Credit Repair: The Ultimate Guide to Increase Your Credit Score, Decrease Your Debt, and Manage Your Finances © Copyright 2017 - All rights reserved The contents of this book may not be reproduced, duplicated, or transmitted without direct written permission from the author Under no circumstances will any legal responsibility or blame be held against the publisher for any reparation, damages, or monetary loss due to the information herein, either directly or indirectly Legal Notice: This book is copyright protected This is only for personal use You cannot amend, distribute, sell, use, quote or paraphrase any part or the content within this book without the consent of the author Disclaimer Notice: Please note the information contained within this document is for educational and entertainment purposes only Every attempt has been made to provide accurate, up to date and reliable, complete information No warranties of any kind are expressed or implied Readers acknowledge that the author is not engaging in the rendering of legal, financial, medical or professional advice The content of this book has been derived from various sources Please consult a licensed professional before attempting any techniques outlined in this book By reading this document, the reader agrees that under no circumstances are is the author responsible for any losses, direct or indirect, which are incurred as a result of the use of information contained within this document, including, but not limited to, —errors, omissions, or inaccuracies Table of Contents Introduction Chapter 1: What is Credit What is Your Credit Score? Chapter 2: How to Increase Your Credit Score How Scores Decrease Steps to Increase Your Score Delving into Steps and Final Tips Chapter 3: How to Decrease Your Debt Method for Getting Rid of Debt Credit Card Reduction Reducing Your Overall Expenses Chapter 4: Establishing Good Debt Steps to Build Proper Debt Chapter 5: Manage Your Finances Creating a Budget Re-evaluating Your Budget Staying Strong Against Consumerism Conclusion Introduction Credit—it is a word we can learn to hate; particularly, when we get into a situation that requires us to repair it You can improve your credit, but not with magical solutions Your credit and your FICO score will not be corrected overnight with any techniques you may read about, even here It takes time, persistence, and determination to meet your financial goals to see a resolution Luckily, you have access to a guide that will offer you step-by-step instructions that anyone can follow You will first learn about credit, your credit scores, and types of debt You will gain knowledge for how to increase your credit score and the major complications that can arise to decrease your score This guide will explore methods to reduce your debt while establishing good types of debt that help you in your financial stability Eventually, you will gain insight into managing your finances better It is possible to live debt free, with excellent credit, and top-notch financial management The secrets are within these pages, all laid out for you to read through and understand with ease The first step you will take right now is to determine what your financial goal is: you want to live debt free, with minimal debt, buy a home, or make your score 800? Set your goal and then follow the steps to ensuring it happens Chapter 1: What is Credit Credit is a form of purchasing by borrowing money that will pay for goods or services Credit is provided by a grantor, whom you will pay back per the agreement You will pay the amount you spent plus finance charges, at an agreed upon time Finance charges are also known as interest fees, which is a percentage based on the sum of money borrowed You may already understand this definition, after all, you are reading this book because you need to repair your credit However, it is also possible that you need to improve your credit because you have little credit history Most of us understand the larger definition of what credit is but not stop to consider the types of credit that can impact your credit history, including improving or worsening your credit score Four types of credit exist Revolving credit is like a credit card, where you have a credit limit that you can charge up to, and each month you carry a balance, paying a minimum payment to keep spending on that credit line Charge cards are in certain ways like credit cards You have a limit You can spend up to that limit; however, charge cards require you to pay the entire balance at the end of the month or on the payment date Service credit is a credit agreement for services, such as mobile phones, electricity, and gym memberships You pay the amount each month based on usage or a specific service charge Some companies like cell phones report this credit to the reporting agencies An installment loan is available in two types: secured and unsecured Secured Installment credit is a mortgage or car loan You used a particular amount of money to make a purchase, agreeing that for three to thirty years (depending on the type of loan) you would make a monthly payment Interest and taxes are part of the agreement Unsecured loans are those that are not backed by goods A personal loan that does not have collateral, such as a house backing it, is an unsecured loan Credit is a necessary part of life if you want to own certain things, such as a home or car Most of us not make enough from our salaries to cover a massive purchase Good to excellent credit is the best way to buy a house or car because it can help you obtain a lower interest rate Credit is also used by landlords to accept or deny a rental property to you To obtain credit, most grantors will assess how much credit history you have, if this history is in good