5 Ways to Manage Your Payment History

Since your payment history affects 35% of your credit score, it is easily the most important part of your credit profile. It is also one that you can control. Clearly, the best way to achieve a high credit score and a positive credit report is to maintain a flawless record of full payments, made on-time, over the course of years.

However, for those people who live in the real world, things happen. It is easy to confuse dates, forget to mail a check, or come up short on funds. The important thing is to know what to do and how to manage those small mistakes, before they sink your credit entirely. Here are a few tips on how to manage your payment history:

1. Don't be late on your payments. EVER. There are plenty of tools you can use, like calendar applications for your computer or iPhone, on-line bill pay, or automatic paycheck deductions that can help you to maintain a spotless payment record. If you are habitually late, or have difficulty remembering to make payments, try setting up an automatic payment through your bank. You can even set up a separate checking account for these static payments, and have the appropriate amount of your paycheck automatically deposited there every month.

If you shy away from automation, or have cash flow issues, companies will often work with you to move your payments around. If you get paid at the end of each month, schedule your phone, cable and credit card bills to come due the first week of the month, when you have the most money in your account. Also, you can work to stay ahead of the payment curve by making your payments as soon as the statement becomes available, usually 30 days prior to the due date. That way, in case an emergency comes up or you miss a payment because you are out of town or short on funds, you have created a 30 day cushion.

2. If you are having a rough financial month and have to miss a payment, make payments on the largest accounts, like your mortgage first. Missing a $50 credit card payment will hurt you less in the long run than a $500 car payment.

3. If you have made the rare late payment on an account in the past, call and ask them to remove the late payment as a courtesy for being a loyal or long-term customer. Point out your history with the company and recent on-time payments, and ask them to consider the late payment as an exception to the rule. If they say no, call back and try to get a different representative on the phone. Lather, rinse and repeat.

4. Check your credit report for any accounts that are marked PAST DUE. These are the accounts that are doing the most damage to your account. When working your way through your financial payments, start here.

5. If you have collection accounts, pay off the most recent accounts first, starting with the largest. Any account older than 4 years can be moved to the bottom of the priority pile, since those creditors can no longer file a lawsuit against you to reclaim their money.

Protect Yourself from Credit Repair Scams

Every disaster seems to breed its share of con artists and scammers trying to make a buck off the misfortune of others. America’s financial meltdown is no exception. Shady outfits advertising fast, cheap credit repair on radio spots and late-night television ads are preying on Americans who are smothering in credit card debt or who are on the verge of losing their homes to mortgage default. Desperate to find a way out of the financial quagmire in which they are mired, these people are easy prey for shady operators posing as legitimate credit restoration agencies.
A constant stream of ready customers for credit repair con artists is ensured by still high unemployment rates and undervalued real estate markets. Savings dwindling or gone and bills piling up, Americans at the end of their financial ropes are lured by the hollow promises debt repair scammers make to get them off the hook with creditors. The National Foundation for Credit Counseling advises consumers to verify the credentials of a credit repair agent or business before providing any personal information or paying for any services. Despite their claims of stellar track records, less than 10% of late night credit repair advertisers actually help customers repair poor credit ratings or manage debt.
Scam techniques that should raise red flags and send consumers running are:

• Scammers tell you to stop paying creditors and deposit money into a special account while the credit repair agent negotiates settlements with your debtors.
• The hook scammers use is the promise to settle debts for considerably less than the actual balance due.
• The rationale used for depositing money into an account scammers set up is that the consumer will be able to pay off the entire negotiated debt in one lump sum.
• The reality is that scammers will withdraw 20% or more of the funds deposited as “service fees” without making any contact with your creditors.

A new law that recently went into effect finally offers consumers a modicum of protection. Debt repair agencies are now required to settle at least some of your debt before charging you. The only way to protect yourself from scammers and con artists is to solicit the services of a reputable credit repair agency.

New Regulations Created to Protect Consumers and their Credit

While the credit crunch and consequential economic recession has taken its toll in many ways, the one silver lining may well be the resulting lessons learned.  Many practices that once were common among banks and creditors have now been deemed misleading and detrimental to the individual and congress has started to take action to protect consumers, and ultimately the economy as a whole.

