Tips & Tools : credit

Credit and Forget It

RE.com Tips & Tools — Thu, 25 Jun 2009 13:03:00 GMT

By Aldo Singer, 123Movers.com

The process of moving into your new home or apartment actually begins years before that event has taken placed. You can’t rent an apartment or find yourself a home if you don’t have good credit. Establishing good credit is one of the cornerstones to a happier life because if you can afford a nice home, chances are you’ve got good credit. Getting to the good credit point of your life starts off slow but there are ways to know that you’re going in to the right direction.

When you’re starting, probably while you’re in college its best to get any credit card you can. I say that because it’s going to be hard to get any kind of credit card when you do not have any credit to go on. Some credit cards you may be able to get are a secured credit card or a prepaid credit card. These cards will help you build on your credit report slowly.

You should also have a savings and checking account in place so the creditors can keep an eye on your funds. There is no point in giving someone a credit card if they don’t have money to spend.

If you’re still having trouble getting a credit card and you’ve been constantly turned down, you should look into being added on to someone else’s credit card account. This can help you build credit as well but it also makes you liable for the other person and vice versa. If the other person on the card or the ‘account holder’ is making charges that neither of you are going to be able to pay, your both going to be held responsible for those charges. You can’t run away from those charges.

When you receive your bill with those large charges you must make a payment to keep building on your credit.

Two of the most important factors of building good credit are paying your bills on time and how much of your actual credit that you’re using. Even if you can’t pay your bill in full (which is the #1 way to build fast credit) you should pay the minimum payment at least. It shows your making an effort.

It is recommended that you use at least 1/3 of your credit availability. Spending $50 a month isn’t going to make your credit score jump very high within a short period of time.

Before you realize it, it’ll be time to move out of your parent’s house and into your new home you should have a solid credit score if you’ve followed the aforementioned tips.

One more thing, probably the most solid tip to live by as much as you can is to never spend more than you make. If you do you’ll find yourself in loads of debt, the exact opposite record of building credit.

Step 1: Checking Your Credit

RE.com Tips & Tools — Thu, 25 Jan 2007 19:33:00 GMT

When buying a home, one of the first things you should do is check your credit report and score.

Your credit score is probably the most important piece of information a lender considers when deciding on your interest rate, so you want to be sure that everything on your credit report is correct. Mistakes can hurt your credit score, increasing your rate and monthly payment.

Your Credit Report and Score

The credit bureaus gather information on your credit payment history, which forms the basis of your credit report. The information they compile includes your current address and past addresses; the amount of debt you carry, what kind of debt it is, the lenders’ names, and your debt payment history; how often credit report inquiries are made; and your history of liens and bankruptcies.

The bureaus use that information to compute a credit score. Your score is a number between 300 and 850, with 850 being the best credit score and 300 the worst. Lenders use your credit score as a general indicator of your creditworthiness, so if your credit score is low, you might be charged higher interest rates.

Check Your Credit for Free

You can get your credit report for free; however most credit scoring agencies make you pay for your score. By law, every year, you can request a free report from any of the credit bureaus. You can get a free report and a free credit score with a 30-day trial membership with the LendingTree credit monitoring service. With membership, you get your free credit report and score online in seconds.

What if There are Mistakes?

Mistakes do occur, especially for people with similar names or social security numbers. That’s why checking your report and score before you get a mortgage is important. If there is a mistake that could hurt your credit score, you’ll want plenty of time to get the error corrected. To correct an error, you need to write the credit bureau, describing the problem. The credit agency must investigate the items in question, usually within 30 days. Then they will send confirmation of the corrections.

Bad Credit

If you discover that your credit report is accurate, but your credit score is low, you may want to reconsider buying a home. Instead, take a few months to improve your credit score by paying your bills on time and reducing your debt. Waiting also allows you more time to pull together a good size down payment. If you wait a few months for your score to increase, the result should be a better interest rate on your mortgage, which can save you a lot of money in the long run.

If you do decide to go ahead with buying a home even if your credit is less than perfect, it’s still important to work to rebuild your credit. Once your score improves, you can refinance your mortgage for a lower-interest loan, which could lower your monthly payments.

Improving Your Credit Score

RE.com Tips & Tools — Thu, 11 Jan 2007 19:31:00 GMT

To improve your credit score under most models, concentrate on paying your bills on time, paying down outstanding balances, and not taking on new debt

Credit scoring models are complex and often vary among creditors and for different types of credit. If one factor changes, your score may change, but improvement generally depends on how that factor relates to other factors considered by the model.

Only the creditor can explain what might improve your score under the particular model used to evaluate your credit application. Nevertheless, scoring models generally evaluate the following types of information in your credit report:

Have you paid your bills on time? Payment history typically is a significant factor. It is likely that your score will be affected negatively if you have paid bills late, had an account referred to collections, or declared bankruptcy.
What is your outstanding debt? Many scoring models evaluate the amount of debt you have compared to your credit limits. If the amount you owe is close to your credit limit, that may hurt your score.
How long is your credit history? Generally, scoring models consider the length of your credit track record. An insufficient credit history may have an effect on your score, but that can be offset by other factors, such as timely payments and low balances.
Have you applied for new credit recently? Many scoring models consider whether you have applied for credit recently by looking at inquiries on your credit report when you apply for credit. If you have applied for too many new accounts recently, that may negatively affect your score. However, not all inquiries are counted. Inquiries by creditors who are monitoring your account or looking at credit reports to make prescreened credit offers are not counted.
How many and what types of credit accounts do you have? Although it is generally good to have established credit accounts, too many credit card accounts may have a negative effect on your score. In addition, many models consider the type of credit accounts you have. For example, under some scoring models, loans from finance companies may negatively affect your credit score.

