Below is a list of the possible benefits of filing for bankruptcy:

The chance to be free from debts. A Chapter 13 Bankruptcy will discharge you from all your obligations to your creditors. However, it is worth noting that not all types of debts can be discharged by bankruptcy such as student loans, liens, family support, to name a few.

The court shall be the one to decide whether you will be eligible for a Chapter 13 Bankruptcy based upon the result of your Income Means Test. If you fail test, the court may rule a Chapter 7 Bankruptcy which will put you under a five-year repayment plan.

Stop repossession. When a borrower files for bankruptcy, the bank or lending company cannot continue with the repossession procedures until the court ruling have been completed. This gives a debtor the opportunity to catch up with their payments and avoid losing their home to their lender.

Stop debt collection. If you are tired hearing from creditors and debt collection agencies reminding you of your obligations, filing for bankruptcy can give you some space and peace of mind. Once your bankruptcy application has been filed, creditors and debt collection agencies must stop all its debt collection attempts at once.

A fresh start to rebuild credit. After being discharged, check your bankruptcy credit report to make sure that there are no errors or inaccuracies in your file. Order a copy from each of the three credit report agencies (Experian, Equifax, TransUnion) so you can start rebuilding your damaged credit history one step at a time.

Weigh the Pros and Cons

Yes, filing for bankruptcy is not advisable for all. It should not be seen as an instant solution to escape debt problems. If you are stuck in a bad debt situation, it is recommended that you seek professional advice from a trusted credit counselling agency to determine whether or not bankruptcy is right for you.

Today, more than ever, people do seek out bankruptcy not just to get a chance to recover from bad debt but to save their families from being out in the streets as well. This article presents the reasons why people file for bankruptcy.

• Sudden loss of employment. One of the worst damages brought about by recession is the unexpected loss of job. Obviously, getting laid off in the middle of a crisis can be very difficult especially if you are the breadwinner of the family. Aside from not having a regular means of income, being unemployed also means not getting the benefits that a company provides.

• Illness or medical emergencies. It is very easy to get into deep debts because of an unexpected illness in the family. Your bill from hospitalization costs, medication and treatments can really soar in just a matter of days. If you do not have a health insurance plan to help you out with these expenses, you may be surprised to find yourself filing for bankruptcy.

• Stopping repossession. Failing to keep up with your mortgage loan payments is a very dangerous situation to be in since you can lose your home to your bank or lender. Once the process of repossession has been started, the only way you may be able to stop it is to file for bankruptcy.

In some States, many people declared bankruptcy to keep their families safe from being out in the streets. Once the bankruptcy application has been approved, it gives a borrower the chance to catch up with the missed mortgage payments.

• Get away from debt collection harassment. In reality, there are debt collection agencies that do violate the Fair Debt Collection Practices Act. Some collectors resort to harassment to force a borrower to make payments. For some people, filing for bankruptcy means getting some peace of mind so they can focus on paying off their debts one step at a time.

If you find yourself in any of these situations, do not lose hope. Bankruptcy doesn’t need to be the end of the road for you. In fact, it can very well be the first step of credit rehabilitation. As soon as you’ve been discharged from bankruptcy, order a copy of your bankruptcy credit report from the three credit report agencies. Checking your report will enable you to work out an effective credit repair plan based on the facts in your file.

Timely Payments

Did you know that making your payments on time can raise your score by as much as 30%? How conscious are you about submitting payments on your due date?

One way to avoid late payments is to set up an automatic payment system with your bank. Hence, payment to your creditor will be automatically sent by your bank using the available funds in your savings account. Prompt payment for at least six consecutive months can significantly raise your score.

But what if you cannot send payment on your due date because of an emergency? In this case, you would want to get in touch with your creditor immediately. Let them know why you cannot submit as expected and request for an adjustment in your deadline. Many creditors will oblige if you talk to them about it.

Keeping old accounts

The length of your credit history is an important factor in your credit report. This is why closing old accounts can damage your score. Be careful about cancelling old credit cards, especially the ones that you first had. If an old card charges a high rate or expensive fees, use it only for small purchases. Avoid the interest rate by paying your entire balance each time.

Setting your credit limit free

How much of your credit limit do you use? Financial experts advise not using more than 40% of your available credit. Why? Creditors may get a negative impression if your credit report shows that you often maximize your credit card’s limit. You may be considered as a “high risk borrower” and potential creditors may be hesitant to approve your application.

