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Simply Refusing Credit Is Not Enough To Get a Good Credit Score

As a fairly young professional, I often come across peers who seem to be going through a rough financial patch. It’s doesn’t require a large stretch of the imagination to see why young people have it so hard – they’re fresh in the workforce (aka not earning that much), they are riddled with student loans, and their credit might be non-existent or even poor!

For some, a natural solution might be to simply swear off using credit completely. I can see the logic behind this- credit is a scary beast that can get out of control. All it takes is for you to be behind on one payment, and if you’re living paycheck to paycheck, then you’re going to be playing catch up forever.

People who refuse to use credit might hope that their frugality would help their credit improve over time. Indeed, black marks on your credit report will fall off eventually. But there are even better ways to improve your credit.

Of course, it will require sacrifice. But as we will see later in this article, that initial sacrifice will put in place a virtuous cycle for your financial situation.

You want Good Credit, instead of No Credit or Fair Credit

As a society we’re growing smarter every day. Gone are the days when debt was viewed with flippant disregard. Our parents would have warned us of the dangers of having debt. However, that might have instilled almost too much fear of credit.

It’s gotten to a point where people are refusing to use credit cards, or pay for a house with as much cash as possible.

To me, it’s the “easy” thing to do. Put your head in the sand and your credit should naturally become not bad. But hey, not bad doesn’t mean good. And it’s Good Credit that gives you financial advantages in life like getting lower rates on your loans, having options in terms of renting an apartment, or even successfully applying for mortgages etc.

Often, you can improve your credit with easy wins

Earlier, I spoke of sacrifice in order to improve your credit. Yes, you probably know what’s required – cut back on a bunch of stuff – even (or especially) your morning latte.  Yes, I do believe that you should hold off on credit for a while, saving where you can and paying off what debt you already have.

IN ADDITION, however, you should also take steps to rectify issues that are marring your credit report. For example, it’s not very difficult to correct delinquent payments, as I show in my guide to getting late payments removed from your credit report.

Firstly, you’d be shocked by how often credit reporting companies actually make errors on your report. Secondly, sometimes it just takes a letter to convince your creditors to remove the delinquent payments from your report.

Having Good Credit is a Virtuous Cycle

Imagine how sweet life would be if you’re on top of all your debt repayments, bills etc. Sure, you have peace of mind. But more importantly, you get options in life. Let me show you what I mean:

Having good credit means that you’re more likely to get lower interest rates or more favourable terms on your new loans ->  you get to save more and build up an emergency reserve fund -> you won’t be caught back footed when you need to shell out in an emergency -> you won’t have to take out loans in an emergency and rack up more debt -> you don’t have huge loan repayments to make and can keep on top of your current payments -> credit improves further -> without all that debt weighing you down you can do more with your money.

See how it’s a virtuous cycle? That’s why it’s so important that you begin the cycle by making some sacrifices today!


Not taking on new credit is a sensible way to improve your credit. But it must be accompanied with other steps in order to really accelerate your credit repair. Steps like spending less, building a reserve fund and paying down your existing debt can really put you in good stead with prospective creditors.

Eventually, you’ll want to take on credit. Simply not using credit will not give you good credit. You build good credit by taking on loans that you can manage, and by staying on top of the repayments. Then you’ll start opening doors in life.

Here’s to wishing you all the best in your credit improvement journey!

Women and Credit

Women and CreditEvery woman, whether married or single, should have credit in her own name. Should anything ever happen to her spouse and the family credit is in the husband’s name, she may not be able to then establish credit for her self. This is especially true if she is a homemaker who is suddenly widowed or divorced with no job or income.

The Equal Credit Opportunity Act was designed to stop discrimination against women. She may not be denied credit just because she is a woman or because she is married, single, widowed, divorced, or separated. As long as she shows that she is creditworthy and falls into the guidelines of the credit application, she can’t be discriminated against.

When she applies for credit, she does not have to use Miss, Mrs., or Ms. with her name. She can choose to use her married name, maiden name, or a combination of both surnames (for example, Mary Williams Smith).

If she has recently married, she should contact each of her creditors and give them her new married name and other pertinent information. Have her creditors update their credit files and notify the credit reporting agencies of the changes.

If she divorces and decides to use her maiden name, she should ask each of her creditors to change her name on their accounts. Once the creditors’ records are updated, it is important that they notify the credit reporting agencies. Obviously, if she had some negative accounts in her husband’s name, I would strongly advise not to have them changed into her name; her credit report would be ruined. The idea is to try and build a credit report without any derogatory information.

