Monthly Archives: May 2013

Houses and Credit History

Will My Old Address on My Credit Report Hurt My Credit Score?

As a general rule, no, an old address will not hurt your score. This is because an address can be found in the personal information section. Any information found within that section is for identity verification purposes only, and does not get included in the computation for a credit score. However, there are exceptions to this rule. These exceptions come in specific scenarios that you do not want to happen to you. This article will discuss the same. Tips and techniques for avoidance will also be discussed.

Identity Theft

An old address shows on your credit report because you have not yet updated the same. It is safe to assume that if you did not update it in your report you might not have updated it on some other mail matter. If the same is a rental property, then the new renters will be receiving your mail. If the same happen to be unscrupulous individuals they can use the information they got to perpetuate identity theft or credit card fraud.

When this happens, you will definitely see your credit score fall, and fast! Worst, you might just find yourself the subject of an arrest warrant. You can of course clarify the matter with your creditors, banks, lenders, credit bureaus, police and/or judge. But the sheer embarrassment and the inconvenience you will experience will be beyond words.

If the property is yours and it is not occupied, make sure that your mail matters are secure. There are identity thieves who target unoccupied houses with lots of mail matters visible in the box or form a window.

Foreclosed Property

Work at home. FreelancerSometimes consumers sell their property, but insist on keeping ownership of the same prior to a certain amount of payment or sometimes even after full payment. In some cases the property is already transferred in fact, but not in the title. There is a contract to sell of course, but the buyers are already allowed to occupy the property and sometimes even pay the amortizations directly.

This is a bad idea. If the property is still under your name, you must pay amortizations. This is because the same will still be considered as an address, albeit an old address. If the new owners do not pay amortizations, you will be the one who suffers. Not to mention the fact that your credit score will suffer as well. Remember, if you let a buyer or a tenant pay amortizations under your name for whatever reason, verify that payment has been made a few days ahead of the deadline. If the same is not paid within a specific date, you pay it yourself and have the buyers or tenants reimburse you. The same terms should be included in the contract.

Utility Bills

Sometimes, a renter forgets to disconnect all utilities and then leaves the premises. The problem is that the old address still shows in the report, or is considered the principal address. And those utility bills are still under your name. These companies will keep reporting the default until the same is charged off. Oh, a charge off is very bad news in your report, because it is there and is part of the computation for 7 years.

What is the Lowest Credit Score?

Does Debt Affect My Credit Score?

The simple answer is yes, and it affects it big time. The better question would be, “How can different types of debt affect your credit score”. This article will discuss the same. Pay attention, this is a very important aspect of a credit report, score, and your finances in general.

Credit Related Debt

As a general rule, if you owe money to a professional entity i.e. bank, lender, credit cards, etc.) ANY default will be reported to credit bureaus. Of course some creditors will be slower than others, but this is the safest assumption. If you owe to a private entity in personal capacity i.e. family members and friends then the same would not get reported.

Immediate and Immutable

What is the Lowest Credit Score?The fact that a consumer defaulted on a payment gets sent to credit bureaus. It doesn’t matter if you paid the next day. If you default, it gets reported; if it gets reported it, gets included in the computation.

Time When Change Is Reflected

At the latest, a reporting entity like a creditor will submit information once every 3 to 4 months. Some entities like credit card companies do it monthly, sometimes even sooner. Best case scenario, the negative information will be included in the report after 3 months. Worst case scenario is when everything lines up. This means the reporting, the score updating, and the inquiry, can be as soon as 3 days to 1 week.

Amount of Debt

Most credit bureaus base their scoring system on the Fair Isaac Corporation (FICO) scoring model. Of course, they modify things, but the broad strokes remain the same. This means that the total amount of debt reported to credit bureaus consist of 25% to 35% of a consumer’s credit score. The FICO scoring system rates it at 35%.

Type of Debt

Different debts get reported differently; for example, home amortization defaults, auto loan defaults, credit card defaults. There is no way to be sure, but these defaults are considered differently by credit bureaus. Why is there no way to be sure? This is because the exact formula of each credit bureau remains a closely guarded secret.

