With changes to bank policies and fees, many Americans have seen changes in their credit scores. If you’re asking “how to improve my credit score?” you are not alone. Many people saw a downturn in their score. Here is a really basic tip on how to improve your credit score.
When you’re applying for credit today, getting a store credit card is the kind of card that’s easy to get, but that you may not use all the time. Once you apply, you may forget about even having that card, if you don’t shop at that store frequently. Yet that open store card account appears on your credit report while it’s still an open account. When you have lots of these types of unused accounts at various stores, you may damage your credit since it looks like you have too much available, and could get overextended. Lenders don’t like to see a lot of available credit you never use.
It’s also true that having many credit card accounts you don’t use can lead to a risk of forgetting bills, and forgetting to make payments on those accounts. Having these kinds of lingering debts can also hurt your credit score. You never want to have a bill go unpaid or be late in any way, if you’re trying to raise your credit score to a higher level. It’s a good policy to only keep open those accounts which you know you will use, and make sure you pay those on time. Close other accounts that you do not use, or do not intend to use. When you have a manageable number of accounts, that means you can more easily keep track of what you need to pay each month, not to mention keeping your payments affordable. You can improve your credit score by closing some of these accounts, and paying the remaining accounts on time.
If you do have one of these accounts that has become delinquent, even if you close the account the history will still appear on your credit report. That’s why it’s so important to make every payment on time. You may also see a slight drop in your credit score when you close an account, because your existing balances are a bigger percentage of the remaining accounts you have open. Don’t worry about this too much, but just keep paying down balances and your score will come into line too.
As an example, if you start out with a total of $4000 in credit, with a balance owed of $1000, but you close two cards and reduce your available by half, owing $1000 on a card limit of $2000 looks worse than owing $1000 on a card limit of $4000. Just keep paying down your balances, make your payments on time, and soon your balances will get below $500 and your credit will improve.
If you are having financial trouble, and think you need credit help to deal with creditors, repair your credit score and raise your credit score to be able to get more credit, maybe it’s time to think about things differently. For example, many people trying to improve their credit are desperately trying to get more credit. But clearly, there is a problem, because you can’t be in credit trouble if you know how to handle credit. The way out of this hole is not to get more credit but to re-think your relationship with credit generally. Maybe instead of getting more credit, or repairing credit just to get more, you need to think about just using less credit, or even no credit at all.
It may seem impossible to live without credit. With the price of cars and houses alone, how would it ever be possible to pay cash for such large amounts? Well there are ways to get both of those things and live within your means. This doesn’t necessarily mean paying cash, but it also may mean buying what you can afford, or renting a house instead of buying.
Today for example, it’s very unlikely that in the majority of areas of the country, home values are not going to go up much beyond the rate of inflation for the next few years. Considering that most people stay in a home for three to five years before selling, why buy a home now unless you want to stay there much longer? The costs and fees and interest in getting a home mortgage will wind up leaving you without much appreciation in value by the time you sell. Renting a home might make more sense that buying in this kind of market.
As for cars, we really think of cars as extensions of our personalities. But some people are coming to their sense and realizing that this is just a tool to get to work and the store and school. When you consider it’s just meant to be useful, and that other things in your life have more importance, you may not be so concerned about pending a year’s salary on a vehicle. Buying something that does the job means you can put the extra $30,000 you saved into retirement account or college fund. Which means more – retiring in style or driving in style right now? That’s a choice you will have to make.
Trying to live without credit is hard at first. but once you realize you need to budget, and keep cash aside for emergencies, you begin to build up a little cushion. You start to think twice about the things you thought you needed, and see how frequently you indulge in impulse purchases. Sometimes it’s hard to believe you would have just snapped up that aisle-ender item without thinking. This is where the money goes when we wonder, “where did all the money go?”
When you give up using credit, there is some adjustment period, but when you hear everyone complain about their holiday bills, the high interest rates, and what amounts to near slavery to the credit card companies, you will feel a satisfaction and relief that is worth more than credit can buy.