Jenny’s Story: A Controlling Husband

On an Internet talk show, “For Women Only,” we (the hosts) opened up the telephone lines for questions; a woman named Jennifer called in. She whispered, “I can’t talk very loud because my husband is in the other room and I don’t want him to hear me. We have been married for eight years. Before I got married, my husband had me sign a prenuptial agreement. He has credit cards and a checking and savings account that he uses in his name only. He has never set up a joint account with my name on it for either a credit card or bank account. I have to ask him for any money that I need to run the household. I feel very insecure with our finances. My husband never tells me how much money we have or the status of our financial situation. We are having marital problems. Is there anything I can do to protect myself and establish credit in my own name?”

Jennifer’s husband was trying to control her by not allowing her to spend money without his consent. Her marriage was in trouble. The first thing we recommended to Jennifer was to open up a checking account in her name. Any extra money she could save and put aside needed to be put into her checking account.

The second thing we instructed Jennifer to do was get a copy of her credit report from all three credit reporting agencies. It was important for Jennifer to see if there was any payment history on her credit report. Perhaps her mortgage was being reported on her credit report without her knowledge. Any positive item that appeared on her credit report could be used to help Jennifer establish new credit in her own name.

Once Jennifer received all three credit reports, we advised her to apply for two different credit cards. We instructed her to apply with a local merchant or department store for a credit card. Once she received the credit card from a merchant in her own name and made payments for at least six months, she needed to apply for a VISA or MasterCard. Where the application asks if the account is for individual use, or joint, Jennifer checked “individual.” An individual account holds the applicant solely responsible for payments on the account and authorizes her as the sole person to make purchases with the credit card.

When she was approved and received the credit cards, we suggested that periodically she make small purchases that she could pay off when the bill came due. This would reflect a good payment pattern on her credit report.

If Jennifer and her husband were to get divorced, Jennifer would be in a much better position than she currently was by planning ahead and getting her credit established, rather than trying to do it later.

Q. The credit cards that I use are in my husband’s name. Because I am using his cards, do I need to get any credit cards in my name?

Yes! Every married woman should have at least one or two credit cards in her name. This is to protect yourself should your husband die or you get divorced. If something happened to your husband and all the credit was in his name, you could have a difficult time establishing new credit for your self. Your credit report could show “no record found;’ which can be interpreted as having bad credit.

Because the credit cards are in your husband’s name, you are only a user on the card. Sometimes the credit card company will reflect this on your credit report, however don’t count on it. Check your credit report from all three of the credit reporting agencies to see if any of the accounts you are using are listed on your credit report.

If you apply for a credit card while you are married, you do not have to have your husband as a cosigner or be listed jointly if your income is high enough to meet the stated requirements.

Q. My husband and I went through a major financial crisis. The credit cards that my husband was using became delinquent and are now being reported on his credit report. I have two credit cards that are in my name only and in good standing. Can I put my husband on my account? Would this help him rebuild his credit?

Yes! Many times a wife is able to help rebuild her spouse’s credit re port by adding him to her credit card account. You can add your spouse as a joint applicant. The credit card company would then request his Social Security number and income information. Because you are the primary applicant, you are responsible for all the payments.

If all the payments have been made on time, this will be picked up by the credit reporting agency and reflect as a positive entry. The more positive entries on your husband’s credit report, the easier it will be for him to reestablish his credit.

It still is advisable for you to have a credit card solely in your name. You never know when you may need it for an emergency.

Q. My husband died several years ago. All the credit cards were in his name. I applied for a new credit card and was denied. I made all the payments on these cards but my credit report says “no record found.” What can I do to get new credit?

Check to see if any of the credit cards that your husband had were joint accounts. If they were, contact the credit card company and instruct it to report this to the credit reporting agencies. If none of the accounts were held jointly, you will have to start all over in reestablishing your credit.

Go to your local bank and see if it offers a secured credit card program. A secured credit card is a VISA or MasterCard that you get from a bank after you make a security deposit. I would recommend that you get two secured credit cards and charge small amounts each month. Pay the full balance off every month. Your good payment history will be reported on your credit report. Make your payments on time. Within six months to one year, request that the bank issue you an unsecured credit card in place of the secured credit card.

