The Dangers of Bad Credit
The Cost of Bad Credit
The Charge Off
Fix Bad Credit
The Bad Credit Car Loan
The Dangers of Bad Credit
If you have bad credit, your financial condition will only get worse unless you become proactive in protecting and/or rebuilding your credit standing. Mortgages and personal loans are not the only places you will pay for a bad credit rating. Insurance companies and auto loan lenders use your bad credit score to help determine your policy rate or the interest rate of your car loan. Along with your claims history, insurers see a bad credit rating as a sign that you are more likely to claim damages. And if you plan to buy a car, a bad credit rating could rev up your interest rate to over 200 percent more than that of a person with excellent credit. A persistent history of missing credit card payments could also impact your job prospects, as some employers check the credit rating of applicants. In many cases, those with bad credit are denied housing, utilities and insurance. You must stop the financial hemorrhaging; take control.
It should go without saying, to improve your bad credit, you must have household income. You must find and/or keep the most suitable employment. You may need to work two jobs. You might consider selling anything you don't really need, especially if you are paying to have it stored. Live within your means - don't spend more than you bring home.
The first step to take in improving bad credit is to pay off or settle as many outstanding debts as possible. Lenders advise that keeping a high debt-to-income ratio will adversely affect your credit rating. Reduce your balance on all revolving credit accounts to below 45% of your gross earnings. This will demonstrate that you do not live on credit, and have planned for possible unforeseen needs of that available credit.
Call your creditors and negotiate some of the terms on your account. You may be able to lower interest rates, stop late fees, eliminate over-the-limit charges, and in some cases settle a debt by making a partial payment in lieu of the total amount due. It is a myth that credit card companies aren't willing to work with you. Most are, if you will make an honest effort. Pick up the phone and show your good intent to pay your obligation. Let them know, you don't want bad credit. Then you may be able to avoid credit repair issues.
We are often asked, "How can I fix my bad credit, and how can I raise my credit score?" Under the Fair Credit Reporting Act, you can dispute information in your credit files with the three credit repositories, and the creditor is required by law to verify the disputed information. That which can't be verified within 30 days must be removed. While bad credit repair can be a do-it-yourself project, it is time consuming and tedious. Innovative Credit Consultants specializes in credit repair, restoration and education.
Once you have taken the above steps to reduce debt, and clean up your bad credit, it is time to start rebuilding your bad credit. This may sound contradictory, but the best way to rebuild bad credit is to obtain credit. There are lenders that will grant credit to high risk consumers. Once you have a credit card, your proper use is reported to the credit bureaus. Secured credit cards are a good way to build credit. Be careful not to fall victim to certain credit rebuilder programs that charge application fees, a high annual fee, and monthly participation fees.
Have questions? We have answers! Contact the professionals at Innovative Credit Consultants today by phone at 800-666-6050 (967-2673) or email at info@icreditinc.com.
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The Cost of Bad Credit
Bad credit - two of the most dreaded words in the English language. Bad credit can really take a toll on a person’s life - and not in a good way. In fact, the effects can be worse than one might think. Having bad credit can make it next to impossible to attain a new car, an apartment, a personal loan or even a home. Even something as simple as getting a new credit card will be out of the question for a consumer with a negative credit history.
Even if you’ve been fortunate enough to be able to purchase a new home or a car with bad credit, you’re still being punished in some way for your low credit score. Usually, the penalty you’ll receive for bad credit is a higher interest rate than you would have received normally. Lenders see you as a risk and one of the downfalls of this is having to pay more in the long run simply because your credit score is low. What does all of this really mean? To put it simply, it means that having good credit and receiving a good interest rate could end up saving you hundreds or even thousands of dollars on your next loan. THE LOWER YOUR CREDIT SCORE, THE HIGHER YOUR INTEREST RATE.
Tired of paying the price of bad credit? Go Clean Credit can help! We have the experience and know-how to help you rise above your past mistakes and turn your future into one where your great credit score gets you the things you want at a fair interest rate.
Auto Loans with Bad Credit
The 36-month new auto loan APRs are estimated based on the following assumptions. A Loan Amount between $10,000 and $20,000, 36 months and Interest rates are fixed for the term of the loan. (Variable rate loans may be available but are not usually beneficial to a consumer in a low interest rate environment.)
