Sometimes we all make unwise financial decisions or take on more credit than we can handle. Sometimes we acquire bad credit from unfortunate circumstances like going through a divorce, loss of a spouse,  or experience  medical issues that results in the inability to work or excessive medical bills. Regardless how you get into debt, I think we can all agree that its much easier to get into debt than to get out of it.

If you have bad credit, or have no credit history, chances are you can still get a credit card but it will cost you more and the terms will not be as good as those who have good credit. For example you may be approved for a credit card with a $500 credit limit, and you’ll probably pay an outrageous  interest rate, anywhere from 22% to 33%.  If you choose to take the card, use it wisely and make sure to make your payments on time. Keep in mind you’re using this card as a tool to better your credit and not another way to purchase.

If all else fails…get a secured card.

For those who don’t trust yourself or nothing else seems to work, you may want to consider getting a secured card. It’s very simple, you put your own money into a saving/checking account and that amount, or a portion of it, becomes the security of your credit card. If you don’t pay your bills, the card issuer will take the money from your reserved account to pay your debt. It may be hard to come up with the initial amount to deposit but it’s a good way to build a credit history. Since your main goal for using a secured card is to build your credit, make sure that the card issuer reports to a credit bureau, if not, the card is not going to help you build your credit. Many people who have used this method and have successfully made 12 to 18 months of timely payments then upgrade to a regular credit card.

As with any credit card offers, you have to beware of disreputable card issuers, especially with secured cards. Make sure to read and study the fine print before applying. Do not accept any offers from people that contact you about secured credit cards, make sure to do your own research and contact the company yourself. Ask questions whether there are application or processing fees and the interest rates and fees. Generally secured cards carry higher interest rates and higher fees.

…if all else fails , get someone to cosign a credit card.

If you can find a relative or a good friend who is willing to help, get them to cosign on a credit card for you. Keep in mind that if you decide to go this path and don’t make your payments, you can ruin the credit of the cosigner who would have to pay off your debt. So be extra careful, you wouldn’t want to do this to someone who was willing to go out on a limb for you.

Keep in mind that paying the bill in full every month is not necessary, but paying-off the monthly charges, and on time, will eventually prove that you’re no longer a credit risk!

Digging your way out of credit card debt can be an overwhelming and feeling hopeless.  It is embarrassing for friends and family members to know that you’re struggling to pay your bills. You also may be tossing and turning at night thinking about how to get out of your current debt situation. You are not alone. With hard work and discipline, you can work your way out of debt!

If getting out of credit card debt is something you want to accomplish, then there are some basics you need to follow. You need to know what is on your credit report and understand why it is there, develop a plan to pay down that debt, and change your way of spending so that you can avoid repeating your mistake.

The first thing you need to do is to find out what the creditors have on report for you. Why is this important? A credit report is your personal record of your credit payment history as reported to credit bureaus by bank, credit card companies, department stores, and other types of businesses you’ve borrowed from. This is where potential lenders get information that will determine the decision on whether or not they want to take a risk issuing you credit. It’s very important to understand how credit reports work because you can protect your rights and avoid being taken advantage of by credit repair clinic and the so-called credit doctors.

If you are considering on purchasing a home or applying for any other types of loans, you will need a good credit report. It is always good to know what is on your credit report before your lender looks into it, this way you will have the opportunity to clean up any mess or errors you may have on your record. You may also want to consider canceling any credit cards you are not using because lenders will include your credit limit as potential debt. If you have credit cards with no balance but with credit limit totaling $10,000, for example, the lender will consider it as an additional $10,000 of potential debt and may reduce the amount of the loan they are willing to give you.

Whats in a credit report?

Your credit report includes basic personal information such as name, current and previous addresses, telephone number,  social security, date of birth, and current and previous employers. The credit history portion includes information about each credit account, including things like when the account was opened, the credit limit, current balance, monthly payment, and your payment pattern during the past several years. In this report, they also include any bankruptcies, accounts sent to collection agencies, unpaid child support or alimony, tax liens, bounced checks, unpaid traffic/parking tickets, car repossessions, evictions from apartments, court records, and names of businesses or individuals who have obtained a copy of your personal credit report. Your credit report pretty  much reports everything that lenders may be interested in knowing. Some information that your credit report does not contain is information about your race, origin, religion, personal lifestyle, political affiliation, medical history, or other information unrelated to your credit history and ability to repay credit debt.

