Carrying the plastic means you’re susceptible to a host of temptations and mistakes that can bring regrets later. Savvy cardholders know to resist them.
Credit cards can be a great asset or a great liability, depending on how a cardholder uses them. While you probably won’t go to hell for committing any of these sins, the financial situation you will find yourself in afterward can certainly cause some pain to your pocketbook and damage your credit score. Read on to find out the seven deadly credit mistakes you should avoid at all costs.
1. Gluttony: Bumping up against your credit limit
Just because your issuer awarded you a $6,000 credit limit doesn’t mean you should max the card out. For starters, those who aren’t able to pay off their balances in full increase the likelihood of winding up in debt, since they’ll be subject to the interest on their purchases. Secondly, bumping up against your credit limit is likely to have a negative overall impact on your credit score.
“The closer you get to your credit limit, the riskier your credit profile is going to look,” says Chris Mettler, the founder of CompareCards.com, since it leads to a high credit-to-debt utilization ratio. Mettler says it’s best to use credit in moderation, using only 15% or less of your total credit at any given time. And yes, you should also pay off all those balances in full by the end of the month whenever possible.
2. Pride: Not checking your credit report
You might assume your credit score is in fine standing based upon a presumably stellar payment history, but the truth of the matter is that credit reports can easily contain errors. And the more egregious ones, like inaccurate delinquencies or improper credit limit information, can cost you more than a few points on your accompanying credit score.
Consumers therefore should check their credit report at least once a year — especially since you’re entitled to one free copy each year, thanks to the Fair Credit Reporting Act — or right before you apply for a big loan, to minimize the chances that you’ll encounter any surprises.
3. Lust: Applying for too much credit
Lucrative sign-up bonuses can certainly be attractive, but that doesn’t mean you should apply for every credit card that’s touting one. Too many credit card inquiries — generated by lenders that are looking to see if you deserve a new line of credit — in a short time frame can also negatively affect your credit score. Instead, apply for credit as you need it, and add a new card to your payment arsenal about once a year until you’ve got three or four you can consistently pay off on time at your disposal.
4. Greed: Taking out a cash advance
It may seem like a great idea to use your credit card to get a cash advance at a casino so you have some cash to gamble with, but in addition to the lousy odds you’ll have trying to make the money grow, the paper comes with a price.
“You’re going to be charged a significant amount of interest,” Mettler says, estimating that most transactions will carry an interest rate around 23% or higher. As such, it’s best to use a credit card only in instances where the plastic itself can be used to make the purchase and you can pay back the funds by the subsequent bill’s due date.
5. Envy: Applying for a card that’s out of your league
Your globe-trotting friend may continually flash a credit card that grants access to swanky airport lounges, earns free airfare and avoids foreign transaction fees, but don’t let jealousy lead you to sign up for one of your own. Typically, cards of that caliber contain high annual fees that are worth paying only if you travel enough to justify the rewards.
Instead, ask yourself a few questions to figure out what type of credit card is more suitable to your lifestyle. (You’ll also want to check that your credit score qualifies you for the account so you don’t rack up any of the unnecessary inquiries we were talking about.) There may be a great rewards card with no annual fee that will look much better with your name on it.
6. Wrath: Closing all your credit card accounts
Those who have gotten burned by their plastic may be inclined to cut up all the credit cards in their wallet and close all the accompanying accounts, but it’s best to curb your anger. Closing accounts can negatively influence your credit-to-debt ratio, especially if the one card you’re leaving open — or transferring a balance to — is bumping up against its credit limit.
It’s better to keep the account open but not use it, since that will keep your credit-to-debt ratio positively intact and not jeopardize the average age of your credit report.
7. Sloth: Not checking your monthly credit card statements
It can be easy to set up automatic bill pay on your account and then forget all about your credit card, especially in instances where you use it infrequently. However, it’s a bad idea to skip checking your monthly credit card statements.
“You can be paying for things you’ve signed up for and forgotten about,” Mettler says, in addition to any fraudulent charges that may appear, courtesy of errors or, even worse, identity theft.
By Jeanine Skowronski, MainStreet http://money.msn.com/credit-cards/the-7-deadly-credit-card-sins-mainstreet.
I found this article and thought it was useful and relative as ever. Get your learn on as we dive into a bit of history.
