Topics:Personal Finance Credit Score Credit Cards 101 Home and Credit Relationships and Finance Credit and Debt Credit Repair 101 Children and Finance Expert Advice Credit Repair Companies
Guest Post by CreditRepair.com We live in a world of credit, with millions and millions of new credit cards being issued each year—providing consumers with instant financial flexibility and convenience. If you’re like most of us, you’ve amassed a wallet full of cards, some of which have become your go-to tools for daily necessities. Others, not so much. Maybe a department store card you signed up for but found you didn’t use that often, or a higher-interest card you might applied for during a time of financial need, that now sits idle in a dresser drawer or deep in your filing cabinet. While those cards are essentially in a holding pattern, ready when needed, smart consumers need to be aware of the potential for scammers and fraud artists to take advantage of their half-forgotten status and do some serious damage to your credit. The Forgotten Card It’s hard enough nowadays keeping on top of your active financial obligations, including bank loans, internet and utility bills, or even student loan payments, and scammers are hoping that your slightly overwhelmed status will mean an inactive card might not get the attention it deserves. While physical security is still important (do keep the cards in a safe place, and neer keep documentation of PIN numbers for cash advances in the same place, in case that all falls into the wrong hands), your best defense is vigilance. And while your inactive credit card may not even warrant a monthly statement from the issuing company—enough months of a zero balance and the news starts to get stale after a while—it’s important to keep an eye on those idle resources. If that means occasionally logging onto a credit card website or signing up for spending alerts, it’s probably worth the five minutes it takes to log on and make yourself aware if there’s any unauthorized usage. Don’t Shred Those Cards . . . Yet You may believe that chopping up an unused card is also a good preventative measure, but that may not be the best strategy for fixing your credit. While excessive balances can certainly drag down your score, credit bureaus (the companies that measure and track your credit usage, your credit history, and your credit inquiries, use the age of credit card as a positive factor. An older card, even one not carrying a balance, is proof that you’ve been careful in your credit usage. Even better, a small, occasional purchase, paid off immediately, demonstrates that the card is still active, which can be an additional credit-building gesture. Another key strategy is active credit monitoring. Your credit report can give you an accurate picture of larger trends in your credit usage, and will let you know if an inactive card is suddenly active again, which may be a sign of a data breach. It can also let you know if a credit company or department store has decided to cancel the card due to inactivity, which occasionally occurs. Whatever you do, remember that your credit resources are valuable and that it’s vitally important to be aware of the cards you do have and how they’re being used.
Guest Post by CreditRepair.com The financial realities of living in modern America just don’t quite add up for an ever-increasing percentage of the population. Among America’s working poor—folks in financial need who are just simply unable to access traditional avenues like bank loans or credit cards—the often cruel world of the payday loan industry is a grim reality. Even worse, for those who have to rely on short-term, high-interest loans to make ends meet, the implications are particularly bad for their credit scores and, ultimately, their ability to interact with banks and legitimate credit cards. Recent research from the Pew Charitable Trust suggests that the scope of payday loans is even more severe than imagined, with some 12 million loans taken out each year, amounting to more than $7 billion in fees. On average, a typical payday loan user ends up being in debt approximately five months out of the year, with fees that boil down to approximately $575 to take out and repay an average of $375, over and over again. Studies suggest that typical payday loan customers earn an average of $30,000 or less a year, and of those, some 58 percent are having difficulties meeting their monthly expenses. Quick Money Is Often a Necessity We all face unexpected money issues from time to time: medical costs, a broken-down car, appliances that suddenly go out of service or travel costs. But for those folks who live paycheck to paycheck, the appeal and relative simplicity of a payday loan keeps them caught in the loop. It’s a matter of basic finances in action: If the money you have coming in is smaller than the money you owe, the cycle never ends, and you’ll always be left scrambling to try to keep up with the costs. The particularly cruel part of the payday loan business, besides its reliance on customers who have run out of other options, is the high interest rates charged for those loans, small as the loan amounts may be, all things considered. The Obama Administration passed rules creating the Consumer Financial Protection Bureau, which sought to help limit the often outrageous interest fees charged by payday lenders; but as the avenue of last resort for so many consumers, even the more limited fees can create insurmountable financial issues. Long-term Impacts on Credit For those trying to break free of the borrow-repay-borrow cycle, the biggest issue is credit, and a positive credit score. Those with poor credit already are more likely to end up using payday loans rather than traditional banking resources. And by using payday loans and scrambling to pay all that extra money in interest, fees and service charges, those consumers are unable to address their underlying financial issues. Good credit depends on factors including your ability to pay back loans on time, but is also contingent on demonstrating a responsible balance of credit, low credit utilization rates and even maintaining credit card accounts for an extended period. Caught in the cycle of borrowing more than they earn to stay in the black, payday loan users find it difficult to make the steps necessary to rebuild their credit and getting their heads above water. Help is available, however, and a credit repair company can offer some management tools and advice, as well as assistance in clearing up items that might be dragging down your credit score.
