Rebuild Credit

What is Debt to Income Ratio? Lesson 6

A debt to income ratio analysis (D/I) is a simple mathematical formula that is used by the financial industry to determine the ratio (expressed in percentile) between how much money you are spending verses how much money you have “coming in,” for the sole purpose of either grating or denying you the loan for which you are applying.

 

SCORING:                  

Above 100% :   means that you have more bills to pay than what you are actually bringing home (“take-home-pay”).

100% :   means that you are “breaking even” with no additional monies left over.

Below 100% :   means that your “take-home-pay” is greater than your bills.  You will have money left over each payday (money that the financial institution you are dealing with, will try to get away from you!)

Add up all of your credit card bills, in addition to your creditor obligations you will now list monthly totals in the areas of groceries, dining and entertainment and miscellaneous living expenses such as gasoline for your car.

Once you have listed all of your totals including your current monthly net income (take-home-pay), you are now in a position to figure out exactly where you stand financially.

By using this method you will allow yourself to begin creditor negotiations in the event that your monthly debt exceeds your monthly income.

Let us try an example where your net monthly income (take-home-pay) is $1750.00 but your monthly bills are $2000.00.  to find your debt to income ratio follow the instructions below:

 

On your calculator:

Enter $2000.00    your “total monthly creditor payments”

Press The  ÷  Key

Enter $1750.00     your “monthly net income”

Press   The  %  Key

Result  114.29 %    This is your “debt to income ratio”

If you do not have a calculator, you can just as easily figure this with pencil and paper:  Divide your “total monthly creditor payments” ($2000.00) by your “net monthly income” ($1750.00) and then multiply the result (1.1429) by 100.  You now have your current debt to income ratio of 114.29%.

The previous example means that for every $100.00 you are currently spending you will need an additional $14.29 of income just to break even.  For every $1750.00 you are now spending, you will need an additional $250.00 just to stay afloat.

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Posted by Credit Master - May 8, 2013 at 6:25 am

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How I settled an old debt

I had a old cell phone bill that had slipped through the cracks, that was not included in my bankruptcy, the total amount was $560 and change. I had been getting calls occasionally from a law firm to settle the bill and since I thought it had been included in my bankruptcy I just dismissed it and thought they would eventually figure it out and quit calling me.

Let me pause for a minute and explain how important it is to make sure all of you debts are included if you should file bankruptcy, just to make sure, you should get a copy of your credit report and make sure all of your debts on your credit report are listed in your bankruptcy, make sure your attorney has a copy of the credit report also.

I found out that this cell phone bill was not included and when they called today I asked them what they would take to settle the debt and they said they they would settle for approximately $226. I asked them if I could make a counter offer and the lady said that I could so I told her that I could pay half of that, approximately $113. She supposedly went to ask a manager and came back with approval to accept my offer.

If you find yourself in a position to negotiate an old debt don’t be afraid to offer them less and maybe I could have gotten it reduced even further. Let me leave you with two other points, the first is to always get the settlement in writing before making the payment and the second is never give them access to your checking account by giving them the account number.

If you have had similar success I would love to hear about it… just post below or send me a private message. Click Here to go to Credit Cards For Bad Credit Page

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Posted by Credit Master - April 9, 2013 at 6:12 am

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Review Your Creditors Listed on Your Credit Report Lesson 5

Before you can set any plan into action, you will need to review your current financial status.  Begin by writing down all your creditors.  A creditor is someone to whom you owe money.  Begin the chart by listing all of your monthly creditors, for example; credit card companies, loan payments for car or home and don’t forget your utility bills, such as electric, gas, phone, etc., those are creditors also!

COLUMNS:

  • Creditor: write down the name of the creditor.
  • Account Number: list the number of the account here.
  • Arrears: write down the total amount that you are behind.
  • Monthly Minimum Payments: when you receive your bill, this is the amount you are requested to pay.
  • Balance on Account: the total amount due on the account.  This figure usually varies from month to month if it is an interest account.
  • Last Payment: enter the date of the last payment made on the account.
  • Due Date: this is helpful in organizing your accounts by when they are due and payable in the month.

