Personal Unsecured Debt Consolidation Loans

Unsecured personal debt consolidation loans are an excellent source of credit if you need to consolidate debt. Unlike regular personal loans, unsecured personal loans do not require you to pledge any collateral against the loan. This means that lenders are relying only on your promise to repay the loan according to the terms and conditions that they have established.

Getting a personal unsecured debt consolidation loan, can help you pay off your debt quickly. By eliminating several different payments, and focusing on repaying one loan only, you can significantly reduce your monthly bills.

Qualifying for a Personal Unsecured Debt Consolidation Loan

It is easier than ever to qualify for a personal loan. In some cases, you may even be able to qualify for personal unsecured debt consolidation loans as high as $10,000. Amounts under $1,000 may not even require a credit check.

If your credit is less than perfect, there is no need to fret. Many lenders have become more lenient when it comes to giving personal loans to people who have bad credit. The real nice thing about unsecured personal loans, is that you do not have to be a homeowner to qualify for the loan. For a list of consolidation lenders visit www.abcloanguide.com.

Finding a Personal Unsecured Debt Consolidation Lender

When choosing a lender, it is important to shop around for the best rates and loan terms. Though they have lower rates than credit cards, unsecured personal loans tend to have a higher interest rate than other personal loans. Finding a lender that can offer you a fair rate on your unsecured debt consolidation loan is very important.

View our recommended sources for an Unsecured Debt Consolidation Loan along with information regarding a Personal Debt Consolidation Loan.

We all want to have enough money to pay our bills and have enough money left over to live. To accomplish this, we’re expected to manage our money and our credit wisely. Our credit score is a picture of how well we handle our debts. What are the typical purchases and decisions that are affected by a person’s credit score?

• Applying for a job
• Buying a car
• Purchasing a home
• Renting an apartment
• Applying for insurance
• Requesting a credit card
• Opening a bank account

This is only a short list of products and actions that involve a credit score. So, what is this mystery called Credit Scoring? It all starts with your “credit report”.

The three national credit reporting agencies are Equifax, Experian and TransUnion (with smaller ones including ChexSystems). These agencies act as warehouses for your information. Your credit report contains personal data, which includes your name (priors and variations), birth date, addresses, Social Security number, and past and present employers. In addition, creditor history, inquiries or authorized credit checks, relevant public records and collections are also used for identification purposes Your credit report card includes your creditor history detailing your accounts, payments to banks, credit unions, finance companies, mortgage companies, credit card companies, retail stores and other creditors. These credit lines detail if you pay on time, balances, credit limits, burden of debt and how long you have had your account. Other than you, outsiders can access your credit report by making an inquiry. Credit card companies are notorious for making inquiries, and you can see on the credit report who has accessed your account, and when.

Relevant public records and collections are also on your credit report. This may include bankruptcies, foreclosures, tax liens and any collection agency debts you may have incurred. A foreclosed property can remain on your report for as long as seven years, Chapter 7 bankruptcy for 10 years and, depending on your state, unpaid tax liens can remain on your credit report indefinitely.

The industry standard for calculating a credit score was invented by The Fair Isaac Corporation (FICO). The scores generate a three digit number ranging from 300 to 850. Credit scores are used to assess your level of credit risk by predicting whether you will pay back your credit obligations in a timely fashion. The higher your score, the better credit risk you are. Because there are three different credit agencies, consumers who have a credit report have three FICO scores. Creditors use these scores to determine if they are going to grant credit to a consumer and what interest rate they will charge.

Are you 100% confused yet? It might bring some consolation to know that information sharing is getting better. Prior to 2001, consumers did not have access to their credit scores. Now you can get free copies of your credit report once a year from each of the three reporting agencies.

Uncle Credit Score is watching you and constantly adding or deleting information. But you do have influence over your score and the fluctuations that can have instant impact. The following is a sampling of some actions you might take that can affect your score:

• Paying your mortgage on time
• Applying for a credit card
• A late payment or closure of a credit card

Your level of debt and payment performance account for 65% of your FICO score. Lenders can also consider your income, a spouse’s income, an appraisal report from a licensed appraiser and other factors when considering an application for credit. If you are turned down for credit, by law, lenders must advise you of the reason in a rejection letter. There could be an error in your credit report which you can fix and possibly increase your score. All the more reason to check your credit reports regularly.

