Archive for the ‘Credit Score’ Category
You have just received a mail from your credit card company offering you a big cash reward if you shopped at that newly opened departmental store! So what if you don’t need anything! How can you let this opportunity pass by? After all, the reward means a lot of saving, doesn’t it?
If you really stop to think of it, you will realize that these instant rewards do not translate to savings.
Credit card companies offer a lot of rewards so that consumers take advantage of these offerings and splurge. Sure! You save money immediately but with what consequences? Your impatience to earn the rewards immediately may have just lowered your credit score. Unbelievable? Read on to know more about it.
Professors Stephen Meier and Regina Pitaro of Columbia Business School with Professor Charles Sprenger of Stanford University studied the results of an experiment conducted at “Center For Behavioral Economics and Decisionmaking”. The experiment involved a group of people belonging to the low income and moderate-income group. These consumers were offered two options of rewards if they agreed for assessment of their FICO Score – instant cash reward of $22 or $50 after a month.
It was found that most of people who wanted the instant reward of $22 had the lowest scores. In fact, their scores were well below 620. Those who wanted to wait for a month had a higher score. Based on the result of this study, the professors came to the conclusion that impatient consumers generally have a low credit score.
Other Aspects Of Choosing Short Term Benefits
There are times, when financial constraints compel people to make choices that can be misconstrued for impatience. For example, if you are short of cash, you may have to withhold a bill payment even though you know that the consequences will be late payment fee. This is a fact that may not have been taken into consideration when the study was conducted. The consumers who opted for the instant reward in the above mentioned study might have had compelling financial reasons as compared to those consumers who wished to wait for a month.
|Rather than using your credit card to buy something you can’t afford, wait till you can pay for it.|
Professor Meier of Columbia Business School feels that even though this factor was not taken into consideration, the impatient factor contributes to low credit scores of many consumers. There are a lot of people who make wrong decisions when they calculate the cost benefits. These wrong decisions, especially when it comes to credit cards, cause a ding in their credit reports.
The next time you go overboard with your shopping and max your credit card, remember that it may cause a significant lowering of your credit score.
Sometimes you cannot understand why some transactions and payments do not reflect in your report. You know about credit scores and report and how they affect your financial life but are unaware when the bureaus update your score. So if you’re also going all jittery thinking about updating procedures of the credit bureaus and when you’ll be able to see the latest updating reflected on your report next, read on.
How Long Does It Take To Update Your Credit Report?
Every lender (credit payment and credit acquisition) reports your financial actions to the credit monitoring agencies – TransUnion, Experian and Equifax – once in 30 to 45 days, which is the usual billing cycle. The bureaus update their records almost immediately on receipt of the information. But this cycle of 30 to 45 days has varying starting and completion dates for various banks or creditors. So there is a fair chance that your credit report will get updated multiple times during a period of 30 to 45 days.
How Can You Improve Your Score?
When paying off your debts, you need to identify repayment of which debt will have a more beneficial effect on your credit score. To know this you must first know more about the types of debts. Debts can be classified as follows:
- Revolving Debts
- Installment Payments
These are the debts that you have on your credit card and other utility bills. Paying off your revolving debt has a more beneficial effect on your credit score than paying off an installment debt.
Installment debts are monthly payments of your big-ticket loans They include your mortgage, education loan, student loans and others. While it is essential to pay off installment loans, you won’t see much of an increase in your credit score as compare to the repayment of revolving loan.
This disparity in the positive effect arises out of a very simple policy that FICO uses. Your credit card score depends on your debt payment history and debt utilization ratio. Debt utilization is the amount of credit you have used from the total amount available to you. In fact, FICO calculates 30%of your score using your debt utilization ratio. Itconsiders only your revolving debts, and not the installment debts.
Thus, paying off your revolving debts will improve your credit scores faster than paying off your installment debts. But this shouldn’t be your excuse to go delinquent on payment of installment debt. Being negligent can ding your credit score significantly.
How Can You Follow Up The Credit Score Update?
