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Credit Scores 101

By at November 17, 2011 17:23
Filed Under: Credit Scores

Most people understand that they have a credit score. Most understand that their scores affect their credit. But many don’t understand exactly what a credit score is, or its significance.

 

A credit score is a number that lenders who are considering extending credit to you will use to determine the level of risk involved. In other words, when you apply for a loan, a lender looks to this number to see not only if you should receive the loan, but also whether you are likely to repay it. If you have a high credit score, the lender will feel at ease in lending to you. A lower score, however, will likely spell disaster for the lender, and equal to no loan for you.


How are credit scores calculated? The scores are determined by taking data from your credit reports, producing a total. There are variances among the three credit bureaus, however, because the bureaus have their own criteria for calculation.


Credit scores contain the following data: 35 percent payment history, 30 percent debt you owe, 15 percent length of your credit history, 10 percent types of credit used, and 10 percent new credit. Let’s define each of these terms.


Your payment history includes the number of accounts you’ve paid according to terms, negative public records and collections notices and delinquent accounts. Your total debt includes how much you owe on accounts, how much of your revolving lines of credit you’ve used, amounts you owe on installment loans and the number of zero balance accounts.

To define your length of credit history is easy: it’s how long you’ve had credit, including the length of time you’ve had an account and the time since the last account activity. Types of credit simply means the mixture of different types of accounts you have – and bear in mind that it is best to have a mix. It shows you can handle various types of debt.


New credit includes the number of accounts you’ve recently opened, as well as the proportion of new accounts to total accounts. You don’t want a lot of new credit applications, which can indicate to potential lenders that you’ve overextended yourself.


What’s a good credit score? Scores range from 340 to 850, and the higher your score the better. A high score guarantees you better rates and terms. A score over 700 us considered good, but if your score is lower, don’t fret. You can work to improve your score and establish better credit.


To do so, simply pay your bills on time, every time, and review your report at least once a year, to be sure there are no errors or fraudulent entries.

 

Click Here to access your credit scores for free.

 

 

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Weigh the risk carefully before seeking secured business loan

By at November 17, 2011 11:19
Filed Under: Small Business Loan

Many business owners who are looking to expand or entrepreneurs looking to start their own business seek out secured business loans because despite the fact that these loans require collateral, they come with lower interest rates. Those lower rates are key, particularly to new businesses.

But these loans do carry risk. If for whatever reason you cannot repay the loan, you could lose your home or whatever property you listed as collateral. Those considering this type of loan should weigh this fact carefully before seeking it out.

This won’t be a concern, however, if you simply make your payments on time, every time, as agreed. Miss one payment, and your lender will become concerned. Miss more than one, and you’ll have big problems. If you are tight on funds and know you’re going to miss a payment or will be late making the payment, contact your lender immediately. 

You may find that your lender will be willing to extend your due date for as much as 30 days so that you can meet your obligation. Most lenders, if you are honest and forthright with them, will do all they can to help you get back on track. After all, doing so benefits not just you, but the lender as well.

For some, this seems like the golden ticket. Can’t make your payment on time this month? Then just call your lender – he’ll understand and give you a grace period. But don’t be mistaken. Lenders are not going to extend as much grace to you if this becomes a habit. 

It’s important that you remember that as a business owner, you’re responsible for your business, its employees, and the reputation of your business. To consistently get behind in repaying your secured business loan could cost you not only your home or property, but also your good name. 


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Be prepared when applying for that business loan

By at October 27, 2011 11:11
Filed Under: Business Tips

Thinking of applying for a business loan? If so, there are some things you should consider first.

 

First of all, make sure you know how much money you really need and have that figure firmly planted in your mind – not how much money you'd like to get. Make sure this amount is an amount you can afford to repay. You should prepare a written business proposal which states this figure.alt=

 

You'll want to meet with a loan officer about your business loan, and when you do, you'll be asked how you plan to use the money. Plan to expand your business?