Kurt Lehman is a financial services expert and writes about ChexSystems banks and problems as well as payday loan debt

When I say, “revolving credit,” I’m referring to any credit account you have where the monthly payment can vary. Credit cards are the most common form of revolving credit.

Of course, “revolving credit” refers to almost everything in your wallet or purse that’s plastic that you can use to buy something. This includes American Express, Discover, MasterCard, or Visa credit cards. This also includes retail store cards such as Macy’s or Target, and gasoline cards.

The exceptions are check cards and debit cards. These little dudes may be plastic and have a MasterCard or Visa logo, but they aren’t really credit cards. They’re more like plastic checks than anything else. Debit cards have nothing to do with your credit scores.

Why your credit reports can show that your credit cards are maxed out when they’re not

In my case, my credit scores were lower than they should have been because I was using my personal credit cards for my business. An easy fix…I just applied for a corporate card and began using only that card for anything business related. (You should do the same if you have a small business.)

A few small business leases were also reporting as revolving accounts on my personal credit reports. Those were simple to resolve by just paying the small amounts off.

Then, I did a quick analysis of my credit reports.

The only way to really discover if revolving credit is lowering your scores is to do a quick analysis of your revolving credit accounts. (I’ll show you how at the end of this newsletter.) That’s how I found the big culprit that was destroying my credit scores…

Beware of home equity lines of credit

When I analyzed my credit reports I got a big surprise…I discovered several of my home equity lines of credit (HELOCs) were being misinterpreted as credit card accounts.

This was fooling the FICO scoring model into thinking that I had an enormous amount of credit card debt. But of course, I didn’t.

What I learned was that HELOC accounts can look exactly like a credit card account on your credit reports.

When I was trained by Fair Isaac Corporation, I got a different story. I was told there are two situations when a HELOC won’t be mistaken as a revolving credit card:

1. When the original amount of the line of credit is more than $50,000
2. If the account has a narrative attached to it (e.g., equity line of credit or real estate)

Even though Fair Isaac claims the above is true, I didn’t find that to be the case with my HELOCs.

It’s bad enough that my HELOCs were being mistaken as credit cards…but to make matters worse…all of my HELOCs were maxed out!When a HELOC is mistaken as a credit card, and it’s maxed out, then it looks like you have a high-limit credit card and you’re using all of its available credit—which lowers your credit scores. Ouch!

My HELOCs were lowering my FICO scores, and it was making it more expensive for me to get personal and business credit. This HELOC issue was a tough nut to crack. We were able to pay off a few of the smaller HELOCs. But we couldn’t afford to pay them all off. So we decided to refinance them into home equity installment loans (HEILs).

What’s better—a HELOC or a HEIL?

There are a couple of important differences between a HELOC and a HEIL. Once you understand the differences you can strategize on what’s best for your credit and financial situation.

Here are the differences:

- A HELOC is a revolving account. This means you can have variable monthly payments determined by the balance you owe each month. A HELOC also allows you to take some or all of the available credit out as you need it…just like a credit card.

- A HEIL is an installment account (just like a car loan or mortgage). This means you’ll have the same payment every month until it’s paid in full. A HEIL lets you take out only a fixed amount in one lump sum.

- A HELOC could be mistaken as a credit card account by the FICO scoring model because they report as revolving accounts. However, a HEIL cannot be mistaken as a credit card account because a HEIL appears on your credit reports as an installment account.

Because of the effect HELOCs may have on our credit scores, my wife and I are now committed to always using HEILs to tap equity in our properties even though the interest rates are usually higher.

How to protect yourself against holes in the credit system

Here’s a strategy you can use to insure yourself against the flaws we’ve been talking about in the credit system. If you want to tap into your home’s equity, apply for the highest HELOC amount you can qualify for. Just don’t use more than 10% of the limit. The most essential part of this strategy is your discipline after you’re approved. If you can keep yourself from going out and buying things with your new line of credit, you can really protect your credit scores.

This way, even if your HELOC is misinterpreted as a credit card, your credit scores can’t be hurt…in fact, it could even help them. So, a HELOC can be a good thing if your balance is extremely low or nonexistent.

My Wake-up Call

Had I not performed a quick revolving analysis of my credit reports—I never would have known my credit scores were suffering because of a simple credit misinterpretation.

Think about all of the things that can lower your FICO scores…late payments…too much credit card debt…too many inquiries, etc.

