What’s Hurting My Credit Score? – Advice

The credit score of the average American is 661, which is considered “fair.” To have good credit, the score must clock in between 700 and 749 and an excellent credit score is considered anything about 750. Needless to say, the majority of Americans don’t have a great FICO score, which means that most are trying to enact debt management or credit repair strategies to boost their scores and thereby make them a more attractive consumer.

So since many Americans have unfavorable credit scores, just where are people going wrong? Here’s a look at some of the most common negatives that impact credit scores:

Late payments: Payment history accounts for 35 percent of an overall credit score. It’s the largest thing that plays into a score and it allows the lender to see whether or not you’ve paid past accounts on time. Make one late payment and it could stay on your credit report for up to 7 years and dock your score by up to 120 points. That’s a big price to pay for not getting your payment in by the due date. Here’s a credit tip – don’t be late with your payments!
- Similarly, a delinquent account is one that you haven’t paid on within 30 days from the previous due date.
Collections: When a debt goes to collections, it means that you haven’t been paying on it and it has been sold to a third-party collector. And being that one measly late payment can severely impact your credit score, just imagine how much damage a debt in collections can do. Generally speaking, the higher your score, the greater damage a debt in collections can do to your score. And it can remain on your score for 7 years since you defaulted on the payment.
High balances: Your utilization rate makes up 30% of your FICO score. The amount of your outstanding balances on your credit cards divided by the sum of your credit cards’ limit, is your utilization rate, expressed as a percentage. Your balances should never exceed 30% of your credit card limits.
Bankruptcy: Bankruptcy is often a last-ditch resort for people who have severely mismanaged their finances. Filing for either Chapter 7 or Chapter 13 can shave up to 220 points from your score. What’s more is that a Chapter 7 bankruptcy stays on your credit report for 10 years and a Chapter 13 bankruptcy for 7 years. That’s a long time to have to work – and wait – to effectively repair credit.
Foreclosure: Foreclosure is essentially when a person can no longer afford to make payments on their home any longer and it becomes the property of the bank. It can dock a good credit score up to 160 points and dock a fair credit score up to 105 points. What’s more is that this will stay on your credit report for up to 7 years, making it difficult for you to get another mortgage or qualify for any other type of loan.

As we mentioned in the open, most Americans have poor to fair credit scores. So make sure you understand what is and isn’t good behavior as it pertains to your finances so that you can work your way into the minority and qualify for the best interest rates on loans.

Should you have any additional questions on how you can remove negative items from your credit report, feel free to Sign Up for $0 Today.

Reasons for Credit Repair – Blog

If personal finance issues make you want to pull the covers over your head, it can be hard for you to know whether you’re coasting along okay or whether you need help with your credit score.

The top signs that you need credit repair:

1. You’ve been turned down for a job.

Many companies will only hire people who have good credit. They believe that good debt management skills points to a higher level of responsibility.

2. You pay more for car insurance.

Insurance companies take your credit score into account when determining your rates.

3. You were denied a car loan.

It is generally easier to get approved for an auto loan than other types of credit. Car loans are good to have, since keeping up with an installment loan over time significantly improves your credit score.

4. You lost a promotion.

Does your company do work with the federal government? These companies often require that employees over a certain level be able to qualify for security clearances. And, you can be denied clearance if you have excessive debt or a low credit score.

5. Debt collectors are calling and harassing you.

When you fail to make payments to your creditors, they end up selling your debt to a collection agency, which then can call you and request payments. The account will be reported by the three credit bureaus as a collection and will affect your ability to get any loans or open a new credit card, as well as damage your credit score.

6. You were turned down for a mortgage.

This is the big one. Homeownership is linked to greater financial stability, a feeling of psychological stability and even tax advantages. Having a good credit record is necessary to achieve this common goal.

7. You’ve been denied for a credit card.

Opening a new revolving account is not as easy as it used to be. If your credit card application was denied, you may need credit “clean-up”. The credit card company is required to let you know the reasons why your application was denied, so you can take the necessary actions to fix your credit.

