and really don’t want to cut down expenses, you may then need to find well paid job.

Delinquent accounts, charged offs, credit inquiries – all these can negatively affect your credit report. There are companies which would promise to improve your score against payment of fees, but usually you can do it yourself as well with little patience and caution. But before discussing on the methods of fixing the Credit Report (CR) you may remember that there is no shortcut towards improving your credit score overnight. Each negative entry would take its time to fall off from the report but efforts taken towards its betterment can help improving your stand even during this time.

First, you must pull your credit report from all the three credit bureaus. As a consumer you’re entitled to receive a free credit report from all the three bureaus once in a year. Check the reports to compare the accurateness of the information. If you find any misinformation, you may dispute it with the Credit Bureaus (CBs) to take it off your report. Lesser the quantity of inaccurate information, better will be your score.

Anyway, following are the ways to repair your credit history.

Paying off debts wisely

You need to be wise at paying off your debts. While staying current on your mortgage and auto loan is important, paying off the credit card debts can help in improving your score faster. Keeping the balance to as low as 30% of the credit limit can actually help in accelerating your score.

Reporting correct limits of the cards

It’s true that credit score gets affected by the credit card limits reported to the agency. Lower and incorrect limits can depress your score. Hence, you may monitor your report to check that the card limits are getting reported correctly.

Older the account, the better it is for your score

Your credit score also depends upon the length of your payment history. The creditors like to see old accounts at good standing. Also, too many accounts opened within a short span of time would lower your credit score.

Avoid maxing out your credit cards

Try and avoid using your cards to their limits. Maxed out credit cards present a bad picture to the creditors and therefore are detrimental to your score. Ideally, you may limit your expenses on a card upto 30% of the credit line.

Dispute old entries

A negative entry should fall off your report after 7 years. Keep a watch on those entries. If they are not taken off by the credit reporting agency after the seven years period you may then need to dispute and get it corrected. Erasing old accounts can significantly boost your score.

Further, if you have been a good customer then you may request the bank to remove one late payment from the history. Remember that 30-day and 60-day delinquencies might not affect your score if you become current again but once you are 90 days late, it would stay on the report for seven years.

Our credit score is an important determinant of our credit worthiness. Hence, special care should be taken to keep the credit report unblemished. If you have poor score, you’d be paying more for auto and mortgage loans or you may even find it hard to qualify for such loans. Therefore, try not to be careless with your credit cards and other bills, and learn to live within your means.

It often makes a hard choice for one to choose between secured and unsecured consolidation loans. We are aware of the secured consolidation loan where the home is considered as the collateral. Though it’s popular yet many would try and avoid putting their home as collateral to obtain further loans in the fear of losing it in the future. For these people, the idea of unsecured debt consolidation loans may seem appealing.

There are private lenders who would offer unsecured debt consolidation loans to borrowers. You may qualify for one under the following conditions.

• You may be overwhelmed with debt burden.

• You are continuously being harassed by the creditors and collection agencies.

• Or, may be you may be at the verge of filing bankruptcy.

Why is unsecured consolidation loan so popular?

• The biggest advantage of unsecured consolidation loan is that it doesn’t require collateral, i.e. you wouldn’t lose your home if you fail to comply with the loan terms.

• Getting an unsecured consolidation loan is easier since it involves less paper work. It also takes lesser time to process the loan as no collateral is involved.
• Another advantage with it is that you can include the unsecured loan under bankruptcy when you default and can still save your house since a collateral is not required here. But when you file a bankruptcy with a secured loan included in it, you may end up losing your home.

But the picture isn’t all that rosy

Yes, the unsecured debt consolidation loan has its share of negatives too.

• Since there is no requirement of collateral, the rate of interest on an unsecured loan is higher than secured debt consolidation loans.
• If you have excellent credit score, you might not face any difficulties in getting an unsecured consolidation loan. But for people with average and poor score, it might not really be an option.

You could be already behind on your loan payments, or you may be overwhelmed with debt and you’re likely to default. In either case, you might have considered the option of consolidating the dues to pay them off fast.

No doubt debt consolidation is a popular way to wipe out debts. But before you choose to go for it, we feel it’s our duty to warn you about the possible fraudulent activities that are being practiced in this industry.

Types of debt consolidation scams

It’s really easy to scam one who is in dire need of help to get out of his financial problems. Amongst the various forms of debt consolidation scams, advanced fee loan scam is one in which a lender promises an immediate loan to the consumer against upfront fee payment with no real intention of lending the money actually.

Even debt consolidation companies aren’t far behind in scamming the consumers. The desperation of the debtor further makes it easier for the consolidators to convince that they can reduce or eliminate his debts. They would sound extremely cordial when you contact them for the first time. However, the situation changes soon after you pay their upfront fees. Further, if your credit already stinks then there is no company that can make it look better over night. So beware of companies that promise an impeccable credit report.

How can you avoid being scammed?

Knowledge is the key to avoid falling a pray to these scammers. While choosing a consolidation firm you must remember the following things.

• Shop around

Since you’d be paying for this service, you must look out for the best deal. Don’t think that you’re required to take the first deal available. The consolidators may try to make you feel that only they can get you out of the mess but that might not be true always. So, compare their charges and also check with hidden expenses.

• Ask questions

Right, ask them as many questions that come to your mind, don’t hesitate, and the representative should be knowledgeable enough to answer all your queries. If you don’t feel satisfied with an answer, ask back.

• Check the company’s background

You should know how long they are into the business and what’s their success rate. Check with sites like BBB; and also with the website of State Attorney General and FTC.

• Keeping information private

Do not share personal information, like your bank account details, at their initial contact. Also, never authorize a check over phone.

Unfortunately, when you’re drowning you may hold on to any straw available, and that is the reason why this industry has flourished so much. It may not always be your poor money management skill that is to be blamed, but at times situations throw us into such position. Adding to your woes are the economic slowdown, high end life style, easy accessibility to credit and other such factors. But it’s not hard to find a reliable consolidating company if we just invest little more time in finding the right one.