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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.

Credit Repair Myths Busted

7 Credit Repair Myths Busted

By | Credit Repair

The first step toward repairing your credit is educating yourself on credit repair myths. For most people, the Internet is the easiest way to access that information. But as with any other common financial problem, you’ll find that the Internet abounds with misinformation and services that, unfortunately, might actually cause more harm than good. We’ve rounded up the most popular credit repair myths so you can save yourself from more unnecessary financial angst.

Credit Repair Myths:

Myth #1: If you pay off your debts, those negative items will dissolve from your credit report.

Paying your debts will increase your credit score, but the damage may already be done. Negative credit items remain on your credit report for seven years, which is a very long time to wait. Especially when you’re facing denials for loans or higher interest rates because of your credit history. The only other way to get an item removed is if you believe it to be inaccurate or outdated. In that case, you can hire a service to dispute the information with the credit bureau or undertake the process yourself. Resolving to pay your debts on time will go a long way toward boosting your credit profile, but it won’t rid your score of the effects of the “bad” debts.

Myth #2: Credit repair companies are a scam.

This is the most popular question when it comes to credit repair myths. Not all credit repair companies are created equal, but legitimate and well-respected companies do exist. Successful and reputable credit repair companies will have a trained analyst review your credit report, discuss any questions and concerns you may have, and go to work on your behalf with the credit bureaus to dispute incorrect or outdated information that is hurting your credit rating. Although you could commence the process yourself, you may choose to save considerable time and energy by handing the reins to a trained professional.

Myth #3: Bankruptcy is my only option.

Bankruptcy should be viewed only a last-resort. Bankruptcy might provide an immediate fix to a devastating financial situation, but your credit score will take a while to recover. Before you take this leap, make sure you have investigated all of the possible options available to you — and better yet, speak with a trained credit counselor who can possibly point you in a direction better suited to your financial situation.

Myth #4: You won’t see improvements in your credit score for a very long time.

Change isn’t going to happen overnight, but it may happen faster than you think. Credit bureaus will generally make marks to credit scores every 30 days, and hard inquiries (a credit check done by a lender when you’re trying to open a new account, for instance) are reported soon after they occur. You might see some small changes if you check your credit report once a month, and more significant improvements will be visible within the first year of working to repair your credit situation.

Myth #5: Negative items can be added back to your credit report.

You may have heard that credit bureaus can add negative events back on your credit report after they’ve been removed due to a dispute. The only way that can happen following a dispute is if the credit bureau finds out that a debt may be valid after it has been contacted to remove the item for being incorrect or outdated. But in most cases, items erased from your credit report won’t make a reappearance.

Myth #6: You’re better off repairing your credit on your own.

You can, of course, gather all of the necessary information, write to the credit repair companies, and request removal of any items that you believe to be erroneous. This does, however, require a great deal of patience, as well as legal and financial finesse. That’s why it’s a good idea to hire a professional, who is trained to negotiate with the credit bureaus and secure the best possible outcome for you.

Myth #7: Credit reports are generally accurate.

Errors are more common than you’d think. A 2012 study from the Federal Trade Commission revealed that one in five Americans have been plagued with an error on their credit report. Most people make it a habit to review their credit card statements monthly to ensure they recognize all charges. The same should be true for your credit report — because you never know what incorrect and damaging information could be affecting your credit score.

It can be tough to separate fact from fiction when you’ve resolved to repair your credit. At Ovation Credit, we are standing by to help answer your questions about your credit score and reports. Contact us today to learn more about how we can help you build a stronger financial future.

unpaid credit cards

Unpaid Credit Cards – You Can Still Repair Your Credit

By | Credit Cards

Statistics show that many Americans have bad credit, and one element that is a common factor is unpaid credit cards and how they affect your credit.

According to the statistics, VantageScore says there are about 220 million scorable people and 68 million of them have bad or poor scores (lower than 601), which is how they got to that 30 percent estimate. Figures from credit bureau TransUnion also say that 30 percent have subprime credit based on the VantageScore 3.0 model.

The good news is that you can fix it, but how do you repair credit when you have unpaid credit cards that, and possibly some in collections?

The First Step

Wondering how to fix your credit or how to improve your credit score? First thing is to find out your credit score and exactly what is on your credit report. Sometimes, there are items that should have been removed yet remain long after. These items are affecting your score and ability to do things like buying a home, buying a car, getting insurance, getting security deposits on utilities or, even worse, getting certain jobs.

If you have unpaid credit cards, they are often sent to third-party collection agencies that will try to collect the debt. One of the first things they do is list it on your credit report, which hurts your overall credit score. These debt collections remain active for seven years unless you take care of the charge, dispute it, or have it erased.