Scoring models may be based on more than just information in your credit report. For example, the model may consider information from your credit application as well: your job or occupation, length of employment, or whether you own a home.

To improve your credit score under most models, concentrate on paying your bills on time, paying down outstanding balances, and not taking on new debt. It’s likely to take some time to improve your score significantly.

This information is adapted from "Bound for Good Credit" published by the Federal Trade Commission.

Correcting Your Credit Report

RE.com Tips & Tools — Thu, 11 Jan 2007 19:30:00 GMT

Having a correct credit report is important because lenders use it as a basis to determine how much you can borrow

Under the federal Fair Credit Reporting Act, both the consumer reporting agency (CRA) and the organization, such as a bank or credit card company, that provided the information to the CRA have responsibilities for correcting inaccurate or incomplete information in your credit report. To protect all your rights under the law, contact both the CRA and the information provider.

Write the CRA, stating the information you believe is inaccurate. Include copies (not originals) of documents that support your position. In addition to providing your complete name and address, your letter should clearly identify each disputed item in your report and factually explain why you dispute the information, requesting deletion or correction of those items. You may want to enclose a copy of your report with the items in question circled. Send your letter by certified mail, return receipt requested, so you can document what the CRA received. Keep copies of your dispute letter and enclosures.

CRAs must investigate the items in question, usually within 30 days, unless they consider your dispute frivolous. They also must forward all relevant data you provide about the dispute to the information provider. After the information provider receives notice of a dispute from the CRA, it must investigate, review all relevant information provided by the CRA, and report the results to the CRA. If the information provider finds the disputed information to be inaccurate, it must notify all nationwide CRAs so they can correct this information in your file. The FCRA also requires that:

disputed information that cannot be verified must be deleted from your file.
if your report contains erroneous information, the CRA must correct it.
if an item is incomplete, the CRA must complete it. For example, if your file showed that you were late making payments, but failed to show that you are no longer delinquent, the CRA must show that you are now current.
if your file shows an account that belongs only to another person, the CRA must delete it.

When the investigation is complete, the CRA must give you the written results and a free copy of your report if the dispute results in a change. If an item is changed or removed, the CRA cannot put the disputed information back in your file unless the information provider verifies its accuracy and completeness, and the CRA gives you a written notice that includes the name, address, and phone number of the provider.

Also, if you request, the CRA must send notices of corrections to anyone who received your report in the past six months. Job applicants can have a corrected copy of their report sent to anyone who received a copy during the past two years for employment purposes. If an investigation does not resolve your dispute, ask the CRA to include your statement of the dispute in your file and in future reports.

In addition to writing to the CRA, tell the creditor or other information provider in writing that you dispute an item. Again, include copies (not originals) of documents that support your position. Many providers specify an address for disputes. If the provider then reports the item to any CRA, it must include a notice of your dispute. In addition, if you are correct and the disputed information is not accurate, the information provider may not use it again.

This information is adapted from "Bound For Good Credit" published by the Federal Trade Commission.

Your Credit and the Fair Credit Reporting Act

RE.com Tips & Tools — Thu, 11 Jan 2007 19:19:00 GMT

Your credit record contains information about your income, debts, and credit payment history

Your credit payment history is recorded in a file or report. These files or reports are maintained and sold by consumer reporting agencies (CRAs).

One type of CRA is commonly known as a credit bureau. You have a credit record on file at a credit bureau if you have ever applied for a credit or charge account, a personal loan, insurance, or a job.

Your credit record contains information about your income, debts, and credit payment history. It also indicates whether you have been sued or arrested, or have filed for bankruptcy.

The Fair Credit Reporting Act (FCRA) is designed to help ensure that CRAs furnish correct and complete information to businesses that will use your credit report when evaluating your application for a loan or a line of credit.

Your rights under the Fair Credit Reporting Act:

you have the right to receive a copy of your credit report. The copy of your report must contain all of the information in your file at the time of your request.
you have the right to know the name of anyone who received your credit report in the last year for most purposes and in the last two years for employment purposes. Any company that denies your application must supply the name and address of the CRA they contacted, provided the denial was based on information given by the CRA.
you have the right to a free copy of your credit report when your application is denied because of information supplied by the CRA. Your request must be made within 60 days of receiving your denial notice.
if you contest the completeness or accuracy of information in your report, you should file a dispute with the CRA and with the company that provided the information to the CRA. Both the CRA and the provider of information are obligated by law to investigate your dispute.

You have a right to add a summary explanation to your credit report if the dispute is not resolved to your satisfaction.

This information is adapted from "Bound for Good Credit" published by the Federal Trade Commission