Credit check; May be required!

When you think of a credit check, chances are your thoughts jump to loan transactions. After all, the point of a credit history is to provide context for your past credit transactions as a way to predict the default risk you pose to a current lender. The reality, though, is that your credit profile is used for other financial transactions.

Just because you aren’t borrowing money, it doesn’t mean that your credit information isn’t being used to make judgments about your level of financial responsibility. Here are five non-loan financial transactions that may require a credit check:

1. Cell phone service

Many carriers want to make sure you’re going to pay your bill as agreed. Others worry about letting you walk out of the store with a phone that will be paid for in the service contract.

Poor credit means that you may be limited in account choices. You may only have access to an account with strict data usage and calling limits if you have a poor score. Additionally, if you want to upgrade your phone later, your carrier might make you pay for the upgraded phone up front, rather than letting you make installment payments.

Some Internet service providers and cable/satellite TV companies also run credit checks before opening accounts for new customers. If you expect to access entertainment in this way, you need to be aware of the possibility that your credit history will be accessed and used to judge you.
                                   

2. Insurance premiums

Many auto insurers review credit scores when setting rates. Poor scores are highly correlated with future claims insurance. You may pay more for car insurance if you have a poor score.

Some states ban insurers from using credit scores to make these decisions, but there is still the chance that you could pay thousands of rupees extra a year on your auto policy as a result of your credit situation. Some homeowners insurance rates are set based, in part, on the results of a credit check.

3. Renting an apartment or a home

Even though you aren’t borrowing when you rent an apartment or a home, the reality is that you are still expected to make regular payments. For some landlords, a poor credit rating could be a red flag that you will be difficult to collect from.

You might also need to get a cosigner for your lease if your situation isn’t up to scratch. In some cases, you will be approved to move into the rental, but you might need to make a larger security deposit. This can be difficult if you are short on ready cash.

4. Applying for a job

Even your ability to earn an income can be impacted by your credit history. Employers aren’t supposed to check your credit score, but that doesn’t mean that some won’t look at your credit report to identify possible risks. This occurs most frequently for jobs where people handle money or other valuable items. Someone with a bad credit report might be considered a risk of embezzlement or bribes. You may lose a good job opportunity if you have poor credit.

5. Finding true love

Finding the right life partner is supposed to be about love and compatibility. It’s supposed to be romantic. However, there are also money components involved with identifying a life partner. Many single people now exchange credit reports and scores before becoming serious in a relationship.

Even if your partner is willing to overlook your past financial indiscretions, he or she might be unwilling to combine finances with you until you get your credit score in shape. Even though marriage doesn’t have to mean that you share a credit profile, many partners are wary that your situation could affect them.

In the end, you need to be aware of the fact that a credit check isn’t just for loan-related financial transactions. Attempts to include other information in credit reports and scores are under way, since utility payments and rental payments can also be indicators of your level of financial responsibility. However, for now your credit profile is still one of the main ways that others — even non-lenders — decide whether or not you are an acceptable risk.

Source: Secondary

Need 850 credit score? See what's holding you back!

As you already know, your credit score is an extremely important three digit number (an 850 credit score equals a perfect score). It sets the stage on whether you will get approved for a loan, and the interest rate you’ll pay on a new home loan, refinance or credit card.

So, what if I told you there’s a tool out there that can show you what’s holding you back from having a higher credit score. 

With Score Analysis, you’ll find out the top four reasons why YOUR score isn’t higher and see what you can do to fix the issues over time.

 Understanding these categories can help you make better financial decisions in the future and may even help you improve your credit.
                              

Here’s a closer look at what influences your credit score.

Payment History – The most influential category when it comes to your credit score. Your payment history is a record of your payments over time. Lenders and creditors look to this as a sign on whether you will make late payments or miss them altogether.

Age & Type of Credit – Each account on your credit report has a “date opened” field. This is the age of your account or how long it has been open. As for type of credit, the different kinds of credit you have impact your report and score. For example, credit card, mortgage, and auto loans.

% of Credit Limit Used – This is otherwise known as utilization and it evaluates the overall usage of your available credit. Experts suggest keeping your utilization under 30% on each of your accounts.

Total Balances/Debt – This is the total amount of money you owe to each of your lenders.

