To develop depth your goal is to earn more income from each of your
current sources. You can develop expertise or get training for your job
or profession that entitles you to better pay.
Increase the depth of your passive income by finding higher interest
paying investments or raising the rent on your rental properties. Move
your mutual funds or non-dividend paying stocks to those that pay
dividends.
Increase the breadth of your income
For breadth, seek out multiple streams of income to increase the
number of sources of repayment. You can develop enough expertise in a
field to become a highly paid employee or consultant, or use that
expertise to write a book, create an information product or conduct
seminars.
Develop and diversify new classes of income producing assets. Consider
dividend paying stocks, bonds or real estate.
For a business loan, lenders determine capacity by looking not only to
the business’s financial projections but also to your personal ability to
repay the loan if the business does not work out as planned. They will
want to know if you have other income (investments, a working spouse,
royalties, pensions, etc.) to help you repay the loan if necessary.
Lenders will want to know the answers to questions such as: if the
business fails, will you be able to return to your present or previous job?
Do you have other skills that could produce income? Be prepared to
provide solid answers to these questions and be able to offer real
evidence to support your answers.
To improve business capacity, increase the products and services that
your business provides. Look for turnkey systems that build off of what
your business already does. If you are a construction company,
consider hiring a certified home inspector in the business. If you own
rental real estate, install a coin operated laundry or vending machine.
With a retail shop, consider candy vending just inside the door, or a
mechanical ride by the entrance.
Saturday, September 16, 2006
Credit Millionaire Ratios -17
Credit millionaires have one more ratio. In fact, this ratio is needed,
because most millionaires wouldn’t be able to pass the other two.
This ratio is reserved for individuals with significant investments or
businesses. Even small businesses get the benefit of using the credit
millionaire ratio—the Debt Coverage ratio.
The Debt Coverage Ratio is your total income from all sources minus
operating expenses. The difference with the ratio for the credit
millionaires and the consumer ratios is the consumer ratios first look to
the borrower’s income for repayment then to the secondary sources.
The credit millionaire ratio considers the net operating from your assets
as the primary method of payment for the debt on those assets. This
ratio puts the borrower’s earned income secondary to the income from
the assets. With the debt coverage ratio, the value of the income from
those assets is generally not reduced, as is rental property income for
an individual borrower.
A Debt Coverage Ratio of 1.0 represents break even cash flow, when the
net operating income from an investment or business is equal to the
debt coverage. The higher the number over 1.0, the better the ratio is.
A debt coverage ratio of 2.0 suggests that the monthly income from the
property is twice the payment on the debt. Lower than 1.0 means that
the income from the property isn’t enough to support the monthly loan
payments.
There are many documents which can be used to show your capacity.
Some are:
Income, W2s or 1099s, check stubs Tax Returns
Court orders for garnishment or support Rent rolls or leases
Royalty agreements Work history
Promissory notes with proof of payments
You can increase your capacity by widening the gap between your
income and expenses. You do this by both increasing your income and
reducing your expenses. Reducing your expenses is not as easy, but
well worth the efforts. We have all heard the axiom, “a penny saved is a
penny earned.” But a penny saved is really MORE than a penny
earned.
Consider this: every dollar that you want to spend, you must first earn.
When you earn income, whether through your job, business, or
investments, you must pay income tax on those earnings before you can
spend them for a non-business expense. So in order to spend $1.00,
you need to earn much more than that.
To calculate how much money you need to earn to spend $1.00, you
add your marginal tax rate (we’ll use 28% for this example) with the
15% tax for social security, Medicare, etc, resulting in a total tax of
43%. Which means you get to spend only 57% of what you earn. To get
the amount you need to spend $1.00, divide it by 57%. You see that an
individual in the 28% tax bracket needs to earn $1.75 to have $1.00 to
spend.
Thus it’s always better to decrease your expenses
than increase your income by the same amount.
What you really want to do is both.
Generally easier than decreasing your expenses is
increasing your capacity by increasing the depth
and breadth of your income.
because most millionaires wouldn’t be able to pass the other two.
This ratio is reserved for individuals with significant investments or
businesses. Even small businesses get the benefit of using the credit
millionaire ratio—the Debt Coverage ratio.
The Debt Coverage Ratio is your total income from all sources minus
operating expenses. The difference with the ratio for the credit
millionaires and the consumer ratios is the consumer ratios first look to
the borrower’s income for repayment then to the secondary sources.
The credit millionaire ratio considers the net operating from your assets
as the primary method of payment for the debt on those assets. This
ratio puts the borrower’s earned income secondary to the income from
the assets. With the debt coverage ratio, the value of the income from
those assets is generally not reduced, as is rental property income for
an individual borrower.
A Debt Coverage Ratio of 1.0 represents break even cash flow, when the
net operating income from an investment or business is equal to the
debt coverage. The higher the number over 1.0, the better the ratio is.
A debt coverage ratio of 2.0 suggests that the monthly income from the
property is twice the payment on the debt. Lower than 1.0 means that
the income from the property isn’t enough to support the monthly loan
payments.
There are many documents which can be used to show your capacity.
Some are:
Income, W2s or 1099s, check stubs Tax Returns
Court orders for garnishment or support Rent rolls or leases
Royalty agreements Work history
Promissory notes with proof of payments
You can increase your capacity by widening the gap between your
income and expenses. You do this by both increasing your income and
reducing your expenses. Reducing your expenses is not as easy, but
well worth the efforts. We have all heard the axiom, “a penny saved is a
penny earned.” But a penny saved is really MORE than a penny
earned.
Consider this: every dollar that you want to spend, you must first earn.
When you earn income, whether through your job, business, or
investments, you must pay income tax on those earnings before you can
spend them for a non-business expense. So in order to spend $1.00,
you need to earn much more than that.
To calculate how much money you need to earn to spend $1.00, you
add your marginal tax rate (we’ll use 28% for this example) with the
15% tax for social security, Medicare, etc, resulting in a total tax of
43%. Which means you get to spend only 57% of what you earn. To get
the amount you need to spend $1.00, divide it by 57%. You see that an
individual in the 28% tax bracket needs to earn $1.75 to have $1.00 to
spend.
Thus it’s always better to decrease your expenses
than increase your income by the same amount.
What you really want to do is both.
Generally easier than decreasing your expenses is
increasing your capacity by increasing the depth
and breadth of your income.
Consumer Credit Ratios -16
Lenders can’t tell how much you earn from your credit report, they rely
on the earnings figures that you report to them. Looking at your credit
report tells lenders only what you owe and how much your monthly
payments are on the accounts that are reported. They compare your
earnings with those monthly payments to come up with the debt-to-
income ratio. Most lenders want to see that your total monthly
obligations don’t exceed 50% of your pre-tax income.
The second standard ratio is the housing expense ratio. This one is
specifically used when purchasing a home loan. The lender will first
look to see that your debt-to-income ratio doesn’t exceed their limits,
then will caluclate your housing expense ratio. This is the comparision
of your monthly mortgage payment for the proposed mortgage compared
with your pre-tax income. The standard is that your mortgage payment
should not exceed 30% of your total income.
on the earnings figures that you report to them. Looking at your credit
report tells lenders only what you owe and how much your monthly
payments are on the accounts that are reported. They compare your
earnings with those monthly payments to come up with the debt-to-
income ratio. Most lenders want to see that your total monthly
obligations don’t exceed 50% of your pre-tax income.
The second standard ratio is the housing expense ratio. This one is
specifically used when purchasing a home loan. The lender will first
look to see that your debt-to-income ratio doesn’t exceed their limits,
then will caluclate your housing expense ratio. This is the comparision
of your monthly mortgage payment for the proposed mortgage compared
with your pre-tax income. The standard is that your mortgage payment
should not exceed 30% of your total income.
When Your Out Of Pocket Exceeds Your Income-Downfall Starts-15
Capacity is simply your ability to comfortably repay the loan. It can be
shown in this role-play:
Paulie: Donna, may I borrow $20?
Donna: How quickly can you easily repay it?
Capacity is reflective of your income. Your loan officer will scrutinize
your ability to repay a loan by looking at your employment and salary.
They want to see a long and stable employment history. Stability also
includes whether your occupation is riddled with industry-wide or
seasonal lay-offs.
Since capacity is that it is your ability to comfortably repay your debt
obligations, lenders will compare your total expenses with your income.
If your present debt expense is too great a percentage of your monthly
income, you may be denied credit because you don’t ratio.
Owen returned the phone to the cradle. “Fran, we didn’t
get the loan.”
