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The Roadmap to Better Credit

Time to Pass Go: 

How to Establish a Good Credit Score

 

Whether it’s finding a home for your growing family, financing your dream car, entering a career or even attempting to acquire a decent rate on car insurance, everything in our lives revolves around credit. No matter what you do, someone is going to be viewing your past choices to asses if you are a liability in your future endeavors and they could be the deciding factor in whether you are living your life or just surviving.  I’m not saying this to scare everyone or say that without good credit you can’t live the life you are meant to live, but that acquiring good credit could provide opportunities that may seem out of reach!

So, I guess its time to get a credit card and start building my credit! Before we get overzealous with the power we have been given with this seemingly divine piece of plastic, let’s take a look into a few ways to reliably start building and maintain our credit.

 

Good Credit Starts with Good Financial Habits

Many people are trapped in credit purgatory, looking for debt consolidators that can act as magical credit faeries to reset their credit scores after they have fallen behind on payments. If you can’t establish good financial management habits, then the attempt to establish better credit will be futile. When building a house, you must start with a strong foundation and the same goes for credit. Some great financial habits that can help you improve your creditworthiness are:

  1. Record every transaction. I know it seems like a pain to keep everything logged, but in the end, you can observe how much you spend down to the last cent. If you wait to record your transactions, you may lose details along the way.
  2. Round up expenses. Say you go out to eat and your bill comes up to $24.14, you should list the transaction as $25.
  3. Round down income. When recording your transactions, you should round down your income. If you got paid $483.23 for the week, round it down to $483.00. This way you’ll have a few extra bucks when you balance your accounts. If your hard-core round down to $480.00 to save a little more and build the habit!

Start with a Secured Credit Card

Now that you have a good record of your finances, you can show your bank that you have a stable income and can responsibly manage your finances. This puts you in a better position to apply for a secured credit card and shows that you are low risk.

When you acquire your secured card, the bank will require you to deposit the limit of the card into an account. So, if the discussed limit of your card is $500, then you will deposit $500 into the secured account. When you make a purchase with this, the $500 is not touched (unlike a debit card that allows you to withdraw the money in your account). The purpose of the money you deposited in the secured account is to provide collateral if you default on paying off your balance.

 

Pay it Off on Time

Now that you have your secured credit card and you have made a few purchases with it, make sure that you have your balances paid off on time each month. The credit card companies make money from the interest charged for late payments and we are trying to establish and raise our credit!

Since you are beginning to establish credit, your interest rates are going to be pretty high compared to someone with established, good credit. In the end would you rather pay the final $20 that was left on the account, or $200 after the absurd interest rates? Some credit companies could also charge you a late fee or reduce your limit if you fail to pay your balance in full when it’s due!

 

Don’t Use Your Credit for Emergencies

Now, an emergency is classified differently among different people. Some classify an emergency as not having gas left in the car a few days before pay day and they are running on empty. Others classify an emergency as a new plasma screen TV going on sale at their local department store and the sale ends before payday. Learn to use your credit card for when it would be more stressful to pay with cash, don’t have an ATM around and can’t pull out cash or small day to day transactions. If you use your credit card for just “emergencies” you may find yourself slipping into a situation where everything is an emergency and spur of the moment purchases will become more frequent. Not having an 80-inch plasma TV to watch “Stranger Things” on is not an emergency!

 

Strive to be Creditworthy

Credit cards can have quite a lot of perks and pros associated with them; however, it could send you into bankruptcy if you aren’t vigilant in how you handle them. Once you have acquired a good credit score it may be tempting to open many additional cards because it’s easy for banks to lend to you now.  You should strive to be credit worthy and push on till your financial freedom. If you are credit worthy, you’ll have a good credit score and can enjoy your transactions and purchases without having to pull out your journal to log everything. Just like working out to get fit or building your career for a future, establishing and maintain good credit does not happen overnight, but in the end will help you achieve the life you know you are meant to live!

 

Author- Joe Peters

Do you have questions about your credit report? If you would like to speak with one of our attorneys or credit advisors  and complete a free consultation please give us a call at 1-800-994-3070 we would be happy to help.

If you are hoping to dispute and work on your credit report on your own, here is a link that provides you with a few ideas on how to go about DIY Credit Repair.

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How Much Is Your Credit Score Costing You?

