Credit Repair and the Hidden Power of Credit Cards

Credit Cards Hold the Key

Credit cards also hold the key to higher credit scores and speedy credit repair success, if you know the secret. But there is more power in that plastic than you think. Credit cards can be a great convenience, or a weapon of financial destruction. There is nothing like the subject of credit cards to get people excited.

The Growing Importance of Your Credit Score

Credit repair revolves around credit score improvement, and for good cause. You are probably aware that a low credit score can keep you from getting the credit you want. But did you know that lenders set interest rates based on credit scores? Late in 2007, Fannie Mae and Freddy Mac, the federally charted mortgage giants, modified their pricing to be more sensitive to credit scores than ever before. Even borrowers with excellent credit will now have their rate adjusted based on incremental score differences.

Every Point Counts

Mortgage lenders are not alone in their recent pricing policy changes. Auto finance companies, long known for tiered pricing, have also sharpened their pencils and are more score sensitive than ever. If you are applying for a loan you should be aware that every point on your credit score could affect your interest rate. Fortunately there is a way to control your credit scores and hasten your credit repair goals.

Credit Cards the Credit Repair Powerhouse

Effective credit repair is all encompassing. But there is a special category of debt that offers more control over your scores than you ever imagined - if you know what to do. Credit cards have a special place in the FICO scoring model, and therefore in your credit repair effort as well. Fair Isaac and Company, the creator of the FICO scoring model, interprets the way you use your credit card as a primary indicator of the risk a lender will assume when lending you money. And there is reasonable logic involved.

Credit Cards as a Barometer of Risk

Fair Isaac and Company is in the business of measuring the risk of lending money. Their method is to assign numeric value to every behavior they can identify within your credit file. These values are measured by a complex algorithm, or formula, which they license to the credit bureaus. The credit bureaus apply this formula to the information they collect about you and come up with a single number; your credit score.

Credit Card Behavior

Fair Isaac gives your credit cards special importance because your balances can change monthly and contain several indicators of potential risk. The indicators measured by Fair Isaac include your payment record, your balance relative to your high credit limit, and the age of the card. In addition, the importance of each indicator varies based on the value of the other categories. Let?s see why.

Credit Repair Rule Number One ? On Time Payments

Many people involved in a credit repair effort open new credit cards to rebuild their credit. If managed correctly this can be a powerful score booster. But there is a dark side as well. If you miss a payment Fair Isaac will cut your score dramatically as a way of alerting lenders that you are a high risk. It?s simple. Your new credit card was seen by Fair Isaac as a test of your ability to manage new debt. And you failed. Credit repair rule number one, make your payments on time.

High Balances Equal Credit Repair Trouble

So, you got a new credit card, ran the balance up to the limit, and now you wonder why your credit repair efforts are not working. You can afford the payments, and you?re making them on time. What?s the problem? Unfortunately, all Fair Isaac can see is unproven debt and a person who may have no restraint. So you get categorized with a statistical majority who get in over their heads and soon default. As a result Fair Isaac will knock your credit score down to warn potential lenders to steer clear. Do you want to keep your scores up? Please keep your balances down.

The Age of Your Credit Cards

Once you have proven to Fair Isaac that you can manage the firepower in your wallet you will be rewarded with increased latitude. Your score will still suffer if you make a late payment, and you will be penalized if you let your balance approach the limit, but not as much. In addition, you will be rewarded with a higher score as Fair Isaac becomes more confident in your staying power. When it comes to credit repair, time is your friend.

Reaching Your Credit Repair Goals

If you exercise caution, your scores will soar, and you will reach your credit repair goals. If your credit cards are under one year old your behavior is especially important. There is also a special deadly over 100% category, which you can expect to obliterate your score.

The first two tiers, 20% and 40%, will increase your scores, 60% is neutral, 80% is bad, and 100% is terrible. The latest release of the FICO score model recognizes five balance-to-limit ratios: 20%, 40%, 60%, 80%, and 100%. Make your payments on time and watch those balances. Do you want to optimize your credit score?

