Credit Scores

Figure out how to manage your high credit card usage.

How to Fix Your High Credit Utilization

By | Credit Scores

If you carry balances month to month on your credit cards, you could be unknowingly weakening your credit score. Credit utilization, or the measure of the amount of credit you owe compared to your overall credit limit, can signal one of two things — either that you are a responsible borrower likely to meet your payment obligations, or that you are dangerously overextended with an excessive credit card and loan balances. To calculate your credit utilization, divide your credit card balance by your credit limit and multiply by 100. Experts generally advise keeping your credit utilization at 30 percent or less. Credit scoring bureaus will calculate the credit utilization ratio for each card separately, as well as the ratio for all of your available credit as a whole. The good news: Once you slash your credit utilization, your credit score will recover rather quickly. These steps will help you kick your balance-lowering mission into high gear.

Monitor All of Your Accounts

Set a goal for yourself to keep all of your credit balances at or under the 30% credit utilization. The trick to achieving that goal is to check in with your accounts frequently. Many card issuers also allow you to sign up for balance alerts via text or email. The more reminders you can have that your balance is creeping past the 30 percent level, the better. That awareness will help you keep your spending in check. If you know that one card is over the 30 percent limit, make a note to use a different card for purchases until you have whittled down the original card’s balance. (This technique will only work if your other cards carry a lower balance.)

Time Your Payments Appropriately

You might not realize that the balance that gets reported to the credit bureaus is the one that appears on your monthly statement. Check a copy of your billing statements to find out the date your billing cycle ends (also known as your account statement closing date). You’ll want to make sure your balance is low just before that cycle ends. That may mean you have to tweak your payment schedule and make payments well before the due date — but it’s worth it for the changes to your credit utilization.

Make Smarter Payments

Paying down debt, as much as possible, is the most straightforward route to attacking a high credit utilization. It unfortunately won’t be the easiest option for everyone. If you can’t pay balances in full, try to at least pay more than the minimum, at least twice a month, to trim your balances. Allocate the highest payments to the card with the highest utilization ratio.

Keep Your Cards Open

When you close an account, you also effectively erase a source of available credit. That, in turn, spikes your credit utilization ratio, as it will appear that you have less credit to use. That’s why you should always keep credit cards open, even if — actually, especially if — they are paid off. An older, paid-off credit card that you don’t use can only enhance your credit score, since it lengthens your positive credit history.

Request a Higher Credit Limit

You may want to ask your credit card issuer to bump up your credit limit. The increase should be just enough to lower your credit utilization ratio. However, make sure that the higher credit limit won’t tempt you into increasing your spending as well — or taking this step could actually compound your high credit utilization woes.

Consider a Balance Transfer

If you have a high credit utilization spread across several cards, it might make sense to transfer all of those balances to a low-interest card. That way, you have freed up credit on several cards, which looks better for your credit overall. Because you will also be saving on interest fees, you can also attack that balance faster. As with the other steps, you need to exercise caution. When you make a balance transfer, remember you are committing to paying down that balance. It is not simply a temporary relief that allows you to continue spending elsewhere.

Having a healthy credit utilization goes hand in hand with building an excellent credit score, and it’s certainly not the only way you can improve your credit profile. Let our team at Ovation Credit help you on the path to improving your score. Contact us today for a free consultation.

Couple purchases a new home after fixing their credit.

House Hunting? Here’s How to Get Your Credit Ready

By | Credit Scores

Shopping for your dream home can be an exciting experience, but it’s also one filled with a lot of financial paperwork. In order for your mortgage application to get approved while landing a competitive interest rate, it’s important to improve your credit as much as possible. While credit repair is usually a long-term process, there are a few general rules of thumb to go by when you’re in the home-buying process. Follow these tips to maximize your credit score during one of the most important financial decisions you’ll ever make.

Check for Credit Errors on Your Report

When you first start thinking about buying a home, you’ll want to make sure your credit score is starting off from the right place. If you haven’t done so recently, go to to access free copies of your three credit reports. These come from the major credit reporting agencies: Experian, Equifax, and TransUnion.

On these reports, you’ll find a listing of all your credit history, including credit card accounts, loans, and any lines of credit. Scour each one to help identify credit errors. If you see anything incorrect, such as a credit card you never opened or an outdated loan balance, you’ll want to take action before applying for a mortgage. Fixing credit mistakes found on a report involves initiating a credit dispute directly with the reporting agency. The process can take up to 30 days, so the earlier you resolve the issue, the better.

