Tag Archives: credit score

10 Credit Score Myths You Need to Reconsider

There is so much misinformation when it comes to credit scores. This is surprising, considering how common credit cards have become. A credit score is used by lenders to determine your likelihood of paying them back. Specific criteria are used to assess a borrower’s general risk. This includes the amount of debt a borrower already has and payment history.

FICO and other credit scoring companies don’t hide the type of information that they use to calculate credit scores. However, there is still a lot of speculation. 

So take a look at some of the most common myths about credit scores.

Large Balances Are Good for Your Credit Score

Some myths are so widespread and believable because there is some truth in them. And this is one of those myths. Using credit can help boost your credit score. 

Carrying a large balance, however, could hurt your credit score.

Your credit card debt accounts for 30% of your credit score. This is according to FICO. So high credit card balances are not good for your credit score. Experian recommends using less than 30% of the total available credit and the individual card limit. If you go above that level, your score will start going down.

Your Credit Score Increases When Your Income Increases

It is easy to believe this myth because most wealthy people have high credit scores. But your income doesn’t affect your credit score. 

According to FICO, the five components that count include credit mix, new credit, length of credit history, amounts owed and payment history.

Income is not used in calculating your credit score. It is just that people with high incomes tend to have enough money to pay off their debt. This boosts their credit score.

If You Get Married You Will Have a Joint Credit Score

Couples can choose to combine their finances when they get married. If you are not sure about merging your score with that of your partner, you have nothing to worry about. Joint credit scores don’t exist. 

Everyone gets to keep their individual credit history. Any joint accounts that you open with your partner will appear on your report. But the credit scores will remain separate.

Paying Off Your Auto Loan Will Boost Your Credit Score

Having less debt helps your credit score. So this means that if you pay off your auto loan, your score will improve, right? Well, wrong. 

In fact, it is possible that your score may go down temporarily if you pay off the car loan. This is because it will become a closed account on your report. Credit mix is used to calculate your score. So if an installment loan is removed from the report, your credit score may drop. But according to Experian, this will probably just be short-term. 

Checking Your Score May Cause It to Drop

Just as with many other myths, there’s some truth to this one. When you apply for credit, the potential borrower will most likely run a credit check. This can make your score drop by a few points. But if you check the score yourself, it will not be affected.

Applying for credit triggers a “hard inquiry” and it can hurt your score. A lender conducting a routine review or you checking your own score is a “soft inquiry” which will not affect your score.

Using Your Debit Card Could Boost Your Credit Score

Responsible debit card usage signifies financial maturity. But even though it is a sound financial habit, it doesn’t affect your credit score in any way. 

Using your debit card is similar to using cash. Managing your cash successfully doesn’t exactly prove to lenders that you will pay back debt responsibly. Issuers of debit cards don’t report your usage to credit agencies. So it doesn’t count.

Taking Out a Mortgage Can Hurt Your Score

When you first apply for the mortgage loan, you can expect your score to drop by a few points because of the inquiry. You will also have a new account on your report with no payment history and a large balance. This, again, may affect your score negatively. 

But with time, the mortgage will start helping your score as you continue paying on time. You will have a not-so-new account with a successful payment history. This is good for your credit score. 

The Credit Score Is Not That Important in the Real World

Some people love boasting about their excellent credit scores like it is a badge of honor. 

But having a great credit score doesn’t just earn you bragging rights in the real world—it is far more useful than that. Having a high credit score affords you the benefit of low interest rates on loans. This includes all kinds of loans—car loans, personal loans, mortgage loans, credit card loans, etc. 

Some lenders won’t even give you a loan if you don’t have a top-tier credit score. 

With an excellent credit score you will enjoy flexibility and low-cost financing.

Applying for Many Credit Cards at Once Isn’t Bad for Your Credit Score

This is a myth rooted in truth.

Whenever you apply for a new credit card, your score drops by a few points because it is a hard inquiry. If you are applying for too many cards, your score may drop even more. 

Most people believe this myth because making multiple applications for some loans (like car loans and mortgages) in a short period of time is considered a single inquiry by credit scoring agencies. It is natural for anyone buying a car or home to shop around until they get the best deal since it is a large purchase. 

This grouping is not available for credit card applications because they are unsecured loan requests.

Closing Unused Credit Cards Will Boost Your Score

This is not true. Closing a card reduces your available credit and this will, most likely, knock a few points off your score. It gets even worse for someone with outstanding debt on other credit cards. A reduction in available credit increases credit utilization which also hurts your score.

Another thing, closing a card means that you won’t benefit from the successful payment history or age of that card on your report. The effect won’t be immediate because closed accounts stay on your report for 10 years. But it will eventually disappear and hurt your score. 

Perch Credit App Backed by Jay-Z Builds Credit Scores

Perch works by having you provide the details of your lease and connecting your bank account to their system. The app will identify your rent payments and start reporting them to two of the three major credit bureaus, Equifax and TransUnion. The third bureau, Experian, will reportedly be added in July 2021.

$10,000 Primary Trade Line No Credit Pull

Credit Strong Primary Tradeline Review

How to Remove Late Payments on Your Credit Reports

How To Remove A Repossession From Your Credit Report

How to Raise Your Credit Scores

The behavior of a consumer is prone to change. When a company makes an inquiry, what they get is a “snapshot” of your situation. When you open a charge account, miss a payment, or pay your debt, your score changes. Although the number keeps changing, you need to know what your score is at a particular time and how you can increase it. Each section of credit information carries a different weight when it comes to calculating your credit score.

35% payment history

This is very important as it contributes the largest share. Underpayments, missed payments, late payments, and other related issues are included in this section. Creditors report this kind of information differently (some 10 days after the due date, some after you have missed two payments, etc.). Get to know how your creditor reports information. 

30% outstanding debt

You have a credit limit and you are the determinant of that limit. Your outstanding debt is calculated against unused credit and used to come up with a credit score. Many credit cards increase your credit limit (if you do not use up the available credit).