You don’t need a credit repair guide to reveal credit repair secrets to you. The majority of details surrounding how your credit score is determined is fairly straight forward. If you just remember that the credit score is a measure of how safe you are to the lender, you just need to think like a lender to improve your score.
Credit Repair Secrets #1 – Credit Issues are Time Weighted
What you are doing with your credit today is of much more concern to lenders than what you did in the past. In fact the credit reports don’t even look back further than seven years. However, going back that far isn’t that important. You need to take care of the here and now first. If there is any debt you are currently past due on, you need to clear that up first and get all of your account balances current as soon as possible.
Credit Repair Secrets #2 – Your Income Has No Bearing on Your Credit Score
Some of the credit repair tips you’ll read online or elsewhere would have you believe that factors like income or even gender, race, or location have any bearing on your credit score. This is absolutely not true, in fact it is illegal. Individual lenders may put this in consideration with your credit score, but your credit report by itself does not track these factors in any way. Making more money is only good if you’re using the extra money to pay down debt.
Credit Repair Secrets #3 – Applying for More Credit Doesn’t Help Your Score
A few credit repair guides will say the best credit repair secrets involve applying for lots of credit to increase your overall available credit, since having more credit would reducing your debt to available credit ratio. This is not an accurate tip anymore because now the rating agencies will put a high weighting on any new credit request. Also, any individual who has a house or large car purchase will have so much in fixed debt, that any additional revolving credit increase won’t change the percentage that much after all.
Credit Repair Secrets #4 – Default on Loans to Settle with Them
This is one step that many credit repair services companies use. They tell you to default on your loans, so that once you are seriously past due, it easier for them to settle with the creditors. After you settle, theoretically, your debt will show paid as agreed on your credit report. This is a very dangerous idea, and will cause long term damage to your credit report. Lenders do not approve of this type of action, and remember, anything the lender hates is bad for your credit score.
The FICO credit score range is a summary of how you handled your credit over the last seven years. Over time companies have used statistics to estimate how people will handle their credit under different credit score ranges to determine what interest rates they would have to charge to make the loan worth the risk.
What is A Good Credit Score?
Well the perfect credit score range is 760 to 850. You won’t see many differences in offers anywhere in that range, but you’ll love every offer you see. To achieve this range you must never (in the last 7 years) ever miss a payment, use credit but pay it in full every month, and have been doing that consistently. Essentially you’re screaming to creditors “I love credit and will play your game exactly how you want me to.”
For the rest of us a good credit score range is anything north of 650. You see a significant drop in interest rates at this point.
Why the Huge Swings in Interest Rates?
The interest rates are the primary tool in battling delinquency rates. The more likely someone is to default on their loan the more you have to charge everyone similar to them to still earn your profit while writing off the bad debt. Here are the primary credit score ranges and their estimated current 30 year mortgage rates. (If you have a low credit score, you might consider taking some credit restoration steps to clean things up before applying.)
Less than 500 (89% delinquent): Not Available
500 to 549 (70% delinquent): Not Available
550 to 599 (51% delinquent): Not Available
600 to 649 (31% delinquent): 6.23% maybe
650 to 699 (14% delinquent): 5.5%
700 to 749 (5% delinquent): 4.9%
750 to 799 (2% delinquent): 4.6%
800+ (1% delinquent): 4.6%
The same credit score ranges on a car loan are even more frightening. The people who need the help getting a car loan the worse (because they really need to keep their job) are the same people getting gouged for the loan. Here are credit score ranges for a 48 month car loan and their corresponding interest rates.
Less than 500: Not Available
500 to 549: 21%
550 to 599: 20%
600 to 649: 15%
650 to 699: 10%
700 to 749: 8%
750 to 799: 6%
800+ : 6%
Before getting a loan check out which credit score range you are in and see if there is anything you can do before getting the loan to push you into the next bracket.
