Is Your Credit Score Costing You A Fortune?

While some surveys show that 9 out of 10 consumers are unaware what their credit score is, I'd like to quickly share with you how your credit score could be costing you a fortune (in more ways than you can imagine).

We all know a low credit score will make everything in the world of finance more expensive because of higher interests rates from lenders due to being considered a greater credit risk (i.e. higher interest rates on cars, homes and credit cards). While this may be considered common knowledge by some, it's truly devastating effects are understood by few.

For example. If you purchase a $200,000 home on a 30 year fixed mortgage at 8% interest instead of 6% (because of your credit score); that 2% is going to end up costing you a total of $96,934.11 over the term of the loan. Now, think about how many extra years you'll have to work to pay off $96,934.11 because of an extra 2% in interest?

The part few people talk about is all the other areas in life where a low score will increase your cost of living on an annual basis. For example. In addition to paying more for a car, home and credit cards, a low credit score will most likely have you paying more for the following as well:

1.) AUTO INSURANCE. As many as 92% of the 100 largest personal automobile insurers use credit information to underwrite new business, according to a 2001 study by Conning & Co., an insurance-research and asset-management firm.

2.) HOMEOWNERS INSURANCE. It's thought many insurance companies see a correlation between low credit scores and increased property insurance claims. Therefore, a low score will result in a higher rates.

3.) LIFE and HEALTH INSURANCE. Customers who are unable to pay their monthly insurance premium thereby pass along that increased cost to the insurance company whose stuck with the bill (resulting in a loss for the company). Since customers who pay without lapse are more profitable it is felt by many that a low credit score now even affects a monthly life and/or health insurance premium negatively.

One of the more shocking areas where a low credit score will you cost you is in the area of employment. It's estimated as many as 42% of employers now do credit checks on applicants before hiring them (according to a 1998 survey by the Society for Human Resource Management).

While many employers claim they only do it to verify information on your application (such as where you live and where you have worked etc.) we can both assume they are taking the liberty to have a peek at how you handle your financial affairs as well. According to the Public Research Interest Group (PIRG) as many as 79% all credit reports contain errors, 25% of which are serious enough to cause the denial of credit (according to a 2004 report).

And that's all the more troubling in light of the increasing impact a bad credit report can have, says Ed Mierzwinski, director of PIRG's consumer program. "It's outrageous that the credit bureaus are claiming their scores are accurate enough to take people's lives and screw with them like this".

The "CREDIT SECRETS BIBLE"
has been in print since 1994 and is published by Consumer Publishing Group. For more information visit: "CREDIT SECRETS BIBLE"

Facts You Should Know BEFORE Considering Credit Counseling or Debt Consolidation

There is one topic which every time I write about it seems to generate some hate mail while at the same time spawning a flurry of wonderful praise from consumers. Of course, the hate mail is always from a few people that happen to own these "certain types" of businesses I discussed and those businesses of course are Credit Counseling or Debt Consolidation companies; of which many "claim" to be non-profit organizations.

You'd almost have to be an ostrich with your head stuck in the sand to not see or hear at least one advertisement a day from a Credit Counseling or Debt Consolidation Company. However, you can expect this to change and change soon. Since this is a topic which tends to "stir up" the owners of these businesses, I am going to take a different approach by NOT sharing my opinion, but rather, the opinion of others. I will start with the news media and the Internal Revenue Service:

"(NPR News, May 15, 2006). The Internal Revenue Service is revoking the tax exempt status of some of the largest credit counseling agencies in the country. An IRS investigation disclosed that the firms solicited business from people seriously in debt and that they didn't provide counseling or consumer education, as required.

Prodded in part by a congressional oversight committee and consumer advocates, the IRS began investigating dozens of credit counseling agencies -- most holding non-profit status -- two years ago. IRS Commissioner Mark Everson says the companies "poisoned an entire sector of the charitable community."

Everson says in many instances, companies were organized merely to funnel business to loosely affiliated for-profit companies. Many of the firms spend millions of dollars on commercials that urge anyone with debt to call them to solve their financial woes. And because tax-exempt organizations are not bound by the federal do-not call list, the firms were able to randomly call consumers, pitching their services under the guise of a non-profit counseling service.

