New loans always cost you points because they start with an inquiry, don’t have credit history repair services and are usually 100% debt to credit ratio. Be cautious in getting a new loan as it does hit your credit score in 7 different ways as we mentioned in previous secrets.  Know what you need the credit for and don’t just get any credit you can as it will hurt your credit scores. It’s a puzzle that needs a plan and requires careful consideration before plunging ahead. What will it be used for, when will you get it paid off, what will it cost you to get, what is the interest rate and will it help to improve your lifestyle or will it put you deeper in debt?

I have noticed that people are not patient anymore and it costs them in money, in time, in heartache, and in stress and strain on relationships.  Plan ahead, be patient, save, invest, gain knowledge from those who are successful and then be patient again.  My father always taught me, “When in doubt, don’t.”  In other words, wait and see so you aren’t jumping on board a boat that has already left the dock.  You get wet and it upsets the fish.

A rule of thumb to getting new credit is this… get a National Bank Credit Card, get a high credit limit, and keep it for the rest of your life, with a low balance, paid on time, every month… this will create an excellent credit score for years and years to come.

Now go be curageous…

A debt threshold is where the report to credit bureaus can hurt or help your credit scores.  When talking about your debt-to-credit limit ratio, there are certain points that can hurt or help your scores depending upon whether you are increasing your debt or decreasing your debt.  One example we teach is that you should never go over 45.91% debt to credit limit on revolving loans or you will lose a significant amount of credit score.  Any time you go below a threshold, you will be gaining significant points and anytime you go up over a threshold you will be losing significant points.  Here are the other thresholds that are important to watch as you are reducing  debt, knowing your credit scores are increasing.  88.78% – 68.72% – 45.91% – 33.37% – 23.69% and 15.89%.

The trick is to stay below 15.89% on all your revolving accounts and keep your credit scores high.

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.