This is the sixth article of the A-B-C's of credit and debt. Today is F for Free advice.

If you can get something for free, you should do it, right?

Well that all depends. Free beer - that sounds great! But a free puppy - well, that could be lots of fun. And it could be LOTS of work and cost you lots of money! It all depends on which one you end up with more of - fun or work. So, free isn't always great. And free isn't always free.

When it comes to financial advice, there's free ADVICE. And then there's FREE advice. Big difference!

There's been a lot of talk recently about the pre-paid debit card from financial celebrity Suze Orman. That's what got me thinking about this entire free advice thing. Let me say for the record that I'm not opposed to any of these financial "experts" you see on TV. They all have their areas of expertise. And I'm sure most of what they say is good, honest advice.


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This is the fifth article of the A-B-C's of credit and debt. Today is E for Empower.

So what is the reason for your money problems? So many people these days find it easy to blame something or someone other than themselves. "It's not my fault" they'll say. It's just so much easier to...

Blame your boss.
It's not your fault you didn't get that raise. Or work crappy hours. It's your boss's fault. They hold you back. They treat you poorly. Someone else gets the good hours, the promotions, the nice office. You, well you get the leftovers.

Blame the government.
Taxes are way too high. The Democrats don't know what they are doing. The leaders in your town and state stink too, right? If only they knew what it was like to be the little guy, the person who works hard and never gets ahead.

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This is the fourth article of the A-B-C's of credit and debt. Today is D for Don't.

Who do you turn to for money advice?

• A friend in the financial industry?
  
• Late night TV shows on money?
  
• Newspapers (online or print) like the Wall Street Journal or New York Times?
  
• Websites like MSM Money?
  
• Financial bloggers who have some real-world experience?
  
• Nobody - you learn for yourself?

When it comes to debt, it seems like EVERYONE has an opinion! Well, you know the old saying about opinions, right?

"Opinions are like a#$%^@#$, everyone has one..."

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This is the third article of the A-B-C's of credit and debt. Today is C for Credit.

Have you heard one of those FreeCreditReport.com TV commercials? You know, the ones with that catchy tune played by those guys in costumes? Heck, nearly every night while watching TV we hear that song. In fact, the other night my daughter started singing along, and it will be at least 4 years before she even thinks about getting a credit card (longer if I can help it!)

So I guess the average consumer probably falls for that catchy tune. Giving away something for "free" is always good for business and it probably works like a charm in this case. Here's an article on how the "free credit report" ads really work.

But what most people don't realize is that free doesn't always mean free, especially when it comes to your report.

In the last few months I've seen a huge increase in the number of articles on credit scores - not credit reports, but the score that goes along with it. The problem is that people are now starting to focus on their credit scores. Not that being an educated consumer is a bad thing. But focusing on your credit score is like focusing on the scale when trying to lose weight - it's nice to see your weight going down, but the scale only shows you what your weight is. It doesn't help you lose it!

If all you do is just keep looking at the scale, your weight won't change (in fact, if that's all you do it might actually go up!)

Same with credit scores - it shows you where you stand, but if all you focus on is your score, it won't help your credit get better!

At least with a scale you know what the number means. If you gain weight the number goes up, if you lose weight it goes down. But when it comes to credit scores, most people don't know the difference between 500 and 600 and 700 and 800. So focusing on your score is pretty much a waste of time. Wondering where to get a copy of your credit score? Here's a good article that explains how & where to get free credit scores.

So, why are people focusing more on credit scores instead of their credit report?

Because Americans like numbers. And they like funny, creative TV ads. They want their news fast. They want their food fast. They want losing weight to be easy. And they want fixing their credit to be easy. Looking at a number is easy, anyone can do that.

But looking at the number won't help your credit. Especially if you don't know what the number means!

So, here's a quick rundown on the difference between a credit report and a credit score - and what it means to you:

CREDIT SCORE:

Your credit score (sometimes called a FICO score) is determined by the credit bureaus, based on your credit history and financial data. The higher the credit score the better. For most people scores typically range from 600-800. There is no way to directly change your score. However, you can change your money habits that affect your score - the biggest one is to pay your bills on time. Here are some others:

• Reduce the amount of your debt you have
  
• Stay within your credit limits & pay on time
  
• Don't use all your available credit
  
• The longer you've had credit the better
  
• Don't keep getting more credit cards and taking out more loans
  

The hard part about understanding credit scores is that each of the 3 credit bureaus calculates its own score, so you really have 3 credit scores! There will all be pretty close, but not the same. Because your creditors don't always report your information to all 3 bureaus.

That's why you need to get a copy of all 3 credit reports (see below) so you have an accurate understanding of what you need to improve.

CREDIT REPORT:

Your credit report shows your entire credit history, and lists all of the above factors that influence your credit score. There is one official website that allows you to get a free copy of your credit report from each of the 3 credit bureaus once a year. So you can get all 3 at once, or get one every 3-4 months. So rather than paying for the "free" monitoring service that's required when you sign up for one of the credit reports from the ads, you can monitor it yourself by spreading out your requests throughout the year.

The "experts" will tell you that you can't repair your credit and you must wait 7 years for bad credit to fall off. But that's not entirely true. I had great success fixing my credit problems - it's not that hard once you know how to do it correctly.

