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.
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.
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.
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.
Although we have heard it over and over and over again just how important it is to have a good credit score, somehow we just never seem to take it to heart. If you could count all the opportunities in life that pass you by because you have a less than perfect credit score, you just might be motivated to do something about improving it.
Credit Scores – the Good, the Bad and the Ugly
So then, what is a good credit score and how high does it need to be in order to get the best interest rates on loans, the lowest premiums on insurance and a good chance of getting that apartment rental or job you are applying for. Actually, you should always shoot for a credit score which is above 700, the higher the better. If your score falls below 620 you will be considered a poor credit risk and if you get any credit at all it will be at sub-prime rates. Any score above 760 is considered to be the upper echelon and will qualify you for almost anything.
As noted above, most people are looking to improve their credit score because they are looking to have credit extended to them. This could be credit cards (revolving lines of credit), mortgages, car loans, personal loans and even installment plans on dental or medical bills. Any time you want credit extended to you, it is imperative that you have a score well above 620 points, over 700 if possible, or you may be denied or subject to extremely high interest rates.
Lower Insurance Payments
Then there is automobile insurance to consider. That auto you are driving is extremely expensive and insurance companies look at your credit rating as a risk factor. Other types of insurance underwriters also base premiums on creditworthiness. If you are looking for private health insurance, for example, your credit score will certainly factor into rates as well as the condition of your health and any preexisting conditions you may have. The lowest possible premiums on any kind of insurance, including homeowners’ insurance, are always offered to those with excellent credit scores.
This is another area where people get into difficulties if their credit score is less than perfect. Apartments, houses and any type of property that is for rent is an investment for the landlord and he/she will want to make money on renting the unit. If you expect to find decent housing, you will need to have a good credit score in order to show that you can afford to pay the rent and that making timely payments is important to you.
Finally, a good percentage of Americans just don’t realize how many employers run your credit before they even call you in for an interview. Along with your work history and criminal records, your creditworthiness indicates what kind of moral character you display. Whether or not you will be handling money or other valuables, your creditworthiness is a reflection of who you are.
It is about time we realized that having a good credit score is of vital importance in almost every area of your life. From applying for loans to getting good premiums on automobile insurance, your credit score will impact how much you pay, and whether or not you are even eligible for credit. Take the time to learn what you can do to improve your score if it is below 700 and also get a free copy of your credit report and score to make sure there are no errors or cases of identity theft. Your whole way of living will improve by building good, solid credit.
Although the laws are changing, there was a time when the only thing consumers were entitled to for free was a copy of their credit report once each year from each of the three major credit reporting agencies. However, as reported by Bloomberg Business Week, now recent legislation is making it possible for consumers to get a free copy of their credit score if they have been denied credit based on that score. As laws continue to change, one thing remains constant and that is our inability to understand just how we are graded in terms of creditworthiness.
One of the first things that confront us is in understanding just what a credit bureau is. There are local credit bureaus that call us whenever we become delinquent in payments but there are also the national credit bureaus (Equifax, Experian and TransUnion) that keep tabs on anything and everything related to what we have and what we owe. Sometimes these credit bureaus are referred to as credit reporting agencies, which is actually a much better name for them. They are not the folks who call us when we are in arrears on payments but they are the ones who tell potential lenders, landlords and employers whether or not we deserve whatever it is we are applying for.
Credit Score, Credit History & Credit Report
Another area which is oftentimes confusing to the average consumer is the difference between a credit score, a credit report and a credit history. Actually, they are all related but a simple way of looking at it is that the credit report details your credit history. Think of it like a report card when you were in school. Your history is all the tests you took, the assignments you handed in and whether or not you were absent or late on any given days. That is all tallied up to give you a ‘report card’ which is your credit report. Based on the history detailed in your credit report, each of the three reporting agencies have some fairly complex mathematical formulas to come up with your credit score. This would be like your final grade at the end of the year.