To help consumers avoid mistakes of the past, The Consumer Financial Protection Bureau has been conceptualized to look out for the financial wellbeing of consumers rather than just banks.  This agency was founded by Harvard professor and consumer advocate Elizabeth Warren and aims to essentially cut out the fine print and act on behalf of consumers to bring full clearer disclosure to the credit and lending industry.  The bureau will be housed within the federal reserve and enforce new regulations for banks, mortgage lenders, credit card, and private student loan companies, as well as payday lenders.  Small businesses will sit on panel within the group in order to ensure that new rules will not have any unintended and unjust consequences for small businesses.  The bureau is already beginning to see that regulations surrounding credit cards, debit cards, mortgages, and credit scores are being met.  Some of the recent policies to be enforced include:

Credit Cards:  Congress has imposed a maximum of $10 for credit card companies to impose minimum card use.  Merchants are no longer able to charge different prices according to use of different credit cards even though they are allowed to charge different rates for cash versus credit.

Mortgages:  Lenders have to check borrowers income and assets thoroughly during the approval process. 
Credit Scores:  Credit scores are now free once a year for all Americans and can be accessed on annualcreditreport.com.  The report includes each of the three credit reporting bureaus: Equifax, Experian, and transunion.

Auto dealers, stock brokers, and annuity salespeople are exceptions many consumer protections rules.  Individual consumers still need to watch their own credit – if there are any blemishes on your credit report, a CredTEK trained professional can assist you in repairing your credit.

Home Foreclosures Decimate Credit Scores

Caught between a rock and a hard place, homeowners are being squeezed. The financial hardship of long-term unemployment and the toll it takes on credit scores, coupled with banks’ unwillingness to modify mortgage loans, is forcing many long-time American homeowners into foreclosure. With unemployment rates expected to remain high for at least the next year, possibly longer, real estate industry experts say the problem is only going to get worse.

“There’s nothing happening right now in terms of foreclosures that makes me think there’s and end in sight,” Ken Gold, director of the Center for Real Estate Education and Research at Ohio State University, recently told The Columbus Dispatch. “It’s now being driven by unemployment and by what’s happened in the past with the banks. And it’s supply and demand: There’s plenty of supply and little demand for homes.”

According to the Mortgage Bankers Association, national mortgage delinquencies reached record levels in the first quarter of 2010. More than 10% of homeowners had missed at least one mortgage payment, a 10% increase over the previous quarter. Nearly 4.3 million U.S. homeowners – 8% of all mortgage holders — are in foreclosure and the number is growing.
Though battered and beaten, homeowners’ financial woes may not end when they hand their deed over to the bank. In an effort to recoup the money they’re losing on short sales and foreclosures, some banks are hounding borrowers to cover the loss. In June, The Washington Post recounted the experience of a Virginia homeowner whose bank billed him $148,064 to cover the shortfall when his foreclosed home sold for less than the amount due on his mortgage loan. With no resources to pay the debt, the homeowner was forced to file for bankruptcy protection.
Before the housing bubble burst, foreclosures were low and banks seldom chose to pursue deficiencies, but times have changed and banks are getting aggressive. What most over-stressed homeowners don’t realize is that there are other options to foreclosure that can allow them to keep their homes and minimize damage to their credit score. We’ll talk about those next time.

How Will a Short Sale or a Foreclosure Affect my Credit?

How Will a Short Sale or a Foreclosure Affect my Credit?


As of this week, a recent study by the real estate data provider, CoreLogic, has revealed that about 11 million US homes are occupied by owners who owe 15% or more than the current appraisal value of their home. This amounts to an alarming 23% of American home owners. This tells us that an even larger number of Americans are “underwater” on their mortgage in some capacity.

Amidst the recent real estate bubble, millions of Americans have found themselves facing the question of whether to fall into foreclosure or attempt to sell their property through a short sale. The next question is usually “which is better for my credit?” First, It is important to know the difference between the two processes. Although there may not be one with any ultimate advantage over the other, this will help you decide which process which is right for you.

A short sale is only possible when your lender agrees ahead of time to accept less than the amount owed on the loan. Not all lenders will agree to negotiate a short sale, especially if you are not currently very behind on your loan or have other cash assets. If you know your loan will become delinquent in the future, (i.e. unemployment payments running out, job ending)having a short sale in anticipation could be helpful - but depending on your individual situation, a short sale could be just as damaging to your credit as a foreclosure.

