Credit Repair 2016!! – Credit Resolutions

Your credit score is important – it’s time to start treating it like it is. That is, if you haven’t already done so.

Yes, a poor credit score can cost you in higher interest rates – if you even get approved for a loan or mortgage at all. In turn, you can end up paying hundreds, thousands, perhaps even tens of thousands of dollars more over the lifetime of a loan than you would if your score was good.

So if you haven’t already put an emphasis on getting – and maintaining – a good or exceptional credit score, why not start now? Here’s a look at some resolutions to help you in 2016:

Check Your Report

Get into the habit of checking your report at least once per year. Why? Because it’s estimated that some 42 million Americans have some sort of inaccuracy on their report. Get the report, look it over and take the necessary steps to dispute any errors on it.

Lower Your Debt-to-Credit Ratio

Say you have one credit card with a $10,000 limit and you’ve racked up $5,000 on it. Your debt-to-credit ratio is at 50 percent – and it’s likely costing you with a higher score. Generally speaking, the higher your debt-to-credit ratio is, the lower your score – and vice versa. For a better credit score, simply work to keep this ratio at or below 30 percent.

Think Twice Before Closing Accounts

Many people think that paying off – and closing accounts – will help their credit score. That’s not necessarily true. While paying off accounts will help your score, keep in mind that the credit bureaus take credit history into consideration as far as your score goes – so it’s important to have it on your record. Closing accounts can actually impact this part of the score. It can also impact the aforementioned debt-to-credit ratio. So instead of focusing on closing accounts, focus more on paying them down – start with the high interest accounts first.

Simplify Things

Pay all of your bills on time. Keep your balances low. Don’t get carried away with applying for new credit.

Simple enough, right? So do it! Set calendar reminders or automatic payments to ensure your bills are being paid in full and on time. Keep your debt-to-credit ratio in check and only apply for credit when you actually need it – not just to get 20 percent off on in-store purchases or for some other promotional offer. Keep it simple and your score will rise to a point where you’ll likely be happy.

Free Annual Credit Score – Why Can’t I Get One?

Upon request, every consumer is entitled to a free credit report each year. And this isn’t just something that the credit reporting companies do out of the goodness of their hearts, consumers are entitled to this by federal law – and for good reason. After all, many entities pull consumer credit reports as part of a background check, so taking the initiative to get your credit report on an annual basis gives consumers a better idea of where they stand big picture-wise and allows them to see if there are inaccuracies on their report.

However, while consumers are entitled to get credit reports on an annual basis, it may surprise you to learn that there’s no federal law in place where consumers can receive complimentary annual credit scores. This isn’t from a lack of trying though – lawmakers introduced legislation in both 2009 and 2013 that would federally mandate this, but both bills stalled before they could be signed into effect.

It’s important to note that it’s not difficult for consumers to attain their credit scores free of charge if they know where to look – and at a frequency of much more than just once per year – but it is somewhat odd considering the difference between credit reports and credit scores in terms of being federally mandated.

Why No Free Credit Scores?

So just why has legislation for free annual credit scores stalled on the federal level? The consensus seems to be that there are just too many different credit scores with too many different formulas to choose from. And while the FICO score is the most commonly known credit score, the fact that lawmakers couldn’t agree on just one score is a likely culprit for its failure to be signed into law. If there was a lone universal credit score, there’s a good chance that this would already be a law. And while that may happen in the future, there’s no indication that such is imminent.

How to Get a Free Credit Score

As we mentioned earlier, it’s not difficult to attain your credit score for free – you just need to know where to go to get it. Many banks and credit unions will offer to pull it for you for free from time to time, and there are a bevy of online services that will allow you to see it for free several times a month.

We strongly advise taking advantage of federal law and pulling your credit report on an annual basis. We also recommend utilizing the various credit entities to check your credit score, at least on a quarterly basis. One thing to keep in mind with the latter, however, is that you want to be checking your credit score and comparing it against the same scoring model to give you a better idea of how it has improved or declined.

