We’ve all seen the ads for them on TV at 3 in the morning when you just can’t sleep and there’s nothing but Golden Girls reruns on in-between infomercials for diet pills.Ads that promise to help you with your money troubles by offering a payday loan, that is, a check for a few hundred dollars whenever you need it.

This sounds like a tempting offer to most of us at one point or another – I mean, who ISN’T facing financial hardships in this day and age, scrambling to find some sort of debt relief and possibly even fix their credit?  Maybe the paychecks from work just aren’t cutting it and you’re not having any luck finding another full-time job, or even a second part-time job to give your finances a little boost, and so these ads sound like a pretty decent deal.  All they ask you for is a paystub, your driver’s license, and a check, and then promise you’ll walk out with cash in hand.  Hell, why WOULDN’T you want in on that action?

Here’s how they work

Those payday loans may sound like a sweet deal when you’re living paycheck-to-paycheck and can hardly afford anything beyond rent and groceries each month, but beneath the candy-coated outer trappings of the payday loan offices lies a gang of witches ready to take you for much more than they’ll ever part with.

Let’s say, for the sake of a blog topic, that you’re in need of a little extra cash – say $200 – to help you stay afloat until your nest payday.  You visit a lender and write up a postdated check in the amount you want to borrow, plus their added fee.  The lender then gives you $200 in cash or deposits the amount in your checking account, and will cash your check come payday unless you apply for an extension (which they charge you for, naturally).

Here’s what they don’t tell you

That $200 dollars you borrowed?  You could end up paying that loan for months, even years, down the line if you’re not careful.  All lenders are required, under the Truth in Lending Act, to disclose just how much they’ll charge you in fees for a loan before they have you sign anything.  Payday lenders generally calculate their fees using one of two methods:

1. As a percentage of the amount you’re requesting, usually something like 10%, meaning you’ll pay $20 for that $200 loan.
2. As a set amount based on the amount you borrow (say, $15 for every $100 borrowed; so in our case, $30 for borrowing $200).

These are pretty conservative estimates; there are a lot of payday lenders that charge as much as $17 for every $100 borrowed.  That means you’re effectively paying over 600% APR (which is nearly 15 times the default rate for the most expensive credit cards out there) for a tiny loan.  This same loan will end up costing you less than half that on a traditional credit card, even with late fees factored in!

It’s not uncommon to find borrowers taking out additional payday loans just to pay off their original loans.  Over the months, they’ll end up owing thousands of dollars for what started off as a $200 loan to help pay a couple of bills and settle other debts they already have!

So what are your other options?

If you’re already swimming in credit card debt and are looking for alternate sources of income to help you repair bad credit, here are a few sensible alternatives to payday loans:

• Take out a similar loan through your bank or credit union.
• Ask your creditors about any hardship payment plans they might offer.
• Ask a friend or family member for a little help.
• Consult a debt settlement firm for a plan to help you reduce debts effectively.

When starting the process of credit repair on your own, there are a lot of factors that you need to consider.  If you aren’t already pretty familiar with your current financial situation, you’re about to give yourself a crash course on it as you dig through past credit card bills, bank statements, and paycheck stubs.

In your search for debt relief, you may begin to feel completely overwhelmed by the sheer amount of dollars to make sense of and start to feel like your goal of complete financial freedom is further and further out of your reach the more you dive into your records and statements; that your credit score will never reach the number it could and should be. 

To help set your mind at ease, we’ve compiled a list of some of the items you don’t necessarily have to worry about when working to fix your credit. 

It’s the little things that don’t count the most

There are very specific factors that make up your credit score.  Paying your bills on time, the available balance on your credit cards, the amount of debt you have, how long you actively been using credit, the types of accounts you have; the list goes on, making the challenge of reaching your credit score goals seem nigh impossible at times. 