Disputing a Debt Collection

It is best to dispute a debt collection as soon as possible, generally within 30 days of when you were first contacted by the agency. This time frame is important because it allows you to request that the collection agency provide proof that you owe the debt. If they ignore your request or cannot prove the debt, then it has to be taken off of your credit report. If the debt does not belong to you in the first place, it has to be removed if they cannot prove it is yours.

Seven Year Dispute

After seven years, past due accounts have to be removed according to the Fair Credit Reporting Act. Keep in mind that some agencies do what is known as re-aging the account, which keeps the debt collection on your account longer and makes it look like the debt is more recent than it really is. If seven years have passed and the debt is still remaining, you can then dispute it and any backup information you have about the age of the account is helpful. The date of the collection starts from the moment you first went delinquent.

Deletion by Payment

How to dispute a credit report when it comes to deletion by payment is fairly easy. The one thing that debt collectors want is their payment. In some cases, the debt collector may agree to delete the debt collection from the credit report if you work out a deal to pay some or all of what you owe on your unpaid credit cards.

There are a few caveats to this deal. Make sure that if you are able to work out this type of agreement, do not rely on an oral agreement over the phone. You must get the agreement in writing so that the collection agency has to abide by what they agreed to do.

Any written correspondence should be sent by certified mail with a return receipt and if the collection agency does not follow through with their promise to delete the entry, you can then dispute it with the Credit Bureau by providing proof of what you were promised. Paying off the debt in collection alone will NOT improve your credit score.

Active Credit Cards

Strategic payments and credit line increases help with what is called your utilization rate. This is the percentage of credit limit you use and agencies that score credit look at this rate to determine your credit score. A good number to be at in your utilization rate is no higher than 30 percent.

If you have credit cards that are active and not in collections, there are ways to improve your score using these methods. This is done by having a lower utilization rate, where you are spending a lower portion of credit than what you have.

If your payments are on time and you have good standing with a credit card company, one way to improve your credit is to ask for a credit line increase without using it. It won’t be helpful to raise your score if you use up the credit line increase as soon as you get it.

For strategic payments, send in early payments and make fewer purchases to see results. Keep in mind that it is best to do this with all credit card accounts, not just the one you owe the most to.

For instance, you have three credit cards – $500, $300 and one with just $100 owed – do not just choose the largest to send extra payments. Instead, if you have planned on paying $100 extra, break that into three payments that you send to each debt equally. So, if your payments are $40 a month on all three, instead of paying $140 to the first card and $40 to the other two, pay $70 to all three to see faster results.

There are plenty of ways to help repair your credit even when you have unpaid credit cards. These are a few of the best that will help you on your way to a higher score.

Sources:

http://www.foxbusiness.com/features/2016/02/15/how-many-americans-have-bad-credit.html

https://www.thebalance.com/remove-debt-collections-from-your-credit-report-960376

https://www.credit.com/credit-repair/how-to-fix-your-credit/

https://www.consumer.ftc.gov/articles/pdf-0096-fair-credit-reporting-act.pdf

repair your credit

4 Simple, Effective Ways to Repair Your Credit

By | Credit Repair

Anyone can make mistakes — and some of those mistakes can impact your credit standing. Even if you’ve always taken great care with your credit, unforeseeable crises can easily undo all your good work. Just as a few serious problems can torpedo your credit rating, a few smart strategies can help you bring it back to life. Fortunately, you don’t have to carry that burden indefinitely.  Here are some simple, effective things you can do to repair your credit.

Repair Your Credit Tip 1 – Start Over With Secured Credit

The worst-case scenario in the credit world is bankruptcy. This last-ditch move can indeed give individuals a fresh financial start, but in the process, you can expect to lose your credit. Oddly enough, you may start receiving credit card offers in the mail sooner than you’d expect. But this can prove a dangerous kind of trap. The creditors making the offers know that you won’t be permitted to file for bankruptcy again for at least 7 years, meaning that you’ll be stuck with paying them back even if you get into trouble.

Still, there is one kind of credit card you definitely should look into: a secured credit card. This card is backed up by a cash deposit, with the credit limit typically equalling the deposit amount. Use this card carefully and pay it off in full every month. By doing so, you’ll be rebuilding a positive credit history that can set the stage for your successful credit repair journey.

Repair Your Credit Tip 2 – Reduce Outstanding Credit Balances

You could have an excellent credit payment history, with multiple lines of credit going back many years, and still get turned down for a loan because of a high credit utilization ratio. This term refers to the amount of your credit tied up in outstanding balances. Lenders generally recommend that you keep your credit utilization ratio under 30 percent of your total credit limits. If you need to reduce your outstanding balances, you may want to try either of two popular debt payment techniques:

  • Snowballing – Snowballing involves paying down one credit line at a time, starting with the lowest balance. For instance, you might pay $25 above a $25 minimum payment (or $50 a month total) to accelerate repayment until the balance hits zero. You then take that $50 monthly payment and add it to the monthly minimum payment on the next-lowest balance. Repeat this process, and you’ll see that credit utilization drop at an ever-faster pace.
  • Stacking – Stacking is the same basic technique as snowballing, except that it involves paying the credit lines down in order of interest rate, with the highest interest rate going first. This may be less satisfying than seeing those smaller balances disappear quickly, but in the long run it’ll save you more money.

