Credit Repair. Increase Your Credit Score!
If you have already begun the credit repair process, you may have noticed that different credit reporting bureaus provide you with a credit score that is rarely equal to the other agencies. Credit scores from Equifax, TransUnion, and Experian will all be reflective of your credit management abilities but it is unlikely they will ever be exactly the same at the same time.
Why Does This Happen?
Each credit reporting agency has a different method and different factor list for determining your three-digit credit score and there are several reasons why your individual scores from the three agencies will differ.
First, it is important to note that not all creditors will report your credit activity to all three of the reporting agencies. Some may choose to report to only one or two of the agencies so the third report would not have this particular creditor data considered as part of their scoring model.
Secondly, the inconsistencies in the credit score may be due to the changes occurring on any given day. Depending on how you use your credit, when you authorize a credit check and various other scenarios, your credit score may change from day to day if only slightly. Credit bureaus also do their credit file updates at different times so the addition of data can be reflected in credit scores. The small differences in your credit report may not seem significant but Read more…
They say you never know a good thing until it’s gone and that includes a good credit score. When your credit score drops, your life could change. But, you can better manage the side-effects of a bad credit score when you know what to expect.
You might not know to expect it, but landlords check your credit report before they rent to you. Depending on what’s in your credit report, you may get turned down for an apartment. Or, if you’re approved, you may have to pay a higher security deposit to move in than if you have better credit.
It’s hard to tell which apartments do credit checks and which ones don’t. But, you can typically expect big apartment complexes to check credit. Condos and houses owned by individual landlords are less likely to do a credit check. Still, if you can stay put until your credit improves, you’ll have a better chance at getting approved.
Higher Security Deposits
If you do move somewhere else and you have to establish new utilities in your name, you may have to pay a higher security deposit. Utility companies like those that provide electricity, water, sewer, and cable, often run a credit check in the application process. Applicants with bad credit often have to pay an upfront deposit. Usually the deposit can be refunded or credited to your account after a certain number of timely payments, but be ready to pay the money upfront to get your services turned on. Read more…
During the process for repairing your credit, debt reduction with the goal of debt elimination is the typical starting place for most consumers. Credit card debt is often the biggest problem in the credit repair equation since missed and late payments or too much credit card debt is the reason your credit needs to be repaired in the first place.
Immediately when learning credit cards are maxed out and bills are too high to pay, many consumers will instinctively want to cancel their credit cards to help them resist the spending temptations which got them in trouble in the first place. But canceling credit cards is one of the biggest credit repair mistakes people can make and doing so, especially to multiple accounts, can be devastating to your credit score.
Here are some things you need to consider about credit cards and credit repair:
Oldest and Dearest Cards Mean Most
The credit card account you opened first means the most to your credit score. Part of the calculation for determining your three digit credit score is the amount of time for which you have established credit. By closing the oldest credit card account, you are essentially erasing part of your credit history which can drop your credit score. Read more…
Credit and debt are very closely related. How you handle your debt can either help or hurt your credit score. On your credit repair journey, it’s important to be aware of what you’re doing with your debt.
Too Much Debt Hurts
A large part of your credit score – 30% – is based on how much debt you’re carrying on your credit cards. If you have a lot of debt compared to your credit limit, then your credit score will be hurt. However, carrying low balances will help improve your credit score and make you a more desirable borrower. Make paying off debt part of your credit repair plan.
Paying Late is Deadly
One of the reasons to keep your debt low is that it keeps your payments at a manageable level. Once your payments get too high, you’ll have trouble keeping up and you may have to miss a month. Late payments will kill your credit score.
It’s not ok to make a late payment just because your credit score is already bad. Doing that will just lengthen the amount of time it takes your credit to recover. Those old late payments will hurt your credit score less as time goes on, but any recent late payments will have to age before the damage lessens. Read more…
You may be familiar with the information that matters to your credit repair tasks and credit score including on-time payments, amount of credit you maintain, the length of time since you established your credit account, and other financial factors. You may also know that your credit score is what lenders rely on to help them making big money decisions and allow them to approve (or deny) your credit application.
Did you know there are factors that are not included into your credit score calculation? While FICO, the company who created the three-digit number credit scoring system most often used by lenders to gauge credit worthiness, will not divulge exactly how their scoring system works mathematically, there are some things that are not factored into your score.
