http://www.articletrader.com/ Articles at ArticleTrader en-us http://www.articletrader.com/finance/credit/first-steps-to-take-after-youve-filed-bankruptcy.html http://www.articletrader.com/finance/credit/first-steps-to-take-after-youve-filed-bankruptcy.html Sun, 19 Aug 2007 00:00:00 -0500
This first step to bankruptcy recovery can be tough for most people. It was tough for me and my wife, Michelle. We had to come to the realization that the way we managed money didn't work.

I wanted all the toys and luxuries everyone else had, even though we couldn't afford them. But of course, this didn't prevent me from buying expensive items we really didn't need.

This got us into financial problems. Michele and I eventually agreed I was the problem. When our Jeep Grand Cherokee and furniture were repossessed, it was my wake-up call. I still remember helping the repossessors load our new furniture in their truck—and Michele crying on the front porch.

Obviously, we were doing something wrong with our money.

Instead of asking someone else to fix our finances for us, Michele and I were determined to manage our money wisely—in order to create a foundation to build on.

So we started with common sense. We asked friends and family who were good with money how they managed their finances.

We quickly learned that we couldn't have luxuries and money while we were rebuilding our credit. We needed to choose one.

Here are some of the steps Michele and I took to recover from bankruptcy:

Began paying our bills early...worst-case, on time

We stopped paying our bills late. We drew a line in the sand and said..."No more! All bills from this point on will be paid early...worst-case, on time." It was amazing how much we saved in late fees and overdrafts...not to mention the satisfaction of being responsible. Initially it wasn't easy. But the short-term sacrifices were worth long-term financial stability.

This is easier today than it was for us many years ago. Today you can take advantage of online bill-pay or automatic bill-pay.

Avoided finance companies

It's easy to get loans or credit after bankruptcy from a finance company. And some (misinformed) people will actually tell you this is good. Credit from a finance company is not good. Not only is it very expensive, having finance companies appear on your credit reports lowers your FICO credit scores (which makes everything else more expensive).

Finance companies are the lenders of last resort. You have to stay away from them at all costs...unless you don't mind paying 25% interest and working with lenders who are friends with the Mafia.

Just said, "No," to co-signers

Bankrupt people often think, "The only way I can get new credit is to have a co-signer." Whether that's from a parent, brother, sister, relative, friend...whatever...you don't need that kind of help reestablishing credit.

Bottom line: you don't want to have co-signers for several reasons.

First, it's not a wise thing to do. It even says not to co-sign in the Bible. You put the co-signer's credit on the line if something goes wrong. If you don't make the payment, guess who they come after? Yup—the co-signer. Can you say, "Friendship over," or, "Relationship strained?"

In addition, having co-signers appear on your credit reports weakens your position with future lenders. When a new lender sees you've had a co-signer, they'll consider you a greater risk and they may ask for a co-signer for their loan as well. In other words, once you get a co-signer for one loan, you start a vicious cycle that is hard to break.

The word "no" meant nothing

You must understand...most of the lenders you come into contact with after bankruptcy have no interest in helping you recover. You're going to hear the word "no" a lot.

You've got to get in your head that the word "no" means absolutely nothing. So if a car dealer tells you, "There's no way you'll be able to get financed, you shouldn't believe him. If a mortgage broker laughs at your goal of owning your first home instead of renting...laugh right back at her.

Discovered the power of asking open-ended questions

When a lender tells you, "No,"...don't stop there! You'd be missing out on the best part of the experience. You need to ask some very important questions, like...

"What would you do if you were me?"

"Since you can't help me, where would you go if you needed to get financed?"

Asking open-ended questions like these helps you find the people you should've been talking to in the first place. That's how we found the car dealer that financed our first car after bankruptcy with very little money down (and that was a post-dated check) at 2.9% interest.

Of course, now I think that's a so-so deal.

All you need to do is know where to go...be prepared...know which cars have the best incentives...and know what questions to ask. Most importantly, always be ready to walk away from the deal, no matter how much you want that new car.

Establish the right kind of accounts.

Overall I encourage people to rebuild their credit after bankruptcy by establishing these types of accounts:

1. Checking and savings accounts at a bank or credit union
2. A few secured bank cards
3. One or two retail credit cards (just don't go crazy)
4. A few secured bank loans.
5. A car financed through a bank, credit union, or captive lender (that reports to all three national credit reporting agencies).
6. A home mortgage.
7. A refinanced mortgage.
8. A home equity loan (not a home equity line of credit).
9. Real estate investment: Your current home becomes your first investment property and you shop for a new home.

Obviously this doesn't happen all at once. And the order changes depending on what you need. This is pretty much the order in which we did things after our bankruptcy.

Notice I don't have any finance company or Crapital One accounts listed above. Sometimes knowing what accounts to avoid is as important as knowing which accounts to establish.

You'll also notice I don't have a personal loan listed above. I spent too much time looking for loans after I went bankrupt. I figured if I could just get a big enough loan, I'd pay off all my debts. Of course, it didn't occur to me that I'd still need to pay off the loan. Duh!

It's like a disease. (Hi, I'm Stephen, and I'm a loanaholic.)



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Stephen Snyder is the founder of the After Bankruptcy Foundation a non-profit organization that provides free bankruptcy information and recovery steps. Stephen also writes a free weekly newsletter on bankruptcy recovery.

Source: http://www.articletrader.com ]]> http://www.articletrader.com/finance/credit/warning-to-happily-married-couples-with-joint-accounts.html http://www.articletrader.com/finance/credit/warning-to-happily-married-couples-with-joint-accounts.html Wed, 11 Jul 2007 00:00:00 -0500
What most divorced couples find out after it's too late is that both borrowers on a joint account are responsible for the loan—regardless of what the judge says—until the loan is either paid off or refinanced in one person's name.

And if your ex-spouse is more than 30 days late paying the bill, your credit reports will also be affected negatively and your credit scores will plummet.

I've seen it happen hundreds of times. A couple gets divorced, the judge says the husband is responsible for paying off the credit cards and loans, and the wife goes home happy, thinking she's off the hook (or vice versa).

Then, a few months later, after the ex-husband fails to make payments or defaults on some loans, the ex-wife's credit scores sink. And keep sinking.

What I'm trying to say is that a mean-spirited spouse can continue to ruin your credit for many years after a divorce by making late payments (or not making them at all) on any credit held jointly. And if you cannot afford to pick up the slack...things will be rough.

So remember, just because a judge says it's so—doesn't make it so. You have to be proactive and get your name off of all joint accounts...or volunteer to be responsible for all joint accounts to ensure they get paid on time.