The History Behind Credit Bureaus, And The Founding Of The Big Three
When you’re in the process of buying a home, looking for a new car or trying to get a credit card, one of the first things the banks or credit card companies will do is check your credit score and pull a copy of your credit report. They want to see how well you handle borrowing money, and whether or not you’re going to be worthy of receiving a new line of credit. If your credit history is bad enough you may be denied a loan, or at least be given a higher rate because you’ve shown yourself unable to handle credit very well.
Having our credit checked when we borrow money has become a fact of life these days, and we’ve all come to expect it as part of the process. But where did the credit bureaus come from, and how long have they been around?
Credit Bureaus In The 1800s
Back in the day when a merchant or business was asked to extend a credit line to an individual, all the merchant had to go on was their personal knowledge of that person, and whether or not they might be a good credit risk. As you might imagine that doesn’t always work out well if someone is new to town, has no history with local merchants, or the merchant just doesn’t know them.
As a solution to this problem as far back as the 1860s local merchants began to maintain lists of individuals who were poor credit risks, and then would share the lists with other merchants. In essence they became the first credit bureaus. By sharing information about people who were poor credit risks, they lessened their own risk and were able to offer more credit to more people.
Populations in the U.S and elsewhere began to move more freely about the country with the advent of mass transit via train and automobile, and as a result more merchants across the country needed to have information about a wider range of individuals (especially those from outside their local area). Larger regional and national credit bureaus as we know them today began to start cropping up.
Credit Bureaus: The Big Three
As the numbers of people seeking credit grew, so did the amount of data about those people – and the need to have consolidated sources of credit information for financial companies to access.
NOTE: In the U.S. there are around 2 billion data points entered every month into credit records, and there are around 1 billion credit cards actively being used.
There have been quite a few bigger national and smaller local and regional credit unions on the scene over the past century and a half, but most lenders and financial institutions now use one of the main “big three” credit bureaus. They include Equifax, TransUnion and Experian. Here’s a brief history of the big three.
Equifax – The First Of the Big Three Credit Bureaus
Back in 1899 Equifax was founded under the name of the Retail Credit Company. They quickly grew over the years to the point where they had offices all over the United States in the 1920s. By the time the 1960s arrived RCC had credit information and files on millions of Americans and would share it with just about anyone.
When the Fair Credit Reporting Act was passed in 1970 credit bureaus had limits placed on what information they could share, and with who. Up until that point it had been a bit of the wild wild west and regulators knew there had to be laws in place to govern the credit industry, as well as to protect consumers. Retail Credit Company suffered some bad PR around this time, and by 1975 they had re-branded as Equifax.
TransUnion – From Rail Equipment To Credit Reporting
TransUnion was founded in 1968 to be the holding company of Union Tank Car, a rail transportation equipment company. TransUnion became a part of the credit reporting industry in 1969 when they acquired some regional and major city credit bureaus.
They’ve continued to grow over the years and now have over 250 offices in 24 countries including the U.S.
Experian – Newcomer Of The Big Three
Experian is the new kid on the block when it comes to the Big Three. They were founded across the pond in England in 1980 as CCN Systems.
They only came to the U.S. in 1996 when they bought a company called TRW Information Services. They’ve continued expanding their credit reporting operations to grow to the point where they now have a presence in 36 countries.
Things Have Changed From The Early Days
In the early days of credit bureaus local merchants were sharing information about local residents who might be bad credit risks, and it didn’t consist of much more than a list of people who hadn’t paid off their debts.
Today credit bureaus process billions of points of data every month and monitor activity on at least a billion credit cards in the United States. Based on the myriad of data they collect they make decisions about the credit-worthiness of individuals and assign them credit scores. Consumers can also access their credit reports online these days and make disputes about the accuracy of the data held there. In the past it would have been much more difficult.
Thanks to the Fair Credit Reporting act consumers can go to the government’s website at AnnualCreditReport.com and check their credit report from each of the big three. Not only that, but there are ways to get a look at your credit score via free or paid services, so it’s easier than ever to determine how good, or bad, your credit situation is. Much easier than it would have been back in the early days of credit bureaus.
by Peter Anderson for Bible Money Matters
Here is a bit of information I found- By the Numbers
Credit-Savings-Mortgage, By The Numbers
That’s the credit score you need to qualify for the lowest interest rate on a new home or car. It makes a huge difference: On a $300,000 mortgage, someone with a score of 760 or higher could get the best rate of 3.24 percent, which works out to roughly $1,304 a month. But if your score drops 100 points, your payment will shoot up another $100. Ouch. The best ways to raise your number? Pay all your bills on time and pay down your debt–those two things make up 65 percent of your score. To make sure there are no errors dragging you down, get your credit reports annually from each of the major credit-reporting agencies (Experian, TransUnion, and Equifax) for free at annualcreditreport.com
This is the national average for credit card interest rates. If you’ve got a card in your wallet with a higher rate, pay that balance off first, because you’re getting slammed with major charges. The good news: Interest rates are generally negotiable. If you regularly pay at least the minimum on time, try haggling your way to a better rate, or consider moving the balance to your card with the lowest one–but do that only if you won’t get socked with hefty fees for the transfer.
