Thursday, February 18, 2021

On February 18, 2021 by Decadeofhits   No comments

Derogatory factors on your credit report will lower your credit rating. Every time you miss a payment or are late for a credit card payment, your credit score takes a hit. If all else remains the same, your score will improve slowly over time. It takes a lot of effort, but a few tips can make a big difference in how high your credit score is by the time you need to borrow money again.

Never send payment after payday until your payday is really near. All finance companies, at some point in time will be willing to negotiate with you, and ignore their collection calls or letters. It’s in their best interest, so they will be more willing to work with you if they see you are making an effort. Paying on time will have a positive effect on your credit report, but if you can afford to pay through your savings rather than taking out a new loan, that’s an even better effect. Avoid penalties. You may be tempted to close a credit card before you pay the fee, but hold off on that for a few days, and let the card if you need a few months to save up the money. Maintain your credit cards if possible. For some credit cards, particularly rewards cards, having a large unpaid balance will start taking down credit score fairly quickly. If possible, keep the balance 50% below the limit. You should never cancel a credit card unless you absolutely can no longer use it, if it is still an option for you.

Keep your credit history clean. When you apply for a mortgage or a car loan, your credit history plays a big role in how favorably your application is received, and if you get approved, how interest rate you ultimately have to pay. One late payment on your mortgage can lower your interest rate by 2% or more, and can knock out as much as $100 off your monthly payment. A few points may not seem like much, but they do add up over time. Know what is in your credit report, and try to clean up any negative items or points. You will have to pay extra to have them removed, so be prepared to make at least that or wait a few months.

Pay off any revolving credit card debt before applying for a new one. Don’t keep your credit card balances open just because you know the balance is coming down. Those balances are still open. They will still accrue interest, and have it added to your available credit. Most of the time the interest on credit cards is a lot higher than the interest on car loans or mortgages.

Take a look at your credit report and see if you can lower your debts. You can lower your credit card minimum payments by paying off larger debts rather than retiring them quickly. For example, paying off larger balances than the minimum payment every month can seem like it is a way to pay more money to your credit card company every month, but in the long run it is the life saver you need to make every payment. Not only will you pay out less money deeper into debt, you will cut down on late fees and over-the-limit fees. Be sure it is realistic in your circumstances or you may find yourself deeper in debt.

On February 18, 2021 by Decadeofhits   No comments

Credit scores are calculated by rating a prospective borrower's financial history, including your payment track record, over a period of time in a different document (credit report). A seasoned loan officer combines the information contained in your credit report with another document - your credit score - to determine your risk level. The lower your credit score, the higher the risk, according to that lender or bank.

Three major credit reporting agencies - Equifax, Experian and Trans Union, collect and compile loan-related information about you known as credit information, which includes your payment history, your current debt and how much credit you currently have available. Information about your employment, income and bank balance are taken into account as well. Through this process, a finance company, a loan company or a bank can evaluate if you are a good or bad credit risk. The following are factors that go into calculating your credit score.

Payment history with lenders (35%)

Your credit score is 35 percent dependent upon your payment history with lenders over the discretionary versus credit review period. The most relevant period is usually the last 24 months. The score goes up or down depending on the foundation of the scores reached from the reference period. A credit score that is higher is considered more favorable than one that is lower.

Credit balance to limit ratio (30%)

Your credit score is 30 percent dependent upon your credit balance to credit limit ratio. For example, if a buyer purchases a $300,000 home with a $200,000 credit limit, he or she will have a more favorable credit status. The reason for this is that the 80 percent of the credit or total credit limit is utilized if a borrower pays the balance with $300,000 and has a $200,000 credit limit. Decreasing the credit amount at the same time increasing credit limit, shows that the consumer can better control debt if the balances are lower.

Length of credit history (15%)

The longer a person has had credit, the higher his or her credit score. Be careful of closing credit accounts if your credit history is short. Owing money to others will lower your credit score, while owing money on your own can make it worse. 

Number of accounts (10%)

The more number of credit accounts, the lower your score. 5 or fewer credit accounts is treated as a higher risk than having 5 or more, and does not make the score any higher. If you know this golden rule, you can either put all your department store cards on the back burner, be careful about department store cards or give your department store a call to see if they can help you out of your current situation.

Types of credit accounts (10%)

The number of credit accounts,upsets the number of installment accounts or the number of mortgage loans, car loans, etc., that you have.

Credit inquiry (10%)

You can have a max of 7,000 inquiries without it having a negative impact on your credit score. However, having 4 or more inquiries within a short period of time or having too many credit accounts can lower your credit score.