We all have credit cards. Actually, most of us have more than one credit card. But do you honestly understand the rates and all the terminology that goes along with your credit card? Understanding all the rates, is the first step in gaining control of your debt and the first step in cutting down those interest charges.

The easiest way to cut your credit card costs is to switch to a card with a lower interest rate.
But before you start to do that you should make sure you understand all the terms and regulations that go behind every card. For example do you know how finance charges are calculated? If the answer to this question is no, keep reading.

Grace Period:

Most credit card offer this service. Simply stated it is the time you have to pay off your purchases before you have to pay any interest. Usually the time is 25 days. When you buy something you will not be charged any interest for that purchase until your next billing cycle. If you pay for it during your current billing cycle you will be charged no interest at all. Check your contract to see what your grace period is for your credit cards. Each credit card company is different and some does not offer this service. You should try to make sure your current credit card companies do offer it. It is a great way to avoid interest payments and to save money.

Cash advances:

Simply stated this is a loan against your credit card. This loan is usually transacted through an ATM machine. There is also usually a special fee added on when using this feature. The fee is based on a percentage of the amount your borrowed. Usually this fee is 2 to 3 percent.

Some credit card companies charges a minimum cash advance fee as high as $5. If you borrow $20 you will be charged $20 plus the additional $5. There is also usually no grace period for cash advances. This means you pay interest starting on the day you borrow the money until you pay it off completely.

The interest rate on cash advances are also usually higher than normal purchases.

You should not use cash advances unless it is a real emergency.

Other fees:

Annual Fee:

This is a fee you pay once a year just for owning the card. If your credit is good look for a credit card without this fee. You pay interest rates you shouldn't have to also pay for the privilege of owning the card.

Late fees:

If your payment for the month is not paid on time, you are billed a fee for this. This fee can be pretty high. So write down when your payment is due and never forget it. When you are late the credit card company can and usually will also turn this in the credit agencies. This mean a negative mark on your credit score.

Over-credit fees:

This is a fee for spending more than your credit is. Keep track of every time you use your credit card and keep track of how much you spend.

Now for the big thing you must understand.

Minimum monthly payments.

This is the lowest amount you can pay and still be in good standing with the credit card company. Sad thing is that most people can only afford this payment. This means it can take years to pay off your debt and a lot more interest. What should you do? If at all possible, start paying more each month. If you can pay double the amount that is the ideal way to start paying off your debt. But even an extra twenty or thirty dollars a month can help. Some credit cards also turn in extra payments to the credit scoring companies. If you pay more than the monthly payment each month, your scores can increase.

Finally, understanding how interest in calculated.

Every day the bank adds up your charges and payments to see what is owed. These totals are added up and divided by the number of days in the month. This is how your average daily balance is calculated.

Next the bank divides its annual interest by the number of months in a year. This gets your monthly interest rate.

The bank multiplies your average daily balance by the monthly interest rate to obtain your finance charges for that month. This is your interest payment for that month.

Understanding all of this, is the first step in dealing with your credit card debt. If you don't understand how interest is figured it can be harder for you to decide how to pay it off.

Remember to try to make more than your minimum payments, make your payments on time and when you can pay off any purchases during your grace periods. These steps can help you gain control of your finances.

An arrear is a legal term and is applied to describe where you are over due in making repayments on a credit agreement. Someone will be ?in arrears? from the date that their first monthly repayment is missed. The term 'arrears' is usually used when denoting made late payments of personal loans, credit cards, mortgage or rent as well as taxes and child support.

A 'CCJ' is the short form for County Court Judgement. A CCJ is a legal judgement pronounced by a County Court connected to someone who remains in debt to another party (either an individual or business) or where they have not met the terms of a credit contract. This judgement will determine an affordable payment arrangement with the purpose that the indebted person can give back what they have been lent. CCJ's are held on official public record and will have an influence on the debtor's opportunities of getting further credit for up to six years.

A default is the term used to describe when you have neglected your credit obligations. In the event you have passed over a payment on a mail in account, as an example, they could file a Notice of Default on to your credit report. This will reflect poorly on your credit report at a later date should you choose to request additional credit.

If you have a poor credit history, it doesn't mean that it has to stay that way. It can take time, but you can rebuild your credit. The key is to show potential creditors that you really are serious about getting your credit back in shape.