However, there are a lot of other items that show up on your credit report that don’t actually affect your credit score at all and so can be ignored if you want.  For example, federal laws already prohibit your credit score to be influenced by race or gender.  In addition, these other factors do NOT factor into your credit profile or overall FICO scores:

• Your age
• The amount of money you have in the bank
• Any employment information, including past and current employers and salary information
• Any time you request a copy of your credit report
• Any inquiries made by your bank during promotional offers (inquiries made with the intention of opening new lines of credit DO affect your report)
• Whether you’re using a credit repair or debt settlement service
• Whether or not you pay child support/alimony
• Whether or not you’re on welfare, or any kind of public assistance
• Whether you’ve ever invoked your rights under the Fair Credit Reporting Act
• Your past addresses – these are for record-keeping purposes only

One last note: the above list mostly applies to your FICO score only.  While it is the go-to score model for most major lender and creditor out there, some banks prefer their own credit scoring models that may take a couple of these points into account.  Check with your bank to see how they view your score before applying for any new lines of credit.

Often times, people looking for debt relief find themselves so overwhelmed by the seemingly endless amount of debt in their name that they often have trouble getting started on repayment. 

Having several types of debt can make prioritizing a nightmare.  Do you start with credit card payments?  With secured or unsecured accounts?  What about any outstanding loans?  Picking the wrong kind of debt could end up costing you more in the long run, so where’s the best place to begin when trying to get out of debt?

Start with the roof over your head

More than anything, you’ll probably want to hold onto the house you’re living in, so make paying your mortgage – including any lines of credit tied to it – a top priority.  If you default on your payments, you’ll run the serious risk of losing your home through foreclosure and not being able to rent because of the serious hit your credit report will take and we can’t have that, can we?

In addition, you’ll want to property taxes to avoid having a tax lien placed on your home (meaning you’ll owe back taxes in addition to your mortgage), and make sure you don’t fall behind on homeowner’s insurance payments so your policy isn’t put into jeopardy as well.

Move on to other major loans

You’ll want to devote your time and resources to secured debts (such as auto and student loans, or medical bills) over unsecured debts. Much like your mortgage payments, your car loan is tied to something you likely use every day and can’t really get by without, so make sure to stay current on it.

If you fall too far behind on student loans or medical bills, you could face the possibility of wage garnishment and lose the ability to secure other loans until your debts are settled (or at least under some measure of control).  This can be an even bigger pain if you plan on going back to school or the same doctor again.

And all the rest…

When it comes to unsecured debt, start with any and all credit card debt that comes with a high interest rate.  Trying debt settlement on a card that’s already maxed out with high interest can be a nightmare if you don’t stick with it.  If you ignore credit card debts for too long, your account will get sold to a collection company, which is one of the worst things that can happen to your credit report (not to mention your finances in general).  Do all you can to pay these cards down to at least 30% of their available balance and make sure they stay that way.

For more information, as well as comprehensive debt settlement options, contact a representative at My Credit Group.

Congratulations!  You’ve successfully finished college, nailed that job interview, and have even found the perfect apartment for your first venture out on your own.  Now, you’re an ADULT™ and you feel awesome!  The only thing standing in the way of financing your great adventure is that old standby, personal finance, and in order.  Now all you need to help finance you on your venture (aside from money in your pocket) is a credit card. 

But as a wise man once said to a Spider-Man, “With great power, comes great responsibility,” and  besides, how are you even supposed to get a credit card when you have no credit history?  You shied away from the deluge of credit card offers that came in the mail after you turned 18, and always paid with cash or check.  Whatever the reason, now that you’re out in the real world and on your own, you’re gonna need something more than your good name and word to back you up when you apply for any type of loan.

Fortunately, establishing new credit isn’t as hard as it may seem – even if you have no prior credit history.  Here are a couple of steps you can take to not only obtain a credit card, but start building a good credit history as well.

Choose wisely

Truth is, getting a credit card is pretty much as easy as walking into your local specialty retailer (anyone from Best Buy to Target) and signing up for one of their store cards.  But while these cards may seem like a good idea at first (they’ll help you build a credit history, plus they usually offer cool deals and promotions), but they could end up doing more harm than good to your fledgling report.

Most retail store credit cards carry high up-front interest rates along with those deals and promotions that can do serious damage to your credit rating if you let your spending habits get away from you.  Say you decide to buy one of those new LED TVs with your Best Buy card.  Not only do you now have a $2000+ charge on your card, but the high interest they’ll charge can make paying the TV off an incredibly drawn out process and can raise your debt-to-income ratio, which will lower your credit score.

So if you do decide to apply for a retail store card, choose carefully when deciding which to go with.