After a long pause Fran asked why. Owen explained that
their current debt payments were too high. Even though
the refinance would allow them to pay some of the bills, and ultimately
they would have lower monthly payments and be paying a lower interest
rate, the mortgage company said the numbers still didn’t work.
“I may be able to pick up a few more hours a week at the store”, she
offered.
“No, we’ll just apply for another credit card. There should be a pre-
approved card application in the mail in a few days. We seem to be
getting them every week or so. In the meantime, we’ll have to cut back
a little around here. I don’t understand why the numbers didn’t work.
The company said something about our monthly payments being too
high compared to our income...”
There are a couple of key ratios that lenders look to when making a
credit decision. The first is the Debt-to-Income ratio. This ratio
considers your overall monthly debt payment and compares it with your
monthly income.
shown in this role-play:
Paulie: Donna, may I borrow $20?
Donna: How quickly can you easily repay it?
Capacity is reflective of your income. Your loan officer will scrutinize
your ability to repay a loan by looking at your employment and salary.
They want to see a long and stable employment history. Stability also
includes whether your occupation is riddled with industry-wide or
seasonal lay-offs.
Since capacity is that it is your ability to comfortably repay your debt
obligations, lenders will compare your total expenses with your income.
If your present debt expense is too great a percentage of your monthly
income, you may be denied credit because you don’t ratio.
Owen returned the phone to the cradle. “Fran, we didn’t
get the loan.”
After a long pause Fran asked why. Owen explained that
their current debt payments were too high. Even though
the refinance would allow them to pay some of the bills, and ultimately
they would have lower monthly payments and be paying a lower interest
rate, the mortgage company said the numbers still didn’t work.
“I may be able to pick up a few more hours a week at the store”, she
offered.
“No, we’ll just apply for another credit card. There should be a pre-
approved card application in the mail in a few days. We seem to be
getting them every week or so. In the meantime, we’ll have to cut back
a little around here. I don’t understand why the numbers didn’t work.
The company said something about our monthly payments being too
high compared to our income...”
There are a couple of key ratios that lenders look to when making a
credit decision. The first is the Debt-to-Income ratio. This ratio
considers your overall monthly debt payment and compares it with your
monthly income.
Creditor’s Security And Credit-14
Character can also be demonstrated by stability. Your creditor will
definitely look at things that don’t factor into your credit score
calculation at all. Whether job security is a reality or a myth in today’s
times, it’s still a very real factor in the lending decision. They want to
know that you are a stable credit risk.
Lenders will be interested in knowing that you own your own home.
Homeowners, as far as lenders are concerned, are more credit worthy
than renters. Lenders presume that homeowners understand financial
obligations and are accustomed to making their monthly payments.
Lenders presume that homeowners are more responsible in matters of
long-term employment and commitments. Owning real estate in your
community will indicate a level of commitment and stability that lenders
want to see.
Lenders are very interested in your line of work, because your
profession is also an indication of stability. Certain jobs are more
desirable to a lender than others, often with a bias towards professional and managerial jobs and away from skilled labor and clerical positions.
In reviewing your application, lenders will also look to your length of
time at your current place of employment. Even in a poor economy
where the concept of job security is a joke, lenders will want to see that
you’ve been in your current job for several years. If you’ve changed jobs
recently, they will want an explanation why the move took place. Since
they are lenders, a greater salary is always a sufficient reason. A
change inside the same industry or with a title change may be seen
favorably, even if it isn’t.
Lenders want to know things such as whether you have a savings
account. People with savings accounts are at least thinking about
saving their money. People with savings accounts with balances are
demonstrating that they don’t spend all they make. If you keep all of
your cash in one checking account, consider portioning some of it off
and opening a savings or money market account. Even a small savings
account will communicate to the lender that you have the ability to save
money, a specific plan to do so, and some evidence of financial
responsibility. Your lender will want to see that you have had your
checking and savings accounts for some time, and without unusual
fluctuations.
Your character, combined with income, are the only factors considered
in most consumer lending decisions. Credit card lenders and other
retailers only want to know the information on your credit report and
the amount of money you earn. Character is important for employers as
well. Especially when applying for a job handling money, lenders want
to know you aren’t in credit trouble, so that you won’t be desperate and
dishonest.
The Relation Between Your Character And Credit-13
When the late American industrialist J.P. Morgan was asked what he
considered the best bank collateral, he responded with a single word:
"character."
The primary factor in a positive credit decision is your personal
character.
The essence of character can be found in this short role-play.
Paulie: Donna, my dear friend, may I borrow $20?
Donna: Sure, anything for you
Some people define character as who you are when no one is looking.
In the case of your credit, character is not only who you are, but also
who you have been in the past. It is said that the best prediction of
today’s weather is what it was yesterday. Similarly, the best predictor of
your future credit behavior is your past behavior with your credit
accounts.
Character is your financial reputation with people and the marketplace.
To the potential lender, solid character means that you will make every
possible effort to repay the loan and avoid taking out loans that are
beyond your means.
The most common indication of your character is your credit score and
credit history as discovered through checks with the credit bureaus.
Character is also demonstrated through good credit referrences,
referrals and your contributions over time to the community.
In addition, most lenders will make a personal judgment of your character based on your presentation over the phone or in person. The
lender will usually sit down across the table from you and make an
assessment regarding his or her comfort level with you as a borrower. If
the words "bad risk" come to mind, you may not get a loan regardless of
how high your credit score is. This is not to say that a lender can make
a credit decision based on your physical appearance alone—thankfully,
we have credit protection laws that protect us against discrimination
based on race, gender or disabilities.
Character is a combination of objective measures, like your credit
history and score, and subjective judgment like your reputation and the
lender’s impression of you. There are techniques that can be used to
improve both the objective and subjective measures of character.
To improve the objective measures like the credit score and credit
history, start today to acquire more credit and use it responsibly. The
more credit that you have that is open and used responsibly, the more
your credit score will go up. If you have no credit at the moment, you are just a few short years away from the highest rated credit. If you have some “dings” or small mistakes in your credit history, you will want to engage in some credit repair.
For the subjective measures, the key to improvement is to build relationships and seek referrals and references As you think about your personal and business history, ask yourself who you have done business with in the past that can vouch for your timely payment history.
Even if a business doesn’t report to credit agencies, they can be positive
references for you. Send each of them a letter using the sample
reference letters in the appendix. Remind them of their pleasant
transaction with you and let them know you will be using them as a
credit reference. Give them the option of calling you if they would prefer
you didn’t.
This is a valuable tip. Always make the action on their part be your
least desired result. You get more “yeses” by default that way. Another
option is to ask the business to send you a letter of how you always pay
as agreed.
Referrals are a powerful example of your character. When people are in
business, they don’t give positive referrals lightly. The best kind of
referral is one from a person who is in a very similar business and has a
long-term relationship with the person to whom you are being referred.
For example, a direct banker-to-banker referral is far more powerful
than a mortgage broker to banker referral.
Thursday, September 14, 2006
5 Characteristics Of All Credit-12
No matter what type of loan you consider, all lending decisions are based on five, and only five, criteria. To the credit industry insiders, these are known as the Five C’s of Credit. They are: character, capacity, collateral, conditions and capital. I call them “All Star Credit” and use
a star to help us remember the five aspects.
The 5 C’s are time-tested criteria all lenders use (whether they know it or not!) to make their lending decisions. Everything that can affect the credit decision is encompassed in these five broad categories, so we’ll spend some time going over each one in detail. By understanding each of these from the lender’s viewpoint, you can anticipate your strengths and weaknesses as they may appear on your application to a potential lender.
You needn’t be perfect or even strong on each of the 5 C’s. Strength in one arena will support and substitute weakness in other areas. For example, excellent capital (what you own) can make up for inadequate collateral. If the lender’s conditions are ripe for lending, the particular
borrower almost doesn’t matter.
However, by applying my All Star Credit system, you will be able to make each point of this star shine as brightly as possible. In the next few articles I will delve into these five aspects in detail, first giving a short role-play to help you identify the factor. Then I will define the C, and show some examples of how to prove or demonstrate that factor. Finally, we’ll offer suggestions to build that element of your personal or your business’ credit.
I'll discuss more on tomorrow.Thank You.
a star to help us remember the five aspects.
The 5 C’s are time-tested criteria all lenders use (whether they know it or not!) to make their lending decisions. Everything that can affect the credit decision is encompassed in these five broad categories, so we’ll spend some time going over each one in detail. By understanding each of these from the lender’s viewpoint, you can anticipate your strengths and weaknesses as they may appear on your application to a potential lender.
