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.
Category: CREDIT BLOG
Bad Credit: 5 Things You Can Do Right Now To Start Fixing Your Credit
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. For more information on why this is so important, check out the free ebook Credit After Bankruptcy & Foreclosure. You may not be experiencing these particular financial crises; however, the information is still valid for anyone looking to repair bad credit.
Two Must Follow Rules To Protect Your Credit Score After A Divorce
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.
Five Bank Policies that Stink
Unless you use a local bank, your bank probably creates all sorts of unfair bank charges and other policies like excessive overdraft fees. And this is just one reason that your bank’s policies stink.
Here are five bank policies that should be changed, and changed immediately.
#1: They Intentionally Keep You in the Dark about Credit
You would think that bankers would be trained to tell their clients everything about credit scores, how to build credit, and how to bounce back from bankruptcy. After all, wouldn’t banks want to help their customers secure the best interest rates?
Hah!
Banks intentionally keep customers in the dark. In my opinion, they do this so your interest rates will remain high and they can keep pocketing money (as if the unfair bank charges aren’t enough). When I went into bank with a SpyCam to ask how to improve my credit score, the banker gave me incorrect, misleading, and incomplete information.
To be fair, I do not think it was the banker’s fault. The bank failed to train him.
So not only do the banks levy unfair bank charges and refuse to provide loans to qualified taxpayers, they also charge high interest rates and keep silent about how you can improve your credit score and lower your interest rates.
Unfair? I think so.
#2: Banks Regularly Report Inaccurate Information
Your credit score is determined by information banks and other creditors report to the credit bureaus. But according to a United States Public Interest Research Group study, 80 percent of you have errors on your credit reports, 25 percent of which are so bad that you would be turned down for a loan or a job.
Let me repeat that. You might be denied a job because the banks report inaccurate or false information to the credit bureaus. With a 9.1 percent unemployment rate, the banks should be a little more concerned for your welfare.
But your bank does not take the time to make sure the information it reports is accurate—the burden is on you. Unfortunately, most people do not know about the mistakes until they have been denied a job or a loan.
And here is the kicker: If you have an artificially low credit score due to bank error, the bank will charge higher interest rates if you apply for a loan.
Why would the bank bother checking to make sure information is accurate when they benefit from these unfair bank charges? Basically, they get to legally rob you of your hard-earned money!
#3: Stingy Guidelines, Loose Morals
In days past, the banks lent money to everyone, even if they were unqualified; nowadays the banks won’t give anyone a loan, even if they are qualified.
A client of mine is looking for a $300,000 loan on a $2 million piece of property. Her loan-to-value ratio is 15 percent, a figure that offers almost no risk.
So why are the banks refusing to give her a loan?
They say that because she is self-employed, she is a risk.
But she is clearly a picture-perfect borrower. She would never default on a $300,000 loan when she has $1.7 million invested in the property. She has enough money currently in reserves to pay the loan for five years. She has a crystal-clean credit report.
The banks were more than happy to take hundreds of millions in bailout money (a.k.a., taxpayer dollars), but now they are stingy when it comes to providing these very same taxpayers with loans.
And I think this sucks.
#4: Unfair Bank Charges in the Form of Overdraft Fees
One of my colleagues, a sole proprietor, told me this story about unfair bank charges that happened a couple of years ago.
The day after my colleague deposited a large check from a client, the full amount of the deposit was reflected in her business account. Per her normal routine, she completed her budget that night, cut checks to cover business expenses, and transferred extra money into her personal account.
A few days later, she logged onto her account and was shocked. The account was overdrawn substantially, and she had incurred nine—nine!—overdraft fees over the course of three days. The overdraft fees alone were $315.
So what happened?
The client’s check bounced.
Okay, to be fair, she should have overdraft protection. She should have paid a little closer attention.
But the bank has her email address. They have her phone number. They could have simply alerted her after the first bounced check so that she could transfer money from her personal account. Banks have all sorts of systems in place to contact their clients with promotions. If they put their heads together, I feel certain they could create a system to alert customers the minute their accounts become negative.
This would be basic customer service, in my opinion, but banks fail to do this. After all, all those unfair bank charges put money in their coffers.
#5: They give loan modifications to people who break the rules and refuse to modify loans for those who follow the rules.
Now does this make sense at all? To qualify for a loan modification, you have to be behind on your payments. If you are responsible, cut corners, and take a second job so you can make your loan payments, the bank probably will not give you a loan modification.
This irks me more than all those unfair bank charges. In fact, this is a moral outcry. If you play by the rules, you receive harsher treatment than those who cannot fulfill their obligations. And I think this stinks to high heaven.
Peer-to-Peer Lending
Listen to this 20 minute interview with a Peer-to-Peer Lending company. Learn how to refinance your credit card debt with a person, not a bank!
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Tim Wood- Finding Your Big Way
Listen to this interview with Tim Wood about “Finding Your Big Way”
Listen to this interview immediately here:
Or, you can download it here.
Harvey Mackay Interview
This is an interview with Harvey Mackay, author of Swim with the Sharks. Harvey talks about how important it is to have exposure to big thinkers… mentors who help you improve your situation.
Listen to this interview right now here:
Or, click here to download it.
Below is a list of Harvey Mackay’s Top-Selling Books:
- The Mackay MBA of Selling in the Real World
- Swim with the Sharks Without Being Eaten Alive: Outsell, Outmanage, Outmotivate, and Outnegotiate Your Competition
- Dig Your Well Before You’re Thirsty: The Only Networking Book You’ll Ever Need
- Use Your Head to Get Your Foot in the Door: Job Search Secrets No One Else Will Tell You
- Beware the Naked Man Who Offers You His Shirt: Do What You Love, Love What You Do, and Deliver More Than You Promise
- Pushing the Envelope All the Way to the Top
- Fired Up!: How the Best of the Best Survived and Thrived After Getting the Boot
Gary Ryan Blair Interview
Listen to this interview with Gary Ryan Blair on Goal Setting!