Don’t overdraw it

Assuming you already have an open bank account or two, make sure to keep the accounts filled and don’t overdraw them.  While your bank accounts don’t impact your credit score directly, keeping a balance in your bank account shows that you have at least some idea of how to handle money, which in turn makes you seem like less of a potential credit risk.

You can also use your good account with your current bank to…

Obtain a secure credit card

Most people who already have a bank or checking account find this is one of the easiest ways to get a credit card is through the firm they already bank with.  Although it does require a deposit to set up the card, many people find the rates more manageable than a store credit account and a great first step to building a positive credit history. 

Don’t forget to pay the man!

Avoid the pitfalls of youthful spending by not overcharging any of your cards – be they bank, secured, or especially an actual credit card – with extra stuff you can’t afford, and ALWAYS remember to pay the bills on time.  You don’t want to end up with a maxed-out credit card, leaving you scrambling to fix your credit, or worse – an overdrawn bank account.  Learn when to say no, and you won’t end up mired in unpaid bills, struggling to find debt relief.  That wouldn’t look very responsible, now would it?

There’s hardly anything as important to someone’s financial well-being as their credit score.  These numbers hold more sway over your finances than most people even know, not because of their inability to understand just what their score means for their money situation, but because there’s so little concrete information about what goes into those numbers that it makes trying to decipher them much like looking at a map with no legend – you know it’s important, but damned if you know what to make of it.

With that said, we’ve put together 5 of the most common credit score myths we’ve come across from thousands of people seeking credit score repair and/or debt settlement services.  Hopefully, these will give you a better understanding of what goes into your score and how to map out a course to fix your credit.

1.Paying your bills on time increases your score.  We might as well start with the most commonly believed myth out there: that paying all of your bills on time will increase your credit score.  While continuing to make monthly payments on time certainly helps your score, it only helps to maintain it, not actually raise it higher than it already is.  Remember, your FICO score is made up of many factors, with only 35% being attributed to your overall score.  Don’t expect to treat your timely payment records as a get-out-of-jail-free card.

2.My boss knows my credit score.  While it’s true that more and more companies are screening your credit reports during the hiring process, that doesn’t mean they have access to your actual score.  Most people believe that their reports come with scores attached, but that’s almost never the case with an employer, unless the position is with a financial institution. 

3.You should always carry a balance.  There’s actually nothing wrong with carrying a balance over each month on your credit card accounts, assuming you keep that balance relatively low (we like to recommend no higher than 30% of your available balance).  Having too high a balance carried over multiple credit cards, or just outright maxing them out, WILL hurt your score.  It shows lenders and creditors that you’re too eager to use credit and are generally irresponsible about it.

4.You’re better off with a short sale than a foreclosure.  My dad loves to use an expression for cases like this: “Polishing a turd doesn’t make it any cleaner.”  In other words, there’s no real difference between a short sale and a foreclosure on your credit report – they both look equally bad in the long run.  A short sale may look better for your neighborhood because it at least means someone’s taking care of the place, but it makes no difference on your actual report and credit score.

5.Foreclosures and bankruptcies are the ultimate scarlet letter on your report.  When faced with something as devastating as a foreclosure or bankruptcy, many people who may have sought help in credit repair tend to think that all hope is lost; that their score has suffered a blow it won’t be able to recover from.  While these both do follow your report for a minimum of 7 years (10 if it’s a BK), it certainly isn’t the end of the world as far as your finances are concerned.  Remember that time heals all wounds, and use this as a wake-up call.  Play by the rules listed here and you’ll be able to raise your score from the dead and start fresh.

Often when clients contact us about our debt settlement plans, when asked about their current financial situation, they run through a laundry list of accounts that have gone from manageable to overwhelming that generally sounds like a perfect example of what you shouldn’t do.  Most of them realize how they got to where they are, whether by their own fault or not, and want to take steps to get out of debt quickly and get their finances back on track. 

So what’s stopping them from achieving their goals?  Many are more than willing to try debt settlement and credit repair services, but say they haven’t made any progress because they’re unable to save any substantial sum of money to help them make more than a dent in their overall debt.  They’re afraid they’ll be stuck in an endless cycle of paying the minimum balance on their accounts for the rest of their lives.