All Rights Reserved. All Content. Kemish. 2007 James W.

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How to Massacre Your Credit Score

Here are some of the things that consumers do that all but massacres their credit score. Again, they know the broad picture, but not the details. Many consumers know that there are some actions or inactions that they can take that will help or hurt their score.

Credit reports are not static. This is one of the most important reasons why consumers must keep an eye out for mistakes or omissions on their reports. First of all, consumers should understand that lenders and creditors are constantly updating the information that is on a person 's credit report.

Some actions or inactions that can kill a credit score follow:

Not examining credit reports often enough is one of the most common problems that consumers face. These reports are used to determine your credit score. If there are mistakes, you need to get them corrected. The truth is one in four credit reports contain errors that are serious enough to hurt a consumer 's chances of getting loan.

FICO credit scores are calculated from five categories listed on credit reports: your payment history, amount of money owed, length of credit history, new credit obtained, and types of credit used.

The second thing many consumers do to hurt themselves is to pay late. Late payments are recorded on your report and they usually stay there for seven years. In general, payment history accounts for 35 percent of the credit score.

The third thing that can cause problems is simply having too many credit inquiries. A credit inquiry occurs whenever someone wants to look at your credit file.

Rate shopping for a car loan, a home mortgage, or a credit card can damage your credit if it is not done properly. Lenders you approach ask credit bureaus for a copy of your report for review. This request shows up on the credit report as a hard inquiry, which affects your credit score.

Minimize the potential damage by rate shopping within a short period of time, such as a couple of weeks. According to myfico.com, "Multiple inquiries from auto or mortgage lenders in a short period of time are typically seen as one inquiry and have little impact on your score."

Believe it or not, closing your old accounts can damage your score because, in essence, doing so may shorten your credit history. Credit history makes up about 15 percent of the score, so you do not want to shorten it unless it is absolutely necessary.

Closing accounts will also affect what is called the credit utilization ratio. This is the amount of credit you are using relative to the amount of available credit you have. Closing an account will cause your ratio to go up because closing the account drops your total available credit while not reducing the amount of credit you are using.

Consumers should be very aware of the amount of debt that they have on the books. Amounts owed will make up nearly 30 percent of the score. The more you owe, the lower your score will be.

If the other person does not pay on time you will most likely see a reduction in your credit score. Lastly, consumers should be careful about cosigning for another person.

Keep track of what is on your credit reports and you will have done a lot to maximize your credit score.

Fico Frequently Asked Questions

Don't worry, you're not the only one. Do you have a few questions about what FICO actually means? You've received the credit report, gone through it, and everything looks pretty much in order.

So, you have decided to consolidate your debts and are trying to improve your credit score.

It is an industry term and is a measure for your credit score. It stands for Fair Isaac Company, which created the most commonly used credit score on the market. First, what exactly is FICO and what does it stand for?

What specifically is a credit score and what can it say about a consumer? A credit score is a numerical calculation based on many different factors. The score can be anywhere between 350 and 850. The lower the number, the worse the rating, the higher the number the better off you are.

Different factors can determine your magic number. These include: past behavior and whether you made payments on time, how much credit you had in the past, and income. A high number generally means the individual is more likely to pay on time and not lose a creditor any money. A better credit score could help you get a better deal on debt consolidation if you need it, although by the time you need debt consolidation help, it 's likely your credit rating is pretty damaged.

Of course, everyone has a right to view his or her FICO scores. For more information, go to the myfico website. A lot of people don't realize how to best use their credit scores and the information that they reveal, and when you see them, you'll know whether you need to improve. Make note of which debts need to be reduced or eliminated most immediately, for a place to start. You are also able to see if there is any incorrect information on there and correct it.

You should also know that the lender looks at more than just your overall rating. There are three additional factors that will affect whether or not you can secure a loan. The first is your credit reputation or your score. The second is what, if any, collateral you have to put up against the loan. Finally, the lender will look at your general income; this will give them a clearer picture of your ability to pay the loan. Someone with a lower credit score but positive other factors may have a better chance in some instances than someone who has the opposite.

