4 Mistakes That Can Ruin Your Credit Score

There are several pitfalls of having a poor or less than adequate credit score. Many US citizens know how it leaves a negative impact on their credit history. Whether you want to apply for a home or car loan, your credit score plays an important role in negotiating loan rates. If you have a low credit score, and struggling due to a blemished credit history, questions such as “How do I repair my credit score?”are natural to crop up.

A credit score above 700 is considered a good score and qualifies you for almost every requirement where credit score is a determining factor. On the other hand, scores below 600 can bring down your creditworthiness. Therefore, it is important that you stay on top of your financial matters. Some of the common mistakes that people usually do and end up with a bad credit score are as follows.

1. Loan Defaults

Defaulting on a loan is one of the main reasons for a bad credit score. A default is a clear indication that a consumer took out a loan, but did not pay back. Also, there are instances when consumers took loans, but to could not repay due to financial hardship. In such a scenario, they often request to get their debts written off. Therefore, those who settle their bills by paying a partial amount have better credit scores as compared to consumers, who don’t pay their dues at all.

2. Late Payments

Late or missing payments can hurt your credit score, but to what extent it depends on the frequency of your payments. Similarly, when you made your last late payment plays a crucial role in determining your credit score. For example, if the last payment was made a year ago, it is likely to impact your credit score more adversely than a relatively recent payment. How soon you make the late payment past the due date is also a determining factor at the time of calculating your credit score.

3. Closing Out Credit Card Accounts

One of the common notions among consumers is that closing out their credit card accounts can prevent their credit score from dwindling further. The reality is, however, quite different. Credit rating agencies consider those consumers more creditworthy, who have a long credit history. Approximately, 15 percent weightage is given to this factor while calculating the credit score. People with relatively recent credit history are considered less credible.

4. Bounced Checks

Check bounce for reasons such as signature mismatch, incomplete or inaccurate information don’t affect credit scores. However, bouncing of check due to insufficient funds is likely to bring down your credit score. Despite knowing this, even the most responsible consumers often issue checks without even checking if their accounts have sufficient balance or not. Therefore, it is advisable to ensure availability of funds before writing a check.

Conclusion

Avoiding the mistakes discussed in this post can help you improve and sustain your credit score in the long run. If your credit is going down constantly, consulting a reputed credit repair company can help you restore your credit score by removing discrepancies from the credit report. This is, however, not a quick-fix solution, and happen over a period of time.

Know How Late Payments Impact the Credit Score

A commonly believed notion that late payments are bad for the credit score is actually not always true. Failure to pay the bills on time might make a dent on your credit score, but not all the late payments are bad. Insurance companies and lenders see credit scores of individuals as the parameter to check their eligibility for a home mortgage or auto loan. A late payment reflected on the credit history sends a negative signal to the lender and becomes a barrier for the loan approval process.

Scoring systems usually focus on predicting whether an individual would default a payment by at least 80 days. A payment that is late by 30 or 60 days doesn’t cause a too much damage on the credit score, as long as it is once in a while incident. If an individual, however, fails to make the payment even after 90 days, it has a significant impact on the credit score. A single mention of 90 days late payment could damage the credit for up to seven years and one might need to speak with professional credit repair services to improve the score. Let’s see the impact of late payments on credit score:

30-days late payment

If the late payment record is recent, it will damage your credit score – provided an individual is 30 days late in paying the bill several times. A single instance of 30-days late payment might not impact the score.

60-days late payment

If an individual isn’t repeatedly making the mistake of paying the debt 60-days late from the due date, it won’t hurt the credit score.

90-days late payment

Failure to make the payment even 90 days after the due date damages the credit score for up to 7 years. The scoring model predicts the ability of an individual to pay the debt within 90 days and a negative entry certainly drops the score.

120+ days late

There’s no direct damage caused to the credit score of an individual if the payment is missed by 120 days or more. The debt is either “charged off” or moved to the third party collection agency in many cases. Reporting these events in the credit history reduces the credit score.

Credit scores are complicated and could become a hurdle in financial achievements of an individual. Whether buying a house or a car, it is always better to check the credit score to mark the events of late payment and ensure that this doesn’t become a repeated act.