This economy has changed a lot of things about the landscape of American lending and credit. One of the items that has been dropped like a hot potato are mortgage bad credit no down payment loans, where individuals with bad credit can get 100% financing. The main reason for this is that these products are one of the causes of the economic meltdown – or rather, the writing of these products by banks, then the banks' sale of these product broken up into loan packages called CDOs. As jobs were lost and home fprices fell, so did the likelihood that these loans would be repaid – so banks have run as fast as possible away from offering these types of loans.
But what is a person with bad credit supposed to do? Everyone needs shelter. If you ave bad credit, and it's seriously bad say under 600, and you have no down payment, then realistically, you should be looking at renting at an affordable rate, and trying to save money. Banks will just not want to work with you, and the FHA, which guarnatees 95% of the loans in the United States, suggests a credit score of 640 as the bottom score for which you can qualify for a mortgage.
It's especially hard to find loans because no one is sure whether home prices will stabilize or go down. So, if you buy a home today with 100% financing, and the price of the home drops, you aren't the one losing equity – the lender and the government are. So lenders do not want to take the risk of taking back a home that isn't worth what they lent.
Does that mean you can't buy a house with bad credit? No. If you can get your redit score up to the 640 range, which is still considered bad credit, you can qualify for a first-time loan (if you have never had a mortgage, or haven't had one in the past 3 years). As a "first time" homebuyer, you can buy a home with 3.5% down. There will also be closing costs and fees, but if you can meet that bare minimum standard, which is still bad credit, you can get a home for almost no money down.
Be sure that if and when you do buy, you can afford it though – today, you can probably rent more house that you can buy for the same monthly payment. Make sure you do what's right fo ryou financially, and avoid continued habits – like borrowing no money down – which keep you in financial difficulties into the future!
Where do you turn when you’re desperately in need of credit repair help? Well right here at Credit Help Online of course! Seriously, the credit repair tips you need to get started are not that complicated. The worst part of having credit trouble is feeling as though there is no light at the end of the tunnel. Well, we’re here to tell you that there is, we have been through it all, and it might take time and patience, but any credit problem can be solved.
There are plenty of credit repair agencies who will offer to help you, but the fact is, you can do most if not all of it yourself. Except for a severe case, where you seriously should consider filing for bankruptcy, the steps are the same whether you do it or you hire someone to do it. If it’s going to cost you fees or time sitting in a classroom, you might want to give it a try on your own first.
We have several posts on this website that describe how to get started with repairing your credit, so we’re not going to list all of those ideas again here. But the most important thing you’ll need, not on those lists, is a change in attitude. You are having credit problems for a reason – like most Americans, you probably have used credit as another source of income, except it’s not income, it’s debt. You owe someone else, and they can take it back from you, whether through legal action, repossession or otherwise. The first step is to realize that you must live within your means. There is no other way to have a secure financial present or future.
To live within your means, you need to know how much you have coming in, and how much you have going out for expenses. To the extent you have too much going out, that it, spending too much, you need to put the brakes on, and either save that money, or redirect it to paying off debt you have already. We all spend money we don’t even think about – and that’s the second step, to stop spending without thinking about it. You should prepare a budget, which is not rocket science after all, and then stick to it. It might take you three or four months, but by making a commitment to never be in debt again, and stop struggling financially, you can do it.
So credit repair help is best when it comes from you – because you are the only one who really has a stake in fixing your own credit. And you can see all the credit repair agencies you want, if you don’t learn how to stop overspending, you’ll just find yourself in the same boat, all over again. (Believe me, we’ve been there too – making the same insane mistakes twice!) The best help is to decide once and for all you are not going to spend more than you make, and then take that next step to determine that you will know, absolutely, where you spend all of your money.
Now, the only way to know where you spend your money is to do that budget. We have a free budget form right here. It is actually very simple. You have a list of the things you need to pay for this month, starting with the items you must have, like food, shelter, heat and water, and transportation to work. (Notice I didn’t say, “luxury transportation to work”.) After that, you can list the items that are “discretionary”, meaning you can choose not to buy them in any given month. Once you know what you must spend money on, as opposed to what you want to spend on, you are on your way.
