The other week, I got an email that made me cringe.
The email was from a man had just been through a divorce. He explained that he lost 94 percent of everything when he and his wife divorced.
“She got the properties, and I got the mortgages.”
Per the terms of their divorce decree, his monthly spousal support check was to include the cost of the mortgages.
When I read that, I just knew what he was going to say next, and that’s when I cringed…
His ex-wife was cashing the checks, but she wasn’t paying the mortgages on time… the very same mortgages in his name.
This Happens All the Time
This situation is common, so if you ever go through a divorce, make sure you protect your credit.
In short, here’s my advice:
1. Refinance the mortgage in your ex’s name only. In the case of the man who emailed me, he should keep paying spousal support. If his ex fails to pay the mortgage, she will be the only one who suffers. He cannot do anything about the past, but in the future, refinancing in her name will protect his credit.
2. If she cannot qualify for a refinance, he should renegotiate the terms of his spousal support so that he pays the mortgage directly, sending his ex a spousal support check for the remainder.
Click here to read a longer article about divorce and credit.
Author: Philip Tirone
How to Fix a Bad Credit Score the Easy Way
People who have fallen onto tough financial times always want to know how to fix a bad credit score. In their attempt to learn how to build credit, they will spend thousands of dollars on credit repair services that promise to wipe their credit reports clean of all errors. Some people even try to create a new credit identity, as if they can sweep past errors under the rug.
The big secret, though, is that most of these services do not work. At best, these credit “repair” services will only temporarily suppress credit problems by using illegal methods to briefly suspend errors from your report—errors that will resurface only after the company has walked away with your dollars. At worst, they will expose you to lawsuits by using illegal methods of attempting to remove delinquent information from your credit report.
The good news is that there are tons of ways to fix your credit score that are both effective and legal. If you want to learn how to fix a bad credit score, keep these two components in mind:
How to Fix a Bad Credit Score, Rule #1: Be strategic.
As you can tell, I am not a fan of credit repair strategies that purport to increase your credit score by surreptitious methods. However, there are legal and effective strategies you can use to raise your credit score fast:
1. Build your credit score fast by adding yourself as an authorized user to a family member’s credit card, so long as it is in good standing.
2. One of the fastest ways to build credit is to transfer your credit card balances to your spouse.
How to Fix a Bad Credit Score, Rule #2: Focus on current behavior.
Think of it from the credit bureaus’ perspective. Wouldn’t you be much more impressed with someone who positively changed his behavior than someone who tried to weasel out of past mistakes? Instead of arguing with the credit-scoring bureaus about all of your late payments, try taking a few simple but effective ways to let the credit-scoring bureaus know you have changed your habits.
This strategy works because credit-scoring bureaus place more weight on current behavior than on past behavior. If you made a mess of your credit score two years ago, the credit-scoring bureaus will pay less attention to this if you are making smart decisions today. This means that you should:
- Pay your bills on time.
- Keep your credit card balances as low as you can – preferably below 30 percent.
- Keep three to five credit cards active. Use them at least once a month, but pay your balances as much as possible each month.
- Open new lines of credit after a financial disaster, like bankruptcy or foreclosure. The credit-scoring bureaus need proof that you can manage several lines of credit. If you wipe your hands of credit, they will not have this proof, and your credit score will not increase. Your bad credit score will increase if you have between three and five credit cards, as well as an installment loan, all in good standing. Bear in mind that your credit score will initially drop upon opening a new line of credit. But after six months of timely payments, it will begin to increase.
So here’s the big secret: If you want to know how to fix a bad credit score, don’t turn to credit repair companies that make promises that seem too good to be true. Repairing a credit score is simple, but it cannot be achieved with the wave of a wand.
Credit Score = Your Financial Reputation, How Much Are You Losing?
Whenever I was in basic training, each recruit, each private was assigned their own roster number. That roster number was our identifier. We had to put it on all our gear. I had to have it strapped across a tape on my Kevlar, which is our helmet. It dictated as far as when we would eat chow and what order we would fall in. It also would designate when we would draw our weapon from the arms room when we had to go to the different ranges. Our roster number was our second name. First name was Private, and the second name was our roster number. Every time you heard your roster number yelled by a drill sergeant or a captain, you always knew either you were called to do something, or you got caught doing something you shouldn’t have been doing.
Do you have a gripe? by 720 Credit Score
A few weeks ago, I wrote a blog about the importance of family meetings in building a strong family unit.
One of my readers posted a blog about how her family used the family meetings to resolve problems.
It’s a wonderful idea, and I wanted to pass it along because I think a family can use this to resolve internal conflicts (like a fight between siblings), as well as external problems (like a bill that needs to be paid).
A lot of siblings never develop close bonds with each other, so even as adults, they aren’t very close. Some even carry their rivalry into adulthood.