Review your entire credit report. Most financial advisers would recommend that you obtain a copy of the free credit report that you are entitled to once a year and review it carefully. If you have been rejected or turned down for credit, housing or employment due to your credit report, you may be entitled to a free copy of your credit report as well. There are three main credit bureaus that are available to you: Equifax, Experian, and TransUnion. All other credit companies obtain their information from one of these three. Since the information in your credit report may differ somewhat from one bureau to another, it is wise that you obtain a copy of your report from each of the three major bureaus once a year. If you cannot afford all three credit bureaus, then consider ordering your report from Equifax since it is the largest reporting bureau. Upon receiving your credit report, if you find an error in the report you can call or write to the credit bureau explaining the error in detail in 100 words or less. You want to provide any documents that may help prove your statements.  Your payment history will stick around for a long time. Chapter 7 bankruptcies will stay on your credit report for ten years from the filing date and Chapter 13 bankruptcies will remain on the report for seven years from the date fully paid or ten years if not paid as agreed. Unpaid tax liens may stay on your credit report as long as fifteen years.

So how do Lenders use the Credit Report?

Lenders typically use the information in your credit report to evaluate your personal character, your total debt capacity and your collateral or capital. Their study of your character is also based on the stability of your employment and residency history. They will check to see how often you have changed jobs, how often you moved and the length of time you stayed at each address. These kind of information gives the lenders a feel for your personal stability and an overall general assessment of your character. To evaluate your debt capacity, they will look into your living expenses, open credit account limits, current debts, and other payments to get a feel of how much debt you can afford with your current spending habits and your income. Another huge factor that goes into the lenders decision on lending credit is your credit score. Your credit score is a number or rating which indicates how likely you are to make payments on time and repay loans, based on information in your credit history. This score is computer generated and factors in your current income, education, job stability, how often you have changed addresses, whether you are a home owner, debt to income ratio, and past payment history.

You may obtain your credit score, or FICO score for a fee. All three major credit bureaus offer this option with your credit report or as a separate option. If you find that your credit score is not so great, do your best to improve your credit score by concentrating on paying your bills on time, paying down your credit balances, and avoiding new debt. Improving your credit score is not an over night task, and may take a long time, but is well worth the effort.

First of all, I want to thank John of Might Bargain Hunter for giving me the opportunity to host this edition. I was really surprised to see the number of submissions to this edition, it was really low.

As always, there were really good articles submitted so please take your time to read these posts. I made some comments on the articles and also took out a quote from each just to give a small idea on what each article talks about. I hope you have a great time here and take a lot out of these great tips with you. Without wasting any more of your time, here are the articles for edition #92:

These articles are in order in which they were submitted

Personal Finance Blog Articles on “Getting Money to Finance Your Purpose in Life“.

Editors Note: This is a nice article on how to get into the right mind set into helping you get out of debt. “No matter how much you earn from these financial streams of income, you must manage your money effectively….
You can have as much money as you want because money is an energy. You may need to change the way you think about money”

3 Debt Consolidation discusses “When Is Your Credit Card Debt Too High?“.

Editors Note: Also shares a nice list of ten indications that shows you carry too much credit card debt. “You know your credit card debt is too high when you have to spend more than 20% of your take-home pay towards paying off the interest + original principal balances on your credit cards”.

Stewart Hsu shares his experience on “Advice from a Billionaire“.

Editors Note: Stewart’s right, its not everyday that you get the chance to hear a billionaire speak about their experiences and their success stories. This article points out some useful tips from a billionaire. Stewart says “Sitting in the audience, what made him so compelling was the genuineness and warmth in which he spoke; I personally felt he was speaking from his heart”.

Family Finance Blog tells us “How to get out of debt – one day at a time“.

Editors Note: “Debt is one of the easiest things in the world to get into and one of the hardest to get out of. There are thousands upon thousands of tips for getting out of debt whether it be slowly or quickly”. FFB is right, debt is so easy and so inviting with hard temptations and once you’re in debt its so hard to get out of. Like what FFB says, take it one day at a time.

The Happy Rock posts, “Having Goals Is Great, But Having Purpose Is Better“.

Editors Note: Happy Rock gives us two situations in which deals with getting out of debt and explains that having purpose is the key success in becoming debt free. “Having goals is very helpful, but having purpose will change your life.”

