#1 Not Fixing Errors on Your Credit Report

Over 80% of all credit reports contain errors (that's a lot of errors!) and errors on your credit

report can lower your credit score. Failing to correct these errors can cost you thousands and

thousands of dollars over time in high interest rates. Did you know that a bad credit score

could also affect how much you pay for insurance? Learn how to repair your credit or hire a

reputable credit repair company to assist you.

The first thing you should do is to get copies of your credit reports from all three bureaus

(see Chapters 3 to find out how to obtain your credit reports). Make sure you get three

separate reports, and not a merged report.

Some of the errors you should look for include incorrect address, name or social security

number; bankruptcies older than 10 years; delinquencies older than seven years; debts that

should be listed as paid that aren't, and accounts that you never opened (an indication of

identity theft).

#2 Avoiding the Use of Credit Cards

Since 15% of your credit score is based on your credit history, it is impossible to build a

decent credit score without using credit. As a matter of fact, according to many creditors,

someone with no credit is a bigger risk than someone with bad credit. Without using credit, it is

likely that you may not even have a credit score because there is not enough information to

evaluate. You need at least two credit card accounts to have a credit score: one at least six

months old and one credit account that has had some recent activity.

There are people in the world that have been burned by credit cards so badly that they have

sworn them off forever. Perhaps their spouse racked up enormous debt before they left, or

even more likely, the debt is the reason the couple got divorced. (The number one reason for

divorce in America today continues to be money problems.) Whatever your justification for not

using credit cards, forget it. Move on.

You need credit if you want to take advantage of the opportunities a good credit score can

afford you. If you want to build your credit portfolio, you will have to pick up the pen or the

mouse and start applying for a credit card (not all at once-spread out your applications over

time). You don't have to repeat the mistakes of the past. Instead, you can learn from them.

#3 Not Using the Right Ratios of Credit

One of the myths surrounding credit cards is that having too much available credit is bad for

your FICO score. It's simply not true. In fact, increasing your credit limits will help you maintain

the vital ratios of credit balance to credit limit that will actually

#4 Making a Large Credit Purchase before Closing on a Mortgage

A man arrived at the closing on his house in his brand new Cadillac Escalade. He walked into

the office and said to his mortgage broker and realtor who were waiting patiently for him to

arrive, "Want to see my new car? I just bought that baby this morning!" The mortgage broker

had a concerned look on his face and excused himself. When he returned, he politely informed

the man that there would have to be some changes to his interest rate since he just made

such a large purchase today.

The man's interest rate went up four points adding an additional $600 to his monthly payment.

Timing plays a critical role in all matters affecting your credit score. When you're ready to

purchase a home or refinance the one you've got, it's a good idea to hold off on any other

major purchases until after your new mortgage is completely finalized. In other words, don't

show up at the closing in a new car!

It is a common practice for your actual lender to review your credit score again right before it's

time to close on your mortgage. They do this to verify you haven’t made any significant

changes to your credit report or score. If they find anything significant, it is grounds for last

minute denial of the loan.

You open a new flower shop and receive your first business credit card offer in the mail. It's a

good interest rate, there's no annual fee and you get points every time you use the card that

you can put towards vacations.

New business owners often mistakenly think that using this kind of card will help their personal

credit – reasoning, “I will get a benefit because of all the items I will need to buy for my new

business.” Usually using a business card this way has the very

#6 Failing to Keep Your Credit Lines Active

Some people have so many credit cards that they simply have lost track of them. Perhaps the

credit card is forgotten, buried in the back of a wallet or shoved in an envelope somewhere in

their office. What they don't know is that having unused credit cards can actually hurt their

credit score in a couple of ways. Credit card companies constantly evaluate the value of

keeping you as a credit card customer. If they see that you never use your card, they just

might take it away by sending a letter saying that they have closed your account. It costs

money to maintain dormant accounts. Why should you care? After all, you never used that

particular card anyway. You

You should never close an account

So what do you do?

Use your "unused" credit cards just to keep them active and pay them off within your grace

period if you don't want to incur any interest on that card.