You needn’t be perfect or even strong on each of the 5 C’s. Strength in one arena will support and substitute weakness in other areas. For example, excellent capital (what you own) can make up for inadequate collateral. If the lender’s conditions are ripe for lending, the particular
borrower almost doesn’t matter.
However, by applying my All Star Credit system, you will be able to make each point of this star shine as brightly as possible. In the next few articles I will delve into these five aspects in detail, first giving a short role-play to help you identify the factor. Then I will define the C, and show some examples of how to prove or demonstrate that factor. Finally, we’ll offer suggestions to build that element of your personal or your business’ credit.
I'll discuss more on tomorrow.Thank You.
Types Of Credits And You-11
Lending takes on a variety of forms, from the simplest, “May I borrow $20” between friends to a much more complex transaction.
The above example represents the type of loan request from someone who displays the utmost in credibility. There is no talk of interest, repayment schedules or terms. This is a loan between friends.
The next level of loan is represented by the “what’s in it for me” mentality, and that is a loan with interest. Similar to the previous example, this loan doesn’t discuss the length of time of the loan or other terms. It’s the kind of loan givento people who are trying to profit and have a high degree of trust in their borrower. Signature lines of credit at a bank are a good example of this kind of loan.
As the level of trust decreases, the number and strictness of the loan’s terms will increase. Perhaps the lender will want a promise to pay by a definite date, then perhaps higher interest. Eventually the lender will want security for the loan in the form of valuable property that the lender can seize in the event the debt isn’t paid. At the lowest level of trust, the lender will want possession of the property. Pawn brokers take actual possession of the property in their shop, and can easily sell it if the borrower doesn’t pay the loan as agreed.
Regardless of the specific terms of a loan, all loans have four parts.
1. something borrowed
2. the costs of borrowing
3. the repayment instructions
4. the penalty for not following the instructions
The description of what is borrowed—a monetary amount in either a lump sum or as a credit line, but it could easily be any other item. There is the cost of the funds—in interest, finance charges, application fees, points and penalties. There is a payment plan—how much you will
pay, how often and for how long, and how the borrowed item will be returned. Finally, there is a provision for the penalties in the event that you don’t fulfill your promise to repay. Some loans ask for an additional term, security.
A secured loan is a loan that is backed by an asset, called collateral. For major purchases like automobiles, some states allow lenders to retain the rights of ownership to the property until you have paid for it in full. Other lenders use the property as additional security for the loan, and can force the sale of your property to satisfy their debt in the event you stop making payments.
An unsecured loan is known as a signature loan. It’s a credit line that is extended to you entirely based upon your credit worthiness. Credit cards are the most common example of an unsecured loan. If you don’t make your credit card payment, the company can’t come and take the items you purchased with the card.
For more information on how the monetary system works, read Modern Money Mechanics, published by the Chicago Federal Reserve Board.
Next time i'll discuss about 5 characteristics of all credit.
The above example represents the type of loan request from someone who displays the utmost in credibility. There is no talk of interest, repayment schedules or terms. This is a loan between friends.
The next level of loan is represented by the “what’s in it for me” mentality, and that is a loan with interest. Similar to the previous example, this loan doesn’t discuss the length of time of the loan or other terms. It’s the kind of loan givento people who are trying to profit and have a high degree of trust in their borrower. Signature lines of credit at a bank are a good example of this kind of loan.
As the level of trust decreases, the number and strictness of the loan’s terms will increase. Perhaps the lender will want a promise to pay by a definite date, then perhaps higher interest. Eventually the lender will want security for the loan in the form of valuable property that the lender can seize in the event the debt isn’t paid. At the lowest level of trust, the lender will want possession of the property. Pawn brokers take actual possession of the property in their shop, and can easily sell it if the borrower doesn’t pay the loan as agreed.
Regardless of the specific terms of a loan, all loans have four parts.
1. something borrowed
2. the costs of borrowing
3. the repayment instructions
4. the penalty for not following the instructions
The description of what is borrowed—a monetary amount in either a lump sum or as a credit line, but it could easily be any other item. There is the cost of the funds—in interest, finance charges, application fees, points and penalties. There is a payment plan—how much you will
pay, how often and for how long, and how the borrowed item will be returned. Finally, there is a provision for the penalties in the event that you don’t fulfill your promise to repay. Some loans ask for an additional term, security.
A secured loan is a loan that is backed by an asset, called collateral. For major purchases like automobiles, some states allow lenders to retain the rights of ownership to the property until you have paid for it in full. Other lenders use the property as additional security for the loan, and can force the sale of your property to satisfy their debt in the event you stop making payments.
An unsecured loan is known as a signature loan. It’s a credit line that is extended to you entirely based upon your credit worthiness. Credit cards are the most common example of an unsecured loan. If you don’t make your credit card payment, the company can’t come and take the items you purchased with the card.
For more information on how the monetary system works, read Modern Money Mechanics, published by the Chicago Federal Reserve Board.
Next time i'll discuss about 5 characteristics of all credit.
Every Dollar You Spend Is Credit-10
The credit system is a continuous cycle of borrowing and lending. All money is borrowed money. Even when you use your own cash, you are borrowing money—from yourself!
Spending money is borrowing from your funds available to purchase income-producing assets to get goods and services. The cost of those funds is the lost opportunity you could have gained had you invested the money.
Now before you start writing me letters about how your children really like to have dinner on the table, I’m not saying that you shouldn’t spend money!
It’s important to have food and shelter, transportation, and yes, even entertainment and luxury items. However, recognize that using funds for these purposes necessarily means they aren’t available for investing. It’s not a judgment on your personal spending habits to say that a
dollar saved is one that can’t be invested. It’s an illustration of the simple fact that all dollars come from the same pool of money. To keep the credit cycle going, borrowers need to repay what they owe.
Every borrower who repays on time allows the lender to profit, which allows the lender to pay his or her own bills, which allows the lender’s lender to do the same. Thus when someone breaks the cycle by not paying as agreed, the entire system suffers.
The largest single lender in the country is the Federal Reserve Bank (“The Fed”). The Fed loans money to national, state and local banks at a nationally published interest rate called the Discount Rate. The Discount Rate is always lower than Prime Rate—which is the rate banks
charge their best customers. The Prime Rate is usually reserved for wealthy individuals and major corporations. Other borrowers are offered an interest rate higher than prime. How much higher varies depending on the type of loan and the borrower’s credit. Who lends money to the Fed? We, the consumers do. When the Federal Reserve needs money, they either print more (I don’t recommend this strategy for you) or issue bonds. When the government issues bonds, they are collecting the money they’ve released into the system back. Consumers buy bonds as an investment strategy—which the government guarantees. The government pays interest on these bonds—the same dollars they released into circulation by printing money. The Fed can make as many of these loans as they feel is necessary for the overall economic strategy—and can do so without a credit check.
Next time i'll discuss about the faces i mean types of credit.
Spending money is borrowing from your funds available to purchase income-producing assets to get goods and services. The cost of those funds is the lost opportunity you could have gained had you invested the money.
Now before you start writing me letters about how your children really like to have dinner on the table, I’m not saying that you shouldn’t spend money!
It’s important to have food and shelter, transportation, and yes, even entertainment and luxury items. However, recognize that using funds for these purposes necessarily means they aren’t available for investing. It’s not a judgment on your personal spending habits to say that a
dollar saved is one that can’t be invested. It’s an illustration of the simple fact that all dollars come from the same pool of money. To keep the credit cycle going, borrowers need to repay what they owe.
Every borrower who repays on time allows the lender to profit, which allows the lender to pay his or her own bills, which allows the lender’s lender to do the same. Thus when someone breaks the cycle by not paying as agreed, the entire system suffers.
The largest single lender in the country is the Federal Reserve Bank (“The Fed”). The Fed loans money to national, state and local banks at a nationally published interest rate called the Discount Rate. The Discount Rate is always lower than Prime Rate—which is the rate banks
charge their best customers. The Prime Rate is usually reserved for wealthy individuals and major corporations. Other borrowers are offered an interest rate higher than prime. How much higher varies depending on the type of loan and the borrower’s credit. Who lends money to the Fed? We, the consumers do. When the Federal Reserve needs money, they either print more (I don’t recommend this strategy for you) or issue bonds. When the government issues bonds, they are collecting the money they’ve released into the system back. Consumers buy bonds as an investment strategy—which the government guarantees. The government pays interest on these bonds—the same dollars they released into circulation by printing money. The Fed can make as many of these loans as they feel is necessary for the overall economic strategy—and can do so without a credit check.