15% length of credit history

Keeping your account for a long period of time boosts your credit score. The most important thing is to pay off your balances and avoid closing accounts. If you use the same finance resource for different loans you will also help your score.

10% new credit information

New credit shows that you can open credit lines and that your financial situation is great since creditors are willing to finance you. It also shows that you are financially active.

10% credit mix

A mortgage is a loan; so is a credit card and any other account that you can charge groceries or gas to. However, they are not the same type of loans. Their difference is important. Several kinds of credit accounts show credit bureaus that you can handle different types of financing. 

Negative items such as tax aliens, judgments, and bankruptcies can damage your score.  Credit bureaus accumulate all the factors above and use their formula to come up with a number that is your score. The number changes regularly and you should check your credit report on a regular basis.

You can improve a bad credit score by adopting good credit habits, not over-borrowing, paying on time, and keeping low credit balances. Dispute negative items on your report; you can do it yourself or involve a credit repair company. Credit repair involves challenging and verifying inaccurate information. It works to retain the good information and eliminate bad information. 

Introduction to Consumer Credit

Consumer credit refers to credit in some form given to the consumers. It is a way of financing a client on condition of a deferred payment, later or within a particular period.

The businesses that provide consumer credit facilities need to comply with some regulations as lay down by the laws of the state. It is equally applicable to specialist credit businesses like credit card providers and money lenders to mail-order businesses or shops that permit the customers to buy on credit or lease out or hires goods. That is, the enterprises that give consumer credit facilities must have a valid consumer credit license from the Office of Fair Trading (OFT). It is a mark of assurance to the customer that the business firm certified by OFT is fit for serve the customers. 

Let us see which all businesses require a consumer credit license as a mandatory requirement by the law. The businesses that sells on credit, leases out or hires goods for over a period of 3 months, lends dollars, involved in credit card selling, arranges credit for others, provides hire/purchase commodities, collects debts, and give advise on others credit standing come under the purview of a consumer credit license.

But those lends amounts or hire goods for a cost more than a fixed amount, those deal only with limited companies and those allow the clients to pay back the amount in four or lesser installments are exempted from the consumer credit license.

Ideally one should check the guidelines from the OFT website to find out clearly which all businesses need a consumer credit license. Remember, to trade without a consumer credit license when you are required to earn one is a crime that invites fine or prison term or both.

Consumer credit license is valid for a fixed time period (5 years or so) and is required by the business to renew it after its expiry. However, the OFT can revoke, suspend or change the license at any point of time. The decision to do so is at the exclusive discretion of the authority. All the consumer credit license holders will be listed in the Consumer Credit Register, which is given free of cost for the public.

If the business consists of many companies, each trading in any of the categories, then each of the firms requires a separate license. Also, the OFT has laid down rules regarding advertising credit and credit agreements. All these details are furnished in the OFT website.

The government and the regulatory body assume that it is the duty of the business to keep themselves informed about the rules and regulations that govern their enterprises. Any breach of conduct can result in hefty fines and prison terms. It is all about being law-obedient and straight.

How to Raise Your Credit Scores

The behavior of a consumer is prone to change. When a company makes an inquiry, what they get is a “snapshot” of your situation. When you open a charge account, miss a payment, or pay your debt, your score changes. Although the number keeps changing, you need to know what your score is at a particular time and how you can increase it. Each section of credit information carries a different weight when it comes to calculating your credit score.

35% payment history

This is very important as it contributes the largest share. Underpayments, missed payments, late payments, and other related issues are included in this section. Creditors report this kind of information differently (some 10 days after the due date, some after you have missed two payments, etc.). Get to know how your creditor reports information. 

30% outstanding debt

You have a credit limit and you are the determinant of that limit. Your outstanding debt is calculated against unused credit and used to come up with a credit score. Many credit cards increase your credit limit (if you do not use up the available credit).

15% length of credit history

Keeping your account for a long period of time boosts your credit score. The most important thing is to pay off your balances and avoid closing accounts. If you use the same finance resource for different loans you will also help your score.

10% new credit information

New credit shows that you can open credit lines and that your financial situation is great since creditors are willing to finance you. It also shows that you are financially active.

10% credit mix

A mortgage is a loan; so is a credit card and any other account that you can charge groceries or gas to. However, they are not the same type of loans. Their difference is important. Several kinds of credit accounts show credit bureaus that you can handle different types of financing. 

Negative items such as tax aliens, judgments, and bankruptcies can damage your score.  Credit bureaus accumulate all the factors above and use their formula to come up with a number that is your score. The number changes regularly and you should check your credit report on a regular basis.

You can improve a bad credit score by adopting good credit habits, not over-borrowing, paying on time, and keeping low credit balances. Dispute negative items on your report; you can do it yourself or involve a credit repair company. Credit repair involves challenging and verifying inaccurate information. It works to retain the good information and eliminate bad information. 

What Is A Good Credit Score?

Your credit influences every area of your life. A good credit score means lower rates for car loans, credit cards, mortgages, and a few types of insurance. Employers also use credit scores to make hiring and advancement decisions.

This chapter will help you understand what a credit score is and what a good or bad score means. Basically, a credit score is a number that shows your likelihood of repaying debts. This number helps creditors decide on whether to give you credit or not and even the terms of the credit.

For instance, your bank uses your score to see if you qualify for a mortgage and to decide on the rate; the higher the score the lower the interest rate.  Credit bureaus calculate credit scores using their internal algorithms. These scores depend on your financial actions, both present and past. How you pay your debt, amount of debt you owe, and the period you have had credit are some of the factors considered.

Your credit score keeps on changing depending on your actions. Simply put, creditors sell your financial information to credit bureaus and the bureaus use the information to come up with your score. This score is like a “grade” of your financial responsibility. New creditors use the credit score to determine your likelihood of repayment. There are many types of credit scores but the one that really counts is the FICO Score. It ranges from 300 to 850. 

Others include:

PLUS, Score: it was developed by Experian. It ranges from 330 to 830.