8. You need to save more than most for a vacation.

No credit card means that you are at the mercy of airlines and may miss airfare sales. Rental cars and hotels hold hundreds of dollars of your money for deposits. Limited or complete lack of access to credit can make every aspect of a vacation more of a hassle.

9. Your application for an apartment was turned down.

Not only can bad credit keep you from buying a house; it can prevent you from finding a place to rent.

10. You feel trapped by a lack of access to credit.

Many everyday financial interactions are made more difficult by a lack of access to credit. But, you can learn how to repair your credit and enjoy more and better opportunities. Visit Key Credit Repair to educate yourself about credit and find helpful credit tips.

For additional information on how to repair your credit, please Sign Up for $0 Today.

Credit Card Offers – Pre-Qualified Vs. Pre-Approved

Everyone is familiar with those letters in the mail from credit card companies offering “pre-qualified” or “pre-approved” cards. Sometimes the cards even appear to have favorable terms. For those who have a less than stellar credit score, or for those looking to improve their personal finance through credit repair, these cards can have some initial appeal. However, it is important to understand what these bulk-mailed offers actually are, and what “pre-qualified” and “pre-approved” actually means.

What Pre-Qualified Offers Really Are

Believe it or not, there actually is a difference between pre-qualified and pre-approved offers. A pre-qualified offer that you receive in the mail is little more than an acknowledgement that your credit score falls within a particular range. These offers are typically sent out to millions of people who fall into a particular category, such as “FICO score between 600 and 650” or “no delinquent payments in the past 3 years”. While these offers might technically be possible, there is basically zero guarantee that you will get anywhere near the terms of the offer in the piece of mail you opened.

What Pre-Approved Offers Really Are

Pre-approved offers are technically different than pre-qualified offers. A pre-approved offer that you receive in the mail is typically a bit more targeted than a pre-qualified offer would be. Usually when you receive a pre-approved offer, it means that the bank or lending institution that sent the offer looked at your particular credit score and determined that you qualified for the offer they have mailed you. However, the big caveat to this is that these offers are pre-approved based on your credit score at the time they approved the offer, which often is weeks or months before you actually receive the letter in the mail. If your credit situation has changed at all, you might not qualify, or they might significant change the terms they ultimately offer you.

What are the Downsides of Pre-Qualified and Pre-Approved Credit Card Offers?

One important thing to remember when discussed pre-qualified and pre-approved credit cards is that they are, first and foremost, a marketing tool being used by a bank or financial institution. This means that the company offering the card expects to make a profit from their interaction with you. Often times, the deals you are offered (or, more importantly, the deal you are ultimately offered if you express interest) is far from the best deal you could find if you sought out a credit card yourself. On top of that, by replying to the mailer, your credit will receive a “hard hit”, which can damage your score.

If you are trying to repair credit, remember that responding to any of these credit card offers will result in a “hard hit” on your credit report, so be very wary about which offers you reply to, if any at all.

For additional information on how to repair your credit and get approved, you can Sign Up for $0 Today.

Mortgage Underwriter – What You Need to Know

One of the most important debt management credit tips that anyone in finance will tell you is the importance of protecting your credit score. This is particularly true for anyone looking to make a big purchase involving credit, such as a mortgage for a home. If you want to apply for a mortgage and are not sure whether or not you need to repair your credit in order to do so, it is important to understand the types of items that can cause red flags on your credit report and take care of them as soon as possible.

Some of the Most Important ECOA Credit Report Codes

ECOA codes, or Equal Credit Opportunity Act codes, are used by mortgage underwriters to analyze a credit report and make a decision on whether or not a particular application should be approved. If you are currently working on credit repair so you can qualify for a mortgage, it is very useful to know and understand exactly which codes a mortgage underwriter is going to look at. Here are some of the most important ones:

Types of accounts

These codes refer to the type of an account, or to the relationship of the user on the account:

