Credit repair the ultimate guide to increase your credit score, decrease your debt, and manage your finances (credit score, FICO score, remove negative items, )

Chapter 2: How to Increase Your Credit ScoreHow Scores Decrease Steps to Increase Your Score Delving into Steps 6 and 7 Final Tips Chapter 3: How to Decrease Your Debt Method for Getting

Credit Repair:

The Ultimate Guide to Increase Your Credit Score, Decrease Your Debt, and Manage Your Finances

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Table of Contents

Introduction

Chapter 1: What is Credit

What is Your Credit Score?

Chapter 2: How to Increase Your Credit ScoreHow Scores Decrease

Steps to Increase Your Score

Delving into Steps 6 and 7

Final Tips

Chapter 3: How to Decrease Your Debt

Method for Getting Rid of Debt

Credit Card Reduction

Reducing Your Overall Expenses

Chapter 4: Establishing Good Debt

Steps to Build Proper Debt

Chapter 5: Manage Your Finances

Creating a Budget

Re-evaluating Your Budget

Staying Strong Against Consumerism

Conclusion

Credit—it is a word we can learn to hate; particularly, when we get into asituation that requires us to repair it You can improve your credit, but notwith magical solutions Your credit and your FICO score will not be

corrected overnight with any techniques you may read about, even here

It takes time, persistence, and determination to meet your financial goals tosee a resolution Luckily, you have access to a guide that will offer you step-by-step instructions that anyone can follow

You will first learn about credit, your credit scores, and types of debt Youwill gain knowledge for how to increase your credit score and the majorcomplications that can arise to decrease your score

This guide will explore methods to reduce your debt while establishing goodtypes of debt that help you in your financial stability

Eventually, you will gain insight into managing your finances better It ispossible to live debt free, with excellent credit, and top-notch financial

management

The secrets are within these pages, all laid out for you to read through andunderstand with ease The first step you will take right now is to determinewhat your financial goal is: do you want to live debt free, with minimal debt,buy a home, or make your score 800? Set your goal and then follow the steps

to ensuring it happens

Chapter 1: What is Credit

Credit is a form of purchasing by borrowing money that will pay for goods orservices Credit is provided by a grantor, whom you will pay back per theagreement You will pay the amount you spent plus finance charges, at anagreed upon time

Finance charges are also known as interest fees, which is a percentage based

on the sum of money borrowed You may already understand this definition,after all, you are reading this book because you need to repair your credit.However, it is also possible that you need to improve your credit because youhave little credit history

Most of us understand the larger definition of what credit is but do not stop toconsider the types of credit that can impact your credit history, includingimproving or worsening your credit score

Four types of credit exist Revolving credit is like a credit card, where youhave a credit limit that you can charge up to, and each month you carry abalance, paying a minimum payment to keep spending on that credit line.Charge cards are in certain ways like credit cards You have a limit You canspend up to that limit; however, charge cards require you to pay the entirebalance at the end of the month or on the payment date

Service credit is a credit agreement for services, such as mobile phones,

electricity, and gym memberships You pay the amount each month based onusage or a specific service charge Some companies like cell phones reportthis credit to the reporting agencies

An installment loan is available in two types: secured and unsecured Secured

Installment credit is a mortgage or car loan You used a particular amount ofmoney to make a purchase, agreeing that for three to thirty years (depending

on the type of loan) you would make a monthly payment Interest and taxesare part of the agreement Unsecured loans are those that are not backed bygoods A personal loan that does not have collateral, such as a house backing

it, is an unsecured loan

Credit is a necessary part of life if you want to own certain things, such as ahome or car Most of us do not make enough from our salaries to cover amassive purchase Good to excellent credit is the best way to buy a house orcar because it can help you obtain a lower interest rate Credit is also used bylandlords to accept or deny a rental property to you

To obtain credit, most grantors will assess how much credit history you have,

if this history is in good standing, and whether your debt to income ratio is inproper balance

If you have more debt than income, it is possible for your credit score to belower than excellent or good, and someone may deny giving you credit forfear that you will have too much debt

What is Your Credit Score?

