Archive for Your Credit
How Signature Loans Can Save Your Credit Score – Part 1
Posted by: | CommentsWhen in debt you may think of getting money from any possible source. One of such source is called a âunsecured loanâ or a âsignature loanâ.
An unsecured loan is a loan obtained without any assets that have been pledged by the recipient as security on the value of the loan. In other words it is a loan that is issued and supported only by the borrower’s creditworthiness, rather than by some sort of collateral.
A person obtaining an unsecured loan agrees to pay back the loan within a set term and signs documents attesting to such. This type of loan can also be called a signature loan.
If you have a bad credit you can still apply for a signature loan â also referred to unsecured loan. Unsecured Personal Loans and Payday Loans are in fact loans on the consumer’s signature.
The simplest unsecured loan is a personal loan from a friend or family member, with an I.O.U. as signature of agreement to pay back the loan. Another common type of unsecured loan is a purchase made on a credit card. Each time a person makes a credit card purchase, he or she signs a form which authorizes the payment and stands as an agreement to pay the money borrowed. When the person has obtained the credit card, the terms and size of the loan are predetermined. Student loans are also considered to be unsecured.
To determine your eligibility for a signature loan, most lenders use your credit history and debt-to-income ratio. Your debt-to-income ratio is the amount of debt you have versus your income. Lower debt-to-income ratios are more favorable by lenders. Since there is no type of collateral backing the loan, the approval criteria are sometimes more stringent. Many lenders have a minimum credit score and income level required for applicants.
We are going to discuss more peculiarities of unsecured loans in Part 2 of this series.
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Your Fico Score and Purchasing San Diego Real Estate
Posted by: | CommentsYou have found your perfect piece of San Diego real estate, and now you only need secure a real estate mortgage at a great rate. Simple, right? Definitely not!
Before a mortgage makes that real estate yours, the lender is going to check your credit score, which will determine what type of terms they offer to you, how much you will pay over the life of the real estate mortgage, and even if you can secure a mortgage. Your credit score tells a lender what type of credit risk you are and the likelihood that you will repay the money loaned.
Though there are several types of credit scores, most real estate mortgage lenders use the FICO score, which was developed by Fair Isaac. The FICO is used for several types of credit and can affect terms offered for credit cards, car loans, home equity loans, private mortgage insurance, the required size of your down payment, and even the amount of documentation a lender will require of you during your mortgage application. Your score determines what type of loan for which you are eligible, as well as how much money you can borrow.
Every person has three FICO scores — one with each of the three major credit bureaus: Experian, TransUnion and Equifax. Since the information retained by each credit bureau varies, your score will differ between the “Big Three”. Before you begin hunting for real estate, it is a good idea to check all three bureaus for your FICO score, as well as right before securing a real estate mortgage. Even if you have checked your FICO scores recently, your scores fluctuate as new information is received by the credit bureaus. It is best to know for certain your FICO scores, than to be surprised during crucial negotiations.
Some of the things each credit bureau looks at in developing your FICO score are your payment history, the amounts your currently owe, the length of your credit history, new credit you have obtained, and the types of credit you use.
The Higher Your Score, the Better
There have been many commercials on television recently about the FICO score and how it follows you wherever you go (as far as credit is concerned). Just remember, the higher your score, the less you will pay to buy real estate on credit. You can save thousands of dollars every year, or you can pay thousands of extra dollars each year on your real estate mortgage, depending upon your score.
The median FICO score is 723, with most lenders requiring at least a score of 760 in order to get the best real estate mortgage terms. The highest FICO score attainable is 850; however, only 13 percent of the population score over 800.
According to myfico.com, a score of 760 or better currently makes you eligible for an average interest rate of 5.98 percent on a 30-year, fixed-rate mortgage of $216,000. The interest rate rises to 7.47 percent, if your score is between 620 and 639, which translates to paying an additional $227 each month or $81,720 for the life of the mortgage. A score below 620 can add another three-to-six percent interest. Even a point or two can make a major difference over time. As scores dip below the 700 mark, borrowers are often limited on how much money may be financed; while many lenders will disqualify you all together for a mortgage, even if the rest of your credit file is fantastic.
