credit report

The Three Steps to Fixing Your Credit

There are a couple of things that you need to know about having less than perfect credit  The first is that there are more people out there whose credit profiles are not nearly as awesome as they’d like them to be—so there is no reason to feel embarrassed about your score or situation. The second is that credit scores change all the time. The credit you have now is not the credit you’ll have next month or next year. This means that you can fix your situation.

Step One: Finding Your Starting Place

The first thing that you need to do is get copies of your credit reports. You are entitled to at least one free credit report every year from each of the three major credit bureaus: Equifax, Experian and TransUnion.

It’s important to understand that accessing your credit reports does not necessarily mean learning your credit score.

Once you have your credit reports, you’ll want to make sure they are absolutely accurate. This means going over every detail and making sure that it is correct. If you see something that is even a little bit off, you need to dispute that detail with the reporting bureau. In addition to raising your credit score, it is important to get a clear and accurate idea of how much work you are going to need to do.

building-creditStep Two: Fixing Bad Credit

Most of the time, the key to fixing bad credit is getting back on track with your bills. Don’t worry about the payments you’ve missed in the past. You can’t do anything about those now. What matters is that you create a positive and steady payment plan for your future. It is also important that you work very hard to reduce your debt to income ratio. Your debt to income ratio is a big factor in your overall credit score. It is what lenders look at when you apply for loans or financing.

The best way to reduce your debt to income ratio is to increase the amount of money you send in to your creditors each month. By now you already know that you need to pay more than the minimum amount due if you ever want to get out of debt. Even $5 more toward that balance is a good thing. A better way to do it though, is to take your minimum amount due, add however much you are charged in interest every month and then tack at least $10 (though 10% is better).

If you have a lot of bills or if you’re worried that you won’t be able to afford to make even your monthly payments each month, don’t panic. Many creditors are willing to work with clients when it comes to things like interest rates and minimum amounts due. They’d rather reduce your interest rate than lose you as a customer. If this process intimidates you (or if you don’t have time to call and haggle with all of your creditors), a credit repair service can reduce the stress of the process. These companies negotiate with creditors on your behalf and help you set up budgets and payment plans that you can afford to keep.

Step Three: Building Good Credit

Don’t wait until you are out of debt to work on building good credit for yourself. You need to work on both simultaneously. Yes, paying down your debt and creating a positive repayment history will accomplish part of this goal. The other part, though, is proving that you can handle credit responsibly. The easiest way to do this is to open a secured line of credit with your bank.

If you are willing to work hard, you can fix your credit. It won’t happen overnight. It might take a few years—but it will happen.


Your Credit Scores: How Much Do You Know About Them?

How often have you heard the term “credit score”? Perhaps— many a times. Yes, you know that it will be one of the key factors considered by lenders when you are looking for loans of any kind—be it cars, mortgage, home improvement or anything. However, are you exactly aware of the regulations behind them? Are you sure that you are not confused about any of the aspects of credit ratings? If no, then read on, to know further.

Provided below is a lowdown of a few nuances of the all-important credit scores—something aimed at helping you with better understanding of your credit or FICO scores.

These scale of the credit scores

The scores generally vary from 300 to 850. It can well be understood that 300 is a very bad and 850 is a very good score. A sufficiently good score for securing an auto loan is around 720. However in order to qualify for a mortgage, you should better 760. You do have the right to know, why a certain lender has rejected your loan application. Similarly you might also ask him why you have been offered lesser than the best rate. They should be totally transparent about the range of scores they have considered (many of the lenders use VantageScore that has a range of 501 – 990).

The Three Bureaus

The three credit bureaus only generate the credit reports. They do not judge your scores and give directions to the lenders whether or not to accept your loan application. They are simply in charge of laying down the history (how well or poorly have you been able to manage your finances like loan repayment or credit card bills etc). Equifax, Experian and TransUnion are the three major credit bureaus. It’s the companies such as VantageScores and FICO who mark you, thereby indicating lenders whether at all it is risky to deal with you or not.

Credit_CardFree Credit Watch

One of the biggest myths attached to credit scores is that you can find out about your scores for free from some websites. You can secure a rough estimate of your scores from these free sites (these scores include those marked by FICO and VantageScore as well as the PLUS scores by Experian) but only when you are willing to subscribe free (on a trial basis) to a credit monitoring service. And, the catch is—if you don’t unsubscribe within a period of 7 days or so, the site might charge you a certain amount of money.

The Credit Card Age

As against popular belief, your credit rating does not “age”, once you close an account. For instance if you close an account in a particular bank, the credit card of that bank will “be a year older” next year. John Ulzheimer, a noted credit expert says: “Not only does it still count in your score, but it continues to age.” (Sources: money.usnews.com)

The closed account stays in your credit report for only a good 10 years. However, if your scores are negative, they will be deleted after 7 years– since, negative rating can only be reported in the history for seven years.