Credit Utilization

A consumer has a credit utilization limit. The most common example of this is the credit limit of a credit card. It bears stressing that credit card limits are based on studied financial capacity and propensity of the consumer. The higher a consumer utilizes this credit limit, the more negative points he/she collects. A good rule of thumb is to stay within 10% to 30% of the credit limit.

Length of Default

The longer the default, the more negative points a consumer picks up. Worst case scenario, it gets charged off. Charged off debts are reported and included in computing a credit score for 7 years. Aside from the obvious negative mark, the information itself is a red flag. Some entities consider the information included in the report, separately from the score. This means a consumer can have excellent credit, but if there is still a charge off information on the report, then lenders will be hesitant.

Credit Score Questions

Why Don’t I Have a Credit Score?

There are several reasons. This article will discuss some of the more common reasons a consumer has no credit score. Tips and techniques in getting one will also be discussed.

Credit Report Means Credit History

A person who has no credit history will not have a credit report. Credit history means the different types of credit transactions your name is associated with in the past and present. For example, credit card charge, a salary loan, a mortgage, auto loan, etc.

You Are A Minor With No Credit Related Accounts

Credit Score QuestionsSome minors already have credit history. This is because their parents have enrolled them on a savings account, a supplementary card, a debit card, etc. However some minors have always relied on their parents. In this case there will be no credit history to speak off.

You Have Always Paid Cash

Yes there are some consumers who prefer to pay in cash. They may have a bank account but the same is not active or not connected with credit cards. This is not really something to be ashamed about. And in fact, some of these consumers are a shining example of financial planning. However, they will have no credit history, so when it comes time to apply for a loan for a big ticket purchase like a house or automobile, they will have to pay cash as well, which some of them actually do.

You have always been unemployed

Some employers provide their employees with the facility of credit. They have payroll accounts, credit card accounts, checking accounts, etc. Those who have never been employed usually do not have a credit history, because no bank or lender will allow them to open a line of credit.

Your Accounts Have Been Inactive

It usually takes around 6 months to 1 year for an inactive account to show no credit reports and scores. There are several reasons for this, you might have been out of the country, you might be in the military service, or you just stopped minding your credit. This is the easiest to remedy, all you have to do is charge a few items, deposit some money to your accounts, withdraw some money, etc.

You Inputted the Wrong Information

And there are also cases wherein you applied for a credit report, but you inputted the wrong information i.e. full name, address, SSN. If you applied by registered mail on a handwritten letter, the same might have been with poor penmanship.  You forgot to fill out necessary information. In order to avoid this, always double check your application information. If possible retain a photocopy for your reference.

Your Credit Facility May Be a Ninja

There are some credit facilities, banks, lenders, etc. that do not report information to the credit bureau. If this is the case, then your credit history exists but it is not on the radar. Talk to your credit facility and ask that your information be reported. You can even do it yourself, but with a written certification from your credit facility.

What Should You Do?

You should build credit history. If you have a dormant account start using it. If you have no account, open some up. If you have a hard time opening accounts with the facility of credit i.e. credit cards, then ask for a supplementary card from a relative or friend.

Credit Cards for Different Credit Scores

Best Credit Cards with No Annual Fees

Applying for a good credit card encompasses thorough examination of the perks that the credit company gives. Comparing credit companies is by far the most logical way to avail of the best card supplier. One of the basic fees that can increase the interest rate is the annual fee. But there are some companies which offer a no annual fee card such as the following:

 1. Citi’s Simplicity Card. This is the most famous card among its product line. Aside from a waived annual fee, it also offers the lowest introductory APR, no penalty rate and late fees for 18 month membership and the annual fee is waived. Added services are an online account management, customer service available 24/7, constant protection of account and price rewind wherein purchases can be registered to Citi’s website; the company will then search for retailers who may offer lower prices within 30 days upon date of purchase. Once Citi found a store with lower prices, the price difference can be claimed back.

Credit Cards for Different Credit Scores2. HSBC. Hongkong and Shanghai Banking Corporation claims to offer a no annual fee card for life. Apart from this, a low interest rate on purchases, balance transfer and cash advance are an added offer. It also has the Home and Away Privilege Program wherein instant discounts on accommodation, travel, shopping in Australia and other countries are given away.