So, check your three FICO scores when you first decide to look for real estate. Get counseling in how to raise your scores, if it is below 760. If you must purchase sooner than you can repair your credit scores, then plan to refinance after you have raised your FICO scores. Buy real estate with terms that are to your advantage. Know your credit scores and repair any problems early.
Using Credit Counseling For Credit Repair
Posted by: | CommentsThere are a few things to take into consideration when searching for the best credit repair companies. Making sure to get the best deal with the best company is the best route to go. Making sure that your debts are paid and you understand how credit works is something that will help you now and in the near future.
Credit repair companies, debt consolidation companies is what most are called. They can help consumers pay off their debt and get them back into good shape as a credit worthy citizen. When looking for the best credit repair company you will want to make sure that the company is registered with the Better Business Bureau and are a very reputable company. You will also want to check into what type of fees are charged. The company with least amount of fee is the best to go with. You want to make sure that the money you are paying is going to your bills not to the company you consolidated with.
The Internet offers tons of great information when it comes to finding the best credit repair company. Research on a couple of the companies should help you decide which one is best for you. Most of the companies do require that you be in a certain amount of debt before they will consider you for debt consolidation. You should also look in your local phone book. There are great companies that could be just a few days away from where you live or work.
Credit consolidations are great for people who are in debt and need help. Being able to stick to the program and pay faithfully is what gets you out of debt and back onto the right track and improving your future.
Credit Repair – Raise Your Credit Score Using Debt Consolidation
Posted by: | CommentsDebt consolidation is a form of debt management that allows you to find a way out from under debt while still avoiding bankruptcy, garnishment and other extreme financial measures.
Debt consolidation allows for you to use one loan to a pay off all other accounts and loans you have leaving you with one monthly payment and interest rate. The way this can help your credit score is by allowing your current accounts, regardless of status, to be considered paid and in good standing. You also open another loan account which shows a certain level of good credit and it then becomes your responsibility to pay the payments on time to keep the debt consolidation as a positive loan in good standing.
Hector Milla Editor of the “Best Credit Repair Agencies” website — http://www.BestCreditRepairAgencies.com — pointed out;
“…There are many debt consolidation companies and with any consumer driven industry there are fly-by-night scam companies to watch out for. When looking for a debt consolidation company and loan take the time to do a little research and learn as much as the company and the people who work for that company as you can. You should also ask for references to talk with real people who have experienced the company and staff members you are considering. The company and employees should be trained and certified to work on debt consolidation cases and offer debt consolidation loans that are reputable and quality…”
Before contacting a debt consolidation company you should take the time to get your debt in order. This includes making a list of all the debt you want to include in the debt consolidation. For each of the items you include on the list, the following things should be included: creditor, creditor contact information, monthly payment, interest rate and current balance. This will give you an idea of the debt you have and the basic information about each one. You also need to total it all up and write it in big numbers on top of the list. This is often one of the hardest parts of debt consolidation, as you have to look at the whole picture and if you haven’t been keeping track along the way, it can be overwhelming. But, this is among the first steps to taking control of your debt, instead of letting it control you.
Debt consolidation can also be followed by other debt management tactics, like debt negotiation, that can help to minimize the debt to allow you to take out a smaller loan and save you more money in the long run. Many credit counselors are trained in the art of debt negotiation and should offer that as a service with your debt consolidation. When you negotiate your current debt you have the opportunity to settle at a lower amount than the current balance, which helps your debt consolidation loan and your repayment over the life of the loan.
“…If you are looking for a way to get out from under debt and help your credit rating and score, debt consolidation could be the right choice for you. Debt consolidation is a smart way to get rid of debt while still preserving integrity on your credit report and can boost your credit rating. When all your debts are paid, this changes the status of the account and when your credit score is recalculated it should reflect this new positive status and boost your credit score. This can bring you hope and instant success in getting your debt under control…” H. Milla added.