A – authorized user on a shared account
C – account with at least two liable parties (joint contractual liability)
I – individual account with no other parties involved
M – account with liable party, with a backup liable party if the original party defaults
P – member of a shared account that cannot be classified as an authorized user or sole account holder
S – account in which the secondary signer (also known as a co-signer) is liable if the maker defaults
T – user no longer linked to the account in question
U – blanket term for undesignated status on an account
X – deceased

The Mortgage Underwriting Process

All of the codes listed above are used to categorize a mortgage applicant during the underwriting process. It is worth noting that this process is significantly stricter than it was during the early 2000s. In fact, the Consumer Financial Protection Bureau recently enacted even stricter underwriting requirements for certain types or mortgages. In effect, this means that mortgage underwriters must do a more extensive background check, including an in-depth look at a criminal background check, deeper checks into bank account and other assets, and a spending and employment history. Ultimately, a mortgage underwriter assigns you a credit risk, then combines that risk with the percentage of your pretax monthly income that would be accounted for with the projected mortgage payment you are applying for.

For additional information on what specific ECOA codes mean, and how you can remove the negative ones from your credit report, feel free to Sign Up for $0 Today.

Credit Around the World

You’re likely already familiar with how your credit score is factored and what debt management tactics you can deploy to repair credit here in the United States. But it’s worth examining credit elsewhere around the world, including how credit scores are calculated, what countries have advanced credit reporting systems as well as some of the consequences one might face abroad when a bill goes to collections.

FICO (or Something Like it)

The FICO concept isn’t just exclusive to the United States. In fact, it’s estimated that up to 20 countries use either the FICO score, or some variation of the FICO score as we know it, to judge whether or not a customer would make a worthy borrower. Using the FICO method is one of the most reliable ways to judge a good borrower, and formulas similar are used in countries such as the U.K., Thailand and Germany (where the credit reporting agency is known as SCHUFA).

Accentuating the Negative

Abroad, credit scores are calculated based on both the good and the bad when it comes to lending history. But if you live in Australia, Hong Kong or Sweden, only your negative credit history is included in your report. However, this is a bit of an unreliable credit system, because a lender is unable to accurately judge whether or not someone would make a good borrower based on the fact that they are unable to see any positive history. Questionable credit reporting methods are particularly highlighted by Sweden, which has no three digit score, just either “good” or “bad” as values.

Consumer Friendly Scoring

In the U.S. it’s usually a good idea to check your credit score and pull your credit history from time to time. After all, it’s truly the only way to institute any credit repair strategies over bad debts or poor past finance habits. But elsewhere in the world, credit reporting is made quite consumer friendly. Take Austria, for instance, where residents must opt-in before any of their personal info can be used for any purpose. In Canada, as long as it’s in writing, you can get as many free credit reports as you desire. And in Norway, every time your credit is checked, you’ll receive an e-mail that details who it was requested by and why.

Discrimination Scoring

If you really want to get an example of a poor – and racist – credit scoring system, look no further than the system that South Africa used in the 90s. It actually considered things like race – and gave black consumers a lower score than other races. That consideration has since stopped, however.

For additional information, feel free to Sign Up for $0 Today.

Debt Collectors Can’t Pay Their Own Debt

What happens if you miss a payment? Default on a loan? Can no longer afford to make the payments required?

Simple – you’re taken to task. The bill can go to collections, debt collectors can come after you and the mishap will be reflected in a negative credit score, forcing you to put debt management and credit repair plans into place to save face. In more dire situations, you might have to declare bankruptcy or seize some of your assets.

Yes, not being able to pay off debt according to the policy you originally agreed on can have dire consequences for your credit score and overall finances. But what happens when debt collectors can’t pay off their own debt? We ask that in lieu of two recent incidents where debt collection agencies have been handed hefty fines that they can’t pay, yet are allowed to remain in business. Here’s a closer look:

RBT Enterprises was handed a $4 million fine from the Federal Trade Commission for a series of deceptive collection practices that are believed to have cost consumers over $1.3 in unethical fees. RBT Enterprises can’t pony up the $4 million, but the FTC is allowing it to stay in business, pending it pays a $100,000 fee to suspend the judgment and the owner turns over his assets. The FTC is also allowing RBT to stay in business pending suspension of its unethical collection practices.
The second example involves ACE Cash Express, a payday advance loan company. The Consumer Financial Protection Bureau (CFPB) alleges that ACE used illegal tactics to force overdue borrowers into taking out more loans. As a result, the CFPB is ordering ACE to pony up $10 million – $5 million in customer refunds and another $5 million in penalties – to make amends, as well as discontinue their illegal tactics.

