This is the Perfect Time to Fix Your Credit

We have all read the headlines about the current economic crisis. We have seen the “Stimulus” packages passed. We have all wondered aloud, “What is in it for us?”

Well, on an individual basis, you may have a lot of ways to take advantage of the current economic situation. Opportunities abound if you have a fist full of cash and/or excellent credit. The sad reality is that most of us have neither. While I could write about a number of ways to fill your hands and pockets with cash, this article is about fixing your credit.

You see, if you don’t fix your credit, your ability to put cash together to take advantage of opportunities will be limited. We live in a credit-based society, and many items are overpriced due to the availability of credit. Do you really think that homes and cars would cost so much money if people had to pay cash for them? Of course, they would not cost so much!

The burning question then is “how to fix your credit?” You have two choices: 1) Do it yourself, or 2) Hire a professional. Let’s think this through.

If you opt for the Do-It-Yourself route, you need to do a lot of research. Why? The decks are stacked against you. Every American wants perfect credit. If it was so easy to fix their credit themselves, they would have done it by now. Instead, the average American’s credit score has been dropping each year at a record pace. The average American’s credit score is now 678, when it was over 720 just three years ago.

You could research the credit laws, pore over case histories, and study the various Federal and State Acts and laws that have been enacted to protect your consumer rights. You could write brilliant letters espousing your innocence against the spurious allegations against you that say that you do not honor your commitments and pay your debts. You could keep meticulous records, building evidence for lawsuits that you would later file against your creditors, collection agencies, and credit bureaus.

The sad truth is that you could do all of these things yourself. The sadder truth is that you probably won’t. Most consumers make a brief effort to write a couple of letters and hope their credit reports will magically improve. Unfortunately, these feeble attempts rarely achieve the goals set by these same consumers, and they sadly give up, and face their fate. Even those who get proactive, take all the right steps, keep their documentation in order, and follow-through are in for a battle that could last two years or longer, and still not get the results they desire.

Your creditors, in concert with the credit reporting agencies and others, have spent a lot of money to back those very same Federal Acts and other legislation that supposedly protects your rights. Do you realize that these laws do little to protect you, but do a lot to protect those who disparage your reputation by saying you don’t pay your bills? It’s sad, but true.

In fact, the three major credit bureaus have spent millions of dollars in lobbying for laws that severely restrict the ability of third parties that would help you fix your credit. Nearly every state in the union has laws set-up to make it very difficult for a so-called “credit repair company” to exist and do business. Why would they fight so hard for this? The reason is simple, “The CRAs do not want you to engage professional help, because they know it works!”

Consumer Reporting Agencies exist for one reason only. They exist to protect the creditors and collection agencies who provide data to them and who rely on this data to make credit decisions. It makes sense that the CRAs would rather have inaccurate, negative data against you than to possibly miss something negative. Since your creditors use the data provided by the CRAs to turn down all but the most solid risks, it is in the best interest of the CRAs to ensure that ALL potentially negative information about you is reflected on YOUR credit report. If the CRA told your creditor that you had a very low risk of default, your creditor gave you a loan, and then you defaulted; it makes them look bad!

This is why when you try to get the CRA to remove any adverse information (regardless of merit) they do everything in their power to avoid removing the item. They stall. They force you to jump through hoops. They ask for more information. They simply tell you that the creditor has confirmed the information as accurate. They tell you that your dispute is frivolous.

They do all of these things, because they know that you will probably not follow-up. They count on the fact that you do not know your rights, and that puts you at their mercy.

This is why you need PROFESSIONAL help. A professional has seen all of these tactics. A professional knows the laws that protect consumers. A professional can cut through the stalls, and attack the CRAs and your creditors using the laws in YOUR favor.

Sure, you could do the work yourself. However, I don’t know a single cardiologist who would do her own angioplasty. A professional should be able to get results for you within three to six months, rather than the two years or longer it might take you to do it yourself. Considering the cost of bad credit in higher interest rates and lost opportunities, it is an investment with a very high return.

Where and how do you find a professional? This is the difficult question. You can hire an attorney to do this for you, but that could cost you thousands of dollars. You could find a company that charges a low monthly fee to do the work (and their motivation to work quickly will be?). You could find an organization that charges a fair amount of money, but actually gets the job done.