You can pay to have this done, but if you take the time to learn how to do it you can certainly fix your own credit.

Not all that complicated, right? But can be confusing if you fall for the fancy TV ads. And focus on your credit score instead of your money habits. There's nothing wrong with getting your credit score so you know where you stand. But you can get a good idea by looking at your credit report. The more "bad stuff" the lower your score will be.

If you really want to improve your financial situation, and increase your chances of being approved for credit (and lower interest rates!!!) get a copy of your credit report, fix the bad stuff, and your credit score will go up even while you are not looking at it!

Thanks to the carnival of personal finance for including us in the "Ask the right questions" edition.

This is the second article of the A-B-C's of credit and debt. Today is B for Begin.

People ask "when is the right time to start fixing my money problems?"

Well, you should probably wait until tomorrow to get started, tomorrow is a new day. Or wait until Monday, after the weekend is over, weekends are so busy. Or even better, wait until January 1 so you get a fresh start in the new year. Well, maybe you should just wait until you get a raise or a better job so you have more money to work with. No, here's a better idea, wait a few months until you save up some more money. Or you could just until things get better, this is a bad time to get started...

Sound familiar?

When it comes to getting out of debt and fixing your money problems there is no "good time" to get started. Actually, let me say that a little differently - the "good time" to get started is RIGHT NOW. Today. If you have to, start small. But start. And I'm not just talking about thinking about getting started, or planning on getting started. You need to actually take some type of action to get started.

Not sure how to get started?

Here are some examples of goals, and ways to get started right away:

Paying off a credit card: Call the bank and ask for them to reduce your interest rate. If you have a balance transfer offer you got in the mail recently, tell them (nicely) that you'll use it if they can't help.

Fixing your credit: Get a copy of your credit report (and don't use the company in the singing TV commercials). Here's how you can get a free copy from each of the 3 credit bureaus, with no strings attached.

Start saving for retirement: Go to your local bank and open up an IRA. Find out what the minimums are invest the minimum. If you can put in more, do it, but if not start small. If you don't have enough, follow the steps below for saving for a big purchase...

Start saving for a big purchase: Get an envelope and put $5 or $10 in it. Then every time you have an extra $5 or $10 put more into it. Before long, you'll have enough saved up.

Buying a house: Call a realtor and meet with them to discuss your needs. It might take a few months to get through the entire process, but talking with a realtor will give you the info you need to start getting all your documents and finances in order.

Starting your own business: Come up with a name for your business and create a flyer. If the business is something big, and requires you to quit your job, write down a plan. If it is something you can do part-time right away, get in your car and start putting up the flyers!

Hopefully you get the idea. Reaching your goals, financial or otherwise, requires taking action. Anyone can plan. Anyone can dream. Anyone can think about. And of course, anyone can "Wait until the right time." Those people who succeed are masters at taking action. And like the old saying goes:

A journey of a thousand miles begins with a single step.

So take that first step today!

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Thanks to MoneyCactus.com for including us in the most recent Carnival of Personal Finance.

This is the first installment of our new series "The A-B-C's of fixing your debt and credit problems." Every few days we'll post another article, in alphabetical order. Today, we're starting with A for Acknowledge (obviously - sorry, I wasn't all that good at English in school).

Let's start with a question - why do people struggle with too much credit card debt?

It's not really due to a lack of money. Sure, having more money would be helpful. But there are plenty of people who make lots of money and still have too much debt. For a lot of people, the more you make, the more you spend (I'd love to be able to spend that much, but that's a topic for another day). And it's not really lack of understanding how credit cards work. If you've had a credit card for more than 30 days you know that you get a bill for what you buy. And if you don't pay the bill in full, it gets bigger from interest. And bigger. And bigger!

The real reason people struggle with too much debt is because they think that they won't get into trouble with debt. Other people have debt, not me, they'll say. Or I'll pay it off completely when the bill comes. Or I'll pay it off completely once I get paid. Notice a trend here...Excuses! Excuses! Excuses!

Well, it doesn't take long to figure out that excuses don't pay the bills.

All of these excuses are signs that a person doesn't understand that there is a problem. Like a drinker or smoker who says "I can quit any time I want" - but doesn't because they really can't - those with too much debt don't stop because they don't admit that there is a problem.

So the first step to fixing your debt and credit problems is to be honest with yourself - and realize that the real problem isn't just too much debt or bad credit. But a real problem with how you look at your finances.

Admitting that there is a problem - admitting that YOU and YOUR actions and thoughts and beliefs are the cause of the problem - is a huge (and very difficult) step.

I know, if you just had a little more money. Or if your creditors would just give a break for a month. Or if you could just get a new job making a little more money. Or if you could just win a few grand in the lottery. Or if ... STOP RIGHT THERE!

Been there, done that.

I know what those feelings are like. I know how hard it is to realize that your actions got you into trouble - and truly understand that your actions are the only way to get you out of trouble!

But once you do, it's such a relief! You feel so much in control. And even if it seems like a mountain standing there in front of you, at least you now have a fighting chance of fixing your money problems!

Stay tuned for the letter B in a few days...

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Thanks to Tom at Canadian Finance Carnival for including us in the latest carnival!