Golden Fleece Blog on “Bundling Cable, Phone, and Internet Costs More“.

Editors Note: The title says is all. Read on to get some advices on how you can save money on cables, phones and internet costs. “One advantage to bundling is that you can periodically call your cable company and threaten to cancel, citing the low promotional rates offered by its competitors.”

Might bargain Hunter explains that “A mortgage is still debt that needs to be reduced”

Editors Note: Amy has a debt of 72,000 and she wants to pay it off by April 2009. Now that’s a great goal, shes going to have to pay roughly 3,000 each month to pay that off in time. MBH says, “I wonder why there’s not the same urgency for people to pay off their mortgages”.

No Credit Needed says he prefers “Creating The System Versus Doing The Work“.

Editors Note: NCN has many tips here on techniques for building better systems. “First, you need a budget that you can setup, modify, and actually use. Elaborate, fifty-page, multi-screen budgets only work for a select few. Create a budget can and will actually use”

That about concludes this edition of the Carnival of Debt Reduction. I hope you will take many tips from these articles and apply them somehow in your life. I hope you will have a great week. Submit your articles for the next edition of Carnival of Debt Reduction here.

Yes, I’m really excited to announce that I have completely paid off my credit card as of this past weekend. I have wrote many posts about my credit card situation and it has been an ultimate goal for a while now. I am finally glad to announce that my long journey has finally reached an end.

For those who do not know, I originally had a credit card debt of about $9,000.00 as of last year May. Over this past year I have been trying really hard to fight temptation to not buy anything that I don’t need and only worrying about paying off this debt.

So now that it’s finally paid off, what’s my next goal? What am I now going to do since my debt has finally been paid off? It’s simple. Save, save and save. Invest, invest, and invest. That is going to be my next goal. Over this past year, paying off my debt has definitely been a great learning experience and through the process I’ve learned to budget effectively and to live frugally.

Now my main goal is to save up for my down payment for my first home. I plan on purchasing my first home in about 3-4 years from now, so I have plenty of time to start saving. I live in Maryland and houses here are quite expensive. If I want to save for a 20% down payment, I’m going to need about $70,000. That’s going to be my next 4 year goal.

Having this credit card debt paid off has relieved a lot of stress off my back and now I’m ready to continue my financial journey.

[Photo Credit]

Follow these 5 steps to be on your way to being credit card debt free. 

1. First thing, you need to stop the credit card offers. You want to get away from all these tempting offers. You can actually force credit card bureaus to stop selling your information at 1-888-5-OPTOUT. Call the number to get the forms.
2. Reduce your interest rates. The average credit card interest rate goes for about 18%, which is really high. You want to be in the 7%-12% range. You can call your credit card provider and negotiate for a lower interest rate. If you have been a customer for a while, then it should be really easy to negotiate. 
3. Stop using your credit cards. If you’re trying to reduce your debt, the last thing you want to do is to keep adding to it. If you have a hard time not using your cards, then take them out of your wallet or purse and leave them at home. If those methods doesn’t work, you can even cut up your cards.
4. Always pay more than the minimum due amount. Credit card companies love it when you only pay the minimum amount because the balance is calculated based on a system so that they can extend your payment plan as long as possible to make optimal profit.
5. Consolidate your debt. Once you have reduce the interest rates of your cards, you want to combine your credit card debt into the card with the lowest interest rate.

Once you have stopped using your cards, reduced your interest rates, and have consolidated your debt, then you’re heading in the right direction for paying off your credit cards.

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1. Big Awareness. Through budgeting, it keeps me aware of how much I spend on the daily basis.
2. Saves me money. By knowing whats coming ahead and being able to plan, it helps me to spend less and less every month.
3. Smart planning. Knowing how much money I have allocated, daily budgeting keeps me financially aware of my situation.
4. Puts me in the right direction. Helps me to reach my financial goals.
5. Helps me Prioritize. By keeping a nice balanced budget, I don’t have room to always buy things that I want. Instead, I need to make sure that I am able to buy the things that I need first before being able to buy anything else.
6. It just feels good. The satisfaction of spending within my allocated funds is a great feeling and an accomplishment.
7. Helps reduce debt. Financial planning and strict budgeting is a great way to help reduce debt.
8. Keeps me in a positive financial mind set. When I’m consistently around numbers and percentages, I’m always being reminded to keep going.
9. I love numbers. I love to calculate and to see how I’m improving from month to month.
10. Organized. Being able to plan my budget has definitely helped me to be more of an organized person.
11. (Extra)I’m ready for those emergencies. Life is unpredictable and you never know what’s heading your way. Being on a budget prepares me for those emergency times when I need those extra few bucks.