TransRisk Score: TransUnion developed this score and it ranges from 100 to 900.

Equifax Score: it ranges from 280 to 850.

VantageScore: unlike the three models above, lenders use the VantageScore sometimes. It ranges from 300 to 850. The credit you want to obtain and the interest rate that you would prefer are the determining factors on whether your score is good or bad. For a small loan, multiple score ranges are good. Mortgage lenders, however, will require a score of at least 640. 

Here are the general range points.

781 and above – excellent credit

661 to 780 – good credit

601 to 660 – fair credit

501 to 600 – poor credit

500 and below – bad credit

Landlords will require that you have a credit score of no less than 620. Otherwise, you will have to get a cosigner. Alternatively, you might be forced to pay a huge deposit.

Average new car rate:

740+ (Super Prime): 2.70%

680 to 739 (Prime): 3.67%

620 to 679 (Non-Prime): 5.49%

550 to 619 (Subprime): 9.25%

<550 (Deep Subprime): 12.42%

Most lenders will not finance you if your score is less than 640. For the best mortgage rates, aim for a score of 720 or higher. For the best rates and a lot of perks, aim for excellent credit (720 and above). A score of 640 and above can also get you a decent credit card. 

How to Remove A Foreclosure from Your Credit Report

Dealing with a foreclosure is never easy. In addition to losing your home, you face the consequences of low credit scores brought on by foreclosure. This gives you a very difficult time as you try to get back on your feet. A foreclosure can be removed from your report.

Lenders make mistakes and there are times when banks must pay restitution due to mismanaged foreclosures. It is not uncommon to find errors in foreclosure cases. Therefore, having a foreclosure permanently removed is possible. A foreclosure can also be removed due to lack of available records.

This happens when the owner of the mortgage goes out of business. Even if the mortgage is sold to another bank, there is a possibility of errors occurring during the process. If this happens and the new owner cannot verify your foreclosure, it must be removed from your credit report. After you get copies of your credit report from the three bureaus, go through the foreclosure entries very carefully.

If there is any inaccurate information, you can file a dispute. Do not make the common mistake of assuming that all the three credit reports are the same. The credit bureaus have different methods of filing this kind of information. If the credit bureaus refuse to remove the foreclosure, ask the lender to remove it, citing the inaccuracies.

Give them a deadline (30 days). If they cannot verify the information, they might remove it. You must file three different disputes with the three credit bureaus. How you word each of these disputes is extremely important; otherwise, they will deem it “frivolous”. Your communication and the proof you provide will affect the bureaus’ decision to act on your dispute. Therefore, it is important to get professional help.

When a foreclosure first appears on your report, expect your score to drop 80-160 points, the better the score, the sharper the drop. You may notice an increase in the interest rates on your credit cards as well. You also might not qualify for new credit. Years ago, it was possible to negate the damage of a foreclosure by completing a deed-in-lieu or a short sale. However, now the implications are the same (although you can qualify for a mortgage after a short sale).

It will take you two years or more to qualify for a mortgage. When you do, you will have to pay a higher down payment and higher interest rates. A foreclosure will remain on your report for seven years, but its effect lessens with time. The same applies to a short sale. How Does A Foreclosure Affect Your Life? The credit score is used: By employers in the hiring process. In setting insurance rates. In determining approval for utilities. In other services such as the internet and cable. By landlords to screen potential renters

How to Remove A Bankruptcy

Dealing with bankruptcy is tough, but you are not alone. Bankruptcy comes with consequences, as far as your credit is concerned, and even after it has been discharged, you will have some work to do. How do you repair your credit after bankruptcy? What do you need to know?

The length of time depends on the type of bankruptcy. A Chapter 13 bankruptcy will be on your report for 7 years while a Chapter 7 bankruptcy will be on your report for 10 years. However, there is a way to get a bankruptcy removed from your credit report before the 7 or 10 years and you can still get credit.

Waiting a few years to get credit may be too much for some people, especially because even after you qualify for credit you will have to pay crazy interest rates. Instead of waiting too long and paying ridiculous rates, work to reduce the negative effects of your bankruptcy. You will be able to repair your credit and receive great credit offers.

A bankruptcy on your credit report can damage your credit score in a huge way. It will take 130-150 points from your FICO if you have a score of 680 and 220-240 points if your credit score is 780. This drop will, most likely, cause creditors to decline your credit applications and if you qualify, they will charge high interest rates. Moreover, the amount you can borrow will be limited. Even when filing for bankruptcy is your best option, you need to be aware of the implications.

The first and most important step would be to remove the bankruptcy from your credit report. Another important thing is assessing and changing your financial habits, so you never have to file for bankruptcy again. Check your income and expenses and put something into your emergency fund. One habit you really need to cultivate is the habit of paying your bills on time. Your payment history is the biggest determinant of your credit score. As you strive to repair your credit, do not accrue new debt.

At least, filing for bankruptcy gets most of your debt discharged. Credit bureaus will have you thinking it is not possible; but you can get a bankruptcy removed. If you file a dispute concerning your bankruptcy, file three different disputes with all three bureaus. They are separate companies and you cannot file one and expect it to apply to them all. In your dispute, state the facts and do not be guided by your emotions. It is totally possible to do this on your own.

However, the process can be tedious and lengthy and positive results are not guaranteed. You dispute the bankruptcy by asking the bureaus how they verified your bankruptcy or by pointing out inaccurate information in your credit report. The bureaus are required by law to respond within 30 days. If they do not verify it, they will send you a written statement and you can use it to have the bankruptcy removed. Before you dispute, suppress your profile with LexisNexis.

After you suppress your file, freeze your file with LexisNexis as well other third-party companies that collect consumer information. Now you want to obtain a document from the local bankruptcy clerk saying they do not report to third parties. This can also be found on their website. All files must have a credit freeze prior to sending a 609 Dispute Letter to the three major credit agencies Equifax, Experian, Transunion. You can also include public record removal letters. 