Add to this, maximizing your credit line puts you at a greater risk of bad debt. To avoid this, make it a habit to pay off your credit card balances in full before charging new purchases. It will also make a big difference if you will create a list before shopping with your credit card.

What are Annual Fees?

What are annual fees and why do credit card issuers require them? As the name suggests, an annual fee is a yearly fee that the credit card holder must pay in order to continue the activation of his account. In short, annual fees can be considered as activation fees for credit card holders.

Not all credit issuers require an annual fee. Usually, credit cards with reward programs are the ones who charge an annual fee from their clients. This is to make sure that the card holder is still actively using the credit card for his purchases.

How much is your annual fee? The amount would depend on your credit card issuer. Typically, the annual fee of a credit card ranges from $20 to as much as $75 or more. The annual of a credit card is usually affected by how much interest rate it imposes. Sometimes, a credit card with a low interest rate makes up by imposing a higher annual fee while a card with an expensive interest rate may impose a low annual fee or may not require an annual fee at all.

Good or Bad?

A credit card with an annual fee can be good or bad. It all depends on the terms of the Issuer and the other costs that come with it. For instance, let’s compare two different credit cards with a varying annual fee. The first one comes with a low annual fee of $25 while the other one comes with $30 annual fee. So which one is better?

Before you go on and choose the first one, consider the other costs. The first card with a lower annual fee actually comes with a 19% interest rate while the second one comes with just 14% interest rate. This means, you will be paying an additional $5 if you get the second credit card but you will also save 5% on its interest rate. Now, which one would you prefer?

Clearly, you cannot judge a credit card based on the annual fee or the interest alone. You need to weigh each of these costs in order to choose the credit card with the best deals. Also, remember that there are credit cards in the market with low interest rates and with no annual fee to boot. If you’re diligent in shopping around and comparing credit cards, surely you will find the one with the most reasonable offer.

1) Get a copy of your credit report. Consumers can get one free copy of credit report each year by visiting www.annualcreditreport.com. This website is supported by the three major credit bureaus (Experian, Equifax, TransUnion). Check report for any errors or unauthorized charges. In case you found any error, get in touch with the bureau that issued your report and request for an investigation.

2) Make your PIN codes unique. When setting a PIN code or password, do not use birthdays or any detail that can be found in your personal information. Choose a PIN code that cannot be easily guessed by anyone. Make it unique yet easy for you to remember.

3) Do not provide your personal information. If you receive a phone call claiming to be from your bank, the BIR or a government agency, and you are asked to provide personal information, stop the conversation right away. You should not be required to give away personal details in this manner.

4) Use filters online. If you have a computer, invest on a reliable anti-virus program. You can find anti-virus programs that also come with anti-spyware and phishing filter. Identity thieves often use “phishing” websites to trick unsuspecting victims. A user may think that he/she is using a safe website without realizing that it is a fake one.

5) Regularly check your bills. Check your monthly billing statements or access your account online regularly. If you do not receive your bill through mail on time, call your issuer right away.

6) Dispose your credit card receipts and bills correctly. Do not throw away bills, old credit cards and banking statements in the trash without first shredding them into small pieces.

7) Do not give out your Social Security number unless absolutely necessary. Some merchants ask their customer to provide their SSN for Identity verification. You may request the company you are dealing with to give you another piece of identifying information instead of your SSN.

8 ) Check the security of the website. The URL of a secured website must always begin with https://. You should also see a locked icon at the bottom right corner of your browser.

9) Do not write your personal information in pieces of paper. Never write your personal details and passwords on sheets of paper that can easily get misplaced or thrown in the trash. Use a log book and keep it in a safe storage.

10) Keep an eye on your credit card. When paying with your credit card, do not let it out of your site. When eating at restaurants take your credit card to the cashier and make the payment yourself instead of handing it out to the waiter. “Phishing” devices are often small enough to be hidden in the palm of a hand. These gadgets can scan your credit card information in just a matter of seconds.

Examining your credit report early has another advantage. It puts you in a much better position to negotiate with a potential creditor and request for lower rates. Needless to say, if you are aware of your credit standing, you can be more confident in negotiating with a lender.

But what happens if you found out that you have poor credit? Ordering a copy of your report at least six months before sending in your application gives you more time to work for the improvement of your current score. Within six months, you can take positive action to raise your credit score. For instance, you can pay off your past due bills and be more consistent with your upcoming payments. Doing so will surely improve your credit standing.