For some real world advice...read a collection we've compiled from divorced Life After Bankruptcy readers to give you a balanced perspective. Go here to download the report.

Of course, I'm not trying to promote divorce. I want to show you how to protect your credit.

How the spouse with good credit can speed up the recovery of the spouse with bad credit

OK, let's say that you have really low credit scores and your spouse has great credit scores. The best way for you to increase your scores is to have your spouse add you as an authorized user to their credit card accounts.

As an authorized user—you'll get a new credit card with your name on it—but the primary card holder will still be responsible to pay the amount owed, regardless of who charges on it.

But here's the interesting part. Most lenders will report the entire credit history of the account on the authorized user's credit reports.

So, you instantly get a good credit history added to your credit reports!

But, don't pick just any card to be an authorized user on. You should choose the accounts wisely. I would select the oldest accounts, with the highest credit limits, that have the lowest balances.

Another word of caution...

Just remember, if you're the primary cardholder and any of your authorized users go on a shopping spree, then fly the coop—you're still responsible for the balance owed.

"...But my husband charged my account to the hilt and left me..."

Doesn't matter.

"...But my husband lied to me, stole my children, and left in the middle of the night without me..."

Lenders don't care.

"...But my wife was having an affair with the pool boy and maxed all of my credit cards that she was an authorized user on..."

Tough luck.

You get the idea. Lenders don't care what's going on in your personal life. All they care about is that the balance gets paid. So, if you have good credit, please think twice about sharing it.

And if you're going to become the authorized user of your spouse's credit card, make sure everything's going OK at home first and that there are no surprises around the corner.

Sometimes it's just about your FICO credit scores...putting your best foot forward

When applying for credit cards your scores are either high enough to qualify or they aren't. For example, when you apply for a department store credit card, there's no negotiating. You're either approved or not. The decision is based on one of your FICO credit scores.

So put your best foot forward at the beginning. The person who has the highest FICO credit scores should apply for credit.

Michele and I do this all the time. When it's time to apply for new credit it's all about who has the highest FICO score from the credit reporting agency the lender uses to make a lending decision. Sometimes my scores are higher. Sometimes hers are higher. It doesn't matter to us whose scores they use, we just want to qualify for the best terms.

In fact, the "putting your best foot forward" strategy isn't always exclusive to credit cards—it works with any lender that makes lending decisions based primarily on FICO credit scores.

For example, the car I'm driving right now was originally financed by one of my wife, Michele's FICO scores. When I decided to keep it a little longer, my scores were high enough to get the best terms—so I refinanced using my scores.

You can purchase your credit scores to determine who should be applying for unsecured credit cards right now. Preferably whoever has 700+ scores. Once approved, you can add your spouse to the account as an authorized user.

"By the power vested in me...I now pronounce you...finished reading this article."



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Stephen Snyder is the founder of the After Bankruptcy Foundation a non-profit organization that helps people recover after bankruptcy. He has helped thousands of people obtain a credit card after bankruptcy with a fair interest rate.

Source: http://www.articletrader.com ]]> http://www.articletrader.com/finance/credit/what-you-really-need-to-know-before-marrying-someone-with-a-bankruptcy.html http://www.articletrader.com/finance/credit/what-you-really-need-to-know-before-marrying-someone-with-a-bankruptcy.html Sat, 07 Jul 2007 00:00:00 -0500
OK, so maybe that's not exactly how most marriage vows go. But, how important are your potential spouse's credit scores in the grand scheme of things?

The first thing you need to understand when you marry someone with a previous bankruptcy appearing on their credit reports is that their bankruptcy and other bad credit will never merge with yours.

So, don't panic—you won't wake up one day and find their bankruptcy appearing on your credit reports. Credit reporting just doesn't work that way. You are two separate individuals with unique Social Security numbers, credit reports and credit scores.

All three of the credit reporting agencies in the United States store credit files on individuals—not couples. Never the two shall meet...unless, of course, you have accounts that are in both of your names. In that case they WILL show up on both of your credit reports and they WILL affect both of your FICO credit scores.

When you're applying for credit with your spouse, you need to pay attention to a few key things:

1. What it means to become a co-borrower
2. How and when to apply for credit together (also known as "joint credit")
3. When it makes sense to add your spouse as an authorized user on one or more of your credit card accounts

Marriages...bankruptcies...and mortgages...

It's a mistake to assume too much when you apply for a mortgage or new car loan.

The most common assumption is that if a person with a bankruptcy is added to the loan application as a co-borrower, the credit will automatically be more expensive. It might be. But then again...it might not be.

The best way to tackle this situation is to know all of your options. You start by knowing how to structure the deal.

How do you do this?

Simple, each of you should fill out individual credit applications.

Now, the lender can review your credit scores and advise you if you're better off submitting an individual or joint credit application to the lender.

The mortgage or auto lender should compare all your options and advise you of the pros and cons accordingly. If they don't take time to compare...take it as a sign that they don't have your best interest at heart and get a second opinion.

If you do like what the lender has to say—then take his advice and do what he recommends.

However, if you don't like what the lender has to say—then you have two choices:

1. Wait six months and work hard to increase your credit scores...then re-apply.
2. Take what you can get, even if it's a high interest rate—but use this only as your very last resort. (If then.)

There were many times my wife and I wanted something...and could have gotten it immediately (but at a higher cost). Instead, we would always wait until we qualified for the lowest interest rates and best terms.

At times it hurt. And we had plenty of arguments about waiting. But in the end, we both agreed it was for the best. It's amazing how much money just one or two extra percentage points on your interest rate can add to the cost of something over time.



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Stephen Snyder is the founder of the After Bankruptcy Foundation a non-profit organization that provides free personal bankruptcy recovery advice. He has also helped thousands of people through the challenges of bankruptcy and marriage.

Source: http://www.articletrader.com ]]> http://www.articletrader.com/finance/credit/warning-revolving-accounts-may-be-lowering-your-credit-scores.html http://www.articletrader.com/finance/credit/warning-revolving-accounts-may-be-lowering-your-credit-scores.html Mon, 18 Jun 2007 00:00:00 -0500
When I say, "revolving credit," I'm referring to any credit account you have where the monthly payment can vary. Credit cards are the most common form of revolving credit.

Of course, "revolving credit" refers to almost everything in your wallet or purse that's plastic that you can use to buy something. This includes American Express, Discover, MasterCard, or Visa credit cards. This also includes retail store cards such as Macy's or Target, and gasoline cards.

The exceptions are check cards and debit cards. These little dudes may be plastic and have a MasterCard or Visa logo, but they aren't really credit cards. They're more like plastic checks than anything else. Debit cards have nothing to do with your credit scores.

