Your credit health isn't just about the here and now. The future of your credit health largely depends not only on how you manage the debts you have at the present time but also what kind of debt you incur in the future.
First things first: Do some investigating into your spending / charging habits. Review some of your recent bills and even some not-so recent bills, if you have access to them. Notice patterns of charging. Where were you? What did you charge? What was your reason for purchasing that item?
Second thing: Determine what were your "triggers" or impulsive purchases.
Tips for the Future of Your Credit Health
- Immediately opt out of regular e-mail advertisements from your favorite catalog store.
- Cancel your subscription to mail-order catalogs.
- Pump gas outside of the gas station/convenience station. If you do not go inside, you cannot be tempted by gourmet coffees, prepared foods, or anything else you might see and wish to purchase once inside the store. Make it a hard and fast rule that you will charge gas, from now on!
- Ask to pay up front or receive a bill in the mail for regular services such as newspaper delivery, health club charges, and magazine subscriptions. Allowing companies to retain your credit card number on file and giving them full renewing access in this manner makes it all too easy for you to miss additional charges, increased fees, among other charges that you may miss due to not reviewing these charges on a regular basis. If it is on paper in front of you, you will quickly notice unauthorized or new charges and can rectify the situation. Get into the habit of reviewing before renewing!
- Immediately implement a "waiting period" for purchases that are going to challenge your budget. From now on, tell yourself that there will be a 4-day waiting period prior to making any large purchases, and especially those that you intend to charge.
- If it requires dry cleaning, forget it - unless you absolutely must have it for work. On top of interest that you will pay for charging this item, you are also signing up for an additional regular expense - dry cleaning - if you purchase this item.
- Write to your credit card companies and tell them very simply that from now on, you only wish to receive the bill - - no more promotions included with the monthly bill.
- Don't charge your homeowner's insurance and annual real estate tax bills. Instead, create your own "escrow account" where you will pay the necessary monthly amounts for each into that account so that at the end of the year, you will have the funds necessary to pay for those items. If you cannot afford to do this, then you need to start being much more frugal with your funds, and no more unnecessary spending. No Exceptions!
Thursday, July 31, 2008
Wednesday, July 16, 2008
Credit Questions Answered
Will Your Credit Score Improve If You Pay Off Delinquent Accounts?
When accounts are not paid on time or go unpaid, it is reflected in your credit score.
A common misunderstanding is that if you pay off these delinquent accounts, your credit score will be restored to what it was prior to becoming delinquent on these accounts. Unfortunately, that is not how the credit bureaus operate.
Your credit score suffers not because the accounts are in and of themselves delinquent but because you ever had a delinquent. Therefore, getting rid of the evidence, so to speak, doesn't erase the fact that you were delinquent on an account.
Only the passage of time and a history of on-time payments erases the damage done by having delinquent accounts.
So, the answer to this is "Yes", but the rest of the answer is two-fold: Pay off delinquencies but then wait it out.
Can These Two Items Be Considered Together But Separate - Income and Credit ?
"Huh?, " you may be asking.
Believe it or not, this question is asked all of the time. You may have wondered it in the past or may be wondering about it right now.
It is most likely a couple who are looking to purchase a home. One has a great employment and income history, and the other has a great credit score. Neither potential borrower has both great employment and a great credit score.
The answer is "No". A borrower with excellent credit who cannot demonstrate the ability to pay the mortgage being asked for is of no use. Your employment / income and credit history cannot be separated.
When accounts are not paid on time or go unpaid, it is reflected in your credit score.
A common misunderstanding is that if you pay off these delinquent accounts, your credit score will be restored to what it was prior to becoming delinquent on these accounts. Unfortunately, that is not how the credit bureaus operate.
Your credit score suffers not because the accounts are in and of themselves delinquent but because you ever had a delinquent. Therefore, getting rid of the evidence, so to speak, doesn't erase the fact that you were delinquent on an account.
Only the passage of time and a history of on-time payments erases the damage done by having delinquent accounts.
