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How To Negotiate Credit Card Debt Like A Pro

July 25, 2010 By FPT Guy Leave a Comment

If you’re struggling to keep up with your repayments and you’re falling further behind each month, you might want to consider whether you can negotiate credit card debt. Instead of paying huge penalty interest charges and overdue fees while you watch your balances get higher, try calling your creditors and discuss your options with them.

Credit card companies are surprisingly happy to work with customers to negotiate various aspects of your account. The key to successfully negotiating with your creditors is to know what you want them to help you with, before you make the call – that way you’ll have a much higher success rate.

Here are some of the best ways to negotiate credit card debt and get yourself back on track financially.

Negotiate for Lower Interest Rates

Many credit card customers are surprised to learn they’re paying far more in interest charges than they thought. This can happen if you’ve missed a payment or been late on payments and your lender has applied a penalty interest rate to your account, along with hefty overdue fees.

This can make it much harder to get back on track with your payments, so call your credit card company and discuss your situation with them. Explain that by reducing the amount of interest you’re charged, you’ll be in a much stronger position to repay the outstanding balance more easily. You’ll be surprised how many credit card companies will consider this option.

Negotiate to Have Fees Waived

If you’ve been stung by late payment fees, over limit fees and other charges that have increased your balance and made it harder for you to keep up, call your creditors once again and ask to negotiate those fees or even have them waived.

Negotiate a Credit Card Debt Settlement Figure

You might find that your credit card debts have spiralled out of your control and you’re no longer able to keep up with the repayments at all. If this has happened to you, you might want to see if your creditor will negotiate a credit card debt settlement figure.

This is where you offer your creditor a lump sum amount of 25%-50% of the total outstanding debt as payment in full for the amount you owe. It might sound strange to offer your credit card company an offer like this, but in reality, the company will understand that it’s better to receive something from you than to risk receiving nothing at all if you file bankruptcy.

Negotiate a Payment Plan

When you’ve reached a credit card debt negotiation agreement with your credit card provider ask for a copy of the agreement in writing. It will show you exactly what the lender has agreed to in an effort to help you with your financial situation.

If this agreement involves reducing the total balance you owe as a lump sum settlement, then you may need to call again to negotiate a payment plan to make sure the amount gets paid. Be realistic about how much you can afford to pay and then stick to your payment amounts to avoid any further problems arising.

Things to Remember Before You Negotiate Credit Card Debt

Remember to be patient and polite, as the person on the end of the phone isn’t personally responsible for your fees. That customer service person is simply doing a job. Besides, you’ll receive a much better reception from the person on the phone if you’re friendly and helpful, as they’ll be more likely to want to help you.

Be aware of what you’re going to offer your creditors before you call. After all, they’re only trying to find a way to get their money back from you, so if reducing your interest rates or waiving your fees will help them do that, they’re more likely to help you.

Filed Under: Best Of FPT, Credit, Debt Management Tagged With: , , , , , , ,

Need Debt Management Help? Top 5 Tips To Get Back On Track

July 23, 2010 By FPT Guy Leave a Comment

If you’re facing a mountain of bills that you’re having trouble keeping up with, you might benefit from some debt management help. However, before you rush out and pay a credit counselor for help, consider some of the simple things you can do for yourself first.

Seeking debt management help is a responsible move and it’s the first step in regaining control of your financial situation again. But you should still make the effort to learn as much as you can about controlling your debts and learning how to manage your finances a little better so that you won’t get back into the same bad situation again in future.

Here are our top 5 debt management help tips to get you back on your feet:

1. Reduce Expenses

When most people read tips that tell them to reduce expenses, they immediately think of switching off a light bulb or learning to cook cheaper meals. Of course it’s always a good idea to look for ways in which you can reduce the amount of money you spent.

In this case, reducing expenses means to find a way to reduce the amount of interest you’re paying on your outstanding debts. Most people are paying far more in interest charges than they should be. By consolidating your high interest debts over to a lower interest loan, you can reduce the amount you pay in interest. You could even reduce your monthly repayments, which can help your cash flow each month.

If you don’t qualify for a low interest rate credit card balance transfer, you might consider consolidating your outstanding debts into a tax-deductible home equity loan.

2. Put Your Interest Savings to Good Use

If you’ve managed to reduce the amount of interest you pay each month and lower your monthly repayments, be diligent about putting your interest savings back towards reducing your debt levels.

Even paying a few extra dollars above the minimum payment amount will help your situation enormously in the long run. You’ll be reducing your balances and staying on top of your payment obligations more easily.

3. No More Credit

If you’re already having trouble managing the debts you have, it’s important you stop paying for new items on credit. Stop using your credit cards at once. Don’t apply for new credit.