Why your credit reports can show that your credit cards are maxed out when they're not

In my case, my credit scores were lower than they should have been because I was using my personal credit cards for my business. An easy fix...I just applied for a corporate card and began using only that card for anything business related. (You should do the same if you have a small business.)

A few small business leases were also reporting as revolving accounts on my personal credit reports. Those were simple to resolve by just paying the small amounts off.

Then, I did a quick analysis of my credit reports.

The only way to really discover if revolving credit is lowering your scores is to do a quick analysis of your revolving credit accounts. (I'll show you how at the end of this newsletter.) That's how I found the big culprit that was destroying my credit scores...

Beware of home equity lines of credit

When I analyzed my credit reports I got a big surprise...I discovered several of my home equity lines of credit (HELOCs) were being misinterpreted as credit card accounts.

This was fooling the FICO scoring model into thinking that I had an enormous amount of credit card debt. But of course, I didn't.

What I learned was that HELOC accounts can look exactly like a credit card account on your credit reports.

When I was trained by Fair Isaac Corporation, I got a different story. I was told there are two situations when a HELOC won't be mistaken as a revolving credit card:

1. When the original amount of the line of credit is more than $50,000
2. If the account has a narrative attached to it (e.g., equity line of credit or real estate)

Even though Fair Isaac claims the above is true, I didn't find that to be the case with my HELOCs.

It's bad enough that my HELOCs were being mistaken as credit cards...but to make matters worse...all of my HELOCs were maxed out!When a HELOC is mistaken as a credit card, and it's maxed out, then it looks like you have a high-limit credit card and you're using all of its available credit—which lowers your credit scores. Ouch!

My HELOCs were lowering my FICO scores, and it was making it more expensive for me to get personal and business credit. This HELOC issue was a tough nut to crack. We were able to pay off a few of the smaller HELOCs. But we couldn't afford to pay them all off. So we decided to refinance them into home equity installment loans (HEILs).

What's better—a HELOC or a HEIL?

There are a couple of important differences between a HELOC and a HEIL. Once you understand the differences you can strategize on what's best for your credit and financial situation.

Here are the differences:

- A HELOC is a revolving account. This means you can have variable monthly payments determined by the balance you owe each month. A HELOC also allows you to take some or all of the available credit out as you need it...just like a credit card.

- A HEIL is an installment account (just like a car loan or mortgage). This means you'll have the same payment every month until it's paid in full. A HEIL lets you take out only a fixed amount in one lump sum.

- A HELOC could be mistaken as a credit card account by the FICO scoring model because they report as revolving accounts. However, a HEIL cannot be mistaken as a credit card account because a HEIL appears on your credit reports as an installment account.

Because of the effect HELOCs may have on our credit scores, my wife and I are now committed to always using HEILs to tap equity in our properties even though the interest rates are usually higher.

How to protect yourself against holes in the credit system

Here's a strategy you can use to insure yourself against the flaws we've been talking about in the credit system. If you want to tap into your home's equity, apply for the highest HELOC amount you can qualify for. Just don't use more than 10% of the limit. The most essential part of this strategy is your discipline after you're approved. If you can keep yourself from going out and buying things with your new line of credit, you can really protect your credit scores.

This way, even if your HELOC is misinterpreted as a credit card, your credit scores can't be hurt...in fact, it could even help them. So, a HELOC can be a good thing if your balance is extremely low or nonexistent.

My Wake-up Call

Had I not performed a quick revolving analysis of my credit reports—I never would have known my credit scores were suffering because of a simple credit misinterpretation.

Think about all of the things that can lower your FICO scores...late payments...too much credit card debt...too many inquiries, etc.

These are legitimate and understandable reasons why your scores would go down. But to lose points for a silly loophole in how HELOCs are reported is just...irritating.

It goes to prove what I've been teaching for more than 10 years now...having good credit takes more than paying your bills on time. Way more.



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Stephen Snyder is the founder of the After Bankruptcy Foundation a non-profit organization that helps people recover after bankruptcy. He has helped thousands of people obtain a credit card after bankruptcy with a fair interest rate.

Source: http://www.articletrader.com ]]> http://www.articletrader.com/finance/credit/your-credit-card-company-is-playing-evil-tricks-on-you.html http://www.articletrader.com/finance/credit/your-credit-card-company-is-playing-evil-tricks-on-you.html Tue, 05 Jun 2007 00:00:00 -0500
I recently reviewed my wife's FICO scores and I nearly fell out of my chair...they suggested she was carrying balances on her credit cards that were too high.

What?!

It couldn't be...she never carries a balance on her credit cards. I knew something was wrong, so I reviewed her credit reports to see what her credit card balances were.

There it was...two of her credit card lenders were reporting her "highest balances" as her credit limits. Highest balance is defined as: the highest balance you've ever had on that specific credit card.

The difference between "highest balance" and "credit limit"

You may be thinking, "What's the big deal? You're overreacting."

I'm not. You see, when lenders do not report your actual credit limits to the credit reporting agencies it can wreak havoc on your FICO credit scores.

For instance, let's say the issuer is Capital One® (Crap One, as I like to call them). They should report your account as follows:

Credit limit (your real limit):
$5,000

Current balance owed:
$1,000

You're using 20% of your available credit on this credit card. Ideally, it should be lower, but this is certainly not bad.

However, let's say that Capital One reports your highest balance as your credit limit. Assuming $1,000 is your highest balance ever, they may report the account like this:

Credit limit:
$1,000

Balance owed:
$1,000

Now it looks like you're using 100% of your available credit—which is not true. It's evil, because it will drastically lower your FICO credit scores. It's as if your son earned five A's and one C in his science class at school—but his final grade is a C because the teacher's policy is to use his lowest grade as the final grade.

Some lenders don't report credit limits at all

Some lenders refuse to report your credit limits.

Why's this bad? Because when there's nothing in the credit limit field on your credit reports, that account isn't helping your FICO scores as much as it could. If your credit cards aren't helping you increase your credit scores, they're useless to your recovery from bankruptcy.

Remember, how much you owe (your balances) versus how much you're approved for (your credit limits) makes up a large part of your FICO credit scores (see Life After Bankruptcy Issue #16). So if you have high credit limits and low credit usage, that's a good thing. It will help raise your scores.

How can credit card issuers get away with these dirty deeds?

Some lenders do this out of ignorance (unfortunately, they're in the minority). Most do it to gain a competitive advantage. Credit card issuers know that when they don't report your credit limit accurately it can screw up your credit scores. In fact, about 5 years ago a disturbing trend started taking place with the top 50 credit card issuers.