Stay on Top of Current Financial Obligations

Having a positive payment history is important during the home loan application process for a couple of different reasons. First, it’s the largest factor in determining your credit score. If you want to improve your credit, making your debt payments on time each month is an easy way to get the job done. A single late payment beyond 30 days after the due date can cause a drop in your credit score.

Additionally, your mortgage lender reviews entries in your credit report. If you have recent late payments, your application could be affected. At the very least, you may need to write a letter of explanation outlining why your payments were late, even if it happened a few years ago. To make the mortgage process as quick and easy as possible, it’s best to have as few late payments as possible, especially in recent months and years.

Make Multiple Credit Card Payments Each Month

Your mortgage application also includes a review of your existing debts. For an easy way to fix your credit score, consider making several payments a month on any credit card balance you may carry. The reason for this is that your credit report reflects just a moment in time, not the most up-to-date data. For example, if the mortgage lender pulls your credit report right before you make a credit card payment, your debt may look higher than it actually is because you haven’t made your payment yet.

Not only can higher debt balances affect your credit score (and consequently, your interest rate), it can also impact how much you’re allowed to borrow for your home. Showing a lower credit card balance could qualify you for a higher loan amount, if necessary.

Hold Off on Major Credit Decisions

Once you decide to actively start house hunting, put your other financial plans on hold. Taking out other types of loans can raise a big red flag to lenders. Plus, it can cause your credit score to drop. If you need a new car, personal loan, or even student loan, hold off until after you close on your new home. You could jeopardize your home loan approval if you take out any new credit.

Similarly, it’s also important not to close any existing accounts during your home search. The average age of your credit accounts is considered as part of your credit score. You could accidentally cause your score to lower by closing out old accounts. From a lender’s perspective, no news is good news when it comes to your credit.

Finally, you should also limit your cash purchases during the mortgage application process. When you submit your bank statements for review by your lender, they may require an explanation for any withdrawal in excess of $1,000. Refrain from making any major purchases until you’ve signed your paperwork at closing.

By following this simple credit protocol, you can make the mortgage application process much smoother and more efficient. At the end of the day, that means a faster closing time, so you can get the keys to your house as soon as possible.

Need some help with credit repair before you shop for a home? Get a free consultation at Ovation Credit.

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Job Seeking and Your Credit Score: Why It Matters

By | Credit Reports, Credit Scores

Job Seeking and Your Credit Score: Why It Matters

When you’re on the job hunt, generally you’re looking to put your best foot forward — in every way possible. Ideally, your qualifications, skills, and past experience alone would set you up for a successful job search. However, your credit score when job seeking could also play a part in your application. Many job seekers are surprised to find out that a credit check is included in a standard pre-employment screening.

Why Is a Credit Check Needed?

Employers typically check potential employees’ credit to obtain a more complete picture of their candidacy. (Note: If you live in California, Colorado, Connecticut, Hawaii, Illinois, Maryland, Nevada, Oregon, Vermont, or Washington, and certain cities and jurisdictions, employers are restricted or prohibited from using credit history as part of an employment decision.) The good news, though, is that when potential employers pull your credit report, they do not access the same level of information that a lender or creditor would. Your credit score when job seeking is, luckily, off-limits. However, the main criteria that factors into the calculation of your credit score — such as your history of on-time payments, amount you owe, and your available credit — will be fully visible to employers. So, even though would-be employers might not be able to see your credit score when you are job seeking, your current credit situation could interfere with your job prospects. Here are the major reasons why your credit matters when you’re pursuing a new position — and how you can overcome this if it becomes an obstacle in your path to employment.

 Illustrates Level of Organization

Your approach toward your own personal financial affairs can speak volumes to your organizational and time-management skills. If you’re up for consideration for a role that requires money management, companies want to know that you can successfully handle your personal finances as well. Your credit will be subject to more scrutiny if the job involves access to large quantities of money or highly sensitive consumer information. A credit report that reveals missed payments, outstanding balances, or a high credit-to-debt ratio could signal that you lack the organizational skills required for this type of position.

May Hint Toward Financial Distress

Your credit report will list your payment history and any accounts you have opened. Certain indicators, such as a flurry of recent account openings, late fees, or high credit utilization, could signal that you are in financial trouble. Potential employers might suspect you are only seeking new employment out of a desire for fast cash and not an actual interest in the job itself. In addition, they might be concerned that you will not be able to support yourself and pay your debts with the salary they are offering. Lastly, even though you may not have committed any wrongdoing, potential employers might see you as a risk for committing theft or fraud in order to cover your debt problems.