Recent Credit Behavior – Opening new accounts and the credit inquiries for a mortgage or credit card, all fall under this category.

Available Credit – Your available credit is the amount of credit that’s available to you at any given time. It’s also tied to your percentage of credit limit used, or utilization.

Source: Secondary

Weird reasons: Credit score is low!

It can be frustrating to find yourself with a low credit score. If you’ve been using credit responsibly, it can be quite shocking to look at your score one day and see that it’s not as good as hoped.

This happened to my husband and me once. We were applying for our mortgage several years ago, and we were surprised when my husband’s score was about 20 points lower than expected. After going through a three-bureau report with the mortgage lender, we discovered that the culprit was the fact that he had several duplicate accounts reported on his reports, some of them with inaccurate balance information.

We were able to clean up my husband’s credit report, and he enjoyed a bump in his score. Not all issues are quite as straightforward, though. Here are some of the weird reasons that your credit score might be lower than you expected:

1. Your credit limit is missing a zero

At first glance everything seems fine. There might be no derogatory information reported, but the score is high.

For some reason, the credit utilization was high.

Small errors like that can make a big difference. Check your credit report for inaccuracies so you can catch them, and keep them from dragging your score lower. 

2. Frequent moves

Moving too frequently can have an impact on your credit score.

It’s not that moving itself is the problem, but rather the fact that it’s easier for things to fall through the cracks when you change location frequently. If you move, and forget to change your address, or let your creditors go, you might miss a bill or two, and that can lower your credit score.

Another difficult situation is if you regularly break your lease when you move. If you don’t pay what you agreed to, the landlord might decide to turn your account over to collections, resulting in a negative mark on your credit report. 

Also, realize that moving internationally can also take its toll. Your credit report doesn’t always follow you around. Different countries have their own reporting agencies, and you may have to start fresh.

3. Duplicate names

If you have the same name as your dad, that could result in credit score issues. It’s possible that some of your dad’s bad habits are attributed to you. There are numerous instances in which the credit sins of a parent are visited on a child due to confusion over names in a credit report.

This is also a possibility when it comes to other duplicate names. Someone with a common name, might have a number of random bad credit items attributed through confusion. In these cases, you usually have to show documentation, and the credit reporting agency has to verify your identity with the help of your Social Security number.

4. Marriage

In general, getting married shouldn’t impact your credit score. However, you have to make sure you follow the right procedures to ensure that your name change is recorded, and associated with your existing credit report. If you aren’t careful with the change, Haney says that marrying the person of your dreams can bring down your score.

However, you still need to be on top of the situation, and check for inaccuracies, since this transition can lead to misreported items.

The good news is that your new spouse’s credit problems shouldn’t affect your credit score. However, if you get a joint loan together, a low score for your spouse could mean that you end up paying a higher interest rate. 

Bottom line

You might think that you have a good credit score because you pay your bills on time and keep your debt levels low. However, there are some small quirks that can impact your credit unexpectedly, usually through some inaccuracy on your credit report.

If you want to avoid surprises down the road, it makes sense to check your credit when you can. 
Source: Secondary

Credit Affects You! See How?

How Your Credit Score Affects The Interest Rate You Receive

Of course, you know that the higher your credit score is, the better interest rate you will get on your credit cards and loans, whether that be for a mortgage, car loan, consolidation loan, or any other type of loan you need.  The reverse is also true; the lower your credit score, the higher interest rate you’ll have to pay.

The interest rate you get is important because it has the potential to save you thousands of rupees.

3 Ways Your Credit Affects You That You May Have Never Thought Of:

Most of us understand the relationship between credit score and interest rate received.  However, there are many other ways your credit score affects you that you may have never considered:
                                 

Rate for Car Insurance.  Crazy, right?  Your credit score can affect your car insurance rate, but it is just one of the factors that are used to determine your insurance premium.  Insurers create a credit-based insurance score that is computed by looking at your credit history, geographic location, age, driving and claims history, among other things.

For the credit portion of your insurance score, these factors are important: payment history, including delinquencies or late payments; length of credit history; and types of credit, such as credit cards and loans.  The good news (if you have a good credit history) is that about half of existing customers receive a rate decrease based on credit score.. The opposite is also true.  Those with lower credit will likely pay more.