This is not an overnight process. If you continue to make your payments as agreed, however, you eventually will be able to get new credit.

Q. When I apply for credit, can I report my child support and alimony payments as income to qualify?

Absolutely! When reviewing your application, the credit grantor must consider any income—whether it be full-time or part-time employment, child support, and alimony.

I have a friend who is divorced with three children. She is working full time and receives child support and alimony. The child support and alimony payments are higher than her income.

Several years ago she applied for a mortgage for a new home. Her wages were not sufficient; however, with the child support and alimony, she was able to qualify for the home and complete the purchase. Always include child support and alimony when applying for credit or a loan.

Q. When you get married and have a new last name but have the same Social Security number, can you get new credit?

Whether you are married or single, the credit reporting agencies use your Social Security number as an identification source. If you apply for new credit under your married name, the Social Security number would be cross-referenced and reported with your maiden name. This could cause your credit report to be merged together with your married and maiden names. All of your accounts would appear on one report.

It is important that you notify the creditors of your name change so that creditors can update their records, which would be reflected on your credit report. Once creditors are notified of the name change and their files are updated, they will report your active accounts and any activity on your ac counts to the credit reporting agencies using your new name.

Q. My husband died and we had some joint credit card accounts. Will I lose the credit cards?

A joint account is the only type of account that protects you against being closed because of the death of a spouse. The Equal Credit Opportunity Act states that a creditor cannot automatically close or change the terms of a joint account solely because of the death of a spouse. The creditor may ask you to update your credit application or reapply if the initial acceptance of the application was based on all or part of your spouse’s in come and the creditor has reason to suspect your income is inadequate to support the line of credit.

If a creditor requires you to reapply, it must give you a written response to your application within 30 days. While the application is being processed, you may use your line of credit with no interruption. If, for some reason, your application is turned down, you must be given the reason in writing.

The chances of the creditor closing your account are very slight, as long as you continue to make your payments on time and do not exceed your credit limit.

Your Retirement Checklist

Your Retirement ChecklistAs the baby boomers reach retirement age, many find themselves unprepared for the changes that lie ahead. Planning for the future doesn’t need to be overwhelming. If you are nearing retirement age (or want to start planning ahead), here are a few things to keep in mind as you prepare for and plan your retirement.

Make a Will

As you start to review your investments, retirement accounts and social security benefits, you should also make sure you have a will. If you don’t have one, now is the time to sit down with a lawyer and write one. If you already have a will, make sure that it stays up-to-date. Wills need to be updated due to a variety of reasons including a birth, marriage, divorce, move to another state, etc. Often an out-of-date will can cause more problems than not having a will at all, so make sure you stay on top of any changes that need to be made. Since you’ve worked so hard earning your wealth, make sure your family will be taken care of the way you intended.

Retirement Budget

To know whether you have enough saved, you need to compare your expected income to planned expenses and create a retirement budget. Keep track of your current spending and include any known future vacations to get a sense of what your expenses will be like during retirement. For your income, add the government benefits you will receive (such as Social Security) to what you have in your 401k, IRA and/or any other retirement accounts. To help estimate these amounts, try using a retirement calculator like the one on CNN Money. Once you know these values, you also must estimate how long your savings will last you. Most retirement experts say you should be able to safely use 4% of your savings each year so that your money will outlast you.

If you find that your expenses will be greater than your income, you have two options. The first is to see where you can cut back in your expenses. Maybe cut back on the amount of travel or consider retiring somewhere cheaper. The other option is to supplement your income. To do this, consider picking up a part-time job during retirement or try saving more money in your retirement funds. While you can usually only contribute a maximum of about $16,500 to your 401k before age 50, that maximum increases to $20,500 after age 50. If possible, you can also consider delaying retirement by a few years that will allow you to save even more in your fund.

Retirement Living

In planning for retirement, you need to consider where you want to live. Do you want to stay in the comfort of your own home, move to a smaller place or sip Mai Tais in the Caribbean? This living situation can be a large factor in estimating your expenses and can affect your other retirement plans. For example, if you want to visit your family in the Mid-West a lot, it’s going to be easier and cheaper to do so if you’re living in Indiana versus Bermuda.

If your home is fully paid off, many people opt for staying put. This way, they don’t need to consider paying a mortgage or rent during retirement. Often this can also be more comfortable as you already have established yourself in that location.