What to Do If You Have Credit Issues?

Credit issues can impact just about every aspect of your life. Why? If you do not have a good credit score, it is harder to qualify for mortgage loans, auto loans and other types of financing. In addition, a bad credit score can result in higher insurance premiums, and you may not be able to secure certain types of employment.

Fortunately, there are effective ways to deal with credit issues. Since you didn’t get into this situation in one day, you can’t repair your credit overnight. Therefore, you should not expect a better credit score after only a few days or weeks. Even so, if you take the necessary steps to get your personal finances on track, your credit score will gradually improve and you’ll be a step closer to achieving A+ credit.

Credit_Card1. Check your credit report each year

Many consumers do not check their credit reports on an annual basis. Your credit report provides a detailed account of your credit history. It includes your most recent accounts, balances, older accounts, as well as your account statuses.

When you apply for new credit, creditors review your credit report to see if you qualify for financing. But unfortunately, your credit report may not be accurate. A creditor may report information in error, or someone may steal your personal information and open accounts in your name.

Checking your credit report regularly is the best way to identify mistakes early and each consumer is entitled to one free report from each of the bureaus every 12 months.

2. Seek professional help

If you notice errors on your credit report, you can notify the reporting creditor to clear up any mistakes. In many instances, this is all it takes to improve the accuracy of your report. But sometimes, repairing serious credit report errors requires professional help.

Credit repair agencies have experience fixing mistakes on consumer credit reports. They’ll investigate a claim and work with your creditors to remove any information that’s inaccurate. Negative information on your reports can drop your credit score by several points. However, once this information is deleted from your report, your credit score will improve.

3. Understand how credit works

If you do not understand how credit works, you may not make wise credit decisions. Several factors influence your credit score, such as your payment history, the amounts you owe, the length of your credit history, the types of credit, and new accounts.

Since your payment history and the amounts you owe make up 35% and 30% of your credit score, respectively, it is important that you pay creditors on time and maintain low balances.

This is much easier to say than do. However, if you only charge what you can afford to pay, and if you pay your balances in full each month, you can improve a low credit score.

4. Get rid of your credit cards

Canceling a credit card may reduce the length of your credit history, thus lowering your credit score. Rather than get rid of credit cards, destroy your cards and only use cash. The less you use a credit card for purchases, the less debt you’ll accumulate.

In addition, do not splurge when applying for a loan. Oftentimes, consumers overspend when buying a house or car. As a result, a larger percentage of their income goes toward paying off these debts. They end up living paycheck to paycheck; and if unable to make ends meet, they might rely on a credit card. This complicates a financial situation. Therefore, know your limitations and be reasonable.

5. Establish new payment terms with your creditors

Defaulting on a credit card or loan, and then ignoring your creditors will not make the debt go away. The credit card company or bank may send your account to collections or seek a judgment. Both moves can damage your credit score, and this negative activity can stay on your report for up to seven years.

To avoid any collection accounts or legal action, always communicate with your creditors. Explain your situation and ask the creditor for a new payment arrangement. Based on your economic situation, the creditor may lower your monthly payment to an affordable amount, or temporarily suspend payments until your finances improve.

Realizing that you have credit issues might keep you awake at night. However, credit problems are not permanent. There are ways to rise above a low credit score. However, you need to be proactive and make wise credit decisions.

 


5 Reasons Credit Cards Make Financial Sense

It’s easy to vilify credit cards as a means of racking up huge amounts of debt. Whilst it’s definitely true that UK consumers are often heavily indebted to their cards, they can still be useful tools to protect your finances and manage cash flow:

They Protect Your Cash

Fraudulent transactions and identity theft are rampant in this electronic age. Using a credit card to make online transactions makes a lot of financial sense: If the website is fraudulent, or your details are stolen and used to make a transaction, you’ll almost certainly be covered for anything coming out of your account. The same thing isn’t true with a bank debit card, and certainly not any kind of money order or cash payment.

Likewise, if a company goes bankrupt before you’ve received your goods, you should be covered. As long as you quickly pay off the purchase, it makes sense to use a credit card for most online and distance purchases.

iStock_000004652423Small-280x0They’re Convenient

So long as your credit card is part of a sound financial plan, and you’ve budgeted properly, it makes sense to use it instead of carrying vast amounts of cash. If you’re faced with an ATM outage, a credit card might well be the only way of paying for goods and services. It makes sense to have one for backup if nothing else.

They’re Great For The Traveller

These days, credit cards are the number one way of carrying money to overseas destinations. The same reasons that make credit cards a safe way to pay for goods and services at home make even more sense on holiday where you can’t always be sure about the security of an ATM or the honesty of a shop owner. Credit cards also mean that you don’t have to worry about carrying vast sums of foreign currency with you either. The exchange rate is often more favourable than an exchange service at home.