Ways to Keep a Tab on Credit Post Holiday Shopping

Holiday shopping has an effect on the finances of individuals and most of them tend to find themselves trying to get about of debt and back on track in the new year. The reason is the urge to avail the discounts without considering the budget. Plastic money in the form of a credit card makes binge shopping easier for the individuals, but it could put a dent on the credit score – in the event of a late payment.

Individuals who exceed their holiday shopping budget and use the maximum credit limit on the cards might find these tips helpful to get the finances back in shape this new year. They don’t need to seek for affordable credit repair solutions, if they follow the below-discussed tips religiously:

Review the debt and plan to tackle it

The first step is to make a list of things such as gifts and clothes that you want to buy from savings and credit cards. An overview of all the expenses gives a good starting point to make further plans. Spending your savings might not directly hit the score, but using a credit card may have a severe impact. Don’t assume that making minimum payments will make everything fine and try to pay off the credit card balance within the first two months of the new year.

Opt for automated payment

You need to pay fines if you delay in paying the credit card balance after the due-date and this might damage the credit score. You can take the advantage of automated payment option to avoid making late payments. If an individual thinks that paying the bill at one go might be impossible, better talk to the credit card company for other payment alternatives such as EMI plans etc.

Transfer balance

Individuals with good credit score can transfer balances to a low-rate card to reduce the amount of interest paid on the debt. It is, however, better to be careful and read the fine print when accepting the balance transfer option. Many balance transfer cards have waived interest, which means the borrower needs to pay interest only on the remaining balance at the end of the introductory offer. The individual needs to pay interest of the entire amount upon failure to pay the entire balance by the end of the introductory offer in the case of deferred interest.

A few last words

It is always better to save money at the start of the new year, so that one doesn’t need to use the credit card for holiday shopping. Right planning and management of finances are the keys to stay debt-free, irrespective of how much an individual spends on buying gifts for the loved ones at the end of the year.

Follow These 5 Simple Tips to Boost Your Credit Score

It goes without saying that a good credit score is essential both for a hassle-free living and improve your financial health. Be it getting a job, applying for a loan, renting an apartment, or applying for insurance, a healthy credit score is imperative. Your credit score defines your credit-worthiness, and therefore, it should be on top of your priority list. One of the reasons many people end up having bad credit scores is negligence. For example, a lot of issues such as late payments, check bounces, and even splurging money on shopping may damage your credit history.

If you wish to improve your credit score, these tips below can give you a roadmap to maintain an impressive credit score, a sure gateway to comfort living.

1. Check your credit report on a regular basis

One of the reasons why the three major credit reporting agencies in the US provide one free credit report annually is because they want people to keep a track of their credit history. By regularly checking your credit report, you can even identify discrepancies in the credit transactions reported by the credit bureaus. You may also hire the services of a credit repair company that can review the report on your behalf and suggest you ways to improve your credit score. Checking credit report regularly can also help you remove the records related to bankruptcy, tax liens, charge-offs, foreclosures, and so on.

2. Setup payment reminders

Making timely payments is one of the biggest contributors to a good credit score. If you are one of those who often get penalized for late payments, you should use the payment reminder features that most banks offer to their customers. Late payments will blemish your credit score and create obstacles to get additional credits in the future.

3. Enroll for auto debit

Another option is to enroll for the auto debit feature that allows payments to be automatically debited from your bank account. It makes the bill payment process easier, faster, and efficient. If used wisely, it may prove to be a great tool for managing your finances.

4. Pay off your debts

If you can pay off all your debts, it will do the world of good to your credit score. Make a list of all the debts that you owe along with their and the interest rates that you are being charged. Pay off as much as you can and for the remainder loans, consult a credit repair company to consolidate your multiple debts into one, with a reduced rate of interest.

5. Manage your credit cards responsibly

It’s a myth that closing unused credit cards or getting new credit cards help increase credit limit helps. In fact doing so may even backfire. A better way is to manage your credit cards responsibly and keep a track of all the cards and the respective debt that you owe on each card.

A Piece of Advice

The process of improving credit score happens over a period of time, and there are companies that can help you repair your credit scores. A lot of companies, however, make false claims. This is the reason why you should first read credit repair companies reviews before hiring the services of any one of them.

