Repair Your Bad Credit First, Buy Your Car Later

Bad credit spoils everything – your dreams for a new house, new car, student loan, any kind of loan. If you have fallen into the debt trap, the best thing to do is to repair your bad credit first and to go shopping later.

Many people will not follow this advice especially if they want to buy a new car. Probably the main reason is that first of all a car is not a high value purchase and second – they do not want to wait. Of course financing for buying a car with a bad credit history is available. It is a separate question who will provide it and if the terms will be as good as they can be if the credit score was OK.

For those who want to repair their bad credit, here are a few tips about how to achieve this.

The first thing to do is to get a copy of your credit report. Get an annual copy and check it thoroughly. You will easily see which loan or loans caused the bad credit score. Try to sort them out by making a repayment plan. You can ask the creditor to do it for you or to ask an independent company to do it. No matter who will make the plan, be honest about your incomes so that a reasonable and realistic plan to be made and start paying the repayment fees regularly. Missing the final repayment date also harms your credit history.

The next steps depend on the type of debt you have. If you have credit card debt you can try applying for a new card and start using it carefully while repaying the old debts. You good "behavior" will count when your credit score is reviewed.

The last resort to "start clean" is to file bankruptcy. This will clean some or all of your debt but will leave a huge ugly stain in your credit history. Of course people who bankrupt can fix their credit score but the time required for this is much more.

Once you have a plan and have taken steps to rebuild your credit score, be accurate and patient. Your bad credit will turn into something from the past quickly if you stay current with outstanding bills, repayments and any other financial issues. Always check the monthly statements and plan in advance how to pay all of your bills in time. If you find you are not earning enough, that cut off your budget. This is not the most pleasant thing but it wil help in the long run.

Children Facing Foreclosure & Homelessness Beg Your Understanding

Kim & Joe M. of Orlando, FL, fell victim to the shrinking house market. Both worked in financial services, Kim an administrative assistant at Wells Fargo and Joe a loan officer with a bank.

For five years, they stayed busy and saved money.

In July 20005, Kim lost her job…downsized. Wells Fargo didn't need her any longer. Not as many mortgage applications. Kim's job search lasted three weeks before she found a replacement for 75% of what she had previously earned.

In September, Joe suffered an auto accident, putting him out of work for six months and without an income as the insurance companies battled it out.

Kayle, 6, and Kyle, 8, knew something was wrong. Mom and Dad were preoccupied. Money was tight.

Kim and Joe and their two children quickly fell victim to bad luck and a slumping housing market. They fell behind in their mortgage payments on the same house in which they had lived for eight years. No irresponsible overspending here. No new BMWs; no Rolexes; no expensive vacations; no extravegence at all.

Joe got hurt…he couldn't work. Kim lost her job…she couldn't recover lost wages. Kyle and Kayle watched on…helpless.

According to the American Banker's Association, most people have less than 3 month's worth of cash in reserve.

Despite eight years of perfect payment history, Kim and Joe's mortgage company refuses to work with them. They've received a Notice of Default.

The foreclosure of your home can lead to the bank seizing your property, your cars, your stocks, your kid's college savings! Even the IRS can get involved with wage garnishment or levying your bank account. Kyle and Kayle watch on…helpless.

The National Association of Mortgage Banker's (NAMB) records show that more mortgages go into foreclosure 3-5 years after issue than at any other time. Credit is trashed and families are scarred.

Children, the most innocent victims of unfortunate tragedy, watch on…helpless.

Kim & Joe's horror will haunt them for life. More than 40% of borrowers took an adjustable mortgage in the past five years . Many of them have children.

Those "teaser" rates of 5% or less are set to explode their mortgage payments by 25-33% or higher when they adjust. In 2006, over $300 Billion dollars worth of mortgages will adjust with $1 trillion more in 2007, according to Freddie Mac, the secondary mortgage lender.
Homeowners are upside down…they have no equity. Some mortgage lenders, who shouldn't be in the real estate business, appear to want to take homes from Kyle and Kayle.

They appear not to want to work out payment plans to help families victimized by bad luck and a slumping housing market.

Adding insult to tragic injury, Kyle & Kayle learned about "deficiency judgment". The bank sold their home…the home where Kyle was born…the sale didn't cover the amount Kim & Joe owed.

The proceeds of the sale did not cover the total owed the bank, including legal fees, administrative fees, fee this, fee that.

If the bank cannot recoup their deficiency from you, Kyle & Kayle, and if your state will not allow a deficiency judgment, the lender will write the deficiency off on their taxes.

However, kids, the pain doesn't stop there. Now the IRS may enter the picture. This "deficiency" amount not collected by the lender is considered money you owe.

They will add it to your annual income and expect you to pay taxes on the total amount. This is business, Kyle & Kayle. Nothing personal. You'll get over it, Kids.