Here are ten personal financial pieces of information that is not a part of your credit score:
- Your age – the only way your age is a factor in credit is potentially the amount of time you have had to establish credit accounts.
- Your vitals – includes gender, race, nationality, marital status, or religion – It is against the laws in American to factor any of this data into a credit scoring system.
- Your employment – includes where you work, your occupation, job title, employer, work histories, or salary.
- Your location – includes your current address/location as well as your past information.
- Your interest rates – includes your interest rates on credit cards and any other loans. Read more…
With an increased focus for consumers on repairing their credit, it makes sense that there are increased efforts on behalf of less-than-reputable ‘credit repair’ companies to market their services to unsuspecting consumers.
The Sad Reality
So many people have suffered through debt and other financial problems that led to a poor credit rating, the national economy felt the punch, especially in light of the housing market crisis. Since the attention on the importance of good credit scores has been steady, more consumers finally feel ready to take their debt to task and finally do something about repairing their credit. There is no longer the deep stigma associated with debt there was in year’s past.
While it is a good sign more consumers are paying attention to their personal finances, it is also creating a vulnerable position for many who are not sure where to start or if they are up to handling the task at hand. They still fear debt negotiations with their creditors or are in need of a ‘quick fix’ to pursue more financing. Both scenarios have paved the way for a so-called credit repair company to easily come to the rescue.
The sad reality is that while many consumers have the best intentions, not all agencies feel likewise. Many are in it for the cash and do not think much about the damage they are causing to consumers when the money is gone but no legitimate credit repair work is done on their behalf. Scam agencies are increasing all the time, promoting credit repair services that are essentially impossible. They make it sound so easy in their aggressive advertising campaigns and many consumers take the bait. Read more…
It’s often hard to get started with credit repair, not because you don’t want to have better credit but because you’re not motivated to do the work involved with repairing your credit. Motivation is often psychological, so if you can convince yourself that credit repair is a worthwhile goal, you’re more like to start working in that direction.
Realize that Credit Repair is Beneficial
You can live with bad credit, but you can live better with good credit. When you think about credit repair, think about all the benefits you’ll get from improving your credit score. You won’t have to be nervous about putting in new credit card and loan applications. You’ll have the good credit that’s needed to establish utilities in your name without paying a deposit. You can pay lower your car insurance rate since bad credit is linked to higher insurance rates. Read more…
When you are working to repair your credit, there are many steps to go through and factors to consider. IT can be easy to get lost in the shuffle and make some mistakes that actually hurt your credit repair work.
Here are some of the most common credit repair mistakes people make and how to avoid them:
Closing Your Accounts
When people are in credit card debt, it can be a gut reaction to cut up the cards and close down accounts to prevent further spending and debt. However, you could be putting yourself at risk for greater credit problems by taking that step. Part of your credit score involves how long you have had credit established. If you end up closing the accounts you have had opened for the longest period of time, you are risking a credit score drop by eliminating portions of your credit history. Instead of cutting up your credit cards for good, it is more appropriate to learn how to manage the credit you have. Pay off your balances and utilize the credit cards minimally. You can give your credit score a boost by charging small things to the cards regularly and paying off the bill each month. Keep the accounts open and somewhat active without overspending for the most benefits to your credit score. Read more…
There comes a time in every credit repair saga, that you have to ask the question, “Am I ready for a new credit card?” Disputing negative information will only take you so far. If you want to take your credit score to the next level, you’ll need to add some positive information to your credit report. One of the ways to do this is by getting a new credit card and using it responsibly.
Before you go fill out a new credit card application, you have to make sure you’re actually ready for a new credit card. If you get one prematurely, you could undo all the credit repair progress you’ve made so far.
Do you qualify for a decent credit card?
There are some credit cards out there that will approve you no matter what your credit score looks like. However, these aren’t the type of credit cards you need. These “subprime” credit cards target people with bad credit and make cardholders pay dearly with high annual fees and interest rates.
Is your credit score good enough to qualify for a credit card that doesn’t have high annual fees and has decent interest rates? An interest rate between 14% and 20% is expected for someone who’s trying to rebuild their credit score. Read more…
Debt settlement is a legal option available to financially strapped consumers who are struggling to recover from huge debt burdens. Despite the fact that this option is perfectly legal and been in practice for many years before the recession, debt settlement is strong medicine for your debt problems. It should be considered as a last resort option for individuals who have fallen behind on their financial obligations but want to avoid filing for bankruptcy.
