Understanding How Credit Card Debt Can Affect Your Credit Score

America has been facing financial difficulties in the past several years. The reason for the financial woes can be attributed mostly to debt. Debt can arise from many different areas such as mortgage loans, student loans and credit cards. Credit cards have for years been a way for people to buy misc. goods and/or services without needing the money up front. This type of consumer spending is what led America to the financial crisis that it faces today.

Credit cards normally charge a reasonable interest rate as long as you pay the balance every month. Conversely, credit cards normally charge outrageous rates when you are late on a payment, sometimes making it impossible for the customer catch up on his or her payments. All the while this is negatively affecting this person’s credit report. A credit report is a numerical assessment of a person’s ability to repay a loan that is not based on a person‘s income. Many credit card companies use this report as a means of determining whether or not they’ll grant customers the card.

Many consumers are unaware of their credit score and don‘t know whether or not they are helping it. The government has made credit reports available to all consumers for free once a year in order to be fair. Credit cards can be a great way to increase your credit rating if you decide to purchase an item and can make the payments on time, every time. In this way you will be able to reap the benefits of having a credit score that will enable you to purchase items of higher value in the future.

Companies that help consumers keep track of their credit report can be a good way to help them become financially responsible. The reason for this is if you have someone that is constantly keeping track of your credit report and whether good or bad it would be easier to go about taking care of unpaid debt. For instance, if your credit score was low it would probably because of poor decisions in the past in regards to credit decisions.

Maybe paying credit card payments late, not paying the bill on a mobile phone service, or becoming delinquent on any kind of loan will negatively affect your credit score. The credit report would detail what areas in your credit file need help in order to progress the credit score to a level more suitable to qualifying for future credit. A good credit repair company could tell you what type of steps you can take in order to create a better score.

If you get your credit report and your credit score is to your liking, a credit monitoring company would be able to aid you in maintaining such a score. Steps to be taken can be to take a small loan in your name and gradually pay back the loan over the course of a year. This type of financial responsibility will show up in a credit report.

Credit reports are normally given out by three main agencies, Equifax, Experian and TransUnion. Most credit reporting agencies base their scores on FICO which is created by Fair Isaacs Cooperation. Some financial institutions use other means of determining whether or not the person will be eligible for the financial services in which they offer. This means that even if your FICO score maybe good that you may still not get approved for the financial service in wish you hope to receive.

If you have not checked your credit score in the recent past, now would be a good time to do so. It is becoming more and more difficult to get credit extended to you based on the current state of the economy and unless you have a high enough score you probably don’t stand a chance of qualifying for anything with a decent interest rate. Get your free credit report and score online and keep track of building better credit. You will be so happy you did.

 

Surviving the Debt Crisis

At the best of times we have trouble keeping our credit scores within an acceptable range, but with the current debt crisis it is almost impossible. Although the debt crisis is called by a number of different names such as a recession or an economic downturn, the bottom line is still the same. Most of us are literally robbing Peter to pay Paul. If you have any hope of surviving the current debt crisis in order to come out the other end with a decent credit score, there are some things you might want to be aware of.

If You Have a Job Keep It!

Statistics have shown that there is a real jobs crisis. Just take a look at the fact that President Obama and current legislators have extended unemployment benefits and you will see that people just are not finding work as they were a year or two ago. In fact, Great Britain recently decided to eliminate 500,000 government jobs as part of their austerity measures. This was under the premise that it would enable them to cut back on corporate taxes which would then enable companies to snatch up those unemployed government workers. The tax money saved was meant to help them grow their businesses.

This didn’t happen and according to a report in the NY Times and it isn’t about to happen any time in the near future. Companies are going bust by the hour. You may be looking for upward mobility, but current conditions are not favorable for changing jobs. With so many businesses closing their doors, you just might land an employer who is about to be bankrupt. Without access to their books, you have no way of knowing how solid that business is. If you have a job, keep it!

