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monitoring your credit score

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.

Spend Smarter: How to Use Credit Cards to Your Advantage

By | Credit Cards

Credit cards can be used for far more than an additional line of credit, but if this is the only way you’ve ever thought of using them, you’re not alone. To help increase your financial know-how, and maybe even fix your credit score, we’ve listed out all the ways credit cards can help you beyond just being financial safety nets. Become a wizard with these little-known credit card hacks.

1. Pay Down Debt Faster

If you’re already swamped with credit card debt, taking on another line of credit may seem counterintuitive to fixing your credit. However, it’s really not if the purpose is to transfer existing debt and consolidate your monthly payments. Choose a card with a better interest rate and more of your monthly payments will be put toward the principal, hence shortening the amount of time it would take pay everything off. Doing this will also improve your credit score. Even if you make your payments on time, too much debt can hurt you.

2. Credit Repair

A lot of people would rather own than rent, but the one major thing keeping them from purchasing their own property is bad credit. Either they can’t get approved for a loan or the interest rate pushes the monthly payments up too high. Of course, many people are also victims of credit errors and have to go into the process of credit disputes, which can take time and money.

To expedite the process, a faster way to repair your credit would be to take out a line of credit. Maintain on-time monthly payments, and your payment history will go up a bump. If your credit is too low for a standard credit card, get a secured credit card at first. Use it for your everyday purchases, pay it off each month, and in about half a year you should qualify for an unsecured card.

3. Pay for Travel

Choose a credit card with a great points system, and all of your normal, everyday purchases can help pay for your next hotel, rental, or flight. Each card is different, so be sure to verify which purchases earn you the most points. Just be sure you pay the card off each month so you don’t accumulate debt!

4. Roadside Assistance

Some credit cards offer roadside assistance to any car the cardholder is a driver or passenger in (just as long as it’s not a company car). Whether your car needs a quick jump start, tire change, or short-distance tow, you can get roadside assistance free of charge. Next time you’re on the side of the road, call your credit card customer assistance number (better yet, put their roadside assistance department in your contacts). The perks are not as great as having a AAA membership, but for free, you can’t beat the price.

5. Save Money When Renting

Car rental agencies are able to cushion their bank accounts by selling insurance to renters. Yes, insurance is always a smart thing to have, but it’s not smart when it’s a redundant purchase. Many credit cards offer free, comprehensive rental coverage to their card members. So the next time you need to rent a car for a long getaway, you could save yourself as much as $40 a day by declining an agency’s optional coverage plans.

6. Purchase Protection/Warranty Coverage

If you purchase an item and it breaks through no fault of your own, your credit card likely has a third-party claims program that you can go through instead of the original retailer (who too often fight returns tooth and nail). Your credit card company will then either refund you the full amount for the repair or reimbursement. Of course, verify any limitations your card has before your next purchase, but for many cardholders warranty coverage is a waste of money.

7. Stop Paying Top $$$ for Currency Conversion

If you’re a frequent traveler, your credit card can save you money on currency conversions. Many credit card companies only charge 5%, but others waive the fees altogether. Stop making visits to foreign banks or travel kiosks that overcharge you. Use your credit card to save time and money. For many people, this perk is the sole reason they take out certain credit cards in the first place.

Ready for Next Steps?

Talk to one of our credit specialists to learn how you can take back your financial freedom. Contact us at Ovation Credit to get your free consultation.

how divorce affects your credit

Finances After a Divorce: 6 Things to Know

By | Personal Finance, Your Credit

Divorce can be a trying period in your life, but you’ll feel like life is a little closer to normal if you can regain your financial footing as quickly as possible. Read these tips to understand the impact on different areas of your finances after a divorce. In some cases, you may even discover a few perks depending on your situation or final divorce settlement.

1. You Can Access Retirement Funds Penalty-Free

If you receive a qualified relations domestic order as part of your divorce proceedings, you can take out an early withdrawal from your retirement account without being assessed for a penalty. Typically, you’d be charged a 10% fee on any distribution before the age of 59 ½. You will, however, be responsible for paying income taxes on anything you withdraw as part of your divorce. You can avoid taxes if you choose to roll your retirement funds into an IRA. Just be cautious not to jeopardize your financial future. Accessing retirement funds penalty-free can help improve credit if you’re trying to avoid debt or collections while going through a divorce.

2. Alimony Tax Laws Have Changed

If your divorce settlement is finalized post-2018, you’ll see some drastic changes in how alimony and child support are treated in terms of taxation. Pre-2019 agreements allow for alimony to be used as a tax deduction for the payer and counts as taxable income for the recipient. Under the new tax law, however, these rules are completely eliminated. There is no allowance for using alimony payments as a tax deduction and recipients do not have to include these payments as part of their taxable income. In short, this is a win if you’re on the receiving end, but could be a minor financial blow if you’re hoping to get a tax deduction for your upcoming divorce settlement.

