Archive for Credit

The Dos And Don’ts Of Credit Repair

Need a financial counselor? We have two!

Starting the Credit Repair Process

If you’ve recently been rejected from a loan application of any kind, you may be looking at a poor credit score for any number of reasons. You might have been late with your credit card payments, have an outstanding judgment against you or have even been victimized by identity theft. This is just the article to begin credit repair step-by-step.
 
Whatever the cause of the fall in your score, you’re probably looking for ways to get it back on track. Tread carefully! There are lots of dishonest opportunists looking to make a quick buck off your pressing need. Don’t become the next victim of a credit repair scam. In fact, there’s nothing a credit repair company can do for you that you can’t do yourself.
 
This probably has you wondering how to untangle the legitimate steps you should be taking now from the pointless and costly actions. Look no further! Our handy guide of credit repair dos and don’ts will help get you on the road to improving your credit score.

Do: Determine your actual credit score

If a recent credit application of yours has been denied, don’t take it at face value – find out why it happened. The three major credit reporting agencies – Equifax, Experian, and TransUnion – are each required to provide you with a complimentary copy of your credit report once a year, upon request. To order yours, visit annualcreditreport.com, or call 1-877-322-8228.
 
If you’ve already requested a report from each of the agencies in the last 12 months, you can still get one free of charge; you are entitled to a free report whenever a company takes adverse action against you, such as denying your application for credit, insurance or employment. To qualify, just request a report within 60 days of receiving notice of the action.

Do: Review your report and dispute any errors

Once you receive your report, review it for inaccuracies. If you spot any fraudulent purchases or erroneous information, you’ll need to dispute them in writing. In your letter, identify every item you are disputing and the reasoning behind your claim. Include copies of documents that support your stance and ask that the errors be removed or corrected. It’s best to send your letter by certified mail so you can ensure the credit reporting company actually received it if that is necessary. Also, keep a personal copy of your letter and all supporting documents for your own records.
 
You’ll also need to dispute the charge with your actual creditor, taking the same steps you did above.

Don’t: Expect any quick fixes

Anxious as you may be to improve your score, know that there is no “quick fix” for creditworthiness. Enhancing your score takes time, lots of hard work and creating and sticking to a realistic debt repayment plan.
 
If your credit score is poor, you may be bombarded with promotional material from credit repair companies that promise to increase your score by 100 points in less than a month. If you think these claims sound too good to be true, you’re absolutely right. There are some legitimate credit repair companies out there, but as mentioned, there’s nothing they can do for you that you can’t do on your own – and without paying their hefty fee.

Do: Take steps toward fixing your credit

If you’ve determined that your credit report is accurate, you’ll want to take a careful look at the habits that may be leading to your unfavorable score.
Are you timely with your credit card payments? If you’re consistently late, consider setting up an automatic bill-pay system so you never forget to make a payment. Are you making headway on your debt? If you’re paying your bills on time but your debt is not going anywhere, it’s time to rethink your spending habits. Don’t shop with credit cards; use only debit or cash. Look for ways to trim your expenses, like couponing wherever possible, planning dinner menus around sale items, and finding cost-free ways to relax instead of blowing money at a restaurant or on retail therapy.
 
Are your monthly bills unmanageable? If you can’t make it through the month and still meet all of your minimum payments, your debt may need an overhaul. Consider debt consolidation, in which your debt is transferred to one low-interest account, or a balance transfer to a card that has an interest-free period. Be aware, though, that lots of open credit is not considered favorable by creditors; close as many accounts as you open – but leave your oldest one open as it shows a longer period of credibility.
 
Also, no card is interest-free forever. When the introductory period ends, you may be hit with higher than usual interest rates. Alternatively, you can contact your creditors and work out a more reasonable payment plan.
 
If these options don’t sound feasible, try finding ways to increase your income instead, using all extra cash exclusively for paying down your debt.
 

Don’t: Expect to see any changes immediately

Don’t fret if you’ve made strides toward fixing your credit and haven’t yet seen an increase in your score. Creditors will only report to the credit reporting agencies on a periodic basis, usually once a month. It may take upward of 30 days or more for your account to be updated and your score to improve.

Do: Ask us for help

Here at Section 705 FCU, we’re all about helping you manage your finances. If you’re in financial trouble of any kind, we can help! Stop by today to ask about our credit counseling services and assistance with creating and sticking to a budget. [We even offer debt consolidation loans, providing you with the opportunity to transfer your debt to one low-interest loan, making the prospect of paying down your debt a lot more manageable. Email a loan officer to learn more!]
 

