How to Get Out of Debt – Best Practices to Managing Your Accumulated Debts

In order for you to make an informed choice in resolving your debt, here are the four common alternatives for dealing with debt problems, each of them has different costs and benefits: Minimum Repayments: You could keep doing whatever you can to make minimum repayments, but did you know, most of what you are repaying … Continue reading “How to Get Out of Debt – Best Practices to Managing Your Accumulated Debts”

In order for you to make an informed choice in resolving your debt, here are the four common alternatives for dealing with debt problems, each of them has different costs and benefits:

Minimum Repayments:

You could keep doing whatever you can to make minimum repayments, but did you know, most of what you are repaying is going towards interest, not towards reducing the debt.

Credit Counseling:

Credit counselling can usually reduce your interest payments by a little bit, but consumer credit counselling organisations do not have any leverage to reduce your balance. That is because they are working for, and getting paid by, your creditors. These companies do not negotiate your balance down.

These companies do help to reduce your monthly payments and interest rate, however they are not able to reduce your overall balance, you will still be paying the full amount owed plus interest charges.

Consolidation Loans:

If you’ve considered debt Consolidation loans, consider this, many people who have taken out a debt consolidation loan, have wound up in greater financial difficulty than they had originally found themselves. Debt Consolidation loans transfer debt from one place to another, while this may sound good, you will still pay back 100% of the original loan plus interest.

If your monthly repayments are lower that is because your debt consolidation company will usually have taken your loan and turned it from an unsecured loan into a secured loan. For many people this means putting their car or home at risk.

Debt Consolidation may be right for some people, but when considering if this is right for you think very carefully, there are many factors to consider and there may be better options available.

Bankruptcy:

The emotional, social and financial impact of bankruptcy is severe, it will stay on your credit report for 7-10 years, it appears every time you apply for credit on your home, car, lease or insurance. Because of the risk in lending to you, higher interest rates will be charged to you, that’s even if you can actually obtain credit.

Bankruptcy is not an easy or even a quick fix, it is a serious decision, with serious consequences. If you are considering bankruptcy you should contact a lawyer to discuss this option.

Debt reductions Programs:

There are debt reduction programs that are a great alternative to bankruptcy. You contribute to your own debt settlement fund. These solutions help you lower the amount you pay each month, help you deal with your creditors and help you reduce your debt, sometimes by as much as 50%!.

Bankruptcy can follow you for as long as up to 20 years, consumer credit counselling can take five or more years, debt reduction programs are often designed to settle within 2-3 years.

Best of all creditors are open to accepting debt reduction settlements as payment in full. Accredited debt reduction companies offering these programs can alleviate your financial stresses, as long as you complete the appropriate due diligence on the companies that you find.

For more advice on selecting the right debt management program hop on over to rachat crdit [http://www.rachat-crdit.info] where you can find further informatio

Reduce Cost of College With Lifetime Learning Credits

Lifetime Learning Credit

For 2015, there are two tax credits available to help you offset the costs of higher education by reducing the amount of your income tax. They are the American Opportunity Credit and the Lifetime Learning Credit.

TAX BENEFIT – For the tax year, you may be able to claim a Lifetime Learning Credit of up to $2,000 for qualified education expenses paid for all eligible students. There is no limit on the number of years the Lifetime Learning Credit can be claimed for each student. A tax credit reduces the amount of income tax you may have to pay. Unlike a deduction, which reduces the amount of income subject to tax, a credit directly reduces the tax itself. The Lifetime Learning Credit is a nonrefundable credit, so if the credit is more than your tax the excess will not be refunded to you. Your allowable Lifetime Learning Credit is limited by the amount of your income and the amount of your tax.

ONLY ONE EDUCATION CREDIT ALLOWED – For each student, you can elect for any year only one of the credits. For example, if you elect to claim the Lifetime Learning Credit for a child on your 2015 tax return, you cannot, for that same child, also claim the American Opportunity Credit for 2015. If you are eligible to claim the Lifetime Learning Credit and you are also eligible to claim the American Opportunity Credit for the same student in the same year, you can choose to claim either credit, but not both. If you pay qualified education expenses for more than one student in the same year, you can choose to claim certain credits on a per-student, per-year basis. This means that, for example, you can claim the American Opportunity Credit for one student and the Lifetime Learning Credit for another student in the same year.

CLAIMING THE CREDIT – Generally, you can claim the Lifetime Learning Credit if all three of the following requirements are met.

You pay qualified education expenses of higher education.
You pay the education expenses for an eligible student (a student who is enrolled in one or more courses at an eligible educational institution).
The eligible student is either yourself, your spouse, or a dependent for whom you claim an exemption on your tax return.