Believe it or not, there is one number that can control a great deal of what you can and can't buy. It's not the number in your bank account; it's your credit score. Your credit score is a number that rates you based on your credit habits. The most common type of credit score is the FICO score, which is a number ranging from 300 to 850. To create your FICO score, an algorithm measures your credit habits based on your payment history, amounts owed, type of credit, duration of account, and frequency of credit applications. There's a major problem, though. A study by the Federal Trade Commission has shown that five percent of consumers has an error on one of their credit report that will create less favorable loan terms. That means of the 242 million adults living in the United States, nearly 12 million may have an inaccuracy on a credit report. This is more than the entire population of Sweden. Concerning? Absolutely. Consumers can potentially be charged thousands of dollars through an error on their credit report, and this happens more often than you think. This doesn't mean that thousands of dollars are suddenly going to disappear from your bank account; but most of that money is lost due to the charge of substantial interest rates and loan terms. You see, because your credit score reflects your credit habits, your credit score will affect what loans you can take out, what apartments you can rent, what kind of insurance you can afford, what employers will hire you, and so on. The money you could potentially lose due to tall interest rates and long loan terms could add up to thousands over time. What Credit Repair Does So how do you dispute unfair errors on your credit report? That's what credit repair companies are for. Credit repair companies exist for the sole purpose of disputing unfair and untruthful claims on credit reports. They usually consist of a team of credit experts that go to battle for you against the three major credit bureaus (Experian, Equifax, and TransUnion) and charge a monthly retainer for their services. Since it can be hard to know if you've reached the point of needing a credit repair company, The Balance has put together a useful list to explain a few signs: You've been denied for credit Your electricity is in someone else's name Debt collectors are calling you You can't find anyone to co-sign your loans Your credit report is keeping you from getting a job Landlords won't rent to you You're afraid to check your own credit report Your credit score is low (under 650) Your interest rates keep going up Card issuers are closing your credit cards Buyer Beware If you need credit repair, be careful. You've probably seen ads on TV and in your social media feed urging you to call immediately under the guise of "fixing your credit 100% guaranteed" or "removing bankruptcies, liens, and bad loans from your file forever." Also look to see if a company pressures you to pay upfront fees, promises to remove negative info from your credit report, won't explain your rights to you, or tells you not to contact credit reporting companies. A good rule of thumb is if it sounds too good to be true, it probably is. Though some of these phony businesses exist, there are a handful of reputable credit repair companies that stand at the ready to help you. If a few of the points above apply to you, it might be time to call a reputable credit repair company. Here's the breakdown of the process: Analysis. Credit repair companies will evaluate your credit score by pulling your credit reports from the three major credit bureaus: TransUnion, Equifax, and Experian. When a credit repair professional acquires your credit reports, they can find inaccurate negative information that has been recorded by one of the credit bureaus. Credit repair pros pull credit reports from all three major bureaus because each bureau has its own "data furnishers" that collect credit information. Legal Action. At this point, your credit repair expert will be able to analyze your credit reports with you and find inaccurate information that may be hurting your score. When that's been analyzed, the expert can take legal action against the credit bureaus for erroneous charges placed on your credit report. For this reason, it's best if a credit repair company has legal staff such as attorneys and paralegals on board. Sometimes these erroneous charges can be as serious as violations of the Fair Debt Collection Practices Act (FDCPA) or the Fair Credit Reporting Act (FCRA). If this is the case, a customer may be entitled to compensation of $1,000. Credit Bureau Investigation. When legal action is taken against a credit bureau, the credit bureau is charged to investigate the problem. Each charge could take between 30 and 45 days to resolve. For this reason, most credit repair companies charge a monthly retainer for their services, which can range anywhere from $50 and $150. Resolution. This takes time. Some consumers will see improvements on their score in a matter of months, but to see their credit fully restored, the process could take years. Again, credit repair experts can do much of what consumers can't when it comes to pressing legal action for erroneous charges, but it's up to the consumer to practice smart spending habits such as quickly making payments and not spending more than one-third of a credit card's max limits. A list of reputable credit repair companies, ranked from best to worst, can be found at BestCompany.com.
