Two Scenarios to be Avoided:

1.    Avoid the high ratios.
2.    Avoid the risky loan.

Avoid a high-risk loan; it will keep your scores excruciatingly low while creating a yo-yo affect in a low score bracket. It will not help get your scores where they need to be in order to achieve low interest rates and save tons of money.

If you absolutely need to have a higher balance on a credit card, then get the credit limit raised before you need it.

You know why; just do it.

Let’s repeat this again and again…

Avoid risky loans and keep balances low!
Avoid risky loans and keep balances low!
Avoid risky loans and keep balances low!

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If you think nobody cares if you’re alive, try missing a couple of car payments.

-Earl Wilson-

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Nothing so cements and holds together all the parts of society as faith or credit, which can never be kept up unless men are under some force or necessity of honestly paying what they owe to one another.

-Cicero-

Each negative on your credit report is a derogatory that creates a derogatory account in your credit file. Derogatory accounts hurt your credit score and pull your credit score down.

One solution, is to let the negative fall off the account after 7 years, at which point the credit bureaus are supposed to change the derogatory status of the account back to “pays as agreed”. However, there is a good chance that this can be neglected by the credit bureaus and you will have to dispute the negative to get it removed.

The other solution is to dispute the negative to get it removed as soon as you find out you have a negative on any of your accounts. This is a right under the law of the Fair Credit Reporting Act. The credit bureaus are required to verify the data that gets put into a public record but the simple problem is that they don’t. The fallout for this neglect is that 79% of all credit reports have negative information in them that is not theirs.  Makes it really fair for the consumer, no?

NO! It’s really a scam and, in reality, credit bureaus make their money by keeping negatives on your credit report.

You certainly have the right to challenge these negatives or dispute them, but the simple truth is that it is a difficult thing to get them off because of the way the credit bureaus interpret the law.

Unless you use an attorney, credit bureaus can thumb their nose at consumers; some items may be removed but the majority will remain for years until they are required by law to fall off at 7 or 10 years.

There is a solution, but we will get to that later.

Lawrence,
Russ and I had a question that we were wondering if you could answer.  We have $8500.00 in credit card debt.  I think our interest rate is around 8%.  We have two trucks that we could sell and pay off the card.  We are wondering though if it would be smarter to do that and buy another vehicle that we’d have to get a loan for or keep one of the trucks and just pay down the card when we have extra money?

Thanks!
Mindy

Hi Mindy,

Thanks for the question!

It sounds like you only need one vehicle and not two. If this is the case, then selling one and paying off your credit cards looks to be the best scenario for paying off debt, and increasing  your credit scores at the same time.

Points to consider:

1. If you sell both vehicles but then have to get a loan on a new truck, your scores will drop because of the new account. Your scores are hit 7 different ways with a new account.
2. Yes, debt to credit limit rations will definitely be helped by paying down credit cards. I would make sure to pay all cards that are over 45% debt to credit limit ratio; then pay them down further as you have more money to put toward them; this will also help increase your credit scores.
3. The best recommendation is to sell the most expensive vehicle and put that money toward bills. As you pay off your bills, save for a new truck, and then purchase it with the available cash that you have saved. You have eliminated debt and increased your credit scores at the same time.

Hope this helps.
Lawrence M law

The whole purpose of credit bureaus is to report accurate information.

This is so that your public record is accurate in order for lenders to see if you qualify for the loans or credit cards that you are asking for. Stand by for a revelation:

They don’t.

The credit bureaus, I mean. They do not attempt to verify information to see if it is accurate or not.

Here’s what happens.

The credit bureaus will take any information from anyone who has an account with them (lenders pay to have an account with credit bureaus) and will accept any and all information that is somehow linked to you i.e., your name, your address, your social security number, or parts of it, and dump it all into your account.

Remember, we previously stated that 79% of all people, who have a credit report, have negative items on their credit report that are not theirs.

Hello….? Is this for real?

Why is the American consumer held guilty until proven innocent? This is happening in a business that is costing the same American consumer(s) billions in extra dollars because of higher interest rates, fees, and other costs, all based on the almighty credit score.

If only 21% of all credit reports have accurate information in them, why do we trust the credit bureaus? This is an outright fraud on the American consumer while Big Business is buying into it like never before!

The only way to really fight this is to have great credit and sidestep the problem to begin with.

How to do this?

Get the negatives off, and manage your credit the way I have previously described and you will see not only mid 700’s but higher into the 800’s, eventually!

Oh, and by the way… it would be an extremely good idea to check all your accounts in your credit report to see if they are accurate and have accurate information. Without accurate information, your credit report is really worthless. You will not be able to get the loan you need or an interest rate that is reasonable. So, check your credit report for accuracy and get the information corrected.

Now.