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Credit Reports

Choosing the Right Credit Card for You

By | Ask a Credit Expert, Credit Cards, Credit Repair, Credit Reports, Credit Scores, Personal Finance, Your Credit

Choose credit cards

There are dozens of credit cards on the market, so choosing the right one may be difficult. Do you want a card that gives you airline miles, or would you prefer cash back when you shop for groceries or buy gas? The options are almost limitless, so be sure to get a card that suits your needs. Credit comparison sites such as CardRatings can help you choose a card that’s right for you.

Cards and Your Credit Score

One of the most important things to keep in mind before you get a credit card is how it will affect your credit score. Also, depending on your credit score, you may not qualify for every card out there. Always keep in mind that credit cards report to the credit bureaus, so if you don’t pay your bills on time, it will negatively impact your credit score.

Types of Credit Cards

According to the American Bankers Association, 83 percent of people with a credit card have at least one rewards card. Why are they so popular? People like getting rewards for purchases they’re making anyway. You can earn free hotel stays and airline miles just for using the right card.

Here are a few types of credit cards that you may want to consider:

  • Cash-Back Rewards – As the name suggests, you earn cash back each time you make a purchase. These are growing in popularity, and there are a lot of options out there. Some flat-rate cards will give you 1.5 percent cash back on all purchases, while others offer accelerated cash back earnings in certain categories. If you like cash back, look for a card that offers generous rewards and bonuses in categories that you spend more on, such as gas or restaurant purchases.
  • Co-Branded Cards – These are often called partner cards and give you extra rewards at a retailer that you frequent while giving you rewards on all other purchases. These are great if you frequent a particular retailer.
  • Secured Cards – Secured cards are a bit different and are generally used to help people establish or fix their credit score. The idea is simple: You deposit money in a savings account at a bank, and the bank gives you a credit line up to that amount. Secured cards offer a couple of advantages. First, the money that you put in your savings account stays there. Secured cards aren’t debit cards. Second, secured cards report to the credit bureaus, which can help improve your credit score if you pay your bills on time. A credit repair service may recommend that you get a secured credit card to reestablish your credit.

Words to the Wise

A few years ago, a survey found that as much as $16 billion in rewards go unredeemed every year. Make sure that you take advantage of the rewards you earn. You should also review your monthly statements and take advantage of bonuses that card issuers sometimes offer. Also remember that miles and points may expire. Don’t let your hard-earned miles go to waste.

Read the fine print. Some credit cards require that you register for revolving rewards every quarter, while other cards place restrictions on the miles that you can use. Before applying for a credit card, make sure that you’ve read the fine print and get a card that matches your spending habits and lifestyle.

Lastly, watch out for fees. Check the benefits and rewards that a card offers and determine whether they’re worth the amount of the annual fee. Also look out for other fees, such as foreign transaction fees if you travel overseas.

Credit cards can be a great way to improve your credit score while being rewarded for purchases. The best advice is to read the fine print on the card that you’re looking at and use the card wisely to maintain a good credit score.

How Long Does It Take to Fix My Credit?

By | Bankruptcy, Credit Repair, Credit Reports, Credit Scores, Your Credit

time to fix credit

Your credit score shows both your short- and long-term credit history, so building a perfect credit report can take years. However, there are many steps along the way, and you can see some improvements to your credit score in a matter of weeks. Here’s how long changes should take to be reflected in your credit score.

Paying Down Credit Balances

Paying down a credit card or other balance is one of the fastest improvements you can make to your credit. Your credit utilization score is a real-time factor that only looks at your current balances and has no memory of the past.

Any payments you make to reduce your balance by your due date will be reflected on your next statement. As soon as the credit bureau receives your new statement (usually within a few days), your credit score should go up. Some credit card companies will even update your balance with the credit bureaus early if you call and ask.

Stopping New Credit Applications

Another nearly instant change is when you stop making new credit card or loan applications to try to dig out of debt. Each application lowers your credit score, so stopping is the first step to improving.

Once you stop applying for new credit, your previous applications stop affecting your credit relatively quickly. They’re only reflected on your credit report for two years, and don’t even affect your credit score after the first year. Better still, the effect of a credit card application is lessened after a few months. You should see credit score improvements even before the year is up.

Successful Credit Report Disputes

If you believe information on your credit report is incorrect and file a dispute, the credit bureau has between 30 and 45 days to investigate the dispute depending on its type. If your dispute is successful, the credit bureau must immediately update your credit report.