Further information about how to secure a trusted and reputable credit repair agency by visiting; http://www.BestCreditRepairAgencies.com
Your Home Mortgage Loan and Your Fico Score
Posted by: | CommentsWhen you apply for a home mortgage loan, you will realize that there are a number of requirements that you have to accomplish, before you can finally be approved and obtained additional funding. One of these is your FICO score.
What Is FICO Score?
FICO stands for Fair ISAAC and Company. This is a professional credit bureau that is being looked up to by numerous lenders. The data they can provide will help them evaluate if you’re capable of paying your debts as well as how much you will be entitled for, if ever you get approved by your lending company. Simply put, it provides your credit rating.
How Can It Affect Your Home Mortgage Loan?
The logic for this is very simple. Lenders will never be able to extend very huge loans to people who have poor FICO score. They won’t be able to enjoy too better loan terms. Normally, if you have bad credit rating, the interest rate for your home mortgage loan will be considerably high. Moreover, the payment term will be shorter than those extended to people with better credit score. If you’re applying a loan to reputable lending companies, you will likely be denied of your applications if you don’t have excellent FICO score.
What Are the Advantages of Having a FICO Score?
Besides having a home loan with low interest rate, you can also have the chance to negotiate your interest charges. This way, you can still bring down your monthly repayments and save more money out of your home loan. FICO score will also speed up the process of approving your loan. You don’t have to wait for weeks before you can obtain the money that you definitely need.
What Is an Ideal FICO Score?
A FICO score that ranges from 600 to 640 is considered to be the most ideal, and there’s a guaranteed chance of availing home mortgage loan. What’s more, you can even request your lending company to automatically give you 100 percent financing. This means that you don’t have to make any down payment or pay any fees before you can enjoy the home mortgage loan. If it’s going to be between 500 and 600, you may still be able to obtain a home loan, but you may have to pay a down payment as well as other costs. You can also expect your interest rate to be slightly higher and the length of your repayments much shorter. Sadly, if it’s going to be below 500, you better try your luck next time as it’s almost impossible to obtain a loan with this kind of rating.
Is There No Way to Obtain a Loan with Bad FICO Score?
To put it bluntly, you will decrease your ability to obtain a workable loan if have bad FICO score. As a matter of fact, there’s bigger chance of getting denied than getting approved. It doesn’t mean, however, that you don’t have any option left. There are still a number of companies that may use other factors, besides FICO score, in determining whether you deserve to be given a loan or not.
Credit Finance, What To Consider Before Applying For One
Posted by: | CommentsIt is important to understand the way that credit finance works because many people have gone into it without fully comprehending the consequences. It is easy to end up amassing debt and having problems that are avoidable if you have discipline. There are many types of credit and it is crucial that you realize what can affect your credit. There are credit cards and loans. It is important that you use them wisely. When you want to get records of your credit history you can view a report. This is especially significant when you are looking for sources of funding in the form of a loan.
The potential lenders will assess your history to see if you are capable of making timely payments. It will show the sort of accounts that you have and your credit limits. Many people do not understand how the various lines of credit work.
It important when dealing with credit finance that you understand the small things like the interest rates, penalties and fees charged. This is vital because usually debt stems from these areas. If you want to get a credit card, it is advisable that you read all the information before you sign up. Having credit in moderation is good because lenders like individuals with low debt in comparison to their income.
Credit finance is a great way to get asset, start a business, and pay bills that would otherwise be difficult to do. It has helped many people achieve their dreams but you must realize that you have to make your payments promptly or you may end up having financial problems.
How your credit score is affected by a Credit Counselor?
Posted by: | CommentsSome people are concerned that consulting a credit counselor will reflect poorly on their credit score. This is just not so. First of all, if you feel you may be in need of credit counseling services, chances are that your credit score may have already taken a hit. There could be delinquencies on your report before you even engage a credit counselor. If that is the case, those delinquencies will remain on your report until time elapses and they are removed in the chronology of things.
