Six Tips in Repairing Poor Credit

Having a good credit score is important because it is something that landlords, employers and lenders check to know whether or not you are trustworthy. Moreover, your credit score reflects your financial status so if you have a poor credit score, creditors will consider you a high risk and have small chances of getting a loan or opening new accounts. If you have a bad credit, the following are some tips on how you can fix your credit score.

First, pay your bills on time because this will be the biggest factor that has an effect on your credit score. Make sure that you have a budget or enough money to pay your loans or credit cards on time.

Second, consider taking on an installment loan. This will show creditors that you can manage having the two major kinds of credit, which are revolving and installment. If handled responsibly, this can help increase your credit score.

Third, consider getting a secured credit card, which limits your credit to the amount equivalent to your down payments. Use it responsibly and it will certainly improve your bad credit score.

Fourth, don’t throw away your old credit cards. If you already paid off the account, just leave it open because closed accounts usually have a negative impact on your credit score.

Fifth, check for errors in your credit report. You can get a free copy of your credit report once every year from the three credit reporting bureaus, which are Equifax, Experian, and TransUnion. Check for erroneous information that could potentially lower your credit score and if there are errors, take corrective actions.

Sixth, ask for help from a professional. Debt problems can be a little overwhelming so if you feel that you cannot manage it on your own, ask help from a credit counseling agency. They will assist in you in looking at options and also on how you can fix your credit.

CFPB Will Manage Credit Bureaus Starting September 30

On Monday, the Consumer Financial Protection Bureau will declare that it will start managing the top credit agencies, which are companies that gather financial information of every person.

Besides banks, credit agencies, together with mortgage brokers, payday lenders and credit card companies, will be one of the financial institutions that the CFPB supervises. The bureau was brought about by the Dodd-Frank financial reform law in the year 2010.

CFPB will manage and make regulations encompassing more or less 30 credit reporting firms, which is 94 percent of the $4 billion credit reporting market. Some institutions included are Equifax, Experian and TransUnion, and others with over $7 million worth of revenue every year.

According to Richard Cordray, director of CFPB, handling the credit reporting market will guarantee that it will operates appropriately for the consumers, lenders and economy.

Since the past, credit reporting firms are already under the Fair Credit Reporting Act and have been managed by the Congress. Now, they also have a federal supervisor.

On Monday, a field hearing will be held in Detroit to gather information from experts, industry groups and community groups concerning credit reports. CFPB will publish in its website, consumerfinance.gov, the regulation stating its administration over credit bureaus.

Credit reports are significant to the life of every consumer. For instance, it is used as basis in approving loans and it can help companies evaluate a potential employee.

However, there some reports that discovered between 1 percent and 25 percent of credit reports have erroneous information that could have a negative impact on the ability of the consumer to apply for loans. A few of the most common errors in credit reports include inaccurate credit limits on accounts, loan and credit cards that a person never opened, overdue dates, and Social Security numbers.

On September 30, the administration of the CFPB over credit reporting bureaus will begin. After that date, on-site assessments will be conducted by the bureau immediately. As present, CFPB is managing loan originators, mortgage servicing companies and payday lenders.

How to Restore Credit After Bankruptcy

While bankruptcy can have a negative impact on your credit, it also increase your credit because once you filed a Chapter 7 bankruptcy, your debt-to-income ratio will significantly increase. This is due to the fact that you no longer have old debt and more money can be used to pay new debt.

You can start rebuilding your credit by finding out the duration and type of your employment. It will be much less difficult to get new credit if you worked at the same job for a long period of time. However, having your employment history is only the first step in credit rebuilding.

You must remember the reason for filing a bankruptcy. If it’s something justifiable, for instance, illness or divorce, then you can still get a new credit. On the other hand, if it’s because of compulsive spending, gambling, drugs or alcohol, then you must first deal with these problems, otherwise, you cannot be a candidate for obtaining new credit.

After that, you can apply for a secured credit card, where you can put in money with a lender as security and the amount of deposit will also be your credit limit. A debit card is different because it has no credit lending component or credit history rebuilding record.

Furthermore, pay your current debt on time, for example, installment loans you might not have paid completely. This is very important, especially with secured loans like auto or mortgage loans, because every on time monthly payment will be reflected in your credit history and reported to the credit reporting agencies. Consequently, it will help in increasing your credit score.

Later, you can also get a store card from gas firm or department store, but keep in mind to use revolving credit casually and frequently.

The combination of credit cards, installment loans and store cards used and paid on time is one of the best ways to rebuilding your credit after a bankruptcy. It can be achieved for a couple of years, together with a decent employment history.

3 Tips on How to Assist Your Child Build Credit

Most parents would probably just ignore the topic of credit, but there are some parents who value the significance of assisting their child build their credit. The following are three tips on how parents can help their child build credit.

First, open a debit card and checking account. Although having a checking account and debit card will not technically increase the credit score of your child, the first thing to building a good credit score is having solid money management skills. When your child understands how to use their money wisely and to keep away from declined debit card charges, they have learned the fundamental skills of reliable credit card use.

Second, parents can put their child as an approved user of their credit card. It will have no effect in your credit score, however, provided that you keep low credit utilization and make on time payments, the account will also appear on the credit report of your child and increase their score. While you can opt not to permit your child to use the credit card to buy things, but at least teach them that it is important to make full monthly payments.

Third, assist your child in applying for a student or secured credit card. Even if the most recent financial policies have become stricter in giving credit cards to young adults, having an appropriate part-time job and the support you’ve given by adding your child as an authorized user of your credit card, your child will be able to look for the best credit card and even without your co-signature, get approved.

Both student credit cards and secured credit cards are good options for those who just started building their credit because the two cards are intended for those with imperfect credit histories and there is a higher possibility of getting approved. Preferably, get a credit card with no fee to pay every year.

Five Ways That May Decrease Your Credit Score

People with low scores usually tend to pay higher interest rates on their loans. However, a lot of people are not aware of what actions are good or bad for their credit scores. The following are five ways that might have a negative impact on your credit score.

First is avoiding credit in general. Although it makes sense not to have debt, lenders actually want to see that you have experience in terms of handling debt, specifically, that you can keep up with the monthly payments, prior to giving you their approval for the loan.

Second is closing your credit card accounts. In reality, lenders want borrowers with experience in long-held accounts. Keep your paid-off credit cards because it shows that you can handle credit even for a long time.

Third is decreasing your credit limit. Spending your credit up to its limit reflects that you are not credit-worth because you are using your total available credit.

Moreover, having your overall debt near the credit limit might decrease your credit score. On the other hand, people with high credit scores only use more or less 10 percent of their total credit limit.

Fourth is opening a new retail card account. While it might a good idea to get a department store card in order to have a 10 percent discount, it can mean that you are dealing with excessive debt. As a result, lenders might reject your loan application.

Fifth is keeping a small credit card balance every month. One of the reasons for more debt, together with interest and fees, is paying the least amount on a credit card, or not paying in full. It’s better to pay your debt on time and in full.

It is important to be aware of these misconceptions so that you will not be confused about your credit report. According to a survey conducted by ING Direct, only five out of 1,042 parents know that some actions, such as closing credit card accounts and having zero credit, as harmful to credit scores.