What is a good credit score – If you are in the USA or any other part of the world and need to buy a car,home loan mortgage or even a personal loan you need to have a good credit score. Equifax, Experian and Transunion are the three credit agencies that will generate a credit report for you.Based on your score,a lending rate will be assigned to you – the better the score the lower the rate of interest will be charged to you.
1.What is a good credit score
2.Credit band ratings
3.Credit Scores for Auto and Home loans
4.Where to check score with online calculators
5.Credit scores vs Lending Rates
6.Awesome ways to improve credit score
7.Annual Credit Report
8.How to deal with credit card collecters
9.How to deal with Debt
10.How to use your credit card to improve credit score
What is a good credit score?
Credit score is a numerical figure in the range of 300 to 850.This measures your range which can be beneficial when you want to apply for a loan and can determine the rate which most lenders will give you.To qualify for good or excellent credit,your score should be above 700.Most people with good credit have a score in the range of 650 to 750,and those with an excellent track record are in the band above 750.There is no definite rating but most reporting agencies and bureaus have a standardised rating to meausre creditworthiness.
Credit score bands and range
what is a good rating?
Here are some of the broad rating ranging from Excellent,Good,Fair,Poor and Bad.These bands will determine to a certain degree your ability to secure a loan or credit card and at what rate of interest or terms it will be provided to you.
Ideal Credit score for an automobile car loan
Ideal Credit score for a housing loan
If you want to buy a home with an FHA (federal housing loan) then the minimum score is 500.This is the bare minimum required for any house loan.Other agencies will require a higher than 650 credit score in order to approve a house loan.
Check your Score
There are 3 major credit bureaus or reporting agencies that give you an accurate account of your credit score for each- TransUnion, Equifax, Experian. These reporting agencies give you a free annual credit report.You can avail of this free services from each of these 3 agencies once in 4 months.This gives you a broader picture and a more indepth look at how your estimate is shaping up.Keeping regular tabs on your this will help in future as every lender will look a these numbers before granting you a loan.
Free credit score estimator calculator
Estimating your credit score every once in a while is beneficial if you plan on taking a loan anytime soon or just to roughly check if you’re tentative credit report is in good standing. This is extremely beneficial in the long run for home equity loans or mortgages in the future, therefore its imperative to have an excellent credit history.
Home equity loans are long term loans and therefore before being approved your finances must be creditworthy.Here are some free online tools that you can use to generate a marginally close credit report, done on similar lines as the credit bureaus.Credit ratings are in the range of 300-850.
By the looks of it, both came out to be exactly the same! The questionnaire at both the websites were similar, so we can say that these free credit score estimator calculator are accurate and hope that these reports are the same as what the bureau comes up with!
Where to check your score
These are all free tools to give an approximate estimation of your credit score as it stands presently.
Small ways to Improve your score
There are a few ways that you can use to improve your credit score.Here are a few tips:
1.Credit accounts-Dont close unused accounts too often.Even if there is a low balance or no balance in the account,its always good to keep it active even if that means making a small minimum due towards that account.
All payments would have to be made every month on time,without missing a payment, or even making a late payment.This goes as a negative point towards your final tally.
Balances on credit card accounts should always be always kept to a minimum.Its a good idea to keep a rotating balance with a good mix of spending and paying back is good without running up a big balance.
Use balance transfers as less as possible.These are a sure shot way of telling the score watchers that your credit is in a mess and you need a helping hand.
Credit score vs Lending rates
Simply put,your credit score is one of the single most deciding factors that determine what rates your lender gives you loans at.Here is an illustrative example for a $300K 3o year loan,fixed rate from 2007.Note that mortgage rates may have dropped in recent years.
As we can see,there is almost a huge 4% difference on both extremes of the credit score spectrum,which can make your monthly mortgage payment difficult to pay back.
9 Awesome ways to improve your credit score
The biggest advantage to improving your credit score is getting lower rates on your loans and future mortgages.The higher your credit score,the better your chances are of securing reasonable rates on your loans.