Canceling Your Credit Cards – The Right Way

Buying A HomeSo you’re thinking of canceling a credit card or two? Before you do anything, make sure you’re doing it for the right reasons. For instance, many people incorrectly think that canceling a credit card will help their credit score. But because canceling a credit card may reduce your credit allotment – and thereby your debt-to-credit ratio – canceling a card could actually hurt your overall score.

Bottom line – before you go about canceling credit cards, make sure it’s for the right reasons and won’t cause you to enact any credit repair tactics to build your score back up. Canceling a card, particularly an older one, may also hurt your credit history, another factor that goes into your FICO score. Good reasons for canceling a credit card, for example, are because of poor customer service, annual fees or if you just plain don’t use a particular card anymore.

Closing Your Card: Contacting the Company

After you’ve made the decision to cancel your card, your next step should be to contact the credit card company and inform them of your choice. From here, the initial representative that you make contact with will likely transfer you to their retention department, where a specialist is tasked with keeping you as a customer of that particular credit card.

If you’re not interested in speaking with a specialist, whose goal is to keep you a customer, see if you’re able to close your account online to avoid the hassle. Often times, retention representatives will offer additional award points, waive annual fees or offer some sort of other incentive to keep you as a customer. If you’re dead set on canceling, you’ll just have to keep declining their offers.

Tie Up Loose Ends

Regardless of the reason behind why you’re canceling your credit card, there are various loose ends you’ll have to tie up. For instance, if there’s a remaining balance left on your account, you’ll need to settle that before you can officially close it. Secondly, you’ll want to be sure that you’ve cashed in or transferred any reward points that you hold with your credit cards – that is, if you don’t forfeit any earned points by closing the card out.

Finally, after you’ve paid off any balance and redeemed any reward points, don’t forget to destroy the card. Even though your account is closed and the card is inactive, it can’t hurt to discard of anything that a potential hacker could track back to you.

As you can see, closing out a credit card isn’t a complicated affair – you just need to make sure that you do your due diligence and that you’re canceling for the right reasons. Canceling for the wrong reasons may actually hurt you more than it could potentially help you.

Right Credit Score – How do I get it?

Picture this scenario: You’re applying for a home loan. It’s a big life event, so obviously you want to be prepared. So you’ve checked your credit score on one of the many online sites that offer the service, were happy with what you came in at and believe you’ll be able to secure a home loan with a low interest rate. Then you connect with your lender, and, as is customary, they pull your credit score too. It comes in tens of points lower than it did when you checked online.

It can be frustrating to be in a situation such as the scenario above, only to discover that what you thought was going to be your credit score is different from what the lender came up with. And in a situation such as a home loan, what the lender discovered obviously trumps what any website came up with.

So how do you get the right credit score? Credit scores vary based on the type of loan you’re applying for (i.e. auto, home, etc.), but what the lender comes up with is always the accurate score for whatever type of loan you’re applying for.

Why the Credit Score Discrepancies?

Just why do credit scores pulled by lenders sometimes vary from the ones you receive via online websites? It’s simple – websites are typically using either their own scoring models, or more updated versions of the FICO score. That’s why it’s important to keep in mind when pulling your score online that these websites serve more of an educational purpose than anything else. These sites can give people an idea of what their credit scores are, and also help them identify areas where credit repair may be necessary to improve. But they’re certainly not scores that are set in stone – those come from the lender.

In noting this, experts advise individuals to just start early in the loan process. For example, if you’re anticipating applying for a loan a year or two down the line, pull your credit score from one of the online sites, see how it looks and analyze whether or not there are areas you can improve it to make yourself a more qualified buyer. Then, when it’s closer to applying for the loan, simply get pre-approved by the lender to get a precise idea of what your score is.

In conclusion, it’s worth noting that there’s certainly nothing wrong with using one of the online credit sites – but don’t take it to be 100 percent accurate, just use it for educational purposes. In the end, the only way to truly get the right credit score is by having your lender run your information before starting the loan process. That’s why it’s best to plan ahead and not be afraid to start the process early.

Debt Consolidation – What is it?

Yes, there are many misconceptions out there about what debt consolidation is. For example, many think it involves the likes of credit counseling or debt settlement, but that’s not the case. So just what is ? It’s simply the act of taking existing debt and paying it off with a new loan with one monthly payment.

