By managing your credit responsibly and taking the right steps towards building your credit, you are opening yourself up to the opportunity of being able to build your credit score in just a matter of a few years.

Bankruptcy actually affects the four Cs of credit. Here they are in case you don’t know them.

Collateral: This is simply an asset that can be used for security on a loan that you get. In most cases, there aren’t any assets after bankruptcy is filed. You can take out a loan to buy something to use as collateral or open up a savings account at a bank in order to use it for collateral.

Capacity: When you file bankruptcy, the amount of money that you owe to other people or companies is reduced quite a bit. Capacity is simply something that tells lenders that you have enough income to make the payments on a credit card or loan.

Character: The reputation of your credit is something that many lenders will look at when they are thinking about loaning you money. When you file bankruptcy, they will be much more cautious about loaning you anything. If you manage your finances in a responsible manner, you have the opportunity to rebuild your credit reputation after filing bankruptcy.

Capital: Capital will simply tell others how wealthy you are. Anyone that you want to get a loan from wants to know that you will be able to pay back what they loaned you. When you file bankruptcy, your capital will be determined depending on what type of bankruptcy you filed as well as what assets were lost due to the bankruptcy.

You can rebuild your credit after filing bankruptcy. Here are a few tips to remember:

• Keep in mind that you need to stay with options that are affordable for you.

• Obtain a secured credit card or vehicle loan.

• Make sure that you keep an existing credit card by reaffirming that particular debt.

• If you can’t pay back a loan, DON’T TAKE IT!

• Create a budget that will help you build your credit and help you pay back your current debts.

Pay more than the minimum, always! Usually the minimum is two or three percent of the balance, and only paying enough to get by is what the banks want. The longer you take to pay a debt, the more interest they squeeze out of you. The best thing to do is to pay as much as you can afford, and if that amount is twice the minimum, then that’s great. Paying more than the minimum might require a little sacrifice, but it will be worth it in the end.

When you’re examining all your credit cards, look at the one with the lowest rate. If you haven’t maxed it out, consider transferring a high-interest balance to that card. If the balance is too big to fit on one card, try to pay the minimum on all your cards but one. Concentrate on paying THAT one off, then work your way on to the next one. This way is sometimes called “snowballing”.

Take advantage of some of those offers that you get in the mail. Banks want you to accept their line of credit, often enticing you with a low teaser rate. Saving all that interest can mean more money in your pocket. Be careful, though, and read the fine print. Sometimes the interest rate can go up sharply, forcing you to do another balance transfer. Banks are starting to get wise to those who hop from card to card. Some are imposing harsh stipulations on balance transfers within the first twelve months, making it harder for some to pay large debts.

- You might also consider liquidating your savings, and using them to pay down your debt. If interest is twelve percent, then your investments would have to be at least eighteen percent to balance everything out. Pay your debt, and it’s like getting that 18% without any risk. The higher your debt’s interest rate is, the more sense that savings liquidation makes.

- If you have a life insurance policy, think about borrowing against it. The interest is usually lower than normal, and you can defer repayment. If you should die before it’s repaid, the loan amount will be deducted from the benefits your heirs get. This will get you out of debt now, but it could unduly burden your loved ones.

- Maybe a friend or family member could loan you some money. Unless you’ve burnt all your bridges, you should be able to get a loan with low or no interest. Make sure you pay them back, and always get it in writing.

- If you own a home, you could get a home equity line of credit. Using that money to pay debt can substantially lower your interest, and that interest could be tax deductible. But, beware. Many get a HELOC, pay off their debts, and then start charging up a storm again.

You could also dip into your 401k. Most allow you to borrow up to 50%, or $50,000, whichever is less. Interest is usually just above prime rate, and when you repay it, that money goes right back into your 401k. It’s not without its drawbacks though. The loan and interest are repaid with after-tax money, but the interest is taxed again when you finally start using your 401k. If you leave your job before you pay it back, you must immediately repay it.

You can always try to negotiate with your creditors. Let them know what’s going on, and tell them if they cannot work with you that you’ll have to declare bankruptcy, which will end their chance of ever getting anything back. Ask them for a reduced payment, or a lower rate. Most will work with a debtor to ensure that they get at least something repaid.

Filing bankruptcy is a viable option but it should be a last resort. Only if you cannot pay the debt under ordinary means should you file. There are times when people simply cannot repay their debts, and there’s no other choice. Bankruptcies stay on a credit record for ten years, making it hard to obtain credit at all. It costs money to file for bankruptcy, in the form of court and lawyer fees. There are two types of bankruptcy, chapter 7 and chapter 13. Chapter 7 basically discharges almost all debts, and chapter 13 forces the handover of financial control to the bankruptcy court. They will form a repayment plan that will span a three to five-year period. When you’ve satisfied all their requirements, you’ll come out debt-free.