1.The balances on your credit card should be kept low at most times.This can be acheived by always paying more than the minimum due.The higher the balance you have,the longer it will take to clear to clear off.This long time accumalation of debt can have a negaive impact on your credit score.
2.Use balance transfers as less as you can.Rather than shifting your credit to another card,try and clear them on the existing card.A balance transfer is a sure shot way to show that you were unable to pay back your debts on your card,hence you’re shifting that outstanding amount to a lower interest scheme.
Most users that settle for a balance transfer keep that as a last option,they have been through fees,penalties and charges that have skyrocketed their balance,and only then as a last resort shift their dues to another bank.It sounds like a good idea to get away from further penalties and rising interest charges owing to an increased balance,but its a bad idea if you plan on repairing your credit score or have any intention of making it better.
3.Keep the number of credit card accounts to a minimum
.This allows you to manage them better and clear off the balances easier.This is one of the simplest ways to keep your credit in check as well as keep the balance constantly low.Having less cards encourages more activity on those few cards.If you had more cards,you would spend less individually on each card,and activity will be more evenly spread out.Also having fewer cards will have you use them for a longer time,this gives you a longer credit history on that particular account.
4.Apply for a free annual credit report
The three main credit reporting agencies can give you one free credit report in a year.The credit report is more exhaustive account of your credit details and personal information.To put it simply,whats in your credit report can go a long way to establish what your credit score will be based upon.Getting this annual credit check is important for you to keep tabs on how your score might be inversely affected.
5.Keep outstanding debt low
Outstanding debt can easily be a big deciding factor to determining your credit score.This could be in the form of credit card debt or a cumulative measure of past debts that reflect on your credit report.
6.Dont apply for credit accounts often
Having to deal with more than one credit account is less manageable to begin with and could be harder to keep track of.Keeping balances down on two cards is easier than four.The more credit accounts you apply for,it could inversely affect your credit score and in future the chance of closing those accounts will be higher.
7.Open a joint account
We have detailed the benefits of joint accounts in a previous post.One of the best ways to improve your credit score is to open a joint account with someone who has a better credit score than yours.Payments to and from that account if maintained well over a period of time will give your credit score a slight boost.
8.Dont close credit accounts frequently
Even if you dont have any balances left on inactive cards,and haven’t used that credit in sometime,keep that card open and dont close that account.Keeping a small balance in that account would also help you bolster your credit score.
9.New credit users should opt for secured credit cards
Secured cards are the best way for new credit card users to start out,or for existing users that have bad debts to improve their credit score.Secured Credit cards work by keeping a collateral amount in a savings deposit in the bank,and in turn the bank issues a credit amount equal to the amount deposited.
This is of great advantage as the bank sends out your credit information to the credit bureaus and credit reporting agencies on a regular basis so that your credit can be fixed and improves your credit score.
10 things to know before getting your annual credit report
1.Officially issued by the three main credit reporting companies Equifax,Experian and Transunion.Each company can issue one free report in a year,and all can be requested at once or at intervals.
2.Credit report differs from credit scores.Credit score is a numerical rating that may differ from each of the three credit reports issued by the CRCs.Credit reports are more elaborate and include sensitive information like social security number and detailed credit information.
3.Your credit report is also available to Credit Lenders,Insurance Companies,Collection agencies and some finance companies for promotional activity.
4. Requesing for your annual credit report can be done at the official website annualcreditreport.com
5.While entering sensitive information online,be especially aware and cautious of Identity theft.Many websites offer free credit reports, but in turn can misuse your credit data.
6.Victims of identity theft can inform the credit reporting companies to place a “fraud alert” on your report so that your account remains secure and cannot be accessed without your consent.
7.Liens on taxes,collection amounts,bankruptcy information and information of companies that requested for your credit report are saved for maximum period of seven years in the credit report.
8.Its possible to prevent promotional companies from accessing your credit report who try to sell financial products.
9.Information about savings,checking accounts and other short term daily accounts are not accounted for in the Credit Report.