Next time i'll discuss about the faces i mean types of credit.
The Time Frame For Building Credit-9
The one ingredient in the credit calculation that I can’t help you with is your length of credit history. Credit building takes time. The good news is, if it isn’t getting worse, it’s definitely getting better. Every month that goes by where:
1) you pay your bills on time, every time, and
2) you don’t do anything to make your credit worse, results in
better credit.
If you have no credit, expect it to take one to two years for you to develop enough credit to qualify for a major purchase.
Once your credit repair activities have removed all the impactful negative information from your credit reports, and the situation or bad habits that caused the credit crisis are under control, you will find that the credit building process is identical to the process for those with no credit.
In either case, you will start to grow and improve your credit. You will ensure that temporary hardships are planned for through proper budgeting. Your credit scores will gradually increase over time.
Improving your credit worthiness will help in other areas too. Not only will you get more credit at better rates from lenders, but also better employment opportunities and lower insurance rates.
All of the strategies you encounter in this blog apply for you individually and for your business. Building credit involves the application of the same principles, whether you have new or old credit, good or poor, business or personal. These strategies work for everyone and every business.
Once you’ve grown your credit, my final articles will tell you how to parlay your good credit into millions, making money all throughout the process. As a credit millionaire, you know it’s easier to borrow $10-million than it is to earn it on your job or save it. And when you borrow
those funds to buy assets that both pay for themselves and appreciate, you’ve discovered the secret solution to the world’s wealth.
Next time i'll discuss about Why using your own cash is also credit!
1) you pay your bills on time, every time, and
2) you don’t do anything to make your credit worse, results in
better credit.
If you have no credit, expect it to take one to two years for you to develop enough credit to qualify for a major purchase.
Once your credit repair activities have removed all the impactful negative information from your credit reports, and the situation or bad habits that caused the credit crisis are under control, you will find that the credit building process is identical to the process for those with no credit.
In either case, you will start to grow and improve your credit. You will ensure that temporary hardships are planned for through proper budgeting. Your credit scores will gradually increase over time.
Improving your credit worthiness will help in other areas too. Not only will you get more credit at better rates from lenders, but also better employment opportunities and lower insurance rates.
All of the strategies you encounter in this blog apply for you individually and for your business. Building credit involves the application of the same principles, whether you have new or old credit, good or poor, business or personal. These strategies work for everyone and every business.
Once you’ve grown your credit, my final articles will tell you how to parlay your good credit into millions, making money all throughout the process. As a credit millionaire, you know it’s easier to borrow $10-million than it is to earn it on your job or save it. And when you borrow
those funds to buy assets that both pay for themselves and appreciate, you’ve discovered the secret solution to the world’s wealth.
Next time i'll discuss about Why using your own cash is also credit!
Perfect Credit Report-8
The credit repair portions of this series of articles are important. Once you have a credit record, you are
sure to need the strategies. It’s estimated that up to 82% of credit reports contain factual errors. One in four contains an error that will result in the denial of credit. While mistakes often find their way onto your report, they don’t seem to find their way off—it’s up to you.
If you are building new credit, in the beginning it won’t be particularly easy. This is a society based on the credit system. Getting ahead in a credit society is hard for those who have been denied access to the system. However, a careful application of my course will allow your
credit to grow in a balanced fashion.
For young readers, college is the place where you will likely learn to build credit. Routinely college campuses are littered with solicitations from credit card companies, looking to build loyalty with a target market that has the highest on-average discretionary spending. They
want to build that loyalty early, hoping that you remain with them for life. Indeed, I still have a credit card that I applied for while a college student.
Because these cards are targeted to new credit users, the applicants are expected to have small or no credit history. These are some of the easiest credit cards to get for that reason. If you are a college student building credit apply today for one of these cards. Then use it wisely by
following the formula I’ll provide later in this series of articles for proper credit useage.
There is a bit of bad news about the credit restoration and building process. It doesn’t happen fully overnight.
Next time i'll discuss the time frame of building credit.
sure to need the strategies. It’s estimated that up to 82% of credit reports contain factual errors. One in four contains an error that will result in the denial of credit. While mistakes often find their way onto your report, they don’t seem to find their way off—it’s up to you.
If you are building new credit, in the beginning it won’t be particularly easy. This is a society based on the credit system. Getting ahead in a credit society is hard for those who have been denied access to the system. However, a careful application of my course will allow your
credit to grow in a balanced fashion.
For young readers, college is the place where you will likely learn to build credit. Routinely college campuses are littered with solicitations from credit card companies, looking to build loyalty with a target market that has the highest on-average discretionary spending. They
want to build that loyalty early, hoping that you remain with them for life. Indeed, I still have a credit card that I applied for while a college student.
Because these cards are targeted to new credit users, the applicants are expected to have small or no credit history. These are some of the easiest credit cards to get for that reason. If you are a college student building credit apply today for one of these cards. Then use it wisely by
following the formula I’ll provide later in this series of articles for proper credit useage.
There is a bit of bad news about the credit restoration and building process. It doesn’t happen fully overnight.
Next time i'll discuss the time frame of building credit.
Credit Rejuvination-7
Credit rejuvination is similar to restoring an old house. You need to repair a few dings in the walls or woodwork and apply a fresh coat of paint. Some people need to build the house in the first place, starting with the foundation.
Credit Rejuvination is desired for three reasons:
1) starting fresh after a financial crisis
2) recovering from the “all debt is bad” mindset and
building credit
3) to remove derrogatory errors
You may have no credit history at all. Young readers in high school or college are just getting exposed to credit and their first experiences with debt. They don’t yet have a record with the credit bureaus.
Some readers may be well into their adult life and still have no credit. Consequently, you
must pay cash for everything. This is a classic profile of the person who has the “all debt is
bad” mindset. I often hear people say, “I have good credit, I’ve never bought anything on
credit.” Unfortunately, no credit score is just asbad as a poor credit score, and it’s often worse.
If you apply for a loan and have no credit history, the lender has to trust you enough to believe that you will pay it back. He has no references that support your creditworthiness.
Frequently, the ones who believe that any debt is bad debt have often encountered a financial hardship in the past. Inevitably, there is an unpaid medical bill or utility bill that appears on their credit report. This can create the worst credit of all. The poorest credit scores occur
when an individual who has not worked to develop any positive credit reporting accounts has one or two negative items on their credit report.
In many cases, having no score will mean you don’t meet the lending guidelines of the bank, disqualifying you for any loan. If you do get the loan, the lender is taking a huge risk and will charge you higher than prime market rate interest.
If you are over 25 years of age and have no previous credit history, thered flags will fly in the lender's mind. Where has this person been? Can he or she handle money? Is this a case of identity fraud? For lenders, in the business of lending credit, it’s hard to fathom that people are able to get through life without using credit—let alone prefeto live that way. They wonder what has changed to be presented with credit application now. To a lender the lack of credit use confuses them—and a confused mind says “no.”
The final section of this manual addresses these issues. You’ll learn the proven systems to build your credit and grow it to the credit wealthiness of a millionaire.
The good news is, if you have no credit yet, you need only to focus on developing a credit history, and doing so wisely.
Next time i'll discuss about perfect credit record.
Credit Rejuvination is desired for three reasons:
1) starting fresh after a financial crisis
2) recovering from the “all debt is bad” mindset and
building credit
3) to remove derrogatory errors
You may have no credit history at all. Young readers in high school or college are just getting exposed to credit and their first experiences with debt. They don’t yet have a record with the credit bureaus.
Some readers may be well into their adult life and still have no credit. Consequently, you
must pay cash for everything. This is a classic profile of the person who has the “all debt is
bad” mindset. I often hear people say, “I have good credit, I’ve never bought anything on
credit.” Unfortunately, no credit score is just asbad as a poor credit score, and it’s often worse.
If you apply for a loan and have no credit history, the lender has to trust you enough to believe that you will pay it back. He has no references that support your creditworthiness.
Frequently, the ones who believe that any debt is bad debt have often encountered a financial hardship in the past. Inevitably, there is an unpaid medical bill or utility bill that appears on their credit report. This can create the worst credit of all. The poorest credit scores occur
when an individual who has not worked to develop any positive credit reporting accounts has one or two negative items on their credit report.
In many cases, having no score will mean you don’t meet the lending guidelines of the bank, disqualifying you for any loan. If you do get the loan, the lender is taking a huge risk and will charge you higher than prime market rate interest.
