Fix My Bad Credit Score

Reader Question Should I use my Visa card or a gas credit card to pay for gasoline? Is one better than the other?
Rex,

Houston, TX

Credit cards can be a great asset if used wisely. At least they are convenient when you urgently need something and just don’t have the cash at that moment to pay for it. Take for instance the recent increase in gas prices. Credit Card companies have responded to these high gas prices: Discover Card recently made huge changes to its credit card offerings to bring their cardholders a gas credit card that competes with the Chase version. The Chase PerfectCard™ gives you six-percent rebates on all eligible gas purchases at any gas station for 90 days and one-percent rebate on all other purchases.

Reader’s Question:

I filed bankruptcy in 2000. its 2008, 8 years later, it is still on my credit report. How long do foreclosures and bankruptcies stay on a credit report?

James

El Paso, TX

Foreclosures and Bankruptcies can remain on a credit report for seven to 10 years.

Some lenders will consider a borrower earlier if they have reestablished good credit standing. The surrounding circumstances with the bankruptcy may also influence a lender’s decision. For instance, if you went through a bankruptcy because your employer had financial difficulties, a lender may be more sympathetic. However, if you went through bankruptcy because you overextended personal credit lines and lived beyond your means, the lender probably will be less inclined to be flexible.

Reader’s Question:

I am planning to go through credit counseling. What is the general process for credit counseling agency?

Linda

Dallas, TX

Let us assume that you are referring to credit counseling offered by companies like Consumer Credit Counseling Services, a not-for-profit company, this is the general process:

1) You will first enter counseling.
2) Then you have to destroy your credit cards and turn over the bills to them.
3) judgments, collections and other debts are also turned over to
them.
4) You will have to work out a budget with them, including everything you spend,
and figure out how much you can pay per month on your debt.

Now, they will contact the creditors and tell them that they are managing your accounts. So the creditors will close the accout, and mark the account ‘Closed by Credit Grantor’ in your file. This may also have the notation ‘Managed by CCCS’ or something similar. The credit card companies may (or may not) choose to lower the interest rate they charge you.

Reader’s Question:

I am in debt up to my nose. Does anybody have any solutions or suggestions to help me get everything paid off? I was looking in to debt consolidation but I am not really sure if it is the best option for me.

Jim

Cleveland, TX

Consumers who are seeking help with their financial problems are under great stress, and can easily be taken in by unscrupulous operators in the credit counseling industry.

The truth is that the answer is very simple and you probably already know about it. You just need to keep chipping away at the debt with regular payments, and not run up any new debt under any circumstances. Debt consolidation is the only a good idea if it’s not going to cost you more, and it might. You may check out the interest rates, fees and terms to be sure.

One of the very best things that you can do is call up your credit card company or bank etc and make a payment arrangement where you can have a payment for a fixed amount every month. It will be less than your installment would usually be, so it will make your bills more manageable, and they will freeze your line of credit so you can’t run up any more debt

Reader’s Question:

Is it easier to clean up your credit after you go through debt consolidation or file Bankruptcy?

Bonnie

Houston, TX

Bankruptcy is better for me than debt consolidation. It wipes out your debt (depending on if you file Chapter 7 or Chapter 13) and within one year usually afterwards you can start getting small loans and credit cards and start rebuilding your credit. Debt Consolidation takes you forever to get through it and then after spending all that money and time to get out of debt you still have to rebuild your credit.

There is a lot of advice that you could receive, but none as good as that of a real financial advisor. I would go see one of them if I were you. They will be able to help you find the best option to suit your current situation. This may cost a little bit of money, but it’s worth it to not have a permanent mark on your credit record.

Reader’s Question:

What is the best consumer credit counseling company to use to repair damaged credit scores? Does anybody have any experience with a consumer credit counseling service?

Irma

Salt Lake City, UT

Consumer credit counseling service is a very reputable company who can help people take control over their debt. If you qualify for the program your accounts will be closed. You will be required to make payments directly to CCCS and they will distribute that money to the various creditors depending on how much they have worked out your payments to be. One program is for financial hardship wherein they actually lower your payments and interest. This will also stop the annoying collection calls. The second program is for people who just want lower debt but don’t have financial hardship just yet. They actually increase your payments but lower the interest to help pay it down faster.

The best Consumer Credit Counseling Service to use will be the one who will put it in writing that they will not put on your credit file you are going to a consumer credit consul co. If they report it to the bureaus, and most do but not all, it will be on your record for the next seven years noting that you could not be responsible enough to take care of your own finances.

Reader’s Question:

I have recently filed for bankruptcy protection. I just want to know if I can still get a mortgage loan.

Gerry

Denver, CO

I know someone who was able to get a mortgage loan after filing for bankruptcy, and also a loan for a new car. You will have to do some research for banks that offer these kind of programs, and you will also have to pay extremely high interest rates on your new loans. I’m not sure what the home loan rate was, but her auto loan was set at 27% interest. If you want to wait a few years after filing, and prove yourself capable, you will have better chances and slightly lower interest rates.

Reader’s Question:

How do you repair a low credit rating after declaring bankruptcy?

Marian

Los Angeles, CA

Make sure to pay all of your bills on time. After you declare bankruptcy, you will have to pay all of your household bills, like telephone, gas and electric, etc. on time. It is not very difficult to get your credit ratings back to normal, because you do not owe any bills now. I know people who declared bankruptcy in 1995, and in 1996 bought a new car, without any problem. If you make all your payments on time, this will not take very long. It is the best thing to do, if you can make your payments, one month ahead of time, so if you ever get sick, or lose your job, you will still have an extra 30 days to make a payment, and still not be late. Good Luck.

Reader’s Question:

What is refinancing and how can it help me out of foreclosure?

John

Fresno, CA

By refinancing essentially you are taking another loan. This new loan is based off a new appraisal of your property. One benefits of refinancing is that you can sometimes get a lower or reduced interest rate, and in turn, decreasing your monthly mortgage rate. But, refinancing is really not for everyone. It can put you also at higher risk for foreclosure depending on a number of factors. Do a lot of research and talk to someone who can advise you well on this option.

Reader’s Question:

When I am in judicial foreclosure, what happens if I do not file an answer to the lawsuit?

Richard

Daly City, CA

The lender gets a judgment by default in this case. The court will then appoints a referee to find the total amount due, including interest and attorney’s fees. Then the lender must put out an advertisement of notice of sale in the newspaper for 4-6 weeks. However, if after this process the total amount is still not paid, then a public sale will commence, headed by the referee, on the courthouse steps. The lender will then must advertise a notice of sale in the newspaper for 4-6 weeks. If the total amount due is not yet paid, a public sale is conducted by the county sheriff or another officer of the law on the courthouse steps. Other lenders or banks usually bid up to the amount of the owed debt at the sale unless there is significant equity in the property, the only bidder at the sale will be a representative of the lender. If no other buyers bid, then the lender will receive title to the immovable property in return. If the proceeds of the sale do not cover the amount owed still, then (in some states) the lender may issue a deficiency judgment against the borrower and all others that guaranteed this loan. This whole process can take sometimes as little as three months and as long as twelve months, depending on the volume of court cases.