A guest post from Nancy Smith, Donna Fox’s executive assistant
Today Donna shared with me her concern for the influx of people reaching out to her for help with their poor financial situations, and how badly she felt for their demise as they were in a very devastating place.
Unfortunately most of these people have waited too long to seek help. A lot of times when we are in a bad financial situation we wait for something to take care of it for us, or we think we can just ignore it and it will go away, or we go on about our business in denial that we’re even in such a predicament, or we’re too prideful to ask for help. These are very dangerous reactions to financial difficulties because the longer you wait without taking action, the worse it will get, and before you know it it’ll be too late to do anything to repair it. Don’t let these negative reactions get in your way of saving yourself from financial ruin.
The best advice I could give is to take action when you see it coming, before it’s actually here. Get into financial combat mode. Start cutting down on your wants, only keeping your needs to survive.
Stop eating out, quit going to Starbucks every morning, cancel out the movie channels to save on your cable bill, do your own manicures and pedicures, if you have cell phones – see if you can get by without the land line, make arrangements to share a ride to work, call all your credit card companies and mention what a great customer you have been for so long and ask if you are at the lowest interest rate possible.
Look in your garage and see what you haven’t used in 3-5 years and sell it on Ebay or have a garage sale. In the winter turn down the heat in your home and use lots of blankets. In the summer turn down the air conditioner and wear less. If you have an extra bedroom in your home, take in a boarder. Do your own gardening and cleaning, it’s great exercise.
Move all your outstanding credit card balances to a new card with special intro promotions with no interest for a year and a low rate there after, and during that time don’t make additional purchases, just pay down the debt, aggressively.
If you see there may be a chance that you could fall behind on your mortgage payment, call your lender before you’re late and see if they are willing to work with you. Most often they will set up a plan to help you through those rough times, especially now. This will buy you time to sell if you need to sell, or find a second job, or see if your mate can find employment to generate a second income or borrow from a relative.
Do these types of things right away when you see a downward trend beginning in your financial future. Start these practices now, even if you aren’t on the down, they can help prevent you from going there. We are living in some pretty uncertain times and we can never know when things could get really bad. Be prepared, get ready to be able to sustain you and your family for times of a possible recession or depression. Pay down your current debt more rapidly, especially with at least one of your properties. Refinance your mortgage to a 15 year loan while rates are low, or split your monthly payment into bi-weekly payments, or make two full payments per month, applying the additional on your principle.
Become more in tune with your financial situation. Check your bank and credit card statements monthly, make sure there are no discrepancies. Set up all your bills in some type of automatic online bill pay system to avoid any late charges.
Credit is an important tool in major purchases and growing your business, so protect it from harm before it’s too late. Sell before foreclosure or bankruptcy. Acquire a partner in your business with the knowledge of something you lack in and grow it together. Learn to live below your means and save the extra for later by investing it wisely. Don’t continue to live above your means and expect a miracle to bail you out when you’ve hit bottom. Society has created a sense of false security with credit and it can be very financially dangerous if you don’t watch it. You cannot continue to buy before you have the money or you will never own anything outright. We need to be more conservative when it comes to purchasing on credit by being able to pay down the debt in a reasonable amount of time.
Recently a lot of people were enticed into buying more home than they could afford with some pretty unmanageable adjustable rate loans. Call me old fashion, but in the back of my mind I could just hear my parents telling me Fixed Rate, Fixed Rate, Fixed Rate. Purchasing any differently to me is a gamble, especially during these uncertain times. For all the Real Estate investors that bought investment homes during the housing booms and thought they were going to sell before the rate adjusted, that’s a huge gamble, one of which I could have taken, but chose not to. When I saw the huge price tag on the 800 sq foot homes, with the neighboring house so close you could reach out and touch their hand without leaving your home, red flags went up in my eyes. It’s time to be very diligent and cautious when investing. If you can’t afford to make the payments on all your properties while unoccupied, then you have no business buying them. If you bought thinking you can turn around and sell the property before the rate adjusted, did you do your homework in the area? Were people in the area making enough money to pay the rent amount you needed to charge to cover the payment? Could their salaries allow them to purchase a home at the inflated prices? Is the area growing too much too fast? Did you follow your gut feeling? Yeah, there will be some of the lucky ones that came in at the right time and sold, but to me there is a scale to investment home buying, beginning stage, top of stage, and ending stage. Beware at the top of stage, and steer clear of the ending stage, unless you can afford the loss.
Also beware of the businesses that are waiting for you to be at your lowest point, they prey on people that have given up and want to hand over their trouble for someone else to handle. When you are in this state of mind it can be very dangerous financially. You could find yourself signing your house over to a complete stranger with promises he/she can sell your house for you, keeping you from going into foreclosure. There are some very smart people out there just waiting to take advantage of people in a bad state of financial affairs. Don’t fall for these scammers, if it sounds too good to be true, then it’s just that.
If you are looking for ways to repair your credit, or ways to build your credit in order to make a large purchase or grow your business look into Donna’s From Credit Repair to Credit Millionaire system, she explains, step by step, how to do these things on your own. The action steps in her system really do work, I have tried them myself, and I have received great results. The key to success with her system is simple, take action and follow up.
Happy Holidays!
Nancy Smith
During this holiday season, I think about all of the gifts that I’ve given and been given, and by far the best gift I received when I was a teenager was the boost to my personal credit when my mother added me as an authorized user to her accounts.
Unfortunately, the gift of good credit is has now gone the way of Christmas past. Like all good tools, when they get abused, it often ruins the opportunity for people who use the strategy legitimately, and that’s what’s happened this year.