That’s the maximum percentage of your take-home pay that should go toward housing, including mortgage payments, insurance, and property taxes. Pre-recession, many experts put the figure at 33 percent, but in this unpredictable job market, that’s too high. If you and your spouse make a combined $80,000, keep your new-home budget under $200,000. And if your housing expenses top the 25-percent mark, refinance your mortgage to lower your interest rate. You’ll feel a huge financial lift once you can truly afford the roof over your head.
That’s the amount to sock away each week in a savings account reserved for emergencies. You should have a six- to nine-month reserve in case you lose your job or face some other budget-blowing problem, but that goal can seem overwhelming. So start small with $50 a week. In one year, that’s more than $2,500 saved, which will put you ahead of many households. One recent poll found that roughly one in four Americans wouldn’t be able to come up with $2,000 in 30 days if they needed it. Start saving now.
The number of savings goals you should have. A recent University of Toronto study found that people who limit themselves to three goals under one theme–say, long-term saving–are three times more likely to say they’ll save than those who have myriad competing goals, such as retirement, a super-luxe vacation, a new home, and college funds for your kids. We say: Focus on retirement and an emergency fund, and the last one is up to you–so pick something worth it!
So here is the second half of the list from yesterday. Filled with nice little gems of information.
6. “It’s easier to ruin your score than improve it.”
Increasing a FICO score could be harder than lowering it. That’s partly because negative behavior, like missed payments, counts toward 35% of a consumer’s FICO score. In contrast, paying down debt helps boost a segment that accounts for 30% of the FICO score. The same is true with competitor VantageScore where payment history counts for 28% of the score while the percent of credit limit that’s used counts for 23% of the score.
FICO says score movement isn’t that clear cut. Sprauve says that borrowers can improve their FICO score through consistent positive behavior, such as paying all of their bills on time every time, keeping their balances low and only opening new credit when they need it.
Wrecking a score can also be a lot easier for a borrower with a high credit score. A borrower with a 780 score who’s 30 days behind on a payment will see their score tumble by up to 110 points, according to FICO. A borrower with a 680 score will drop by up to 80 points. The spread grows as the severity of events gets worse: In foreclosure, the 780 will fall up to 160 points while the 680 will shed up to 105 points. After filing for bankruptcy the 780 will tumble by as much as 240 points while the 680 will fall 150 points. “There’s more incentive for someone with a high score to not mess up,” says Paperno.
Sprauve says the lower score already reflects a person who is a greater risk because they have exhibited negative behavior previously. “If someone has maintained an impeccable credit history, their score is going to be hit harder the first time they trip up because statistically it is an indicator of increased risk,” he says, adding that low scores don’t stick around forever — depending on the next steps borrowers take. “They can begin to recover soon after by consistently demonstrating responsible credit management over time.”
7. “Some debts are better left unpaid than others.”
For all the talk about keeping debt to a minimum, wiping out mortgage or car loan debt might not raise a score at all. Ulzheimer says he paid off a $249,000 mortgage two years ago, which resulted in a meager four-point rise in his FICO score. In contrast, paying off all credit-card balances can boost a score by triple digits, he says, assuming no late payments or other credit problems. FICO’s Sprauve says, “Paying off the loan completely has small statistical value when predicting credit default risk.”
The rules change when borrowers are cash-strapped. If they can’t pay all their monthly bills, missing their mortgage payment could hurt their score more than missing a car or credit card payment, says Paperno. The larger the dollar amount of the past due debt, the bigger the initial hit to the credit score.
To be sure, what’s better for a credit score might not be better for borrowers. For example, advisers point out that they won’t have much time to catch up on car loans if they fall behind. Cars are being repossessed after 60 to 90 days of nonpayment.
8. “We’re sometimes wrong.”