So, the answer to this is "Yes", but the rest of the answer is two-fold: Pay off delinquencies but then wait it out.
Can These Two Items Be Considered Together But Separate - Income and Credit ?
"Huh?, " you may be asking.
Believe it or not, this question is asked all of the time. You may have wondered it in the past or may be wondering about it right now.
It is most likely a couple who are looking to purchase a home. One has a great employment and income history, and the other has a great credit score. Neither potential borrower has both great employment and a great credit score.
The answer is "No". A borrower with excellent credit who cannot demonstrate the ability to pay the mortgage being asked for is of no use. Your employment / income and credit history cannot be separated.
Tuesday, June 17, 2008
Are You Really Ready for a Mortgage?
There are some general guidelines for most mortgage loans, and they are as follows:
CONSIDER YOUR CREDIT HISTORY
BANKRUPTCY: Most lenders want to see a minimum of two (2) years since final discharge date.
FORECLOSURE: The majority of lenders are looking for a minimum of three (3) years since foreclosure was finalized.
LATE PAYMENTS: Late payments for installment loans or credit card accounts usually only appear on a credit report if a payment, or minimum required payment, is 30 days late or more. Most lenders are looking for a minimum of 12 months (1 year) with no late payments on a credit report. If your credit has been excellent for years, and a minor late payment occurs, you may be able to provide an explanation (i.e., thought you paid it online, misplaced the bill and due date passed before you remembered the bill, etc.). Some explanations really are accepted by lenders.
Lenders also usually check with landlords for a borrower's rental payment history for at least the past two (2) years for renters to verify timely payments. Be sure to ask your landlord to document your rental history, and double-check to be sure that the lender is considering any prior rental payment history so that you can gain the lender’s trust with respect to your creditworthiness.
DEFAULTED STUDENT LOANS: Keeping up payments on your student loan(s) can make or break you with prospective lenders. When any government guaranteed student loan is in default, it can and in most cases will disqualify a person for a mortgage.
If you can show the lender that a loan repayment schedule has been renegotiated and payments have been made on time for at least one (1) year, the history of the defaulted loan might not keep you from getting a mortgage.
COLLECTIONS: Collection accounts can and do eventually catch up with you if you apply for a mortgage before the statute of limitations runs on the debt, and it is removed from your report. A lender and title company, for that matter, will make sure that all collection accounts are repaid before qualifying for a mortgage loan.
Note: Pull your own credit report to examine it for any collection accounts and/or discrepancies. If you find discrepancies, immediately file a dispute (report it) with the appropriate credit reporting agency.
If you find valid collection accounts, and if you do not have the funds to repay those debts in addition to making a down payment on a home purchase together with closing costs and any other costs that may arise in the process of purchasing your home, it is best to wait before applying for a mortgage.
JUDGMENTS: If you even think that there may be judgments or liens that you are responsible for, check with your local clerk’s office at the courthouse (and other locale that you have resided) as you will be required to pay these accounts in full as well prior to qualifying for a mortgage.
In cases of court ordered child support payments, the payments must be caught up and current.
CONSIDER YOUR INCOME
SELF-EMPLOYMENT AND COMMISSION-BASED INCOME: If you are self-employed or a commission-based professional, unless you have been making a living this way for a minimum of two (2) years, the lender may not be able to qualify you for a mortgage. Of course, there can be some exceptions; however, that will depend on the lender that you are currently working with.
OVERTIME AND BONUS INCOME: Generally, a lender can use overtime or bonus pay as "qualifying" income if you have a history of overtime or bonus pay from your current employer for at least one (1) to two (2) years, and one (1) year is being optimistic. Two (2) years is generally the best guideline. However, your employer will have to verify the number of overtime hours or anticipated bonus income that is likely to continue for it to be used as "qualifying" income.
INCOME FROM A SECOND JOB: If you are working a second job to supplement your primary income, the income from your secondary job can be considered “qualifying income” only if you have had a continuing history of working your second job for at least two (2) years.
