The Essential Credit Repair Handbook: A Quick and Handy Guide for Anyone Who Wants to Get and Stay Out of Debt
212
The Essential Credit Repair Handbook: A Quick and Handy Guide for Anyone Who Wants to Get and Stay Out of Debt
212eBook
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Product Details
| ISBN-13: | 9781601636669 |
|---|---|
| Publisher: | Career Press, Incorporated |
| Publication date: | 09/12/2025 |
| Series: | The Essential Handbook |
| Sold by: | OPEN ROAD INTEGRATED - EBKS |
| Format: | eBook |
| Pages: | 212 |
| File size: | 883 KB |
About the Author
Read an Excerpt
CHAPTER 1
SETTING NEW FINANCIAL GOALS
Times have changed from the good old days when you felt as though you had set good, solid financial goals. You may be one of the survivors of a bad economy that left you with a drop in income and your world turned upside down. Your financial situation may be something that was totally out of your control and had nothing to do with the economy. The financial goals you had previously set were either diminished or set on the back burner.
The good news is that you are back and ready to undo any damage from your past and start a new beginning. It's not easy trying to regroup and get back on top, but you can do it. Stepping back and reassessing your financial goals is a must.
Goal-setting has changed for most people. Your priorities have changed and although those big goals and dreams are still on your list, they are repositioned to another level in the future.
Many of us have written down our goals, such as buying a home, saving for retirement, paying off student loans, taking vacations, starting a business, and so forth. These are great goals, but are long-range. Most of the time, these are things people will write down as their financial goals. But times have changed. The short-range goals need to be addressed in order to reach the long-range goals.
Rebuilding your credit portfolio includes strengthening your credit report, budgeting, living within your means, and controlling your spending.
Short-Range Goals
Setting goals for your credit and financial needs is just as important as setting goals for your life. As you accomplish each goal, you will gain confidence in setting new ones.
You need to determine how your short-range goals will help you position yourself for the long-term goals. Let's review the short-range goals that will be your building blocks for a great financial future.
[check] A solid budget. Everyone hates a budget, but if you want to be successful in reaching your financial goals, you must have a workable budget. You need to tighten up your budget so you can save money for your future.
[check] Getting out of debt. For some people, this is a New Year's resolution. To be successful, you need to eliminate your debt so you can use that money for your long-range goals.
[check] Paying your bills on time. Sounds easy, but if you get sloppy at paying your bills and they fall behind, your credit report will be affected and your credit score will decrease.
[check] Saving money. Putting money into a savings account will help you achieve your goals.
[check] Having a good credit report. It is important that you have a good credit report to achieve some of your long-range goals. Your FICO score is derived from what your credit report says.
[check] High FICO scores. High credit scores are a must. Qualifying for most large purchases, such as a home or automobile, will be based on the credit score on your credit report. This should be a high priority on your list.
If you are able to achieve these short-range goals, you will be in a better position to make major purchases. After reviewing your income, net worth, what you can afford with your debt-to-income ratios, and your credit scores, you can see whether these purchases will fit into your budget. Once you have accomplished this, you can move toward your long-range goals.
Long-Range Goals
Most long-range goals constitute some type of investment, luxury item, or type of credit that you want to acquire. As you review these different goals, most of them can only happen once you have accomplished your short-range goals. It is important that you accomplish the short-range goals to further your financial gain.
Review the following long-range goals that most people have, and the basics of accomplishing them.
[check] Home. A home is probably the largest investment an individual will ever make in his or her entire life. In order to qualify for a home mortgage or equity line of credit, you must be credit worthy. Without a good credit history and high credit scores, you will not be able to qualify for a home loan. If your credit score is too low, you may not qualify for the best interest rate and terms, or you may be disqualified altogether. Having a high credit score is a must in qualifying for a mortgage approval and low interest rates. The less debt you owe, the higher your credit score will be.
[check] Automobile, boat, or motor vehicle. Most people need an automobile or some type of vehicle for transportation. In order to qualify for a motor vehicle, the lender or bank is looking at your FICO credit score. The interest rate and terms the lender will offer you will be based on your credit report score. The higher the credit score, the lower the interest rate will be.
Occasionally, finance companies will let you establish credit if you've never had credit, or if you've had negative credit. For this type of scenario, the cost of the loan and interest rates are substantially higher. An automobile purchase is probably the second-largest investment you will make. If you cannot pay cash for the automobile, try to pay the loan off as quickly as possible.
[check] Business. Your goal may be to start or purchase your own business. Establishing a line of credit for a business is frequently needed. A line of credit may be necessary for the start-up of the business or to have on hand for future reserves. This can be done through your bank or a large credit line with a credit card.
When applying for a line of credit, one of the main things banks are looking for on your application is your credit report. If you are unable to qualify for a bank loan, or decide not to apply for a loan, you can use your credit cards as a line of credit for cash advances, but the interest rates are usually higher. By using the line of credit from your credit card, you can request an increase of your credit limit, provided the account is current and in good standing.