This is a very short lesson but a very important one. As mentioned earlier, reviewing your accounts means just that. Study all aspects of your accounts. Get to know the rules, interest rates, term (length) of contract, default (late payment) penalties and possible alternative restructuring plans especially in the case of a threatened or already filed foreclosure (law suit filed by your mortgage company in an effort to take back your home). Most banks and mortgage companies now have special departments trained to assist you in alternatives to foreclosure but you will need to exercise this privilege and aggressively pursue what is called a forbearance plan further explained later.

All of the information you have listed your Review of Accounts Form that you just created will be transferred to the monthly budget later, so make sure you have listed all of your creditor accounts.

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Posted by Credit Master - December 5, 2012 at 9:39 am

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Can you change negative information that is accurate on your credit report? Lesson 4

If your credit bureau report shows negative information about your accounts such as late payments, charge offs, repossession, foreclosure or possibly a bankruptcy and it is true, these remarks must remain on the bureau for the specified time allowed.  For example, late payments and charge offs remain on your report for seven years while a bankruptcy will remain for up to ten years.

It is never too late to turn your financial life around.  You can rebuild your credit status.  By simply paying your bills on time and not overextending yourself, you will begin to demonstrate a good payment history.  Within a short amount of time, your positive credit history will build.  Eventually, the negative information will be deleted from your credit report leaving you with the positive history you are starting to build today.   To apply for new credit that you can use to start rebuilding your credit click here.

The steps in these lessons are proven and effective. The next lesson deals with reviewing your accounts. Get to know what makes up a contract. Learn about what you have signed. The more you know about the promises you have made, the better negotiator you will become. Your creditors will respect you for actually taking the time to care about the financial situation you are experiencing (in most cases).

Your financial character and stability are your tools for your financial independence.  Use them wisely.  YOUR financial future depends on it.

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Posted by Credit Master - December 5, 2012 at 9:32 am

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What do you do if your credit report contains errors? Lesson 3

At least half of all credit bureau reports contain errors.  It could be something very minor such as the misspelling of your first name or something more detrimental like delinquent accounts that are not yours.  All too frequently information is carelessly entered on your report causing your potential lender to deny you credit because of

false or misreported information.  If your credit file contains errors that you know are incorrect such as accounts that are not yours, you can dispute them. Enclosed with your bureau report should be a dispute form .  This form allows you to correct any information that is not being reported correctly, whether it is your date of birth, home address or loan account that is not yours.  If you did not receive a dispute form, you can just as easily write a letter detailing the inaccurate information.  Be sure and wrote your name, social security number, date of birth, and home address at the top of the page.  You will again be required to provide ALL of your identification information as detailed under (How to get a copy of your credit bureau report)  in Lesson 2.  List the account number(s) of the disputed item(s) and detail a reason for the dispute such as; “the account is not mine” or “the account was paid in full.”  Be sure to back up your statement with a copy of your cancelled check verifying that the account as paid in full or a copy of your social security card in the event that you social security number is being misreported.

It can be very helpful if you make a copy of the original credit bureau report and highlight all the errors with a yellow hi-lighter to draw the credit bureau’s attention to the items you are disputing.

Before mailing your dispute letter, with the highlighted copy of your bureau report and proof of claim, make copies of your correspondence and file the copies in a file folder with the credit bureau’s name on it.

 

Mail the original documents “certified with return receipt” to the credit bureau.  The credit bureau has thirty (30) days in which to respond to you and make the appropriate changes.  The credit bureau will mail you a copy of your credit report with the appropriate changes.  Read it over carefully.  If the credit bureau failed to update an account to your specifications, send another dispute form or letter and repeat this process until you get your desired results.

If the credit bureau does not respond to your requests, call the credit bureau.  If you mailed the documents “certified with return receipt” you will have proof that the documents were sent and that the credit bureau did receive them.

Remember that you will need to repeat this same process with all three major credit bureaus.  Since the credit bureaus are independent of each other they more than likely will be reporting different information.

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Posted by Credit Master - December 5, 2012 at 9:24 am

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How do you get a copy of your credit report for Free? Lesson 2

How do you get a copy of your credit report?