If the information you disputed was completely erroneous or unsubstantiated, it will be removed as if it never happened. Your credit score will be recalculated without the negative information.

If the information was correct but the date was wrong, the date will be adjusted. Because negative items have less effect on your credit over time, if the date is adjusted into the past, you should see a bump in your score.

The total time to complete a dispute and have your credit reported updated should be about two months.

Closing Accounts

You may hear that closing an old credit card will drop your credit score — that’s a myth. If you’re trying to fix your credit, you might wrongly think you need to keep paying an annual fee to keep your credit score up. If you don’t like a credit card, go ahead and close it today.

Positive account history stays on your credit report for 10 years after you close the account. By then, you’ll have replaced the positive history with more positive history.

The only thing to worry about is if you have a credit card with a high limit that accounts for a large portion of your available credit. In that case, closing the account could increase your credit utilization and lower your score. But, as explained above, your credit score will bounce right back up once you’ve paid down those other balances.

Late and Unpaid Accounts

If you have late payments, charge-offs or collections on your credit report, these items are generally reported for seven years plus 180 days from the date they occurred. After that time, they will fall off your credit report.

Luckily, their effect also lessens over time. You will see credit score improvements long before seven years as long as you don’t incur new negative items. In addition, isolated late payments lose weight much faster than longer patterns.

There are also a couple of tricks to removing these items even sooner. One is simply catching up on your payments, then calling or writing a letter to the lender apologizing for your mistake and asking the lender to remove the negative report. If that doesn’t work or you’re still behind on payments, some lenders will agree to remove the negative report in exchange for immediate full payment.

Tax Liens

Tax liens are another reason to avoid owing money to the IRS. An unpaid tax lien can stay on your credit report for up to 15 years, and paid liens remain for up to seven years.

However, the IRS is forgiving if you pay your debt or make arrangements to pay. Depending on the amount you owe and how delinquent your account is, you may be eligible to have the lien erased as if it never happened.

Bankruptcies

Bankruptcies stop collections and wipe out past due balances, but they don’t wipe your credit report clean. All negative information from before the bankruptcy will stay on until its usual expiration date. The bankruptcy itself remains on your credit report for 10 years.

Like with other negative information, the impact of a bankruptcy lessens over time. People who make a focused effort to rebuild their credit after a bankruptcy can often reestablish a good credit rating within a year or two after their bankruptcy.

Sources:

  • http://www.consumerfinance.gov/askcfpb/1339/if-credit-reporting-error-corrected-how-long-will-it-take-i-find-out-results.html
  • http://blog.equifax.com/credit/how-long-does-information-stay-on-my-credit-report/
  • http://www.experian.com/blogs/ask-experian/credit-education/score-basics/improve-credit-score/
  • http://credit.about.com/od/creditscorefaq/fl/How-Long-Does-it-Take-for-Your-Credit-Score-to-Improve.htm
  • https://www.nerdwallet.com/blog/finance/how-long-high-credit-utilization-ratio-hurt-credit-score/
  • http://www.investopedia.com/ask/answers/102814/how-long-does-information-stay-my-credit-report.asp

Why You Need to Dispute Errors on Your Credit Report

By | Credit Repair, Credit Reports, Credit Scores, Fair Credit Reporting Act, Your Credit

chasing bad credit

There’s a plague in the United States, but it has nothing to do with the flu. Instead, it’s a plague of errors on the credit reports of millions of Americans.

According to the Federal Trade Commission, more than 20 percent of Americans had errors on their credit report as of 2013, and more than 5 percent of those errors were serious enough to negatively impact a credit or interest-rate decision. That means that more than 60 million Americans have errors on their credit report, and more than 15 million of those people could receive a denial for credit or pay exorbitant rates because of incorrect credit reports.

While you may find those numbers shocking, the most shocking fact is that they’ve stayed roughly the same for decades. While the three major credit bureaus and their regulating authorities often talk about the necessity to minimize errors, the simple fact is that the burden of ensuring your credit report is accurate falls entirely on your shoulders.

Why Credit Report Errors Are Dangerous

Which would you prefer, a 25-percent interest rate on a loan or a 5-percent interest rate? Do you want to get a denial for your next credit-card application? A low, erroneous credit report could even lead to failing your background and credit check for a new job.