Shows Responsibility and Maturity

Paying your bills on time every month is good for your credit score — and the same is true for your overall credit report. A history of on-time payments shows potential employers that you are responsible, trustworthy, and fully capable of committing to obligations. On the flip side, a spotty payment history might hint that you do not have the level of responsibility that the employers require in the position you are seeking.

How You Can Address Problems

A history of credit problems may well cost you a coveted position. If you want to avoid this, it’s best to try to address the situation upfront. If you know you have negative information on your report — and the employer has informed you that you will be subject to a credit check prior to a job offer — be proactive and come prepared to explain what happened. Focus the conversation on what you have learned from the situation and the concrete steps you are taking to fix it. The more straightforward and solution-centered your explanation is, the better. The employer might even reward your honesty with a job offer.

H2: We Can Help

As you perfect your resume, don’t forget to clean up your credit report, too. Embarking on a job search is an excellent time to check in with the major credit bureaus and dispute any incorrect details that could be tarnishing your credit score. At Ovation Credit, this is our specialty. Contact us here for a free consultation.

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Notice a Credit Score Drop? Here Are 6 Reasons Why

By | Credit Scores

When you’re working on fixing your credit, or simply paying attention to your score as part of your monitoring efforts, you may be surprised when you see your credit score drop. Whether it’s a significant drop or a minor one, it’s good to stay aware of what’s happening.

Here are six potential reasons why your credit score may have dropped recently.

1. You Have Credit Errors Due to Identity Theft

Identity theft is constantly on the rise. In fact, in 2017 there was a 44% increase in security breaches that exposed personally sensitive consumer information. Because of this, it’s vital to make sure any new activity on your credit report is actually from your own actions. Order a free credit report and scour each account to make sure that you actually opened it yourself. Also, check all of the balances to ensure no one has compromised your existing accounts and charged them up without you noticing.

2. Your Debt Has Increased

You’ll likely see a credit score drop if you’ve increased your debt load, especially if it’s revolving credit rather than an installment loan. You may see a slight dip after you take out large loans, like an auto loan or a mortgage, but those aren’t weighted as negatively as credit card debt. If you’ve upset the balance of your card balances, especially if you’ve maxed out one or more credit accounts, your score is bound to drop. The good news is that you can improve your credit pretty easily by paying down those balances. Typically having just a 30% credit utilization rate is ideal for your score.

3. You Were Over 30 Days Late on a Payment

Being late on your mortgage payment or credit card bill by a few days won’t be reported to the credit bureaus. Once you hit 30 days late, however, the creditor will most likely report it as a late payment. Since your payment history accounts for 35% of your credit score, you’ll probably notice a decrease in your score. Don’t sit on that bill. You’ll receive additional negative entries at 45, 60, 90, and 120 days late. Make that payment as soon as possible to protect your score from being damaged even further.

4. You Closed a Credit Card Account

The age of your credit history influences your score. Consequently, if you close an old account, the cumulative average age of all your accounts will drop. Your score, too, might drop a bit. If you’re paying an annual fee for a credit card and you’re not really taking advantage of the benefits, by all means cancel the account. But if it’s not costing you anything, it might be a good idea to keep that old card in your wallet, especially if you’ve had that account open for several years.

5. You Paid Off a Loan

Paying off a loan isn’t a bad thing, especially if it gets you out of debt or reduces your interest payments. When you do this, however, your credit mix will change, which can impact your credit score. This is especially true for installment loans since they’re viewed as more favorable than credit card debt. Keep paying down those credit cards to help offset the drop in your score. You could also consider consolidating credit card debt into a low-interest debt consolidation loan. It could save you money on your interest payments and also get your credit mix back to a better place.

6. You Had a Derogatory Item Added to Your Report

If you had a collections account added to your credit report or a public record, this can do significant damage to your credit score. A collections statement is added when an account is severely late. To get it removed, you could initiate a credit dispute or make a settlement payment and negotiate to have the listing removed from your credit report.

Alternatively, your score will also suffer if you’ve had anything added like a foreclosure, tax lien, bankruptcy, or civil judgment. These are serious items and typically take between seven and 10 years to be removed from your credit report.

Luckily, these types of public records and any other negative item on your credit report can be removed early. Use a credit repair service like Ovation Credit to help initiate credit disputes with an experienced legal team. You do have rights when it comes to credit repair and you shouldn’t be afraid to exercise them.

Sign up for a free consultation today with Ovation Credit and find out how you can get your credit score back on track.

What’s Causing Your Credit Score Fluctuations?