Your credit score is a three-digit number created using an algorithm to ratethe information on your credit report There are a few credit scoring modelsout there, but creditors typically look at your FICO score FICO scores rangefrom 300 to 850 Anything above 750 is considered excellent You want yourscore to be anywhere from 700 to 850 to get the best interest rates for thecredit you need Scores above 700 are good Scores between 600 and 700 arefair, and anything below 600 is not good

When calculating your score, the payment history, amounts owed, length ofhistory, types of credit, and new credit matter Personal and demographicinformation is not applicable to the score

Your payment history accounts for 35 percent of your score This historyassesses your ability to pay on time, without creating delinquencies Missedpayments and late payments lower your score

The amount you owe for all your accounts counts for 30 percent of your

score Companies look to see how much credit you have and how much youhave used on revolving credit accounts If you have more than 50 percent ofthe credit limit used on credit cards, your score will be lower

The length of your credit history counts for 15 percent of the credit score andassesses how long you have had credit accounts open and the account

activity The score is evaluating if you consistently close and open new

accounts or keep accounts open for several years

The types of credit you have are 10 percent of your credit score The

company creating the score looks at revolving and installment accounts todetermine if you have a fair spread of both types of credit or tend towards onetype

New Credit is also 10 percent of your score This part of the score views newcredit pursuits, including the number of new accounts and credit inquiriesthat have been made.

Some companies reporting to the credit agencies do so each month, but manywill report your history every three months Typically, the average is takenfor those months, so if you make one late payment it may not appear, but ifyou make two late payments, it will be recorded

Certain types of credit count more than others, such as student loans and carloans Car loans are weighted more in your score than student loans If youwalk into a car dealer with only student loans, four years of rent payments,and low balance/low limit credit cards, you are seen as a person without acredit history Your scores may be in the 700s, but the interest rate will behigher than someone with multiple credit cards, car loans, and a mortgagebecause you lack credit

The above factors are imperative for your understanding of repairing yourcredit

Chapter 2: How to Increase Your Credit Score

Numerous situations can impact your credit score Obviously, how muchcredit, the amount you owe, the length of your history, types, and new creditform your score However, what are some things that may decrease yourscore?

How Scores Decrease

The following are the top reasons your credit scores decline

High debt to income ratio

Credit utilization ratio

Applying for new credit accounts

Payment history (particularly a negative history)

Derogatory marks, including accounts in collections, tax liens, andbankruptcies

Age of open accounts

Total accounts you have and whether you have a mixture of types ofcredit

You can take steps to increase your credit score Everyone’s situation is

different You may have accounts in collection and be able to pay those offwithin a few months, with a new agreement Someone else may have a

bankruptcy, which will be on your record for seven to ten years According toFICO Chapter 13 bankruptcies are on your record for seven years and

Chapter 7 filings remain on your report for ten years Other negative

information such as late payments will be on your record for seven years.Unfortunately, the credit reporting agencies (Experian, Equifax, and

Transunion) do not always clean your record after the appropriate length oftime You may need to actively request information to be removed from yourcredit history, negative details, to improve your score

Steps to Increase Your Score

It is time to learn what you can do to improve your score The steps in thissection are proven methods for you to follow You may not have some ofthese issues on your credit report, so you can skip steps if they do not apply

to you

1 Visit one of the credit websites that offers you a free credit report Justtype “Free credit report, ” and the main supplier of credit reports willpop up Some places like MyFico charge you per month for your reportand scores Your score is not always free; however, your credit reportshould be You can also approach all three credit reporting agencies tohave your report sent to you

