Credit Scores Archives | Ovation Credit Repair Services

De-coding Credit Scores – What your Score Really Means

By | Credit Scores

what-your-credit-score-meansYour credit score – that three-digit number on your credit report – has significant implications on your ability to borrow money and how much interest you pay. But, do you know what your credit score means? What is considered good or bad?


The 400 and Under Credit Score

A score this low is nearly impossible to accomplish. But, maxing out a bunch of credit cards immediately after receiving them and then filing for bankruptcy might do the trick. Unfortunately, most lenders can’t do anything for you, with a score this low. But, some car dealerships may be able to give you a car loan at an insanely high interest rate.


The 500 Credit Score

You might fall into this scoring range if you defaulted on some credit cards, have significant late payment history and/or have a high debt-to-limit ratio. A common misconception is that credit reports reflect your debt-to-income ratio; however, your income has no bearing on your credit. How much you owe vs. how much your credit limits are play a large part in your report.

If you’re in the 500 range, getting credit from traditional lenders will be tough, so you may want to opt for a pre-paid credit card. These cards require cash up-front to establish the credit limit (a $500 payment gets you a $500 credit limit). While technically you are borrowing your own money, using the card and making on-time payments will help you build your score. Also, some lenders specialize in finding credit for low scores, but the interest rates are very high.


The 600 Credit Score

While you have more lending options available to you than someone with a 500 score, you are still considered a somewhat risky borrower. That means that banks will be reluctant to lend money to you and if they do you will have to pay higher interest rates. The goal with this score is to try and improve. Perhaps consolidating some student loans could do the trick, lowering the balances on your credit cards, or simply setting-up some calendar reminders to ensure on-time payments. Aim for a score in the high 600s or 700s.


The 700 Credit Score

This is the above average category and borrowing at decent interest rates should not be a problem. However, keep in mind that the best interest rates are reserved for scores above 740 – depending on your exact score you may have some work to do to reach the preferred rates. Take a look at your credit utilization ratio on your credit cards – this ratio accounts for 30% of your score. Lowering your credit card balances might be all you need to push upwards to 800 or beyond.


How to Buy with a Bad Credit Score

If you found yourself in the 500 or below categories, you probably already know how difficult it can be to secure lending. But, there are still some options for buying what you want. The first option is to pay cash. Learning to save and wait are budget skills that will help you maintain a higher credit score once you achieve it. Credit card-debit cards (like Visa-debit or MasterCard-debit) allow you do make purchases that are usually reserved for credit card holders, but the purchase is made with cash from your checking account. This includes shopping on-line, airline tickets, hotel rooms and car rentals.

As mentioned above, there are some lenders who are willing to take a risk on borrowers with low scores – but you have to be willing to pay the price. Interest rates can be as much as 6% higher (meaning a higher monthly payment) and the down-payment required on a car loan or mortgage may be as high as 35%.

No matter what your credit score is, you probably have some room to make it better. The factors that contribute to your FICO score are: payment history, amount of total debt, how long you’ve had credit (the longer the better), how often do you apply for new credit and the types of credit you use (mortgages, car loans, credit cards etc.) The past has already happened; look forward to your future and your new and improved credit score.


Photo Credit: telegraph.co.uk


How Much is Your Bad Credit Costing You?

By | Credit Scores

There are many motivations for improving your credit score: lower interest rates, the ability to secure a loan or mortgage, higher credit limits and more credit card reward options. In the world of credit, the best deals go to the people with the best credit scores. But what is a good credit score actually worth in dollars?

More than $5,000 on a Loan

Whether the money is used to go to college or to buy a new car, almost everyone applies for private loans (from a bank) at least once. However, if you squeak by – meeting the lending requirements with the lowest acceptable credit score – it’s going to cost you. Compare the interest rates on a $25,000 loan that is to be paid off in six years (or 72 monthly payments).

Interest Rate Total Interest Paid Monthly Payment
5.5% $4,460 $413
7.5% $6,200 $437
12.5% $10,800 $501

The difference between the highest rate and the lowest rate is more than $5,000! However, there are still significant financial gains if you are able to improve your credit enough to shave off a few interest points – the difference between 7.5 percent and 12.5 percent is $4,600.

More than $500 per year on Credit Cards

Without a decent credit score, it can be difficult to secure a credit card. Many lenders have tightened their application requirements, and the best interest rate (after any promotional period) is 10.99 percent. If you are able to get your hands on a credit card with less-than-perfect credit, you will likely have an APR of 20.99 percent. How much in interest does that cost you? With an average balance of $8,000, the higher interest rate will cost about $60 more per month, or $720 annually.