Here are some steps to follow:

1. First of all, if you do have any credit currently, make sure that you keep all your payments up to date. Never make a late payment and certainly don?t miss one.
2. Open up a couple of new 'small' accounts - and pay them off quickly. By showing that you can run a credit account and pay it off without problem will show as a positive on your credit file. However, do not apply for too many accounts. This could give the impression that you are 'panic applying' due to finance problems. Store cards are a good way to rebuild your credit rating.
3. Keep balances low on any credit and always pay back more than the minimum payment. Never have more than 30% of your credit limit as a balance as this will look like an excessive debt to creditors.

Finally, it will take time to rebuild your credit history, but you must be patient. By slowly rebuilding a 'damaged' credit file you can prove that you can make monthly payments and are credit worthy.

Getting Out Of Debt

Debt consolidation services basically act like your bookkeeper. You send them a check every month. From that amount, they pay your creditors and deduct their own small fee.

Before making payments, debt consolidators create a repayment plan based on what you are currently paying. Within this figure, they can get you out of debt sooner by negotiating lower rates with your debt holders.

Since not all accounts carry the same balance, your accounts will be eliminated over time. In most cases, all short term debt can be retired in five years or less.

Improving Your Credit

In as little as a year, you can see a significant improvement in your credit score. While most lenders will temporally freeze your credit when you first begin a debt consolidation plan, they will usually extend new credit after twelve months.

Two years of on time payments will significantly improve your score. Even though those late payments, foreclosures, or bankruptcies will be on your credit report, they will have hardly any impact after two years. A reduction in your debt to income ratio will also bolster your credit score.

Working With An Online Debt Consolidation Company

Online debt consolidation companies offer their services through the convenience of the internet. Depending on the company, you can request pay off quotes, services, or information. Some companies handle the entire process online, saving you from wasting time on meetings or phone conferences.

Before selecting a debt consolidation company, look at several sites. Make sure they answer your questions and provide you with detailed information. Request pay off dates on your accounts and information on their fees.

Once you find a company that offers reasonable rates and you feel comfortable with, go ahead and start the process. The sooner you start, the quicker you will get out of debt.

I've spoken to thousands of people over the years about their credit. I'm often asked to explain the steps that should be taken to remove errors from credit reports. Here is a step by step guide that will produce results if followed carefully. The content of your credit report has a major impact on the quality of your financial life. The efforts that you make to improve your credit will pay significant dividends. Good luck!

Get Copies of Your Credit Reports

I strongly suggest that you get individual copies of your three credit reports rather than a tri-merged report which combines all three. This will make the tasks that follow considerably easier. You will be addressing your communications to the three individual bureaus and it is essential that you remain organized. Your credit reports can be obtained for free from annualcreditreport.com one time per year. If you have done this within the past twelve months and must purchase your reports please make sure to purchase them individually.

Organize Your Effort

Once you have your three reports it is time to get organized. Make three individual files and label them clearly with the names of each credit bureau. You will need to follow the directions below for each bureau individually. It is important that you keep copies of all of your correspondence with the bureaus in the proper files so that you can monitor the results and take follow up action as necessary. Time to get to work!

Look for Derogatory Information

Review each report for the presence of derogatory information. Make a note of anything that you see that is questionable. Give yourself the benefit of the doubt. If you see a late payment that you don't remember, or an account that you don't recognize, it is important that you not assume that the credit report is right. Credit reports are notoriously inaccurate. You need to look out for yourself. You will be disputing every single thing that does not ring true.

Look over Neutral Information

This is a step that most people ignore. And yet the neutral information on your report can have as much of an impact on your credit scores as the more obvious derogatory information. Neutral information includes the initial reporting dates for each account, high credit limits for each account, current balances, duplicate accounts, and unrecognized inquiries. These items are crucial. An understated high credit limit, for example, might cost you 20 points on your credit score.

Start Your Disputes

It is time to start writing letters to the bureaus to dispute every questionable item. Take the time to do this right and you will have success with your credit repair efforts. These tips can make all of the difference. First of all, type your dispute letters. Second, keep it simple; just say what you need to say and not a word more! And third, don't dispute more than three things at a time. Follow these instructions and you will be thrilled with the results.

Dispute Again

There is a very high probability that the first response that you get from the bureaus will indicate that they have checked the item in question and it was verified by the creditor to be correct. Don't worry. This response is built into the system. After all, the reason the error is on your report is that the creditor is reporting it. So now it's time to dispute again. This second dispute must clearly indicate that you are not satisfied and that you would like the issue to be researched. If you don't get satisfaction after the second dispute don't be afraid to dispute a third time; this is the final and most effective step in credit repair. This time you must demand that they provide documentation. If the reported item is incorrect it will be now be removed.