This will also tell you if you have obligations, beyond the necessities, such as credit card or loan payments, which take you above and beyond your monthly income. If you have credit payments that you can’t afford, then you REALLY need a budget! And you also need to check out the section of this blog that talks more about how to negotiate debt with your creditors.
These credit repair help ideas will get you started on your way. Have patience, promise yourself that you will make this financial change in your life, and it will impact your wealth for a lifetime.
More Americans are in need of bad credit help than ever before. With high balances on credit cards, many card holders are watching helplessly as the credit card companies hike interest rates and cut available credit. Making the minimum payment is harder than ever for some families, Plus, the impact of lower limits on credit scores means fewer Americans qualify for credit.
Even if you’re not delinquent with your bills, or facing bankruptcy or foreclosure, you still may want to get some credit help to figure out how to reduce the burden of high balances and high payments. Credit help can come from many sources, including do it yourself.
Since so many people are having trouble, the ads on television have blossomed with offers to help you with your debt burden. Many of these credit companies simply negotiate with your credit card issuer to reduce your balance or lower your monthly payments. Some horror stories are out there too, as some of these companies can be scammers. For example, one debtor had a company tell her she just had to sit and wait for seven months, not making payments, and ten the credit card companies would work with her to reduce balances. This bad advice was after she’d paid them a hefty fee! To follow this type of advice would destroy your credit score even more than it already might be.
There are some legitimate credit repair companies though. Many of these are not for profit companies, and don’t charge you high fees. They work with credit card companies to reduce your monthly payments to make them easier to afford, but generally your balances will remain the same. It’s important to note that some of these nonprofits are funded by the credit card companies! And the fact that you are working with them will appear on your credit report – a fact that some lenders will consider as bad as filing for personal bankruptcy. So, be sure to ask if that’s the case with any company you work with.
Another point is that these companies will focus on your credit card debt, which is unsecured, and would be discharged in a Chapter 7 bankruptcy. They are not as focused on working with your secured lenders, your landlord or mortgage company, and so on. They want to see if you have the money to keep paying your credit card bills.
It’s not altogether necessary for you to work with a credit agency though. Many lenders know that many Americans are having financial trouble, and they take the approach that the sooner they get an agreement in place with you, the better, before you decide to stop paying them altogether. Not all companies will work with you though to extend credit help. For some reason, there are banks out there who insist still on playing hard ball and threatening you to keep paying as agreed.
How would you go about doing a credit repair program on your own then? You can do just what the credit counseling agencies will do. First, you should have a budget. You should know how much money is coming in each month or week, and what your necessary living expenses are. Make sure that you are meeting the costs of living first – your food, rent, and utilities – before you start negotiating with your credit card companies. You probably want to work with your secured lenders too, to see if they will renegotiate your loan terms, or give you a couple months off so you can get back on your financial feet. Remember thought that secured lenders can simply repossess your car, or house, or whatever goods are securing your loan.
After you have a good picture of what money you have each month to pay unsecured bills, talk to your lenders. Let them know you can’t make payments based on their new terms, and that you want to work out a plan. If any of them refuse to work with you, then work with the ones who will. Make the others sit and wait for a payment.
Ideally you’ll want to keep your payments current, otherwise your credit score will suffer. So some of the tips here are for those of you who can’t make the minimum payments each month. If you are able to pay your minimum monthly payments, that’s great, but then you want to take steps to start chipping away at your overall debt to be able to have an emergency fund, or retirement fund, or save your money to build wealth, not just keep paying creditors.
Whether you are able to make your minimum payments or not, you should take action to earn some extra income to pay your debts off faster. Once you have all your debts current, you can start finding ways to put more than the minimum payment toward your bills. And if you’re having trouble making monthly payments, then you definitely need to find a way to make some extra cash to pay your bills.
Try selling household items you don’t need any more, using eBay or Craigslist. You might also consider selling items that are really too expensive for your lifestyle – the expensive tee vee, the expensive car, the expensive jewelry. These are items that you have traded your financial security for – and they are not worth losing everything. Selling things to raise cash is quite popular these days, and be sure to put all the extra cash you earn toward your monthly payments.