A serious plan

If the above scenario sounds all too familiar to you, it could be because you don’t have much in the way of a savings plan.  Have you ever been able to successfully save a significant sum of money over an extended period of time, as in 4 or 5 years?  If not, the problem could be you don’t have a good savings plan to help you get to where you need to be. 

Saving money can be hard at times, but these days it’s pretty mandatory.  Having little to no extra money set aside in a savings account can lead to big problems whenever life throws a curveball your way, usually in the form of auto repair, a sudden illness, or job loss.  If you’re living paycheck-to-paycheck, how will you be prepared for, well, life?

How to get out of debt

Start by building a fund for emergencies only (i.e., something like the examples listed above, not an “I left my wallet in my other pants” emergency) by setting aside leftover funds and any other money that comes your way; if you have no leftover cash from your paychecks, you may want to consider a second job.  Dedicate a set amount from each paycheck to this fund so you can build it up to at least a couple thousand dollars.

Once you have a sizable emergency fund in place, get to work on a debt fund as well.  For the time being, continue to pay the minimum balance on your accounts (assuming that’s all you can afford), while setting aside money for your overall debt fund.  Save as much as you can over the next 10-12 months (or at least until you have enough to make some real headway on debt repayment) and then throw everything you’ve got at your outstanding debts.

Remember to at least keep paying the minimum amount due each month.  Stopping everything to build this fund may seem like a good idea, until you realize you’ll be adding problems to your credit history in the long term.

As always, for more info on all credit and debt inquiries, contact a rep at My Credit Group.

If there’s one point we try to hammer home to each of our clients here at My Credit Group, it’s the importance of your credit score – not just to you, but to everyone around you.  Whether you’re trying to take out a loan, score a new credit card, or even apply for a job, your credit report being in top form should be a high priority.

Unfortunately, a good number of people don’t realize this fact until it’s staring them in the face and refuses to back down.  Playing a game of chicken with your credit (and finances in general) isn’t always the best idea, yet people seem to love to play it as long as they can until they’re searching for a way to fix credit fast, generally turning to credit counselors and credit repair companies for help.

In the interest of helping you fix your credit before things get too desperate, here are 3 of the top credit score killers to avoid.

1. Late payments.  We all know that making a payment late (or missing it altogether) doesn’t look good on your credit report.  What most people don’t realize is how badly even one missed payment can reflect on your credit report, sometimes deducting as many as 20 points off your score.  The longer you go without making a payment, the faster your score will fall.  Always try to make the minimum payment on your credit accounts, and ALWAYS on the due date.

2. Accounts in Collections.  If any of your late payment accounts goes into collections, then your credit report is really in for a world of hurt.  Collections can drop your score anywhere from 70-100 points, depending on the account, making you look completely financially irresponsible in the eyes of creditors.  This could translate into rate hikes and a door slammed in your face if you should ever try and apply for new credit.  Again, this can be avoided simply by paying bills on time.

3.Too many inquiries.  This last point is an often overlooked one, and while it’s not as detrimental on your report as late payments or collection accounts, having too many recent inquiries can add up over time if you’re not careful.  Luckily, you only run the risk of having too many “negative” inquiries if you are actively searching for new lines of credit and are consistently rejected.  This makes you appear desperate to any other lenders or creditors who take a look at your report, and that’s never a good sign.

Use this guide to help you dodge the minefield of bad credit pitfalls out there and keep your credit in to form.  For more information on repairing bad credit or debt settlement, consult a specialist at My Credit Group.

Here’s a no-brainer for you: according to a new study from J.D. Power and Associates, American consumers’ overall satisfaction with credit cards is improving.  In other news, water is still wet, the sky is still blue and we’ll all be paying taxes next year.

The study also found, however, that just because overall satisfaction with credit cards was on the up-and-up, consumers weren’t necessarily happy with their current options and would actually prefer to fix credit rather than be burdened with more credit card debt.  How exactly does that work?  Let’s find out.

Who gets a gold star for the day…

According to the study, dubbed the Credit Card Satisfaction Study, consumer satisfaction with plastic cards is up to 714 out of 1000, culled from 8500 participants in regards to 6 major factors: billing and payment, benefits and services, actual interaction with card companies, terms on the cards, rewards, and problem resolution.