Repair Your Credit Tip 3 – Go Easy on the Applications

If you’re tempted to obtain a new credit card to make your credit utilization ratio lower, take care. While your utilization will indeed drop as your total available credit rises, that new credit line will require what’s known as a “hard pull,” or credit review. This type of review can temporarily make a bad credit score even worse. Actually using the card will compound your troubles if you don’t make certain to pay it off faithfully each month.

Other types of loan applications can also ding your credit, at least in the short term. Each car loan, home loan, or other kind of bank loan application will result in a hard pull. Too many of these inquiries can seriously disfigure your credit score. The fewer credit lines or shorter credit history you have, the more damage your score will take. If you need to shop around for the lowest rate among multiple lenders, make all those credit applications within the same 30-day credit cycle. Creditors recognize rate shopping when it occurs in this pattern, and they will score those multiple applications as a single hard pull.

Repair Your Credit Tip 4 – Watch Your Credit Report

Consumers who struggle with credit issues are only human — but so are the people who enter information into creditors’ databases and credit reports. It’s always possible that inaccurate data is depressing your credit score unfairly. You may also be suffering the effects of a co-signer or other party who has damaged your credit without your realizing it.

You can catch these issues by requesting and studying copies of your credit report from each of the three major credit reporting agencies (Experian, Equifax, and TransUnion). You’re legally entitled to one free copy of each report per year, and you can also purchase additional copies. If you see something wrong, you can dispute that entry and possibly get it expunged from your record. Once you’ve sent a written dispute letter, ideally via Certified Mail, the reporting agency is required to investigate the possible error within 30 days’ time.

As you can see, there’s no single “magic bullet” to repair your credit. But the right combination of best practices, implemented with patience, intelligence, and consistency, can give you the power to fix those nagging credit issues and prevent them from recurring. Last but not least, you’ll enjoy the tremendous feeling of accomplishment and empowerment that comes from taking control of your own destiny — and that’s surely something worth taking credit for!

Sources:

https://www.bankrate.com/finance/credit-cards/10-questions-before-getting-a-secured-credit-card-1.aspx

www.nerdwallet.com/blog/finance/improve-your-credit-utilization-ratio-fast/

https://www.thebalance.com/debt-snowball-vs-debt-stacking-453633

https://www.moneytalksnews.com/ask-an-expert-will-opening-a-new-credit-card-hurt-my-credit-score/

https://www.myfico.com/credit-education/credit-checks/credit-report-inquiries/

https://www.usatoday.com/story/money/personalfinance/2015/08/22/nerdwallet-check-your-credit-reports/32129411/

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

Credit Changes After Co-Signing a Loan

By | Loan

Co-signing on a loan is a big decision. You are putting your name on something that is not even for yourself. It requires trusting the other party to be as responsible a borrower as you are. This can be disastrous, but sometimes it works out okay.

Co-Signing Loan

Regardless, there are implications to your credit profile. Your score could drop, and you could even be left on the hook for the balance. If the other applicant fails to repay and the debt goes to collections, it can really hurt you.

Here’s typically what happens when you co-sign.

Applying Results in a Hard Inquiry

Your credit score has an initial drop from the hard inquiry. This occurs when your credit file gets pulled by the lender to see if your creditworthiness can secure the loan. Typically, your score will drop anywhere from 5 to 25 points after one or more hard inquiries in a specific time frame.

This factor is pretty negligible. Your credit score will lift back up soon after, as long as the loan gets repaid on time. Hard inquiries also only stay on your report for two years and usually impact your credit score for no more than one year.

Your Credit Report Gets a New Account

Assuming that the co-signed loan is approved, there’s now a new account showing on your credit report. How it appears will depend on the specific loan. But, in most cases, it will be an installment debt. This means the borrower must pay a fixed amount across so many intervals of time.

This type of debt will post as the full balance until it’s paid entirely. If it is a one-time need, the goal should be to cover the debt right away. The longer you carry the co-signed loan on your report, the more your score gets calculated with higher debt balances.

As with any debt, the credit reporting agency will notify the bureau every so often. Any payments made on time, or late, will get marked both on the credit report of the co-signer and the borrower. This late payment can impact the credit score of both parties. If it is your first late payment, it could mean 100 points or more lost.

Credit Utilization Ratio — How Does It Change?