Interested in more stuff like this? Connect with us on Connect with us on FacebookInstagramTwitter, or YouTube!

 

Credit Scores Explained in (Exactly) 250 Words

Credit Score Factors: On-time payments, capacity used, length of credit history, types of credit used, and past credit applications

Photo Credit: http://ow.ly/4vjh30bM8LB

What credit scores are: Three-digit numbers expressing the likelihood you’ll repay someone who lets you use their money (like a loan or credit card).

Who has a credit score: People who have been listed on an account that was reported to any of the three credit bureaus: Equifax, Experian and TransUnion. An account can be a student loan, car loan, credit card, credit-builder loan or maybe rent. It represents something you are obligated to pay.

Where the number comes from: Data is collected by the credit bureaus, which get the information from lenders, credit card issuers and public records. Then it is weighted to produce a score, typically on a 300 to 850 range. Higher is better. There are hundreds of scoring models, so most consumers have many credit scores.

How do I get started?

  • If someone with good credit makes you an authorized user on an account that’s reported, that can help.
  • Student loans and sometimes car loans can be relatively easy to qualify for.
  • Credit-builder loans and secured credit cards are made for people building credit or re-establishing credit.

What should I do to boost my credit?

  • Pay all bills on time, every time.
  • Use your credit cards lightly — that is, don’t use more than 30% of your credit limit on any card.
  • Keep old accounts open unless you have a good reason to close them (like high fees).
  • Apply for credit sparingly.
  • Consider having both installment (level monthly payments for a set period) and credit cards.

Bev O’Shea is a staff writer at NerdWallet, a personal finance website. Email: boshea@nerdwallet.com. Twitter: @BeverlyOShea.

The article Credit Scores Explained in (Exactly) 250 Words originally appeared on NerdWallet.

More from NerdWallet

 

Like us on Facebook!

The Two Kinds of Interest: Earning V Paying

Two Kinds of Interest: Earning V Paying Interest

Interest Rate 101!

Albert Einstein once claimed the most powerful force in the universe was compound interest.  That’s pretty impressive praise from the person whose work helped create nuclear power and atomic bombs.  While interest can be powerful, it can also be confusing, because when people talk about it on the news, they mostly talk about it in terms of vague forces and odd numbers.  Here’s a quick rundown on what interest is, as well as how it affects your life today and in the future.
 
When someone borrows money, they pay back more than they borrow.  Whatever extra money they pay back is called interest, and that’s one way that financial institutions and credit card companies make money. That money is basically paying the lender for the risk they take, since there is a chance some of the money wouldn’t get paid back. So interest rates can go up or down depending on how likely the money is to be paid back.  Credit unions like Section 705 Federal Credit Union work in a lot of the same ways, except that the money they make from interest is shared with credit union members, like you and your family.
 
So, a high interest rate must be bad, because that means people have to pay more money back, right? Well, it’s not really that simple. If it were that easy to understand, then interest rates wouldn’t be on the news all the time.  There’s another kind of interest, which is what you earn on your money.  At a credit union interest on savings accounts is referred to as “dividend” because it is what you are paid for your share of the cooperative.
 
When you deposit money into your savings account, it’s like we’re borrowing money from you.  After all, we’re holding onto your money, so we pay you dividends.  The more money you put into your account, the more we pay you.  So, when you save money, you want a higher dividend rate, which allows you to make more money as your savings account balance increases.
 
That’s the confusing part about interest: Some people want a high rate and others want a low rate.  Unfortunately, those rates are part of everything around you:  If you own your home, you’ll want a low interest rate.  If you’re saving money for college, you’ll want a high dividend rate.  Just about any business that wants to open new locations or get new equipment is going to need a loan, so they’ll want low interest rates.  Retired people who have money saved are wise to seek out the highest dividend rates so their retirement savings will last.
 
Trying to balance all of these people is difficult, which is why the government created a central bank, known as the Federal Reserve (or the Fed) to manage all of this.  It can raise or lower the rates for everyone, but it can’t do both at the same time.  The Fed spends a lot of time figuring out what’s best for the country, and it tries to keep its work secret until it’s ready to reveal whether it’s going to raise or lower rates.  It sends out secret shoppers to check the prices on thousands of goods around the country, and uses all that information to figure out what to do.
 
Hopefully, the next time you’re watching the news, it’ll be more interesting when they talk about interest rates.  It might sound like boring business talk and math, but really it’s a report on secret government shopping spies who are working to figure out whether we need businesses to open up new locations or your college fund to grow.
 
LINKS: