Archive for ‘Credit Score and Repair’

July 16th, 2010

Secured Credit Cards

Secured credit cards can be good.

If you are unable to get a normal credit card because of poor credit, all hope is not lost. A secured credit card is different in that it utilizes funds a consumer has placed in a savings account. The secured card is protected by the savings account. Therefore the consumer is “borrowing” from his or her own account. In this way the consumer can re-establish their credit repayment history thereby exhibiting improved credit worthiness. Some secured cards even come with a conversion feature allowing an upgrade to an unsecured credit card after a successful repayment history of a pre-determined length of time.

Credit cards in general can be exceptionally beneficial to the consumer. Secured credit cards provide all the same benefits. But additionally a secured credit card offers the consumer with less than good credit an opportunity to build credit history, which is 33% of a consumer’s credit score.

My best recommendation is to check with larger banks and especially credit unions locally and ask if they offer a secured credit card program. You might also ask them if they report to all 3 credit bureaus and how often they report since one of your main concerns is rebuilding credit. Also check to see if they offer a conversion to an unsecured card and after what period of time.

Secured Credit Cards Can Be Bad

Many years ago I wrote an article saying that credit and credit cards are the agony and ecstasy of life. I have not changed my opinion. Like all credit cards, a secured credit card can make the impossible possible. But it can also drive the unsuspecting consumer into the ground or even worse bankruptcy Court. Fortunately a secured credit card will not permit you to spend more than your savings amount. However, should you fail to make on-time payments, you may find yourself not only without access to your secured account, but without future use of any secured card from any source.

When selecting a secured card, be on the lookout for excessive administrative and set up fees as well as high interest rates. There should be no application fee nor “insurance costs” unless you feel insurance is necessary. There may be an annual fee but shop around for interest rates and annual fee costs.

The Federal Trade Commission (FTC) offers the following warnings. Be aware of:

  • Offers of easy credit. No one can guarantee to get you credit. Before deciding whether to give you credit, legitimate providers examine your credit report.
  • A call to a “900” number for a credit card. You pay for calls with a “900” prefix. You may never receive a card.
  • Credit cards offered by “credit repair” companies or “credit clinics.” These businesses also may offer to clean up your credit history for a fee. [Most consumer advocates recommend against these clinics.]
  • Of special note are callers offering secured credit cards as well as offshore secured and unsecured credit cards. There are some very good offshore-unsecured creditors but most marketers of secured or unsecured offshore versions are more than likely scam artists.

Report suspected credit fraud and scams to the National Fraud Information Center (NFIC), a project of the National Consumers League. They are not available by phone but there suspect fraud form for Internet, mail, or telemarket is located at the web site above.

NFIC helps the FTC and state officials by entering complaints into a computerized database to help track and identify fraud operators.

______________________________

DID YOU KNOW:

The average consumer can eliminate all debt including their mortgage with the money they currently earn in an average 7.5 years. I have been teaching people how to do this for years and you can see how it is done yourself by receiving the free Debt Freedom Mini-Course via email.

You might also want to know that that eliminating all debt is like getting a 40% Tax-free Salary Increase.  If you don’t believe me, read the blog about it.

Posted in Credit Score and Repair | 1 Comment »

Tags:
May 27th, 2010

Divorce and Debt Advice

In Divorce, Debt and Credit , you learned that until you are divorced financially you are still joined at the hip in debt.  This article continues with more advice on the divorce and debt arena from some pretty savvy divorce and debt folks I know.

Experian

Experian says, “There are several ways you can prevent credit obligations from making divorce more difficult – and reestablish your own distinct credit lines after divorce occurs. You may wish to consider the following:

  • Communicate with your ex-spouse. Make as clean a financial cut as possible.
  • Communicate with your creditors. Decide which credit belongs to whom, then ask each company and bank that extended you credit to transfer the debt to the name of the person who will be responsible.
  • During divorce negotiations, keep your joint bills current, even if you ultimately will have no responsibility for the debt. If you don’t, your creditors could become more reluctant to release one party from joint liability.
  • Ask the credit grantor to remove your spouse’s name as an authorized user or close the joint account to additional charges.
  • If your spouse runs up large amounts of debt, you should cancel as many of the accounts as possible. Inform all creditors, in writing, that you are not responsible for these debts. This may not prevent them from trying to collect, but it does show that you attempted to act responsibly.
  • Upon your divorce settlement, you and your ex-spouse might consider obtaining individual consolidation loans to cover your share of the joint bills. Pay off the joint bills with your individual loans and close all joint accounts. This helps ensure you’ll be responsible only for those bills you agreed to pay. It also will help you establish or reestablish credit in your own name. “

