The Credit Challenge

Let’s face it; everyone is looking to build good credit. There are many benefits to having good credit such as saving money on interest, having a lower insurance premium, and even saving you the embarrassment of having your job application denied because of having poor credit.

The truth is, with a little bit of discipline, it’s very easy to build good credit without much effort at all. If you are short on time and money to build good credit, then here are 5 instant tips to building good credit and a good credit score.

1. Increase Your Credit Limits – did you know that you can easily call your credit card companies and ask for a credit limit increase? The point is to have a higher limit and instantly lower the percent of balances that you carry. The lower the credit card balance compared to the credit limit, the better for your credit score as credit balances count for 30% of your credit score.
2. Spread Out Your Balances – if you have a credit card that is maxed out and others that are paid off simply transfer part of the balance over to the other cards. What that means is that you wouldn’t get hit from the credit agencies for having a maxed out card since you have now spread out the high balance over a series of cards.
3. Have Several Types Of Credit – part of building good credit is having a good mix of credit. The saying “Don’t put all your eggs in one basket” definitely applies here. When it comes to your credit, having different types of credit is key. It’s best to have credit cards, auto loans, mortgages, and other installments loans within your credit profile than just having one of these categories.
4. Pay On Time – this seems like the most obvious, but often is overlooked. Many people look for the magic bullet for building good credit; however, it’s the simple things like paying your expenses on time that make the biggest impact. There’s nothing better that you can do for your credit and credit score than paying on time each and every month.
5. Apply For New Credit With Caution – when you are seeking to get new credit, don’t go into a credit application frenzy and apply for many different cards or loans all at once. Although they don’t do as much damage as other credit factors, inquiries can cause your credit harm. Spread out the time that you apply for cards by a few months so that you don’t have a lot of credit inquiries in a short amount of time.

As you can see, there are simple things that you can do regularly to build good credit. They don’t take any money at all other than what you are already using to pay your bills. Aside from costing absolutely no money, each of these will only take you a few minutes and will guarantee that you build not only good credit but also a higher credit score.

Just wanted to let you know that I created a video that further discusses the top 10 reasons to rebuild your credit score.  I hope you enjoy!

I’d love to hear your comments on this video. This is the first of many video tips that I will be giving you on this blog. Make sure to leave a comment and let me know what other credit related topics you would like me to create a video on.

So, yesterday I gave you the first 5 reasons why you should begin the process of rebuilding your credit score.  It doesn’t matter what difficulties you’ve had in the past with your credit score, the main thing is that you start now.

So, here are reasons 6-10 (or 1-5 as they are listed here) of why you need to rebuild your credit score now:

1. Be Favored Over Others – if you are looking to get a lease on an apartment, having good credit can give you the advantage over other tenants with less than perfect credit scores.  Believe me when I tell you that the last thing landlords are looking to do is chase down the rental payment every single month as opposed to having it in the mailbox on the first of the month.
2. Get A Green Light On That New Job – many times, new applicants go through background checks and screenings. Part of the background check includes your credit profile and history.  There are many cases that people get turned down for a new position due to bad credit because it is looked at as lack of discipline and responsibility.
3. Achieve The American Dream – one of the biggest reasons that you want to rebuild your credit score is to be in the position to purchase your own home or upgrade to a bigger and better house.  Without a good credit score, your options for home ownership become very limited, and in many cases, non-existent.
4. Good Credit Attracts Better Opportunities – think about it, without good credit, there aren’t very many opportunities that come along for you to make money.  Most people with bad credit don’t have much money put away either.  Opportunities always find the right person who can take advantage of them.  With good credit, people will look for you to offer you opportunities to invest or buy at discounts because you are in the position to take advantage of them.
5. Because You Owe It To Yourself – you owe it to yourself to pay the absolute lowest on everything you borrow.  You owe it to yourself to save and invest the money that you would be spending on higher interest or fees due to a lower credit score.  You owe it to yourself to have the absolute best lifestyle available to those who have control of their credit and finances.

So there you have it, the top 10 reasons to rebuild your credit.  There is much more that a good credit score can do for you, but hopefully these examples were enough for you to realize it that it is critical to your life and your finances to rebuild your credit score.

As you may know, people want to fix their credit right now.  Many people are losing their jobs or going through a foreclosure.  Gas prices have made money a little tighter and many people are falling behind on their bills.  This can be devastating when it comes to their credit report and credit score. 

However, I want you to know there is still a way to fix your credit even under those situations.  The problem is that people often lose hope and are paralyzed when it comes to paying their bills on time once they get the news of a foreclosure or other big events like that.  That leads me into the one thing that you want to avoid when you fix your credit.

First, let’s start off by talking about the behavior that occurs when you start paying late (for most people at least). 

