How Does the Credit Scoring System Really Work

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First Tax Solution LLC offers Debt Reduction Consultation, Online Advisory Service. We really care about you, your family and your future. We will help you get out of debt and stay out debt while improving your credit at the same time.

Raise your credit score to 740

As lenders continue to tighten credit requirements, getting a good interest rate -- or a loan at all -- requires that you understand how the scoring system works.


In our post-crisis economy, good credit isn't just nice to have -- it's essential if you want to level the playing field with lenders.

Credit scores are three-digit numbers lenders use to gauge your creditworthiness, and until the financial crisis hit, a 720 FICO credit score was enough to get the best loan terms. Even people with lower scores could get decent deals, and at the peak of the lending boom it seemed that no score was so low that it merited a rejection.


How to fix credit report errors
These days, lenders typically demand 740 scores for the best mortgage rates. Lower scores mean higher rates or perhaps no loans at all. Fannie Mae, the giant mortgage-buying agency, recently lifted its minimum score requirement from 580 to 620.

People with top scores are still getting credit card and balance transfer offers. If their issuers raise their rates or lower their limits, they can move their business elsewhere. People with weaker scores, by contrast, are finding their access to credit slowly strangled. Issuers can push them around, and credit seekers have little recourse.

* See which states have the best credit

Less-than-stellar credit can hurt in other ways. After all, credit information is used by:

* Insurance companies to evaluate applicants and set premiums.
* Landlords to decide who gets apartments.
* Employers concerned about higher risk of theft from those with troubled finances.

Clearly, cultivating good credit scores is an essential 21st-century skill.

The good news is that it's possible to boost your numbers if you have a handle on your finances and you know how credit scores work. After all, the median credit score is 720 on the 300-to-850 FICO scale, meaning half the adult U.S. population has a higher score and half has a lower score. Forty percent have scores over 750, and 13% have scores above 800, according to Fair Isaac, the company that created FICO scoring.

Plenty of folks are handling their credit well enough to earn good scores. You can, too. But first you need to recognize that:

* You can't raise your scores if your finances are still in free fall. If you're unable to pay your bills, you certainly can't fix your credit. Real credit score repair will have to wait until your financial crisis has been solved and you have enough money to cover your expenses, plus some extra to begin paying down your debts.
* You can't raise your scores if you don't use credit. Credit scores try to predict how well you're likely to use credit in the future by how well you've used it in the past. So while living a cash-only lifestyle may do wonders for your wallet, it won't boost your scores -- in fact, without continuing use of some type of credit, eventually your credit reports won't even generate credit scores.
* You don't have to pay credit card interest to achieve great scores. "Using credit" is not the same as "carrying a balance on your credit cards." Carrying a balance is expensive, bad for your finances and completely unnecessary. Many of us who have achieved 800-plus scores pay off our balances religiously, and we know you can build and keep great credit scores without ever paying a dime of credit card interest.
* You can't expect overnight results. You're likely to see improvement in your scores within 30 days if you pay down significant chunks of your credit card debt. But otherwise, credit repair takes time, and how much time depends on the many details of your credit reports. If you have serious black marks, such as bankruptcies or foreclosures, you can see significant improvement in your scores as time passes but you may have to wait until those negatives drop off your credit reports before you can join the 700-Plus Club.

Now that you understand the basics, you can use the following techniques to get your scores over 740.
You have to nail the basics
Patrol your credit reports. Your credit scores are based entirely on the information in your credit reports on file at the big three credit bureaus: Equifax, Experian and TransUnion. If the information is wrong, your credit scores could suffer. You can get your reports once a year for free from the government-run AnnualCreditReport.com; you can buy subsequent copies directly from the bureaus or from myFICO.com. Dispute any serious errors, such as:

* Accounts that aren't yours.
* Reports of late payments when you paid on time.
* Bankruptcies older than 10 years or accounts that were wiped out in bankruptcy but are listed as still due.
* Other negative information that's older than seven years. (The seven-year clock typically starts 180 days after the account first went delinquent.)

Get a major credit card. Retail cards and gas cards can help you build your credit history initially, but to get your scores into 700-plus territory you'll want at least one big kahuna: Visa, MasterCard, Discover or American Express. If you can't qualify for a regular card, consider a secured version, for which you make a deposit with an issuing bank. You can find offers at CardRatings.com, CreditCards.com, LowCards.com and Index Credit Cards, among other sites. Just make sure the card reports to all three bureaus, and try to get a card that converts to a regular credit card after 12 to 18 months of on-time payments.