Table 3-1. Overview of the Lifetime Learning Credit for 2015

Maximum credit

Up to $2,000 credit per return

Limit on modified adjusted gross income (MAGI)

$128,000 if married filing jointly;

$64,000 if single, head of household, or qualifying widow(er)

Refundable or nonrefundable

Nonrefundable-credit limited to the amount of tax you must pay on your taxable income

Number of years of postsecondary education

Available for all years of postsecondary education and for courses to acquire or improve job skills

Number of tax years credit available

Available for an unlimited number of tax years

Type of program required

Student does not need to be pursuing a program leading to a degree or other recognized education credential

Number of courses

Available for one or more courses

Felony drug conviction

Felony drug convictions do not make the student ineligible

Qualified expenses

Tuition and fees required for enrollment or attendance (including amounts required to be paid to the institution for course-related books, supplies, and equipment)

Payments for academic periods

Payments made in 2015 for academic periods beginning in 2015 or beginning in the first 3 months of 2015

CANNOT CLAIM THE CREDIT – You cannot claim the Lifetime Learning Credit for 2015 if any of the following apply.

Your filing status is married filing separately.
You are listed as a dependent on another person’s tax return.
Your modified adjusted gross income (MAGI) is $64,000 or more ($128,000 or more in the case of a joint return).
You (or your spouse) were a nonresident alien for any part of 2015 and the nonresident alien did not elect to be treated as a resident alien for tax purposes. More information on nonresident aliens can be found in Publication 519.
You claim the American Opportunity Credit or a Tuition and Fees Deduction for the same student in same year.

QUALIFYING EXPENSES – The Lifetime Learning Credit is based on qualified education expenses you pay for yourself, your spouse, or a dependent for whom you claim an exemption on your tax return. Generally, the credit is allowed for qualified education expenses paid in same year for an academic period beginning in the same year or in the first 3 months of the following year. For example, if you paid $1,500 in December 2015 for qualified tuition for the spring 2016 semester beginning in January 2016, you may be able to use that $1,500 in figuring your 2015 credit.

Academic period. An academic period includes a semester, trimester, quarter, or other period of study (such as a summer school session) as reasonably determined by an educational institution. In the case of an educational institution that uses credit hours or clock hours and does not have academic terms, each payment period can be treated as an academic period.

Paid with borrowed funds. You can claim a Lifetime Learning Credit for qualified education expenses paid with the proceeds of a loan. You use the expenses to figure the Lifetime Learning Credit for the year in which the expenses are paid, not the year in which the loan is repaid. Treat loan disbursements sent directly to the educational institution as paid on the date the institution credits the student’s account.

Student withdraws from class (es). You can claim a Lifetime Learning Credit for qualified education expenses not refunded when a student withdraws.

For purposes of the Lifetime Learning Credit, qualified education expenses are tuition and certain related expenses required for enrollment in a course at an eligible educational institution. The course must be either part of a postsecondary degree program or taken by the student to acquire or improve job skills.

Eligible educational institution. An eligible educational institution is any college, university, vocational school, or other postsecondary educational institution eligible to participate in a student aid program administered by the U.S. Department of Education. It includes virtually all accredited public, nonprofit, and proprietary (privately owned profit-making) postsecondary institutions. The educational institution should be able to tell you if it is an eligible educational institution. Certain educational institutions located outside the United States also participate in the U.S. Department of Education’s Federal Student Aid (FSA) programs (such as Oxford University).

Related expenses. Student activity fees and expenses for course-related books, supplies, and equipment are included in qualified education expenses only if the fees and expenses must be paid to the institution for enrollment or attendance.

NO DOUBLE-DIPPING – You cannot do any of the following.

Deduct higher education expenses on your income tax return (as, for example, a business expense) and also claim a Lifetime Learning Credit based on those same expenses.
Claim a Lifetime Learning Credit in the same year that you are claiming a tuition and fees deduction for the same student.
Claim a Lifetime Learning Credit and an American Opportunity Credit based on the same qualified education expenses.
Claim a Lifetime Learning Credit based on the same expenses used to figure the tax-free portion of a distribution from a Coverdell Education Savings Account (ESA) or Qualified Tuition Program (QTP).
Claim a credit based on qualified education expenses paid with tax-free educational assistance, such as a scholarship, grant, or assistance provided by an employer.

For each student, reduce the qualified education expenses paid by or on behalf of that student under the following rules. The result is the amount of adjusted qualified education expenses for each student.

Tax-free educational assistance. For tax-free educational assistance received in 2015, reduce the qualified educational expenses for each academic period by the amount of tax-free educational assistance allocable to that academic period. Some tax-free educational assistance received after 2015 may be treated as a refund of qualified education expenses paid in 2015. This tax-free educational assistance is any tax-free educational assistance received by you or anyone else after 2015 for qualified education expenses paid on behalf of a student in 2015 (or attributable to enrollment at an eligible educational institution during 2015).

Tax-free educational assistance includes:

The tax-free part of scholarships and fellowship grants
Pell grants (Scholarships, Fellowship Grants, Grants, and Tuition Reductions)
Employer-provided Educational Assistance
Veterans’ Educational Assistance
Any other nontaxable (tax-free) payments (other than gifts or inheritances) received as educational assistance.