The Great Credit Card Dilemma

It has also been reported by almost every major consumers’ group that people are now using their credit cards to pay monthly bills such as their utilities and to shop for groceries in order to make ends meet. Inflation is skyrocketing but wages are at a virtual standstill. The best advice here is to try to avoid using your credit cards if at all possible. Keep in mind that you will be paying interest on those expenses which is making already high bills even higher! What you might want to do in a situation like this is make sure that the amount you charge can easily be paid within thirty days so that those charges don’t accrue interest.

Of course, that pre-supposes the fact that you have a credit card that doesn’t charge interest if the balance is paid in full within that billing cycle. If you already have a balance which cannot be paid in full it will not work. What most financial advisors are suggesting is that you get rid of all your higher interest credit cards and only keep one on hand for emergencies only. (The operative word here is emergencies!) Most utilities companies and other debtors will gladly set up payment arrangements if you contact them timely before the due date. Once you have passed your due date it becomes much more difficult to get a payment plan.

In the end it is up to you to cut back wherever and whenever you can. Only use your credit cards as an absolute necessity and keep your job even if you feel you are not making enough money. You may find a better job and you might not, but hang on to the one you have until you are certain you have a better position. Take the time to check out a new employer before making the change. Surviving the debt crisis will take extra planning, cutting back on expenses and a little extra fortitude, but it can be done. With a little effort you can come out the other end of these trying economic times with a decent credit score. Save now – spend later.

 

Strategic Delinquency Rates Reach 27%

A strategic delinquency occurs when a homeowner purposefully allows their mortgage payments to become 60 days late, usually shortly after property price drops eliminate much of their equity while they’re attempting to keep other debts repaid. In other words, as homeowners continue to lose equity in their homes because of the dropping property prices, many of them are making the strategic decision to not pay their mortgage in order to keep up with other financial obligations. According to JPMorgan analysts, approximately 12,000 to 14,000 strategic delinquencies have occurred per month during the past year. As a result, strategic delinquencies now comprise as much as 27% of the total new late payments in the United States, rising up from only 20% just a year ago.

Analysts believe that many Alt-A and prime borrowers are choosing to go delinquent even though they have the means to continue making repayments towards their mortgage. Amherst Securities Group Analyst Laura Goodman believes that lenders and financial institutions need to focus on reducing principal in order to provide incentive for homeowners to avoid delinquencies and begin stemming the current foreclosure crisis, which could threaten another 10 million properties if such measures are not taken.

According to recently released Bloomberg data pertaining to August bond reports, a record high of nearly 33% of the $1.2 trillion in securitized nonagency loans have either become at least one month delinquent, are currently in foreclosure, or have already been seized. These statistics not only reflect the decisions of homeowners to go delinquent strategically, they also indicated that there has been a significant slowdown in loan liquidation. According to a recent S&P index, home prices in and around 20 of the largest US cities have dropped more than 30% since their peak in July 2006.

According to Freddie Mac and Fannie Mae analysts, the number of loans that are larger than the limits defined by the federal government for which loans would be backed, is up to almost 40% from 30% a year ago. This statistic indicates that lenders are becoming increasingly dependent on borrowing by applying for more of these “jumbo” loans. The share of Alt-A loans that are expected to be defaulted on strategically has risen from 30% to 35%, while the number of subprime loans that are expected to be defaulted on strategically has also risen similarly from 20% to 25%. In terms of loan amounts, 15% of loans less than $100,000 may be of are at risk for being strategically defaulted on, while 35% of loans larger than $400,000 are likely to be liquidated due to strategic delinquencies.

Surprisingly, individuals with the highest credit scores account for approximately 40% of the strategic delinquencies, while individuals with low credit scores account for only approximately 20%, confirming the suspicion that some of the more sophisticated borrowers are strategically defaulting on mortgage loans to focus on repaying other debts. Because of the high number of strategic delinquencies on nonagency securitized mortgages, approximately 10,000 homes per month are being liquidated, a statistic that has been steady for the past several months. According to Federal Reserve data, the loans that have been strategically defaulted on account for approximately 12% of the overall US home-mortgage debt.