Innovis Security Freeze Options

1-800-540-2505

https://www.innovis.com/securityFreeze/index

Advance Resolution Services A.R.S.)

1-800-392-8911 (no website)

Sagestream (formely ID Analytics)

1-888-395-0277

https://www.sagestreamllc.com/security-freeze/

LexisNexis

1-888-497-9172

https://www.lexisnexis.com/privacy/

Corelogic/CREDO

1-877-532-8778

http://www.corelogic.com/solutions/credco-consumer-assistance.aspx (information only)

Factor Trust

1-844-773-3321

https://ws.factortrust.com/consumer-inquiry/request-your-credit-report/

Clarity Services Inc.

1-866-390-3118

https://www.clarityservices.com/support/security-freeze/

Microbilt

1-800-884-4747 option #5

1-888-222-7621

http://www.microbilt.com/us/consumer-affairs

(Freeze all third-party companies prior to disputing a bankruptcy)

Below is an example of what you should receive from the bankruptcy courts before disputing with the three major credit bureaus. Also, read below to send an email to Pacer. Make sure you email them for your records. Below is what they sent me. Hi, my name is (place your name) and i wanted to know the procedure or the process you use when validating and reporting public records to credit bureaus. Thank you. 

Public Access to Court Electronic Records (PACER) is an electronic public access service of the United States Federal Courts that allows users to obtain case and docket information from Federal Appellate, District and Bankruptcy courts through the Internet. PACER does not contact consumer reporting and credit reporting agencies. PACER simply provides access to federal court records.

Thank you,

PACER Service Center

Phone: 210-301-6440

Toll Free: 800-676-6856

For Frequently Asked Questions: http://www.pacer.gov/psc/hfaq.html

For Account Information: https://www.pacer.gov/psco/cgi-bin/psclogin.pl

Below is an example to include with the 609-dispute letter. This is after you place a security freeze with third party companies. 

Consumer Credit Reports Information 

All bankruptcy case filings appear for 7-10 years from the date the case was filed on a credit report. Federal Law 15 U.S.C. §1681c, “Requirements relating to information contained in consumer reports,” provides information regarding bankruptcy cases and what can be disclosed. Bankruptcy records are public records unless sealed, and all information contained in them can be retrieved by anyone, including credit reporting agencies.

The U.S. Bankruptcy Court is not responsible for credit reports. Any disputes with a credit agency must be resolved by the debtor and that agency. If you wish to obtain a copy of documents filed in your case, you may set up an account with http://www.pacer.gov, or you may come to our office at 701 Broadway, Nashville, TN 37203. If you come to our office, the price for copies varies. If you print the documents, it is $0.10 per page. If the Clerk prints the documents, it is $0.50 per page. The Clerk accepts cash, cashier’s check, or money order.

Cashier’s checks and money orders must be made payable to U.S. Bankruptcy Court. Filing for bankruptcy is never anyone’s first option. However, sometimes it is the best thing you can do to help your financial situation. It is a negative account on your credit report, but it frees you from debt. Here is all you need to know about bankruptcy. Bankruptcy is basically the process of eliminating debt or satisfying it under different terms. It is a serious decision but if you cannot pay back everything you owe, it can set you free from debt.

The two major types of bankruptcy are Chapter 7 and Chapter 13. The other one is Chapter 11— it is usually for businesses but can also apply to individuals. Chapter 7 bankruptcy is for people who meet specific income guidelines and cannot afford to satisfy the debt using a repayment plan. There is a means test that you must pass to qualify. It is the fastest and cheapest option. With this type of bankruptcy, your personal property is likely to be sold off to satisfy the debt instead of you making payments. If you want to protect some belongings from being sold off, you need to apply for exemptions.

This depends on the debt you owe. You can use a Chapter 7 delinquency to delay a foreclosure process. As for unsecured debts like personal loans or credit cards, you may be able to file for an exemption on your car, home, or other major items to protect them from being auctioned or repossessed. Your state laws will determine the eligible exemptions. Chapter 13 bankruptcy is for people who make a lot of money, preventing them from qualifying for a Chapter 7.

Its advantage is that your property will not be sold off, but you will have to pay your lenders over the next three to five years. The repayment plan varies. All secured debts, priority debts, and administrative fees must be repaid in full for you to keep your property. Your income determines the duration of the plan and the amount you will pay on unsecured debt. Chapter 11 is mostly for companies, but individuals may apply. You can qualify if your debt level surpasses the limits of Chapter 13.  Chapter 11 is like Chapter 13 in most ways such as security of property from repossession. The main difference is that you must repay your debt over a five-year period. There is no option to reduce the period.

A bankruptcy is bad for your credit score. It can deduct 160 to 220 points from the score. A Chapter 13 bankruptcy remains on your report for seven years. A Chapter 7 can stay for ten. The effects, however, lessen with time. Getting credit immediately after a bankruptcy will be a challenge; but with time, you will begin to qualify. You may still have to pay crazy interest rates. A mortgage will be the hardest to get.

Is Bankruptcy the Best Option for You? There is no simple answer to this question and the decision lies with you. Talk to a credit counselor so they can walk you through it. Most importantly, figure out how you got here and how you can avoid such a pitfall next time. Even though a bankruptcy will linger on your report for a while, there are useful tips to help you improve your score and become eligible for credit, even with the bankruptcy still on your file. This is no easy task, but it is possible. Talking to a professional will provide knowledge and experience and could get the account permanently deleted from your report before the seven years. In the process, they can get other negative items removed from your report as well. Some people get into financial troubles due to situations that are out of their control such as medical emergencies or a job loss.

Other people get into trouble because of careless spending. Whatever the reason for filing for bankruptcy, try your best to make sure it never happens again. If you have a problem with overspending, come up with a monthly budget and stick to it. If an emergency is the reason for your financial hardship, consider setting aside a rainy-day fund. Even if money is tight, find ways to help you spend less so you can save. A credit card is a quick and effective way to improve your credit.