Credit |
Score |
Rate |
Payment |
Added Cost |
Excellent |
720-850 |
5.038% |
$750.00 |
$0.00 |
|
700-719 |
5.794% |
$758.00 |
$307.00 |
Moderate |
675-699 |
8.158% |
$785.00 |
$1,279.00 |
|
620-674 |
11.214% |
$821.00 |
$2,567.00 |
Bad |
560-559 |
15.385% |
$871.00 |
$4,380.00 |
|
500-559 |
17.540% |
$898.00 |
$5,341.00 |
As the chart clearly shows above, getting an auto loan with bad credit can end up costing you hundreds or thousands of dollars more than it would have with good credit. Higher interest rates are always given to people with bad credit, but Go Clean Credit doesn’t want you to be punished anymore. Ask us how you can get a free consultation and learn what we can do to get you lower interest rates on your bad credit car loan today!
Credit Cards with Bad Credit
As the chart below clearly shows, having good credit or bad credit can mean saving or losing hundreds, or even thousands of dollars. Why is this, you ask? It’s because when you have bad credit, you end up paying a lot more in interest. If a person with bad credit gets a credit card, chances are that the annual fees and interest rate are much higher than it would be for someone with good credit. It can be hard for someone with bad credit to recover from having to pay such high fees on their credit card. Instead of wasting your money on a credit card for people with bad credit, all you have to do is sign up here and we will help you get a lower interest rate than you could get on your own.
Card Type |
Score |
Rate |
Payment |
Added Cost |
Platinum |
720-850 |
4% |
$5,000.00 |
$0.00 |
|
700-719 |
5.5% |
$5,000.00 |
$275.00 |
Gold |
675-699 |
8% |
$5,000.00 |
$400.00 |
|
620-674 |
10% |
$5,000.00 |
$500.00 |
Standard |
560-559 |
16% |
$5,000.00 |
$800.00 |
|
500-559 |
23% |
$5,000.00 |
$1,150.00 |
Mortgages with Bad Credit
How bad credit affects home loans -
The 30-year fixed jumbo home mortgage APR’s are estimated based on the following assumptions. FICO scores between 620 and 850 (500 and 619) assume a Loan Amount of $350,000, 1.0 (0.0) Points, a Single Family - Owner Occupied Property Type and an 80% (60-80%) Loan-To-Value Ratio.
Take a look at the chart below. Notice how a low FICO score increases the amount of money you will end up spending on a loan throughout the course of its life. If your FICO score is below a 560, most lenders will not even consider offering you a jumbo loan for a FICO score that low. If you want to save money and stay away from bad credit mortgages, sign up here!
Credit |
Score |
Rate |
Payment |
Added Cost |
Excellent |
720-850 |
5.597% |
$861.00 |
$0.00 |
|
700-719 |
5.722% |
$873.00 |
$4,269.00 |
Moderate |
675-699 |
6.259% |
$924.00 |
$22,903.00 |
|
620-674 |
7.409% |
$1,039.00 |
$64,316.00 |
Bad |
560-559 |
8.531% |
$1,157.00 |
$106,500.00 |
|
500-559 |
9.289% |
$1,238.00 |
$135,871.00 |
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The Charge Off
When a consumer becomes severely delinquent on a debt (often at the point of six months without payment), the creditor may declare the debt to be a charge off. It will then be listed as such on the debtor's credit bureau reports (Equifax lists "R9" in the "Status" column.) It is one of the worst possible items have on your file. The item will include relevant dates, and the amount of the bad debt.
A charge off is considered to be "written off as uncollectible." A major reason for this involves taxes. Every year, corporations file a Profit And Loss Statement with the Internal Revenue Service. It is also made available to federal and state regulators, and to shareholders. All of the year's bad debts (individual charged off accounts) are added together as an item in the "Loss" section of the P & L Statement, and are deducted from the corporation's tax return, much like other business expenses. To banks, bad debts and even fraud are simply part of the cost of doing business.
