...But I have Bad Credit (or No Credit)

Ok, so you have been working YOUR plan and planning YOUR work and are ready to tackle this pesky bad credit issue. Now what?

You have made a list of all your debts (from your credit report and the ones you know about); you have made your short, medium, and long term goals; you have started your Emergency Fund; you have made a budget that fits your needs; and you have paid off a huge chunk of your debts...

Most people are in debt because of credit cards because they don't know how to use them. Now you want to find and/or learn to use a credit card....to your advantage. There are some rules (some standard and some of my own) to follow to get the most out of your credit card experience.

Before I talk about finding the right card for you, let's talk about how to make your credit cards work for you....

Rule #1 - Credit cards are NOT for wants! Remember back when I wrote about Wants, Needs, and Needs to Wants? Well, CREDIT CARDS ARE NOT FOR WANTS OR NEEDS TO WANTS.

Rule #2 - Credit Cards should only be used as an Emergency Fund IF one doesn't exist. See Rule #1!

Rule #3 - Pay off the balance IN FULL every month. For brand new cards with no balance the BEST way to make the card work for you is to only use it once a month for a SMALL purchase, then pay off the balance immediately. This helps to build your history of making payments on revolving debt and builds your credit history. If you have a balance, STOP using the card! Pay the card according to the plan you developed. If you are using the snowball method and this card is at the top of your pay down list - throw as much money at it as possible, while paying the minimums on everything else.

Rule #4 - See Rule #1!

Now that you know the rules of credit card use, what types of cards are avaliable to you and what do you want them to do?

There are many different credit cards, that do many different things. Here is a quick run-down from http://www.creditcards.com/:

• Low Interest Credit Cards
  Credit cards with 0% intro APRs & low fixed rate offers
• Balance Transfer Cards
  Transfer a high interest balance onto a low APR credit card
• Rewards Credit Cards
  Credit cards that "reward" you for your purchases
• Cash Back Credit Cards
  Credit cards that allow you to earn cash back on purchases
• Airline Credit Cards
  Earn frequent flyer miles with an airline credit card
• Instant Approval Cards
  Get approved instantly on select credit cards from specific banks
• Prepaid & Debit Cards
  Control your spending with debit cards, prepaid debit cards, & prepaid credit cards
• Credit Cards for Bad Credit
  Cards for people with bad credit or less than perfect credit
• Student Credit Cards
  Credit cards for high school & college students
• Business Credit Cards
  Cards for corporate & small-business owners
• 0% APR Credit Cards
  Credit cards with 0% APR for 6 - 12 months on purchases or balance transfers

Let's focus on the Credit Cards for Bad Credit and the Prepaid & Debit Cards because we are trying to establish a good history of credit use and to do that we need the right card.

Credit Cards for Bad Credit (or No Credit):

The following Credit Cards and Prepaid Debit Cards, some of which are fee based, are for People with Bad Credit or less than perfect credit. Simply getting a credit card will not help you build, re-build or re-establish your credit history. Making on-time minimum payments with all of your creditors and maintaining your account balances below the credit limits is the key to changing your financial future. Choose from both secured and unsecured credit card.

What is the difference between Secured and Unsecured credit cards?

Secured

A secured credit card is a guaranteed VISA or MasterCard that has been secured by a deposit to the issuer's bank. Generally, you must deposit an amount, ranging from $300 to $5000, in a low-interest saving account or CD to secure the credit card. You then receive a credit line for up to 100 percent of your account balance. Each creditor has its own requirements for how much you can deposit for your credit line. The creditor issues you a credit card by using your deposit as security.

Unsecured

An unsecured credit cards offer just that -credit. When you make a purchase or withdraw cash (usually called a cash advance), funds are drawn from your "line of credit." You pay back the amount you borrowed or "charged" each month, or carry over to the next month (revolve) a certain amount that was borrowed and you are assessed an interest charge. You are then responsible to pay the interest charge as well. Credit cards carry a brand logo (e.g., Visa, MasterCard, American Express, etc.) and are accepted by participating merchants. When you use your credit card, the transaction requires a signature.