After six months, order a new copy of your credit report to check your progress. Bear in mind that even the slightest improvement can make the difference in getting a lower rate or a higher loan amount from a creditor.

Should you order your credit report only if you want to apply for a loan or a credit card? It is recommended to check your personal credit report at least twice a year. Reviewing your report is your best protection against identity theft and fraud.

All consumers are entitled to get one a free credit report each year. Visit to get your free credit report. If your requesting your second copy or additional copies, the fee cost ranges from $9-$15, depending on the credit reporting agency. Remember that the three major credit bureaus- Experian, Equifax and Trans Union- each have their separate reports so it’s best that you get copy of your credit report from each of these bureaus.

In addition, if you have been a victim of fraud or ID theft, or if you are unemployed, you can request for a free copy of your report.

Should you find errors in your report, exercise your right to dispute inaccurate reporting. Send a letter of dispute to the credit bureau that issued your report so that an investigation can be started immediately. Upon receiving your dispute letter, the credit bureau has 30 days to respond to your complaint.

How about people with no credit history? A research conducted by the Fair Isaac Corporation reveals that about 50 million Americans have little or no credit history at all. These group of borrowers easily become a target to predatory lenders. Without good credit history, they may find it difficult to get approval from the best lending companies in the market.

A New Credit Scoring

The FICO scoring system was introduced by the Fair Isaac Corporation in July 2004 and since then, has become the most widely used credit scoring system. It is used by the three major credit bureaus and many leading creditors as well. What makes the FICO scoring model distinct compared to other means of calculating credit rating? The FICO method is based on a number of factors such as the length of one’s credit history, payment history, the credit line usage, the types of account, and public records (bankruptcy, foreclosure, liens, etc.).

Recently, Fair Isaac Corporation announced a new form of scoring based on the FICO model called the Expansion score. Under this new system, credit cards and loans will not be the only sources of credit history. Rather, untraditional types of debts or credit such as payday loans, utility bills, and rental fees will be considered as part of a person’s credit history as well.

Yet another type of credit scoring system is created by the First American corporation, known as the Anthem Score. Under this scoring system, rental history, child-care expenses and utility payments will be considered as a major part of credit history. Financing corporations are presently considering the potential of the Anthem Score and the possibility of adapting this new system.

The PRBC or Payment Reporting Builds Credit credit reporting agency has also developed its own credit scoring method. Their credit scoring system focuses on rental and utility payments of the borrower. The scores are rated using the letters of the alphabet, with A being the highest rating and D as the lowest rating.

These untraditional methods of calculating credit scores are still yet to be explored by lending companies and financial institutions. While there are a few credit reporting agencies and financing companies that make use of other models, The FICO scoring system still remains to be the leading method in the industry. These credit scoring methods can further be developed so that a person’s credit worthiness can be determined by a more reliable and reasonable criteria.

Your Credit Report

Your personal credit report is divided in four sections – personal identity, credit history, public records (if any), and credit inquiries made by lenders, insurers, and other sources where you may have submitted a credit application.

The first section contains personal details such as your full name, past and previous residences, employment history, Social Security Number, Driver’s License Number, etc.

The second section is credit history. Here, all your transactions with creditors are recorded such as the type of account you have, the amount of debt you have, your payments, balances, etc.

The third part is the public records section. This is where you can find legal remarks or court judgments such as tax liens, bankruptcy, foreclosures, etc. Ideally, this part of your report should be blank or free from any derogatory remark.

The last section is where you can check all inquiries made by potential creditors, insurers, employers and other companies to whom you may have submitted an application. You may also find other inquiries from companies who are interested in offering you credit even if you did not submit an application. These inquiries are called “soft” inquiries and will not damage your credit score.

Your Credit Report Score

The FICO system is used to calculate credit history. It ranges from a low score of 300 to a high of 850. Lending companies have varying qualifications when it comes to approving credit ratings. Generally, a score of 700-750 is considered as good while a score of 750-800, excellent.

Of course, if you have a higher credit score, you are more likely to get the quickest approval. Furthermore, an impressive rating gives you the power to make demands such as a lower interest rate, a higher credit limit, and more flexible terms.

A score of 650-700 is regarded as fair which means your application may or may not get approved, depending on the lender’s credit standards. A score that falls below 650 or 600 is obviously a bad score. If you have poor credit rating, your only chance of getting approved is to apply with a subprime lender.