There are many credit reporting agencies, but the three major credit bureaus that are used most often are: Equifax, Experian and TransUnion. It is recommended that you check for inaccuracies at least once every twelve (12) months.

If you have been turned down for credit in the past sixty (60) days due to negative information being reported by the credit bureau, the report is free. Be sure to enclose a copy of your recent credit denial letter for proof.

If you have not been turned down for credit but want to get a copy of your credit report you will need to enclose a check or money order made payable to the
credit reporting agency in the amount the bureau’s charge in your state. See credit report agencies contact information below.

Due to the identity theft and credit fraud that is occurring these days, the credit bureaus are attempting to reduce consumer fraud risk by making sure you are who you say you are. It is necessary to include copies of your government identification card and a utility bill. Accepted identification includes one of the following:
• Drivers License
• State ID Card
• Military ID Card
Additionally, you will also usually be required to provide a copy of one of the following:
• Utility Bill
• Bank Statement
• Insurance Statement
To protect your personal identification information, the credit bureaus will not mail back correspondence that you send them, so don’t send originals; always send copies. Make sure the copies are clear and legible and enlarge the copies if necessary. Always be sure to include all identification information as follows: full name including middle initial (and generation such as Jr., Sr., II, III, etc.), your previous address for the past two years, social security number and date of birth.

It might be wise to call the credit bureau reporting agency, before you mail your request letter, to verify mailing addresses due to the fact they seem to change their post office box numbers quite frequently. The toll free telephone numbers and websites of the three major credit bureaus are:
Toll Free Lines Websites
• Experian 888-397-3742 www.experian.com
• Equifax 800-997-2493 www.equifax.com
• Transunion 877-322-8228 www.transunion.com

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Posted by Credit Master - December 5, 2012 at 9:04 am

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Rebuild Credit -Start with Your Credit Report Lesson 1

From the time you fill out your first credit card application, or apply for your first credit card, your credit file is already in the works. The information being reported to your credit file is being supplied by your creditors, not from you. Your creditors supply the credit bureau companies with your personal and financial account information to create a credit bureau history that is accessed by your social security number and date of birth. The credit bureaus in turn sell this information to credit card companies, banks and insurance companies in the form of a credit report.

When applying for credit, your potential lenders will access your “financial report card” and score you according to your grade point average. Your score, for example, will either “pass” you to getting your first credit card or “flunk” you by denying you any credit at all. When starting to rebuild credit it is important to know where you are currently at, that is why it is a good idea to know what is on your credit report.

Your credit file includes the following information

  •  I.D. SECTION : Personal information such as your name, address, phone number, date of birth, social security number and your place of employment are listed in this section.
  •  CREDIT HISTORY SECTION: Your creditor(s) name and your payment history are reported here in this section whether it is positive or negative. The creditor’s name, the account number, type of account (joint, individual etc.), when the account was opened, total months your account has been reported, date of your last payment or charge, your highest balance, the term of the loan balance due on the account, status of the account (rated from 1 to 9…1 being best and 9 the worst) and the date of the last account update from your creditor.
  •  COLLECTION AGENCY ACCOUNTS : Recorded here are all of your accounts which your creditor(s) have turned over to a third party collection agency for collection.
  • COURTHOUSE RECORDS : Any public record information such as bankruptcy filings, tax liens, judgments, repossessions, and records of marriage and divorce are shown here.
  •  ADDITIONAL INFORMATION : If your former addresses and past employment are reported by your creditor(s), they will be shown here.
  • INQUIRY SECTION : Inquiries are listed when a creditor requests a copy of your credit file. These inquiries are generated when you apply for a credit card, bank loan or mortgage. Inquiries are also made when a creditor checks your credit file periodically for possible credit line increases, provided your accounts are up to date, or credit suspension if derogatory marks are viewed. Companies that provided you with promotional offers are also listed here but only you can view these, your creditors will not see these entries. These inquiries remain on your credit report for up to two years. Too many inquiries will reduce your overall credit score so be a smart shopper and stop shopping for a while.

If you are serious and want to rebuild credit then this information enclosed in your credit report is important to know.

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Posted by Credit Master - January 24, 2012 at 9:04 am

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