Debit Cards, Prepaid Debit Cards, & PrePaid Credit Cards

Prepaid debit cards and prepaid credit cards can help you control your spending. A reloadable debit card allows you to only spend up to the amount you have pre-deposited into the account. If you tend to overspend or would like to control your spending then a pre-paid debit card or prepaid credit card could be a good card for you.

When thinking about what type of card you need, think about your goals, priorities, and WILL POWER. Building or establishing credit is all about doing the right things and using the card in the right ways.

Remember to follow the rules and you will be fine....if you need help choosing the right card or learning how to use your card correctly, Personal Finance 4 The People is just an email away!

Personalfinance4thepeople@gmail.com

Improving Your Credit Score

Your Credit Score is probably the most important number associated with you. More important than your Social Security number, even. How can this be?

Your Credit Score tells things about you like if you are responsible, if you are a good person to loan money to, what your interest rate will be, if you will be hired for that big job. Your Credit Score is suppose to be gauge for risk factor for anyone who is going to be loaning you money, or even hiring you. Of course, there are circumstances when your score may be out of your control, but those moments are what we call life.

There are many reasons your score may not reflect you in a positive way. Medical bills and unpaid bills are 2 of the biggest reasons I have found to be an issue for most people. That, along with a lack of credit. Yup, not having "enough credit" is a bad thing too. To find that "perfect" balance, here are some tips:

- Pay your bills on time. Paying bills on time, for my clients, is often an issue because if they had the money to pay their bills on time they wouldn't need me. Paying your bills on time is important because it builds a history of being financially responsible. Even if you are only paying the minimum amount due, make sure it's on time. If you can't pay a bill on time, call and let the company know. They will probably work with you.




- Having a credit card is important in your Credit Score. Having a credit card does a couple things for you. Part of your credit score is HOW LONG you have had that card, your HISTORY of paying revolving debt, and your CREDIT-TO-DEBT RATIO. Your credit-to-debt ratio is how much avaliable credit you have compared to how much debt you have. Use your credit card for small purchases and try to pay the balance off every month. Most people carry a balance, so make sure you are paying, at least, the minimum payment due each month.





- Have an Emergency Fund. An emergency fund gives you room to live when life happens. An emergency fund stops the use of credit cards for emergencies. The emergency fund gives you room to breathe when something unexpected happens. A good rule is to start with a goal of $1,000 and work your way up to 6 months of BASIC expenses.





- Educate yourself. Learning the methods and tips of good financial habits is something most of us weren't taught growing up. There are too many personal finance blogs out there to use the excuse of not knowing better. There are too many people willing to help you learn the right things to do financially. You can only use the "I was never taught" excuse for so long before you have to teach yourself.





- Plan YOUR work! Work YOUR Plan! Sit down and develop a plan. Plan for things you want, for things you need, and for things you need to want. Have a plan A, B, C, even a plan Z if you need it.





- Check you credit report. You get one free report from each of the 3 companies once a year from the government at http://www.annualcreditreport.com/ . There are also other ways to keep an eye on your credit. Your bank might offer a service to monitor your credit, things like this usually come with a fee so keep that in mind.




These are small but important things you can do to make sure your credit is where you need it to be. You have a life to live, don't let your lack of financial knowledge keep you from living the life you want.

If you need assistance, contact us by email, Facebook, Twitter, Phone.

personalfinance4thepeople@gmail.com

http://www.facebook.com/#!/PF4TP

@peoplesfinance

202-431-8008



Plan YOUR work! Work YOUR plan!

My personal and professional motto is Plan YOUR work! Work YOUR plan!

My dad tells me this all the time...and he got it from his mother. Everything I do in life, I try to have some sort of plan for every situation. I'm a Capricorn, It's in my nature to be a planner.

Planning is a great way to get out of debt and stay that way. You develop a plan to attack your debt, your budget, and your savings goals. You plan as best you can for emergencies. You plan for vacations. You plan for new clothes. You plan...