Ability to Rent an Apartment.  Put yourself in a landlord’s position.  Would you want to rent to someone who had a high likelihood of not paying and that you would have to spend months trying to evict?  That doesn’t sound like a good time, not to mention all of the money the landlord would lose while the tenant is not paying.  For this reason, more and more landlords are checking credit scores before renting to people.

Job Prospects.  How you handle your credit and how you perform at your job should be two separate issues, right? Not so for some employers.  An employer can only look at your credit history with your permission, but for some employers, if you don’t give permission, you won’t get any further in the interviewing process.

While the majority of employers will not ask to see your credit, in particular fields, asking is routine. A bad credit rating is likely to be more of a factor in certain industries like financial services

Credit scores affect more areas of your life than you may realize.The more responsible you can be financially, the higher you can make your credit score. The higher your credit score, the less you’ll pay in many areas of your life. Have you knowingly been affected in these unexpected ways by a high or low credit score?

Visit: www.cibilconsultants.com
Source: Secondary

What After Credit Score?

Many consumers look at their credit scores and are at a loss for what to do next. Since a credit score is the reduction of your entire credit history to three digits, it’s hard to really see what is happening to get your score to this point. You might see that you have a low score or a high score, but what does that mean for you and your finances? How can you go behind the credit score to get a better idea of what you can do to improve the situation?

The first thing beyond the credit score is a person’s credit report.

Your credit report and clues about your credit score.

It’s the information in your credit report that is used to determine your credit score. Credit scoring models assign numeric values to the information in your credit report and use an algorithm to figure out what your three-digit score will be. But the process isn’t even that straightforward. 

 Each of the credit reports from the different credit reporting agencies is used in the creation of credit scores, and that means that differing information between credit reports can result in different scores. Plus, individual lenders might use their own modifications of scoring models, emphasizing different aspects of your situation, depending on the loan you are getting.

As a result, your first step is to dig into your credit report to make sure the information listed is correct.  If there are any errors, you should dispute them. “potentially material” error about information often used to generate credit scores. 

Once you have your credit report, you can begin looking at information to help you see where you might be weak. Fix errors on your report, identify problem areas, and begin to move forward.

Consumer credit sites and in-depth help with your credit score.

Sometimes, even after you get a copy of your credit report, it’s hard to identify what items are causing you problems, and how each part of your report impacts your credit score. Getting beyond your credit score to see what actions you can take to improve your situation sometimes requires guidance. 

Consumer credit sites make it a point to analyze your score, breaking it down in plain terms for you. If you have a low score, a consumer credit site can tell you exactly why. The explanations of these reason codes can provide you with greater insight into how your score is figured, and help you see exactly which of your behaviors are contributing to a score that might not be quite as high as you would like.

Not only do many consumer credit sites offer you information about the “why” behind your credit score, but many also provide you with concrete steps you can take to improve your credit situation. You can receive helpful strategies for improving your credit score specifically, and improving your finances overall. With helpful insight and guidance in creating an action plan, your credit score becomes more than just a number; it becomes a way for you to confront the realities of your situation and make lasting changes to the way you manage money. This can save you money on all sorts of financial services, from loans to insurance.
                                 

Your credit score gives lenders and others in the financial services industry a way to make snap judgments about you, and the way you are likely to handle credit (and, by extension, your finances). However, this doesn’t mean that you can’t dig into your score and figure out how to improve it so that you put your best foot forward.

Remember that a credit score is dynamic. A bad one can be improved in a short amount of time. A good can be lowered in the same short amount of time.

The right resources, and an understanding of what goes on behind the scenes of your credit score, can help you stay on top of the situation and build a credit reputation that ensures you the best loan rates and other good financial deals.

Source: Secondary

Foreclosure can impact your credit!

You know that a foreclosure on your home can be a big deal when it comes to your credit. But how big of a deal can it be? You might be surprised at how much a foreclosure can impact your credit, and how long it can take to recover, depending on the situation.

Why foreclosure can be so devastating?

Foreclosure can be so devastating because it is related to your payment history. Your payment history is the largest factor affecting your credit score. Before your home goes into foreclosure, there is a good chance that you have missed at least three payments. By the time the foreclosure process is complete, you might have missed even more payments. All of these missed payments are recorded in your credit history and affect your credit score.