[check] Student loan. With the rising cost of college, many students need financial aid, which usually involves student loans. Many banks offer students special financial programs. Many of these programs are government loans, which students can defer making payments on until several months after they graduate or leave school. The interest rates are usually low. If you have a child entering college, you may have to qualify for a student loan. Having a good credit report is necessary.
[check] Retirement. Although saving for your retirement does not involve your credit report, it does involve being able to save and manage your money. It is important that you have a strong budget in place and stick with it during your retirement days.
As a retiree, you have worked hard to get to this place in life, but you need to make sure that you are able to live comfortably without any financial stress. Staying out of debt is one way to manage your money.
[check] Investing. There are many different types of investing. If you are investing in real estate, most of the time you will need to get a loan for the property. A loan for an investment property is more challenging to qualify for. Your credit scores must be high enough, and a substantial down payment and cash reserves are required.
If you are investing in other things such as stocks, bonds, mutual funds, and so on, you must have cash. Being able to budget and save will help you build your financial portfolio.
Goal-Setting Tips
You need to evaluate what it is you want and do everything possible to make your goals a reality. Doing your homework and setting a plan of action can make the goal much easier to accomplish.
Setting goals is time consuming and something most people don't look forward to doing. Procrastination is what usually turns a great idea for goal-setting into a less-than-enthusiastic reality. Goal-setting is your road map to making something happen. It gives you a direction on how you are going to achieve it. You need to follow through and set your sights on goals that are reachable. Careful planning and being responsible will give you a boost toward building a successful financial and credit portfolio.
There are several steps in making goal-setting for credit and financial needs a success. Defining in what areas you may need credit and financial assistance is a must. Review the list of goals mentioned previously. Are these goals you want to accomplish?
When setting your goals, you must be specific. You need to create a Master Financial Goal Worksheet. List the types of things you want to achieve. For example, if it is a home loan, list "mortgage" and the amount you need to qualify. If it is an automobile or other motor vehicle, list the amount you want to finance. If it is for a student loan, list the amount. If you are trying to get out of debt, list the amounts you need to pay off.
You need to be cautioned not to set unrealistic goals that will cause you to be overextended. Make sure the amount of income you bring home can support your household.
10 Steps to Goal-Setting
[check] Step 1. Put it in writing.
check] Step 2. Visualize your goal.
[check] Step 3. Set a realistic time frame to accomplish the goal.
[check] Step 4. Write out your plan of action.
[check] Step 5. Remove the excuses you have for not following through with your goal.
[check] Step 6. Anticipate any situation that may arise that will cause you to stop moving ahead. If you know of anything in your credit portfolio that could cause you a problem, find a way to correct it. This could be revealed to you through an updated credit report.
[check] Step 7. Define your motives. Are your intentions to build a credit portfolio for the future, or only for material gain?
[check] Step 8. Look at all your past experiences. Learn from them. Do not be afraid of failure.
[check] Step 9. Believe in yourself. You can accomplish what you set out to do.
[check] Step 10. Avoid procrastination. Become a doer, not just a talker.
A short-range goal will give you more confidence to reach the long-range goals. Goals will save you time and give you enthusiasm to start your day. Everybody looks forward to new challenges. A good credit and financial portfolio is something that you will live with for the rest of your life.
There is a proverb that says, "Plans fail for lack of counsel, but with many advisers they succeed" (Proverbs 15:22 NIV). If you need advice from a credit or financial expert, don't be afraid to ask for it. You must have knowledge in credit and financial matters. It is a necessity of life.
CHAPTER 2NO REPEAT PERFORMANCES, PLEASE
As you step back and reassess your financial situation, it is time to look back at your past mistakes. So often when we have come through a stressful situation, we tell ourselves, "Never again. I have learned my lesson."
Sounds good, but the problem is that most of us are creatures of habit. We might get beat up along the way, but when we bounce back, it is easy to slowly fall back into making bad choices.
In order to make a full recovery, you need to get to the root of your problem. Why did your credit and finances get out of sync? You need to figure this out as you work on cleaning up your credit report, establishing new credit, and setting new financial goals.
Sometimes you have to take a step back and look as far back as your childhood. Maybe that seems strange to you, but it is not unusual for adults to duplicate their parents' spending habits. For example, if you were living in a home where you saw your parents whipping out the plastic for most of their purchases, it probably looked like free money. Or you may have lived in a home where your parents were very frugal and you had to beg for something you wanted.
Most parents do not discuss their finances with their children, especially if they are having financial difficulties. In essence, if your parents were living off of credit, they probably never discussed being in debt or money management, so in your mind, everything was fine. Why not do what they did?
The example of frugality could point you in one of two directions: You will be frugal as well, or you will become a "credit card spender" and wind up in debt. All of a sudden, you were handed a credit card and you didn't have to ask anyone's permission to buy something. This would be best described as a "power card spender."
Interesting enough, in most marriages, there are two different spending characteristics. One spouse is usually frugal and the other spouse is a spender. It can be frustrating for both if they can't come to a meeting point in handling their finances. Money problems are one of the main reasons people get divorced.