In today’s world, others use your credit report in numerous ways that can seriously impact your life even beyond interest rates and credit approvals. Just consider the legal ramifications if someone steals your identity. What if the thief were to start a company in your name or try to get a tax refund in your name? Before you know it, simple credit-card bills are the least of your worries.

It’s vital that you closely monitor your credit reports from all three bureaus, then move decisively to dispute any error as soon as you spot it, no matter how small or inconsequential it may seem.

How to Monitor Your Credit Report for Errors

It’s important to remember that “your credit report” isn’t a single entity. Instead, each of the three major credit reporting agencies in the United States holds its own version of your credit history, and each has its own relationship with your creditors and other information-reporting parties.

That means if you find an error on your credit report from any one of the three agencies, you then need to verify that information on your report from the other two agencies as well.

You can do this in two primary ways:

Use your free, annual credit reports

The Fair Credit Reporting Act, or “FRCA,” requires each of the three primary reporting agencies to provide you with a free copy of your credit report every 12 months. The only official online Web page to start that process is at AnnualCreditReport.com, a website run jointly by the three bureaus.

You can request your report from all three bureaus at the same time or spread your requests throughout the year. Each bureau runs its own 12-month timeline, based on the last time you requested your report from that bureau.

Use a credit-monitoring service

The downside to relying on your free, annual reports is that you’re only viewing your information from each bureau once per year. If an error occurs just after you’ve requested your report, you might have to wait 11 months to find out about it. As an alternative, credit-monitoring services can provide you with updated reports each month. A variety of paid memberships are available, but many credit-card providers also offer their customers free monitoring services.

How to Dispute Credit Report Errors with Credit-Reporting Agencies

If you find any type of error, even just a mismatch in your personal information like address history, you need to initiate a dispute immediately. You’ll need to contact each credit-reporting agency separately because they’re not required to communicate with each other until someone confirms or removes a dispute. Even then, a corrected error within one agency can still linger in another’s records.

Remember that you should always use certified mail when sending information to a credit agency through the post office.

Dispute Credit Report Errors with Equifax

Equifax allows you to dispute errors online or through the mail. To get started online, visit the Equifax Online Dispute portal that will walk you through the process of initiating the dispute and monitoring its progress.

To begin a dispute by mail, send a letter explaining the full circumstances of your dispute and all supporting documentation to the following address:

Equifax Information Services, LLC

P.O. Box 740256

Atlanta, GA 30374

Dispute Credit-Report Errors with TransUnion

TransUnion allows you to dispute errors online, through the mail or over the telephone.

To dispute an error online, visit the Transunion Online Dispute portal.

To dispute an error over the phone, call 1-800-916-8800. Make sure you have all supporting information at hand before you begin the call.

To dispute an error by certified mail, send a letter explaining your dispute with all supporting documentation to:

TransUnion LLC Consumer Dispute Center

P.O. Box 2000

Chester, PA 19016

Dispute Credit Report Errors with Experian

Experian allows you to dispute errors online, through the mail or over the telephone.

To dispute errors online, visit the Experian Online Dispute portal.

To dispute an error over the phone, call 1-866-200-6020.

To dispute an error by certified mail, send your letter and documentation to:

Experian National Consumer Assistance Center

P.O. Box 4500

Allen, TX 75013

Sources:

http://www.creditcards.com/credit-card-news/10-surefire-steps-to-get-errors-off-credit_reports.php

http://www.creditcards.com/credit-card-news/ftc-credit-report-mistakes-1270.php

http://money.usnews.com/money/blogs/my-money/2014/02/27/the-3-most-common-credit-report-errors

https://www.consumer.ftc.gov/articles/0151-disputing-errors-credit-reports

https://www.credit.com/credit-repair/dispute-credit-report-error/

How Does Credit Work?

By | Credit Repair, Credit Reports, Credit Scores, Personal Finance, Your Credit

how does credit work

You hear a lot about building credit, using it, protecting it and repairing it. At some point, you may have paused to wonder exactly what credit is, and how it works. Here’s your basic introduction to this vital engine that drives today’s consumer marketplace.

The word “credit” usually refers to a person’s ability to borrow money. When we talk about good or bad credit, it’s a shortcut for referring to someone’s track record on handling finances. Your credit score is a number attached to this track record. When you request a loan or a credit card, the lending institution considers the likelihood that you’ll pay back what you owe.