After living in China for seven years, Lonnie Hedge returned to the U.S. last year and discovered that $8,000 in fraudulent charges were on his credit reports, and his credit score had dropped from the low-800s to the low-600s. Six months later, Hedge, a disabled veteran, says he’s still trying to clear up the error by contacting Equifax, where his score is the lowest, but has made no headway. He hasn’t been able to connect with the bureau on the phone. Even after mailing paperwork he says proves he didn’t make those charges, he says they have yet to be removed.
Daryl Toor, a spokesman for Equifax, says the bureau is focused on resolving disputes, though due to a variety of factors not often in its control, the amount of time it takes to help a consumer get resolution can vary.
Credit scores are determined by the information in consumers’ credit reports. Those reports aren’t always accurate and the repercussions can be severe: an error or fraudulent charges that are left unpaid can result in a lower credit score, which can derail borrowers’ attempts at getting credit. A report by consumer advocacy group U.S. Public Interest Research Group in 2004 found that 79% of credit reports contained an error. A separate report last year by the Policy Economic Research Council, which is funded by the credit industry, found approximately 0.5% of credit reports had material errors. The Federal Trade Commission will release its report on credit report accuracy later this year.
Debt counseling groups say they deal with errors often. “We probably see someone once a week who has something on their credit report reported incorrectly,” says Melissa Whittaker, branch manager at Augusta, Ga. nonprofit Consumer Credit Counseling Service. She says it’s often a creditor that hasn’t updated a late payment that was received, medical bills that patients assume their insurance has covered, or cases of identity theft.
This month, the Consumer Financial Protection Bureau announced plans to supervise the major credit reporting bureaus, such as Equifax, Experian and TransUnion, starting this fall. The CFPB says the move is partly in response to consumer filings about errors on credit reports.
9. “Our numbers don’t add up.”
The average FICO score — the number most lenders use to gauge a potential borrower’s credit-worthiness — stood at 690 in April, according to data released in July. That is roughly in line with both last year’s average score and the average in 2007, before the market meltdown and recession wiped out many Americans’ wealth.
Many credit pros say that data doesn’t make sense. Since 2007, nearly nine million homes have gone into foreclosure and over six million people have filed for personal bankruptcy — events that typically send FICO scores tumbling. Borrowers who previously had high FICO scores (above 750) may see their scores drop by more than 200 points in such events, says Ulzheimer. “Something stunning isn’t showing up in the data,” says Anthony Sanders, a professor of finance at George Mason University, who studies credit scores.
FICO defends its calculations. There are roughly 200 million U.S. consumers with a FICO score, so in order for the average score to change more noticeably, a much larger number of consumers on one end need to be affected, says Anthony Sprauve, a spokesman for myFICO.com, the consumer division of FICO. In addition, over the past several years, even though the average has stayed roughly the same, more consumers have moved away from the middle in both directions, Sprauve says. There are “two opposing forces at play,” Sprauve says.
10. “You can game the system.”
For years, financial planners have told their clients to pay off their debts before signing up for a mortgage. With less debt, they’ll have a better shot at having a higher credit score, which would in turn lead to a lower interest rate on their home loan. But just how much a certain action would boost their score was unknown to the consumer until after they actually implemented it.
Much of that mystery is gone now. A credit management software company in Baltimore, Md., called CreditXpert offers a simulator where consumers can plug in their credit information and run what-if tests, like paying down debt on one credit card or paying off a student loan to see to what degree each action could impact their credit score. David Chung, managing director of CreditXpert, says mortgage loan officers and brokers are using this system to help their clients. After reviewing an applicant’s credit scores, they run theoretical scenarios on CreditXpert’s simulator to see if paying down a certain debt (or another action) will raise a borrower’s credit score enough to qualify for a lower rate.
The incentive for the mortgage officers, he says, is to close the loan rather than lose it to a competitor, and to possibly gain referrals from satisfied customers. Donnelly, of the Mortgage Bankers Association of Washington, D.C., says some lenders don’t encourage their loan officers to use this since it could be seen as gaming the system. FICO’s Sprauve says the only simulator that’s based on the FICO scoring model is on its web site.
By ANNAMARIA ANDRIOTIS
It’s true that many companies assess a job candidate’s report before hiring, and having one that looks terrific rather than awful can work in your favor. But why would an employer pull your report in the first place?
They’d do it because they’re looking for objective insight into your character, financial responsibility and overall level of stability. After all, you may say you’re a perfectionist, but if they see a bunch of unpaid bills on your credit report, those words may not mean much.
Still, your concerns about the impact of your credit reports may be having at this stage may be unfounded, especially if you’ve yet to be invited in for a face-to-face interview.