How Your Score Is Costing You Thousands

Back when I graduated high school (a few years after dinosaurs walked the earth) I had absolutely no idea how detrimental my credit score would be to my  future purchases. My brother was sitting pretty with a 750 credit score and financed his new car at an extremely low interest rate!  On the other hand, I was sinking with a 580 credit score and financed an older Honda Civic for almost double the interest rate! No big deal, I saw this coming but what about insurance. My brother is only 3 years older than me, had 2 accidents on record and we had the exact same insurance agency providing our car insurance. Even with a good driver discount, an older vehicle, no accidents and basic liability coverage;  I was paying 40 dollars more a more a month than my brother for my insurance!  Why is it that I had to pay so much more than George and how can I get  the same payments as he does? The answer all comes down to our credit score difference!

Low FICO Scores

Your credit scores play a major role in the financial freedoms you have. There seemed to have been a misconception that if someone made great money, the credit scores didn’t really have too much pull. Credit impacts us all, from the moment we start to take on paying bills, buying cars, cell phones etc.

Your employer might even take a look at your credit report and deny you for a job if they are low.

Contrary to popular belief, FICO impacts us all, across all demographics.

So, how does a low credit score cost you more money?

 Higher Interest Rates

If you were to apply for a 60 month car loan with a credit score between 500-589, one could expect to be quoted around 15.2% interest rate. That means that your poor credit is costing you and holding you back from lower interest rates (home and auto) and you are actually seeing your money be used in a way that is not benefiting you or your credit score.

Denied Financing

If you have low credit scores, you may have been denied a bank account, credit cards, a home loan or worse. While you may feel defeated right now, there are several ways to start improving your score. If you are in a tight spot financially and are thinking of completing credit repair on your own, please visit our DIY blog to learn more. If you would like to speak with a credit advisor about how to improve your credit score quickly, please contact Credit Law Center today.

How Do I Make A Change?

It is a good idea to monitor your credit scores. If you have noticed that you have any the below items on your credit report, you might be in need of credit repair.

  • Collections
  • Charge Offs
  • Repos
  • Bankruptcies
  • Foreclosures
  • Tax Liens

If you are thinking about going and paying these items off in hopes that they will increase your credit scores, rethink that option. Your credit report will change, but not in the way you want. If you have a 10 year old medical collection reporting and you decide to pay that collection off, the last date of activity on your report changes to the day you pay it. FICO is looking at your activity and weighing it heavily. Your score may decrease significantly due to the last date of activity being updated. There is less than a 2% difference whether a collection is paid or unpaid, most weight is given to how recent the activity. This does not mean we are advising you to not pay your bills or let things fall into derogatory status.

 

free credit repair consultation

The easiest and quickest way to start seeing a change in your credit scores is to start paying down balances you may have on current credit cards in your possession. This will have a direct/immediate impact on the score. If you are planning to start paying down your cards, try to keep the utilization down below 30%. This will help you start to see a swing in a positive direction.

The largest factor on your credit report is your payment history. Late payments are huge when it comes to dropping the credit scores. At any given time, always try to make at least the minimum payment on your loans.

 

Facts on Fico

 

Saving Money Starts Here

Whether you are looking to get into a new home or buy a new car, your credit scores are vital. If you are hoping to make changes for your financial future, you can start taking small steps now to get back on the right path. If you are in need of assistance today, our credit advisors can help educate you on what you can be doing on your end while we work on derogatory items on the credit report that are hindering you from higher scores.

 

 

 

A Note From The Author: The opinions you read here come from our editorial team. Our content is accurate to the best of our knowledge when we initially post it.

Article by Joe Peters

Do you have questions about your credit report? If you would like to speak with one of our attorneys or credit advisors  and complete a free consultation please give us a call at 1-800-994-3070 we would be happy to help.

 

Debt Collectors

Are You A High Risk Borrower?

I Want To Buy, Now!

Are you preparing to purchase a home in the next few months? It seems that when we are not looking, a home just pops up and finds us, at a time when we were not even contemplating making a move. Then, boom!  The rush is on to beat the clock and make an offer before the next person does. With how quick homes are flying off the market, the best thing to do is be as prepared as possible right now, in the event you do find what you are looking for.

Many borrowers hoping to apply for a home loan are unsure of what a lender might need because it is either their first time, or the process was so long ago. Let’s go more in depth here, about what you will need to get to the point that you are ready to purchase!

