CREDIT REPAIR VIDEO

Rebuild Credit: Insider Credit Repair Techniques to Improve Credit Score Fast!

What’s the fastest way . . .

Pastor and TV preacher John Avanzini offers practical stragegies for people to emerge from their unending web of debt, arguing that God does not want people to incur debt or remain there.

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Over 70% of Americans have a FICO score lower than 670, which is considered to be a sub-prime credit score. These people have a credit report that shows lending companies and creditors that they already have a past history of being unreliable with bill repayments.

Banks will happily penalize customers with bad credit by charging them higher interest rates, more fees and they can even refuse credit applications altogether if your credit is bad enough.

Most people believe these extra charges and higher rates are unfair and often claim that banks are heartless for charging more money from those who can afford it the least.

Unfortunately banks are not charities. They are in business to make a profit from lending out their money to you so you can buy things you want. When you borrow money, you sign a credit contract or loan contract that promises the bank that you’ll pay back their money along with interest on top. That’s how they make their profit. It’s their business.

This is precisely why they want to see if you’re the type of customer who is likely to repay your debts and bills and it’s why the Credit Reporting Bureaus keep your credit history and repayment history listed for them to view. It tells them what kind of customer you’ve been in the past. Because most people repeat habits and patterns in their lives, it also tells them what kind of customer you’re likely to be in future too.

If you have a high credit score, then a bank or credit card company already knows you’re likely to be a great customer. You’ve already shown that you pay your bills on time and you manage your current credit very well.

When a bank receives an application from a customer like this, they already know they’re going to get their money back. They know payments are likely to be made on time.

Customers with high credit scores are considered to be good risk or low risk customers and so banks will reward them with low interest rates and lowered fees.

However when a bank receives an application from a customer with a bad credit score, the bank has already seen a credit report that shows them that customer has trouble repaying debts and is often late repaying bills.

Customers with bad credit scores mean the bank is taking a much higher risk by approving a credit application. They need to make a profit in order to stay in business, remember? If a client doesn’t repay the money they borrowed, then the bank isn’t making a profit and they won’t stay in business very long.

Because the credit score is low, this means the customer’s repayment history is bad or there have been financial issues in the past and so a bank will raise interest rates accordingly.

In banking terms this is called ‘rate for risk’. The higher the risk to the bank, the higher the interest rate to the client.

No bank, lender or credit card company anywhere in the world wants to take legal action against a customer. They really don’t want to repossess your car and they don’t want to throw you out into the street to become homeless. Seriously, they make much more profit from you when you pay all your bills on time and keep all your assets.

But if the repayments aren’t made then they have no choice but to try and get their own money back somehow. Banks will only resort to these tactics if they feel they have no other alternative for getting their money back - the same money you promised to repay when you applied for the loan.

So if you already have bad credit or if you’re behind on your payments, it’s important you call your creditors and arrange for payment terms immediately. They won’t bite you and they won’t threaten you. Most importantly, they don’t want to lose a customer.

In fact, you’ll be surprised by what they’ll be willing to do to help a profit-making customer to catch up any late payments. When you have great credit and you’re making your repayments, you’re making them a profit.

If you’re falling behind, then they still believe you can catch up, fix your bad credit and be turned into a great customer. This is why they’re so willing to help you!

It also means that if you’re smart you can save yourself a lot of money on interest rates and benefit from easy credit terms just by playing their game.

Hopefully you understand more about why banks want you to repair bad credit. Now it’s time to start taking some steps to repair your credit and reduce your interest rates today.

These credit repair companies promise to fix your credit problems, increase your credit score and remove bad information. Some will even promise to increase your credit score for good. It sounds like a dream come true.

Unfortunately these wild promises also come with a huge price tag - a fee that you can’t afford to pay if you’re already in financial trouble.

The Federal Trade Commission warns that many companies offering to repair credit problems might not be completely legitimate. No matter what they say, there simply is no way to completely repair bad credit overnight.

Of course there are some companies around that are legally able to help to design ways to improve your credit score.