Generally, any scholarship or fellowship grant is treated as tax free. However, a scholarship or fellowship grant is not treated as tax free to the extent the student includes it in gross income (if the student is required to file a tax return for the year the scholarship or fellowship grant is received) and either of the following is true.

The scholarship or fellowship grant (or any part of it) must be applied (by its terms) to expenses (such as room and board) other than qualified education expenses.
The scholarship or fellowship grant (or any part of it) may be applied (by its terms) to expenses (such as room and board) other than qualified education expenses.

You may be able to increase the combined value of an education credit and certain educational assistance if the student includes some or all of the educational assistance in income in the year it is received.

Refunds. A refund of qualified education expenses may reduce adjusted qualified education expenses for the tax year or require repayment (recapture) of a credit claimed in an earlier year. Some tax-free educational assistance received after 2015 may be treated as a refund.

Refunds received in 2015. For each student, figure the adjusted qualified education expenses for 2015 by adding all the qualified education expenses for 2015 and subtracting any refunds of those expenses received from the eligible educational institution during 2015.

Refunds received after 2015 but before your income tax return is filed. If anyone receives a refund after 2015 of qualified education expenses paid on behalf of a student in 2015 and the refund is paid before you file an income tax return for 2015, the amount of qualified education expenses for 2015 is reduced by the amount of the refund.

Refunds received after 2015 and after your income tax return is filed. If anyone receives a refund after 2015 of qualified education expenses paid on behalf of a student in 2015 and the refund is paid after you file an income tax return for 2015, you may need to repay some or all of the credit.

Credit recapture. If any tax-free educational assistance for the qualified education expenses paid in 2015 or any refund of your qualified education expenses paid in 2015 is received after you file your 2015 income tax return, you must recapture (repay) any excess credit. You do this by refiguring the amount of your adjusted qualified education expenses for 2015 by reducing the expenses by the amount of the refund or tax-free educational assistance. You then refigure your education credit(s) for 2015 and figure the amount by which your 2015 tax liability would have increased if you had claimed the refigured credit(s). Include that amount as an additional tax for the year the refund or tax-free assistance was received.

If you pay qualified education expenses in 2015 for an academic period that begins in the first 3 months of 2015 and you receive tax-free educational assistance, or a refund, as described above, you may choose to reduce your qualified education expenses for 2015 instead of reducing your expenses for 2015.

Amounts that do not reduce qualified education expenses. Do not reduce qualified education expenses by amounts paid with funds the student receives as:

Payment for services, such as wages,
A loan;
A gift;
An inheritance; or
A withdrawal from the student’s personal savings.

Do not reduce the qualified education expenses by any scholarship or fellowship grant reported as income on the student’s tax return in the following situations.

The use of the money is restricted, by the terms of the scholarship or fellowship grant, to costs of attendance (such as room and board) other than qualified education expenses, Scholarships, Fellowship Grants, Grants, and Tuition Reductions.
The use of the money is not restricted.

COORDINATION WITH PELL GRANTS AND OTHER SCHOLARSHIPS – You may be able to increase your Lifetime Learning Credit when the student (you, your spouse, or your dependent) includes certain scholarships or fellowship grants in the student’s gross income. Your credit may increase only if the amount of the student’s qualified education expenses minus the total amount of scholarships and fellowship grants is less than $10,000. If this situation applies, consider including some or all of the scholarship or fellowship grant in the student’s income in order to treat the included amount as paying nonqualified expenses instead of qualified education expenses. Nonqualified expenses are expenses such as room and board that are not qualified education expenses such as tuition and related fees.

Scholarships and fellowship grants that the student includes in income do not reduce the student’s qualified education expenses available to figure your Lifetime Learning Credit. Thus, including enough scholarship or fellowship grant in the student’s income to report up to $10,000 in qualified education expenses for your Lifetime Learning Credit may increase the credit by enough to increase your tax refund or reduce the amount of tax you owe even considering any increased tax liability from the additional income. However, the increase in tax liability as well as the loss of other tax credits may be greater than the additional Lifetime Learning Credit and may cause your tax refund to decrease or the amount of tax you owe to increase. Your specific circumstances will determine what amount, if any, of scholarship or fellowship grant to include in income to maximize your tax refund or minimize the amount of tax you owe. The scholarship or fellowship grant must be one that may (by its terms) be used for nonqualified expenses.

Finally, the amount of the scholarship or fellowship grant that is applied to nonqualified expenses cannot exceed the amount of the student’s actual nonqualified expenses that are paid in the tax year. This amount may differ from the student’s living expenses estimated by the student’s school in figuring the official cost of attendance under student aid rules. The fact that the educational institution applies the scholarship or fellowship grant to qualified education expenses, such as tuition and related fees, does not prevent the student from choosing to apply certain scholarships or fellowship grants to the student’s actual nonqualified expenses. By making this choice (that is, by including the part of the scholarship or fellowship grant applied to the student’s nonqualified expenses in income), the student may increase taxable income and may be required to file a tax return. But, this allows payments made in cash, by check, by credit or debit card, or with borrowed funds such as a student loan to be applied to qualified education expenses.