Here are 4 things you’ll want to start thinking about before you meet with your lender:

  1. Locating your W2, pay stubs and documents to provide proof of income
  2. Decide if someone will be on the loan with you
  3. How much money you may have/can save for a down payment
  4. Your credit scores
This list will start to prepare you for what your lender will want to discuss with you. More often than not, what is going to keep you from moving through the process as quick as you’d like, is if your credit scores are not where they need to be.
Facts on Fico

FICO is grading you on a few key factors:

  • Payment history
  • New credit
  • Types of credit used
  • Length of credit history
  • Amounts owed

 

If you are looking at your credit report and seeing several derogatory accounts, late payments or other items you will want to look at cleaning up your credit before you go in to a lender. In an effort to lessen the pain of a solid “No” next time you meet a lender, and miss out on your dream home, please consider the following points. If you feel you are a high risk borrower, there are a few things you can you do to ensure that you can lower your risk to lenders. The more prepared you are and the more education you have, the more equipped you will be to get approved and improve your buying power!

4 Challenges of a High Risk Borrower

1. Do you have a low Fico?

You can be sure that your lender will be taking a look at your credit report when you are thinking about purchasing a home. This score is a large portion of what they are using to determine your trustworthiness and the likelihood of you defaulting on a loan, based off previous loans, bank accounts, credit card payments, etc. As important as the scores are in this process, do not let this keep you from going in to see a lender.

If your FICO scores are low there are several things you can do to increase your scores on your own. Read more here, or speak to a credit advisor at Credit Law Center so they can look through your report and ensure you are mortgage ready before you find the home of your dreams.

2. What does your employment status look like? 

Your employment status and employment change are two very different things. Should you be changing jobs often, this may be cause for concern. If you are working a full-time job with regular, consistent pay, creditors prefer this. If you do not work on a set schedule with set pay however, or maybe are self-employed (with less than 2 years of verifiable income), a lender may be very hesitant to lend you any money.

 

 

free credit repair consultation

 

3. Are you lacking excess funds?

Although there are several programs in place for borrowers with little to no money down, it is a good idea to save and have some skin in the game for a down payment. Many lenders would prefer to work with someone that has shown financial responsibility and saved and set aside money. A lender may be hesitant if you  do not, and potentially feel like you still may be a risk.

4. Are you avoiding other responsibilities you have?

Late payments impact your credit score the greatest. If a lender sees you have been falling behind on responsibilities you already have, this can be a large red flag during this process. Again, they are considering the likelihood of you to fall behind on the loan, and if you are late on several bills, why would they feel your mortgage would be any different?

If the above apply to you, and you are potentially a high risk borrower, do not let that stop you from pursing a home. As discouraging as things might seem, there is hope for you after some time of getting back on track.

If your credit is not where it should be and your lender has expressed concern, you may look into a few different options within credit repair. If you are in a rush and are pressed for time, Credit Law Center can help you through a quick and affordable process. Each round with Credit Law Center lasts 30-45 days. If you have items on the credit report that have to be removed (collections, tax liens, bankruptcy, etc) allow a credit advisor to walk you through a consultation.

The credit advisors at Credit Law Center will let you know what you can work on, on your end as well as what you may be doing that is keeping you from higher credit scores. With a little help and a guide to walk with you, that new home may be closer than you expected.

student credit builidng

A Closer Look At Your Credit Score

Understanding Your Credit Score

Credit has become so essential to most big purchases you as a consumer will have to make, and that can be scary if you do not know how credit works. Credit can be confusing, but the more you can learn and utilize your credit effectively, the better off you will be in your financial future. A credit score above 700 is typically considered good, and if it is above 750 then that is excellent. 800 is typically the highest and 350 the lowest on most credit scales. This score is determined through 5 different factors:
  1. Payment History: Late payments will lower your credit score.
  2. Amount Owed: If you have a high credit utilization ratio, then your score will be lower.
  3. Length of Your Credit History: The longer you exemplify responsible financial behavior, the better your score will be. On average, most people in the excellent credit category have a credit history exceeding 7 years.
  4. Your Credit Mix: Having a diversified credit portfolio including multiple different types of credit should help increase your credit score.
  5. New Credit: The more often you apply for credit, the worse your score will be. Opening new accounts also lowers the average length of your credit history, which effects factor 3 on this list.

Other Possible Influences on Your Credit Score

Joint accounts can affect your individual credit score. So, a late payment by either party included in the joint account can hurt both people’s credit. Student loans are also dangerous for young people who do not know how to manage their credit year. Making sure to make these payments on time can be very beneficial to a student’s financial wellbeing in the future.