The more payments you miss, and the more “important” those accounts are, the bigger the impact on your score. Additionally, reports that your credit can be impacted even more if your credit score is excellent. If your score is 680 and you go through a foreclosure, you could see a drop of 85 to 105 points in your score. A higher score, of 780, could result in a drop of between 140 and 160 points.

Combining foreclosure with another problem, such as a short sale or a bankruptcy on your record, can be even more devastating and result in more difficulty as you attempt to recover your score.
                                 

Improving your credit after a foreclosure

It can take several years to improve your credit after a foreclosure. You might not even be eligible to buy a home for two or three years after the foreclosure is complete. However, you can start working to improve your score.

One of the ways to get started is to have someone with better credit add you as an authorized user to a credit card account. However, for this strategy to be effective, you need to have a close relationship to the other consumer, as a spouse or a child.

You can also start improving your score by getting a secured credit card. You might not be able to qualify for a “regular” credit card right after a foreclosure, so a secured card can help you begin re-establishing your credit. As you make on-time payments, and they are reported to the credit bureaus, you can begin to see improvement. After nine months to a year, you should be able to “upgrade” to an unsecured card that will further help your score.

Other types of small loans, such as a personal loan from your bank or an auto loan, can also help you improve your credit. You need to be prepared to pay higher interest rates, though. As long as your credit is poor, you won’t qualify for the lowest rates. When your score starts to improve, you can take advantage of better offers and lower your interest rates.

Source: Secondary

Look for these on your credit report!

You probably already know that you should check your credit report at least once a year. But just why should you care about your credit report in the first place? Well, your credit report is the “snapshot” of your financial health that’s used by lenders, landlords, credit card companies, insurance agencies, cell phone companies and even future employers to judge your creditworthiness. 
Your credit report and your credit score is based on your credit history, and lenders use that to decide your ability to pay your bills or repay your debt.

So your credit history impacts a lot, which is why checking your credit report and making sure it’s accurate is so important. Understanding your credit report – what you owe and to whom – and making sure your report doesn’t have any errors will make sure that you’re as financially healthy as possible.
                     

When you do get your credit report, you’ll want to look through it to make sure that everything is accurate and there is no suspicious activity or accounts you don’t recognize. Here’s what to look for when you look through your credit report:

Information that’s not yours: If you have a common name, your credit history might have some information from someone else’s history. Make sure your name and address are accurate on your report.

Information from an ex-spouse: If you are divorced, your ex’s information may be mixed up with yours.

Accounts you don’t recognize: If there is an account on your credit report that you don’t recognize, it could mean that someone has used your personal identity to open up financial accounts in your name. This is also known as identity theft. Identity theft happens when someone steals your personal information and uses it for financial gain. A person might open a new credit card account or open a new bank account in your name if they someone got access to your full name, birth date and Social Security number. If bad checks are written or bills are not paid from these accounts, it will show up on your credit report.

Out-of-date information: You may have negative marks that are listed after the legal deadline for removing them from your report. Most negative marks can stay on your account for up to 7 years.

Wrong notes for closed accounts: An account that you closed yourself may look like a creditor closed the account. An account closed by a creditor can actually hurt your credit history, so make sure it’s reported correctly.

Non-delinquent accounts still appear as delinquent or more than one delinquent date is listed on your account: Credit reporting agencies may not have noted which delinquencies have been fixed. Similarly, it you have an account that’s in collections, your report might accidentally have more than one date for when your account became delinquent. Make sure there’s only one date listed.

If you do spot an error on your credit report, you have the right to dispute any inaccurate or incomplete information. You’ll need to contact both the credit bureau and the organization or company that provided that information. Both are responsible for correcting inaccurate or incomplete information in your report.

Learn more about identity theft, visit: www.cibilconsultants.com

Source: Secondary

They affect your credit score most.

You probably already know about the connection between your credit history and your credit report and how both impact your credit score. Remember that your credit score is like the grade on your credit report: companies use this number to rate your likelihood that you’ll repay your debts and pay your bills.

But just what are the factors that go into calculating your credit score? And which ones impact your score the most?

