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Protect Your Credit from Other People’s Credit Problems

By | Your Credit

Many people think its just about building your credit but you also have to protect your credit. Whether you already have great credit or have been steadily improving your score over the years, you’ve worked hard to get where you are. It can be tempting to use your good score to help loved ones when they come to you for assistance, but doing so can damage your credit standing. If you want to protect your credit and financial future, you should think hard before you help someone out. Simply say no when there’s a chance your assistance could hurt your credit. Read these 6 tips before you agree to “help” a friend or family member.

Protect Your Credit

1. Think Carefully Before Cosigning

If you have family members or close friends with bad credit, they might ask you to cosign with them on a loan at some point. Maybe they need to buy a car or get a rental lease and need your help. But the problem is that if they default on the loan or rental contract, their credit won’t be the only thing affected. As a cosigner, you’ll be expected to make any payments they default on. If you can’t make those payments, your credit will be negatively affected. For this reason, you should protect your credit by avoiding cosigning for loved ones, especially if you know they have a history of not making their payments on time. The only exception is if you can afford to pay for the loan yourself should the worst occur, and if you know your loved one is responsible with money and just needs help establishing credit.

2. Don’t Let Other People Use Your Credit Cards

Just as you shouldn’t give just anyone access to your good credit, you also shouldn’t let others use your cards. Maybe someone has asked you if they can become an authorized user on your credit card, or perhaps they want you to make a major purchase on your card and they promise they’ll pay you back. Either way, the debt is yours in the long run. If they suddenly can’t repay the amount they used on your credit card, you’re responsible for it. This means you either have to pay for the bill yourself or allow your credit to be ruined when you don’t pay it.

3. Don’t Rent with Unreliable People

If you need to rent a house or apartment and need a roommate, make sure you can trust him or her to help you pay rent on time every month. Otherwise, you’ll end up with late fees, and your landlord may even report you and your roommate to the credit bureaus once you’re more than a month late on rent. So if you have a best friend who is frequently unemployed and can rarely pay bills on time, do yourself (and your credit score) a favor and don’t rent with him or her–unless you can afford to pay the entire rent by yourself every month. And of course, if you own a house and you want to rent it out, perform a credit check on your new renters to make sure they have a history of paying bills on time.

4. Don’t Make a Habit of Lending Money to Friends or Family

The rule of thumb for lending money is to only lend what you can afford to lose. This means if you lend someone $500, you’d better not be depending on getting that back, because you probably won’t. If you have the money to lend, just give it as a gift if you feel the need to help a friend or family member. However, if the same people are constantly asking you for money, giving it to them may be enabling them. Instead of being a crutch for their bad money management habits, offer to help them make a budget or find a second job to pay their bills. This will protect your credit and go farther than lending them money every once in a while.

5. Build Up an Emergency Fund

Sometimes bad things happen that are out of your control, and you can’t help that. But what you can do is be prepared, and usually having extra money on hand is part of that. For example, maybe you picked a great roommate who can normally pay her bills, but she lost her job and won’t be able to pay rent this month. If you can’t cover the full payment, your credit could be affected and you might even be evicted. Having at least three months’ worth of expenses in savings will help you keep a roof over your head while your roommate finds a new job. Of course, it will also help you in case your own emergency occurs, such as if your car breaks down, you lose your job or you have a sudden health crisis.

6. Protect Your Credit by Focusing on Your Own Financial Goals

Having an emergency fund is a good start if you want to improve your financial security. But you should also have other goals when it comes to money. For instance, buying your own home is a great goal to have if you want to invest in your future rather than throw away money on rent every month. If you already own a house, upgrading it every few years is a good way to improve your investment, so you should save up money to do that. And if you have any debt–such as credit cards or student loans–you should have a plan to pay it all off so you spend as little as possible on interest.

If you need help improving your credit–or want to tell a loved one where to go for financial help–come to Ovation Credit Services. We offer a free credit consultation, so contact us today to get started!