You need to know where your weaknesses are and break those old habits. Listed are several weaknesses that people need to change in order to be successful with a fresh start.
Give It to Me Now
Like so many people who have dealt with past credit problems, it all started with the instant gratification urge. You may have seen or heard an advertisement on something you just had to have. Maybe you were out shopping and saw a flat-screen television with all the bells and whistles, and whipped out your charge card to make the purchase. It may have been a designer handbag. Whatever it was, you had to have it and you made the purchase without thinking about how long it would take you to pay it off and how much the interest was going to cost you.
The days of instant gratification have to be over in order to succeed with a new financial beginning. If you feel the urge to make a purchase and know that it is on an impulse, walk away. Go home and sleep on it. By morning, you should be over the urge. Remember that everything you do with your money has to fit into your budget and able to be paid for with cash. Anything that you do with credit is going to be reflected on your credit report and history.
Living Beyond Your Means
The average person or family lives beyond their means. In other words, you have more bills than you have money to pay them. Credit cards become the source of purchases that you never would have made if you were paying with cash. Credit cards are a false paycheck and give people a false sense of security.
Now that you are beginning fresh with new financial goals, it is important to know what your debt-to-income ratio is. A debt-to-income ratio is a calculation that determines what percentage of your income is going out to pay off debt. For many people, the debts are higher than the income.
To determine what your debt-to-income ratio is, divide your monthly gross income (before taxes) into your total monthly debt. The answer will show your percentage. Here is some basic information on how a credit grantor looks at your application.
When credit grantors look at your application for credit, they will estimate your net income at 80 percent of your gross income (before taxes). Rent or mortgage and bills should not exceed 70 percent of your net income. Other variable expenses such as food, utilities, gas, and so on are estimated to be about 20 to 25 percent of your net income. After the credit grantors assess your income and expenses, they look to see that approximately 90 to 95 percent of your net income is utilized for all your expenses. Anything greater means that you are probably overextended on your credit and debts.
Are You a Charge Card Addict?
Do you have problems walking way from a great sale? How about watching your neighbor buy new things that you want too? Did you ever feel that you are owed this purchase? If you answered yes to these three questions, you need to reverse your thinking. You are still living with your old mindset.
Probably more than half the things we purchase with credit are on an impulse. You may have heard of a great sale that you need to go to. When you arrive at the store, your head may be spinning because there are such great buys.
The old you would load up the shopping cart with items you think you can't live without. After all, it is on sale. You don't have the cash, so you take you credit card and charge it. Once you get your purchases home, you may feel a sense of guilt, because you know that you really didn't need these items in the first place and bought them on an impulse.
The new you must not fall into the temptation of impulse buying. Remember, you just need to walk away and go home. Better yet, don't put yourself in that position to have to walk away. Just don't go to the store where you are tempted. Many people are "sale addicts." Buying on sale is great if you really need the item, but in most instances, the sale purchase is a "want item" and if purchased with a credit card, adds to your debt load.
Keeping Up With Your Neighbor
Keeping up with the Smiths should never be a reason to make impulsive purchases. You have no way of knowing if the Smiths paid cash or used credit to make purchases. Because you don't want to feel as though you are being left behind, you may make a purchase that you really can't afford. Again, you use your credit card or line of credit to make the purchase. Look at what you just did. You just stepped back into the debt trap.
(Continues…)
Excerpted from "The Essential Credit Repair Handbook"
by .
Copyright © 2011 Deborah McNaughton.
Excerpted by permission of Red Wheel/Weiser, LLC.
All rights reserved. No part of this excerpt may be reproduced or reprinted without permission in writing from the publisher.
Excerpts are provided by Dial-A-Book Inc. solely for the personal use of visitors to this web site.
Table of Contents
Introduction,
SECTION I: BUILDING YOUR PLATFORM,
Chapter 1: Setting New Financial Goals,
Chapter 2: No Repeat Performances, Please,
Chapter 3: 11 Myths of Credit,
Chapter 4: Tips for an Effective Budget,
Chapter 5: Save Money While Retiring Your Debt,
Chapter 6: Get Out — and Stay Out — of Debt,
SECTION II: CREDIT REPAIR 101,
Chapter 7: The Role of Credit Reporting Agencies,
Chapter 8: Understanding Your Credit Report,
Chapter 9: The Credit Repair Process,
Chapter 10: Improving Your FICO Credit Score,
SECTION III: A FRESH START,
Chapter 11: Rebuilding and Reestablishing Your Credit,
Chapter 12: Life After Foreclosure, Short-Sale, or Bankruptcy,
Chapter 13: Qualifying for Credit,
Chapter 14: The Home Loan Process,
SECTION IV: PROTECTING YOUR CREDIT,
Chapter 15: Establishing Credit in Your Own Name,
Chapter 16: Protecting Your Credit During and After Divorce,
Chapter 17: Credit Card Regulations,
Chapter 18: Indentity Theft and You,
Chapter 19: Medical Identity Theft,
Conclusion,
Resources,
Index,
About the Author,