Information you do not want to see on your credit report

To put it simple, your credit report is a picture of you as a payer. This information is especially precious for any potential lenders or people who are going to make some deals with you (such as landlords). If you belong to the group of bad credit score owners (below 600), you are probably already quite resigned, but you do not have to give up. There is a chance to improve your “picture” and in spite of the fact that it may take time and effort it will really pay back.

In general, there are things which damage your credit score and you must know what they are in order to avoid them at all cost. In the article we provide 4 most “hurtful” elements which may occur on your credit report as a result of your financial management mistakes.

Tax liens

If you have ever tried to avoid paying taxes, you probably have already got to know that it is a wrong path. Any unpaid taxes can result in a tax lien which is the tax man’s claim on your property. Such a tax lien is a public record and it is going to appear on your credit report for a long time (7 or more years). The only way to escape such a difficult situation is to pay off the debt or try to find another individual solution to the problem communicating with the tax man, and then, if it was possible, do what you would be demanded to do as a consequence of the arrangement.

Foreclosure

Another fact destroying your creditworthiness. Being unable to pay for a house may result in losing it and ending up with a foreclosure record on a credit report. No need to add that this situation makes buying another house in the future almost impossible. In such circumstances, it would be advisable to find a cheap place to live and cumulate all efforts to work hard on rebuilding the damaged credit. In the case of serious problems with managing personal finances you should consult a financial adviser who will help you save precious time and avoid next costly mistakes.

Charge-offs

The situation in which you keep avoiding the payment on your credit account and the bank decides to charge it off (usually after 6 missed payments), will result in a really bad mark on your credit report. You can insist on running away from paying the debt, but it is still with you. If you care about your credit score, you do not really need such a “companion”. The solution is simple: pay off the debt, remember about paying other payments on time and make utilization on your credit cards low.

Collections

This mark provides the unfortunate information that your account has been sent to collections. The bad news is that this information is going to “stain” your credit file for even 7.5 years. Any advice? Start with paying the account, so that it could go from the “unpaid” collections account to the “paid” one. It will not help as much as you would like to, but it will definitely improve your image in the eyes of lenders seeing your credit report. Apart from that, it is important if you do not want to be sued by the creditor. Besides, for example Vantage Score 3.0 does not pay any attention to the paid collections accounts.

Closing old accounts will not help your credit score

You had checked your credit score and you ended up totally disappointed? Yes, low credit score can damage your dreams of receiving a loan. Although restoring the score takes some time and effort – which concerns mainly changing some bad habits and too extravagant way of thinking- it is possible to become a more creditworthy client.

Surprisingly, being a credit-free man does not help, in fact, it damages your credit score. You have no credit history? There is no evidence of your creditworthiness and there is no possibility of giving any assessment of your financial personality. Age, race, salary, place of living, marriage or occupation (and other personal details) do not influence your credit score. If you do not provide any significant information about your experiences as a borrower, you cannot immediately become a good candidate for a credit. So what should you do? Have a good credit history!

It is also not easy to increase your bad credit score. You definitely need a new credit to raise the score, but no one wants to give you one. Borrower’s “dirty” past costs a lot. If you are already familiar with the topic, you probably know how much you can gain from having a high credit score so do not give up and prepare yourself for necessary changes.

Lenders check your credit score for one reason: to check how successfully you deal with money. Your score does not inform who you are, how much your earn and where you are from. Its main concern is what kind of borrower and payer you are. Reliable and punctual ones are the most precious. Your credit history shows whether you are creditworthy or not really.

So how about closing the old accounts and starting with a blank sheet?

The fact is that closing your old accounts damages your score. One of the deciding factors in calculating the scores is credit utilization. It includes a ratio between the amount of your debt and your credit limit. By closing accounts you lower the amount available to you, which automatically increases the utilization. In the eyes of lenders, having the old accounts is considered your advantage. Instead of closing them just change the course of history. Reduce the balances and prove that you cope with your credit well enough to receive more trust. Become strictly punctual with your payments and do not burden yourself with more credit than you can carry. Inability to pay off your credit every month is always a warning sign for lenders. You are not seen as a safe and promising payer and your credit score cannot go higher until you show better financial management skills.

Taking care of your accounts pays off. Especially, a long term care is valuable, yet you always have a chance to fix the faults. If you are working on your high credit score, remember that your accounts can help if they become a place to show that you are a responsible borrower with a long credit history and personal finance management experience.

You can “repair” your credit score!

What is this „credit score” in fact? Do you even know what credit score you have? If you are not familiar with this topic, you should definitely change it. You are probably even not aware how much you can lose having a low credit score.

Why is this score so important? Just because it monitors your financial behaviors: all money you borrow and pay back. It is the representation of your financial responsibility and creditworthiness. For instance, there may happen a situation in which you will not be accepted for a dream post, because your potential employer have checked your score and, as it is low, you no longer seem reliable enough. It is also the area of interest of landlords, banks or other institutions. This is the sad truth – the credit score demands your knowledge and effort to maintain it on the high level. Luckily, it is really worthwhile.