Find ways to pay cash for the things you need out of your income each pay period. For bigger purchases, use the interest-free option of putting them on lay-away and pay them off over a period of time.

4. Change Payment Times

If all your repayments are due monthly, but you get paid bi-monthly or even weekly, see if you can alter your repayment times to help pay off debts more easily. A big part of the reason why many people fall behind on their payments is that they attempt to find enough cash to make a full monthly payment at the end of the month.

Even though these people might receive regular income each week, or each second week, their money is spent on other bills during those weeks. By the time the monthly repayment falls due, the income amount isn’t usually enough to cover the full payment.

A good way to avoid this problem is to change your repayment frequency to match when you receive your income. For example, if you’re paid every second Friday, try to make a smaller repayment on your credit card bill every time you get paid. By the end of the month, make sure the smaller payments you’re making add up to at least the minimum payment due.

This can be a great way to keep on top of your debt management efforts and make it far easier for you to budget.

5. Seek Professional Debt Management Help

If all else fails and you really can’t find a way to make some of the easier debt management help tips work for you, it may be time to seek out professional credit counseling.

Always try to look for a non-profit counseling firm, as they get most of their funding from creditors, not from charging you outrageous fees. Before you agree to any services at all, make sure you find out in advance precisely what services you’ll receive.

Ideally, you should receive counseling, debt negotiation services, a debt repayment plan and some solid budgeting advice, and you should receive agreements for these services in writing before you go ahead. You should also take the time to check that the counseling organization is a member of any professional bureaus, such as the Better Business Bureau.

Once you’ve entered an agreement, you won’t have to worry about paying multiple bills each month. Instead, you write one check to the organization and they’ll distribute your money to your creditors on your behalf.

When your payment arrangement is in place, your credit counselor should then call your creditors. They’ll try to negotiate with them to reduce your interest rates, lower any penalty fees and waive any late fees in an effort to help reduce the amount of debt you have to repay.

Debt management help is readily available, but always make the effort to work on some simple things you can do for your own financial situation first. Learning to manage your own finances responsibly can sometimes be frustrating, but it will mean you’re less likely to get into the same bad situation again in future.

Filed Under: Best Of FPT, Debt Management, Financial Planning Tagged With: , , ,

The Easy Way To Qualify For A First Home Mortgage

July 20, 2010 By FPT Guy Leave a Comment

If you’re thinking of applying for your first home mortgage, there are some things you can do to help improve your chances of being approved. Buying your first home can be an exciting time, but the thrill will soon fade if your bank doesn’t let you borrow the money you need to close on your purchase.

Before you apply for your first home mortgage, prepare your finances so you have the best possible chance to impress your bank. Here are some quick tips to help you qualify for a home loan more easily.

Gross Monthly Income

Your lender will look carefully at the gross monthly income for all borrowers. This is the amount paid to you before taxes are deducted. If you’re applying on your own, provide pay stubs to verify your income amount. If you’re applying jointly with a partner or spouse, make sure you provide evidence of all income you each receive.

The bank will calculate your affordability based on the net income amount you receive, less any existing repayment obligations you have, less an amount allocated for living expenses.

The maximum amount you can borrow will reduce if you have credit card payments, personal loan commitments or other loans to repay. Conversely, the amount you can borrow can increase on your existing income by reducing your debts.

Credit Score

Your bank’s lending assessor will look at your credit score closely to determine what kind of customer you’ve been with your previous creditors. If you have a history of paying your bills on time and managing your debts well, you’ll have no problem.

However, if you have some blemishes on your credit report, spend some time catching up any past due bills. Reduce the balances on your credit cards and get your finances in order.

Employment History

Your lender will want to know the details of your employment. This will include how long you’ve been employed in the same industry or line of work. You can still apply for a first home mortgage if you’re fresh out of college or trade school, as long as your new job relates to the line of study from which you graduated.

Keep in mind that banks often view regular job changes to various different industries badly, as it could be a sign that you’re not able to hold down a long term job. While they’re negative towards frequent job changes, this doesn’t apply if you’ve been made redundant or if you’re changing positions within the same industry.

Down Payment

While it used to be possible to apply for a first home mortgage with no money down, these types of loans are becoming scarcer. If you know you’re going to buy your first home soon, work through your budget and begin putting money aside into a savings account.

The more money you can put towards your down payment, the more lenient your bank will be on your application. Your savings history can show your bank that you’re disciplined enough with your income to handle the responsibility of a mortgage.