Another route is to get a second job. This economy is tough, as many people are losing their full time jobs, and part time jobs are competitive. But it’s not going to get better in the short run, so even if you have to deliver pizzas or bag groceries, you should try to earn some extra money each month.
Finding ways to make money on the internet is also an alternative. This method can be inexpensive, but does take time to build an online business. There are many websites that should you how to do this, but don’t spend a lot of money on anything until you have a chance to check it out thoroughly. There are scammers, there are “courses” which charge thousands of dollars – and none of these will help you as much as the more modest sites that really want to teach you how to build an online business. (We recommend The Keyword Academy, which has information about how to make money online with a one month trial for just $1. Worth checking out at that price!)
The bottom line is that if you are going to seek credit help, be sure to educate yourself about all the options available to you. don’t sign up with the first credit counseling agency you come across, or don’t believe what you see on television. You can find great resources on the Web for low or no cost, and can get started on your own, for free.
One of the main reasons why many Americans look to bankruptcy and other measures of debt reduction to clear their name from this debt is because statistically as a country we have a very high debt to income ratio; sometimes way over 50% per household. This ratio can prevent people from obtaining financing, establishing credit, and can also get you in a major bind with many of your own creditors. You can calculate this by taking the percentage of the debt you have versus how much income you bring home.
So how can we as whole get better with debt reduction? Having a high DTI can be a deterrent for many creditors and finance companies to want to give us any kind of chance of having credit or financing. Taking a look at your DTI involves you taking the percentage of debt versus your income.
Getting a loan approved involves having the lender calculate your debt to income ratio to show how much risk you are as a consumer. If you DTI is higher than the norm, this shows the company that you are high risk and may run into the problem of not being able to pay the creditors back in time.
Next, you will have to calculate all your debt; this includes the payments you make monthly on all outstanding balances. Do not include your utility bills, just your credit cards, car payment, mortgage, child support, personal loans, and any business loans. If you know that any of these balances will be paid off within 3 months, do not include it. Lastly, divide your monthly expenses by the monthly income and you will calculate your debt to income ratio.
Your monthly income is the first thing that needs to be determined to start this equation. Your monthly income can include child support, alimony, benefits, annuities, and your monthly wages; this will include all income that comes into the household on a monthly basis. If your income is different on a monthly basis then the lender will calculate the last six months of standard and averaged income.
The next thing to be calculated is the debt you have incurred. Debt does not include any utility bills, but it will include credit card balances, mortgage, child support, business loans, personal loans, the car payment, etc. Do not include it if it will be paid off within three months.
Finally, go ahead and divide your monthly expenses by the your monthly income. This will give you the debt to income ratio.
Example:
Monthly Income = $3500
Fixed Monthly Expenses = $1700
DTI = 58%
This debt to income ratio is very poor and shows that expenses are so high that it would be very difficult to gain any additional credit or financing.
The first step of debt reduction is always taking a look at where you currently stand, and that is through obtaining your debt to income ratio.
Looking to find the best advice on Smart Debt Repair, then visit www.smartdebtrepair.com to find the best advice on debt consolidation scams and various debt repair tips.
Right now many people are frantically trying to find out what the best credit repairactions are that they can take, as banks tighten up dramatically on the credit scores that they will approve for credit. Anyone with a score under 700 is likely not to get great credit offers, so finding a way to improve credit is really important. But best does not necessarily mean fast.
The best credit repair efforts are those that you accomplish over a few months, because credit reporting agencies update monthly, and sometimes changes you’ve made in your credit will not show up for a while. Still, taking the steps and moving along one step at a time is important so that you are rebuilding your credit. So what are some of the best steps you can take to fix your credit?
Of course you want to get copies of your credit report, and this is where just about everyone should start. Review your report to know what is on there that is damaging your score. Also, it’s key to make sure there are no errors. You can get a copy of your credit reports at http://annualcreditreport.com. This is the FREE site from the government which gets you copies of the “big three” reporting agencies reports. These are free, and you can download copies online. Start looking at these to see if there are any errors. Get all of your mistakes fixed on your reports – every error can mean a ding on your credit score. Also, check each report, as the three can each have different information.