Here’s the breakdown of what affects your credit score, from the highest impact to the least:

Your payment history : Whether you pay your bills on time and if you always pay at least the minimum amount. Even one late payment can impact your credit history.

                      

The amounts you owe : Some percent of your credit score is determined by the amounts you owe, which is made up of two parts: the total amount of money you owe all your lenders and the percentage of available credit that you’re using (like hitting the limit on your credit card). People who are using less of their available credit are considered lower risk than people who are using a lot.

The length of your credit history : The amount of time you’ve been using credit makes up fifteen percent of your credit score. Someone who has been using credit for a long time is considered less of a risk.

New credit you open or try to open : Some percent of your credit score is also based on the amount of new credit you’ve applied for recently. Every time you apply for a loan, credit cards, store cards and even a cell phone, someone will run your credit. Someone who applies for a lot of credit in a short amount of time is seen as a credit risk.

Types of credit : The types of credit you have impact about ten percent of your credit score. People with a mix of credit types, like credit cards, an auto loan, and a mortgage may have a slightly higher score than those with only one type.

So, now you know what makes up your credit score, which is your overall “credit grade.” Your credit report, on the other hand, gives you all the details about each account and shows you everything from how much money you owe, how many accounts you have, how many accounts are in good or bad standing, and how many times a lender or another company has checked on your credit history. Since, your payment history make up 35 percent of your credit score, you’ll want to pay attention to two places on your credit report: potentially negative items (accounts unpaid or past due) and your status and payment history.

Even if you do have a few negative marks on your credit report, the good news is that on-time and regular payments can help boost your credit score. It may take a little time and patience, but paying your bills consistently can help boost your credit.

Source: Secondary

No Problem, if you have no credit score!

Seems like you need credit for everything: buying a house, getting a loan, and even renting an apartment. Your credit score is your magic number to unlocking a lot in your financial life. But if you’ve never had a line of credit to your name or you barely have any credit history, you may be struggling to think of where you fit into the credit history equation.

If you don’t have any credit history, you have two options: start building credit history or go off the grid and try to avoid needing credit in the first place. We’ll cover how to accomplish the first point – which is arguably a lot easier than the second choice, though not impossible.

So, just how do you go about building your credit history? Here are a few simple steps to building solid credit:
                       

• Double check to make sure that you do or don’t have any credit history. You’d be surprised what may or may not be in your credit history, even if you don’t think you have any credit to your name or you’ve never checked your credit before. Before assuming that you’re starting with a blank slate, you’ll want to check your credit report. That will show you if you have any lines of credit that have been opened under your name. If there are any accounts you don’t recognize, your name might have been used to open up an account without your knowledge (or it could be that one account you opened years ago that you forgot about…).
• Ask your bank about a secured credit card. A secured credit card is an easy way to start building credit through your bank or credit union. They’re kind of like a mix between a debit card and a credit card, since you’ll need to make a security deposit first and then you’ll receive a credit limit that’s usually equal to the deposit you made. But unlike a debit card, activity on your secured credit card will be reported to the credit reporting bureaus, helping you build credit history.
• Once you have momentum, open a second line of credit. Once you’ve got some positive credit history with a secured credit card, you’ll want to open a different line of credit to help build your score and mix things up. Different types of credit besides just a card can help boost your credit score, so consider taking out a smaller loan or opening up another account.
• Use your credit responsibly. Once your start building credit, you’ll want to make sure that you use it responsibly. The worst thing you could do is damage your newly established credit history! Late payments, even on small things like your utility bills, can end screw up your credit history in the long run.

So that’s the basics of credit building. But if that’s not your style, you may choose,

Go off the grid. If you don’t want to play the credit score game, it can be really difficult but not impossible to live with a super low score or no credit score at all. Instead of using a credit card or taking out traditional loans, you’ll probably have to resort to using debit cards and borrowing from friends, family or other alternative lending sources.

Source: Secondary

Credit highly impact your mortgage

If you’re in the market for a mortgage or looking to refinance your home, you’re probably already tracking the mortgage industry and the rising interest rates we’re seeing in the housing market. Over the last year, mortgage interest rates have climbed more than a percentage point. While increasing interest rates could signal an improving economy and a rebounding housing market, it also means a more expensive home for home buyers.

