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Ten Mistakes to Avoid When Trying to Improve Credit Scores

Ten Mistakes to Avoid When Trying to Improve Credit Scores

Don't damage your credit score further by rushing to do things that may intuitively make sense when trying to fix bad credit, but will actually negatively impact your credit score more. Let’s first look at what makes up one’s credit score, as developed by Fair Isaac:

The exact formulas for calculating credit scores are a closely guarded secret; however, Fair Isaac has reported the following components and the approximate weighted contribution of each as key factors:
35% - payment of credit accounts on time in the past (only includes payments later than 30 days past due)
30% - the amount of debt, expressed as the ratio of current revolving debt (credit card balances, etc.) to total available revolving credit (credit limits)
15% - length of credit history
10% - types of credit used (installment, revolving, consumer finance)
10% - recent search for credit and/or amount of credit obtained recently

Mistake #1: Cancelling old credit cards. Remember, fifteen percent (15%) of your credit score comes from the age of your credit history. Therefore, cancelling your oldest credit card can often be a mistake. In addition, if you have balances on other credit cards, cancelling an old credit card that you don't use can impact your debt ratio, which makes up 30% of your score. If you don’t have other sources of credit that are older than seven years, do not cancel your oldest credit card.
Mistake #2: Paying “most” of your credit cards on time. 35% of your score depends on whether your payments were made on time (only payments that are more than thirty days late affect your score.) If you must be late on any card, make up that payment before it’s thirty days late. Don’t make the mistake to keep up with all but one or two of your cards and let those go later and later; instead, juggle the cards a bit if you have to, but make sure you are not too late on any one card.
Mistake #3: Requesting more credit than you need. 10% of your credit score comes from the types of credit used, so if you have a lot of open sources of revolving credit (i.e., credit cards), you may be seen as a credit risk because you have the potential of racking up a lot of debt very quickly. Don’t open store credit cards just to get a discount or other perk, and if you have any recently opened store cards, cancel them as soon as they’re paid off.
Mistake #4: Maxing out your cards. 30% of your score is developed from the ratio of your credit card debt to your credit limits. So, if all of your cards are maxed to their limit, your credit score will suffer even if you’re keeping up with the payments. Don't continue to charge and buy more and more on credit. Instead, focus on paying down the cards by making extra payments.
Mistake #5: Avoid taking loans and debts.When it comes to your credit report, no debt is effectively bad debt. If you’re a credit card avoider, you should consider getting one and making an occasional purchase with it - paying the balance on time. Some people use one credit card such as a card affiliated with their favorite gas station chain.They use it just for gas purchases, often racking up discounts on it, paying it off in full each month. This will help them maintain a solid credit score in case they need a loan in the future.
Mistake #6: Requesting a credit limit reduction. Many consumers believe that they have been granted too much credit and that they’re better off reducing their credit limits. The only significant effect a limit reduction has on your credit score is a negative effect on your debt ratio. Don't request a credit limit reduction unless it has a huge psychological value for you; otherwise, it will hurt your credit score.
Mistake #7: Using the first credit counseling service you hear about or find online. Very often, the ones that advertise the most are the ones that do the worst job. Use the FTC’s advice when searching for a reputable credit counseling service in your area. Call several of them and ask the questions from the FTC page to find ones that seem legitimate, then check with the Better Business Bureau before moving signing with one.
Mistake #8: Declaring bankruptcy. Too many people declare bankruptcy because they believe it’s the only way out. Before taking such a drastic measure, seek counseling first with one of the legitimate sources mentioned above. Bankruptcy can destroy your credit score for a very long time. Very often there are better solutions available to you, such as negotiating with creditors.
Mistake #9: Credit card arbitrage. Playing this game can seriously damage your credit score if you’re not an expert. Stay away ufrom this practice unless you’re financially stable and know exactly what you’re doing; if you make a mis-step, your credit score could easily be destroyed, and for a long time.
Mistake #10: Never checking your credit report. Most people who behave well with their credit just assume that their credit is fine, but sometimes errors can show up on your report. Visit annualcreditreport.com to get the free report that the United States government guarantees you from the three major agencies.

Tags: improve credit scores,

Lenders act to limit US foreclosures - Yahoo! News

Here is an article that is extremely imporant for anyone who is having trouble paying their mortgage. There is some help out there. Try to make your e mortgage payments on time, so that your credit score does not suffer. Talk to your lender to let them know you are having difficulties to see what type of assistance they may be able to offer.