Meanwhile in late September, the California Attorney General said that she would reject the proposal for a nationwide settlement with banks pertaining to foreclosure practices, based on her opinion that the proposed agreement was “inadequate.” According to CoreLogic Inc. (a California real estate data provider), there are nearly 11,000,000 homes that may be foreclosed on within the near future in California, which comprises more than 22% of all the homes in the state have a mortgage. Unfortunately, J.P. Morgan analysts believe that property values will most likely drop another 7% before hitting rock bottom next year.

 

Correcting Erroneous Items on a Credit Report

Credit reports are requested by prospective lenders, credit card companies, and even employers to determine the financial stability of applicants. Whether you’re trying to apply for a profitable job position, obtain financing for your dream home, start a new business endeavor, or simply apply for new credit card, you’ll need to ensure that your credit report is free of negative items and accurately reflects your financial history. Although credit reporting agencies like Experian, Equifax, and TransUnion typically do an excellent job of maintaining the accuracy of their reports, there are some instances in which erroneous items may be filed. Luckily, it is relatively easy to dispute inaccurate information, provided you have the proper documentation and understanding.

Items That Can Be Disputed on a Credit Report

While it is not possible to dispute the credit score itself, you may be able to have negative items removed from your credit report if it can be shown that they are an accurate in any way. After the items are removed your credit score should improve within 30 to 90 days, depending on how long after a new score is issued. The following are items that may be able to be disputed:

  • Outdated Information

It is not uncommon for outdated items pertaining to delinquencies and defaults to be found on a credit report, even after the debt has been fully repaid. In addition, any debts that are older than seven years should not remain on the credit report, and can be removed if brought to the attention of the reporting agency.

  • Inaccurate Late Payments

Many times credit card companies or financial institutions will issue a negative item on a cardholder’s credit report even though the payment was submitted on time. It may be possible to have these notations related to late payments removed if you can prove that they are an accurate. Thus, it’s best to make credit card payments with automated bank transfers or checks that can be recorded and documented in the event that proof is needed during the dispute.

  • Items Caused by Fraudulent Activity

Unfortunately, credit card fraud is becoming increasingly common as fraudsters invent new ways to obtain credit card details over the Internet. Nowadays it is possible for fraudulent activity to go unnoticed for months or even years at a time if you do not closely scrutinize your credit report. Some credit reporting agencies will make the mistake of filing a negative item on your report because someone with a similar name defaulted on one of their loans. Luckily, after being brought to the attention of credit reporting agencies most cases of fraud are removed from the credit report and the credit score returns to normal shortly thereafter.

Filing a Dispute

To maximize your chances of success when filing a dispute with a credit reporting agency it is important to include the proper documentation along with your dispute letter. Although it is possible to file a dispute via e-mail or phone, for the best results it would be advisable to write a formal letter that describes the erroneous/inaccurate item, and why you believe it should be removed from your credit report.  Ideally, you should attach a copy of any statements that relate to the negative item (if applicable), and include a copy of the erroneous credit report with the questionable information highlighted or circled to simplify the job of the person responsible for reviewing your dispute. By filing a dispute in writing with the appropriate documentation attached you can prove that steps were taken to dispute a negative item in the event of a legal suit.

Workers Earning Less Now than at the Height of the Recession

If you have ever wondered why you don’t seem to be able to stay on top of your bills, a recent report issued by the New York Times can answer that question quite easily. You are probably earning at least 6.7% less than you were during the height of what is being called the Great Recession.

It is difficult enough to keep up with recurring bills such as utilities, rent/mortgage, automobile payments, credit card bills but when you are earning $6.70 less on every hundred you make, it is almost unbearable. Not only are you earning less, but prices just keep on going up. Inflation is at a breakneck speed and it does not appear that it will level off any time soon.