What factors affect your credit rating? Some of these things include late payments, the amount of the payment and how tardy you were in paying it. More recent instances of this will have a heavier negative impact than will something that happened a while ago. Bankruptcies, of course can also greatly affect your FICO score. How long has your credit been substandard? That can also affect your number.

Lenders may also look at include new credit applications, how much money in total you owe, how much credit history you have, and what kind of outstanding debts you have. These are all important things to remember when applying for any kind of loan or debt consolidation.

Is there a best way to fix your FICO score? Well, first, straighten out your finances. Pay your bills on time and bring current any that are past due. Although you should pay off credit cards and then cut them up if you can't trust yourself not to use them, you should not close accounts unless you will find this too tempting. This is because closing accounts can actually lower your credit score.

Double-check your credit report and the information on it to be sure everything is accurate. Pay credit cards off as fast as possible, starting with the highest interest rate first and making minimum payments on the others. This will help make sure you really do only use it for emergencies. You may want to keep one credit card for emergencies only, and put it in a container of water and freeze it, so that to get to it, you have to thaw the ice first.

So, too, will opening new ones.

This will further raise your score. A final tip is that you should not apply for any new credit card debt, at least until your accounts are all current and you are credit card debt free.

Credit Monitoring Services

Monitoring services notify you via email and/or wireless telephone instantly of any changes made to your credit report, which can help you identify fraudulent activity faster, and therefore minimize the negative impact it would have on your credit. Monitoring services notify you via email and/or wireless telephone instantly of any changes made to your credit report, while protecting your credit and identity information. Online credit monitoring services provide consumers with a suite of tools that help you to take proactive action in monitoring your credit report, while protecting your credit and identity information.

Notifications by Credit Monitoring Services

What types of activity will generate a notification or alert from the credit monitoring services? As a member of such a service, you?ll receive notification whenever your address has been changed, a new account has been opened, or when an existing account has been changed. This is extremely valuable information as you will know immediately if someone is attempting to use your good name to obtain financing. Time is of the essence when dealing with credit and identity fraud, and without credit monitoring services, it could be several months before you are aware of fraudulent activities.

Tips for Improving Credit

Most credit monitoring services also provide a host of tools that allow you to see what your credit score is at the current time, as well as steps you can take to improve it. Since credit scores are used to determine whether or not to extend individuals credit and at what interest rate; it?s important that your score be as high as possible.

Citi?s Credit Monitoring Service provides a very useful credit analyser function that allows members to determine the effects of several types of activities on their credit score. For example, if you?re considering applying for a car loan, you can use the analyser to determine how much of an impact applying will have on your score, as well as what would happen if you obtained the loan or applied and were denied the loan.

You can also use the analyser to view how missing a payment or two might effect your score overall, or determine which activities will raise your score the most and how long it will take. Extremely useful for individuals who are working diligently to improve their credit score, the Citi Credit Monitoring Service with credit analyser takes the guesswork out of improving your credit.

Identity Theft Insurance

Many credit monitoring services offer identity theft insurance programs that will reimburse members of the credit monitoring service up to a certain dollar amount if there are instances of fraud. (This service is not available to individuals living in the state of New York.) Typical expenses that are covered by identity theft insurance include:

Lost wages for several weeks of work missed if you take time off to deal with the fraud
Repayment of notary or certified mail costs for the delivery of affidavits.
Long distance phone costs in conjunction with the fraud
Attorney fees incurred for dealing with the fraud

Companies Offering Credit Monitoring Services

There are numerous companies that offer credit monitoring services. Most of the services offered are the same or similar, but a few companies having notable differences may make their services more beneficial to individuals.

If you?re looking to improve your credit, you want to be sure a credit monitoring service offers an analyser, like Citi Credit Monitoring Service, TrueCredit, or Identity Guard.

If you want to see results from all credit bureaus, then it?s important that you select a company that provides access to all 3 of the major credit reports.