Points To Ponder From Yours Truly

Though critically important for surviving this terrible time, emotions and so many other issues divert attention away from personal credit and its impact. Here then is a checklist and summary for a potential divorce in order to best protect your credit and rating:

  • Get a bank account in your name only.
  • Get at least one unsecured credit card in your name only. At a minimum get a secured credit card but in your name only. (This should occur whether divorcing or not.)
  • Ask to freeze any joint accounts with an outstanding asset or liability (bank, credit card, loans, etc.) so that both signatures are required before any transactions can be made.
  • Notify all creditors in writing (and call them). Document dates and who spoken to.
  • Have joint accounts closed if a zero balance or if possible have the account placed in the primary responsible party’s name only.
  • Instruct all creditors that you want all authorized users removed except the primary holder.
  • Inform all creditors you are not responsible for charges from that point on if not in your name.
  • Get copies of your 3 credit reports and inform all credit bureaus when the divorce is final. Make every effort to separate your credit file from that of your former spouse.

The primary party of any credit may have to re-qualify with the lender. This also means whoever will be responsible for a mortgage will probably have to refinance in order to remove the secondary party’s responsibility.

MyVesta.com and Divorce.net

MyVesta.org adds the following great suggestions: “Make sure your name is listed on your utility accounts, an item often overlooked by many. When you go to get credit, they often look to see if you have a phone number in your name. If you don’t, even if you are listed in the phone book at that number, it can be problematic.

“Before signing the divorce papers, consider one addendum: change of name authorization. Crazy as it seems, many states require your ex-spouse’s signature before issuing you a driver’s license or other ID in a previous or maiden name. Men who added hyphens during marriage could encounter identity trouble, as well.”

Divorce.net offers very fitting final thoughts:  “Your spouse may be in contempt of court for disobeying a court order that requires him [or her] to pay certain bills. However, if you are jointly liable to a creditor as in the case of a mortgage or co-signed credit applications, your spouse’s contempt of court is NO EXCUSE for your non-payment. It simply isn’t a legally sufficient defense to say, “It’s no longer my responsibility because the court ordered my spouse to pay.”

_____________________________

The average consumer can eliminate all debt including their mortgage with the money they currently earn in an average 7.5 years. I have been teaching people how to do this for years and you can see how it is done yourself by receiving the free Debt Freedom Mini-Course via email.

You might also want to know that that eliminating all debt is like getting a 40% Tax-free Salary Increase.  If you don’t believe me, read the blog about it.

Posted in Credit Score and Repair | 1 Comment »

Tags: , ,
May 24th, 2010

Divorce, Debt and Credit

Divorce, Debt & Credit… Facts you need to know.  Until your debt and credit are divorced, you are not divorced!

 

Before a divorce, during a divorce, and after getting a divorce you need to concern yourself with credit… credit establishment, credit files and credit scores. Though divorce and credit is a concern for both men and woman, woman tend to have the greater credit difficulty due to societal standards. Therefore, I encourage woman of any age or marital status to learn as much as possible from this and other articles.

But for all men and woman, essential credit and financial matters must be addressed when contemplating a divorce in order for either and/or both parties to fiscally survive. Even if legally divorced, until finances are divorced, there is still a partnership as will soon be apparent.

Here are some key points concerning credit that should be dealt with.

Joint Accounts – Joint Responsibility

The Federal Trade commission says: “If you’re considering divorce or separation, pay special attention to the status of your credit accounts. If you maintain joint accounts during this time, it’s important to make regular payments so your credit record won’t suffer. As long as there’s an outstanding balance on a joint account, you and your spouse are responsible for it.”

If you divorce, you may want to close joint accounts or accounts in which your former spouse was an authorized user. Ask the creditor to convert these accounts to individual accounts.

By law, a creditor cannot close a joint account because of a change in marital status, but can do so at the request of either spouse. A creditor, however, does not have to change joint accounts. The creditor can require you to reapply for credit on an individual basis and then, based on your new application, extend or deny you credit. In the case of a mortgage or home equity loan, a lender is likely to require refinancing to remove a spouse from the obligation.

