Avoid These 5 Credit Score Disasters Like The Plague

Building a healthy credit score shows you are financially responsible. With a good score you have access to good loan terms and can buy homes and cars without paying too much in interest. A good credit score and report can also get you into nicer apartments and get utilities turned on without putting down huge deposits. There is plenty of reason to get a good credit score and keep it healthy.

Once you have a good credit score, there are a few things you need to avoid like the plague. These actions can bring down your credit score.

Have you ever spent so much on credit that you maxed out one or more of your cards?

If so, you have already done one of the worst things you can do to your credit score. A big factor in how a reporting agency calculates your credit score is how much debt you have to the credit amount you have available. The higher your debt level is to available credit, the lower your score will be. For example, if a credit card company extended a credit line of $10000 to you, and you used $1000 of it, your credit score will be higher. But, if you used all the $10000, your credit score would be lower.

Have you ever missed a credit card payment?

You might think that missing a payment after a long time of never having a problem will not effect your credit score. However, it will cause your credit score to go down several points. A single missed payment will not be a permanent scourge on your credit score. However, more than one will start to bring your credit score down. Missing more than one in a row and you will see long-term damage to your score and report.

Have you ever applied for multiple credit cards at one time?

You might have gotten a new job and thought it would be a good time to get a new credit card or two. Credit card companies send offers in the mail. You may see advertisements online that say “Apply here.” So, you go for it. You send in applications for multiple credit cards, hoping one or two go through. Well, what you did was bring your credit score down. Credit Card Companies do a hard credit pull when you apply for a credit card. This will bring your credit score down a few points. When you apply for multiple cards at one time, you of course get hit several times.

Do you have credit cards but never use them?

If so, you are negatively effecting your credit score. That might seem illogical. You are managing your money and not using credit. That should mean your credit score remains high. But, the credit reporting agencies want to see how you use credit. Use is the operative word. Over time, unused credit will start bringing your score down. To counter this, occasionally charge something to a card and pay it off immediately. You should not be hit with interest charges and will start seeing your credit score go up.

Did you ever close an old credit card account?

Many people have old credit cards they no longer use. The card might have a high interest rate or a low credit limit. So, you closed the account. That hit your credit score in the wrong way. Credit card companies calculate your debt ratio by dividing your total debt amount to the amount of credit you have available. So, if you have $1000 in debt and $10000 in available credit, your debt ratio would be 0.10. But, let’s say you closed a credit card that had a limit of $5000 on it. That would lower your amount of available credit to $5000. Your new debt ratio would be 0.20. The higher your debt ratio, the lower your credit score.

Good credit score management requires knowing a bit of how reporting agencies use your credit use in their calculations. If you use your credit cards wisely, you will see your credit score go up steadily.

How To File Complaints About Credit Bureaus

Consumer credit reports are a very valuable tool for both consumers and lenders. They assist in determining your suitability for a loan or line of credit, and attempt to gauge your reliability as far as repayment goes. They can affect many aspects of your life: home ownership, buying a car, increasing a line of credit, joining the military, and maintaining a security clearance from the federal government. The problem with all of this is the confusion and inconsistency that surrounds this vital financial report.

There are three major credit reporting agencies: Equifax, TransUnion, and Experian. You never know which agency will be used to assess your financial stability, just as you can never be sure what will be on the report. The information listed by one agency can differ (greatly in some circumstances) from the other two, and vice versa. Typically the information listed on your credit report will be your identifying information, current and past address, number of accounts open and their statuses, and past charge-offs or other financial trouble. This is all fine and dandy until you discover a mistake.

In a 2004 report from the Federal Reserve, an estimated 79 percent of consumer credit reports contained errors, with around 25 percent of those errors being grievous enough to impact the granting of credit. Those figures are astounding, especially when you take into account the confused nature most consumers have toward their credit reports. Some never bother to check for accuracy while others pay for a service to monitor all three credit reporting agencies and alert them if there are any negative changes.

The kicker with these credit reports is that you are entitled by law to receive a copy of your individual report once each year from each of the three major credit agencies. While they all may display slightly different information, the majority of the information will match. The requesting of your annual report is quite simple, and all three reports can be requested from one website. Your score, however, which is merely a numerical designation assigned by the agency (and will vary between each agency) is not provided. To receive the score you must pay a fee for it, although the score should not be your main concern: the accuracy of the information on your report should be.