What is debt settlement?
Also referred to as debt negotiation, debt settlement is a practice where an individual or a third party company hired to represent an individual, negotiates with a creditor to reduce the balance needed to pay off an account. Most creditors are unwilling to negotiate a reduced payoff amount if an account is current, which is where problems with your credit first begin. In order to negotiate with your credit card company you will likely have to be delinquent on your account which obviously affects your credit score. With that in mind, understand that while a successful negotiation of your debt may help you reduce the amount owed, the process itself will damage your credit.
How to repair credit after debt settlement?
Consumers who have gone through the debt settlement process have a long road ahead to repair their credit. Fortunately, despite the negative affect of debt settlement on your credit, the consequences are less severe than filing for bankruptcy. Credit repair after debts have been negotiated can be accomplished with the following steps. Read more…
If you experienced financial difficulties at some point in your life which made it impossible for you to make payments owed to a lender – after awhile, it’s possible the lender “charged off” the account. You will need to work on credit repair after an account is charged off.
What is a Creditor Charge-Off?
When a creditor considers an account as being in charge-off status, they are essentially considering the debt as uncollectible so late in the game. The chances of a consumer paying off the total debt are slim to none. At this point, the creditor will charge-off the account, meaning they will write off the debt for their own tax purposes and claim the loss.
While the debt may be gone in the eyes of the creditor as far as collection goes, the debt you have incurred with the creditor is still very much legally collectable provided the debt is still valid. At this point, a creditor will seek out the services of a debt collector to pursue the debt.
Unfortunately for the consumer, a charged-off status will show up on your credit report and is bad news if you wish to pursue financing in the next seven years. It is about the worse mark you can get on your credit report and lenders do not take kindly to your inability to meet financial obligations extending this far past due. You will be noted as a credit risk and find it hard to get credit for many years to come.
How to Deal With a Charge-Off
Ideally, all consumers should strive to repair their credit before a charge-off is reported to the credit bureaus. It is in your best interest to request copies of your credit reports and see where you stand. Make every attempt to negotiate the balances you owe to get current with your creditors before being sent to collections. Many creditors will be willing to take lesser amounts in order to settle the debt. Marks on your credit report will not be great but a settled account looks better to lenders than doing nothing at all.
If you have reviewed your credit reports and found that an account has been inadvertently reported as being in charge-off status, it is essential that you dispute the item with the credit reporting bureaus as well as the creditor or collection agency to have the item removed as soon as possible. Repairing inaccurate information on your credit report can significantly improve your three digit credit score, especially where a charge-off account is concerned. Since credit reporting agencies are susceptible to human error, it is always wise to regularly check your reports for such errors.
If a charge-off is correct, there is no way to remove the mark on your credit report, even if you make an attempt to pay off or settle the debt after the fact. It is mark that will drop your credit score and present you as a credit risk for future financing. If you have more than one creditor reporting a charge off, it is very important you still attempt to improve your credit score and repair your credit history in every other aspect. Seven years is a long time to wait out bad credit news so be proactive about your credit monitoring and credit repair activities.
Credit Repair Activities After a Charge Off
First, get a copy of your credit report to view the account and how it is listed on your credit report. See how much you still owe on the account, and how much of it is listed as “past due”.
Can you pay the account in full now? If so, contact the creditor and find out how to make payment and how long before the information is corrected on your credit report.
If you do not have enough money to pay for the account in full, contact the lender or the collection agency handling the account and find out what your options are. Sometimes they will accept a payment plan toward paying off an account in charge off status; other times they require a lump sum payment. If they do accept payments, ask whether or not they will also update the account on your credit report to show you are making payments. This would show any other companies viewing your credit report that you are making good on this debt – although your credit score itself would not likely improve until the account is paid in full.
Settlement of a Charge Off Account
For accounts with large balances which have charged off, you may want to consider “settling” the debt with the lender. Sometimes you can make arrangements to settle an account for much less than you actually owe. You might consider this route if you are unable to come up with the full amount to pay the account off, as the damage to your credit score has already been done. Normally, a debt settlement will lower your credit score, but since the account is already in a charge off status, settling the account for less than you owe is not going to hurt your credit score any further – making it a reasonable option for starting credit repair after an account has charged off.