There are many myths surrounding credit reports and employment.
Employers don’t randomly access credit reports from all job applicants. They only do so for those who are solid candidates. If they are pulling it, congratulations! They are doing a background check, and that is good news, as they are seriously considering you for the position. They won’t run it before you are a finalist. Not all occupations or industries are checking credit reports for new hires either. Most employers are looking at credit reports for people applying for positions that are clearly related to finance or have access to cash or credit. And in general, they don’t access credit reports for people applying for minimum wage jobs.
The only way an employer can pull your report is with your permission.
Do know, though, that a potential employer does not have access to the same type of reports that lenders do. The reports employers can see never include your credit scores or list your date of birth. All they can view is your credit history. In addition, these reports are considered “soft inquiries” and will not show as a “hard inquiry” to anyone else viewing your reports.
As for the real impact of your credit damage, employers are very sensitive to the fact that credit reports are not perfect. And everyone in the world knows there is a recession, and employers take that into consideration. It’s a misconception that people are being blacklisted because of their credit reports. However, if the employer makes an adverse decision based on your report, you have a right to know about it and get a copy of the report they used.
Credit Repair: The Truth About What Can and Cannot be Done
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.
•Add an authorized user acct
Ask a friend/relative/business partner to add your name to one of their good credit card accts as an authorized user. This enables their good credit acct to reflect on your credit report and you automatically have their years of good paying history. This is an overnight success for your credit score. (Normally takes 30 days to get on the report.) Although it is good for score, lenders know that this is not your account and has no benefit through the lenders’ eyes.
• **Open a secured credit card account like the one above. This card is set up with no credit check. This account will take 4- 6 months to mature, but is a good way to invest in your credit. Try with your local bank to see if they offer one of these. Otherwise, go to credit cards.com click on left side column that says “cards for bad credit”. Open one of these to begin your credit history. Make sure you pick one that has the best deal for you financially, but more importantly, one that reports to all 3 credit bureaus.
• The 3rd option is something our company offers. For a fee of $495, we can have a credit account added to your report with a $5000 limit. This can only be used at an online e-books store and is set up for automatic approval.
• Whenever you add a new account to your credit report, the account needs time to age and add points to your scores. Generally, 4-6 months is that time frame.
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
7 Credit Score Killers
Your credit score, from about 350 (poor) to 800 (excellent) is a numerical rendition of your credit report. The higher your score, the more likely you’ll get approved for credit and the more likely you’ll get the best rate and terms. Negative actions posted to your credit report, take a bite out of your credit score.
Here are the seven worst things you can do to your credit score. And speaking of “seven,” that’s how many years these black marks can stay on your credit report.
• Deadbeat behavior. Frequent, significant and late payments 30 days, 60 days, 90 days late. Don’t believe a 30-day-late payment won’t hurt. It may not ruin your credit but it’s not helpful and can remain on your report for years.
• Collection activity. When the lender gets tired of your deadbeat behavior it will call out the dogs — a third-party collection agency. The collection agency will report collection activity to the credit bureaus and again, seven years of bad luck.
• Charge offs. If the lender gives up on your collection case, acknowledging you’ll never pay the bill, it charges off the debt and puts your credit report on notice for seven years.
• Public recordings. Bankruptcy, tax liens, judgments and the like are killers for your credit rating. Judgments are good (or, from your viewpoint, bad) for seven years, even if you pay them off. Bankruptcies can dog your credit report for 10 years and unpaid tax liens never go away.
• Settlements. If you pay a portion of a debt to your lender in a settlement, say some of the mortgage in a short sale, you can get a settlement notice on your credit report for seven years. Credit cards and other debts, likewise can be settled, with negative impact to your credit report.
• Foreclosures. If you can’t or won’t pay your mortgage the lender will eventually foreclose and relieve you of your home. Another seven year negative notification will drag down your score. The same applies when you give the home to the lender in a deed-in-lieu of foreclosure.
• Repossession – When you don’t pay your vehicle loans a bounty hunter will be coming your way. He or she is not coming after you, but your vehicle, and that’s often without notice, after you’ve been dunned for a while. It’s all legal. The repo man can take your property down and your credit score will follow.
By Cesar Marrufo
ELITE FINANCIAL, LLC
Cesar is an expert in the credit repair field, with over 10 years experience reading and analyzing credit reports. For more information or for help with your credit, visit www.elitefinancialllc.com or call (909) 570-9048
“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.