standing, and whether your debt to income ratio is in proper balance If you have more debt than income, it is possible for your credit score to be lower than excellent or good, and someone may deny giving you credit for fear that you will have too much debt What is Your Credit Score? Your credit score is a three-digit number created using an algorithm to rate the information on your credit report There are a few credit scoring models out there, but creditors typically look at your FICO score FICO scores range from 300 to 850 Anything above 750 is considered excellent You want your score to be anywhere from 700 to 850 to get the best interest rates for the credit you need Scores above 700 are good Scores between 600 and 700 are fair, and anything below 600 is not good When calculating your score, the payment history, amounts owed, length of history, types of credit, and new credit matter Personal and demographic information is not applicable to the score Your payment history accounts for 35 percent of your score This history assesses your ability to pay on time, without creating delinquencies Missed payments and late payments lower your score The amount you owe for all your accounts counts for 30 percent of your score Companies look to see how much credit you have and how much you have used on revolving credit accounts If you have more than 50 percent of the credit limit used on credit cards, your score will be lower The length of your credit history counts for 15 percent of the credit score and assesses how long you have had credit accounts open and the account activity The score is evaluating if you consistently close and open new accounts or keep accounts open for several years The types of credit you have are 10 percent of your credit score The company creating the score looks at revolving and installment accounts to determine if you have a fair spread of both types of credit or tend towards one type New Credit is also 10 percent of your score This part of the score views new credit pursuits, including the number of new accounts and credit inquiries that have been made Some companies reporting to the credit agencies so each month, but many will report your history every three months Typically, the average is taken for those months, so if you make one late payment it may not appear, but if you make two late payments, it will be recorded Certain types of credit count more than others, such as student loans and car loans Car loans are weighted more in your score than student loans If you walk into a car dealer with only student loans, four years of rent payments, and low balance/low limit credit cards, you are seen as a person without a credit history Your scores may be in the 700s, but the interest rate will be higher than someone with multiple credit cards, car loans, and a mortgage because you lack credit The above factors are imperative for your understanding of repairing your credit Chapter 2: How to Increase Your Credit Score Numerous situations can impact your credit score Obviously, how much credit, the amount you owe, the length of your history, types, and new credit form your score However, what are some things that may decrease your score? Final Tips Set up payment reminders for all of your credit accounts Missed or late payments will stop happening once you take control of your financial situation; thereby, increasing your credit score Do not go out and open new credit cards just to make your other credit cards lower than half the credit limit Do not close credit accounts just because you are not using them Keep the history on your report, as long as there are no problems, such as liens or marks against you from the past on those accounts Get current on all of your accounts Once you return to making payments, on accounts you may have recently struggled with; your score will begin to improve Always pay off debt instead of moving it from card to card, as this will better your score versus opening new lines of credit or going from one card to another with balance transfer deals Open new accounts only when needed, such as moving to a new state that does not have your bank Have credit cards, but manage them responsibly Re-establish your credit history if you had trouble in the past by opening new accounts when necessary and making on-time payments till your accounts are paid off Chapter 3: How to Decrease Your Debt Decreasing your debt is a priority if you are struggling to pay bills It is affecting your credit score You can also reduce your worries One of the biggest issues right now for the world is too much debt People cannot afford their lifestyle and stress begins to eat away at them The tiny house movement and Hygge (Hooga) are big because people are finding they can be happy living minimalist lifestyles without any debt Stress can kill Do not let it affect you anymore Take action by reducing your debt through the method listed Method for Getting Rid of Debt Open an Excel spreadsheet, get a piece of paper, or use a word processor List all of your debts, all the credit cards, medical bills, student loans, mortgages, secured loans, equity loans, car loans, and anything you “owe.” Put the entire balance next to the type of loan If you have three credit cards, list all three, with their current balance In the next column list the interest rate you pay on the loans If there is no interest rate, such as medical bills, leave it blank In a fourth column list the terms of the loan For example, car loans can have up to 60 months to pay it off, whereas a mortgage may offer 30 How many years of those payments you have left—list those years or months—not when you started making payments When you see your debts in black and white, it often motivates you to move quickly; however, you