Two of the largest issuers stopped reporting credit limits to all three credit reporting agencies. Soon after, other large credit card issuers jumped on the bandwagon and withheld their customers' credit limits. After about six months it was more common to see a missing or manipulated credit limit than it was to see an accurate one.

It got so bad that Fair Isaac Corporation performed a quick analysis and determined that the practice of not reporting accurate credit limits hurts some consumers' FICO scores. Why in the world would credit card companies refuse to report real credit limits when they know it will hurt their customers' FICO scores?

In two words...monetary gain.

In 123 words...

The credit card issuers thought they were losing customers to their competitors. Here's an example...

Let's say I have a National City Bank® credit card with a $2,500 credit limit reporting on my credit reports. When a limit is reported on credit reports, all the other credit card companies can see it. If Capital One saw that my limit with National City Bank was $2,500, they could then offer me a $3,000 or $5,000 limit to entice me to switch cards.

Credit card issuers were stealing business from each other by making their credit limit offers a little better than what you already had. This is called "poaching." And the easiest way to prevent poaching was to not report their customers' credit limits.

Who cares if it hurts your FICO scores? The credit card companies sure didn't.

But I care. And I know that some credit card issuers still don't report any credit limit information at all. Capital One is the most notorious offender. (Surprised?) Others just report your highest credit balance as the credit limit.

So how can you determine if your FICO scores are being damaged?

1. Review your credit reports.

2. Look to see if your credit limits on your credit cards are being reported properly. If you're not sure, look at the last statements you received from each of your credit card issuers and write down what the limits should be.

3. If they're not listed on your statements, call the credit card issuers and ask them what your credit limits are. Then compare them to the limits showing on your credit reports. You may ask yourself, "How do I do that?"

If you find one of your lenders incorrectly reporting your credit limits, or not reporting anything, here's what to do:

1. Telephone the credit card companies and alert them of the problem and how it affects you. Ask them to start reporting the accurate credit limits. Remember, it takes 30 to 60 days for any change to post to your credit reports. So the sooner you take action the sooner you'll see results.

2. On the same day you telephone them, follow up with a written letter (via registered mail) to the person you spoke with on the telephone summarizing the problem in writing and outlining the plan of action they gave you over the phone. Be sure to date the letter and keep a copy.

3. If after 45 days you don't get a response...your next line of defense is to hire an attorney to represent you. Hopefully it won't come to this...but a threatening letter from an attorney can work wonders.

4. If the lender refuses to adjust their policy for you, then you have a decision to make. Will you take them to court? Or will you transfer your balance to a more reputable lender? I'm not a big proponent of transferring balances, but this would be a situation where you may have no other choice.

Here's my take on things...

The Fair Credit Reporting Act says that any accounts that are inaccurate, incomplete, misleading, unverifiable, or outdated have to be deleted or corrected—or it's a violation of federal law.

I would argue that an account with an inaccurately reported credit limit is not only inaccurate, but is also grossly misleading—especially to FICO credit scoring models. This is especially important for people recovering from bankruptcy—it's hard work to increase our credit scores and we need every FICO score point that we earn.

In summary: Make sure you know the reporting policies of all your current lenders, and any lenders you're thinking of applying with. You should use only lenders that are willing to give full credit for your good credit habits.



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Stephen Snyder is the founder of the After Bankruptcy Foundation a non-profit organization that helps people recover after bankruptcy. He has helped thousands of people obtain a credit card after bankruptcy with a fair interest rate.

Source: http://www.articletrader.com ]]> http://www.articletrader.com/finance/credit/attention-shoppers-retail-stores-are-destroying-our-credit-scores.html http://www.articletrader.com/finance/credit/attention-shoppers-retail-stores-are-destroying-our-credit-scores.html Mon, 21 May 2007 00:00:00 -0500
You walk into a department store to purchase something you need. Then the friendly young person at the cash register says, "You can save 20% off your
purchases today if you apply for our store credit card right now."

Save 20%? Wow!

Sounds like a great deal, doesn't it? But let's take a look at what really happens to your credit when you give in to that temptation.

How department store credit cards work...

First of all, you have to remember that the young clerk, who barely looks old enough to drive, doesn't understand how the system works. They just focus on how many applications they can "sell" during the holiday season. Clerks who sign up the most people get some kind of bonus in return—usually cash or company merchandise.

Let's assume you agree and fill out a credit application. The clerk presses a few buttons and processes it on the spot. (Guess how? Yup, by quickly making a decision based on how high one of your FICO credit scores is.) This is called "instant credit." You see, retailers know that the best time to sell you something is while you're still in the store.

Whether or not you get approved, you have a credit inquiry from that store on your credit reports.

Your FICO Scores Can Plummet Up To 12 points Per Inquiry

According to our research, each credit inquiry can lower a person's credit scores up to 12 points. And here's the kicker...EACH department store credit inquiry will affect your scores for 12 months. That's 1 year! 365 days! 8,760 hours!

Let me repeat that: EACH inquiry from any retail store will count against your credit scores.

At some point in our lives, we've all shopped at a mall. Sometimes you end up going to 8, 10, or 20 different stores. If you're applying for cards at all those stores, your scores are going to take a major dive.

Meanwhile, Back At The Department Store...

The young person behind the register suddenly announces (loudly, of course) that you were denied credit, gives you a receipt, and says, "Thank you, please shop with us again."

You walk out of the store rejected. Not to mention embarrassed—and you didn't even save any money because you have to actually qualify for the card to save the 20%. Punks.

What went wrong?

You weren't prepared.

I remember the fear that ran through me every time I filled out a department store credit application after my bankruptcy. I would actually wait until there was no one in line at the cashier! That way, if I got declined at least I wouldn't get too embarrassed.

In the Snyder household, we don't apply for this type of credit anymore. It was one of the reasons we filed bankruptcy 12 years ago. So we stay clear of department store credit. It's expensive credit (the interest rates usually hover around 23%) and it's too tempting and too easy to go into debt.

And the worst thing about department store credit is that the negative impact of the inquiries will last 12 months...so any store credit card applications you fill out will haunt you for the next year. It can be a vicious cycle if you don't break it.

You can do it...break the cycle.

There's very little a retail store credit card can do for you that your normal VISA or MasterCard can't.

I should know...before I filed bankruptcy I was the king of buying on store credit! The more store credit I got, the more successful I felt. I don't do that anymore. Now I know better. And so should you.

Who you are isn't determined by how many credit cards you get approved for.

Do you even need their credit card? Is saving 20% of $50 really worth the trouble? (Seriously, do the math...10 bucks is all you would save.) Remember, whether you get approved or declined, your credit scores are going to take a hit. And when you're recovering from bankruptcy with credit scores that are already low, every point counts.

