I’ve posted a few times about how I’ve improved my credit score from a measly 581 to a whopping 758 within a year (through Transunion). It took a lot of hard work, effort, and time. Through this process, I also realized I need to check my credit score annually and make sure it stays above the 720 mark, or in the very good range, in order to eventually obtain the lowest interest loan on a future mortgage (a goal of mine!) If you haven’t checked your score or report in a while, now might be a good time to do so. Below I’ve offered a step-by-step process using GoFreeCredit.com as a guide. This is one of the easiest credit reports and scores to read that I’ve encountered so far (and believe me, I’ve used quite a few!) Checking your score and report is not as scary as you think, just follow the few steps below:

1. Go to www.GoFreeCredit.com: There you will fill out your name.

Sign up with Go Free Credit

2. Fill in the requested information and credit card information (they will charge $1.00 for a 7-day free trial to the card you use):

Information requested

Credit card information

4. I was asked if I wanted a free public report as well. However I did not, so I clicked a small blue link that said “No Thanks – Continue.”

5. Next, you will be given your membership number and asked to proceed to your scores. It is important to write this number down for future reference.

Customer code

6. After that, you will need to provide some personal information by clicking the ‘Start Here’ button. These 6 questions or so didn’t take very long to answer and verify that you really are who you say you are. :

Start Here

7. Finally your finished and able to view your report and scores:

Your Home Page

Here are a view samples of what the scores and report look like:

Credit Scores - easy to see all three. It will also explain why your score is what it is at the bottom, such as not a long enough credit history, not enough different types of accounts, etc. (You might notice that the three bureaus calculate scores differently from each other – quite frustrating).

Credit Scores

Credit report – a portion of a credit report:

Sample report

Lot of extra information- a link on each credit account (‘More about this account’) allows you to see additional information like credit bureau remarks, high limits and monthly payments. GoFreeCredit.com also allows you to view any credit alerts, such as a new inquiry or negative posting.

More information on account

Credit alerts

Again, this is one of the easiest reports to read that I’ve encountered. For more information, read the FAQ’s below:

What credit scores do consumers get when they sign up for GoFreeCredit.com (GFC)?

They receive instant access to their scores from TransUnion, Equifax, and Experian. These are not the same as a FICO score.

Will signing-up for GFC hurt my credit score?

No, this is a soft pull, not a hard pull, and will not hurt your score.

With Christmas just a few days away, I’m finishing some last minute gift wrapping and planning my trip out of town. However, now is as good a time as any to see how I stand on this past year’s resolutions. At the beginning of this year, 2010, my goals were to:

• Keep paying off our line of credit: $8,400 more to go!

Status: I’m half way there. We swapped out our crummy line of credit for a lower interest rate loan. I have $4,200 more to go. Whoo, hoo!

• Raise our credit scores between 50-75 points: I’ve already raised mine over 100 points, so I just need to continue working on this!

Status: I think I can completely cross this goal off. I’m now in the “excellent” ranking and over 758 (at least with Transunion.)

• Mid-Year find out if we can qualify for a home loan: this will only happen if we have our down payment saved.

Status: We’ve revised our plans of owning a home and have put it off for a few more years. So this goal is null and void for now.

• Speaking of the down payment, keep saving for our down payment!

Status: I’ve made very little progress for saving a down payment. *sniff*  However, I do have a plan that I’ll reveal in a few weeks that should get me back on track.

• Continue writing: I’ve found that I really enjoy writing every day. I think my readers enjoy reading my posts. Right? Well…right?

Status: I’ve continued writing and passed my one-year blogging mark. I am even a staff writer for Wise Bread now. I’ll just say this is a continuing goal; I really need to bump it up a bit and start submitting more guest posts. Also, a big thanks to the Yakezie Personal Finance Bloggers group for such remarkable support.

• Ride my bike more: The first year I had my bike, I rode a lot, like 1,500 miles! I’ve slowed down this past year and need to keep up the momentum (and get my behind back in shape!)

Status: I’ve made little progress this year on this goal as well. I’m starting to ride more. However, this last week the rain has halted any last minute progress I was hoping to make. I’m marking this as a continuing goal for now.

Most of my resolutions are continually on-going. However, next year I really need to get my act together when it comes to boosting my savings accounts.

Have you found that you’ve made good progress on most of your resolutions this year? Do you have new ones you’ll be looking to fulfilling?

One part of my 3-step plan is definitely on track; and I dare say complete! I’ve finally increased my credit score to a whopping 758 and that’s put me in the ‘Excellent’ category. Of course, I should probably slow down and back track a bit since this is really just my Transunion score.

If I look back at the beginning of last year, my score was a pitiful 581. Yikes! I was not at all considered a good credit risk. Luckily, many of my negative items from yesteryear dropped off (with some help by me filling out forms and disputing old items) and my payment history began to kick in. Almost 20 months later, my score reflects my diligence of keeping my bills paid on time and reducing my debt.

I think I can cross this step off my list and now focus on my other two goals: pay down the remainder of my debt and save for a house. I really like to think in 3′s, so adding retirement savings is now coming to the front and center of my goals for this year.