However, the debt is still legally valid, and the creditor can attempt to collect the full amount. This includes contacts from internal collections staff, or more likely, an outside collection agency. If the amount is large (generally over $1500 - $2000), there is the possibility of a lawsuit.
Paying an old charge off will not remove it from your credit reports. It will simply be updated to a "Paid charge off," which, while slightly better, is still a seriously derogatory item.
As per the Fair Credit Reporting Act, a charge-off, whether paid or not, can remain on a consumer's credit reports for up to seven years. The time limit is based on the date of the original delinquency (i.e. when the debtor missed a payment and never again became current), not the date of the last activity. Thus, post- charge off payments should not "re-start the clock.”
Some debtors may be able to negotiate with the creditor to have the item removed from the consumer's credit reports in exchange for partial or full payment. This must be done directly with the creditor, not with an outside collection agency. The chances of success may depend on the amount of the debt and settlement offered, the age of the item, and the particular creditor's policies. If you attempt this, do everything in writing (keeping copies), and be sure that the individual you are dealing with has the authority to grant your request. Remember that your payment is your leverage, and get a clear, valid, written agreement before you pay. If you have already paid without a written agreement, then the creditor will have no motivation to do you any favors.
If you have any charge off on your credit reports, your ability to obtain credit will be seriously impaired, and you must actively work to achieve personal credit repair.
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Fix Bad Credit
To fix bad credit, you first need to understand the state-of-the-industry when it comes to credit records. 79% of all credit reports contain errors. Yours may be one of them.
Credit repositories deal with millions of credit files and are constantly updating the info in those files. Mistakes are bound to be made while trying to manage that much data. Some of the most common errors are these:
· Duplicate records
· Accounts that belong to others
· Paid or closed accounts that have not been removed
· Items that have been successfully disputed but never removed
· Accounts or charges resulting from identity theft
· Balances posted in error
· Records of credit entries taken without your knowledge or consent
The Fair Credit Reporting Act (FCRA), Fair Debt Collection Practices Act (FDCPA) and Fair and Accurate Credit Transactions Act (FACTA) allow you to investigate and challenge questionable items on your credit report. It is legal and ethical to remove unfairly reported listings from your credit report.
You, the consumer, can fix a bad credit report by disputing records on your own provided you know the protocol. Over time, with responsible money management, you can further improve your credit score.
If you don't have time, or don't know where to start, contact the professionals at Innovative Credit Consultants for assistance. We know the laws inside-and-out and can get your inaccuracies, as well as certain other items, removed. By law, the credit bureaus must provide adequate proof of their records or remove disputed items.
We realize that all things being equal, you'll do business with those you know, like and trust. We have built our business one relationship at a time. Get to know us. You'll like us and you'll trust us. Contact the professional credit repair specialists at Innovative Credit Consultants today.
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The Bad Credit Car Loan
Whether you have good credit, bad credit, slow credit, or no credit, you need wheels to get around. You shouldn't have to settle for an old, high-mileage car from a buy-here pay-here dealer just because you need a bad credit car loan. If you have been turned down for financing from one of the manufacturers because you have less than perfect credit, and need a bad credit car loan, you will likely be taken advantage of.
Bad credit car loan buyers may feel forced to drive a vehicle they wouldn't want to be caught dead in. Bad credit car loan buyers often pay sub-prime rates in excess of 20% and are promised that financing that special vehicle will simultaneously re-establish credit. If you are going to make exorbitant monthly payments, at least make certain your bad credit car loan payment history will be reported to the credit bureaus.
Unless it is absolutely necessary and urgent for you to buy a vehicle with a bad credit car loan, take steps to improve your credit report before buying with a bad credit car loan. Under the Fair Credit Reporting Act, you can dispute information in your credit files with the three credit repositories, and the creditor is required by law to verify the disputed information. That which can't be verified within 30 days must be removed. While credit repair can be a do-it-yourself project, it is time consuming and tedious. Innovative Credit Consultants specializes in credit repair, restoration and education. Once you have improved your credit scores, you may qualify for a standard loan or a bad credit car loan with better terms.