One of the challenges of having multiple credit cards is the effort it takes to be organized so

you don't forget to pay any of your credit card bills. Some people use software that can be set

up to pay the minimum payments of your cards that you’ll carry a small balance on each

month. If you wind up with a credit on your account, that won't do you any harm. The main

thing is to develop some kind of system that will help you pay all your bills on time.

#7 Closing Accounts Losing Valuable Credit History

As mentioned in #6, when one of your credit card accounts is closed, it doesn't look good on

your credit report and it often lowers your credit score.

Another reason you don't want to close credit card accounts is because 15% of your credit

score is based on your credit history. If you close accounts, you are removing part of that

history. Not a good move.

Another factor that is considered in your credit score is your credit ratio to credit balance as

explained in #3. If you remove some of your available credit by closing some of your accounts,

that will affect your credit utilization. Whereas before, for instance, you might have had

$70,000 of available credit, by closing two accounts with credit limits of $10,000 each, you

now have only $50,000 of available credit. Your ratios will change and your credit score will

most likely be lowered.

#8 Having Too Many Credit Inquires

Yes, you can have too many inquires and yes, they can hurt your credit score. But that doesn't

mean you can't shop around for rates and terms if you're in the market for a mortgage or a

new car. (Auto and mortgage inquires are counted differently). Just try to keep all of your

inquiries within 14 days and you should be fine. The way auto and mortgage inquiries are

calculated:

The first 14 days, auto and mortgage inquires are counted as one. Don't worry if you see each

and every inquiry listed on your credit report. That's normal. It's the way that they're counted

that matters. Credit card companies and department stores will try to get you to submit

applications for credit cards, but fill out too many at once, and your credit score is at risk for

significant lowering. Applying for more credit is a necessary part of building up your credit

portfolio - just make sure you spread out your applications over time. A good rule of thumb is to

wait about six months between each application for a new credit card.

#9 Failing to Obtain Your Three Credit Scores

If you want to play the credit card game, you've got to know your score. How else will you

know if you're winning? A few years ago, access to your credit score was not even an option.

(Imagine that!) Now it's not only available, it's easy to obtain. You just need to make sure

you're getting your scores from a reliable source.

There are lots of web sites misleading you into believing they can give you your three credit

scores from the three credit bureaus for "free". Mostly likely they're trying to sell you some

kind of service that will require a monthly charge. Read the fine print and make sure you

know what you're getting into.

At the time of this writing, it will cost you about $39 on any of the big 3 credit bureaus

websites.

#10 Not Knowing the Lenders' Requirements for Approval before You

Submit an Application

When it's time to apply for credit, most people don't consider getting pre-qualified by potential

new credit card companies. But think about it. What if you don't get approved, or what if you

get approved but at a much higher interest rate because your credit score did not meet the

requirements of the original offer? You will wind up with inquiries on your credit report for

nothing if you don't get the card. (See #9, Having Too Many Inquiries)

When we suggest getting pre-qualified, we mean simply calling the credit card company before

you submit your application and asking a few questions to determine your ability to qualify.

Three of the questions you should ask are:

1)

2)

3)

#11 Not Paying Your Credit Card Bills Installment Loans on Time

The biggest portion, 35%, of your credit score is based on your payment history. Not only do

creditors punish late payments with expensive late fees, they will also report your delinquency

to the credit bureaus, which will result in lowering your credit score.

The more recent the late payment occurrence, the more it will have a negative affect on your

score.

What systems can you put in place to make sure you pay all of your bills on time?

Some people find that setting up an automatic online bill paying system for their credit cards

works well. This can become a necessity if you are in the process of building your credit card

portfolio and have acquired too many credit cards to keep track of manually.

You can set up the payment amount to be above the minimum payment. Each month, if you

want to make adjustments to individual payment amounts, you can do that manually. The

important thing is to develop a system that is fail-proof in regards to paying on time.

Set up automatic online payments for all of your installment loans. Take the stress and worry

out of bill paying. With today's technology, there's no reason to have late payments. Do

whatever you need to do to avoid being late. Treat paying your bills on time as a serious

business, because it is a serious business. Anyone that's ever had to pay high interest on a

loan because of late payments knows just how serious it is.

