Why Most Americans Need Credit

                                                         

     

You need a credit card or loan to generate a credit report and credit score. No credit no credit score, it’s just that simple. If you live a cash only lifestyle and don’t feel you will ever need to apply for a credit card or loan then you don’t have to worry about a credit score. However, most Americans at some point in their lifetime will need to apply for a credit card or loan at least one time.

If you have no credit it can be almost as difficult to get approved for credit as someone who has bad credit, however they are not the same. If you have no credit or bad credit try opening a department store credit card. Once approved and you have at least 6 months of good payment history you can apply for a bank credit card.

If you need to apply for a credit card, student loan, mortgage loan, personal loan, home equity loan or line or credit, car loan, business funding, refinance, consolidate loans, need any type of insurance, need a utility account, cable or internet service you will need a credit score of at least 650 to get approved or to get service from a service provider.

As credit card companies became more competitive they started to target consumers who were the most lucrative to them – essentially consumers who always carried a balance from month to month. Companies then began offering teaser interest rates, cash back, and other perks to retain consumers and attract new consumers.

Some credit card companies offer perks such as frequent flyer programs, discounts on products, rebates, cash back rewards, points and other perks. Credit card interest rates can range from 1% to 29%. Grace periods vary by company. Credit cards also come with lots of fees such as annual fees, late fees, over-the-limit fees, balance transfer fees, and more. Read the terms and conditions of the credit card including the dispute policy and fees charged. Don’t get tricked by the 10% off discount to open a credit card. Compare at least 4 different credit cards to see which has the best feature for you using sites like www.bankrate.com or www.creditcards.com. Pay the balance in full every month.

You are not a good candidate for a credit card if:

• You constantly pay late fees
• You are a procrastinator
• You are struggling to pay your current bills or living paycheck to paycheck
• You are unemployed, underemployed or a college student
• You don’t keep track of your spending or don’t have a budget
• You are an impulse or emotional shopper or have a shopping addiction
• You aren’t good with paying bills
• You are already owe a lot of debt
• You defaulted on your student loans or already have bad credit

Take advantage of credit card perks such as:

• Return protection - if you are able to return a purchase your credit card may cover the cost of the item
• Purchase protection - if your purchase is stolen or damaged you could be reimbursed for the cost of the item
• Warranty extension - your warranty can be extended for up to a year
• Rentals - covers damage or loss when you rent a car which is cheaper than the insurance coverage offered by rental car companies and can be used in addition to your car insurance coverage 
• Shopping portals – most credit cards offer an online shopping portal which offer deals that earn higher amounts of rewards points or cash back
• Traveling protection - some credit cards offer trip cancellation and trip interruption policies, lost or damaged luggage insurance, travel assistance hotlines, coordinate roadside automobile repairs or discounts on entertainment
• Identity Theft - offer more protection that debit cards if your card is stolen or comprised. Visa and MasterCard have a zero liability policy that protects consumers and any credit card with the Visa logo but not all credit cards offer this protection.
• Laws – consumers are protected under the Fair Credit Reporting Act, Fair Credit Billing Act and Fair Debt Collection Practices Act. 
• Fees - some credit cards offer no annual fee or low fees.
• Programs - rewards cards only work to your advantage if you pay the balance off in full each month.

However, I encourage you to reduce your dependence on credit cards as you pay off all of your debt and as your financial situation improves. Credit should be a secondary form of payment not a primary form of payment.

9 Ways to Boost Your FICO Score

Your credit score it is one of the most critical factors in your financial life. It determines if you will be approved for a loan or line of credit. Credit scores are used to determine: if you will be hired for a job, interest rates, terms and conditions, downpayment costs, rates for medical and other insurance coverage, approval for cable and internet service and more. According to a survey by the Demos group 1 in 10 Americans are denied jobs due to their bad credit.

A credit score is a mathematically calculated number developed by the Fair Isaac Corporation (FICO) that lenders use to rate potential customers in determining the likelihood that a customer will pay their bills on time.