By | Credit Scores

Once you’ve started to check your credit score on a regular basis, you may notice that the score tends to fluctuate. If you were to pull your credit report once a month, you might see changes in your credit score — or even on a daily basis (although that’s not recommended). The simple explanation is that your score is changing based on real-time updates to your credit report. If you check your score right before you make a payment on a loan or credit card, and then check it afterward as well; you might see slight differences. A number of factors could be at play, depending on your recent credit history.

Late Payments

The first thing you’ll want to consider is if you have had any missed or late payments recently, which tends to be the most significant reason that credit scores can fluctuate. Late payments remain on your credit report for seven years, even if you only missed the payment by a few days.

Changes in Credit Utilization Ratio

If you made a large purchase or paid off a substantial debt, your credit utilization ratio may change — which is part of the formula that the major credit bureaus use to determine your credit score. Your credit utilization ratio is calculated by dividing the amount of your debt on a credit card by your credit limit. For example, if you rack up $5,000 in spending on a credit card with a $7,500 limit, your credit utilization ratio will increase. On the other hand, if you made a large payment on a revolving credit card loan, that ratio would decrease, as you are now using less of your available credit.

Opening New Accounts

If you open a new account or take out a new loan, that typically shows up as a “hard inquiry” on your credit report, lowering your score. That is one reason why experts recommend not opening too many accounts at once. However, hard inquiries have less of an effect on your overall score than other factors.

Age of Accounts

As accounts grow older and cross certain thresholds, credit bureaus view them as less important in the overall calculation of your credit score. The bureaus consider the age of the oldest account, as well as the average age of all of your accounts. In addition, any credit “events” are deleted from your credit report once they pass the seven-year mark. So the fluctuations to your credit score could be the result of a negative event falling off your report or simply the passage of time lapsing since certain entries in your credit report.

Closing an Account

If you decide to close an account that you no longer use, that might cause your overall available credit to decrease, affecting your credit utilization ratio and therefore, your credit score. It’s typically recommended to keep old accounts open for that reason.

Changes to the Number of Loans or Accounts

To gauge your ability to pay debt responsibility, lenders want to see a diverse amount of open accounts and loans. Paying off a loan — even if it’s the largest one you have — will cause some changes to your credit score. Also, if you are opening a lot of accounts at once, your score may also take a hit as it may appear to lenders that you are struggling financially.

Word to the Wise

While regular credit report checks are a healthy part of credit management, you’ll want to resist the urge to check your score too frequently. And make sure you’re comparing apples to apples — your credit score can vary between the different scoring models, since each model uses its own specific formula. Fluctuations are normal over a daily or monthly basis, but it may take longer than that for your credit score to reflect your efforts to improve it. Keep in mind that slight changes over a brief period of time matter less than the overall picture.

It’s critical to check your credit report every so often to make sure the information being reported is both accurate and timely. Credit report errors are another common culprit of credit score fluctuations — and luckily, you can get them removed from your report. If you believe your credit report may contain errors that are causing your score to fluctuate without good reason, contact the pros at Ovation Credit. We’ll be happy to talk through your concerns, review the report, and work with the credit agencies on your behalf to remove the errors.

Better Credit Score

5 Strategies for a Better Credit Score

By | Credit Scores

When you’re committing to a healthier financial future, a good credit score should be one of the first areas you focus on. With a better credit score, you’ll qualify for more favorable loan terms and interest rates, which add up to substantial savings over time. Credit scores range from 300 to 850, with a score of 750 or higher generally considered excellent. Although the path to a higher credit score isn’t easy, you can set yourself up for success by adopting certain strategies. It’s worth noting that sound credit management is quite a bit like deciding to stick to a healthier lifestyle. You’re more likely to find success if you can implement these practices as “lifestyle changes,” rather than viewing the process as simply a temporary fix to your credit problems. Here are five of the most effective strategies to attain a higher credit score.

1. Pay down your monthly balances as much as you can.

Your payment history is one of the most important factors determining your credit score. So it’s a good idea to keep those credit card balances low. Your payments affect the percentage of revolving credit you have compared to what you’re actually using — and a low percentage is good for your overall score. Experts generally recommend keeping your percentage at or below 30%. So, for example, if a credit card has a limit of $1,000, you would not want a balance higher than $300 per month. And always make the minimum payment at the very least — if you can, try to set aside a few extra dollars to pay more than the minimum.

2. Stick to one or two cards.

If you have multiple balances across several different cards, look into consolidating them into one loan with a lower interest rate. Having multiple cards with balances will eventually lower your score. You should limit yourself to spending on only one or two cards (preferably with low interest and decent rewards and incentive packages). This strategy also carries the additional benefit of limiting the number of bills you’ll be responsible for paying every month.