Something to consider is whether you will benefit from applying a scholarship or fellowship grant to nonqualified expenses will depend on the amount of the student’s qualified education expenses, the amount of the scholarship or fellowship grant, and whether the scholarship or fellowship grant may (by its terms) be used for nonqualified expenses. Any benefit will also depend on the student’s federal and state marginal tax rates as well as any federal and state tax credits the student claims. Before deciding, look at the total amount of your federal and state tax refunds or taxes owed and, if the student is your dependent, the student’s tax refunds or taxes owed. For example, if you are the student and you also claim the earned income credit, choosing to apply a scholarship or fellowship grant to nonqualified expenses by including the amount in your income may not benefit you if the decrease to your earned income credit as a result of including the scholarship or fellowship grant in income is more than the increase to your Lifetime Learning Credit as a result of including this amount in income.

NON-QUALIFYING EXPENSES – Qualified education expenses do not include amounts paid for:

Insurance;
Medical expenses (including student health fees);
Room and board;
Transportation; or
Similar personal, living, or family expenses.

This is true even if the amount must be paid to the institution as a condition of enrollment or attendance.

Sports, games, hobbies, and noncredit courses. Qualified education expenses generally do not include expenses that relate to any course of instruction or other education that involves sports, games or hobbies, or any noncredit course. However, if the course of instruction or other education is part of the student’s degree program or is taken by the student to acquire or improve job skills, these expenses can qualify.

Comprehensive or bundled fees. Some eligible educational institutions combine all of their fees for an academic period into one amount. If you do not receive or do not have access to an allocation showing how much you paid for qualified education expenses and how much you paid for personal expenses, such as those listed above, contact the institution. The institution is required to make this allocation and provide you with the amount you paid (or were billed) for qualified education expenses on Form 1098-T. To help you figure your Lifetime Learning Credit, the student should receive Form 1098-T. Generally, an eligible educational institution (such as a college or university) must send Form 1098-T (or acceptable substitute) to each enrolled student by January 31, 2015. An institution may choose to report either payments received (box 1), or amounts billed (box 2), for qualified education expenses. However, the amounts on Form 1098-T, boxes 1 and 2, might be different from what you paid. When figuring the credit, use only the amounts you paid or are deemed to have paid in 2015 for qualified education expenses.

In addition, Form 1098-T should give other information for that institution, such as adjustments made for prior years, the amount of scholarships or grants, reimbursements or refunds, and whether the student was enrolled at least half-time or was a graduate student. The eligible educational institution may ask for a completed Form W-9S, or similar statement to obtain the student’s name, address, and taxpayer identification number.

CLAIMING DEPENDENT’S EXPENSES – If there are qualified education expenses for your dependent during a tax year, either you or your dependent, but not both, can claim a Lifetime Learning Credit for your dependent’s expenses for that year. For you to claim a Lifetime Learning Credit for your dependent’s expenses, you must also claim an exemption for your dependent. You do this by listing your dependent’s name and other required information on Form 1040 (or Form 1040A), line 6c.

Expenses paid by dependent. If you claim an exemption on your tax return for an eligible student who is your dependent, treat any expenses paid (or deemed paid) by your dependent as if you had paid them. Include these expenses when figuring the amount of your Lifetime Learning Credit. Qualified education expenses paid directly to an eligible educational institution for your dependent under a court-approved divorce decree are treated as paid by your dependent.

Expenses paid by you. If you claim an exemption for a dependent who is an eligible student, only you can include any expenses you paid when figuring the amount of the Lifetime Learning Credit. If neither you nor anyone else claims an exemption for the dependent, only the dependent can include any expenses you paid when figuring the Lifetime Learning Credit.

Expenses paid by others. Someone other than you, your spouse, or your dependent (such as a relative or former spouse) may make a payment directly to an eligible educational institution to pay for an eligible student’s qualified education expenses. In this case, the student is treated as receiving the payment from the other person and, in turn, paying the institution. If you claim an exemption on your tax return for the student, you are considered to have paid the expenses.

Tuition reduction. When an eligible educational institution provides a reduction in tuition to an employee of the institution (or spouse or dependent child of an employee), the amount of the reduction may or may not be taxable. If it is taxable, the employee is treated as receiving a payment of that amount and, in turn, paying it to the educational institution on behalf of the student.

FIGURING THE CREDIT – The amount of the Lifetime Learning Credit is 20% of the first $10,000 of qualified education expenses you paid for all eligible students. The maximum amount of Lifetime Learning Credit you can claim for 2015 is $2,000 (20% × $10,000). However, that amount may be reduced based on your MAGI.