SPECIAL NOTE: any time you open an individual account, you may authorize another person to use it. A creditor who reports (good or bad) credit history to a credit bureau, will report it in the file of any person you have named as “authorized user” as well as your own file.  

BEWARE – Defaulting on a Joint Account

Regardless of any court decision, if one joint account holder defaults on a loan, I guarantee the creditor will not care who the court ordered to pay it. The creditor will definitely come after the other joint account holder. Even if declaring bankruptcy, a creditor will make every effort to reclaim their lost revenue or property from the surviving spouse.

Therefore be fully aware that if a creditor does not agree to transfer joint accounts to an individual, then both of you are still responsible for full repayment to the creditor, regardless of how you’ve agreed to split the bills in the divorce settlement. If a spouse fails to make a payment, a creditor will come after the remaining joint holder, regardless of any divorce agreement. Additionally both joint holders will have negative comments on their credit file regardless of fault. 

Point To Ponder

And from yours truly I add this. Until you are financially divorced with your own credit established, you remain tied to your former spouse. Divorce is not the tidy little package some people would like to think it is. It is not simply a matter of walking out one day. Over and above issues of child support and alimony, there are other financial ramifications beyond the emotional ones. The greater the communication at these times on both parts, the less of an impact there will be to both parties and the sooner the final separation will occur.

Communication is critical in a marriage. It is just as critical in a divorce.


 

___________________
The average consumer can eliminate all debt including their mortgage with the money they currently earn in an average 7.5 years. I have been teaching people how to do this for years and you can see how it is done yourself by receiving the free Debt Freedom Mini-Course via email.

You might also want to know that that eliminating all debt is like getting a 40% Tax-free Salary Increase.  If you don’t believe me, read the blog about it.


 

Posted in Credit Score and Repair | 1 Comment »

Tags: , , ,
April 13th, 2010

Improving Your Credit Score

Is improving your credit score possible?  Improving your credit score is not only possible but a must if you want that loan, or better rate, or insurance or even maybe that job. But the first and most essential trick to improving your credit score is insuring the accuracy of each of your credit reports.   You can get a free copy of your credit report from only one source.  (See how from Free Federal Credit Report)   But Only after you are certain of the accuracy should you begin planning other steps to improving your credit score.

And just so you know when you get your credit score, it will normally cost. But if you can get your credit score from Credit Report.com , you can get your credit score for free if you also get a 3 credit report monitoring program. It could well be worth it for you to do so.

Improving your credit score can be easy and can be maintained at its peak… if you know how to do it.  I recommend reading Credit Score Basics  Part 1 and Part 2 in conjunction with this article.

Scoring models such as FICO (Fair Isaac scoring model) generally evaluate the following types of information in your credit report and are weighted as suggested by the percent shown:

On Time Payment – 35% -Have you paid your bills on time? Payment history typically is a significant factor. Your score will be affected negatively if you have paid bills late, had an account referred to collections, had a repossession, or declared bankruptcy. The age of the positive or negative comment is also important in this factor. For example, a 90 day late payment 3 years ago may be less important than a 30 day late last month. The more current the factor, the greater the weight.

Amount Owed Versus Capacity – 30%- What is your outstanding debt? Many scoring models evaluate the amount of debt you have compared to your credit limits. If the amount you owe is close to your credit limit, that is likely to have a negative effect on your score. Authorities suggest 30%-60% is desirable by creditors. Maintaining a low balance on multiple cards is better than high balances on one… but don’t run out for more cards to “even out” balances just before applying for a loan. Recent applications cost you as shown in below. You should note that a few creditors will use highest balance as your credit limit. For example if you have a $10,000 limit and have used only $1000, your limit will show not 10% but 100% utilization.

Length Of Credit History – 15% – How long is your credit history? Generally, models consider the length of your credit track record. A recently opened account will have less weight than an account 3-4 years old. An insufficient credit history may have a negative effect on your score, but that can be offset by other factors, such as timely payments and low balances. If you are going to close an account, try to maintain the oldest accounts as age of account matters.

New Credit Accounts – 10% – Have you applied for new credit recently? Many scoring models consider recency. Similarly, if you have applied for too many new accounts recently or had to many recent inquiries, that may negatively affect your score. However, not all inquiries are counted. Inquiries by creditors who are monitoring your account or looking at credit reports to make “pre-screened” credit offers are not counted.

