Category Archives: Credit Scores

ways-to-improve-your-credit

Ways to Possibly Improve Your Credit Score

The world has, in the past few years, become focused on credit scores. But the problem for many consumers is that, while they may know what a good or bad score is, they may not be aware of just what actually makes up that score and what affects it the most. And that can cause big problems.

For consumers with bad credit, there are a number of ways to improve their damaged score, according to a recent article in the magazine Entrepreneur. For example, it’s important that consumers examine their credit report to find any inaccuracies which could be dragging their score down. The article recommends that consumers check at least once a year to keep errors off their report.

The article also says consumers should lower their balances so that banks know they are dealing with a consumer that won’t just let debt accumulate. Another important factor in determining a consumer’s viability is how old their accounts are. Older accounts show lenders that they are dealing with a trustworthy, reliable consumer.

It is important, the article said, that consumers have a variety of credit types on their account. If they can carry not only credit card debt, but also installment loans like car and boat loans, as well as larger loans like mortgages, it proves that, no matter the situation of a loan, a consumer can pay it off.

The article also recommends that the consumer not try to get any new credit lines, as repeated inquiries by potential lenders can further damage a credit score.

It’s also important to know just what makes up a credit score. The biggest determining factor in any credit score is actually how the consumer does at paying their bills on time, every time, said an article in the Poughkeepsie Journal. This one factor actually comprises about 35 percent of a consumer’s credit score.

Another 30 percent of their credit score is based on outstanding debt, the article said. Lenders expect consumers to carry a certain amount of debt on their credit cards, but it’s important for them to not carry more than they can afford to pay off every month.

Another 15 percent of a credit score is made up of past credit history, since it makes sense that lenders are more likely to extend a loan to people with a proven history of paying it back.

credit-score-and-debit-card-usage

Credit Score A Factor In Debit Card Usage

A new study has found that there is a close correlation between consumers’ credit scores and how often they use their debit cards to make purchases, and how much they spend on them.

According to a study from MasterCard, which also cited third-party findings from Lightspeed Research, the lower a consumer’s credit score is, the more likely they are to use their debit card with greater frequency every month.

The study found that “subprime” consumers – those with a credit score below 650 – use their debit cards to make purchases an average of 28 times per month, and spend a total of $860 doing so. This usage makes up 73 percent of all their card spending.

On the other hand, “superprime” borrowers, who have credit scores above 720, use their debit cards just 11 times per month to spend only $324 on average. They also use their credit card about as often as subprime borrowers use debit, 72 percent of the time.

Average consumers – those with credit scores between 650 and 720 – use their debit cards an intermediate amount, an average of 20 times per month, the study found. Those purchases totaled just over $600.

Despite the wide-ranging amount of usage over the three credit score bands, there have been increases across the board. The study found that between the fourth quarter of 2008 and the same period in 2009, debit use among subprime borrowers rose 10 percent, and 17 percent for prime consumers. Superprime Americans, meanwhile, used their debit accounts 12 percent more. The study said that these increases, however, did little to impact credit spending, and instead replaced the use of cash and checks by consumers.

Even when analyzed by income, MasterCard found that debit usage peaks with households who it described as “middle income,” those making between $40,000 and $70,000 a year. Debit card usage was lower for consumers with both higher and lower income.

In recent years, as the economy got worse and delinquencies rose, credit card companies tightened lending restrictions, and effectively shut subprime borrowers out of their ability to obtain a line of credit. This new lending environment may be what has led consumers who fall into this category to rely on debit cards more often.

Credit-Score-for-Auto-Loan

What Credit Score Do I Need to Get Approved for an Auto Loan?

Purchasing a new car is a major expense that everyone cant always afford in one lump sum. Many people take out a loan to help finance their purchase. However, just because youre in need of a car, that doesn’t mean you’ll automatically be approved for the financing that you may require. By educating yourself on how your credit report and credit score can play a role in your financing options beforehand, you can avoid surprises and be realistic about your options for an auto loan and its relative interest rate.

