A credit score is the final result of a complicated formula that is used to forecast risk for loan lenders and creditors. The credit score is determined by using information in your credit report, account history and/or applications. The main purpose of the exercise is to accurately ascertain the timely payment of accounts, as well as any delinquencies. Creditors and loan lenders use credit scores to decide:

Boosting the credit limit on a current account.

Insurance companies use credit scores to help them decide:

Issuance of new insurance policies Renewal of current policies

Also, the employers use credit history to help them make employment decisions. The main credit bureaus are Equifax, Experian, and Trans Union. The credit score is commonly known as the FICO score. Some lenders including, mortgage lenders use merged credit reports that incorporate credit scores and other credit information in order to make mortgage loan decisions.

It is important to understand that your credit score is frequently updated in your credit report and your scores are calculated even if your information is incorrect. The credit score is made up of five categories:

History of payment 35%

The two most critical factors that make up your credit score are your payment history and the balance you carry. Cumulatively, the two factors make up approximately two-thirds of your credit score. One of the most important things is to focus on a path that improves your credit score, paying down your debt and your bills on time.

Whenever a creditor, lender, or an employer does a credit check, an inquiry is created on your credit report. Too many credit checks in the last few months to a year can have a negative impact on your credit score. These credit checks do not impact your credit score:

When you request your own credit report or score Mortgage or car loan credit checks in a short time period are lumped together and are usually counted as a singular inquiry (This doesn’t apply to credit card inquiries) Pre-approved credit card or credit line file reviews for promotional offers

Irrespective of what your credit score and debt situation is, never cancel your credit card accounts. The closing of your card accounts can negatively affect your credit score. Remember that your credit score is based on your credit history and how you have handled it over time. When you cancel your card accounts, you are limiting the information available to credit bureaus that helps them extrapolate your future payment actions.

Additionally, you will lessen the length of your average credit history. In calculating your credit scores, a longer credit history is better. If credit debt is an unending concern for you and you’ve exhausted all known options, then debt consolidation, credit counseling, or credit consolidation may be good option.

Mortgage refinance has always been the choice for homeowners when mortgage rates are lower. In the beginning of this year, mortgage rates fell below 6% for the first time since 2005, leading to a surge in mortgage refinancing. In January, more than half of the all mortgage loan applications were for mortgage refinancing. Just in the first week of the year, mortgage refinance volume jumped 53.9 percent, accounting for 57.7 percent of total home loan applications.

Homeowners led the surge in these applications as they wanted to refinance more expensive loans. Thus far, more than six out of 10 mortgage applications have consisted of refinances. But interest rates on mortgages have been fluctuating; the average 30-year mortgage hit 6.2% by February’s end, up from 5.6% in January.

However, last week, the rates reached historic lows again as 30-year fixed mortgages dipped below 6 percent to an average of 5.87 percent. The mortgage rates on 15-year fixed mortgages, a very popular refinancing choice, dropped to 5.27 percent last week, a slip from 5.60 percent two weeks ago.

This is the perfect time to perform a mortgage refinance as interest rates are at historic low rates. If you have an adjustable rate mortgage (ARM), refinancing may be a good move. Many ARMs are expected to readjust this year and, if inflation keeps rising, your mortgage rate may jump to unaffordable levels. Still the increase may not end, you might very well face the possibility of another increase every year after that.

Recently, the government readjusted Fannie Mae’s and Freddie Mac’s conforming loan limit from $417,000 to $729, 750. If your once jumbo loan now fits the criteria of a conforming loan, you have the best opportunity to refinance to a lower mortgage rate.

Generally, jumbo mortgages are about one percentage point higher than conforming loans, thus converting to an applicable conforming mortgage refinance loan can save you thousands of dollars in the long-term. No one can guess what the long-term may hold, so take advantage of an opportunity that is currently available to you. Residential real estate prices are falling, if home values keep going down, you may find it harder to refinance later on. At present, you will need at least 10% equity in your home to be approved for a refinance.

You can calculate your equity by getting a current estimate of your home’s value and subtracting it from your mortgage loan balance. In order to get the best refinancing deals, a good credit report and credit score would be ideal.

Don’t wait long to refinance your home, if you wait you might just lose out on an historic opportunity to leverage low home loan interest rates. Do a mortgage refinance now and save thousands later.

