8 credit score myths debunked

July 17, 2015 by · Leave a Comment 

8 credit score myths debunked

Misconceptions abound when it comes to the ways credit scores are determined. Here are some of the more egregious falsehoods surrounding the process

Myth No. 1

Every inquiry for credit costs five points

Fact No. 1

There is no fixed set number of points that a credit inquiry will cost. Generally speaking, inquires make a relatively minor contribution to overall scores. (up to 10%)

Myth No. 2

Part of my credit scores is calculated based on where I live.

Fact No. 2

Credit score calculations do not factor in where you live (city or ZIP code, for example). Effectively managing your credit, on the other hand, will result in higher scores — regardless of whether you live in Beverly Hills, Calif., or Zanesville, Ohio.

Myth No. 3

A bankruptcy will haunt my credit scores forever.

Fact No. 3

While most negative information must be removed from your credit report after seven years, the Fair Credit Reporting Act allows bankruptcy to be listed on your credit report for up to 10 years. It’s true a bankruptcy will negatively affect your scores, though the impact on your scores lessens over time as the bankruptcy ages

Myth No. 4

A short sale has less of an impact on a credit score than a foreclosure.

Fact No. 4

The presence of either a foreclosure or short sale information on a credit bureau report is considered negative, as it is predictive of future credit risk. Generally speaking, both will have a similar impact on a credit score. It’s what you had before the default that matters most (Good credit).

Myth No. 5

Making a lot of money results in higher credit scores.

Fact No. 5

Your income does not have a direct impact on credit bureau scores, as your income information is not recorded on your credit report. The scores focus on how you manage your credit, not on how you could manage your credit given your income.

Myth No. 6

Going to a credit counseling agency will hurt my scores

Fact No. 6

Not true. An indication that you are working with a professional credit counselor will not, in and of itself, hurt your credit scores. However, negotiated settlements on balances owed to your creditors may affect your scores if the lenders report them as such.

Myth No. 7

Carrying smaller balances on several credit cards is better than having a large balance on just one card.

Fact No. 7

Not always. A credit score will often consider the number of accounts or credit cards you carry that have a balance, in addition to your overall utilization of available credit. Thus, you may lose points for having a higher number of accounts with balances

Myth No. 8

850 is the perfect credit score.

Fact No. 8

While 850 may be the highest FICO score, it is not a “perfect” score. The “perfect score” is what a lender requires to approve you for the credit and credit terms you are seeking.

By Tom Quinn, for Credit.com

Credit Repair: The Truth About What Can and Cannot be Done

July 16, 2015 by · 1 Comment 

Credit Repair: The Truth About What Can and Cannot be Done

Contrary to what the credit bureaus would like you to believe, credit repair does work and can
work for 100% of people in most circumstances. This is, of course, provided you are getting the
best advice and have an experienced professional working on your case.
Any one with a credit score below 720 can benefit long-term from the advice and information
provided through credit repair; however, there are times when your own limitations make
adhering to this advice impossible. The two limiting factors are: (1) your financial situation and (2)
the time frame within you need to reach your results. It is possible to remove anything from a
credit report, even accurate items, if the creditor does not adhere to the law the outlines what
needs to be done and by when. Just because you have a certain type of account removed at one
time does not mean other, similar items are going to be able to be removed, even with the same
circumstances. A hit-or-miss aspect exists in credit repair, because credit repair relies not only
on the strategies of the person attempting to repair the credit, but also on the effectiveness or
ineffectiveness of the creditors and credit bureaus in adhering to the laws. Sometimes you want
the creditor and credit bureaus to follow the law, sometimes you don’t-it all depends on
your particular situation.
The reason credit repair has received such a bad name is due to the abundance of scam
artists who flock to the easy money made available by people desperate for this type of service.
This unfortunate reality leads the credit bureaus and the FTC to make blanket, untrue statements
such as, “Credit repair does not work ever and there is nothing a credit repair company can do for
you that you can’t do for yourself.” Given that more than 80% of credit repair companies are scam
artists, promising the world and then disappearing when you pay, the credit bureaus and the FTC
are forced to make such bold statements. It would be impossible for them to explain the truth to
consumers without causing them to make a bad choice that would result in the getting scammed.
As a result, the credit bureaus and the FTC must adhere to the “credit repair does not work”
position.