Ways of Getting a Home Loan with Low Credit Score

The credit score of an individual plays a significant role while purchasing a property. Lenders often turn down the borrowers with a low credit score or offer high-interest-rate for the home mortgage. These things, however, shouldn’t discourage an individual from going ahead with the plans to buy a property. An individual can get in touch with credit repair services provider in McKinney or any other part of the US to improve their credit score. In addition to getting help from a credit repair specialist, individuals need to take some steps on their own to get a home loan irrespective of a low credit score.

Ways to get home loan irrespective of low or bad credit

Make higher down payment

Lenders take into consideration a number of factors when they approve a loan. One of these factors is the amount of down payment a borrower plans to make. If an individual offers high down payment, some lenders might agree to provide the loan at a low-interest rate. Higher down payment means the borrower has more equity in the property and there’s a lesser risk for the lender. An individual willing to pay more down payment, but with a low credit score needs to consider applying for a loan with a smaller credit union or banks, as these usually have more flexible guidelines.

Look for non-conventional options

A non-conventional loan such as USDA, FHA or VA loan is another affordable option for the borrower as these have less strict lending requirements. An individual might get an FHA loan with a credit score of 580 and by making 3.5 percent down payment. There are, however, certain eligibility criteria for these non-conventional loans, which an individual needs to fulfil to get the mortgage.

Some banks also have specialized lending programs for low credit homebuyers and those with low income, which could make it easy to qualify for the home mortgage.

Explore the Options

While a 30-year home mortgage program is a popular choice amongst borrowers, it might not be ideal for someone with a low credit score. Look around for mortgage plans with adjustable interest option. The lender gives the borrower a chance to repair and maintain the credit score while paying the mortgage that has lower interest rate than the fixed-rate or say 30-year home mortgage.

A Few Last Words

The home buyer, in addition, to above steps can seek the help of a family member to co-sign the home mortgage, which increases the chances of loan approval. It is advisable to continuously work on improving the credit score, while trying to qualify for a mortgage plan. Credit score improvement is time-consuming, but the efforts do pay in the long run.

Merits of a Good Credit Score before Marriage

If you are planning to get married soon, you need to have a good credit score in place. If the numbers don’t look good, credit repair services can help you get back on track. Besides booking a nice wedding hall, sending invites, and making plans with your partner, don’t forget one important aspect of married life, which is financing. Your partner’s happiness becomes a priority. Besides promising a love and affection to your partner, you also need to provide for their material needs. You will need to go on a honeymoon, have a roof over your heads, pay the bills, and put food on the table. Not everyone can take care of all these needs from personal finances and securing finances from external sources, such as taking a home loan, is one way out. Having a poor credit score may prevent you from accessing such facilities or impose heavy interest rates on your borrowing. When you have a poor credit score, there is no end to the difficulties you will face in trying to set up a home and provide for your family. We will discuss five reasons you need to work on your credit score before taking the leap.

Loan Application

Whether you want a loan to buy a new car or a beautiful new home, if your credit score is poor, your borrowing power is drastically diminished. In today’s volatile economy, lenders have become more stringent than ever before. Mortgage or auto loan lenders have tightened their terms and conditions for drafting new loans. More is now required of the average borrower, including a fixed down payment and a credit score of not less than 720 (the score may vary from lender to lender). If your credit score is unfavorable, you have an uphill task ahead of you.

Interest Rate

The interest rates on your borrowing depend heavily on your credit score. The interest rate is often defined by calculating the level of risk found in your credit score. If you have been late with your payments, collections, bankruptcy, and so forth, in the past, your credit report will reflect all this information, which results in high interest rates. If you get your credit score repaired, you will see a reduction in interest rates, giving access to cheaper financing and savings.

Insurance Premiums

During your marriage, mitigate risk by getting your property insured, and having a good credit score qualifies you for attractive rates. Insurance companies evaluate your past financial records to determine your risk level and to have a low credit score means you are a high-risk candidate.

Employment Opportunities

If you have a low credit score, you will face a lot of disappointments when seeking employment. You may come across lots of opportunities but with a poor credit score, it is hard to get employed. Many employers do a credit check before hiring, and a poor credit score conveys a lot of negativity that includes being irresponsible. Despite being qualified and possessing considerable acumen, an adverse credit report makes a bad impression on prospective employers. It makes you seem disorganized and careless- two traits that should never be part of your resume.

Peace of Mind

A good credit score ensures that you have a hassle-free life. There are many other instances where credit scores play a deciding factor. Being on the safe side guarantees you absolute peace of mind.