Arrange automatic payments for every card or loan. Credit scores are extraordinarily sensitive to whether you pay your bills on time, so don't let travel, a busy schedule or a simple brain cramp trash your scores. Most lenders will let you set up automatic payments that take an amount you specify -- the minimum payment, a set dollar amount or the full balance -- every month from your checking account.

Don't let disputes go to collections. Yes, your insurance should have covered that bill; no, you shouldn't have to pay for a broadband connection that doesn't work. But if you let a commonplace problem like these escalate, your account will be turned over to collections and become a big black mark on your credit reports. Pay under protest and get your revenge in small claims court. (Don't get sued yourself, though: Lawsuits and judgments are another major stain on your credit reports.)

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Debt Reduction and Yes It Does Work

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Debt-settlement companies promise that you can get out of your debts for pennies on the dollar. Typically, these outfits demand that you stop paying your creditors and instead send the money to them. After a few months, the debt-settlement company promises to open negotiations with your lenders and use the money you've sent to pay them.


The idea is that after a few months of not getting paid, your creditors will agree to a fraction of what they're owed.

Of course, your credit will be trashed at this point, you'll have paid fat fees to the debt-settlement company, and you may be facing lawsuits from your lenders. That's if you're lucky. If you're not, you'll risk all this, and the debt-settlement company will disappear with your money. If you need more details, read "Debt settlement: A costly escape."

Better alternatives include: Debt Reduction Tips.

* Credit counseling. Legitimate credit counselors have debt-management plans that reduce or eliminate the interest rates on your credit card debt.


* Bankruptcy. If you can't pay your debts, you may be better off getting a fresh start through bankruptcy. Your credit rating may recover more quickly, and you'll be able to keep the cash you would have otherwise sent to the debt-settlement company. Consult an experienced bankruptcy attorney who can evaluate your situation and discuss your options.

Debt-consolidation loans from private lenders

A big mistake
If you owe money to lots of creditors, you may be a sucker for pitches from debt consolidators, which promise to combine all your debts into one "affordable" loan.

Unfortunately, though, these loans often come with high interest rates and hidden fees. Instead of helping you pay your debt off faster, a debt-consolidation loan can stretch out your repayment schedule so you actually end up paying more.

Better alternatives include:

* A do-it-yourself plan. If your credit's good, you may be able to negotiate lower interest rates on your debt. (See "Get a better deal . . . with a threat" for techniques.) Then you can tackle your bills one at a time, starting with the highest-rate debt or the credit card that's closest to its limit, while paying the minimums on your other debt. Once this high-priority debt is paid off, make the same-size payment to the next-highest-priority debt. Continue until you're debt-free.


* A debt-consolidation loan from a credit union. Because they're member-owned, credit unions tend to offer more-reasonable interest rates than other lenders.


* Credit counseling. If you can't afford to make the minimum payments on the debt you have, a credit counselor's debt-management plan might be your best option.


* A home-equity loan. Consider this option only if you have plenty of equity in your home, you stop the behavior that got you into debt in the first place and you pay off the loan as quickly as possible. Otherwise, you'll just be draining one of your most important assets, and you'll wind up deeper in debt in short order.

This is my last option. I almost choose not to list it. Only use this if you can and are willing to make life changes in controlling your financial future.

First Tax Solution LLC Offers Debt Reduction Tips and Consultation and it does really work.

Our Professional Personalized Accounting Management Team will help you get our of debt and stay out of debt. We work with you hand and hand. We teach you how to pay your own bills with our proven system. AND YES IT WORKS.

Our Motto is Accounting and Tax Service When You Need It

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• Impact Debt Settlement FAQ on Debt Settlement and its Impact (slideshare.net)

Small Business Owners Under more Scrutiny from the IRS

Self-employed business owners will continue to be the target of more scrutiny, thanks to the Internal Revenue Service's new Small Business/Self-Employed Operating Division. This Division will focus on partnerships and sole proprietors with more than $100,000 in total gross revenues, and small corporations with less than $5 million on their balance sheets. In addition, Congress has approved an increase in funding that the IRS is going to use to try to increase the number of audits conducted.


Congress wants to make sure that every deduction is legal and is documented. Stressed Out Try our Virtual Bookkeeping

Is your record keeping a nightmare? Most small business owners are very unorganized when it comes to bookkeeping and accounting. There just isn't enough hours in the day and enough of us to go around.

Here are some tips to help make the task less painful.

* Keep all your receipts. (everything: whether you need it or not)
* Keep a large envelope in your car; put every receipt in it. Not in your visor, glove box or console.
* Buy a calendar with small boxes for each day. Write down the odometer reading in the box for that day and where you are going. Do this every day.
* At the end of the month calculate the miles driven for business and personal: write the total for each on the calendar.
* Compile your receipts from the envelope and match with credit cards, debit cards and bank account.