According to a study conducted by two former officials of the Census Bureau, the median household income is now at $49,909 which marks a total decrease of 6.7% from December of 2007 when the recession officially began. During the recession household income only fell 3.2% which is why it is so dismaying that we have fallen so low when Washington tells us the recession is over.

Americans are not only unhappy with the current state of affairs, they are downright angry. When polled, most people state that leaders are letting them down and that it’s politics as usual. This does not appear to be good news for either the Democrat or the Republican parties as the caucuses are in full swing.

President Obama is calling the financial situation an official ‘emergency’ and is asking for Congress to pass his jobs bill. Many analysts feel that it doesn’t stand a chance of passing even though there are some strong spots in the bill. However, at a cost of $477 billion, it is more than Washington is prepared to spend at the moment. The bill itself is a blend of public works, tax cuts and unemployment benefits which Republicans are none too pleased with.

The two men responsible for the report on the current state of household income, John F. Coder and Gordon W. Green, Jr. find that the American standard of living is significantly reduced. Oddly, our standard of living is reduced but joblessness is waning as well. They find that there are two main factors contributing to this situation.

First of all, there are growing numbers of people outside the workforce. These are categorized as those neither working nor seeking a job. The second factor is that hourly pay is being held low and is not in keeping with the rate of inflation. Of note are the rises in the cost of oil and food which have risen significantly. What is most surprising about these facts is that during the recession, wages rose faster than inflation.

The pair noted that a great number of people who became unemployed during the recession had to take a sizeable decrease in pay just to get a job again. In fact, the situation is so critical at the moment that many of the country’s leading economists claim that the recession is far from over.

For the average consumer in the United States, this means tightening our belts and really keeping an eye on our own debt. If all you can make is minimum payments, then at least keep up with them. Economists suggest that we charge less, pay more and watch our own personal finances. We could be in for the long haul if things don’t improve soon.

Also, take the time to keep track of your credit report because hard economic times also tend to lead to rising amounts of identity theft. Make sure to order your annual free credit report and score so that you can make sure that everything on your report is of your making. If not, dispute it as soon as possible. Times are not getting easier and you need to know that any debt on your report is fair and accurate.

 

How to Deal with Interest Rate Penalties and Credit Card Repricing

Recent reports indicate that more than 50% of cardholders are now paying penalty interest rates on their card balance. When the interest rate applied to a credit card balance or certain transaction types is suddenly raised this is called repricing. Sadly, the majority of cardholders that are dealing with credit card repricing are not even sure why the penalty interest rate was applied in the first place. Although many times a credit card company will simply charge a one-time fee to penalize a customer for late payments or not paying the minimum amount, in some cases they may apply a permanently raised interest rate. The following paragraphs outline the common causes of interest rate penalties and credit card repricing, as well as how to prepare for and deal with repricing.

 

What Causes Credit Card Repricing

 

Credit card repricing is not always understood by cardholders that are subjected to interest rate penalties, but sometimes the cause of the penalty can be disputed with success. In most cases, credit card companies will hike the interest rate due to a late, insufficient, or missed repayment. However, it is also possible for repricing to be caused by regional economic factors, such as bank interest rates. All credit card companies and lenders have the right to raise interest rates at any time as long as they provide at least 14 days notice to the cardholder or borrower. Thus, it is important to check your mail on a regular basis and be on the lookout for notifications from your card company, so that you may dispute repricing as soon as it becomes evident.

 

Preparing for Repricing

Fortunately, it is possible to adequately prepare for credit card repricing and minimize the possibility of incurring unnecessary debt by understanding the terms and conditions of promotional periods, interest rates, and repayment requirements. It is important to know the expiration date of the promotional period, as this will help you prevent the possibility of being caught off guard and conducting a lot of transactions while you’re under the false assumption that your balance is incurring the 0% introductory interest rate. It is also important to note that some transaction types automatically carry different interest rates than general purchases. For example, a cash advance can carry interest rates as high as 20% APR or more, even if the same card has a 0% APR introductory rate for balance transfers and other transaction types. It is becoming increasingly difficult to avoid penalty interest rates due to the universal default clause, which allows credit card companies to apply penalties to cardholders for defaulting or making late payments on any of their credit cards.