Whichever route you choose, choose wisely, because credit repair organizations earned the bad rap they received back in the 90s by not performing. Things are much better now, but you need to choose your solution wisely. Do your homework. Ask the right questions. Contact this author for suggestions.

Help is available, if you know where to look, and whom to ask. Fix your credit, and then we can talk about how to use that access to capital to start building your wealth.

Special: Bailout Update

Early edition this week. I just received information on where some of the early bailout money went, and how it is allocated. I seem to recall hearing that the monies were to be invested in such a way that taxpayers would be repaid as quickly as possible by those to whom help was given. I didn't believe it then, and given the new information that I have found, I certainly don't believe it now.

Here is a partial listing from the original $350 billion in allocations:

• $250 Billion for purchases of Senior Preferred Shares under the Capital Purchase Program (This is the money we are supposed to get back right away, when things turn around)
• $ 20 Billion to Bank of America - The government is to share in the losses on a $118 billion package of assets. (If we are sharing in the losses, how do we get this money back later?)
• $ 20 Billion to Citigroup, same as BofA above, where the government (you and me, folks) will share in losses on a $301 billion package of assets. (Again, same question as above.)
• $ 5 Billion to Citigroup to cover additional losses with TARP funds.
• $ 40 Billion to AIG Insurance. (This is certainly money well spent!)
• $ 21 Billion to prop-up the US Auto Industry. (Of course, the industry doesn't have to make any substantive changes, but GM is offering $20K buy-outs to ALL employees and a $15K new car voucher, if they will retire or quit early. Why not just offer $20K to every taxpayer to buy an American-made car?)
• $ 20 Billion to the Federal Reserve to improve consumer access to credit. (Really? Do we need this? Isn't loose credit what got us into this mess in the first place? Also, doesn't the Fed already control all of the money supply?)

This just explains where about $376 Billion of our dollars went. With over $1.5 Trillion to $2.0 Trillion in total bailout money, which will be added to our current $1.0 Trillion deficit; where, when, and how will we ever pay this money back?

The answer is, we won't! The Fed will have to print new money in order to make these payments on behalf of the government. They are trying now to sell $2 Trillion worth of Treasury Securities in order to fund these programs. Who still has money left, and who is going to lend to the US government now? Good luck with that!

This is just another example of your government screwing you big-time! While you can't fight back against the government, you can use the bailouts of financial companies to your benefit.


The National Consumer Rights Alliance (NCRA) offers the following services, all of which will help you to lower your outstanding debt, reduce your interest rates, improve your cash flow, and potentially save your home:

• Mortgage Modification / Forbearance / Short Sale / Recission - These are all tools offered by the association to help protect you from your mortgage lender. You may qualify for a reduction of principle in your mortgage, a reduced interest rate, postponement of late payments and penalties, conversion from an adjustable to a fixed rate, a short-refinance, or other concessions from your lender. The NCRA offers these services at much lower costs to its members than you will find anywhere else.
• Debt Settlement / Renegotiation / Bankruptcy - Debt Settlement can reduce your unsecured debts by 50% or more, and enable you to become debt free within three years, in most cases. Renegotiation can help you lower your interest rates. If you absolutely cannot pay your bills, or you have judgments or extended liabilities that have wreaked havoc on your finances, or if you just have no other way to save your home, the NCRA can refer you to a local bankruptcy attorney who will represent you at drastically reduced rates. We rarely recommend bankruptcy, but if it is your only way out, at least we can save you money.
• Credit Restoration / Secured Credit Lines / Bank Accounts - NCRA now offers NO-COST Credit Restoration services to its members. They used to charge a $5.00 fee per deletion, but they have now waived this charge, in order to further assist members in the current economy. NCRA can also provide referrals to secured credit accounts, which will help to reestablish credit, and if you have found yourself in the ChexSystems database, NCRA can refer you to a local financial institution that will let you open a checking account without a ChexSystems verification.

Since the Federal Government is giving so much money to financial institutions, they have been mandated to work closely with debtors to work out arrangements for debts. Since the government has agreed to cover the losses, it only makes sense for an intelligent consumer (that would be you, dear reader) to take advantage of this situation for your own gain. After all, it is OUR tax dollars that these companies are receiving. Take advantage of the help that is being afforded you. Until next post, I wish you well, and I hope that this information will help you. Spend wisely, and sleep well!

Here is a Special Offer from the NCRA for my readers, so listen up! 

