Understanding Credit and Credit Scores

Bad credit creates many difficulties to get a mortgage, credit card, student loan or car loan. When you have a bad credit record, it creates an impression on the mind of creditors that you are not paying your financial obligation on time and they label you as a high risk borrower.

Bad credit is simply the result of poor or wrong financial choices. Basically, it is the result of delayed payments in any type of loan like a car loan, housing loan or student loan. Most often, these delayed payments are caused by the mishandling of finances. But even those who are good in handling their finances can incur debt because of loss of job.

Whatever is the cause of your bad credit record, the important thing is the realization of the many negative effects that it creates on your credibility when you want to get future loans. It is only after this bad situation that consumers learn to make better decisions.

Credit Scores are numbers. They are calculated based on how well the consumers are paying their financial obligations. Consumers get high scores by paying their loans on time. Conversely, the scores go down when payments are delayed or default. All your payments whether on time or delayed are regularly reported to the three big national credit bureaus for the calculation of your credit scores. The three big credit bureaus are TransUnion: Precision, Experian:FICO (Fair Isaac Corporation) and Equifax: Pinnacle.

The most commonly used credit score reference is FICO. In this model the score ranges from 300 to 850. The worst score is 300 and the best score is 850.

Only a very few have excellent credit scores and these belong to a few elite who qualify easily to get loans with the best interest rates.

A score of 600 is still considered as low APR. A score of 500 puts a consumer in trouble and may require higher interest rate for a loan. Creditors or lenders will always do investigation especially on your credit scores before granting loans. Therefore, consumers should handle their finances properly to protect their credit scores. This is how important credit scores are.

Fix your Bad Credit by Yourself

Credit has several advantages. One of its advantages is that your credit helps you to determine your buying power to own a car, a house or to get a student loan. But consumers have to accept the fact that their credit limit could be greatly affected by bad credit. They have to take extra caution about credit repair services which might only give them more problems instead of helping them.

Creditors do intensive investigation before granting credit to consumers. They check consumers’ paying bill track record, whether their bills are paid on time. They check the outstanding debt, collection against the consumers, the number of accounts of the consumers and other important information. All these details are taken into account in determining the risk factor involved in dealing with consumers. It must be understood that creditors want to get their money back that is why they have to get all the important information of consumers seeking to borrow money.

A bad credit is a problem. Every consumer wants to fix his or her bad credit problem. But they are warned about credit repair services that claim that they can remove all the negative information about their bad credit.

Carefully take note of the following tricks of credit repair services.

1. They require up-front fees prior to giving their services.
2. They do not disclose the rights that consumers have and the things consumers can do for free.
3. They advise consumers not to contact directly the three big national credit reporting agencies.
4. They assure consumers that they can remove all the negative information from their bad credit record.
5. They tell consumers to make new Identification number instead of using their Social Security Number.

Do not put yourself to a risk of prosecution by giving false on a loan application. Do not be trapped by these tricks. The best way to fix your bad credit record is to control your spending and pay your bills on time.

Bad Credit Loans for Cash Flow Improvement and Bad Credit Repair

Credit scores are important factors taken into account when availing loans. The credit score can shift from bad to worse if the loan is not properly handled. But loans can help consumers in their financial needs like funds for education or for paying urgent bills. Bad credit loans can help remove cash flow problems and improve credit scores.

There are loans designed for consumers with poor credit history. Poor credit history is the effect of default, delayed payments and other credit problems. The two types of loans specially designed for people with bad credit history are the secured and unsecured loans.

The secured loan requires borrowers to put up collateral to guarantee safety for the amount released by the lender. The range of amount released to the borrowers is from 5,000 to & 75,000 and the term of payment is from 5 to 25 years depending on the paying capacity of the borrower. The interest rate is low because of the collateral put up to secure the loan.

The second option is the unsecured loan. This type of loan does not require putting up collateral. The loan targets the self-employed, tenants, employees and the amount of loan ranges from 1,000 to 25,000. The amount is lower compared to the secured loan because of the more risk involved on the part of the lender. The rate of interest is also higher than the secured loan.

These two types of loans, the secured and unsecured, can be accessed through the internet. Credit bad loans are intended for the purpose of helping those people who are struggling with their financial needs. These loans will help them also improve their credit scores by paying in full the amount within the given period of time. The terms and conditions are not burdensome but reasonable because the intention is to lift people from their financial distress.

How to be Cautious of Credit Counseling Companies

A lot of clients come to an attorney after an awful incident with a credit counseling firm. Others are so bad that a watchdog document has been made about them by the Internal Revenue Service.

A list of signs that indicates a credit counseling firm is a scam has been compiled by the Federal Trade Commission. To protect people from becoming victims of these scams, the Congress passed the law called the Credit Repair Organizations Act.

Only a small number of these firms are operating legally. These firms are actually paid by the creditors and they have to make you pay the highest possible amount to your creditors.

The first warning that a firm is a scam is when they ask for payment right away. Based on the Credit Repair Organizations Act, until after you have fulfilled their services, the firm is prohibited to charge you.

The second warning is when you are forced to get a debt repayment plan instantly instead of offering you advice and counseling without charge.

In order to keep away from credit counseling laws, a number of credit counseling companies start as nonprofit organizations. Through this, they are deceiving the public that they are a firm with a good reputation. FTC closed down Ameridebt, which was originally nonprofit, because it was found out that they had charged more than $170 million to their clients.

Other warnings are when firms prevent you from communicating the three major credit reporting bureaus, when they don’t explain your legal rights, when they ask you to use an Employer Identification Number instead of Social Security Number, or when they inform you to argue all the contents of your credit report with the credit agency.

To avoid these scams, consult if the firm is part of Better Business Bureau and has high evaluation. You can ask help from your state Attorney General if you become a victim of these scams.

Renting an Apartment with Poor Credit

It might be difficult to rent an apartment if you have bad credit because a number of privately-owned apartment complexes ask for credit checks. If the applicant does not conform to their standards, they will refuse the application. Also, your application will still be declined if you have poor credit score, even though you have the income.

The answer to this dilemma is to completely avoid the credit issue. Other privately-owned apartments prefer applicants who have good recommendations from past landlords. However, an increasing number of private owners require credit checks so that they know who the good tenants or bad tenants are.

If you cannot get away from the credit issue, then you need to handle your poor credit report positively. The following are some steps to take to improve your bad credit.

First, get a copy of your credit report from either of the three credit reporting bureaus, Experian, TransUnion, or Equifax. Assess your credit report, or you can also ask help from a banker or financial manager, or you can also consult the internet. If you discover some erroneous information, discuss it with the lender so that if proven otherwise, the credit agency will cross it our on your credit report.

Second step is to converse with your prospective landlord. If you are uncertain of the impact of your credit report, ask questions to your prospective landlord.

Third, you can choose to look for a co-signer. Even though you have bad credit, asking a parent, spouse, or friend who has good credit will make renting an apartment easier. However, this might be a risky alternative because both your credit and your co-signer’s credit will be hurt if you make overdue or unpaid accounts, so make sure to always pay on time.

Lastly, you have to be ready to pay promptly. Other landlords accept tenants with bad credit but they increase the charges or monthly payments. Moreover, other huge corporations also accept tenants with poor credit but they have to pay more expensive security deposits.