After you look at your reports, you should be working to get all your payments current on all of your debts. Any delinquent payment, even if you’ve been on time for many months, will jam up your credit score. Do whatever you can to get current as soon as possible. This can include maybe selling off some stuff on EBay or Craigslist, throwing a garage sale, getting a part time job, or even starting something like an online business that brings in a few hundred a month. Whatever you do, try to get everything up to date.
As a last step, work hard to pay more than each creditor requires as a minimum payment every month. When you pay extra, you save a lot of money on interest payments over the life of your debt. You also get closer to paying off those debts much more quickly. Just as with getting current, find additional income if you need to, by selling some stuff, or working on the side. The best credit repair you can do is the repair steps that get you started and get your debts under control.
After you’ve declared bankruptcy, and you now have been discharged, you might be wondering what are bankruptcy credit repair actions you can take now? It’s going to be a long hard road, that’s one thing you can be sure of, to repair your credit again. If you haven’t filed bankruptcy yet, but are thinking about it, read this post before you file, you may change your mind. Bankruptcy credit repair is not impossible, but it will be tough. Here is what you can expect.
First off, it’s odd but if you’ve used a credit repair attorney they may not be the same person you’d hire as a bankruptcy attorney. A bankruptcy attorney probably has nothing for you at all after bankrutpcy to help you repair credit afterward. They got their fee, and did their job, now you’re back on your own.
Next, remember that a bankruptcy stays on your credit report for ten years. Some creditors will automatically turn you down just because they see the bankruptcy, even if it was eight years ago and you’ve paid all on time since then. That’s pretty hard to overcome. This means you just have to sit there and keep current on everything for ten long years.
As for your credit score, a personal bankruptcy will affect your credit score for sure, but by the time you get to file bankruptcy, your score has already been so damaged by late payments, the bankruptcy itself isn’t going to lower your score a whole lot more. Still, going forward, it won’t be easy to get your score up due to the bankruptcy, which shows up as a public record on your credit report.
You will also see than next to every single debt you discharge in bankruptcy, there will be an entry on your credit report that says “Discharged in Bankruptcy”. Guess what? For a lender, that’s like waving a red flag in front of a bull. All they can see is that long list of lenders and creditors who got “discharged in bankruptcy” and lost all the money that they lent to you. So going after bankruptcy credit repair may be futile ins some degree as long as that mark appears.
However, some lender and other creditors will cut you a break after a couple of years. While many banks won’t take the same risks today that they took just a few years ago, with people with bad credit on their records, after two years of paying everything you have left on time, you can possibly see some improvement in your credit score. You may have some debts, like a student loan, that you didn’t discharge, that you are still paying. Or you “reaffirmed” a car loan ( meaning you didn’t default and lose the car but continue to make payments) then be sure you keep paying those on time no matter what, so you can rebuild your credit in some fashion.
If you have any debts at all you are still paying, one method for bankruptcy credit repair you must follow is to pay those on time every single month. If after your bankruptcy there is even a hint that you are falling behind again, you will be in big trouble. You can’t just refile bankruptcy either, you have to wait a period of time before you can do another filing. So don’t stock up on a lot of new debt just because your credit record has been wiped clean. (Not that banks will be beating down your door to lend you money anyway!)
Finally, this might be a good time to stay out of debt once and for all. When economic trouble hits, its people who are in debt who have the most trouble from possible job losses, or higher living costs, because those monthly payments are still hanging over their heads. In addition, it becomes nearly impossible to build real family wealth while a chunk of your paycheck goes to pay debts every month, instead of into the bank where it can earn interest or grow in the stock market or other investments. When you are paying off debt, you are making someone ELSE rich! Why not stay out of debt, now that you have cleared the slate, and start making yourself rich instead?
These basic bankruptcy credit repair efforts, while they will take some time, will eventually get your credit back on track – but you might find you don’t really need to get in debt again after all.