The IRS investigations are also likely to affect consumers, thanks to a new bankruptcy law that requires consumers considering bankruptcy to get counseling before they are allowed to file. The IRS wants to ensure that only legitimate non-profit agencies are doing the counseling. In addition to the actions announced Monday, the IRS is sending more than 700 compliance letters to the rest of the credit counseling industry .

Since almost all Credit Counseling and Debt Consolidation companies claim a non-profit status, I feel most consumers are easily sucked in with their skepticism and defenses at bay. After all, when most of us hear the word "non-profit" the first thing we usually think of is a church or homeless shelter.

From the NPR article and the actions of the IRS, I think it's fair to assume that many of these "non- profit" organizations have been operating under a scenario similar to that of a wolf guarding a hen house. However, this doesn't mean all credit counseling and debt consolidation companies are bad but... you do need to know the truth about how they operate and their limitations.

The first thing you want to understand is these companies are ALL more interested in making money off you than they are in preserving your credit rating. The bottom line with either credit counseling or debt consolidation is that it absolutely ruins your credit. I can just hear the companies arguing this with a consumer right now, telling them nonsense like "It helps your credit since it tells creditors that you're working on your situation and not just running away from it." Listen... if one these places tells you that than watch out. Why? Because they will lie to you about other things as well!

One of the first actions these programs usually requires you to do is for you to CLOSE all your revolving credit accounts. You then make payments to the organization and they take care of everything for you. What this says to all your creditors (as well as anyone considering giving you credit) is that you are so out of control with your finances that you can't even manage paying everyone back on your own. Therefore, you're hiring someone else to do it for you!
99% of the time these companies will claim they can negotiate with your creditors and get interest rates reduced thereby saving you money. While this is true, what's also true is you can easily negotiate these same rates as well as they can by just calling your creditors yourself.

You'd be amazed at how many of your creditors would love to hear from you (especially when the chips are down!). Not too mention, any money the counseling company was to save you would more than likely be sucked back up by their monthly fees (usually around $500 to $1,000 per year).

This brings us into a whole other dynamic of their business model. Because these companies always make their money off of monthly fees paid by the consumer, the longer they can keep those monthly fees coming in the more profitable their business will be. It's for this reason that most consumers who sign up with these companies usually find themselves on payment plans with the lowest monthly payment possible (which turns out to also be the LONGEST payment plan as well). Not surprising is it?

Am I against Credit Counseling and Debt Consolidation companies? Absolutely not. After all, there are millions of people in America who will never be able to manage their finances. Credit to them is a destructive addiction much like alcohol or drugs and they will never be able to control it.

Instead, it will always control them. We've all seen these people. Every time they are extended credit shortly thereafter they are in financial trouble (usually blaming it on some external factor). For these people I think these credit and debt counseling programs can be a good thing (as a ruined credit report is not a hindrance to them but actually an asset). It keeps them out of future financial trouble by forcing them to live their lives on a "cash and carry" basis; which is ultimately conducive to a better standard of living down the road.

On the other hand. If you're good with your finances and have control with credit but went through some type of hardship beyond your control in the past (i.e. divorce, job loss etc); then the services of these companies will never be for you. You will do far better and preserve your credit rating by taking matters into your own hands. Reason being is that you understand your credit rating is a powerful tool that can help you move ahead faster, help others and help yourself as well as create the life you want. It all comes down to self management. We all know that those who cannot manage themselves will ultimately be managed by others. Credit is no different. When you learn to manage it well, you are the master and it is the servant.

If you care about your credit and want to benefit from it in the future, then you will never rely on a credit or debt counseling service to help you get out of any trouble you find yourself in.

Instead, you'll look inward and get yourself out while preserving your credit rating the best you can. Credit and debt counseling is for people who are "ok" with throwing their credit rating in the trash so they can have "someone else" manage their payments for them (since they are unable to manage them themselves). And again, as far as negotiating interest rates, you can do just as good as them or better. If you don't believe me just call any of your creditors and straight out tell them your situation. You will quickly find you don't need to be afraid of them. They just want to get paid like the rest of us.

The "CREDIT SECRETS BIBLE" has been in print since 1994 and is published by Consumer Publishing Group. For more information on the "CREDIT SECRETS BIBLE" you may visit:

Killing Credit Cards With A Loan

Thanks to a worldwide credit crunch and mounting bad debts, banks and building societies have started to curb their lending. They have withdrawn thousands of mortgages, increased interest rates on personal loans and credit cards, and started to reject far more applications for credit.