Better Credit Scores - 7 Tips

These agencies then report your scores to any lender who requests it. There is no way to avoid having credit scores since the Big Three consumer reporting agencies - Equifax, Trans Union, and Experian - keep tabs on your credit situation daily. Credit scores are the equivalent of a financial report card.

Your low score can also actually contribute toward your financial woes since it usually means higher monthly payments on any money you borrow. If you have a low credit scores you could be turned down for home or auto loans. A credit score is also called a FICO score.

There is hope, however! By taking the right steps, you can improve your credit scores significantly. Here are 7 tips for improving your credit scores.

Tip #1: Check your latest credit reports from each of the Big Three bureaus:

The first step toward better credit scores is to find out your current score from each of the Big Three consumer reporting bureaus. You can find a number of Web sites that give you access to this information for FREE. To find one, run a search in your favorite search engine using the keywords free credit report.

Tip #2: Immediately correct any blatant mistakes:

Download and review each report item by item, circling any blatant errors you find. Of particular importance are inaccurate unpaid balance flags, the existence of credit accounts that you never opened, and incorrect information concerning your current address. You must take each of these mistakes quite seriously and address them to both the relevant credit agency and, when applicable, the lender in question.

Tip #3: Pay your bills on time:

This is a common sense item, but people having credit problems often neglect it due to the snowballing nature of their debt situation. Paying your bills on time is very important, and nowadays even utility companies are reporting your payment history to the credit agencies. Hint: to improve your score even more, make your monthly credit card payments before the end of the statement period. This has the positive effect of keeping any charges made that month from even showing up as a balance on your cards, thereby improving your ongoing debt-to-credit limit ratio (see Tip#4).

Tip #4: Improve your debt-to-credit limit ratio:

In calculating your credit worthiness, the Big Three credit agencies factor in heavily your debt-to-credit limit ratio. As the term implies, this ratio is simply the result of dividing your total current credit card debt by the total credit limit across all of your cards. The ratio is always a number between 0 and 1, with numbers below 0.5 being most favorable. There are two ways to reduce your debt-to-credit limit ratio. One way is to simply reduce your credit card balances by paying them down. Another option that many people fail to consider: request an increase in credit limit from your creditors.

Tip #5: Pay off debt, don???t just move it around:

While it can be a smart move to transfer debt from your higher interest credit cards to your lower interest cards, this does not substitute for actually paying down your overall debt. Just moving your debt from card to card is not going to improve your score.

Tip #6: Avoid closing credit cards just prior to a loan application:

Some people believe that closing out some of their credit cards immediately prior to applying for a loan is a good idea. However, this is not true. On the contrary, it has the effect of suddenly increasing your debt-to-credit limit ratio, which is a credit score no-no. In fact, as long as you have the will power to use your credit cards wisely, it can be a good idea to keep multiple cards. Then, use these additional cards from time to time, charging small amounts and then quickly paying them off. This reflects positively in your credit scores as your having a healthy ability to manage your debt.

Tip #7: Understand the influence that bankruptcy has on your score:

Bankruptcies can stay on your credit report for 7 to 10 years. As a final note, beware that having declared bankruptcy in the past can make it especially hard to achieve better credit scores.

Refinancing Solutions Provided By Canadian Mortgage Brokers

Do you renew your mortgage with your existing bank or lender, or should you shop around to see if better rates and terms are available from another lender? Home owners face a perennial refinancing decision each time the term on their existing home mortgage expires.

Difficulties can arise, however, when there has been a material change in the borrower?s circumstances. Mortgage renewal is a no-brainer for a bank?s loan officer, who is often able to shave a half-point of interest off posted rates or match the offers of competitors who are trying to entice an existing borrower to take his or her business down the street. particularly if the borrower does a little leg work and finds out the competitive rates from other lenders. Most banks and institutional lenders will offer their existing borrowers competitive interest rates when it comes time to renew a mortgage ?