Minimum Scores
There’s not one single number across all auto lenders that serves as a threshold to be approved for a car loan, in part because your credit score isn’t the only factor used in determining your approval. However, according to Edmunds.com, you’re going to have a harder time if your credit score falls below 620, because at that point you’re considered a “subprime” borrower. You might still be able to get a loan, but you’ll likely need to pay a higher interest rate and might also be required to pay a higher down payment to show that youre still a good credit investment for the lender.

Impact of Higher Scores
Don’t be content to have just the bare minimum credit score necessary to get approved for an auto loan: as your score increases, the interest rate you pay on your car loan could decrease. This could save you hundreds or even thousands in interest over the life of the loan. For example, as of late 2013, according to Cars Direct, a person with a credit score above 740 would receive, on average, a 3.2 percent interest rate.

Checking Your Credit Ahead of Time
Before you go to apply for a car loan, Edmunds.com recommends checking your credit report. This allows you to see what your report consists of, so you can ensure that all your best credit behaviors are being reported. In addition, if you check your credit score ahead of time, you may get a better idea of what the interest rate on your loan might be, so you can set a better and more realistic budget for your total loan amount.

Applying for Auto Loans
When you’re ready to apply for an auto loan, doing your loan shopping in a short period of time can help you minimize the impact of the loan inquiries that are placed on your credit report. According to Experian, most credit scoring formulas count all inquiries for auto loans within a relatively brief period of time, generally 14 days, as just one inquiry when calculating your credit score. That way, as long as you do all your car loan applications within two weeks, your credit score should be affected by only one inquiry, no matter how many banks or other lenders you explore within that period for that purpose.

This article is provided for general guidance and information. It is not intended as, nor should it be construed to be, legal, financial or other professional advice. Please consult with your attorney or financial advisor to discuss any legal or financial issues involved with credit decisions.

Published by permission from ConsumerInfo.com, Inc., an Experian company. © 2014 ConsumerInfo.com, Inc. All rights reserved.

Banking-Activity-Credit-Score

Does My Banking Activity Affect My Credit Score?

Most people keep their money in the bank, whether in in a checking account, savings account or certificate of deposit. Most of the time, what you do with your bank account won’t show up on your credit report. However, there are certain instances when it can impact your credit score.

Opening Bank Accounts
Opening a new checking account could have an impact on your credit score. That’s because some banks pull your credit report before allowing you to open a new account.  For instance, when you go to open a checking account, the bank may pull your credit score which may result in a “hard inquiry” on your credit report. According to Experian, these types of inquiries may lower your score slightly, but will never be the only reason youre denied credit. Inquiries also stay on your credit report for approximately two years, so theyre not a permanent fixture there.

Overdraft Protection
Some banks offer overdraft protection, which allows you to withdraw funds for more than the balance in your account. Depending on your bank, it may report your overdraft protection amount as a line of credit, which would show up on your credit report. If you withdraw funds for more than your balance and don’t pay back the money to the bank, the bank may turn it over to a collection agency, which will report it to the credit bureaus as a debt you are late in repaying.

Monitoring Your Credit
Whether you’re curious as to how your bank is or isn’t reporting your accounts to the credit bureaus, or just interested in keeping tabs on your credit score, checking your credit report and score regularly can help you understand what affects your credit score and how it impacts your life. In addition, making on-time payments on your lines of credit is one of the best ways to keep your credit healthy ”something that staying connected with your credit can show over time.

This article is provided for general guidance and information. It is not intended as, nor should it be construed to be, legal, financial or other professional advice. Please consult with your attorney or financial advisor to discuss any legal or financial issues involved with credit decisions.

Published by permission from ConsumerInfo.com, Inc., an Experian company. © 2014 ConsumerInfo.com, Inc. All rights reserved.

credit-when-married

How to Help a Spouse Build Better Credit Habits

Mixing and mingling finances can be quite challenging especially when one spouse could use some help getting on the right track. In fact, according to a recent survey from Experian Consumer Services, credit scores were reported as a source of stress for 21 percent of married participants. However, couples who communicate monthly about their financial goals are more likely to agree on financial decisions, including how to use credit as a couple.