 

How to Dispute Penalty Interest Rates

It is imperative to dispute any unexpected repricing or interest rate penalties as soon as they’re noticed, especially if you’re not sure why the interest rate has been changed. The first step to disputing penalty interest rates is determining the cause by submitting an inquiry to your credit card company either via e-mail or phone. Anyone that frequently utilizes one or more lines of credit should closely examine their monthly statements and always strive to understand any changes in their account status or interest rates. If you find that your card’s interest rates have been risen unjustifiably it is best to write a formal letter or e-mail to request that the rates be returned to the standard or introductory APR if possible. Before zealously disputing a penalty interest rates caused by a late payment, it is important to realize that credit card companies penalize cardholders based on when a payment is processed.

 

Consolidating Credit Card Debt to Simplify Repayments

Repaying multiple credit card debts or loans can be a hassle for anyone that is not a professional accountant, but many tend to underestimate the challenges associated with balancing ongoing monthly bills and several debts that are accumulating interest at increasingly high rate. Because most cardholders are subjected to penalty interest rates after a late or missed payment, it is not uncommon for one to have two or more credit cards with outstanding debts that carry an APR of 20% or more. The key to escaping debt quickly, with a minimal amount of interest paid, is to consolidate the debts to centralize and simplify monthly repayments.

 

Using Balance Transfer Credit Cards

The best way to consolidate the balances of several credit cards to a single account is to utilize the benefits of a balance transfer credit card. Balance transfer cards are called so because they do not carry balance transfer fees, which can range from 2 to 5% of the total transaction amount each time a balance transfer is conducted. In addition, balance transfer credit cards often have 0% APR introductory periods, allowing the cardholder to begin making repayments towards their newly transferred balances without any interest charged. If you can manage to repay all of the transferred debts before the introductory rate expires, you may be able to avoid all future interest. Keep in mind that it may be difficult to receive approval for an ideal balance transfer credit card after your credit score has already been damaged, so it would be ideal if you already had an open balance transfer account to use.

Using Standard Credit Accounts

 

If you’re unable to obtain approval for a balance transfer credit card, it may still be beneficial to use standard credit account, depending on the cost of the balance transfer fees and how much interest could be saved,. For example – If you currently owe $600 on a credit card that is being charged 20% interest, and you have another credit card account that is currently incurring the introductory rate, yet has balance transfer fees of 2% of the transaction amount, it would still be advantageous to transfer the balance and consolidate the debt. On the other hand, if the card that is being charged 20% APR only has an outstanding balance of $300, and the balance transfer fee is 5% of the transaction amount per transaction, then it would not be beneficial to conduct the transfer. As a rule of thumb, as long as the account that is being used to centralize the debts carries a lower interest rate than all of the other accounts and does not have exuberant balance transfer fees, then it may be advisable to consolidate debts using that account.

 

Using Loans with Lower Interest Rates

In rare cases, it may be possible to obtain approval for a loan that carries lower interest rates than one or more of your current outstanding credit accounts. Unfortunately, once the credit score has been damaged it is often difficult, if not impossible, to find a lender that will approve you for a loan that has better terms and conditions than the credit cards that you are currently trying to repay. If you’re interested in using loans to consolidate credit card debts, it would be best to avoid those that have strict penalties such as payday loans, as these could be detrimental to your debt reduction efforts by causing more debt to accumulate. It may also be possible to find a close friend or family member that is willing to obtain or cosign for a better loan to help you consolidate your debts.

