Improve Your Credit Score: Determine Your Creditworthiness

Sure, the economy may be flailing, but learning to preserve and maintain your creditworthiness and improve your credit score is still extremely important. If you’ve spent any time watching or reading the news, you’re aware that bad mortgages obtained with faulty credit lending practices and other flawed methods have sent the economy into a tailspin.

Creditworthiness is defined as being financially established to the point where lending credit is deemed a sound judgment by a bank or financial institution. Your credit score determines many things – if you’re responsible enough to re-pay a loan on time and not default as well as your experience handling lines of credit and interest rates. In the eyes of a financial institution, your creditworthiness will help you acquire a loan for a car, house, or other large asset much easier.

The Dynamics: Maintain and Improve Your Credit Score

Developed as a mortgage tool in the mid 1990s (1), your credit, or FICO (R), score essentially determines what, if any, loans you are eligible for and the amount of interest you’ll be required to pay. As your score decreases, the rate of interest increases. Credit companies often say that timely payments are perhaps the most important factor to foster and continually improve a credit score that is high or within an acceptable range.

Your credit score is broken down into many factors: 35% is your payment history; 30% is the current amount you owe; 15% is the time you’ve had your credit lines open and active; 10% comprises new credit lines; and the remaining 10% is the type of credit you use (2). If you’ve fallen behind on payments and the amount you owe is increasing, your creditworthiness (in the eyes of the lending institutions) may be floundering.

Send Away for Your Credit Report – for Free!

Are you interested in seeing what’s on your credit report and determine your creditworthiness for yourself? It’s easy to get this information. Simply write a letter stating that you wish to receive your credit report from the three following credit reporting agencies, and you’ll be mailed your report free of charge when requests are made once within each year. Please note that there is an additional fee to obtain your credit score from the credit reporting agencies.

Experian, www.experian.com: receive your credit report free of charge by visiting the Experian website; requesting a copy by writing to P.O. Box 2002, Allen, TX 75013; or by calling 1-888-397-3742.

TransUnion, www.transunion.com: request a copy of your credit report by writing to P.O. Box 1000, Chester, PA 19022 or view your report online with a free trial subscription. You can also call the credit agency at 1-800-888-4213.

Equifax, www.equifax.com: write a letter of request to P.O. Box 740241, Atlanta, GA 30374 or call 1-800-685-1111 for more information. You can also view your credit report online with a free 30-day trial (3).

Knowing the dynamics of and working proactively to improve your credit score will help you boost your creditworthiness and perhaps even protect you from identity theft or credit fraud. And, if the numbers on your report are less than favorable, there are ways to improve your credit score further.

How Lenders Judge Your Ability to Re-pay a Loan

If you receive your credit report and there a few items on it that you are less than happy with, you do have some recourse in the situation. Most of all, however, do not pay someone to help you out of your mess. A credit counseling agency will offer advice on how to improve your credit score and boost your creditworthiness but will charge you extensively for this information. Basically, working to improve your credit score and fostering creditworthiness is a three step process: 1. Request and review your credit report from multiple agencies; 2. Pay in full your overdue accounts; and 3. Open new lines of credit, starting slowly with either a pre-paid or unsecured credit card.

When lenders or creditors pull up your credit report, they apply the word ‘risk’ to the situation. If someone with a low credit score is looking for a home loan, a lender will likely view this individual as high risk and perhaps deem him unable to re-pay the loan in a timely or even responsible manner. However, lenders will also consider your current income, occupation, and the amount of credit you need.

If you’re reviewing your credit report yourself, the following scale will come in handy:

Below 550 to 599: Your credit problems need to be addressed. Lenders and/or creditors consider these credit scores to be terrible.

600 to 649: Within this range, you will have trouble finding loan approvals and you may receive poor interest rates. Lenders will consider you to be high risk.

650 to 699: While close to 700 is considered healthy, as you get closer to 650, the tables begin to turn. A score of 650 is not great but is considered average. You need to think about a course of action to improve your credit score.