Sources:

https://blog.equifax.com/credit/should-i-co-sign-on-a-loan-for-a-family-member/

https://www.nerdwallet.com/blog/finance/money-rules-of-thumb/

http://www.investopedia.com/financial-edge/1011/top-5-ways-to-protect-yourself-against-problem-renters.aspx

10 Little-Known Benefits of a Better Credit Score

By | Credit Scores

Better Credit Score Ovation

There are many reasons why you want to make sure your credit score is as high as possible; it’s not just to ensure you can qualify for a credit card or mortgage. Take a look below at 10 little-known benefits of better credit scores that you’ll want to learn right now.

1. Moving Violations Don’t Hurt Your Credit Score as Much

It’s unfortunate, but a moving violation can cause your insurance premiums to go up. The amount of the increase ranges depending on the situation. Your risk level is also taken into consideration. A big part of this is your auto insurance score, which is almost the same as your basic FICO score.

So, you’ll find yourself in a much better situation after a moving violation if you have good credit. In fact, the amount your premiums could go up may be as much as $1,000 a month after a single violation. Yet, if your credit-based insurance score is strong enough, you might only see a smaller increase of $100 to $150 per month.

2. You Can Negotiate With Insurance Providers

Companies that offer auto and homeowner insurance typically use the credit-based insurance score to determine your risk level. If your score is strong, it’s possible to negotiate a better insurance premium.

Additionally, if you can prove your risk level isn’t as high as it seems, you may be able to improve your credit score, and your current insurer may reduce your premiums. If you are rejected, it doesn’t hurt to check whether other insurance companies are willing to offer more competitive rates.

3. Renting a Home Gets Less Difficult

A typical tenant screening process involves a credit check. The landlord or property manager might not care if your credit isn’t good. However, there are many that will use this as a quick way to deny your approval. Someone renting out a place is likely to see your good credit score as proof of your financial stability. Therefore, if you have excellent credit, you’ll get priority dibs for the rental properties you can afford.

4. Reward Cards Become a Lot More Rewarding

You can qualify for any reward credit card when you have excellent credit. This gives you the opportunity to earn cashback rewards on all the shopping you do. The best reward cards sometimes pay as much as 3 to 5 percent back on all your purchases. In the end, you could save thousands of dollars every year by taking advantage of rewards programs.

5. Signup Bonuses Get Better

It’s important to inspect all terms before you apply for a credit card. Picking one just for the signup bonus isn’t a good idea. However, sometimes having excellent credit can gain you access to incredible signup rewards. There are travel reward credit cards that pay especially well. In fact, some signup bonuses can be worth $1,000 or more.



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6. Better Credit Score = Tier 1 Borrower

Many banks and lenders categorize borrowers by tier level. There are three tiers, which essentially put a borrower into one of three borrowing statuses. You’ll either be ranked as “Good”, “Better”, or “Best,” depending on your FICO score.

The cutoff depends on the company reviewing your file. Sometimes, you’ll need at least a 750 score, but on other occasions, you might require at least an 800 score. So, having as high of a credit rating as possible will ensure lenders consider you as a top tier borrower. This will result in optimal interest rates and a higher chance of approval.

7. Starting a Business Is Less of a Struggle

Most small businesses require a bit of startup capital. Without it, you have a much higher chance of experiencing failure. This is because there are many startup costs and scaling expenses you can face along the way.

Also, if your personal credit is excellent, your business creditworthiness will be sky high. This could mean that you can borrow as much as you need instead of getting capped at a few thousand dollars. If you like, all your monthly expenses and sudden purchases can go under one business card, as well.

8. Skipping the Paperwork

You are pre-approved for many credit opportunities. This ensures less paperwork when you do want a new credit card or loan of any sort. You also get to enjoy shorter wait times when you apply for new credit.

9. Qualifying for Unique Financing Options

There are certain types of financing that are not available to the average borrower. For example, you need to have excellent credit to qualify for a vacation home rental unless you make a a sizable down payment.

10. Real Estate Investments Become Trivial

Now, you have easy entry into the real estate market. You can qualify for mortgages with little down. Your interest rate is super low, so your holding costs are kept to a minimum. Sometimes, you can even get into a great deal without making a down-payment. Then, it’s just a matter of getting renovations done, which you might be able to get cheap financing on, as well.

Increasing your credit score will do you and your family good. The key is to not use your financial strength for impulsive spending or unnecessary expenses. Heed this advice, and you can enjoy the financial gain behind your excellent credit status.

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