And then upload the information to your client portal at First Tax Solution and we will do the rest for you. First Tax Solution is the Number 1 Small Business Accounting Firm. We really do make your life easier. With our On line Business Tax Preparation, our IRS Problem Resolution and Virtual Bookkeeping. We have you covered.

We are the Nations first Virtual Accounting Firm, Our motto is Accounting, Business Consultation and Tax Service When You Need It.

Contact us today First Tax Solution

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• He got a $150,000 tax refund (cnn.com)

Most of us can't tackle all of our spending and saving needs at once. But following this outline can make it a lot easier to keep your finances on track.

http://articles.moneycentral.msn.com/SavingandDebt/ManageDebt/the-9-step-guide-to-your-finances.aspx


By Liz Pulliam Weston
MSN Money

Here's a money secret that might keep you from driving yourself crazy: You can't do it all.

We're supposed to max out our retirement savings, pile up huge emergency funds, pay off all our debts and buy tons of insurance. Yet we've also got other bills to pay, kids to raise and, yes, fun to have.

Even in good times, many of us can't cover all the bases perfectly. Now that many are facing pay cuts, unemployment or unpaid furloughs, more of us are facing painful trade-offs on less income.

Here's what you need to know now to properly prioritize your spending and manage your money. You may not be able to cover everything right away, but as more money comes in you can work your way down the list and be reasonably sure you're getting the important stuff right.
Priority No. 1: Pay your bills
Obviously, you need to keep a roof over your head and food in the fridge. But your ability to manage all your other financial priorities will be greatly enhanced if you can get a handle on your basic living expenses.

Bankruptcy expert Elizabeth Warren recommends limiting your "must-have" bills to 50% of your after-tax income. Must-haves, as she wrote in "All Your Worth" (co-written by her daughter Amelia Warren Tyagi), include shelter, utilities, transportation, food, insurance, child care and minimum loan payments.
More from MSN Money
Poor © image100/Corbis

* Your 5-minute guide to managing debt
* 6 steps to dumping toxic debt
* When paying off debt is a bad idea
* 5 money mistakes in a bad economy
* Calculator: Too much debt for your income?

Her plan leaves 30% for "wants" such as new clothes, entertainment and vacations, and 20% for savings and debt repayment.

If your must-haves balloon over 50% of your after-tax pay, you may be able to rein in your costs by trimming your food bills and lowering your home's thermostat. If not, you may have to make more painful adjustments, such as finding a cheaper place to live or getting rid of a too-expensive car.

What you shouldn't do is cut your insurance coverage. Shopping around for coverage and choosing higher deductibles are better ways to lower costs than dropping your policies altogether, since that can leave you exposed to catastrophic expenses from accidents, illness or lawsuits. What you need:

* If you have a car, you need liability coverage, at least. Comprehensive and collision insurance is a good idea on newer cars and may be required by your lender.

* If you own a home, homeowners insurance is essential. Make sure you have enough coverage to rebuild your home, plus adequate liability insurance ($500,000 is good, and more is better).

* If you rent, renters coverage is a smart buy. Your landlord's policy doesn't cover your stuff or your liability.

* Health insurance is a basic expense you shouldn't forgo if you have any choice, because a single accident or illness can bankrupt you. If you don't have or can't afford coverage, read "A survival guide for the uninsured."

* Life insurance may be an essential, but only if you have financial dependents (people who need your income to survive). Term insurance is the cheapest way to go; learn more at MSN Money's Save on Life Insurance Decision Center.

Video on MSN Money
Credit cards © Fancy/Veer/Corbis
Dump your credit cards
Liz Pulliam Weston says your best investment move now is paying off credit card debt.

If your income isn't stretching far enough to cover your must-have bills, read "How not to pay your bills" and consider a consultation with a bankruptcy attorney. For more on bankruptcy, visit MSN Money's "Guide to Personal Bankruptcy."
Priority No.2: Save $500
Just a few hundred bucks in the bank can eliminate expensive bounced-check and late-payment fees. Having $500 in the bank also allows you to pay for minor emergencies without adding to your credit card debt. Furthermore, there's a huge psychological advantage to having even this small cushion, as I wrote in "Want to sleep better? Save $500."

Eventually, you'll want a bigger stash to guard against financial setbacks, but $500 is a good initial goal. Set up an automatic transfer from your checking account into a high-yield savings account, or jump-start your savings with a windfall, such as your tax refund check.
Priority No. 3: Start saving for retirement
You may be surprised to see retirement so high on the list. Surely your credit card debt and your kids' college educations are more important.

