Monthly Archives: June 2013

What is the Lowest Credit Score?

What is the Lowest Credit Score?

Generally, in the credit world, it is hard to define the lowest credit score.  It is due to the fact that lenders view credit scores differently.  For some, your credit score may be high, while for others, it is just average.  Though FICO can provide the range from 300 to 850, it will mainly depend on how lenders, banks, credit card companies and other financial institutions will judge your credit score.

What are the general interpretations of credit scores?

Lenders set up few guidelines on how to determine if one’s credit has high risk or low risk.  Most lenders or creditors consider scores above 620 have an average or good risk.  While account holders who have above 700 credit score have a very low risk and scores beyond 760 is the lowest risk based from formation of scores of FICO.

Who is getting the lowest credit scores?

Obviously, those are people new to credit, those who don’t own a credit card or any other financial accounts.  Next, those who have accounts handled by collection agencies have delinquency records and may have filed for bankruptcy.

How long will I have the chance to improve my credit score?

Immediate attention and action is needed.  It is advisable to review your credit report, to check any possible errors, to make sure everything is properly reported to credit bureaus.  A credit score is the sum of all the information we have on our credit report.

How can I view my credit report?

Once a year, major credit bureaus are sending credit reports for all consumers for free. Once received, take time to review the information because for any errors you find, you have the right to dispute it.  We can’t let a single or minor error pass because it can hurt our credit score.

The set of information you can find on a credit report include;

  • What is the Lowest Credit Score?Contact information- name, both present and previous addresses, contact numbers, etc.
  • Credit summary- this will include the total number of financial accounts both previously and currently you have, like loans and credit cards.  This includes also the total amount of debts you owe.
  • Public records- though not all consumers have public records.  This section shows information issued by the government or federal court like bankruptcy, tax liens, judgments, foreclosures, etc.
  • Credit inquiries- credit inquiry has 2 types, the soft and hard inquiry.  These inquiries are either made by an account holder or made by lenders who viewed your credit report to assess your credit worthiness before they approve your applications for getting a new loan or credit card.
  • Account History-  this shows the major information regarding all your financial accounts including name of lenders, balance information, payment details, status of the account, etc.

With all these information given regarding formation of credit scores, we are already aware what makes it or break it. It helps us to understand the importance of credit information that can lead to a very low score.  Having the lowest credit score doesn’t mean it will stay forever on that level because it will depend on us; how we pursue a change to improve or even get the highest credit score possible.  No one achieves it without effort because it is a continuous process that needs a lot of hard work and discipline.

Credit History

What Is a Hard Inquiry on My Credit Report?

A Hard inquiry is a specific type of credit inquiry. This is in relation to a consumer’s credit report and score. This article will discuss several important aspects regarding the same.

Credit Inquiry

Realistically speaking, any entity i.e. corporation, person, bank, lender, etc. can pull out your credit reports. Most consumers are not aware of this, but their credit reports get checked numerous times without their knowing it. More often than not, these are from entities that have something to sell and want to see if the consumer pre-qualifies for their “promotional offer”.

Soft Inquiry

Any credit inquiry that was not expressly authorized by the consumer is a soft inquiry. This means that it should not be included in a credit report in the first place. And, even if it does, it should not be considered in calculating the credit score. Why? This is because the consumer had no control over the actions of the inquiring entity. In some cases, the credit bureau should not have even provided the information.

Hard Inquiry

Credit HistoryAny credit inquiry by any entity that has your EXPRESS authorization. This usually means in writing. Some consumers are not even aware that they have already signed an express authorization. This is because the same is included in the terms and conditions, is an oversimplified “check box”, or the consumer was just not paying attention.

As a general rule, any application for the facility of credit will involve you signing a waiver. This includes personal loans, auto loans, home loans, application for insurance, application for utilities, application for a mobile phone, credit card application, checking account application, etc. In fact some employers pull out credit reports for individuals who are applying for a highly confidential or finance related position.

Whenever you sign anything that involves you applying for something, ask the representative if the waiver includes the pull out of your credit reports and if they will pull out your credit reports. While you are at it, ask what credit reports they will pull out. If they say, they may or may not, it usually means they will.

Important Tips to Remember

A popular myth is that credit inquiries will ruin your credit score. In reality it can lower your score but only by a few points. Unless you lack credit history, and do not have various types of credit available (i.e. checking, credit card, loans, etc.) the same is not too significant.

There are however instances wherein checking the credit inquiry section of your credit report can help you earn a few points back. First, if you are sure about every express waiver you made, and there are hard inquiries listed on your credit report that you did not authorize, you can dispute the same. Second, if you see a credit inquiry that is already more than 2 years old but is still reported, you can dispute the same.

You can dispute the hard inquiry online, on the phone, or by writing a dispute letter. Make sure you address the letter to the credit bureau that listed the information on its credit report. The contact information can be found on the credit report itself.