Helping your spouse kick their bad habits can improve their life and help the two of you come closer to achieving your financial goals. Doing it requires not only good habits and advice, but also sensitivity to the fact that your spouse might be uncomfortable with his or her situation.

Here are some tips on how to approach talking with your spouse about credit.

  • Perform a credit report check on yourself and your spouse. Doing it together may help to prevent your spouse from feeling singled out. Reviewing the information in each others credit report is also a way to assess both of your credit situations so you will be able to see the impact of any changes that you make moving forward.
  • Build a budget for your household together. A personal budget can help plan spending and also ensure that you have enough money left to pay down any existing debts. A qualified financial advisor may be able to help with this process, either by providing finance-related ideas or by helping to manage your spouse’s feelings or perceptions.
  • Define which habits you want worked on. For instance, a goal might be for your spouse to pay on time or to use only a certain percentage of available credit every month. Another goal could be to reduce balances so that less interest is paid, or to hit a certain credit score target.
  • Establish positive payment history. Consider adding your spouse to one of your accounts as an “authorized user” to help him or her add positive items, such as on-time payment history, to your spouses credit report. Gradually open joint credit accounts with your spouse as his credit habits improve and his credit reaches a point where he or she can be approved for accounts on favorable terms.
  • Continue monitoring both of your credit reports. This allows you to see improvements in credit, while also enabling you to minimize the impact of identity theft by ensuring that any new accounts, increased balances, or other problems that you’re not aware of dont linger.

Remember that your marriage is about more than money. While helping your spouse with his or her credit is part of building a strong foundation, it’s only one of many parts of your relationship.

About the Author
Steve Lander has been a writer since 1996, with experience in the fields of financial services, real estate and technology. Lander holds a Bachelor of Arts in political science from Columbia University.

This article is provided for general guidance and information. It is not intended as, nor should it be construed to be, legal, financial or other professional advice. Please consult with your attorney or financial advisor to discuss any legal or financial issues involved with credit decisions.

Published by permission from ConsumerInfo.com, Inc., an Experian company.     © 2014 ConsumerInfo.com, Inc.   All rights reserved.

Strategies-for-Using-Credit

Can Making Credit Card Charges Impact my Credit Score

Your credit score is used to evaluate you as a prospective borrower. One of the most important factors is how good you are at making your payments on time, every time. However, it isn’t the only factor. Another important consideration for your credit score is how much of your existing credit that you use. Generally, less is best, but in some scoring models, not using your credit at all can end up slightly reducing your score.

Credit Utilization

Credit scoring models calculate your credit utilization by dividing the credit card balance that shows on your credit report by your credit limit. If you have one credit card with a $2,000 limit and you owe $1,200, you’d have 60 percent utilization. Cutting your balance down by either paying off the balance or using your card less would give you a lower utilization rate.

How Much Utilization

Experians Maxine Sweet suggests that the lower your utilization ratio, the better for your credit scores. Other experts agree that by keeping your total utilization under 30 percent of your limit, youre usually safe from doing damage to your score. This is because it could be assumed that having high balances is a sign that you could be on your way into financial trouble, so the less you use, the better you generally look.

The Problem with Zero

Sometimes, it’s possible to go too low. A zero utilization rate may actually hurt your credit scores when calculated using some credit scoring models. Often times, lenders check your credit report to predict how you will do if they give you a credit card based on what you’ve already done. If you don’t have any utilization, there isn’t any behavior to use to judge you.

It may also indicate that you might take out a credit card and not use it, not generating an opportunity for the lender to make any money. With this in mind, making a very small charge every month and paying it off when you get your statement could prevent this from happening.

About the Author
Solomon Poretsky  has been a writer since 1996, with experience in the fields of financial services, real estate and technology. Poretsky holds a Bachelor of Arts in political science from Columbia University.

This article is provided for general guidance and information. It is not intended as, nor should it be construed to be, legal, financial or other professional advice. Please consult with your attorney or financial advisor to discuss any legal or financial issues involved with credit decisions.