need to be smart A mortgage is not something you have money in savings for, so not expect to pay it off early What you want to work towards is paying all your expenses each month and putting 20 percent of your income in savings accounts More will be discussed on financial management For now, determine what debts you can pay off with money you have in savings For credit score purposes, if you not have enough in savings to pay all debts off, make certain you pay enough to each debt to show a credit utilization below 49 percent Credit Card Reduction Paying off credit cards requires a special formula if you cannot pay off all the cards at once with your savings To improve your credit score, you want your cards below 49 percent of the credit limit Obtaining a lower debt usage may not be feasible right now It depends on the amount of savings you have and how many cards you have If you cannot get your cards below 50 percent, then you should determine if you can pay more than the minimum payment to one card Let’s say you have $100 left over at the end of each month This $100 has been going to savings, but you already put 20 percent of your income in savings You will apply this $100 to one of the credit cards There are a couple of theories for this method Some experts will tell you to pay off the lowest balance card first, while others will tell you to pay off the highest interest rate card It will depend on your psyche for what method you choose If you need to feel optimistic about reducing your debts, pay off the lowest balance card first It gives you a boost and keeps you going in your fight against debt If you understand the higher the interest rate means, the more of your money is going to interest and not the principle, then you will feel an urgency to pay off the card with the highest annual percentage rate What card has the highest APR? What card has the lowest balance? Can you move money around for a more favorable situation? Let’s say your card with the lowest balance is using 10 percent of your credit limit and has the lowest APR, and a card with the highest APR has 80 percent of the credit limit used You can move 39 percent of the balance to the lower APR card Yes, for credit score purposes you are told not to move money around; however, to get rid of your debt it is a necessary issue Now keep in mind, you have to assess the transfer fee as part of the overall percentage of use After the balance transfer, you will start to allocate extra funds to the card with the highest APR You still make the minimum payments on all your debts, but you put more money towards one debt with the highest APR As soon as the card is paid off, you will have the minimum payment plus any additional funds you paid towards that debt to put towards another card Once the next card is paid off, you move to the next card, this time with both minimum payments from the first two cards plus the extra income you sent towards paying the card down Eventually, you make it to the last card You always want to start with credit that has higher APRs, which will be credit cards Freeing up the minimum payment money you sent for those debts, you can start to allocate the money towards other types of debt It is imperative that you maintain all payments to your debts If you cannot find extra income to start reducing one debt at a time, then you may need to seek a legitimate credit counselor or reconfigure your financial management system, as well as your lifestyle Money can be saved if you know where to look It can also be scary to tap into savings accounts that you have simply to reduce the debts you have, but it may be necessary Reducing Your Overall Expenses Debt piles up because you start to live a lifestyle that is beyond your income Sometimes it is necessary You may need to buy a new car to drive to work or put an expense on a credit card to keep your car running You may have taxes you owe due to few deductions No matter how you get into debt, making changes to your financial management and lifestyle will help you reduce those debts Use savings when you have it to reduce your highest APR debts Leave non-interest rate debts for last Yes, you will need to make payments on installment agreements, such as medical bills to keep yourself out of collections However, you can make minimum payments instead of paying off a debt that has no interest or fees If a bill comes in pay, it right away if you have money in your account for it that is not needed for other bills and expenses Do not leave yourself open to spending money on dining out, entertainment, and other less necessary things because this increases your debt Seek settlement options with certain debts if applicable If you know you are about to miss payments because of job loss, request a review of your account, reduction in interest rate, or possible settlement to pay off the debt Reduce your expenses in any way you can If you pay for Amazon Prime, cut the ties for a year until other debts are paid off The same with other subscription accounts that you not need for work The money from these expenses can be used to pay off debts that continually add interest to your account Other methods for reducing your bills and keeping your credit score high will be discussed in financial management For now, concentrate on the steps to pay more to high-interest rate debts and to manage other debts with on time, minimum payments Chapter 4: Establishing Good Debt Some debt is better than others Credit card debt is easy to start using incorrectly As you make on time payments, credit card companies, send you new offers They increase your credit limit Credit card companies are rarely willing to lower your interest rates even if they offer a higher credit limit Revolving debt has its uses to