You can expect most lenders to accept 70 cents per dollar owed; or perhaps as low as 50 cents per dollar owed in the form of a settlement. If they agree to your proposed settlement amount, get it in writing, including a notation that says they will update your credit reports to show the account as settled, paid as agreed. Once you’ve taken care of this settlement payment and your credit report has been updated – you will begin to see your credit score improve as you make your other payments on time.
You may be working really hard to get back on track with your credit and have made every effort to repair your credit score but you need to pay close attention around the holidays or your hard work can be in jeopardy.
Why The Risk?
So many people with poor credit scores got into their situation because they had a hard time controlling their spending in the first place. This is especially true during the holiday shopping season when people feel as though they have to give the best to everyone whether they can afford it or not. This results in overspending, mostly on credit, for items and purchases they can never dream of paying back in a reasonable amount of time. The overextension of credit ends in reduced credit scores and the inability to keep up with payments.
How To Stay On Track
You need to really pay attention to your finances during the holidays. Before you hit the mall, you should know how much money you have after the bills are paid and your other financial obligations have been taken care of for the month. You are wise to start a Christmas Club savings account so you’ll have extra cash to devote to your holiday shopping needs. If you did not enroll in such a savings program, it is crucial to sit down and figure out where you stand. Read more…
For some people, repairing credit is not a top priority on their list of things to do because they are instead focusing on accumulating money in other ways in hopes of conquering their debts. Gambling is a serious problem in America. There are so many state-sponsored lotteries, top-drawer casinos, and other supposed moneymaking opportunities people begin to believe they can use luck to deal with debts.
Instead of socking away the $5 a week towards a debt relief fund, they spend that and more on games of chance and slot machines with the intentions of winning enough to pay off their debts. They falsely believe their small weekly spending is not hurting their financial situation but the reality is the money spent on any type of gambling is money poorly spent.
How can you tell if gambling is affecting your credit and financial life? Here are some tips to help you decide:
Seeing the Problem
No one likes to admit they have a problem of any kind let alone a gambling problem. A gambling addiction is a real-life psychological condition. Much like alcohol and drug addictions, treatment may be necessary to turn things around. Admitting you have a problem with gambling is a big first step but it is the most important one. If you can answer ‘yes’ to one or more of the following questions, you may be in need of additional help. Read more…
When you hear or read about credit repair companies from “reputable” sources, you usually see these sources warning you against credit repair. They tell you not to hire credit repair companies and that you’re better off repairing credit on your own. Why have credit repair companies been made into villains? Because many of them are villains.
In 2008, the Federal Trade Commission (FTC) shutdown 33 credit repair companies because these companies violated Federal laws for credit repair companies. When the FTC sues these companies it’s usually because they’ve been making false claims, not delivering on their promises, and taking money from customers upfront. These are all illegal for credit repair companies to do.
It’s Easy to Start a Credit Repair Company
Anyone can start a credit repair company. While there are Federal laws stating what credit repair companies can do once they’re operating, there are no laws or requirements for any individual or company to start doing credit repair. The internet makes it easy for someone to start a credit repair company without even getting a state business license or training. Read more…
If you thought you could ignore the rest of your finances and build a good credit score anyway, you were wrong. Credit is an integral piece of your financial picture. If you’re doing bad in one area, chances are you’re doing bad in another area. So, there are some parts of your finances you must fix before you can start credit repair.
1. Create a budget. The lack of a budget is quite possibly one of the things that led to your credit demise. Without some type of budget, you’re more likely to overspend, leading to higher credit card balances and less money to pay your credit card bills. If you don’t already have a budget, create one now.
2. Start an emergency fund. An emergency fund is a financial safety net that catches you when you fall. It’s savings that you can use to pay for unexpected expenses. This keeps you from having to put the expense on a credit card.
3. Have a checking account in good standing. A sign of financial responsibility is having a checking account that you can use. A checking account makes it easier to pay your bills, an essential step in credit repair.
4. Avoid overdrafts and bounced checks. Overdrafts and bounced checks happen when you spend more money than you have in your checking account. Both events result in a fee. If it’s a regular occurrence, it’s a sign that your spending is off. Overspending is one of the things that leads to bad credit and if you’re overspending your checking account, the same might happen soon with your recovering. Read more…