When broken down by the card companies themselves, American Express, Discover, and US Bank came out on top with the popular vote, while CitiGroup, HSBC, Capital One, and Bank of America all came out not looking quite as pretty.  Consumers seemed to prefer Amex’s rates, rewards, and services, awarding them the gold star with the highest amount of satisfaction.

How would you rate your experience?

One reason for many consumers’ increased affection for their cards may have come as a result of the Credit CARD Act of 2009.  Short for the Card Accountability Responsibility and Disclosure Act, the new law and its terms have seen more consumers pleased with their card’s billing and payment terms. 

The study also found, not so surprisingly, that consumers who carried a monthly balance on their cards showed increased satisfaction under the new terms, while those who paid their bills in full each month weren’t quite as enthusiastic with their cards.

Why?  Those who carry monthly charges, revolvers, tend to be more sensitive to their rates and fees, with a belief that as bad as things are now, they could’ve been even worse.  Revolvers are then more likely to be pleased with the CARD Act and its disclosures of credit term.

Do not pass Go

But in the end, many consumers remain wary of credit cards and card companies – many likening the relationship to a game of cat and mouse according to the study, leaving complete credit score repair just barely out of reach.  Indeed, another figure on the rise is the percentage of people shopping around for other cards, and those who said they didn’t plan on switching cards anytime soon accounted for only 22% of the poll.  So which end of the spectrum do you fall under?

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How are Most Companies Fixing Bad Credit?

Perhaps the reason so many credit repair companies claim their services to be "fast" and "easy" is because they take so many short-cuts.

A common approach to dealing with negative credit reports is to send dispute letters to the credit bureaus and collection agencies, in hopes of getting as many removals as possible. 

And what's the problem with that?  It's ineffective at best and illegal at worst. 

Dispute letters are intended strictly for the purpose of having credit report errors corrected.  Any time a credit repair company disputes accurate credit report information, they are operating unlawfully and can add further complications to your

How often we've heard that credit repair is a scam, that it's not worth the trouble, or that it's downright unethical.  And while it's unfortunate that the more "illegitimate" credit repair companies have all but ruined the industry–we're proud to say that there is a very realistic, very effective, and very honest way to fix bad credit.

But first let's talk about what "credit repair" means to alot of these other companies.

How are Most Companies Fixing Bad Credit?

Perhaps the reason so many credit repair companies claim their services to be "fast" and "easy" is because they take so many short-cuts.

A common approach to dealing with negative credit reports is to send dispute letters to the credit bureaus and collection agencies, in hopes of getting as many removals as possible. 

And what's the problem with that?  It's ineffective at best and illegal at worst. 

Dispute letters are intended strictly for the purpose of having credit report errors corrected.  Any time a credit repair company disputes accurate credit report information, they are operating unlawfully and can add further complications to your credit situation. 

In some cases, disputing accurate information can even get you sued. 

So What's the Alternative? There's more than one way to fix bad credit.  But Dispute letters alone will not entirely resolve your problems.  That's why following a few simple steps can take you a long way in the credit repair process.

Remember that every credit situation is different–what works for others may not be the best option for you. But one way or the other, the laws that govern consumer credit and and the credit repair industry provide ways for you to gain conrol of your financial problems and get your credit back on track. 

Related posts:

1. A Fool-proof Way to Fix Bad Credit
2. Can I repair My Credit With Disputes Alone?

Here at MyCreditGroup we’ve been asked countless credit repair questions over the past 10 years.  Now we’re looking to put all of those questions to good use with our credit repair forums.

Many clients tend to have the same questions, but we understand that every individual case is going to be unique in some way.  What better way to showcase the answers those particular questions than with a community-driven knowledge market known as MCG Answers.

In addition, we figured what better way to objectively populate our MCG Answers pages than by giving a free month of credit repair to our top contributor each month.  If you’ve had a credit repair experience, good or bad, or are informed about credit repair, we invite you to share your knowledge, and possibly win some free services.

Over the next few weeks, we’ll be uploading the questions we’ve catalogued over the years; our hope is that if you can’t find an answer to your specific situation that you’ll enlist the help of our Credit Repair Forums.

MyCreditGroup appreciates that starting the credit repair process may be overwhelming.  Now with MCG Forums, you don’t have to go it alone.

Related posts:

1. Solutions for Debt Relief: Ask Yedda