The plan always changes, so you can't take it personal. Keep planning until you find a plan that works best for you.



From the blog Cash The Checks, here are some ideas for your planning:

- Write down all of your debts. use your credit report as well as your statements to see what you owe. Write down who you owe, what kind of debt it is and the amount.

- Create a budget. In order to tackle your debt, you need to set money aside to pay it down. But first, you’ll need to see where your money is going to see how much you can contribute towards your debt.

- Be patient. While it may have taken 1 year to accumulate this debt, it can take you many more years to completely wipe it out. Don’t be discouraged. This plan you’re creating just proves that there is light at the end of the tunnel.

-Decide what to pay first. You’ll want to tackle your worst debts first. Try paying off those with the highest interest rate first. If you have some smaller debts, get rid of those as soon as you can too. This can have a psychological benefit and, if listed on your credit report, will have its status changed to paid which will raise your credit score.

- Savings. While the goal is to pay off your debt, you should not ignore your savings account. In fact, the lack of having any savings is likely the reason you’re in debt. Unless you keep your savings account funded you’ll just continue to rely on credit.

- Sell your stuff. We all have a lot of extra junk we don’t need. Now is the time to get rid of it. Have a yard sale. You can sell gold, sell diamonds and other jewelry. Put up your old electronics on eBay. You will declutter your home and make some money in the process.

Do you have a plan for your financial and personal lives?

Wednesday's Lunch Time Financial Time: How to Save Money in 20 Minutes

Each Wednesday, PF4TP brings you a financial tip to help you on your journey towards Financial Independence! Enjoy!

From Yahoo! Personal Finance - Organize Your Finances and Save Money in 20 Minutes

Anatomy of a Credit Score

From Get Rich Slowly

Your credit score plays an increasingly important role in your financial health. But what is it? And how does it affect what you pay for loans and credit cards?

Your credit score is a single number that indicates your creditworthiness. This number is derived from various pieces of information contained in your credit report. Your credit report is accumulated by various credit agencies — credit card companies and banks and other financial institutions, who pass along information about how much you owe, how well you pay, and how long you’ve been a customer. Your credit score determines the types of credit you can obtain, and how much you will be charged in interest.



In general, your credit score is based on the following:

According to Fair Isaac, the company behind credit scores, these factors are accurate predictors of future credit performance. That is, these are the things that best indicate how great a credit risk you are. (For some people — such as young adults who don’t have a lengthy credit history — the importance of each category may be somewhat different.)



For more detailed information about the components of your credit score, check out the following pages at myFICO:

What’s in your score?
What’s not in your score?
Improving your FICO score.
myFICO states that the median credit score in the United States is 723: half of the population has a score of 723 or above, and half of the population has a score of 723 or below. myFICO also provides the following table, which indicates how your credit score affects what you pay for a loan:

For a $216,000 30-year, fixed rate mortgage:
If your FICO®
score is: Your interest
rate is: …and your monthly
payment is:

National interest rates as of 02 June 2006
760 – 850 6.33% $1,341
700 – 759 6.55% $1,373
680 – 699 6.73% $1,398
660 – 679 6.95% $1,429
640 – 659 7.38% $1,492
620 – 639 7.92% $1,573

How much can you save if your credit score is 760 instead of 699? In the example provided above, you would save $57/month on interest payments. That’s $684/year.

A recent federal law gives consumers access to their credit reports, however it costs extra to obtain your credit score. Your credit score is not an actual component of your credit report.

The Fair Credit Reporting Act (FCRA) requires each of the nationwide consumer reporting companies — Equifax, Experian, and TransUnion — to provide you with a free copy of your credit report, at your request, once every 12 months.

If you’d like, you can obtain reports from all three credit reporting agencies at once. Or, you can stagger your requests, possibly requesting one report every four months from a different agency. There are three ways to obtain your credit report:

Order it online at annualcreditreport.com.
Call 1-877-322-8228.
Complete the Annual Credit Report Request Form and mail it to: Annual Credit Report Request Service, P.O. Box 105281, Atlanta, GA 30348-5281.