Say I get into a situation where I can no longer afford my mortgage payment and all of a sudden my house goes into foreclosure.  This may cause tons of stress and anxiety for me so I figure that I’ll just give up on all my bills and obligations. 

I stop paying everything at this point; my mortgage, credit cards, car loan, and even my utility bills because my house is about to be taken from me.  Guess what happens next?

My credit score plummets to the depths of the sea!!!  I have late payments on everything now.  This is the major mistake that people are making in this desperate time. 

Now, here’s the BETTER WAY to handle this situation and one you can learn from to help yourself and your loved ones not to completely destroy their credit.

Again, let’s say that I am losing my home.  I call the bank to see if there is anything we can work out rather than just dodge their calls.  They may or may not be able to help, but at least I tried.  So let’s say that there’s no other option than losing my home.  Sad, but OK in the long run.

Now, here’s where the magic takes place.  

Although the mortgage company is taking my house, I decide to keep paying my credit cards on time, my car loan on time and everything else on time since there’s no hope in keeping up with my mortgage payment.  KEY - PAY EVERYTHING ELSE ON TIME!!

The reason that you want to do this is because you will still have available credit in good standings to help fix your credit after the foreclosure.  Even though you have late payments on the mortgage and a foreclosure, you still have the credit cards and car loan (or any other credit you may have) that you have been paying on time and is still in good standing.  Over time, the good history on these other accounts will help you slowly boost your credit score higher and higher and help fix your credit.

Compare this to someone who loses hope completely and stops paying everything.  They have late payments on every account, a foreclosure on their home, collection accounts from the other credit they stopped paying, and all the credit cards have been closed by the creditors for lack of payment.  What do they have left to build on?  Absolutely nothing!

While you just continue paying your open accounts on time and showing the credit agencies that you can still handle credit in a timely manner, the other person is desperate to fix their credit but has no open accounts in good standings to build off of. 

They must try hard to open new accounts to re-establish themselves and fix their credit.  This may take several months or even years to accomplish.  You on the other hand don’t have to worry about that because you paid everything else on time, other than the mortgage, and you continue to have open credit in good standings.

So, the one thing that you want to avoid when you fix your credit after an event such as a foreclosure is to stop paying on all your other accounts.  As long as you continue paying everything else on time, you have a 99% better chance to fix your credit much easier and faster than all the others that decided to give up on all their expenses.

I hope this has been helpful and has opened your eyes to see that your credit is not doomed forever if you go through a bad financial time.  Do it intelligently and with some tact, and you will be back on your feet much sooner than most others.

If you are interested in learning more of these tips and tactics to fix your credit or boost your credit score, click Fix Your Credit to get this valuable information emailed to you.

Most of the time that I am in conversation with people about their credit score and credit report, they often underestimate the importance of these 3 magical numbers, their credit score.

The obvious reasons that you want to take care of your credit score are either to get approved for a loan or to get a lower interest rate whenever you borrow money.

Yes, these are crucial, but there are other, often overlooked, needs for having a great credit score.

Here are a few that you should be concerned with.  When you …

• Open a bank account
• Are looking to rent an apartment
• Are trying to set up your utility services
• Apply for a new job
• Are looking to get insurance (auto, renters, and others)
• Are looking for expand on the credit that you already have

As you can see, there are many benefits to having a stellar credit score.  For that reason, I want to give you a small gift.  Click on Good Credit Score and you will get instant access to an audio interview on how to attain and keep a high credit score.

Do you know anything about the Fair Credit Reporting Act?  If you don’t, you really should because they are your rights.

For those of you that don’t know, you have certain rights as it pertains to a credit report.  Most of us think that the banks and lending institutions are the only ones with rights when it comes to your credit report, but that’s not true at all.

So, what should you know about the Fair Credit Reporting Act?  Here’s a couple things that are helpful to know.

• Your credit report has everything to do with your credit payments, credit history, and credit record and nothing to do with your age, race, marital status,  national origin, religion, or even if you receive public assistance.
• You MUST receive a decision on your credit inquiry within 30 days.  Whether you are approved or not, the lenders only have 30 days to notify you with their decision.  After 30 days they are in violation of the Fair Credit Reporting Act.  If you weren’t approved, they must include a detailed statement of why you were denied credit and also mention your rights, including access to a free credit report.
• The Fair Credit Reporting Act also gives you the right to a free copy of your credit report from all three credit bureaus once every 12 months.  Go to www.AnnualCreditReport.com for your free credit report.  It is good to see your credit report and look for any errors or identity theft, among other things.
• You have a right to dispute any inaccuracies on your credit report, and creditors must respond to you within 30 days.  If you were right or the creditor cannot show proof, they must remove that negative account from your report.  If it cannot be removed, then you have a right to include a 100 word statement or explanation for consideration and clarification on the item that you disputed.