Note:

#12 Getting "Maxed Out"

This one goes back to #3, Not Using the Right Ratios of Credit. If you are maxing out your

credit cards, you are definitely not using the right ratios of credit in terms of your credit score.

Your creditors look for that healthy balance of credit utilization to available credit. If you have

no available credit because you've used it all up, that doesn't paint a very stable picture. In fact,

it may suggest that you're on the verge of bankruptcy.

In order to increase your credit score, you need to pay down your credit cards to a more

healthy usage. Using 90% or more of your available credit is maxing out your credit cards. Get

that number down to 60 - 70% and you should see an improvement in your credit score. Get it

down to 30-50% and you should see more improvement. The ideal place to be is 15 - 32%

credit usage to credit limit.

#13 Believing Debit Cards are Like Credit Cards

The only thing debit cards have in common with credit cards is that they are both made of

plastic. Debit cards do not loan you cash. Debit cards withdraw funds from your money, not

"other people's money." Therefore, using debit cards will not help your credit scores. It may be

confusing, since your debit card usually looks and feels like a credit card, complete with a

MasterCard logo on it, for example. And there is nothing wrong with debit cards. They just will

not help you in building your credit. Look at your credit report. You will not see your debit card

listed there.

It's just a piece of plastic that replaces your checkbook and makes life a little more convenient.

If you want to increase your credit scores, look to real credit cards, not debit cards.

#14 Making Minimum Payments

It's becoming common knowledge that if you make only the minimum payments on your credit

card accounts, it will seem impossible to ever pay down your debt. For instance, it can take

you 22 years to pay back a $1,000 purchase when you are only making the minimum payment.

That's insane! Or how about this one: It can take you over

#15 Defaulting on Payments Which Move into Collections

What a lot of people don't realize is that not paying a medical bill or other types of non-credit

related bills could impact your credit score quite heavily. Perhaps you know your insurance

company should have paid that bill, so you refuse to pay it.

By not resolving the matter, you are only hurting yourself. Get it resolved before it goes into

collections.

When these companies fail repeatedly at collecting their money, they eventually will report

their failed attempts to the specific credit bureaus that they subscribe to. This is bad news for

you. Once the collection is on your credit report, it will stay there for seven years. Many people,

at this point, figure that if they pay off the bill the item will be removed. Unfortunately, that is

not the case. It will still stay on your credit report for seven years - even if you pay it off. Even

worse, paying off a collection usually has NO EFFECT on the credit score. All that matters is

that it REACHED a collection status.

Obviously, the best thing to do is to pay your bills and not let them get to the point where they

go into collections. Even if you think the bill is an error, you should still do whatever is needed

to resolve it. Seven years is a long time to have a collection on your credit report.

What you can do

Try to get the item removed by negotiating with the company you owe the money to. As part of

the negotiation, ask that they contact the credit bureaus and have the item removed from your

credit reports.

#16 Not Reading the Fine Print

While it may be true, reading the fine print of credit card applications and agreements may not

be the most exciting reading material in the world, it is still a necessary part of the process of

becoming successful in building your credit portfolio. If you want to avoid being caught off

guard or falling into one of the many credit card traps that can cost you thousands and

thousands of dollars, reading the fine print is something you shouldn't skip over.

There are certain important things you need to know when choosing a credit card. Do they use

a two-cycle billing or a one-cycle billing? What is the interest rate... REALLY? It says on the

offer that the interest rate is 9.8%, but in the fine print it says that the interest rate will be

21%.

Is that because I did not qualify for the 9.8%? How long is my 0% balance transfer rate good

for? What is my credit limit? If I'm late on one of my credit cards other than this one, will you

automatically raise my rate and to what? What is the annual fee?