Raising Your Credit Score

Bad credit can seem scary and overwhelming, but it is not irreversible. Through responsible financial behavior and potentially the help from credit repair companies, you can raise your score to a level you will be proud of. Keeping an eye on your credit and just being mindful of your financial habits can go a long way in raising your score.  
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Fun Facts About Your Credit

Knowing as much as you can about credit and credit scores in general can actually be very beneficial to your everyday life. Although dealing with credit may not always be the most fun activity, impressing people with all of the knowledge you have about credit might be slightly more entertaining. So, here are some “fun facts” about credit you probably did not know before!
  1. Around 40 percent of United States consumers have applied for new credit a minimum of one time this year. Obtaining new credit does make up 10 percent of your credit score too.
  2. Minnesota has the highest average FiCO credit score in comparison to the rest of the states in the United States at 728. Some may argue that this is because of their conservative debt managing strategy, their booming Twin Cities economy, their low natural rate of unemployment, or their low cost of living.
  3. The average FICO credit score in the United States is 704, which is actually not a bad score. Keeping your credit score above average will make you stand out more, though, when applying for credit. There are ways to get it up too if your score falls somewhere below the national average.
  4. Keeping your credit utilization ratio low is very important when it comes to keeping a good credit score, which is why consumers with scores about 785 use only about 7 percent of their credit. The lower that percentage, the better your score.
  5. On average, American consumers have about 14 credit accounts open and about 5 credit cards reported on their credit report. As long as payments are all made on time, there is nothing to worry about here.
  6. The top 1 percent of consumer credit would be those consumers with scores of 850. You do not have to keep your credit score this high to be considered a responsible consumer, though. Scores ranging between 670 and 739 are also considered good.
  7. FICO scores are what are checked most commonly by lenders with a usage rate of over 90 percent.
  8. Poor credit scores would be those falling below 580. Only about 16 percent of American consumers fall into this group.
  9. Fair credit scores range between 580 and 669. About 17 percent of the population would fall into this category.
  10. Good credit scores would range between 670 and 739. 24 percent of the population would be considered to have good credit.
  11. Very good credit scores would range from 740 to 799. About 23 percent of the American population falls into this range.
  12. Finally, Exceptional credit scores would be considered over 800. About 20 percent of the population falls into this category of people.
    Article by Joe Peters Do you have questions about your credit report? If you would like to speak with one of our attorneys or credit advisors  and complete a free consultation please give us a call at 1-800-994-3070 we would be happy to help. If you are hoping to dispute and work on your credit report on your own, here is a link that provides you with a few ideas on how to go about DIY Credit Repair.
Credit Law Center Credit Score

How Much Money Is Your Credit Score Costing You?

How Your Score Is Costing You Thousands

Back when I graduated high school (a few years after dinosaurs walked the earth) I had absolutely no idea how detrimental my credit score would be to my  future purchases. My brother was sitting pretty with a 750 credit score and financed his new car at an extremely low interest rate!  On the other hand, I was sinking with a 580 credit score and financed an older Honda Civic for almost double the interest rate! No big deal, I saw this coming but what about insurance. My brother is only 3 years older than me, had 2 accidents on record and we had the exact same insurance agency providing our car insurance. Even with a good driver discount, an older vehicle, no accidents and basic liability coverage;  I was paying 40 dollars more a more a month than my brother for my insurance!  Why is it that I had to pay so much more than George and how can I get  the same payments as he does? The answer all comes down to our credit score difference!

Low FICO Scores

Your credit scores play a major role in the financial freedoms you have. There seemed to have been a misconception that if someone made great money, the credit scores didn’t really have too much pull. Credit impacts us all, from the moment we start to take on paying bills, buying cars, cell phones etc.

Your employer might even take a look at your credit report and deny you for a job if they are low.

Contrary to popular belief, FICO impacts us all, across all demographics.

So, how does a low credit score cost you more money?

 Higher Interest Rates

If you were to apply for a 60 month car loan with a credit score between 500-589, one could expect to be quoted around 15.2% interest rate. That means that your poor credit is costing you and holding you back from lower interest rates (home and auto) and you are actually seeing your money be used in a way that is not benefiting you or your credit score.

Denied Financing

If you have low credit scores, you may have been denied a bank account, credit cards, a home loan or worse. While you may feel defeated right now, there are several ways to start improving your score. If you are in a tight spot financially and are thinking of completing credit repair on your own, please visit our DIY blog to learn more. If you would like to speak with a credit advisor about how to improve your credit score quickly, please contact Credit Law Center today.