Improving Your Credit Report Score

If you’re planning to apply for a credit card or a loan, order a copy of your credit report before submitting application. What can you do if you have bad credit?

You can improve your credit rating by paying off past due charges in your accounts. If it’s not possible for you to pay all your debts at once, call up your creditor and negotiate for an easier repayment term.

If you are struggling with debt, you can also get a free credit repair guide from a trusted non-profit credit counseling agency nearest to you.

Protect Yourself from ID Theft

One way to make sure that no one is opening new accounts under your name or using your account for unauthorized transactions is to check your credit report at least twice a year.

Under The Fair Credit Report Act , all consumers are entitled to one credit report for free each year. To claim your credit report score, visit www.annualcreditreport.com- a website supported by three major credit bureaus – Equifax, Experian, Trans Union.

Your credit report contains all information about your accounts – be it a credit card account, personal loan, car loan, mortgage, etc. It shows the type of credit you have, the amount of debt you owe, the payment you’ve made, etc.

Aside from your payment history, your report also contains basic information about you such as your full name, residence, employment history, Social Security Number, etc. Another section will reveal all the companies that inquired your report. The last part of your report should empty unless you have a record of bankruptcy, alimony, tax liens, etc.

Your Free Credit Repair Guide

Your credit report contains all information about your accounts – be it a credit card account, personal loan, car loan, mortgage, etc. It shows the type of credit you have, the amount of debt you owe, the payment you’ve made, etc.

Aside from your payment history, your report also contains basic information about you such as your full name, residence, employment history, Social Security Number, etc. Another section will reveal all the companies that inquired your report. The last part of your report should empty unless you have a record of bankruptcy, alimony, tax liens, etc.

Check every detail in your credit report. If you find unauthorized charges, call the creditor involved to dispute the charges. The next step is to send a dispute letter to the bureau that issued your report. Point out the charges in question and enclose copies of documents that support your claim. Send your letter via registered mail to ensure that it will not be lost along the way.

Upon receiving your dispute letter, the credit bureau must immediately begin an investigation regarding your complaint. You may need to wait up to 30 days before the matter can be corrected. Once your dispute has been proven, the bureau will send you an updated copy of your report for free. On the other hand, if you do not receive any response from the bureau within 15 days after submitting your dispute letter, you must send a follow-up letter, reminding them of their duty to respond to a customer dispute.

Overdue Bills. Examine the credit history section of your report. Do you have late payments or past due charges? If so, you should know that it will likely be pulling your credit score. Remember that your payment history comprises 35% of your overall credit score. A single late payment could notably cause your fico score to drop by several points.

To prevent late payments, what should you do? Generally, lenders are required to give a minimum of 21 days before reporting late payment. It is your duty to be aware of your deadlines and make your payments on time. Nonetheless, if an unexpected situation comes up that prevents you from making a prompt payment, get in touch with your creditor without delay.

Explain your circumstances and let them know that you’ll be submitting your payment within the following days or weeks. Ask your creditor not to report your late payment if you can pay on the date you promised. Oftentimes, if you demonstrate your determination to pay your debts, a lender will grant you the chance to make it up.

Maximized Credit Lines. Do you often maximize your limit? If yes, then you are inflicting damage to your credit history. Financial experts advise keeping at least 40%-50% of your credit line free from charges. Maximizing your limit will not just reduce your score, it can also send a negative impression to other creditors.

Too many accounts. The varieties of credit you have comprises 10% of your FICO score. If you have several credit cards in your name but without other types of credit, your credit rating may be reduced. Preferably, you must obtain at least two to three types of accounts which are all in good standing. Besides credit cards, a mortgage or a car loan under your name can increase your credit score.

Closed Accounts. Terminating your oldest credit card accounts simply because you do not use them is much like deleting the oldest portion of your credit history. You do not have to use your old credit cards often particularly if they have high interest rates. Nevertheless you can use them to make small purchases from time to time just to prevent them from automatically closing.

Errors in your credit report. Although you may do your best to keep up with your obligations, you may still get a low score due to erroneous reporting. The truth is, errors and unauthorized charges tend to be a recurring problem in credit reporting. To ensure that these errors are corrected, you need to personally check your credit report at least every 6 months. If you find false details, send a dispute letter to the credit bureau that issued your report and request for an investigation right away. If you do not know what to do, you may also ask for a free credit repair guide from a trusted credit counseling agency in your area.