So how do you know which is the right one?

Spot the Scam

If you’re dealing with a credit repair company that wants you to pay fees up front before they’ve done any work, then be very wary.

If you find any company that suggests you should apply for a new Employer Identification Number and simply ’start again’ with a clean slate then run fast in the opposite direction. This activity is not legal, so you could find yourself in serious trouble.

Another sure sign you’re dealing with a less-than-reputable company is that they don’t tell you any credit repair measures you can do on your own for no cost. If they insist the only way you’re ever going to get any help is to pay them huge fees, run!

It is illegal to attempt to remove accurate reports that list details about your past financial credit. If you have a bankruptcy or repossession listed, then these details will remain on your credit report no matter what these companies promise you.

If a scam credit repair company has already taken your money and given nothing in return but false promises, report them to your local consumer affairs office immediately.

The Real Deal

Some credit repair companies legitimately want to help you to get out of trouble. These companies will help you to fix any credit errors you might have listed. They’ll help to negotiate with your creditors and set up a realistic payment plan for you.

Any company that is completely up front and honest about what credit items can be repaired and which ones can’t and then tells you before you begin precisely what fees will be involved is most likely trying to do the right thing by helping you.

Make sure you ask for and receive a copy of the brochure “Consumer Credit File Rights Under State and Federal Law”. You should also receive a detailed description of the exact services the company will perform on your behalf.

If your credit is bad enough to warrant professional credit repair assistance, make sure you find a professional, accredited company and discuss all your options before signing any contracts or paying any fees to anyone.

Did you know there are ways your bank can stop your biweekly payments from working for you? You could be diligently paying your mortgage every fortnight, or on the same day every 14 days, yet you’re not getting any further ahead.

This is because banks teach their staff a special language known as ‘Bankese’. This language translates the same way every time. It simply means ‘making more profit for the bank and less profit for you’.

Your real biweekly payments should always be HALF your monthly repayment. To make them work for you, pay them on the same day every 14 days. If your minimum balance is $1,000, then divide this by two and start paying $500 every 14 days. That’s it. It’s not rocket science.

Let’s look at some of the traps your bank can set for your biweekly mortgage payment plans.

Turning Biweekly into Twice-Monthly Payments

You might find that if you ask your bank to change your repayment times to biweekly instead of monthly, they automatically deduct your payments on the 1st and on the 15th of each month and no other time.

Paying your biweekly payments twice a month has no extra effect on paying off your mortgage quickly. You’re paying the same amount of money, so it’s not reducing your balance any faster. You’re also not reducing the loan term at all.

You must be firm about making your bank accept your repayments on a fortnightly basis, not twice a month. The point of paying biweekly is to pay every 14 days. By the end of the year, this method will put you exactly one full monthly payment ahead on your mortgage.

When Biweekly Payments Aren’t Really Biweekly Payments

Some banks are sneaky about calculating your new fortnightly payments their way instead of your way. You both know what your minimum monthly repayment is supposed to be. Grab a calculator and divide this payment amount by two.

When you know how much half your monthly payment is, this is the real biweekly repayment you want to make.

Unfortunately, your banker might think he or she is helping by telling you that there are not 2 fortnights in each month, so they’ll divide it differently for you to save you some money.

This is where they’ll give the following calculation for you:

Let’s say your minimum payment is $1,000. They’ll tell you that annually this adds up to $12,000. There are 26 fortnights in a year, so your real biweekly payments should look like this:

$12,000 divided by 26 = $461.53

If you started paying their version of biweekly payments, then you might find that most months in the year have two fortnights – not three. By paying the bank’s version of your biweekly payments, you’ll pay $461.53 twice. This adds up to $923.06

You’ll remember that we’re working on an assumed example of $1,000 per month as a minimum payment. You would only have paid $923.06 – which means your mortgage is in arrears.

Suddenly your bank is able to charge you default interest rates and penalty fees for not making your minimum monthly payment.