All said and done, how can you follow up the update of your credit score?The simplest and most logical way is to access your free credit report from AnnualCreditReport.com. You can get a free report from each of the credit agencies once in a year. Review it and see if bureaus have updated your score.
In case you find out that your credit report hasn’t been updated even after the usual 30 to 45 days cycle, contact the original creditor and request them to report to resolve the issue at the earliest by reporting the financial activity to the credit reporting agency.
|Use Rapid Rescoring only if your credit score is too low (below 600) and you need to update it urgently.|
If you preparing to apply for a big-ticket loan and can’t wait for 30 to 45 days while your score gets updated, you can ask the lender to use the process of ‘rapid rescore’. Remember that this is an unscheduled updating of the credit report and usually takes 72 hours to reflect. Also, be prepared to shell out a considerable amount of money for availing this service.
Remember that there is little you can do by personally appealing to credit reporting agencies when it comes to updating your report, all requests or complaints must go through the concerned creditor.
Obtaining a free credit report without a credit card is easier than many think. There are many sites that are either in existence for the sole purpose of providing free credit report information or they provide it as part of an overall financial package. The tricky part is that many won’t give you this information without putting in a credit card first. In addition, credit scores are typically not included in these offers, which are what most consumers are looking for, since the actual credit report may be difficult for the average individual to interpret, as it relates to their credit score. Either way, there is more information available today than there has ever been.
Before the internet, credit reports were sight unseen for individual consumers. They existed in the background only as a tool used by lenders and underwriters to ascertain the credit worthiness of applicants. Today, information has become more transparent, and the credit reports naturally turned into something that consumers wanted to review, understand, and even manage to ensure that their lending requests are approved.
Why review your credit report. The best way to ensure this is by reviewing your credit report. However, this can seem costly as many of the service providers offer a monthly charge of around $20 for this service. This can add up over time, and probably does not give an individual a good value proposition and will eventually be looked at as an unnecessary cost. There are benefits to obtaining your credit report though. For starters, it will assist you in identifying any fraud activity quickly to mitigate the damage. It also allows you to notice inaccuracies in a timely manner, which will greatly increase the likelihood of getting it fixed and corrected easier through the creditor.
Another benefit it that it will allow you to stay on top of your financial situation and view yourself as an underwriter or lender does. This is invaluable in helping to make short and long term credit decisions like whether or not you should take on more debt, pay down some debt, or consolidate your debt. These types of decisions can have a rather large impact on your credit score as well, especially if you have even a basic understanding of how it is calculated.
Where to go. Okay, so we have determined that it is a good idea to review your credit history, and that we are fortunate to live in a time when that is possible. Now what? Where can you go to get this information? First and foremost, if you have never requested a copy of your credit report, and you wish to obtain a free credit report without a credit card being used, then your first stop should be one of the three major credit bureaus. By law, they are obligated to provide you with a free copy of your credit report once per year upon your request, as illustrated here at www.freecreditreportsinstantly.org.
In addition, the three credit bureaus, TransUnion, Equifax, and Experian must also provide you with a free credit report in the event that you were turned down for credit recently based on information provided on your credit report.
There are many places on the internet offering free credit reports, but unfortunately, in my research I have found that most don’t offer a free credit report without a credit card. Instead, they offer a free subscription for a short period of time if you provide your credit card (which they claim is for verification purposes). After your introductory period, they begin to charge you monthly for their services. There are a few websites that don’t attempt these types of tactics. The first is a www.quizzle.com which offers their customers a complete view of their finances, including a free Experian credit report, with an internally calculated (non-official) credit score. This score is a good enough gauge for someone to determine their credit worthiness.
Another site that offers a free credit report without a credit score is www.creditkarma.com. The attractive thing about this is that they offer both a free credit report and a free credit score. You must be ready to endure a lot of ads however, as this ensures that the site remains free.
All those of you waiting eagerly to start a family, hold on for a while. Have you checked out on your credit scores? If you have not, it is worthwhile to do it now before you venture out to begin a new life. Even if you have a family and kids, it is advisable to get an in depth credit check of your every family member online to achieve a stable family financial position. In order to get a good family credit score, all you need to do is try to better each of your credit scores taken together taking the help of the national average and rectifying any mistake that you notice on checking your credit records and updating them time to time.
