credit score

Credit Score: Small Debt Forgiveness

November 5, 2014 by arizona

There are a large percentage of individuals that have debt. The sizes of those debts vary tremendously. Most individuals with large debts are offered deals to get their debts erased and financial status back to normal. However, what about the individuals whose debts are not large enough to receive those offers? If you have found yourself in a small debt that you want to erase, fear no more. There is a new credit scoring that is responsible for forgiving small debt. In 2009, FICO released a way of credit scoring that aims at increasing your credit score based on you being an individual who is able to manage credit. Continue reading to find out more about small debt forgiveness through new credit scoring.

Small Debt No Longer a Problem

Before 2009, all debt, regardless of the amount, was reported on your credit report in turn affecting your credit score. Since then, any debt that started at a number totaling under $100 is eligible to be erased from your credit score. Even if your small debt has increased from $50 to $500, the debt qualifies under FICO’s new scoring system. Keep in mind though— any type of debt, whether big or small, is still recorded on your credit report. This type of thing must still be available for lenders to see when you are trying to get a loan or open a new line of credit. So, do not involve yourself in the pattern of accepting small payments and deciding not to pay them. Those companies will report nonpayment to the credit bureau and it will be reported on your credit report. It will not be reflected by your credit score, but it can result in your inability to do a variety of things that depend on the findings on your credit report, including buying a new house, getting a credit card, or purchasing a car.

Large Debts Still Exist

Although small debts no longer affect your credit score, large debts still play a big role in your credit score. FICO’s credit scoring system is designed to help creditors determine how well you are able to manage your credit. This includes a combination of different debts, like student loans, credit cards, mortgages, personal loans, and any payments that are currently in collections status. In turn, larger debts depend on a few factors:

The age of your debt—a debt that has accumulated in the past few months will be more of an effect on your credit score than one occurring a few years ago.
The size of your debt—the larger the debt, the bigger the impact will be on your credit score.
The quality of your debt—for instance, if your debt is from just one student loan, your credit score will not be as affected.

Get Your Credit Back on Track

Regardless of your size of debt, it is important to work toward getting a decent credit score. At first, getting your credit score to a decent number may seem difficult, but be mindful that the task will require a lot of hard work and determination to complete. You may even find yourself needing the help of a financial advisor. Getting a decent credit score can be beneficial for you if you want to purchase a new car, receive a new loan, get a credit card, purchase a new home, or even obtain good employment. If you are ready to get your credit score at a decent number, below are some tips you can use to get your credit back on track:

· Keep Up With Payments.

Having a pattern of missing payments can hinder your ability to maintain a good credit score. When you keep up with payments, you let creditors know that you can manage your credit.

· Mark Your Credit Limit At 15%.

Constantly reaching or going over your credit limit can negatively impact your credit score as well. A good rule of thumb is to keep your credit card use minimal and keep your credit card limit below 15%. If that number is currently not achievable, start of slowly and build to that point.

· Keep Credit Card Applications At A Minimum.

It may seem beneficial to have more than one credit card, but if you do not need it, do have them. If creditors see that you apply for more than one card at a time, this could throw red flags and encourage them not to approve you. More than one credit card rejection will negatively impact your credit score as well.

In conclusion, the new scoring system set up by FICO has help many individuals improve credit score by getting rid of small debts. But this new scoring system does not eliminate all debt and credit report findings. It is still your responsibility to manage your credit properly and avoid increasing your own debt.

How to Raise Your Credit Score

June 18, 2014 by arizona

Your credit score is always a part of your life whether you pay attention to it or not. So, it’s extremely important to make it a top priority when it comes to your financial health. With a poor credit score, you will find yourself unable to accomplish the things that you want to without paying huge penalties. This includes things like getting credit cards, home loans, car loans or even renting an apartment, among others. If they have already taken abuse, you can rest assured there are ways to raise your credit scores. But, first you should understand how they work.

Understanding How It Works in Order to Raise Your Credit Score

Your credit scores are calculated using by looking at a combination of different types of histories, account types, payments and inquiries. For example, your actual use of credit only accounts for 30% of your score, while the history of your payments is 35%. In addition, how long you have had credit accounts for 15% in this model, account types make up 10% and inquiries on your credit account for only 10%. This means that even if you have a lot of debt to handle, you can significantly improve things for yourself by making your payments on time.

Paying Your Rent on Time Can Raise Your Credit Score

There are certain things that you would usually see on a credit report and rent was not one of them until recently. Below is a list of what has traditionally been mentioned in your report.

Debt from credit cards
Educational loans
House payments
Loans on installments
Liens from taxes
Debts held by collectors
Utility bills and phone bills that are unpaid

Many property owners and managers are now being encouraged to report rent payments to the different credit reporting agencies in a bid to increase the scores for sub -prime consumers. Bureaus like Transunion and Experian are making this even easier for them to report by setting up special services to report payment histories of renters. In this manner your property manager can send in information each month on the timeliness and amount paid, in addition to any extra owed. In order to make it an even bigger draw, Transunion in specific does not charge for this service. And, if requested, they will share this information with other national reporting companies.