As you can see, there are many rights that you have under the Fair Credit Reporting Act.  It’s important that you know them because you may be missing out on getting your credit report for free or even settling for a lower credit score that you really deserve.

If you are interested in finding out more tips like this, be sure to visit here Fix Your Credit Score to get a free audio interview on obtaining a credit score of over 700.

There are many students or individuals who have gone bankrupt in the past that are now looking for ways to obtain a credit score.

It is really not that difficult to obtain a credit score even if you don’t already have one. 

Here are a few tips that I usually give to my customers to help them obtain a credit score.

1. Become an authorized user - this is one of the absolute quickest ways to get a credit score.  All you have to do is ask your spouse, family member, or friend if they would add you as an authorized signer on their account.  You will then get the benefit of their payment history on that account.
2. Apply for a secured credit card - if you have an account with a bank, they often offer secured credit cards, which require a deposit for the amount of credit they extend to you.  It is much easier to qualify for this type of account because the bank has some kind of security that you will pay; your deposit!
3. Report utility bills - this one is simple.  Simply get the payment history for your utility bills and send them to the credit agencies.   If you have a good payment history, these accounts will get you scored quickly.
4. Apply for a personal loan- you may be scared off by the high interest rates in the double digits, but make sure you only borrow a small amount so you won’t be trapped with high payments.  This will give you credit, and will establish the basis of future credit from other places.
5. Purchase with a co-borrower - although you may not have the credit needed for a purchase, you can purchase with someone else and get your foot in the door with credit. Since the co-borrower will help you qualify for the loan, you will now use that loan to get a credit score.

Just because you don’t have credit or a credit score does not mean that you are doomed.  There are many options for you to obtain a credit score, and also credit in general. 

The first line of credit may be slightly more difficult or expensive, but you are paving your way to a strong credit score and opportunities to establish your credit worthiness for your lifetime!

If you are looking to improve your credit report scores quickly, now is the time to get started. With the way the market is going, there’s no telling where the requirements for obtaining financing is going. We have gone from needing little credit for obtaining 100% financing on homes to having near-perfect credit report scores and still not qualifying for a mortgage.

With this in mind, here are some great strategies you can utilize right away to jump start your credit report scores.

1. Create Some Balance: While paying down installment debt (car, school, mortgage, etc.) will definitely boost your credit report scores, paying down or paying off revolving debt, such as credit cards, can cause a quick jump in your score on your credit report. The trick is to get and keep your balances below 30% of your credit limit on each card.

For faster results, attack those cards with balances closer to their respective credit limits first, as opposed to those cards with simply the highest debt. Remember, if you pay off any credit cards completely, do not close your accounts as it may drop your credit report scores since you are eliminating a trade line from your credit profile. Canceling those cards may inadvertently undo all of your hard work.

2. Know Your Limits: Make sure that your credit card issuers are reporting the correct limits on your accounts to the three major credit bureaus. Without an available limit, your account will appear to be maxed out at its highest reported balance each month. This could cost you up to 80 points in certain instances and drastically drag down your credit report scores.

Some creditors, such as American Express® and certain cards issued by Capital One®, actually have a policy of not reporting available credit. However, most companies will report your credit limits on your credit report if you ask them in writing.

3. Take Some Credit: If you have a credit card account in very good standing, make sure that all three credit bureaus know about it. Just like your credit limits, some creditors don’t report your information to all three credit companies – this is why credit report scores often vary between bureaus.

If this is the case, give them a call to find out why. Correcting this oversight could provide a significant boost to your scores on your credit report. Also, if you’re in very good standing, ask your creditor for a lower rate or higher credit limit. This will increase the gap in the debt you owe versus the credit you have available. Sometimes hinting about closing an account can suddenly bring out the generous spirit of certain card issuers. Give it a try. The worst they can say is no.

4. Protect Your Interests: Your credit is calculated based solely on the information available to your creditors. If you have a Home Equity Line of Credit, make sure it’s listed as a mortgage or an installment account on your credit reports and not a revolving debt. This alone can boost your credit report scores, because it will not appear as a revolving account with a high balance.

If you had a bankruptcy, be sure that all items associated with the bankruptcy are being reported correctly, that is with a zero balance. This action could increase your score by 50 to 100 points. Because simple mistakes like these can wreak havoc on your credit report scores, it’s important to monitor your credit every four to six months.

5. Even the Score: If you find information on your credit report that you believe is inaccurate or incomplete, then you have the right to dispute it free of charge. For the fastest results, visit the appropriate credit bureau’s website and file a complaint online. If supporting documents are necessary, you have to file your dispute by mail. Just working out these corrections will automatically increase your credit report scores without spending any money on lowering your other expenses.