Benefits

Now that you know what it is (and what it is not), let’s take a look at some of the major benefits of it, of which there are several. These include:

Easier to manage: Because all of one’s existing debt will be consolidated, payments are generally much easier to manage. That’s because instead of making payments to several lenders, you now only have to worry about making one monthly payment to one lender. Remember, one of the largest factors in your FICO score is making payments on time. Debt consolidation makes this a whole lot easier to do.
Lower interest rates: It’s is especially helpful if you make high interest payments to lenders. One of the goals of a successful program is to do it with one, new lender at interest rates that were lower than with previous lenders. That’s when consolidating debt is really, truly worth it. This helps you save money in the long run and, ideally, pay off the amount more quickly than you would have before.
No negatives to your credit score: As we noted earlier in this post, many people confuse debt consolidation with debt settlement. Debt settlement is the act of negotiating a reduced balance payment amount with lenders to settle outstanding money owed. It also can take a hit on your credit score if you have to come to that. Debt consolidation is simply combining several payments into one monthly payment, ideally at one overall lower interest rate. As long as you make the one monthly payment on time, it won’t impact your credit score.

Now that you know about it, think about whether or not you may be a good candidate for it. If you have several, smaller loans that you’re paying off at high interest rates and believe you could consolidate them into one, cheaper monthly payment, then it’s time for you to take a hard look at this option. While debt consolidation doesn’t eliminate debt, it can help people feel more confident and at ease about their financial situation based on the money that they’re ideally saving from achieving a lower interest rate. At the same time, however, it’s important for individuals who go the debt consolidation route to be cautious not to take out any more debt before the consolidated loan has been paid off. If that’s the case, then the cycle will just start all over again.

Credit Bureaus – Why are there 3 ?

One of the things that people new to credit repair and financial literacy often wonder is why there are three different credit reporting agencies. If it’s an official agency, wouldn’t one do the job? The answers have a lot to do with how the agencies are structured and their actual roles in individuals’ credit scoring. So, let’s understand why there are there are three different business credit reporting agencies.

1. They’re for-profit companies.

It’s common for people to believe that the credit reporting agencies are federal government agencies. But, Experian, TransUnion and Equifax are all businesses. So, asking why there are three different credit reporting agencies is kind of like asking why they make Pepsi and Coke.

While these are private companies, they are governed by laws that dictate how they can use your information. For instance, they must send you your report when it is used to deny you a loan. They also must be responsive when you are trying to get an erroneous debt removed. This is important because business credit reporting is a complex process and any discrepancy in the same can significantly pull down your credit score.

2. They’re in competition.

These three companies are in competition for one another. They make their money by selling reports to lenders that can help determine how risky it is to do business with a potential borrower. If you compare your credit reports from the three agencies, you will often find that the information on them is not identical. Often, one will miss a debt that is shown on another, or there will be a small difference in how they report an account.

Because the three bureaus are in competition, they don’t generally share information with one another. While you work to repair your credit, it is important to request your reports from all three bureaus. If you find errors, make sure to request corrections directly from all three reporting agencies. All disputes must be escalated to respective credit reporting agencies so that proper corrective actions are taken right away. Removing inaccurate information from your credit report can significantly improve your score.

3. There doesn’t need to be just three.

At the current time, there are three major credit bureaus. But, there are also other credit bureaus that you may run into in other situations. ChexSystems keeps track of people’s history with bank accounts. If you’ve bounced checks or overdrawn accounts in the past, their reports can keep you from getting new accounts. There are also credit reporting agencies that deal with specific types of debt, such as rent-to-own furniture or other sub-prime loans.

Over time, we will see more companies offering credit reporting services. Plus, the three credit reporting agencies are starting to add more services for both consumers and lenders. TransUnion is now offering a credit score that is similar to your FICO credit score. While this score may not be used by many lenders, it can give consumers a ballpark idea of their credit scores and help them determine whether they will qualify for credit cards, car loans or mortgages. By keeping up to date on what credit reporting agencies are out there and being used by banks, you can empower yourself to protect your financial future.