Other Useful Tips

If your credit is limited you would be well advised to open one or more new accounts. If your credit keeps you from being approved by traditional credit card providers then you should apply for a secured credit card. These require a small saving deposit to be made as collateral. It is also effective to be added to a friend or relative's existing credit card as an additional cardholder. Of course they have to be willing to help you in this way, but once this is done your credit score will benefit from the presence of the item on your report.

Your credit score can be improved and maintained at its peak... if you know how to do it. I recommend reading Credit Score Basics in conjunction with this article.

Scoring models such as FICO (Fair Isaac scoring model) generally evaluate the following types of information in your credit report and are weighted as suggested by the percent shown:

On Time Payment - 35%

Have you paid your bills on time? Payment history typically is a significant factor. Your score will be affected negatively if you have paid bills late, had an account referred to collections, had a repossession, or declared bankruptcy. The age of the positive or negative comment is also important in this factor. For example, a 90 day late payment 3 years ago may be less important than a 30 day late last month. The more current the factor, the greater the weight.

Amount Owed Versus Capacity - 30%

What is your outstanding debt? Many scoring models evaluate the amount of debt you have compared to your credit limits. If the amount you owe is close to your credit limit, that is likely to have a negative effect on your score. Authorities suggest 30%-60% is desirable by creditors. Maintaining a low balance on multiple cards is better than high balances on one... but don't run out for more cards to "even out" balances just before applying for a loan. Recent applications cost you as shown in below. You should note that a few creditors will use highest balance as your credit limit. For example if you have a $10,000 limit and have used only $1000, your limit will show not 10% but 100% utilization.

Length Of Credit History - 15%

How long is your credit history? Generally, models consider the length of your credit track record. A recently opened account will have less weight than an account 3-4 years old. An insufficient credit history may have a negative effect on your score, but that can be offset by other factors, such as timely payments and low balances. If you are going to close an account, try to maintain the oldest accounts as age of account matters.

New Credit Accounts - 10%

Have you applied for new credit recently? Many scoring models consider recency. Similarly, if you have applied for too many new accounts recently or had to many recent inquiries, that may negatively affect your score. However, not all inquiries are counted. Inquiries by creditors who are monitoring your account or looking at credit reports to make "pre-screened" credit offers are not counted.

Types Of Credit In Use - 10%

How many and what types of credit accounts do you have? Although it is generally good to have established credit accounts, too many credit card accounts may have a negative effect on your score. In addition, many models consider the type of credit accounts you have. For example, under some scoring models, loans from finance companies (rather than a bank) may negatively affect your credit score. There is also a hierarchy of debt beginning with a mortgage. This is followed by a secured debt such as a car, then unsecured debt (credit cards), then revolving charge cards and gasoline cards.

Most Important Issues

It's likely to take some time to improve your score significantly. However, the most important issues to improved credit score are:

accuracy of report
on time payments
paying down outstanding balances
not taking on new debt.

The Final Analysis

You should also be aware that the Fair Credit Reporting Act (FCRA) is designed to promote accuracy and ensure the privacy of the information used in consumer credit reports. It is enforced by the Federal Trade Commission. Recent amendments to the Act expand your rights and place additional requirements on Credit Reporting Agencies as well as businesses that supply information about you to these agencies. Additionally, if you tell an information provider in writing that you dispute an item, a notice of your dispute must be included anytime the information provider reports the item to the reporting agency. All of this can affect your credit score in your favor. Note: the operative word is "CAN".

Some companies continue to charge interest, but most don't. If they do decide to keep charging interest, they have to continue to report it as income. Most companies would rather just write it off and be done with it.

Having charge offs on your credit report usually results in the consumer being denied credit by other lenders. Even worse, it can also affect the interest rate that other lenders charge on current debts even if those lenders were not impacted by the charge off themselves.

If you find yourself late on your payments, you should always try to contact the lender and let them know you are having problems meeting your financial obligations. Ignoring the situation and letting it get to charge off status always makes it worse. You can usually avoid your account being charged off by at least letting them know you intend to pay and by at least making small payments as often as you can.

If you already have charge offs on your credit report, it is possible to have them removed. You can try to contact the original creditor and arrange a payment plan in exchange for them removing the charge off once it is paid. It doesn't hurt to ask them how it can be resolved or removed. You can also dispute it with the credit bureaus.

It's much easier to get a paid charge off removed from your credit report than it is an unpaid charge off. When you dispute the charge off with the credit bureaus, they have 30 days to verify the account with the creditor. If the account is paid, many times the creditor will just ignore the verification request. They really only report charge off so that they can damage your credit hoping that it will turn make you want to pay them off. It's highly unlikely that they would ever ignore a dispute if you still owe them money.