How Do I Make A Change?

It is a good idea to monitor your credit scores. If you have noticed that you have any the below items on your credit report, you might be in need of credit repair.

  • Collections
  • Charge Offs
  • Repos
  • Bankruptcies
  • Foreclosures
  • Tax Liens

If you are thinking about going and paying these items off in hopes that they will increase your credit scores, rethink that option. Your credit report will change, but not in the way you want. If you have a 10 year old medical collection reporting and you decide to pay that collection off, the last date of activity on your report changes to the day you pay it. FICO is looking at your activity and weighing it heavily. Your score may decrease significantly due to the last date of activity being updated. There is less than a 2% difference whether a collection is paid or unpaid, most weight is given to how recent the activity. This does not mean we are advising you to not pay your bills or let things fall into derogatory status.

 

free credit repair consultation

The easiest and quickest way to start seeing a change in your credit scores is to start paying down balances you may have on current credit cards in your possession. This will have a direct/immediate impact on the score. If you are planning to start paying down your cards, try to keep the utilization down below 30%. This will help you start to see a swing in a positive direction.

The largest factor on your credit report is your payment history. Late payments are huge when it comes to dropping the credit scores. At any given time, always try to make at least the minimum payment on your loans.

 

Facts on Fico

 

Saving Money Starts Here

Whether you are looking to get into a new home or buy a new car, your credit scores are vital. If you are hoping to make changes for your financial future, you can start taking small steps now to get back on the right path. If you are in need of assistance today, our credit advisors can help educate you on what you can be doing on your end while we work on derogatory items on the credit report that are hindering you from higher scores.

 

 

 

A Note From The Author: The opinions you read here come from our editorial team. Our content is accurate to the best of our knowledge when we initially post it.

Article by Joe Peters

Do you have questions about your credit report? If you would like to speak with one of our attorneys or credit advisors  and complete a free consultation please give us a call at 1-800-994-3070 we would be happy to help.

 

Credit Law Center Mortgage Pre- Approval

Fact or Fiction; A Look At Hard Inquiries

 

What's the Difference Between a “Hard” and a “Soft” Credit Inquiry?

Whether you are applying for a new credit card or a home loan, hard inquiries are constantly present when attempting to build credit. Although hard inquires are one of the most common items found on a credit report, there is still much mystery surrounding their effect on a credit score. In todays “Fact or Fiction” we will be taking a deep dive into hard inquiries to shed light on some of the most common misconceptions and answer some of your most asked questions!

 

What Is A Hard Inquiry?

It is a common misconception that in any instance that there is a request to pull your credit, a hard inquiry will be listed on your report. A hard inquiry will only occur when you inquire for financing with a lender directly. This does not apply when you are inquiring for pre approval or pulling your credit for informational purposes and is considered a soft inquiry. Unlike hard inquiries, a soft inquiry will not appear on your report and does not impact your credit score.

   -Soft Inquiries-

Soft inquiries are a little different from hard inquiries; while they do show up on your credit report, they are strictly for your personal reference and have no impact on your credit score. Soft inquiries are not visible to lenders as they are strictly made for informational and pre approval purposes and are only seen by the consumer. Soft inquiries will fall off of your report in anywhere from 12-24 months depending on their type!

How Long Do Hard Inquiries Stay On A Report?

Hard inquiries differ from other items on your report when it comes down to their expiration date. A hard inquiry will usually stay on your report for about 2 years but only affects your score for about 12 months! Hard inquiries are meant to serve as a timeline of when and how often you have applied for credit and can mean different things to different lenders. Multiple hard inquiries can portray a sense desperation to a lender as it shows that you have attempted to apply and were denied by multiple lenders. In some cases, like when inquiring for a home loan, there is a short window where multiple inquiries will count as a one!

 

How Much Do Hard Inquiries Hurt My Score?

There are many misconceptions about just how much a hard inquiry is “worth” when it comes down to affecting your score. It isn’t a case of “One hard inquiry amounts to 5 points and if I have 10 hard inquiries, that means I’ll drop 50 points”. Hard inquiries do not necessarily have a dedicated point value and their potency really falls to how healthy your credit score is prior. Someone with a long positive payment history and multiple open accounts with low credit utilization will not be as heavily affected by hard inquiries as someone who is new to building credit.

Can I Dispute Hard Inquiries?

