Author: Philip Tirone

Build Credit: Using Credit Cards As Tools of Financial Freedom

Posted on February 4, 2021 by - CREDIT BLOG

Credit cards have gotten a bad reputation as more and more people view these cards as vessels for temporary financial freedom. The thought of being able to buy whatever you want even if you don’t have the cash readily available is exhilarating. As times have gotten harder and more and more people are relying on credit to help them through, retail therapy has become a quick emotional fix. Unfortunately, if you don’t know how your spending habits hurt or help your credit, you could be paying for more than a quick dose of endorphins.
While credit cards certainly provide access to splurge on these instincts, that doesn’t mean they are all bad. In fact, it’s actually important to maintain three credit cards in order to improve your credit score. This may sound confusing, but your credit card history is a crucial factor in determining your overall credit score. As with many things, there are some points to watch out for. When using credit cards, you’ll want to keep these tips in consideration:

  • Always remember the 30/30 rule. 30 percent of your credit score is based on your outstanding debt, and if your credit balance is more than 30 percent of your credit limit, your score is going to drop. Never exceed 30% of your limit.
  • Make sure your credit card companies are reporting your actual credit limit. If they are reporting a lower credit limit, then your calculation for 30% of your credit debt is going to be reported incorrectly, therefore damaging your score.
  • Be aware of the credit balance myth. Some people believe that they must keep an ongoing balance on their credit card in order to improve their credit score. This mistaken belief causes some consumers to make unnecessary interest payments. The truth of the matter is that credit bureaus have no way of knowing whether you pay your balance in full or make monthly payments. If you have the financial resources to do so, pay your balance each month. That said, keep your cards active. If you never use your credit card, it will become inactive and stop helping your credit score.

So if you need the credit cards, but credit card debt is also damaging, the question then remains: What exactly should you be spending your money on? How can you use your credit cards to build good credit?
To keep things in perspective, consider the following statement: wealth is creating a state of abundance. If you are using credit cards to pay for something, not only are you paying for the item, but you’re paying extra for the right to “pay later.” So instead of moving forward financially, you’re actually creating more debt. With this in mind, it’s important to examine exactly what you are using your credit cards for. Buying a shirt or even a tank of gas for your car at an inflated rate doesn’t really make any sense when you factor in interest. However, purchasing a book on finances or taking a course that will teach you a skill you can monetize will be well worth the extra interest you incurred.
Therefore, credit cards should be used to increase your quality of life or your wealth, not used as a means to create more debt. The next time you’re about to charge something, consider whether that purchase is going to create a state of abundance or create a state of debt. This type of control will not only help you improve your credit rating, but it will also help you make better long-term financial decisions.

Bad Credit Is Bad News for the Unemployed

Posted on February 2, 2021 by - CREDIT SCORING

A recent report from Inc. Magazine says at that at least 60 percent of employers run credit checks on potential job applicants at least some of the time. This is a 17 percent increase from 2006.
And given the high unemployment rate, this is particularly concerning. With a much bigger pool of candidates to choose from, employers can narrow the pool of qualified candidates by looking at a job applicant’s credit score. Fearful that a poor credit score is a sign of irresponsibility, an employer might not offer a job to a candidate with bad credit.
This means that job applicants may be hit with a double dose of trouble. Not only are they out of work, but they also are unable to make regular payments on mounting mortgage and credit card bills, which is causing their credit score to plummet. Since many employers are making credit checks a mandatory condition of employment, job applicants may find themselves stuck in a vicious cycle: No job translates to no ability to pay bills, which in turn causes poor credit, which means a person might be ineligible for jobs.
If you are a job applicant worried that an employer will run a credit check, your best bet is to be candid with possible employers and let them know about your experience. Since the recession has had unfortunate consequences for many people, the employer might be sympathetic to your plight. Pitch your situation as a learning experience so that you can show the employer that you are ready to move on from your mistakes.
Explain that you have started the process of learning how to build credit to minimize damage and improve your credit score.
By taking serious steps to repair your credit, your credit report might indicate that you have had a shift in the positive direction. If you walk into a job interview armed with a the facts about your credit score, how you have turned over a new leaf, and what your credit report indicates about your current behavior, a potential employer might be sympathetic, especially if you have extenuating circumstances brought on by the recession.
Though credit checks for job applicants might create barriers in the already-tight job market, employers are also likely to value an honest account of your situation. By being forthright about your past mistakes and offering evidence of your progress, employers will be more likely to look past a three-digit number and offer you the job.

