How Bad Credit Can Affect You

How Bad Credit Can Affect YouCredit scores are used to determine many things that will affect your life. They are used to determine if you qualify for a loan, how much interest you should pay, what your loan terms are, and whether or not you can get insurance. Surprisingly those who have bad credit are still in fact able to qualify for loans. However, they will have to pay a significantly higher interest rate and will also be affected by what type of loans they are eligible to apply for. If you have a low FICA score, then you may not be able to qualify for a standard vehicle loan or take out a special loan with high interest rates. Bad credit can affect you in many negative ways. If you were to take out a loan for the same car or a good line of credit, this will cost you thousands of extra dollars. Below are other ways bad credit can influence your life.

Bad Credit Could Mean Higher Financing Rates
Usually you have to take out a loan in order to buy a car, a house, or even appliances such as a television. The rate of these loads depends on your credit score. If you have excellent credit score, then you will have a greater chance of having better loan terms and lower interest rates. If you have bad credit then these loan lenders will be less likely to trust you and make it more difficult to take out a loan. They will probably charge you a higher interest rate and add on additional fees. The lenders might also require you to put down collateral that can be taken from you to secure your loan.

Bad Credit Could Mean Having Higher Down Payments
If you have bad credit and are planning on purchasing something like a home, you might have to put down a higher down payment then someone who has a good credit score. The lender is probably afraid that you are unable to pay your loan back, so they ask you to put down a larger down payment to give you the opportunity to gain their trust. If you do not have additional cash or savings, this would make it more difficult to get a loan.

Having bad credit can make it difficult to getting a loan down the road. A person with bad credit has to pay significantly more for an item like a house, car, etc than a person who has excellent credit. This will absolutely make it more difficult to apply and be approved for future loan because all of your cash is tied to a current loan. In the future this can affect your future when it comes to buying big-ticket items. Read these reviews to learn more about which credit repair companies to choose.

Tips For Choosing The Right Credit Repair Companies

Choosing Credit Repair CompaniesIf your credit report or credit score is in some serious need of professional help, it may be time to consider hiring a credit repair company. Here are a few tips on how to search for qualified credit repair companies:

  • Research online – If you choose to search for credit repair companies online, it is important to avoid those annoying sales pitches from pushy salesmen that are more concerned with their commission checks. Pay close attention to ratings and reviews, compare prices, etc.
  • Word of mouth – If you know anybody who has recently used a company to repair his or her credit, what better way to find a reliable company then to get a word of mouth recommendation from him or her? Ask questions and find out what they thought of the company and whether or not they have a good track record of winning cases and repairing credit.
  • Educate yourself – One great thing about researching information on the internet is that it allows you to read and educate yourself on certain things. One thing that can be quite helpful when trying to repair credit and hiring reputable credit repair companies is to familiarize yourself on the Fair Credit Reporting Act that governs credit agencies, promotes accuracy in reporting and regulates how negative information is reported and/or disputed.
  • Reputation is key – When searching for the best credit repair companies, it is important to pay close attention to certain characteristics. One such characteristic that is especially important is reputation. Look for any red flags like promises that sound too good to be true, requests for large upfront payments to cover costs, or discussions of creating a new identifier to fool the credit agencies. These are all effective ways to tell a scam apart from a legitimate company.
  • Understand the fine print – Make sure that you fully understand what you are signing up for. Always read the fine print to contracts before signing anything. Will you be obligated to use this service for a certain amount of time? Familiarize yourself with a company’s policies and contract before signing anything and don’t be afraid to ask questions.
  • Convenience – Another important thing to consider when looking for a company that will do their best to suit your credit repair needs is to find one that offers convenience. If you are a person who enjoys managing online accounts then you may want to try and find a company that can meet this obligation. There are many companies out there that offer online accounts so that clients can monitor the status of the company’s credit repair efforts.
  • Values customer service – Finding a company that takes great value in having you as a customer is vital. Companies that fail to return telephone calls or are unprofessional on the phone will eventually wear thin over time. So, make sure that you identify whether or not your company prioritizes the customer. This is very important in order to get the best service possible.
    By following tips that are listed above, one should be able to find a reliable company to help repair their credit report quickly and effectively, while saving time and money as a result.