Credit report and credit history are some of the most important facets of your credit. Americans by law can access their credit report annually for free. It is easy and simple to obtain and crucial to your financial success. Any inaccurate information on your credit report can create issues with prospective employment, credit cards, qualifying for loans, and much more. Currently, there are only three credit-reporting agencies, Experian, Equifax, and TransUnion that have to provide you with a credit report once every 12 months, upon request.There are several ways to access your credit report:

Log onto AnnualCreditReport.com, the only government authorized resource for you to get your annual credit report online for free. Fill out a form in the Annual Credit Report Request brochure, and mail it back to them. You can order the brochure from the Federal Trade Commission

A credit report is important because it is a complete rundown of your payment history, your payment behavior, listings of your accounts, and balances for each. It doesn’t reflect your credit score, or FICO, nor your creditworthiness. However, credit scores use the information provided in your credit report as part of their calculations, hence, it is important to correct any inaccuracies in your report quickly as it can improve your credit score.Before you order your credit report, it is important to go through AnnualCreditReport.com instead of the three major credit-reporting agencies, who may charge you for the report.You are entitled to your credit report if: you’ve been denied an insurance policy, a loan, or employment based on your credit report. Don’t get suckered into online scams and advertisements for a “free credit report,” as there are many credit report “scamsters” out there on the prey. The three main credit reporting agencies established AnnualCreditReport.com to be the exclusive, federally mandated free no-frills credit report resource site. Don’t waste your money paying for your credit report on one of the scam sites that charge a fee to view your report.Your credit report can be an important source for finding out if anything needs to be corrected. Sometimes, it may require the exhaustive credit repair process. There are many companies that help with credit related issues, including credit debt, credit card repair, and credit consolidation. Financial services websites like SecureLoanConsolidation.com are a good place to get started.

Credit card identity theft is one of the fastest growing crimes in the country. As criminals become more brazen and technology savvy, protecting the integrity of your credit report and credit history becomes even more important. Important information on bills, canceled or blank checks, investment and credit card statements are easy prey for identity thieves. Also, income tax records, medical records, and credit reports are a wealth of information for these crooks.

Many consumers simply toss important documents into the trash once they no longer need them. But is that sufficient? I would say no. You need to start shredding your documents. Criminals are extremely resourceful; they go through people’s garbage and other means to obtain any information necessary to steal your identity.

In most cases very little information is required; your Social Security is enough to apply for credit cards, bank accounts, loans, apartments, cellular phones, and utility accounts. The Federal Trade Commission (FTC) is getting tough with any person that possesses consumer personal information for business purposes. Whether the business is a sole proprietorship or a multinational corporation, the FTC is clear in stating that sensitive data must be maintained or disposed of in a secure manner.

Herein, businesses that employ consumers’ personal data such as, lenders, banks, auto dealers, hospitals, investment firms, doctors, real estate agents, credit card companies, employers, and more must be vigilant in protecting peoples’ information. The businesses must pulverize, burn, or shred paper documents and thoroughly destroy or erase all electronic media.

Somehow the general public shies away from using a cost effective shredder to protect their identity. Here is a list of the most important documents you should shred:

Financial statements

Consider getting a crosscut shredder that cuts paper horizontally and vertically, provides more protection than the traditional strip-cut shredder.

Your personal information is too critical to be ignored when it comes to protecting your identity. You can only worry about what you have control over; you have control over who you give access to your personal information to and the method of disposing your personal information. By being vigilant in both areas you can go a long way in safeguarding yourself against identity theft.

Credit Card debt and other forms of debt have been plaguing many Americans for years. The problem of excessive consumer debt has continued to grow without any foreseen end in sight. Is it possible to pay down debt, save money, and invest at the same time? Yes, in certain circumstances it is. Let see what actions you can takeGet out of debt and save moneyYou are not alone; many people are facing the same situation as you, a mountain of debt with no way out. The burden of credit debt and other consumer debt has permeated every echelon of our society. Overextended bill payments are garnering the major proportion of household incomes, leaving little if any cash flow. However, there is light at the end of the tunnel. If you can become disciplined with your finances, you can have long-term financial success and peace of mind.Track expenses and curtail spending. Start noting your monthly expenses. If you have Excel, uses a spreadsheet expense tracker, if not, just write down expenses in a dedicated notebook. Only by seeing your expenditures in black and white will you have a realistic idea of your spending habits. For some it will be an eye opening exercise meaning you might discover you are spending more than you thought. So what is the point of this exercise?The main reason to track your expenses is because it is an integral component of budgeting. How can you determine to cut back when and where unless you know what your expenses are? After tracking your expenses for a period of time, you can get a good idea of your average expenses over time. You can also determine where the best opportunities are to curtail your spending and using your credit cards. Determine your cash flow. Cash flow in simple terms is your cash outflows minus your cash inflows. Calculate your cash inflows by including your net income, income left after all deductions and taxes. You can calculate outflows by adding regular monthly expenses such as, mortgage or rent payment, utilities, food, fuel and transportation, loan or credit card payments, child care, and other regular expenses.By deducting outflows from inflows you will have a factual understanding of your true net cash flow. A positive net cash flow means you have some money to invest and save, a negative number means you are spending more than you bring in.Save money. The rule of thumb in the financial industry is that you should have at least three to six months of living expenses in case of emergency. It is recommended, to put money into a savings account at any time, the important thing is that you do so on a consistent basis. If your cash flow increases over time, increase the amount you save on a regular basis.Reduce your debt

Pay off your highest interest rate debt first, in most cases those are credit cards. Avoid making minimum payments. If you have to perform a debt consolidation. A credit card consolidation involves placing all of your card debt onto a lower or zero interest rate card. Make sure you understand the terms of the balance transfer offer. You can also consolidate all debt by paying off the debt with a home equity line of credit (HELOC). Again make sure you clearly understand the terms of the loan. If you are need professional guidance, seek out the services of a reputable debt counseling, credit repair or credit counseling service. Read the term of their services and compensation clearly.