The Best Way to Apply for a Department Store Credit Card

But let's assume you're smarter and more responsible than I was when I was younger, and that you've never had a problem with spending more than you can afford (after all, we don't all go bankrupt because of overspending). Here's how to properly master this process.

1. Find out what their credit guidelines are. Specifically, you want to know what credit reporting agency they use to make a lending decision and what minimum FICO credit score is required to get approved. Don't bother asking the young people at the checkout register—they won't have a clue. Your best bet is to call someone in the store's credit department.

2. Know all three of your FICO credit scores. You can purchase them through www.myfico.com/12. This way, if the credit card issuer tells you their credit guidelines, you'll know whether you'll qualify or not.

3. If the credit card issuer cannot give you straight answers to the questions you're asking, then talk to another person within the department that will. If no one will tell you what you need, you're either not asking the right people, or you should take it as a sign you shouldn't be applying for that credit card.

By knowing the retailer's credit guidelines and your FICO credit scores you can apply for credit with confidence.

Of course, it's easy to get caught up in the joy of bringing a smile to someone's face when you think you're being a good parent or spouse by spending more than you can afford on credit.

Last words...

You must remember, the joy your children will get from a bunch of small gifts now will be multiplied by a hundred when you're financially stable enough to pay for their college education...or buy them their first car...or help them with a down payment on a new home. Plus, your financial responsibility will set a great example for your children.

The bottom line is: you need to think twice about the negative effect credit inquiries have on your ability to finance more important things such as mortgages, home equity loans, new cars...not to mention your insurance premiums could skyrocket!

--
Stephen Snyder is the founder of the After Bankruptcy Foundation a non-profit organization that provides free bankruptcy information and recovery steps. He has helped thousands of people understand complex credit score information.

Source: http://www.articletrader.com ]]> http://www.articletrader.com/finance/loans/what-to-do-if-youre-listed-in-chexsystems.html http://www.articletrader.com/finance/loans/what-to-do-if-youre-listed-in-chexsystems.html Thu, 03 May 2007 00:00:00 -0500 “...I'm sorry, my bank cannot help you. You're listed in ChexSystems...”

My wife and I just moved from South Bend, Indiana to Indianapolis. We needed a checking account. We both wanted a fresh start after bankruptcy, and opening a new checking account with a new bank seemed like a good place to start.

I chose to go with a national bank and found a branch on Fall Creek Road in Indianapolis near Geist Reservoir. I was nervous.

The thing about filing bankruptcy that most people have a hard time understanding (unless they've gone through it themselves) is the feeling of inferiority. Each new credit application can cause anxiety.

I'll share a quote that pulled me through this stressful time in my life. It's from Eleanor Roosevelt. She said...

“No one can make you feel inferior without your consent.”

I love that quote.

So I walked into the bank branch with the attitude, “Everyone knows I filed bankruptcy—so what?” I asked to be directed to the person who could open a new checking account for me.

The lady at the desk who began to talk to me about opening an account was really nice...until she found my name in ChexSystems.

Then everything changed...

“...I'm sorry, my bank cannot help you. You're listed in ChexSystems...”

That was that.

I walked out of the bank without a checking account because of a company called ChexSystems.

What is ChexSystems?

ChexSystems is a checking account verification company based in Woodbury, Minnesota. Banks and credit unions use them when people apply to open a checking account. It's essentially a consumer reporting agency designed to check if people have a history of writing bad checks. If you're listed in ChexSystems you're usually not allowed to open a checking account with that bank.

ChexSystems is the largest player in the check verification industry. However, there are other companies that provide similar services, such as TeleCheck and Decision Power Insight from Equifaxreg;.

I'll focus on ChexSystems since they're the largest.

Are You On The ChexSystems Blacklist?

There are several actions that can get you on ChexSystems' blacklist...

- Fraudulent handling of a checking account
- Bouncing a check resulting in non-sufficient funds (NSF)
- Overdrafting your account while using your ATM or debit card
- Having your account “closed for cause”

One of the most common ways to get listed in ChexSystems happens when you move or change banks. Because check and debit card charges don't show up on your account as soon as you make them, you can get hit with NSF charges after you thought you closed your old bank account.

The best way to avoid this problem is to leave your old account open until you are sure all your transactions have cleared.

Once you're listed in a check verification service such as ChexSystems—it's best to just pay what's due. Also, make sure you request a letter on that bank's letterhead stating that all debts have been paid.

Now, one would think that if you included an unpaid check in your bankruptcy petition that your debt would be erased—I personally didn't find that to be the case.

I learned that entries remain on your ChexSystems report (even if they're paid off) for five years. So if you think you're safe because you paid the check or included it in your bankruptcy, you may not be.

This was my ChexSystems experience. Yours may be different. If you have a ChexSystems story to share go here to tell me about it. I'll compile all the information and share it with everyone in a future issue.

How Do You Know If You're Listed In ChexSystems?

You'll either be unable to open a new bank checking account or you'll have a difficult time getting stores to accept your checks.

You see, the same corporation that owns ChexSystems also owns SCANSM, the company that verifies checks at places such as Wal-Mart or your local grocery store.

When you write a check at a store, and they put it through that little machine at the register, they're looking to see if you're listed in either SCAN's or ChexSystems' databases. If you are, they usually won't accept your check.

If they do accept your check, then ChexSystems has guaranteed that it will be honored by your bank. If it bounces like a rubber ball, then ChexSystems will pay the merchant the amount of the check out of their pocket...then you not only have to pay your bank's NSF fee, but ChexSystems' as well...which can get expensive.

The best way to know if you're in ChexSystems is to review your ChexSystems report. Since they're a consumer reporting agency, ChexSystems has to follow the Fair Credit Reporting Act (FCRA) and the new Fair and Accurate Credit Transactions Act (FACTA). This means you're entitled to one free copy of your ChexSystems report every year.

What I Figured Out By Accident

After my unexpected rejection from the bank on Fall Creek Road, I needed a few days to regroup.

My wife and I shared a car at the time, and she had a job interview at a RE/MAX real estate office near Geist Reservoir.

As I waited for her, I noticed three new banks just a stone's throw from each other. Literally, one on each corner of the road. What were they thinking? None of the branches looked busy. My guess was they were stumbling over each other to win new bank customers...even ones listed in ChexSystems.

So I took a chance.

I locked the car, hoping Michele wouldn't return right away. Then I picked the bank that looked the newest. I went in and asked to be directed to the person who could open a new checking account for me.

I sat down in the branch manager's office. And as he was going through the routine pleasantries, I noticed him reaching in his drawer for a new starter checking account kit.