Experts have supported this decision by adding some great data to show that this certainly a credit improving strategy for consumers. One such expert found that 79 % of consumers found an increase in their previously reported scores within just one month of renting a new apartment. This is a huge opportunity if you are looking to raise your credit score. It is worth your time to find out if your management company or landlord reports to the national agencies. If they don’t, simply ask them to! Don’t miss out on such a small way to make giant difference to your credit score.

Some Other Ways to Raise Your Credit Score

Rental agencies and landlords aren’t your only opportunity to start exploring. There are other providers that may not currently report your payments that can. You should always ask if they do report to the credit agencies and if they don’t, you might be able to convince them to. It is also very important to remember that even the service provider in question does not report accounts in good standing, your history may be reported if you don’t pay or if you pay them late.

So, besides paying on time, what else can you do to raise your credit score?

You can set your payments up with automatic withdrawals on a twice a month schedule. In addition to reducing your debt in a swifter manner, this will also keep you from ever missing any of your payments or paying late on anything. It also allows you to reap the reward of lowering your credit utilization on a daily basis.
Keep a watchful eye on your credit report. You can check it for no cost at annualcreditreport.com. If you find any errors, you must dispute them for them to be removed. It’s a necessity for you to protect your report from erroneous negative marks because no one else is going to check it for you.
Work on increasing your credit limits, however, just because they give you more doesn’t mean you should use it. This will lower your credit utilization and bring your score up.

Always remember that it is your credit score and you are the one that has to make the decision to take control of it. The ways that you pay your bills have a direct effect on you reported score, so make sure you are following the steps set for here, and you will have it improved in no time!

Importance of a High Score on Credit

January 1, 2014 by arizona

Sometimes we wonder about the importance of a high score on credit for our financial decision. Well, a credit score is a numerical figure which shows a consumer’s behavior on his payments and debts he has taken. In the last decade, the importance of a high score has risen and people are now concerned about their credit scores. This is because of various reasons we shall discuss in this article.

Why is a high credit score important?

When we talk about improving our finances, we need to pay attention of everything that revolves around money, including our credit ranking. Let’s discuss the four most important reasons for this.

Makes you financially responsible

Well, to be responsible in your finances you must look at your credit obligations so that you keep control of your money. When you review your score, you will adopt habits that will make you responsible in you finance decisions.

High score leads to more financial opportunities

Among the opportunities are low interest rates on any loans you apply for. A good credit rating makes you a low risk and reliable borrower and lenders would be happy to offer you lower rates. Even employers review your credit report and a bad score can make you lose a dream job. So, importance of a high score should not be ignored.

Avoids identity theft

There are many cases when someone else is using your name to borrow money and not paying back. If you don’t review your credit rating you might not notice it before it’s too late and you end up having a stained credit history. If you suspect that something is wrong when you monitor your credit rating, you can act immediately.

Doesn’t let you fall deeper in financial crises

When you keep an eye on the credit rating, you will always know how much debts have been taken and how much you can afford before they get out of hand. You can stop before the debts cross their limit. It you do not pay attention, you can end up in serious consequences. Therefore, staying in touch with your credit score will tell you what you owe and what amount can you easily afford to borrow without damage to your rating.

Calculating the credit score

If you understand the importance of a high score, you must know how it is computed. Well, you do not have to do the calculations yourself and the real formula is still not known by the public. However, some credit score estimators are available online that will do the working for you. Among them are creditcards.com, freecreditscore.com and the free calculator on MyFico website.

To understand fully, you must understand that there are five categories that affect the calculations of your credit rating.

Your Payment history.

The history of your previous payments forms thirty five percent of the overall score. They show the persons payment behavior. So, if in the past you had been making delayed payments, your credit rating will be greatly affected. Keeping up a high score require you to make timely payments.

Total amount of debt

The more debt you have, the lower your credit score will be. Almost thirty percent of your score depends on the total debt you have taken. So before taking further debt, even through a credit card, you must know where you stand. This way you will maintain financial stability and a high score. If you want to borrow more, you need to pay some existing debts to maintain your rating.

Your Credit history

Your previous credit history affects fifteen percent of your current score. Previous accounts help you to make a high score so you should try and keep your old accounts. However, they have to be operated and not just opened and unused. Moreover, using your accounts also mean that more payments need to be made in time. If you know that importance of a high score, you must make timely payments.

Type of debts you owe

This might seem like a very tiny part as it forms ten percent of your credit rating. But, you should not ignore it. It involves different kinds of debts that a person owes. You should be aware of the fact that three credit card debts will be counted as just one. One should keep installment and revolving debts (credit cards & personal loans, correspondingly)

New credit

If you are applying for a new loan, remember that your lender will ask for a copy of the credit report. This will form at least a ten percent of your overall credit score. It will also be stated on your reported and can lower your score.

All these factors are used to compute the credit score. So if anyone wishes to improve their score, they must work on these five categories. Improving the ones that consume a larger ratio will help you to get a high credit score.