700 to 750: Anything between these two scores is considered financially stable and you will receive the best interest rates.

751 to 850: While 850 is the highest on the FICO scale, the high 700s are ideal and are considered the least risky for lenders. Your creditworthiness is considered quite high.

Creditworthiness Means Heightened Diligence

Poor credit can really come back to haunt you. That’s why diligence in making your payments on time and regularly checking your report to improve your credit score or maintain your creditworthiness are two of the most important things you can do to ensure you remain in balance financially.

Ultimately, your credit determines what loans you are eligible for, and if you have less than spectacular credit, you may have a hard time securing a loan for a car or a home. And if you do receive that loan, the interest rates will kill you in the long run. A little diligence goes a long way – work to improve your credit score and lenders and/or creditors will help you embark on your path to financial health and stability.

Sources

1. http://www.privacyrights.org/fs/fs6c-CreditScores.htm
2. Ibid.
3. http://www.fightidentitytheft.com/credit_bureaus.html

Fix Credit Report – Improve Credit Score

Correcting credit errors such as charge offs and collections is not usually performed overnight. However, it is a quicker process if you dispute items in the proper order.

If your credit is a mess, chances are you have a variety of bad credit listings such as charge offs and collections. Some items are more damaging than others.

Ordered below is the list of negative items as they correspond to their severity.

Public Records/Bankruptcy are the most severe. Public records include tax liens and court judgments. These items are allowed to remain on your credit report for 10 years – as opposed to the seven years limitation rule that applies to other items.

When you file bankruptcy, you will have multiple negative credit items. You will have the bankruptcy itself as well as any items that were included in the bankruptcy case. All these notations are equally severe.

A single collection item can lower your score by as much as 100 points overnight. You should dispute any collection error as well as negotiate with the agency for a removal.

Foreclosure/Repossession are likewise very severe. These listings are severely damaging to your score and can keep you from getting the next mortgage or car loan.

A charge off is very severe. You may even have multiple listings on your report for a single charge off since it is bought and reported by third-party collection agencies.

A recent late payment surprisingly is equally bad as a charge off. The more recent a black mark is on your credit report, the more it lowers your credit score. Multiple late payments only make matters worse. The credit bureaus interpret multiple late payments as signs that you are having a financial meltdown.

Moderately severe items include a 30,60,90, or 120 day late payment. These items can either be disputed with the credit bureaus or negotiated with the creditor.

The credit scoring formula is biased more towards recent late payments. Older late payments should be given a low priority in your dispute process.

Incorrect Personal Information such as a wrong address or employer is not important. The credit scoring formula does not use this information to generate your score so it is less important compared to the items above.

In order to quickly clean up your credit report, you must challenge the most severe items first. It does no good to focus your time and effort on insignificant items like your employer or address.

To learn more about credit repair or a free credit repair letter to dispute negative listings visit us. To learn about lexington law a professional credit repair firm visit us.

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Why you Need to Improve your Credit Score?

Have you check your credit score? Do you know how high your credit score is? Many people only pay attention to their credit score when they need it for any credit application. If you just realize you have low credit score at the time you need it for a loan or credit application, it might not help in getting the best rate because the best interest rate of any loan or credit always offer to the person with high credit score and time is needed to rebuild your low credit score. Hence, it’s better to pay attention to your credit score now and put your efforts to improve it if you found it low.

The three major credit bureaus: Equifax, Experian and TransUnion collect data from your lenders about your history of borrowing and paying back credit. The information is then being compiled into your credit reports. The company like FICO will then takes the information from your credits and applied a trade-secret formula to produce one score ranging from 300 to 850 based on your credit history. The more excellent of your credit history, the higher credit score you will get.

Top tier scores are range from 760 to 850. People who fall into the top tier scores are expected to get the lower interest rates as they are categorized as the lowest risk group by the lenders and this group has more choices to select their favorite loan package with more attractive offers. In general, a score about 500 to520 is the lowest acceptance level for many lenders to approve any loan or mortgage application. If your credit score is fall in this low acceptance range, you can be expected to be quoted significantly higher interest rates and may be offered with fewer varieties of loan offers. Any score below 500 has very low chances to be approved for any credit unless you go for secured loan.