show that you are capable of making on-time payments, as well as paying off the entire balance before the interest fees are added But, they take self-control You are wiser to go with “good debt” options, such as car loans, mortgages, equity loans, and other secured loans Secured loans with installment agreements can be paid off early or within the appropriate time limit They show proper payments, as long as you make payments on time, and establish that you can be trusted Steps to Build Proper Debt Return to the list you made regarding the types of debt you have Now that you have eliminated your credit card debt, you want to avoid using the cards for anything more than you can pay off that same day In other words, if you spend $40 on fuel for your car, you should be able to go home and make a payment to the credit card to pay it off You want to keep your credit card accounts open, active once per month, and use them to establish a good pattern of behavior By using the card, it shows fraudsters that they cannot steal an inactive account The credit card company can also report that you are in good standing If there is no activity, they are less likely to report anything to the three credit bureaus Have you ever purchased a car? If you have not purchased a car and need a dependable vehicle, use a car loan to establish proper debt First, the vehicle is useful Second, the loan is an installment type with a set period to pay the debt back An installment loan is a proper debt to have Make your vehicle choice wisely You need a vehicle that will work in your area For example, if you live in the mountains and purchase a front wheel drive car, chances are you will have to park it during snow storms You are then paying for something you cannot use Do not go out and get a car loan if you not need a car If you live in the city and will never drive a vehicle to work, don’t spend the money You not need good debt just because you want to enhance your credit history When you get a car loan, have at least 20 percent for a down payment and try to obtain a loan for two or three years, if the payments are feasible Mortgages are another type of installment loan that are proper debts to have Renting helps with certain credit history, such as living in the same place, making rent on time, but it is a mortgage that will offer the best credit history A mortgage payment is high, so there will be a bump in your credit score, but making on-time payments will take care of that small dip Furthermore, you have an interest in your future that shows stability You have shown that you want to live in one place for three decades The key piece of information about a mortgage being proper debt is that you can afford the payment you need to make You will have the 20 percent down payment You will have six months of mortgage payments saved in the bank, and you will have the monthly payment as less than or equal to half your monthly income To have proper debt, you require a low debt to income ratio Your bills should not exceed more than 50% of your income for the month unless you have a mortgage Ideally, you want 20 percent of your income going to savings for retirement, 10 percent for emergencies, and less than 50 percent as a mortgage Proper debt is having money left over at the end of the month that has no assigned place to go When you reach a point of having expendable income where you can enjoy a holiday, entertainment, and dining out occasionally, then you have a proper debt situation You are not being told to go out and obtain more debt just to make it “good” debt You need to make educated choices on the types of debt you add to your credit history based on your life You may not be ready for a mortgage You might wish to rent because you want to move to a better city or move overseas The point is that you work towards lowering your debts, obtaining excellent credit scores, and maintaining a low debt to income ratio for when you need to add to your credit history If you start taking out new debts just to have “good” debts, then you are not repairing your credit—you are adding to the out of control situation you have been in—avoid letting money be the driving factor Chapter 5: Manage Your Finances Repairing your credit has led us to manage your finances appropriately It is very easy to get into debt, let your credit scores become deplorable, and ruin your financial future You want to repair your credit, or you would not be reading through the information presented to you You can take all the steps in the world to repair your credit, but to make it work out, you need better financial management Thankfully, there are steps and solutions you can take Creating a Budget It is time to create a budget to stick to your plan of becoming free of debt, establishing better credit, and increasing your credit scores There are Excel spreadsheets you can download, or you can create your own The key to your budget is to have all income listed, then start listing your expenses A spreadsheet helps with this because you can see how much debt you have in certain categories Many budget sheets have monthly expenses, unsecured/secured loans, housing expenses, and dispensable income It is possible to set the spreadsheet up so you see how much you spend in each category, what you have left and what you should assign to savings You can also see whether you have enough income for all the expenses you have listed and plan, on a monthly basis, for expenses that come infrequently List all your income sources List your expenses, such as service expenses, auto expenses, and others List your credit cards List your loans List any savings or retirement contributions Total the expenses and minus them from your income to see what you have left at the end of the