Your credit score tells the lender how big a risk it’s taking if it lends you the money. Like any investment, the bigger the risk, the better the payoff for the investor. For this reason, some lenders are happy to lend to people with poor credit, but they charge very high interest on the loan.

Years ago, the risk of conducting business deals was understood on a personal basis. Whether it was a neighborhood or a village, everyone knew who was good at following through on promises and who was irresponsible or unstable. People new in town might need to present a letter of reference to secure a job or a place to live.

Even now, if a friend or acquaintance asks to borrow something — your car, for example — you would probably think about their driving habits before you answer. Has he had accidents? Is he generally careful with his possessions? Does he keep his word? In today’s complex marketplace, we no longer know the people we deal with personally. Instead, we rely on credit bureaus to track people’s history and turn it into a single number that represents how much they can be trusted in the financial realm.

There are three main credit reporting agencies, or credit bureaus: Transunion, Equifax and Experian. These agencies gather information each month about your financial behavior. Anyone to whom you pay bills (credit card, utility bills, mortgage payments, auto loan installments, medical bills) reports to one or two of the credit reporting agencies. In addition to information on whether you pay your bills on time, the agencies also check on how much of your available credit you have used and the age of each account. Finally, they add in information about whether you apply for credit frequently and whether those applications are approved.

Each credit bureau usually has a slightly different version of your credit report, since each may receive information from different creditors. Your credit score is created by FICO or another credit-scoring company, using information from the credit bureaus. A high credit score tells lenders that you’re a good risk, so they charge you less to borrow money.

The fee for borrowing money is interest. With good credit, you can save thousands of dollars on a home or auto loan and pay less interest on your credit card. Conversely, a person with poor credit may end up paying 25 percent more on an auto loan, making that $20,000 automobile cost $25,000 over five years.

Taking out loans isn’t the only use for credit, however. In many states, your auto and home insurance costs are tied directly to a credit score that’s generated especially for each industry sector. A person with excellent credit may be charged only half as much as someone with poor credit for the exact same auto insurance coverage. It’s also standard practice for landlords to run credit checks on prospective tenants, and having poor credit can make it difficult to find a place to live. Prospective employers even check your credit score sometimes to see how responsible you are.

Credit reports are highly important, but unfortunately they often include errors. Your report may include information from someone with a similar name or someone who lived at your address before you moved in. A paid-in-full account may still show as owing due to the creditor neglecting to report the fact that you paid. There are numerous causes for errors, and each one needs to be individually disputed with each credit reporting agency.

Because errors are common in credit reports, it’s important to stay aware of what your report contains. You are entitled to one free credit report per year from each credit bureau from this federal government site. Many financial advisers suggest ordering a credit report from one bureau every four months so you have a higher chance of catching errors soon after they occur.

If your credit is poor, the good news is that it’s repairable. There are two approaches to repairing credit. You may only need one of these steps, but many people need both. The first step to repairing credit is to examine your credit report, find any errors and engage in a dispute process with the credit bureaus until they remove the incorrect content. The second step is to budget your money so you can pay all your bills on time.

Learning as much as you can about how credit works is a great foundation for building excellent credit. Your power to move through the financial world is dependent on your ability to handle the all-important tool of credit.

How Is FICO Different From VantageScore?

By | Ask a Credit Expert, Credit Reports, Credit Scores, Your Credit

If you make use of any credit monitoring tools, you may have noticed that FICO isn’t the only scoring model in the game anymore. Worse, you may even have experienced a shock if your credit score appeared to change after your monitoring tool switched models.

Yes, it’s true. FICO has a competitor in the (relatively) new scoring model from VantageScore. Because VantageScore usually sells its credit reports to businesses more cheaply than FICO does, chances are your credit monitoring tool has already switched to it, or will soon.

But what is VantageScore, how is it different from a FICO score, and what impact does it have on your credit options?

The History of FICO and VantageScore

While many Americans use “FICO” to mean “credit rating” the way we use “Kleenex” to mean facial tissue, that’s a mistake for the same reason. FICO is simply the brand name for the credit scoring model first developed by the Fair Isaac Corporation (FICO) in 1958.

FICO was a niche business for nearly 30 years, but after releasing its first scoring model intended for general use in 1989, it quickly established a near-monopoly over modeling personal credit scores. Indeed, to this day, it remains the only scoring model approved by the Federal government for evaluating mortgage applicants.

