Pierre Money Mart Blog

Now that you are committed to tackling your debt problem, it’s time to step back and take a critical look at where you really stand. Since you’re still reading, you already know that you have debt you want to get rid of. The only way to do this is to find out where your monthly paycheck has been going. The logical step is to take the time to write that information down. In other words, you need sit down and put your current budget into writing (okay, that was your first test to see if your commitment was true or just a passing fantasy).

There is something about the word “Budget” that brings about the image of all things terrible. It ranks right down there next to going to the dentist on the list of things people want to do. Before you stop reading, let us try to reassure you a bit. Making A Budget doesn’t mean you can no longer do any of the things you like to do. It’s merely a process that allows you to see where all your income is currently going. Unless you understand where the money is going, it will be difficult (if not impossible) to understand where the debt is coming from.

For most people, compiling their current spending habits is a truly eye opening experience. For many, the outflow that is causing the debt is often not the result of what they imagined. Many times it is not the big ticket items (sometimes it is), but the accumulation of easy to forget small expenses that is causing the problems. These seem to fly below the radar screen never to be seen until you take the time and effort to put your current spending habits down into writing so they are right in front of your eyes.

Once this is done, you are in the position to make the needed changes to bring your spending back within the limits of your current earnings. That, however, won’t be enough. In addition to balancing your cash inflow and outflow, we will also search out an additional 10% of your earnings which will be used to pay off your debt. Okay, okay…we can already hear the shouts of “Impossible!” If you have already given up, it’s time to go back to your reason for reading this article in the first place. The resources on this site will show you plenty of ways to do it if you have the commitment.

For most people, simply limiting credit card use to tangible items that do not disappear once they have been purchased will bring you back into balance. Purchases such as dinners, bar drinks, movie tickets and the like that no longer exist once they have been used are where most people get into trouble. It doesn’t mean you can no longer do these things…just that if you chose to do them, you need to pay for them in cash. For those further in debt, and in order to find that extra 10% you will need to pay down your debt, a look through the saving articles such as Savings Games, as well as the saving tips on this site, will make it possible for you to easily accomplish this. If after reviewing all this, you still can’t even balance your income and spending, you need to jump to step #10 to decide if that is your only alternative or if you want to give this step another shot.

This process will also give you a clear picture of all the debt you currently have. This debt will most likely include a minimum of number of credit and department store cards, a car payment and possibly some student loans and a house payment. Once you have figured out a way to live within your current means and have the current debt information directly in front of you, you have put yourself in the position of finally being able to take care of the debt. You are now ready to tackle the next step.
Want to learn more? Read our do-it-yourself Credit Repair Manual here!

Although the image is that people getting into debt is the result of poor credit card use, this is far from the case. While credit card missuse is one factor that gets some people into debt, there are many other reason you may find yourself currently in debt. For example, it is estimated that half of all people that file for banruptcy are doing so due to debt resulting from medical expenses.

Whatever the reason, the ultimate goal is to get out of debt and back into the black.

There are a few questions you can ask yourself regarding your current credit card use to determine if you are creating a credit card debt problem. Do you have outstanding monthly balances on more than one credit card? Do you only make the minimum monthly payment on your credit card? Have you had debt on your credit card for more than three consecutive months? If you answer “Yes” to any of these questions, then your credit card is probably more of a liability to your financial well being than an asset and, you should consider a plan to reduce your debt.

Although there are many types of debt, credit card debt is by the far the most menacing form for most people. Although many sites have debt reduction plans, we have put together one that will not only eliminate your credit card debt, but ALL your debt (credit card, car payments, student loans, medical bills, legal bills, taxes and even the mortgage of your house) in less than 10 years. That’s not a misprint. Depending on the depth of the debt and how motivated you are, it is quite possible to be debt free much quicker!

Want to know more? Check out our do-it-yourself Credit Repair Manual here!

Annual Fees: service fees charged yearly by creditors to borrowers for the use of their credit card.

Buydown: a payment made to a creditor by the borrower to reduce the amount of the borrower’s repayments.

Credit History: a personal record of past credit accounts paid. Credit history is commonly used to predict a person’s likelihood of making payments on time.

Fair Isaac and Company: Fair Isaac is the company responsible for creating the FICO score. This three digit score is created using information from your credit report and ranges from 300-850. The major credit bureaus use this score in evaluating your credit.