I see this as only the beginning of an even harsher clampdown on credit, as lenders tighten up their lending criteria and improve their risk management. Thus, I believe that now is an excellent time for us to wean ourselves off our credit habit. In particular, I think it's high time that we abandoned ‘plasticmania' -- our addiction to spending on credit cards.

For the record, we have around £55 billion of outstanding debt on our credit cards, which comes to exactly £2,200 per household. However, this is only an average, and millions of credit-card users have far higher balances. Indeed, some visitors to our Dealing with Debt discussion board owe £50,000+ on their plastic. Ouch!

Credit cards are useful for short-term borrowing, especially if you avoid interest by paying them off in full every month. However, because of their high interest rates, they are an expensive way to borrow over periods exceeding a year. (Unless you use a 0% credit card, of course!)
Thus, if you're looking to borrow over several years, then a personal loan is usually a much better bet than a credit card. This is because interest rates on personal loans are considerably lower

article source http://www.fool.co.uk

Over half of UK repossessions in sub-prime sector

According to a recent report over half of repossession order that are brought in the UK come from sub-prime lenders, who are lenders that specialise in giving credit to those with bad credit or no proof of income.

Sub-prime lenders have come under fire in the past because of the high rates of interest that they charge on loans to consumers that already have financial problems.
A spokesperson from one sub-prime lender said: “It should come as no surprise that those lenders dealing with borrowers with past credit problems are likely to have to deal with more cases of default amongst their borrowers. Comparing lenders like GMAC-RFC with high street lenders is a bit like comparing apples and pears.”

However, the lenders are quick to point out that not all of the orders actually result in repossession, with one sub-prime official stating: “The figures are based on possession claims hearings and are therefore not representative of actual repossessions, which are a lot lower. Of proceedings started, where solicitors become involved, five out of six are resolved without having recourse to repossession.”

In a recent study of twelve hundred recent orders that went through the courts it was found that 10% of these were brought by two sub-prime lenders, GE Money and GMAC-RFC

The TRUTH About Credit Repair...

Have you ever wondered what companies send you when they claim you can erase bad credit overnight? How about those ads that say you can get any major credit card without a deposit or a credit check?

Ads abound almost everywhere these days (online and off) selling books, systems and secrets to help you fix your credit. Many of these programs have claims which read like the covers of supermarket tabloids:
"In 3hrs my credit score jumped from 580 to 676!"...
"Erase bad credit and smash your debts with just 2 Magic Letters!".

Are these types of claims ALWAYS too good to be true? The answer is "Yes and... no".
While many people would love for you to believe the only thing that can fix bad credit is time; in reality... nothing could be further from the truth. The fact is, time is only one factor which can fix a credit report, but it's a far cry from being the only factor. How can I back this up? Easy.
Under a consumer protection law known as the Fair Credit Reporting Act (a.k.a. the FCRA) the only negative information which can remain on your credit report is not what is accurate... but what can be proved as accurate under the FCRA. What's this mean to you?
It means any negative item on your credit report can only remain there if it is accurate and CAN BE PROVED AS SUCH under the guidelines of the FCRA. This undisputable fact presents consumers with both good news and bad news.

The good news is that through the FCRA your credit score can most likely be improved dramatically in a very short period of time with only a modest amount of effort on your part.

The bad news is that while the actual "work" will take very little of your time, it is vital that you have good information on "how" to go about it. This is the bad news; 9 out of 10 courses on restoring your credit will do nothing more than lead you into snake pits because they will provide you with what the industry refers to as "Boiler Plate" dispute letters. These are nothing more than form letters and... quite frankly (more bad news) the Credit Bureaus and Creditors will laugh at you if you try to use them.

While I agree with the Federal Trade Commission (FTC) that "Anything a Credit Repair Clinic can do for you legally, you can do for yourself at little or not cost"... the key element you need for success is the latest inside techniques and procedures to get the results you want. This involves strategies such as "Proof of Contract", "Constructive Notice", "Challenge of Procedure" or"Restrictive Endorsement" and many others.

All these terms may "sound" impressive but they are really quite simple. In the end, it is nothing more than a method of communication which exercises your consumer protection rights, gets the results you want and raises your credit score.

The "CREDIT SECRETS BIBLE" has been in print since 1994 and is published by Consumer Publishing Group.For more information visit the "CREDIT SECRETS BIBLE"