You may be hesitant because more debt is not exactly what you are looking for, but a positive payment history affects your score more than any other component. Instead of charging all your expenses to your card, pick a single bill to pay with your credit card every month and then repay the balance immediately. A long history of on-time payments will start to increase your score. How do you get a credit card with a bankruptcy?

You have the option of both secured and unsecured credit cards (even immediately after a bankruptcy). A secured credit card requires you to place a refundable deposit equal to your credit limit. The deposit is security and you will be paying for the card balance out of your own pocket. Ensure that the credit card issuer reports your monthly activities to the three credit bureaus. Do not apply for multiple credit card applications as this could hurt your score even more. Before you start thinking about a car, be responsible with your credit card for at least six months. This shows that you can repay your debts and improves your score.

Also, set aside some money to use as a down payment, even if you are eligible for the full amount. Remember you will, most likely, must pay a higher interest rate. Consider a used car rather than a brand new one. Buying a house will have to wait for a while depending on the type of bankruptcy you filed for and the loan you want. You will have to get permission from the court and have a 12-month history of on-time payments. You might also have to pay a higher down payment and interest. Because of this, spend the seasoning period making responsible financial decisions and rebuilding your credit.

How to Remove A Repossession from Your Credit Report

A repossession on your credit report will damage your credit score. It may cause you to be denied a car loan, home loan, and even credit card offers. A car repossession will be on your credit report for seven years. Its effect reduces with time but if it is there, it will affect your score negatively. Repossession occurs when you default an auto loan.

You are usually required to make monthly payments. Until you pay the loan in full, the bank that gave you the loan owns the car. If you fail to make the payments, the bank has a right to take back the car. The creditor can take the car anytime as long as you have defaulted on the loan. In some states, the law does not require them to notify you before they repossess the car. They take it and try to resell it to get back their money.

It does not make any difference whether you voluntarily surrender the car, or they take it. The implications on your credit score are the same. Even after repossessing the vehicle, the bank can decide to sue you for the remaining amount. For instance, assume you owe $15000 for a car and it gets repossessed. If the creditor sells it for $10000, they might sue you for the additional $5000. If they sue you, there will be a judgment on your credit report—which makes things even worse for you. You do not have to wait seven years to have a repo removed from your credit report.

There are two things that you can do. First, you can get the bank to agree to a renegotiation of payment terms. If they accept the new terms, they can remove the repo from your report. If they agree to remove it, make sure the agreement is in writing. Second, you can dispute the repossession account. If the creditor fails to verify your repossession or does not reply to your dispute within 30 days, you can get it dropped from your report. If you doubt your ability to file and follow through with a dispute, seek help from a professional credit repair company.

It is possible to get a car loan if you have the repossession removed from your credit report. It will be difficult to get financing for a car with the repossession still on your report. If a creditor agrees to finance you, they will charge you very high interest rates and you end up paying way more than the car is worth. 

How to Remove Credit Inquiries from Your Credit Report

Inquiries may remain on your report for two years. Whenever an inquiry is made, the three credit bureaus record it. Once the inquiry is logged, your credit score might be affected.  At the bottom of your credit report is a “Credit Inquiries” section. When you apply for credit, your potential creditor checks your credit report to determine your creditworthiness—that is how an inquiry comes about.

“New credit” makes up 10% of your credit score. How does it affect your score? New accounts: the number of new account types you have in various account categories affects your credit score. Student loans, mortgages and installment loans are more favorable than revolving credit.

Number of recent inquiries: the amount of credit inquiries over the last two years is also considered. Time between inquiries: an inquiry negatively affects your score for 12 months after it was made and remains on the report for two years. Age of your account: an older credit account is better for your credit score than a new one. Inquiries are not as bad as delinquent debts or missed payments.

Their effect on your score is low and lessens with time. If you have worse things on your credit report, focus on them first. Soft credit inquiries have no impact on your credit score while hard ones do. Applying for new credit such as a credit card, car loan, or mortgage results is a hard inquiry. A new cell phone, job application, and a new insurance policy can also result in a hard inquiry. Soft inquiries happen when a lender checks your report without your consent. Maybe you asked for a pre-approval rate but did not really apply for credit.

A soft inquiry might also occur when an existing creditor checks your credit. Note: checking your own credit score or report is a soft inquiry. Sometimes inquiries will not have an impact on your credit score. In other circumstances, they will lead to a drop in your score with a maximum of 5 points. If you have many inquiries, the effect may be big. Too many inquiries at once also lead a potential lender to believe that you desperately need money and are in financial trouble.

Avoid applying for numerous types of credit at the same time. However, while shopping around for a single type of loan, say an auto loan, and apply for a few of them to compare rates, they are counted as one when calculating your score. The same applies for a mortgage and credit cards. First, you need to get a copy of your report to see what is in your Credit Inquiries section.

If you did not authorize an item and it is listed, you can dispute it by – Sending a letter to the creditor asking them to remove it because it was unauthorized. Hiring a professional to help repair your credit (especially if there are other negative accounts you need removed). To avoid unauthorized inquiries in future, place a freeze on your report. 

Sample of A Credit Inquiry Removal Letter

Instead of standard mail delivery, send the letter via certified mail to increase the chances of a faster response. The letter should be personal and straight to the point. All the relevant information should be included.

Name

Address

Phone #

Credit bureau: Name

Credit bureau: Address

Date

Subject line

(Explain that you found an inquiry that you did not authorize. If you filed a dispute with the inquiry source, mention it. Request an investigation and an updated copy of your report reflecting the findings of the investigation).

Signature

Printed name

Include a copy of the report page that shows the inquiry. If possible, highlight the section with the error. If you want the bureau to hurry with the process, be as clear as you can. A less complicated dispute takes a shorter time to solve.

When is The Best Time to begin Credit Repair?

This article explores the need for credit repair when creditors start calling.  You will see a case study of how one can begin in debt just by paying the essentials but may be able to get out of debt by adjusting a few of those essential items.