The two instances in which borrowers are most apt to run into difficulties securing refinancing from their existing lender are when (a) their employment profile or income stream has changed, and (b) when the price of their home house prices has decreased in value. While the Canadian housing market has stabilized and house prices have maintained their value and continue to grow, albeit at a more moderate rate, there are some local markets where housing prices have dropped. Moreover, there has been a general tightening in Canadian lending practices as credit markets have tightened globally due to turmoil in the U.S. mortgage and housing markets. As a result, some Canadians who have less than optimal credit scores, who have been affected by job losses and/or who have seen the value of their homes drop are reportedly facing greater than normal difficulties in obtaining refinancing for their existing mortgages.

Borrowers from banks and other federally regulated lenders are required to purchase mortgage insurance for high-ratio mortgages where the value of the mortgage exceeds 80% of the value of the mortgaged property. As a result, some homeowners who have seen the market value of their property drop below the high-ratio mortgage threshold may be required to obtain mortgage insurance from the Canadian Home Mortgage Corporation, or one of the private federally recognized mortgage insurance companies. Obtaining mortgage insurance can prove difficult in such circumstances for individuals with a bad credit history and poor credit scores.

?People with a shaky credit rating, who relied on so-called 'B' lenders for a mortgage, could be left scrambling to find a new lender if their mortgage is coming due soon,? according to Chatham, Ontario?s Daily News. Homeowners in some Ontario cities affected by manufacturing job losses and falling housing prices have reportedly fallen into the gap created when they go to refinance with federally regulated lenders who now require mortgage insurance, but mortgage insurance is not commercially available based on their financial circumstances and/or past credit history.

for people looking to refinance with poor credit. People with poor credit finding themselves unable to renew their mortgage is "happening quite frequently now," reports a local Chatham, Ontario mortgage broker, noting that the ?market is very, very shallow right now? Home owners experiencing difficulties in obtaining refinancing, as well as savvy consumers looking to find the best rates and terms available from competitive lenders are increasingly using the services of mortgage brokers when it comes time to refinance.

Most often Canadian mortgage brokers are able to find a refinancing solution that banks cannot offer, and are often able to offer homeowners better terms and rates for refinancing than are available from the bank that holds their current mortgage. Rather than relying on loan specialists at their local bank to obtain refinancing, home owners - particularly individuals with marginal credit scores and credit difficulties - are turning to mortgage brokers who offer a much, much wider of mortgage products from a broader spectrum of publicly regulated and private lenders.

Adjustable Rate Mortgages: ARM???s Can Be A Pain In The Neck

You want to ask what the margin, periodic cap, lifetime cap, and index will be. The initial fixed-rate period can range anywhere from one month to 7 years or more, depending upon the specific program. Lenders then add a set margin to that index resulting in payments, which can go up or down over the life of the loan.

The most common indices are the US Treasury Bills, California 's 11 th District Cost of Funds (COFI), and the London Interbank Offered Rate (LIBOR). Compared to a fixed-rate mortgage, there is usually a lower interest rate to start, but the interest rate is adjusted at periodic times, usually based upon an ???index???. Compared to a fixed-rate mortgage, there is usually a lower interest rate to start, but the interest rate changes periodically according to the terms of the loan program. are loans in which the interest rate changes periodically according to the terms of the loan program. Adjustable rate mortgages, or ???ARM???s???

If your loan???s prepayment period is set at three years or more, you will have to pay the penalty if you refinance just after Your interest rate will begin to adjust after the initial three years, but you plan to refinance into a fixed-rate mortgage after two years. For instance, suppose you take out an adjustable mortgage that is based on a 30 year repayment schedule, with your initial interest rate remaining fixed for three years. A prepayment penalty occurs if you pay off your loan or refinance into another mortgage before the predetermined time period expires.

To this point, you want to know if your loan has a prepayment penalty period and the details of the penalty amount attached to your loan. The individual takes advantage of the initial lower rate period and later sells their home or transfers to a fixed-rate loan before the rate adjusts upward. ARM???s are often considered by people in the process of restoring credit scores, expecting an increase in future income, or are planning to move within a set number of years. Now, it may seem that an adjustable rate mortgage is a risky deal on the surface, but they can be advantageous in certain situations.