Take these tips and be sure to put them to use.  As you can see, it isn’t very difficult to boost your credit report scores anywhere from 20-100 points within a couple weeks.

There seems to be a cloud of mystery surrounding how credit scores work, and how you can boost your credit score as quickly as possible. There are many opinions available, but unfortunately, many are just not true. So, what is the most important factor in your credit score anyway?

Payment history is the most important part of a credit score.

According to myFico.com, “payment history” within you credit score includes:

• Account payment information on specific types of accounts (credit cards, retail accounts, installment loans, finance company accounts, mortgage, etc.)
• Presence of adverse public records (bankruptcy, judgments, suits, liens, wage attachments, etc.), collection items, and/or delinquency (past due items)
• Severity of delinquency (how long past due)
• Amount past due on delinquent accounts or collection items
• Time since (recency of) past due items (delinquency), adverse public records (if any), or collection items (if any)
• Number of past due items on file
• Number of accounts paid as agreed

Most delinquencies on your credit aren’t reported to the credit bureaus until after they are 30 days late. This allows for a small grace period - which is supremely helpful to folks who aren’t adept at organization. Since you have this grace period, your credit score will not be damaged simply for being a few days late.

What’s valuable to know is that delinquencies which occurred within the past 2 years are of greater weight than older items. That means that if you see an item sent to collections, it might actually hurt you to pay it off during the loan process if it’s more than two years old.

Why? Because paying collections will decrease the credit score due to the date of last activity becoming recent. But if you do decide to pay off a collection, MAKE SURE that the creditor gives you a letter of deletion first.

If, however, you have any recent accounts with past-due amounts, paying them off immediately will help your credit score. Again, if you do decide to pay off a collection, MAKE SURE that the creditor gives you a letter of deletion first.

In credit repair, it is important not only to take notice of what you owe, but also the last active date of your accounts. Knowing this simple thing can keep you from causing your credit to bomb for paying off a collection account.

Many people are on the constant hunt to have a great credit score, or even improve the credit score that they have. Although this is a worthy cause, it is important to start your journey of obtaining excellent credit by understanding the way credit really works.

Once you are familiar with the way the credit report system works, you would be better equipped in how to dramatically increase your score, as well as maintain the high score you have managed to obtain.

So, what is the credit report system and how does it work. Great questions, and I am about to tell you just that.

First of all, your credit score is a number that represents your credit risk based on a number of different factors. These credit scores range from 300 to 850, and the national average is right around 675. The reason this number is so important is because it is a gauge that lending institutions use to determine the likelihood of you paying your debt in a timely fashion.

To get a little more specific, the score that you are given is based on the last 24 months of credit history, and using those historical facts, the credit report system determines the likeliness of you paying your account 30 days past due within the next 90 days. That sounds confusing, but it is really quite simple.

Here’s an example. If you are late on your payment this month, but haven’t been late over the last 24 months, your score will be impacted because the chances of someone having a late payment within the next 90 days is greater than someone who has never been late. However, the impact is far less than someone else who has been late several times within the last 24 months.

You can imagine that the higher your credit score, the lower credit risk you are and the more likely you are to be given credit at low rates. That is absolutely true.

Also, credit scores in the low 600s and below will often have problems obtaining credit, while scores of 720 and above will usually give you access to the best interest rates available. I like to say that once you reach a 720, you are like Noah, where the seas parted before him. Well, lenders will start parting for you!

So let’s also talk about how these credit bureaus arrive at your score. There are three main credit bureaus, Equifax, Transunion, and Experian, and each of them use different methods to arrive at your score.

Most credit bureaus use the FICO system, which comes from its developer Fair Isaac Corporation Company. This is by far the most used software since the Fair Isaac Corporation developed the credit score model used by many in the financial industry and is still considered one of the leaders in the field.

Using the FICO system, the credit bureaus and lenders are quickly able to see patterns in your credit, and then the system will provide them a score based on the finding.

Credit reports are compiled by the credit bureaus, which ultimately use the information from lending institutions and other agencies that provide your credit information to the bureaus. The type of information that is collected and factored into your score include the balance on your accounts, how many accounts you carry, the length of time that you have had established credit, the mixture of credit types, late payments, and credit inquiries.

As you can see, there are many factors that are included to determine your credit scores. There are also some important things to take note of. Your age, sex, and income do not count towards your credit score.

One can never know exactly how the credit scoring model works, however, the more information that you consume regarding credit, the easier it becomes to maintain excellent credit. Knowing this information is critical in not only establishing and managing your credit, but also repairing it.