When the creditors are ringing the telephone off the hook you know it is time to repair your credit. The U. S. alone has in excess of millions of individuals and families straining to discover a way out of debt. This is the reason when you go online you see thousands of web sites that disclose, they have the answer for relieving debt. Do not be fooled! Most of the telemarketers that say they can get you out of debt can only produce a lot more problems. There is no solution for all of us, but there is a solution for us all individually.

Let us look at a case. Let’s say that you make $220 each week per paycheck. Your debt is about $6000, and it does not appear that you can find a way out. Now let’s claim that you have two cars, and both are paid in full and you have a monthly rent that equals $500. We understand that you only have $650 per month to buy food, pay utilities, clothes, and other items desired to live. We cannot overlook the telephone bill. This seems like an impractical situation but in reality, there is a solution available.

Now if your telephone invoice is about $80 per month and you pay out about $60 per week on groceries and about $160 per month on utilities, you will notice that you will have barely a dime left at the end of the month. Thus, the answer is getting a job that pays more, looking for a low-income residence that bases the rent on your income and using less utilities per month.

In today’s time you will pay out $60 simply on groceries and not have enough to make it to the next week.  Thus, is it feasible that you can eat foods that are inexpensive and last longer? When you are broke you have to live like a person who is broke. The sadness about people who struggle is that they regularly envy or strive to buy items they do not truly need. Rather than paying the bills on time, they regularly pay a portion of the bill and purchase items that are not needed.

If you have two cars and are a lone individual it is smart to put one of the cars up for sale and use the balance toward the bills. You may notice from this deduction that more money is needed to live. Why are you paying $400 for rent when there is many sources on hand that present rent for less? Now let us twist this around.

From here on out, we will give you tips on how you may be able to get out of debt and begin to keep a little money for yourself.  This article should become a little more helpful to you.

What if you effectively rented a low-income apartment? Let’s say that your rent amount is lowered to $300 per month. This leaves you an additional $200 per month to purchase groceries, pay utilities, pay your telephone bill, pay car insurance and have a few bucks left over each month. This is one answer and it does not produce much but it does produce a small reward. Now if you can lower your utilities to around $100 per month that is another $60 you could pay out on bills.

If your credit history is delinquent, yet you are not sinking in quicksand you might qualify for a credit card. The answer is not to get the credit card to purchase items, instead it is to get a credit card that will help you pay your monthly bills and allow room to repay the credit card. Ensure the credit card has low interest rates and no annual fees attached. If you can get by with no credit card, all the better, but today it is nearly impossible now to go without a card.

If you can get a job with higher wages, then this is beneficial too. The disadvantage is when people get better paying jobs, they regularly take it for granted and land further in debt. The more money you make the more you spend. It pays to be cautious with your money and keep aware of your credit situation to maintain a repair in place. When creditors are calling, it is time to fix your credit so get ahead of the game before the telephone starts ringing.

No matter which way you look at it, having a firm understanding of credit repair will benefit you in the long run, even if it is just slightly.

5 Easy Steps to Rebuild Your Credit after Bankruptcy

Bankruptcy often is the last ultimate solution for many debtors who have unbearable debts. With filing a bankruptcy, you will get rid of your debts instantly and relief you from the harassing call of your creditors.

Although bankruptcy has many undesirable consequences such as your bad credit record will remain on your credit report for 7-10 years, but with a little work, you can improve your credit even before these negative records expire. Here are five easy steps you can take to rebuild your credit.

Step 1: Get to know your current credit status

The first step to rebuilding your credit is to look at exactly where you stand. Order all your three credit reports from those three national credit bureaus: TransUnion, Equifax, and Experian. You can order these reports online, it easy and secure.

Print each report and review it closely. Try to understand the information listed in your credit reports and highlight any negative records or inaccuracies that are damaging your credit score.

Step 2: Check the expiration dates

By law, your bad credit record will remain in your credit report for 7 to 10 years, but the exact expiry date might be different among these 3 reports. Your bad record will still remain at your credit report although you have pay off your old debts and discharge from bankruptcy.

Look up the exact date of each of bad records including judgments, liens, charge-offs, late payments, bankruptcy filings, and collection records. You will likely see a major improvement in your credit score when these records expire.

Step 3: Request For Correct On Any Inaccurate Records

If you find inaccurate records, fraudulent accounts, or records that should have expired on you credit reports, you have the right to send a separate dispute letter to each of the credit bureaus to correct your Equifax, Experian, and TransUnion records. The bureaus will initial a 30 days investigation to see whether your requests are valid and if so, they will correct the inaccuracy in your credit report.

Just one note, don’t try to dispute any of the positive information listed in your credit reports and it is a waste of time to attempt to dispute these records. Disputing positive information may actually harm your credit scores.

Step 4: Start to create good credits

Since there is no way to remove your bad record from your credit report, the best way to improve your credit score is to add good credits and building up your credit from there. You can easy do this by open up a new credit card from banks like Orchard Bank (Orchard bank has credit card plan designed specially to help people rebuild their credit after bankruptcy).

Use this new credit card responsibly and make the monthly payment timely; with this you are building new history of good credit behavior on your credit report. Over time, you may want to open additional credit card accounts or obtain a loan to boost your credit score even higher.

Step 5: Monitor your progress

Subscribe to a credit card monitoring service or get a credit card monitoring software and use it to track your credit score progress closely. Your credit score should improve steadily as you continue to use credit responsibly and add new positive information to your credit reports.

Summary

Bankruptcy does not need to chain you to bad credit for the next seven to ten years, but you have to be proactive in order to recover and rebuild your credit.

What Credit Score Is Needed to Buy a Car?

A good credit score means that you will have more interest rate options. If your credit score is poor, you can either seek an alternative strategy or try to improve the score first. 

What Credit Score Do You Need to Buy a Car?

In general, you can acquire prime financing from banks and credit unions if you have a credit score of 650 to 660. But the lower your score, the higher the interest rate. 

You will get great financing arrangements if your credit score is anywhere from 680 to 700. And with a score of 720 to 750, you can expect the lowest interest rates. 