3. Pay attention to all of your bills.

You might be surprised by what items affect your credit score — even down to an overdue fine on a library book. Paying your bills on time every month is an essential strategy in achieving a better credit score. Having a bill get sent to collections for lack of payment could send your score into a nosedive. If you can, try to set up all of your bills on auto-pay — and always pay the smaller fees, like those for library books or medical expenses, as soon as you receive the bill.

4. Spend within your means.

One of the biggest pitfalls that credit card users face is spending more than they can afford to pay back. Although it’s sometimes easier said than done, the trick is to start to view credit the same way as you would cash. If you’re thinking of purchasing something on credit that you can’t afford to buy right now with cash, the simple answer is to delay the purchase until you have the cash. If you find yourself frequently resorting to credit cards to cover unexpected expenditures, shop around for a card that offers low interest rates, so that if you end up having to pay for a larger expense over time, you will ultimately pay less interest.

5. Leave old “good” credit accounts open.

Many people make the mistake of closing accounts that they no longer use, mistakenly believing that too many open and unused accounts hurt their score. The fact is, the unused older accounts are actually quite beneficial to your credit. Don’t rush to close an account that’s paid off. That’s considered good credit, and lenders will look favorably on those items in your credit report. Closing an account could also change your credit utilization levels. If you close an account with a $1,000 limit, that’s significantly less available credit — which could make your debts look higher in comparison.

As part of your goal to get a better credit score, you’ll want to keep a close eye on your credit reports to ensure that no incorrect or outdated information is unfairly lowering your credit score. If you think you need to dispute something on your credit report, we can help. Contact the pros at Ovation Credit for a free consultation to learn how we can help you clean up your credit report.

5 Factors That Impact Your Credit Score

By | Credit Scores

Like it or not, your credit score probably affects where you live, the car you drive, the smartphone you use, and how you take vacations, go to college and care for your family. Even with a moderate or lower income, it’s important to understand the factors affecting your credit score. With smart moves and strategic thinking, you can build a foundation for the future and enjoy the benefits of plentiful low-interest credit. Here are the five factors to remember every time you’re considering a loan, card or new account:

1. Number of Accounts

Every time you open an account that requires faith in your ability to pay on time — and this includes phone lines, utilities and student loans — you add a record to your credit history. Most financial advisors recommend limiting yourself to the average amount of three or four cards. The reason is simple: The more cards you have, the higher chance you’ll miss or forget due dates. Alternately, you should get at least one card if you don’t have one. This is because you can’t build credit without having any.

Obviously, you can’t control the number of accounts for life necessities like heat, electricity, internet and phone. You can, however, limit the number of student loans, car loans and mortgages. If you’re married, work it out so both you and your spouse hold accounts for things you share. One partner might pay the power bill, the other the internet. This practice also allows each partner to practice good financial management and build a healthy score.

2. Age of Accounts

A long time ago, you took on a high-interest or secured credit card as a way to improve your score. Should you close that account when a better card comes your way? Maybe, but probably not. The age of your accounts is another factor that affects credit rating, so an old account is a plus instead of minus. Just make sure you have a low balance, no more than five percent of the limit, and pay on time to avoid fees. Be aware that closed accounts will drop off your record after a certain period of time — usually seven years. Keep track of open accounts by looking at your credit report frequently.

3. Number of Inquiries

Although it can be frustrating and seem unfair, your score is affected when lenders considering your request for a mortgage, business loan or credit card request your credit report. Sometimes, your credit history is also accessed by potential employers, agencies checking your background, or other instances in which your character may come into question. Keep the number of inquiries in check by planning ahead. Be strategic about major purchases, like a car, that will cause numerous checks on your credit as you search for the best financing. By limiting the number of inquiries in the months before the purchase, you’ll suffer less damage when lenders look at your record.

4. Outstanding Debt

Imagine that every cent of your credit is poured into a single, large bucket. This bucket, the total amount of credit assigned to you, is marked with three gauges — green at the top, yellow in the middle and red near the bottom. The point where the contents of the bucket settle represents your debt-to-credit ratio, one of the most important factors of a credit score. As a rule, your credit card balance shouldn’t be higher than one-third of your total allowed credit. Why? Consider how your high balances look from the viewpoint of lenders — if you have a crisis or emergency and no means to pay with your credit, the chance of late payment or bankruptcy increases.