Get the Best Deal

Before you apply for your first home mortgage, spend some time getting your finances and documentation in order. Then shop around to find the best deal to suit your needs. A mortgage broker can help you sort through the home loan options available.

You might find you qualify for one of the flexible credit solutions offered by many lenders, such as a FHA Loan or a VA Loan, or another such program that could help reduce the fees associated with buying a home and setting up your first home mortgage.

Watch out for loans like 125% home equity loans and 40 year mortgages – these can seem like a good idea, but generally aren’t due to many factors.

Filed Under: Best Of FPT, Home, Loans and Mortgages, Real Estate Tagged With: , , , , , , ,

Top Tips For Settling Credit Card Debt

July 15, 2010 By FPT Guy Leave a Comment

Settling credit card debt on your own can save you money, help reduce your debt – especially if you are proactive and design your own legal credit repair plan. However, there are some things you’ll need to be aware of before you simply call your creditors and hope they’ll agree to negotiate a debt settlement agreement with you.

In most cases, you can only settle on unsecured debts, such as credit cards, store cards, student loans or medical bills. You’ll also need to know whether you’re trying to negotiate with your credit card company directly or whether your debt has been allocated to a debt collection agency.

Settling Credit Card Debt with the Credit Card Company

If your account is still with your credit card company and you’re being hounded by their collections department to make a payment, you might want to consider settling your credit card debt with them directly.

Be aware that your account should be more than 90 days past due before they will consider even discussing the option of a debt settlement agreement with you. If your account is already at this point, then you can call your credit card company and offer them an amount of money that is 25-50% lower than the total amount you owe them as payment in full.

Most of the people who work in the collections department at your credit card company have been trained to try and get a payment out of you while you’re on the phone. They may also be disinterested in talking about a debt settlement with you. Be polite and patient with them and explain that you are not in a financial situation where you can afford to pay the full amount.

Credit card companies understand that it’s often better for them to receive any amount from you rather than for them to receive nothing at all if you file for bankruptcy.

When you reach an agreement for an amount of the settlement, get this information sent to you in writing. You should also be sure you don’t offer more than you can realistically afford to pay. If the amount is larger than you thought, you might consider arranging a payment plan to repay the amount you agreed upon over the next few months.

Settling Credit Card Debt With a Debt Collection Agency

If your outstanding debt has already been handed to a debt collection agency, the process for settling credit card debt may be a little different. Instead of calling the debt collection agency on the phone, write to them with your offer to pay off debts that you have. Send your letter by registered mail and request a receipt. Include your name and account details and total amount owing on your correspondence and always keep a copy of everything you send for your own files.

Keep in mind that debt collection agencies are used to settling debts at pennies in the dollar, so you should begin your negotiation amount at no more than 25% of the amount you owe, preferably less. For example, if you owe $5,000 you should open your negotiation for a settlement amount at $1,000, which is 20% of the debt.

When you’ve reached an agreement for settling credit card debt with the collection agency and you have the agreement in writing, write back and negotiate your credit rating with them too before you make your payment. You don’t want the agency to list your debt settlement as a ‘paid collection’. Instead, try to get them to agree to enter ‘settled’, as this can be less damaging on your credit.

Filed Under: Best Of FPT, Credit, Debt Management Tagged With: , , , , , , ,

Pros and Cons of Annuities Explained

June 21, 2010 By FPT Guy Leave a Comment

Finding ways to get annuities explained can be an exercise in frustration. It seems that those people who do understand how annuities work can’t explain them in simple English, while those who aren’t sure seem to get even the basics confused.

There are several types of annuities investors can consider and they can become a valuable part of any retirement savings portfolio if they’re done correctly. Unfortunately, they can also have some disadvantages if you’re not aware of the types of annuities you’re dealing with.

Below are some basic pros and cons of annuities explained:

Pros of Annuities

1) Tax Advantages - Annuities can offer investors some good tax advantages. This is because the tax is deferred until after you’ve started to withdraw your funds, which can be ideal for many people who anticipate that they’ll be in a lower tax bracket by the time they retire.

2) Guaranteed Return - If you’ve chosen to use fixed annuities, you can receive a guaranteed rate of return on the money you invested. In most cases, the rate of return can often be lower than other comparable types of investments, such as the stock market or mutual funds, but the risk to your investment capital is also inherently lower.

Variable annuities can also sometimes offer a guaranteed rate of return, but you could find this option will also include investments that are based on stocks or mutual funds. These additions can improve the rate of return you thought you were guaranteed if the markets rise, but if the markets fall, you don’t receive any less than the guaranteed floor amount.

3) No Maximum Investment Amount - Another good advantage of annuities is that you aren’t restricted by a maximum investment amount as you are with 401k or IRA accounts. This can be ideal for any investor wanting a tax deferred investment in which to invest as much money as possible.