As I have stated, credit repair does work, but…don’t let anyone tell you that credit repair is effective every time. Its success varies with the number of players in the game, some of whom never perform consistently. Even if you have a true master of credit repair on your side, you have to take into account that sometimes the other players perform in a way that throws your master off his game. Take Kobe Bryant. Although he has the ability to win every game for his team, there are going to be times when the other team has a formation that takes him off his game and causes his results to be less than optimal. Given that fact, you still cannot predict to any level of certainty whether or not he will perform well or poorly the next time he faces that team. Credit repair is similar. Sometimes the opposing side shows up strong, other times they don’t. Even if you follow the same approach with every situation that arises when doing credit repair, your results will still vary due to the other players involved. So the next time someone tells you they can get everything repaired on your credit, run the other way, because, at best, the pendulum will swing widely both ways for the same situation.

Credit repair limitations occur almost 100% of the time under the following situations. These situations make it nearly impossible for credit repair to help someone needing results within six months to a year. Please keep in mind even when you can’t be helped in the short term, the advice that can be given now, if coming from a professional, can prevent you from making a mistake in the near future that may worsen your situation. Here are examples of situations where not much can be done with-in a six to twelve month period.

1. If more than 50% of the negative accounts showing on the credit report appear as unpaid collections, charge-offs, repossessions, or foreclosures and you do not have the money to either pay the accounts in full or settle them. Due to the negative accounts remaining unpaid, these items will simply reappear on your report once removed. Any negatives, even unpaid accounts, can be removed-but, unless the negative account is current, paid or settled, it will simply reappear in 10-90 days.

The only way to prevent this is to bring the account current by paying the past due amount, or, in the case of a collection, charge-off, repossession, or foreclosure, pay the balance in full or settle it for pennies on the dollar. Unpaid accounts that do not have collection, charge-off, repossession or foreclosure status require only that the past due balance be paid to be considered current. Unless the negative account is a public record, the only way to keep it from being re-reported is to make sure the status is “current, paid, settled, transferred or sold.” In other words, if deleted, any negative account that does not show one of those five statuses will most likely get re-reported, unless the account is a public record.

Public records are the only negative items that do not need to be paid to prevent re-reporting. Because they are only reported once, public records, such as unpaid judgments and tax liens, can remain unpaid and yet will not reappear once they are removed. In fact, the only time they reappear is when the initial reason for removal was the public record agency failing to respond the credit bureaus’ verification request with-in the 30 day period outlined by the Fair Credit Reporting Act, in which case the credit bureau would reinsert the public record if and when the public record agency responds to the credit bureaus after that 30 day period.

2. Credit repair is nearly impossible if you can’t pay your minimum monthly payments and you keep adding new late payments to your report. This is a “spinning wheels” scenario that rarely yields much improvement to your credit score.

In conclusion, you can repair your credit if you hire a pro and listen to his or her professional advice. The effectiveness of the credit repair depends not only on the skill of the professional you hire and your ability to cooperate with his or her advice, but also, a little luck.

 

Why Credit Repair?

July 15, 2015 by · Leave a Comment 

“If you think nobody cares if you’re alive, try missing a couple of car payments.” Earl Wilson

What’s your score? How healthy is your credit? Are you sure about that?

As a credit restoration business, we are often amazed that people have no clue what their credit profile looks like until they get turned down for a loan. They have no idea as to why a clean credit history and high scores are necessary. Let’s take a minute to see what one has to lose by not having a good credit history.

For starters, having good credit will help determine whether or not you will get the financing you are seeking. When you apply for a loan, whether a mortgage, car loan or new credit card, your lender is going to check your credit to get an idea of whether you’ve been responsible with your use of credit in the past. They will also evaluate your current financial position. They will want to see if you are currently paying your bills on time, in order to decide whether you have the ability to carry the loan you are trying to acquire. If your credit history or your credit scores are in bad shape, then the prospective lender is all but guaranteed to deny your application.