It seems a little odd and unfair that unethical debt collectors are allowed to stay in business after breaking so many rules and are given leeway when they can’t pay up as a result of their actions, especially when individuals faced with similar financial issues are judged so harshly and may have to spend years following a series of credit tips to repair credit in order to become a “good” borrower again.

But the aforementioned examples should highlight how careful you should be if collectors are coming after you. Remember, debt collectors can’t lie to you – that’s illegal. But apparently if they do lie and deceive consumers, they can still stay in business after a smack on the wrist…

For additional information on how to deal with debt collectors, please Sign Up for $0 Today.

Student Debt – The Meteoric Growth

If you have student debt, you are part of a quickly growing segment of the population. Since 1999, student loan debt has increased by over 500%. In 1999, student loans totaled roughly $90 billion. They now total over $550 billion. That number’s higher than the GDP of Norway. And, the consequences for both students and society at large are huge.

Rising Tuition, Rising Debt

While more and more people are seeking secondary education, this is only a small part of the cause of rising student debt. The cost of a college education has gone up at several times the rate of inflation. Between 2000 and 2012, the average cost at a public college went from $10,000 a year to just over $14,000.

If the Bubble Bursts

The current default level on federal student loans is rising, going from 9% to 10% over the past three years. Student loan default can have a disastrous effect on your credit score. This debt stays on your credit report for many years. It cannot be discharged in a bankruptcy. Often, the only option for those who wish to repair credit and move on to opportunities like home ownership is expensive rehabilitation.

The costs of growing student loans is not limited to the individual. Our economy is consumer based. And, when people have less to spend, this leads to lower economic growth, as we saw during the housing crisis. Should the student loan bubble burst in the way the mortgage bubble did, it will lead to slowed growth in every segment. Fewer people will be able to purchase homes. Costs for products that range from credit cards to insurance will put a higher burden on a wider range of individuals.

For additional information on how to repair your credit score and deal with overwhelming student loans feel free to Sign Up for $0 Today.

Experian Sued by the State of Mississippi

Credit reports are a necessary evil. Creditors pull a copy any time you borrow money, landlords use them to determine whether you are a safe bet, and employers in some states still use them to determine your ability to manage financial affairs.

No Built-In Protections

The problem is, credit reports are routinely riddled with errors. Debt management companies work with clients every day who are hounded by inaccurate information and in need of credit repair. Like being accused of robbing a convenience store when you are actually home in bed, it is up to you – the consumer – to disprove inaccurate information included on your report and repair credit. The three major credit bureaus have thus far made it a practice to do little more than collect data and sell that information to those who want to see it. Whether or not that data is correct is of little concern as long as they continue to make a profit.

States Become Involved

Now comes news that the state of Mississippi has sued the world’s largest credit bureau, Experian. The lawsuit contends that paperwork errors and sloppy consumer protection are rampant. Experian has gone so far as to report that some consumers are on a terrorists watch list. While it is Mississippi leading the fight against the massive agency, 32 other states are currently investigating the industry as a whole.

They ask how fair it is for a person to be denied a job or loan due to errors included on a credit report. According to Mississippi Attorney General Jim Hood, the company knows that the credit files of millions of Americans contain grievous errors, and yet refuse to do anything to correct the situation. Credit bureau are not the consumer’s friend and do not exist to give credit tips or help the consumer build their credit score. Even as states come after them, it seems that as a whole the industry refuses to back down.

Three Major Bureaus, Three Sources of Trouble

All three of the major credit bureaus – Experian, TransUnion and Equifax – gather information from banks, landlords, debt collectors, and any other source that might provide a snapshot of personal finance habits. Although it is an open secret that these credit reports are often laughably inaccurate banks and some prospective employers still look to them to help determine a person’s financial stability.