Five Common Credit Myths … Debunked!

Posted on February 2, 2021 by - CREDIT BLOG

Five Common Credit Myths
Here are five common credit myths … debunked at last!
Credit Myth #1: Requesting your own credit report will hurt your credit score.

The Reality: You can pull your own credit report every week without having your FICO score suffer. However, if a multitude of potential lenders frequently request your credit report, your score will suffer.
The credit bureaus distinguish between a “soft” inquiry—one that you initiate for the purposes of monitoring your credit—and a “hard” inquiry—one initiated by a lender for the purposes of determining whether to grant you a loan or credit card.
The former is considered responsible and will never hurt your score. But too many “hard” inquiries indicate that you might be:
1.     In financial jeopardy and looking for a way to pay your bills.
2.     Preparing for a spending spree.
Either way, your score will suffer.
Credit Myth #2: If you pay for everything in case and don’t use credit cards, your credit score will be flawless.

The Reality: One of the biggest myths is that the less credit a person has, the better his or her score will be. But it’s not true.
Having no credit can be just as bad as poor credit. If the credit scoring models don’t have information to judge a person’s behavior, they will take the safe route and assign a low FICO score to that person.
Some people want to wipe their hands clean of credit cards. They decide not to have credit cards, to pay for everything with cash. But that’s not really a good move.
For example, what happens if you have an emergency and need a loan? If you have no credit history, your FICO score will be low or possibly even non-nonexistent.
In that case, you’ll have a hard time qualifying for a loan at a low interest rate. Eventually, most people want to buy homes.
Guess what? A person without credit will only qualify for a loan at the highest interest rates – and pay thousands of extra dollars in interest over the lifetime of the mortgage!
So use credit, and use it responsibly by learning how to build your credit score.

Credit Myth #3: If you pay all of your bills on time and in full each month, you must have a perfect credit score.

The Reality: Unfortunately, the credit-scoring process doesn’t work that way. While paying your bills on time is a very important factor, only 35 percent of your credit score is based on whether you pay your bills on time.
Other key factors and their weight in influencing your credit score include:

  • The amount of money you owe (30 percent).
  • The length of time you have had credit (15 percent).
  • The type of credit you have (10 percent).
  • The number and frequency of credit inquiries (10 percent).

Even being rich can’t guarantee you a good credit score. I’ve seen people with millions of dollars in the bank have credit  scores below 720.
Credit Myth #4: There’s no difference in credit scores reported by the major credit bureaus.

The Reality: There are three different agencies (Experian, TransUnion, and Equifax) providing as many as four different types of credit scores – and they are not all the same!
Depending on who is requesting your score, each bureau will apply different formulas to calculate the score. Plus, each bureaus has different information on file – some credit card companies might only report to one or two bureaus.
All this means that your score can be different on the exact same day!

Credit Myth #5: A smart move for gaining control of your finances is to take most of your credit cards out of your wallet, cut them up with scissors, and throw them away!
The Reality: If you have too many credit card accounts, credit bureaus might think you have overextended yourself.
But getting rid of those extra credit cards could also be hazardous to your financial health. Reason: closing all those accounts might hurt you credit score.
How? By lowering your overall utilization rate and shortening the average age of your active accounts.
Instead of cutting up your credit cards, pay down the balances so they are below 30 percent of the credit limit on each.
But keep the accounts open and active. Doing so protects you from suffering lowered limits, a byproduct of inactive accounts.
– Philip Tirone

12 Little Known Facts About Your Credit Score

Posted on February 2, 2021 by - CREDIT BLOG

Everyone seems to have a different viewpoint on what affects your credit score and what doesn’t. Some of this is because the credit bureaus do not let their formula for computing credit scores become well known, while even more of it is due to companies or people trying to make money off of the misinformed. If you have questions about your credit, you’ll find these facts about your credit score interesting and informative.
80% of people have errors on their credit report. It’s important to check through your credit report to ensure everything is being reported accurately. If you haven’t done so, before making any changes to your credit you should always get your credit report to know where you stand.
Pulling your own credit report will NOT hurt your credit score. It’s true that credit inquiries count for ten percent of your credit score. However, you will never hurt your credit score by pulling your own credit report. You could pull it once a day for a year and your score would not be hurt.
You have more than one credit score. In fact you have three. Most lenders consider scores from the three major credit bureaus (TransUnion, Equifax, and Experian). Lenders will use the middle of the three scores in determining your credit worthiness. Because of this, you should monitor your report from each of the three bureaus.
Your credit score can affect your employability. 60 percent of employers check an applicant’s credit report at least some of the time.
Your salary doesn’t affect your credit score. You could be a housewife with no income or a millionaire. All that matters to the credit agencies is how responsible you are with the money you are borrowing, not how much of it you have or don’t have.
Late payments hurt your score, but your immediate credit history carries more weight. The credit-scoring models assume that your current behavior is a far more important indicator of your creditworthiness than your past behavior. Your current behavior, after all, can better forecast whether you are experiencing a downward financial turn. So while you may have an account in collection for over a year, a late payment on your mortgage this month will be more damaging.
Most of the time, late payments made before 30 days past due are not considered “past due” by the credit bureaus. While you will still incur a late payment fee from your creditor, most creditors will not report a late payment to the credit bureaus until you have gone past the 30 day billing cycle.
When applying for a loan as a couple, the lower of the two scores is used. This means that whoever’s FICO score is lowest will determine the interest rates on a mortgage for the couple.
Always use the same first, middle and last name when applying for credit. You may not think a small thing such as your middle initial can cause significant issues on your credit report, but it’s true. If your name is Robert Michael Jones, Jr., you shouldn’t apply as Bob M. Jones, Jr., or any of the other variations of your name. Pick one name and stick with it, or risk having your credit information divided among the various names. Worse yet, it could be merged with another person’s information. (For instance, if you are Robert Michael Jones, Jr., and your father is Robert Michael Jones, the credit bureaus might combine your files if you do not use “Jr.” when applying for credit.) That said, if you changed your last name upon marrying, start applying for credit under your new name. It might increase the likelihood of errors, but the damage will be temporary; the new last name is forever.
Your collection account history doesn’t stay on your report forever. Collection accounts only minimally hurt your credit after two years, and after four years, the damage is all but erased. After seven years, a collection account is wiped from your report.
There are credit cards for people with bad credit. If you have poor credit, you might not qualify for traditional credit card accounts. Instead, open a secured credit card. A secured credit card requires you to pay a deposit equal to or greater than the balance. Obviously secured credit cards do not come with the same privileges as regular credit cards, which allow you to buy now, pay later. With secured credit cards, you basically pay now, buy later, and then pay again. It might not sound like a great deal, but it will help you rebuild your credit so long as the credit card company reports to all three major credit bureaus—be sure to ask! After six to 12 months of timely payments, ask the company if it will refund your deposit and transform your secured credit card into a regular credit card.
Technology can help keep you in good standing. If you struggle to pay your bills on time because you are too busy, or because you do not manage your money well, try this: Sit down with a calendar and a copy of all your regular bills. Then create automatic payments on all your credit cards, mortgages, installment loans, and finance accounts. If you are a compulsive spender, this might help curb unnecessary expenditures by forcing you to pay the required bills each month.

The Credit-Scoring Scam of the Century

Posted on February 1, 2021 by - CREDIT SCORING

Are you a victim of the credit scoring scam of the century? If you have a credit card, there’s a 50/50 chance that you are.
What Is the Credit Scoring Scam of the Century?
About half of credit card companies use a shameful tactic to keep their competitors away from you, and this tactic hurts your ability to build a good credit score.
It works like this:
When sending credit card solicitations, credit card companies target specific people to receive their offers. Imagine that all of your credit cards have low interest rates and credit limits of at least $10,000. A credit card company would not offer you a credit card with a high interest rate and a $500 limit.  After all, you would never apply for that credit card.
But a credit card company might offer you a credit card with a $15,000 limit and even lower interest rates. And you just might take advantage of this offer and switch cards.
Obviously, your existing credit card companies don’t want you to receive these offers because they might lose you as a customer.
And this is where the credit scoring scam of the century comes into play.
To create their marketing lists, credit card companies buy information about you from the credit bureaus. While the credit bureaus do not disclose your specific financial information, they do provide information about the credit cards you carry. For instance, Whatchamacallit Credit Card Company might buy a list of people who have credit cards limits of at least $5,000. Whatchamacallit could then send a credit card offer targeted to these people
And here is the credit scoring scam: Your existing credit cards can keep your name off these lists by reporting a lower credit card limit than you actually have, and this slaughters your credit score.
Let’s use the earlier scenario as an example. Whatchamacallit is looking for people with credit limits of at least $5,000. You carry a Tweedledee credit card with a $5,000 limit. Technically, your name should be on the list Whatchamacallit buys from the credit bureaus.
But Tweedledee doesn’t want Whatchamacallit to steal your business, so it reports your limit as only $3,000.
Your name is not included in Whatchamacallit’s list, so you do not receive the competing credit card offer.
You do, however, receive a credit card solicitation from John Q. Credit Card Company, which offers a new credit card with a $3,000 limit.
When you receive the offer, you immediately toss it in the garbage, thinking to yourself, “Why would I get a John Q. credit card with only a $3,000 limit when I already have a Tweedledee credit card with a $5,000 limit?”
Voila! Tweedledee has successfully kept you as a customer.
But here is where the credit scoring scam gets really dirty. About 30 percent of your credit score is based on the amount of money you owe. Credit scoring formula want to know how much you owe based as a percentage of your credit limit. This balance-to-limit ratio is called a “utilization rate.” The credit scoring bureaus will award you more points if your utilization rate is below 30 percent.
For instance, if you have a $1,500 balance on a credit card with a $5,000 limit, you have a 30 percent utilization rate. If you have a  $1,500 balance on a credit card with a $3,000 limit, you have a 50 percent utilization rate. In other words, you are utilizing 50 percent of the available limit.
So when Tweedledee reports your limit as lower than it actually is, your utilization rate appears higher than it actually is, and your credit score plummets.
The credit scoring bureaus assume that someone with a high utilization rate is suffering from a financial drought and might be unable to pay his or her bills. On the other hand, a utilization rate below 30 percent indicates that your finances are in order.
In other words, this credit scoring scam can mean the difference between a good credit score and a poor credit score. In turn, this can mean the difference between low interest rates and high interest rates.
How to Fix the Credit Scoring Scam
Start by pulling your credit report. Check your credit card limits and make sure they are being reported accurately.
If any of your limits are being reported inaccurately, call your credit card companies and tell them to report the accurate limit. They might refuse. (Shockingly, this credit scoring scam is legal.) If they refuse, tell them you plan to stop using that card until they report the proper limit.
You might even threaten to close the account, though I don’t suggest carrying through with this threat. Closing a credit card can hurt your score. Nonetheless, the threat might be enough to get the credit card company to report the accurate information
Next, send a letter to the credit scoring bureaus asking them to correct the information. Be sure to send your credit card statement as proof of your actual limit.
Then follow up. Keep calling the credit card company until they correct this credit scoring scam. Be sure to pull your credit report every six months to make sure the mistake hasn’t resurfaced.