Example below will give you a better picture on how the credit score will affect the interest rates of credit:

760 to 850 tier: Interest rate = 5.78%

700 to 759 tier: Interest rate = 6.00%

660 to 699 tier: Interest rate = 6.30%

620 to 659 tier: Interest rate = 7.10%

580 to 619 tier: Interest rate = 8.58%

500 to 579 tier: Interest rate = 9.50%

Let assume if you credit score is top tier (760 to 850) and you care being approved for 0,000 mortgage with 30 years term; the total interest for this 0,000 mortgage over 30 years is 0,772. Whereas, if your credit score is at bottom tier (500 to 579), the same 0,000 mortgage, the total interest over 30 years will be 2,709. You are paying about ,000 extra interest just because your credit score is at bottom tier as compare to if you credit score is at top tier. That’s why you need to get the highest possible credit score so that you can save more money in term of interest for any credit you apply for.

Even your credit score is not as bad as fall into the bottom tier, as long as your credit score is not in the top tier, it worth for you to work it out to improve your credit score so that your credit score is fall into the 760 to 850 range so that you have more options to get the best offers whenever you need to apply for a credit.

Summary

Lenders measure your credit history based on credit score, the higher credit score the lower risk as seen by the lenders and you are at a better position to get better credit offers. Hence, it worth for you to improve your credit score if you r score is not fall into the top tier range.

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How to Use a Mortgage to Manage your Debt and Improve your Credit

What if there was such a thing as a magic card that you could carry with you, which had the power to open doors for you all over the world? You show someone your magic card and ‘voila’, you can have what you wish for. You would want to protect that card very carefully, wouldn’t you? Your credit is a little like that. Your good credit is a passport to financial opportunities. A poor credit rating can be a terrible obstacle… and repairing your credit is often a slow and difficult process.

What you may not know is that you can actually use an Ontario mortgage to re-establish your credit. Canadians are carrying heavier loads of personal debt than ever before. For some, the cost of servicing those debts is itself an obstacle to correcting the problem. Each month can be a chase to make the interest payments to keep the debt afloat. But if debts are rolled into a new mortgage, your credit can improve rapidly, assuming of course that you don’t rack up any new debts!

Here’s how it works:

Perhaps you have maximized your credit cards – and maybe even have a short-term loan or line of credit that you are also trying to pay down in addition to your regular mortgage payments. You may be considered a “high risk” borrower under these circumstances, even if you are managing to squeeze out your payments each month. Your overall payment history is satisfactory, but your debt load is heavy. If you consolidate your debts into a new mortgage, you can better manage those debts while also restoring your credit rating.

You may not have considered using a mortgage to refinance and manage your debts, but there are a few significant advantages. Your status as a homeowner can give you access to a lower overall borrowing rate. A house is considered very reliable security, so mortgages often offer the best rates available anywhere. In addition, your credit history enjoys an almost immediate boost, as you begin to make your monthly payments. There are many innovative mortgage options available today, including a new mortgage product that has been designed specifically as a credit repair tool.

This specialized mortgage is good news for clients who are trying to distance themselves from their past credit problems. Debt is controlled quickly – since the new mortgage offers an interest rate lower than credit cards that can dramatically reduce the interest charges on your debt — and your credit typically improves in only a few months.

You probably already know that it makes sense to consolidate your debt into one payment. You can generally enjoy substantial savings on interest charges; you have a more manageable monthly payment and better monthly cash flow. Consider how a new mortgage can help you manage your debts – and make it a goal this year to improve your credit rating.

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How to Repair Credit Report and Improve Credit Score

With the economic situation the way it is and home values down, many people have found that their once perfect credit is now tainted with late fees, over limit fees, closed accounts, and in the worse situations credit cards and loans that can no longer be paid, along with possibly bankruptcy or even foreclosure.  However, with all these negative marks on their credit, credit scores are now even more important than before and banks, car dealerships, mortgage companies, and credit card companies are making getting loans and credit even harder than before.  Not to mention that jobs, insurance companies, and a slew of other companies are also pulling credit reports now before approving applications or even offering jobs.  In the dire straight of the economy the need to repair credit report has become even more imperative than before.  Even if you plan to never own a credit card again or always pay in cash, fixing the credit you have is still important and if you can should be done.

Some basic steps to fix your credit to improve credit score are:

Get all your credit reports, from all three agencies, which are Trans Union, Experian, and Equifax Make sure all the information on the reports are correct Fix any and all information that is incorrect, misspelled, or wrong in any way Have any incorrect accounts or information removed immediately Contact the credit bureaus by filling out the appeal form they offer and by phone when necessary Contact all banks and credit card companies to see about negotiating terms to lower your interest rate, payment amount, and to remove all late fees and over limit fees Cancel almost all your credit cars, keep one or two for emergencies, but cancel the rest Close all loan accounts, even if they are not paid yet, close them now as you pay them off If the banks or credit card companies will not work with you, contact a credit repair agency to negotiate terms for you Make sure to make all payments on time from there on out Do not open any new accounts or apply for any additional loans, the extra hits on your credit will lower your score further, especially if you are denied

Credit report repair usually takes time.  It will not happen overnight.  It will take a lot of patience and due diligence to improve credit score.  Making payments on time every month and correcting your credit reports will make the biggest difference.  Also, again do not apply for more credit.  Every hit on your credit report lowers your credit score even further.  Remembering that it will take time and not to become frustrated or give up.  Following these simple steps to repair credit report will pay off over time.  After a year or two you will see definite improvements on your credit reports and probably in your business relations as well.  It is never a hopeless situation, no matter how bad your credit report looks, it can be repaired.  Information does fall off after a few years and you can get your credit back on track and in good standing again.

Fix Credit Reports – Dispute Smart to Improve your Credit Score

What’s a dispute letter?  To fix credit reports its better to think outside of the box.  The reason so many say that credit repair and disputing doesn’t work anymore is that they keep on beating the dead horse.  Meaning they use the same old tired tactics that don’t get any results.  Denying isn’t disputing and that’s what many dispute letters do.  You have to take the law into your own hands.  Wait, let me rephrase that, before anyone goes a little nuts.  You have to use the laws that are in your hands.  That’s better.

 

There are laws that can help you fix credit reports without having to use old tactics that rely on just a delay of time.  That’s what the old tactics did.  They simple expected to have the creditor not comply within the response window and use that as a way to have the derogatory credit account removed.  They’re much faster at responding, some of you might have figured that out already.  That’s why the old dispute letters don’t work.  A smart dispute letter would address certain issues with the account and the collection company.  It would ask a specific question.  Ask for proof of the debt, accounting and perhaps proof of the company’s right to collect from you.  You see how it changes?

 

Another thing is violations to your rights.  I don’t fix credit reports for a living.  I learned all this from research and credit manuals.  I don’t need an expert to read something from a book to me.  I can do that myself and save 1,200 dollars.  The violation issues are usually re-aging of your debt.  By law they cant start the clock on you again.  If they do, they’re negatively affecting your credit reports for a longer period than allowed.  See where this is going?

 

One last thing on collections, it wont fix your credit reports to simply pay a collection.  It can actually do more damage than good.  Depending on how old the collection is it can bring the debt current and have a damaging impact on your credit.  To improve credit reports by paying of collections you have to settle and get a deletion letter.  That letter will have the account removed.  Otherwise, the credit report is simply updated as paid and continues to reflect a negative account.

 

That’s it remember to be smart and you can fix your credit reports.  Take the law and make it work for you.  They’re there to protect you.