Except they're not. You have only so many working years to set aside enough cash to last you for the rest of your life, and any delay in getting started will cost you big time. Waiting just five years to begin can reduce your total nest egg by as much as 30%.

* Facebook users: Become a fan of Liz Pulliam Weston

Stopping or reducing your contributions is another bad move. It may be hard to contribute when markets are so volatile, but it's still important if you hope to build a nest egg. (Read "Under 35? Hurray for the meltdown" for more.)

But how much should you save? In "16 favorite money rules of thumb," I suggested that you save "10% for basics, 15% for comfort, 20% to escape." If you start saving for retirement by your early 30s, putting aside 10% of your income should cover your basic expenses in retirement, while a 15% contribution rate should give you a more comfortable nest egg. A 20% rate should allow you to retire early or enjoy luxuries such as extensive travel.

Continued: What if you can't manage 10%?

Your money priorities, first to last

Continued from page 1
[Related content: savings, budgeting, Liz Pulliam Weston, 401k, financial planning]

What if you can't manage even 10% right now? Then:

* If your 401(k) still offers a match, contribute at least enough to get that.

* If there's no match, start by contributing whatever you can, and bump it up a percentage point or two whenever you get another raise. (See "No 401(k) match? Save anyway.")

* If you don't have a retirement plan at work, contribute to a traditional individual retirement account. You can contribute up to $5,000 a year if you're under 50 or up to $6,000 if you're 50 or older, and your contribution is tax-deductible.

Need some inspiration to put the money aside? Think about how hard it is to live on your current income. Now image living on about $12,000. That's the typical Social Security benefit, and it's all you'll get if you don't start saving. For more, read "Could you survive on Social Security?"
Priority No. 4: Pay off 'toxic' debt
Now it's time to tackle your credit card bills and other dangerous debts, including payday, car title and pawnshop loans.

As I explained in "6 steps to dumping 'toxic' debt," debt is toxic if:

* The lender can change rates and terms at any time, with little or no provocation.

* The standard or default interest rate is in the double digits, or higher, which typically prolongs the time you remain in debt.

* Initially easy payment terms encourage you to rack up more debt than you can comfortably repay.

The best way to pay off toxic debt is usually to target the highest-rate debt first, paying as much on that as possible while paying the minimums on your other debts. But you also could tackle your smallest debt first, just to give yourself the psychological boost of retiring a bill.
More from MSN Money
Poor © image100/Corbis

* Your 5-minute guide to managing debt
* 6 steps to dumping toxic debt
* When paying off debt is a bad idea
* 5 money mistakes in a bad economy
* Calculator: Too much debt for your income?

Priority No. 5: Bolster your emergency fund
As layoffs mount, the perils of living paycheck to paycheck become more obvious, and your $500 cushion will disappear fast if you lose your job.

So focus on building up an emergency stash worth at least three times your must-have expenses. That should tide you through a typical spell of unemployment if you cut all nonessential costs. (The median duration of unemployment was 11 weeks in February, according to the Bureau of Labor Statistics, up from 8.9 weeks a year earlier.)

You might want to bolster your cushion even more in many cases. If you work in a troubled industry that's already swamped with job seekers -- say, newspapers, real estate or auto manufacturing -- your joblessness might extend for months. The bigger your fund, the better you'll sleep. (See "Why I'm saving up $15,000 this year.")
Priority No. 6: Check out long-term-disability insurance
You've probably heard it before: Your earning power is your greatest asset. Meanwhile, your chances of a disabling accident or injury during your working life are much higher than your risk of dying in the same period.

But workers' compensation will pay you only if you're injured on the job, and disability benefits from Social Security are tough to get. So long-term-disability insurance is a smart purchase if you can afford it.

The cheapest way to get coverage is usually from your employer. If your job doesn't offer it, check with any professional organizations to which you belong to see whether disability coverage is offered.

If not, you may need to look for an individual policy. These can be prohibitively expensive, so you may need to compromise by agreeing to a longer waiting period before benefits begin (such as 90 or 180 days, instead of 30 or 60) and/or by limiting the benefit period to five years instead of to age 65. For more, see "Disability insurance can save your life."
Video on MSN Money
Credit cards © Fancy/Veer/Corbis
Dump your credit cards
Liz Pulliam Weston says your best investment move now is paying off credit card debt.
Priority No. 7: Enhance your retirement savings
Once you're contributing at least 10% of your income to a tax-deductible retirement plan, you can consider what's known as tax diversification.