These are legitimate and understandable reasons why your scores would go down. But to lose points for a silly loophole in how HELOCs are reported is just…irritating.

It goes to prove what I’ve been teaching for more than 10 years now…having good credit takes more than paying your bills on time. Way more.

Stephen Snyder is the founder of the After Bankruptcy Foundation a non-profit organization that helps people recover after bankruptcy. He has helped thousands of people obtain a credit card after bankruptcy with a fair interest rate.

Last summer I got so mad at American Express, I closed a personal credit card account that I had just opened with them.

The lady I spoke with at Amex was a complete idiot…and clearly working in the wrong department. I thought I was talking to a person in

customer service…she obviously worked for the sales prevention unit.

It felt empowering when I told her to, “close the account,” and promptly hung up the phone.

Then I realized what I had just done…

Closing Credit Card Accounts is a Fast Track to Lowering Your FICO Credit Scores

You want to avoid closing credit card accounts at all costs.

If you want to do something to irritate the credit card companies—pay the account off with pennies…never carry a balance so that they

don’t earn any interest…pay your account in full and add a dollar to your payment so they have to send you a reimbursement check for a

dollar…anything to irritate them. Just don’t close your account!

Fortunately, I escaped without any significant damage to my credit scores. The account was so new that I wasn’t really getting anything

positive out of it yet anyway.

I was lucky.

Had the account been several years old with a clean payment history, my credit scores would have tanked.

Why is Closing Credit Card Accounts Unhealthy for Your Credit

Here’s why…one of the categories that makes up your FICO credit scores is called “time in file.”

In English, “time in file” translates to:

- How old the oldest account on your credit report is, and
- The average age of all the accounts on your credit report

The longer you have the same accounts the better it will be for your FICO credit scores. (And it is in your favor if those accounts are in

good standing.)

I’ve had the opportunity to study a few credit reports where the consumer obtained FICO credit scores of over 800.

These folks are like the white buffalo. They’re very rare and rank in the top 5.85% nationally. This means their credit scores are higher

than 94.15% of the rest of the people in the country.

One thing the, “800 Club” members all have in common are several old accounts appearing on their credit reports. When I say “old,” I mean

really old…decades in some cases.

One example is from a guy from Georgia who had a Sears credit card on his credit file that was opened in 1954. It actually said that on his

credit report…opened in 1954. (That means that his credit report is 52 years old.) His lowest FICO score was 809.

Bottom line: an old credit history is good for your credit scores. And you can’t achieve an old history if you close your accounts.

How to Increase Your Credit Scores by Keeping Your Credit Card Utilization Low

The second problem with closing credit card accounts has to do with utilization.

I know that’s a “techie” word, but I can’t think of a better one to describe it.

Let me try to “Homer Simpson” it for you…

Let’s say you have 10 credit cards, and each of them has a $1,000 credit limit. Your total credit limit would be $10,000.

Now let’s assume you’re maxed out on 5 of the 10 cards. So your total balances on those credit cards equals $5,000.

Your utilization percentage would be 50%.

The higher your utilization percentage—the lower your credit scores will be.

Recently, I’ve read articles saying that a 50% utilization percentage should be your goal. They’re wrong…really wrong. There is no magic

utilization percentage.

Your goal is to keep your revolving balances as close to $0 as possible. If you can do this, you’ll be on your way to obtaining the highest

scores.

OK, back to our credit card utilization example. Let’s say you have not used the other five of your credit cards (the ones with a $0

balance) in years. In fact, you’re not even sure why you still have them.

So, you decide to close all five of those accounts.

Can you guess what just happened to your utilization?

By closing those 5 unused accounts you are now 100% utilized on your remaining cards…completely maxed out!

Your scores take a nosedive like a plane that ran out of fuel…or the singing career of William Shatner …or Lindsay Lohan’s sobriety. Not good.

But let’s say you’ve already closed some old credit card accounts. What can you do?

Here’s what to do:

1. Reduce your credit card balances on all your remaining cards.
2. Increase the credit limits on the five cards that are still open.
3. If you’re a small business owner you should have corporate credit cards—use them instead of your personal credit cards.

Be Careful When You Increase Your Credit Limits

Earlier I talked about how you can keep your credit scores high by increasing the credit limits on your existing credit cards.

But be careful…increasing your credit limits doesn’t mean you should increase your spending limits!

