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Most of us want a good credit report to obtain automobile financing, credit cards, and to purchase a home. But, beyond these consumer loans, your credit report can cost you in everyday living expenses. What you don’t know about your credit could be costing you money.

Having a credit card means that you can order tickets, rent a car, and reserve hotel rooms. Besides these conveniences, your credit report can mean that you must pay higher deposits and fees for everyday services.

Did you know that your credit history can keep you from getting utility connections, good telephone rates, the best auto insurance, home owner?s insurance, or even keep you from getting hired?

Some utility companies set minimum standards for service connections. If your report shows collection accounts for prior utility bills, you may not be eligible for service at all. And if utility companies do agree to connect your service, you’ll need to pay a higher deposit than another customer with good credit who may not need to make any deposit.

The same requirements exist for telephone services. People with a good credit history don’t need to pay deposits for home telephone or cell phone services. When we first got a cell phone with poor credit scores, we had to pay a $300 deposit, for one cell phone. After fixing our credit, we got eight cell phones for our business, with zero deposits.

What many people don’t realize is that good credit enables them to get better insurance rates. High-quality, low-cost home owners? insurance, auto, and life insurance companies set minimum credit standards for their policy holders; this means that consumers with poor credit have to pay more for less coverage. Many automobile insurance companies now base your monthly premiums on your credit score; these companies offer a 17% discount if your score is over 625 and a 25% discount if your score is over 725. Why? Because according to their studies, people who are careful with their credit are also careful with their property and careful drivers.

Bad credit can cost you a job. More and more employers run an applicant?s Read more…

Credit needed for real estate mortgage financing differs from credit needed for consumer loans. If you need help getting a home mortgage, these credit tips will help you.

Contrary to what many credit advisors say, paying off credit cards each month is not always the best action to take. When making credit card payments, don’t pay the balance in full each month — let a little roll over. Carry a balance on your credit card every other month –as little as a dollar. Paying balances in full does not increase your credit score; paying balances in full may in fact lower your credit score. Accounts with zero balances do not compute significantly in your total score. For instance, a credit card with a perfect payment history and no balance will not raise your credit score as much as a credit card with a low balance. Any balance keeps the card active so it computes in your credit score.

You most likely have been advised to cut up your credit cards and close your accounts. Following this advice degrades many credit scores.

Canceling Credit Cards

Canceling credit cards can lower your credit score. Keep your longest-term credit card account open to show long-term credit history. If this account has prior late notations, negotiate with the creditor to drop negative reporting on your credit history file. Slowly close out newer accounts after they are paid off. Keep your best accounts open — those paid on time or reporting “pays as agreed” and with the longest history.

Credit card companies may raise your rate if you cancel a card before it is paid off; it is best to keep accounts with outstanding balances open until you pay them off.

Perfect Balance of Credit

1. Mortgage over one year old with all payments on time

2. Visa Card or Master Card with less than 10% of available credit as balance due

3. Discover or American Express Card with less than 10% of available credit as balance due

4. Auto loan either paid off or paid down with low payments compared to monthly income.

Debt-to-Income Ratio

Credit scores do not reflect income — credit bureaus do not have income reported to them. However, real estate lenders look at the consumer debt-to-income ratio — the amount of monthly debts in relation to the amount of earnings. Consumer debt is more highly regarded/scores higher if total debt is under 20% of net income, or total monthly payments on all debts is less than 35% of monthly gross income.

Qualifying Ratios

Lenders want the total debt ratio (the percentage of total monthly payments, including the new mortgage, to income) to be less than 33% for a typical conventional mortgage. This means the Read more…

When you buy real estate, lenders run all of the “big three” credit bureau reports. Each credit reporting agency lists your credit history as supplied to them by the individual lenders and includes governmental records. Each report assigns a credit score number to you. The credit scores reflect your theoretical risk of default to the lending institutions.

Software developed by Fair Isaac and Company generates your “FICO score.” Experian uses a system called Fair Isaac Risk Model, a computer program which rates you with a score according to Experian?s information. Equifax bases scores on BEACON programs and TransUnion bases scores on EMPIRICA models.

Your Baseline

You have three credit scores, often called FICO scores, one from each credit bureau. The lender takes the middle score as your baseline. Lenders have different standards, but generally a “C” score is around 500 to 600, a “B” is around 600 to 680, and an “A-” is above 680. Over 700 is the magical number that gets you the attention you desire. If your score is under 500, find someone to privately finance for you or a partner with good credit while you work on improving your score.

How Lenders Rate You

Credit score Available mortgage financing
720 – 800 Superb! You get what you want
700 – 719 Wonderful! You get top rates

The process of clearing credit can be laborious and frustrating. Understanding your rights empowers you and saves you time and effort. By employing the following tips, you can enlist the help of credit reporting agencies (CRAs) as you work to improve your credit rating.

