How Credit Works

Here’s “what we should have learned in school” about credit.  Without this information, you’ve probably wasted thousands of dollars, or worse.  Now you’re about to learn exactly how your creditors have been taking advantage of you this whole time, and how to flip the tables to win the credit game.  This unique info is unlike anything else out there in it’s completeness, effectiveness and simplicity.  Please enjoy the benefits forevermore…

Your credit will be affected no matter what you do.

Let’s learn how…

In just a minute, my world famous “3-Legged Stool” analogy will demystify how credit works and makes it simple and easy to understand. This is credit advice that “makes sense”.  You can use these credit tips to your advantage for the rest of your life.

If you want a high credit score more than anything else, then I offer additional credit tips and strategies to get your score as high as possible ASAP.

However, first let me ask you an interesting question:

What do you really need your credit score for, other than acquiring more high interest (bad) credit card debt?

How much is your credit score costing you each month – in real dollars?

(Dollars you could spend on food, shopping, vacation, retirement, your children, education, etc, instead of handing it over to your creditors in interest payments every month?)

Credit Importance Test

What’s most important to you?

1. To have the lowest monthly payment possible on your debts?
2. To get out of debt for the lowest amount possible?
3. To get out of debt as soon as possible?

In 2005 I conducted a “National Debt Relief Survey” while serving as COO of STARTOVERTODAY.COM, a nationwide financial solutions company I co-founded in 2002. I surveyed over 10,000 people who had asked us for help with their credit card debt online this question, “What is most important to you?”

Here are the results for the answers chosen:

• Lowering your monthly payments 7.6%
• Reducing the amount of debt you owe 12.7%
• Getting out of debt ASAP 42.4%
• Preserving perfect credit 4.2%
• Restoring less-than-perfect credit 16.1%
• Having only one monthly payment 4.2%
• Stopping creditor calls 4.2%
• Reducing or Eliminating Interest & Fees 3.4%
• Other 5.1%

When I saw these results, all I could say was, “Wow!”

I was shocked, and so were the executives of several top debt management companies who I shared the results with, because we were all convinced up until then that most people just wanted the lowest monthly payment.  As it turns out, most people just want to get out of debt ASAP!

Back to the question I asked you a minute ago, here it is again:

What’s most important to YOU?

1. To have the lowest monthly payment possible on your debts?
2. To get out of debt for the lowest amount possible?
3. To get out of debt as soon as possible?

Would you be willing to lower your credit “rating” in the short term in order to accomplish (Questions #1, #2, or #3 above) if it improved your credit “worthiness” long term?

We’ll learn the difference between between credit “rating” vs. “worthiness” in just a minute, along with a few insider tips to improve or recover both, but first let’s dispel a common myth…

Credit Myth Exposed

There’s a myth out there that you can lower your monthly payment, get out of debt for the lowest amount possible and/or get out of debt as soon as possible WITHOUT any negative effect on your credit.

Well, this is simply not true. The fastest ways to get out of debt all have some kind of negative affect, minimal or extreme.

The truth is, there is no option available for you to accomplish what you have in mind whether you want to lower your monthly payment, get out of debt for the lowest amount possible and/or get out of debt as soon as possible WITHOUT negatively affecting your credit in the short term.

Bankruptcy

Extreme negative, often viewed as the worse mark you could ever have. Chapter 7 stays on your credit for 10 years.  Chapter 13 stays on your credit report for 7 years AFTER it’s discharged, usually following a 5 year repayment plan, thus damaging your credit for a total of 12 years!

Credit Counseling

Also know as CCCS, Consumer Credit Counseling Services, Debt Consolidation, Debt Management Programs,  “Credit Counseling” no longer affect your credit “score”, BUT enrolling in this type of program DOES have a major negative impact to your credit “worthiness”.  Lenders view this as bad or worse than bankruptcy, often calling it a “walking bankruptcy”. This negative affect lasts about 30 days longer than the debt management program lasts, which is usually 5-7 years.

When you learn who’s behind CCCS, you’ll understand why this change was made, as well as why CCCS and the Credit Reporting Agencies leave out this important fact when they say it has “no affect on your credit rating.”  Watch out for these tricksters.  Here’s a great article for reference: Credit Counseling Lies Exposed – The Truth Non-Profit Credit Counselors Don’t Want You to Know

Debt Settlement

Debt settlement has minimal to serious damage to your credit rating due to late payments and charge offs, depending mostly on how good your credit rating is in the first place.  Debt settlement may significantly affect someone with perfect credit but may not have much negative affect at all on someone who’s already fallen behind.  In fact may significantly improve credit rating and worthiness for such individuals rapidly.

NOTE: Debt settlement is not reported on credit report as a bankruptcy and credit counseling are.

We’ll look into more specifics on how bankruptcy, credit counseling and debt settlement all affect your credit later in “Options To Get Out Of Debt”, but for now you can see all these have a negative impact, some more than others.

High Credit Scores

If keeping your credit score high (assuming it’s already high enough to matter) is more important to you than getting out of debt the fastest, cheapest or for the lowest payment, then the only options you have are either continuing to make your minimum payments or get out faster by paying even more per month and doing what’s called an “accelerated debt payoff plan”.

Still, we must ask ourselves, what do we want credit for?

…A quote I read in an article once said:

“worrying about your credit rating when you’re drowning in debt is like worrying about how your front yard looks when your house has just burned to the ground…”

“Less-Than-Perfect Credit”

If you have less than perfect credit, then you may not have much to lose at all, and a whole lot to gain. You’ll learn the specifics of how each option affects your credit and understand which option will eliminate your debt and credit problems, and be easiest to clean up after. Plus, you’ll learn how to repair and build your credit, no matter what you’ve been through.

Credit “Rating” (Score) vs. Your Credit “Worthiness”

I understand you’re concerned about your credit, especially if you currently have a high credit score, and you should be.  That’s smart, but do you really understand the difference between your credit “rating” (score) vs. your credit “worthiness”?

Not many really do.

Let’s take a look at how this credit stuff actually works…

I’ve made it easy for you to understand credit, how credit works and how to make credit work for you in my…

>>> NEXT: My World Famous “3-Legged Stool” analogy.