5. Payment History

When you pay and how much is another important factor of total credit score. Establish the good habit of paying more than the minimum amount due to offset any interest charged to the account. When possible, pay all but five percent of the outstanding balance due. Leaving a small amount due in each account shows the account is active and confirms your commitment to the lender, but don’t forget it’s there, forget to pay and be charged a late fee.

If you have a record of late payments, it’s possible to recover. Pay a few payments on time and then call the lender and ask them to remove the negative mark. They might not agree, but you’ll never know unless you ask. The same goes for accounts in collections — once you are in the position to pay off the debt, call to negotiate with the agency or lender. Many times, they will reduce the total amount due if you agree to pay the amount due and close the account. Also note that you should speak carefully and cautiously when talking to debt collectors on the phone. Review your rights with a credit counselor first.

By setting goals, paying on time and making a sincere effort to raise your score, you can earn the good things in life. Low-interest credit opens doors to opportunities like self-employment, travel and education. Now that you know more about how credit scores are calculated, it’s time to get yours in shape for a better and brighter future.

Sources “What is a credit score?”

Credit “How many credit cards does the average American have?” “How closing accounts affects my credit score”: “”

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6 Ways Your Credit Score Impacts Your Life

By | Credit Scores

If you’re like most people, you won’t know your credit score until you suddenly realize it’s important. Normally, this happens when you apply for a mortgage or another large loan.

You see, you might be ignoring your credit score, but banks, businesses and other lenders aren’t. For these users, your credit score is a vital snapshot of your financial well-being and trustworthiness, and it enables them to manage their risk when lending to you, hiring you or selling you their services. It’s the culmination of every large financial decision you’ve ever made — and it can have a significant impact on your future decisions.

Let’s take a look at some of the significant ways in which your credit score impacts you.

1. The Interest Rate on Your Mortgage

Your mortgage is likely to be the biggest loan you take out in your life, and your credit score plays a significant role in determining which mortgage you can get and how much it is going to cost you. Applicants with a low credit score, indicating potentially risky financial behavior, are likely to have to pay a higher interest rate on their loan and, in some cases, may be rejected outright.

A small change in the percentage of interest you pay might not seem like much, but with many mortgages stretching from 25 to 35 years, it represents thousands of dollars of extra spending.

2. Whether You Get the Rental Property You Want

Not bought a house yet? Your credit rate still affects your choice of home. After your earnings-to-rent ratio, your credit score is the most important factor in deciding whether your rental application is accepted. Given the choice of two applicants with similar earnings, the one with the higher credit score will always win — landlords know that by reducing their risk, they save money.

3. The Car You Drive

In 2017, the average auto financing loan had an APR of 4.21 percent, with most loans falling between 3 percent and 10 percent APR. The difference between a great credit score and a very poor one is even bigger: Someone with a very bad record might receive as much as 20 percent, while some users with a great record can still get zero percent APR. The difference between the two can easily amount to hundreds or even thousands of dollars per year.

4. Your Refinancing Options

As interest rates change, what seemed like a good deal a few years ago can quickly become expensive; by refinancing your mortgage or student loan, you can save a lot of money. Unfortunately, if you have poor credit your ability to do this may be limited or nonexistent.

It doesn’t matter what your credit score looked like when you first got the loan, either. Many borrowers have a good score when they get their mortgage, then fall into bad practices. When they try to refinance, their now-reduced credit score limits their options and gives them a nasty shock.

5. Your Employment Opportunities

Many employers like to credit-check job applicants before making a hire, particularly if the role comes with a large amount of financial responsibility. Although they’re not lending you money, the business is exposing themselves to risk of another kind by putting their finances and reputation in your hands. By screening out applicants with a poor credit score, businesses aim to reduce workplace theft and fraud.

6. Taking Out a Student Loan

If you’ve already borrowed the maximum federal student loan amount, it’s likely you’ll need to turn to a private loan to make up the difference to cover your tuition. These private loans (issued by a bank, credit union or school) are affected by your credit score, just like a mortgage or auto loan. This can come as a shock to students who have only dealt with federal loans before (which aren’t affected by credit score).

You’ll probably be paying off your student loan for years to come — a poor credit score could add thousands of dollars to the amount.

The Impact Can Be Positive or Negative

We’ve primarily focused on the negatives of having a poor credit score in this article, but at the other end of the spectrum are a bunch of people who get great deals on everything. Their above average credit score enables them to get better mortgages, cheaper loans, and superior work and housing opportunities. And because their interest rates are lower, maintaining their score is easier — it’s an unfortunate fact that the high interest rates those with a low score receive make it harder for them to improve that score.