Cons of Annuities

While there are some very good advantages to investing in annuities, there are few disadvantages you should consider before you jump in at the deep end.

1) Low Liquidity - Annuities are not a very liquid type of investment. If you can foresee that you may need to use the money you’re investing for other purposes in the future, or if you want to use your investment income for other things, then annuities might not be right for you.

There are hefty penalty fees to consider if you withdraw your money early that can erode the capital amount you have invested. While it’s possible to sell your annuities on a secondary market, you’re often paid less than you could have received if you’d let your investment mature.

2) Higher Fees - You might also find that the fees associated with annuities can be higher than those charged on other types of retirement savings plans and investment options. If you’re trying to maximize your retirement savings, then a typical investor could benefit from increasing a 401K or IRA plan first until it’s maxed and then think about adding an annuity at a later point.

Hopefully this easy guide to the pros and cons of annuities explained makes your investing decision easier to make.

Filed Under: Best Of FPT, Investing Tagged With: , , , , ,

7 No-Nonsense Investing Tips For The Beginning Investor

June 14, 2010 By FPT Guy Leave a Comment

Many people avoid investing tips as they tend to believe they don’t have the money to begin investing. The truth is, you can start investing on any income with very small amounts of money. The object behind investing is to potentially increase the amount of money you began with, so that you receive more in the end that you originally put in.

Before you begin, remember that there are no set rules when it comes to investments, just as there are no guarantees that you’ll get the returns you hoped for. However, there are some ways to help you make informed choices so that your money is working for you, rather than you working for your money.

Here are some sensible investing tips to help get you started:

1. Understand Why You’re Investing

Ask yourself why you want to invest your money and what your ultimate goals will be. When you have a clear understanding of why you want to get into investing, it can be much easier to formulate a strategy to get you there.

You might decide you want to begin saving for retirement or add to existing savings. You might simply want to create some cash flow from passive investments such as dividend payments or rental income. You could be aiming at wealth creation strategies to increase your net wealth over the longer term.

Whatever the reason, be clear about your goals and you’ll find it much easier to focus on strategies to get you there.

2. Understand the Markets

There are many viable markets in which to invest and each of them will have different levels of return as well as different inherent risk factors. Before you put your money into any form of investment, take a little time to educate yourself about how the markets you’re thinking about work and how the returns will be generated and distributed. This can help you to make more informed decisions about where to put your money.

3. Understand the Types of Returns

There is no single easy way to choose the right investment for you. Different people will have very different risk aversion levels, in the same way that different investors will also have different goals and objectives.

Money invested into a term deposit might earn interest on your savings, while stocks can pay dividend payments to shareholders and real estate investments can yield rental income.

Aside from these, many investments can also benefit from capital growth, such as an increased value of a stock in a rising stock market, or the increased value of a property in a rising real estate market.

4. Understand Risk Management

As a general rule of thumb, investments that offer higher-than-normal returns often carry much higher risks while investments yielding lower returns can be somewhat lower risk.

Depending on your particular investing strategy, you might want to aim at opportunities that offer lower yields and lower capital growth rates, but are more likely to be safer places to park your money.

5. Understand the Asset Classifications

Many investment tips advise people to diversify their investment portfolio. It makes good sense to spread your risk across more than one market to give you a buffer against anything going wrong, almost like not putting all your eggs in the same basket.

You might decide to spread your investments over lower risk assets, like term deposits or bonds that yield a slightly lower return but also offer less risk than some other investment opportunities.

You could also decide to put a portion of your investment money into the stock market or into real estate to diversify your portfolio across other markets. This can help your total investment value by earning a dividend or rental income for cash flow, as well as increasing the total value of your investment with capital growth over the long term.

6. Understand How Much You Can Afford to Invest

Many investing tips focus on how and where to invest your money, but there is little sense in trying to earn an investment yield of 5% or 6% if you’re paying 18% in interest on credit card balances.

Get into a habit of paying more than the minimum payments on any outstanding debts you have and reduce your consumer debts as quickly as possible. These are things like credit cards, store cards, personal loans, car loans and any other loan that doesn’t help you to build up your investment value.

When your consumer debts are cleared, continue putting that same amount of money away into a separate savings account to build up as your investment seed money.

7. Understand Gearing for Growth

Many investors want to fast-track their investment returns, so they might be tempted to take unnecessary chances on high risk investments just to aim at the higher returns promised. This isn’t always necessary in order to increase your asset-base, especially when you understand how to use the power of leverage to your advantage.