Tips to Rebuild Credit after Bankruptcy

October 8, 2013 by arizona

It is possible to rebuild credit after bankruptcy; it is not the end of the world. But it will take hard work and a lot of commitment for this to be able to be accomplished. It is not going to happen overnight, and any companies that tell you they can rebuild your credit score quickly you should avoid, they are not going to help you at all and they might do further damage to your credit rating.

There are some tips that you can use to help to rebuild credit after bankruptcy and they are going to get you through some of the tough times ahead. It is important to rebuild your credit rating because this will mean that you are going to be in a better position financially and as a credit rating can affect most of your life and not just credit it is a great tool to get right. Your ability to rent a home, get a job, get insurance and further credit are all effected with your credit rating.

It is not going to be easy, but neither was filling for and going through the procedures that you will have needed to face to file for bankruptcy in the first place.

First Step

You must get a copy of your credit report and check that all the information on this is correct and up to date. Any mistakes need to be rectified and this can take time to get any information changed and updated.

Your bankruptcy note will be a public record under each section of your credit report. This information can stay on your credit report for 10 years but if you are using credit wisely then it could disappear sooner. The creditors that you are using are going to be more interested how you use your credit now and this will help to rebuild credit after bankruptcy.

If when you applied for bankruptcy and you had loans or mortgages that you hadn’t defaulted on then you need to continue working on these. You need to pay you balances on the day that they are due because this will prove that you are being responsible.

One of the most important facts that you should understand about your credit report, is that the figure is based on different aspects of your ability to pay but 35% is that you pay your amount due on the correct day and that you are not late in paying.

Credit

It is important that you use credit again because this is the only way that you are going to be able to rebuild credit after bankruptcy. You will need to learn how to use money first and some of the basic steps will be learning how to budget your money and how you save money too. Only once you feel that you understand money should you consider the next step of using credit.

You must start small and if you use a credit card then you must pay off the full balance each month. This will demonstrate your responsibility and help you build trust with creditors. If you spend more on a credit card than what you can afford this might lead you to get into more trouble and end up where you where before.

If you had a credit card before the bankruptcy and you still have them use them wisely. If you don’t have a credit card then you will need to think about the options of getting one. This can be difficult for a person with low credit score, and if you apply for too many this will affect your credit score too.

Secured Credit Cards

It is possible to get a secured credit card and this means that you normally have an account with money in that can be used if you default on the credit card payments. But you can’t use the money in the account and you can’t use the money to pay off the bill each month either.

You will need to check that whatever credit you are using to rebuild credit after bankruptcy that the company is giving feedback to the credit report companies each month. This will ensure that the creditors can see that you are trying to make the right choices every month and are being responsible with the credit that you have.

How Long

It is not going to be easy to repair a credit report and it is going to take time and a lot of time. It could be 2 years before you are eligible to apply for a credit card and it will be longer for a mortgage, up to 4 years. So you will need to:

Work hard and have commitment
Use a budget and stick to it
Know that it could be 2 years before applying for credit card
Understand that a minimum of 4 years will pass before the possibility of a mortgage.

Reasons Why You Must Care For Your Credit Score

June 24, 2013 by arizona

Some people usually have two opinions about credit score monitoring. One of them is that it is unnecessary. They think that monitoring how well you take care of debt is unimportant if you are paying off what you owe regularly. There are others who think that it is ridiculous to take care of it as well – especially since raising one’s score involves putting yourself in debt.

If you are one of the people who believe the issues mentioned above, here are some of the things that you must consider.

First of all, your credit score will play a huge role in any financial assistance that you plan to apply for in the future. If you wish to buy a home or put up your own business, you need to start taking care of your credit score now. Lenders and most banking institutions look at your credit report to see your payment behavior and if you can still accommodate the debt that you are about to loan. A bad credit score will not keep you from being approved of the loan but it can spell the difference between a 5% and 15% interest. If you have a low credit score, that makes you a high risk borrower. Lenders will have to take steps to protect their loan investment and that is usually in the form of a high interest rate. Think about the savings that you will get if you only took time to take care of your credit score.

Prospect employers will also look at your score before they hire you. It may not be the main reason for hiring you but when it comes to choosing between two applicants with the same qualifications, they will definitely go for the one with the better score.

Landlords also look at the credit report of applying tenants. It can cause you a home in a safe neighborhood if you have a bad score. You can end up in a not so reputable place where your security and that of your family can be an issue. If you want to live in a good and safe neighborhood, you have to take better care of your score.

Also, you can save yourself from the destructive effects of identity theft. Your credit report can help you spot unauthorized loans under your name. You can report it immediately to the account involved. Not doing so could end up forcing you to pay for a debt that someone else benefitted from.

If you are in debt and you are worried about the effects of debt relief on your score, know that there are options that will not harm it. Debt consolidation is a great option that will keep your score from being damaged. It hardly has an effect and in fact, it will help you raise your score. This type of debt relief restructures your payment scheme so that it becomes easier to accomplish. Since there is no debt reduction, it should not be reflected in your credit report. All it will register is the fact that you are now paying your dues more responsibly.