If you’re looking for a change of pace, try looking at a smaller home that won’t require as much maintenance. These will be cheaper and you will save on housekeeping and yard work. Keep in mind that metropolitan areas will be more expensive in general and adjust your expenses accordingly. For some ideas, check out Forbes’ list of the best places to retire.

While you’re looking at where to live, also consider looking into nursing homes for the future. Depending on the type of home, the prices can range dramatically and this can be a good way to make sure you have the funds saved now.

Retirement does not need to be complicated. For those who still have many years before retirement, continue saving so you will be able to have your dream retirement. For those who are soon to retire, make sure you have gone through this list so you can ensure a stress-free and enjoyable retirement.

The Fair Credit Reporting Act: Know Your Rights

Fair Credit Reporting Act (FCRA)The Fair Credit Reporting Act (FCRA) is designed to promote accuracy, fairness, and privacy of information in the files of every “consumer reporting agency” (CRA). Most CRAs are credit bureaus that gather and sell information about you – such as where you work and live, if you pay your bills on time, and whether you’ve been sued, arrested, or filed for bankruptcy — to creditors, employers, and other businesses. The FCRA gives you specific rights in dealing with CRAs, and requires them to provide you with a summary of these rights as listed below. You can find the complete text of the FCRA, 15 U.S.C, 1681 et seq. at the Federal Trade Commission’s website.

You must be told if information in your file has been used against you. Anyone who uses information from a CRA to take action against you — such as denying an application for credit, insurance, or employment must give you the name, address, and phone number of the CRA that provided the report.

You can find out what is in your file. A CRA must give you all the information in your file, and a list of everyone who has requested it recently. However, you are not entitled to a “risk score” or a “credit score” that is based on information in your file. There is no charge for the report if your application was denied because of information supplied by the CRA, and if you request the report within 60 days of receiving the denial notice. You are also entitled to one free report a year if you certify that (1) you are unemployed and plan to seek employment within 60 days, (2) you are on welfare, or (3) your report is inaccurate due to fraud. Otherwise, a CRA may charge you a fee of up to eight dollars.

You can dispute inaccurate information with the CRA. If you tell a CRA that your file contains inaccurate information, the CRA must re-investigate the items (usually within 30 days) unless your dispute is frivolous. The CRA must pass along to its source all relevant information you provided. The CRA also must supply you with written results of the investigation and a copy of your report, if it has changed. If an item is altered or deleted because you dispute it, the CRA cannot place it back in your file unless the source of the information verifies its accuracy and completeness, and the CRA provides you a written notice that includes the name, address and phone number of the source.
Inaccurate information must be deleted. A CRA must remove inaccurate information from its files, usually within 30 days after you dispute its accuracy. The largest credit bureaus must notify other national CRAs if items are altered or deleted, however, the CRA is not required to remove data from your file that is accurate unless it is outdated or cannot be verified.
You can dispute inaccurate items with the source of the information. If you tell anyone — such as a creditor who reports to a CRA — that you dispute an item, they may not then report the information to a CRA without including a notice of your dispute. In addition, once you’ve notified the source of the error in writing, they may not continue to report it if it is in fact an error. Outdated information may not be reported. In most cases, a CRA may not report negative information that is more than seven years old; ten years for bankruptcies.

Access to your file is limited. A CRA may provide information about you only to those who have a need recognized by the FCRA — usually to consider an application you have submitted to a creditor, insurer, employer, landlord, or other business. ? Your consent is required for reports that are provided to employers or that contain medical information. A CRA may not report to your employer, or prospective employer, about you without your written consent. A CRA may not divulge medical information about you without your permission.
You can stop a CRA from including you on lists for unsolicited credit and insurance offers. Creditors and insurers may use file information as the basis for sending you unsolicited offers of credit or insurance. Such offers must include a toll-free number for you to call and tell the CRA if you want your name and address excluded from future lists or offers… If you notify the CRA through the toll-free number, it must keep you off the lists for two years. If you request and complete the CRA form provided for this purpose, you can have your name and address removed indefinitely.
You may seek damages from violators. You may sue a CRA or other party in state or federal court for violations of the FCRA- If you win, the defendant may have to pay damages and reimburse you for attorney fees. If you lose and the court specifically finds you sued in bad faith, you or your attorney may have to pay the defendant’s fees.
You may have additional rights under state law… You may wish to contact a state or local consumer protection agency or a State attorney general to learn those rights. 