It seems to me that if a family member presents a problem, and then the rest of the family works together to come up with a solution that works for everyone, each member of the family will feel honored, respected, and a valuable member of the family.
And then, the family will work together to execute a solution as a team, making the family grow closer together.
My kids are still young, so I am ironing out the kinks, but here are some of my thoughts on how families can solve problems together and build an atmosphere where family members work together:
- When a family member presents a problem, make sure that each person in the family has a chance to add to the context.
Explain that the family meeting isn’t a time for fighting, but rather to state the problem as everyone sees it.
- Then, explain that because you are a family, it is important that you find a solution together. Explain that the family is not going to focus on the problem; instead, it is going to come up with a way to make the problem go away.
Tell your kids that you all love each other and want to get along, and that resolving conflict by looking for solutions together is an important part of this.
- Then let everyone brainstorm for solutions.
Write everything down, and don’t criticize people’s ideas, even if they are absurd. After all, your children need to know that you respect their opinions.
- Then, ask the family members to discuss the solutions that seem the most fair.
- Then talk it out, and try to come up with a solution that works for everyone.
Like I said, I think this works for internal conflicts as well as external problems. If Suzy is mad at her brother because he didn’t help with the chores, this can be resolved during family meetings.
And if Suzy really want to go to soccer camp but she doesn’t have the money, this is a great time to problem-solve and teach your children about goals, savings, and “opportunity costs.”
Suzy might say, “I want to go to soccer camp, but I need $500 and I don’t have it.”
Then the family can throw out solutions.
“You can start saving your allowance. That will get you a little bit of money.”
“You could sell your bike.”
“How about a part-time job?”
“Could we look for a cheaper soccer camp? If so, maybe Mom and Dad could pay for your soccer camp as an early birthday present.”
I love this idea because it reinforces the idea that a family is a unit—a team that supports each other, cheers each other on, and looks for solutions together. (Thanks to my reader, Andy, for the idea!)
What do you think? Let me know if you have any other ideas, particularly if they have to do with solving financial problems.
Philip Tirone
The best way to pay off credit cards, by 720 Credit Score
A few weeks ago, I told you about my friend with $68,000 in credit card debt. For most of it, that feeling of being in debt is crippling. We feel like our lives are out-of-control—like all the balls could drop at once.
So I reminded you to be strategic, to push the emotions out of the way and really examine the opportunities. Well, one of my readers asked me about a specific strategy for paying off credit card debt. Roger, thanks for taking my advice and running with it. I’m thrilled to help you find a strategy.
A lot of people are confused about paying down credit cards because there is so much contradictory advice out there. And the conversation can be even more complicated because sometimes your short-term financial interests are at odds with your long-term goals regarding your credit score.
For instance, if you consider your financial interests only, the smart move is paying offer the credit cards with the highest interest rate first because this one will cost you the most money. But from a credit-scoring perspective, you should pay off cards with the highest balance first (and/or transfer high balances to cards with lower balances) because the closer you get to a 30 percent utilization rate, the better.
So Roger, here’s my answer:
- Figure out when you are next going to need to rely on a high credit score. Are you buying a car soon? A house? Getting a new job? If so, protect your credit score by first getting all your balances below 30 percent of the limit. Once this goal is accomplished, start paying the card with the highest interest rate.
- If you are several years away from needing a high credit score, but you have that out-of-control feeling and want to get your finances in order, then you might need to sacrifice your credit score by transferring as much debt from cards with high interest rates to cards with lower interest rates, even if this means exceeding a 30 percent utilization rate rule—by a lot.
I know that what I just said might be controversial, especially coming from a credit expert, but the truth is that sometimes you have to sacrifice your credit score to make your life work. A credit score by itself is totally meaningless. It’s how you use it to enhance your life. And sometimes letting it take a nosedive is the best thing for your life. (In fact, even though it’s terrible for your credit score, I’m a proponent of bankruptcy sometimes because I think it can make people’s lives a heck of a lot easier.)
The good thing about the world of credit-scoring is that if you know what you are doing, it won’t take all that long to rebuild your credit score, so even if you do sacrifice your score, you can take the right corrective steps to see your score transform in a year or two.
I hope this helps Roger, and everyone else, too.
Philip Tirone
P.S. I’m sure this sparks some questions, so be sure to comment below. Depending on my schedule, I don’t always answer every question, but as you can see, I do read each comment!
The important part of improving your score fast, by 720 Credit Score
If I had to choose one thing as the most important aspect for raising your score after a financial meltdown, it would be this: Apply for new credit.
The problem is: How can you qualify when your score is low?
We generally refer people to secured cards, but even then: If you are already having financial problems, how can you afford the deposit required by secured cards?
Fortunately, our researcher, Natalie, found a new card that accepts applications for people with a score as low as 580. It’s not a secured card, so you don’t have to put any money down to qualify.