FICO charges each of the three major credit bureaus to make use of its scoring algorithms, and in response, Experian, TransUnion and Equifax struck a deal in the mid-2000s to collaborate on the development of their own, cheaper scoring model. The result: The first official release of the new VantageScore credit scoring model in 2006.

Both primary scoring models undergo changes every few years, and as of 2016, we’re on version 3.0 of VantageScore, and version 8 (soon to be 9) of FICO.

It’s estimated that FICO remains the credit scoring model of choice for more than 90 percent of all credit approvals, including loans, credit cards and mortgages. But VantageScore’s market share increases a bit every year, and in the meantime, it’s made major inroads with businesses that want to pull your credit score without actually making a credit decision, like credit monitoring services.

So, for the first time in the modern history of U.S. credit scoring, you’re very likely to deal with two entirely separate credit scoring systems when viewing your own credit score versus applying for credit or a loan.

Understanding the Differences Between FICO and VantageScore

As of 2013, VantageScore uses the same 300 to 850 scoring range that FICO uses, but the way your score is calculated between the two models has a few key differences.

Establishing Credit History

While FICO requires you to have qualifying credit activity in the last six months to calculate your credit score, VantageScore considers the past 24 months. This means if you’re a new entrant to the credit market and don’t have an established credit history, VantageScore is more likely to provide you with a credit score than FICO.

Factors Influencing Your Credit Score

While neither company releases detailed information about how it calculates its primary scoring models, FICO has long made rough guidelines publicly available.

Your FICO score is broken down according to these approximate guidelines:

  • 35 percent is determined by your history of on-time or late payments.
  • 30 percent is determined by the total amount of debt you owe.
  • 15 percent is determined by the length of your credit history, that is, the age of your oldest on-record account.
  • 10 percent is determined by the number of recent credit lines or loans you’ve established.
  • 10 percent is determined by the type of credit you use, for example, credit cards, mortgages and so on.

VantageScore has yet to provide the public with a similar percentage breakdown, but it has issued general guidelines on what impact different types of information have on your credit score:

  • Highest impact: Your history of on-time or late payments.
  • High impact: The length of your credit history (oldest account age), the type of credit (cards, mortgages and so on) and the percentage of your credit that’s used (your credit utilization).
  • Moderate impact: The total amount of your current debt.
  • Least impact: Your total available credit and recent credit inquiries or activity.

Frequently Asked Questions About FICO and VantageScore

Can you choose which score is used for a credit decision?

No. Any business you authorize to check your credit score or pull your full report decides on its own which agency and scoring model to use.

How can you view your FICO and VantageScore credit scores?

An increasing number of credit monitoring services now use VantageScore, but there’s usually no way to specifically order one type of score over another. You need to contact or review the business you plan to work with to find out if it offers both scores or only one of the two.

How do you know which score is being used at any given time?

Most businesses should make it clear on your paperwork (credit report, application decision and so on) which scoring model is used, but if you’re ever in doubt, don’t hesitate to contact the business directly for clarification.

Sources:

http://blog.credit.com/2013/01/fico-v-vantagescore-5-differences-you-should-know-64279/

What Is a VantageScore?

http://creditcardforum.com/blog/vantagescore-vs-fico-score/

http://www.top10creditreport.com/credit-score-breakdown-fico-vantagescore-infographic-article

http://money.usnews.com/money/personal-finance/articles/2016-02-05/goodbye-fico-hello-vantagescore

Home Equity Loans and Your Credit

By | Credit Repair, Credit Reports, Credit Scores, Home Buying, Homeowner, Mortgage, Personal Finance, Uncategorized

Home equity loans, as the name suggests, are a way for homeowners to borrow against the equity that they built up in their home. For a number of years following the 2008 financial crisis, lenders were reluctant to offer home equity loans because the value of so many homes had decreased. This lowered the equity that people had built, so it was difficult for many Americans to take advantage of them.

The good news is that as the housing market has stabilized, fewer people are at risk of defaulting on their mortgage, and home values are on the rise. In fact, the home equity market has improved for its third straight year, and, according to USA Today, the number of loans increased by about 20 percent in 2015. Consequently, lenders are more willing to extend home equity loans to customers who qualify.