Special Alert: Bad credit auto loan consumers are being warned that the used vehicle being purchased could fail to offer air bag protection. Unscrupulous repair shops and dealers sometimes do not replace the air bag after the auto has been in an accident, or take the air bag out of the auto in order to resell it. Test have shown that one (1) out of twenty five (25) vehicles on the road today is not equipped with an operative air bag. Instead of air bags, such items as cardboard, foam, and paper have been found in the air bag container. The reason for the deception is greed.
Air bags are an expensive accessory, after an accident or deployment, air bag replacement can range from $1,500.00 - $4,000.00 per air bag depending on the type of vehicle. A fake air bag cover cost $75 - a nice profit margin for the repair that has an investment of less than $100.00. Air bags are also stolen from vehicles. A stolen air bag can bring from $500 - $2,500 depending on the type of vehicle. Air bags have become a hot item for thieves.
Before you purchase a vehicle with a bad credit car loan, protect yourself by requiring the dealer to furnish you with a CarFax record check and a certificate in writing by an ASE certified mechanic that the air bags on the vehicle your are purchasing with a bad credit car loan are in working order, or find another dealership to purchase a vehicle.
Make your bad credit car loan experience a good one by doing your due diligence.
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How to Get Debt Collectors Off Your Back
By Tracy Needham
Life's tough enough when layoffs, divorces, injuries or illnesses saddle you with bills that can't be paid. It only gets worse when the collection agencies start calling.
But you don't have to dread the ring of the phone or let them beat you down until you feel like America's most-wanted criminal. Yes, you owe money and repaying your debt is serious business. But the collectors treat their job as a game, and you'll fare much better if you do so, too.
Just follow our 10 steps for dealing with debt collectors:
Step 1. Respond immediately.
Don't ignore a debt collector, even if you don't think the debt is yours. The agency isn't going to stop calling, and if you don't respond, they may sue to obtain a judgment against you. The result can cost you a lot more time and trouble in the long run.
Step 2. Know your rights.
You may owe money, but you're still entitled to fair treatment and respect for your privacy. The federal Fair Debt Collection Practices Act puts strict limits on how much harassment you have to put up with. Our 10 things debt collectors can't do explains the restrictions.
The one downside is that the restrictions apply only to independent collection agencies, not in-house billing departments at banks or hospitals.
Step 3. Get the facts.
By law, collectors must tell you their real names and the name of the agency they work for. If you have not yet received a letter from the collection agency, tell the collector that you expect a written follow-up with details about how much they claim you owe, the name of the original creditor and what steps to take if you don't believe you owe the money.
Step 4. Dispute inaccuracies.
If the debt isn't yours, is a result of identity theft, has already been paid or is more than what you think you owe, you need to file a written dispute within 30 days of the agency's first contact with you. The written notice, which you should have received within five days of first contact, should have instructions on how to dispute the debt.
Once filed, the agency must correct the inaccuracies or prove that you owe the debt. There is no set time for the agency to conduct its investigation, but it cannot resume collection action unless it confirms the debt.
Step 5. Document every contact.
Keep a log of who calls and when. Take copious notes on everything said and agreed to. And save everything -- even voice mail messages, if they include promises or threats. Any letters or forms you send should be by certified mail with return receipt requested. In fact, it's good to send a written confirmation setting down the details of anything that you may need to prove later, including payments agreed to, promises or threats and rude or harassing comments.
Step 6. Select your strategy.
If the debt is legitimate, you essentially have two ways to play your hand:
Option 1. Call their bluff. Send the agency a letter (via certified mail, return receipt requested) telling them not to contact you any more. After that, the agency can only contact you once more to explain how it is going to proceed. If you're lucky, the agency will decide it's not worth its time to pursue you, and that'll be the last you'll hear from its collectors. If you're unlucky, the agency will sue. They usually don't, but there's no way to predict which route they'll take. The more you owe, and the more likely you are to have the money, the greater the risk they'll take you to court.
Option 2. Cut a deal. Bluntly ask the collector, "How much do I have to pay to make this go away?" John (not his real name) spent eight months working for a debt collection agency after college. Like many agencies, his would buy bundles of bills that hospitals or credit card companies couldn't collect, paying only a percentage of what is owed. (Other collection agencies get paid a commission based on what they are able to collect.)