Achieving Your Desired Credit Score

There’s no such thing as an irredeemable credit score; with time, effort and discipline, anyone can improve their score and access better rates. But, it doesn’t happen overnight — it takes time. Which means that the best time to improve your score is always now. You need to start preparing your credit score in advance if you want to get the best deals on a mortgage.

Unfortunately, the information on your credit profile doesn’t always tell the whole story — through no fault of your own, this information can be incomplete or even inaccurate. When that happens, your best bet it to repair your credit profile.

Ovation Credit Services helps the 79 percent of consumers whose credit reports contain a mistake of some kind. Sign up today and take the first step toward repairing your reputation!

5 Reasons Why Paying Your Bills on Time Is Not Enough

By | Credit Scores, Uncategorized

Accounting for 35 percent of your credit score, payment history is the number one factor affecting your credit standing. A single missed payment could lower your credit score by 60, 80 or 100 points, depending on the date of the late payment and your current credit score. Generally speaking, higher scores are hit harder by late payments than lower scores and older late payments have less impact than recent ones.

If you want great credit, you must pay all of your bills on time — that’s a given. However, excellent payment history alone will not give you the credit score you desire. You must also pay attention to the factors that make up the remaining 65 percent of your credit score.

5 Factors That Influence Your Credit Score

Credit scoring models look at a variety of factors when calculating your score, including payment history, credit card utilization, length of credit history, mix of credit and inquiries.

1. Credit Card Usage

With the exception of payment history, credit card utilization impacts your credit score more than any other factor. A whopping 30 percent of your credit score depends on it. Your utilization score represents the percentage of revolving debt you have in comparison to the total amount of revolving credit available to you. Most revolving credit comes in the form of credit cards, but it can also include any other type of revolving credit, such as a revolving loan.

Ideally, your credit card utilization should be 30 percent or less. For example, if you have $5,000 in revolving credit, your total balances should add up to no more than $1,500. To find out your utilization percentage, divide your total balance by your total credit then multiply the answer by 100.

2. Length of Credit History

The length of your credit history accounts for 15 percent of your credit score. To calculate your length of history, credit scoring models determine the average age of all credit accounts listed on your credit report. Closed accounts that have fallen off of your credit report are not considered.

When it comes to credit history, there is no magical number you should strive for. However, the longer history you have, the better.

3. Mix of Credit

Accounting for 10 percent of your credit score, your mix of credit depends on the types of credit accounts listed on your credit report. A diverse mix that includes installment loans, revolving credit and secured credit is best. The following is a brief explanation of each type of credit.

  • Installment loans: Personal loans, student loans, furniture loans
  • Revolving credit: Credit cards, retail credit cards, gas cards
  • Secured credit: Auto loans, home loans, equipment loans

For the best possible score, maintain a mix of credit accounts but don’t go overboard. A single installment loan combined with two credit card accounts and an auto loan is sufficient to show how you manage different types of credit.

4. Hard Credit Inquiries

There are two main types of credit inquiries: soft and hard. Soft inquiries are initiated without your knowledge by companies screening you for pre-approved offers. They do not affect your credit score.

Hard inquiries, however, account for the remaining 10 percent of your credit score. Hard inquiries include any and all credit applications initiated by you or by a lender on your behalf. Scoring models look at two factors when considering hard inquiries: the number of inquiries present and the date they were initiated. Older inquiries carry less weight than newer ones.

5. Multiple New Accounts

Too many new accounts can lower your score by decreasing your length of credit history and increasing the number of hard inquiries appearing on your credit report. For this reason, you should avoid opening multiple accounts within a short amount of time. Strive to wait at least six months between credit applications.

How to Improve Your Credit Score

To improve your credit score, take steps to address and optimize all of the factors affecting your credit score. The following tips will help you.

Improve Payment History

Do this by making all payments on time. If you have late payments listed on your credit report, contact the lender to see if there is a remedy. You may be able to restructure your loan or set up a payment arrangement in exchange for the removal of the delinquency from your report. This only works if your account is not currently in collections.

Lower Credit Card Utilization

Do this by paying down your credit card balances or asking for a credit limit increase on one or more of your revolving accounts. Remember, balances should account for no more than 30 percent of your available credit.

Increase Length of Credit History

This can be accomplished by being patient and letting your credit profile age. Avoid obtaining new credit, as this will shorten the average length of your credit history. Also, consider leaving older accounts open even if you’re not using them.

Diversify Mix of Credit

You can do this by obtaining new types of credit. If you have two or more credit cards, do not apply for more revolving credit. Instead, consider taking out a personal loan.