Bottom Line

Getting married requires more than just love and devotion. Bad credit scores suck all the love and fun and often introduce trouble in paradise. Don’t let a poor credit score undermine your ability to provide for your family and make your way in life hassle-free. If have not been serious about your credit score, it is time you worked towards improving it. Seek professional help to get your credit score repaired.

5 Ways to Repair Credit Post Bankruptcy

Bankruptcy is not the end of the road for borrowers that only goes downhill. Rather it is a key lesson from which they may learn and try to restore their financial stability in the future. Severity of bankruptcy depends on the current credit score of borrowers; which means that someone with a score of 780 might witness a sharp fall to somewhere between 540 and 560 post-bankruptcy.

After bankruptcy, borrowers may find it difficult to get an auto loan or mortgage at lower interest rate. Many lenders may not even consider lending money to borrowers with the history of bankruptcy. It is, therefore, important that people work towards improving the credit history as much as possible. Here are a few effective ways to repair credit after bankruptcy:

1) Maintaining a Responsible Financial Habit is Important

Borrowers may be able to maintain consistency over time through paying all the bills and fulfilling credit obligations. If any delinquency remains in the report for a minimum of seven years, then bad credit history along with bankruptcy could be a double whammy for people seeking loan options.

2) Monitor Credit Report

It is important for borrowers to understand where they currently stand to make a plan for the future. Checking credit report on a regular basis to identify inaccuracies and verify the debts may save a lot of hassles. An accurate data about finances could help borrowers plan out the ways to pay off the debts and improve their credit score.

3) Open a New Bank Account

Holding a bank account indicates financial stability of an individual. So, make sure to open a new checking and savings account post-bankruptcy. It may prove to be an effective method to develop a habit of saving money regularly and becoming more financially independent.

4) Get a Card for Retail or Gas

Getting a card for retail or gas doesn’t require applicants to have a good credit score, but getting any of these cards may improve the credit score. Any purchase you make at the retail store or gas station helps improve the credit score.

5) Don’t Close Existing Accounts

According to the credit bureaus, the payment history of a borrower accounts for 35 percent, and the amount owed accounts for 30 percent of the credit score. Thus, closing credit card accounts may bring down the credit limit and lowers the credit score.
It is not difficult to restore credit score after bankruptcy provided borrowers plan out their finances carefully and remain focused to achieve their financial goals. It may take up to seven years to get bankruptcy removed from the credit report. However, a consistent credit history may work for a borrower to become financially independent.

3 Key Tips to Wisely Use a Credit Card

Getting a credit card may be easy, but using it smartly could be difficult. Depending on how consumers use their credit cards develops good or bad spending habits. Responsible use of credit cards increases the credit score and makes people eligible to secure mortgages and auto loans at lower interest rate. On the other hand, reckless or unplanned use of credit card leads to bad credit and consumers might end up spending thousands of dollars paying for late fees and interests.

Ways to Avoid Credit Card Pitfalls

Proper financial planning might help consumers get through a monetary crisis without causing a dent to their credit score. It is always better to set certain rules on usage and repayment of a credit card to achieve financial stability. Here are a few tips that might help an individual manage credit card wisely:

1) Regular Payments

Debtors need to pay off their credit card balance every month, without a fail. Clearing the dues every month eliminates the need to pay interest on the purchase made using the credit card. To avoid paying monthly interest, they need to keep track of their expenses and avoid overspending.

2) Don’t Skip Payments

If you have a significant balance on the credit card, look for ways to get out of the debt. Try to make the minimum payment every month because missing out on a payment will cause late payment fees, and affect your credit score.

3) Don’t Spend Over 30 percent of Credit Limit

Keep the credit utilization rate of your credit card below 30 percent to maintain a healthy credit score. The credit utilization rate is inversely proportional to your credit score, which makes it all the more important to check your spending. Someone with a credit card limit of $2000 should try to keep the balance below $600.

 

Many consumers often discard the idea of owning a credit card by seeing its negative impact on their credit score. Let’s learn why having a credit card isn’t a bad thing:

 

• Many credit cards offer reward programs such as miles point and cash back, which may be useful for the card owner.
• Plastic money might protect card owners from losing any money due to theft. Even if you lose your credit card, you would not have to pay for the fraudulent charges if the thief maxes out the credit limit.
• When you make timely payment of credit card bills every month, it improves your credit score and builds a positive credit history. The habit of making on-time payments may help you get a home or auto loan at a lower interest rate.