The key word is “qualify.”Owning a home and having some equity doesn’t mean you automatically qualify for a home equity loan. Lenders want to be sure that you’ll be able to repay your loan. Your credit score and credit history are key indicators. So lenders won’t just look at the amount of equity that you have in your home, they’ll review your credit score and your payment history on other lines of credit, such as credit cards and your existing mortgage.

Credit Scores

While a potential home equity borrower may be current on all of his loans, he may still have a credit score that is too low for him to qualify for a home equity loan. Enlisting the help of a credit repair service such as Ovation Credit Service is a great way to improve your credit score. Our services work with credit bureaus and creditors to resolve issues that may be hurting your credit score.

A key service of credit repair services is educating you about factors that are impacting your credit score and keeping it lower than it could be. Not everyone understands how things like credit utilization and the number of open lines of credit can affect credit scores. Having an expert on your side to help navigate your credit report can help improve your score and show you which behaviors are likely to have the greatest impact on your score.

Types of Home Equity Loans

There are a lot of home equity lenders. You can go to your local bank, where you already have a relationship, or shop online for the most competitive rates. There are two main types of home equity loans:

  • Traditional Home Equity Loans are a lump sum amount paid to you when you’re approved. These are best for repaying credit card debt, consolidating other loans, paying for your kids’ college tuition, or splurging on a big-ticket purchase such as a car. The funds are given to you, and you make payments based on how much you borrowed.
  • Home Equity Lines of Credit (HELOC) are a great way to borrow against the equity in your home and keep some funds in reserve. If you’re renovating a room in your house or want to take a nice vacation, you can tap into some of the equity available to you. You only pay back the amount of equity from the line that you used, but you have other funds available if you decide to expand the scope of your renovation project or extend your vacation.

Things to Consider

A traditional home equity loan is a great tool for borrowers who want to improve their credit score. Having some cash available to consolidate high-interest credit cards—or pay them off entirely—is a good way to manage your credit. A credit repair service can recommend which lines of credit you should pay off first to have the greatest impact on improving your credit score.

Pay Off Debts – 9 Affects on Your Credit Score

By | Ask a Credit Expert, Bankruptcy, Consumer Rights, Credit Laws, Credit Repair, Credit Reports, Credit Scores

Credit Repair - Pay Debts

Are you wondering how paying off your debt could affect your credit score? There’s no doubt that paying all of your debts is the ideal thing to do, but sometimes it just isn’t possible. If you’ve lost your job or suffered other hardships, you may have to choose which bills to pay. Here’s how each course of action will affect your credit score.

1. Paying in Full

You may be unable to pay in full now, but it’s worth considering in case you win the lottery, find a higher paying job or have some other windfall. When you start paying on time again, you’ll have positive payment history added to your credit report.

Unfortunately, any past late payments or other negative remarks will not be removed from your credit report when you bring the account current. They may affect your credit score for up to seven years from when they happened.

2. Paying Only the Minimum Payment

Paying the minimum payment due by the due date keeps your accounts current and avoids late payment penalties. Even when money is tight, make paying the minimum payment on every account your first priority.

When possible, you should pay more than the minimum. In addition to saving interest, you’ll also be improving your credit profile.

Paying only the minimum payment can lead to your credit card utilization ratio increasing, which will lower your credit score. Credit card companies also have internal models that flag accounts with only minimum payments as high risk, and they may reduce your credit limit or close your account.

3. Paying Late

Paying late should never be an option. Even if you’re trying to pay off a higher interest credit card first, don’t skip paying the minimum payment on your lower interest cards.

If you absolutely can’t make every minimum payment, you should understand the two payment deadlines. The first is the actual due date that must be met to avoid a late fee, while the second is for credit scoring purposes. Late payments aren’t reported to the credit bureau as long as you make the payment within 30 days of the due date.

4. Ignoring Your Bills

If you can’t make your minimum payments and have already had a late payment reported on your credit report, don’t just ignore the bill. It will only get worse.

Unpaid debts will be reported as charged off or result in a lawsuit and judgment against you. These have a much bigger negative impact on your credit report than late payments.

If you’re sued, you’re also at risk of having your wages or bank accounts garnished and losing even more control over your finances.



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5. Using the Debt Snowball Method

The debt snowball method is a strategy you can use once you stabilize your finances and are able to make more than the minimum payment on your credit cards. With the snowball approach, you focus on paying off one credit card at a time — either the lowest balance or the highest interest rate.