 

Then be ready to explain to the loan officer how you plan to go about doing so. Or if you want to purchase equipment or inventory for your business, plan to tell the officer what you need, how much it costs and how you plan to use it. If you will resell what you buy, you should tell the loan officer how you plan to market it. All this preparation will help the loan officer understand that you are well prepared and truly have a plan for the money you wish to borrow.

 

Perhaps the most important thing you can be prepared to discuss with the loan officer is how you plan to repay the money. This answer you must give clearly and concisely, as well as confidently.

 

The lender will likely ask for collateral, and you should be prepared with what you wish to offer as such.

 

Make sure that you have already checked your personal credit history before you go to speak with the loan officer, and that you have taken care of any errors or negative marks on the report.

 

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Get a plan before you start looking for a business loan

By at September 15, 2011 12:36
Filed Under:

When you apply for and receive a business loan, it can help you get your business up and running, or expand the one you've got. Not enough money is one of the top reasons businesses fail today, and in the current economy, making sure you've got the capital on hand to run your business effectively is paramount.

 

There are a lot of ways to finance a new business, but it's best to check out all of your options before you approach a lender for a business loan.alt=

 

It can be difficult to obtain a startup loan, and the process is also difficult. Before you even get started, you have to know what kind of financing you need so that you can fill the lender in on how you plan to use the money. One way to do this is to first work out an operating plan for your business, which should include a mission statement. You can then use this to help potential lenders better understand your business and, hopefully, secure the loan you need.

 

Terms on business loans can vary – they can be long or short term, and they can also be secured or unsecured. The terms you get will depend on the amount of loan you are applying for, as well as the collateral being offered. Terms will also depend on the lender, the type of loan and, of course, your credit score.

 

Before you start the application process, make sure your business has had adequate financing to show lenders that your business can and will generate a profit. This is important because it shows the lender you can pay back the loan you're asking for.

 

If you are unable to secure a traditional loan offered by a bank or credit loan, you may want to contact the Small Business Administration, or look into unsecured loans.

 

Regardless of the type of venture, you will likely be able to find a business loan to start living your dream – owning your own business.

 

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Get your ducks in a row before you apply for that traditional startup loan

By at September 08, 2011 11:16
Filed Under:

You can apply at banks and credit unions for new business loans or startup loans. But there are other lenders you should consider as well. And even though there are lots of lenders out there, all too often entrepreneurs don't know where to turn to get the money they need in order to live out their dreams.

There are lenders who aim to lend to nonprofits, women and minorities. These private lenders may be more likely to lend to these groups than a traditional lender, particularly if it is for a startup loan or a loan for a new business.

No matter what group you fit into, whether it's minority or not, you'll have a better chance of getting the loan you want if you have an original business proposal. This proposal must describe to the lender what the business is, how it will succeed, and how it will provide enough profit to repay the loan. New business loans are more difficult to obtain for startups than for a franchise.

If you are seeking a business loan, as an entrepreneur you should have at least 10 percent of the total amount you'd like to borrow as a down payment. Having less will likely mean you'll be turned down for the loan by a traditional lender. Many banks recommend that business owners take out a home equity loan in order to obtain the down payment.

Once you've gotten the business loan you need, it is up to you to be sure the monthly payments are made, as per your loan agreement. This may mean putting up some collateral, but if you don't have any collateral, then you may want to reconsider. It would be wise to not apply for a loan if you know you may not be able to repay it. 

If all of this is daunting, or if you don't have collateral or don't want to risk your property, you may want to consider an unsecured startup loan. These loans don't require collateral, and can often take less time than a traditional loan to acquire. But be sure you shop around, and compare rates and terms.

 


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Bankruptcy may not be the easy answer you think it is

By at August 18, 2011 11:37
Filed Under:

With the economic depression the country has been facing the past few years, many Americans have come to figure that debt is just the way it is – and there's no way out of it. With many out of work, and others struggling to make ends meet, it's just been the accepted norm.