The amount of your Lifetime Learning Credit is phased out (gradually reduced) if your MAGI is between $54,000 and $64,000 ($108,000 and $128,000 if you file a joint return). You cannot claim a Lifetime Learning Credit if your MAGI is $64,000 or more ($128,000 or more if you file a joint return).

Modified adjusted gross income (MAGI). For most taxpayers, MAGI is adjusted gross income (AGI) as figured on their federal income tax return.

MAGI when using Form 1040A. If you file Form 1040A, your MAGI is the AGI on line 22 of that form.

MAGI when using Form 1040. If you file Form 1040, your MAGI is the AGI on line 38 of that form, modified by adding back any:

1. Foreign earned income exclusion,

2. Foreign housing exclusion,

3. Foreign housing deduction,

4. Exclusion of income by bona fide residents of American Samoa, and

5. Exclusion of income by bona fide residents of Puerto Rico

How to Fix Your Credit Yourself

You can pay a credit repair company to fix your credit, but if you’re willing to invest your time instead of your cash then you can do it yourself without having to pay a professional. The only questions you need to know before you get started are how much your time is worth to you, and how comfortable you are with initiating and managing multiple credit profile related contacts via phone and email. You will also need to be comfortable with reading and writing quasi-legal documents. You can find example correspondence online which can help you with this.

Step 1: Obtain Your Credit Reports

Your credit score is based on a combination of factors and information which is reported about you by 3rd parties to the 3 major credit reporting agencies. The major agencies we are concerned with are Experian, Equifax and TransUnion. These three companies are the ones who are responsible for publishing information about you onto your credit report, however they are not the ones responsible for generating the information. A creditor, a collection agency or another company (known as data furnishers) will tell Experian, Equifax and TransUnion what to publish about you, and then the credit bureaus will publish it. They do not perform a thorough investigation into the legitimacy of the information when they initially report it. Only when it is discovered and disputed by you will it be investigated, at which point it may have been damaging your credit for months or years. It is also very common for information to be different on each of your three credit reports, which is like playing Russian roulette every time your credit is pulled if you don’t fix all three at the same time. The reason is because you never know which report your potential landlord, employer or loan provider is going to pull. Let me give you an example:

You have never checked your credit reports or felt the need to do so, however 2 years ago a credit card account was fraudulently opened in your name, maxed out and never paid on. You have never heard anything about it. The credit card company which was defrauded only reports payment information to Equifax and TransUnion, not to Experian. You have previously been approved for a car loan from your bank about 9 months ago, so you assume your score is good, however you are turned down in the final stages of your employment application and receive a form in the mail stating that a consumer report was used in the negative determination of your employment application. That means that even though your bank pulled your Experian information to verify your credit worthiness for your car loan, your potential employer used Equifax or Transunion and assumed the fraudulent negative credit card entry was valid.

Situations similar to the above are very common, and whether you are turned down for a loan, a credit card application, a job or an apartment it is a huge disruption to your plans and can be a major stress inducing event. Go and check your credit reports right now and then once a month from here on out in order to nip this potential problem in the bud.

The first step to take is to simply obtain a credit report from each of the agencies above. Legally you are allowed to do this for free once per year and also every time you are denied credit or suffer another qualifying negative event based on the results of a consumer report. To get your free reports go to annualcreditreport.com and follow the instructions to obtain your report. This is the official government website for obtaining your free credit reports, and it does not require a credit card or any kind of subscription or trial. Some people are not able to receive their reports from annualcreditreport.com due to problems verifying their identity or other reasons. If you are unable to obtain your reports from annualcreditreport.com, you can either search online for credit report providers or you can contact the credit bureaus directly yourself. Typically you can find providers online which will charge you $1 for your first month of access to your credit reports and to a credit monitoring service, with cost rising to about $30 per month thereafter. Remember, it’s free for you if you can get your reports from annualcreditreport.com, so that is definitely your first choice. If you can’t get them there try a paid provider or contact the bureaus directly either online or by mail and persuade them to provide you with a copy of your report. I always send mail certified, signature required, with a tracking number – and I highly advise you do the same. Keeping a detailed record of all of your communications with each entity you will be contacting is of the utmost importance to your success. The dates of your mailings and of the correspondence you receive as a result are extremely important. Below are the web addresses for the credit bureaus – search their site or search online for instructions for requesting access to your credit report if you are unable to do so through annualcreditreport.com.

So, just to be clear:

annualcreditreport.com – official site for obtaining your credit reports – go here first
Experian.com – Equifax.com – TransUnion.com; contact directly if needed

OK, I’ve received my credit reports in the mail or I’ve accessed them online – now what?

Step 2: Reviewing Your Credit Reports for Accuracy

Once you receive your reports you will need to review them for accuracy. Check each one carefully. There are several sections you will need to review and each one contains important information about you which will be checked by employers, landlords, utility companies, your cell phone provider and of course, potential creditors and others. Credit reports from the three agencies each look slightly different, but are generally composed of sections similar to these:

Personal Profile: This section contains your personal information, such as your legal name, your current and previous addresses, your employment history and your birth date.