Check out our do-it-yourself Credit Repair Manual online!

In today’s world, there are a lot of things that it’s very difficult to live without. One of them is credit. Can you imagine trying to save up for a car until you had enough cash to just pay for it outright? Do you think you would be able to pay for college tuition and study at the same time? Who would ever own their own home? A life without access to credit when you need it will be severely limited in any number of ways. Everyone, at some time, will be looking for a loan.

If you apply for a loan from a commercial lender, they will do a credit check. It doesn’t matter what form the credit takes, it could be a credit or store card, a mortgage, auto finance or a loan to start up your own business. In all of these situations, whether or not you are approved will depend mainly on your credit score. Applying for a loan is not the only time your credit score will be used. Also if you apply for insurance, to rent or lease a home, or even when applying for a job, in all of these situations, your credit rating will be used.

Shopping for an auto loan is usually about price and loan terms — which lender is offering the lowest interest rates and best rebates, for example.

When you buy an auto from a dealer, it is likely to direct you to a lender, often one that specializes in making auto loans to buyers of a particular make of auto.

You can find online lenders on the Internet that focus on auto loans. Other lenders are aggregators, which act as a kind of wholesaler or broker to pull together the best loan rates and terms from a variety of lending institutions. In exchange for identifying potential customers, lenders pay a fee to aggregators. As a result, you should be skeptical if a loan aggregator seeks payment from you.

Buying an auto is a major financial deal. However, it has gotten easier as technology has improved the loan underwriting process and the auto industry has grown more aggressive in its sales tactics.

Similar to other online transactions, applying for an auto loan online requires you to complete an online application and trust the lender or aggregator to use secured-sockets-layer (SSL) or similar encryption technology. If in doubt, read the lender’s privacy policy.

If you have an existing auto loan, you may want to check with your current lender, either through a visit to its Web site or a visit to a retail branch.

Your lender may be willing to negotiate a reduction in the loan rate if your payment history has been good. Your current lender is also most familiar with your credit history. If your lender stonewalls you, you may be able to find better loan terms with other institutions.

Credit ratings are determined differently in each country, but the factors are similar, and may include:

* Payment record – a record of bills being overdue will lower the credit rating.
* Control of debt – Lenders want to see that borrowers are not living beyond their means. Experts estimate that non-mortgage credit payments each month should not exceed more than 15 percent of the borrower’s after tax income.[citation needed]
* Signs of responsibility and stability – Lenders perceive things such as longevity in the borrower’s home and job (at least two years) as signs of stability. Having a respected profession can improve a credit rating.
* Re-Aging – Through re-aging, a credit history is re-written and you are given a fresh start on that particular account. This can dramatically improve the credit score. In 2000 the Federal Financial Institutions Examination Council (FFEIC) clarified guidelines on re-aging accounts for delinquent borrowers.
* Credit inquiries – An inquiry is a notation on a credit history file. There are several kinds of notations that may or may not have an adverse effect on the credit score. Soft pulls don’t affect the credit score and are characteristic of the following examples:

A credit bureau may sell a person’s contact information to an advertiser purchasing a list of people with similar characteristics, like homeowners with excellent credit. A creditor can check a person’s credit periodically. Or, a credit counseling agency, with the client’s permission, can obtain a client’s credit report with no adverse action. Each of the preceding examples are commonly referred to as a “soft” credit pull.

However “hard” credit inquiries are made by lenders. Lenders, when granted a permissible purpose by a borrower for the purposes of extending his credit, can check his credit history. Hard inquiries from lenders directly affect the borrower’s credit score. Keeping credit inquiries to a minimum can help a person’s credit rating. A lender may perceive many inquiries on a person’s report as a signal that the person is looking for loans and will possibly consider that person a poor credit risk.

* Credit cards that are not used – Although it is believed that having too many credit cards can have an adverse effect on a credit score, closing these lines of credit will not improve your score. The credit rating formula looks at the difference between the amount of credit a person has and the amount being used, so closing one or more accounts will reduce your total available credit. And the lower the percentage of available credit, the more the credit score will drop. The credit formula also factors in the length of time credit accounts have been open, so closing an account with several years of history is another avoidable credit mistake.