No matter how helpful you feel your bank is being, always do your own calculations. Always insist that your biweekly mortgage payments are happening on the same day every 14 days and then insist that the payments be worked out your way – not the bank’s way.

This is your financial future we’re talking about here, so stand firm, take control and you’ll reap the benefits.

There are some debt reduction companies who are willing to charge you massive fees to teach you how the bi-weekly debt reduction system works if you don’t want to do it on your own.

Or you can learn a little about how it works for yourself and save yourself some fees once you realize how easy it is.

Why Pay Bi-Weekly Payments?

When the bank sets up your mortgage for the first time, they amortize your repayments. This means they have already factored into every one of your repayments and amount for their interest payments and profit amounts plus a tiny amount that comes off your balance. This is what they call ‘principle and interest’ payments and it means that for every payment you make, only a little is coming off how much you owe.

Most people pay the minimum amount written on their statements each month and then they wonder why they’re not getting ahead or they wonder why it takes so long to reduce any debtsd. Banks love this way of thinking because they make the most profit from their customers when this happens.

By making more frequent repayments you not only reduce your balance more quickly, but you also reduce the amount of interest the bank is able to charge you.

Getting Started with Bi-Weekly Payments

Before you change any of your payments, you need to know how much you’ll be paying each fortnight. Start by dividing your monthly repayment by 2. It’s not rocket science. Just look at your monthly payment and divide it by 2.

This new amount will be half your normal monthly payment and it will become your new bi-weekly repayment.

Don’t try to use any other calculations and don’t allow your bank’s customer service people to calculate it for you. Work out your own monthly repayment and divide it by 2. Insist the bank’s customer service people use your figure - not theirs. This is important.

Setting Up Your Bi-Weekly Payments

You will need to call your bank or lender and work out your payment changes. They will need to alter their computer systems

You will need to arrange for your payment structure changes with your bank. They need to know that your payments are now being made bi-weekly so they can adjust their systems.

The bank staff might make suggestions about doing “real” bi-weekly payments, which are even cheaper than the figure you worked out from the step above. If this happens, use your own bi-weekly figure that you worked out in a previous step and don’t be swayed.

Tip: When you call your bank keep it firmly in mind that bank’s staff are all well trained to make the bank a profit. It’s their job. They get paid when the bank makes a profit. Remember this rule and stay firm with your own focus.

Why Bi-Weekly Payments Work

When you pay your loan monthly, you will make 12 payments each year.

When you pay bi-weekly you will pay 26 payments per year - which is more than just double your monthly payments. It’s actually 13 monthly payments.

This means if you continue to pay your mortgage payments bi-weekly you will be one monthly payment ahead each year. No wonder the banks didn’t want you to know about it.

It’s so simple but this method really can cut several years off the end of your loan term and save you thousands of dollars in interest charges.

Try entering your own numbers into any good online mortgage calculator and check what savings you could be making by paying your mortgage bi-weekly.

The number you see as your credit score is a figure calculated using various factors by the three big Credit Reporting Bureaus. The factors they use for this calculation come from any reports they receive from your creditors about your past credit history and behavior.

Let’s think for a moment about your current debts. You could have any combination of credit cards, store cards, personal loans, mortgages, student loans and others. Each time you make a payment - or miss a payment - on your loans, it will be reported to the Credit Reporting Bureaus.

Americans have an average credit score of 693. When banks look at credit applications, they will consider this average score to be generally acceptable to their policies, although they realize there is room for improvement.

Banks will consider any customers with a credit score higher than 700 to be good and if you can get your credit score as high as 750, banks will see this as exceptionally good. Customers with good credit scores are offered the better interest rates and are rewarded for having great credit histories.

But clients with low credit scores, which is any score below 675, are considered to be risky customers. Banks don’t make as much profit from customers who don’t pay their bills. So they label them ’sub-prime’ borrowers and they charge higher than normal interest rates to counteract the bank’s potential risk for taking on risky clients. Unfortunately this increases your repayments each month too.