All in all, the key to long-term financial success is discipline, education, motivation, and consistency. You can do it; it won’t be easy but stick it with. It will be well worth it at the end.

The Fed announced today that it is cutting key interest rates by half-percentage point in an effort to save the softening U.S. economy. The reserve bank took interest rates down by 75 basis points in an unheard of step during an inter-meeting on January 22. The central bank thus far, has cut its federal funds target five times since mid-September last year. The immediate result of the lowering rate is that the federal funds overnight interbank loan rate came down from 5.25% to 3.0%. The federal funds rate is the interest rate the Fed charges member banks on overnight loans.

It was only five months ago, when Federal Reserve Chairman Ben Bernanke ignored the global financial commotion caused by risky subprime mortgages and eulogized about credit and inflation concerns. The new rate cuts have been initiated to ward off an economic trough partially instigated from the subprime mortgage meltdown, the slow housing market, and tightening credit that have infected every segment of the U.S. economy.

Wall Street and the international stock market have been in retreat in the past months and the gesture of rate cuts by the Fed was to appease the Street’s financial institutions. However, more medicine from the central bank is going to be injected into the economy. There are likely going to be more rate cuts from the Fed to keep the economy from softening further.

The rates cuts came days after President Bush announced his economic stimulus plan. The Bush plan included $145 billion in tax relief for individuals and businesses. But after consulting Congress, a bipartisan plan was hammered out that was a billion dollars more than the original Bush initiative, a total of $146 Billion in tax rebate offers.

The tax rebates are $600 for individuals and $1200 for couples. The President and Congress hope that you will spend the money and help drive the economy north through consumer spending. But I believe that the tax rebate should be used by you to save or more importantly pay off consumer credit debt. There are many types of debts out there but the most common and the ones with the highest interest rates are credit card debt.

Credit debt has ballooned over the last few years to an average household debt of $8500. Remember that is the average debt, millions of people have debt in the five figure range. More and more people are seeking help of debt consolidation, debt counseling, and credit counseling services to get out of credit debt.

The economic situation is squeezing the middle class everyday; credit card debt is burdening further their precarious financial situation. It will be interesting to see how the people use their tax rebate checks, whether they spend it or pay off their debts. For their sake, I hope it is the latter.

The American consumer has become overly dependent on easy credit. Credit cards afford many a prolifigate lifestyle that is not reflective of the ground realities. The American nation has truly become a credit card nation, where consumers pursue spendthrift policies not reflective of their true financial realities. Currently, in Davos, Switzerland, the World Economic Forum (WEF) 2008 is taking place. At the WEF world leaders, business leaders, entrepreneurs, and many more share ideas and discuss solutions for economic progress in conjunction with social development. This week, at the WEF, the Chinese economist Cheng Swei of the National People’s Congress commented, “Asians…save today’s money for tomorrow. Americans spend tomorrow’s money today.” The commentary by Swei couldn’t have been more accurate. Americans have a negative national savings rate and an average household credit card debt of $8,500. As a result of increasing credit use and vanishing personal savings, the national dependence on credit has had many ill effects, including deterioration in credit ratings and credit scores.

Your credit history keeps a tab of when you borrow money. The credit lender sends your credit information to a credit bureau that keeps track of how well you conduct credit debt management. Based on your credit report information, the credit bureau arrives at a credit score buttressed by five major factors: 1. your past credit history, 2. your current state of debt, 3. how long your credit has been in use, 4. the types of credit available to you, and 5. your pursuit of new credit.

The five factors affecting your credit don’t receive an equal weighting. This is how credit bureaus evaluate your credit weighting:

5% – Your pursuit of new credit

Hence, your credit history affects your credit rating and credit scores the most. The biggest factor that can increase your credit rating is your ability to pay off your debts quickly. Furthermore, keeping low levels of indebtedness, a long credit history, and abstaining from applying frequently for other credit cards can help . Here are the top ten ways to improve your credit rating:

1. Make timely credit card payments with the correct amount

2. Know your credit card issuers. Avoid credit from financing companies

3. Maintain a low credit-debt ratio, ideally around 30%

4. Monitor your credit report annually. Dispute any errors with the credit bureau

5. Don’t cancel your unused cards. Keep them in a shoe box, don’t use them.

6. Be patient, improving your credit rating takes time. Just follow these tips and you’ll be fine.

is not an overnight process. In addition to following the above tips, some of you may need the help of a reputable debt management, debt counseling, or credit counseling agency to help you navigate out of the waters of credit disrepair.