Say you've just been offered the job of your dreams! You're excited! The employer's excited! But just before your new employer can officially offer you the job, he or she asks you to fill out a background check form, and included in that form is the authorization for the employer to view your credit report. While checking a potential employee's credit history is not as popular as it was once, the practice is not altogether uncommon. According to a 2012 report from the Society for Human Resource Management (SRHM), approximately 47% of employers conduct credit background checks on potential employees. They do this for a number of reasons: sometimes to check for criminal history, but mostly to see how well you manage your personal finances, which can say a lot about you. What Potential Employers Can See Currently, 11 US states (California, Colorado, Connecticut, Delaware, Hawaii, Illinois, Maryland, Nevada, Oregon, Vermont, and Washington) restrict or prohibit employers from conducting credit-based background checks in most circumstances. The credit reports potential employers can access (with your written consent) do not contain any personal information such as your age, credit score, or financial account numbers; however, he or she can see the sources and types of credit that compose your profile. What Derogatory Items Say to Potential Employers Having a negative item on your credit report does not necessarily disqualify you from consideration for most jobs-in fact, nearly 80% of employers polled in the SHRM's survey reported hiring someone in spite of derogatory marks; however, depending on the industry, the quantity and quality of negative credit items on your credit report sends certain messages to an employer that your resume does not. Among other things, a healthy credit report speaks to your integrity, not just as a potential employee but also as a person. Negative items on your report such as bankruptcies, judgments, and delinquent payments can suggest varying levels of irresponsibility, untrustworthiness, and overall high risk. Jobs Where Credit History Really Matters As mentioned before, not every employer requires a background check before considering you for a job; however, some industries rely on the integrity of their employees far more than others-especially when it comes to money or security. Mortgage Professionals One of the most lucrative positions in the mortgage industry is the mortgage loan originator; however, this position requires a license. And according to the Nationwide Mortgage Licensing System and Registry, your credit and debt history can play a major role in your licensure. If you have poor credit, you could be denied a license; if your credit has been damaged after the fact, your license could be revoked. Good credit is an important indicator of financial responsibility and character-and in light of the 2008 mortgage crisis, these have become crucial qualities in this profession. Finance If your goal is to become a CPA, auditor, or any profession in which you will have access to sensitive financial information, your own credit history must be above reproach. Simply put, good credit shows that you're actually good at handling money. It also implies integrity, a major requirement in the finance industry. Bankruptcies and late payments on your record, meanwhile, make you a risky hire in the eyes of most financial employers. Military/Government Any job that requires a government security clearance is going to require a thorough background check-and your credit history does play a role in your chances of getting hired. These jobs include all the branches of the military, the Transportation Service Administration (TSA), and other positions in both state and local government. According to the TSA's job application form, if you have more than $7,500 in delinquent debt, delinquent student loans, tax liens, judgments, or child support, you might as well not apply. Law Enforcement Speaking of security, law enforcement is another area where background checks, including credit-based background checks, play a significant role. Infrequent and occasional hits to your credit report do not usually warrant denial or termination from a law enforcement position, but a pattern of irresponsible behavior (particularly when it comes to debt) is a red flag. According to Richard Weinblatt, dean of the School of Public and Social Services at Ivy Tech Community College, law enforcement officials under incredible financial duress are more open to bribes and other forms of corruption. What You Can Do Whether or not your future plans involve any of the industries above, your credit report is still an important part of your future success. It can affect your ability to get a loan, to buy a house, and so much more. So before you start sending out your resume, here are some steps you can take to ensure that your credit status is healthy. Get to Know Your Credit Report According to a 2013 report from TransUnion (one of the three major credit bureaus), one-third of Americans have never checked their credit reports, with another 25% reporting they haven't checked their reports in at least a year. If you don't know your credit score or what shows up on your credit report, find out today! You can access a free credit report every 12 months through AnnualCreditReport.com. Your credit report will tell you a few things: A list of companies that have given you either credit or a loan The total amount of each loan, and the size of each credit limit The frequency, amount, and timeliness of each loan or credit payment you've made Foreclosures, bankruptcies, tax liens, late payments, judgments, and other delinquent payments Checking your credit report is also important in the event of identity theft. If someone else is using your identity, your bank accounts, or other personal information to start new accounts, you're credit report will reflect that. Start Building Good Credit Today To know how to build good credit, it's important to know what goes into your credit score. According to Mint.com, your credit score is determined by a number of factors: Credit Usage What percentage of your credit limit are you actively using? Do you regularly max out your credit cards? In order to build good to excellent credit, you'll want to keep this number below 40 percent (ideally under 20 percent). A higher percentage indicates that you have little control over your spending habits. Payment History Your payment history records the number of total payment you've made versus the number of those payments that are late. Minimizing late payments demonstrates your reliability (both to lenders and future employers). If you make 100 percent of your payments on time, you're in good shape; anything less than 97 percent and you're in trouble. Average Age of Credit While the age of your credit accounts has a medium impact on your score, it's still a pretty important indicator of your creditworthiness. An average credit age of nine years or more is ideal; if you are opening and closing several credit accounts in a short period of time, tells creditors and employers that you are a high risk borrower/employee. Account History Meaning, the number of accounts (both open and closed) under your name. Having 22 or more accounts over a long period of time (e.g. credit accounts, loans, or investments) is a good indicator of creditworthiness. BUT BE WARNED: opening several credit accounts at once can drive your score down. Credit Inquiries A large number of "hard" credit inquiries (where you give a lender permission to pull your credit report) can drive your score down. Meanwhile, "soft" inquiries (where you provide the credit report yourself) do not affect your credit score at all. Derogatory Marks As mentioned above, derogatory marks will negatively affect your credit score, your ability to secure loans, and potentially your livelihood. Derogatory marks, unless disputed, can stay on your credit report for seven years or more. If Necessary, Seek Credit Repair If after looking through you credit reports-one each from Equifax, TransUnion, and Experian-you discover inaccuracies or outdated information, you have the option to dispute these items, either on your own or through a professional credit repair company. While credit repair is no guarantee that you can raise your credit score by deleting inaccuracies from your report, it does provide an opportunity to clean up your credit history, and in some cases, land that job you've been looking for.