More than $50, 000 on a Mortgage

Buying a home may be the most expensive purchase you will ever make, and with bad credit, it can cost you even more (if you can even qualify for a home loan). While the best rates go to the people with the best credit scores, the difference of even a few interest points can add up to big money over the life of a mortgage. Here is an example of three different mortgage rates, the resulting monthly payments and the total interest paid over the life of a 30-year mortgage:

Interest Rate Total Interest Paid Monthly Payment
2.75 % $140,005.67 $1,222.25
4.75 % $260,364.46 $1,556.58
5.66 % $319,621.06 $1,721.18

The difference between the best rate and the poorest highest rate is nearly $180,000 in total interest costs. However, improving your credit score from a rate of 5.66 percent to 4.75 percent can save you almost $60,000.

Having bad credit is expensive. Improving your score can mean huge interest savings over the life of your borrowing, as well as significant savings on a monthly basis. If you combine the three examples above, the difference between good credit and bad credit amounts to $645 in monthly payments, or a cost of $7,740 per year.

How much is good credit worth to you?

Home Lending Scores Explained

By | Home Buying

Did you know that there’s more to getting approved for a home loan than just the standard credit score? In fact, most lenders take a variety of scoring information into account when determining your ability to qualify for a home loan. The more you understand about the process, the better prepared you can be to get the home of your dreams.

Standard Credit Scores
One of the most popular methods of determining approval for a home loan is your FICO score. Based on several benchmark factors, including credit history and access to credit as well as income, you are assigned a number score ranging from 300-850. Your credit score tells prospective lenders what your potential risk factor is and whether you pay your bills late or not at all. The higher the score, the better chances you have of obtaining the best home loan.

eFunds DebitBureau
The eFunds DebitBureau can also help you when working toward a home loan. By collecting important consumer data from the DebitBureau, the eFunds score consists of specific economic factors, such as reporting how often your credit is checked, how many previous closures or bounced checks you may have and how much debt you currently have. With eFunds, your debit history score takes into account 78 standard data combinations. Using this risk model, many applicants are approved when typical credit scores may indicate potential trouble.

When the three major credit companies join together, you get the VantageScore, which is based on a letter system similar to grades in an academic environment. With a score ranging from 501-990, your VantageScore is a combination of data retrieved from your collective credit scores that reflects the depth of credit in your profile. Again, payment history is decisive, as it reflects more than 30 percent of the VantageScore.

It is never too late to make changes to improve your credit and get the house of your dreams. Every year, you should get an updated copy of your credit report – it is free to do so – to make sure it is reflecting your financial habits in a productive way that helps you build your life as you go. With so many options out there, you are sure to find the right home loan!

Proper Spending Habits will Protect Your Credit Card Health

By | Credit Laws, Credit Repair, Credit Scores

When we bag our groceries, we are encouraged to choose paper over plastic, in the effort to protect our environment. We suggest you do the same when protecting your credit card health: choose paper, not plastic.

Banks make their money from plastic. Every time you as a consumer use your credit card instead of cash, a percentage of your purchase goes into the coffers of the bank.  Subsequently, banks want you to use plastic as much as possible. They will bribe you to use your credit cards even when you don’t need to – or when you shouldn’t – use plastic instead of cash.

Points are often awarded to frequent credit card users. As travelers are awarded points for flying with a particular airline regularly or frequenting a specific hotel, credit card users are awarded points for regularly using a particular credit card and often for a particular purchase.

Seasoned credit card users realize that a different interest rate is assigned to cash advances; this rate is higher, and fees are often added to this higher rate. In contrast, lower interest rates are assigned to balances transferred from a competitor’s credit card, as the lender offering the lower rate wants your business. In their efforts to remain competitive, however, banks are now awarding points, double points, and triple points.

One lender may give you double points if you use their credit card for gas. Perhaps the lender may give you double points if you use their credit card for groceries. Another lender may offer triple points if you use their credit card to pay utility bills. Beware!

Banks will try a multitude of tactics to get you to use their credit cards and to continue using them on a regular basis. You will find that you are developing habits that will cost you more in the long run, and unless you are a credit card user that pays off your full balance every month, you are building interest that increases the cost of the service or item for which you are paying.  Develop habits that will protect your credit health.