Published by permission from ConsumerInfo.com, Inc., an Experian company.     © 2014 ConsumerInfo.com, Inc.   All rights reserved.

role-of-your-credit-score

The Role Your Credit Score Plays in Your Life

Many people dont even think about their credit scores until theyre ready to apply for new credit and some dont consider them even then! But credit scores can play a big role in your life, even if youre not planning to buy a car or house or rarely use your credit cards. Its important to understand who has access to your credit score, whos looking at it and how theyre using it to make decisions about you.

  • Lenders rely on a credit score and report for their lending decisions. Your past credit behavior is generally considered to be the best predictor of how likely you are to repay new credit. A good score indicates you’ve managed your credit usage well in the past, and you may be more likely to be approved for credit. So lenders from auto loan and mortgage companies, to credit card issuers and student loan agencies, will usually consider your credit score when you ask them for credit.
  • Employers are reviewing credit scores. Some employers might check the information included in the credit reports of candidates before offering them a job. For example, a potential employer may ask for permission to review your credit report as one part of the application process. Generally, however, this is only one of many factors that may be considered in deciding to extend you a job offer.
  • Landlords consider credit. They want to ensure youll pay your rent on time, and past behavior is considered a good indicator of well you will meet the financial obligation of paying rent on the due date and in full.
  • Mobile service providers and utility companies check credit. While a good score doesnt mean youll get a better deal from these companies, a poor one might mean your application wont be approved without a co-signer or you may need to pay a deposit.

Your credit scores can influence many aspects of your life beyond your ability to secure credit at favorable rates. Understanding how it affects your life and what credit factors can impact your score can inform you how to manage your finances in general.

This article is provided for general guidance and information. It is not intended as, nor should it be construed to be, legal, financial or other professional advice. Please consult with your attorney or financial advisor to discuss any legal or financial issues involved with credit decisions.

Published by permission from ConsumerInfo.com, Inc., an Experian company.     © 2014 ConsumerInfo.com, Inc.   All rights reserved.

good-credit-scores

Three Things to Know Before Sitting Down with an Auto Dealer

Summer is just around the corner and like many, you might be dreaming of cruising in a new car. Many dealers are motivated to move inventory as new-year models debut but theyre still likely to be concerned about making a profit. And of course you want to pay as little as possible for your new vehicle. Before you head out to a dealership to begin negotiations, you should know these three key pieces of information:

1. What you really want.

Your budget and your head may tell you to buy that gas-sipping sub-compact. But if you dont have a specific make and model in mind, budget and list of priorities, it will be much easier for a salesman to sway you toward that continent-sized, costlier SUV hes trying to get off his lot. Know what you want, need and can afford before you leave home and try and stick to your guns at the dealership.

2. The actual cost of the car youre buying.

Every car has the potential for more than one price. Theres what the dealer paid to the manufacturer for the privilege of selling the car, theres what the dealer may put on the sticker as a starting point for negotiations, and then theres what the vehicle might really be worth. Arriving at that last number can take some research on your part, but its important that you know that price before you go shopping. Also keep in mind, there may be associated costs such as taxes, registration and car insurance. Understanding the true cost of a vehicle can help you possibly avoid overpaying.

3. Your credit score and credit status.

Even if you plan to wait until you get to the dealership to arrange financing (and we strongly recommend you dont), knowing what your credit score says about you in advance can help ensure you get fair terms for your auto loan. Understand your credit score and report before you begin shopping. If possible, line up financing options before you go to the dealership. You can always consider the dealers financing offer, but knowing your credit and having a backup plan can help ensure you dont have to rely on the dealership to fund your purchase.   Good credit scores can also lead to higher credit limits and lower interest rates.

This article is provided for general guidance and information. It is not intended as, nor should it be construed to be, legal, financial or other professional advice. Please consult with your attorney or financial advisor to discuss any legal or financial issues involved with credit decisions.

Published by permission from ConsumerInfo.com, Inc., an Experian company.     © 2014 ConsumerInfo.com, Inc.   All rights reserved.

bankruptcy-and-credit

What Happens to My Credit After Bankruptcy Drops Off My Credit Report?