That means putting money in various retirement buckets that will receive different tax treatment in retirement.

Retirement plans that give you a tax break upfront, such as 401(k)s and traditional IRAs, will require you to pay income taxes on withdrawals in retirement.

* Your 5-minute guide to retirement

* Retirement planner

Contributions to a Roth IRA, by contrast, don't give you an upfront deduction, but you can withdraw from them tax-free in retirement.

If you can't contribute to a Roth (the ability to contribute begins to phase out once your modified adjusted gross income exceeds $105,000 for single filers or $166,000 for those who are married filing jointly), consider putting money into a taxable brokerage account. Again, there's no upfront tax break, but investments held a year or more qualify for more-attractive capital-gains tax rates.

Continued: Start saving for college


ontinued from page 2
[Related content: savings, budgeting, Liz Pulliam Weston, 401k, financial planning]

Priority No. 8: Start saving for college
You're on track for retirement, your toxic debts are retired, and you've got a decent emergency fund going. Only now should you lift your sights from your future to that of your kids.

Putting your progeny so low on the list is hard, I know. But they have other options to pay for school, including loans. Nobody will lend you money for retirement.

The best way to save is likely to be through a 529 college savings plan (though not everyone would agree). You can contribute lump sums or set up automatic withdrawals of as little as $25 a month.

* Your 5-minute guide to saving for college

How much should you save? If you're trying to pay the full freight at Harvard, one heck of a lot: $819 a month, starting at birth, according to the college savings calculator at Savingforcollege.com.

A more realistic goal for most families might be to save for one-third to one-half the cost of public-school education and rely on borrowing to cover the rest. That would require a contribution of $80 to $125 a month for a child who just entered kindergarten.
More from MSN Money
Poor © image100/Corbis

* Your 5-minute guide to managing debt
* 6 steps to dumping toxic debt
* When paying off debt is a bad idea
* 5 money mistakes in a bad economy
* Calculator: Too much debt for your income?

Priority No. 9: Save for spectacular experiences
If you've covered all the priorities and have cash left over, it's time to start putting money aside for something wonderful: a special trip, a family reunion, a sabbatical. (Yes, people take those, even in recessions.)

Because money isn't just about covering the essentials; it's also a tool for living life to its fullest.

We tend to forget that when we focus only on the bills, the retirement accounts or the tangible stuff money can buy. Yes, purchasing a new car or TV can give you a rush, but that fades fast. What lasts are our connections to other people and our memories of happy events.

Make sure you're getting enough of those.

First Tax solution LLC

Move Your Money: More Americans Considering Smaller Banks

www.huffingtonpost.com

“There are more benefits to banking with smaller banks and credit unions than people realize.

1. Cost associated with banking is normally less
2. Convenience for the most part is better (expect if you go to an area that does not have a branch: you just have to plan ahead, and we do have debit and credit cards)
3. With Technology today it really does not matter all banks today offer online banking.
4. The majority of small banks remember what is is like to be a normal person. The President and CEO does not make 25 million dollars a year.
5.. To me the most important part is the bank associates, Branch Manager and staff actually know who you are and knows your name. (amazing)

http://firsttaxsolution.com”

Donations for Haiti Relief Paid in 2010 may qualify to be Deducted on Your Tax Return in 2009

Certain Cash Contributions for Haiti Relief Can Be Deducted on Your
2009 Tax Return
Congress passed a new law which allows you to choose to deduct certain charitable contributions of
money on your 2009 tax return instead of your 2010 return. The contributions
must have been made after January 11, 2010, and before March 1, 2010, for the
relief of victims in areas affected by the January 12, 2010, earthquake in Haiti.
Contributions of money include contributions made by cash, check, money order,
credit card, charge card, debit card, or via cell phone.
The new law was enacted after the 2009 forms, instructions, and publications
had already been printed. When preparing your 2009 tax return, you may
complete the forms as if these contributions were made on December 31, 2009,
instead of in 2010. To deduct your charitable contributions, you must itemize
deductions on Schedule A (Form 1040) or Schedule A (Form 1040NR).
The contribution must be made to a qualified organization and meet all other
requirements for charitable contribution deductions. However, if you made the
contribution by phone or text message, a telephone bill showing the name of the
donee organization, the date of the contribution, and the amount of the
contribution will satisfy the record keeping requirement. Therefore, for example, if
you made a $10 charitable contribution by text message that was charged to
your telephone or wireless account, a bill from your telecommunications
company containing this information satisfies the record keeping requirement.

Contact us for more information at www.firsttaxsolution.com