Do not pay interest for gas. Do not pay interest for groceries. Both gas and food prices have increased enough over the past couple of years; do not make the situation worse.  If you must use your credit card, use the purchasing power of the card for larger ticket items, saving your cash for basic energy and grocery essentials. Also, realize your spending habits. If you are one to buy impulsively, train yourself to walk away from a prospective purchase. Give yourself 24 hours; you may find that you do not want a particular item as much as you originally thought you did. If you don’t need the item and you don’t have the cash, don’t buy it.

Credit card rewards are a bonus for those consumers who can afford to pay their balances and avoid hefty interest rates. These same rewards, however, are bait used to lure the user into a dangerous cycle of revolving debt that siphons additional money from the consumer that the user does not have.

Live After Bankruptcy

By | Ask a Credit Expert, Bankruptcy, Credit Repair

You can’t believe it actually happened. Maybe it came about quickly, or maybe it was a long time coming, something you’d avoided facing for as long as possible.

You’ve filed for bankruptcy.

It’s something you used to only read about other people doing, yet here you are. If you’re feeling ashamed and alone, don’t: According to statistics from Epiq Systems, there were over 1.3 million bankruptcy filings last year. You may also be feeling angry, relieved, depressed … and maybe a little bit tired.

But here’s something else you should feel: hopeful. Yes, there is life after bankruptcy. In fact, filing a Chapter 7 or Chapter 13 bankruptcy is actually the first, often necessary, step toward restoring one’s credit. And while the temptation might be to put all of this behind you and never look at another credit report again, taking the opposite tack will bring you more peace of mind — by actively managing your credit and finances now, you’ll be able to mitigate the impact your bankruptcy has on your future.

One powerful way to offset the effects of bankruptcy might seem counter-intuitive: Get, and use, a credit card. The goal here, of course, isn’t to rack up more debt (which can hurt your credit score), but to show you can make timely payments. In order to avoid more debt, pay off the balance each month. And avoid large balances, which can negatively affect credit scores. Most important, though: Make EVERY payment on time. If organization isn’t your forte, or you’re a proud procrastinator, pay your credit card bill when you first receive it or, better yet, sign up for an auto-pay option.

If you can’t qualify for an unsecured credit card right away, a secured card may be your next best option. These cards, which require a collateral deposit (typically the amount of your credit line), are an excellent tool for rebuilding credit. Bear in mind, however, they’re not all created equal: Fees can vary wildly, and some disreputable providers are more akin to subprime mortgage lenders. Look closely at all fee schedules, consider a trusted institution that you know (although not one that was included in your bankruptcy filing), and don’t balk at the higher interest rates — this card is not for carrying a balance, it’s for building good credit. Finally, be sure the card issuer reports your payments to the big three credit bureaus, and double check that the account isn’t flagged as being a secured card.

Ideally, after a few months of timely payments on your secured credit card, you’ll begin to get offers for unsecured cards, and you can switch to something with lower fees and interest rates.

A track record of timely payments, along with strict, careful budgeting to keep debt under control, can restore your creditworthiness way, way ahead of the typical 7-10 years it takes for a bankruptcy to be removed from your credit report. Taking charge now will only get you there sooner.

10 Improve-Your-Credit-Score Resolutions for 2012

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

Let’s get real. You might make that resolution to workout more, eat less, lose weight, and be the healthier version of you…but by the next holiday season, you’ll just be tempted all over again with those favorite indulgences, whether your taste buds can’t resist mashed potatoes and gravy or pecan pie. This year, instead of worrying about the number on the scale, why not make some resolutions that will impact what might be considered a far more important number: your credit score.

Ovation proudly presents our top ten credit repair resolutions for 2012:

10…Request a copy of your credit report from all three of the major credit agencies and make sure the information reported is accurate.

9…Create a budget. Make sure you create a budget you can live with that allows you to pay all of your bills, every month. Start by cutting out the daily latte and go from there.

8…Prioritize savings. Put enough money in savings to cover at least three, but preferably six months of bills just in case the unthinkable (job loss, catastrophic illness) happens.

7…Avoid the credit trap. Just because the credit card company gives you a line of credit of $5,000 doesn’t mean you should spend it. Keep your balances at 30-50% of the total credit available.

6…Use Ovation’s payment tools. You can use our tools to develop a plan to get out from under your debt. You can create a plan that works for you, targeting the card with the highest balance, the one with the highest interest rate, or something in between.

5…Sleep on it. Before you use your credit card to buy that new phone, TV, or other device that’s tempting you, sleep on it. Think about whether or not the cost plus interest will still be a good deal…or if it will just be another burden.

