Learn About Credit
Why Credit Matters
5 Factors Affecting Credit
- Payment History
- Amounts Owed
- Length of Credit History
- Taking on More Debt
- Types of Credit in Use
Learn About Credit
How to Establish Credit
If you don’t have a checking account, potential lenders become very skeptical about the way you handle your financial affairs.
When potential lenders see a savings account on your credit application, it makes them more confident about your financial stability, regardless of the amount you have in your account.
These accounts are usually the easiest to get when you are new to credit.
Financial companies are usually more receptive to individuals who are just starting to build credit. The interest rate is a lot higher than a bank, but your chances of getting started are greater. Be sure you talk with your banker first to see the chances of getting a loan from your bank before applying to a finance company.
What affects your FICO
The point system used technically ranges from 0 – 999, but all or nearly all actual credit scores fall between 330 and 850.
330 – 619: Poor credit. In banker jargon, a person with a score in this range is considered a “Credit Leper.”
620 – 659: Sub-prime financing will be available to you.
660 – 720: Prime financing will be available to you.
721 – 750: Prime – x% may be available to you. That is, you may be able to get interest rates on loans that are even lower than the prime rate.
751+: Excellent credit. May allow you to get even lower prime -x% interest rates depending on the credit type you’re utilizing.
The exact calculation of the FICO score is kept secret as proprietary information, but there are some general guidelines we can apply.
Payment History: Approximately 35% of a credit score may be based on payment history. A credit score is negatively impacted if bills are paid late or if there is a history of delinquent payments listed on the credit report, including matters of public record such as bankruptcy, collection accounts, etc.
Amounts Owed: Approximately 30% of a credit score may be based upon amounts owed or other outstanding debt. A credit score can be negatively impacted if the amount owed is close to the credit limit. A low balance on two credit cards may be better than a high balance on one credit card.
Length of Credit History: Approximately 15% of a credit score may be based upon length of credit history. A credit score can be positively impacted the longer that accounts have been open, especially if they are with one financial institution. So, if you wish to start building credit, you might want to look into opening a credit account with an established bank.
Taking on More Debt: Approximately 10% of a credit score may be based upon how much new debt a consumer is incurring. A credit score may be negatively impacted if someone has recently applied for a number of new credit accounts. Promotional inquiries usually do not negatively impact a credit score.
Types of Credit in Use: Approximately 10% of a credit score may be based upon the types of credit currently in use by a consumer. A credit score is usually negatively impacted by loans from finance companies.
There is no “quick and easy” answer to this question. You should discuss your situation with a credit counselor or a bankruptcy attorney, to evaluate the costs and benefits of bankruptcy given your personal financial situation. Not every debtor qualifies to file for Chapter 7 bankruptcy. A means test is applied to determine if you will be able to repay a substantial percentage of your debt, and if you are determined able to do so you will be ineligible for a liquidation of your debts and will likely have to engage in a repayment plan as part of a Chapter 13 bankruptcy. The type of debt you owe can be a significant factor in whether you file for bankruptcy, as well as the form of bankruptcy you pursue.
If you have filed for bankruptcy, your ability to rebuild credit is better than it has ever been. After you get your discharge, you will receive many solicitations from lenders offering to finance homes, vehicles and credit cards. The most important thing about building credit after bankruptcy is to remember what led you to bankruptcy in the first place. You should now be careful in choosing those you do business with.
Credit score facts and fallacies
By Pat Curry, Bankrate.com
Credit cards are a fact of life. You need one to make a hotel or plane reservation, or to rent a car, even if you plan to pay cash. Many stores require a credit card to accept your check. Responsible use of a credit card builds a good credit rating, too, marking the owner as mortgage-worthy. But people who have never had credit or need to repair a poor credit history may not qualify for a regular credit card. For them, a secured credit card may be the only way to help in building credit. If you’re in that boat, here are the answers to the top 10 questions about secured credit cards.
Mortgage options for distressed sellers
If you are behind on payments and want to know what options are available, professionals could forget about presenting simple options to homeowners. For professionals in the foreclosure business, we use terms such as deed-in-lieu, forbearance, loan mod, and other terms that homeowners may not. We have come up with a few terms and options that homeowners should have available as options for available alternatives to foreclosure.
Credit Reports and Services
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LifeLock offers consumers protection from identity theft and credit fraud. As an alternative to traditional credit monitoring services that alert customers after their credit information has already been compromised, LifeLock blocks access to consumers credit files before thieves can access them. They also offer helpful services to your customers such as stopping pre-approved credit offers and providing a smooth experience when trying to obtain new credit.
A number of government and private organizations have information about various aspects of identity theft and fraud: how it can occur, what you can do about it, and how to guard your privacy. Agencies like the Federal Bureau of Investigation, Federal Trade Commission, United States Postal Inspection Service, United States Secret Service, the Better Business Bureau, and more.
KeyPoint provides credit repair, monitoring, and other business credit services. Contact us for any inquiries about our services, or to request for a free consultation.