The credit counseling service itself reports your conference and, ultimately, your repayment plan to no one. They are sworn to confidentiality.
As the credit counseling agency negotiates your repayment schedule, they will contact your creditors with an offer to accept this arrangement. Your creditors have the option to accept or decline your repayment plan. In the event they accept your offer through your credit counselor, they have the right to make a note of this arrangement on your credit report. This notation in no way affects your credit score, but if you miss payments or are late in keeping up with the promised schedule, such misdeeds will negatively affect your FICO score.
Agreeing to a negotiated repayment plan will stop you from getting credit until after you have met the repayment promise, but it is not viewed to be as negative as a bankruptcy history.
Before deciding on a suitable credit counseling service, ask for references. A credible company will put you in touch with previous customers who have had good results in debt consolidation from this company. This is your financial future; don’t rely on just some ad or direct mail piece to point you toward the credit counseling service you should use.
Make sure your counseling service is accredited. There are practices and standards maintained by the American Association of Debt Management Organizations. Credit counseling services with their accreditation will be following required practices and abiding by ethical standards.
Check with the Better Business Bureau. If your credit counseling service is a member in good standing of the Better Business Bureau, it shows that they have had few complaints and are willing to engage in resolution of any problems. Call your local BBB and ask for information on whatever counseling service you may be considering.
Avoid for profit counseling services. Seek out non-profit counseling services, as there is a good chance that their advice will be independent of any outside influences.
Most of all don’t allow your apprehension, based upon misunderstandings; stop you from getting the help you need.
Are you tired of your debt? You can get rid of it with a systematic approach. Perhaps a credit counselor will guide you in your journey. But how will he help you? Will his involvement affect your credit score? Chintamani Abhyankar explains.
Understanding Your Fico Score
Posted by: | CommentsObtaining copies of your credit reports from the three major credit reporting bureaus is a must for all American consumers. If you order your copies directly from each bureau, you can get yours for free [once per year per bureau]. That is the law. There is, however, one piece of information not included with your credit reports and that is your FICO score. Your FICO score can determine several things, including what interest rate mortgage lenders will charge you and the rate you will pay for your credit cards. For just a small fee you can order your FICO score and get a hold of a piece of information that is critical to you fully understanding and improving your credit rating.
FICO, or Fair Isaac Corporation, is a score that helps determine what interest rate creditors will charge you. The higher your score, the lower your interest rate will be resulting in lower mortgage payments and more money for you. Indeed, when you apply for a new cell phone account, purchase a car, or make just about any type of credit application, your FICO score is obtained by creditors. Unfortunately, you typically do not know what that score is unless you get the information yourself. Don’t count on creditors sharing that information with you!
Your FICO score is based on five determining factors. According to the Fair Isaac Corporation, these five factors are weighted differently and each one is assigned a percentage figure based on their importance. Specifically, they are:
1. Payment History – 35%
2. Outstanding Balances – 30%
3. Length of Credit History – 15%
4. New Credit – 10%
5. Types of Credit Used – 10%
Obviously, if you have made several late payments and owe a large amount of money to your creditors, your FICO score will be much lower than the person who pays what they owe on time, has a manageable level of debt, and possesses a solid credit history.
Coupled with your credit report, your FICO score can help you determine the plan of attack you need to take to improve your credit standing. This is very important step to take especially if you anticipate making any sort of credit application within the next year. If there are errors in your credit report than these will lower your FICO score. Make certain that the three credit reporting bureaus correct each error now and, once amended, run your FICO score again to determine if it has been adjusted upwards.
Remember, the higher your FICO score, the lower your monthly payments will be on virtually everything you finance through a creditor. Order your free credit report today and pay a little extra to obtain your FICO score.
Troy Michigan Home Market Benefits from Tax Credit Extension
Posted by: | CommentsDisclaimer: I’m not a CPA or Tax Specialist; if you’re going to buy a house and take advantage of the tax credit, work with a good accountant or tax specialist to make sure you get everything right.