A valuable tip here is to check your credit score for all the three business credit reporting agencies. This will help you compare the credit report and better identify erroneous items or negative information pulling down your score.

Credit Agency Response Period – How Long Do I Wait?

The credit bureaus are somewhat of a lifeline to your credit score. They’re also the entities that you need to take up errors on your credit report with. It’s estimated that as many as one out of every three Americans has an error on their credit report, errors which can negatively impact one’s score and purchasing ability. However, it’s possible to dispute negative items or errors on a credit report, a process that consists of corresponding via mail.

But just how long does it take to hear back from the credit bureaus on such issues? Here’s a timeline of what you can expect for the credit agency response period:

Credit Agency Response Period – How long does it take?

After your initial mailing, you should initially hear back from the credit bureaus within a couple of weeks. However, this initial response is usually not a resolution to the issue you presented. Generally, it’s more of a confirmation that they’ve received your correspondence and are investigating the matter. (You might also choose to send the letter with a return receipt requested so you can confirm that it was received.) It’s worth noting that a credit bureau has to respond to your inquiry within 30 days, or they must remove the negative item listed, per Fair Credit Reporting Act regulations.
A credit bureau’s investigation cycle, including mailing of the findings, usually takes about 45 days.

While you certainly want the credit bureau to respond informing you that they’re investigating your dispute, that’s not always the case. They may also respond citing your dispute as frivolous or irrelevant, or send you a rejection letter.

As you can see, getting a negative item from your credit report removed is not something that happens quickly – these things take time. So if you believe that there’s an error on your report that will raise your credit score enough so that you qualify for low-interest financing following removal, be sure that your expectations match reality. You can’t dispute the item one day and then apply for a mortgage or car loan the next and expect things to have been sorted out. Hence, be sure that you periodically check your credit report so that you can sniff out errors sooner.

Mistakes When Checking Credit – What to look for

If you’re not checking your credit at least once a year, you’ve leaving yourself a risk of identity theft or allowing a bad debt to build on itself. ave your money in the long run by tracking your credit carefully. Just make sure to avoid these six common Mistakes When Checking Credit

Paying for Free Reports

Under federal law, you’re entitled to one free credit report each year. You can get your free report online in a matter of minutes and it won’t cost you a penny. If you haven’t gotten your free report this year, don’t even think about spending a dime until you do.

Only Checking With One Bureau

There are three big national credit agencies out there, and they all work separately. That means you credit could be perfect according to one agency and absolutely awful according to another. They all get their information at different times and from different sources. As a result, you need to check your credit with each agency to get the full picture.

Asking For the Wrong Score

Different industries use different formulas to calculate your credit-worthiness, so you can get misleading information by asking for the wrong credit report. If you want to know if you qualify for a new mortgage, for example, don’t request a report tailored to credit card companies. They use different criteria, so the report won’t do you much good.

Misinterpreting the Score

You need to understand the scales used on your credit score to get a sense of what the number means. While most FICO scores operate on a scale from 300 to 850, others use a scale from 150 to 950. Just taking a quick glance and seeing the number 650 on a paper doesn’t actually tell you much. Check the scale to see where you fall relative to others. Also, don’t just look at the score. Check for any listed debts in poor standing, too.

Not Keeping a Copy

Save yourself a big headache by always keeping your credit reports stashed away somewhere safe. Even if you’ve got perfect credit without a black mark anywhere, having a paper copy in your records can help you if you need to contest false reports or charges in the future. For example, if an unpaid car loan suddenly shows up on your report next year, having an old copy to compare against could prove very valuable. Just make sure to stash old reports somewhere safe to reduce the risk of identity theft.

Getting Obsessive

You checked your report last year and found a score of 760, but this year it’s suddenly down to 758! What on earth went wrong? Absolutely nothing. Your credit score naturally fluctuates by a few points all the time and it’s nothing to worry about. Don’t stress out about tiny changes. That two-point drop might reflect a tiny change on your credit card balance or a tweak in the agency’s calculations. It doesn’t signify anything important about your credit, so don’t fret about it.

Credit Score Changes – How often does it happen?