If your credit score drops even lower to below 600, you may only be able to borrow funds with great difficulty.

Before you begin looking at ways to improve your credit score, it’s important to understand a bit about how your score is calculated and why certain behaviors and actions will either increase or decrease your score.

Let’s look at how your credit score is calculated.

35% of your credit score comes from your credit history

By making sure all your repayments and bills are paid on time each month, then this part of your score is the easiest to improve, but it’s also the quickest to destroy if you start falling behind. For a quick boost to your credit score, try making smaller, more regular payments on your bills and outstanding debts. Instead of paying monthly, break down your payments to bi-weekly or even weekly and this section of your score will begin to improve.

30% of your credit score comes from your account balances

The Credit Reporting Bureaus add up the total of your available credit limits and then consider the ratio of how high your current balances might be. For example, several maxxed out credit cards all at or near their top limit will give you a high ratio and reduce your score. This also means that several credit cards with very low balances but plenty of unused credit limit is a low ratio, which increases your score.

15% of your credit score comes from your length of time with credit

If you’ve been faithfully paying off your mortgage for some years now, then this has a big benefit in this section of your credit scoring calculations. The banks can easily see that you have discipline and you’re usually very responsible with your money.

But if you’ve gone on a credit binge in the last year and have several credit cards all with high balances near their limits, then banks consider that you’re not very good with handling your financial resposibilities.

10% of your credit score comes from your types of credit

Credit reporting bureaus know that almost all families have a healthy mix of a mortgage, perhaps a car loan and a credit card as part of everyday financial use and will give a good score for this section.

But people with several credit cards, store cards, personal loans or other outstanding debts are showing that they aren’t able to manage their lifestyles on the incomes they receive. This amount of excessive consumer debt can often be a sign of financial irresponsibility and your score will be reduced as a result.

10% of your credit score comes from credit inquiries you’ve made

Each time you apply for credit, it’s reported to the Credit Reporting Bureaus. Your credit enquiries are listed on your report for up to 5 years. If you have a rush of applications in the past 6 months for credit cards or personal loans then the bank might consider that you’re either on a credit binge or that you’re having financial difficulties in other areas.

This popular way of reducing debt has several benefits for anyone wanting to get rid of any outstanding loans and credit cards.

Apart from dropping your debt levels and balances quickly, the snowball method also helps you improve your credit score and teaches you to gain control your spending habits and learn to budget easily and effectively.

Here’s how it works.

Snowball Debt Reduction Method Step One:

List all your outstanding debts on a sheet of paper. Write down the creditor’s name, the amount of interest charged and your minimum monthly payment. Make your list so that each debt is shown in order of size – smallest to largest. Be sure to check your statements on each account to be sure you’re working with the right interest amounts.

Snowball Debt Reduction Method Step Two:

Look at your current spending patterns carefully and see where you might be able to re-allocate a few dollars toward debt repayment instead of treats.

For this example let’s assume you sacrifice one cup of coffee per week and cut out $3 of spending per week. It’s such a tiny amount of money you won’t miss it if you spend it. So go ahead and buy your regular coffee every day except for one day. You only need to sacrifice one cup per week.

That gives you $12 per month extra to add to your snowball debt reduction plan. It doesn’t seem like a lot of money, but you’ll be surprised how quickly it can add up toward reducing your debts.

If you’re really determined to reduce your debt, see if you can find more available cash each week fro your spending habits. If you can, use this extra money toward your debt reduction plan.

Snowball Debt Reduction Method Step Three:

Take a look at your list of outstanding debts and select the one with the smallest balance. You’re going to work on reducing this smallest debt first. Don’t worry about which interest rates are being charged on which accounts.

The point of working with the smallest debt is to increase your confidence that you really can pay off a debt on your own. It helps to keep you motivated when you can see results.

Keep focused on making payments on this smaller debt until the balance is down to zero and then close the account. Don’t charge any other purchases to this balance. You want to pay it off and get rid of it.