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7 Effective Ways to Improve your Credit Score

There are many misconceptions about credit scores out there. There are customers who believe that they don’t have a credit score and many customers who think that their credit scores just don’t really matter. These sorts of misconceptions can hurt your chances at some jobs, at good interest rates, and even your chances of getting some apartments.

The truth is, of you have a bank account and bills, then you have a credit score, and your credit score matters more than you might think. Your credit score may be called many things, including a credit risk rating, a FICO score, a credit rating, a FICO rating, or a credit risk score. All these terms refer to the same thing: the three-digit number that lets lenders get an idea of how likely you are to repay your bills.

1. Understand where credit scores come from.

If you are going to improve your credit score, then logic has it that you must understand what your credit score is and how it works. Without this information, you won’t be able to very effectively improve your score because you won’t understand how the things you do in daily life affect your score.

In general, your credit score is a number that lets lenders know how much of a credit risk you are. The credit score is a number, usually between 300 and 850, that lets lenders know how well you are paying off your debts and how much of a credit risk you are.

Similarly, credit bureaus and lenders often look at general patterns. Since people with too many debts tend not to have great rates of repayment, your credit score may suffer if you have too many debts.

2. Pay your bills on time.

One of the best ways to improve your credit score is simply to pay your bills on time. This is absurdly simple but it works very well, because nothing shows lenders that you take debts seriously as much as a history of paying promptly. Experts think that up to 35% of your credit score is based on your paying of bills on time, so this simple step is one of the easiest ways to boost your credit score.

3. Avoid excessive credit.

If you have many lines of credit or several huge debts, you make a worse credit risk because you are close to “overextending your credit.” This simply means that you may be taking on more credit than you can comfortably pay off. Even if you are making payments regularly now on existing bills, lenders know that you will have a harder time paying off your bills if your debt load grows too much.

The higher your debts the greater your monthly debt payments and so the higher the risk that you will eventually be able to repay your debts. In order to have a great credit score, avoid taking out excessive credit. You should stick to one or two credit cards and one or two other major debts (car loan, mortgage) in order to have the best credit rating.

4. Pay down Your Debts.

If you have a lot of debt, your credit score will suffer. Paying down your debts to a minimum will help elevate your credit score. If you are serious about improving your credit score, then start with the largest debt you have and start paying it down so that you are using a less large percentage of your credit total.

In general, try to make sure that you use no more than 50% of your credit. If possible, reduce the debt even more. If you can pay off your credit card in full each month; that is even better. What counts here is what percentage of your total credit limit you are using – the lower the better.

5. Have a range of credit types.

The types of credit you have are a factor in calculating your credit score. In general, lenders like to see that you are able to handle a range of credit types well. Having some form of personal credit – such as credit cards – and some larger types of credit – such as a mortgage or auto loan – and paying them off regularly is better than having only one type of credit.

6. Beware of debts and credit you don’t use.

Having credit lines and credit cards you don’t need makes you seem like a worse credit risk because you run the risk of “overextending” your credit. Also, having lots of accounts you don’t use increases the odds that you will forget about an old account and stop making payments on it – resulting in a lowered credit score. Having fewer accounts will make it easier for you to keep track of your debts and will increase the chances of you having a good credit score.

7. Check your credit score regularly

You are more likely to notice problems and inconsistencies if you check your credit score on a regular basis – at least once a year and preferably three times a year. Be sure to check your credit rating with each credit bureau, too. If you notice anything odd or anything you don’t recognize (such as a charge account you did not open) report it immediately.

Sometimes, these errors are caused by mistakes made at the credit bureau, but they could be an indication that someone is using your identity. In either case, such mistakes could hurt your credit score. Fixing such errors improves your credit score.

Credit scores, on the scale assigned by FICO, range from 300 to 850. Who has an 850 credit score and what canyou do to get one? Less than 1 percent of the population has a credit score above 800, so it’s very unlikely you will have an 850 credit score. However, if your credit score is above 720, you will probably still receive the best rates. Watch more credit and identity theft videos from Expert Real Estate Tips to learn how to raise your credit score.
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