If you are over 25 years of age and have no previous credit history, thered flags will fly in the lender's mind. Where has this person been? Can he or she handle money? Is this a case of identity fraud? For lenders, in the business of lending credit, it’s hard to fathom that people are able to get through life without using credit—let alone prefeto live that way. They wonder what has changed to be presented with credit application now. To a lender the lack of credit use confuses them—and a confused mind says “no.”
The final section of this manual addresses these issues. You’ll learn the proven systems to build your credit and grow it to the credit wealthiness of a millionaire.
The good news is, if you have no credit yet, you need only to focus on developing a credit history, and doing so wisely.
Next time i'll discuss about perfect credit record.
Wednesday, September 13, 2006
Five Most Common Reasons You'll Be Denied Credit-6
There are various reasons that a lender will deny credit. The most
common reasons are the five that follow.
1. The primary reason that credit is denied is that the applicant
has a history of late payments, bad debts, or legal judgments.
Failure to treat credit responsibility in the past is seen as
unequivacable evidence that you will likely default on a loan.
2. The second largest reason for the denial of credit is the
applicant submitted an incomplete application. This also
includes the incidents of discrepancies between the
information on your application and in your credit report, such
as total debt or different addresses.
3. The applicant has too much debt when weighed against their
income. Lenders will want to see an applicant that has a good
balance between their income and their debt.
4. The forth largest reason why lenders deny credit is due to one
of the reasons listed above...but it’s an error in the credit file!
It is said that one in four credit reports contain factual errors
that could lead to a denial of credit.
5. The final reason that credit is denied is for insufficient credit
history. Either the applicant has no previous credit file, or
credit that is too young with too few accounts. Lenders
consider people without a track record of responsibility to be
too much of a risk.
Many other people sink into a credit crisis because of a temporary
hardship. Perhaps they had a layoff from their job, or prolonged
hospitalization of themselves or a loved one which caused a temporary
strain on their budget. Perhaps a distaster struck their underinsured
home. For these individuals, fixing the problem means finding ways to
provide a safety net for themselves in the event of more bad luck.
Insurance, cash reserves and passive income streams will help.
A good rule of thumb is to set aside three to six months of living
expenses in a cash account to cover these setbacks. Next blogpost on
Finacial Planning will tell you how to create a cushion to ensure heathy
credit when your personal economy falters.
Tomorrow I'll discuss about credit rejuvination.
common reasons are the five that follow.
1. The primary reason that credit is denied is that the applicant
has a history of late payments, bad debts, or legal judgments.
Failure to treat credit responsibility in the past is seen as
unequivacable evidence that you will likely default on a loan.
2. The second largest reason for the denial of credit is the
applicant submitted an incomplete application. This also
includes the incidents of discrepancies between the
information on your application and in your credit report, such
as total debt or different addresses.
3. The applicant has too much debt when weighed against their
income. Lenders will want to see an applicant that has a good
balance between their income and their debt.
4. The forth largest reason why lenders deny credit is due to one
of the reasons listed above...but it’s an error in the credit file!
It is said that one in four credit reports contain factual errors
that could lead to a denial of credit.
5. The final reason that credit is denied is for insufficient credit
history. Either the applicant has no previous credit file, or
credit that is too young with too few accounts. Lenders
consider people without a track record of responsibility to be
too much of a risk.
Many other people sink into a credit crisis because of a temporary
hardship. Perhaps they had a layoff from their job, or prolonged
hospitalization of themselves or a loved one which caused a temporary
strain on their budget. Perhaps a distaster struck their underinsured
home. For these individuals, fixing the problem means finding ways to
provide a safety net for themselves in the event of more bad luck.
Insurance, cash reserves and passive income streams will help.
A good rule of thumb is to set aside three to six months of living
expenses in a cash account to cover these setbacks. Next blogpost on
Finacial Planning will tell you how to create a cushion to ensure heathy
credit when your personal economy falters.
Tomorrow I'll discuss about credit rejuvination.
Myths Affect On Your Credit -5
Continued from previous article..
The first myth is perhaps the most damaging. Credit card
companies will and do give credit cards to people who can’t
afford to pay the debt on them.
No one can depend on a lender to keep a buyer's spending within safe
and reasonable limits. The lender has no idea about your spending
habits since that information doesn’t directly appear on your credit
report. If you rent your home, that payment likely doesn’t show up on
your report. Likewise your food bill, entertainment expenses and
utilities don’t appear anywhere on that report. The lender only knows
the income you state on your application, and your debts which appear
on your credit report. Thus when credit is extended, it may not always
be in your best interest to use it.
Notice that most of the credit mythology relates to credit card use.
We’ll talk more about credit cards, exploding the myths and telling you
how to use cards properly, in the article Pick a Card, Any Card: The
Deal with Credit Cards.
Denial is not just a river in Egypt...
Sometimes your credit card applications will be denied. Credit will
usually be extended as long as a borrower has shown the ability to
repay in the past. Our credit system ensures that these borrowers will
be allowed to continue buying, even after they can no longer afford the
payments on their debt. Creditors, after all, are in the business of
lending, not rejecting applications! Despite this, once bad credit habits
start appearing on your credit report, lenders will deny your
application.
The first myth is perhaps the most damaging. Credit card
companies will and do give credit cards to people who can’t
afford to pay the debt on them.
No one can depend on a lender to keep a buyer's spending within safe
and reasonable limits. The lender has no idea about your spending
habits since that information doesn’t directly appear on your credit
report. If you rent your home, that payment likely doesn’t show up on
your report. Likewise your food bill, entertainment expenses and
utilities don’t appear anywhere on that report. The lender only knows
the income you state on your application, and your debts which appear
on your credit report. Thus when credit is extended, it may not always
be in your best interest to use it.
Notice that most of the credit mythology relates to credit card use.
We’ll talk more about credit cards, exploding the myths and telling you
how to use cards properly, in the article Pick a Card, Any Card: The
Deal with Credit Cards.
Denial is not just a river in Egypt...
Sometimes your credit card applications will be denied. Credit will
usually be extended as long as a borrower has shown the ability to
repay in the past. Our credit system ensures that these borrowers will
be allowed to continue buying, even after they can no longer afford the
payments on their debt. Creditors, after all, are in the business of
lending, not rejecting applications! Despite this, once bad credit habits
start appearing on your credit report, lenders will deny your
application.
Journey To Good Credit-4
The next step on your credit journey is to focus on the first prong and
build sound financial principles. There is a plethora of financial and
wealth-building advice at your disposal. Volumes have been written on
the topics of budgeting and financial planning alone. All of the
information available to you is right—and wrong!
Correct financial advice and planning information varies depending on
your goal. Without knowing your ultimate goal, writers can’t provide
specific advice and resort to generalities. Sometimes the general advice
is contrary to your goal of business building. This blog benefits
from the ability to know your goal—becoming a credit millionaire. We
can get in deep and detailed with the information you need to reach
that goal.
Next of this blog discusses the three pillars of credit wealthiness:
budgeting, bad debt reduction and credit card useage—all with the
ultimate goal in mind—becoming a credit millionaire. You’ll learn
proven strategies for bad debt reduction. You’ll discover that creating a
financial statement is not as scary as it may originally seem with our
sample net worth statement. You’ll learn 101 tips for living below your
means and much, much more.
After you’ve developed the skills to keep on the good credit path for
your entire life, the blog continues your journey, clearing the path to
becoming a credit millionaire with the rejuvination and repair of your
credit.
Credit crisis:
While some people are in need of credit repair because a temporary
hardship caused them to get behind in their payments, many people
get into a credit crisis because of a failure to be educated about the
effects of their credit decisions. They believe common credit mythology,
such as:
“The credit card company wouldn’t have given me a card if I
couldn’t handle it”
“The best way to build credit is to pay the minimum”
“I have such good credit, my credit card companies often
give me a payment holiday—I don’t have to make a payment
this month!”
“I can charge this now because I usually get a large tax
return check.”
“There’s nothing wrong with my credit report, I haven’t been
denied credit.”
Next time i'll discuss the myths affect on your credit.
build sound financial principles. There is a plethora of financial and
wealth-building advice at your disposal. Volumes have been written on
the topics of budgeting and financial planning alone. All of the
information available to you is right—and wrong!
Correct financial advice and planning information varies depending on
your goal. Without knowing your ultimate goal, writers can’t provide
specific advice and resort to generalities. Sometimes the general advice
is contrary to your goal of business building. This blog benefits
from the ability to know your goal—becoming a credit millionaire. We
can get in deep and detailed with the information you need to reach
that goal.