 

For some, it seems the only answer is bankruptcy. The commercials on television make it seem like the easy way out. But don't ever forget that bankruptcy can have a devastating effect on your credit score. So it's best to seek other alternatives before you consider filing for Chapter 7 or Chapter 13 bankruptcy.alt=

 

For those who do file for bankruptcy, it feels like they just need a way to make the overwhelming debt they face go away – and go away fast. But it's best to remember that it took time for that debt to grow – and it will take time and effort to make it go away. Finding another way to make that happen is a much better alternative to bankruptcy – even if it takes longer.

 

To avoid bankruptcy and help pay off debt, consider selling assets off, then use the money to pay down your debt. Make sure that you begin to do this the moment you can’t afford your payments – if you wait until you’re behind on your payments, it may be too late. Items to consider selling include jewelry, electronics or furniture.

 

Another step you can take to help pay down your debt is to cut down on your excess monthly expenses, and use that money toward your debt. You could turn off your cable or satellite television, change the service plan on your cell phone, turn off Internet service at home, and stop eating out for lunch or dinner; take your lunch to work instead.

 

You should definitely talk with your creditors. Tell them about your situation, and ask if they will lower your monthly payment or decrease your interest rate. Many will do so to be sure they get at least some payment.

 

Whatever option you choose, make sure you learn your lesson. Never allow yourself to stack up painful debt again.

 

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Should I refinance my mortgage?

By at July 21, 2011 10:40
Filed Under:

Refinancing your mortgage is like taking out a new loan at a new, lower rate. The terms change, and most lenders require that you have at least 10 to 20 percent equity in your home before you can refinance.

But how do you know if it’s worthwhile for you to refinance? How do you tell if the difference in interest rates is enough to make financing worthwhile? 

Refinancing may make sense if you have a second mortgage or home equity loan with a higher rate. It also makes sense if you want to take advantage of lower interest rates to shorten the term of your loan in order to pay off your loan much sooner. 

But sometimes it just doesn’t make sense. If you’ve had your mortgage for more than 10 years, you could end up paying a lot more if you refinance. After 10 years, you should have begun chipping away at the principal, and if you refinance, your payments will once again go against interest. So evaluate your situation carefully, and consider the total interest cost over the life of the loan. 

If you are considering a refinance, think about how long you plan to be in the house. If you aren’t staying there long, you could lose money. 

But if you’re going to be there a while, figure out how long it will take to pay off the cost of refinancing and start saving money. To do this, deduct the new payment from the current payment to find out what your monthly savings would be. Multiply this figure by your combined state and federal tax rate to get your tax cost, and subtract that figure from your monthly savings. Divide the total of all the fees and closing costs by your net monthly savings after the tax adjustment. This will show you how many long it will take to pay off the refinance.

The bottom line is this: your house is your home. It’s not an ATM. Using it as such is dangerous. If you must refinance, make doing so worthwhile. 


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Filing bankruptcy may get rid of tax debt – but know before you file

By at July 07, 2011 10:46
Filed Under:

If you've ever declared bankruptcy, your income tax debts could be eligible for discharge under either Chapter 7 or 13 of the Bankruptcy Code. This is just one of the five ways to get out of tax debt, but you shouldn't consider bankruptcy unless you meet the specific requirements for discharging your taxes under a bankruptcy filing.

 

First, you must understand the differences between the two chapters: Chapter 7 provides a full discharge of all allowable debts, while Chapter 13 provides a payment plan to repay the debts, with the remainder of debts discharged.alt=

 

Under new bankruptcy laws, tax debts are treated the same under both chapters. You must determine which petition is in your best interest to file. There are five criteria that your tax debts must meet in order to be discharged as part of a bankruptcy.

 

First of all, the due date for filing a tax return should be at least three years ago. The tax return file date must be from two years ago, while the tax assessment should be at least 240 days old. The tax return has to be valid and not frivolous, and the taxpayer must be innocent of tax evasion.

 

• If you determine that filing bankruptcy is not the best method for getting out of tax debt, there are some strategies you should consider that can help you.

 

• Set up an installment plan with the Internal Revenue Services to repay the debt.

 

• Set up a partial payment installment plan, which allows you to have a long term payment plan to pay off a reduced amount.

 

• Agree on a settlement with the IRS and pay it off all at once.