Of all the things you can do to your credit, bankruptcy carries the single greatest negative impact because each account, marked derogatory by the bankruptcy, could drop your score along with the public record of the bankruptcy itself.   Meaning, by the time many debtors file bankruptcy, they’ve usually already missed numerous credit payments and may already have judgments against them. Then, filing for bankruptcy will result in a public record which can harm your score even further once its recorded by the credit bureaus.

Credit Score Components

One of the reasons bankruptcy has such a negative effect on a credit score is due to the way that scores are structured. Of the most influential components of a credit score are your payment history and   credit usage which collectively accounts for 61% of your Experian PLUS score.    Bankruptcy may raise a red flag about your payment history and show that you cant manage your credit usage. Additionally, bankruptcy hurts another section of your score due to the fact that it’s a public record, and as soon as one is recorded, your score will likely be penalized.

Bankruptcy Deletion

Since bankruptcy has such a negative effect on a credit score, when it falls off, your score may change. Unfortunately, you may have to pay the price of time. A Chapter 13 bankruptcy, in which you pay back at least some of your debt, stays on your report for seven years. A Chapter 7 bankruptcy, which typically results in no payment to creditors, stays for a full 10 years.

Your score may also improve over the years as your delinquent accounts fall off your report, which usually happens seven years after the first reported date of delinquency. With a good payment history, you may see your score recover over time.

Rebuilding after Bankruptcy

Although your bankruptcy will likely have a negative impact on your credit score, you can begin bankruptcy recovery immediately. After your discharge, you may be free of debts that caused you constant late payments. With your remaining obligations, and any new credit that you may be able to eventually take on, keeping your payment history timely will be taken into account. No matter what you do, you’ll have to wait the full seven to ten years before your bankruptcy will actually drop off your report.

Monitoring Your Credit

Monitoring your credit allows you to keep up with changes to your credit report and to stay educated about whats contained in your credit report. You might say that your credit awareness can increase along with your financial literacy. Monitoring your credit is a way to become more aware of your financial actions, from applying for a new credit card to paying down credit card debt.

This article is provided for general guidance and information. It is not intended as, nor should it be construed to be, legal, financial or other professional advice. Please consult with your attorney or financial advisor to discuss any legal or financial issues involved with credit decisions.

Published by permission from ConsumerInfo.com, Inc., an Experian company.     © 2014 ConsumerInfo.com, Inc.  All rights reserved.

estimate-tax-payment

Estimated Tax Payments & Your Credit

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If you didn’t have income taxes withheld from you income, you may be able to make estimated tax payments. The IRS provides the following information:

  • You may need to make estimated tax payments if you didn’t have taxes withheld from your income. This applies if your income is from self-employment, dividends, interest, or capital gains.   Making these payments during the year may help you avoid a penalty.
  • If you believe you may owe $1,000 or more in taxes when you submit your federal return, you may need to make estimated tax payments
  • In figuring out your estimated taxes, you can include tax deductions and credits that youre eligible to claim.
  • You can use Form 1040-ES to figure estimate and figure what your taxes will be.
  • Youre able to pay your tax obligation online, by phone, money order, check, debit card or credit.

Failure to Pay Taxes Can Come with Penalties

Ignoring your taxes wont make them go away. If you default on your taxes, the government has the option of filing a federal tax like and reporting it to the credit reporting agencies.   Thus, it can find its way to your credit report ”negatively affecting your credit score.

If you think you may need to make estimated tax payments, but are unsure, consult with a credible tax-preparer who can guide you. Paying your taxes on time has its benefits ”like helping you maintain a positive relationship with the IRS.

About the Author
Mark Kennan is a freelance writer specializing in finance-related topics. He has worked as a sports editor and published articles on a number of online outlets.

This article is provided for general guidance and information. It is not intended as, nor should it be construed to be, legal, financial or other professional advice. Please consult with your attorney or financial advisor to discuss any legal or financial issues involved with credit decisions.

Published by permission from ConsumerInfo.com, Inc., an Experian company.     © 2014 ConsumerInfo.com, Inc.   All rights reserved.