How many times have you looked at your credit report? Do you know your credit score? The information contained in your credit report is the only thing that directly affects your credit score. In return, your credit score impacts your ability to obtain credit and approval for loans. The score also affects the interest rates you will be charged on your credit and loans.

The credit score ranges from 300 to 850, with the highest score reflecting excellent credit. Having a low credit score can stop you from getting credit and loans, or at a very high cost; meaning you will be charged higher interest rates. The reason for charging higher interest rates is because lenders see consumers with poor credit scores as a higher risk than people with good credit scores.

Over the life of a loan, a high interest rate on a home equity loan, student loan or car loan can cost you thousands of dollars in interest fees, which could have been lessened with a low-interest rate loan.If your credit score is low, it is important for you to improve your score in order to help secure your financial independence through sound financial planning. The road to credit repair can take weeks to years depending on the severity of your credit history.

For now, it is critical we focus on how to enhance your credit score over time. These are the top ten tips to boost and improve your credit score:

1. Make bill payments on time

Late payments appear negatively on your credit report leading to a drop in the credit score. Make your loan and credit card payments on time, don’t be late. There is no exception. Never skip your mortgage payments, make late payments or default on credit/loans; a record of which can be on your credit history for seven years.

Avoid your accounts from going to a collections agency. If you are unable to make your monthly payments, negotiate for an alternative payment schedule. By simply paying what you can and working with your creditors, instead of avoiding them, you can take a responsible approach towards protecting your credit and enhancing it over time.

2. Use your credit card as a last resort

By the mere fact of possessing credit cards impacts your credit score. Another important factor taken into account in calculation of your credit score are credit card balances. If you have a balance of over 35 percent or more of total available credit limit on individual cards, this can hurt your credit, even if you make your regular payments.

By responsibly using your credit cards, as a last resort and keeping your balances to a minimum, you can manage your appropriately. This can serve you well in keeping your credit score from dropping and may help improve your score over time.

3. Don’t terminate unused accounts

Credit card agencies use the length of time you have held each card into consideration when calculating your credit score. So if you have some cards that are no longer being used, don’t cancel the account. It is better to keep your cards in your shoebox and not use them. Remember, you are rewarded for maintaining a long-term relationship with each creditor, irrespective of whether you use the card or not.

4. Avoid getting too many credit cards

The temptation to receive the 10 to 15 percent discount off your retail purchase by applying for that store’s credit card can be tempting. But it can also hurt your credit score. If you obtain multiple new cards (plus retail credit cards) within a few month period can negatively affect your credit score.

5. Avoid balance transfers

It is common for people today to play the balance transfer game. Consumers keep transferring balances from one credit card to another because they are unable to payoff the credit balance. Simply opening a new card account can lower your credit score by about 5 points or so. If you transfer your balance to a lower limit card you can hurt your scores.

Also, if you close your account after you transfer your credit balance, you can hurt your credit score because you have less credit available, available credit is used in formulating credit scores.

6. Evaluate your credit report annually

Make sure you order your free credit report from one of the credit reporting agencies (Equifax, Experian, or TransUnion). Carefully review all of your credit reports and initiate a dispute to correct or remove erroneous information.

7. Don’t have a frequent credit checks

Every time you apply for a loan or a credit card, a credit check is performed with one of the three credit reporting agencies. This inquiry is added to your credit report and becomes part of your credit history. Each inquiry will remain listed for two years.

However, during the first year the inquiry will reduce your credit score. Several credit checks in a very short period of time can considerably diminish your score.Take into account, when shopping for an auto loan or a home loan mortgage; it’s allowable to have several inquiries for this purpose within a 30- to 45-day period, without the inquiries hurting your credit score. These compounded inquiries will be counted as a single inquiry.

8. Avoid Bankruptcy

Negotiate with lenders about restructuring your debt, hire a debt consolidation expert, or a credit counselor before you file for bankruptcy. By filing for bankruptcy your credit score will drop like a rock. Moreover, a bankruptcy will burden your credit report for ten years.9. Restructure and payoff your balance

Stop making late payments or transferring balances. Make payments on time and have a time frame to payoff your entire balance over time. A disciplined approach towards your debt can save you thousands in interest over time.

10. Get your creditors to work with you

Believe or not, creditors want to be repaid the monies they lent you, even if it’s pennies on the dollar. The message, you can negotiate with your creditors. Openly communicate with your creditors, instead of skipping payments. Don’t force the credit card companies to turn to collection agencies to collect the debt. This will hurt your credit score further.