3. College Financial Aid Goes Through the Custodial Parent

If your children are approaching college age, it’s important to understand how financial aid works when the parents are divorced. Rather than having to count both parents’ income on the Free Application for Federal Student Aid (FAFSA), only the custodial parent’s income must be included, which can potentially increase your child’s chance of receiving federal aid. Note, however, that child-support and alimony payments received from the non-custodial parents also have to be included as part of the FAFSA paperwork. If parents have a 50% custody agreement, the custodial parent is considered the one with whom the child stayed the most number of days in the preceding 12 months. With a bit of planning with your ex-spouse, you may be able to minimize your family’s financial responsibility by making the person with less income the custodial parent.

4. Joint Debt Can Be Assigned to One Person

You may feel happy that the judge assigns joint debt like a car loan or personal loan to your ex-spouse, but the situation has the potential to seriously damage your credit score. If your ex-spouse fails to make payments on the loan, whether on purpose or out of financial hardship, those missed payments will be reflected on your credit report. It can take up to seven years for a single late payment to naturally drop off your report unless you’re able to successfully initiate a credit dispute and get it removed before then.

5. Set Yourself Up for Credit Protection

In order to protect your credit score and financial future after divorce, check your credit report for any errors. You may want to sign up for credit monitoring services to track payments for accounts that still have your name on them. Additionally, remove your ex as an authorized user on all of your credit cards and any other lines of credit you may have. Look into refinancing joint loans so you can eventually separate your credit from your ex’s for good.

6. Hire a Pro to Expedite Credit Repair

If you’ve already experienced credit damage as a result of your divorce, consider hiring a professional credit repair firm to help get it back on track. Whether you’re feeling overwhelmed or simply want to move on to the next stage of your life, fixing your credit is a great first step to a clean slate. You can even sign up for a free consultation with Ovation to find out if you’re a good candidate for credit repair.

A divorce usually isn’t a walk in the park. But with a bit of background knowledge and some advance planning, you can minimize its financial impact and move on to brighter days.

Sources:

http://www.finaid.org/questions/divorce.phtml

leasing or buying a car is better for your credit

Is Leasing or Buying a Car Better for Your Credit?

By | Personal Finance

You need a new car, but you either don’t have the cash or need something better than a clunker. At the same time, you might also be working on your credit repair. With competitive leasing options available these days, you may be wondering if you’re better off going that route or financing your car with a traditional auto loan.

Keep reading to find out how to finance your next vehicle while simultaneously fixing your credit.

Both Monthly Payments Count as Debt

If you’re looking to lower your credit utilization, it doesn’t make a difference if you choose to lease or buy your next car. They’ll both count as debt on your credit report, with either balance showing up. If you ever need other types of loans, lease and loan payments also count toward your monthly debt-to-income ratio, which can result in higher interest payments or even not getting approved.

However, when you purchase a car, your entire financed amount shows up on your credit report. If your loan is for $25,000, that is the amount of debt reported to the credit bureaus. With a leased car, on the other hand, the residual value of the vehicle after your lease term doesn’t show up. Say that same $25,000 vehicle will be worth $15,000 after your three-year lease. In that instance, only $10,000 shows up as your borrowed amount on your credit report. In that sense, it could help you with your credit repair journey.

Leasing May Result in Fewer Inquiries and Improved Credit

Another factor to consider is how inquiries are handled during the leasing and car loan application process. Lease financing generally goes directly through the dealer, so only one inquiry shows up on your credit report. If you apply for an auto loan through a car dealership, on the other hand, your loan request may be sent to multiple lenders.

If you’re doing all of your car shopping within a couple of weeks, all of those inquiries may just be counted as one, since you’re clearly just rate shopping. However, if you need to take longer with your car shopping, you could end up unraveling some of your credit repair success with multiple inquiries spread out over time. Even after you’ve applied for a car loan, it’s smart to check your report for any potential credit errors from the application process.

Your Lease May Show Up as Completed Contract

Depending on how long you plan on spreading out your car loan, a shorter lease may help boost your credit score significantly when you’ve successfully completed payments. A finished contract on your report is a strong asset to have, and leases generally come with shorter repayment periods. If you’re comparing a 36-month lease to a 60-month car loan, for example, you’ll reach that stage of completion a full two years before your car payments are finished.

Lease Maintenance May Be Covered

With a lease, you may be able to spend less on maintenance and covered repairs. Check your contract to see what’s included in your coverage. How does this help fix your credit? The less you spend on these unexpected expenses, the more you can put toward debt or emergency savings. You can also use that extra cash to avoid having to borrow money or charge up credit cards in the future.

Both of these things help protect your credit in the future. While you definitely want to proactively work on your credit repair, you should also have a plan to create a safety net to avoid future financial pitfalls as much as possible.

Buying vs. Leasing: Bottom Line

While many of these credit-related issues tend to favor a lease over a car loan, there are lots of other factors to consider. These include things like affordability, whether or not you need a down payment and costs at the end of your lease contract. A lease may be more expensive on a monthly basis if you choose a shorter term. You can lower that amount by making a down payment, but that’s not always the best choice, especially if you don’t plan on buying the car at the end of your lease. If you drive a lot, you may also have to pay extra if you go over your allotted mileage during your lease.

Consider your options holistically to get the best deal both from a financial and a credit perspective. Also, think about both choices from both a short-term and long-term point of view.

Looking for other ways to improve your credit? Sign up for a free consultation with Ovation Credit. We can help you efficiently navigate credit disputes to improve your credit report.

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