Credit Summary: A snapshot of your credit, including how many accounts have been opened in your name and their total balance. Reported delinquencies will be listed here as well.

Public Records: The odds are that you likely don’t have any public records listed on your report, but they are very common. Mistakes in this area of your report are also fairly common and need to be disputed immediately. This type of information includes bankruptcy, tax lien, court records, judgements and child support.

Credit Inquiries: Any company you have given permission to review your credit file (called a hard inquiry) will be listed here for two years. More than 3 inquiries listed in this section can lower your credit score. If you see companies listed in this section that you have not authorized to pull your credit, then they need to be removed. If you personally check your own credit (such as through a paid provider or credit monitoring service like referenced above) your credit score will not be affected. This type of inquiry is known a soft inquiry. Typical listings in this section include lenders, and potential or former employers and landlords.

Account History: This is the specific account information for all accounts opened in your name which are reported to a credit reporting agency. This information can be positive or negative, and collectively has the biggest impact on your credit rating. A large amount of inaccurate information can be found on some people’s credit reports in this section. Positive information reported about you will remain on your report indefinitely, while negative information will remain for 7 – 10 years from the date that the account was closed, or the date you last made a payment on or acknowledged the alleged debt.

The contact information for all the companies who are listing information about you will also be found in this section. These addresses are where you will be sending your dispute letters if you choose to mail them versus filing online (recommended).

The above sections will comprise the majority of your credit reports. As stated before, go through them very carefully. Pay special attention to the alleged amounts that you owe, the payment dates and the names of the companies which are reporting the negative information. Take note of whether or not it is the original creditor or a debt collector as this will have an effect on the wording of the letters you will be sending out, and look at the account creation dates. In short, go through and verify that every single datapoint which is being reported about you on that credit report is accurate. Make notations of what you believe to be incorrect, reconcile this information with your records and if it is not exactly the same, then it may be being reported incorrectly and having a negative effect on your credit profile.

Step 3: First Contact

Now that you have reviewed your credit reports the fun part starts. You need to take all of the information which you want to be removed from your report and begin writing letters to address those issues. You can put multiple issues on each letter, however I never send more than 3 issues per letter to any agency and I recommend you don’t either. You will want to send a letter to each of the credit bureaus which specifically details the reasons the information should be removed from your report. If it is inaccurate in any way, then legally it must be removed from your report. Carefully word your dispute letter with diplomatic and professional language, and inform the credit reporting agencies that you want them to investigate the points you raise in your letter as you are disputing their accuracy. If you have evidence supporting your claim, submit a copy with your dispute letters. The credit agencies want to report correct information, and they will look at the evidence you send to them. Make sure you do not acknowledge that the debt is yours or make any payment offers as this could potentially restart the 7 year clock that the debt will be reported about you.

After you have disputed your items the credit agencies are allowed a minimum of 30 days to respond under the Fair Credit Reporting Act (FCRA). During this time they will contact the data furnisher and attempt to verify the accuracy of the debt they are reporting about you. Generally the data furnisher will simply respond that the data is correct, and nothing will change. The credit bureau will send you a letter explaining that they reviewed your claim, and the information was reported to be accurate, and therefore they will continue to report it. If you have submitted good documentation supporting your position, the credit bureau will review it, however they may still side with the data furnisher and refuse to remove the incorrect items(s) from your report.

If this happens, you will need to contact the original creditors and the collections agencies if they are involved, and request validation of the debt they are reporting about you. Typically you will receive some sort of report generated by them which simply states that you them a certain amount of money. This amount will rarely correlate with what you think you owe, or what is being reported onto your credit report. Depending on what type of information you receive from the data furnisher directly, you may be able to simply write a new letter to the credit bureau with copies of the information you received from the data furnisher and an explanation of how the information doesn’t correlate with what is being reported on your credit report. They are also required to be able to validate your debt. This is different than verifying it, which is what data furnishers sometimes do. Look up this distinction online and then check to make sure that they have provided the evidence legally required of them to continue reporting information about you.

The parties you will be contacting include:

The three major credit bureaus
Experian
Equifax
TransUnion

The data furnishers
Original creditors
Collection agencies
Attorneys
Others various parties

Dealing with each of these contacts and correctly generating effective correspondence to them along with corroborating evidence will be the best and fastest way to fix your credit reports.

Do not enter into any payment negotiations with collections agencies or any other data furnishers without express written statements from them that they will be deleting the “tradeline” once you have fulfilled your payments. This is a very important step when dealing with data furnishers, and forgetting to specify this could cause negative information to stay on your report for much longer in the form of a paid collections account.

Step 4: Raising or Establishing Your Credit Worthiness

If everything looks good on your credit reports and your score still isn’t as high as you think it should be, or if you are just new to obtaining credit, there are several things you should be aware of.

Some credit scoring models will give you a lower score for credit card limits or loans which are under $2,000 – get a limit at least this high if you can.