Bad Credit: 5 Things You Can Do Right Now To Start Fixing Your Credit

Posted on February 1, 2021 by - CREDIT BLOG

We live in a credit-driven society. You need credit for just about everything from buying a house to even getting a job. With so much importance put on using credit as currency, it’s really no surprise that so many Americans are swimming in debt. There are 22 different criteria for determining credit score, but unfortunately, the only ones who know the actual formulas are the credit bureaus themselves.With so little information on how to rebuild credit, people often make common mistakes that seem like the right choice, but in the end actually hurt your credit score even more.
If you’re in a situation where you need or would like to increase your credit score, you’ll want to try the following five actions you can take right now to get you started on the right path. Prior to doing any of these steps, however, you need to make sure you know where you stand. Odds are you wouldn’t build a house without a blueprint. In the same vein, you wouldn’t want to try to make changes to your credit if you don’t know exactly what needs fixing. Therefore, before starting these steps you’ll want to get your credit report.
Quick Fix #1: Check for Errors
One of the most common sources of a bad credit score can be attributed to reporting errors. The first thing to check, after any obvious errors, is to make sure your credit limits are being reported correctly. Your credit score is affected by your utilization rate, which is based on the percentage of your credit limit you use each month. If your credit limit is not being reported correctly, your utilization rate will be off and can significantly harm your score.
The other main error to check for is duplicated notices on a single collection account reported as active. Often a collection account will be transferred to more than one collection agency to be handled. There’s no real issue with this fact, and all of the collection agencies might be listed on your credit report. That’s normal, and all but the agency currently trying to collect the debt should be listed as transferred. But if more than one collection agency is reporting the collection account to the credit bureaus as active, you have a problem. If this happens, the one collection account is reported as two separate accounts and therefore contributes to a lower score.
Quick Fix #2: Start Reducing Credit Card Debt
This fix should seem like a no brainer, but it’s often overlooked because it’s never really explained why the amount of your credit card debt is so significant. We like to call this tip the 30/30 rule. 30 percent of your credit score is based on your outstanding debt, and if your credit balance is more than 30 percent of your credit limit, your score is going to drop. If you’ve racked up over 30 percent of your limit in debt and you’re only paying the minimum monthly payment each month, you’re score is going to drop – regardless of how “on time” you were each month. With this information in mind, it’s imperative to reduce your credit card debt as much as possible to maintain the 30/30 rule.
Quick Fix #3: No Credit = Bad Credit
Credit scores are created based on information from your credit history. If don’t have any credit history, there’s nothing to base your score off of. This isn’t a case of being innocent before proven guilty. When it comes to lending money, there aren’t many resources that are going to hand over a wad of cash if they don’t know whether you are a good investment or not. Think of it this way: Let’s say you needed heart surgery, and you met a guy who said he was the best heart surgeon in the world. He might be the best heart surgeon in the world, but if he had no credentials and no references, there’s no way you’d ever let him open up your chest. Likewise, you’d never let a guy who lost his medical license open up your chest.
The credit scoring bureaus think of you in the same terms. If you don’t have credentials, they consider you high risk. You have to give them information by which to judge you. To be sure you’re giving them enough information to properly judge your risk, you should have three to five credit cards and an installment loan.
Quick Fix #4: Authorized Users
If you’re in a situation where you either don’t have a lot of credit, or have fairly bad credit, you may want to explore getting added as an authorized user. As an authorized user, you get added to a relative’s (preferably one with the same address) credit account. This allows you to piggy-back on their good credit standing and reap the benefits. This only works, however, if the credit card company reports your status as an authorized user to the credit bureaus and if the outstanding debt on the card never exceeds 30 percent of the credit limit. Keep in mind, that while this is a great way to improve your score, if the account falls into poor standing your score will also be affected negatively.
Quick Fix #5: Use Credit!
It’s a natural reaction for someone to want to steer clear from something that has caused them harm in the past. In fact, it seems to make sense rationally that if you are having credit issues, you probably wouldn’t want to keep using credit. Unfortunately, this way of thinking couldn’t be further from the truth.

FTC and DOJ Announce Asset Acceptance Settlement Which They Want to Be Framework for Debt Collection Industry

Posted on January 31, 2021 by - CREDIT BLOG

David Vladeck director of the FTC’s Bureau of Consumer Protection and DOJ Assistant Attorney Tony West today conducted a conference call I attended to provide additional information regarding an announced settlement with collection company Asset Acceptance. In the settlement Asset Acceptance agreed to pay the second largest fine ever against a collection company for alleged violations.
Asset Acceptance is one of the larger debt buyers. They purchase and collect old debt that had been previously placed with other entities but problems with accuracy and data create a situation where the data is less reliable, yet it was being used. As a debt is passed from one entity to another the quality of records deteriorates when people with similar names and address are involved. Erroneously people may be contacted about debts that never belonged to them at all. And that’s a problem.
In some states the applicable statute of limitations will prevent suits on this old debt but in others a partial payment or an agreement to repay will restart the clock on the ability for a debt collector or debt owner to sue. Debt buyers and debt collectors sometimes are not clear about this and can trick the consumer into reviving an old debt by agreeing the debt is theirs or making a partial payment.
The FTC and DOJ alleged Asset Acceptance had little or no evidence to support validation of some debts they were attempting to collect on and that Asset Acceptance did not take reasonable steps to validate. They stated Asset Acceptance continued collection efforts anyway. And reported to credit reporting agencies.
The action against Asset Acceptance creates a framework of what is acceptable.