The federal government recently extended the home buyer tax credit deadline to April 30th, 2010 and made some updates to the program that could impact the Troy Michigan home and condo market.
INCOME / FINANCIAL GUIDELINES
Before the adjustments were made, buyers would need to earn less than $75,000 a year to qualify for the full credit (the limit was set at $150,000 for couples). The government has since adjusted the program to allow individuals with income up to $125,000/year to qualify (or $225,000 for couples). The income limit is based on your modified-adjusted-gross-income, or what you take home after deductions, plus income from foreign investments. This adjustment will have a positive impact on the nicer homes and condos in Troy’s neighborhoods.
FIRST-TIME-BUYER LIMITATIONS
This adjustment will affect singles and couples who are looking to move from their existing home or condo into a larger Troy residence. If you’re a homebuyer who has owned a home, you’ll qualify if you (or your spouse) has owned and used the same residence for a 5-consecutive-year period within an 8 year period ending on the date that you purchase the new home (read that again, I know it’s confusing –and remember to consult your tax professional!).
QUALIFYING FOR A PARTIAL TAX CREDIT
If your income is above $125,000/year but below $145,000 ($225,000 and $245,000 for couples), you can still qualify for a partial tax credit. They determine the amount of your credit based on your yearly income.
OTHER FACTS
You have to live in the home for three consecutive years after the purchase. Tax credits on purchases made in 2010 can be claimed on your 2009 taxes. FHA buyers can get the credit at the time they purchase their home (you don’t have to wait until you file your taxes). Home purchases above $800,000 will not qualify for the home tax credit. Military personnel who have been deployed overseas for over 90 days in 2008 or 2009 will have one additional year (until April 30th, 2011) to qualify for the credit.
You have to live in the home for three consecutive years after the purchase. Tax credits on purchases made in 2010 can be claimed on your 2009 taxes. FHA buyers can get the credit at the time they purchase their home (you don’t have to wait until you file your taxes). Home purchases above $800,000 will not qualify for the home tax credit. Military personnel who have been deployed overseas for over 90 days in 2008 or 2009 will have one additional year (until April 30th, 2011) to qualify for the credit.
These adjustments are obviously great news for people looking for homes and condos in Troy. If you’ve started your search and you have questions about the area or a particular home, feel free to contact us. If you’re just starting your search, check out the maps at http://troy.centricliving.com.
Vendor Credit Lines Can Build Business Credit Scores
Posted by: | CommentsQualifying for a bank loan or other traditional sources of business financing can seem like a difficult task if you’re like most small business owners that haven’t even begun to establish credit in the name of your business let alone have any type of business credit scores.
You probably believe that you have no other choice but to use your personal credit but let me share with you a viable alternative before you slap down your plastic.
Vendor credit also known as trade credit is when a company extends credit to your company in order to allow you to buy its products and services upfront but defer the payment for a later date.
After you purchase a product they will issue an invoice which must be paid according to the terms of your agreement. If you’re a startup company or have no business credit then most vendors will have net 10 or net 15 day terms. Keep in mind these terms can be extended to 90 or even 120 day terms if you continue to build a solid payment history with your vendors.
Several of the major benefits include:
Conserving Cash Flow
By purchasing products or services and deferring the payments for a later date your business is able to conserve cash and have the funds it may need for other important expenses.
Establish Business Credit Scores
As each invoice is paid on time you begin establishing a positive payment history on your company’s credit files. Remember it takes a minimum of four accounts reporting to generate business credit scores with Dun & Bradstreet.
Improve Credit Capacity
When your vendor credit limits increase so does your company’s overall credit capacity. Larger credit limits showing on your files will improve the overall creditworthiness of your business simply from the fact that banks and lenders will see that other companies are willing to extend credit to you in much larger amounts.
No Personal Credit Check or Guarantee
The majority of vendors will not require a personal credit check or guarantee which clearly protects your personal scores and liability.
Now for business credit building purposes there are some key factors that never get mentioned which can make all the difference in the world.
You see not all vendors report your payment history, in fact out of half a million vendors in the U.S. less than 6,000 supply payment data to a business credit bureau. So either you should select the right companies to apply with or you can always purchase one of DNBs trade reference programs.
Several other factors to consider are the frequency of reporting and how the data is being reported by your vendors. Some report on a quarterly or even yearly basis which does not help in building your profile in a timely manner.
As far as your payment data it’s critical that the actual vendor credit limits that your company is approved for shows on your file not just the amount owed. Some vendors will not report this information and it can have a serious impact on how lenders view your company’s creditworthiness plus it affects the size of the credit limit recommendations that business credit bureaus display on your file.
I know this can seem confusing and time intensive but there are ways to streamline this whole process taking all the guesswork and frustration out of the equation. By taking full advantage of all the tools and resources available you can greatly improve your company’s ability to qualify for the business financing it needs.
Understanding What is a Fico Score and Tips on Hiring the Best Credit Repair Service
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FICO score is a credit scoring system that was developed in the1950s by Fair Isaac & Co. Today, the three major credit reporting bureaus Experian, Equifax and Trans Union all use FICO scores to evaluate the credit worthiness of almost 90% of the adult Americans. FICO scores can range from 300-850 and these scores are calculated on the basis of scoring models and mathematical calculations that are not revealed to the public. The higher the FICO score, the lower the risk to the creditor and hence if your FICO score is high, you end up with lower interest rates, faster loan approval time, lower insurance premiums and better employment prospects. If your score is low, you may be in need of the services of the best credit repair firm that can help you take repair action via a personalized credit repair program.
A FICO score of a person is determined by studying a personâs credit history. Late payments, charge offs, judgments/liens, bankruptcies, foreclosures, the total amount of credit used and the total credit that is currently available, credit cards issued, employment history, the amount secured as loans, their repayment history are all considered while determining a personâs FICO score. It is a snap shot of the credit worthiness of a person that is used by creditors when they evaluate any credit application. Persons with a FICO score of less than 500 are said to have a bad credit record and this qualifies them to seek the help of one of the firms offering best credit repair services. There are several genuine firms that operate online offering credit repair service for a nominal fee. The legally trained and experienced credit repair specialist will make it easy for those who wish to remove negative or inaccurate information from their credit reports in a hassle free manner.
The three main credit reporting agencies use three distinct types of FICO scores. The FICO score used by Equifax is referred to as BEACON, the one used by Experian is referred to as Experian/Fair Isaac Risk Model and the one used by Trans Union is referred to as FICO Risk Score, Classic. Each of them is compiled taking into account the data currently available at the individual credit reporting agencies. With credit repair support from a team of professionally qualified experts, people will have little difficulty in erasing erroneous reports and inaccurate information while the personalized repair plan of action ensures that they make improvements to their FICO score steadily. You can improve your FICO score and repair your credit report by hiring the best credit repair firm.
Credit “Secrets”: Your Debt-to-Income Ratio in 3 Simple Steps
Posted by: | CommentsThe second leg of my World-Famous “Three-Legged Stool” Analogy of “How Credit Works” is your “debt-to-income ratio”.
“DTI” as they call in the mortgage industry.
If you’ve ever gotten a mortgage or refinanced your home, then you know the mortgage folks are very interested in your debt-to-income ratio.
Remember, debt-to-income ratio is the amount of money that you’re obligated to pay each month towards your debt vs. your monthly income, but what’s important is how the creditors see it…
To calculate your debt-to-income ratio, just follow these three simple steps:
Step 1. Add up your total monthly gross income.
That could include your income from an employer, bonuses, tips, commissions, government benefits, child support, alimony and interest and dividends accruals.
Step 2. Add up your total monthly debt payments.
Needless to say, that includes your mortgage payments, your car payments and any minimum payments you make on your credit cards. It does NOT include your taxes or utilities.