I then spoke up and asked, “But what if I'm listed with ChexSystems?”

His answer shocked me.

“We don't use CheckSystems. I'd be happy to open an account for you.”

And so he did.

I returned to the car, excited to share my discovery with Michele. We had a checking account from a bank!

What I hope you glean from this is that not all banks or credit unions use ChexSystems. It may seem like it in some cities, but they absolutely are not used by 100% of financial institutions.

How To Get a Checking Account If You're Listed In ChexSystems

The best way is to find a bank that doesn't use ChexSystems to verify new accounts.

Here's how to go about it...

1. Start by making a list of all the bank branches in your area. You'll do better if you stick with the smaller, local banks and avoid the big banks.
2. Call and ask to speak to the branch manager.
3. Inquire about their different checking account programs. (How much money do you need to start an account, how long does it take, can you do it online, what check number will they start you out at, etc.?)
4. Then ask how they verify new accounts. Do they review your credit report? If so, which credit report, and will the credit inquiry lower your credit scores? (Of course, you know the answer to this question is yes—but let's see how many tell you the truth.) Or, do they use a check verification service? If so, which one?

If the branch manager tells you they don't use ChexSystems—you've got a winner! Be sure to write down the person's name and make arrangements to stop in and open an account. If the branch manager tells you they use ChexSystems...here's what to say next...

“...Darn it. I'm listed with ChexSystems and they're a bear to deal with to get something resolved. Is there anything I can do to get an account with you?”

If they say, “No,” ask them...

“Do you happen to know of a local bank that doesn't use ChexSystems or a program that can help me open a new bank account?”

Sometimes you can speed up your search by asking for help. It will take you only a few seconds to ask, but the right answer may save you hours of research.

A New Trend Developing

I've noticed more and more banks are reviewing credit reports in lieu of using check verification services. Sometimes they even do both! I wouldn't open an account with a bank that does this—mainly because their credit inquiry will lower my credit scores. So keep looking.

Banks That Really Care

Some banks are willing to give even bankrupt people a break. If you're searching for a new bank and you think you may have trouble getting a checking account, ask if they have some kind of “second chance” or “fresh start” program.

A lot of banks have probationary programs that offer limited services for a set amount of time (usually six months). If you really need a checking account, these programs can be a lifesaver.

There are also two specific services that a lot of banks and credit unions are becoming affiliated with. Basically, these programs allow you to take a course on how to manage a checking account. And when you complete the course, you'll be given a certificate to open a bank checking account with a participating bank or credit union.

The two programs are called Get Checking and InBalance. Get Checking is geared more toward banks, while InBalance is more for credit unions.

So don't be afraid to ask. Remember what Eleanor Roosevelt said...

“No one can make you feel inferior without your consent.”

--

Stephen Snyder is the founder of the After Bankruptcy Foundation a non-profit organization that helps people recover after bankruptcy. He has helped thousands of people obtain a loan after bankruptcy with a fair interest rate.

Source: http://www.articletrader.com ]]> http://www.articletrader.com/finance/credit/should-a-mans-fico-credit-score-always-be-higher-than-a-womans.html http://www.articletrader.com/finance/credit/should-a-mans-fico-credit-score-always-be-higher-than-a-womans.html Thu, 19 Apr 2007 00:00:00 -0500 "...My wife and I purchased our FICO credit scores the other day. I was shocked to discover her credit scores were a lot higher than mine! Why? I make more money than she does, and almost all the credit is in my name..."

I hear this all the time. It's almost as if husbands are competing against their wives to see who has the better FICO scores. I must admit, I felt the same way when my wife's FICO credit scores were higher than mine.

About two years ago I was shopping for a new car. After I decided on the make and model, I submitted a credit application to the lender.

I Thought I Was Prepared...

I had checked all three of my FICO credit scores about three months prior to car shopping. At the time, all three were over 700. I also knew the auto lender's tier schedule gave the best interest rate to people with scores over 700. Needless to say, I was confident I would be approved for the lowest interest rate and best terms.

My assumptions were wrong.

I was approved...but, to my surprise, not at the best interest rate they offered.

They approved me in their third tier. Which means I was not offered the best...or the next best...but the third best interest rate. (Yuck!)

This was painful for me. I'm always in the top tier. What gives?

As it turns out, my scores were lower than I thought. The balances on my credit cards that month were higher than normal (I should have checked my scores a few days or a few weeks before I filled out the application...not three months before). In addition, the lender recently changed their tier schedule. To get their best interest rate I now needed a 740+ score. (Yikes!) My scores were around 680 at the time.

Guess I shouldn't have assumed.

I did catch one lucky break, though. Fortunately, I had financed two cars with the same lender in the past, and each had a perfect payment history. So, as a courtesy, the car dealer convinced the lender to bump me into the second tier. But it was still only second best. The difference in the interest rate between the two tiers was less than 2%...but I just couldn't bear to be "second best."

So I said, "No."

Sometimes You Need to Walk Away from a Deal

I really wanted this car. It was a convertible. I already envisioned myself in it, flying down the road, my gray locks flowing in the wind. Saying, "No," really hurt. However, one of the most important things I learned when we were recovering from bankruptcy was the ability to not compromise and the willingness to say, "No"...even when it hurts.

It's better to walk away than get saddled with a bad deal that will last years. Our attitude has always been that if the deal doesn't make sense—there will be a better one waiting for us down the road.

So I went to plan B.

How a Husband and Wife can Work Together to Get a Lower Car Payment

I talked with Michele, my wife of 14 years, and asked when she last checked her credit scores. She hadn't checked them for several months.

So we went quickly purchased her three FICO credit scores from myFICO.com/12.

All three of her scores were MUCH HIGHER than mine.

How embarrassing is that? Now ladies, don't take that the wrong way. It's fine that her credit scores were higher than mine. But, I'm the credit scoring expert!

So, instead of sulking over it (O.K., I sulked a little), I asked myself a question, "How can we use this to our advantage?"

I am Woman, Hear Me Roar...

We took action. Michele was elected to become the borrower for my new car. We quickly filled out a credit application in her name and I faxed it to the lender. As expected, they approved it right away...at the lowest interest rate and best terms they offered.

Imagine that. My new car, but financed in my wife's name. I can see it now. I'm getting a speeding ticket and have to explain to the police officer it's my wife's car...embarrassing.

At first, it was a little tough to let my wife finance MY car, but I had to "build a bridge and get over it."

You can't let pride get in the way of your goals. You have to take every advantage you get if you want to accomplish what you want. This is a strategy we've used for years. We use whoever has the highest FICO credit score(s) at the time. We saved several hundred dollars a month by putting the car in Michele's name.