People in the subprime category (650/660 range) can end up paying double-digit interest rates. 

A Good Credit Score for Buying a Car

Your credit score doesn’t just determine whether or not your loan will be approved. It affects the interest rate you will be charged. 

A low credit score shows that you are likely to default the loan. So the lender will ask for a high interest rate in an attempt to offset the risk. 

This applies to used cars too. You may not pay as much but the interest rate will still be way too high than you would have paid with a high credit score.

Improving Your Credit Score Before Getting a Car Loan

With a car loan, you will not have a lot of time to improve your credit score. For this reason, you need options that work almost immediately. 

If you plan on buying a car sometime in the future, you have to start working on your credit score now. Here are some steps that may help:

  • Start making all your payments on time and let this be a habit.
  • Have erroneous negative entries removed from your report.
  • Pay off loans and credit cards or pay them down.
  • Pay off any past collections and due balances.

If you act soon, your credit score will improve greatly. Some of these steps require time and they will have a great positive impact. 

Getting Your Loan Approved with Bad Credit

What if you need a car right now and your credit is bad? 

In that case, you have six options.

  • Get your regular bank to pre-approve: they will be more kind to you compared to a new lender. A preapproval will make you a stronger buyer and the dealer can even give you a better deal.
  • Check different lenders: go to several lenders and try to get the best deal. 
  • Purchase a used car: you are more likely to get a better deal with a used car than with a new one.
  • Make a large down payment: this will increase the chances of your loan being approved and you may pay a lower interest.
  • Short loan term: long term loans are riskier. You will get a better deal with a short-term loan.
  • Get a consigner: your co signer’s credit profile will be used to determine the rates.

3 Ways To Get Your Free Annual Credit Report

Yes, you can now get your credit report without paying a dime. And unlike before, now it is truly free. No longer do you have to sign up for a “free” credit report by signing up for “credit monitoring protection service” for a low annual fee of $79 a year! The days of dodging the annoying charges and service fees for a free credit report are over.

Under the 2003 Fair and Accurate Credit Transactions Act, you have the right to a free copy of your credit report within a 12 month period from the big three credit report bureaus (Experian, Equifax and TransUnion).

The goal of this new government act is to ensure that Americans have the right to stay informed about what these three credit reporting bureaus say about you without having to pay for it. Since identity theft, fraud and errors are quite common today, why should you have to pay for a copy of a report to fight back against these problems?

Here are the 3 ways to get your free annual credit report:

The three credit reporting agencies have created a website to request your annual credit report.

1) Go to http://www.annualcreditreport.com

2) Call (877) 322-8228 to request your free credit report.

3) Complete a form from the Federal Trade Comission, http://www.ftc.gov/bcp/conline/include/requestformfinal.pdf and mail it to: Annual Credit Report Request Service, P.O. Box 105281, Atlanta, GA 30348-5281.

If you go directly to the three agencies or use any other type of service you may end up having to pay or sign up for the subscription services I mentioned above! Make sure you use one of the 3 methods I have listed to get your annual free credit report.

You can get the reports from all 3 agencies at once or stagger the reports from each one during the course of 1 year. The advantage of staggering the reports that you receive is to keep track of how any major changes in your financial picture affect what is on your credit report. For example, if you plan on getting a second mortgage over the coming year, or applying for student loans, ect. it might be wise to get a report before and after these major events!

This new Act does not supplant the other methods you can take advantage of to receive a free credit report. If you are applying for unemployment or been denied a loan, or need a credit report in order to get a job, you still have the right to obtain a free credit report.

Take advantage of this new government regulation and make sure all of the information listed by all three credit reporting agencies are correct. Any errors or omissions can reduce your credit score and end up costing you a lot of money when you apply for any type of credit.

Yes, you can now get your credit report without paying a dime. And unlike before, now it is truly free. No longer do you have to sign up for a “free” credit report by signing up for “credit monitoring protection service” for a low annual fee of $79 a year! The days of dodging the annoying charges and service fees for a free credit report are over.

FICO Score Vs Credit Score: What’s the Difference?

Everyone should know their credit score. However, a credit score is calculated using several ways and it is never just one number. 

Your credit score is a simple way of portraying your credit history—it is compiled into a number that tells lenders the risk they’ll be taking if they offer you a loan.

There are two main ways of estimating your credit score: the VantageScore and the FICO Score. This article seeks to explain the two and how they affect your journey to getting good credit. 

Defining a Credit Score

‘Credit Score’ is a general term encompassing the various models used to calculate a 3-digit number, from 300 to 850. This number shows your creditworthiness. A good credit score means higher chances of getting approved for credit. And not just that; you also get lower interest rates.

Unused credit, total debt load, payment history and other information about your credit are reported to Equifax, Experian and TransUnion. These are the major credit bureaus. They use an algorithm to translate that data into a credit score. 

When you seek new credit, the lender requests for that information from one of the credit bureaus. 

Each of the three bureaus will gather and organize your data in a different way. So they will most likely give you a different score. 

The Credit Scoring Models

The VantageScore and the FICO Score are the most commonly used models. The financial institution asking for the report determines which model will be checked. 

FICO Score

This one ranges from 300, which is very bad credit to 850, which is considered exceptional credit. This model is the most common one and almost all of the top lenders use it. 

Fair Isaac Corporation came up with the model in the ’90s. The biggest mortgage companies, Freddie Mac and Fannie Mae started using it in 1995 to determine loan applicants’ credit risk.

Over a dozen FICO Score versions have emerged and the most used one is the FICO8, devised in 2009. The rest of the versions are slightly different depending on how they are used. 

The FICO8 Score Ranges

  • 350 – 579: Very Poor Credit
  • 580 – 669: Fair Credit
  • 670 – 739: Good Credit
  • 740 – 799: Very Good Credit
  • 800 – 850: Exceptional Credit

FICO8 Score Components and Their Weight

  • Payment history: 35%
  • Amounts owed: 30%
  • Length of credit history: 15%
  • New credit: 10%
  • Credit mix: 10%

Getting Your FICO Score

You can refer to your credit card statement. Some issuers let their customers know their FICO Scores for free every month. Alternatively, get it from Experian for free at http://www.freecreditscore.com/ .