Decrease Hard Credit Inquiries

Do this by spacing out your credit applications. Only apply for credit if it’s absolutely necessary. Note: multiple inquiries for a car loan or mortgage are often grouped together and only considered as one inquiry, provided they occur within a reasonable time frame.

Credit scoring models are complicated and mysterious on purpose. Credit agencies do not want you to know or understand the exact formula they use to calculate your credit score. However, they offer enough transparency for you to optimize your credit profile in an effort to earn the best possible score. If you learn all you can and take steps to improve your credit profile, you will see your score improve over time.


Credit Utilization: Master This Key Scoring Factor

By | Credit Scores

Imagine two people borrowing the same amount of money from the same lender. One has a stellar credit utilization ratio. The other has a relatively poor number. Well, the first person could end up paying thousands of dollars less than the second individual due to a lower interest rate.

Your credit utilization rate accounts for 30 percent of your overall credit score. Given its significance, you should strive to make yours impressive.

Credit Utilization Rate


Calculating Credit Utilization

To figure out your credit utilization ratio, take your monthly balance and divide it by your credit limit. Let’s say you have a credit card with a $2,000 limit. Last month, you charged $200 on it. When you divide 200 by 2,000, you get 0.1. Thus, last month’s utilization ratio for that card is 10 percent.

Your credit reporting agency will give you a utilization score for each of your credit cards as well as other types of credit like home equity loans. It will also assign you an overall credit utilization score. The agency will compute that comprehensive number by adding all of your balances and all of your limits and then dividing the first sum by the second.

If your credit utilization score is too high, it’s harder to obtain loans with favorable terms. That’s because potential lenders will see you as someone who charges too much and who may, at some point, have trouble making loan payments.

Know Your (Credit) Limits

For a credit utilization score, the magic number is 30 percent. Try not to go over it. A strong utilization rate is between 10 and 20 percent, and an exceptional one is less than 10 percent.

To stay below the 30 percent mark, always monitor your credit card limits. If a credit card issuer lowers your limit, rely on that card less often. Conversely, if a credit card company raises your limit, you can feel free to use that card a little more frequently. Similarly, keep checking your balances online. If you’re coming close to 30 percent on one of your cards, don’t touch it again until next month.

Your credit card companies might have a program wherein they text you when you’ve hit a certain percentage of your limit. You could ask them to let you know when you’ve reached 20 percent or so.

Credit Card Carefulness

If your credit utilization score is currently higher than 30 percent, don’t worry too much. You can bring it down soon enough. Your first step is to carry more cash and keep more money in your checking account. That way, when you shop for groceries, clothing and other personal items, you can leave your plastic in your purse or wallet.

In addition, don’t shop on the Internet as much. Or, if you must buy products from digital stores, get in the habit of using a debit card rather than a credit card. Always search cyberspace for deals and discounts, too.

Higher Credit Lines

You might want to get in touch with one or more of your credit card issuers to apply for a limit increase. Just be aware that a credit card company must conduct a hard inquiry on anyone who makes such a request. A hard inquiry will probably lower your credit score a little.

Seeking a limit increase carries some risk. If your credit history isn’t in good shape, your credit card company could choose to reduce your limit instead, putting you in an even worse predicament.

On the other hand, if your credit report is exemplary, you could receive a credit limit increase without even asking for it. Either way, with a greater limit, you could spend the same amount of money, but your utilization rate would still go down.

In any event, approach a higher credit limit with caution. When you’re granted one, it’s natural to start spending more. And, unfortunately, it’s easy to go too far. In short order, you could be facing a higher credit utilization rate and mounting debts.

Shaky Strategies

Could you lower your utilization ratio by getting more credit cards and spreading out your spending? It’s possible, but you should resist that idea. A credit reporting agency might view your new credit cards in a negative light and lower your score accordingly. Not to mention, every time you apply for a credit card, the issuer will have to do a hard inquiry.

Plus, with extra credit cards, it becomes more likely that you’ll charge more than you can afford or forget to make a payment.

Give Yourself Some Credit

Finally, it’s a great idea to partner with a credentialed credit repair company. Its team members can study your credit history and find mistakes, questionable entries and other problems that are unfairly bringing your scores down, including your credit utilization ratio. Those pros can then contact your credit reporting agencies and convince them to fix the inaccuracies.

Knowing that your credit utilization number is going in the right direction should give you feelings of pride and security. Getting a low interest rate and advantageous conditions on your next loan or mortgage will feel even better.


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