For a limited time, just for readers of my blog, the NCRA will give you a family membership for the same price as an individual membership, for full payment upfront. This is a savings of up to $800 over the price of purchasing a family membership under their payment plan! 

Again, this is only for readers of this blog. In order to avail of this special, send an email to administrator@ncramembers.org, mention that you are a reader of this blog, and that you would like this special pricing. NCRA accepts PayPal, bank check, and credit card. Your benefits will begin immediately upon joining. This special pricing is not noted on the website, so be sure to request this special via email. This offer is good for the month of February 2009, and is subject to revocation without notice. In other words, this is a limited time offer. NCRA has promised this pricing for the first 100 readers who sign-up for the special. I suggest you send your email today!

Your Way Out - Personal Economic Recovery

Judging from the record number of comments that I received from all of you this week, I realized two things:

1) I have a lot more readers than I suspected.
2) You are an impatient bunch! OK, perhaps it was cruel to make you wait, but the last post was so long that I wanted to ensure that it got enough time to be read, and I didn't want to put so much into one post, that no one would read it all the way through.

The Four "I"s

This topic has nothing to do with wearing glasses. Last week, I asked you to gather all of your financial data from the last year. Since most of you didn't do it, do it now.... I'll wait....   

Welcome back! Now, the Four "I"s consist of Income, Investments, Insurance, and Interest. In order to succeed financially, you must have all four of these items in place in your life. Most likely, you don't, but we can fix that.

Income consists of all inflows to your household, regardless of source. Primarily, this consists of profits from your business or your salary or wages from employment. You may also have income from investments or savings, hobbies, and avocations. You need to maximize this aspect of your life. To the extent that your income derives directly from the "amount of time" you spend on an activity, you need to maximize your return on that time (i.e. Become more efficient).

Investments consist of continuing returns on prior income. In other words, first you worked for your money, and now your money is working for you. To the extent that you are successful with your investing, you are now using time to compound your return on your original labor.

Insurance is the method by which you protect everything that you have accomplished in your life to date. Some methods are obvious, while others are not. I have written a few articles about insurance, which you may peruse. The less obvious insurances may include unemployment insurance and workers' compensation, which protect your income. Life insurance protects your family by replacing your income, while property and casualty insurance protects your accumulated assets. Liability insurance protects everything you own against the claims of others.

Interest will either work for you, or it will work against you. You may derive interest on savings or investments in debt securities (bonds or corporate notes payable) and you may lose interest on borrowing (mortgages, auto loans, credit cards, etc.). Albert Einstein said something along the lines of "Those who understand compound interest will be investors, and those who don't will be borrowers." Which of these describes you?

Using the Current Situation to Your Advantage

At present, financial institutions in the United States are reeling. They cannot possibly keep up with all of the issues that they face. Approximately 16% of mortgages will foreclose this year. This will keep real estate prices low, which contributes to foreclosures. Yes, this is a vicious cycle. As people see their credit ratings destroyed due to non-payment of their mortgage obligations, they will tend to care less about paying for unsecured debt (credit cards), which will take away the banks' most profitable income center. A record number of bankruptcies is expected this year (well over two million cases).

Since I do not wish to create a forty page blog posting, I will lightly cover the areas that you need to address in order to solve your financial issues. This is not a do-it-yourself posting, as I cannot give you all of the information, skills, and tools needed to solve this problem yourself, in the space of a single blog posting. I will ask that you contact this week's sponsor, as they are in a position to help you accomplish all of these tasks, and as an advocacy organization, can do it much more efficiently and more cost-effectively than you can handle them yourself.

National Consumer Rights Alliance, Inc.

The NCRA is an advocacy organization dedicated to the protection of Consumer Rights for all Americans. They provide a number of benefits to their members, including credit repair services, a nationwide legal network, IRS Audit Defense, debt settlement assistance (not bankruptcy), mortgage modifications, and mortgage attainment assistance. They also assist with second chance bank accounts (no ChexSystems verification) and second chance (secured) credit cards. I believe so much in this organization that I have accepted a position as its President, in order to help drive their mission forward. I know of no better organization, public or private, that is in a better position to assist consumers in the ways that I suggest below. Of course, you may take all of these steps on your own, but I think you will find better results by allowing their experts to work on your behalf. Even if you were a skilled surgeon, you still wouldn't perform your own appendectomy, would you? Save time and money by joining the organization today.