CHILD SUPPORT INCOME: Child support “income” needs to be received consistently to be used as "qualifying" income. A lender will typically want to see a history of payments; therefore, if you are just recently receiving child support payments, you may not be able to persuade a lender to consider your newly awarded child support as "qualifying" income.
LAWSUITS OR PENDING DIVORCE: If you are being sued, or perhaps involved in a pending divorce (the divorce has not yet been made final by the Court), most underwriters for mortgage companies are not going to approve a mortgage application. Due to various laws governing marital property and marital debt and those laws varying from state to state, a careful lender is not going to want to be entangled in a later legal battle that questions who has legal title to the property or “whose debt is this anyways?” Therefore, if you are filing for divorce, have recently filed for divorce/been served with divorce papers, or are awaiting the Court’s Decree stating that you are divorced, you will need to wait to purchase a home.
CONSIDER YOUR CREDIT HISTORY
BANKRUPTCY: Most lenders want to see a minimum of two (2) years since final discharge date.
FORECLOSURE: The majority of lenders are looking for a minimum of three (3) years since foreclosure was finalized.
LATE PAYMENTS: Late payments for installment loans or credit card accounts usually only appear on a credit report if a payment, or minimum required payment, is 30 days late or more. Most lenders are looking for a minimum of 12 months (1 year) with no late payments on a credit report. If your credit has been excellent for years, and a minor late payment occurs, you may be able to provide an explanation (i.e., thought you paid it online, misplaced the bill and due date passed before you remembered the bill, etc.). Some explanations really are accepted by lenders.
Lenders also usually check with landlords for a borrower's rental payment history for at least the past two (2) years for renters to verify timely payments. Be sure to ask your landlord to document your rental history, and double-check to be sure that the lender is considering any prior rental payment history so that you can gain the lender’s trust with respect to your creditworthiness.
DEFAULTED STUDENT LOANS: Keeping up payments on your student loan(s) can make or break you with prospective lenders. When any government guaranteed student loan is in default, it can and in most cases will disqualify a person for a mortgage.
If you can show the lender that a loan repayment schedule has been renegotiated and payments have been made on time for at least one (1) year, the history of the defaulted loan might not keep you from getting a mortgage.
COLLECTIONS: Collection accounts can and do eventually catch up with you if you apply for a mortgage before the statute of limitations runs on the debt, and it is removed from your report. A lender and title company, for that matter, will make sure that all collection accounts are repaid before qualifying for a mortgage loan.
Note: Pull your own credit report to examine it for any collection accounts and/or discrepancies. If you find discrepancies, immediately file a dispute (report it) with the appropriate credit reporting agency.
If you find valid collection accounts, and if you do not have the funds to repay those debts in addition to making a down payment on a home purchase together with closing costs and any other costs that may arise in the process of purchasing your home, it is best to wait before applying for a mortgage.
JUDGMENTS: If you even think that there may be judgments or liens that you are responsible for, check with your local clerk’s office at the courthouse (and other locale that you have resided) as you will be required to pay these accounts in full as well prior to qualifying for a mortgage.
In cases of court ordered child support payments, the payments must be caught up and current.
CONSIDER YOUR INCOME
SELF-EMPLOYMENT AND COMMISSION-BASED INCOME: If you are self-employed or a commission-based professional, unless you have been making a living this way for a minimum of two (2) years, the lender may not be able to qualify you for a mortgage. Of course, there can be some exceptions; however, that will depend on the lender that you are currently working with.
OVERTIME AND BONUS INCOME: Generally, a lender can use overtime or bonus pay as "qualifying" income if you have a history of overtime or bonus pay from your current employer for at least one (1) to two (2) years, and one (1) year is being optimistic. Two (2) years is generally the best guideline. However, your employer will have to verify the number of overtime hours or anticipated bonus income that is likely to continue for it to be used as "qualifying" income.
INCOME FROM A SECOND JOB: If you are working a second job to supplement your primary income, the income from your secondary job can be considered “qualifying income” only if you have had a continuing history of working your second job for at least two (2) years.