The average age of all of your combined accounts is important – the older the better. What this means is that if you have 10 accounts with an average age of 22 years and then you go out and open 4 new accounts to try and raise your score, the average age of your accounts will drop to just under 15 1/2 years old. This will have a negative effect on your credit score and may offset any benefit of opening 4 new accounts, which will also generate 4 new hard inquiries which will also have a negative effect. Make sure you absolutely need credit before applying for it.

Having over twenty accounts in good standing can raise your score, however the average age of your accounts will generally make more of an impact on your score than the total number of your accounts (see above).

If you have bad credit or no credit – try this out: Pull your credit reports and fix everything on them that you can so that your credit history is as favorable as possible. Save up $200 dollars, and then go to your bank or go online and find a company which offers secured loans and credit cards – these are generally easy to be approved for because the credit limit is the same as the amount which you deposit. In this case, you will deposit $200 to obtain a secured loan, then you will take the $200 from your loan and open a secured credit card. This way, you will gain two new accounts which are reporting your timely payments to the credit bureaus for the price of one. Also, you aren’t really out any money because even though you deposited $200 to obtain a secured credit card and loan, you now have $200 worth of credit at your disposal. Make sure you make timely payments on these two accounts and your score can easily go up 75 points or more in just a few months. If you can manage a $2,000 secured loan then you will get the benefit of having a loan and a credit card with credit limits of at least $2,000 each which will both report to the major credit bureaus and can raise your score even more. If you decide to do this make sure your secured card provider reports to all three major credit bureaus – and try to pay off your credit card in full each month.

On time payments to your accounts in good standing are the best way to raise your score and keep it there.

If you are offered a lower credit card limit than you want you can always call the financial provider and request a higher limit. Sometimes all they need is a little additional information to approve you for thousands of dollars more.

The amount of your credit limit which you actually borrow matters; your debt to credit ratio is what credit agencies use to quickly see how much of your available credit you are using each month. This amount can change on a daily basis and has a major effect on your credit score. Keep the total amount of your debt down to about 20% or less of your available credit to look favorable.

Don’t max out individual cards; if you have $10,000 of total credit on three cards of $4,000, $5,000 and $1,000 dollars, don’t max out any individual card. Keep each of them at 20% or less utilization to save on interest and to keep your cards from being individually over utilized.

Keep your cash back by paying your cards in full each month. As long as the accounts are active and being used, paying them off each month won’t look bad for your score. By not carrying a monthly balance you will avoid paying interest completely while still receiving cash back for using your cards. In this case, you can actually make money by properly managing your credit cards if you are disciplined.

Paying twice can save you thousands; many loans can be paid off much quicker by simply taking the monthly amount owed, splitting it in two and paying it off in two separate payments each billing cycle. If you can add just a little extra in each payment your savings could be significant and it could speed up the time it takes to pay off your loan by months. Mortgages and car loans are great for this strategy.

I encourage you to look into the huge amount of information available online and learn as much as possible prior to taking any of the steps outlined above as a simple mistake could be extremely negative to your credit profile. Fixing your credit can be tricky, with a lot of pitfalls and confusing rules, regulations and recommendations. Even so, it is absolutely imperative to just go ahead and dive into it and get started as the longer you wait, the more it will cost you in the long run.

Three Types of Credit You May Not Know You Have

Every business has three types of credit: the Consumer Credit of the business owner, Bank Credit, and Business Credit.

Most business owners are familiar with their consumer credit. This is credit that reports to the consumer credit reporting agencies TransUnion, Equifax, and Experian. Scores range from 350-850, and credit is linked to the owner’s Social Security Number.

Most business owners don’t know that banks have their own internal scoring system for businesses. This scoring system is known as bank credit, or a bank rating.
This score is based on how you manage your business bank account. Having $10,000 or more in your bank account will give you a good bank credit score.

A business also has its own credit profile, known as business credit. Business credit reports to the business credit reporting agencies, Dun & Bradstreet, Equifax, and Experian. Scores usually range from 0-100, and credit is linked to the business EIN number, not the owner’s SSN number.

Business credit provides a lot of benefits. For one, it has no link to consumer credit, so no personal credit check is required, and accounts don’t report to the consumer agencies.

No personal guarantee is needed in most cases, so you won’t be personally liable for your business debts. Also, credit limits are 10-100 times higher than with consumer credit.

With consumer credit, just because you have an SSN doesn’t mean you have an established credit profile.

To get a consumer credit score and profile, you first must: get approved for accounts that report to the consumer reporting agencies, use those accounts, and pay your bills for those accounts, then and only then will you have an established credit profile and score for your SSN.

Just like with consumer credit, just because you have an EIN doesn’t mean you have an established business credit profile and score.

To get a business credit score and profile, you first must: get approved for accounts that report to the business reporting agencies, use those accounts, and pay your bills for those accounts, then and only then will you have an established credit profile and score for your EIN.