Here’s what you need to know about the mortgage rules and your credit history, and some simple ways to improve your chances of landing a mortgage:

• Your outstanding debt and what you earn has a bigger impact on your mortgage. Thanks to the Ability to Repay Rule, lenders will be looking more closely at two things: your income and your outstanding debt, including credit card balances, student debt and car loans. You debt-to-income ratio – or what you owe versus what you earn each month – is going to have a bigger impact over the type of mortgage and the mortgage terms you qualify for. There are a few ways to improve your debt-to-income ratio: 1) increase your repayment amounts for any outstanding debts, 2) avoid taking on any significant, new debt during the mortgage application process, and 3) consider earning money on the side or asking your employer for a raise to help boost your income.                                                                  
• Paying off your smaller debts could boost your credit history and your mortgage application. Since lenders now have to document and verify all of your income and debts under the Ability to Repay Rule, your finances will be even more under the microscope – and you’ll likely have to wade through a longer application process. To help shepherd along your application and to increase your chances of qualifying for favorable mortgage terms, you should begin to focus on paying off your smaller debts. If you have a lingering credit card balance or you only have a few hundred left on your student loans, focus on paying off those smaller debts in the short term. The less outstanding debt you have in multiple accounts, the more favorable your mortgage application will look.
• Your overall credit still matters a lot – if not more. The Qualified Mortgages Rule means that lenders are not allowed to push consumers into a higher interest loan just to earn a commission. From the consumer protection point of view, this rule is a winner. But it also means that loan officers will be forced to make smarter loans and will therefore be looking for more qualified lenders. So while your credit history and credit score still mattered significantly in the past, it matters even more now as loan officers will want to be absolutely sure you can repay your debt.

Source: Secondary

Bankruptcy: Merits and demerits!

The feeling that your finances are out of control, and that you’ll never be able to afford anything again, is a terrible one. But if you’re overwhelmed by debt and you can’t see how you could possibly get out from under it, bankruptcy is an option you may want to consider.

Bankruptcy is a legal process through which existing debts, under the protection and supervision of a court, are eliminated or reduced, and/or the repayment period is extended.

                    

PROS

– You get a “fresh start.” Most unsecured debts – such as credit card debt – will be discharged through bankruptcy. That means you no longer have to pay that debt. Secured debts are those that have collateral, such as your mortgage (for which your home is the collateral) or your car loan (for which your car is the collateral). If you continue making the payments, you will most likely be able to retain your home and car throughout the bankruptcy proceedings and beyond. However, if you cannot afford the payments or stop making them, the creditor is likely to try to repossess the property or at least re-negotiate the loan.

– Filing for bankruptcy creates an automatic stay against collection efforts. This means that any creditor who tries to collect on the debt after the stay has gone into effect may be cited for contempt of court or ordered to pay damages. If you are about to be evicted, foreclosed on, or have your utilities shut off, the automatic stay resulting from filing for bankruptcy can give you a little breathing room. However, note that creditors can ask a court to lift the stay, and it will likely be granted if it appears you cannot or will not pay off even a part of your debt. Additionally, the automatic stay does not apply to certain types of debt, so depending on the type of debts you have, it may not be helpful.

– You probably won’t lose as much as you think. Every state protects certain types of assets during bankruptcy proceedings, such as your home, personal transportation vehicles, money invested in qualified retirement plans, household items, and clothing. 

CONS

– Bankruptcy is a public legal proceeding, so your family and friends may find out that you have declared bankruptcy. If you have been hiding your financial difficulties, then you may be embarrassed to have others know about your situation. However, unless your case is publicized by the media or you personally know your creditors, it is unlikely that your friends and family will find out about the bankruptcy proceeding the same way they would find out about a new job or new baby.

– Certain types of debt cannot be discharged through bankruptcy, including student loans, child support, alimony, and debts arising from criminal conduct. Thus, if these types of debts comprise all or the majority of your debts, bankruptcy will not relieve your financial burden.

– The bankruptcy will remain on your credit report for ten years, and is the worst kind of negative entry you can have. Thus, you may find it extremely difficult or impossible to borrow money, or the rates you are offered may be much higher than what the average borrower could get. However, it is certainly possible to rebuild your credit history and eventually have a good credit rating.
Visit- www.cibilconsultants.com
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