A credit score or credit rating is determined by using five main criteria as defined by MyFico.com: your payment history which accounts for 35% of your credit score, the amounts owed which accounts for 30% of your credit score, the length of your credit history which accounts for 15% of your credit score, new credit which accounts for 10% of your credit score, and the types of credit used which accounts for 10% of your credit score.

Payment history shows the history of how you paid your bills either on time or late but unfortunately does not show if your bills were paid before the due date. Amounts owed shows the total amount of credit you have available. The length of history indicates how long you have had credit. New credit indicates how many times you have applied for new credit. If you open too many new accounts in a short period of time this may lower your credit score. The types of credit used indicate the types of accounts you have such as revolving or installment accounts. Revolving accounts are usually credit cards and installment accounts are usually mortgages, auto loans, etc.

The FICO credit score model ranges from 300-850 with 850 being an excellent score and 300 being the worst score. The higher the credit score the lower the interest rate you will receive for a loan or line of credit. Possessing a good credit score can save you thousands of dollars in interest over the life of the loan or on a line of credit. A good credit score is generally in the range of 720 or above but may vary from lender to lender.

When applying for credit or a loan if all three credit scores are pulled, the middle score is generally the score used with the application.  Your credit score varies from each bureau because each agency collects their own data from various sources and may collect different data for the same account. Your score can vary anywhere from 5-40 points between the three credit bureaus.

Your credit score changes due to updates to your credit file which changes based on account activity such as balance changes or additions to your credit file (i.e. new accounts or deletion of older negative accounts more than 7 or 10 years old). As a result, you may see a difference in your score from one month to the next.  If you have bad credit or a low credit score here are 9 things you can do to boost your FICO credit score:

1. Review your Equifax, Experian and TransUnion credit reports at least once a year at www.annualcreditreport.com.  
2. Errors. Fix errors on your credit report. 
3. Keep total amount of debt owed low.  Keep credit card balances at 20% or less of the credit limit.
4. New Accounts. Number of new accounts opened. Don’t open more than one new account every 2 years.  If you are applying for a mortgage loan or credit card shop within a 2 week period, the inquiries will count as one inquiry (versus multiple inquiries). 
5. Denied. Don’t apply for credit if you know you will get denied the inquiry will temporarily lower your credit score.
6. Mix of accounts. You need a mix of revolving (credit card) and installment (loan) accounts to boost your credit score.
7. Payment history. You will need a payment history of at least 7 years or more with no late payments to have excellent credit. You will need a payment history of at least 3-5 years with no late payments to have good credit.
8. Length of credit history. You will need a credit history of 2 years or more to establish a decent credit history profile. 
9. Pay your bills on time. Get current on all late accounts.         

9 Ways to Increase Your FICO Credit Score

Your credit score it is one of the most critical factors in your financial life. It determines if you will be approved for a loan or line of credit. Credit scores are used to determine: if you will be hired for a job, interest rates, terms and conditions, downpayment costs, rates for medical and other insurance coverage, approval for cable and internet service and more.

A credit score is a mathematically calculated number developed by the Fair Isaac Corporation (FICO) that lenders use to rate potential customers in determining the likelihood that a customer will pay their bills on time.

A credit score or credit rating is determined by using five main criteria as defined by MyFico.com: your payment history which accounts for 35% of your credit score, the amounts owed which accounts for 30% of your credit score, the length of your credit history which accounts for 15% of your credit score, new credit which accounts for 10% of your credit score, and the types of credit used which accounts for 10% of your credit score.

Payment history shows the history of how you paid your bills either on time or late but unfortunately does not show if your bills were paid before the due date. Amounts owed shows the total amount of credit you have available. The length of history indicates how long you have had credit. New credit indicates how many times you have applied for new credit. If you open too many new accounts in a short period of time this may lower your credit score. The types of credit used indicate the types of accounts you have such as revolving or installment accounts. Revolving accounts are usually credit cards and installment accounts are usually mortgages, auto loans, etc.