If you have bad credit and you somehow get lucky enough to acquire a new loan, you better believe that loan is going to come with highly unfavorable terms. Specifically, the loan you receive is going to come attached with a very high interest rate. A high interest rate hurts your financial position in two ways:

  • Your monthly payments will be considerably higher
  • A high interest rate compounds over time, so when you finally pay off your loan you will have spent 2 or 3 times more than you would have if you had qualified for a lower interest rate

As if these financial realities weren’t bleak enough, your credit plays an increasingly important role in seemingly unrelated areas of your life. For example, poor credit is now being used as a disqualifying factor for everything from getting a job to acquiring a new apartment as well as determining the rates you receive for various insurances.

All of this is to say nothing about the emotional toll that poor credit will have on you with. Guilt and feelings of being out of control, will add to the financial burden of poor credit. When you take these factors into consideration, it’s clear improving your credit is one of the wisest decisions you will ever make.

The ever important part of all of this is to take that first step. It is but 1 step that begins the journey of 100 miles. Let us help you through your journey as guided support. Call us today at (909) 570-9048 to learn how you can reach your goals.

 

Credit 101 Part 3 Your Credit Profile

July 13, 2015 by · Leave a Comment 

 

This is part 3 in a series of videos on the basics of credit, that is Credit 101. What is your credit profile? How do we explain what makes up your scores? This is something that should be taught in high school. A brief explanation of credit. Interview between Adam Villaneda and Cesar Marrufo. Elite Financial, LLC credit repair in Yucaipa, California. Learn how to fix your bad credit report and position yourself to purchase a home. I do NOT own rights to this music and am not claiming that I do.

Credit Inquiries – What’s The Big Deal?

June 19, 2015 by · Leave a Comment 

Credit Inquiries: Everything You’ve Ever Wanted to Know

 

First things first, let’s define “credit inquiry.”  A credit inquiry is simply a record of someone gaining access to your credit reports.  The inquiry record has two meaningful components, the date of the access and the name of the party doing the accessing.  The credit reporting agencies maintain a record of inquiries from anywhere between six months and 24 months, depending on the inquiry type.

All inquiries fall neatly into two categories, hard and soft.  Hard inquiries are usually generated when you apply for something (there are exceptions though).  Soft inquiries are generated when access to your credit report is granted for a reason other than the underwriting of an application.  Below are just a few examples of each type.

Hard Inquiries Soft Inquiries
Mortgage applicationsAuto loan applicationsCredit card applicationsPersonal loan applicationsCollection agency skip-tracing Consumers pulling their own credit filesLenders sending you a pre-approved credit offer in the mailLenders with whom you have an existing relationship viewing your credit periodically

Hard inquiries are what we in the credit-scoring world refer to as “fair game,” meaning they are viewed and considered by credit scoring models, lenders and anyone else who has access to your credit reports.  These are the types of inquiries that CAN lower your scores.  Notice the obnoxious bolding of the word “CAN.”  Hard inquiries don’t always lower your scores but they certainly can.

Soft inquires are off limits.  They’re off limits to credit scoring models and off limits to lenders.  In fact, they aren’t shown to anyone other than you when you ask for a copy of your own credit reports.  Most credit reports are polluted with soft inquiries so thankfully they have no impact to your scores, at all.

Just like everything else on your credit reports, there is no fixed value per inquiry.  So, when you read things like “My score went down 12 points because of an inquiry” or “Inquiries are worth 6 points each” you can ignore what you’ve read because it’s incorrect.  The number of points you earn in the “Inquiry” category is based on how many hard ones you have on your file over the previous 12 months.  That’s right, hard inquiries over 12 months old don’t have any impact on your FICO scores despite the fact that they’ll be on your files for another 12 months.

Now, let’s address the method which FICO uses to count inquiries.  This is complicated, which is why there’s so much incorrect information on the subject floating around in the web world.  Remember, we’re just talking about hard inquires at this point and only those that have occurred in the previous 12 months.

30-day “Safe Harbor” period

Mortgage, Auto and Student loan related inquiries that are less than 30 days old have no impact, at all, on your FICO scores.  That’s why the date of the inquiry and the party accessing your reports is so important, because that’s how the inquiry is dated and categorized.  So, if you want to split hairs, these types of inquiries only count for a maximum of 11 months because they’re ignored for their first 30 days on file and then only counted while they’re up to one year old.