So you have found some sort of error on your report, and it is serious enough that you need to dispute it. You begin the dispute process, and you find yourself unhappy with the resolution. This occurs fairly frequently, and it is due in large part to the credit agencies enjoying the freedom to essentially do as they please. At least that’s the way it used to be, before the Consumer Financial Protection Bureau (CFPB) really started to get in to the game.

A few months ago, the CFPB established an online portal for you to file all manner of complaints against the credit agencies. The site streamlines the reporting process and lists steps to follow and how you should anticipate the resolution of your complaint. The five reasons for a complaint, as listed on their website reporting form, are as follows:

The 5 Reasons For a Complaint

  • Incorrect information on my credit report
  • Credit Reporting company’s investigation
  • Improper use of my credit report
  • Unable to get my credit report or credit score
  • Credit monitoring or identity protection services

Those are the five reasons they list as being worthy enough to file a complaint. The CFPB urges you to attempt to resolve the issue through the credit agency’s dispute system, but should the outcome be less than stellar, this should be your next step.

The information on your credit report has been historically used to judge whether or not you are worthy of receiving credit from whomever decides to pull your report. The accuracy of the information likely has been wrong (don’t forget the 79% statistic), meaning you could have been affected by this and not even realized it. This is remarkably unfair, especially when you consider the amount of regulation and confusion surrounding consumer reports and the power of the three main credit agencies.

There is no time like right now to check your report and ensure the information is correct.

7 Tips For Your Credit Score Recovery

Every day, there are people in this country who struggle with their personal financial situation. As our current economy drags on, more and more families find themselves missing payments or filing for bankruptcy. If you are among those people who have made missteps and are looking for ways to repair a credit score that may have once been very respectable, there are seven important steps you can take to clean up your credit history.

Most important, you need to take stock of how much money you have coming in versus how much you have going out. Chart your income and expenses, and take a hard look at the numbers. Construct a budget, and stick to it. Look for ways to cut expenses or increase the amount of money you are bringing in. Decide where you want to get to financially, and then adjust your priorities to match your goals.

Once you have a good grip on your current situation, it is time to start looking at your credit report. By law, you are allowed one free copy of your credit report every year. Once you have obtained your report, assess your credit history. Are there any errors or incorrect information on the report? If so, make sure to get them corrected before moving forward. Incorrect negative information can greatly impact your credit score, making it hard to do things like refinance your mortgage and negotiate with creditors. Before making any long-term credit decisions, make sure you know where you stand.

Make sure you contact your creditors right away if you are afraid you may be in danger of falling behind. If you have missed some payments, do not ignore the phone calls, reach out to creditors and explain your situation. They may be able to set up a more affordable payment plan. No matter how far behind you may be, acting in good faith may give you some time to get back on your feet before they start taking action to collect on your account.

You may notice on your credit report that your creditors have recorded your payment history. Make sure that you are submitting your payments on time not just for any credit cards you may have, but any extended credit. If necessary, keep copies of cancelled checks or receipts as proof that you have been paying on time.

Especially in these uncertain times, stay at your current job unless a position change will mean greater financial leverage for you. Employment status is an important indicator that you are able to pay your bills, and creditors feel much more secure about people who have been at their job for at least a year. Maintaining employment for at least that amount of time will give your creditors more assurance that you will be able to make good on your debts.

Once you begin to get your financial house in order, be careful to make good credit decisions moving forward. If you have been able to pay off a few of your credit cards, don’t jump right back on the bandwagon right away. Give yourself several months to prove to yourself and any potential creditors that you can manage your money correctly.

Above all else, beware of quick-fix schemes that promise you they can remove any and all negative information from your credit history. There are no magic tricks to repairing a damaged credit score outside of strict fiscal responsibility and adherence to the budget you have made for yourself. Any incorrect information on a credit report can be fixed yourself with a little effort. Many times, companies prey on those who have been frivolous with their finances and charge an exorbitant amount for their services. If you do decide to employ a third party to help you negotiate with creditors, make sure you know your rights, and read any contracts thoroughly before you sign.

Credit score recovery can be a long hard road, but the sooner you start the quicker you will see results. Adherence to your goals and your budget will pay off in the long run, and get you further down the road to financial independence.