Credit repair companies and the Better Business Bureau

Credit Repair BBBPrior to settling for credit repair companies, it is important to know their credibility. Better Business Bureau can help you by allowing you to find out the number of complaints that have been filed against the company you want to hire. The company that you are planning to hire should also be accredited by the BBB and watch out for the ratings that the BBB gives these companies. Of late, it has been observed that there have been rise in the number of complaints that have been filed against the credit repair companies and also the State Attorney General’s office. Aside from banking upon the BBB, it is important that you know what your rights are. Go through the fine print when it comes to the FCRA or the Fair Credit Reporting Act as well as the Credit Repair Organization Act.

Credit repair companies – Ratings by BBB

Earlier in 2012, a study was carried out by the Better Business Bureau on various aspects of debt settlement and credit repair. The main focus was, however, on the consumer complaints. Also much stress was laid on the changes that were incorporated in the laws pertaining to the different credit repair policies and their enforcement. On conducting the study, it was found out by the BBB that the incidence of consumers seeking professional assistance related to credit repair companies and debt help companies escalated by over 800% in less than 5 years. And amongst these companies there were several companies that were not competent enough to handle the cases of consumers that had approached them for credit repair. One of the main causes of concern was the fees that the credit repair companies were charging long before they could show any results. However, as per rules, unless credit repair companies were able to accomplish their task, they could not charge fees from consumers. There were also instances, when credit repair firms had run away with money taken from consumers without delivering what they had promised.

As per a recent study that was carried out as many as 133 complaints were processed by the Better Business Bureau in the year 2006, which escalated to 1,084 cases way back in the year 2010. The figures have been rising since then. These cases were all related to working of the debt help firms as well as credit repair organizations. There have also been several instances when the FTC has fixed credit repair companies.

How To Protect Credit During Divorce

Take Ownership

Protect Credit During Divorce

Going through a divorce can be very difficult for all parties involved. Not only can the entire process be quite stressful, but it is likely that there are many other things on your mind during this time that you may easily forget about protecting your credit. Even if the terms of your divorce are quite amicable, the future credit activity of your spouse can negatively affect yours if you do not take some precautions to separate your credit lines apart prior to finalizing your divorce.

Only you are able to take ownership of your finances and your credit is a large part of this. The first step in the process is to review all of your credit reports. Upon pulling your credit reports you should be looking to identify the jointly-held accounts where both you and your spouse shared. Once you review, you should close any credit cards that were jointly shared. While closing a credit card typically negatively affects your credit score, it is imperative that all joint cards are closed. Make sure the joint card’s balance is paid in full and then open a new card in your name only. This new card will now be your new means of credit and it will solely be yours and yours alone.

Take Care Of Yourself

Once you’re divorced, you legally do not have any credit responsibility to your spouse. Of course the terms of every person’s divorce all vary so while it is possible that you may need to financially still support your spouse, you do not need to share a line of credit. It is recommended that you remove all credit card authorizations from appearing on your credit cards. Even in the best terms of a divorce, it is dangerous allowing an ex-husband or wife to still have access to a credit card. Even on an emergency card, access should only be for you. To this point you should also require your spouse to do the same. The reasoning for this is not necessarily to prevent you from using their card, but instead it is a safety net used to protect you. Should your spouse fail to meet credit card payments, you will not be held fiscally responsible if you are not on their card.

Check Up & Resist Temptation

After a divorce is finalized, the last thing that you might want to do is check up on your spouse, but considering how much stress it can cause to your credit line, it is necessary to do a check-up. If your spouse agreed to take on a mortgage, auto loan or other debt that could not be refinanced into the name of only one person then you need to request the lender to send you monthly statements. This is a way for you to establish a way of checks and balances to ensure that payments are being made on time. If you are concerned about your spouse using your credit then credit monitoring services are very helpful to give you updates when changes are being made to your credit report.

Lastly, it’s also important to resist any temptation to rack up some big-ticket items and serious debt. It may be unavoidable to build up some debt after a divorce thanks to legal fees and other expenses from moving into a new place, etc. That said, there are definitely some ways in which you can cut expenses and therefore reduce debt. As long as you take all the necessary precautions, your financial future following your divorce will be a bright one!

Advantages To Using Credit Repair Companies

Credit Repair Companies

If you have bad credit then chances are you have probably considered at one time or another, using credit repair companies to improve your credit. Although you may have considered using a company to improve your credit score, perhaps you have not really weighed all of the pros and cons involved in doing so, or perhaps you do not understand how credit repair companies work. If this is the case, then you have come to the right place.