  1. Time Barred Debt / Statute of Limitation Debt: If a collector calls demanding payment Asset has agreed to disclose to consumers that it is time barred and cannot be collected via a lawsuit.
  2. Partial Payments Reviving Debts: Many debt buyers accept partial payments to reset clock without informing consumers this will happen. Asset has waived it’s right to partial payment revival of stale debt.
  3. Collection agencies park debt on credit reports to force consumers to pay off the debt to get rid of it even if it is not accurate. The thought was that a consumer applying for a loan or new credit and who discovered an old collection debt might just pay it off. Asset Acceptance has agreed to give consumers notice when it reports to credit reporting agencies.
  4. Reliability of Information. If a collector or knows or should know the information is not accurate and the consumer has provided reliable information proving the information is not accurate, the collector must take reasonable steps to confirm the accuracy of the information before collection efforts. What those reasonable steps are was not made clear.

Department of Justice Assistant Attorney General Tony West said, “Going forward we have a framework for the entire debt collection industry to follow.” This should be a message to debt collection industry that they will be held accountable, “if they don’t act fairly and responsibly.”
The FTC complaint against Asset Acceptance alleged Asset was:

  1. misrepresenting that consumers owed a debt when it could not substantiate its representations;
  2. failing to disclose that debts are too old to be legally enforceable or that a partial payment would extend the time a debt could be legally enforceable;
  3. providing information to credit reporting agencies, while knowing or having reasonable cause to believe that the information was inaccurate;
  4. failing to notify consumers in writing that it provided negative information to a credit reporting agency;
  5. failing to conduct a reasonable investigation when it received a notice of dispute from a credit reporting agency;
  6. repeatedly calling third parties who do not owe a debt;
  7. informing third parties about a debt;
  8. sing illegal debt-collection practices, including misrepresenting the character, amount, or legal status of a debt; providing inaccurate information to credit reporting agencies; and making false representations to collect a debt; and
  9. failing to provide verification of the debt and continuing to attempt to collect a debt when it is disputed by the consumer.


@GetOutOfDebtGuy
Author: This article was contributed by GetOutOfDebt.org, a site that provides free debt consolidation help and debt relief advice for people looking for answers.
Source: FTC and DOJ Announce Asset Acceptance Settlement Which They Want to Be Framework for Debt Collection Industry

Tough Week?

Posted on January 29, 2021 by - CREDIT BLOG

I had something interesting happen to me this week …
I was listening to my sister talking about how anxious she feels. I was nodding, sympathetic, and at one point, I said, “Yes, I know that feeling.”
She looked surprised and said, “You feel anxious sometimes?” She assumed that I don’t feel anxious simply because I’m in a different place financially.
We started talking, and she asked me a series of questions:
“Do you feel stressed sometimes?”
“Of course,” I told her.
“Do you feel pressure?”
“Of course,” I said again.
Our conversation went on for a while. The point I wanted to make is simple …
Negative feelings and anxiety are normal. The secret lies in how you react to these situations. Here is the formula I use …
3 Questions to Ask When Having Negative Feelings

1) Why do I feel this way?
Instead of reacting immediately, identify why you are having negative emotions.
2) Do these feelings make logical sense?
I’ve found that oftentimes, my emotions are saying one thing, but my intellectual mind is saying another thing. When I think about the situation, I’m able to pinpoint the “hot buttons” that were triggered, but they don’t make logical sense. Many times, simply making this identification helps me move past these feelings. If not, I ask question #3.
3) Can I “be” with these feelings for the next few hours?
The answer, of course, is yes. I can live with negative feelings for a few hours, even a few days. By not trying to suppress the feelings, I can get over them much faster. And by allowing myself to “be” with them for a while, I resist the temptation to take immediate action, which might be inappropriate and reactionary.
What do you think?  Comment below to tell me how you deal with negative emotions.
– Philip Tirone