Unlike other items on your report that can be disputed due to infractions in their listed information, legitimate hard inquiries are difficult to remove. If a hard inquiry  is pulled from your report without your knowledge, you do have the right to request its removal. This also applies in the instance of identity theft as the application is not legitimate to your inquiry.

Do you have hard inquiries on your report that were made without your knowledge? Do you have questions about your credit report or credit questions in general? f you would like to speak with one of our attorneys or credit advisors and complete a free consultation please give Credit Law Center a call at 1-800-994-3070 we would be happy to help.

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       -Disputing Inquiries Made By Car Dealerships-

How to Find the Best Car Dealerships in Los Angeles - Silverback Automotive

 

Disputing multiple inquiries made by an auto dealership is a rough area for many consumers. When submitting a loan application at a dealership, they will often inquire with multiple lenders to attempt to get the best financing opportunity for the consumer. This practice is referred to as shotgunning and is common in every auto dealership and when signing  a car loan application, is essentially giving the dealer permissible purpose to make multiple credit pulls. Depending on the FICO score used, similar to shopping for a home loan, there is often a window where the multiple inquiries will only count as a single inquiry on the report. The FICO score used will depend on which lender is being inquired with.

 

Article by Joe Peters

 

The In’s and Out’s of Medical Debt

What is Considered Medical Debt

With there being more than 45 different FICO scores in circulation there is bound to be some variances in how each score is reported. Each debt listed on a report holds different weight; from revolving debt to past due debt, each instance is judged differently across each scoring model when determining risk. With the emergence of the Covid 19 pandemic, many consumers have experienced a new type of debt over the past year, unpaid medical debt.

It is rare for a medical debt to appear on your report listed under your practitioners’ company or service provider. You will primarily see your medical debt appear on your report as a collection under a third parties’ agency.

Medical collections is one of the more daunting debts held by a consumer as they do not willingly place themselves in the situation unlike opening a tradeline with a credit card provider or loan officer. The dilemma sits with the morality behind paying off the debt. Medical service provides are entitled to payment for their services like any other provider. On the other hand, no one chooses to fall ill or succumb to injury. Regardless of the situation, there have been many changes made by the credit reporting and scoring communities to attempt to pad and reduce the impact of medical debt to the consumer.

Are you unsure what is on your report? You’re entitled to one free copy of your credit report every 12 months from each of the three nationwide credit reporting companies but monitoring your credit on a regular basis is the best way to help protect your score! Sites like Credit Armor allow consumers to monitor all three bureau reports with monthly pulls, track how your credit score changes over each month, and provides helpful identity theft protection tools like fraud insurance!

 

NCAP

In March of 2015, the three credit reporting companies (Trans Union, Equifax and Experian) established a plan to provide more accurate and accessible information. The National Consumer Assistance Plan was set to help consumers better understand and correct errors found on their reports as to bolster their credit portfolio. This plan adjusted common practices in many beneficial ways:

1- Consumers who acquire their annual credit report and dispute information that causes the report to change will receive an additional free credit report after updates have been made.

2- The reporting time for medical debts has been changed to report after 180 days to allow insurance to be applied. Credit reporting agencies will also be removed from the reports that previously listed medical collections if they have been paid or are being paid by insurance. If the debt is reported by a debt collector, the account still needs to be noted as being a medical debt as stated by the Fair Credit Reporting Act in Section 623.

3- Traffic tickets, parking tickets or any other debt that didn’t not come from a contract or agreement will not appear on a consumer’s report.

4- Victims of identity theft will receive special attention or those that have another individual’s information listed on their report.

Do you have medical debt on your credit report? Do you have questions about your credit report or credit questions in general? f you would like to speak with one of our attorneys or credit advisors and complete a free consultation please give Credit Law Center a call at 1-800-994-3070 we would be happy to help.

 

free credit repair consultation

An Ever-Changing Reporting System

Every few years a new credit scoring model is developed in an attempt to make meaningful changes in how credit report entries are considered. Currently we are acknowledging almost 50 different FICO scores, each assessing different aspects of the consumers debt. VantageScore (another leader in the credit scoring community) has also faced many changes in their scoring model throughout the years when it comes to medial debts. In the past, VantageScore had ignored medical debts that were furnished by the original medical provider. Though the situation was found to be extremely rare, this meant that a medical facilities debt had no impact on any generation of the current VantageScore (1,2,3 and 4).