A negative credit report hinders your quest for financing a house. You will have to do a lot of tedious work to clear up any mistakes in your credit report, but remember that CRAs are required by law to protect your rights. They must remove undocumented information on your report.

Once you receive your reports, you will be given a phone number to discuss your report with a real person. Your gentle manners and pleasant conversations with the credit bureau employees will motivate them to help you more than angry words. Remember, these people are just doing their job and they get yelled at day after day by frustrated consumers.

Double-D Line of Attack

Dispute Discrepancies and Document

Complete the dispute form provided with your credit report and write a letter for all discrepancies to both the creditor and the credit bureaus listing the item. Identify each error by their corresponding account number and state why it’s wrong. Include a photocopy of your credit report with the errors circled with your dispute form and letters. Send copies of your supporting documents. Keep your letters in your computer in case you need to write again.

Document, document, document

Keep copies and records of all the dispute forms, letters, and supporting documents that you send. In extreme cases this proof is used by attorneys for settlement or in court.

Credit bureaus must investigate disputes within 30 days of receiving your Read more…

Let’s be crystal clear, right up front. Paying someone to “fix” your credit is a waste of your time and money, since the negative issues that are temporarily removed from your file will only reappear again in a couple of months.

Be careful with credit repair scams.

Most “credit repair” companies really don’t help. In fact, you can improve your credit more effectively on your own. By using credit repair companies, you may also be opening yourself up to identity theft, unsolicited emails, and direct mailings. Protect yourself; don’t ever share your personal information with strangers or give up your right to handle your own financial affairs as you see fit.

Another important point: credit counselors only promise to get you out of debt, not to improve your credit. Some companies will have you send them a check every month, out of which they’re supposed to pay your creditors for you. However, some credit counselors will often pay your bills late, which means that your credit report soon becomes filled with “over 30 days late” notations and your credit score drops even lower than it was.

“Debt negotiators,” posing as non-profit organizations, can ruin your credit even further, advising you not to pay your credit card bills at all. They also charge upfront fees, maintenance fees, and monthly fees, all of which are supposed to be placed in a “trust” account. Then, after many months have passed, debt negotiators finally convince creditors to settle for less money than was owed, making yours an “uncollectible account.”

That tactic not only ruins your credit, due to the many “over 90 days late” remarks and collections notations, but all the money you supposedly saved — which was actually money you owed — will be considered as income by the IRS! In other words, if you owed $20,000 and settled for $12,000, you’d be required to list the $8,000 difference as income!

Credit repair companies promise to help clear up your credit problems. They write letters to credit bureaus, stating that various listed information is false, so the agencies will remove that information while they investigate your account. During that time, the credit repair company sends you a clean credit report, thereby giving you the false impression that Read more…

1. Payment History — 35%

The number of accounts paid as agreed and a good payment history give you a higher score.

Negative points lower credit scores because of 30 days, 60 days, and 90 days late on any debt. The dollar amount of these delinquencies also impacts credit scores. Severity of delinquency, how long past due, and number of delinquencies are nasty remarks on some credit reports. The older these derogatory items are, the less impact they have on credit scores. You do not want any present delinquent accounts when applying for a real estate loan.

Never, ever pay a mortgage payment more than 30 days late. Lenders do not like to see any delinquencies on real estate loans.

Adverse public records, such as bankruptcy, judgments, suits, liens, and wage attachments negatively dominate credit history. Any of these items cleared up helps improve a credit score, unless the item is aged. The older the derogatory entry, the less the impact. Any activity on a particular item makes the item update and therefore, remain on the report for another seven years. So, if a derogatory item is more than four or five years old, don?t bother with it.

Collection items unfavorably shape credit payment history. The more age a collection account has, the less its consequence. Most mortgage companies require that collection accounts be cleared before lending. If this is your problem, see ?Help with Collections? later in section six.

2. Proportional Amounts Owed — 30%

The amount owed on a credit line compared to the available credit is termed the proportional amount owed. With a credit card limit of $5,000, the score will be higher if less than $2,500 is owed. Even better is to owe less than 1/3rd of the available credit or less than $1501. To have the highest proportional amounts owed scoring factor, owing less than ten percent of the available balance gives you the best possible rating. On the other hand, owing over $4,500 on an account with a limit of $5,000 lowers your score significantly, especially if you have too many credit cards and other loans with high balances compared to available balances.

Tip: Call your creditor and ask them to raise your available credit as long as you don?t use this credit. This raises your proportional amount owed scoring factor.

To raise your credit score dramatically and quickly, pay down as much as possible on each credit line instead of paying off one credit card at a time. If a credit card is totally paid off, it does not compute in the proportional amount owed; therefore your rating does not benefit from paying balances in full. On the contrary, paying balances in full takes the account out of the equation and you don?t get higher points for the low proportional amount owed.

3. Length of Credit History — 15%

Any account over twelve months with a good payment history helps a credit score if the balance is not too high compared to the available credit. Six months is the minimum length of time to establish credit. The time since accounts opened and the time since account activity are factored into the length of credit history.