VantageScore

This is another major scoring model that the credit bureaus came up with. It also has multiple versions and ranges from 300 to 850. The standard version is the VantageScore 3.0. The main difference between VantageScore and FICO is that with the former you’ll get a score even with a short credit history. 

VantageScore 3.0 Ranges

  • 350 – 630: Poor Credit
  • 630 – 690: Fair Credit
  • 690 – 720: Good Credit
  • 720 – 850: Excellent Credit

Vantage 3.0 Components and their Weight

  • Payment history: 40%
  • Depth of credit: 21%
  • Utilization: 20%
  • Balances: 11%
  • Recent credit: 5%
  • Available credit: 3%

Getting Your VantageScore

Most banks let you know your VantageScore every month for free. Alternatively, opt for Credit Sesame. They will give you your TransUnion VantageScore for free. 

Your FICO Score and VantageScore may be similar in most cases, but that doesn’t happen every time. Sometimes, they will vary by almost 100 points because the models are different. You don’t have to keep up with both models. One is enough as it will let you know where you stand. 

What Credit Score Is Needed to Buy a House?

Your credit score determines whether or not your loan will be approved. But that is not all. It will also affect the amount you pay for the home every month and the mortgage insurance. 

What Credit Score Is Needed to Buy a House?

The minimum credit score requirement depends on the type of loan you want. 

There are 5 main mortgage programs and each one has a different credit score requirement. 

  • Conventional: the conventional home loan requires a minimum score of 620. If it’s an investment property or vacation home, the required score may be higher. 
  • FHA: the minimum score here is 580. But if your down payment is 10%+, they will allow a lower credit score. 
  • VA: a minimum score is not usually imposed with this type of loan. But most lenders set the minimum at 620. Others may set it lower (even 580). 
  • Jumbo: the absolute minimum for this type of loans is typically 620. The loan amounts are high and offered by private sources. The minimum may be higher, up to 680.
  • USDA: there is no fixed minimum for USDA mortgages. But for a standard approval you will need a minimum score of 640.

HELOCs (home equity lines of credit), home equity loans and second mortgages set their own minimum.

How Your Credit Score Affects the Interest Rate

After meeting the credit score requirements, the next step is knowing how much interest you will pay. Secondary financing, jumbo mortgages and conventional mortgages involve tiered pricing. This means that there are a number of factors that will determine your loan rate. 

The factors include your credit score, type of loan (adjustable or fixed) and loan-to-value ratio. 

With a credit score of 630, you may end up paying interest that is 1.5 points higher than someone with an excellent score. Over the years, the difference could be $50,000+. 

Private Mortgage Insurance Factor

With jumbo and conventional mortgages you will have to pay PMI (private mortgage insurance) if your down payment is less than 20 percent. 

PMI is different from mortgage life insurance. The latter pays off your mortgage in the event of your passing. PMI will pay off the lender in case you default. So if you have a lower credit score, it is assumed that you are at a higher risk of defaulting and your monthly payment will be higher. 

Improve Your Credit Score Before You Apply for a Mortgage

How do you do this?

  • Monitor your credit: get your credit score for free from Credit Sesame or Credit Karma.
  • Request a copy of your report: make sure you get official credit report copies from the three main bureaus: TransUnion, Equifax and Experian. 
  • Dispute negative entries: if there are any negative errors, dispute by filing a formal report. If you have documents that support your point, the entry can be corrected or removed.
  • Lower your credit utilization: this is how much you owe on credit cards and loans. Lower it to improve your score.

Mastering Credit: The Ultimate DIY Credit Repair Guide

Does Closing a Credit Card Hurt Your Credit Score?

When you have decided to start repairing your credit, the first thing you will go for is probably your credit card account(s). For many people, credit card accounts contribute largely to negative entries. And if you pay off the balance or cancel it completely, you figure it will be a big step in the right direction. 

Should You Cancel Your Credit Cards?

No, you shouldn’t. It is a bad idea. One of the biggest determinants of your credit score is your credit history. It is, therefore, better to keep the credit account open. Holding on to the account will help you maintain your current score or improve it. 

Besides, if you cancel the credit card, it will still remain in your credit report. And it will be there for ten years. It is part of your credit history which makes up 15% of your credit score. 

Your Credit Score May Get Hurt If You Close Your Credit Cards

Having open credit card accounts contributes to your credit history, even when it has negative entries. It is better to clear late payments than to close the cards. 

This may be confusing because closing a credit card account may seem logical. But a few months after you close the accounts, your score will most likely drop.

Why does this happen?

How you manage your open credit accounts greatly determines your credit score. If you close the account, the only thing that will matter is the history and it may not be good. 

An exceptional credit score shows that you have well-managed long-term accounts. 

Too many credit accounts are not good for your score. But the solution is not closing them. Rather, you should avoid opening many accounts. 

So if you have an open credit account, don’t close it. 

Credit Utilization Will Fall

If you close your credit cards, your credit utilization will be negatively affected. This is the percentage of available credit used. Lower credit utilization increases your score. In fact, credit utilization makes up for 30% of your credit score. 

Cancelling a card lowers your available credit. And if you spend what you usually spend using your credit cards, the utilization ratio goes up. 

To improve credit utilization ratio, pay off your credit card balance (or most of it) and use credit cards less. 

Closing Your Credit Card Account: Alternatives

Instead of cancelling your credit card, it is better to stop using it or use it less. But there’s something else you can do. Contact your credit card company. See if they can waive your annual fee. 

You can also switch to a no-annual-fee card. Everything will stay the same. The only thing you may lose is the rewards point program. 

How About Reopening Credit Cards Accounts?

If you had already closed the credit card account, talk to the issuer and ask whether they can reopen it. They will definitely take a look at your report first. And they may consider if you have improved.