Thankfully, co-signing on a loan is not the same as helping someone get a credit card. These installment debts will not play a role in your credit card utilization rate. This means that the second-biggest factor of your credit score will not be harmed. Since 30 percent of your FICO score depends on your credit utilization stance, this is a very good thing to realize.

However, while it doesn’t hurt your utilization rate, it almost does in the perspective of a new lender. Assume you try to qualify for a mortgage: Suddenly, the total debt you carry is higher. If you qualified for a $160,000 home loan prior to co-signing a $15,000 line of credit, now, until it gets paid, you might only be approved for $145,000.

Worst Case Scenario — Credit Score Damage From Co-Signing

By being eligible to co-sign, chances are you take your creditworthiness seriously. The amount you help someone borrow might be negligible versus what you can already borrow yourself. If so, the worst case scenario is that you have to pay the debt yourself — including any interest and penalties.

However, the damage is more crippling if you are unaware of payments in arrears. It is imperative to communicate with the borrower. You need to know if there will be a late payment — so you can prevent it from happening in the first place. As mentioned earlier, your scores could drop 30 to 100 points or more after just one 30-day late entry on your credit report.

Thankfully, there’s a bit of power for the co-signer. You have the right to request monthly statements. This is the simplest way to ensure payments are always made on time, and if a missed payment occurs, you can act on it quickly.

Your credit score will already have enough downward pressure. Just look below at how your co-signed loan can weigh in on some of the main credit rating factors:

  • Payment history: 35% of your FICO score depends on your payment history. Any late payments can be severely damaging to your score. A single missed payment could drop your score enough to cost you tens of thousands, especially if you plan to refinance your home soon. Your next loan will get approved with a lesser score, subjecting you to worse interest rates than normal.
  • Credit age: 15% of your score is made up of the length of your credit history. This new account is fresh and will influence a lower average age for your open accounts. It will close at some point and no longer be a factor. Regardless, while the account is open, it will only reduce the average credit age of a co-signer.
  • New credit: 10% of your score is also fundamentally backed by your new credit. FICO looks at whether you can really afford any new debt you take on. There might be large loans in your name already, and your credit score qualifies you as a co-signer. Yet, you might not be seen as someone able to afford more debt right now. Even though it is not technically yours, it is for this part of your score calculation — which is risky.

Conclusion

Co-signing a loan might not hurt your credit profile as much as you think. It’s more of a concern if you plan to finance a big purchase in the near future. But, absolutely never co-sign unless you trust the other borrower. Also, make sure to have funds available elsewhere in case you suddenly need to pay the loan off to save your credit.

Sources:

https://www.credit.com/credit-reports/what-is-a-hard-inquiry/

http://budgeting.thenest.com/late-payment-affect-cosigner-24854.html

https://www.thebalance.com/how-will-a-late-payment-hurt-my-credit-score-960543

http://www.creditcards.com/credit-card-news/help/5-parts-components-fico-credit-score-6000.php

http://www.moneycrashers.com/cosigning-loan-reasons-risks/

7 Myths About Credit Repair Companies

By | Credit Repair

Credit Repair Myths

If your credit score is not as high as you’d like it to be, thanks to some delinquent accounts on your report, credit repair may be your best bet. If you haven’t considered this route before, it’s probably because you’ve heard a few misconceptions about how credit repair companies work. Fortunately, many of the negative things you’ve likely heard about credit repair can be debunked. Check out the truth behind the most common credit repair myths.

Myth 1: Your Credit Score Will Increase Overnight

Credit repair will surely increase your credit score, but not right away. You’re not going to go from 500 to 750 in a month, either. Instead, plan to see incremental score improvements over the next several months. This means it might increase by 25 points one month and 50 the next, and so on. Going into the process with a realistic attitude when it comes to how long it will take to see improvement will ensure that you’re happy with the results. Just know that if you choose the right credit repair company, you will see a marked difference in your credit score this year.

Myth 2: You Can Get the Same Results on Your Own

It’s true that you can call or write to each of your creditors on your own to get inaccurate or negative information removed from your credit report. But the reality is that few people actually do this. And if you do happen to get around to contacting every creditor, you will need to have some patience and great negotiation skills to get the same results credit repair companies do. Otherwise, you’ll only end up fixing some of the problems. This is why hiring a credit repair company is the most effective option, since professionals know exactly how to spot and fix all your credit issues.

Myth 3: Credit Repair Will Decrease Your Score

Some people assume that the fact that they had credit repair will show up on their credit report, thus decreasing their score. While your score may go down at first, it’s not because of the credit repair itself. If this happens to you, it’s because once you remove a few items on your report, your credit has been rebalanced and you no longer have enough credit accounts to qualify for a good score. You can combat this issue by continuing to build up your credit after the repair, which will help you end up with a better score in the long run.