Now, with the later VantageScore 3.0 and 4.0, all paid collections are ignored and removed from the account. This had provided a more lenient scoring model that has been much more forgiving to consumers who face medical debt. Keep in mind that a medical debt that is paid by insurance is different from an account that is settled. A settled account is not applicable when it comes to removal and only paid collections made by insurance companies will be removed.

The most current and forgiving VantageScore (4.0) is the only scoring model that distinguishes medical collections from other accounts on your report. This means that medical collections are in a realm of their own leaving accounts such as credit cards and auto loans to be reported normally. This is meant to minimize the impact of a medical collection on consumers reports and better differentiate these accounts from all other types of collections.

Article by: Joe Peters

 

freezing your credit

Closing Credit Cards? How Can It Affect You?

From a young age we were taught the importance of living debt free. When assessing your personal finance goals, you may find it tempting to close out some of your credit card accounts in an attempt to lower your debt. To many, it may feel good to close out an account that held negative payment history or feel at piece with one less credit card in your wallet to temp unneeded purchases. While the sense of accomplishment may be present, the effects of closing a credit card account can be a detriment to many aspects of your credit report.

 

When Should I Close my Credit Card

In terms of  your credit score; canceling your credit card can harm you in a few different ways. A large portion of your credit score is dependent on the length of your credit history. The longer you make on time payments on an account, the better impact it will have when building your credit score. The good news is, if you have established a positive credit history with a particular card and do decide that closing it is the best option; it will be ten years before that cards history falls off of your account. This means that even if the account is unused, it will still factor into your credit history length!

Your credit history length is not the only aspect of the report that can change when closing a credit card account; your credit utilization rate will also take a hit. Your credit utilization rate is based off of the available amount used out of the cards available limit. This means that the lower the balance, the more positive effect the account will have on your score! Depending on the amount available to you, cards removed with a higher limit will harm you more than a card with a small available limit.

If you are attempting to establish credit, then closing your account can be a harmful setback. If you have already established positive payment history and have other revolving account active, closing a card may not harm your your score or harm it at all.

Looking for help in deciding if you should close out one of your credit cards? Do you have questions about your credit report? If you would like to speak with one of our attorneys or credit advisors and complete a free consultation please give Credit Law Center a call at 1-800-994-3070 we would be happy to help.

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How Does Canceling A Credit Card Hurt My Score?

A single credit card can be the deciding factor when it comes to achieving a higher score. The majority of your credit report analyzes how well you are able to manage your open accounts and how trust worthy you are with the funds you have been allotted. A exemplary credit score will mirror the individual who holds long term, well managed accounts.

Once you have closed an existing account, the amount of available credit to be reported and your credit profile becomes less diverse. It is important to know that opening too many accounts or applying for new accounts too frequently can also hurt your score. The key is to manage the accounts you have currently open and not apply for new ones if the current accounts are not in order.

As mentioned previously, your credit utilization is another factor that is effected when a credit card account is closed.  Say that you have 3 cards with $5,000  in available credit ($15,000 all together). If you utilize $3000 of your limit per month, you are sitting at about a 20% utilization rate among all accounts. If you happen to close out one of these cards and keep using $3,000 each month, you have risen your credit utilization rate to about 33%.

 

Should I Re-Open My Closed Accounts?

Once a credit card is closed, the only way to re open the account is to contact your creditor and attempt to negotiate a reopening of the account. Reopening the account can prove to be troublesome in many cases as the creditor will treat the reopening as a new account. The creditor will pull your credit report and evaluate your credit habits since closing the account when determining whether or not to reopen your card.

Instead of closing your card,  an alternative measure would be to keep the card off of your person in a safe place and use it only on rare occasions to keep it from going inactive. A small charge should keep the account active and avoid the cards automatic cancellation.

 

Always Remember

  1. Do not close positive credit accounts.
  2. Avoid opening a gratuitous amount of accounts (just a couple of cards should do the trick).
  3. Only attempt to reopen a closed account after you have established good credit practices and can show credit worthiness.
  4. Assess your personal credit situation before considering  closing a card.

 

Have you experienced a drop in your credit score after closing a credit card or a decrease in your cards limit and want to get your credit back on track? Follow us on Facebook or join us on our site for tips and tools to help get you back on the road to better credit!

 

 

Decrease In Credit Card Limit? What can I do?

How Does A Decrease In Credit Limit Effect Me? 