CHILD SUPPORT INCOME: Child support “income” needs to be received consistently to be used as "qualifying" income. A lender will typically want to see a history of payments; therefore, if you are just recently receiving child support payments, you may not be able to persuade a lender to consider your newly awarded child support as "qualifying" income.
LAWSUITS OR PENDING DIVORCE: If you are being sued, or perhaps involved in a pending divorce (the divorce has not yet been made final by the Court), most underwriters for mortgage companies are not going to approve a mortgage application. Due to various laws governing marital property and marital debt and those laws varying from state to state, a careful lender is not going to want to be entangled in a later legal battle that questions who has legal title to the property or “whose debt is this anyways?” Therefore, if you are filing for divorce, have recently filed for divorce/been served with divorce papers, or are awaiting the Court’s Decree stating that you are divorced, you will need to wait to purchase a home.
Thursday, April 24, 2008
So, You've Been Denied
You've applied for a loan, and you've been denied. Your score is too low. "Now what?", you may ask.
You've followed all of the tips listed earlier, or perhaps these tips do not apply to your particular situation.
Have you paid off all of your credit card, auto loans, and not making any monthly payments? Do you not even have a credit card or auto loan at this time? Perhaps it is time to boost your credit score by making on-time payments on either a small installment loan (that you could get through your bank) or on a credit card. Whatever you do, try to avoid borrowing money from a consumer finance company.
If you have long-time and established credit cards but are not using them, then use one for gas and one for groceries and pay off each month. Pay them off early, too.
If your cards are nearly maxed out or over about 40% of the credit available, this could present a problem for your credit score. One option in resolving this is to call your credit card companies and request a credit line increase on your credit card. If you are making on-time payments and have been making on-time payments for a couple of years, make your request based solely on your payment history. That being said, you can request they only review your payment history. If they raise the limits, that will change your debt to credit ratio, and therefore, that will improve your credit score.
A problem to watch for and something to rule out: If you are using your credit card and charging up massive amounts each month even if you are paying off the balance in its entirety each and every month, if your most recent payment is not reflected, your credit score may not be accurate at the time of the credit pull.
Look at all three of your credit reports right now. The fewer the addresses and the fewer the employers that are listed, the better. Old addresses and former employers - outdated information - is also material for a request to the bureaus to have these inaccurate statements removed. Just treat the requests as you would any other dispute.
You've followed all of the tips listed earlier, or perhaps these tips do not apply to your particular situation.
Have you paid off all of your credit card, auto loans, and not making any monthly payments? Do you not even have a credit card or auto loan at this time? Perhaps it is time to boost your credit score by making on-time payments on either a small installment loan (that you could get through your bank) or on a credit card. Whatever you do, try to avoid borrowing money from a consumer finance company.
If you have long-time and established credit cards but are not using them, then use one for gas and one for groceries and pay off each month. Pay them off early, too.
If your cards are nearly maxed out or over about 40% of the credit available, this could present a problem for your credit score. One option in resolving this is to call your credit card companies and request a credit line increase on your credit card. If you are making on-time payments and have been making on-time payments for a couple of years, make your request based solely on your payment history. That being said, you can request they only review your payment history. If they raise the limits, that will change your debt to credit ratio, and therefore, that will improve your credit score.
A problem to watch for and something to rule out: If you are using your credit card and charging up massive amounts each month even if you are paying off the balance in its entirety each and every month, if your most recent payment is not reflected, your credit score may not be accurate at the time of the credit pull.
Look at all three of your credit reports right now. The fewer the addresses and the fewer the employers that are listed, the better. Old addresses and former employers - outdated information - is also material for a request to the bureaus to have these inaccurate statements removed. Just treat the requests as you would any other dispute.
Sunday, April 6, 2008
5 Ways to Boost Your Credit Score
Hello Folks. Here are five ways to boost your credit score that are probably pretty obvious to you but are worth repeating on a regular basis. I am thinking of these ways to boost your credit score off the top of my head so the order is not important.