4. New Credit — 10%

Whenever you apply for a new credit line, your score receives a negative hit. The more Read more…

We’ve all seen the ads on television or in magazines, shouting, “Erase bad debt!” or “Remove negative entries from your credit report!” If you’re a person suffering from a less-than-stellar credit rating, those headlines may seem like the answer to a prayer.

The only problems is, those programs don’t work, and to add insult to injury, you’ll find yourself paying hefty fees to those companies, only to end up right where you started, or worse. Sometimes, what is couched as a credit repair program may actually be an attempt to steal your identity by gaining information about your social security number, bank accounts, and credit cards.

Here?s how the credit repair scam generally works:

First, the company will contact the various credit bureaus and tell them that the negative information contained in your files is false. Since they want to accurately reflect your credit information, the credit bureaus will temporarily remove the negative information while they investigate the claims. Meanwhile, the scammer sends you a copy of your credit file, showing that the negative information has been removed, claiming that your credit history has now been repaired.

It will seem like a miracle, until you learn that as soon as the credit bureaus have completed their investigation, any accurate negative information will be returned to your credit report, and you’ll be back where you started, minus the fees that you paid to the scammer.

The key concept to remember when it comes to your credit report is that accurate entries will stay on that report for seven years from the time they’re reported to the credit agencies. Bankruptcies stay Read more…

The process of clearing credit can be laborious and frustrating, but your efforts will be paid for in better financing. Your rights are protected by laws, but you need to take reasonable actions toward your goal of clearing credit discrepancies. You can get the credit reporting agencies to help you instead of hindering your excellent credit quest with these tips.

1. Order credit reports.

2. Check for discrepancies.

3. Note problems and discrepancies in your Credit Dispute Log.

4. Contact disputed companies by telephone. (Contact original debtors, not collectors.)

Log the telephone call with a brief summary of agreements.

Remember to record the name of the contact representative.

5. Follow up with certified letter to original company.

6. Write letters to collectors, dispute bill, send documentation of payment to original company.

7. Fill out dispute form provided by credit bureau.

8. Write separate letter for each disputed item to credit bureaus.

Send letters by certified mail.

Enclose copies of supporting documentation.

9. Use the number provided by the credit bureau Read more…

If you can’t sleep at night because of credit card debt worries, you’re not alone. Many people get in over their heads charging things they think they can’t live without.

You don’t need to cut up all of your credit cards. Save your major bank cards, but stop charging needless temptations on them. You need a couple of major bank credit cards to maintain or build strong credit scores.

The credit cards you should cut up, department store credit cards, cost you too much in interest. Plus, these types of credit cards lower your credit scores. When mortgage lenders compute your credit worthiness for real estate financing, they deduct points for unfavorable department store credit lines.

Here are a few things you shouldn’t charge on your credit cards:

1. Gasoline. Why charge something that gets burned up before you pay for it? Think about how much per gallon you pay when you pay interest.

2. Food. Many people use their credit cards to purchase groceries that they pay for over the next year or longer. Also, because it’s so easy to pay with plastic, they buy extravagant and unneeded items. What’s more important–junk food or a good night’s sleep?

3. Clothes. Think before you buy clothes on credit. Don’t charge clothes on your credit cards unless you can pay them off right away. Children’s clothes wear out or they outgrow them before you’ve Read more…

It’s one of the most frustrating situations that a homeowner can face. You’ve decided to move, yet you can’t make that move until your current home sells. Then, for one of a number of reasons, buyers just don’t seem interested in buying your home. It happens all the time, and though it’s frustrating, the reasons are generally fairly straightforward. Here are several of the most common reasons that homes sit on the market longer than they should.

First, your asking price may be too high. This is the most common reason that a home doesn’t attract buyers. Homebuyers are often some of the most savvy shoppers in the world, because buying a home is generally the most expensive purchase a person will ever make. That means they shop hard and they know what homes are worth in their target area. If yours is out of line with those prices, it will sit on the market while others are snapped up by eager buyers. So check your price regularly against the competition.

Make showing easy. Sometimes the difficulty lies in how hard it is for potential buyers to view your home. If you or your listing agent insists on being home each time it’s shown, that means many viewing opportunities will be missed. If you want your home to sell quickly, it needs to be seen by as many buyers and selling agents as possible, so make it convenient for them to visit if you want a faster sale.

Another common reason a home doesn’t sell is its condition. Homebuyers know what they can get for their money, and they have an idea how much it will cost to repair or upgrade a home. So it your home needs work, you have a couple choices. You can either make the necessary repairs or adjust your sales price to reflect what it will cost to make repairs. Either way, you’ll improve your chances of selling your home more quickly.

However, be aware that many people won’t look at a house that’s advertised as a fixer-upper or as-is. The vast majority of folks want to be able to move in and begin enjoying their new home without having to do any substantial repair or upgrade. Therefore, it’s generally more desirable to make the repairs before you list your Read more…