Credit Card Rewards

Best Credit Card Rewards Programs

Now is the best time to get a new credit card because companies are giving away lots of rewards when you sign up for a new card.  The rewards given away range from free cash, free airline tickets, free merchandise and many other perks they can think of offering to their clients. These are real bonuses that you can use and enjoy when you sign up for credit cards. You can have all these if you have a credit score that qualifies you to sign up for a new credit card. Credit card companies offer different sets of bonuses and perks and it is up to you to choose which one offers the best credit card rewards programs. The following are some of the companies and a brief rundown of their offers.

Credit Card Rewards1. Capital Venture Card – For people who travel a lot, this is the card to have. It offers reward points amounting to around 2% on all travel-related expenses which the cardholder can redeem and pay for his hotel bills, airline tickets, and other travel expenses. There are no requirements imposed when the rewards points are redeemed. The cardholder simply pays for the current bills using his accumulated bonus points. It offers a 100-dollar signup bonus and is one of the cards that offer the best credit card rewards programs.

2.  Blue Cash Everyday – This card from American Express is what you should have in your hand if you are a great spender and have an excellent credit record. It offers 3% rebates on your first $6000 purchase in stand-alone U.S. supermarkets and 1% for succeeding purchases. It also offers 2% cash back on gas purchases from selected filling stations and all purchases from specified major department stores nationwide. The rebates come in the form of statement credit which can be redeemed through the Reward Dollars plan. There are no other requirements like minimum purchases or enrollment to the bonus offers. You are entitled to $100 dollar cash bonus when you spend at least 1,000 dollars on the first three months.

3. Chase Freedom Visa – This is another cash back credit card issued by JPMorgan Chase.  It offers a remarkable 5% rebate for all your quarterly purchases in selected rotating categories like groceries, gas, travel, department stores, movies, restaurants and the like, which can translate into big savings if you plan to purchase in bulk.  It offers a 1% across-the-board rebate on all other purchases. It gives a 100-dollar cash bonus on the first 500$ you spend.  It does not charge annual fees.

4. Bank Americard Cash Rewards – Cards with the best credit card rewards programs usually have excellent cash back offers.  This card offers a 100$ cash bonus on your initial qualifying purchase and does not charge annual fees. You enjoy a 2% cash back bonus on grocery purchases and 3% cash back on gas purchases if you spend a combined 1,500 dollars purchases per quarter for both gas and groceries.  The card also offers 1% cash back on all other purchases.

Credit Score

What is a Soft inquiry on My Credit Report?

A soft inquiry is a form of credit inquiry. This shows up on a consumer’s credit report. Below are a few things you should know regarding the same.

Credit Inquiry

A credit inquiry is a situation wherein any entity pulls out the credit report of another. The same is resorted to in order to determine the application of a consumer. It is also resorted to in order to determine whether or not to qualify a consumer for a promo, offer, insurance, employment, etc.

Soft inquiry

Credit ScoreRealistically speaking, it is easy to pull out the credit report of a consumer. In fact most of the time, the consumer is unaware that a product or service provider, or even a potential employer has just pulled out his/her credit report. As a general rule any credit inquiry without the express consent of the consumer is considered a soft inquiry.

Hard Inquiry

A hard inquiry is one made with the express consent of the consumer, even if in most cases, the same is unaware that the report will be pulled. This is because some consumers do not read carefully the terms and conditions of whatever it is they are signing or whatever online box they are “clicking” or “entering” or “ok”, etc. As a general rule, hard inquiries have been initiated by the consumer. This is because they applied for something. This can be a credit card, a bank account, a loan, insurance, employment, etc.

De-Duping

This is a case of several hard credit inquiries. This usually happens when a consumer shops around for a loan, insurance, employment, credit cards, etc. The law recognizes the reality that consumers will shop around for a loan. Therefore credit inquiries made by related entities within a short span of time, usually a week or two, is considered 1 hard inquiry. The others are simply not considered like a soft inquiry.

Below are examples of SOFT inquiries:

  • Scenario 1

A cable company or other utility companies pull out reports on consumers within their network. The goal is to see which consumers are within their target demographics.

  • Scenario 2

A cell phone provider pulls out the credit reports of their existing clients to see which to consider for a promotional offer, an upgrade, prepaid service alerts, etc.

  • Scenario 3

A scammer tries to pull out your report in order to see if you are susceptible to identity theft or credit card fraud. Of course the scammer pulls the report under the semblance of a legitimate offer.

  • Scenario 4

A credit card company pulls out your credit report to see if you have other credit cards. This will aid them in determining whether or not to offer you a credit card or not.

  • Scenario 5

You go to an auto dealership to shop for a car. You made general inquiries, and left your calling card as a courtesy. You did not request pre-approval for a car loan. The representative went ahead and pulled out your reports anyway. This may be because of a mistake or intentional. Regardless, you did not sign anything and did not give authorization for them to look at your credit report.

Getting Different Credit Scores

Can I Get a Car Loan With a Low Credit Score?

