Credit can be a sore subject, especially when a person’s credit history is continually blemished by late payments and delinquent accounts. Some people would rather just ignore their credit history, but the reality of the matter is that there are often times when a credit score will be checked for more than just obtaining credit; employers, potential landlords, and insurance companies all utilize credit histories to predict a person’s reliability and trustworthiness.
For persons who simply close their eyes to their bad credit, there comes a time when they must make an effort to repair it. It may be tempting to simply pay a credit repair service to take care of the repair instead of personally engaging in the task. After all, there is an abundant pool of credit repair companies to choose from, and many consumers feel overwhelmed at the prospect of attempting to take care of repairing their credit themselves. Some consumers may not even realize that they can take care of the repair without assistance from a professional company. Rest assured, it can be done, and in all likelihood a person can do it better than a company would.
There are two different types of credit repair services: consumer credit counseling services (CCCS) and “We’ll Fix Your Credit” type companies. Despite CCCS being a much more reliable alternative to the other alternative, there are several credit counseling services who take advantage of the non-profit status afforded by the government to swindle desperate people out of money. Stories abound of payments being made late or not at all and of ludicrous fees eating up consumers’ money. A sound counseling service will not charge for using the service, as it is creditors who make these sorts of programs possible. Creditors love these types of services even though they generally require lower interest rates and forgiveness of some fees, because they prefer a consumer who pays off a delinquent balance bit by bit with the aid of a company rather than not paying off the balance at all.
Those companies who advertise so prevalently, claiming to be able to erase bad debt from credit effortlessly yet for a fee, are best shunned. These companies may indeed get negative items removed from credit reports, but the outcome is only short-term. By the time the consumer realise the debt is back on their report the company is long gone with their money.
Perhaps the best way to repair credit is to do it yourself. Those same collectors, who call at all hours, insisting on payments and usually being rude, will mellow down if you are suddenly willing to cooperate. The next time one calls don’t hang up or yell at them for hounding you. Instead, explain to the collector that you are aware that you owe the money and you are going to pay and tell them a realistic amount that you can pay back monthly.
You may be astonished to discover that an amount as small as 10 dollars a month can ward off the collectors. Some financial experts even suggest sending a copy of your budget to the collector to show them that you aren’t kidding when you say you only can spare a few dollars. This proves to the collections company that you’re serious, and they may stop the phone calls. Even if the manageable payments are minute in comparison to the balance owed, it is legions better than ignoring the problem. After all, you did incur this debt, and it is your responsibility to pay.
If at all possible, contact the company prior to your accounts going bad. If you know you are going to have problems paying your bills this month there is nothing wrong with calling up your lenders and requesting what is called a “skip pay.” This means you skip making a payment one month, without penalty, in an effort to stay afloat. That may be just what you need to get your monetary affairs back in order. Keep in touch with your creditors, try to pay your bills promptly, and stay devoted. Why pay for something that you can do on your own?
By: Ivan A Cuxeva
Posts Tagged ‘Credit Histories’
How To Repair Bad Credit – Don’t Pay For Credit Repair Services
January 19th, 2010Credit Repair Post Subprime Mortgage Crisis
October 11th, 2009
Many individuals and families with less than perfect credit scores have found themselves caught up in the recent US subprime mortgage crisis. In many situations, they are the victims of unscrupulous lenders who have engaged in predatory lending practices and unfair, or “teaser”, interest rates. The end result is that many victims have come out of the crisis with their credit histories in ruins. These are typically people who had less than perfect credit to begin with. Many believed their subprime mortgages would eventually help them earn better credit, only to have the outcome be the exact opposite.
Subprime lending is a term used when loans are given to borrowers who have blemished credit histories, lower income levels, and/or less than perfect job histories. These people cannot qualify for traditional mortgages at market interest rates. As a result, lenders offer loans with higher interest rates and unconventional terms. Although some feel that this type of lending is important in helping this group of people access credit and build credit, the recent fallout in the US housing market has had disastrous results for this very group.
The individuals hardest hit by this crisis are those who are most vulnerable to changes in the housing market and changes in interest rates. Subprime adjustable rate mortgages (ARMs) account for 6.8% of the mortgage loans currently outstanding in the US, but in the third quarter of 2007, these loans represented 43% of the foreclosures instigated during this same period.
There are a variety of types of ARMs, however many ARMs allow borrowers to pay a fixed interest rate for an initial period, after which the rate can increase as much as 2% per year. These mortgages can cost far more than a traditional mortgage. A 4% fixed rate on a 30-year, $500,000 mortgage would end up costing the borrower $864,000. An ARM, with an initial three year lower rate period, at 10% for the remaining 27 years would cost the borrower $1,367,280.
The message is clear to those still hanging onto ARMs. “Your last rate reset may have been a nonevent, but your next one won’t be,” voices Greg McBride, senior financial analyst for BankRate.com.
The Effect on Subprime Borrowers
There is no question that the majority of subprime borrowers are those individuals with poor credit scores. The payment delinquency rate for these ARM borrowers has ballooned to four times its historic level. Easy access to credit, along with the belief that US housing prices would continue to increase, led many borrowers to overextend. However, once housing prices began to drop, refinancing loans became more difficult, causing many borrowers to default as their interest rates and corresponding payment obligations increased. The negative effects of this on their credit scores cannot be underestimated.
Credit Repair for Victims
The real victims of this debacle are those individuals who strove to increase their credit scores through home ownership, only to have the carpet pulled out from under them, largely by forces entirely beyond their control. Foreclosures, bankruptcies and late payments are some examples of negative credit information that markedly lowers a person’s credit score.
If the mortgage crisis has left you in a credit crisis, some simple suggestions may help. The first step is to Obtain copies of your credit report to ensure that all the credit information they contain is accurate. If there are any inaccuracies, consult a legitimate credit repair company. An expert can not only get errors on credit histories corrected, but can also help a client with debt consolidation strategies to assist the client in rebuilding a good credit score.
The worst thing a victim of the subprime mortgage crisis can do is give up and walk away. It is critical to face the challenge head on so that your credit score doesn’t end up further hampering an ability to get access to credit at a reasonable rate and use that credit to help build a higher credit score.
Credit repair services can help.
By: Nora Hansell