Lenders act to limit US foreclosures - Yahoo! News
Lenders act to limit US foreclosures
By Mark Trumbull, Staff writer of The Christian Science Monitor Thu Apr 26, 4:00 AM ET
"The home-loan industry, facing the worst housing downturn since the early 1990s, is ramping up efforts to help strapped borrowers stay in their homes.
The goal is to restrain a gathering wave of foreclosures that carries big costs for both lenders and borrowers.
This rescue effort isn't expected to save every at-risk homeowner. But it promises to reduce monthly payments for many who have fallen behind on mortgages. In the process, it could help to stabilize a struggling real estate market.
So far the housing slump, precipitated in part by overzealous borrowing and subprime lending, continues its downward slope. In discouraging news for homeowners and homesellers nationally, a report Tuesday showed "the deceleration and declines in home prices are showing no signs of turnaround." Citing February data, Standard & Poor's Case-Shiller index of housing prices in 10 cities posted a 1.5 percent drop from February 2006 – an annual decline not seen in 15 years.
That news follows hard on a revised 2007 price forecast by the National Association of Realtors. NAR said this month it no longer expects the median price of an existing home to rise this year, predicting instead a 0.7 percent decline. The slower recovery, it said, is a result of "tighter lending criteria and fallout from the subprime loan debacle."
Some lenders offer to refinanceImpelled by financial and political pressures to try to curtail foreclosures, lenders are taking action on several fronts:
• Fannie Mae, America's leading mortgage lender, says it plans to help as many as 1.5 million "subprime" borrowers – people with low credit ratings – refinance out of high-interest loans.
• Freddie Mac, which like Fannie Mae is a government-backed corporation, is creating new products to make homes more affordable to buyers with poor credit. Freddie Mac doesn't make loans directly but pledges to buy as much as $20 billion worth of these mortgages from participating lenders.
• Washington Mutual, another giant lender, says it will refinance $2 billion in subprime loans, helping borrowers avoid foreclosure. The new loans will come with below-market interest rates.
• Some finance companies are partnering with nonprofit organizations that act as advocates for at-risk borrowers.
• In addition to efforts by specific companies, the Mortgage Bankers Association announced a foreclosure-prevention campaign in partnership with the nonprofit group NeighborWorks America. They will link homeowners to a free counseling hotline (888-995-HOPE) provided by the Homeownership Preservation Foundation, boost the capacity for homeownership counseling within NeighborWorks, and conduct a national ad campaign for homeowners in financial distress.
All of this represents significant relief, but the magnitude of the problem is large and growing.
"We're struggling to provide help" to troubled borrowers, says Robert Pulster, who heads a Boston nonprofit group called Ensuring Stability through Action in our Community. "We're seeing double the problem that we were seeing last year."
The lenders themselves are careful not to overstate what the new projects can achieve. "While these efforts will help cushion the expected rise in foreclosures, we need to be clear that these offerings are not a panacea," said Richard Syron, chief executive of Freddie Mac, as he unveiled the new products at a congressional hearing April 17.
Even when the economy and the housing market are strong, some borrowers run into financial difficulty because of events such as job loss, divorce, or illness.
Over the past year, two other factors have driven the rise in past-due loans and foreclosure filings.
One is known as "payment shock," when adjustable-rate loans reset sharply upward. Lenders in recent years failed to consider whether the borrowers will be able to afford their loans once initial "teaser" rates adjust, critics charge.
The other is simply that a decade-long housing boom stalled out. Some who bought homes near the market peak – often with no down payment – owe more than the house is now worth. So selling it offers no sure escape route from foreclosure.
But foreclosure is costly for lenders, chewing up tens of thousands of dollars in missing loan payments, home-sale expenses, and property maintenance. If foreclosures are concentrated in a community and drag down home values, that's bad for lenders' business prospects.
Politicians have been prodding lenders to help at-risk homeowners. In congressional hearings, Democrats have bashed the mortgage industry for helping to create the problem. Nonprofit organizations have added to the pressure.
Rita Askew, safe at homeRita Askew of Evanston, Ill., is one borrower who remains in her red-brick townhouse thanks to help from her lender and community groups.
Her husband, the family breadwinner, had to leave his school-maintenance job for several months last year because of an accident. "I probably would have been selling my house," Mrs. Askew says, if the National Training and Information Center (NTIC) hadn't stepped up for her.
NTIC helped win a loan-modification accord that cut the monthly payment from $1,668 to $1,117. The interest rate dropped from 10.6 percent to 6.0 percent.
Several major lenders, including Ocwen Financial Corp., CitiFinancial, and Select Portfolio Servicing Inc., have agreed to partner with NTIC to negotiate "workout" deals when possible for troubled loans.
But for people who face difficulty paying their mortgages, the choices can narrow quickly if the loans go unpaid for a month or more.
Borrowers can seek a traditional refinance deal with any lender. They can seek temporary forbearance or a loan modification deal. Some can successfully sue the lender, showing that the original loan process violated state or federal laws. Or they can try to sell the home, perhaps talking the lender into accepting proceeds that fall short of the loan balance due.
Housing advocates say to beware of "rescue" scams, outfits that charge big fees and then fail to help people stay in their homes."

Tags: Lenders act to limit US foreclosures, credit score

What are Ways ID Theft Can Occur?

What are Ways ID Theft Can Occur?