The FICO credit score model ranges from 300-850 with 850 being an excellent score and 300 being the worst score. The higher the credit score the lower the interest rate you will receive for a loan or line of credit. Possessing a good credit score can save you thousands of dollars in interest over the life of the loan or on a line of credit. A good credit score is generally in the range of 720 or above but may vary from lender to lender.

When applying for credit or a loan if all three credit scores are pulled, the middle score is generally the score used with the application.  Your credit score varies from each bureau because each agency collects their own data from various sources and may collect different data for the same account. Your score can vary anywhere from 5-40 points between the three credit bureaus.

Your credit score changes due to updates to your credit file which changes based on account activity such as balance changes or additions to your credit file (i.e. new accounts or deletion of older negative accounts more than 7 or 10 years old). As a result, you may see a difference in your score from one month to the next.  If you have bad credit or a low credit score here are 9 things you can do to boost your FICO credit score:

1. Keep total amount of debt owed low.  Keep credit card balances at 20% or less of the credit limit.
2. New Accounts. Number of new accounts opened. Don’t open more than one new account every 2 years.  If you are applying for a mortgage loan or credit card shop within a 2 week period, the inquiries will count as one inquiry (versus multiple inquiries). 
3. Denied. Don’t apply for credit if you know you will get denied the inquiry will temporarily lower your credit score.
4. Mix of accounts. You need a mix of revolving (credit card) and installment (loan) accounts to boost your credit score.
5. Payment history. You will need a payment history of at least 7 years or more with no late payments to have excellent credit. You will need a payment history of at least 3-5 years with no late payments to have good credit.
6. Length of credit history. You will need a credit history of 2 years or more to establish a decent credit history profile.

7.      Pay your bills on time. Get current on all late accounts.

8.      Errors. Fix errors on your credit report.

9.      Review your credit reports at least once a year at www.annualcreditreport.com.

If you plan on purchasing a large item such as a car, house or investment property, it is best to pull your credit yourself to see if any negative items appear so you can fix those issues before applying for a loan. The best way to understand your credit score is to do research and read the information that is provided when you order your credit report.

Interpreting Your Credit Score

 

Your credit score it is one of the most critical factors in your financial life. It determines if you will be approved for a loan or line of credit. Credit scores are used to determine: if you will be hired for a job, interest rates, terms and conditions, downpayment costs, rates for medical and other insurance coverage, approval for cable and internet service and more.

A credit score is a mathematically calculated number developed by the Fair Isaac Corporation (FICO) that lenders use to rate potential customers in determining the likelihood that a customer will pay their bills on time.

A credit score or credit rating is determined by using five main criteria as defined by MyFico.com: your payment history which accounts for 35% of your credit score, the amounts owed which accounts for 30% of your credit score, the length of your credit history which accounts for 15% of your credit score, new credit which accounts for 10% of your credit score, and the types of credit used which accounts for 10% of your credit score.

Payment history shows the history of how you paid your bills either on time or late but unfortunately does not show if your bills were paid before the due date. Amounts owed shows the total amount of credit you have available. The length of history indicates how long you have had credit. New credit indicates how many times you have applied for new credit. If you open too many new accounts in a short period of time this may lower your credit score. The types of credit used indicate the types of accounts you have such as revolving or installment accounts. Revolving accounts are usually credit cards and installment accounts are usually mortgages, auto loans, etc.

The FICO credit score model ranges from 300-850 with 850 being an excellent score and 300 being the worst score. The higher the credit score the lower the interest rate you will receive for a loan or line of credit. Possessing a good credit score can save you thousands of dollars in interest over the life of the loan or on a line of credit. A good credit score is generally in the range of 720 or above but may vary from lender to lender.

When applying for credit or a loan if all three credit scores are pulled, the middle score is generally the score used with the application.  Your credit score varies from each bureau because each agency collects their own data from various sources and may collect different data for the same account. Your score can vary anywhere from 5-40 points between the three credit bureaus.