Here is what you need to do to help your score go up:

1. Do not use all your credit up.

Your credit card balances should remain below 30 percent. You have a $10,000 limit? Do not exceed
$3,000 in your spending. Your whole credit cards debt is going to be divided by all your credit limits and this will provide the result for your “Credit utilization” – one of the main parts of your credit score. However, you should know that not using any of your credit is not recommended here as well.

2. Do not close your “ill” card.

Repair it, not close. Bring a regular bill (like autopayments) to it and fix the situation. It is better to keep your cards and use them sensibly to show that you are a reliable and punctual payer.

3. Avoid closing the old accounts.

15 percent of your score comes from the length of your credit history. It is calculated by taking the average of your credits’ lengths. That is why, you should keep your credit card open as long as possible.

4. Be punctual with your payments.

This is the most important factor for your credit score – payment history is 35 percent of it. It is going to be checked how many times you missed your payment, how much it was, how long was the delay and how long ago. If you’ve missed a payment for the first time, pay it immediately and contact your bank to explain the situation – in this way you can avoid consequences for your credit score.

How much impact do negative marks have on your credit score?

5. Spend only as much as you will be able to pay off by the end of a month.

If you know that you will not pay the large amount in the next 30 days, do not be attracted by your bank’s minimum payment option. Just spend money responsibly – it will help your credit score and budget at the same time. Interest rates can be really high in such cases.

6. Do not pay off all your loans too quickly.

When you are a responsible borrower, many types of loans mixed can do your credit score a real good.

7. Feel free to open new accounts.

Do not owe plenty of money on a numerous cards – such a situation is not well seen by agencies. But if you are afraid that applying for some new credit will damage your score, you are wrong.

8. Find help.

You can try to find support. If you do not feel competent enough, consider using a free credit- monitoring service. Check out Credit Karma – it will keep you up to date.

5 tips to make your credit score boost

Some people turn out to be more successful in money management than the others and consequently, they can benefit from their high credit scores. Actually, it is very profitable to have a high credit score, because there are situations in which it saves a lot of your money – for example, borrowers with good credit scores receive better interest rates.

If your financial habits left you with a low score, you should change them for those which will help you increase the score. Below you can find five things you must become aware of if you want to become one of those successful people.

  1. You need to know what the credit score is and check it regularly. To put it briefly, a credit score is a number from 300 to 850, and here the higher , the better. There is a whole range of factors which influence your score, but in general it concerns your debt and how you deal with it. Its purpose is to show the potential lenders how much credible you are – they can see your credit history and assess the risk of lending money to you. And people with high credit scores receive much better loan or credit card offers than those with the lower ones. First of all, learn about credit scores, and then, check it regularly
    once a year just to know where you are at the moment.
  2. Being unpunctual in your payments lowers your score. The history of your payments constitutes 35 percent of the FICO score – it is a very influential factor. Therefore, if you tend to forget about your bills and you rarely pay them on time, you lose a lot. You need a good solution to this problem so think of a strategy that will make you a punctual payer, finally. We have some clues: choose automatic payments if you know you will keep forgetting, decide that you pay everything as soon as you receive the bill or choose one day in a month when you sit and pay everything at once.
  3. You should become well-organized with your financial actions. Monitor your budget and spending. Write everything down to keep control over your finances and due dates of any payments. You can consider Mint or LearnVest – softwares which help organize your finances.
  4. You should avoid high balances. Having a high limit on your credit card does not allow you to buy too much. Active credit accounts are needed for your credit report, but high balances are not welcome. If your credit utilization ratio does not exceed 30 percent, you just spend more than you can pay for and in this way you lower your score.
  5. Do not exaggerate with the new credit. It is significant to be sensible in getting more and more credit accounts, since opening a few ones in a short amount of time will decrease your score. Why? Just because such a situation is not well-seen by credit bureaus.

Now decide what you need to do to boost your credit score. Changing your financial routine may take a bit of time, but do not feel discouraged. Try to achieve the goals one by one and know that the final result is really worth the efforts.

Does your savings account influence your credit score?

You may have heard this great news that opening an account in a certain bank will improve your credit score. It would be really great if we could improve our credit scores by opening an account alone, yet it is not so easy unfortunately. Actually, it can help, but in an indirect way rather than directly, since credit reports just do not inform about bank accounts. Your savings history has no direct influence on your credit score. Why is it so? Just because your credit report is focused on your debt, not your general financial situation. These are credit cards, loans or any other registered borrowed money, which decide on your credit report performance. Your investments and savings, and even your income, are not important when it comes to your credit score.

Why do some banks suggest that opening an account with them will help your credit score?