Myth 4: Credit Repair Costs a Lot of Money Up Front

When you’re already in debt, it doesn’t make sense to add to it with extra expenses, which is why it’s good that credit repair is often affordable for anyone who wants credit help. In many cases, you’ll pay a monthly fee that is likely less than most of your other bills. And in return, your score will eventually increase enough to get you the lower interest rates you deserve, so you’ll likely start seeing return on your investment within months. In this way, paying for credit repair is one of the wisest ways to spend your money.

Myth 5: You Can Increase Your Credit Score by Simply Paying Off Delinquent Accounts

It’s a good idea to pay your debts on time. But it’s a little late to start this once a negative item shows up on your credit report. At that point, it’s already affecting your score and you need to get it removed as soon as possible. If you don’t have a credit repair company request to remove it, it can continue to negatively affect your score for about seven years. So while you should get into the habit of paying your debts, it’s best to do this before they get sent to collections and show up on your report. After that point, you need to hire a credit repair expert to request that it be removed.

Myth 6: Certain Negative Items Can Never Be Removed From Your Report

Some people assume that bankruptcies, foreclosures and other types of delinquent accounts can never be removed from their credit report. But in reality, it’s possible to remove any negative item, assuming you hire the right credit repair company. Some accounts might take a little more time and effort to remove, and there are no guarantees regarding the results you’ll get. But most credit repair companies can tackle any type of negative item on your report, so don’t assume you can’t be helped if you have a foreclosure or bankruptcy.

Myth 7: Negative Items Removed by Credit Repair Services Will Come Back

If you’ve been putting off contacting a credit repair company because you’ve heard that the negative items on your report will show up again, you can rest assured that’s a myth. In most cases, once an item is removed from your report by a credit repair company, it’s gone for good. You might have heard this myth because sometimes the credit bureaus remove an item after being contacted by a credit repair company, and then they hear back from the creditor months later and find that the debt may be valid. At that point, they may add the negative item to your credit report again, at which time your credit repair company can once again request that it be removed.

Now that you know the truth about these credit repair misconceptions, it’s time to give this method a chance to increase your credit score. Credit repair won’t decrease your score, so the only way you can expect to go is up!

Sources:

https://www.credit.com/credit-repair/

http://www.moneychoice.org/best-credit-repair-services-fix-bad-credit/

https://www.nerdwallet.com/blog/finance/credit-repair/

https://wallethacks.com/best-credit-repair-companies/

5 Biggest Credit Score Myths Debunked

By | Credit Scores

Credit Score Myth

Your credit score plays an important part in your life. Whether you realize it or not, that three-digit number can impact whether you are hired for a job, the interest rate on your credit card, and even your mortgage payment. Yet, around 40 percent of Americans never bother to check their credit ratings, and many people simply don’t understand how credit scores work.

Let’s put a stop to that. Here are five of the biggest credit score myths, and the truth behind the lies.

Credit Score Myth 1 -You Only Have One Credit Score

One of the biggest credit score myths is that each person only has one credit score. The reality could not be further from that misconception. The truth is that each credit reporting agency has its own method for calculating your credit rating, and many lenders have their own system, too.

There are three main credit reporting agencies — Equifax, Experian and TransUnion – but they aren’t the only ones in the game. There are lots of credit reporting agencies in the United States. Then, there are the companies like FICO and Beacon that have their own systems for figuring your credit score. The worst part is that, depending on the algorithm each one uses, your credit score could vary significantly.

Credit Score Myth 2 – The Fewer Credit Cards You Have the Better

Another popular credit score myth is that the fewer credit cards and loans you have, the higher your credit score will be. People, believing the lie, close their accounts and pay off loans early in an effort to boost their credit scores, but when the dust settles, their credit scores are often lower than they were before they closed those accounts.

The reason comes down to the amount you owe relative to the available credit you have. It is called credit utilization, and it has a major impact on your credit score. If you close your accounts, the amount of available credit you have also goes down and your credit utilization rate increases in response. In turn, your credit score takes an unnecessary hit. Ideally, you want to have a large amount of credit available and be using a small percentage of it.

Credit Score Myth 3 – Your Credit Score Is Affected by Your Income

The idea that your credit score is impacted by your income is a common myth, and it couldn’t be more false. Your credit score is calculated using many different factors. Whether you have paid late or missed a payment, how much you owe, your credit history, the number of new accounts you’ve opened, and the types of credit you carry all figure into your credit score to varying degrees. Income is not part of that picture.

While a creditor or lender may use your income in tandem with your credit score to make a decision about whether to grant your loan or allow you to open a credit card, if someone such as your insurance company or a potential employer runs your credit score, your income does not come into it. In fact, credit reporting agencies do not even have access to that information.