10.When Receiving your credit report be sure to check,all the credit and debit card transactions for inconsistencies in the entries.Also check your personal information like addresses and other public record information.
How To deal With Credit Card collectors
The foremost reason consumers have low credit score is due to balances accumulated on their credit card.When call collectiosn start on your outstnding card balances it is a good idea to deal with them appropriately and make a payment towards your card immedialty,not doing so will have a negative
I’ve spent more than a fair amount of time collecting debt to tell you to how it works, and how you can avoid those pesky calls that disrupt your peace of mind, not to mention invade your privacy at work. I’ve spent countless hours on the phone “convincing” defaulting customers to make a small contribution towards their piling debts, and in the bargain have faced some of the choicest language from customers.
I admit, some of the tactics we use to persuade customers to pay parts of their debts can be anything short of harassment,but done clean and ethical.
Most major credit card companies and loan issuers source their debt recovery to third party collection agencies, that charge a flat fee for their services as opposed to a commission of the debt collected. The collections process is quick and efficiently executed with thousands of customer profiles stored on record,that are fed to an automated dialer. The system dialer then pulls up the relevant profile in real time with the amount owed by that customer along with other confidential details like your SSN, work address & credit information.
The concept of ”Buckets”
Buckets are a business idiom for describing the stages of delinquency. As debt collectors, its part of our duty to deal with customers appropriately that fall into the first bucket-1 to 30 days late, second bucket-30-60 days late, or third bucket-more than 60 days. These three buckets are all examples of past due accounts that have to handled using different “WIIFMs” (whats in it for me).We give the customer reasons to pay rather than veiled threats. The higher the bucket number, the more aggressive the collection strategy.
Everyone remembers the blockbuster box office major “the Terminator”.In many aspects, a debt collection agent can be compared to that fictional figure, for the simple reason that he/she will never give up until a satisfactory intermediate contribution is made towards lowering the outstanding debt.
Even first time defaulters receive collection calls, as a gentle reminder to make their payments on time in the next billing cycle.Its common practice for second bucket delinquent customers to receive embarrassing calls at work. These are the most irate customers and often threaten to sue the debt recovery agency.
If the customer fails to make an online payment during the collection call,or even an assurance to pay, then the customer profile goes back into the dialer and could end calling the customer several times in a day!
How to deal with Debt collectors
A PTP, als0 known as a “promise to pay” is a phrase collectors use for an assurance received by the customer during the collection call. There are 2 ways you can temporarily get the collection calls to cease for sometime. Either make an online check payment or a PTP. The collection agent will first press hard for a check payment,even something as low as $50 is gladly accepted. If not,the agent will settle for a PTP, and takes details of the amount and time period when the “promise to pay” will be met. Debt collection agents are under of pressure to clear as many accounts in a day, as the system dialer has thousands of defaulting customers.Agents too work on targets and easily settle for an assurance to pay.
Things to remember
1.Credit card dues can easily be taken care of. The minimum monthly dues are between 3%-5% of the total amount due. This is relatively a small amount and if not paid,a call from collections is warranted.
2.Whenever you get a call from collections either give them a timely assurance of payment or even better give them your checking account number and authorize a check for even a small amount.This should stop the calls, and give you temporary relief.
As a last line of advice, id like to tell everyone reading this, to do your best to avoid getting trapped in the collections process. Not only does it have the potential to hurt your credit score,and having your profile reported to the credit bureaus, its a never ending spiral cycle that will only get worse with time.
DEALING WITH DEBT
Dont lament over how you got into this tricky situation, instead, analyze,frugalize and budgetize and of course once you have won your battle with debt, and have all of it cleared up,dont live beyond your means.Read this carefully-Everyone got someone else’s money, and they want to give it to you to make more money for themselves. Dont be a fool, learn to say no sometimes no matter how hard it may be to resist.
We all love money, lets make no bones about it,but there comes a time when you take too much and cant pay it back.That is the time when all hell breaks loose.Here are a few tested way for all those of you out there who are dealing with debt.