Next of this blog discusses the three pillars of credit wealthiness:
budgeting, bad debt reduction and credit card useage—all with the
ultimate goal in mind—becoming a credit millionaire. You’ll learn
proven strategies for bad debt reduction. You’ll discover that creating a
financial statement is not as scary as it may originally seem with our
sample net worth statement. You’ll learn 101 tips for living below your
means and much, much more.
After you’ve developed the skills to keep on the good credit path for
your entire life, the blog continues your journey, clearing the path to
becoming a credit millionaire with the rejuvination and repair of your
credit.
Credit crisis:
While some people are in need of credit repair because a temporary
hardship caused them to get behind in their payments, many people
get into a credit crisis because of a failure to be educated about the
effects of their credit decisions. They believe common credit mythology,
such as:
“The credit card company wouldn’t have given me a card if I
couldn’t handle it”
“The best way to build credit is to pay the minimum”
“I have such good credit, my credit card companies often
give me a payment holiday—I don’t have to make a payment
this month!”
“I can charge this now because I usually get a large tax
return check.”
“There’s nothing wrong with my credit report, I haven’t been
denied credit.”
Next time i'll discuss the myths affect on your credit.
Journey To Good Credit-3
This article alone contains everything you need to know to begin your
lifetime journey to good credit.
In my research for this blog and my Give Yourself the Credit seminar, I
learned that very few people ever fully utilize the information on wealth
and business building that they learn. Further investigation revealed it
wasn’t just with wealth and business building, but also with weight
loss, ballroom dancing—everything! It seems that while the information
is learned, it never gets to the point of being a habit and thus produce
the desired result.
You will find this blog is very different. You will discover the truth
about building and rejuvinating credit. The article evaluations will help
you take practical steps in the right direction—to good credit habits
and becoming a credit millionaire. Even when you reach your goal of
becoming a credit millionaire, you’ll continue to apply the strategies
you learn in this blog to maintain your credit millionaire status.
The Journey
The journey from credit repair to credit millioniare can be stated in a
simple four-step process.
1. thoroughly explore what credit is from the eyes of a lender
2. learn sound financial principles
3. correct errors on your credit report, restoring your perfect credit
4. using your good credit to build wealth
Sounds simple, doesn’t it? It really is that easy. But knowing what t
steps are is like knowing the title to a book—you have no idea what
nuances the story unfolds. Like a good novel, this blog takes you
on the journey to millionaire credit. Together we’ll walk through each
of those four steps—legs on your journey—learning the shortcuts and
pitfalls along the path. You’ll learn the resources you need to pack fo
the trip. Whenever you find it necessary to stray from the path to
explore an interesting cove or tree of life, I’ll be right here, waiting to
guide you further along your journey.
That journey starts with a deep understanding of the credit system.
The common credit advice focuses on improving your credit score.
While this is a fine approach if you are looking for good credit to buy
your home or automobile, it’s shortsighted when looking for millionair
credit. On some next articles of this blog explodes this consumer credit myth and
explores what lenders really look at when issuing credit.
You’ll discover the five factors in every lending decision, and how to
present those factors to a lender. I call this the All-Star Credit plan.
My business used these very five factors as the framework for our
business plan presentation to the bank that ultimately gave us a $5-
million asset-based credit line. Once we knew how to tell bankers wh
they wanted to know, the doors to the vault were opened for us. On
this journey, you too will learn how to crack the code to bank vaults.
Once you’ve trained for the trip by learning what credit really is and
how to appropriately demonstrate it, you are ready to work on your
credit heath.
Complete credit rejuvination and building efforts require a two-pronged
approach. First, you need to fix the behavior or circumstance that
resulted in bad or no credit, then you need to remove, soften or respond
to the evidence on your credit report. Each prong works hand-in-hand
to bring your credit to life and ensure that the credit damage doesn’t
recur.
Next time i'll discuss the second step of your good credit journey.
lifetime journey to good credit.
In my research for this blog and my Give Yourself the Credit seminar, I
learned that very few people ever fully utilize the information on wealth
and business building that they learn. Further investigation revealed it
wasn’t just with wealth and business building, but also with weight
loss, ballroom dancing—everything! It seems that while the information
is learned, it never gets to the point of being a habit and thus produce
the desired result.
You will find this blog is very different. You will discover the truth
about building and rejuvinating credit. The article evaluations will help
you take practical steps in the right direction—to good credit habits
and becoming a credit millionaire. Even when you reach your goal of
becoming a credit millionaire, you’ll continue to apply the strategies
you learn in this blog to maintain your credit millionaire status.
The Journey
The journey from credit repair to credit millioniare can be stated in a
simple four-step process.
1. thoroughly explore what credit is from the eyes of a lender
2. learn sound financial principles
3. correct errors on your credit report, restoring your perfect credit
4. using your good credit to build wealth
Sounds simple, doesn’t it? It really is that easy. But knowing what t
steps are is like knowing the title to a book—you have no idea what
nuances the story unfolds. Like a good novel, this blog takes you
on the journey to millionaire credit. Together we’ll walk through each
of those four steps—legs on your journey—learning the shortcuts and
pitfalls along the path. You’ll learn the resources you need to pack fo
the trip. Whenever you find it necessary to stray from the path to
explore an interesting cove or tree of life, I’ll be right here, waiting to
guide you further along your journey.
That journey starts with a deep understanding of the credit system.
The common credit advice focuses on improving your credit score.
While this is a fine approach if you are looking for good credit to buy
your home or automobile, it’s shortsighted when looking for millionair
credit. On some next articles of this blog explodes this consumer credit myth and
explores what lenders really look at when issuing credit.
You’ll discover the five factors in every lending decision, and how to
present those factors to a lender. I call this the All-Star Credit plan.
My business used these very five factors as the framework for our
business plan presentation to the bank that ultimately gave us a $5-
million asset-based credit line. Once we knew how to tell bankers wh
they wanted to know, the doors to the vault were opened for us. On
this journey, you too will learn how to crack the code to bank vaults.
Once you’ve trained for the trip by learning what credit really is and
how to appropriately demonstrate it, you are ready to work on your
credit heath.
Complete credit rejuvination and building efforts require a two-pronged
approach. First, you need to fix the behavior or circumstance that
resulted in bad or no credit, then you need to remove, soften or respond
to the evidence on your credit report. Each prong works hand-in-hand
to bring your credit to life and ensure that the credit damage doesn’t
recur.
Next time i'll discuss the second step of your good credit journey.
Good Debt And Bad Debt-2
What’s worse than the mounting consumer debt is the loss of
opportunity when bad debt prohibits us from acquiring credit for
investments—good debt.
Good debt is debt that produces a financial benefit—it’s an investment.
It’s debt that is used to purchase assets, specifically those assets that
put money into your pocket every month. Debt used to acquire a rental
property, piece of equipment or a business is good debt especially when
the income from that asset covers the expenses of the debt every month.
With good debt, the investment pays for itself over time.
A catchy phrase I’ve heard a number of times to describe the difference
between good debt and bad debt is:
Good debt feeds you while bad debt bleeds you.
Leverage is when you use some of the equity in your assets, or the
assets of other people, to buy more assets. The power of leverage is the
greatest tool of wealth building. And without good credit, leverage is
unobtainable.
For investors and business owners, leverage is the tool that expands
your purchasing power and accelerates your success. Credit, leverage,
other people’s money (OPM)—call it what you will, but if you have a
history of misused credit, or have never established any credit, then
this important tool is not available for your use.
Let’s go back even further to discover the meaning of credit. The word
"creditor" is derived from the Latin word "credere," which means to put
faith or trust in.
Historically, the credit decision by a lender was based entirely on trust.
Banking was done on a handshake by a local lender based upon the
borrower’s reputation in the community. A lender trusted that a borrower will honor the debt, and pay it back in accordance with their
prior agreement. In essence, a creditor was someone who was willing to
place his/her faith in you. It is the trust in your ablity to borrow
money and pay it back over time, with interest.
With our economy becoming more global every day, someone’s personal
relationships and reputation in the community now plays a minor role
in the typical credit decision. An agreement between two individuals,
concluded by the traditional shaking of hands, is a rare relic. Although
credit in today's world is still based on trust, now the trust factor is
determined far less by relationships and far more by a system of scores
and formulas.
When you apply for credit, you usually grant permission for the
prospective lender to review your personal credit history as compiled
from a credit bureau. For most borrowers, credit decisions are largely
based on this impersonalized score and a sterile set of financials.