Borrowing money against your investment in order to increase the amount you have invested is often called leverage, or gearing. For example, in order to buy an investment property, a bank will gear your property up to an agreed loan-to-value ratio (LTV). This will become your investment loan and help you to purchase an asset that you otherwise wouldn’t have been able to afford.

In much the same way, banks may also allow some investors to gear against their stock portfolios using a margin loan. This is where the lender will allow you to borrow up to an agreed LTV against the value of the stocks you own in order to buy more stocks.

Gearing can be extremely risky for investors who don’t fully understand how to protect themselves against any losses and minimize the inherent risks of borrowing money to enter an investment market.

These investment tips should hopefully give you a basic understanding of some things you should consider before you invest your money into any opportunity you find. Always take a little time to educate yourself about where your money is going and what could happen to it before you make a decision.

Also check out our investment guide to see what kind of investing personality you have.

Filed Under: Best Of FPT, Financial Planning, Investing Tagged With: , , , , , , , , ,

Best Ways To Learn Personal Financial Planning Tactics

May 30, 2010 By FPT Guy Leave a Comment

Many people leave their personal financial planning goals and advice up to a professional financial planner or financial adviser. While it’s always best to seek professional advice before making major decisions that could affect your future, it’s also a good idea to learn a bit about implementing some goals and plans of your own.

What is Personal Financial Planning?

Personal financial planning is about dealing with several different financial issues by using proper planning to achieve a desired outcome for your financial goals. In most cases, this kind of work is carried out by a personal financial planner.

Some of the strategies included in a detailed financial plan include cash flow management, debt management, risk management, retirement planning, investment advice and planning, estate planning, and asset protection.

Creating a Personal Financial Planning Strategy

Before you can develop your own strategy for the future of your finances, you’ll need to sit down and create a long term goal. Your individual desired outcome will usually be different to anyone else’s, so it’s important you consider carefully what’s important for you and your family.

Creating a strategy to manage your cash flow and your debt levels more proactively is usually a healthy place to begin, as you’ll find you often have far more disposable income to work with once your consumer debts are under control. Effective tax planning strategies are also a key in making sure your cash flow is as structured as possible.

From here, factoring in your long term investing goals, such as building up retirement savings or developing an investment portfolio to provide further income becomes important. Asset protection and risk management are also crucial steps to consider once your investments start to increase.

You need to be realistic about what goals you want to set for your future, as it will become much easier to put the steps in place to get you to your desired outcome.

Prioritizing Your Financial Plan

There’s no point building up your asset base and your retirement savings if you haven’t effectively managed your current debt levels and personal cash flow properly. By learning simple tactics that can reduce the amount of tax you pay and reduce the amount you pay on personal debt repayments, you can increase your available cash flow.

This gives you more available income to put towards achieving your wealth creation and savings goals for other aspects of your total personal financial planning strategy.

In order to make sure you reach the goals you’ve set for your future, a financial plan should incorporate ways to help you work towards the outcome you want. Sometimes this can mean learning to put aside some of your regular income now so that you can benefit from it in the future. Many people cringe at this idea, but there are plenty of benefits to allocating your money to create a stronger financial future now.

Putting Your Financial Plan into Practice

There’s no point creating a plan if you don’t intend to take the steps necessary to make it a reality. The strategies you outlined in your financial plan should include various aspects of budgeting, saving, debt management and regular investing.

Once your plan is created, it’s then up to you to follow through on the steps put in place within the plan to see that you’re making the most of your own income while you can.

If you find that you’re not always as disciplined as you’d like, it’s possible to set up automated direct debit agreements with many lenders, banks and credit companies to make the payments into your savings accounts or off your debt repayments automatically when you get paid. The same principle is true of your retirement savings plan and your insurance payments.

You might even find that it’s possible to invest small amounts of money, from as little as $100 a month, into mutual funds by automated direct debit agreement with some companies. This can help you to continue growing your investment portfolio on a regular basis without having to worry about remembering when to deposit funds.

Finding a Professional Financial Planner to Help You

In most cases, financial planners are paid a commission for recommending various investment and financial products designed to help you achieve your goals. These can include various insurances, mutual funds, bonds, REITS and other investment options.

When you’re trying to find the right financial planner to deal with the precious asset of your future financial status, it’s important to verify that your planner is keen to work to achieve your own goals and not to pad his own commission check.

In America, your financial planner should be registered and licensed as an investment advisor. Make appointments with several financial planners and discuss what you want to try and achieve with your goals. Ask about their qualifications and previous experience and check that they’re willing to use a wide range of financial products to suit your personal needs, not just those that pay the highest commission amounts.