Your Personal Recovery Steps

Income - You need to find ways to increase and diversify your income. In the current job environment, changing jobs is probably not the best option. In fact, you may be doing all you can to hold onto the job you have. Perhaps, you have lost your job, and find yourself in a very difficult spot. Try to find ways to supplement your income. Most online methods are scams, so be careful. It is possible to make money on E-Bay or Google and with certain blogging opportunities, but most people fail. NCRA has a referral program that can provide a good second income, so that might be worth investigating. 

Investments - Assuming that you still have some money invested, you need to find a way to build back up. If you are still able to invest each month, I suggest that you continue to invest. In most cases, the companies in which you are invested lost value due to the overall market, and not due to anything directly related to the performance of the company with respect to its peers. If this is the case, continue to invest in the same companies, and allow dollar-cost averaging to work for you. If you need to realign your investments, speak to your investment advisor.

Insurance - Be sure that your insurance policies are up-to-date. Is your life insurance protection adequate to replace your income for at least twenty years? If not, reevaluate. Be sure you are getting the best value for your health insurance as well. Many individual and family policies now provide benefits as good or better than your workplace may provide. Oftentimes, these policies are cheaper if your family is in good health, due to the elimination of "adverse selection" that exists with group policies. 

Interest - Good news! This is the area in which you have the most control at present. These are the areas that we can address here, which will help you to solve the majority of your financial problems. Of course, if you have no income, that is a severe issue, but you can still work on alleviating much of the pressure you face by addressing these issues.

Reducing Interest and Credit Liabilities

Mortgage Modification is a great way to reduce your mortgage liability, payments, interest rate, or a combination of the three. I highly recommend that you NOT DO this yourself. Even if you are not behind on your mortgage, you may be able to renegotiate your mortgage into a better interest rate, longer terms to lower your payments, reduction in pricipal, and other options that can help you save your home and/or lifestyle. I have seen instances where individuals have lowered their monthly obligation by as much as 75%, reduced interest rates to as low as 3%, and had tens of thousands of principal balance forgiven. This is not an area for do-it-yourself. Help will cost you one mortgage payment on average, but you will have one month in which you will not owe a mortgage payment to your lender, so it is a service generally provided at no net cash flow loss to you. NCRA can connect you with a law firm to handle this for you. 

Debt Settlement is another way to greatly improve your cash flow. What would it mean to you if you could slash your total outstanding debt by 50% or more, reduce your interest rates to single digits, be debt free in 36 months, and actually come out of the process with excellent credit? Even if you have good credit and can afford to pay your debts now, this may be a great way to free up money for investment. Again, this is a service provided by attorneys, and you don't want to play this game on your own. 

Credit Repair/Restoration can help you qualify for much better terms on mortgages, auto loans, and credit cards. Do you have old collection accounts, chargeoffs, or even some late payments showing on your credit report? These items can cost you dearly when it is time to obtain financing for any purpose. NCRA provides attorney-assisted credit services at almost no cost to its members, as a benefit of membership. You only pay $5 per deletion obtained. 

Mortgage Refinancing is available if you can prove your income, have a debt-to-income ratio of 45% or less, including your mortgage, and have a credit score higher than 720. If you have these attributes, then you can probably refinance in the low 5% range on a 30-year fixed mortgage. If not, then take some of the steps above before trying to refinance. A mortgage modification may be a better deal anyway, as the cost of modifying a mortgage may be much lower than the cost of obtaining a mortgage. 

Margin Account Borrowing is available to investors who have active trading accounts with the major wirehouses. If you have been purchasing stocks without borrowing against them, you can open an account, which will allow you to borrow up to 80% of the value of the shares at rates as low as 2%-3% per annum. If you take this money, and payoff your high interest credit cards, your savings could be significant. If you will take this tact, I advise that you only borrow 50% of what is available to you, and then repay the monthly payments that you would have made on the credit cards back to your margin account. In the alternative, you can take that monthly payment to reduce the liability on other high interest accounts, but be sure that as you accumulate these payments that you eventually pay off the margin account. 

That's all for now. Once you take these steps, keep me apprised of your results. Of course, I am always here to help, so keep those comments coming. If you need individual help, let me know. If I receive similar questions from a number of readers, I will post my comments, so that we can all benefit. See you soon!