When NOT to Use this Strategy

If you've just been discharged from bankruptcy, or are trying to build your credit, this may not be the best strategy for you to use.

Why not?

Because, for people with bad credit, we need as much good credit on our reports as we can get. That's how we rebuild our credit. It's fine that we got the loan in Michele's name, but the problem is that this loan never showed up on MY credit reports. So, I never got any benefit for paying it on time.

Fortunately, I had already built up my credit, so it was no big deal that the loan wasn't showing on my credit reports. However, your situation may be different. If your scores are really low, and you need to build credit, you're probably better off waiting until you can apply for the loan in your name.

When My Credit Scores Went Up—I Put the Loan in My Name

So, now that a few years have passed, I decided to convert the auto loan into a lease and keep the car for another three years. This time I had current information before I filled out the application. And my scores were back to normal.

In fact, my scores were higher than Michele's scores (this makes me a happy credit scoring expert). So the car is back in my name—I guess now I can start speeding again!



--
Stephen Snyder is the founder of the After Bankruptcy Foundation a non-profit organization that provides free bankruptcy recovery information. He has helped thousands of people get a car loan after bankruptcy by showing them how to increase their credit score.

Source: http://www.articletrader.com ]]> http://www.articletrader.com/finance/credit/a-secret-credit-score-your-car-dealer-wont-tell-you-about.html http://www.articletrader.com/finance/credit/a-secret-credit-score-your-car-dealer-wont-tell-you-about.html Tue, 03 Apr 2007 00:00:00 -0500
You've done all your homework.

You know your three FICO credit scores.

You determine that your highest FICO credit score is from Equifax (also known as your BEACON score).

So, you find a car dealer who uses your highest score (which increases your opportunity to get approved at a good rate).

You get to the dealership and ignore all the salespeople by going directly to the finance director's office.

But as the finance director reviews your credit file in front of you...you can't help but think something is wrong.

Sure enough...the dealer says your Equifax/BEACON score isn't high enough for their lowest interest rate.

How can this be? You just checked your FICO credit scores through www.myfico.com/12 a few hours ago. It's possible—although unlikely—the information on your credit report has changed and that your scores have decreased since you last checked them. Remember, your credit scores are dynamic and will change whenever information on your credit reports changes.

Your credit reports can change several times each month as new information is added or updated by your lenders. But more than likely, your scores wouldn't change in this situation (especially if there were only a few hours between when you checked your scores and when the dealership reviewed your credit reports).

So, if your credit reports didn't change, why is the finance director staring at your scores with such a discouraging face?

Car Dealers Can Use "Different" FICO Scores Than The Ones You See

The car dealer is probably using what is known as the FICO Auto Industry Option score instead of a traditional FICO credit score. You see, car dealers not only get to select the credit reporting agency they receive FICO credit scores from...they also get to decide if they will use a traditional FICO credit score or a variation of a FICO score called an Auto Industry Option score.

What's the difference between these two types of scores?

Not a whole lot to most people...but there's enough variation to make the majority of auto lenders use the Auto Industry Option score. The real difference between the two scores is that the Auto Industry Option score pays a lot more attention to how you handled previous auto credit.

- Have you made late payments on a current or previous auto loan or lease?
- Have you ever settled an auto loan or lease for less than you owed?
- Have you had a car repossessed?
- Have you had an auto account sent to collections?
- Did you include your car loan or lease in your bankruptcy?

Those actions will affect your Auto Industry Option score more than they'll affect your traditional FICO score. Bottom line, if you handled your previous auto credit perfectly, you should have a high FICO Auto Industry Option score—that's a good thing.

But what if you've had a few bumps in the auto credit road in the past? You guessed it...your Auto Industry Option score will be lower. You'll be perceived as a greater credit risk and the auto lender may either deny you or use your lower score to justify charging you a higher interest rate.

You see, auto lenders are different than other types of lenders. And I'm not talking about their slimy ways, leisure suits, short ties, manly hairy chests, or gold bling.

A lot of other lenders look at your whole credit picture to determine whether or not to give you a loan. But many auto lenders care about only one thing...how you handled your past AUTO credit. That's what a FICO Auto Industry Option Score gives car dealers—a way to pinpoint how you've handled what matters to them the most.

So, even if everything else on your credit reports went down the toilet after your bankruptcy, if you didn't include your auto loan in your bankruptcy and never defaulted or missed a car payment, your Auto Industry scores will probably be better than your traditional FICO scores!

What a Former Auto Finance Director Revealed to Me

I recently spoke with a former finance director, and this is what she told me...

"So many people I have helped couldn't believe their scores were so high with the FICO Auto Industry Option score. They had included all their credit card debt and their mortgage in their bankruptcy, but they reaffirmed their auto loan. What's good about the auto score is that it truly helps the auto lender concentrate on what is important—how the customer handles his/her auto loans.

By our dealership having the auto enhanced FICO, it helped 30% or more of our customers get better rates."

I don't believe I'm going to say this, but I think I may actually have found something good to say about car dealers! Well, some of them, anyway...

As you can see, the FICO auto scores can work in your favor, if they are used correctly.

OK, I just wouldn't be able to live with myself if I only said good things about car dealers. So, in the interest of fair and balanced reporting, here's how to protect yourself against slimy car dealers that can use your FICO Auto Industry Option scores against you...

A Dirty Trick Car Dealers Can Play with Your FICO Scores

Let's imagine your Equifax/Beacon FICO score is 585. Not too good. With a score that low, if you do get approved for a car loan, you'll probably wind up with a high interest rate and high monthly payment.

So you go to a dealership and talk with the finance director and tell him your Equifax FICO score is 585. The finance director then reviews your FICO Auto Industry Option score. And, unknown to you, this score is actually higher than the Equifax/Beacon FICO score you pulled.

With this higher score, you'll get approved at a better rate...right?

Not necessarily!

Here's what unscrupulous car dealers can do. They won't tell you that your auto score is higher than your traditional score!

They figure they have a sucker sitting in front of them. So they'll try to get you financed at a higher rate based on the lower FICO score (thus making more profit for themselves).

How Some Car Dealers "Play the Spread" to Get You to Pay More

Now check this out...

It's possible that a car dealer has the ability to pull your traditional FICO scores AND your FICO auto scores. That means they'll have six scores on you. It's a guarantee that some of those scores are going to be higher than the others. So which ones will they use when trying to get you financed?

It depends.

Are you familiar with the term "spread"? It's how car dealers make money when they finance you. If they can quote you a higher interest rate than you deserve—then they stand to make a nice chunk of change from the bank that finances you.