By the end of the process, you will already know which planner or advisor you prefer working with, so it becomes much easier to choose one to work with for your long term future. Personal financial planning doesn’t have to be difficult, but it does begin with creating a plan for what you want to achieve.

Filed Under: Best Of FPT, Financial Planning Tagged With: , , , , , ,

8 Easy Tips For Fixing Credit Score Problems

May 24, 2010 By FPT Guy Leave a Comment

There are many tips and hints available for fixing credit score problems. Unfortunately, if you aren’t quite sure what you’re doing, you could potentially make your issues worse instead of better.

Understanding how your credit score works isn’t difficult. The Credit Reporting Bureaus put together a summary of your borrowing history, your debt levels, the types of credit you have and your repayment history, which is then calculated to give a score.

Lenders and banks access your score to determine how you’ve managed your financial obligations and responsibilities in the past. A higher score tells them you’re likely to be a good paying customer, while a lower score tells them that you’ve had some financial difficulties in the past.

If you need to work on fixing credit score problems, here are some easy tips that can help to boost your score.

1.  Order a Free Copy of your Credit Score

Before you begin working on fixing your credit score, you first need to know what it looks like today. Order a free copy of your credit score from all three Credit Reporting Agencies. You’ll find that there can sometimes be a discrepancy in your total credit score between each agency. When the report arrives, read through the listings carefully.

You should notice that any credit inquiries you’ve made in the last few years are shown there, along with any missed payments, defaults, judgments, liens or any other issues you might have had.

Once you have a clear idea of what is affecting your current credit score, you’re in a stronger position to work on fixing any problems.

2.  Remove Incorrect Listings

If you notice any listings on your credit report that don’t belong to you or any listings that should have been removed, make a careful note of them. Incorrect listings can be disputed and if the Credit Reporting Bureau can’t verify your claim, the listing will be removed.

You should be looking for entries that weren’t made by you. These can include listings for people with similar names to your own or listings made fraudulently by someone using your identity.

You should also look for any listings marked ‘unpaid’ or ‘past due’ by the lender that you know you have paid in full. These can be amended by your creditors easily once you’ve verified that the account has really been paid.

3.  Clear Up Past Due Debts

Once you fall behind on repayments it can be difficult to catch up again. Unfortunately this creates a negative spiral where your lender may be charging you penalty interest rates and overdue fees, which makes it even harder to catch up.

If you’re serious about fixing credit score problems, then you’ll need to look into ways to catch up those past due debts and pay off debts as soon as possible.

You might consider a debt consolidation loan or a balance transfer credit card that offers a lower rate than you’re paying now to clear those old debts. If you don’t qualify for these options, then you may need to negotiate a realistic payment plan with your lender to help you get back in front.

4.  Negotiate a Payment Plan

If you have no way of raising enough cash to clear any overdue payments, call your creditors immediately and negotiate a payment plan. Where possible, try to make sure your payment plan is realistic and that you can afford to keep up with the amounts you’ve agreed to pay.

While you’re talking to your creditors, it can’t hurt to ask if they’re willing to negotiate a lower interest rate with you, or perhaps an adjustment on the penalty fees and charges you’re paying.

Once you’ve set a payment plan that is designed to pay off the overdue amount, be sure to add even small amounts extra on top of the payment due. Even an extra $5 per month can have a huge benefit to putting you back in front.

When your past due payments are caught up, call your lender again and ask them to amend the negative listing they placed on your credit report. A paid default listing is far preferable to an unpaid debt listing.

5.  Repayment Frequency

An entire 35% of your total credit score is based on your repayment history. As this is a major portion of your total credit score, it makes sense to focus on this aspect to give your score a quick boost.

Take a look at how often you pay your credit card bill right now. If you’re like most people, you’ll make the payment once a month on or around the due date. However, if you don’t have the cash to make an entire monthly payment when the due date arrives, you risk being late with your payment. Your lender will report this late payment activity and this could affect your credit score adversely.

To help avoid this problem from happening, try to make your repayments on a more frequent basis. For example, if you receive your income weekly, pay one quarter of your regular monthly repayment each time you get paid.

You’ll be paying four smaller amounts of money each month that still add up to the minimum payment due. Keep your credit card bill so you can make payments when you want to make them. If you have personal loans, call your bank and see if they can arrange to make more convenient payments.

Your creditors will be happy that your payments are on time and you’ll find it’s much easier to budget this way. It’s also much harder to fall behind on your payments.

6.  Re-Structure Your Finances

An entire 30% of your credit score is calculated based on the balances you have outstanding as they relate to the credit limits available. Unfortunately, this has led people to try and shift existing balances around between other cards in an effort to reduce credit score. While the theory sounds good, the reality is most people will simply begin to spend more once they have the extra credit available.

