"Defeating the Credit Monster!! - Building A+ Credit" - By Jason J Hurst

One of the main hurdles that buyers face to prepare for the home buying process is getting their credit in order for purchase.  Thanks to the Great Recession of 2008, many people have taken hits to their credit profiles that may take years to over come.  BUT THEY DON'T HAVE TO!!  Now, I know the banks haven't made it much easier by tightening their policies toward lending, but with a plan and a little bit of faith, you are more than able to overcome the DEBT MONSTER (muah-ahahahaha!!).

I, too, was a victim of the real estate collapse and job losses of 2008; leaving me to battle two foreclosures and a, seemingly, insurmountable amount of close to $30,000 of debt to pay off.  But here we are in 2014, and I am now a homeowner once again, in the market for a second home, and that $30,000 debt figure….. Blowing in the wind!!  Now, I didn't say it was easy and it may not happen overnight like you want it to, but diligence, mixed with faith, and a lot of patience, and you'll be in the position to walk the path of homeownership in NO TIME!!  Here's some simple steps to help:

1. Get a credit card if you don't have one
Now I recommend this with EXTREME caution.  You have to know yourself and your

propensity to spend and make impulse decisions.  If you are irrationally exuberant then STAY AWAY!!  In my young and impulsive days, I had the mentality that the money would always be there, but life always finds away to make the music stop and you have to be prepared for those seasons. Now, having said that, having and using a credit card or two can really build your scores.  If you can't qualify for a regular credit card, consider a secured credit card, where the issuing bank gives you a credit line equal to the deposit you make. Look for a card that reports to all three credit bureaus. My wife and I used Capital One, which has some good options, especially for the "credit-challenged".

2. Add an installment loan to the mix
So, the name of the game is "RESPONSIBILITY".  Potentially lenders need to know they're going to get piz-AID!! So they are looking at your ability to honor your word that you will repay what you owe.  You'll see rapid benefits if you've proven you are consistently repaying these types of credits: revolving (credit cards) and installment (personal loans, auto, mortgages and student loans).

Again, be sure that the loan of choice reports to all three credit bureaus.

3. Pay down your credit cards
Paying off your installment loans (mortgage, auto, student, etc.) can help your scores but typically not as dramatically as paying down -- or paying off -- revolving accounts such as credit cards.

Lenders like to see a big gap between the amount of credit you're using and your available credit limits. Getting your balances below 30% of the credit limit on each card can really help; getting balances below 10% is even better.

Though most debt gurus recommend paying off the highest-rate card first, a better strategy here is to pay down the cards that are closest to their limits.

4. Use your cards lightly
Racking up big balances can hurt your scores, regardless of whether you pay your bills in full each month. What's typically reported to the credit bureaus, and thus calculated into your scores, are the balances reported on your last statements.

You often can increase your scores by limiting your charges to 30% or less of a card's limit; 10% is even better. If you're having trouble keeping track, you can set up email or text alerts with your credit card companies to let you know when you're approaching a limit you've set. If you're going to practice the use of credit, I HIGHLY RECOMMEND… let me say that again.. HIGHLY RECOMMEND that you ONLY use it for purchases that are considered "normal course of life purchases". What do I mean by that? Purchases that you would have normally bought with cash, according to your budget (You do have a budget right???) Have the mentality that the card is same as cash.  And pay those charges off, IMMEDIATELY at the end of the month, if not when you get home for the day, if you have to.  (Do you notice a theme here with all of the bolded words?)

5. Check your limits
Your scores might be artificially depressed if your lender is showing a lower limit than you actually have. Most credit card issuers will quickly update this information if you ask.

If your issuer makes it a policy not to report consumers' limits, however -- as is sometimes the case with "no preset spending limit" cards -- the bureaus may use your highest balance as a proxy for your credit limit.

You may see the problem here: If you consistently charge the same amount each month -- say, $2,000 to $2,500 -- it may look to the credit-scoring formula like you're regularly maxing out that card.

If you have an American Express charge card -- the kind that must be paid in full every month, rather than the kind on which you carry a balance -- you probably don't have to worry, because charge cards typically aren't included in the credit utilization portion of the FICO formula.

If, however, the card is categorized on your credit reports not as a charge card but as a revolving credit card, and either a credit limit or high balance is reported to the bureaus, your balances on the card could be a problem.

You could go on a wild spending spree to raise the high balance reported to the credit bureaus, but a more sober solution would simply be to pay your balance down or off before your statement period closes.

6. Dust off an old card
The older your credit history, the better. But if you stop using your oldest cards, the issuers may decide to close the accounts or stop updating them to the credit bureaus. If you're like me, you have probably made a bonfire of your old cards and destroyed them completely, so this may or may not be for you. But, nevertheless, it may help.

7. Get some goodwill
If you've been a good customer, a lender might agree to simply erase that one late payment from your credit history. You usually have to make the request in writing, and your chances for a "goodwill adjustment" improve the better your record with the company (and the better your credit in general). But it can't hurt to ask. I'm the type of person with the type of boldness to ask for anything.  If they say "no", well shoot, I'm in the same place as where I started.  But if they say yes, IT'S ON, BABY!!


8. Dispute old negatives
Say that fight with your phone company over an unfair bill a few years ago resulted in a collections account. You can continue protesting that the charge was unjust, or you can try disputing the account with the credit bureaus as "not mine." The older and smaller a collection account, the more likely the collection agency won't bother to verify it when the credit bureau investigates your dispute.

Some consumers also have had success disputing old items with a lender that has merged with another company, which can leave lender records a real mess.

9. Blitz significant errors
Your credit scores are calculated based on the information in your credit reports, so certain errors there can really cost you. But not everything that's reported in your files matters to your scores.

Here's the stuff that's usually worth the effort of correcting with the bureaus:

• Late payments, charge-offs, collections or other negative items that aren't yours.
• Credit limits reported as lower than they actually are.
• Accounts listed as "settled," "paid derogatory," "paid charge-off" or anything other than "current" or "paid as agreed" if you paid on time and in full.
• Accounts that are still listed as unpaid that were included in a bankruptcy.
• Negative items older than seven years (10 in the case of bankruptcy) that should have automatically fallen off your reports.

Again, this is not "conquering Rome in a day". Although for some who have never checked their credit reports, it just could be.  But for the rest of us, it is a process and you are, in large part, the main, determining factor of how long that process will take.  With diligence and persistence, I am a living witness that it can be done! I even got audacious enough in my belief that I created a daily affirmation and took my credit bills and marked them the balances down to "$0" just so I could begin to visualize myself debt-free. And sure enough, IT HAPPENED!! And you can do it too!

If you have any questions, or need any other resources, I'm here to help. Contact me at any time!