First, understand that improving your credit means making some changes in the way you live. That means taking a long hard look at your monthly expenses. Have you been living beyond your means? Do you rely on credit cards to take up some slack each month? Is your total indebtedness increasing each month and you have nothing to show for it? Then it is time to make changes in the way you spend money. Begin by spending a week paying your expenses out of your checking account and with pocket money - no credit card purchases. When you don't have the money, you do without. If this means eating at home rather than going out, or watching television rather than going to the movies, then so be it.

Next, once you have made it through that sobering week and realize you have a spending problem, it is time to take a long hard look at your monthly budget. If you don't currently operate with a budget, then you are in for a real change. A budget essentially involves two components: your income and your expenses. Ideally, your monthly expenses will be less than your monthly income. If not, you are in big trouble. A budget, when planned properly, allows you to take care of your obligations, save a dollar or two, and even allows you a treat now and then. It also keeps you from running up enormous credit card debt, because you will only allow yourself a certain amount of credit card purchases each month, along with a corresponding amount of payments.

Third, cut up those credit cards, except for one you will stick back for emergencies. But don't cancel those accounts. You want to have active credit cards that show a zero balance on your credit report. This actually will help your overall credit card rating. By cutting up the cards, you are not tempted to use them, and can pay the outstanding balances down more quickly.

Fourth, put money in a savings account every month. It doesn't matter if you can only put thirty dollars a month in that savings account. At the end of the year, you will have $360.00 plus a small amount of interest. While not impressive, that is more in liquid assets than you had before. Plus once you see the balance growing, you will find it a little easier to put in an a little extra here and there, rather than blow it on something you don't need and will not want after a few days. Besides, a savings account counts as an asset that will make your credit rating a little better.

Last, don't get discouraged. You will do better with your goals some months than others. Make a big deal of it when you meet or exceed your goals, and cut yourself some slack when you fall a little short. By focusing on the positive and not giving the negative any more attention than it rightly deserves, you will be able to make great strides in improving your overall financial health, including your credit rating.

Is your credit score far from perfect? Are you planning on a major purchase or loan but fear being rejected by creditors? Don't worry. More than 30 million Americans are in the same boat. According to the general myth, there is one sure way to fix bad credit report-time, financial effort, careful budget planning and discipline. This formula has proven to bring a gradual credit score increase. The paradox here lies in the fact that most of us need that nice house, luxury car, personal or business loan NOW, not later. Luckily, there are some less known secrets and shortcuts that can help you raise your credit in a shorter period of time.

Here are 3 rules you have to keep in mind if you want a fast credit repair:

1 Where are you?Where do you have to be?

The fist thing you have to figure out is where do you stand on the credit scale and where do you have to be. The Fico score places you somewhere on the credit scale between 300 and 850. This three digit number that the credit bureaus assign to you determines if you will get approved for a loan and if you will have to pay thousand of dollars in high interest. And not only that -the score is increasingly used by employers, landlords, insurers in order to evaluate applicants. Once you know where you stand, you have to figure out where you need to be. Different lenders have different criteria. A 700 score can be enough for one creditor to give you the most favorable loan. Yet it might be insufficient score for another lender. Do you need to raise your score with 10, 20, 50, 100, 200 points? This is vital information if you want to come up with a viable course of action.

2 The newer the debt, the bigger the influence on credit score.

In general the most recent credit history has the biggest influence on the overall FICO score. The older the negative item, the less impact it has. Credit is time sensitive and you have to keep that in mind when you embark on your credit repair program. Taking care of current late payments or bringing down current credit card balances to a healthy balance/ credit ratio will produce dramatic change in your score.

3 "paid " vs "deleted" status.

Contrary to what many people think, a paid collection is still considered a negative item on your credit report. In other words, it still impacts your score negatively. "Deleted"collection on the other hand will instantly raise your score with more than 30 points. How do you delete a collection? You simply negotiate with the collection agency and promise to pay the settlement amount ONLY if they delete the item from your record. In a similar fashion, you can send a "goodwill" letter to your creditor explaining the circumstances surrounding your late payment and ask them to remove it from your account. A little diplomacy can really work miracles with your credit score.

These are just some of the things you have to keep in mind if you want to fix bad credit report. There are many other credit secrets that can help you boost your credit in no time. You'll be surprised to find out how easy credit repair is once you start thinking outside the box.