An easier way to fix this aspect of your credit score is to restructure your finances. A good example of this could be to try and consolidate some outstanding credit cards or store cards into a personal loan or consolidation loan. You should find that the interest rate charged on these types of loans is often lower than you’re paying on credit card balances, so you could be saving money on interest as well as reducing your monthly payments.

While you’ll still have the same amount of debt to start with, as you make each payment, the amount you owe is reduced. This is because the payment structure on loans is dramatically different to the payments due on your credit card balances.

As your debt level drops, your credit score will begin to improve with it and you can starting working towards that perfect credit score you’ve always wanted.

7.  No New Credit Cards

The worst thing you can do when you’re working on fixing credit score problems is to keep building more debt. This can be challenging at first, especially if you’re used to paying for all your purchases on credit card.

Instead of adding more debt, ask yourself if you really want to pay off a pair of shoes or a night out at 18% for the next couple of years. If you really want to buy a more expensive item, try putting it on lay-away and pay it off each time you get paid instead. It’s interest-free this way and won’t harm your credit score.

8.  Mix and Match

By mixing and matching these tips to suit your own budget, you should find that it doesn’t take long to regain control of your finances again. Stick to your plans and work on keeping up with your payments. If you find you have a couple of extra dollars left over at the end of the month, put the extra into your repayments to help you even further.

In Final

Fixing poor or average credit score issues doesn’t have to be difficult, but if you still find you’re unable to make any difference on your own, don’t be afraid to seek out professional help.

Filed Under: Best Of FPT, Credit, Financial Planning Tagged With: , , , , , ,

Top Budgeting Tips: Frugality Made Easy

May 12, 2010 By FPT Guy Leave a Comment

When most people hear the word ‘budgeting’, they immediately cringe and think of living like a miser, scrimping and saving every penny. The truth is frugality is not about missing any of the fun things you enjoy.

Budgeting is all about knowing how much you have to spend and how much you’re expected to pay out and matching the two together. Frugality is simply about learning to spend the money you have on wise purchases and informed choices that won’t get you into financial trouble later. There’s nothing more sinister involved than that.

Here are some tips on budgeting and frugality that can make your financial life a lot easier.

Create a Clear Budget Snapshot

Before you can begin budgeting properly, you’ll need to spend a bit of time creating a clear snapshot of your financial situation as it stands today. This means writing down exactly how much income is coming into the household each month and how much you spend on bills, repayments, expenses and other living costs each month.

Be honest about what you’re spending now on your current expenses. This is an important step, as you can’t begin to improve your situation until you understand fully where you are right now.

Reduce Spending Costs

Take a close look of your current list of expenses and see if you can pinpoint any places where you might cut back your spending or reduce your costs. The majority of people automatically look to trying to cut back on grocery spending or on utility bills.

If you look closely at your budgeting snapshot, you might identify other areas of your spending that could be cut back. You might decide to try taking a packed lunch to work two days a week instead of buying every day. It’s only two days, but it can really reduce the amount you spend.

This can be a good start, but there are other ways to reduce your costs. Look at how much interest you’re being charged on consumer debts like credit cards, store cards or unsecured personal loans. By shopping around and finding lenders or banks willing to offer you lower interest rates than you’re currently paying, you could easily reduce the amount of money you pay in interest costs.

You could also reduce your monthly repayment amounts, freeing up cash flow from your budget for other things.

No More Credit

If you’re already in the habit of paying for all your purchases using your credit card, then this step in frugality can take a little patience to get used to. You should try to use cash whenever you can to pay for the things you need.

The key to this step is to add up the amount of money you need to pay for bills, expenses and other daily spending items, like lunches, entertainment or fuel. Then withdraw that amount of money when you get paid.

Your budget should show you how much you need to make it through each week, so don’t take more than you need. This way, when you go shopping, you won’t be as tempted to buy expensive items you see because you’ll know the money you have available has to last you the rest of the week.

Frugality is about considering your purchases carefully. You worked hard for the money you have, so it makes sense to try not to waste it on things you might regret later.

Reduce Debt Levels

If you’ve managed to cut back on your expenses and reduce your monthly payments and you’ve stopped adding more debt to your credit cards, you’re in a strong position to begin working on a debt reduction plan.

You should try to put some of your interest savings towards repaying your credit card balances and reducing other debts whenever possible. Try to increase the amount you pay on your payments so they’re higher than the minimum amounts due.

As your balances begin to fall, you should notice that your monthly repayments can begin to fall too. Don’t be tempted to reduce the amount you pay, though. Keep up the higher payments until the debt is gone.