45-day “Rate Shopping Allowance”

Over a decade ago FICO changed how they treated multiple inquiries caused by lenders in the mortgage and auto lending industries.  And more recently, they’ve changed how they treated student loan inquires.  The issue was how to not penalize consumers who were interest-rate shopping and, thus, filling their credit reports with multiple inquires in a very short period of time.  The 45-day logic considers inquiries from mortgage, auto and student loan lenders, which occur within 45 days of each other as 1 inquiry.  So, you can apply for 15 auto loans in as long as the lenders pull your reports within a 45-day period the 15 inquiries will be counted by the FICO score as only one search for credit.  The idea, which makes perfect sense, is that the shopper is really only looking for one loan, not 15.  There was a time when the 45 day period was only 14 days, but that was in much older versions of the scoring software.

You’ve probably noticed that credit cards, retail store cards and gasoline cards are not protected.  That’s because people don’t generally shop for plastic like they’d shop for an auto loan.  You don’t apply for credit cards with Capital One (COF), Discover (DFS), American Express (AXP), Bank of America (BAC) and Wells Fargo (WFC) and then choose whichever issuer gave you the best deal.  What you’ve actually done is to open new cards with Capital One, Discover, American Express, Bank of America and Wells Fargo and opening so many accounts in a such a small period of time is indicative of elevated credit risk, so no dice my friends.

The same is true for retail store cards.  You don’t rate shop at Macy’s stores at every mall in your city.  The rate you get is going to be the same regardless of which store you apply at.  This is very troubling news for the people who use their credit reports as “15% off” coupons at the mall and apply for instant credit at the register just to save a few bucks.  Each of those is really an application for a new store credit card, and those inquiries can sting.

There are also some notable exceptions to the hard inquiry rule (that they are always seen and considered).  For example, employment inquires do not count in your credit scores.  Neither are insurance or utility inquiries counted in your scores.  As you can imagine, it’s hard to argue that applying for a job, insurance (which is generally a legal or lender requirement) or utilities leads to a debt obligation and you certainly don’t want to penalize people for applying for these basic needs.

There you have it.  Everything you ever wanted to know about inquiries but were too afraid to ask.

Sep 20, 2010 / By John Ulzheimer for Mintdotcom

OG Article here: http://www.mint.com/blog/credit/credit-inquiries-09202010

 

Credit Score Recovery…Post Foreclosure

June 18, 2015 by · Leave a Comment 

Credit Score Recovery…

POST Foreclosure

Wondering how long it will take your credit score to recover from a home foreclosure or short sale? That depends on how good your credit was in the first place, says John Ulzheimer, a credit score  expert who blogs on the subject for mint.com.

Somewhat depressingly, the better your credit score was before your mortgage woes started, the longer it will take you to recover. Citing data from credit reporting firm FICO, Mr. Ulzheimer said it would take roughly three years for a consumer with a 680 FICO to recover to that level after a foreclosure, compared with seven years for someone with a 780 score. That’s because high scores require “pristine” credit files, he said, while a middling 680 doesn’t.

Late mortgage payments follow the same pattern. A person with a 680 score who pays 30 days late can bounce back to that level in about six months, compared with three years for someone with a 780 score. His (somewhat obvious) advice? Don’t miss payments.

This is where we can help. Want to get back to that status from earlier? Simply contact us for information on how to get your credit life back on track.

7 “Fixes” To Better Credit

June 16, 2015 by · Leave a Comment 

‘Cheat’ your way to better credit

Wait….What?

Great credit scores mean a healthy financial future. If your scores are less than ideal, here are some quick, legal ways to push them up.
To err is human, to forgive takes time — at least when you’re dealing with credit scores.

Even small missteps can deal big blows to your scores that can take months or even years to heal. Bigger screw-ups can keep you in the credit-score basement even longer.
Fortunately, there are ways to speed up the recovery process. Each of the methods described below is perfectly legal, even though we’re calling them “cheats.” They’re more like shortcuts to get better credit.

None of these methods will work for long, though, if you don’t have your financial act together. You’ll quickly lose any improvements in your scores if you miss a payment or wind up with new collection accounts.