The downside to the snowball method is that your credit score may not rise as quickly as it could. It’s typically better to have moderate balances on all of your cards than to have one or two with no balance and the rest almost maxed out.

The credit card companies that you’re only paying minimum payments to may also get nervous, as explained above.

6. Taking Out a Loan to Pay Off Credit Cards

Taking out a loan to pay off credit card debt may or may not be advantageous. The biggest positive impact it will have is to bring up your credit score by reducing your credit card utilization ratio.

However, a loan will often have higher monthly payments than your credit card minimum payments. This puts you at greater risk of making late payments unless you’re absolutely sure you can meet the new payment amount.

Of course, you’ll also need to compare the interest rate of the loan to your credit card rates to see if it’s worth it. This is more likely to be the case if previous late credit card payments have pushed you up to the penalty APR.

7. Offering a Settlement

If lenders believe there is a risk they won’t be paid in full, they’re often willing to accept a lump-sum settlement or a modified payment plan. Legally, you won’t owe them any remaining balance, but your account won’t be reported as in good standing on your credit report.

Your credit report will also reflect that you settled the account for less than what you owed. As with other options, past negative history is not deleted.

8. Paying for Deletion

Paying for deletion is a type of settlement where you ask the creditor to remove negative items from your credit report in exchange for your payment. You may also be able to ask that the account be marked as paid in full rather than settled or charged off.

Technically, the credit bureaus don’t allow this practice, but many creditors bend the rules if it helps them get paid. If you’re successful, the negative items will be removed from your credit report, and your score will be the same as it would have been if they were never added.

9. Declaring Bankruptcy

A bankruptcy in itself has one of the largest negative impacts on your credit score, and it also doesn’t erase negative history. However, bankruptcy will stop collections and prevent new negative marks from being added to your credit report.

If you can’t keep up with your payments, bankruptcy may be the best option to stop the damage and allow you to focus on rebuilding your credit score.

Sources:

  • https://www.consumer.ftc.gov/articles/0152-credit-scores
  • http://www.consumerfinance.gov/askcfpb/317/what-information-goes-into-my-credit-score.html
  • http://www.federalreserve.gov/pubs/Bulletin/1996/796lead.pdf
  • http://www.sites.ext.vt.edu/newsletter-archive/fmu/2002-04/factors.html
  • http://citeseerx.ist.psu.edu/viewdoc/download?doi=10.1.1.203.3472&rep=rep1&type=pdf
  • http://www.myfico.com/crediteducation/whatsinyourscore.aspx

Badcredit.org Review: Customized Assistance & Credit Education Empowers Consumers to Get Their Finances Back on Track

By | Ask a Credit Expert, Credit Repair, Credit Reports, Credit Scores, Your Credit

Badcredit.org just released a review of our premier credit repair services.

In a Nutshell: Ovation is a credit repair company with more than a decade of experience helping clients get over their credit woes. With one-on-one customer service and additional features like fast track same-day service, identity optimization, and letters of recommendation, this agency is a trustworthy means of fixing credit report errors. Committed to customized service for every client, Ovation empowers, educates, and assists people on their way to a better credit standing.

Read the whole review here:

http://www.badcredit.org/ovation-credit-repair-empowers-consumers/

Credit Cards: What You Need to Know Before Applying

By | Consumer Rights, Credit Cards, Credit Reports, Credit Scores

Think you know everything there is to know about your credit history and how it will impact your access to credit? In 2013 it was reported that 5% of consumers in the U.S. had an error on a credit report that led to them paying a higher interest rate on a loan.

Out of all the disputes credit card companies faced 16.5% of them were about billing. That’s more than double the amount of disputes regarding interest rates or fees.

That tells us that consumers don’t fully understand and utilize credit reporting. By habitually checking your credit report you can prevent errors and fraud and save money on fees and interest.

If you’re in the market for a new credit card, there are a few steps you should take first. By following these steps you can secure a good interest rate and possibly be approved for a higher line of credit.

Prioritize

Determine what your goals are before shopping for a credit card. If you need to pay down debt on a credit card with high interest, look for credit card promotions that offer 0% balance transfer fees. If you need to make a big purchase look for cards that offer 0% interest for 12 or more months to provide ample time to pay down your debt before interest kicks in.