First what is Identity Theft?
Identity theft is a very bad event that causes a lot of harm to a consumer’s credit. Think of how you would feel to know that someone else has used your credit and has left all the responsibilities and problems for you. Once the fraudulently opened accounts start appearing on your credit report, it will lower your credit score for sure because the ID thief is not likely to behave well with your credit.

What are Ways ID Theft Can Occur?

ID thieves have so many ways to scam people - and it is an easy crime to get away with. It is important for consumers to know how thieves can get access to personal information, and use it.

• By stealing or hacking the database of a business.
• By stealing your wallet.
• By stealing your snail mail or email containing your personal information, or submit a change of address form and bypass your mails to their door. (shred your junk mail and other correspondence)
• They can get your personal information from trash.
• They can steal your information through fake mails, phone calls and from duplicate sites purposefully build to scam people.
• They can pull your credit report by camouflaging as employer, creditor or land-lord.

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So what happens when ID Theft occurs?
Using your personal information, crooks can ruin your credit in a very short time. They can –

• Open credit card account in your name.
• Take out bank loan to buy a car.
• Open a bank account with your information and write a number of bad checks.
• They may apply for a phone service in your name, obviously the bill will be charged to you.
• They can quickly do all of the above!

How can I avoid the scam?
There are some things that you can do to help you avoid identity theft. Here are a few:

• Do not carry extra credit cards with you that you do not need.
• Never disclose your SSN to a person who you do not know or send it out over an unsecured media.
• Keep a watch on your credit report regularly and make it a habit.
• Periodically check your bank statement.
• Close the credit cards that you are not interested to use any more.
• Do not have your SSN printed on your check leafs.
• You can stop pre-screened credit offers or ask credit reporting agencies to block your date of birth and SSN on your credit report.
• Do not respond to any email that states unrealistic message for you, like your bank account has been closed or craps like that. If necessary, type the website address of the concerned institution by your own, do not follow the link embedded in the emails.
• You can subscribe to an identity theft prevention service, such as LifeLock, that will take care of all of this for you.

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Credit Repair and Buying a Home

Credit Repair and Buying a Home

If you are considering buying a home - stop! Before you do anything else, get a copy of your credit report. You can obtain a free copy once each year from AnnualCreditReport.com.

Why get your credit report? Well the fact is that most credit reports contain erroneous information which, in some cases, may affect your credit score negatively. It is very important to check your credit report very carefully, and if you find errors, dispute them immediately with all three of the national credit bureaus. It can take 30 days or more to get erroneous items deleted from your credit history.

Your credit score is used to determine the rate of interest that you will pay for the mortgage. Erroneous or negative items listed on your credit report could bring that score down considerably, costing you thousands of dollars over the course of the mortgage. You can improve your credit score; however, it can take some time, so start early.

Credit repair and buying a home are definitely tied. Even if you think you have very good credit, be certain. Check your credit report because may people have been victims of identity theft, affecting their credit horribly, and they don't even know it.

So, before you start looking for a new home - get your credit report in shape.

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Personal Information Contained In Credit Report

Personal Information Contained In Credit Report

If you have never looked at your credit report, you may be wondering what type of information it contains. First of all, we do advise that you order a copy of your credit report from each of the three major reporting bureaus at least once each year. You are entitled to one free report each year, and may access your reports for free online at AnnualCreditReport.com.

You may be surprised at the amount of sensitive personal information that it contains. In addition to your name, address, and past residence addressess, you'll also find your date of birth, social security number, and employer. In addition, information about every credit account and whether or not you pay on time, any collection activity, or legal judgements will also appear on your report.

Understand your credit report and all of the listings there to be certain that you have not been a victim of identity theft. Check your report very carefully for erroneous items or any indication of fraud. Any errors should be disputed and reported immediately to the credit bureaus so that your credit is not negatively impacted.

Personal information contained in credit report should also be safeguarded. Be careful to whom you give access to your credit information. Identity theft prevention protection is available, and highly recommended.

Tags: Personal Information Contained In Credit Report

Info on Credit Repair Websites

Info on Credit Repair Websites

You'll find lots of information floating around the Internet about credit repair, credit restoration, and increasing your credit score. Some of the information is good, and some could get you into trouble.

First of all, it is not legal to establish a new credit identity. This credit repair scheme called “file segregation” promises a chance to hide unfavorable credit information by establishing a new credit identity. This may sound great to you, especially if you’re afraid that you won’t get any credit due to a bankruptcy or other negative credit report listings.

The problem: “File segregation” is illegal. If you use it, you could face fines or even a prison sentence. If you come across any Web site or agency that offers you this alternative, keep looking.

Although there are many such websites out there that will claim to help you by changing your identity or with other schemes that are not legal, there are just as many good ones.

Info on credit repair websites is available from the Federal Trade Commission Web site. Take a look on OnlineCreditProfessor.com for an example of a very good and informative site about credit repair and other personal finance topics. Suzanne Busby, the Online Credit Professor, also offers an excellent and informative Blog that is sure to help you, as well.

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