 3. American Express’ Blue Cash Everyday. Another no annual fee credit card. The company offers cash back gained through qualified purchases. Cash back can be availed as a credit statement, merchandise and other gift items through Rewards Dollars. American Express gives certain cash back on different US establishments such as 3% on stand- alone supermarkets, 2% on gasoline stations and select department stores. As a welcome offer, new card members are entitled to 100 reward dollars for $1,000 spending.

4. Virgin credit card.  Aside from the fact that there is no annual fee for a lifetime, this card offers a number of benefits. It gives interest free purchases for up to 44days and an annual rate of 18.99%.  A reasonable 2.9% per annum balance transfer rate for 6 months can also be availed. Virgin credit card takes pride of their Fraudshield which is a system that protects the users and their transactions by detecting irregular purchases made on the credit card.

5. Citibank’s Ready Credit. This is a great choice for borrowers who want to use plastics to cover for bills, groceries, and other personal acquisition such as car, vacation or home improvements. Guaranteed to have 0% annual fee, it’s also the best option for individuals who want to combine all debts into just a single credit facility. Ready Credit offers worldwide privileges and discounts such as free bottle of wine each time the user dine in a Citibank partner restaurant.

There is still a lot of no-annual fee credit card, and the key is just research. There is no reason for charge-off if a user will just be careful on choosing the best credit card company. Annual fees can really be skyrocketing high, but there is a definite way on how to eliminate them. Being fully aware by examining the fine prints will be one of the keys.

What is the Lowest Credit Score?

Will Multiple Loan Applications Hurt My Credit Score?

The answer depends on how you go about making multiple loan inquiries. But if you do things wrong, it will definitely hurt your score. Below are a few scenarios. Useful tips and techniques will also be discussed in order to prevent or minimize any damage to a consumer’s credit score.

Soft Inquiry

You might not know this, but natural and juridical persons pull out credit information on every consumer on a regular basis. These are credit inquiries conducted WITHOUT your permission. As such, they do not hurt your score, regardless of how many times it is done. These are called Soft inquiries.

Hard Inquiries

What is the Lowest Credit Score?These are credit inquiries conducted WITH your permission. The waiver is usually included in most credit related applications i.e. credit cards, auto loans, home loans, etc. These are called hard inquiries. One or two inquiries will not really lower a credit score. However, dozens of inquiries over a span of several weeks will! This usually happens because a consumer is careless and keeps signing waiver after waiver when he/she shops for the facility of credit.

It’s My Right to Shop Around!

Yes it is, and the law recognizes that. This is the reason why credit bureaus are prohibited from including in the computation several or dozens of inquiries made over a short period of time that seem to be related. A short period of time varies. The safest would be 1 to 2 weeks tops. However some experts believe that the credit bureaus look at the inquiring entities. If it seems a consumer is shopping around for a specific loan, then the same is treated as 1 hard inquiry. This is called de-duping.

Realistically Speaking (Score Wise)

It takes a lot of inquiries to substantially dent your credit score. A dozen or two will not really hurt you much, even without de-duping. As a general rule this is a low priority item on the computation. By way of exception, its significance increases if the consumer lacks information on the other categories i.e. credit history, types of credit, if the consumer has a significant amount of debt.

Inquiring Entities Look Beyond the Score

In some cases an inquiring entity will look beyond the score and look at credit inquiries as a specific criterion. In this case the same gains a different significance. That is why, as much as possible it is a good idea to limit consented inquires.

For example

If you must shop around for a loan then do it right, take advantage of de-duping. For example, Mr. A wants to purchase an automobile. The best way to go about this is to conduct the initial research. Make sure about his financial capacity first and then start with one or two requests for pre-approval. If the results are positive, well and good. He can shop around with several other lenders in the span of 1 week. If the lenders disapprove the application, then Mr. A better step back, assess the situation and repair his credit score. The worst he can do is continue with applications, knowing it will most likely be disapproved. This will only waste him time, and put other creditors on alert, as to the reason why Mr. A keeps getting disapproved.