Your credit score changes due to updates to your credit file which changes based on account activity such as balance changes or additions to your credit file (i.e. new accounts or deletion of older negative accounts more than 7 or 10 years old). As a result, you may see a difference in your score from one month to the next.  If you have bad credit or a low credit score here are 5 things you can do to boost your credit score:

1.      Pay your bills on time.

2.      Get current on all late accounts.

3.      Pay more than the monthly minimum payment.

4.      Develop a plan to reduce your total debt.

5.      Keep your credit card balance at 20% or less of the credit card limit.

If you plan on purchasing a large item such as a car, house or investment property, it is best to pull your credit yourself to see if any negative items appear so you can fix those issues before applying for a loan. The best way to understand your credit score is to do research and read the information that is provided when you order your credit report.

5 Clever Ways to Raise Your Credit Score

If you do a search on the internet you will find thousands of websites that provide information on how to increase your credit score or repair your credit.  This means that there is something beneficial about having good credit.  Good credit increases your chances of being hired for a job, provides you with cash back rewards, provides good interest rate and terms, notices about sales or discounts and more. 

Your credit is your financial identity - your financial resume and is one of the most important aspects of your life.  It can help you or hurt you during the course of your life.  Credit affects many aspects of your life such applying for a home or apartment, or applying for a personal loan or credit.  Some people have been fired from jobs or have not been considered for employment because of their bad credit.  If you have bad credit it is never too late to fix it and improve your financial situation.  You can restore your credit and still achieve your financial goals.

The first step to repairing credit damage is by ordering a copy of your credit report from the three major credit bureaus, Experian, Equifax, and TransUnion at www.annualcreditreport.com. Review your credit reports carefully checking all information for accuracy such as: name, address, phone number, SSN, date of birth, current and previous addresses, accounts, account numbers, open and closed dates, status of the account, amount owed, and payment history.

Once you have reviewed your credit report determine if you have any past due accounts. If you have bad credit due to the loss of a job, health issues, family issues or a disability let the creditor know right away. Call the creditor to setup a payment plan to pay the debt.  Determine the monthly amount you can afford, but don't let the creditor determine the amount for you.

If you find errors on your credit report write a letter to the credit bureau that is reporting the error or request an investigation by disputing the information online at the credit bureau's website. Provide any supporting documentation to prove your claim. The credit bureau will respond to your letter within 30 days from the day of receipt. Keep copies of all correspondence sent and received in the event you need to reference it in the future. If you do not receive a response follow-up with a letter to the credit bureau to verify the updates were made.

Order another copy of your credit report after 45 to 60 days have passed to verify the updates were made. You can also write a letter to the creditor reporting the error.  If the creditor does not respond with 30 days you can request the credit bureau remove the account from your credit report based on the Fair Credit Reporting Act.

1. Establish Credit. Open a department store credit card. They usually have the highest interest rates but provide easier approval than bank credit cards.  Buy something small and pay the balance in full each month. You can also open a secured credit card account. Ensure the account is reported on your credit report.  Get a secured card with low fees and a low interest rate.
2. Pay down debt.  Keep balances at 20% or less of the credit limit. Having credit cards maxed out or close to the limit decreases your credit score. Pay the smallest bills first then work towards paying the larger bills.
3. Get current.  Pay late accounts which greatly lower your credit score such as bankruptcy, judgments, tax liens, foreclosures, repossessions and collection accounts.  Ask creditors to remove the accounts from your credit report after the account is paid in full to help increase your credit score.
4. Closing accounts.  Don't close accounts that have been open for 2 years or more and don't close accounts that are in good standing.  Closing accounts can decrease your credit score. 
5. Negotiate.  Ask creditors to settle the account for 50% of the total amount owed.  In exchange for payment ask the creditor to remove the account from your credit report and request a confirmation letter stating the account will be removed prior to making a payment. If the creditor refuses ask the creditor to report the account as “paid” or “paid in full”.