4…Take identity theft seriously. Shred, don’t toss. Don’t apply for credit over the Internet just because someone offers you easy credit through an anonymous email. And revisit resolution #10!

3…Don’t use credit as income. Using your credit cards as a way to extend your monthly income is a certain sign of trouble. If you’re having trouble making ends meet, work a few extra hours, cut spending wherever possible, and

2…Don’t be afraid of using your credit cards as a tool. Use credit cards sparingly, as a way to build your credit rating, by charging small amounts that you can easily pay off each month. If you do have to charge something large, like a car repair, make a plan to pay it off in a few months’ time.

1…Pay every credit card bill on time, every month, all year. Whenever possible, pay more than the minimum payment.

What Is Your Lucky Number?

By | Ask a Credit Expert, Credit Reports, Credit Scores, Fair Credit Reporting Act, Personal Finance

We may play the date of our wedding anniversary in the lottery, remember that magnificent eighteenth birthday when we got to drive our father’s car for the first time, and long to lose that extra ten pounds, but the number that most impacts our life – both in what we decide and in what others decide about us – is our credit score.

Our credit score affects whether or not we can buy a house, the interest rate we can get on a new car loan, and sometimes even whether or not we get a job interview. A credit score is more than a memorable number or date, it is something we must actively manage to improve our quality of life.

Credit scores range from 350-850, and the higher the score the better. These numbers are guidelines, so while many folks aspire to achieve a credit score of 850, most people top out at 815 or 820. Some people who actively work to maintain a credit score over 800 call themselves the 800 Club. They get together online or in person and discuss ways to increase their score. It pays off – if you have a credit score of 800 or higher, refinancing your mortgage is a piece of the proverbial cake.

For the rest of us, a credit score of 620-650 is enough to secure a mortgage (albeit at a higher interest rate than the folks with credit scores of 750-800). A credit score under 650, though, sets the borrower up for additional scrutiny and potential problems with securing credit. (620 works for a mortgage because the mortgage is secured with the house itself; however, someone with a credit score of 620 is unlikely to get a credit card since that line of credit would be unsecured.)

If your credit score is below 620, the only credit offers you’ll receive are for secured cards. With secured cards, you put money down up front to back the line of credit. For instance, you would give the lender something like $500 to hold as collateral. $500 would then be your credit limit on a credit card that you can utilize and pay off like any other credit card. When the credit card is paid off, you would get your $500 back.

On the other end of the spectrum is American Express, one of the hardest credit cards to get these days. Most American Express cards have to be paid off each month – compared to most Visa, MasterCard, and Discover cards that have only a minimum payment due each month – so America Express has a higher standard (and a higher credit score requirement) for its card holders.

Wherever you are in the credit score spectrum, it is time to learn what your score is and why. It is time to own, and not be owned by, the most influential number of your financial life and to manage it to make it work for you.

3 Credit Myths Debunked

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

There have been a lot of great movies in recent years based on mythological characters: Percy Jackson & the Olympians: The Lightning Thief (2010), Clash of the Titans (2010), Immortals (2011), and Thor (2011). Myth-based movies are great entertainment, but myths about your credit score can be expensive. The following three myths about your credit score can end up being very costly.

Myth One: If I Pay Off the Debt, They’ll Report It

One of the biggest myths about your credit score is believing that the company to whom you’ve paid a debt will properly report it to the credit agencies. People often believe that as soon as they’ve paid off a debt, the company will immediately report that to the credit agencies and their score will improve. Unfortunately, depending on the company’s reporting practices, they may wait three months to report the payoff, or they may never report it at all.

What you actually owe a lender and what’s reporting on your credit report are often two different things. It’s crucial to review your credit report regularly and take charge of making sure it stays up to date if you really want to improve your credit rating.

Myth Two: If It’s Not on the Report, I Don’t Owe the Debt

Another myth that hurts consumers is the assumption that if something does get removed from your credit report that you no longer owe the money. For example, let’s say you really do owe $4,000 on a charge off, but we’re able to get it removed from your credit report because it isn’t being accurately reported. That doesn’t mean you don’t still owe the money.

Myth Three: Paying Off Debt Fixes Everything

Many consumers believe that the minute they pay off their debts that their credit rating will increase significantly. But if you’ve had a history of late payments and delinquencies, companies can still report all the late and missed payments for seven years. It can take that long for your credit to fully recover.

Paying off your debts and bringing payments current will help your overall credit score. Making the debt go away, especially if it is in collection, helps in two ways: one, it shows paid instead of still owed. Two, it stops the date of last activity, which means seven years from that date it goes away. Otherwise, it just keeps being a current reporting, and the seven years keeps being seven years in the future.