 

Knowing When to Close Credit Card Accounts in Times of Debt

After incurring a significant amount of debt and successfully repaying all of your credit card balances, it can be easy to make the decision to close the accounts in order to avoid future temptation to create new debt. However, closing a credit card account may not always be the best course of action. In fact, closing an account can have variable outcomes on a person’s credit score or credit report, depending on how many accounts they already have, the status of those accounts, and the status of the account being closed. The amount of credit accounts that you have open also has an effect on the debt to credit ratio (utilization rate), as closing an account could decrease your available credit, causing your outstanding debts to become a higher percentage of your overall credit line. Knowing when to close a credit card account when trying to recover from debt can mean the difference between an incredibly slow or fast recovery.

When Closing Account Is Detrimental

It is never beneficial to close a credit account when there is still an outstanding balance, as this would cause immediate harm to the credit score. Once you’ve repaid a credit card account it is important to determine whether your current credit score will allow you to obtain approval for a card that carries more attractive terms and conditions than the card that you just repaid. Many people hastily close credit accounts after repaying them in an effort to avoid future debt, only to find they are unable to be approved for any other credit cards and therefore cannot begin rebuilding their credit as quickly as possible.

When Closing an Account Is Beneficial

If you have multiple credit cards that you’ve just repaid, and several of them are incurring debt with a penalty interest rate applied to the balance on a monthly basis, it is crucial to keep a certain number of accounts open to keep your utilization rate from dropping too low. The utilization rate, also known as the debt credit ratio is the percentage of debt in comparison to your available credit on all of your credit cards. If you have four credit card accounts, and each one has a $1000 spending limit, you have $4000 in available credit. If you still owe $1000 on one of your cards, you currently have a 25% utilization rate (which is underneath the recommended 30%). However, if you close one or two of those accounts your available credit drops causing the utilization rate to rise to levels that are detrimental to your credit score. Thus, it is important to be selective when choosing which credit cards to keep, and try to repay all of the cards before choosing so that you’re not forced into keeping less than ideal accounts open simply to repay them.

Which Accounts Should You Try to Keep Forever

If you had a credit card for several years and have a consistently good payment history with it, but recently failed to make a payment on time or in full, there is no reason to close the account. This is especially true if you have been earning points towards rewards, such as frequent flyer miles, free gasoline, vacations etc. Any credit card that offers benefits, has a relatively low interest rate, and does not charge unfair fees should be kept for as long as possible. Ideally, if you want perfect credit or you want to repair your credit as fast as possible it would be best to never close an account at all and simply keep all of your debts paid.

 

The Latest in a Series of Attempts to Curb Credit Card Fraud

One of the reasons why we are urged to monitor our credit reports is because of the huge amount of credit card fraud that has been plaguing consumers around the world. Recent research has indicated that banks are among the easiest to infiltrate simply because their automated tellers on the phone require so little information before giving the caller access to your accounts. New technology which rolled out last month is an effort to ensure the identity of the person using the credit card in an effort to prevent fraudulent use of other people’s credit information.

What many people might not understand is that the thief doesn’t actually need to have possession of your card. Yes, there are times when your credit cards are lost or stolen, but credit card fraud is most often the case of someone gaining access to your account number and your personal identifying information such as your address and/or phone number and sometimes even the three digit security code on the back of the card.

New technology is rolling out almost by the day to help prevent identity theft and the newest ‘gadget’ is something called Netswipe which made its debut in August of 2011. There is also a plug in for Word Press that does much the same thing. The principal behind both innovations is that the person ordering online is able to ‘swipe’ their card with a web cam and the merchant is then able to verify that the person ordering a product or service is actually holding the card and entitled to use it. Remember, the bulk of credit card fraud is the result of unsavory characters getting hold of your credit card info but not actually having the card itself.

For the consumer, this is good news because it is another mode of identity protection that can help them keep their credit score in good standing. For merchants, it could be a good thing as well because the cost of such innovations as Netswipe is significantly lower than traditional card swipe systems merchants currently employ. The developer of Netswipe, Daniel Mattes, is going to charge 2.75% for processing fees which in reality is perhaps less than half what most merchants are currently paying.