Two Must Follow Rules To Protect Your Credit Score After A Divorce

Posted on January 26, 2021 by - CREDIT BLOG

Divorce can be a tough time in many ways. You’re dealing with emotional issues, separating assets, possibly separating children from one of their parents, and trying to get your respective lives back in order. The last thing you need to be worrying about is whether or not your former spouse could be ruining your credit score.
I first met Sheila when she was applying for a home loan. She had a bad credit score because the mortgage on a home she bought with her ex years earlier was dangerously close to foreclosure. “I don’t understand why this should affect my credit,” said Sheila. “I have a divorce decree and a quitclaim deed. Isn’t that enough to protect myself from the problems associated with divorce and credit scores?”
I explained to her that those documents were not, in fact, enough to protect her. The fact that she and her ex jointly applied for the mortgage loan meant that the bank still considered her just as obligated to make payments as her ex. This continues until one person refinances the loan in his or her name.
If your ex keeps the home but does not refinance it into their name alone, your credit score will be damaged if your ex becomes late on a payment. On the flip side, if you get the house and don’t refinance, your ex is still legally responsible for the payments as well. And what if they get sued? The courts could attach a lien to your ex’s properties, which could include your home!
Divorce and Credit Scores Rule #1: If you are going through a divorce, you must immediately refinance the home in the name of the spouse who retains ownership. During the transition process, protect your credit by making mortgage payments directly to the bank.
Divorce and Credit Scores Rule #2: Separate any and all jointly held accounts, as well as accounts that list you or your ex-spouse as an authorized user. This includes credit cards and auto loans.
Even in the “best” divorces, couples often have a hard time separating finances and agreeing to the terms of the divorce. Divorce often means that a couple has less access to resources. One household becomes two households, and you might end up paying 100 percent of the overhead instead of 50 percent. Finances can become tight. Even if a person has plenty of resources, the pressures of divorce, custody, courts, and moving can wreak havoc, causing a person to make late payments simply because other items on the “to do list” are taking priority.
For this reason, cancel all jointly held accounts as soon as you begin the process of divorce. You might need to close the account entirely, or you might be able to transfer the card into one spouse’s name. Regardless, decide who will carry the debt, and transfer balances accordingly.
Likewise, remove your name from any accounts on which you are listed as an authorized user. And remove your ex’s name from any of your accounts. To protect your credit score,you should also refinance cars in one spouse’s name only. If you have questions about the procedure for separating accounts, simply call your bank and explain your situation.

Build Your Credit with Do-It-Yourself Credit Tricks

Posted on January 26, 2021 by - CREDIT SCORING

Okay. You want to build your credit score, but you don’t want to pay a bundle.
Here are a few tricks that will help turn a bad score into a good credit score.
An obvious place to start is with your credit cards.
Here’s a little trick that can really boost your FICO score. (By the way, even though it’s perfectly legal, not one consumer in a thousand knows this technique.)
Most credit cards have a limit: a maximum credit line.
You are allowed to borrow against that credit line up to the maximum amount.
But, you should NOT!
Why not?
Lenders don’t like to make loans to consumers who are constantly “maxing out” their credit cards, because they consider them spendthrifts.
In fact, if the balance on any one of your credit cards is more than 30 percent of the credit line, your FICO score will be penalized.
So how do you reverse that trend … and raise your FICO score?
Here are two easy methods that work and won’t cost you a dime:

  • Transfer balances from one credit card to another, so that none of the balances exceed 30 percent of the credit limit. If necessary, obtain another credit card and transfer some of your balances to it. (But keep in mind that you should never have more than five credit cards, and that you should transfer your balance after you have secured the credit card and know the limit.)
  • Ask the credit card companies to increase your credit limit so that your current balance falls under 30 percent. If you can get the credit card company to raise your limit from $10,000 to $25,000, then you can safely borrow up to $7,499 – and not just $3,000 – on it without jeopardizing your credit.

Now here’s another trick …
You probably don’t know this, but credit card companies routinely under-report the limits on their customers’ credit cards – or, even worse, don’t report them at all. Let’s say your true limit is $10,000. The credit card company might report your limit as only $5,000 to the credit bureaus .
So if you have a $4900 balance, you appear to be “maxing out” the credit card, which will hurt your score.
Why do credit card companies do this? Because it keeps their competitors from offering you other cards.
When competing credit card companies see high limits from another card issuer, they have found credit-worthy borrowers whom they can solicit through the mail.
On the other hand, customers with low limits are not as desirable.
So many credit card companies report incorrect limits just to protect their customer base. But this could be hurting your credit score by causing the bureaus to think you are closer to maxing out your cards.
So what should you do? Simple: Just check your credit report to make sure the bureaus have the correct information. If not, call your credit card company and tell them they must correct the mistake – knowingly reporting incorrect limits is illegal. If you raise heck, the credit card companies will report the correct information.
– Philip Tirone