Your credit utilization rate is one of the most important factors when it comes to your credit score. Depending on how much of the available balance you use will reflect what kind of borrower you are and can be the deciding factor in a substantial credit boost. The lower your credit utilization rate, the better impact the account will have on your credit report. 

It can be frustrating to hold a lower credit utilization rate of 15% on an open trade line, but find that with a drop to your allotted limit, you have almost doubled your original rate. This can lead to lower credit scores and curbs one’s buying power substantially! A sudden change in your credit habits can also portray you as a risky borrower and can spur other lenders to reconsider limits as well.

Can They Do That?!

Just as a card issuer can raise your credit limit as a reward for your continued loyalty or due to your personal request, they can also lower the amount you can access when borrowing from them. This can happen for a multitude of reasons but primarily is due to the cardholder being seen to have a higher risk of default.  An example can be seen with holders that have added an authorized user onto the account; if one has a substantially lower credit score, the lender may see the account as being at risk. Another example comes with the recent dealings of the Covid 19 epidemic. With many borrowers experiencing financial difficulties in the last year, lenders have had to take protective actions with the exponential rise of credit utilization from their borrowers. 

Though federal laws provide some protections related to credit limit decreases, banks usually have free rein to edit your credit limit as they see needed. This can be seen as an unfavorable or even shady tactic, but as they are the ones lending the money, the ball rests in their court. 

What Are My Rights? 

If the credit changes do not breach your cardholder agreement or federal credit regulations, issuers can make changes to your card’s terms as they see fit. Currently, there are no laws that can protect consumers from a credit limit decrease or the damage that will potentially occur with the change. 

The Fair Credit Reporting Act does require the issuer to send an adverse action notice to the consumer when they take an action based on your credit report. This does protect you from misinformation if another person’s poor account history is added to your report; you will receive notice of that change and can take appropriate action to correct it! 

The good news is that it is extremely rare for an issuer to reduce your credit limit lower than the amount you have already charged to your card (IE: if you have a credit utilization rate of $2000 and you have charged $1500 to the account, it is extremely unlikely for the issuer to lower the limit below that $1500). If there is a rare case of the issuer decreasing the amount below the current borrowed amount, there are CARD Act provisions that can protect you from any fees that may come from maxing out the account. With this law in place, your issuer is unable to charge the “over the limit” fee within 45 days from the credit limits change.

Has your credit score dropped because of a recent cut to your credit limits? Do you have questions about your credit report? If you would like to speak with one of our attorneys or credit advisors and complete a free consultation please give Credit Law Center a call at 1-800-994-3070 we would be happy to help.

CREDIT REPAIR CONSULTATION

 

How Can I Get My Old Limit Restored? 

Now that your limit has been cut, what are some steps you can take to begin restoring it? If you have had your credit limit lowered, the first thing you need to do is verify with your card issuer and ask a representative for an explanation for the credit limit drop. Depending on the reason for the limit cut, there are a few things you can do!

If the cutback was caused by a financial setback that prevented you from making your payments or keeping your balance in good standings, just explaining the situation can make all the difference.  This could be going over what exactly happened that threw off your standing or an explanation of what steps you are going to take to get everything back in order! Many issuers would be more than happy to work with you to restore your credit limit if certain criteria are met! This can be anything from making on-time payments over an extended period of time or paying down your balance to a certain number.

Another way you can potentially help your situation would be to write a goodwill letter to the issuer! A goodwill letter can also prompt the issuer to remove a late payment from the report depending on your credit history. This option can take substantially longer to take effect and is only valid if you held prior positive payment history.

Your issuer is not required by law to make changes to restore your previous credit limit and these prior attempts may not show results. If you are denied and you believe that the card company is neglecting to assist you in any way, you can file a complaint with the Consumer Financial Protection Bureau to attempt to provide urgency to the situation.

 

Don’t Put Yourself At Risk

It is not common for card issuers to make changes to your credit limit, but there many cases where it does happen. There are a few ways that can help ensure you are never the target of a credit limit cut. Be sure to monitor your credit report for any changes, errors, and fraudulent accounts that could lead to a credit limit cut. You are entitled by law to one free credit report per year from each of the major credit bureaus, and it can be obtained at AnnualCreditReport.com. There are many other monitoring services out there like Credit Armor that take a deep dive into your credit report and provide helpful tools to help dispute and correct misinformation on your report.

The best way to prevent a decreased credit limit and keep your credit in good standings is to make sure to keep your credit utilization as low as possible, pay your balances on time and monitor your report for any inconsistencies that may pop up!