Step 3. Divide your debt payments by your monthly income.
Here’s the formula:
Total Monthly Debt Payments ÷ Monthly Gross Income = Debt-to-Income Ratio
Sample debt-to-income table based on a person earning a gross income of $66,000 per year:
Step 1. Add up your total monthly gross income.
Monthly Income (Gross)* = $5,500
* Monthly Gross Income: Income before taxes and other deductions
Step 2. Add up your total monthly debt payments.
Debt / Monthly Payments:
Mortgage Loan $1,300/mo
Auto Loan $395/mo
Credit Card #1 $60/mo
Credit Card #2 $45/mo
Credit Card #3 $75/mo
Total Monthly Debt Payments = $1,875
Step 3. Divide your debt payments by your monthly income.
$1,875 ÷ $5,500 = .34 (34%)
This person has a debt-to-income ratio of 34 percent.
According to most lenders, a debt-to-income ratio of 36 percent or less is what you should aim for. It’s an indication to lenders that you have disciplined spending habits and are “credit worthy”.
Here are the other percentage categories most lenders recognize:
37 to 42 percent: Your debts appear manageable, but are more likely to get out of control. Start paying them down now. You may still be able to obtain credit cards, but acquiring loans may prove difficult and will cost more.
43 to 49 percent: Your debt ratio is too high. Financial difficulties are likely unless you take immediate action. You may still obtain financing, but at much higher rates, costing you far more money over time.
50 percent or more: Seek professional help immediately to reduce debt before it’s too late.
Important: Recalculate your ratio every year or whenever you face a significant life event, such as divorce, job change, etc.
So now you know if you’re on sound financial footing or if your ship is likely to sink. (You probably had a good guess anyway, but the Debt-to-Income Ratio confirms it.)
Another way to look at this is, how much money do you have available to pay for new debt? How much more in monthly minimum payments can you afford? Lenders still want to lend you as much as they can within a tolerable risk, but they charge you much more interest to do it.
If you have past due amounts, then this is for you:
If you’re reading this, it’s very likely you’re experiencing some kind of financial hardship; whether it’s medical issues, unexpected bills, loss of a job or reduced income, even poor money management. These are the most common things getting people into deep trouble.
Here’s a “secret” you need to know about how being past-due may be affecting your debt-to-income ratio:
Say you fell behind a couple of months and there’s a past due amount listed on your credit card account statement. When computers scan your credit report, they’re looking for the current amount due, this goes up to include all past due amounts and “lop-sides” your debt-to-income ratio, making it go through the ceiling.
Often when people lose a job or have a reduction in income, they fall behind on payments… and those stack up as past due amounts… and this exponentially worsens their debt-to-income ratio. (Quadruple whammy – Ouch!)
If you’re in a hardship situation like this, then it’s time to “do something” to eliminate your debt, ASAP!
Your debt-to-income ratio reveals your financial soundness. Monitoring your ratio also helps to avoid “creeping indebtedness.” If you’re seeking to obtain a loan for a home, vehicle or business, lenders look at this ratio when they’re considering extending a line of credit.
A Credit “Secret” Most People Will Never Know:
You can have a perfect payment history (never missing a single payment), but if your debt-to-income ratio is too high then you’re effectively crippled when it comes to “credit worthiness” (your ability to get a loan). You’re not credit “worthy”, even though you may have a good credit “rating”.
So that’s your “debt-to-income ratio” – a very important factor of your credit.
Increasing Your Credit Score
Posted by: | CommentsHow to Raise your Credit Score
Use the following information as a “guideline” when repairing your credit scores. The reporting agencies have a computer model that generates the credit scores using 40 different criteria. The models differ for each repository and not all financial institutions report to all three credit bureaus. Hence, the reason the scores from the three bureaus can differ from 50 to 100 points. Based on our years of experience and information tracked by other companies and individuals, the following factors have been fairly consistent in how they affect credit scores.