By reading this book and reviewing credit card agreements, you will begin to understand the

"language" the credit card companies use in the fine print, usually to confuse you and keep

you from understanding how they calculate your interest, raise your interest, and compound

your interest. By continuing to educate yourself on the credit card lingo, you will begin to make

some sense out of the fine print. Making an educated decision about which credit card to

choose is an important part of succeeding in the world of building credit. Be patient with

yourself, and understand that in many ways, reading the fine print is a lot like learning a new

language. Once you begin to understand the definitions of certain key words, you will be able

to make better decisions for your overall credit health.

#17 Not Having a Variety of Credit

Creditors like "well-rounded" customers, meaning customers with a variety of credit. This

actually will help your score. Do you have a mortgage? A car loan? Credit cards and even a

student loan that you have paid off on time? We're not suggesting that you go out and get a

student loan if you have no need for one. What we are suggesting is that you think about how

you can include the "basics" in your credit history.

The picture painted by a customer who is a low risk is someone who owns a house, car and

has some credit cards, and has the credit history to go along with it.

Having a variety of credit cards also means making sure you have some of the major credit

cards, such as MasterCard, Visa, American Express or Discover. All is even better.

#18 Not Paying Attention To Your "Reason Codes"

When you receive your three credit scores, they each will include four "negative reason

codes."

These negative reason codes are two-digit codes that represent the reasons standing in the

way between you and a higher credit score. In other words, they are part of the answer to how

you can improve your score. Valuable information!

Here's an example of some of the negative reasons you might receive with your credit score:

O Proportion of loan balances to loan high balances is too high

O Too many consumer finance accounts

O Too many new accounts

O Excessive amount owed on revolving accounts

O Insufficient length of revolving credit history

O No recent non-mortgage balances

O Serious delinquency, derogatory public record or collection

O Insufficient number of satisfactory accounts

O Insufficient time since most recent account set up

O Derogatory public record or collection filed

You can only receive a maximum of four negative reason codes. The ones that you receive

should be the most significant reasons affecting your score. Under new models of credit

scoring, there are as many as 60 reason codes.

#19 Playing the Balance Transfer Game Without Keeping Good Records

The credit card industry refers to people who are known for transferring their balances

between low interest credit cards as "rate surfers" or "gamers." Rate surfing does have its

advantages, we must admit, but in order to be a successful rate surfer or gamer, you have to

be extremely organized or all your efforts to save money in your low-interest balance transfer

could be wasted. You need to schedule into your calendar when your balance transfer rates

are about to expire. To be safe, you should move your balance to another low interest credit

card about a month before the promotional period is over just to make sure you move your

debt out of that vehicle in time.

#20 Early Payment of Installment Loans

Installment loans are different than credit card loans. An example of an installment loan is a

mortgage or a car loan. The amount you pay is not based on your balance. The amount you

pay is the pre-determined monthly amount at the time the loan is approved. You have a

certain number of payments to make over a certain number of months.

Your credit history is very important to your credit score. Without a history of paying off a

loan over time, how else will you be able to build that history?

#21 Ignoring Negative Narrative Codes on Your Credit Report

Negative Narrative Codes can be found in your credit report next to the corresponding

account. These narratives are short statements that usually are, well... negative. Some can

be neutral narratives, but if they are negative, they will most likely hurt your credit score.

Here are examples of some of the negative narratives you might see on your credit report:

O Charge off

O Paid charge off

O Repossession

O Redeemed repossession

O Foreclosure process started

O Settlement accepted on this account

O Account included in wage earner plan

O Account included in bankruptcy

What should you do?

Contact the original lender and see what you can do to resolve any negative narratives.

When negotiating a resolution of a debt ALSO negotiate the final status the creditor will

report. That status mark, unless factually inaccurate, is solely up to the discretion of the

information furnisher. For example Paid is better than Settled. Deleted Altogether is

better than any derogatory status and still reported.

#22 Not Applying for More Credit

One of the myths surrounding credit cards is that it's not good for your credit score to apply for

more credit. While it's true that you need to watch your number of inquiries; this doesn't mean

that you shouldn't apply for more credit.

It's actually good for your credit score for you to apply for more credit as long as you are

someone who is using the credit that you currently have, and paying your bills on time.