The average American household carries at least $10,000 in credit card debt. For some, it’s a lot more. Most families end up paying over $1000 in interest on that bill per year. And, to make the problem worse, most credit cards have a “locked in” rate that’s almost always higher than 10%. This statistic explains why those balance transfers are so tantalizing, and why a lot of people get so excited that they fail to read the fine print. If you’re thinking about a balance transfer, you definitely want to read the agreement fully. That way, you know what you’re getting into.

These offers are usually made to those with top-notch credit, but if you’re offered a 0% balance transfer, stop and think. If you have trouble paying on time and you don’t plan enough, you might just get slapped with a big rise in your interest rate before you know it. It’s a losing proposition for someone who doesn’t have their spending under control. They, like everyone else, will have to pay up eventually, and probably at an astronomical interest rate. The ideal balance transfer candidate wants to pay off their debt, and has a plan in place to get it done. Read further, and you’ll get some tips on how to make a balance transfer work for you.

Things you should know and take into consideration:

• Don’t underestimate the credit card company. They aren’t being nice by offering you a balance transfer, they’re playing the odds that you won’t pay the balance before the 0% interest grace period’s up.
• No guarantees, ever. A low introductory rate doesn’t mean that you’re guaranteed to get it, and this applies especially to those with tarnished credit. Make sure that you read the agreement when you get the card and the rate is in fact 0%.
• See if your card offers 0% on purchases as well. Not all do. And, the offer requires that you pay off the transferred balance first, and new charges after that will have a higher interest rate.
• Be selective. Don’t let that 0% make you blind to the card’s disadvantages. Of course, you want a card with no annual fee, but it pays to also look for a cash-back offer and fraud protection. If you decide to keep the card after you pay your balance, you’ll be glad you did.
• Make sure it’s actually free. Some companies charge a fee for each balance transfer. Check the fine print, again.
• Pay the bill on time. If you’re late, even once, your interest rate will rise, and you’ll get penalty fees. To make sure you pay on time, set up an automatic payment. Be sure that you pay more than the minimum, though, so the balance goes down.
• Keep track of when the 0% deal ends, so that you can transfer a balance again before that date.
• Know when to quit. Credit card companies will know when you’re “card hopping”, and it will show on your credit.

With the tips we’ve given here, you should know now whether a 0% balance transfer is appropriate for you. Take a look at the fine print, shop around, and get the best deal possible. Good luck, and responsible spending!

Correct The Black Marks That Errors Can Cause

There are several different types of errors that can occur on your credit report that will cause your score to be much lower than it actually should be. Information that does not contain current and up-to-date facts, credit that you have earned yet has of yet to be posted onto your report, and even information on a specific loan that may be completely untrue, are three of the most well known errors that can occur on a persons credit report.

Before advancing any type of lender with a loan you would like to apply for, it is a good idea to carefully review your report and make sure that all of the information that it contains is accurate. This includes checking with TransUnion, Experian, and Equifax, which are three of the most commonly used reporting agencies.

Keep Your Available Credit Below 30%

Low balances and making sure that you stay current on all of your loans and bills, without paying any payments late will help a great deal in trying to recover the good credit that you once enjoyed.

Below are several factors that you will want to avoid to ensure that you are not turned down on an important loan that you are thinking of applying for.

• Several accounts that hold a delinquency
• Any large delinquency
• A large number of different accounts that have balances owed
• Accounts filed with a collection agency
• Revolving account balances are much too high pertaining to credit limits
• Amount of time elapsed since accounts have been created

If any of these are items that can be found on your credit report, you will want to clear them up as quickly as possible. The longer you let financial matters go, the quicker they will pile up and before you even realize it things can easily become out of hand.

#1: Learn to Snowball

One of the best debt elimination techniques is the snowball method. Basically, start by examining the balances and interest rates on your credit cards. Find the card with the highest rate and focus/divert your resources to paying down that card while making the minimum payments on the others. Once this card is finished, move on to the one with the second-highest rate and so on. You’ll find that as your debts decrease, the amount of money you have to tackle remaining debt increases.

Another way to snowball your debt is to transfer your balances to a low-interest card. In some cases, look for banks offering promotional transfer rates that can substantially reduce your monthly payments for a brief time and allow you to hit the principal hard. Watch out though, at the end of the promotion the new rate may be applied retroactively to all outstanding balances!

#2: Bite the Bullet

Want a chance? Try paying more than the minimum payment. While there are a few neat tricks to driving down your debt, the most effective solution is to step up and start putting more money towards your bills. Be prepared to give up a few luxuries in the process. While it may be painful in the short term, the money you save in interest will more than compensate.

#3: Cash out Accounts

This may seem risky, crazy even, but if you are faced with high enough interest rates, cashing out your investments is a safe bet. While you do have to take into account state and federal taxes, paying off your debt is the same as getting a sizable return in light of the money you’ll save.

#4: Negotiating – It’s Time to Talk

Are you between a rock and a hard place? Every creditor will talk when you bring up one magical word – bankruptcy. Not actual bankruptcy, but the threat thereof. In any case, a creditor will try to avoid a total loss and most likely will be willing to establish a lower repayment schedule, lower interest rate, or even lower payment.