Please click on a subject to view a sample from that section. Our library contains hundreds of pages of information to get credit, repair credit and maintain credit. With the right information and the resouces to get it done you can be on your way to good credit and a better life.

The Cost of Bad Credit

^top

Many good people experience problems in life from illness to loss of a job or an injury. Times like these can affect your credit which can take years to get back on track. Although most people do qualify for credit, these same people do not realize that their credit may be worse than they imagine which can cost $1000's over time.

Scoring for Credit

How does a creditor decide whether to lend you money for such things as a new car or a home mortgage? Many creditors use a system called "credit scoring" to determine whether you are a good credit risk. Based on how well you score, a creditor may decide to extend credit to you or turn you down. The following questions and answers may help you understand who gets credit, and why.

What is Credit Scoring?
Credit scoring is a system used by some creditors to determine whether to give you a loan or credit card. The creditor may examine your past credit history to evaluate how promptly you pay your bills and look at other factors as well, such as the amount of your income, whether you own a home, and how many years you have worked at your job. A credit scoring system awards points for each factor that the creditor considers important. Creditors generally offer credit to those consumers awarded the most points because those points help predict who is most likely to pay back the debt.

Why is Credit Scoring Used?
In smaller communities, shopkeepers, bankers, and others who extend credit often knew by word of mouth who paid their debts and who did not. As some creditors became larger and as the number of their consumer credit applications grew, these creditors needed to establish more systematic and efficient methods for evaluating which consumers were good credit risks. Credit scoring is one such technique. Although smaller creditors still may rely on informal credit evaluations, many large companies now use formal credit scoring systems. Although no system is perfect, credit scoring systems can be at least as accurate as informal methods for granting credit -- and often are more so -- because they treat all applicants objectively.

How is a Credit Scoring System Developed?
Most credit scoring systems are unique because they are based on a creditor's individual experiences with customers. To develop a system, a creditor will select a random sample of its customers and analyze it statistically to identify which characteristics of those customers could be used to demonstrate creditworthiness. Then, again using statistical methods, a creditor will weigh each of these factors based on how well each predicts who would be a good credit risk.

How is a Consumer's Application Scored?
To illustrate how credit scoring works, consider the following example that uses only three factors to determine whether someone is creditworthy. (Most systems have 6 to 15 factors.)

Some credit scoring systems award fewer points to people in their thirties and forties, because these individuals often have a relatively high amount of debt at that stage of their lives. The law permits creditors using properly-designed scoring systems to award points based on age, but people who are...

^top

Fair Debt Collection

^top

If you use credit cards, owe money on a personal loan, or are paying on a home mortgage, you are a 'debtor.' If you fall behind in repaying your creditors, or an error is made on your accounts, you may be contacted by a 'debt collector.' You should know that in either situation, the Fair Debt Collection Practices Act requires that debt collectors treat you fairly by prohibiting certain methods of debt collection. Of course, the law does not forgive any legitimate debt you owe. This brochure answers commonly asked questions about your rights under the Fair Debt Collection Practices Act.

What debts are covered?
Personal, family, and household debts are covered under the Act. This includes money owed for the purchase of an automobile, for medical care, or for charge accounts.

Who is a debt collector?
A debt collector is any person, other than the creditor, who regularly collects debts owed to others. Under a 1986 amendment to the Fair Debt Collection Practices Act, this includes attorneys who collect debts on a regular basis.

How may a debt collector contact you?
A collector may contact you in person, by mail, telephone, telegram, or FAX. However, a debt collector may not contact you at unreasonable times or places, such as before 8 a.m. or after 9 p.m., unless you agree. A debt collector also may not contact you at work if the collector knows that your employer disapproves.

Can you stop a debt collector from contacting you?
You can stop a collector from contacting you by writing a letter to the collection agency telling them to stop. Once the agency receives your letter, they may not contact you again except to say there will be no further contact. The agency may notify you if...

^top

Credit Card Insights

^top

The cards we are going to discuss here are the MasterCard and Visa only. Banks and Savings & Loans issue these. You can either purchase goods and services using this card or go to the institution who issued you the card and get cash advances, i.e., get cash directly against the card.

To obtain these cards, one has to have very good credit or reasonably good credit. Checking your credit can be done in different way. One way is by writing to the Credit Bureau near them and getting your credit standing in the Bureau's Credit File. Another way is to evaluate you by their own standards of point system (please see table at the end of this chapter).