The bottom line is that agencies often are willing to negotiate a partial payment, because they can still turn a profit. While the amount they're willing to accept varies, John says it usually ranges from 30% to 50% of the debt.
You don't have to pay it all at once. Collection agencies usually are open to monthly payment plans. Just be sure the agency sends the terms in writing.
Step 7. Buy some time.
If you can't agree on a repayment plan, or don't have the money to make a serious offer, the collector will put you into a calling queue -- an automated system to make sure you are pestered on a regular basis.
John says the best way to get a collector to temporarily stop calling is to make a promise-to-pay -- even if it's a trivial amount like $20. That should take you out of the queue for at least a week, maybe even a month.
But it's important to keep any promise you make. At John's agency, the collectors' bonuses were based on both the total amount of dollars they collected and a promise-to-pay versus dollars-collected ratio. So, if you make a promise to pay and don't follow through, the collector is penalized for that -- and is guaranteed to be even less amenable to you on the next call.
Step 8. Establish the rules for when and how you can be contacted.
Whether you're seriously negotiating or just buying time, you have the right to tell the collector not to call at work, before 8 a.m. or after 9 p.m. You can even have all calls and correspondence go through your attorney.
Step 9. Seek the right kind of help.
If you get tired of dealing with the calls and can't agree on a repayment plan, it's time to seek outside help. Be wary of companies that promise an easy solution to debt -- these credit repair "doctors" and debt consolidators often end up doing more harm than good. The best place to turn for help is to contact a member of the National Foundation for Credit Counseling. They work with creditors to stop harassing phone calls and negotiate a realistic repayment plan that forgives a substantial part of your debt, all for a reasonable fee.
Step 10. Complain about any agency that breaks the law.
When debt collectors cross the line, call them on it. You can use those records to report agencies that break the law to your state's attorney general, the Federal Trade Commission and a local lawyer who specializes in battling bill collectors. Here's where to learn more about reporting bad collection agencies.
It's important to know that whatever happens, the collection agency usually notifies the credit reporting agencies about your delinquency. The debt will then be marked as a "collection account," including the amount and whether or not it was paid. Even if you pay the amount in full, the entry is not automatically removed from your report, although it should be updated as "paid."
You should also know that if you get collectors to agree to accept less than the total amount of debt, the amount they forgave may still show up on your report as a bad debt. However, you can try to negotiate what they will report when you're negotiating the terms of a payment agreement. (Again, get it in writing.)
Regardless of what gets noted on your report, the fact that you had an account in collection may show up on your credit report for seven years.
Source
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How to Land a Job Despite Bad Credit
By Erin Brereton
Bad credit won't just keep you from getting a loan or a new credit card. It can keep you from getting a job.
About 42% of employers who do background checks will run job candidates' credit histories, up from just 19% in 1996, according to the Society for Human Resource Management.
If you're applying for a job in which you'll handle money or valuables -- as a broker or chief financial officer, for example -- or one where you'll be trusted to be alone in an office, such as being part of a cleaning crew, the company may ask to run a credit check before hiring you.
A study done by Eastern Kentucky University found that there is no proven link between credit history and work skills. But that hasn't stopped employers from using credit to gauge whether they should hire a job candidate.
Many employers see a chaotic credit history as a sign that you may be an unreliable worker.
Some companies even conduct checks after hiring. To make sure an employee doesn't run into financial problems, 27% report that they run background checks at some point after the person joins the staff, according to the human resources group.
Credit issues can be the result of not paying your bills on time. But flawed credit can also be the unfortunate side effect of being saddled with unexpected medical bills, getting behind on your mortgage payments or falling into foreclosure because of an unaffordable home loan, or a number of other reasons.
As the unemployment rate rises and the economy continues to struggle, bad credit is likely to become a problem for more consumers.
For a company to access your credit history, you have to give written permission. You'll most likely be asked to sign a form saying it's OK at some point during the interview process.
Even if you'd rather hide your credit issues, refusing to allow a credit check probably isn't an option. "If you say 'no,' they'll probably say it's a requirement of the job and that they can't hire you without it," says attorney and employment law firm owner Robin Bond.