1. Look for any past due balances on the credit report and bring them current.
2. Reduce all revolving debt to as close to a zero balance as possible. If unable to pay all debt down, evenly distribute any remaining debt among open credit cards, or consider opening a
and transferring some of the balances. Try to keep balances below 30% of available credit; near zero would be even better. Do not close existing accounts or open new ones unless you have been counseled on the ramifications.
3. If married, keep separate credit cards. This provides flexibility in transferring some or all of the balances to one spouse to increase the credit score of the other. This provides the possibility of one spouse becoming the sole borrower and it does not change the ownership of the home.
4. Request an increase in available lines on cards to reduce debt ratio, but only if your credit card company can do that without a hard credit inquiry. Also make sure that the high limit being reported matches the maximum credit limit on each credit card. If it does not, request that the credit card company report the maximum limit available. Many times the reported high credit is actually the maximum amount you have charged on the card, not the maximum credit limit available to you. This will make it appear as though you have used 100% of your available credit when you have not.
5. Pay off past due collections, charge offs, liens and judgments that are with-in the last 24 months. Paying off these items when they are older than 24 months can have a temporary negative effect on your scores. Refer to “Credit Repair Guidelines”.
6. Request that creditors and credit bureaus delete any outstanding debt that is incorrectly charged to you or has yet to be cleared. They have an obligation to react within 30 days. If you choose to pay off an outstanding debt (less than two years old) mark the back of the check “accepting this check is evidence that the transaction is complete and this charge will be deleted from my credit.” You may be able to use the cancelled check if the outstanding debt is not removed.
These are some of the steps covered in any credit repair program. Good credit is the key to reducing monthly payments and saving money long term.
For more information or to begin repairing your own credit, visit www.creditrepair-4you.com.
The Truth About Your FICO Score Unveiled
Posted by: | CommentsFICO is an acronym for The Fair Isaac Company. It is actually a company who is responsible for the creation of the formula used in calculating a consumers FICO score. A FICO score, on the other hand, serves a basis to credit companies whether to grant or not to grant a loan to an aspiring applicant. This scoring method was launched way back 1956 by a mathematician named Earl Isaac in partnership with an engineer named Bill Fair.
To be able to get a consumers credit score, FICO uses these factors as its basis. A consumer’s payment history tops the list. It is 35% of the total score. Next comes the amounts owed (30%), then comes the length of credit history (15%), new credits (10%) and lastly, the types of credit cards used (10%). These factors have its own importance or role in the total outcome of the calculation process.
One fallacy that is often believed by many is that FICO actually calculates a consumers credit score. This is absolutely not true. FICO is just a calculating method and it is not and will never be a company that calculates scores. The truth is, Fair Isaac is the creator of the formula but the credit bureaus are the one responsible for the end result of the credit score. These credit bureaus use the FICO scoring method that is why it is often a misconception by consumers that FICO is the one able to give scores.
Although the 3 major credit reporting companies (Equifax, Experian and TransUnion) uses the same calculating method that is the FICO, each of the 3 still has slightly different credit scores they give to consumers. This is because the difference in the information will prompt the calculation method to calculate on different figures also. This also causes a person to have 3 different scores from the 3 credit bureaus.
Not only has that, to add confusion to the already confused consumer, the 3 major credit reporting bureaus its own unique term they used to describe a credit score. TransUnion named its version of the FICO score, EMPIRICA while Equifax named it the BEACON score. On the other hand, Experian fondly renamed its version to the Experian/Fair Isaac Risk Model or sometimes, the Score Power.
This confusion may have also prompted the 3 major credit reporting companies to create what they called a Vantage Scoring Method. This is the same as a FICO, it calculates a consumer’s credit score but it differs with its determiners which are used in calculating a consumer’s score. Both also differ in the score range it gives to consumers. FICO has a 300-500 sore range while Vantage has 501 as its lowest and 990 as its highest possible score. But the thing is Vantage Scoring Method is still seldom used by credit companies.
If a consumer is able to understand what a FICO really is and how it works, chances are, he might be able to understand and improve his credit score too.