What Are Some Advantages To Using A Credit Repair Company?

Just a few of the many different advantages to using credit repair companies are:

  • Bad credit affects you all the time. Whether you are looking for a job, trying to apply for a credit card, or even getting insurance. Having a good credit score is essential to obtain all of these things.
  • DIY credit repair can be time consuming. Forget the tedious tasks and why not let a professional do the work instead?
  • Consulting a credit repair company is a great way to save time, energy, and money. They also help speed up the credit repair process.
  • Credit repair companies will only charge you after the work has been completed, which makes it an ideal scenario for most looking to repair their credit and save money while doing so.

Common Mistakes That Can Hurt A Person’s Credit

When it comes to bad credit, there are a lot of common mistakes that many individuals make when trying to improve their credit. They are as follows:

  • Closing accounts – Closing accounts can actually have a negative impact on your credit score. This is because it can actually raise your debt to total credit ratio, which is an unfavorable factor when calculating one’s credit score.
  • Stop credit cards – Many individuals do not realize that when they stop using credit cards altogether, what they are actually doing is preventing new credit history information from being obtained, which can result in the credit card issuer closing the account, thus increasing your debt to credit ratio.
  • Debt consolidation – Although debt consolidation does offer individual’s savings in low interest rates, consolidating credit cards actually impacts an individual’s debt to credit ratio, bill payment history, and types of credit in force. As a result, the best approach to manage debt is to do so slowly. If you must close any accounts, do so one at a time over a period of several years.

Many criticisms of these types of companies are actually based on the same simple premise that there is nothing that a credit repair company advantages can do for you, that you cannot do for yourself. When considering this piece of information, although it is true that a company really does not do much else than what you could do yourself, something to factor in is that these companies are professionally trained to repair credit, and can therefore do it a lot quicker than you could. This will save you lots of time, money and energy. Why do all of the work yourself when you could have someone do it for you instead?

What is Credit Monitoring?

Credit Monitoring

If you want a service that offers you notifications every time your credit report changes, then credit monitoring is definitely what you need. This is offered by all three credit reporting bureaus, which is a good plus in maintaining good spending habits. Equifax has four, Transunion has two, and Experian has five credit monitoring products. Other than them, you can tap into independent businesses to offer their own credit monitoring products. You’ve probably searched them over the net or seen some of the ads on TV.

Credit monitoring services cost generally around $10 and $23 a month with most of these services offering ID theft insurance or compensation guarantee if your identity is wrongly used.

The advantage of paying a fee is that you get to check out your credit reports more frequently than you would through a one-time, free annual report. Moreover, if anything negative happens that may affect your report, you will be notified. Other than that, you may receive notifications if you open a new account or perhaps a credit line. Unlike that one-time annual report, you can access your credit score. You won’t have access to your FICO score, which is used by most lenders, though.

Should You Get the Service?

Applying for credit monitoring isn’t mandatory, but you should definitely consider these facts if you want to get a subscription.

  • If you are confident about your credit, then you shouldn’t worry about any problems on your report.
  • Each credit bureau offers a free report each year, excluding your credit score.
  • When you order your credit report, it does not affect your score.
  • If you check out your credit report often, especially if you’re concerned about the information present, you may need to sign up for a credit monitoring service.
  • Purchasing additional copies cost around $10 to $15.

Ask yourself before you want to know about your credit report.

  • Have you been turned down for lower interest rates when you purchase through credit?
  • Did you have problems leasing or renting?
  • Were you ever turned down for credit?

Knowing your credit report and your score is definitely nothing wrong. It’s actually a good way to keep tabs on how you spend and how it’s affecting your score. If you are aware about when you might need credit monitoring, you can save yourself the problem of getting pitched by other companies who offer you monitoring products.

Keep a vigilant eye on the different monitoring services out there. You should pick one that you trust, especially ones from the credit bureau so you won’t have to worry about added expenses, or in worst case scenarios, scams. If you have a clear understanding of your spending habits through the reports, you can definitely adjust to optimize how you spend. By accessing review sites on credit monitoring services, you can really find out what would work for you best.