Whether you are about to get married or expecting a little bundle of joy at home it is necessary to have a tete-a-tete about your individual credit scores and how to improve them and start your savings plans before your new venture begins.
Get Yourself the Perfect Score
Sit together and discuss what the credit score of your family should be and how to strive to achieve it at any cost. After deciding on the target score that each adult member above the age of 18 are entitled to, it is essential to have a discussion on fiscal responsibilities such as credit loans, debts and the likes. While you check your scores online, make your kids to participate in the discussion telling them what to do and what not to do.
Go through the National Average Credit Scores
In order to understand your credit scores, you need to first check out on the National Average Scores and Records, based on which you can gauge whether your credit scores have dropped or remained the same by having a look at them online. The National Average Credit Score in accordance with the Experian Information Solutions is 692. Obviously obtaining the Perfect Score is a tough job, but if you possess a score that is at par with or higher than the national average you are in a god position related to credit scores.
Update Your Credit Score and Erase Unnecessary Content
Rectifying any mistake that lies in your report by getting in touch with the reporting firms or companies is an absolute essential thing to do. First, the credit card companies; then followed by the reporting companies should all be informed about any change in your credit score or mistakes, if any. Even after notifying these agencies, it is better to check out yourself to see whether the changes have been effected and solve financial problems like an unpaid debt by a combined couple effort.
Given the fact that all individuals today are conversant with the necessity of a credit report and the vital credit score, it is equally vital to have an idea of the scoring models. For those still in the dark about what credit score models are, the simple answer could be that the institutions that deal in loans, financing and the like have a fixed procedure to calculate the credit scores for applicants to the same. Every credit bureau has a separate model of credit scoring that is adopted by the authorities in question.
Companies do not Stick to a Specific Model
As a consumer, you cannot be predictive that a company will stick to a specific model for a certain period. It might just be that your friend got a loan sanctioned at a score lower than your current one but you are rejected on applying! Do not be surprised. This is just a norm that the companies reevaluate their scoring models over time. It also signifies that despite changes in scoring models on part of FICO, an independent company has the right to stick to its previous model. Thus, now you know why your bank has been following the older model still.
As consumers, you shall not be intimated every time your lender adopts an updating or change in scoring systems. They simply are not entitled to make public announcements about modifications in scoring models. One positive aspect in this regard is that as a consumer you have the right to request information of the scoring model in use by the lender.
Why does Remodeling Occur?
An interesting question, this is best answered by the reason that the credit score developing bodies change score model dynamics to predict the risk associated with the credit given out. In the contemporary economic situation, there is a huge risk associated with individuals who fail to pay as per stipulated deadlines. They also tend to apply for credit more frequently. Unless the lender revises score models, a past score can easily make defaulters avail the benefits of fresh credit sanctions. This would spell doom for the lenders in turn!
With latest trends in the credit market like credit cards and the like, it becomes necessary to incorporate these into the evaluation checkboxes for credit score calculation. The remodeling is necessary to keep track of modern inputs and developments for better gauging of the credit situation.
Given the well known significance of the credit scores, it is evident that one links up this feature with all other aspects of financial living. In simpler terms, most often try to find out if their scores can affect some financial dealings entered into. More specifically, we shall discuss the relation that the credit score shares with the insurance that you pay for. The first importance of the score comes into effect while an insurance company goes over your application. In case the score is too poor, the insurance application is not deemed as worth sanction. Insurance premiums need a bit of devoted financial planning and healthy financial habits. Therefore, it is important to have a healthy credit score.
Impact on the Insurance premium
It has been seen that those with problematic credit are given to filing insurance claims. This brings in the angle that such people end up paying more for insurances. Thus, companies often deny them insurances or give them low amounts of coverage.
The higher the credit score, the greater chances of landing a better deals on the insurance. A score of 700 and more are excellent and this aids in helping individuals earning the best rates on insurance premiums.