Shop Around

According to a consumer satisfaction survey first reported in US News Money, consumers are most satisfied with American Express. Credit Card companies that fall short include Wells Fargo and Capital One. Shop various credit card offers before applying.

Compare Rewards

Credit card point programs can be rewarding if you choose the right card. If you travel often and are looking to earn additional travel points go with a card that offers additional rewards on purchases made at hotels and on flights. If you tend to make a lot of small purchases, look for a card that rewards every day purchases like trips to the gas station or market.

Check Your Credit Score

Use a site like CreditKarma.com to get your credit score and review your credit history. If your credit card utilization is high, you may want to pay down some of your debt before applying for a new credit card. If you’ve already paid down your debt, but your score hasn’t refreshed wait for this to process before applying for an additional line of credit. By waiting you could save yourself money paid in interest later.

Access to credit can be a great thing when used responsibly. Always make sure to practice financial responsibility before applying for additional credit. Review the terms of a credit card agreement before signing up. Be aware of interest rates and due dates to stay on top of your bills and avoid late fees.

Uncovering the Mystery that is Your Credit Report

By | Consumer Rights, Credit Reports, Credit Scores

A credit report can either be the key to or road block to getting access to credit. Whether you’re looking to take a trip or purchase a home, your credit history plays a big role in how much you can borrow at what rate.

While most of us are aware of how important good credit is, many of us don’t know what our scores are or how to improve them.

Luckily popular credit card companies like Discover Card and American Express have started to provide free credit reporting to customers. In addition there’s CreditKarma.com which is a completely free credit reporting service.

Credit Karma provides users with their credit score overview and detailed description of credit factors. If you’ve never dug into your credit score before you may be confused as to how the number is generated. The following are factors that impact your credit score:

  • Credit card utilization
  • Payment history
  • Derogatory marks
  • Age of credit history
  • Total accounts
  • Credit inquiries

Each of these factors has either a high, medium or low impact on your credit score. While they all impact whether you have poor, good or excellent credit some are more important than others. When attempting to improve your score it’s important to pay the most attention to those factors which have a high impact on your overall score.

High Impact

Having a high impact means that these factors can significantly increase or decrease your credit score. Factors that have a high impact on your score are: credit card utilization, payment history and derogatory marks. Credit card utilization is calculated by comparing the amount of credit you have access to and how much you are currently utilizing. In order to have excellent credit you must only utilize 0% to 9% of your available credit. Someone with a good credit score utilizes between 10% and 29% of their available credit. To have a poor credit rating means that you are utilizing 50% to 74% of your available credit. Payment history and derogatory marks also heavily impact your credit score. As long as you make your bill payments on time you should have an excellent rating.

Medium Impact

Age of credit history has a medium impact on your credit score. Creditors are interested in the age of your credit history, because it helps provide a better picture of your ability to repay debt. If you have no derogatory marks on your credit history, and you’ve never missed a payment but you’ve only had a credit card for 6 months a creditor can’t determine with absolute certainty that you’re capable of repaying debt. Here’s how age of credit history is ranked:

  • Excellent – 9+ years
  • Good – 7 to 8 years
  • Fair – 5 to 6 years
  • Poor – 2 to 4 years
  • Very poor – less than 2 years

Unfortunately there’s not too much you can do to improve the age of your credit history. It is important to keep old cards alive, especially if you are in the fair to poor range. Your first credit card may have been a store card or may not have the best interest rate, but the age of the card can help with your credit history. Keep these accounts from closing by spending a small amount from time to time, and paying debt off right away. This will help maintain your current age and keep it from decreasing.

Low Impact

There are two additional factors that impact your credit score. The total number of accounts you have open, and amount of credit inquiries performed have a low impact on your credit score. The total amount of accounts you have open include student loans, mortgages, credit cards and other loans. In order to have an excellent score you need to have 21 or more accounts active. To fall within the poor score you’d need to have less than 10 accounts open. Any time a creditor runs a credit inquiry your credit score is impacted. Applying for a credit card, car loan or any other type of funding can impact your credit score. Even just one hard inquiry can move your score down from Excellent to Good.

Staying on top of your credit report is important. Not only can it help you improve your credit and odds of getting approved for loans, but it can also help you prevent fraudulent activity. By monitoring credit inquiries you can find out if someone is attempting to take out a loan or credit card in your name before it’s too late.

Was this article helpful? How will you improve your credit score? Let us know in the comment section below.

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