How You Can Fight Back

Helping consumers take advantage of their rights to a fair and accurate credit report is what Credit Zeal is about. Credit repair companies provide everyday people with simple, effective, and affordable credit repair services designed to help improve their overall credit picture. Working together with you, they companies I've reviewed will challenge inaccurate, outdated, and unverifiable information contained in your credit reports on your behalf, with each of the three major credit bureaus directly. Through the use of proprietary methodologies and proactive interventions, they bring together a whole range of approaches tailored to your specific needs in an effort to help remove or improve questionable, inaccurate, and outdated information appearing in your credit reports.

Raising Your Credit Score

Over the years reputable companies have developed various systems and methods that they have experienced great success with, and have encountered almost every credit issue there is. Negative information such as late payment histories, bankruptcies, charge off’s, judgments, foreclosures, repossessions, collections, liens, settlements, etc, all have to meet the same criteria under the Fair Credit Reporting Act to be continuously reported on your credit report. To date our methods have helped to remove thousands of inaccurate, outdated and unverifiable items from credit reports all over the country. Providing expertise and compassion in a time of need, their services enable people to move forward with their life, by helping them clean up the past.

Understanding The Risks Of New Age Mortgages

It has become difficult in these times for many people to even think about owning a home. This economy and the damages it has brought about has scared a number of people away from home ownership. However, to combat this fear many banks and lenders have produced new age mortgages that are far more tempting for consumers, but come with a number of hidden drawbacks that people are unaware of. Many people are able to qualify for these new mortgages but at the beginning the pitfalls are often unseen. 

The economic downturn left many people unable 
to purchase a home that is in their price range. Banks have seen this and come up with options for people looking for a home that are downright risky for many people to have. This has led many people to take out mortgages that have high risk and low initial payments. Many people haven’t realized that this can put their new home in jeopardy along with their financial well-being. We are going to look at these new age mortgages and when they could be right for you. Let’s look at some of the examples of new age mortgages that you might be tempted into taking.

One of the first examples of mortgages banks have come up with is the piggy back mortgage. This is one of the least risky options. What is entailed here is taking out two different mortgages. The first will be a line of equity of the home up to twenty percent of the value. This becomes the amount you use to make your down payment. You then take a second mortgage to cover the rest of the home. The risk involved with this is that you have zero equity in the home. This becomes very critical when the house depreciates in value.
In terms of the most dangerous mortgages that have come out, we have to discuss option-payment mortgages. What is entailed here that you have options of payments each month. These options include principle and interest, interest only, or a minimum payment required by the bank. The minimum payment can be lower than your interest each month. The risk involved with this is that anything you don’t pay gets put on top of the mortgage. If you get too far behind with payments you can be turned upside down financially rather quickly and get yourself in a lot of trouble. 

Another risky option is an interest only mortgage. This process goes on by paying only the interest each month for three to ten years. When that time is up your payments will jump so you can start paying the principal. When this happens you need to be ready for that jump in payment each month. People often time get into these payments when they are looking to resell the house, but if you are unprepared for the quick increase in monthly payments then you could easily miss a payment or two and fall into an uncomfortable financial situation. 
The safest mortgage one can take out is a 40 year fixed mortgage. This gives you ten extra years over a 30 year mortgage and essentially gives yourself lower payments. The risk involved is that you are going to take much longer to build equity in the home. 

One more option that is very hard to find anymore are low-doc mortgages. This is when a lender will allow you to take a loan without needing to provide a proof of income. This can be very risky because many people get into loans that they cannot afford. You should only look at this if you are sure you can make your payment each month, and are not intrigued by any of the normal mortgages that are offered. 

So how do you make sure that you are protected from the bank when searching out the mortgage that fits your life and budget

If you are a high risk home buyer, often time’s banks will only require you to look at some of the riskier options. The first thing to do when protecting yourself is to make sure that you get a fixed rate mortgage. Rates at the time are low and you will be protected from increases in rates.

If an adjustable rate mortgage is what you qualify for make sure not to walk into the situation blindly. Look at what can happen when the rate increases as you need to make sure that you will be able to make the payment if the interest rate goes up.
When searching for the right loan, do not be afraid to shop around. You are not only limited to your bank or banks in your area. Often times you can find a better rate from a lender online. 

In all, just make sure you don’t get yourself a loan that is larger than you can afford. Waiting another year to save up enough money might be the most beneficial thing in the long run, rather than jumping into a situation that you are not prepared for financially.