Credit Repair: Tips to Help Maintain a Good Credit Score.

By | Credit Cards, Credit Repair, Credit Reports, Credit Scores, Loan, Payment, Personal Finance, Revolving Debt

Accurate negative information generally remains listed on your credit report for up to seven years, while bankruptcies remain for 7-10 years.   However, there are things you can do to gradually improve and maintain a good credit score, such as the following:

  • Fix any inaccurate information.  This is one of the most important things you can do to maximize your credit score.  Up to 79% of credit reports contain errors.
  • Update old accounts.
  • Request that old inquiries be removed (older than 2 years).
  • Pay your bills on time. Delinquent payments, even if only a few days late, and collections can have a major negative impact on your score.
  • If you have missed payments, get current and stay current. The longer you pay your bills on time, the better your credit score. Older credit problems count for less, so poor credit performance won’t haunt you forever. The impact of past credit problems on your score fades as time passes and as recent good payment patterns show up on your credit report.
  • Be aware that paying off an accurate collection account will not remove it from your credit report. It will stay on your report for seven years.
  • Keep balances low on credit cards and other “revolving credit”.  High outstanding debt can affect a credit score.
  • Pay off debt.  The most effective way to improve your credit score in this area is by paying down your revolving credit. In fact, owing the same amount but having fewer open accounts may lower your score.
  • Don’t close unused credit cards as a short-term strategy to raise your score. Maintain your accounts for a long time.  The longer your credit history, the more it helps increase your credit score.  Closing older accounts can actually lower your score.
  • Don’t open a number of new credit cards that you don’t need, just to increase your available credit. Apply for and open new credit accounts only as needed. Don’t open accounts for the purpose of providing a better credit picture – it probably won’t raise your score and, in some instances, may even lower your score.
  • If you have been managing credit for a short time, don’t open a lot of new accounts too rapidly. New accounts will lower your average account age, which will have a larger effect on your score if you don’t have a lot of other credit information. Also, rapid account buildup can look risky if you are a new credit user.
  • Do your rate shopping for a loan within a focused period of time. FICO scores distinguish between a search for a mortgage or auto loan, where it is customary to shop for the best rate, and a search for many new credit cards.


If I file Bankruptcy, I will not have to pay back my debt and my credit report will be wiped clean, correct?

By | Ask a Credit Expert, Bankruptcy, Collections, Credit Repair, Credit Reports, Credit Scores, Debt, Personal Finance, Your Credit

This is one of the biggest myths and misunderstandings with credit.  When you file bankruptcy you are telling the court that you do not have enough money to pay your bills.  Since you do not have enough money to pay your bills, you will have to include EVERYTHING in the bankruptcy and in return you can wipe away your debt and stop the collection calls.  If you file a Chapter 7, then you debt is wiped away.  If you file a Chapter 13, then you set up a payment program to pay a percentage of the money back to your creditors over the next 3-5 years.  The debt may be gone or may be lowered dramatically and put in a payment plan and the creditor calls will stop, but remember the Bankruptcy as well as all of the creditors included in the bankruptcy will report on your credit report.  All of your creditors (even positive accounts) will now report as Included in Bankruptcy, which reports in the same category as Charge off or Collection accounts.  So, your debt may have been wiped away but you usually end up with an even lower credit score in its place.

Bankruptcy is not the end of the world.  A bankruptcy does report for 10 years but sometimes it is the only way out.  As a consumer you need to focus on rebuilding your credit after you file bankruptcy.  In the last several years a lot of credit companies have changed their approval process and will approve consumers for credit after a bankruptcy.  That is great news, so you can start rebuilding your credit, but start small.

After filing bankruptcy you want to check your credit reports as well and make sure that all of your creditors are reporting accurately.  It is very common for creditors that are included in the bankruptcy to report the account as charge-off that is inaccurate information that can damage your credit score, so you need to get all information reporting inaccurately fixed. That is what Ovation Credit Services is here!

If you have any of these errors or have any questions about a bankruptcy you filed and how it is reporting, give Ovation Credit Services a call.  Our Case Analysts would be happy to review your credit reports with you and make sure everything is reporting accurately.   Call us at 1-866-639-3426 option 2 for your FREE Credit Consultation. During your free credit consultation we will also help you order your credit reports so we know exactly what is going on with your case.

If you have any questions for our Credit Expert Kristi Thornton, please email me at [email protected].

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