fix credit rating

Francine Denson asked:




Your personal credit rating is considered any time you are seeking a loan or line of credit. This is what ultimately determines if you get the loan or not and if so what interest rate you will pay. For this reason, your credit rating is one of the most important numbers in your life. Having a good score can save you money while having a poor credit score will cost you dearly.

Learning your personal credit rating is not difficult. There are many services online that offer a free credit report, and some that also offer a credit score. Be aware that these are two different things. A credit report is a look at your credit history and accounts where as a credit score (also known as a FICO score) is a numerical representation of the risk you represent to a lender.

It is a good idea to keep tabs on your credit especially if you are looking to buy a home, car or even if you are seeking a job as employers are looking at this data these days as well. Another good reason to mind your credit is that you will be able to detect fraud and identity theft before it destroys your credit. Unfortunately, identity theft is becoming more and more common and it is costing innocent people countless sums of money and time.

So what can you do? Your first step is to order a free credit report with credit scores. Its very important that you choose a provider that offers the ability to see your scores and not just your report. Your scores are what lenders are mostly interested in, so you should know those as well. Some free credit report services offer this and some don’t. Your best bet is to use a comparison tool like the one linked below to find out which services offer the scores as well.

Maintaining and improving your personal credit rating is easier if you use a credit monitoring service. These are often offered as free trials when you request your credit report, so you will get a chance to see how it works before they bill you and you can decide if it’s something you want to keep or not. Overall, they are incredibly useful because they watch your credit for you and alert you to changes on your reports. This is good for those who are actively repairing their credit and also good for detecting identity theft early on before the damage sinks in.

As you can see, learning more about your credit rating is as simple as taking a look at your current credit report and credit scores. This information is available for free from a number of services and it will give you great insight in to your current borrowing power.

Charlie

Dr. Butt, CPA asked:


I am the co-signer with my mom when we financed a car from Honda. It lasts for 5 years. I am trying to pay it off in 2 or 3 payments within 1 year to avoid having to pay the high 9% interest rate. By doing this, how will it affect my credit rating? Will I have better credit if I pay it off throughout the 5 years?

Curtis

Maury Lum asked:




This article covers the topic of our personal credit rating and credit history. Credit rating plays a very large role in determining eligibility for securing new credit in addition to the terms and options available. As such, it is important to understand what information the credit reporting agencies use in order to come up our credit rating and credit score so that we can do all that we can to ensure our credit score is as always as high as it can be.

Using credit and carrying debt is a normal part of our day to day lives for many of us. Credit offers an element of convenience as well as the ability to purchase goods today that we may not be able to pay for in full. However, we may be able to pay for an item over time and would not mind paying a premium (i.e. interest rate) for the benefit of enjoyment and use of the item today (e.g. house, car, furniture, electronics, etc.). The use of credit though is important to understand as when used responsibly we will start to build and establish a good credit history and credit rating. Conversely however, if credit is misused and if we become delinquent with our credit, our credit history will show an irresponsible use of credit and therefore will be reflected with a poor (i.e. low) credit rating. The goal over time is to demonstrate that we have had access to a reasonable amount of credit, used that credit responsibly over time, and have also paid back the credit as agreed over time.

During the application process for new credit (e.g. credit card, car loan, mortgage), lenders (i.e. banks) will review your credit report and credit score to check how you have managed your debts in the past. The idea here being that how you have used and managed your credit in the past will be a good indication of how you manage your debts in the future. A credit report contains information such as, previous and current trade lines (i.e. accounts), credit limits, credit balances, payments over time, and if payments have been on-time or late.

If you have not had any credit in your own name before, it is recommended to apply for a form of credit so that you can start to establish a good credit history as having no history can be an obstacle in getting and being approved for new credit. You may need to start small and slow with a low limit as a bank may be apprehensive to start you off with a high available limit when you have not had any credit before. So start small, use the credit each month and then also pay it off in full each month. Over time the institution will likely be comfortable with starting to increase your limit slowly. One other important point to note is that if you have a number of credit cards and find that you are not using some, it is recommended to permanently cancel these. Keep about two to three mainstream credit cards that make the most sense (e.g. accepted the most places, provide the best rewards or insurance coverage, have the lowest interest rate). Canceling extra credit cards helps as potential access to too much credit can work against you when looking for new credit, in addition to the risk of lost, theft, and fraud.

If you think you have had a “blip” in your credit history try not worry about it. What you think may have been a “blip”, may not have been. However, it is recommended to review your credit report each year just to make sure everything is reporting to it correctly. Examples of potential “blips” that can be hurting your credit score may include: late payments, not making the minimum payment required, going over your limit if even by $1.00, an outstanding collection, etc. If you have a “blip” on your credit report it is highly recommended to correct it as soon as possible as until it is rectified it can severely negatively impact both your credit score and your ability to secure new credit. So, if you have a problem in your credit report you will need to consider how much it is worth to you to fight and or ignore the problem vs. simply fixing it right away (e.g. an outstanding collection you do not want to pay). Also, all information, good and bad, is kept as part of our credit report for seven (7) years before it falls off. As such it is best not to have negative information report to our bureau in the first place but if it does, try to minimize it and resolve it as soon as possible.

One final note is to treat all credit carefully and plan any purchase where you will use credit carefully. Any lending institution will not want total outstanding debt and monthly payment obligations to exceed a specified amount, largely based on household income. So before taking on new credit think out into the future on any other credit you may be needing or want to apply for as taking on credit today could mean you may not be able to be approved down the road for another form of credit (e.g. get a car loan today that may create to large of an monthly obligation to also be approved for the mortgage you want in 3-6 months from now).

Meet and consult with an Accredited Mortgage Professional (AMP) regarding your credit report as we can always be a good resource and starting point to provide the information and help needed.

Jose

W. M. Blake asked:




Anyone who has checked into their credit score has probably found the rating scale to be somewhat confusing. There are a bunch of numbers, each meaning something different. Understanding how this rating works will help you to read your credit score effectively.

There are several pieces of information reviewed by companies when they build your credit score. These factors include the following:

- Your past payment history

- When you pay your bills

- The amount of outstanding debt you have

- The length of your credit history

If you have a great deal of debt or you don’t have a very long credit history, you will receive a lower credit score even if there are no “black marks” against you.

Recent credit applications also factor into your score. If you have made too many applications recently, this will cause you to receive a lower score. As will too much debt at high interest rates, such as high rate credit cards.

A score of 700 or higher is considered a good credit score. At this level, you shouldn’t have any problems getting credit, and at a low rate of interest.

If your score is between 450 and 650, it indicates that your credit needs some work to improve it. At this level you’ll likely have a harder time finding a loan or qualifying for a credit card without some type of security. You will also likely be paying a higher interest rate because you are considered a higher risk.

If your score is below 450, your credit is in need of some serious help. At this level you likely won’t be able to qualify for a loan or credit card until you pursue some form of credit counseling to improve your score.

If your credit score needs improvement, there are a number of sources that can help. There are many credit counseling services available, many of which are free to use. They will be able to assess your financial situation and offer advice as to the best route to improving it – and your credit score along with it.

Geraldine

Anj asked:


My husband and I are planning to purchase a new home in the next couple of months. I know that traditionally, without 20% down payment, banks require you to pay PMI. While I understand the bank’s perspective on this, as a buyer – it seems like money thrown to the wind every month.
My husband has impeccable credit, so we can get a good interest rate. We just aren’t in a position to put 20% down at this time. I have heard about 80/20 loans, but I am not sure if that is a better option. I am only intrested in a 30 year fixed rate mortgage – no ARM! Do I have any other options other than PMI???

Gilbert