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Posts Tagged ‘Debt’

If you’re really determined to improve your credit rating, then you should check your current standing with all three of the major credit rating agencies, Experian, TransUnion, and Equifax at least once a year, because hard as it might be to believe, more than one third of all credit reports in the U.S. contain errors and many of them are major ones.

When you request your credit reports, be certain to specify that they contain credit scores, because without them, they’ll be virtually useless, and also be aware that 694 is an average score and that below 600 means that you have a poor credit rating.

You’ll hopefully never see the lowest credit score which is 300, and although I’d love you to receive a credit score of 750 which is the best that’s currently available, be very thankful if yours is 720 or above, which is excellent.

If you find errors in your credit report, which is highly likely, then dispute them as soon as possible by sending the credit agency in question any details and copies of documents that you believe might help.

Send the documents by certified mail, and be aware that apart from the postage that there should be no additional cost involved because all of the major credit ratings agencies offer a free credit report.

Here’s How To Improve Your Credit Rating

Fortunately, the main contributing factor to a bad credit rating will most likely be the easiest to fix, if you’re determined to do it.

The number one thing that you’ll need to do, will be to reduce your debt-to-credit ratio which in the simplest of terms, means reducing as many as possible of your debts, across all open lines of credit.

Your debts should never amount to more than 80% of the ongoing credit that you have available at any given time, and if you can reduce it to 50% then you’ll be well on your way to having an excellent credit rating, because reducing debts improves a credit score faster than anything else.

Pay special attention to reducing the number of small retail credit cards that you have, such as JC Penny, Sears and Lowe’s etc because those types of cards cause far more damage to your credit rating than the major credit cards like Master Card and Visa do.

Once things are somewhat under control, and your credit rating starts to improve, you should contact all of the companies that you owe money to and start reducing your indebtedness. It doesn’t matter if you do this extremely slowly, but be consistent, and once you’ve made a few payments, try to see if can reopen an account.

Paying down your debt and getting accounts reactivated will have a hugely positive effect on your credit rating and it will be worth any ‘goodwill deposit’ that you might have to pay.

If at some point you’re in need of a new loan or loans, then check your credit rating online, and try to make certain that the loan will be approved before you submit the application.

You can do this by asking right up front, “What are my chances of getting this loan, with my present income, and with the credit rating that I now have?”.

The idea here is to keep the number of credit card inquiries on your report to an absolute minimum.

The good news, if we can call it that is that most financial crises end within two years and according to the NBER (National Bureau of Economic Research) the present recession began in December 2007 which means that we should start coming out of the present one in December 2009 or thereabouts.

The not so good news however is that many Wall Street pundits claim that the real recession only started in September 2008 which would mean that we still have a long way to go!

The Bad News!

The current crisis is global and if one compares the present one to recent ones in other countries such as,

· Spain 1977
· Norway 1987
· Finland 1991
· Sweden 1991
· And Japan 1992

one finds that the parallels are astounding and according to a large number of macroeconomic indicators we are in for a very bumpy ride, and perhaps the most worrying trend from a U.S. point of view is the rise in government debt that can be expected.

Using data gleaned from the crises in the above countries we can expect U.S. government debt to rise around 85% during the first 3 years of a recession which in America’s case would mean between $8 and $9 trillion!

The unemployment problem is generally much greater in richer countries because of their higher levels of wage insurance and stronger worker protection policies so it’s likely to worsen for at least another two years and may last up to five years and reach double digits at its midway point.

House prices in the U.S. peaked in 2005 so it’s quite likely that we won’t see them bottom out until the end of 2010 and based on our earlier models their inflation adjusted prices will fall around 36% which would mean a further drop of about 8-10% in real house prices from their current levels.