Benefit of Checking Your Credit Report
Unlike your report card in school, at least you have the option to dispute any errors or fraudulent entries on your credit report. Students usually don’t question the grades their teachers give them. They may complain, but rarely dispute those grades. However, you are given the legal right to dispute any entries on your credit report if you feel they were made in error or that it could be a case of identity theft. In fact, you are encouraged to get a free copy of your credit report from each of the three reporting agencies once a year for just this purpose. If something is not right you can take steps to have it corrected.
The language of credit may be confusing but there are plenty of resources out there to help you have a better understanding of what it all means. Whether you are looking at ways to improve your credit score or are simply looking at how to correct an erroneous entry, help is available. Understanding your credit score may be another matter altogether as each agency calculates your score a bit differently. Even so, if you find a way to keep your payments current, don’t spend more than you make and can show that you use the money you earn wisely, your credit score should not be a problem. The real problem is understanding the language, but have no fear – there are plenty of interpreters out there who are willing to help!
For two weeks the price of stocks has been plunging on Wall Street which is causing a great deal of anxiety among economists in the United States. There are growing concerns that we may be heading back into a recession of the enormity experienced in 2008, or worse.
Anyone who is just working their way out of the financial difficulties they experienced during that year and the year to follow will need to pay special attention to events as they continue to unfold. If you are just at the point of building up your credit score to a point where you may be ready to apply for credit, you may want to put a hold on that – at least temporarily.
What is causing so much concern is that lower stock prices indicate that many Americans’ wealth is shrinking as well. With lower confidence in the market they will be less likely to invest, less likely to spend and employers will certainly be less likely to take on new hires.
According to an article published in Yahoo! Finance, when the Dow’s average plummeted by 513 points, it is indicative of the fact that investors have growing concern over the European debt crisis and the problems we are having here at home with our own national economy.
When these types of drops in stock prices become evident, consumers will invariably spend less money which will further compound the problem. As we watch our bank accounts thinning down we are less likely to make major purchases and this fact alone places more strain on already endangered jobs. We saw this with the automobile industry at the height of the debt crisis in 2008-09.
New reports released by the government state that consumer spending was reduced for the first time in almost two years, 20 months to be exact. Retailers across the board from budget stores to high end luxury shops are seeing a drop in spending which is also an indicator that another recession just might be on the horizon. Whenever consumer spending drops significantly, it is a direct reflection of the uncertainty among consumers.
For those who have been struggling to pull themselves out of a financial hole they found themselves in within recent years, this news is all the more depressing. If it were not for the fact that we have just begun to see the light of day after our most recent depression and if it were not for the fears infiltrating the EU that Spain and Italy would soon default on debt, it might not be so bad.
However, if things continue as they are going at the moment, now is not the time to apply for any new credit if at all possible. What you may want to do is get a copy of your credit report, make sure everything is accurate, and then sit tight until you see which way the wind is blowing. If the economy rebounds then you may want to apply for credit, but if it continues to be uncertain, hold tight a bit longer.
The point is, you have already been victim of a poor credit score and are trying to rebuild it step by step. While times of economic crisis are not the best times to apply for credit, you may be forced to do so under certain conditions. If you have no other alternative than to purchase on credit, at least take the time to shop around a bit for the best loan at the lowest interest rate. In other words, if at all possible protect yourself from becoming a victim once again of a floundering national economy.
There seems to be widespread misunderstanding as to the impact that medical bills have on a consumer’s credit report but as it stands now, even those bills which were eventually paid in full do remain on the credit history for a full 7 years. This may or may not have an impact on a person’s creditworthiness since some lenders view these bills with greater or lesser weight. Even so, they are there and they do lower your credit score.
According to CNN Money, legislation which was recently proposed could erase old doctor bills from your credit report. The House Committee on Financial Services will eventually review the Medical Responsibility Act of 2011 which was proposed earlier in the year. In fact, the bipartisan Act may even come before the house as early as this fall, which is only weeks away.
