How to Survive the Credit Crunch

(Now I would love to take the credit for this next article because it is truly inspired. However my wonderful husband is something of a Guru in this area and has some very solid advice on how to survive the current economic crisis.)





The day is here where your credit score really is the key to your finances.

Expect to pay more for car insurance and every type of credit this year based on your credit score. Salary is important but truly the name of the game is credit score now.
20% down and a min credit score of 740 is the norm now to purchase a house.

Credit lines are being decreased and creditors do not care how well you have paid your account to date. What matters is what percentage of your balance is being carried month to month.

Sacrifice now to enjoy the rewards later.

1. Check credit reports for mistakes. By law, you can get your credit report free once a year from each of the major consumer credit reporting agencies. Go to www.annualcreditreport.com to get a copy online. You are also due a free copy if you are a victim of identity fraud or if you've been turned down recently for credit, employment or insurance, based on your credit information. To keep better tabs on your credit, request one free report from a different agency every four months, instead of ordering one from all three agencies at the same time. If you see something off base, contact the credit-reporting agency immediately to correct the error.

2. Know your credit score. Your credit score is a three-digit number that reflects whether you are a good credit risk. The scale generally runs from 300 to 850 — the higher, the better. A late payment or notice that your account has been sent to a collection agency can subtract 35 to 100 points from your credit score. Aiming for 740 is a good score. Though you can get your credit report free, you'll have to pay for your credit score.

3. Pay your bills on time. This is the single most important thing you can do to affect your score. Currently, under the credit scoring system developed by Fair Isaac Corp., known as FICO, 35% of your credit score is derived from how well you pay your bills on time. For more, see fico.com. Not good about getting things done on time? Consider setting up automatic payment plans so you don't miss the due date.

4. Repair your credit. If your score is below 700, chances are that too much debt, medical bills, overdependence on credit cards; poor student loans repayment or overdue utility bills may be the cause. If that is so, begin bringing down debts aggressively, contact creditors, and make payment arrangements today. Pay debts starting with the one that has the highest interest rate.

"Lenders compare your debt-to-income ratio to determine the amount of money you can borrow for a loan," "Excessive debt will lower your credit score and reduce your buying power."

5. Use credit cards wisely. If credit card use has put you in financial despair, consider cutting up all but one card once you've paid off the balances. Don't close the accounts — accounts that stay open a long time help build good credit. Keep one card active once your debt is under control. Using that card responsibly can help you rebuild a solid credit record. Never carry a balance of more than 50% on any credit card. Using over 50% is a red flag to credit grantors and lowers your credit score.

6. Be persistent in credit repair. Bad credit cannot be fixed without effort. If you're paying your debt and staying current with your bills, you should begin to see up ticks in your score within a few months. It can take as little as six weeks and as long as two years, depending on the amount and type of damage. A 50- to 100-point improvement in your credit score can save hundreds to thousands of dollars in interest charges on a loan. Quite simply good credit can change the way you live.

7. Beware of credit repair scams. There are tons of services that make all kinds of promises, from fixing your credit score to eliminating debt. Take charge of your own situation. Look at your own report. Contact the lender or creditor. Attempt a resolution. No success? call again the next day and talk to another representative. No success? Call again in a month, call near the end of the month and attempt a resolution. You can generally solve your own issues best. Repairing your own credit is an investment in you.

And finally, don’t panic –survive!

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