However, there are some steps you can take to minimize the impact your credit issues may have.
If you have bad credit and are looking for a job:
Let the employer know if there's a valid reason your credit is bad. For example, if you are a recent victim of identity theft, let the employer know before they run your credit. Tell them you'd be happy to sign the waiver, but you'd appreciate the opportunity to explain some recent incidents that affected your credit.
"The employer is going to look at how serious the report is," Bond says. "Are there a lot of evictions, bad checks, repossessions? Is the bad credit due to divorce? There are good reasons credit could go bad."
Be proactive about proving you're a good employee. If you know your credit is less than stellar because you've simply not handled it well in the past, have other evidence ready to illustrate you are responsible, such as solid references or letters of recommendation from former employers. After all, a credit check is just one piece of the process.
Challenge any mistakes on your report immediately. Obtain free copies of your credit reports from AnnualCreditReport.com and look for obvious mistakes. Information is posted to the wrong reports all the time.
Correcting errors on your report probably won't help you get the job you were applying for -- getting a mistake corrected can take months -- but it help will prevent any credit-related issues in the future.
Ask why you're turned down for a job. It's legal to reject job candidates because of credit issues. But employers are required to tell you if that's the reason and provide a copy of the credit report they used to evaluate your financial history.
Bankruptcy is an exception.
Section 525(b) of the bankruptcy code forbids employers from discriminating against workers because they have a bankruptcy on their record, according to Bond.
Companies can't fire employees who file for bankruptcy, and they can't refuse to hire someone who is bankrupt.
But such motives are often difficult to prove, and some employers never acknowledge that credit played a role in rejecting a job candidate.
If your credit is bad, just don't just give up and accept that you'll always have a poor credit history. With some dedication, you can make it better over time.
Source
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Refinance with Bad Credit
Bad Credit Mortgage Refinancing Loans are Used to Solve Two Different Problems.
By Carrie Reeder
Problem Number One: The homeowner has bad credit, significant high interest credit card debt and a home with substantial equity. In order to pay off the high interest bills, the person refinances his/her home and cashes out all or part of the equity. The cash from the equity is used to pay off the high interest obligations. Although the interest rate on the bad credit mortgage refinancing loan may be higher than that of a conventional loan, the house payment should still be less than the total of the high interest consumer debt.
Refinance with Bad Credit, where the owner intents to use the cash from the home's equity to pay off bills is called a debt consolidation loan. The value of the home being refinanced must have grown so that the home's appraised worth will justify a larger loan. The new loan amount must be high enough that the owner can cover the loan's closing costs and still have enough left over to pay off the credit card debt.
A bad credit mortgage refinancing such as this can have several advantages. The term of the loan will be longer. Since even a high interest sub-prime loan carries a lower interest rate than do high interest credit cards the new house payment will be smaller than the total of the old house payment and the consumer debt payments. However, choosing to refinance in this manner carries risks. If the homeowner does not change the behavior that led to the high debt, even more high interest credit card bills may be accumulated. Since the homeowner's equity has already been "cashed out" of his/her house the only alternative in a money crunch may be bankruptcy or foreclosure.
If a homeowner chooses a debt consolidation loan as the method of bad credit mortgage financing, it is imperative to use the cash received to pay off the accumulated debts. Credit counseling to keep from returning to poor credit practices should also be considered.
Problem Number Two: The homeowner had bad credit when the home was originally purchased and had to take out a high interest sub-prime mortgage loan at that time. Two or more years have passed since the loan was made during which time the homeowner has made all of the loan payments on time and has incurred no other bad credit. Now the time has arrived to refinance the loan and receive a better interest rate.
Even with two years of excellent credit history, a homeowner trying to refinance a bad credit mortgage may not be able to obtain a conventional low interest loan. The type of loan that can be attained will depend on a variety of factors such as current income and how much debt the homeowner has.
Refinancing a bad credit mortgage under these circumstances may be a good idea if the following two statements are true.
1. The new loan will carry an interest rate two or more percentage points lower than the current loan.
2. The homeowner plans to stay in the house for three or more years.
Carrie Reeder is the owner of ABC Loan Guide, an informational website about various types of loans
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