1. Pay your bills on time! I don't think there is anything more important than this one tip. If you are in the habit of paying bills late, you will never be able to boost your credit score. If you are reading this post, you obviously have a computer and there is also a good chance that you have access to your bank accounts online. If so, do yourself a favor and get in the habit of paying your bills online through your banks "online bill pay" service.
There are several advantages to paying your bills online that can help boost your credit score. First, your bills are paid instantly when done online. No more putting the bill in the mail and hoping it arrives on time or at all. Second, it saves money. You don't need to buy stamps or waste gas driving to the post office.
2. Pay more than the minimum due. This can boost your credit score all by itself because it shows the credit bureaus that you actually want to pay off your credt at some point. It takes years and years to pay off debt when only paying the minimums but you can shave years off the payoff by sending just a little bit more each month.
3. Don't max out your credit cards. It's okay to have a balance but try not to let it get beyond 50% of your available credit line. In order to boost your credit score, you need to get your balances below the 50% level but realistically any drop in your debt/credit ratio is a good thing.
4. Keep old credit accounts open. You may be thinking that having some old credit card in your wallet that never gets used is hurting your credit score by showing as an open account. In fact, the longer an account is open, the more boost to your credit score you'll receive. Credit bureaus like to see a long credit history. To boost your credit score even more, use that old credit card once in a while and then pay off the balance over a few months. You may pay interest on the purchase but you will boost your credit score by showing you are a responsible borrower.
5. Don't buy things you can't afford. Even though you may have a credit card or equity line available to you that enables you to purchase that hot tub you have been coveting, unless you can afford to pay for it cash or save for it over a few months, don't buy it. It is too easy to get in over your head with credit and before you know it you start missing payments and your credit takes a nosedive. Remember, your goal is to boost your credit score, not sink it.
Next time I will tell you how to boost your credit score even if you have serious problems on your credit report.
1. Pay your bills on time! I don't think there is anything more important than this one tip. If you are in the habit of paying bills late, you will never be able to boost your credit score. If you are reading this post, you obviously have a computer and there is also a good chance that you have access to your bank accounts online. If so, do yourself a favor and get in the habit of paying your bills online through your banks "online bill pay" service.
There are several advantages to paying your bills online that can help boost your credit score. First, your bills are paid instantly when done online. No more putting the bill in the mail and hoping it arrives on time or at all. Second, it saves money. You don't need to buy stamps or waste gas driving to the post office.
2. Pay more than the minimum due. This can boost your credit score all by itself because it shows the credit bureaus that you actually want to pay off your credt at some point. It takes years and years to pay off debt when only paying the minimums but you can shave years off the payoff by sending just a little bit more each month.
3. Don't max out your credit cards. It's okay to have a balance but try not to let it get beyond 50% of your available credit line. In order to boost your credit score, you need to get your balances below the 50% level but realistically any drop in your debt/credit ratio is a good thing.
4. Keep old credit accounts open. You may be thinking that having some old credit card in your wallet that never gets used is hurting your credit score by showing as an open account. In fact, the longer an account is open, the more boost to your credit score you'll receive. Credit bureaus like to see a long credit history. To boost your credit score even more, use that old credit card once in a while and then pay off the balance over a few months. You may pay interest on the purchase but you will boost your credit score by showing you are a responsible borrower.
5. Don't buy things you can't afford. Even though you may have a credit card or equity line available to you that enables you to purchase that hot tub you have been coveting, unless you can afford to pay for it cash or save for it over a few months, don't buy it. It is too easy to get in over your head with credit and before you know it you start missing payments and your credit takes a nosedive. Remember, your goal is to boost your credit score, not sink it.
Next time I will tell you how to boost your credit score even if you have serious problems on your credit report.
How To Boost Your Credit Score
Welcome to How to Boost Your Credit Score. This site provides tips and techniques to boost your credit score in order to improve their credit rating. If you have questions not covered in How to Boost Your Credit Score please feel free to leave a comment.
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