 

There are two key aspects of successfully manage your finances and the credit score. Firstly, never spend more than what you are supposed to pay at the end of the month. Secondly, if you use the credit card to borrow money, it is essential to make a payment schedule in advance to pay off the balance in the shortest possible time.

5 Handy Tips when Negotiating With Creditors

Inability to repay credit card bills or loan EMIs on time pulls down your credit score. Not only this, falling behind in your payments brings even more severe consequences as the creditor or debt collector keeps ringing your phone and sending you various other communications. These calls, emails and letters suffice to introduce misery in your life. If you are failing to keep up with your payment obligations, it is important to ensure that this information is conveyed to the creditor in a way they understand, and an amicable solution is reached. In this article, we discuss tips for negotiating with creditors. Let’s start.

Explain Reasons the Lag and Stick to It

A creditor might not be interested in your excuses, however, they understand the hardships that clients go through. Explain the reasons behind your inability to honor your obligations, and stick to whatever you say.

Clarify Any Doubts

A creditor or debt collector can call to warn you legal consequences if you fail to pay as expected. The threats may also include loss of property, blacklisting, and other undesirable ends. If any such threats are conveyed, the next best thing to do is ask when you can expect summons for the case. Maintain your calm and always remember that such warnings are sometimes illegal.

Pay what You Can

Another way to negotiate with creditors or debt collectors is to be realistic and agree to pay. First determine the amount you can easily pay and inform the creditor about your shortcomings and commitment. Seeing this gesture, creditors may reconcile and stop disturbing you through incessant calls.

Seek Competent Credit Repair Services

If you feel the situation is beyond your control, consult any reputed credit repair service provider without further delays. Financial experts and credit repair specialists will guide you to take requisite remedial steps and will negotiate directly with the creditor or debt collector. The small fee you have to pay to the service provider is worth it considering the expertise they bring to the table.

Conclusion

There are numerous reasons that cause people to lag in their periodic payments towards credit card and other forms of debt. Ignoring collection calls and letters only gives you temporary relief but digs you knee deep into trouble in the long run. Always consult your creditor and try to negotiate as opposed to playing hide and seek.

3 Common Credit Score Mistakes to Avoid

“I did not spend too much using my credit cards; still my FICO score has gone down.” This is a common reason that bugs most consumers in the U.S. Even a minor out-of-way expense may dent your credit score significantly. We all know that a high credit score increases consumer’s’ eligibility to secure mortgages, auto loans and credit cards at lower interest rates.

Despite being careful, committing a few common mistakes might bring down your credit score. Let’s talk about the ways to avoid them.

Mistake 1

When you spend too much time seeking the best interest rate

Whether you are looking for a student loan, auto loan or mortgage, it’s logical that you look around for the the best interest rate. FICO encourages borrowers to do rate shopping so that they could get the best deal. FICO also ignores the loan inquiries you make within 30 days before scoring. It means if you manage to get a loan within 30 days of making the inquiries, it won’t affect the credit score during the rate shopping. However, the hard credit inquiries might pull your credit score down. The recent version of FICO counts the inquiries that consumers make within 45 days as a single inquiry. Due to this reason, it is better to do rate shopping as quickly as possible when looking for a loan.

Mistake 2

When you become a co-signer

You need to be careful before co-signing with your friend, relative or someone else as you will also become responsible for the debt. This debt is likely to reflect in your credit report. If the real borrower misses out on a payment, it would affect your  as well.

Mistake 3

When you get casual and ignore a missed payment incident

Timely payment is important to maintain a good credit score. If you miss out on a payment even by a few days, it may cause a long-term damage to your credit history. In order to avoid late payment, you can automate your payment on the due date. If payment automation is not possible, you may track the dates of payment every month. Creditors often don’t report a late payment until it is 30 days past due date. However, this shouldn’t be an excuse to skip the on-time payment schedule. If an instance of non-payment shows up in your credit report, it may stay there for seven years. Even if you pay off the due amount later, the blemish simply doesn’t go away from your credit report.

Besides the above mistakes, you need to avoid maxing out your credit limit, and for that check the credit report on a regular basis. All these small but important activities ensure that you maintain a high credit score to secure a loan at the best interest rates.