Once you’re in a position to pay all your bills and start using credit responsibly, though, you might consider some of the following:

Cheat No. 1: Piggyback on someone else’s credit
Being added as an authorized user to someone else’s credit card can raise your own scores, if the credit card issuer is cooperative. Many issuers will export the cardholder’s history with that account to your credit reports.
Some issuers won’t do these exports, and some credit-score formulas ignore authorized-user information in their calculations. But the leading credit score, the FICO, still takes authorized-user information into account.
You’ll need to first find a cooperative person with good credit (obviously), and that person will need to check with his or her issuer to make sure the information will be exported to your credit reports. If all systems are go, you don’t need to have access to the card — the other person’s responsible use of that plastic will help your scores.
Caveat: The flip side is that your scores can suffer if the other person suddenly skips a payment or maxes out the card, so make sure you find someone you can trust to continue handling credit well.

Cheat No. 2: Make your credit card debt disappear (Option 1)
A big part of the FICO credit-scoring formula is credit utilization: how much of your available credit you’re using at any given time. The formula is more sensitive to balances on your revolving accounts, such as credit cards, than it is to balances on your installment loans, such as mortgages, auto loans, student loans and personal loans. When it comes to credit cards, the less of your available credit you use, the better. Using less than 30% is good, less than 20% is better and less than 10% is best.
If you have big credit-card balances, consider paying them off or down with a fixed-rate personal loan from a bank or credit union. These loans, which typically last for three years, can not only help you get out of debt but can transform the nature of that debt in the eyes of credit-scoring formulas. A balance that is hurting your credit scores because it’s on a credit card could be a neutral or even a positive factor in your scores if it were transferred to an installment loan.
Caveat: Lender policies differ, but not everyone will be able to qualify for a personal loan.

Cheat No. 3: Make your credit card debt disappear (Option 2)
If a personal loan isn’t an option, you can consider paying off your cards with a loan from your 401k or other retirement plan. Retirement-plan loans typically don’t show up on your credit reports and aren’t a factor in your credit scores. As far as the credit bureaus are concerned, that debt just disappeared.

It didn’t really, of course. You’ll still owe the money, just to a different account. And retirement-plan loans are risky: If you lose your job, you may have to pay back any outstanding balance quickly, or the loan will turn into a withdrawal — and that’s very, very bad. Not only will a withdrawal trigger a hefty tax bill, but you’ll lose all the future tax-deferred compounding that money could have earned. If you’re in your 30s, a $10,000 withdrawal could cost you $100,000 or more in lost future retirement income. If you’re in your 20s, you could be out $200,000 or more.
There’s another downside: If you’re in over your head with debt, your credit card bills could be erased in bankruptcy court. A retirement-plan loan isn’t eligible for the same treatment. In essence, you’re taking money that would be protected from creditors to pay a debt that would otherwise be wiped out.
Caveat: Consider a retirement-plan loan only if your job is stable and you’re not a financial basket case.

Cheat No. 4: Spread your debt around
The FICO formula looks at how much of your total available credit you’re using, but it also looks at the credit utilization of each individual account. A big balance on a single card can hurt you more than the same debt distributed over several cards.
So spread your debt around. You don’t want to open a bunch of accounts at once, because that can hurt your scores, but see if you can transfer some of your debt to your other cards.
Caveat: Your ultimate goal should be to pay off your debt, not keep moving it around. And if you’ve already maxed out all your cards, it’s way too late for this tip; you should be talking to a legitimate credit counselor (you can get referrals from the National Foundation for Credit Counseling) and a bankruptcy attorney (referrals from the National Association of Consumer Bankruptcy Attorneys).

Cheat No. 5: ‘Bribe’ your creditors
The FICO formula treats a collection account as a “severe negative derogatory,” in credit-scoring parlance. That means “seriously bad news” for your credit scores.
Many collection agencies, however, can be persuaded to wipe a collection from your credit reports with the right motivation. That means cash.
This is a technique called “pay for deletion,” where the borrower settles the debt, usually with a lump-sum payment, in exchange for its deletion as a collection account.
You may not have to pay 100 cents on the dollar to settle the debt, because chances are good the collection agency paid only a few pennies on the dollar to buy it. But whatever deal you negotiate, make sure to get the agency’s promise — in advance and in writing — that the account will be deleted from your credit files and that the collection agency won’t sell any unpaid portion of the debt to another collector. (You may wind up with a tax bill for any “forgiven” portion of the debt, however.)
Caveat: Erasing a collection account won’t erase what the original creditor has to say about you. If the account was charged off before it was turned over to collections, for example, the charge-off will remain on your credit reports and have a larger negative impact on your scores than the collection did. But even so, getting rid of the collection certainly won’t hurt your scores and could help them considerably.