Working to improve your credit score? Be patient – Credit Score Changes are something that happens overnight. No, you have to work at it, which is why it’s important to think of credit repair more as a process than a quick fix. However, with that being said, it’s not out of the question to see slight improvements (or reductions) to your credit score on a month to month basis. Here’s a closer look at how often credit scores change, and why they do.

It’s All in the Credit Report

Your credit score is based off of your credit report, which is a detailed history of your lending and consumer habits. How often are credit scores calculated? Usually when they’re requested by a lender.

However, it’s worth noting that any lenders you’re working with will usually report to credit bureaus about once a month, disclosing things like the timeliness of your payment, your account status, your account balance and any other activity. It’s this reporting that can either help or hurt your credit score on a month to month basis.

Big Changes Are Unlikely But Possible

While your credit score may change monthly, don’t expect these changes to be big, sweeping changes. Usually, when we talk month to month changes in the credit score, we’re talking about gaining a few points or being docked by a few points. Remember, credit repair is a process. With that being said, there are a few exceptions to this rule that can cause bigger credit score fluctuations by the month. These include:

Any delinquencies: Payment history makes up 35 percent of your FICO score, the single largest category. Hence, it’s important to make on-time payments. That said, should you fall behind on a payment, even for just 30 days, your credit score could be docked significantly.
Debt: About 30 percent of the credit score is based on debt owed. Generally speaking, you’ll have a better credit score if you keep debt owed within 30 percent of your total credit allotment. That means that if your debt load increases, your credit score will likely drop. Conversely, if your debt load decreases, you could see a significant boost.
Legal dispute: If you’re in a legal dispute, it’s likely that the judgment will land on your credit report, dropping your credit score significantly.

Credit Repair is a Process

We’ll say it again – credit repair is a process. And while small fluctuations can occur on a month to month basis, the best way to improve credit is by developing a debt management and credit repair plan and sticking to it. This might include paying down high interest loans or credit cards faster than others, setting payment reminders or automatic payments to ensure on-time payment and watching how much you charge to your credit cards.

While your credit score can change on a monthly basis, seeing any significant change can take up to several months.

Credit Tips – That Aren’t As Useful As You Thought

It seems like everyone has advice for how to improve your credit score. But it should go without saying that not all of this advice is good advice. In fact, some of the suggestions that people have are more likely to hurt than help your credit score. Needless to say, there’s a lot of misconception out there about the best ways to up your score. Here’s a look at some of those tips that you should stay away from:

Credit Tips that Aren’t as Useful as you Thought

Lower credit limits: Some people think that simply asking for a lower credit limit can help reduce debt. While that’s true, you must also keep in mind that part of your FICO score is based on how much you owe compared to your credit allotment. For a good credit score, you need to keep debt at or below 30 percent of your total allotment. But if you lower your credit limit to $3,000 and max it out, it won’t do your score any good.

Pay off installment loans: Don’t focus too much on paying off installment loans early – it can actually drop your debt load – and possibly your available credit. Instead, focus on paying off credit cards.
Open lots of credit cards: To get more of a credit allotment and increase utilization ratio, many people think that opening up several new credit cards at once is the answer. It’s not – it can actually hurt your credit score due to the multitude of inquiries for new cards.
Settling debt: It’s always a good move to settle any outstanding debt with lenders, preferably for less than you owe. However, many people make the mistake of doing so and not ensuring that a written report is filed that states the debt was “paid in full.” Make sure all debts – even if they’re paid – aren’t listed as “settled.” It can hurt your score.
Pre-paid debit cards can help build credit: They can’t – they have nothing to do with helping you build your credit score. A secured credit card, however, can. This works similar to a debit card.
Never use your credit cards: Never using your credit cards can’t hurt your credit score, right? Wrong – part of your credit score is dependent upon credit history and knowing you’re making on-time payments, so you’ve got to use them. It’s better to charge small amounts and pay it off each month than to never use your credit cards.
Credit repair firms are helpful: While this is true for some firms, it’s not true for others. That’s because while there are a lot of qualified and credible credit repair firms out there, there are arguably just as many unethical ones that may attempt to repair your credit via identity theft or some other illegal manner. Beware!