month Re-evaluating Your Budget Even if you have minimal expenses, you can still re-evaluate your budget There is no hard and fast rule for why you should keep spending money on certain things if you need to spend it elsewhere When you go through your monthly budget, you are going to assess what you need to spend your money on and what you not For example, a young woman has the following expenses: Health Insurance Kindle Unlimited Grammarly Credit card payment Estimated Quarterly Taxes Two student loan payments Mobile Phone Groceries Auto Fuel TV Occasional Auto Maintenance/Registration Medical Bills Electricity Garbage Dining/Entertainment Our example lives in a property with free internet because the owner works for an internet provider She also pays $400 in groceries for the household instead of paying rent, which would be given to a family member who would use it for groceries Water is free from a well The house also has solar panels, so electricity is $16 per month Garbage is taken to a dump, so twice a month the payment is around $26 total If you look at the list, you’ll notice there are a couple of things that she may not need Does she need TV? What about Kindle Unlimited? Does she need to eat out or go to entertainment venues? You might as a minimalist say no But, what if you find out she is self-employed and uses dining/entertainment, Kindle Unlimited, Grammarly editing software, and TV for tax deductions You see all things on this list matter in some way that they pay for themselves You can create a similar situation in what you buy When assessing a budget, you look for ways to reduce bills, get rid of bills, and ensure the reports going to the credit bureaus are outstanding What can you reduce based on what you pay out each month? If you pay $200 for TV, you watch every channel you pay the company to provide access to? Is it possible to switch providers and save $150 per month? Direct TV has new options for $60, SlingTV offers main channels for $55, and Hulu provides local shows for around $8 to $13 depending on the package If you spend $100 on a mobile phone are there work discounts or plan changes you can make to save money? Do you pay for subscriptions that you rarely use? Perhaps you have Amazon Prime, but you only buy things twice a year, and you never seem to watch more than one or two movies a year? Think about how you use your subscriptions and whether you get your “value” out of them Anything that is extraneous or does not provide the right value for the price can be eliminated Are you renting or paying a mortgage? Could you reduce your expenses, pay off your debts, and move into a small home? Downsizing is always an option to enhance your budget Not only can you pay off debts, which increases your credit score, but it also helps you save money each month The point of examining what you spend is to find ways you can save You will need to change your lifestyle to save money There are reasons you may never save money If you are going out to eat every night, spending $40 to so, and buying $600 in groceries that you trash then you are wasting money Even if you have to give up a few things for a short while, it is better than having a huge debt and bad credit score Staying Strong Against Consumerism Consumerism can take a hold on you and not let you go Commercials, ads and various marketing campaigns are designed to get you to spend your money An ad about pizza can ensure you go out and get some magnificent tasting pie The same can be said for emails and subscriptions If you go onto Amazon with your Prime account to buy a present and you know you can add $10 to get free shipping, you may try to find something else to buy You have just spent an extra $10, and you may have spent only $4.99 on shipping Be careful in what you do, so that you avoid falling into consumerism traps Unsubscribe your email from any place you will not be buying from shortly Remove your email from clothing, restaurants, and other shopping locations Spend less time in front of the TV and watching ads Think about where you would put a new item if you buy it Can you get rid of something else or sell something else to account for the new purchase? Always have a rule that if something new comes in, something old must go out In this way, you are thinking about what you will buy and if you need to create debt just to “have” it Conclusion Repairing your credit is possible You can increase your scores, lower your debt or live debt free, and re-establish good debt patterns You also understand the proper principles for setting up a budget and managing your money with a better thought process Credit repair is not an overnight solution It will take time You are going to need to change your lifestyle You have to fight consumerism to make certain you are not falling into traps to spend more money than you have If you cannot afford a five-bedroom home for $2,000 a month, then find a home that is smaller There is nothing wrong with downsizing, minimalizing your life, and having money to buy what you enjoy the most For some people being able to buy one book a month is a goal Create your financial goal so you can reach it ... your financial future You want to repair your credit, or you would not be reading through the information presented to you You can take all the steps in the world to repair your credit, but to. .. is Credit What is Your Credit Score? Chapter 2: How to Increase Your Credit Score How Scores Decrease Steps to Increase Your Score Delving into Steps and Final Tips Chapter 3: How to Decrease Your. .. improve your credit because you have little credit history Most of us understand the larger definition of what credit is but not stop to consider the types of credit that can impact your credit history,