The only way to make a killer "spread" is to make you think that you have lower scores.

So, what can you do?

Don't despair...I can help you.

How to Use Your FICO Scores to Your Advantage when Buying a Car

Fortunately, you don't have to fall for their dirty tricks. Now that you know all about FICO Auto Industry Option scores, you can protect yourself.
Here's what I suggest...

1. When you first walk into the finance director's office, don't tell him what your FICO scores are. Wait until he reviews the scores himself. Then ask him what your scores are.

2. If the scores he reviewed are higher than the ones you have, don't say anything and just go by his scores.

3. However, if your scores are higher, then pull them out and show him. If he has a choice in the type of scores he can use, there's a possibility that he'll be able to use your highest score. And, it will let him know that he doesn't have a fool sitting in front of him. He can't take advantage of you!

How do you find out what your FICO Auto Industry Option scores are before you walk into a car dealership?

You can't.

Sorry. They're not for sale—at any price. Only lenders have access to them.

FICO would like to sell them...but there just isn't enough demand. I mean seriously, up until you read this article, had you ever heard of the FICO Auto Industry Option score?

Exactly.

Remember, we were just given access to purchase all three of our traditional FICO credit scores on June 11, 2003 at 8:00 a.m. (I actually got misty that day...what a geek I am.)

Only a very small percentage of the population even knows they have three FICO credit scores...let alone three Auto Industry Option scores.

So How Can You Use This Information to Help You Get Your Next New Car Financed at the Best Interest Rate

1. First, get your three credit reports. If you handled your previous auto credit well—your FICO Auto Industry Option scores will be higher than your traditional FICO scores. So expect more from the lender.

2. You can also ask the lender to show you their tier levels. Tiers are basically charts lenders use that have different interest rates based on your scores. You want to see which tier your fall in. To see an example of an auto lender's tier schedule, click here.

3. If they won't show you...at least have them break it down verbally for you. (Personally, I like to see it with my own eyes, as I never believe a word that comes out of most car dealers' mouths.)

4. If you've handled your auto credit poorly...then you should simply try to find an auto lender that uses just the traditional FICO credit scores. When you find a lender that uses a traditional FICO credit score, you'll have your best chance to get the lowest interest rate.

5. Start by calling dealerships and asking the finance director if they use a traditional FICO credit score to make their lending decision or if they use the FICO Auto Industry Option score.

These steps will get you headed in the right direction to get a car loan after bankruptcy . This won't be easy, as a lot of car dealers use the FICO Auto Industry Option score.

--
Stephen Snyder is the founder of the After Bankruptcy Foundation a non-profit organization that provides free bankruptcy recovery information. He has helped thousands of people get a car loan after bankruptcy by showing them how to increase their credit score.

Source: http://www.articletrader.com ]]> http://www.articletrader.com/finance/credit/how-to-increase-your-credit-scores-with-one-short-phone-call.html http://www.articletrader.com/finance/credit/how-to-increase-your-credit-scores-with-one-short-phone-call.html Tue, 20 Feb 2007 00:00:00 -0600 "One of the quickest ways to increase your credit scores is to increase your credit card limits."

Pretty simple, huh?

Now let me explain why something so easy can have such a great impact.

Let's imagine you have 10 credit cards each with a $1,000 limit. So you have a total (or aggregate) credit card limit of $10,000.

Now let's assume that five of these credit cards are maxed out. In this case, you have a total (or aggregate) credit card balance of $5,000.

Your balance-to-limit ratio is now 50%. You've used $5,000 of your $10,000 total credit limit. This is called your "revolving utilization." It's the total amount of your credit limits that you are currently using.

Being 50% utilized is considered high by most lenders' standards...and more importantly...by the creators of the FICO credit score.

But now watch what happens.

You pick up the telephone and ask for a credit limit increase on each of the five credit cards you haven't maxed out.

Let's suppose each of the five lenders doubles your credit limit. So now you have 5 credit cards with a $2,000 limit and a $0 balance. But you also have 5 credit cards with a $1,000 limit with no available credit.

By increasing your credit limits you've just reduced your balance-to-limit ratio from 50% to 33%.

And if you doubled the credit limit on the other 5 cards in this example, your balance-to-limit ratio would be 25%.

That's a significant decrease in your ratio!

Bravo! You've just increased your credit scores by making a few free telephone calls.

However, there are some potential pitfalls with this strategy.

When you ask for a credit limit increase it will cause a credit inquiry...the type that lowers your credit scores.

So, to be safe, apply for all credit limit increases within a 14-day period. Here's why.

Credit Scoring Tip

When calling to increase the credit limit of credit cards issued by banks or credit unions, there's a good chance multiple inquiries will be counted as only one, minimizing the impact several inquiries could have on your credit scores.

In the past, you've seen me write about how, when you apply for a mortgage or comparison shop to buy a car, you should always do it within a 14-day period since mortgage and auto inquiries made within this timeframe count as only one inquiry.

Well, the same can be true when you ask your bank or credit union to increase your credit limits. This is the first time I've revealed this tip.

The reason this works is because the FICO credit scoring models can't usually distinguish why a bank or credit union is inquiring about your credit. In other words, there's no way to tell if the bank is inquiring about your credit in order to approve you for a mortgage or because they want to increase your credit limit. So it errs on the side of the consumer because you COULD be applying for a mortgage or auto loan from a bank or credit union. In this case it groups all inquiries within 14 days and counts them as only 1. This is very much in your favor.

But even if you do get stung by a few credit inquiries, generally your reduced utilization percentage will outweigh any negative effect of the inquiries—as long as you don't go on a shopping spree afterwards!

That brings me to the second pitfall...

Increasing Credit Limits is NOT a "Spend More Money" Strategy

If you go out and use up the newly available credit you'll be back in the same situation with your scores (and you will owe even more money). So don't make that mistake.

Think of your increased limit as overdraft protection on a checking account. You're not supposed to ever use it...but it's nice to have just in case.

Use this Technique to Increase Your Credit Scores Every Six Months

From personal experience, I've found that you can request that your credit limits be increased about once every six months—as long as you put yourself in a position to deserve an increase.

In order for the credit card companies to increase your credit limits, you obviously need a good payment history with them. If you continually make late payments or have a large balance, odds are they won't increase your limit. So keep this in mind when you ask for limit increases.

At minimum you should: pay your bills early or on time, pay more than the minimum amount due, and/or pay off your balance each month.

--

Stephen Snyder is the founder of the After Bankruptcy Foundation a non-profit organization that provides free bankruptcy information and recovery steps. Stephen also writes a free weekly newsletter on bankruptcy recovery.

Source: http://www.articletrader.com ]]>