What is a FICO Score

FICO Score

Fair Isaac Corporation score is what can make or break your credit or loan, or determine what kind of auto insurance you are able to get. This determines whether you are legible or not for your request. This was named after the inventors of the credit risk score, a three digit number in charge of your credit worth or the capacity you have to pay your debts. This score is calculated from information in your credit reports. This gives you an idea that your credit reports are very important, so they should be correct and complete.

For any spender on credit, you should focus on making sure your FICO score passes the requirements of certain firms so you can have your application accepted. This can be done through effective spending habits. But, first, it is important to learn exactly what constitutes your FICO score.

What Makes up your FICO Score?

Generally, a FICO score is between 300 and 850. Higher range scores are greatest for gaining credit and low interest rates. You should take note that Experian, Equifax, and TransUnion – the three credit rating agencies – operate quite distinctly in calculating your FICO score. In that effect, you actually have three scores instead of just one. These scores differ because credit report information varies between credit reporting agencies.

These are the elements of your FICO score, so you know how they are calculated:

  • Payment History – 35% (Frequency of paying bills on time)
  • Credit Utilization – 30% (How much you use credit, compared against debt)
  • Credit History – 15% (time when you acquired your credit or loan)
  • Credit Types – 10% (various credits you have such as mortgage)
  • Credit Inquiries – 10% (how often lenders check out your credit )

FICO Scores and How to Change Them

Your scores can change depending on how you spend. Late payments can lower your FICO score, for example. The opposite will give you a higher FICO score, and as a result, better interest rates and credit. Every time you request your FICO store, always take note of the positive and negative areas in your report so you can compare them each year.

Other factors that affect your FICO score include:

  • Increased credit card balances
  • Closing credit card accounts
  • Repossessions or foreclosures
  • Reduced credit limits
  • Opened new credit accounts
  • Collections, tax liens, or debt-related judgments made against you

When your FICO score drops even though you’ve done nothing to change it negatively, you need to check your credit reports for any errors that arise. Using a credit repair service can definitely help you out if you want to find out what went wrong over that certain span of time. Make sure you do this the moment you find out your FICO score is affected, because, if you don’t, you might suffer the consequences.

Keep your FICO score in top shape to get the best benefits you deserve for your credit application. Make sure to spend wisely as it can affect how your FICO score develops.

How To Improve Your Credit Score

Know Where You’re Score’s at through Reports

Knowing what’s up with your scores is your first step in repairing it. Tap into TransUnion, Equifax, and Experian-the three credit bureaus utilize to provide you with your credit report for free once a year.

Get Your Facts Straightened

Any erroneous information on your credit report should help you out a lot. As a result, you can remove it and our credit score will immediately take a turn for the positive. But you should make sure that you get everything sorted out to really prove that the information is false. Always keep your receipts, canceled statements or checks showing payment to help you build your case. This will really prove that the purchase recorded on your credit report is wrong and will be fixed immediately, improving your credit score in the process.

Argue Errors that Occur in Your Report

Improve Your Credit Score

Errors can definitely give you a wrong score on your credit report, which may make things worse than they normally appear. Should you wish to dispute this error, make sure you understand how credit reporting entities have their specific procedures for entry disputing. What you should keep in mind, though, is to ask for proof regarding the error. This will help you realize what the error you feel really is. This can come out in two ways: if there is proof, the entry will stay; if not, the entry is automatically removed, enhancing your credit score.

But what if they have proof but you believe it still is an error? Providing evidence that is stronger than what they provide will increase the chances of that entry removed.
You should take note, however, that if the credit bureau does not take your dispute seriously, this can be frustrating. But, be careful if the dispute is something that is obvious or insignificant.

As a result, you should be patient regarding the time it takes for any result. A minimum wait would be 30 days, but sometimes it can take about 45 to 60 days. Take note that if communication occurs between the credit bureau and you, or even between a creditor and the bureau, results could be in in a matter of weeks.
No matter how long it takes, be confident about your dispute. This will ensure that your rights are respected and your credit score redeemed, which is a huge plus for you in the future.

Enhance Your Debt-to-Credit Ratio

Improving your debt-to-credit ratio is vital in enhancing your credit score. If you happen to own three cards, then use them to help out your score. This can be done by maintaining low balances on each card by dividing your debt by the limit of the card.