You can listen to this interview immediately here:
To buy his book, click here.
To sign up for the 100 Day Challenge, click here.
3 Credit Scams That Are Hurting Your Credit Score
The Credit and Debt Summit is exposing one credit scam after another. This time, credit expert Brian Diez exposed three credit scams that could be hurting your credit score and your ability to secure a loan.
Are you a victim?
Here are the three scams:
Credit Scam #1: Lenders oversee themselves.
Lenders report information to the credit bureaus. If you submit a claim that disputes this information, guess who is responsible for verifying the information? Lenders.
Imagine that you were to file a lawsuit against a doctor. You arrive at court to prove your case, and the doctor is sitting on the jury responsible for deciding whether your case is valid.
Such is the system of repairing errors on a credit report.
Credit Scam #2: Lenders benefit from errors.
And it gets even worse. Lenders benefit from sloppy records. If a lender causes an error to appear on your credit report, your credit score could drop. In turn, the lender can charge you more in interest.
“This scam is propagated by a system that almost guarantees errors,” Diez told attendees at the Credit and Debt Summit. It works like this:
The computer systems that collect information from lenders and then report this information to the credit bureaus do not require an exact match. If a Social Security number matches a last name, the system considers it “good enough,” even if the first name and address don’t match.
You can see how easily a mistake can appear on your credit report. In fact, 44 percent of reports of identity theft are nothing more than a merged credit file.
Credit Scam #3: Unless you are a politician, celebrity, or attorney, your complaint will not be taken seriously.
Making matters worse, if you try to correct an error on your credit report, you will have to jump through hoops … unless you are “someone important.”
Let’s imagine that you are one of the many people with an error on your credit report. (About 80 percent of people have at least one credit report error.) You contact the lender to report the mistake. The lender tells you to send a letter, which you promptly drop in the mail.
If you are a celebrity, politician, or lawyer, your letter will be handled immediately. Otherwise, your letter will be sent through a computer system that is responsible with determining whether your complaint is frivolous. If the computer says the letter is frivolous, your complaint won’t even be processed.
If the computer decides that your complaint has merit, your letter will be outsourced to Costa Rica, the Philippines, India, or Jamaica. A foreigner who most likely speaks English as a second language will be responsible for reading your letter and assigning a two-digit code, which determines the next action that should be taken on your complaint. Now a computer will spit out a letter telling you what will happen next.
Instead of doing actual research, Diez says the lenders just take the easy way out. So unless you are a celebrity, lawyer, or politician, you will be treated like a commoner. The worst part, your credit score just keeps dropping.
Banking Scams: How Banks Are Legally Stealing Your Money and What You Can Do About It
The down economy has hurt more than just general public – banks are feeling the pinch as well. In an effort to generate extra income, they’ve become quite creative and sneaky in their tactics. We refer to these at 720CreditScore.com as banking scams. They are the ways banks “legally steal” from you month after month, most times without you even realizing it.
Whether you want to hear it or not, the truth is that the banks are in bed with the government and although the government tells the banks to “treat people fairly,” they continue to steal your money, while greedily taking money from you (via the government and your tax dollars) at the same time.
To spread the message and help people avoid these banking scams, we’re inviting everyone to share their stories of banking scams that may have happened to you. The goal is to make the public aware of what’s really going on so you can protect your hard-earned money. A few dollars here and there may not seem like much, but when you add up the thousands of accounts they are doing this to, you can see how much banks depend on these banking scams.
This is an important issue that we believe strongly about and we greatly appreciate your time in sharing your scam. If you don’t have a story to share, take a few minutes and read through the scams to make sure you don’t become a victim, or share this page with others who you think will benefit from the information.
To make it easier to find your story, if you’re sharing a scam please start your comment with the words “BANKING SCAM.”
If you have a facebook account, post this via the Facebook Comments below so we can get this message out!
In the spirit of sharing, here is one that happened to me recently.
US Bank: BANKING SCAM
If this isn’t a scam from US Bank, I’m not sure what is.
Last week I was helping my Mother in Law close out her lease with US Bank, she owed the final payment of $395, so I called to pay it.
Before they collected the payment, I told the US Bank Representative that my Mother just moved from California to Arizona eight weeks ago. She gladly took the information and then told me that she will have to charge my credit card $405 instead of $395. I asked, “Why?.”
Well, I found out that it is US Bank’s policy to charge an extra $10 fee for billing addresses in Arizona. Interesting.
Hmmm… I have clients all over the world and it doesn’t cost me extra money to charge a person’s credit card in Arizona vs. California. Even if it did, NO WAY it would be $10. And, even if I were charged extra, I wouldn’t even think about passing that on to the client.
Here I am, five days after this happened blogging about this US Bank Scam… to my entire client base. These companies need to start focusing on building more value to their clients instead of penny pinching all of us.
Here is how I got around the $10 scam. I told her to change my address back to the California address and rerun it. I told her, “If you charge me the $10 fee, I refuse to pay the bill.” She changed the address, I saved $10, and I’m not using US Bank again!
Share your Scam!!
Philip Tirone is a Credit Scoring Expert and Champion for the Human Race
Other Scam Posts:
The Retail Store Credit Card Scam – Click to Read
The Dirty Little Secret that Hurts Credit – Click to Read
Protecting Yourself from Common Bankruptcy Scams – Click to Read
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