Remember in the previous step we assumed you’re sacrificing just one cup of coffee each week at $3 per cup? This means you’re paying an extra $12 every month on top of your normal payment. Add up what this brings your new monthly repayment up to - and then divide this monthly payment by 4.

Round up your new weekly payment to the nearest dollar and begin paying this amount every single week. Don’t be tempted to miss a week. You can schedule online payments to come out of your account automatically if you don’t trust yourself to remember to make the payment manually.

Once you start seeing real debt reduction results it’s often tempting to look more closely at your budget and start to cut other areas of your spending too. If you can find even a couple of extra dollars each week to put more money toward this debt then do it. $2 might not seem like much but it really adds up when you consider the bank can’t charge you interest on that money and it’s helping in the long run.

Snowball Debt Reduction Method Step Four:

When you’ve managed to completely reduce your first debt down to zero don’t be tempted to stop there. You should now have the amount of money you were paying off your first debt spare each week. Put this whole amount on top of your payment for the next debt in line.

Your new payment on the next debt is now the minimum you were paying off it before plus the amount you were paying on the debt you already cleared.

Some lenders require notification of how you want the extra payments allocated. This means you may need to call your lender or credit company so that they apply each of your payments directly off the principal. Don’t be afraid to call and ask them.

Snowball Debt Reduction Method Step Five:

Hopefully by now you would have begun to create a new, positive repayment habit. You should start seeing some real results if you’ve stayed focused and disciplined.

When your next debt in the line is down to a zero balance and the account is closed, add the amount you were paying each week into reducing the next debt you have and keep repeating this process until your debts are more manageable. You should even find that your budget is almost automatic by this time.

You will be surprised at how quickly you can reduce your debts with this simple snowball method of debt reduction. It’s fast and it’s effective - so stay focused on your goal and you’ll get rid of your debt once and for all!

You see, banks really don’t like mortgage reduction plans. They like their customers to stay in debt and make their repayments on time for as long as possible. This is how they make their profits.

It’s also why some banks offer lending products that are specifically restricted and inflexible. Banks really like mortgage and other lending products with very little flexibility because they know you’ll stay in debt longer. They purposely make it difficult for clients to adjust repayments or make it expensive to repay your loan too early.

Adjustable Rate Mortgage (Variable Rate)

Most people understand that an Adjustable Rate Mortgage is charged at a variable interest rate. Your repayments go up or down in line with any interest rate movements on the money market.

Fixed Rate Mortgage

A fixed rate mortgage allows you to lock in your interest rate at a specified rate that remains the same for a fixed term. Fixed rates can be ideal for anyone on a difficult budget, or if they know the rates are likely to increase in the coming years. They’re also great for investors who need to maintain steady investment costs.

Principal and Interest Mortgage

The vast majority of mortgages are charged using a repayment calculation method called ‘amortization’. This is where the bank can calculate exactly how much interest they want to charge you in advance over the entire loan term and then they can determine how much of your monthly payment will be in the interest portion and how much will pay off the principal.

Understanding that each payment you make is made up of both principal and interest payments means that you can try to find ways to reduce your mortgage balance so you’re paying less interest and more principal whenever possible.

Interest Only Mortgage

Some banks allow investors to repay only the interest portion of their mortgage and not repay the balance owing. Many property investors elect to use these mortgages, choosing to either bank on capital gain in the property or to keep the profit generated by the rent.

Equity Loans

An equity loan is a revolving line of credit that is a little like a giant credit card. Theoretically, a line of credit could be used as an amazingly powerful debt reduction tool. Unfortunately, 95% of people who have equity loans are never given enough information to use these loans effectively and so they end up in worse trouble than they imagined.

Equity loans are charged at an interest only rate on the balance owing each month. You’re not asked to repay the principal unless you want to. This makes it very tempting for people to pay only the minimum and redraw any available equity they may have, which keeps them in debt for longer rather than paying off debt.

Unless you’re extremely disciplined with your money and able to create and maintain a very accurate budget each month, then avoid using a line of credit.