Some credit repair organizations started using the authorized user strategy to sell better credit scores to consumers with credit problems, an activity that violates the Federal Credit Repair Organizations Act, FICO decided to change the rules. (I’m restraining from a sidebar about creating oversweeping changes that hurt legitimate people in an effort to stop illegal activity…grrr)
The new FICO scoring system will completely bypass any account where someone is listed as an authorized user. FICO expects the system to be fully in place early in 2008.
FICO expects that 30% of the population will receive a drop in their credit score when this change goes into effect. They also expect the move to disproportionally affect women, who are often added as authorized users to their spouse’s accounts.
And in typical FICO fashion… they are considering constructing the new system in the way that’s most damaging to consumers. These new accounts are completely bypassed for the purposes of positive scoring… but may be counted when the account has a negative impact. Hearing news like this bringing me back to my days as a pre-teen. I want to stomp my feet and say, “that’s not fair!”
That’s FICO.
How to get around this? Well, instead of being added as an authorized user, ask the cardholder to add you as a “Joint Account” holder instead. You will be responsible for payment, and good or bad credit history goes on your account. The only real difference is that the lender will likely check your credit before adding you as a joint account holder. If you have bad credit your application could be denied… or the interest rate on the account could be increased.
Bottom line, if you’re a Credit Millionaire or soon to be and are using the system available at www.credit-millionare.com then take the report and strategy called, “Give the gift of good credit” and change all the words “authorized user” to “joint account holder”.
It’s a higher level of commitment, so you don’t want to do this with people you aren’t close to.
If you’ve already been added as an authorized user to someone’s account to boost your score, apply for new credit now, so you can take advantage of the score boost, before the changes lower your credit score.
and as always, bountiful borrowing,
Donna Fox
The number one question this month at http://www.credit-millionaire.com/ask is
“How do I remove inquiries from my credit report?”
To answer this question, I first want to come back to the language in the Fair Credit Reporting Act which states that if the “completeness” or “accuracy” of any item is information is disputed, it must be verified removed within 30 days of receiving the notice to dispute the item.
So if a inquiry is legally yours, it must be either incomplete or inaccurate for it to be challenged.
Ok, so first thing is first. There are soft inquiries and hard inquiries. Soft inquiries are when companies request the name and address of people that fit into a certain profile. These are listed at the end of your credit report, usually with a note that they don’t affect your score. They don’t. Lenders also don’t see these inquiries. They are listed for your information only, and they don’t hurt you.
While we are on the topic, neither do your own inquiries to your report. Don’t worry about them.
Then, when you look at your report there are likely some inquiries that you don’t recognize at all. Challenge them with an “I don’t recall” letter. Something like, “I don’t recall applying for credit from this company, please remove it from my credit report.” If that doesn’t work, send a 45 day letter, which can be found in the letters appendix of the Credit Millionaire System manual. If they aren’t legally yours, they shouldn’t be on the account.
So let’s talk whether they are legally yours. As credit millionaires, many of you are applying for credit for your business. Unless your business has been in existence for years, your lender is going to look at your personal credit to make a decision about your business credit.
This is the worst kind of inquiry, because the credit you are eventually extended doesn’t appear on your personal credit report. Inquiry without corresponding loan equals lower score.
Incidentally inquiry with corresponding loan usually means higher score… but that’s an explanation for another post.
So, how do you remove those business inquiries from the account? Step 1: send a letter to the bureau saying that those credit inquiries were for your business, and are therefore not yours and should be removed. This simple act seems to work 30% of the time. Step 2: if you don’t hear from them in 30 days, write a stronger letter that says they should be removed or verified by showing you a signed credit application in your name. As good credit millionaires, you wouldn’t have signed the application as you, but only as “Your Name, Title”, clearly showing that you personally didn’t apply for credit.
Next, inquiries that are your personal ones, but are inaccurate. Perhaps the creditor name is incorrect. Maybe you applied for credit from one company, but the inquiry is from another. Interestingly, the strategy is the same as it is above for business credit, except the “reason” is inaccuracy.
Finally, inquiries that are your personal ones that are incomplete. This is the least likely reason you’ll be able to challenge the account. Some reasons why the inquiry might be incomplete is because it lacks the full name or address of the creditor. Lame, but if it’s the truth, you may be able to get the inquiry removed.
With a challenge like this, you’re really hoping that they credit bureau doesn’t verify the item within 30 days. Items not verified in 30 days must be removed. To prove the 30 day time period, many people advocate sending certified letters. It’s up to you, but I usually don’t send the first letter certified. Certified letters are responded to more quickly at the bureau level.
You can also challenge an inquiry with the lender that’s listed on your report. You can write that “My credit report shows a credit inquiry by your company and I do not recall authorizing an inquiry. I know you aren’t legal allowed to put an inquiry on my report unless I have authorized it. Please have this removed from my credit file and forward me the documentation that you have done so.”
If you try this step and the lender doesn’t respond, you can use that fact in your credit bureau challenge. “Please note that before contacting you about this error I sent a letter to the lender responsible for this unauthorized inquiry and asked them to remove the inquiry from my report and cease this illegal activity. I have not heard a response from them within XX days.”
In all cases of inquiry disputes, it’s important to remember that the effect inquiries has on your credit report is very minimal. Only spend your time with them if they are the last thing you’re trying to challenge. Within 6 months the impact of the inquiry is quite minimal to your score (although particular lenders may care about the number), in just 2 years the inquiries are gone from your records.
