Financial Series #1: How I Repaired My Credit

How I Repaired My Credit

By Afua Serwah Osei-Bonsu

It’s August and I am making a plan to repair my credit.  The first step is to assess

the problems and chart a course to health.  I find it very worthwhile to ask creditors

who are often supplying credit ratings for good credit, to return calls and whenever short

to make arrangements to pay from the next paycheck via automatic withdraw.

What really impressed me recently was thinking not backwards at a life lived below zero but forwards to building capital.  I heard about “Hantz Financial” and establishing a variety of savings and investment strategies.  It’s possible I found out to have an outside IRA with a financial company and then when and

if you leave a position with a 401K, to roll in your 401K to your outside IRA.  People often save half a million or more in IRA’s.

Getting out of debt has to do with “positive thinking.”  I looked at my current financial profile to find locations to save money in an IRA or an education fund or in a savings account for a house etc.  I look for jobs that have 401K’s or retirement accounts to have a long term savings goal for a business.  Some employers offer matching funds which is a great way to build up your savings for a later business plan.  By the time one really has enough experience, education and money sometimes retirement may be an ideal time to start a business.

One good technique for building credit is to budget all your debt into an excel worksheet.  On a second worksheet to budget all of your savings accounts like, escrow plans, IDA’s, IRA’s, basic savings accounts and multiple bank accounts etc.  One thing that really matters in the end is to have a high income to debt ratio, the more you save the better this formula and your credit improves.

When I initially sat down I thought I will save $177 a month in one account, $40 a week in another two accounts one internal 401K and one external IRA account etc. and started right here and now to build my wealth.  Getting to that point is not hard, but you don’t have enough work, unless you can save something.

I even thought to save for surgeries, health and beauty etc.  To get out of a slump is not that hard actually.  Get two even three jobs.  Even volunteering with AmeriCorps Vista can pay something and serve as humanitarian service.  The best thing to do is to balance work and school and be on a path to improvement with lots of fresh knowledge, friends and colleagues.  Net worth often goes up with the more education one has.

In the long run one needs to envision debt shrinking and wealth building and not to just focus on debt.

You can spend a lot of time on debt and end up with the same scaffolding that creates debt and build debt again and also not have built wealth.

 One has to consciously build wealth-it does not magically appear.

Debt scaffolding is usually in the form of credit accounts.  A good thing to do with larger debt such as student loans is to consolidate with companies like KPA and to get either debt forgiveness or freeze interest to actually be able to start paying it off and pay it off as soon as possible even while you’re in school.  Very often the forgiveness is frozen interest with KPA and student loans.

There are some larger ideas that can be debt producing but also really good wealth builders like real-estate.  It’s possible with good taste to purchase a property at a reasonable rate then value the property with renovations then appraise it.  For example installing a fire pit or tiles, or a pool, or even a tennis court, or new siding or to face the house, or a build out-lots of things can add value to a property and garner a higher appraisal and ultimately wealth for the owner.

The first goal is to assess, the second goal is get enough work, the third goal is to build wealth, the fourth goal is to eliminate debt, and the fifth goal is to progressively increase earning potential via education.

Credit cards almost always create bad credit I find.  The best thing to do may be to pay them off and cut them up either after their paid or before and to eliminate your debt scaffolding.  Credit can mean living below zero.

Think often about loans and amortization and long term interest that make it hard to pay things back. Check for example www.bankrate.com to see what your loans will actually cost you.  It can be scary to be offered a loan and pay on a variable interest only plan while you’re in school-imagine just paying and paying and never paying on the principal?

Large purchases like cars, houses and vehicles need to be done very carefully.  Try not to impulsively walk into the dealership and lease a car.  Whenever possible pay cash for your car and get the newest one possible.  Even go 3 years back to get a good price on a vehicle with a 125 point inspection.  One dealership in Michigan says their lowest preowned vehicle runs about $5,500-get up that point.

Leased cars are considered by some dealers to be rentals.  You have to pay for full coverage insurance with leased vehicles plus the financing charges and monthly interest one will very often not get their monies worth.  The financing alone can be the price of a pre-owned vehicle.  Be careful even trading in a good vehicle and leasing, you can lose your investment.  Sometimes dealers add up your vehicle trade in price and eat it in the financing charge so it becomes worthless.

The other thing I find is to pay for PLPD insurance not full coverage because insurance companies rarely replace the vehicle.  If you lease a car, full coverage insurance is required, but all that’s essentially needed on the road is PLPD as cheap as possible.  Full coverage plus a leased vehicle can be so expensive that you go into severe debt and the car could crash or devalue.

There are companies like Lexington Law that can help to re-establish ones credit rating.  Lexington Law uses letters etc. and make sure things get updated appropriately and that everything is accurate in your credit report.  It can be nice to have a lawyer or legal team go over your credit reports to boost your credit rating.

After the cards are cut up-old style-that debt will start to go down, it won’t be able to go up.  Many people with bad credit had health problems or time off work and end up with a credit slump.  Simply returning to work usually posts to one’s credit report and improves their score.  Things need to be paid off, not paid regularly.

Decide what is going to be your good credit and call them and ask them for good credit. The people who call you, creditors very often give you a rating that impacts your score.  If you notice someone consistently giving you bad ratings get out of that relationship as soon as possible.

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