Credit Score Myth 4 – One Late Payment Isn’t a Big Deal

The mail gets lost. You misplace your statement. The dog eats your bill. Late payments happen. However, they have a bigger impact than you might expect. “Payment history is typically the single largest factor in a credit score,” explains Discover. Your payment history makes up about 35 percent of your credit score, and some places may weight it even higher – the penalty can be severe. According to Discover, “Missing one payment could wind up on your credit report for up to seven years. What’s more, in the short term, it can drop your score by more than 100 points.” That’s enough of a drop to cost you an opportunity or at least qualify you for a far less advantageous interest rate.

Credit Score Myth 5 – Your Credit Score Is Accurate

One of the most dangerous myths about your credit score is that it will always be accurate. After all, why check your credit score if you can’t change it? As it turns out, there are some pretty big reasons to keep an eye on your credit score.

According to a 2013 study by the Federal Trade Commission, “one in four consumers identified errors on their credit reports that might affect their credit scores,” and for around 5 percent of people, those errors were significant enough to result in paying higher interest rates. The FTC also found “slightly more than one in 10 consumers saw a change in their credit score after the CRAs modified errors on their credit report.”

Moreover, the study found that one out of 250 people had an error on their credit report that resulted in a change of over 100 points after the inaccuracy was corrected. It is for this reason that the government allows you to check your credit report from each major credit reporting agency once a year. It is also the reason that so many companies provide assistance in correcting credit report errors.

With this much misinformation out there, it can be hard to know what to do about your credit score. You need a trusted adviser who knows what goes into a credit score, as well as how to correct errors in your credit report. Ovation Credit Services can help you make sure your credit report is accurate and provide you with the guidance you need to improve your score and reach your financial goals. Contact us today for a free consultation.

Start Living a Better Credit Life

By | Your Credit

Better Credit Life

We all struggle with the stress that money creates. Take it from Antoine Walker, a former Miami Heat star that ‘went from $108 million to bankrupt‘ in less than a decade. This serves as a reminder: it’s not how much you make, but how you use it.

If you have a stable job, it is possible to live a Better Credit Life as long as you put the time and organization into your financial planning. Ready to get started? Here are 10 ways for you to start living a Better Credit Life:

1. Plan for Disaster from Day One

If you anticipate a financial crisis, then there will never be one. So planning for the near and mid future will keep you safe in the long run. And you have no excuse; just join the millions of Americans that already use budgeting and personal finance tools. Having a budget and sticking to it, is a sure way to stay on track to a Better Credit Life.

Simply download Mint, YNAB, or another highly-rated app, and finally take charge of your financial freedom today!

2. Watch for Credit Report Errors

It’s surprising how often errors end up on credit reports. Stats suggest this impacts 1 in 20 consumers, which is five-percent of Americans. While some errors are more damaging than others to your credit score, as many as 1 in 250 consumers are behind more than 100 points from errors.

You can request a free copy of your credit file from AnnualCreditReport.com once a year from each credit bureau. Further, with our services you’ll find out if there are any errors right away – as we provide a copy of your Equifax and TransUnion files.

3. Examine All Your “Fees”

Most Americans have no idea how much goes to waste on preventable fees. It’s said that hundreds of dollars are spent every year on unknown costs. According to the Ponemon Institute, an average of $942 is spent on hidden fees each year.

Online banking has made a difference, but there are new ways to lose money without realizing in the digital age. Get digging and see where you’re losing!

4. Negotiate What You Pay

Many things are made cheaper so compare costs and cut deals where you can. As you look for high fees, this might open you to ideas like switching bank accounts and utility providers.

Don’t ever be scared to negotiate – for instance, most cable, phone and Internet providers have a user retention line. Most that inquire end up getting a moderate to large discount on their services.

Heck, even some “extreme couponing” could make a big difference!

5. Consolidate Your Large Debts

Your total amount owing is the second biggest variable of your FICO score. So it only makes sense to limit your overall debt.

FICO’s algorithm weighs revolving debt higher than installment debt. This means temporary loans set with payment installments (like a student loan) will drag your score down less.

Therefore, by obtaining a consolidation loan for your credit cards (which are revolving debts), you can eliminate the biggest credit hindrance of all.

6. Build a Relationship at a Credit Union

You stand a better chance getting a home loan with moderate credit at a credit union than a traditional bank. This is especially true if you get familiar with the staff at your local credit union. Further, you will find many rates are better, insufficient funds fees are easier to waive and other perks.

7. Don’t Become a Data Breach Victim

Your information on the web is never safe. Make sure to audit your Internet safety from time to time. The single most effective way of doing this is by checking whether your email was hacked. If your data was leaked on the web, you will be able to find out through HaveIBeenPwned.com’s search tool. Further, you can set up email alerts to inform you if a data breach occurs.

8. Plan for Christmas in January

You should look at your past year of finances and what you expect to make and spend for the following year all at once. Do this after Christmas is over and prepare your budget for the next winter holidays. If you don’t want to buy the items right away in case it’s not appealing later, stash the money in gift cards or make a savings account for this purpose.