The Mississippi law suit with experian also alleges that Experian provides no easy way for consumers to correct those glaring mistakes, regardless of how an individual may be impacted by the errors to their report. When Experian does respond to a customer complaint, more often than not they find in favor of the debt collector or banking institution that reported the black mark. After all, it is essential to keep their paying customers happy.

Neither the credit bureau or its trade group, the Consumer Data Industry Association, are willing to discuss the law suit or answer any questions about their lingering practices.

For additional information on the Mississippi law suite with Experian Sign Up for $0 Today.

Credit Score Boost for Renters

It’s a conundrum that a lot of renters face: you pay your bills on time every month. But, the monthly payments don’t count toward your credit score, meaning that you are less likely to qualify for a home loan.

A new company called RentTrack is partnering with Experian and TransUnion to change that. Users of the service can pay their rent online through the RentTrack site. The credit bureaus will, at the renter’s request, add the payment history to the renter’s credit report. This should create a large credit score boost for renters.

Why Credit Bureaus Are Getting Involved

First-time homebuyers make up a smaller portion of home purchasers than ever before. The reason is that many don’t have high enough credit scores to get approved for a mortgage. But, adding a consistent payment history to a renter’s application can make all the difference when it comes to approval of funds to finance a house. TransUnion performed a study showing the effects of rental data on a credit report. One-fifth of renters saw their scores increase by 10 points or more in the first month. Another two-thirds saw either no effect or at least a small increase.

How It Works

Renters can visit RentTrack’s site to see whether their landlords are already enrolled in the program. If a property owner is not signed up yet, an invitation will be sent. Then, the renter makes payments through the site using an e-check or a credit or debit card. You can even sign up for automated payments if you have trouble remembering when to pay the bill.

The site can be a boon to those undergoing credit repair, since it rewards you for doing what you will be doing anyway. Talk to us about the things that you can do to take control of your finances and improve your credit score.

For additional information on how to repair your credit, please Sign Up for $0 Today.

Debt Settlement Vs. Bankruptcy

Think of it as a debt management conundrum – should you file for bankruptcy or try to strike a settlement agreement with your creditors? Depending on your situation, either one can be a viable route if you can no longer make payments on a loan or credit card. But it’s important to carefully analyze both courses of action, not only in terms of cost, but impact on your credit score. Here’s a closer look at both debt settlement and bankruptcy:

Bankruptcy

Generally speaking, filing for bankruptcy – whether it’s Chapter 7, 11 or 13 – negatively impacts your credit score for longer than a settlement would. A Chapter 7 bankruptcy, for instance, would remain on your credit report and be reflected in your credit score for up to 10 years. A Chapter 13 bankruptcy, for seven years. But the big thing about bankruptcy is that there’s really nothing you can do to repair credit after you’ve filed – you just have to endure until the bankruptcy is removed from your credit report after seven to 10 years.

Settlement

Debt settlements typically require you to work with the creditor to see what they’d be willing to accept to settle an outstanding balance. While in many cases, they’ll accept less than what you actually owe, there are a few things to consider when it comes to settlement:

You’ll likely have to make a lump sum payment.
Your credit may still be damaged if you’ve failed to make on-time payments. Therefore, you’ll still have to enact a credit repair strategy to raise your score following settlement. (Credit tip: If a payment goes to collections, it isn’t removed from your credit history until it’s reached seven years from the time of last delinquency. So if you just now settle a debt you stopped making payments on 4 years ago, you’ll only have 3 more years before it’s wiped off your report.)
The IRS considers forgiven debt as taxable income, which means that federal debt collectors might be coming after you for more money if you don’t file your income taxes properly.

So if you’re caught in a financial pickle, be sure to do your homework before you settle or file for bankruptcy and what it may mean for your credit future.

For any additional information on how to repair your credit after a bankruptcy or settlement, please Sign Up for $0 Today.