Add a Savings Amount to Your Budget

As your budgeting expertise begins to grow and you become more comfortable spending only the cash you can afford to spend, you should notice it’s much easier to keep a few dollars left over at the end of each pay period.

Allocate these funds to a savings plan each week. If you don’t believe you’ll be disciplined enough to put the money away on your own without spending it, ask your bank to set up a direct debit payment from your account over to an interest-paying savings account.

Shop around for different types of savings accounts and ask your bank about what interest rates they’ll pay on savings. Even if it only adds up to a few extra dollars in interest, it’s still money you wouldn’t have had otherwise.

Set Realistic Goals

Sometimes it can be difficult to stick to a savings plan if you don’t have a clear idea of what you’re saving for. You might want to save for a new TV or an expensive outfit or even save for a down payment on a home.

Whatever it is, create a goal to give you something to stay motivated for and you’ll find it easier to stick to your budgeting resolution. You’ll also find that frugality doesn’t have to mean going without the things you want.

Filed Under: Best Of FPT, Budgeting, Financial Planning Tagged With: , , , , , , ,

How To Improve Your Credit Score: 5 Things You Must Consider

May 6, 2010 By FPT Guy Leave a Comment

Learning how to improve your credit score is often much easier than most people think. If you have a poor or average credit score you really can make leaps and bounds with your credit rating if you focus your actions correctly.  Unfortunately, far too many people look for the quick-fix solution rather than the long term good effects that come with learning to control your finances responsibly.

There simply is no quick credit fix solution for serious problems, regardless of what the late-night infomercials say. It’s also not possible to remove any listings on your credit report that are true, although you certainly can have any listings added in error taken off.

How Your Credit Score is Calculated

Before you can learn how to improve your credit score, you should take a moment to understand what factors could potentially damage it and how important each factor is to your overall score.

35% – Repayment History
30% – Outstanding Balances
15% – Length of Credit History
10% – Types of Credit Used
10% – New Credit Applications

Repayment History

As shown above, the major factor in calculating your credit score is your repayment history. This aspect accounts for a full 35% of your score. If you have a habit of falling behind on your payments or making your payments past the due date, chances are your credit has been negatively affected.

Work on catching up any late payments and pay off any overdue amounts as quickly as you can. Find a way to get your budget in order so that you’re able to make your payments on time each month. This can have a big impact on improving your credit score.

Outstanding Balances

A full 30% of your total credit score is based upon how much you owe on your outstanding balances as they compare to your available credit limits. If you have several credit cards and they’re all near their limits, then this will reduce your credit score.

If you’re serious about finding out how to improve your credit score, then debt reduction will be a big factor. Work on ways to begin paying down your outstanding balances. With each extra payment you make on your credit card, your balance will be further away from the available limit.

Don’t be tempted to charge more purchases to your credit cards just because you’ve paid a little bit off the balances. Continue to reduce your debt levels and you’ll see several benefits arising.

Aside from knowing you’re in less debt, you should also notice your minimum monthly payment amount reduces as you pay off what you owe. You’ll also notice that your credit score will begin to rise accordingly as you fix bad credit issues.

Length of Credit History

While time is the only thing that can improve this side of your credit score, there are things you can do to help. Each time you apply for new credit, it’s listed on your credit. You can improve this side of your score by not applying for any new credit until you’ve regained control of your existing situation.

When a person has applied for several credit cards or loans in a short period of time, this can reduce your score, as it could indicate that you’re not able to manage your financial obligations responsibly.

Types of Credit

A big part of how to improve your credit score is about knowing what can affect your score and how to avoid it. While 10% of your score is based on the types of credit you use, don’t be tempted to go out and apply for new loans or credit cards just to have more accounts or to try and create a balanced mixed of credit. This won’t work.

As long as you manage the credit facilities you already have wisely, this aspect of your credit score will be relatively easy to improve.

New Credit

A person who submits several new credit applications in a short period of time can end up with a lower credit score. Instead of applying for more credit, work on ways to handle the credit you already have more responsibly.

Reduce your debt levels and you’ll find there’s always plenty of available limit on your credit card when you need it for emergencies. You’ll also find that your repayments will decrease a little as you begin to pay down the outstanding debts.

The best part of how to increase your credit score is that you’ll be learning to take control of your financial situation again so you’re less likely to get into the same trouble again in future.  Soon enough you’ll be able to find an easy to get credit card and back on your way to an excellent credit score – or even a close to perfect credit score. – which is really true credit power and freedom.

Filed Under: Best Of FPT, Credit, Financial Planning Tagged With: , , , ,