Types Of Credit In Use – 10% – How many and what types of credit accounts do you have? Although it is generally good to have established credit accounts, too many credit card accounts may have a negative effect on your score. In addition, many models consider the type of credit accounts you have. For example, under some scoring models, loans from finance companies (rather than a bank) may negatively affect your credit score. There is also a hierarchy of debt beginning with a mortgage. This is followed by a secured debt such as a car, then unsecured debt (credit cards), then revolving charge cards and gasoline cards.

Most Important Issues

It’s likely to take some time to improve your score significantly. However, the most important issues to improved credit score are:

accuracy of report

on time payments

paying down outstanding balances

not taking on new debt.

And don’t forget you can get your free credit score from Credit Report.com

Posted in Credit Score and Repair | 1 Comment »

Tags:
April 12th, 2010

Credit Scoring Basics Part 2

As you read in Credit Scoring Basics Part 1 and In a nutshell, high credit score reports help your request for credit to be approved. It can also mean lower interest on loans or even insurance rates. Low credit score reports can cause higher rates and loan denials… and even that promotion or new job you were seeking. So improving your credit score is critically important.

What’s my credit score?  How can I find my credit score?

Although there is an associated cost, you can view credit score reports from Credit Report.com

Your score is made of data you supply to a potential creditor who utilizes a scoring model supplied by someone like Fair Issac Company and produce what is know as a FICO score (sometimes referred to as Beacon Score).

So what’s a good score?

General US population FICO Scores range throughout the country per the following table.   You will see that the adult population is divided into 5 groups and with the following point spread:

780 to 850 – 20%

740 to 780 – 20%

690 to 740 – 20%

620 to 690 – 20%

Below 620 – 20%

What constitutes good credit score reports is a matter of economics.  Not long ago your pet turtle could have applied for and probably gotten a credit card so a good score could have been 620.  In a very tight economy with minimum lending a good score is considered 740 or better.  It all depends how much credit is being extended.

How Can I Get My Credit Score Reports?

Through Annual Credit Report.com  (See Free Federal Credit Report for more information), a credit REPORT can be obtained for free. ( The forthcoming article  Improving Your credit Score explains this as well.)  However, please understand, credit SCORE reports will all have an associated cost but can be obtained from the same source you received your credit report.  But as mentioned above you can also view credit score reports from   Credit Report.com

Posted in Credit Score and Repair | 4 Comments »

Tags:
April 11th, 2010

Credit Scoring Basics Part 1

The credit granting agency utilizes computer software designed by folks such as Fair Isaac Company (thus a credit score is often referred to as FICO).  An acceptable point value is established based upon selected criteria, which offers the lender insight as to the risk involved with getting the loan.

The loan applicant gives information to the lender, which is submitted to a credit bureau. Per Fair, Isaac, the credit bureau then returns a: “credit bureau risk score, which is a snapshot of your credit risk picture at a particular point in time.” Lenders can then determine the risk in loaning money.

Is Credit Scoring Objectivity Questionable?

Fair, Isaac concludes: “Computers don’t make lending decisions, lenders do. Computers analyze credit information to produce a score, but individual lenders decide what scores are acceptable for different loans or credit cards. ”

The problem is that subjectivity has been completely removed in the models. Models should make recommendations not decisions and that is usually not the case today… it is more “expeditious” and “efficient” to rely on the model. The model, then, has become the decision maker instead of the lender.

However, consider, what would happen without a model system? In many cases the result would be non-standard chaos based upon subjective guesswork and prejudicial criteria. If I am a bald lender and very sensitive to long hair, isn’t it possible without a measuring standard to be prejudicial in my decision to loan out my money to a longhaired rock musician?

Now add on something a little closer to reality like race, color, creed, etc. None of these should be permitted into the decision making process. But we all know of incidents with objective measures fully in place where it has still happened. How bad would it be without a system, any system, fully in place?

On the other hand, what would happen if very few applications were turned down? There is no standard so how am I, the lender, suppose to know who will and will not pay me back. I can’t predict the future. The very reputable and honest person in front of me may well have extraordinary events occur tomorrow. Without some measure of prediction, I could loose more loans then are paid back. That’s a tough way to stay in business and not to very welcome at the next meeting of the stockholders.

How is a FICO Calculated?