Cheat No. 6: Disavow all knowledge
About a third of us have a collection on our credit reports, and many of those are for piddly amounts: a small doctor bill, an unpaid parking ticket, a tiny balance on a cellphone account. Those small amounts can have outsized effects on our credit scores.
The good news is that collection agencies think those amounts are piddly as well and may not bother to verify the information if you dispute it. Typically, this works for collections that are small (less than $100) and old (close to the seven-year mark where it will fall off your reports anyway). After pulling your free credit reports at AnnualCreditReport.com, you can try disputing small, old collections as “not mine” and see what happens.
Caveat: A collection agency might fail to verify an account within the required 30 days after you dispute it, but the company could report the account again later. You’ll need to keep checking your reports to see if it pops back up. Also, this technique is unlikely to work on larger and more recent accounts. It really is meant for those who screwed up in a minor way once, long ago, and just want to hurry the black mark off their reports.

Cheat No. 7: Erase the evidence
Defaulting on a federal student loan has serious consequences. Your tax refunds can be seized and your wages subjected to garnishment, and you’re shut out of future student aid. Student-loan collectors don’t need to get a court order to make this stuff happen; they can just do it.
If you can get back on track with your payments, however, you have an option not available to most other borrowers: Your default can be erased from your credit reports and thus your credit scores.
How do you make this miracle happen? It’s called rehabilitation, and it’s available on a one-time basis with federal student loans only. If you default again, you won’t be eligible for rehabilitation. Private student loans aren’t eligible.
To rehabilitate most federal student loans, you’re required to make nine out of 10 consecutive payments on time. (“On time” means within 20 days of the due date.) With Perkins loans, you must make nine out of nine consecutive payments on time. The required monthly payment must be “reasonable and affordable,” as worked out between the borrower and the student-loan collector.
Caveat: You’ll have to pay collection costs of up to 18.5% of the unpaid principal balance, as well as accrued interest, which can be substantial if the loan has been in default for a while. But even if you didn’t enter into rehabilitation, you’d still owe that interest, plus collection costs that are likely to be higher.
By
Liz Weston
for MSN

How Many Credit Cards Should You Have?

June 15, 2015 by · Leave a Comment 

How Many Credit Cards Should You Have?

I’m asked this question on a weekly basis and have been for years. The infatuation with the optimal number of credit cards makes me smile because I know a secret that not many other people know. That secret is this… there is no right number of credit cards to have.
The basis for the question is purely credit score driven. Consumers rightly care and want to earn and maintain solid credit scores. One of the ways to do so is to become familiar with the things that matter, and by how much. The assumption is that you should have an exact number of credit cards, which would help your scores.
Haters Keep Hating
The hater crowd will undoubtedly suggest that 0 credit cards is the optimal number and that debt is evil… blah blah.
And while I respect the right to have your own opinion on the topic of consumer credit, I’ll be the first to point out when it’s wrong. Having credit cards is an easy and inexpensive way to establish, build, maintain, or rebuild credit. In fact, the vast majority of you started your consumer credit lifecycle by opening some form of plastic.
I’ll give you the same answer I gave for 7 years while I was at FICO and have given for the 7+ years I’ve been gone. As it pertains to your FICO score, the number of credit cards you have isn’t remotely as important as how you’re managing them. And while you can have too many inquiries or too many accounts with balances, it’s hard to have too many credit cards.
Same Numbers, Different Impact
Having only one credit card that also happens to be maxed out is incredibly damaging to your credit score. Having only one credit card that also has a very low balance relative to the credit limit is very helpful to your credit score.
Having fourteen credit cards, like me, that are all paid on time and have $0 balances is very helpful to your credit scores. The last time I checked my FICO scores, my lowest was an 801. Having fourteen credit cards that all have balances is very damaging to your credit scores. Same numbers, different impact.
As For a Hard Number…..
If you really want me to give you a number of cards to have, fine… how about five?
If you can end up with five general use credit cards (those issued with a Visa, MasterCard, Discover, or American Express logo) that each have $20,000 credit limits, then you’ll be in great shape.
First off, you’ll have $100,000 of capacity or buying power (that’s probably enough for most of us). Next, you’ll have a large aggregate credit limit, which means you can charge as much as $10,000 in any one month and still not be over 10% “utilized.” That’s what I call “utilization insurance” because it’s unlikely you’ll cause any serious credit score damage simply because you had one month of expensive charges.
Finally, and this might be my favorite reason, you’ll have a diverse enough set of cards that you won’t run into any situation, in the United States anyway, where you’ll hear “we don’t take that kind of card.”
If five sounds like too many, then have fewer. If you’re responsible with your plastic and you want more, then have more. If you don’t want to have any credit cards, then don’t have any credit cards.
Opinions about how many credit cards to have are just that, opinions. None of them are fully correct and none of them are fully incorrect.
By John Ulzheimer
For mintdotcom /blog/credit/how-many-credit-cards-should-you-have-052012/