If your parents cannot pay, the IRS can come after everything you own, including your mom's & dad's paychecks.

Kim & Joe sought professional help as suggested. Kim & Joe's lender chose not to help them save their home. Tragedy strikes not just once but repeatedly, oblivious to children.

It's business. Real people with real children (scarred for life) lose their homes, get hit with a deficiency judgment & meet the Gestapo (the IRS).

It's not just the irresponsible overspenders carelessly losing homes to foreclosure. Some are real people with real children.

Debt Management Primer

Credit is essential these days. A person needs credit to be able to do almost everything, from buying a car to getting a utility turned on. Bad credit can be quite costly. That is why debt management is so important. Debt management is the way you acquire and handle your debt so that you can afford it.

The key to debt management is understanding your finances. You have to have a budget and you have to know what you can and can not afford. That may seem simple, but credit is actually designed to help you get what you can not afford and that is why many people end up with credit problems.

The whole idea of credit is to offer you a loan so you can buy something you would otherwise not be able to afford. You are borrowing money. The simplest way to avoid debt is to not borrow at all, but then you would not be building your credit, which, as mentioned is very important. You have to learn how to borrow responsibly.

You have to be smart about credit and debt. Part of good debt management is setting limits for yourself. Do not let your debt get out of control. You can use credit cards or get loans as long as you can afford them. Most people get some type of loan during their life. A good example is an auto loan. Most people can not afford to pay upfront for a car, so they get a loan.

For someone who is careful about their debt, they will make sure they can afford the loan. They will figure it into their expenses and if they can not afford it they will pass it up and try a different option. Someone who is not managing their debt would simply take the loan and figure out how they could afford it later. This is what leads to debt problems.

Debt management involves going through your finances. You have to list all of your expenses and you income. Your expenses should never be more than your income. If this is the case then you need to learn how to manage your debt. You may have to cut expenses, if at all possible to get them lower than your debt.

Once you understand your debt you can then manage it. Lets say your expenses per month are $1000 and your income is $1500. You would have $500 extra each month. You have some options of what you can do with that money. You could put it into a savings account where it will build interest.

You could pay extra on some of outstanding debt to help pay it off sooner or you could take on more debt. The chose is yours, but always keep in mind that you should never spend more than you make or you will fall victim to bad credit and debt.

By conducting good debt management you will find yourself enjoying a good credit rating. This will open many doors for you and allow you more financial freedom.

Credit Counseling

Specialists advise to contact your creditors immediately when you face difficulties paying your bills. It's necessary to tell them the truth about why it has become difficult for you to meet payments. If they see your sincere wish to cope with hardships as well as with the debt it will be easier for you to work out a modified payment plan that will make your payments lower to some extent. Debt experts also say there's no good waiting till your accounts will occur at a debt collector's hands. This may become a point when your creditors "have given up on you". To avoid this grief you need to obtain definite knowledge about debt and money management.

Unfortunately, most ordinary people lack this kind of knowledge. What common people know is that debts can be of two types – unsecured or secured. Secured debts are those which have been tied to an asset. The assets can also be of different kinds – it may be your car for a car loan, or your house for a mortgage. In the case you stop making payments, lenders have the right to repossess your car or foreclose on your house. Unsecured debts are those which are not tied to any asset. They usually include debts for various types of services (such as most credit card debt, bills for medical care, signature loans, etc.).

There can be situations when you can't solve your financial problems even with the most desire and contacts with creditors. These are the cases when professional help is needed. Credit counseling company may become the source of the guidance necessary.

Credit counseling is a good option for those who are not disciplined enough and who have difficulties when creating a reasonable budget or repayment plan. There are numerous nonprofit credit counseling organizations that work with clients to handle their problems with finance. The service is different from company to company. There can be credit counseling companies that provide their service through local offices, the Internet, or on the telephone. The most convenient, perhaps, is to find a credit counseling company that offers in-person counseling. As debt and bad credits are widely spread phenomena in the U.S. you will have no difficulties in finding information about such organizations. You just need to ask you friends or just acquaintances, your financial institution or local consumer protection agency. Such safe referrals may serve to you as additional guarantee that you will turn to a reputable credit counseling organization.

These organizations provide rather wide range of services. It can help you with managing your money and debts, help you develop a budget, and offer free educational materials and workshops. Only experienced specialists work at leading companies. Consumer credit, money, debt management, and budgeting are the spheres all the counselors are certified and trained at. All the contacts are held with the most attention to your requirements. You will discuss you financial situation with a professional counselor in details. You will be assisted and professionally guided when developing an individual plan to manage your money and debt. At the very beginning you will get an initial counseling session that usually lasts an hour. Then follows a suggestion of further on sessions. So, being provided with experts' help you will definitely improve your financial situation.