If you don’t have three cards in your name and cannot afford secured cards, you should apply for this card right away. Don’t wait, even for a day since we don’t know how long the guarantee will last.
Of course, we’ve done the research, and we believe this is one of the best subprime cards out there. It isn’t one of the 46% of cards that will hurt your score, so as long as you keep your balance low and pay your bills on time, this card will help your score increase.
Click here to apply.
Your Identity Theft Stories….
Please post them here… so we can all learn from each other!
Include as much information as possible:
1) What happened?
2) How did you find out you were a victim?
3) What did you do?
4) How did it all work out?
5) Was your credit impacted?
Thank you.
– Philip Tirone
I don’t mean to brag…, by 720 Credit Score
I’m generally a healthy guy, but I gotta confess…
I love ice cream.
I can clean out a pint in less than 25 minutes.
And… I’m a busy guy, so I let fitness slip through the cracks here and again.
Then ten months ago, I made a commitment to get into the best shape of my life. I’ve been taking pictures in regular intervals documenting my transformation.
If you look at the pictures*, there isn’t much difference from one picture to the next. But if you hold up Month One against Month Ten, it’s like you are looking at two different people.
Here’s another related thought…
My oldest daughter, Ava, is five. And I swear that from day-to-day, she looks exactly the same as she did the day before. But even though the growth from day-to-day is undetectable, she’s been growing like a weed.
In fact, when I look at Ava next to my newest baby (Emma will be two weeks old tomorrow), Ava looks more like an adult than a baby!
My Coach Tim Wood has said to me, “People always over estimate what they can accomplish in a year, and GROSSLY underestimate what they can accomplish in five years.”
Here’s my point: Transforming your credit score or your finances is possible—it’s even easy once your behaviors become second nature.
But don’t measure your progress daily—you’ll only get frustrated. Give it some time, and then look back in a month or six months. Just keep piling on small changes, and see what happens!
–Philip Tirone
* I was going to post the pictures, but one of my staff members said, “No thanks, Phil. We don’t need to see you with your shirt off.”
So I’m not going to post the before and after pictures, but please leave a comment on my blog if you have any thoughts!
The Fastest Way to Build Credit
Question: What is the fastest way to build credit? I am applying for a business loan, and I need to bump my score up by about 60 points.
Answer: There are a lot of reasons you might want to raise your credit score, and raise it fast. In today’s environment, you might not qualify for a loan if your credit score is not at least 720. About 60 percent of employers run credit checks on potential employees. Landlords won’t rent to people with bad credit. You will pay more in interest if you have bad credit. The list goes on and on …
Fortunately, if you want to learn how to build credit fast, I have a great trick. This works best for married people, but single folks can use it as well. Let’s start by assuming you are married. Later, I will explain how to modify this example if you are single.
The Fastest Way to Build Credit: A Tip for Married People
To build your credit fast, transfer as much of your credit card debt into your spouse’s name. To do this, simply have your spouse “buy” your debt by paying your balance(s) with his or her credit card(s). Assuming you both have individual credit cards, this will cause your score to jump quickly.
You see, the credit-scoring bureaus place a lot of weight on something called a utilization rate. Each of your credit cards has a utilization rate, which is a number that describe how much of your limit you are utilizing. For instance, if a credit card has a $1000 limit and you have a $100 balance, you are utilizing 10 percent of your limit. Your utilization rate, therefore, is 10 percent.
Credit-scoring bureaus respond best if your utilization rate is below 30 percent, so if you want to learn how to fix credit, you should always lower your utilization rate.
Start by transferring balances to your spouse’s credit cards. Of course, this might lower your spouse’s credit score, but you will buy the debt back (thereby increasing your spouse’s score) once you have qualified for the loan.
In short, you will have better loan terms, and your spouse’s score will be lowered only temporarily.
The Fastest Way to Build Credit: A Tip for Single People
If you are single and also want to know the fastest way to build credit, you can modify this tip and use the same strategy with a family member or a loved one. However, be sure to put some structures in place so that your family member/loved one is protected. For instance, you might want to structure a proper contract by hiring a lawyer or using an online service such as Virgin Money. You might also give your family member/loved one collateral. Is your car paid off? Do you have an expensive piece of jewelry? One way or another, be sure that you never jeopardize family relationships just to raise your credit score!
And be sure to download our free ebooks about how to secure home and car loans during this tight lending environment.
Debt Settlement Scams- 10 Stupid and Simple Ways to Get Burned
Over the past few years I have heard non-stop stories from consumers who were taken for costly rides by debt settlement scams. While it is true that there are a few good and well intentioned programs available that provide real debt solutions, my experience shows that a vast majority of these outfits are simply money grubbing nightmares for cash strapped consumers.
The debt relief world can be a very confusing place, especially when people are in a seemingly desperate financial situation. With that in mind I would like to shed a little light on this industry and present:
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