Not so for the wealthy. The wealthy in society are still able to borrow
money far in excess of what they own and earn. Unlike the majority of
borrowers, the wealthy still bank on relationships and a handshake,
allowing them the opportunity to create more and more wealth.
The lenders to the wealthy know credit is much more than a score and
a balance sheet. They view credit in a way that is far different from the
typical social folklore on what makes good credit. Some of the credit
myths that the wealthy and their lenders know are false:
in the articles that follow, and teach you to
think of credit in the same way that the
wealthiest people do.
By reading this blog, you have made a
commitment to improving your credit. The good news is, you are 24 hours away from better credit, 90 days away from
more credit, and as little as two years away from the kind of credit
profile that can make you a credit millionaire.
Yes, you can be a millionaire by focusing on your credit. This blog will
tell you the secrets the wealthy use to become wealthier, and provide
you with proven strategies for repairing, increasing and polishing your
overall credit profile.
Keep in mind that your credit can be improved—whether it’s new, poor
or excellent.
If you have bad credit, your credit problems are surmountable—no
matter how bad your past indiscretions or misfortunes. The only way
to repair damaged credit is to continue moving in this positive
direction. Take baby steps.
If you have no credit, we will walk together through the process to build
it. It may take some time to build really great credit, but in as little as
90 days you can have a positive credit profile. If you already have good
credit, it can get better! Presentation is often the primary reason that a loan gets accepted or approved. In this blog you’ll learn how to present
your credit profile in a way that lenders can’t resist.
The only way to get millionaire credit is through the proper application
of credit building strategies over time. And the only way to be a credit
millionaire is to use good credit to purchase assets.
Next time i'll discuss starting your journey to a good credit.
opportunity when bad debt prohibits us from acquiring credit for
investments—good debt.
Good debt is debt that produces a financial benefit—it’s an investment.
It’s debt that is used to purchase assets, specifically those assets that
put money into your pocket every month. Debt used to acquire a rental
property, piece of equipment or a business is good debt especially when
the income from that asset covers the expenses of the debt every month.
With good debt, the investment pays for itself over time.
A catchy phrase I’ve heard a number of times to describe the difference
between good debt and bad debt is:
Good debt feeds you while bad debt bleeds you.
Leverage is when you use some of the equity in your assets, or the
assets of other people, to buy more assets. The power of leverage is the
greatest tool of wealth building. And without good credit, leverage is
unobtainable.
For investors and business owners, leverage is the tool that expands
your purchasing power and accelerates your success. Credit, leverage,
other people’s money (OPM)—call it what you will, but if you have a
history of misused credit, or have never established any credit, then
this important tool is not available for your use.
Let’s go back even further to discover the meaning of credit. The word
"creditor" is derived from the Latin word "credere," which means to put
faith or trust in.
Historically, the credit decision by a lender was based entirely on trust.
Banking was done on a handshake by a local lender based upon the
borrower’s reputation in the community. A lender trusted that a borrower will honor the debt, and pay it back in accordance with their
prior agreement. In essence, a creditor was someone who was willing to
place his/her faith in you. It is the trust in your ablity to borrow
money and pay it back over time, with interest.
With our economy becoming more global every day, someone’s personal
relationships and reputation in the community now plays a minor role
in the typical credit decision. An agreement between two individuals,
concluded by the traditional shaking of hands, is a rare relic. Although
credit in today's world is still based on trust, now the trust factor is
determined far less by relationships and far more by a system of scores
and formulas.
When you apply for credit, you usually grant permission for the
prospective lender to review your personal credit history as compiled
from a credit bureau. For most borrowers, credit decisions are largely
based on this impersonalized score and a sterile set of financials.
Not so for the wealthy. The wealthy in society are still able to borrow
money far in excess of what they own and earn. Unlike the majority of
borrowers, the wealthy still bank on relationships and a handshake,
allowing them the opportunity to create more and more wealth.
The lenders to the wealthy know credit is much more than a score and
a balance sheet. They view credit in a way that is far different from the
typical social folklore on what makes good credit. Some of the credit
myths that the wealthy and their lenders know are false:
- Credit is bad.
- If something is done to my credit fraudulently, it’s easy to repair.
- If I get a raise, I’ll have a better credit score.
- This loan will go through no problem because of the value of the collateral.
- Getting out of debt is the best way to financial freedom.
- A good credit score means I have good credit.
- Closing accounts will increase my credit score.
- Paying my credit cards in full every month is the best way to improve my credit.
- I have all the credit I need.
- Getting a copy of my credit report will hurt my score.
- Shopping for a large ticket item will hurt my credit score when multiple vendors pull my credit.
- Declaring bankruptcy will damage my credit forever.
- I should have no problem getting credit for my rental property, even though I’m a renter myself.
in the articles that follow, and teach you to
think of credit in the same way that the
wealthiest people do.
By reading this blog, you have made a
commitment to improving your credit. The good news is, you are 24 hours away from better credit, 90 days away from
more credit, and as little as two years away from the kind of credit
profile that can make you a credit millionaire.
Yes, you can be a millionaire by focusing on your credit. This blog will
tell you the secrets the wealthy use to become wealthier, and provide
you with proven strategies for repairing, increasing and polishing your
overall credit profile.
Keep in mind that your credit can be improved—whether it’s new, poor
or excellent.
If you have bad credit, your credit problems are surmountable—no
matter how bad your past indiscretions or misfortunes. The only way
to repair damaged credit is to continue moving in this positive
direction. Take baby steps.
If you have no credit, we will walk together through the process to build
it. It may take some time to build really great credit, but in as little as
90 days you can have a positive credit profile. If you already have good
credit, it can get better! Presentation is often the primary reason that a loan gets accepted or approved. In this blog you’ll learn how to present
your credit profile in a way that lenders can’t resist.
The only way to get millionaire credit is through the proper application
of credit building strategies over time. And the only way to be a credit
millionaire is to use good credit to purchase assets.
Next time i'll discuss starting your journey to a good credit.
Crdit Repair To Credit Millionaire-1
I am going to start a series of articles which will give you a kickstart to repair your bad credit and become a credit millionaire who never denied by anyone for credit.
Simply defined, credit is financial responsibility. Credit is also any way
of paying for goods and services that doesn’t require you to pay in full
when you receive them.
In today's world it is difficult to get by without good credit. The use of
credit can buy a person time and give them access to opportunities
that would otherwise elude them. For example, how many people could
afford to purchase a new home or automobile with cash, or be willing
or able to wait the time to save enough? Many have trouble saving the
down payment for those items, let alone the entire purchase price.
Furthermore, just try to rent an automobile or make an airline or hotel
reservation without a credit card.
Credit is the bridge between you and the things you want to buy.
Over the last decade, credit cards have changed the face of the global
economy. Their wide acceptance, portability and fast transaction time
have made them the preferred currency. Increasingly, companies are
allowing us to purchase almost anything with the swipe of a card and
the scrawl of a pen—sometimes with just the electronic equivalents. As
a result, credit has assumed a greatly expanded role in the lives of
individuals.
Credit—once reserved for major purchases like homes, cars and
furniture—is now used to purchase groceries, gasoline, and even the
morning coffee. From pay-at-the-pump gas stations to online shopping
and even self-checkout grocery stores; it’s becoming easier and easier
to buy using a credit card.
What started as a convenient alternative to carrying cash has
plummeted the world into a quagmire of consumer debt.
Unfortunately, it’s easy to spend next month's
earnings before you earn them. It’s now typical for
tax refund checks expected in May to be spent to
pay the debts of the previous year’s expenses.
There is an estimated
$3 trillion in total
If you don’t think that the use of credit cards
personal debt
results in more spending, consider this: in 2001,
in the US
two professors at the Massachusetts Institute of
Technology in Cambridge conducted an
experiment. The two held an auction for tickets to
a Boston Celtics basketball game. Half of the
bidders were told that the winner would have to pay for the tickets in
cash after grace time to come up with the money. The other half were
told they could use a credit card. The bids of the credit card people
were twice as high as those of the cash people.
(My Generation, Sept-Oct 2001)
It is estimated that one in every six Americans has problem credit.
Statistics show the average person carries $8,562 in credit card debt as
of 2001, up from $3,000 in 1990. There are 185 million credit card
holders carrying 1.3 billion credit cards in use in the US, if you count
store and gas cards. These users charged $1.4 trillion to their cards in
2002. There is an estimated $3 trillion in total personal debt in the US,
not to mention business debts. The largest company in the nation, the
federal government, carries a national debt of $7.2 trillion at the time of
this writing, and it is growing over $1.7 billion a day.*
Given the present debt loads, why read a book advocating becoming
ndebted $10-million or more?