It is not a lie or a common sales talk to allure more unaware clients. As it was mentioned above, it can help, but only indirectly. It simply means that lenders, like credit card companies, will be more open to making any business with you when your bank accounts present you as a good financial manager. When you look more reliable, you have bigger chances to receive credit. Looking from this point of view, we can assume that creating a good account and then using it in a sensible way, really can help you built your better credit score in some way.

Will cancelling a credit card hurt your credit score?

10 facts about credit scores you should know

Probably all adults in the United States have at least encountered the term “credit score”. Quite a big part of your life depends on this three-digit number. For instance, a successful purchase of a new house, car or being accepted in a new job may be a result of your previous financial decisions and actions influencing your credit score. That is why, the more you know in this area, the better.

Fact 1

There is more to it than FICO. It means that more organizations deal with analyzing your financial actions. Still, it is FICO which is considered the “king” of the scores and in 90% of cases, lenders’ decisions are based on FICO. The next significant one is VantageScore.

Fact 2

You can get a few versions of your FICO score. Three of them are most significant. Experian, Equifax and TransUnion are the credit bureaus which give the potential lenders an insight into your finances. The three scores can vary a bit and you can be never sure if your lenders will check one or all three. Just in case, you can pay slightly more and monitor all.

Fact 3

Not only a loan depends on your score. Insurance or cellphone companies, employers or even landlords can check your score before doing business with you, so as to learn if you are worth their trust. It, actually, provides a good picture of you.

Fact 4

You can check your credit for free. The website annualcreditreport.com provides the credit reports for everyone every year. You can also subscribe to a special service which enables you to have more frequent insight into your situation seen from the formal side.

Fact 5

According to the FICO score range, good credit scores start at 690. 720 and above means the excellent result. In fact, it depends on what you need the score for, because the notion “good score” can vary.

Fact 6

People with better scores pay less. Good score guarantees more offers and, what is more, the better ones. It is best seen on the example of the mortgage interest rates which are lower for those with higher scores.

Fact 7

Bad credit now does not mean the end of everything. The older the bad item on your credit report, the less important it becomes. Especially when you try to make up for your bad decisions and behavior, it systematically loses the power of its impact.

Understanding your Credit Score | by Wall Street Survivor

Fact 8

A small credit card balance turns out to be healing for your dropping score. The credit utilization should not be high, but no balance at all will not do your score good as well.

Fact 9

There is some information which does not influence your credit score. These are the obvious: place of living, age, race, religion, marital status or sex, and also some concerning your finances like: salary, profession, employment history, interests on debts, child obligations, participation in credit or financial counseling.

Fact 10

Surprisingly or not, lots of people do not have a score. If you want to have it you should open an account and use your credit.

Is it possible to receive a mortgage when your credit score is 580?

A low credit score does not disqualify you from the struggle for your own home. FHA mortgages are available also for clients with a credit score as low as 580. Nevertheless, the average score of the approved mortgages is 686, so is there still hope for poor score borrowers? Good news: yes, there is. And in this article we provide some useful information in order to help you buy a home even with a low credit score.

Low scores and FHA

The facts say that with a credit score of at least 580 you may receive 96.5 percent mortgage and lower scores will require 10 percent down. So where is the problem? – you may think. The problem is a bad credit, not a low FICO score in itself.

What with your bad history?

Your bad actions from the past turn out to be a harmless factor for your financial credibility. Yet, not all weak points of your credit-related behavior influence the score to the same extent. Lenders just need to ensure that doing business with you is not a high-risk situation, thus, if they check your history and they see “continuous slow payments, judgments, and delinquent accounts”- the bad history items indicated by the FHA guidelines- they will not approve your application. In such circumstances you need to offer some compensation in order to get a loan. Of course, if the bad actions took place a long time ago and you have already proved to be financially credible (in the period of at least 12 months), your chances grow.

Compensating factors

These most powerful and beneficial for you are:

  • Downpayment – must be higher than average, between 5 and 10%
  • Debt-to-income ratio – take care of lowering it to at least 38%
  • Housing expenses which are higher than the possible new ones including a loan costs
  • Impressive savings

Downpayment in the case of low scores

If your score is less than 686, you must be prepared for higher downpayment. You should also work on a better ratio between your debt and income.

What to do to pay less?

It seems sensible to find a few options to choose between. Check out more lenders and their conditions, since the lender can give you a loan regardless of your lower score, but he can also decide not to do this or just offer you too high interest. If you want to have a choice and be offered with lower interests you need to find more than one option to consider.

Last resort – what if not FHA?

The potential homebuyers have an alternative to FHA. If your efforts to obtain the FHA loan end up with failure, avoid giving up your dream of the own home immediately. Another option for you is a non-prime loan. As distinct from FHA, it will demand more downpayment money – starting from 15 % with the marginal 580 score, and even more, depending on how poor the score is. Unfortunately, the costs of all fees and interest included in the non-prime loan are also much higher than it is in the case of FHA.