Application For Credit APPROVED

How to Increase Your Credit Card Limit

Credit cardholders sometimes feel that they need to increase the credit limit of their cards. This is probably because they actually prefer to purchase more stuff using their cards. Other cardholders say they feel like they have more freedom when using their credit cards to spend and would like to increase their credit limit to allow them to buy more goods. There are procedures to follow in requesting for an increase in your credit card limit, but there are several things to consider before you file a request to increase your credit card limit. 

Timing is an important consideration

Application For Credit APPROVEDIn the credit card business, the usual practice is to grant credit limit increases only to cards that have been used for at least six months. If your credit card has been in use for less than six months, there is very little chance for your request for increase in credit limit to be granted. If your card has been in use for only 5 months, it is advisable for you wait for another month before making a request to increase your credit card limit.

The Reason for Increasing Your Credit Limit

It is important to determine why you need an increase in your credit limit because you will surely be asked to explain the reasons for your request. One of the valid reasons for increasing your credit line is additional income. When you have more money to spend, it is natural for you have a higher credit limit.  When you apply for an increase, you will be asked to justify your request so you should be ready with facts and figures to support your request. Your best justification is your credit history or good paying habits and the satisfactory way you have so far managed your credit card account.

Asking the Credit Card Company for Approval

The only way to increase your credit card limit is to convince the company that you need one. When requesting for the increase, you must be firm in your decision and be frank in informing the company you will be looking at other options if your request is denied. You can mention that you might be forced to do a balance transfer in case you are not given an increase in credit limit. If you have been a good paying customer, there is no reason why the company will not approve your request. The important thing to remember is that you should ask for a reasonable credit limit increase based on your history of using the credit card.

Ask for the Credit Limit That You need

Usually, an increase of 10% over your last credit limit will suffice; but you can ask for a bigger increase if you really need it. You can ask for a 25% increase but this is probably the highest increase that any company will approve.  Requests for increase of credit card limit higher than 25% are seldom granted by credit card companies.  On the average, a 15% increase is an ideal figure that can be easily negotiated.

Questions About Your Credit Score

Do Cell Phone Payments Effect Credit Scores?

Strictly speaking it does. As a general rule, not by much. But there are exceptions. Below are a few scenarios that should prove useful.

Does My Cell Phone provider Report My Defaults?

Here is the thing, technically speaking, creditors can report any default to the credit bureaus. But this is not always the case. A credit bureau can choose to include the information or not. Even if the information is not found on your credit score, it does not mean that the same is not considered. Remember, you may know the broad strokes of how credit bureaus make their computations, as well as the 5 main categories for consideration. But in large part, you have no idea about the details. Bottom line is, better not take the chance.

Questions About Your Credit ScoreScenario 1: One Time Default

A one-time default may not cause so much irritation that your cellular phone provider will report the same. This is especially true if the amount is negligible. The problem is, if the amount is substantial. In this case it would be better to contact your cell phone provider and reach an accommodation regarding payment.

Scenario 2: Credit Card

If your cell phone payment is tied up with your credit card, and you fail to pay the credit card company on time, then you can be sure that the default will be reported. Remember, a credit card is convenient, provided you are paying on time and in full. The problem starts when you default on payment and/or pay the minimum.

Scenario 3: Repeat Defaults

Repeated defaults on your part will may force your account to be reported to the credit bureaus. To put things in perspective, it does not mean that the same will be considered. Even if it does, there isn’t going to be much weight placed on a few cell phone defaults, especially if they are isolated cases. The problem occurs when your credit card default is on top of other defaults.

How to Check?

Aside from defaulting and looking at your report, which is a bad idea, you can try to contact your lender. Ask if they report the defaults or what circumstances warrants the default information being reported.

How to Avoid?

The simple answer is to pay your bills on time and in full. Below are a few suggestions that can be helpful:

  • Auto Debit: Most bank accounts allow the consumer to auto debit the payments monthly. Of course you want to check regularly to see that your payments are not becoming too steep.
  • Pay a few days in advance. You will be surprised at just how many times a consumer defaults because he/she forgot! You can prevent this by having a payment calendar.
  • Get a prepaid account. If you continually default on your cell phone bills, you might consider converting to a prepaid account. This way even if you default, the same does not get reported. You do however lose the ability to make calls, sms, tweets, etc, until you reload.