They’re Good For Your Credit Rating

If you have a credit card, or even several, and always pay them back on time, it can be a good way of demonstrating your financial stability. Often, a lending company is more willing to give a loan or mortgage to an individual that has a credit history but makes timely repayments, than one with no credit history at all. Lenders keep detailed records about your credit limit as well as what you’ve repaid and when, so a clean credit card history is a great way of improving your score. Remember though: despite what you might have read in a credit cleaner review, it’s very difficult, if not impossible to remove a bad credit record, so make sure you make prompt repayments

They Come With Some Useful Extras

Credit cards often come with a useful interest free period on both balance transfers and purchases, so they can be used as an effective way of managing debt, as long as that’s part of a properly planned budget. In addition, many cards often come with some enticing bonus offers that give you things like air miles, money off vouchers and even entrance into the business class lounges of airports. Shop around, and you could save a substantial amount of money just by using your card.

Proceed With Caution

Credit cards can be a great way to not only manage your finances, but also to protect them. Just make sure your credit card use is part of a sound financial budget.

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By Harry Price

Harry Price returned to his love for writing after leaving his job as an interior designer. He is enjoying his new entrepreneur life and the freedom it gives for him to travel and move around the world.


How Your Credit Score Is Determined

credit scoreLike income taxes and 401Ks, credit scores can be mysteriously difficult to understand. With the overwhelming majority of the population being affected by them, one would hope there would be a simple method for individuals and families to calculate their own scores. Of course, the same could be said for taxes and retirement plans, but we know how that story goes…

Although the specific calculations are convoluted, and typically hidden from the public, the commonly accepted and standardized scores used by lenders are made up of five primary factors listed below, in order of highest percentage of impact to lowest:

35%:  History of Payment

If there is one question lenders want answered, that question is: Will payments be made on time, and in full? Above all else, this single fact determines worthiness and reliability in lending. More than how much money is in an account, more than how much income a household makes in a year, this is the key: if a history of paying the proper amounts on time can be shown, the most important base has been covered.

Although an occasional late payment is a rather common accident amongst American families, credit scores don’t react nearly as badly to one late payment as it does consecutive or patterned late or non-payments. Do not panic if a single payment was accidentally missed; the scores looks for repetition.

30%:  Amounts Owed

This factor can be initially misleading, in that people tend to assume that the higher amount one owes, the lower their score must automatically drop. However, there is a critical difference to be made: the significant amount is the ratio of available credit that is being used. Simply put, the lower the percentage of available credit, the lower the score.

The reason creditors care more about percentages and ratios than raw amounts is that when an individual is using a large percentage of their available credit, they are considered financially over-extended, and carry a higher risk of not paying on time. Again, paying on time and in full is so important, that not only is payment history the strongest credit score factor, but the next strongest is simply trying to show lenders if people will pay on time in the future.

15%:  Length of Credit History

Another factor that is commonly misinterpreted, having a longer credit history does not necessarily translate to a higher score. If poor credit is shown over a long period of time, that will have a proportionately negative effect on a score as having good credit for the same length of time would yield a positive effect.

Yes, lenders are certainly more leery of rookie or inexperienced credit users, but a score is not automatically low just because an individual or family is new to credit. In fact, only a few months of reliable credit payments actually yield quite a high score, but to get a score to prime levels, it does require good behavior shown over a longer duration.

10%:  Types of Credit

With the wide variety of credit cards, loans, installments (monthly payments), mortgages, and other types of credit available, more is not always better. Results seem to show that the two most noteworthy conclusions to draw from this section are 1) lenders prefer users who have managed credit cards properly, to those who have not managed them at all (meaning using a card is probably worth your while), but 2) do not open a credit card or other form of credit unless you intend to use it.

Paying monthly installments, a mortgage if one is in use, and a responsible credit card is more than enough to boost this portion of the credit score.

10%:  New Credit

The myth that simply opening a line of credit will drop your credit has been exposed; this is simply not the case. However, a dangerous red flag to lenders is when a household opens up multiple forms of credit in a very short amount of time, particularly if that household is not already an established, trusted credit user. When getting started, avoid rapidly opening multiple accounts.

Written by Clif, a freelance writer for SereniCare Corporate Marketing, a Phoenix-area franchise opportunist. For further questions about credit scores, you can find more in-depth explanations at myfico.com. I hope this post was an enjoyable and worthwhile read for you.


Unlocking the Mystery of Your Credit Report

A recent FreeCreditScore.com survey discovered that 28% of respondents have never checked their credit scores, so it’s not surprising that so many consumers have no idea what to expect to see on their credit reports.

Credit ReportingHowever, there’s no excuse for not understanding your credit report because you can request a free copy of your report from the credit bureaus once every 12 months. It’s a good idea to check out your report to see what factors are showing up, but also to search for any reported mistakes.