It doesn't make sense in the eyes of the creditors for you to apply for more credit when you

haven't used the six credit cards you have in eight years. On the other had, say you are a

good consumer of your credit cards in the eyes of creditors (they like consumers who use 15 -

32% of their available credit). You're not maxed out, but your accounts are all active. Applying

for more credit makes sense and you will not be penalized for it. It will actually help your

score when you are occasionally applying for more credit.

#23 Misusing Cash Advances

There are a few ways to use cash advances to your advantage, but for the most part, people

lose out when they utilize this form of quick cash. First off, there is usually a 2-4% (or more)

fee of the amount advanced right upfront. Add to that the fact that cash advances usually have

a higher interest rate than your credit card (check the fine print!) and that they do not have a

grace period. This means that the "interest" meter begins ticking the moment you get the

money.

#24 Not Opening Your Mail

Denial is a very expensive habit. It can cause you to leave credit card bills and statements

unopened because you are afraid to see what's inside. You temporarily put them aside to deal

with them "later."

However, by the time you get to it, you realize that the due date has come and gone and now

you have another late payment. No amount of reprimanding yourself is going to change the

amount of money that you owe and the new late payment you've received. You can call the

credit card company, again, and ask them to remove the late fee, but there is only so many

times they will let you do that.

Credit card debt can easily get out of hand - so out of hand that you "accidentally" misplace

bills and forget to open them. Don't fall into this trap. Deal with your debt head on, and once

and for all. If you are in this predicament, develop a plan to get your credit life in order so you

can begin to concentrate on building wealth instead of paying down debt.

#25 Failing to Inform Credit Card Companies of an Address Change

Failing to inform your creditors about an address change can create many unnecessary

problems. First, you may not receive your bill on time, causing you to go 30 days late on a

payment. This not only hurts your credit score, the next time you make a purchase you’ll be

blocked because the address/zip codes won't match.

People make this mistake all the time and it can be an expensive one. Notify your credit card

companies of a change in address or a name change before you move.

In the Game of Life® here is your

Day Of Reckoning

Be Honest With Yourself and Answer…

Step One

Check the mistakes that you've been "guilty" of in the past.

1. Not Fixing Errors On Your Credit Report

2. Avoiding the Use of Credit Cards

3. Not Using the Right Ratios of Credit

4. Making a Large Credit Purchase Before Closing on a Mortgage

5. Failing to Separate Your Business Credit from Your Personal Credit

6. Failing to Keep Your Credit Lines Active

7. Closing Accounts & Losing Valuable Credit History

8. Having too Many Credit Inquiries

9. Failing to Obtain Your Three Credit Scores

10. Not Knowing the Lender's Requirements for Approval Before You Submit an Application

11. Not Paying Your Credit Card Bills/Installment Loans on Time

12. Getting "Maxed Out" (on Your Credit Cards)

13. Believing Debit Cards are Like Credit Cards

14. Making Minimum Payments

15. Defaulting on Payments Which Move into Collections

16. Not Reading the Fine Print (of Your Credit Card Terms)

17. Not Having a Variety of Credit

18. Not Paying Attention to Your "Reason Codes"

19. Playing the Balance Transfer Game Without Keeping Good Records

20. Early Payment of Installment Loans

21. Negative Narrative Codes on Your Credit Report

22. Not Applying for More Credit

23. Misusing Cash Advances

24. Not Opening Your Mail

25. Failing to Inform Credit Card Companies of an Address Change

Step Two

Make notes of actions you ready to take to begin to increase your credit score AND your

credit limits so you can have accessibility to the cash you need for future investments.

Notes:

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Step Three

Remember not to feel "guilty" if you've made any of the 25 mistakes above. We all have. In

fact, the credit card companies count on consumers being in the dark when it comes to how

the credit card industry operates. When dealing with credit cards and building credit, your

best defense is information. The more you educate yourself about the hidden secrets of the

credit card industry, the better you'll be able to use credit to your advantage.

If You Have Benefited From The Information In

This Special Report, Please Share This Report With

3 Or More Friends, Business Acquaintances or Coworkers

For Personal Credit Restoration

&

The Business Credit Builder Program

© Copyright 2008 by The Mack Financial Group