Budgeting is a very nice way to keep track of all your expenses and it also helps you stay organized. The best thing is it only takes about 20 minutes per week. I recomend using this program called pear budget. Its an excel spreadsheet that keeps track of how much you spend on the daily casis. If you want to give it a try, you can download it for free here.

[Photo Credit]

1. Help your child understand the value of saving money.  Here is where you start showing them the importance and the  benefits of saving money. This can be done with a simple but balanced form of an allowance. While they are young, giving them small amount of money will help them prepare for the future when the amount becomes larger.
2. Discuss the privileges and pitfalls of owning a credit card.  Show that credit cards can be a very powerful tool which could help you dramatically with your finances and also in return, how you could misuse a credit card and how much that could affect your life.
3. Give your teen ‘real world’ experience with money and budgeting. Instead of buying their yearly school clothes yourself, give them a set amount and let them decide what they need and what they don’t need. Emphasis that that is all they are getting so chose wisely.
4. Teach your child how to track spending. Get them in the habit of tracking their spending by either getting a notebook or a creating a simple excel spreadsheet on your computer.
5. Cover the basics of investing. It’s never too early to start explaining the general overviews of investing. The earlier you start, the better they’re equipped when it’s actually time for them to start investing.

1. Chinese food – This one is really stupid considering I have a meal plan on campus which is completely already paid for. I just need to throw out all my carry out menus from my room.
2. Starbucks - Ah, how I love coffee. This one is going to be a little hard to stop but I am going to try to cut down little by little. I go about 5-7 times a week. I love their new Dulce de Leche Latte. Such temptation makes this one quite tricky.
3. Random grocery shopping. Yes, I am truly a college student. I all I do is eat and study. Although I love the infamous Ramen Noodles, I tend to spend a little more on the hot pockets and frozen pizzas.
4. Car gas. Gas price is no joke. Especially since my car only takes premium fuel.
5. Pure junk. Stop carrying my cards and cash everywhere. Simple.

I think that if I am able to cut down on these 5 things I can save so much more. I’m going to set my target date for May 21st. Until then, I plan on keeping a record of how much I would of spent and instead saved.

1. Set a goal or a target. Write down the amount you want to save and also a date in which you want to accomplish this goal. Get a general idea on how much you have to save per week or month to meet your goal.
2. Don’t let your money stay idle. Keep idle cash in an account that pays interest.
3. Keep your checking account low. Have enough money in your account to pay bills and move the rest to somewhere else to gain some interests.
4. Put savings account on Auto-Pilot. Set up an automatic monthly or weekly transfer to your savings account from each check.
5. Shop around for the best interest rates. There are many places that offer more than 4%, places like gmac bank. Their money market savings account which also serves as a checking account are current running at 5.10%!
6. Fees are bad. Find checking/saving accounts with low minimum balances and little to no fees.
7. Avoid ATM fees. Find banks who can reimburse you on those annoying ATM fees.
8. Take advantage of banks that show transactions online. This way, you don’t have to wait for that monthly account statement to come in the mail and you can balance your account when it’s best convenient for you.
9. Overdraft protection. We all make mistakes – avoid those overdraft fees by having overdraft protection for your savings and checking accounts.
10. Learn to reason. The rule is simple, if you don’t need, you don’t get. Learn to differentiate between your needs and your wants. It’s good to treat ourselves every now and then but let’s not make that a habit.

***Editors Choice***

Ask Mr. Credit Card reveals some Drastic Ideas for Debt Reduction. “If your present income has taken a hit and you are very stretched, you may have to take some of the following steps to relief your debt payment burden”

Your Credit Score Secret explains the importance of your Debt to Credit Ratio and How they affect your Credit Report. “People are constantly commenting on what a good idea it is to make sure and pay off all of your cards every month in full to make sure to establish good credit and show that one can pay their bills. This is such a misconception and only leads to confusion. Having a revolving balance kept at the right percentage compared to your debt and you are on your way to a better credit report”

360 Degree Success on Money Consciousness: Do you have any of the 5 symptoms of Debt Overload. “In our society, so many people are overrun by debts. “Debt overload” is any situation where your debt is in control of you, instead of you being in control of your debt.”