A foreclosure will occur when you are indeed behind on mortgage payments. The amount of allowed payments missed before the final foreclosure will vary according to your state. These late payments can very negatively affect your credit and regulations state that you’ll likely need to wait 24-72 months to apply for a new home loan. (One advantage for short sellers is only needing to wait about two years to re-apply for a mortgage loan.)

There is some debate about whether short sales will harm your credit any less than a foreclosure, but the fact is, neither will help you to obtain good credit. Bad credit can get in the way of renting a new apartment, buying a newer downsized home, or even getting a new car or new job. In order to secure your future after a short sale or foreclosure, it will be imperative to assess your individual situation with complete financial and credit counseling.

Government Cracking Down on “Debt Relief” Scams

Less than legitimate “debt settlement companies” have found themselves in the perfect environment to exploit during recent years. Scams Artists posing as useful debt settlement companies have been thriving on the credit crunch of recent years and on the millions of Americans who are in debt. Genuine government bailouts of banks and other corporate giants have made the idea of an actual a “government sponsored” bailout for consumers all too easy to sell. The fact of the matter is, there is no government sponsored bailout for consumer’s with credit card debt.

This may sound contrary to the many radio, tv, and internet ads you may have been hearing lately. A great deal of misleading advertising has been created to deceive desperate individuals and families in order to trick them into paying large upfront fees for what turns out to be absolutely no help at all.

You may recall recently having heard catch phrases like “Credit card debt relief act” “president Obama’s debt relief plan” and “national debt hotline.” These misleading terms are completely illegitimate and deceiving. Again, no such government program to bail consumer’s out of credit card debt or even to alleviate their debt.

Many companies who are advertising with these phrases aren’t even directly in the debt settlement business. Several are simply marketers who hope customers will contact them and give them their information so that they can sell the leads to other companies for a hefty sum. Many are just companies who ask for an upfront fee without any promises of delivering or actually delivering any debt settlement whatsoever. What’s worse? Dealing with any of these companies is likely to greatly damage your credit.

Luckily, the Federal Trade Commission (FTC) has created new laws that take effect on September 27,2010 that will help protect consumers from debt settlement scams. Under the new laws debt settlement companies and affiliates will be required to:

•Disclose how much the companies charge to settle debts

•How long the process is likely to take

•Disclose any negative consequences of debt settlement, including the facts that your credit scores could be lowered, you may get sued, and you’re likely to get a tax bill for any debt that is forgiven

•Follow a ban from collecting upfront fees

Until then, be sure to beware in order to protect your credit.

When Debt Collectors Error, Consumers Pay

When debt collectors make a mistake, it’s up to the consumer to prove his innocence. In most states, credit repair specialists caution, laws governing debt collection favor collection agencies, not debtors. In most states debt collectors are allowed to freeze bank accounts, seize checking and savings account balances, garnish wages, and place liens on homes and property without any legal oversight and often without notifying the debtor.

If the debt has already been paid, if the consumer was the victim of identity theft, if the collection agency has made an identity mistake or an error in debt amount, the consumer bears the burden of proof and must defend himself in court to resolve the problem. Unfortunately, aggressive collection actions often leave consumers without the financial resources to hire a knowledgeable attorney, stacking the decks against them once again. Too often the innocent wind up paying for debts they do not owe.

The poor economy has fueled the growth of a new type of debt collector, warn credit repair professionals. These “debt sharks” buy up lists of uncollected old debts, many of which have already been claimed as losses by the financial institutions that hold them. In the business to make money, debt sharks don’t bother to investigate to see if a debt has already been paid or reduced or forgiven. They don’t look into the circumstances of the debt to see if it’s the result of identity theft. They don’t verify the current status of the debt to see if it has been partially or fully paid.

Debt sharks take old, usually out-of-date debt lists and initiate immediate and aggressive collection actions. Many of these debt collection firms don’t even bother to contact debtors to see if they’re going after the right person, they just file collection actions in court based on the often faulty information on purchased debt lists. As soon as debt collection actions have been filed, these sharks turn around and strip unsuspecting consumers of their cash and attach their assets.

Consumers can be left with no money to pay for food, shelter or medicine. And even when debt collectors admit an error, it can take their victim’s months to recover their money.