 

• Enroll in the IRS program where the IRS agrees to not collect on the tax debt for at least a year, labeling your debt “not currently collectible.”

 

Whatever you decide to do, remember that you can’t completely walk away from any debt scot-free. There will be payment – but you do have options on how you wish to pay.

 

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How Do We Spend Our Money?

By at May 17, 2011 13:04
Filed Under: Personal Finance
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Saving Money At The Grocery Store


Smart consumers everywhere are finding more ways to stretch their dollars, whether they are on a fixed income or just want to get more for their hard-earned dollars. Saving on groceries is one of the easiest and most rewarding ways to save money.


With a little attention to deals and coupons, as well as a little research, it's a safe bet that you can save about one-third of your usual grocery spending per month.


First of all, you should get familiar with the average price for the items you normally purchase. This may seem a bit pointless, but if you don't know the average price of the items you're looking for, you won't know if you're getting a good deal when you see these items on sale. If you shop at several stores, take note of the price differences. This can also help you save money.


If you don't read the newspaper on a regular basis, start picking one up on Sundays and check out the coupons. The average Sunday paper costs about $1.50, and you'll save that and then some on groceries. Check the paper for weekly ads from local grocers and bonus coupons from non-grocery stores where you shop. These are usually found on Wednesdays.


You can also find coupons and deals online. Many grocery chains now have websites, and you'll find special deals and printable coupons there as well.


There are also numerous coupon websites that guide you toward the best deals and printable coupons. Some of these include thefrugalgirls.com, thrifty411.com, southernsavers.com, couponmoms.com and coupons.com. Search for more sites and bookmark the ones that have the best deals for you.


Be sure you make a list, noting which items are on sale, are buy-one-get-one deals, and items you have coupons for. Be sure you ask for rain checks on items that are not available, and remember to use the rain check within the next couple of weeks, so you don't forget it.


Last of all, set a budget and stick to it. Look at your expenses and see how much you can realistically afford to spend at the market. Don't be tempted by the end-cap items at the end of aisles, and don't pick up items at the checkout stand like magazines and candy.


You may think that doing things like clipping coupons and buying in bulk won't make much of a dent in your overall bottom line. But just try it – you'll be surprised when you see how all those little things quickly add up to big savings.


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Bankruptcy is an option – but only as a last resort

By at May 12, 2011 11:14
Filed Under:

In this day and age, you’d be hard-pressed to find someone who isn’t carrying at least some debt. It seems to be a way of life for most consumers.

For some, it can become so overwhelming that bankruptcy seems to be the only way out. But before you file bankruptcy, consider the devastating effect it can have on your credit score and seek other alternatives. If there’s another way to save your credit and get out of debt, even if it takes a bit longer than you’d like, it’s a much better option than bankruptcy.

First of all, consider selling your assets. Sell whatever you can spare and use the money to pay off your debts. You can sell items on eBay, Craigslist or in a yard sale. You may chafe a little at the idea of parting with your things, but you’ll adjust. And avoiding bankruptcy and keeping your credit intact will certainly aid in the transition.

If you can afford to pay off your debts over a period of time, you should go for it. If you take a closer look at your budget, you may be able to make some cuts – like cable or cell phones – and save some money. You can use that money to help pay down your debt more quickly.

Remember that your creditors would rather get some money out of you than none at all. Let them know you are having a rough time, and that you want to avoid bankruptcy. Tell them you want to repay your debt, and ask if they would be willing to lower your monthly payment or decrease your interest rate. Or even both.

If you have no luck working with creditors on your own, enlist the help of a professional. Find a consumer credit counselor who has experience working with creditors to help you get your payment and interest rate reduced.

Another option is debt settlement. This is not the best option, but it’s certainly better than bankruptcy. Don’t settle on any debt that is current, but instead focus on debts that have been charged off or sent to collection. Be ready to pay as soon as an agreement has been made.

You can and should consider all of these things as your “arsenal” against bankruptcy. By combining any or all of these things, you can get out of debt on your own and avoid falling into the bankruptcy trap.

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