2 Assess your credit report for accuracy Are there phone numbers,

addresses, and accounts that do not belong to you, but appear on yourreport? Sometimes reports have inaccurate information because thereporting party enters misinformation or similar names and addresses

on your report

3 You can send a letter or fill out a form online to dispute all

inaccuracies Any address, telephone number, or credit inquiry that youdid not allow can be removed These elements do not impact your scoreother than to assign credit that is not yours An increase in credit

inquiries will lower your score as it factors in the calculation The

lower score is why you want to dispute any information that is

incorrect

4 You must dispute any lines of credit and accounts that are not yours Ifsomeone has stolen your identity, you may have accounts open in yourname You need these removed

5 Are there old accounts hindering your score? Anything that is seven toten years should automatically fall off; however, sometimes the

information does not You have the right to ask for information to beremoved from your credit history if it is doing you a disservice Let’ssay ten years ago you missed a couple of payments You can have thosemarks, which go against you, removed In fact, you can have the entireaccount removed if it is no longer open The length of credit historyand type of credit history is important, but late payments or missedpayments hurt your score more than having a longer history will help.Any accounts you still have open need to remain on your credit history,even if they have troubling information—just remember old enoughdata can be removed

6 It is time to assess your credit utilization First, how many accounts doyou have that are open and active? What types of credit are these

accounts? If you have credit cards, do these credit cards carry a balancehigher than 50% of the credit limit? Secured loans and revolving creditweigh more than bank accounts, savings accounts, student loans, andservice accounts If you can show you keep on top of your installmentagreements and you do not carry credit card balances that are more than50% of the limit, your score will be higher

7 What is your debt to income ratio? If you make $50,000 in a year buthave $150,000 in debt, then your debt to income ratio favors more debt

Delving into Steps 6 and 7

Step six has its protocol to follow You are not going to run out and buy anew car, secure a mortgage, or add more credit to your credit history justbecause you may lack a few times of credit It will not be prudent for

financial management purposes, and furthermore, it will not improve yourscore enough to warrant such action Instead, you need to determine whereyou stand with the credit you do utilize

With step seven being about how much debt you have, you also need toconsider what actions you can take to reduce your debt and create a morefavorable debt to income ratio

1 Start with credit cards Are there any credit cards with a low balancethat you can immediately pay off? For example, if you have a creditcard with $200 and you have $5,000 in a savings account, use $200 topay off the credit card You have a credit card with a zero balance.Your debt amount is also lower

You may have a situation where you have three or more credit cards, all with

$5,000 or more in debt, and limits that are near $10,000 If you do not havethe savings to pay off all those credit cards, then you need to follow step 2

2 Take some of your savings to reduce all your credit cards to a balance

of 49 percent of your credit limit If your limit is $10,000, then youshould have no more than $4900 as the balance on your card

By reducing the debt, you have your debt to income ratio appears in a betterlight; thereby, increasing your score over time Furthermore, by reducingyour debt to less than 50 percent of your credit limit, you are going to see anincrease in your score

Credit utilization and debt-income ratio assessment are going to help you in

the next chapter as a means of lowering your debt It is handy that if youwork towards increasing your credit score, you also work towards loweringyour debt.

Final Tips

Set up payment reminders for all of your credit accounts Missed or latepayments will stop happening once you take control of your financialsituation; thereby, increasing your credit score

Do not go out and open new credit cards just to make your other creditcards lower than half the credit limit

Do not close credit accounts just because you are not using them Keepthe history on your report, as long as there are no problems, such asliens or marks against you from the past on those accounts

Get current on all of your accounts Once you return to making

payments, on accounts you may have recently struggled with; yourscore will begin to improve

Always pay off debt instead of moving it from card to card, as this willbetter your score versus opening new lines of credit or going from onecard to another with balance transfer deals

Open new accounts only when needed, such as moving to a new statethat does not have your bank

Have credit cards, but manage them responsibly

Re-establish your credit history if you had trouble in the past by

opening new accounts when necessary and making on-time paymentstill your accounts are paid off