One of the key benefits provided for in the Act would be the fact that medical bills would no longer be a factor in a consumer’s overall credit score. In fact, CNN’s report states that removing just one medical bill from a person’s credit report could improve his or her credit score by an amazing 50 points. This just might be enough of a boost to place that consumer in a better position to qualify for credit.
Part of the problem Americans now face is in direct relationship to the job market. Within just the past 2 years more than 57% of workers who became unemployed also lost medical insurance benefits. Now, without a job and medical insurance, they are forced to seek out emergency care or other medical services that don’t require an upfront payment. Unfortunately, without a job these consumers are also unable to pay those bills as they come in.
According to a recent study conducted by the Commonwealth Fund, 30 million adults in 2010 were contacted by credit collection agencies because they had unpaid medical bills. The study did however find that 44 million adults in America said they were actively trying to pay down those debts. In any case, once the debt is reported it will have a direct negative impact on your credit score as it now stands.
Unfortunately, there are opponents who feel that it is unwise to remove medical debt because this will portray creditworthiness when in fact that consumer is greatly in debt. While the amount of medical debt in question needs to be under $2,000, it is still an indication of that consumer’s ability and willingness to pay debts timely. This is a huge concern to the American Bankers Association.
The controversy is in the fact that some people really did fall on hard times while others had the ability to pay their medical bills and simply refrained from doing so. If enacted, this law would benefit both groups, which would be a travesty of justice, according to an ABA spokesperson. Further, all three of the major credit reporting agencies said that expunging medical debt would take away a lender’s predictive ability which is largely based on a consumer’s credit history.
It has been noted that most patients don’t leave their medical provider with the intention of not paying their bills but are sometimes either unable to do so or are unsure what is covered by their medical insurance. Some of the blame is being placed on insurance companies as their coverages and co-pays are difficult for the average consumer to understand, but in the end, the bottom line is that the responsibility still lies with the consumer.
In any case, it will be interesting to watch how this unfolds as the House debates the Act when it is brought before them this fall. Those who have unpaid medical bills on their credit reports would be well advised to follow this Act as it makes its way through the legislature.
These days it is almost impossible to do anything at all without good credit, from redecorating your home to buying a new car. In fact, almost everything we do is purchased with credit which is why it is so important to keep track of your credit score. Whether you are trying to obtain credit or trying to repair credit that has gone awry, you are probably looking at how to get a free credit report.
Actually there are a few ways you can get a copy of your credit report for free. Once a year you can contact the major credit reporting agencies to get a copy or you could contact a credit monitoring service to get a 3 in 1 credit report. It is all the more important to learn how to get a free credit report when you are in the midst of repairing bad credit because you can see how your credit has improved after paying on time for a while. As your score improves so too will your credit score.
It never ceases to amaze young people that they can just be starting out in life and already have an assortment of negative marks on their credit report. Unfortunately, there are a great number of people out there who are less than reputable and think nothing of stealing another’s identity. This happens more often than you might think which is why it is imperative even for young people to order a one time credit report.
There are a number of ways in which to obtain a credit report but the easiest way is to order a free credit report from one or all of the credit reporting agencies. In fact, a 3 in 1 one time credit report that has information from all three credit bureaus is also available if you find the right website. You are never too young to worry about your credit since it is so important to everything you do in life. In fact, you might even decide to take advantage of an annual free credit report, but at the very least get that one time report so that you know what is on it.
Computers have become a part of our everyday lives and this is never more apparent than when it comes to your credit. It seems as though there isn’t a single aspect of life that isn’t recorded somewhere on some computer. Unfortunately, this can have a negative impact on your life if your credit is less than perfect. From job seeking to applying for a line of credit, everything that affects your finances can be reported which is why it is so important to always get your free yearly credit report.
Altogether too many people walk through life without knowing what is on that report which is a grave mistake in judgment. As a responsible adult you should always know what is being reported so that you can dispute any errors or cases of identity theft and it is easier to keep track of than you think. You are entitled to a free yearly credit report so take advantage of it before your credit gets the best of you.