Remember, the idea is to use your increased credit limits to LOWER your utilization, not buy more stuff.

To increase your credit limits, simply call your credit card provider and ask for a, “credit limit increase.” But, do so only if you have a

good payment history.

When you call the credit card company and ask for a limit increase they’ll review your credit report(s), which will cause a credit inquiry.

This type of inquiry will lower your scores.

How much?

Based on our research, each inquiry can decrease your score by as much as 12 points.

There’s another type of credit inquiry called an “account management” or “account review.”

This is when a credit card company periodically reviews your credit reports to determine if your credit limits should be increased.

The good news—this kind of inquiry does not lower your credit scores. The bad news—they may only review your reports once each year. And,

there is no guarantee they’ll significantly increase your credit limits.

So, you have to judge if the credit inquiry is worth it. I personally believe it is—especially when you have a specific credit inquiry

reduction plan in place.

There’s also one more negative effect that closing credit card accounts has on your credit scores—it starts the clock ticking.

And when that clock hits seven years the credit reporting agencies usually delete that information from your credit reports.

That’s fine when the information is negative. We want negative information to go away.

But we never, ever want good information to be removed too soon. We want good credit history on there for the longest time.

Remember, only information appearing on your credit reports will influence your credit scores. So, if you have a lot of good credit

information, but it doesn’t appear on your credit reports…it won’t help your credit scores.

If you want good scores, make sure you have a lot of old accounts on your credit reports. And don’t limit your own scores by closing accounts!

Stephen Snyder is the founder of the After Bankruptcy Foundation a non-profit organization that provides free bankruptcy information and recovery steps. Stephen also writes a free weekly newsletter on bankruptcy recovery.

When faced with overwhelming debt the first step is to not add to the problem. Put your credit cards in a bank vault or some other secure place where you cannot easily get to them. Pay cash, write checks (so long as you have available funds) or use a debit card to pay for everything. Do not apply for new credit. Just stop. Okay, so you won’t be able to make impulsive purchases, but that is good while you are trying to pay off your current debt.

Now that you have placed yourself on a strictly cash diet you will need to make a decision. There are three apporaches that make the most sense.

• Sort by interest rate
• Consolidate
• Low to High sequence

The Sort by interest rate approach suggests that you make an effort to pay off those creditors that charge the highest rate of interest first. If you choose this approach you must be sure to pay at least the monthly minimum in an on-time fashion on all your other bills. If you can’t do that this approach is probably not a wise choice. Once you decide on the order in which to pay off your charges, call the first creditor on your list and ask if there is any way to lower the interest charged as you really want to pay the bill off as quickly as possible. Because your creditor is interested in getting paid they will often agree to reduce interest and, in rare cases, suspend interest altogether. Once creditor number one is paid off, repeat the process, including asking for a reduced interest rate. Keep going until your last creditor is paid off.

If you choose to consolidate you must be aware of the risks involved. Often consolidation makes the most sense if you can borrow at a lower interest rate than you are paying on your credit cards. If, for example, you have significant equity in your home, you can apply for a home equity line of credit and pay off all your outstanding bills using the proceeds from that loan. There are, however, significant risks involved with consolidation. First, if you didn’t make your credit cards unaccessible you may be tempted to run up new balances which put you in a far worse situation than before you had the loan. Now you have a loan and a new round of credit card debt. Secondly, if you default on your home equity line of credit you may lose your home through foreclosure or have the property tied up with a lien. Consolidation is a way of trading debt for debt. It only makes sense if you have equity in your home and can negotiate a lower interest rate through the bank than you are paying on your credit card debt.

Choosing the low to high sequence approach lets you pay off the smallest debt first, then the next smallest and so on until your debts are paid. Like the sort by interest rate approach, you must be able to make the minimum monthly payment on all of your credit card debt at the very least. This approach provides you with quick victories and a nearly immediate sense of relief.

Keep your credit cards locked up after you have paid off your debt. You are developing a pay-as-you-go strategy. You can then use debt to add value to your life as the need arises rather than using debt to just consume.

Copyright © 2007 Roger Passman All Rights Reserved

Roger Passman is the President of WDC Financial Services, Inc. His firm works with clients to restore damaged credit, negotiate payment plans, and reduce debt. You can visit WDC Financial Services at http://www.wdcfinancialservices.com