3-Step Update:

• Pay down debt: total to date $21,843 (including a line of credit from a few years ago: $3,500, car loan: $8,000, and student loan: $10,000 -rounded amounts)
• Save for down payment on a house: Goal $25,000 (over 3 years or $700 a month approx.)
• Put 5-8% away for retirement: Realistically I think I’ll be able to start with 5% and work my way up to 8% once my line of credit is paid to $0 and the car loan is paid down a bit more.

Obviously, I still need to work on paying down my debt. However, I’m close to paying off the line of credit and am shooting for having it paid in full by July or August of 2011. I’d like to pay down the car loan a little more, then tackle the student loan debt last. The student loan interest rate is low, so once I get all of my other debt paid off, I can begin focusing on these loans and get it paid down faster.

Have you pulled your score lately? Are you making progress toward your annual goals?

A while ago, a mutual friend of ours admitted that he had ruined his credit and wanted to begin rebuilding it through obtaining a secure credit card. I advised him on opening up a secure credit card because  most banks keep the amount of the credit line, for instance $500, in a savings account as collateral for extending credit to a person who is a less than credit worthy. A secure credit card is similar to a  prepaid Visa gift card, but it’s reported to the credit bureaus as an actual credit card which helps build a positive payment history, providing on-time payments are made.

To my astonishment, he was declined a secure credit card through a large financial institution. His credit was so poor, the bank wouldn’t extend him the line of credit even with depositing the total amount of the credit line into a bank account. He was flummoxed and wasn’t sure what to do next. Knowing that his credit was so poor, I did a little investigating and realized that his next best hope would be to approach his own bank, a credit union, to see if they could help him out. It turns out that they were able extend a credit card to him, and it wasn’t even a secure one at that.

Would this help anyone who’s credit is in shambles? It depends, but a few tips to follow if you’ve had this happen to you:

• Approach your own bank about a secured credit card. They might be able to work something out with you if you’ve been a customer for a while and have a good banking history.
• Open a bank account at a credit union, and then apply for a credit card – credit unions are sometimes more accommodating.
• Forgo the credit card altogether and fix your finances!

My third point is important; if your credit is really terrible, it might be better to work on the negative existing accounts than to open yet another one, even if it is a secure credit card account. In his case, it might have been better to not open another account just for the plain fact that he’s having difficulty managing his money and his credit. As you can imagine what happened next….he maxed out his card and is now back to his old habit of making minimum payments and not seeing the balances drop. Unfortunately, some people need to experience great pain before changing their ways, even after a friendly lecture on personal finance!

Do you know of someone who was turned down on a secure credit card offer? What would you recommend to a friend struggling to get their finances in order?

Deep in Debt? Don't buy into checks in the mail that offer relief.

Once a month I help out one of our clients with her personal finance issues, such as checking her credit card balances and calculating her residual income from her deceased ex-husband’s films. Unfortunately, she has always had others take care of her bills and finances and is purposefully clueless about finance charges and credit card debt. Hence, whenever credit card offers come in the mail, she has me look over them. The majority of the offers I shred immediately; there’s no reason to own more than 20 credit cards!

However, the other day while going through her offers, I came across a suspicious looking check from the National Debt Relief Stimulus Plan. “Hmmmm,” I thought. The return address was directly from Washington D.C., but knowing her finances fairly well, it seemed too good to be true; pay one-third of the debt she owed by cashing their $28,000 check. It just smelled fishy, so I did some quick and dirty research online and found that most people were wondering the same thing. It turns out that it is not a program from the government as the title would have one believe. Instead, it is a debt consolidation company using the terms “relief and stimulus” in their name for some persuasive and deceptive marketing.

Luckily for this woman, I caught the scam and shredded it right away. But what about a more desperate person who thinks this is their answer to becoming debt-free? What would happen then?

According to my research, if someone actually cashed one of these checks unknowingly, they’d be signing up for a debt consolidation program. The debt consolidation company would begin negotiating with their client’s financial institutions for a settlement amount. Obviously, someone who is already delinquent with their payments may not care as much about how a debt settlement would affect their credit score. However, a person who has been able to keep up with their debt payments, but is becoming frustrated by not seeing a reduction in their total amount due would then be subjected to a negative account or accounts on their credit report.

Is this helpful for a person deep in debt? Personally, I think it depends on the individual. If they are making a decent and conscious effort to change their spending ways and begin living debt-free, then it could be beneficial; getting their debt down to zero in a shorter period of time and paying less for it. On the other hand, many people enrolled in these programs never complete them. They end up missing a payment, then all of their accounts plus their consolidation account go into collections. This behavior is usually the reason they ended up so far behind to begin with. I know someone who recently entered one of these programs because they were “desperate” and they are already missing payments only a few months into the program.

Is this National Debt Relief Stimulus Plan company deceptively marketing to desperate people? In my opinion, yes. Personally, I think this is wrong. If I were the CEO of this company, I would feel ashamed to be posing as a government program. Instead they need to offer a free finance seminar on how people can negotiate with their creditors themselves, then explain how their services really work.

Have you encountered these checks or know someone who did? Does this seem like a legitimate way to market a debt consolidation company? Is it ethical?