9. Shop Online for the Best Cards and Loans

Whether you need a consolidation loan, a travel rewards card or even an auto loan, you should compare the best rates online. Sites like BankRate.com make it easy to see which cards and lenders provide what you need.

10. Honor Your Debts

Everyone wants to disavow their debts, but no one wants to go bankrupt. The key is to forget how owing money can damage your life. Since 15% of your FICO score is based on your credit length – it’s better to keep your lines open. So when you pay off a card, don’t close the account!

Even taking on a higher credit limit is good – it improves your credit utilization rate, so long as you don’t waste the new funds.

Conclusion

Never give up on the idea of living a Better Credit Life, because it’s available to you with a little discipline. Even if you need credit repair help or require consolidation loans to make it happen–as the saying goes, “Where there’s a will, there’s a way…”

Sources:

http://money.cnn.com/2015/07/24/investing/antoine-walker-nba-bankruptcy/

https://www.ftc.gov/news-events/press-releases/2013/02/ftc-study-five-percent-consumers-had-errors-their-credit-reports

http://www.forbes.com/sites/adamtanner/2014/04/14/these-sites-tell-which-of-your-accounts-have-been-hacked/

http://fraud.laws.com/false-adversiting/surcharges-and-hidden-fees

How to Improve Your Credit Score

By | Credit Scores

Improve Your Credit Score

If your credit score is not great or even good, don’t despair. You have the power to change it. It might take months or possibly years to get close to the coveted 850 credit score, but it can be done. You can get started by taking these tips into account.

Check Your Credit Report

The most effective way to improve your credit score is to keep a close eye on it. Start by ordering your free credit report from AnnualCreditReport.com — everyone gets one free report every year. It won’t tell you your score unless you pay a fee, but it will let you instantly see all the accounts that add up to your credit rating.

Your first goal should be to make sure your report is accurate, starting with your contact information, birth date and social security number. Then look at the accounts on your report. They should all look familiar. If you see any accounts that you did not open, you should follow the steps on the site to get the errors fixed. Similarly, if you see late payments reported that you know you made on time or you see derogatory marks that don’t belong there, you can contact the creditor. If the creditor does not fix the error, you can dispute it.

Establish Credit by Using a Credit Card Responsibly

If your credit report is pretty bare, it may be time to get a credit card. You might wonder how that will improve your credit score since most people are advised to avoid credit cards. But the fact is that you need to show the credit bureaus that you can handle credit well. This is hard if you don’t have any accounts to handle yet.

This doesn’t mean you should go out and apply for a car loan or mortgage to improve your credit score. You won’t have much of a shot at these types of loans if you don’t have any credit to your name. Instead, start by getting a credit card. Your best bet is to apply for a secured credit card. With this type of card, you pay either a portion or the total amount of your credit limit upfront and then use the card. Since you pay the creditors ahead of time for this type of card, you know you’ll likely be approved, even without any credit history. Then you can work on building your credit by making your payments on time.

If you already have some credit, but what you have is poor, you may be able to get an unsecured credit card to improve your credit score. The only catch is that you might have to apply for a credit card for people with bad credit, which may have a high interest rate. But the good news is that once you get one, use it regularly and make your payments on time, you will improve your credit score so you can eventually apply for credit cards for people with good credit.

Pay Your Bills on Time

If the main issue with your credit report is that you have a lot of late payments that were reported to the credit bureaus, you can turn it around by making sure you never miss a payment again. Even if you can only make the minimum payment some months, it’s crucial that you pay on time. Otherwise, you will likely be facing fees and a lower credit score after it gets reported to the bureaus. And if it’s a credit card payment you missed, you might also end up with a higher interest rate.

This is why many people with good credit automate their payments so they always get paid on or before the due date. If you are ever having trouble paying a bill, your first step should be to contact your creditor to see if you can make arrangements to pay late without it affecting your credit score. And keep in mind that the longer you pay all your bills on time, the less your score will be affected by any late payments you made months or years ago, which means it’s never too late to get into this habit.

Pay Down Debt

One of the best ways to improve your credit score is to keep your credit utilization down. More specifically, you should strive to keep your credit card balances at less than 30 percent, meaning you have at least 70 percent available. If you’re a little above that, just keep paying down your balances.

You can also get faster results by requesting a credit limit increase, which will automatically reduce your credit utilization. Just be sure you don’t spend more once you get an increase! And if your credit utilization is already around 30 percent or less, keep paying it down, since many people with the best credit scores boast credit utilization of 10 percent or less.

Get Help from Credit Experts

If you’re feeling overwhelmed as you work to improve your credit score, you can come to us for help getting started. We’ll give you a free credit consultation so you can see what you need to improve on your credit report. We’ll also help you dispute inaccuracies on your report and monitor your credit so you know about any changes to your credit right away. Contact us today if you’re interested in getting help improving your credit score.