Information about you is collected from your credit application and other sources. Data includes your bill-paying history, the number and type of accounts you have, late payments, collection actions, outstanding debt, age of your accounts, and other information. Using the Fair, Isaac statistical program or model, creditors compare this information to the credit performance of consumers with similar profiles and award points for each factor that helps predict who is most likely to repay a debt.

Credit information is weighted based upon its type and history… the more current the good or bad information, the more weighty the affect. For example a very old 90 day late may be less weighted than a very recent 30 day late. The type of data is also weighted:

Past Payment Performance (35%  heaviest weight)

Credit Utilization (30%  next heaviest)

Credit History (15%  third heaviest)

Types of Credit In Use (10% or far less weighted)

Inquiries (10% or least weighted)

See this article continued in  Credit Scoring Basics Part 2 and Improving Your Credit Score (forthcoming)

Posted in Credit Score and Repair | 3 Comments »

Tags:
April 10th, 2010

FREE Federal Credit Report

If you are seeking to repair your credit score, you can get a FREE federal credit report from each of the three major national credit bureaus every 12 months.  This is the law.  It is also the first step to repairing your credit score.

Consumers may also be entitled to a free report if credit has been denied within the past 60 days. You are also entitled to a free report if you think your report is inaccurate due to fraud.

But under the law, Equifax, Experian and TransUnion offers a free federal credit report but only from Annual Credit Report. There is also a toll-free phone number: 877-322-8228. Finally you can write to P.O. Box 105281, Atlanta, GA 30348-5281. Yahoo News suggests: “If you do use the postal address, it’s best to print and mail in a completed online request form. You can’t get your report unless you answer questions on the form.” There is also information available through Federal Trade Commission.

You can also purchase additional reports and/or a credit score by contacting one of the consumer credit reporting companies.

Equifax

Experian

TransUnion

You can purchase a credit score when you request your free federal credit report through Annual Credit Report (referenced above.)

You might want to note that each bureau offers credit ID fraud, but for fees. For example Equifax offers Equifax Credit Watch Gold along with a 3 in 1 report and a $1 million ID theft insurance.

Once you have your report, what do you look for?

Here are some basic things you should check on your report. Go through your entire report entry by entry. Have the credit agency legend by your side in order to verify coding compliance. Have also a paper and pencil to annotate any item you find in error. Go slowly! Record the line item and error to the credit reporting agency.

  • Don’t assume your personal information is correct. You could be viewing information from someone else’s report with just a simple error such as: first name misspelled, missing Jr./Sr., erroneous address, bad zip code, wrong employer, or any other incorrect personal data.
  • Insure marital information is correct. Are accounts listed as “joint” really joint?
  • Is the report in compliance with court settlements? Outdated information is normally considered to be any item older than 7 years except for bankruptcy, which is usually 10 years.
  • Closed accounts should not be listed as open. Accounts you closed should reflect, “Closed by consumer”. Otherwise it can be assumed that it was closed by the creditor– not good.
  • Accounts should not appear twice even in different sections.
  • Incorrect histories such as late payments, a credit entry you do not recognize, a pre-marital debt of your current spouse, or other such items need your attention.
  • Are there missing reports that would be beneficial to show a good history, and are profiles, credit limits, and balances correct?

A former correction to your credit file that has since disappeared should be brought to the agency’s attention.

Final Comments

I am often asked if a collection company sells your account to another collection agency, can you get the first one deleted from your report or will it just show as a zero balance?

Reporting depends on who owns the account and there are several directions this can take:

  1. If the original creditor still owns the account but assigns the debt to a collection company then both get to report on that account listing.
  2. If the original creditor retracts the collection and re-assigns it to a new collection agency then both original creditor and the 2nd collection agency can report but the first one must remove their listing off of the credit report.
  3. If the original creditor sells the debt to a collection agency then the creditor will report zero balance / sold to another lender, and the collection agency will report.
  4. If that collection agency assigns a debt to another collection agency then it is allowable for both to report the account listing, but if they take back that account then that assigned collection agency must remove their reporting.
  5. Now if that collection agency sells the debt to another collection agency they get to keep their reporting on the report since they owned the account at one time, and the new collection agency picks up on the reporting.

Therefore, the difference is if your account is assigned or sold.

Posted in Credit Score and Repair | 7 Comments »

Tags: , , , ,