WAIT, this is NEW STUFF and not what you think… Let’s talk about this.  Be punctual – Pay all your bills on time.  Late payments, collections, and bankruptcies have the greatest negative effect on your credit score. But let’s talk about “Late Payments” for this week.

Late payments cost you in points, big time, because of what they mean in increased credit risk to the credit bureaus. Higher credit risk means loss of points and lowered credit score.

OK, so you make your payments on time and your scores are still low. What is causing this to happen? Let’s look at what is happening with your payments. Let’s say you have a credit card that is over the 45% debt to credit ratio. You make your payment on the due date but when you pull your credit report, your points have dropped. What is happening is that the credit card company is getting your payment “on time” but the recording date when they determine your interest charged and when they report to the credit bureaus can actually be before the due date. This creates more revenue for them as well as causing your balance to be recorded higher to the credit bureaus thus causing your scores to drop. When you think your payment has lowered your balance to less than 45% by the due date, they have already charged you interest and reported to the credit bureaus and already your scores have dropped. Surprising, but true.

So, the solution is to look over your free credit card debt solution statement and find when the interest is entered onto your statement. Then make your payment to arrive before the interest is applied to your statement and before it is reported to the credit bureaus. Lower balance, lower interest, lower risk, and higher credit score! Ahhhh…

There are horror stories of debt consolidation companies that devastated credit scores for people because of how they work. The debt consolidation company will negotiate payoffs with your creditors and the creditor will automatically and immediately close your account with the debt still owing. This hurts your credit scores several ways. The account is closed and the history is lost, the debt to credit ratio is lost due to the credit limit being reported as $0 and the amount owed still showing, etc. So, my recommendation… avoid debt consolidation companies, debt counseling services at all costs unless they do not negotiate payoffs with creditors.

If you want to negotiate a settlement there are several things you should know before you begin. Understand that the creditor will close your account and you will be hit with the same things I described above, debt to credit limit ratio through the roof and loss of credit history for that account. It is better to make the minimum payments until you can afford to get the debt paid off in full and keep the account in good standing. The only accounts you should really negotiate payoffs which would be collections or accounts already closed by the creditor. The damage is already done and paying off the debt would help your credit scores return upward. Not to the original score because you will have lates, loss of history, but your debt to credit ratio would be negated.

How the payoff is reported will also affect your credit scores. I highly recommend negotiating how it will be reported as well. Reporting as “settled” is not good but being reported as “paid in full” or “paid as agreed” or “satisfied” would then reflect a positive on that account even if there are lates and the account is closed. Remember to always get the negotiated payoff in writing and don’t make the payments until the document is in your hands and written as agreed. Then make the payment and you are done. Oh, you can even negotiate for them to remove the collection off your credit file… if you are tough enough to stick it out with them, as they will complain that they cannot do that or company policy states… etc. They can and do regularly when the stakes are high enough.

How much to negotiate is also very important. If you don’t have the money, then negotiating payments may be the only thing you can do, but always ask to reduce the payment and the amount. If you have the money to pay it off immediately then you can negotiate a payoff that could be as low as 40% of the original debt. Factors such as how big the debt is and how old the debt is will determine how much the collection company will allow to be negotiated down. The bigger the amount and the older the account, the more they will negotiate. But waiting till your collections are old to reduce a payoff is not a good thing for credit scores and establishing good credit history. You will have to decide which is more important. Personally, I recommend getting the debt paid off and having the good credit scores for negotiating better interest rates to save money in the future.

However, there is another, alternative solution.  This involves a group of attorneys that do credit law, only credit law license repair and for over 24 years.  By having them work for you, they will attack the collection companies, and the credit bureaus for you and get the negatives off  your credit report, thus improving your credit scores and giving you back your freedom.  Check out National Credit Federation at http://www.VantageCA.com to see for yourself what they can do.  With an average 127 point increase in just 4 to 6 months… you can get your freedom back and start living life again.  Check it out today.

PS – They can also negotiate settlements down to 9 to 12 cents on the dollar.

Ok, so you think you are hotshot and can get whatever you want cause you still have plastic, still have checks or still have money burning in your pocket. When, sheesh, get a life. You can’t spend everything and expect the bills to be paid with your good looks. Creditors just don’t think you are that good looking. So, my friends… stop spending your dough. It’s called self-control and works really great in situations like this. In fact, the wealthy people have 5 savings plans that help them with their finances. There are addiction recovery groups or Over Spenders Anonymous that you can join to help get over this addiction. Didn’t think you had an addiction did you. Well, if you can’t control your spending then yes, you are out of control and there is an addiction. So, get some help.

You will discover that you are out of control when you have no money at the end of the month and still have bills. What’s the adage? I have more month at the end of my paycheck. There are lots of ways to cut spending and save some money. Some of us already have pinched all we can in every conceivable way and still don’t have enough. There is another to get spending in control. You could also get a part time job, ask for a raise or find a better paying job that will help you have the money to pay for the bills you have. Just be sure to not spend more until you get things in control. See # for a plan we have that will get you out of debt in 1/3^rd the time, get your credit scores into the mid 700’s and increase cash flow at the same time. It works, it’s amazing and it can change your financial future almost instantly.