Entrepreneur.com reports that 90% of business owners know nothing about business credit. Business credit is usually reserved for established businesses, or those that meet a certain criteria for approval, and often is used by companies big enough that they have a CFO.

You can build business credit and get a good score QUICKLY! Having business credit increases the value of your company, and you won’t need financials or collateral for approval.

Any business can actually establish business credit, but the key to success is knowing the formula for success, knowing what steps to take and in what order.
Business credit isn’t highly promoted in stores, or with cash credit sources, so usually only larger businesses take advantage of it.

Credit issuers and lenders like it this way, because usually those larger companies are more established and have less of a risk of default, although it’s not actually the size of your company they look at for approval.

To get approved your business must pass a test that shows the credit issuers and lenders that you are credible, no matter your size.

If you pass this test and are credible in their eyes, you’ll be approved for business credit. Many times you get approved automatically by their computers without someone manually reviewing your application.

Business size and how long you’ve been open aren’t really the driving factors for your approval, but passing this test is.

This means even if you just opened your doors yesterday and have little or no revenue, you can still be approved with most business credit sources… as long as you pass their test.

You must have a physical business address, or use a virtual address. You’ll need to have a business phone number, preferably a toll free number, and it’ll need to be listed in 411.

You’ll need a business fax number and you should have a professional email address, and website. You must have the proper licenses for your business, industry, city, county, and state and you need an EIN, entity setup, and bank account.

There are actually 20 items on this test that will be reviewed, but you now know some of the most important factors that credit issuers and lenders review.

When establishing business credit, there are actually three types of credit you can get: vendor credit (starter accounts that offer Net 30 terms), store credit (revolving credit cards available in retail stores), and cash credit (revolving credit cards such as Visa and MasterCard that card issuers or banks approve you for).

The biggest mistake entrepreneurs make when building credit for their business is that they try to apply for store or cash credit first, and skip vendor credit.

But stores and banks will NOT approve a business owner for credit until their EIN credit profile and score are established. If you try to apply for store or cash credit without an established business credit profile and score, you’ll be denied… 100% of the time.

You must get approved with vendors first who offer Net 30 terms. After you use those accounts and pay your bills, the accounts will get reported to the business credit reporting agencies.

Then and only then will you have an established business credit profile and score. Once it has been established, you can begin to be approved for store revolving credit.

You should seek out vendors who will approve a business for credit, even if none is established yet. There are actually many vendor sources who are well known for this: Uline, Quill, Reliable, and Laughlin and Associates, just to name a few.

To start business credit, you first should get approved for accounts with these vendors.

Some will require you purchase their products first and some will have you make three orders and pay before they’ll issue you a line-of-credit. But all of the sources I listed will approve a brand new business, even if you have no credit now.

You’ll want to insure you have a total of five payment experiences reported before you even think of applying for store credit. A payment experience is the reporting of an account to a business reporting agency.

So Quill, for example, reports to both D&B and Experian. That means that one account will count as two payment experiences. Laughlin only reports to Experian, counting as one payment experience.

Once you have five payment experiences reporting, you can begin to secure revolving store credit cards for your EIN.

KEEP IN MIND, all applications will ask for your SSN but you do NOT need to provide your SSN on the application. If you do supply your SSN, they WILL pull your personal credit… and if it’s bad your application will be denied.

When you leave the SSN field blank, they’ll pull your business credit. Once they see that you have business credit established and at least five payment experiences reporting, then you’ll start to get approved for store credit.

Most major retailers do offer business credit as well as consumer credit. Staples, Office Depot, Home Depot, Lowes, Target, Walmart, Costco, Sam’s Club, Radio Shack, Best Buy, BP, Chevron, Amazon, Shell, and most other stores, offer business credit.

Some sources like Home Depot might have more stringent approval requirements and want to see big revenue and three years in business for approval of no personal-guarantee credit. However, sources don’t have these requirements, if you have credit established for the business.

WARNING!!! Do NOT put your SSN on the application. Do NOT apply for revolving store credit without having at least five payment experiences reporting to the business credit reporting agencies. If you do either of these, you’ll be denied or you’ll have to give them your personal guarantee.

Once you have a total of 10 payment experiences reported to the business bureaus, then you can start to get cash credit cards. Cash cards are those issued by Visa, MasterCard, even AMEX, and are cards you can use anywhere, not just cards you can only use in one store.

It’s recommended that at least one of your 10 payment experiences has a high limit of $10,000 or more before applying for cash credit. Dell is a revolving store source who regularly approves business owners with established business credit for an account with a limit of $10,000 or more.

Key Bank and Home Depot are two sources that offer revolving cash credit cards you can use most anywhere; many banks offer these also.

When you follow these steps, your business can have an established credit profile and score.

This profile and score can then be used to get you credit in your business name, regardless of your personal credit, and without a personal guarantee.

You’ll want to continue building business credit, applying and getting more credit, using that credit, and getting approved for higher and higher credit limits.