Sources:

http://www.bankrate.com/finance/debt/7-simple-ways-improve-credit-score-1.aspx

http://www.myfico.com/credit-education/improve-your-credit-score/

http://www.experian.com/blogs/ask-experian/credit-education/score-basics/improve-credit-score/

Repair Your Credit – “Waiting It Out” Doesn’t Work

By | Credit Repair

Repair Your Credit Now

You ran into a few problems with credit and now you have negative accounts listed on your report. Derogatory information no longer appears after seven years, so you may be tempted to wait it out as a way to repair your credit. However, you run into several major issues when you take this approach.

1. Creditors Reselling Debt

Once you miss a few payments on an account, a creditor typically claims a loss on the debt through a process called a charge-off. They may sell the account to a collection agency. This company attempts to get payment for the delinquencies. If they’re unsuccessful, the debt may pass to other debt collectors. These accounts may linger on your credit report, particularly if you make a payment to one of the businesses. You may get stuck waiting several additional years past the seven-year limit due to this activity and debt reselling.

You also get into a position where it’s difficult to keep track of the agency holding your debt. Some scam companies may act as though they are the responsible party, but they’re simply trying to get your personal information. With identity theft on the rise, you put yourself at risk.

2. Delayed Drop-offs

Why repair your credit when the negatives will just go away in seven years? Well actually, your bad debt doesn’t disappear from a credit report when the account reaches seven years in total. It’s calculated based on the date of the first delinquency, which is when you began missing payments. If you skipped several months then attempted a payment plan with the company before the charge-off, you may end up adding months or years to the predicted drop-off rate.

3. Multiple Listings

Another issue with waiting out seven years instead of repairing your credit, is the number of negative account listings you end up with on your credit report. You may only have one charge-off, but you can have the original listing, plus another one for every collection agency that purchased the debt. Waiting it out actually causes you to accumulate even more bad debt. Time is of the essence when you need to repair your credit. These entries bring down your credit report and can make your credit-worthiness look worse than it is.

4. Legal Consequences

You are legally liable for the debt you incur, even after the original creditor charges the amount off. The company has a certain statute of limitations in which they can take legal action against you for the account. This period varies from state to state but lasts for several years. You can get served with a lawsuit for the full amount, plus legal costs. Not only do you need to go to court, but you get a judgment against you that also ends up on your credit report.

5. Financial Consequences Costing You Thousands

Bad credit does more than stop you from getting credit cards. You end up with higher interest rates on mortgages, personal loans and car loans, if you can even qualify for them at all. Insurance companies use credit scores as part of their risk profiling, so you get a higher premium when you pick up vehicle or home insurance. Some creditors may place a wage garnishment or bank account lien on you after winning a judgment. You get money taken out of your paycheck or directly from your checking account, which can have disastrous consequences if it happens at the wrong time.

If your delinquent accounts come from the same company that holds your checking or savings account, it may end up pulling money from your accounts to cover these costs.



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6. Career Consequences

Government contracting often requires a security clearance for employees. If you have significant debt, you may not qualify for the right level to get the job. Many companies, particularly those in the financial industry, also look at your report as part of the hiring process. They may feel that many collection accounts show a lack of responsibility. To think you could be fully qualified but not get the job because you didn’t repair your credit.

7. Personal Consequences

Finding a place to live becomes difficult with bad credit. Landlords look through credit reports to determine whether you can afford to live in the apartment and whether you would be a good tenant. If they see a lot of charged-off accounts, you could get passed over for other applicants. Most professionally managed properties look at this information, so you would have to search out a private landlord instead.

The stress associated with bad credit is also significant. You have to worry about constant application rejections, wage garnishments, lack of access to credit products and an inability to get good rates on anything. In an emergency, you can’t turn to a credit card, which leaves you at the mercy of predatory lenders.

Since you can’t get credit cards, you don’t have access to incentives such as cash back, rewards points, roadside assistance and travel insurance. If you do qualify, you may have to pay an annual fee to keep the card open or secure the credit limit with your own money.

Sitting back and waiting for everything to blow over works well in a natural disaster, but it’s not a great tactic when you need to repair your credit. You face legal action, personal consequences and financial instability when you aren’t proactive about your credit health. Start looking into credit repair assistance, so you don’t have to put your life on hold for seven, 10 or even 15 years.

Sources:

http://www.myfico.com/crediteducation/creditscores.aspx

http://www.experian.com/blogs/ask-experian/when-negative-information-will-be-removed-from-your-credit-report/

http://www.rd.com/advice/saving-money/5-smart-ways-to-reduce-stress-around-personal-debt/

http://www.forbes.com/pictures/eegk45gidm/credit-scores-dont-stop-with-credit/#54e166fd44c6

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