To get a quick guide of institutions issuing credit cards, get out your yellow-pages and look under Banks and Savings & Loans. Call them and make a list of the ones issuing these cards and then go to them and pickup their applications and keep them ready. Then go through this book and write all the ones listed and get their applications. Get a hold of other institutions using the yellow-pages of major cities and get their applications. Then when you have enough applications at hand, fill them all up and mail the ones from zip codes starting 0 to 5 the first day, the ones of zips 6 to 8 the next day, and zips 9 the third day, so they all reach the institutions the very same day (for California only - other states please improvise).

If you get accepted in 10 out of 30, each with a credit limit of $1,000, you can have access to $10,000. This is one of the quickest ways of obtaining a loan in the shortest time (and the safest).

A sure-shot way of getting credit card is the secured cards. These are credit cards issued against your depositing cash in that institution. If you have saving or other checking accounts, then you might as well have it at their institutions which give credit cards in return. The credit requirements of these mentioned ones is not very stringent. A good way to raise your credit limit on the secured credit cards is to take cash advances and re-deposit the cash (and pay the debt) till you reach your credit limit.

Be advised that this method must only be done if you do not plan on applying for major credit in the near future such as a home purchase as too many applications for credit will affect your score. In addition you can also have too much credit.

Visa and/or MasterCard
There are special bankcard agencies that will issue a Visa and/or MasterCard to anyone that opens a $300 savings account at their bank regardless if the person has bad credit or no credit. It makes no difference if you have a bankruptcy. You're guaranteed the cards regardless hoe bad you credit might he if you open the savings account at the bank! You would receive your card within 30 days from the time you open your savings account with them. The credit limit on the card matches dollar for dollar with the amount of money in your savings account.

A lot of people can't part with $300 for long because of bills that are pressing them. There's a way around this. Go ahead and open the savings account and get the card. Then go to a Western Union and make a $300 cash withdrawal on your card and you have your money right back plus the card. Even though you can't charge anymore because you've reached your credit limit, you can still use the card for identification or check writing purposes. Then you can pay your bill down a little at a time as opposed to putting up the entire $300 at one time and leaving it in the savings account.

Another way to get around not paying out the entire $300 at one time is for you to work with a close family member or friend in splitting the $300 cost to get the card. Decide on which one of you is going to apply for the card first. And when that person gets his card he's to make a $300 cash withdrawal on it so the other person can apply for his card. When the second person gets his card he's to make a $300 cash withdrawal on it also and give his partner his $150 investment back. This procedure will work for as many as 3 people putting up $100 each to help each other get their cards.

There's also a maneuver that a person can utilize with his secured card that will show him more credit worthy than he actually is. It will cause banks to loan him more money and quicker. And it will make creditors want to give you things that they normally would not have. In order to do this you have to be patient and you can't make any charges on...

^top

Introduction to FICO

Fair, Isaac and Co is the San Rafael, California Company founded in 1956 by Bill Fair and Earl Isaac. They pioneered the field of credit scoring for financial companies. They have expanded their enterprise to cover decision systems, analytics and consulting. Every credit agency, and most lenders, calculate your credit score using software from FICO (Beacon) or in house software based on the FICO rating system.

What your score means.
This rating system is meant to develop a snapshot of the risk you currently represent to a lender. Several parameters in your credit file, including length of credit history, number of open accounts, loans, mortgages, public records, and others are formulated to produce a 3-digit score between about 300 and 950. There are other scores used by lenders and insurance companies (some of which are developed by FICO) such as Application and Behavior scores. These other scores take other information into account. Usually a lender will use a combination of your credit score with other factors when determining your risk. They all have the same objective, to determine the borrower’s potential risk. Regardless of whether the score was generated by FICO or a system based on FICO parameters, they all yield an industry standard 3 digit score. This score places the borrower in one of 3 main categories. (We named the third one ourselves)

Prime, Sub Prime, and Shafted

Prime
If your credit score is above 680, you are considered a "prime borrower" and will have no problem getting a good interest rate on your home loan, car loan, or credit card.

Sub Prime
If your credit score is below 680, you are "sub prime", and will likely pay a much higher interest rate on your loan.

Shafted
Below 560 is the shafted score. At least that is how most lenders and credit issuers perceive it. You can still get a credit card but you will likely be hit with a security deposit or high acquisition fee. In addition to that your interest rate
will likely be 22 to 23%. You can forget about most home loans and the majority of new car loans at this score. Below 560 is no place to be. You will pay much, much more in higher interest and ...

^top