How 5 Bucks Can Ruin Credit

June 12, 2015 by · 1 Comment 

 

 

 

 

 

 

 

 

How $5 ruined my credit score

Even a small bill can hammer your credit rating if it goes to collections. Fortunately, there are ways to protect yourself.

CardRatings.com asked readers to tell us how they helped or hurt their credit scores. This story from reader Melinda Graham of York, Pa., shows how a little bill can cost you big money.

“In the fall of 2008, I got a flu shot at my doctor’s office. A few weeks later, I got billed $5 for my co-pay on a ‘blood draw’ on that date. I procrastinated a bit on calling in to ask my doctor’s office to fix what was probably just a miscoded procedure. Eventually I called and went through the usual ordeal of explaining the situation to person after person before finding the one who said they could take care of it.

“In the fall of 2009, I got a notice from a collection agency that my doctor’s office had turned over a $5 unpaid bill for collection. I racked my brain for another bill that might have fallen through the cracks and couldn’t come up with anything but the co-pay. So, there I was, looking at this collection notice and remembering the time spent on the phone the first time around, and I decided $5 wasn’t worth the hassle. I mailed a check to the collection agency.

“Fast-forward a few months, when my fiancé and I decided to really get into discussing our finances in preparation for merging them after we got married. I told him about AnnualCreditReport.com, and how I like to review my credit report every few months. I hadn’t checked it in a while, so we thought we should get our reports and pay for credit scores, too. And then I nearly fell off my chair when I saw that because the $5 medical bill had been reported by the collection agency, my score had dropped from 785 to 689! I was shocked: $5 = 96 points?! Boy, did I ever regret my decision to avoid the minor hassle of a phone call to straighten out the billing error.

What to do about a damaged credit rating

“Subsequently, I did contact the doctor’s billing office and got it all straightened out. They also notified the collection agency of the billing error and had that entry removed from my credit report with the credit bureaus. Unfortunately, my score only went back up to 764.

“No more collection agencies for me!”

Here’s what every consumer should do to protect or improve a credit score:

  • Pay all bills on time, and keep your credit usage low. To improve your score, try to use only 1% to 10% of your available credit line.
  • Check credit reports regularly. Federal law allows you to get a free report once a year from each of the credit-reporting agencies — Equifax, Experian and TransUnion. Log on to AnnualCreditReport.com to order or download yours.
  • Fix mistakes on your credit report. While lenders and credit card issuers report your activity to the credit bureaus, you are responsible for the accuracy of your credit report. Errors can be as simple as a wrong name or address or as complex as a line of credit that has been opened in your name, meaning you may be the victim of identity theft. Follow these six steps to fix errors on your credit reports.
  • Pay for your credit scores. If you anticipate applying for a loan such as a mortgage, you should get your credit scores a few months in advance so you can work on raising them. The higher your scores, the lower your interest rate will be. You may also want to subscribe to a credit-monitoring service, which will give you access to your scores on a regular basis. Knowing how much your scores go up or down based on your financial behavior may help you improve your money-management skills. Also, keeping an eye on your credit report and scores means you can jump on a problem before it gets out of hand and destroys your credit.

 

By Ellen Cannon, CardRatings.com

 

Why credit scores are different

May 23, 2015 by · Leave a Comment 

 

 

 

 

 

 

 

 

Many consumers go beyond getting their free annual credit report from the nationwide credit reporting agencies, Equifax, Experian and TransUnion. These consumers pay for monthly subscriptions to a credit monitoring service with the goal of knowing their credit score at any point in time and receiving alerts when someone uses their personal information or accesses their credit history. It takes many people by surprise when they purchase credit scores just before applying for credit only to find the lender’s credit score disclosure does not match. Why is that the case, and what can you do?