Make a paper plan and stick rigidly to it.Span these plans over the next few months.This time is crucial, its when you clear the high interest debts that have accumulated first.These are the toughest to get rid off, so lets deal with those first.Track all your outgoings and expenditure and play them against whats coming in, however humble your fortnightly income may be.Use web based tracking tools, estimators, calculators and management software that might help you organize your finances and give you a picture perfect view of how your household Economy holds up.
Time frames are of the utmost importance, its your single biggest enemy.Its what you’re fighting, so keep rock solid time frames in which to clear reasonable amounts of debt. Sticking to these time frames will make you disciplined and keep your analytics chart in check.
An important aspect of your debt crisis would be a smart budget plan.Assuming that an initial overview of your monthly finances has been analyzed its time to set markers and limits to the cash flow.An advisable way of doing this is to segregate a large portion of this pie towards paying back your debt in the first few months and keep a bare minimal for essential expenditure.Its important that you dont use your credit card as a crutch during this period as that can be a temptation.The basic reason for implementing our budget and making it work is to curtail our expenditure, which means no unnecessary expenditure.
Most people are too proud to live a frugal life.They equate frugal with “free”.Looking at it in a different way we could call it “living smart” or simple just living within your means simply.This takes care of all extra expenditure like eating out,gas bills or buying anything that you can do without.This simple living is only for a short time.It might be hard in the start,but after you have overcome most of your debt you can slowly ease out frugality in a small way, one step at a time,but going back to your lifestyle that led you into debt would be foolish.
Next,take the drastic step of locking up your credit cards and keeping them in cold storage until all your credit card dues has been wiped clean.You could opt for consolidating your credit card outstanding to help you clear that .Opting for free online checking accounts gives you benefits and no service charges,make use of that.For your home dues,you could get quotes for a good refinance plan to ease out those monthly outgoings.If your insurance premiums are too high,its time to put those on hold for a few years.
Follow this power packed plan -analyze,budgetize and frugalize over a period of 12 to 24 months depending how deep you are and see yourself fr
How to use your credit card wisely and improve credit score
Your’e credit card can either be a blessing in disguise or a a disaster waiting to happen.In what capacity you use your card will determine how much you stand to gain if you use your credit card wisely.Most card users shop with the thought that can pay back at leisure.Rule to remember is always pay back much more than the 3% minimum amount due.
A good practice is to pay back 20% of your balance every monthly cycle as credit card APR are extremely high.Keep that in mind while paying your monthly dues,and its not only the finance charges that are levied,other service charges and taxes are also added to your monthly statement.This effectively reduces the 3% of TAD (total amount due) minimum payment to just about 1%,the other 2% gets absorbed by the service charges and taxes
.This principle of paying atleast 20% of TAD keeps your credit balance in check,and goes well with your credit report.In the long run this can be beneficial if you wish to take loans in the future.Also, paying back credit in time will give you an added edge towards an increased credit limit and reduced APR, which is extremely useful.
On the other hand,if credit card expenditure is not kept in check, the balance will increase to such an extent that even the minimum amount will be hard for you to pay.The generated bill statement of the credit card,is defined in such a way that a very small part of your monthly payments actually goes towards reducing your balance.
Clearing the minimum due on a high balance,even over a period of 12 months will only negligibly reduce the balance,which will ultimately frustrate you.This will then lead to payment defaulter and thats the stage from where its all downhill.Collection agencies will make your persona life hell and the late payment fees,service charges and misc penalties will accrue.
To make things worse,all the additional amounts will become part of your balance, and interest will be charged on this too.Your balance will rise exponentially and in a matter of a few months, your balance will go beyond your credit limit, to which over limit (OL) fees will be levied. There is no coming back now, and the only way out would be a balance e transfer, and live through the misery with another card issuer.This will adversely affect your credit and your prospects of a future loan, will only be a myth.
Important thing to note, is to spend wisely on your card. Dont go berserk on a spending spree,its not “your” money you’re spending ,to begin with.Think of it as money you borrowed from a friend.That friend will want it back someday,with a little extra too.