Yes you can! However, your choices will be a bit limited and you have to put up with higher interest rates and a few other minor inconveniences. Below is a discussion on the realities of a bad credit auto loan. Tips and techniques to maximize your credit will also be discussed.

Don’t Take the Word of the Lender

Most lenders will overstate how bad your credit report and scores are. Pull out your own reports and know the usual interest rates applicable. There are plenty of websites that have free auto loan calculators and relevant auto loan articles. Tip: Pull out free credit reports if possible. Remember you get 1 free report per year under federal law. In some states the consumer gets another free copy.

Scores and Rates

Getting Different Credit ScoresThe most accepted scoring method is known as the FICO score. It was developed by Fair Isaac Corporation and utilizes 5 categories to rate a consumer as a potentially good payer or bad payer. As a general rule credit scores are ranged from excellent to bad. For example:

  • 720 – 850 Excellent
  • 690 – 719 Good
  • 660 – 689 Above average
  • 620 – 659 Average
  • 590 – 619 Below Average
  • 500 – 589 BAD

Applicable Interest Rates

The rates will vary depending on the amount of loan, number of payments, type of automobile purchased, brand new or used, etc. However the DIFFERENCE between the best type of credit and the worst can be as much as 5% to 8%. For example, Mr. A has excellent credit, the interest rate applicable is 3.68%. Mr. B has bad credit. The applicable bad credit auto loan rate is 11.92%.

Maximize Your Score

If possible you want at least 3 to 4 months to fix your credit report and scores. However if you do not have the time, you can undergo emergency rescoring for a price. This may add a few points to your score in a matter of 3 to 7 days.

Shop Around for Lenders

Shop around within the span of 1 to 2 weeks. This way all the hard inquiries you accumulate will be counted as only 1. Tip: bring your own reports and show it to the lender. If they pull your reports and scores, ask for a copy of the same.

Lower the Total Amount of Debt

The lower the loan amount the bigger your chances of getting approval on a bad credit auto loan. This usually means you pay for a higher down payment. If you have a few months to spare, try to arrange for an installment basis down payment. At the very least you want to go beyond the usual 10%. 25% to 50% is your best bet.

Avoid Going Subprime

Subprime lenders may allow you to apply and get an auto loan even with the worst credit scores, but the rates are just too high. There have been instances wherein the subprime rates go as high as 20% or more. Remember, if your only choice is subprime, then you’d better wait a few more months and build up your scores and down payment.

Credit History

How Often Does My Credit Score Change?

A credit score is the numerical equivalent of a consumer as a boon or risk. The higher the score, the better the rating; the lower the score, the worst off a consumer is.  Credit score change reflects the financial situation or at least the past financial actions of a consumer. Below is a detailed discussion of the same

Reporting Entities

Most reporting entities like creditors file a report to credit bureaus once every month. Of course, some creditors make reports more often than others, and some are more thorough. This means that most consumers have a 1 month window for any substantial change to occur on their credit score. Tip: If you are about to default on a payment, contact your creditor immediately. Ask for an extension. Ask that the same not be included in the report. There is no harm in asking.

Credit Bureaus

Credit HistoryCredit bureaus have a main database. Once an inquiry is made, they collate the information in a report form, and send it to the inquiring entity. Theoretically speaking, this means a credit report is up to date the very minute the request is processed. But bear in mind that they can only input information they have on the consumer or are reported by interested entities.

Regular Movement

Consumers will find a major credit score change every 3 to 4 months. That is why most experts will tell you to pull out a new report if your current one is at least 3 months old. And this also means that it is a good idea to pull out your reports once every 3 months. Hence, the once a year free credit report really does not cut it.

Credit Inquires

As mentioned earlier, a credit report is printed as soon as an inquiry is made. In most cases, the same inquiry will be evident in the report that has just been printed. Therefore, you could say that credit report changes once every inquiry.

Judgements

Any intervention of the court that involves finances such as bankruptcy, alimony, child support, wage garnishment, etc. gets reported as soon as the same becomes part of the public records. In some cases though, the fact that a court assisted procedure has been availed of becomes evident in a report, i.e. bankruptcy filing but prior to discharge.

Credit Repair

Most consumers have a tendency to ask the question “When will my credit score change or how often does it change, because they have tried to repair their score. The answer to this is 30 to 60 days. Sometimes it can take as much as 90 days.

Emergency Credit Repair Services

Contact the reporting entity first before you call the credit bureau. Ask the former to have any inaccurate, obsolete, or false information removed, or at least ask for a signed letter regarding the mistake. Then go for emergency credit repair. At best, you may be able to add a few points within 3 days to 1 week.

Consumer Based Movement

Realistically speaking any movement, minimal or extensive, depends on the consumer. If the same defaults, suffers a foreclosure, files for bankruptcy, is made to pay alimony, etc., then there will be a corresponding report, and update. Bottom line is, if you do not want your report to change for the worse, then don’t default.