What Credit Scores Tell Consumers and Lenders
Credit monitoring services and nationwide credit reporting agencies make money by selling credit scores to consumers, lenders and other businesses that use credit scores for decision-making. You, as a buyer, borrower or consumer, can buy educational credit scores from a credit monitoring service. Educational credit scores help you prepare to apply for loans, manage your debts and eliminate fraud or identity theft. Mortgage lenders, auto loan companies, credit card providers, insurance companies, landlords and employers buy credit scores from credit reporting agencies. Credit scores help them determine if you will pay your bill on time, in full, every month; predict if and when you might fall delinquent on your accounts; or evaluate if and when you are likely to default on your credit obligations. Whatever they’re being used for, credit scores should be based on the same information for both lender and customer, so why are scores from different sources so different? Two reasons credit scores differ are discrepancies in reporting methods and different scoring models.

Issues with Reporting Methods
Common discrepancies in reporting methods include:

  • Consistency – not all data furnishers give information to all credit reporting agencies.
  • Timing – data furnishers may provide the same information to all agencies but at different time schedules.
  • Accuracy – changing personal information, i.e. names or addresses, has to be matched to the correct credit file.
  • Privacy – Credit reporting agencies do not cross-share details on inquiries and information with each other.

Lenders and other creditors can choose what information to report, when to report it and which agencies to report to. Some lenders report monthly to all three agencies. Other creditors, like collection agencies, may report quarterly or only when there is activity on your account. Some agencies only report to a single credit reporting agency. A one-week difference in reporting information to the agencies could make a difference in your score from each one. Since reporting agencies do not cross share information with each other, the report and score you buy may not contain the same information that the lender report and score contains.

Scoring Models
Each credit reporting or monitoring agency uses a different method to calculate your score. They base these calculations on complex mathematics, statistical or algorithmic models. Scoring models are proprietary systems and are protected by trademarks, patents and copyrights.

There are three types of credit scores that credit providers purchase:

  • Generic scores – predict general payment performance
  • Industry scores – predict performance on specific type of credit
  • Custom scores – predict performance by company’s customer base

Generic credit scores are used by credit monitoring services to educate you, the consumer. You can use a credit monitoring service to learn how to get your score from what it is today to where you need it to be in the future. You can also use this service find out how late payments, opening new accounts or paying off debts may change your scores over time. Again, these are educational items and there is no guarantee you will achieve a certain score at any time.
Industry credit scores tell, for example, car lenders how you have paid your car loan, but that score may be different from a mortgage or credit card score. If you have had an automobile repossession, your auto industry score may be low in comparison to your mortgage industry score if you have never had mortgage delinquencies. Lenders may have their own in-house system to calculate a custom score based on their specific credit products and customer base. These scores often rank you in comparison to other customers and may work more like a grading curve than a general purpose credit score.

Take an Active Role in Providing Your Own Credit Information
You cannot control what credit scores you or a lender will get at any time, but you can know what information is in your credit file and keep it up to date. Make sure your name, address, birth date, Social Security number and employment information are current and correct. If you have a common name make sure other people’s information is not in your credit report. If you have received collection agency notices, check for reporting with the original creditor. Duplicate items can affect your credit score. When you correct or dispute an item, make sure you do it with all three bureaus, Equifax, Experian and TransUnion.

The Bottom Line
Finally, educate yourself about the different types of credit scores, credit reporting agencies and credit monitoring services in the market. Visit their websites to learn about their scores and services. Here is a list of providers most often used by consumers and industry.

CreditXpert Score Affinion www.privacyguard.com www.identitysecure.com
Experian PLUS Score Experian www.experian.com www.freecreditscore.com www.freecreditreport.com www.familysecure.com
Equifax Credit Score Equifax www.equifax.com
FICO Score EquifaxFICO www.equifax.com www.myfico.com
VantageScore TransUnionVertrue www.transunion.com www.truecredit.com www.privacymatters.com
www.freescore.com
www.creditdiagnosis.com
www.creditadapter.com

Read more @:sfgatedotcom