Need To Be Debt Free explains how debt is the reason why Most Americans Will Not Have Enough To Retire. “To maintain their standard of living, experts say Americans will need to save ten times their annual pay in their 401(k)s by the time they retire.”

Kirby on Finance asks Is Your Own Ego Your Worst Enemy?Emotional spending and investing are created by our own perceived weaknesses, but just as a perceived weakness can cause us to handle our money poorly, so can an unreasonable perceived strength – an ego.”

Pfadvice brings us Wasting Money When You Think You’re Saving. “There are many instances when people believe they are saving money when in reality they are actually wasting it”

Suite 101 on The College Loan Process. “Find out how to manage the process before you dig into the hole of student debt”

John from QueerCents wrote A Costco Fable: The Day Money Became Real. “But by being forced to pay cash, and by having to wait for a discount, I was given a rare oppurtunity to view a $20 savings as real money.”

***More Great Articles***

Creditcardlowdown presents “Borrowing to pay me” and 19 other moronic things people do with credit cards. “20. Last and most obvious, but not the least: use a credit card when you don’t have the money to pay back the amount spent. Have a payment plan in mind before you make the charge.”

1031 Exchange Lowdown  posts Get divorced while screwing the women out of everything. “Divorce can be a dirty business – with the help of lawyers, your ex can easily play power games to gain an unfair advantage over you.”

My Two Dollars on Credit Cards that Pay you for Carrying a Balance. “Ohh, cash back on the interest I already paid. Gee, thanks for giving me some of my own money back.”

My Wealth Builder explains and illustrates Another Cost Of Having Debt-Weath Destruction. “Having $25,000 of debt can cost one over $2,600,000 of wealth.”

The Skilled Investor says If Personal Finance Is Difficult For You, Then Carefully Hire A Good Financial And Investment Advisor. “A good financial advisor could make things much better. A poor one could make things much worse.”

Debt Free 4 Ever states it’s 70% Attitude and 30% Hard Work. ”If you think you can, or if you think you can’t, you’re right”

FreeMoneyFinance brings up the question: Is It Ever a Good Idea to Pay a Credit Card Annual Fee? “Yes, under the right conditions, it can be worth it to pay a credit card annual fee. But for the vast majority, it’s not a good deal”

SearchLight Crusade explains Why Refinances Tend To Have Lower Payments. “…you should Never Choose A Loan (or a House) Based Upon Payment”

NCN gives Massive NCN Network Update! 11 Charts! Over $40,000 Paid! “well over $40,000 worth of debt has been paid in the last four months!”

CampusGrotto shares the Benefits of getting an MBA. “With tuition alone at the Harvard Business School at just under $40,000, an MBA will give you more college debt. Even with the combined student loans, the investment in education is worth the debt.”

FiveCentNickel on Georgia Upholds Ban on Payday Loans. “Supporters of House Bill 163 have argued that the state went too far in banning payday lending back in May 2004, and they want to bring the industry back, albeit with new regulations”

Information Age Education  posts Suze Orman Supports Financial Literacy for Women. “It’s a five month program to help you create a healthy relationship to money, make more out of the money you have for yourself and your loved ones, and gain more financial freedom.”

Mill1on questions Are You Living Paycheck To Paycheck? Save A Little. “Saving just 1% of your paychecks over a period of a year can save up to thousands over a 2-3 year period depending on how much you make”

Financial Hack lists 10 Ways To Simply Your Finances. “Consolidate all your investments at one company: By placing them all with one company, you can reduce the fees that you pay and it will be much easier to track how all your investments are doing.”

Money Under 30 says You’re In Debt. So what? “Let me make it very clear: debt is not you, and you are not debt. Your debt is a financial consequence of past life choices or circumstances. That is all.”

OhCash points out Things To Consider When Consolidating Debt. “Once things get to a certain point, often times people will start thinking about bankruptcy. For most people this is a scary concept. It will of course show up on ones credit report, and can remain there for up to 10 years after filing the case. It is at this point that many will start exploring debt consolidation”

Well that’s it. I hope you enjoyed the stay. I want to mention that the next edition of the carnival will be hosted at NCNBLOG so start getting in your submissions! Have a great week