Even if an individual has a score between 650 to 700, the insurance rates they get their hands on are fair enough. Until the score of 600, the process of obtaining insurance is not impossible but below this range, the difficulty crops up. Generally, one fails to get a competitive rate on the premium with such poor scores.
Are there ways to improve a credit score?
This is a common query that comes from most insurance seekers. The answer lies in the affirmative. You need to negotiate with the companies from where you have obtained credit from. Read on.
Start with collection agencies and see if they can remove the entries on the credit reports if the amount is settled as a whole. Make sure that all agreements are made in writing. Next, try to make it with closing of the credit cards, which are not being used. Instead of paying the minimum amount on the credit cards, pay more. See if the credit limits have been crossed and settle these. All these steps help in getting a better score, and eventually, a better insurance premium.
Scan the report for any mistake in it. This is the reason why monthly checks from the credit bureaus online are suggested. Once any error is located, immediate steps must be taken to get it rectified. The insurance companies too must be notified of the correction and the updated scores so as to get the best deals.
Now that it is clear that what the in and outs of the credit scores and the insurance premiums are; go head and see what schemes are apt for the credit score you have. Maintain a good credit score throughout- because there are chances for changes in the terms of an insurance company.
Have you been approached by your cousin to co sign his loan application with a leading bank in your area? Alternatively, have you been requested by a friend to help him out with his application for a loan by co signing the papers? In any case, what you should know is that co signing is not as simple as it appears.Though you just need to put in a signature, there is much more to this. Co signing a loan is a huge responsibility and has a number of effects on your credit score. Read on.
• The Positive Angle
Bearing the onus of co signing is not necessarily detrimental to the credit score of the individual. There is a positive side as well. In case your friend or relative manages to pay off the installments on the loan on time, without a glitch, then there could be no better news! The credit report shows a positive entry without you even having done anything. This means your credit score increases out of no effort that you had to put in.
• The negative angle
However, things may not always be hunky dory. There have been reported and seen several instances in which, co-signers manage to ruin their credit score out of no fault. Just imagine the condition if the applicant fails to pay up the debt! The lenders could consider repayment responsibility on part of the co signer as well. The downslide too occurs out of no fault of the co-signer.
• Late Payments too matter
Not only failure to pay up the debt, but also the late payments and arrears on the loan appears on the co-signer’s credit report. This significantly lowers the credit score of the co signer and leads to a fall in his credit worthiness. There are times when the co signer receives rejections in financial schemes because of the negative entries made because of the person for whom he co signed.
After a clear discussion on the effects of co signing, it is entirely up to an individual to go ahead with such a proposition. In case you ever choose to co sign a loan for a friend or family, keep in mind that you may have to pay up if the primary borrower fails to cough up the dues. Be careful of the risk of losing any asset that you deposit and collateral if asked for by the lender. Research into the laws in this regard. They are varied in every state in USA.
Keeping these precautions in mind is sure to help you to a good extent. Think twice before you jump into a co signing decision. It could be a life changing decision indeed!
Non-payment or late payment of loans is considered negative for the credit score and they reduce the credit score. Individuals facing this problem try to get rid of the problem by paying off debts. Most of the people repaying loans think that it improves the credit score immediately. However, this is not true and it takes long time to improve the credit score.
Why to Pay When Accounts are removed after Seven Years?
It is known universally that negative accounts are removed from credit reports after a period of seven years. You must be thinking why to pay the loans if it would be removed automatically after seven years.
Well, paying off the loan is always better in comparison to never paying the amount. When the individuals do not pay the amount then you should stay away from any kind of financial activity for seven years. However, by paying debt you can be assured that credit score would improve in less than seven years. In addition, you can carry out activities that help in boosting the credit score. As a result, you would come out of this challenging situation soon.
Paying off Debt is Essential for Mortgage
If you plan to mortgage house in near future, then paying off debts is mandatory. Most of the mortgage companies ask customers to clear their pending debts before their mortgage application can be selected. Thus, try to repay the loan amount at the earliest possible if you wish to continue enjoying lower interest rates and credit of course.