Debt, inherently, is not bad, financially irresponsible, or evil. Most
millionaires wouldn’t have their wealth without incurring debt.
Debt is “good” or “bad” relative to what the debt is used to purchase.
Debt becomes bad debt when people use it to purchase consumable
goods and even necessities. Don’t use debt to live beyond your means
and buy things you really can’t afford. Examples of bad debt are
http://www.brillig.com/debt_clock/
Next time we'll discuss about good credit and bad credit.
Simply defined, credit is financial responsibility. Credit is also any way
of paying for goods and services that doesn’t require you to pay in full
when you receive them.
In today's world it is difficult to get by without good credit. The use of
credit can buy a person time and give them access to opportunities
that would otherwise elude them. For example, how many people could
afford to purchase a new home or automobile with cash, or be willing
or able to wait the time to save enough? Many have trouble saving the
down payment for those items, let alone the entire purchase price.
Furthermore, just try to rent an automobile or make an airline or hotel
reservation without a credit card.
Credit is the bridge between you and the things you want to buy.
Over the last decade, credit cards have changed the face of the global
economy. Their wide acceptance, portability and fast transaction time
have made them the preferred currency. Increasingly, companies are
allowing us to purchase almost anything with the swipe of a card and
the scrawl of a pen—sometimes with just the electronic equivalents. As
a result, credit has assumed a greatly expanded role in the lives of
individuals.
Credit—once reserved for major purchases like homes, cars and
furniture—is now used to purchase groceries, gasoline, and even the
morning coffee. From pay-at-the-pump gas stations to online shopping
and even self-checkout grocery stores; it’s becoming easier and easier
to buy using a credit card.
What started as a convenient alternative to carrying cash has
plummeted the world into a quagmire of consumer debt.
Unfortunately, it’s easy to spend next month's
earnings before you earn them. It’s now typical for
tax refund checks expected in May to be spent to
pay the debts of the previous year’s expenses.
There is an estimated
$3 trillion in total
If you don’t think that the use of credit cards
personal debt
results in more spending, consider this: in 2001,
in the US
two professors at the Massachusetts Institute of
Technology in Cambridge conducted an
experiment. The two held an auction for tickets to
a Boston Celtics basketball game. Half of the
bidders were told that the winner would have to pay for the tickets in
cash after grace time to come up with the money. The other half were
told they could use a credit card. The bids of the credit card people
were twice as high as those of the cash people.
(My Generation, Sept-Oct 2001)
It is estimated that one in every six Americans has problem credit.
Statistics show the average person carries $8,562 in credit card debt as
of 2001, up from $3,000 in 1990. There are 185 million credit card
holders carrying 1.3 billion credit cards in use in the US, if you count
store and gas cards. These users charged $1.4 trillion to their cards in
2002. There is an estimated $3 trillion in total personal debt in the US,
not to mention business debts. The largest company in the nation, the
federal government, carries a national debt of $7.2 trillion at the time of
this writing, and it is growing over $1.7 billion a day.*
Given the present debt loads, why read a book advocating becoming
ndebted $10-million or more?
Debt, inherently, is not bad, financially irresponsible, or evil. Most
millionaires wouldn’t have their wealth without incurring debt.
Debt is “good” or “bad” relative to what the debt is used to purchase.
Debt becomes bad debt when people use it to purchase consumable
goods and even necessities. Don’t use debt to live beyond your means
and buy things you really can’t afford. Examples of bad debt are
http://www.brillig.com/debt_clock/
Next time we'll discuss about good credit and bad credit.
Wednesday, September 06, 2006
The importance of credit score and adverse affect of bankruptcy on credit score.
While filing for bankruptcy is becoming a common practice worldwide and millions are swimming in debt ; avoiding bankruptcy and increasing the credit score is the most important step to get rid off this destructive situation . An expert can guide anyone in this situation fairly and if his advices come free then it is better.
Avoiding bankruptcy is the key of any good credit score sheet.
Bankruptcy is the single worst thing that will destroy ones credit score. Bankruptcy will lower the persons credit score by 200 points or more and is very difficult to come back from.
Once a persons credit score falls below 620, any loan he/she get will be far more expensive. A bankruptcy on a credit record is reported for up to 10 years.
And the importance of credit score to get credit and credit card anywhere in the world is unavoidable.
The FICO or credit score ranges are broken down as follows:
720-850 - This represent the best score range
700-719 – Able to obtain favorable financing terms
675-699- This is still a decent score range
620-674 – May have trouble obtaining favorable credit terms
560-619 – May have trouble obtaining credit
500-559 – Time to improve your score
Ones credit score is broken down into 5 distinct categories each with their own importance based on a percentile. The 5 categories and the percentage they represent I relation to his/her credit score are as follows:
Payment History – 35%
Amounts Owed – 30%
Length of Credit History – 15%
New Credit – 10%
Types of Credit Used – 10%
Ones payment history contains information on credit cards, retail accounts, installment loans, finance company accounts and any mortgages he/she may have had. It also details any past due accounts and the amount owed on him. He will also find bankruptcy information as well as other adverse information in regards to his credit history. This is why it warrants a 35% piece of the pie.
So , it is important to increase credit score even if one have good credit and must if one have bad credit and one should avoid bankruptcy as far as possible with help of a credit consultant .
My next topic will be about how to avoid bankruptcy and wahat are the alternatives of bankruptcy.
Avoiding bankruptcy is the key of any good credit score sheet.
Bankruptcy is the single worst thing that will destroy ones credit score. Bankruptcy will lower the persons credit score by 200 points or more and is very difficult to come back from.
Once a persons credit score falls below 620, any loan he/she get will be far more expensive. A bankruptcy on a credit record is reported for up to 10 years.
And the importance of credit score to get credit and credit card anywhere in the world is unavoidable.
The FICO or credit score ranges are broken down as follows:
720-850 - This represent the best score range
700-719 – Able to obtain favorable financing terms
675-699- This is still a decent score range
620-674 – May have trouble obtaining favorable credit terms
560-619 – May have trouble obtaining credit
500-559 – Time to improve your score
Ones credit score is broken down into 5 distinct categories each with their own importance based on a percentile. The 5 categories and the percentage they represent I relation to his/her credit score are as follows:
Payment History – 35%
Amounts Owed – 30%
Length of Credit History – 15%
New Credit – 10%
Types of Credit Used – 10%
Ones payment history contains information on credit cards, retail accounts, installment loans, finance company accounts and any mortgages he/she may have had. It also details any past due accounts and the amount owed on him. He will also find bankruptcy information as well as other adverse information in regards to his credit history. This is why it warrants a 35% piece of the pie.
So , it is important to increase credit score even if one have good credit and must if one have bad credit and one should avoid bankruptcy as far as possible with help of a credit consultant .
My next topic will be about how to avoid bankruptcy and wahat are the alternatives of bankruptcy.
Saturday, September 02, 2006
Bad credit credit cards
I've discussed many times how and where you can get the best credit card after bankruptcy or bad credit. Today i'll discuss how to increase your credit score using a bad credit credit cards.
These steps will help you to increase your credit score with a bad credit credit cards.
When you are building your credit score, you want to start small. Open one account and use it at least once a month to make a purchase. This can be a regular purchase that you have cash to pay for. The point is to use your credit and then repay it. Every time you make a payment, it will show up on your credit report.
Lenders will also look at how often you make payments. So using your card once a year and paying off the entire balance that month won’t do you much good. Your credit report covers three years’ worth of payment history, and lenders want to see your payment pattern.
Don’t max out your card either. Only use a small portion of your credit to show lenders that you don’t get yourself into financial binds.
Credit card companies offer several different types of credit cards for consumers. You can find student programs that require no co-signer or income. This is a great offer for your first card, but these cards also have higher rates.
You can also find cards with cash back rewards or other incentives. The trade-off are higher rates though. However, you can find no frill cards with low interest rates if you plan to carry a balance. Whichever credit card program you choose, make sure it fits with your financial goals.
Regular payments are only one part of your credit score. You also want to keep your credit in good order. If you have dozens of accounts open, close the ones you don’t use. The less open credit you have, the more you will be eligible for, a bonus when buying a home or car.
Also be sure to take advantage of your annual free credit report. Look over it to make sure that your credit history is correct. If you find any discrepancies, resolve them with your lender.These steps will help you to increase your credit score with a bad credit credit cards.
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