The bottom line for consumers is the fact that greater care is being taken to protect their identities. There has been so much identity theft over the past couple of decades that many consumers have unsatisfactory credit scores as a result. It will still be necessary to monitor your credit report from each of the three credit scoring companies (TransUnion, Equifax and Experian) because there still isn’t a foolproof way of protecting your identity 100% of the time.

Some consumers choose to order one report every 4 months so that they can have an idea of what is going on with their report throughout the year, but this may present some inherent problems. One thing which many people aren’t aware of is the fact that companies and lenders do not all report to the same agencies. For example, your mortgage holder may report to Experian whereas your credit card company may report to TransUnion and so on.

In order to monitor your credit report throughout the year, it may be better to contract with a credit monitoring company that charges a monthly fee. These companies notify you by email, text message and sometimes even by phone whenever a change is made to any of the reports they are monitoring. If you didn’t make a recent purchase then you can immediately dispute charges before the damage is done. Until such time as a foolproof identity protection system is in place, take the time to monitor your credit report.

 

How to Increase Your Ability to be Approved for Loans

Although the process of being approved for a loan varies depending on the lender and their specific credit requirements, most lenders and financial institutions follow the same basic methods to determine the creditworthiness and borrowing eligibility of an applicant. Unfortunately, simply being denied for several loans consecutively can subsequently decrease your chances of obtaining approval for a loan in the near future. This creates a challenging situation because many aspiring borrowers are confused about how they can improve their credit if they cannot even be approved for credit. It is a classic paradox – how can credit be built if credit is not extended?

Utilizing Collateral and Finding Easily Obtainable Lines of Credit

Fortunately, there are some types of credit cards and loans that are granted to people with poor credit, which gives them an opportunity to begin rebuilding their credit if they are able to responsibly make payments on time and in full. However, the defaulting on poor credit loans often results in exuberant penalty interest rates and many credit cards and loans that are offered to subprime borrowers have less than ideal terms and conditions. Nonetheless, it is possible to obtain a secured credit card or loan using collateral and/or a cash deposit. Most secured credit cards require a cash deposit that is equal to the amount of the credit line, and the majority of these cards have credit limits they did not exceed $500. When trying to use a secured credit card to rebuild your credit score is important to ensure that the card issuer files items with at least one of the three main credit reporting agencies – TransUnion, Equifax, and Experian.

Renting Inexpensive Property

There are many rental stores that will allow you to rent inexpensive property such as furniture and electronics regardless of whether you have poor credit or no credit at all. These places usually require some form of proof of employment, so it would be best to bring to check stubs from your current employer. You may also be required to list several references, and the interest rates are typically higher. However, some rental companies will file positive items on your credit report if you’re able to consistently make payments on time and in full. People with poor credit may also be able to to rent a cheaper vehicle that costs anywhere from $500-$4000 with a down payment of $500-$1500, depending on the terms and conditions of the dealer. These types of vehicle rentals are usually offered by companies that handle their own financing. Any type of credit that can be extended to you and will have an impact on your credit report can help you rebuild your credit score.

Using Teamwork

It is also possible to receive approval for a home or vehicle rental by having someone with good or exceptional credit cosign for you. By cosigning the partner is basically vouching for the applicant’s creditworthiness, while also promising to cover payments in the event that the borrower defaults. It can be difficult to find someone that will trust you enough to cosign for you, as your mistakes could cause their credit score to be damaged if they’re unable to cover your payments. When searching for a cosigner is best to start with family members, spouses, and close friends, as this is a serious financial commitment. When someone cosign for a loan or credit card in a joint application the prospective lender calculates the average credit score of both applicant’s combined. Thus, to people with poor or below average credit could not help each other by cosigning, as it would not raise the average score enough to affect the outcome of the approval process.