Ways to Pay Pending Debts
Paying off old pending debts is not easy task and it might become a nightmare for you. However, you should not be scared of such situations and handle them smartly.
One of the ways using which you can repay the loan amount is paying it altogether. It is considered the best way of paying loans and improving the condition of credit report. However, if you cannot pay the amount in lump sum then do not panic at all.
Another way using which you can pay pending debts is through settlement. Large numbers of people in the world rely on this method and you can do the same without thinking twice. In this method, the customer and the credit company settles on an amount that should be paid to the company.
Surely, with consistent and smart efforts you would improve the credit score without taking much time.
Large numbers of individuals across the world suffer from the problem of bad credit score. As bad credit score prevents individuals from getting loan and other financial benefits, it is mandatory to improve the score at the earliest possible.
If you seek assistance on improving your credit score then you might be told about removing the negative items from your credit score. But the question how to remove the negative items remains unanswered. Here are mentioned some of the steps that would help you in getting familiar with the ways of removing bad marks of credit from the credit report.
Dealing with Disputed Items
It is quite common for individuals to face the problem of disputed items in the credit report. Well, if the disputed item is rejected then you do not need to worry about anything. However, the situation is worsened when the item is verified by the reporting agency.
Generally, if the item is found to be accurate then it is mentioned in the credit report. As a result, it poses threat to credit score and it is lowered down.
Most of the people think that if the item is verified then nothing can be done regarding it. However, this is not true and you can seek information regarding the method chosen for verifying the item. It is the right of the consumer and you should not think twice before using this right. Once you apply for the method of information, you would be replied within a span of fifteen days.
Getting Rid of Old Delinquent Accounts
If you have any old delinquent accounts mentioned in your credit report then it is time to get rid of them right away. If you can manage to repay the amount to the creditor then it would be reflected as paid. It is true that paying the money would not improve credit score immediately but it improves with passage of time.
Another way is to escape any activity that would be reflected in the credit report. Old delinquent accounts can be removed from the credit report after the period of seven years. However, it is important to know that period of seven years is counted from the last activity onwards.
Thus, you should stop making any payments to such accounts for seven years such that it would be removed automatically.
Surely, by following these simple steps it would not be difficult to remove negative items and clean your credit report.
Credit score plays a crucial role in shaping the financial lives of individuals and this is the reason why it should be dealt with care. Credit score of any individual is influenced by a wide array of factors. Some factors improve the overall score while some deteriorate it. Surely, you do not need to think much about factors influencing credit score positively but care should be taken about negative factors.
Among the various negative factors, mortgage application is one of the most prominent one. Here is presented the information that would help you in being acquainted with affect of mortgage application on credit score.
Is Mortgage Application The Culprit in Deteriorating Credit Score?
It has been seen that most of the people are not clear with the fact whether applying for mortgage at various companies affects credit score or not. Well, if you keep on asking for credit from credit companies then it would lower down your credit score surely.
Thus, you should take care of mortgage applications as it might bring down your credit score lower significantly.
How Does Mortgage Applications Works?
Whenever one applies for mortgage to a company, the company seeks credit details from the credit agencies. The company makes an inquiry of the credit record and if the numbers of inquiries are more it poses a negative impression.
It has been seen that each inquiry made on the credit record would lower down the credit score more than five points.
How to Deal with Mortgage Applications without affecting credit score?
Undoubtedly, individuals apply for loans and it cannot be stopped at all. However, if the search for the loan were done properly then it would not act as a negative factor.
Select some creditors to whom you would be sending a mortgage application. Once you have shortlisted, the companies it is the time to send applications to all of them within a span of 45 days. It is advisable because all the inquiries made would be considered as one. Thus, the credit score does not move towards lower value and you can enjoy loans without any inconvenience.
Situations Where Loan Inquiries should be avoided
Some situations are there in which loan inquiries should be avoided to the maximum extent possible. One such situation is when the credit history of an individual is limited. It has been seen that if credit inquiries are made in such a situation then it greatly affects the credit score.