But if you’re too impatient to wait for your credit report to arrive, here are just a few things that may appear on your credit report.

Identification Information

Your credit report will include your personal information such as your name, birth date, home address, social security number, and employment information. If you’re married and share finances with your spouse, your spouse’s information may appear as well. As for your other personal information, like your criminal background, medical history, ethnicity, or race, these specifics will not show up on your report.

The credit reporting agencies include this information on your credit, but none of it goes into the calculation of your credit score.

Credit Information

Obviously your credit report will reveal information about your credit history. It will include any accounts you have open with credit card companies, banks, and lenders. The report will also uncover any late payments, current balances, outstanding debt, as well as the amount of credit you have available.

These are all important factors that determine your credit score, so it’s important that you look closely for any mistakes.

Public Record Information

Unfortunately credit reporting agencies will file any money related public record information on your credit report. This includes, but is not limited to bankruptcies, liens, lawsuits, wage garnishments, and foreclosures.

Some of these actions, such as a bankruptcy, could significantly lower your score and remain on your credit report for up to ten years.

Credit Inquiry Information

Any time that you request a loan or apply for a credit card, the lender will take a peek at your credit report before approving you. Each time that a lender does so, it’s called a hard inquiry, and the inquiry will appear on your credit report. A hard inquiry could temporarily lower your credit score, so it’s a good idea not to request multiple credit cards and loans throughout the year.

With that being said, there are such things as soft inquiries, which pop up when you request a copy of your credit report for yourself. In this case, these inquiries won’t harm your score, but they will appear on your credit report.

The information on your credit report shouldn’t be a secret. Take the time to request a free copy for yourself so you can get a better understanding of your financial standing.

Chloe Mulliner writes and edits for CreditSources.org, which is a personal finance website that focuses on credit card options and loans for people with bad credit.


How Can I Improve My Mortgage Credit Report?

There’s a new buzzword around town. And that buzzword is “mortgage credit report.” And it’s definitely in your best interest to pay attention to this new buzzword. Because if you ever hope to buy a home it is vital to know how important these mortgage credit reports truly are.

Mortgage credit reports explained

mortgage_card_explainedSo let’s start off with the basics, shall we? In order to recognize how important mortgage credit reports are, you first have to understand what they are. They really are a basic concept. When mortgage companies are considering you for a mortgage loan (and deciding what interest rate they will charge you), they want copies of all three of your credit reports. If your husband/wife will also be on the loan, they want copies of all three of their credit reports also. That equates to pages and pages to analyze in their loan acceptance process. That takes too much time.

So, in come Mortgage Reporting Companies. Instead of your mortgage lender having to pour over these endless pages of credit reports, they hire these mortgage reporting companies to do that for them. Mortgage reporting companies order copies of your credit reports and consolidate them into one report. This consolidated report created by the mortgage reporting company is called, you guessed it, your mortgage credit report. It is the information found in this report that is used by mortgage lenders to decide your acceptance or denial for your loan, and of course your interest rate. Everything to do with your mortgage loan rests on the information found in your mortgage credit report.

Ways to improve your mortgage credit report

Now that we’re all on the same page of understanding the importance of mortgage credit reports we can get down to the reason why we’re here: discussing how we can improve these reports. First things first, you are probably wondering how to access your mortgage credit report. As of right now, the only way for you to access your mortgage credit report is if you’ve already been issued a mortgage loan. If that is the case, then your mortgage credit report should be included with your closing paperwork.

If you don’t already have a copy of your mortgage credit report, don’t fret. You can start by accessing copies of your normal credit reports from the three major credit bureaus (Equifax, Experian, and Transunion). If you are wanting to improve your mortgage credit report this is probably your best bet anyway, because the information found on your mortgage credit report is pulled from your major credit reports anyway.

Now on to improving these reports. There is no way to go about particularly improving your mortgage credit report on its own. That is because, as explained above, the information found on it is pulled directly from your other credit reports. So if you want to improve your mortgage credit report, then you would go about the same processes and steps that you would use to improve your normal credit reports and scores. As your normal credit reports improve, then so will your mortgage credit report. So, the typical steps that you would use to improve your credit, including paying your bills on time, paying down balances, working with a credit repair company if needed, etc, will all also help to directly improve your mortgage credit report.

That is the good news! You don’t have to take any extra separate steps to improve your mortgage credit report. It really is that basic: if you want to improve your mortgage credit report, then start by focusing on improving your basic credit reports. As you see improvements in your normal credit reports, your mortgage credit report will simultaneously improve. This new and improved mortgage credit report will help you to find easier acceptance on a mortgage loan, as well as lower interest rates for your new home.

This article was contributed by Chase Sagum. Chase writes about credit repair and personal finance issues/opportunities.

Image credit: http://www.flickr.com/photos/68751915@N05/6808984167/


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