If you happen to get a value of less than 10% or less, your debt-to-credit ratio is good. This helps your FICO Score or credit score at a positive toward maintaining a good ratio.

There are many factors that affect your credit score. In fact, 35% is from payment history, 30% from amount of debt, 10% from types of accounts, 15% from how long you’ve had credit, and 10% from history of looking for credit. Make sure you’re knowledgeable about these factors so you can modify how to improve your credit score altogether.

Four Steps to Avoid Credit Repair Scams

Credit Repair Scams

Falling for credit repair scams can be emotionally devastating and wind up costing you a lot of money.  Your credit score determines how much you pay for things like insurance and mortgages and affects your ability to get approved for a loan.  If you have found yourself in a situation where your credit score is less than desirable, there are many companies out there that can help you to rebuild your credit score.  While there are many legitimate companies that can help you to rebuild your credit score, there are also many companies out there that are scams and prey on those who are vulnerable.  These are the four steps to take to avoid credit repair scams.

Step 1:

Look for Companies That Don’t Make Outrageous Claims

If a company is claiming to easily erase anything negative on your credit report and that they can restore your credit without a problem then proceed with caution.  Negative information cannot simply be erased unless it is not valid or accurate.  If it is accurate, then it has to stay on your credit report for a predetermined amount of time.  A company that tells you they can simply erase anything negative from your credit report should not be trusted and you should stay away from them to avoid falling for a credit repair scam.

Step 2:

Look for a Company that Educates their Clients

Legitimate credit repair companies should aim to educate their clients in the process of credit repairing and be able to inform you as to why your credit was damaged in the first place.  It is possible to repair your credit on your own, the credit repair companies are just in place to help guide you through the process and make it easier to succeed.  If a company tells you not to contact the major credit reporting companies directly or tells you that you will be unable to repair your credit on your own, then you should avoid them as they are most likely a scam.

Step 3:

Look for Credit Repair Companies that do not make you pay up-front

Legitimate credit repair companies will wait until after their services have been performed before they accept any payment.  Companies that request payment up-front before they have performed the services that you are requesting are most likely a scam.

Step 4:

Look for credit repair companies that encourage you to work on improving your credit score rather than attempting to change your credit Identity

Some illegitimate credit repair companies try to convince their clients to create a new credit identity by applying for an employer Identification number to use for their credit report instead of their Social Security Number.  Doing this can be considered fraud and any company that encourages the use of this is most likely a scam and should be avoided at all costs.

If you find yourself needing to repair your credit score and do not want to fall for a credit report scam then it is best to be familiar with your rights and know exactly what your credit score is and what the factors are that are lowering your credit score.  It is also important to seek out the advice of a professional who is well versed and knowledgeable in FTC guidelines to help you navigate the credit repair process.  There are many organizations that will offer credit repair counseling for free or little charge and there are also many organizations that will offer in-person credit counseling to those who need it.

Avoid False Promises of Credit Repair Companies

Avoid False Promises

It is probably not true if it sounds untrue initially. Credit repair always proves the rule of thumb to be true. On most occasions the promises made by credit repair companies towards reducing your debt burden turn entirely false. Prior to repairing your credit, you might need to do one or more of the following things:

Obtain a new identity

A few of the companies might try to persuade you to create a different identity; they would try to establish that by creating a new identity you’ll be able to remove all of your bad credit history. You must know that it is not possible for you to create a duplicate identity; you’ll move against the law if you try to obtain a new social security number in your name.

Submitting wrong information

Stay away from options like submitting wrongful information regarding your purchases; a good company should only ask you to improve your bad history. Some companies would ask you to do it so that your information can be disputed and a few bad histories can be rectified to reflect a better look of your credit report. Remember, in doing so you’ll actually be committing fraud although it might sound good.

Paying for your credit report

Under a few conditions, you might be able to obtain a credit report without bearing any charges towards your credit repair company. Once your credit card application gets denied, it will take you some 60 days to obtain your credit report for free. While checking your report if your eyes meet with a mistake, then you may get it disputed with the information provider and the credit reporting agency.

No bad history on your credit report can actually be removed by any agency or individual. You may rectify any wrong information that you come across in your report without any charge; credit repair companies know the process better and can help speed up the process. At the same time, you’ll need to beware of companies that request you to pay a stipulated amount for working on your behalf and then vanish into the thin air without resolving your issue.