Some are advertised with very low interest rates. Adjustable rate mortgages come in many shapes and sizes.

ARM???s can be a pain in the neck! with more information about adjustable rate mortgages. So you are now ???armed???

Time For a Credit Repair Tune Up!

Every Point Counts!

A nationally recognized credit repair expert explains how to give your credit score the tune up it needs. Every point makes a difference! Your credit score will determine the interest rate you pay on every dollar you borrow, from your car loan to your mortgage.

Starting your Credit Repair Tune Up: Get Your Reports

A credit repair tune up does not have to be hard. If you break up the project into smaller tasks the whole job will be a breeze. Don?t be intimidated. Take it slow and you will get the job done. Each little step along the way can add points to your credit score and move you closer to your credit repair goals.

Credit Repair Made Simple - One Bureau at a Time

There are three credit bureaus, so you need to tune up three credit reports. Many people starting a credit repair effort are intimidated when they see their reports. The formats are unique and the information reported by each bureau is different. Don?t worry; you don?t have to work on all three reports at the same time. There is no economy of scale. Start with one report, do what needs to be done, and then move on to the next one. Slow and steady wins the race.

High Credit Limits

Begin your credit repair tune up with something easy. I suggest you get a highlighter and mark the high credit limits on your accounts, both installment and revolving. If you find an account with an underreported limit it is costing you points on your scores, possibly significant points. It is easy to correct a limit error, just dispute it with the offending credit bureau and attach a copy of a recent statement showing the correct limit. Your credit repair tune up is off to a good start.

Account Opening Dates

The age of each account has an impact on your credit scores. Credit repair rule number one: an old account is a good account. Highlight your account opening dates. If you find one that underreports an opening date you should contact the creditor and inform them of the error and ask them to report it correctly. You should also ask them for a letter indicating the account opening date and then submit it to the bureaus yourself. You will be surprised with the results?

Credit Repair and Collection Accounts

The sale of debt is so common in the collection industry that you may find a single collectable account reported many times on your credit report. Collectors that no longer own a debt are not allowed to report it to the credit bureaus. And yet there is no incentive for collectors to cease reporting when they sell the debt to another collector. If you see the same account being collected by more than one collector, dispute all but the most recent. They will be removed. Your credit repair tune up is really getting into gear.

Negotiating Uncollectable Collections

Collections may be collected through the courts for a limited amount of time determined by state law. These time limits are called statutes of limitation (SOL) and are usually surprisingly short. If a debt cannot be collected through the courts it cannot be enforced. Please note that the SOL is not the same as the reporting period limit for your credit report. So, you may want to negotiate these ?uncollectable? collections as part of your credit repair effort. The collector will love to hear from you, and you might even get them to remove the account from your credit in exchange for payment instead of just reporting it as paid. Give it a try!

Paying Down Your Balances

If you have the ability to pay down revolving balances, go ahead and do it. The FICO scoring model puts a lot of emphasis on the ratio between your balance and your high credit limit - and the lower the better. Are you looking for quick credit repair results? Pay your balances down below 20% of the high credit limit. If your balances have been lingering near the limit wait until you see what lower balances can do for your scores!

Trimming Down Accounts

You need to have open accounts in good standing to have a good credit score. But you can also have too many accounts. Successful credit repair involves achieving the right balance of accounts, so go ahead and close a few. But it is important to pick the right ones to close. MasterCard and Visa cards are the most valuable for your credit scores. Store cards have little value and should be the first to go. When you pick the accounts to close, please remember that old accounts are good accounts.

Credit Repair and New Accounts

You scores will thank you! Get some credit cards and prove that you are a good risk. Your scores are a measure of your ability to pay and manage your debt.

Remember, no credit, no credit scores. It?s easy and you won?t get denied. Secured credit cards are the perfect credit repair tool. If your credit scores are too low to get approved for regular unsecured credit cards, get two secured cards.

Two is a good number! If you do not have any open MasterCard of Visa accounts it?s time to open a couple.

All Rights Reserved. All Content. Kemish. 2007 James W.

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