Monthly Archives: November 2015

dfMost Americans wonder why they get denied when they submit their first credit application if they do not owe money to no financial institution. Would you be able to lend me ten thousand dollars without knowing me? No, right? That is why financial institutions have to use credit reports to evaluate customer's credit behaviors.

Credit score is influenced by four factors: history of payments, length of accounts in good standing, inquiries, and types of accounts.

It is difficult to obtain history, length with accounts, or types of accounts when you do not have any kind of previous history. Most credit agencies will turn you down or denied your application because they do not know you. To start building a good credit score, you must establish a secured account. Some institutions call it "secure credit cards" or "secured loans." Secure products will help you generate history with a credit institution with a low-cost and without risk of generating unnecessary debt. A secured account starts by initiating a savings account which will be taken "hostage" by the financial institution in case you do not repay the loan they will give you for the same amount on the savings account. This way, creditors will be more likely to give you an account regardless of your past history or credit scoring. This product works perfect for college students who want to establish a positive history and get denied for not having any yet. There might not be a need to borrow against the secured line of credit, but it is necessary to borrow and pay every month, so the creditors will report your good behavior to the credit reporting agencies.

Once you have generated a few months of good history (usually 6 months), apply for second secured line of credit to create two trades in your credit history. Please do not inquire more credit on your behalf, so you can start building up positive accounts. If you inquire too much, creditors will think you are desperate for credit and will not look good on your report. Remember the number of inquiries can affect negatively your score.

Then, apply for a small credit card preferably with the same institution. Chances are the credit institution could see your good behavior with credit and usage of secure loans and payments impacted positive on your credit score which enables you to a positive number. After the approval of the credit card, try to keep your credit card and secure loans with less than 30% of usage monthly and pay them ALWAYS on time and in full. Creditors like to see payments in full monthly because it shows your positive cash flow and not credit abuse.

Finally, keep just a couple of secured lines and a couple of credit cards to show at all times your wise use of credit. Most wealthy people do not need credit because they have the funds to pay for their daily expenses, but they use credit cards just to show their good behavior and control of credit. Most of them, charge the card and pay them all the balance at the end of the cycle to generate rewards, cash backs, miles, or other perks financial institutions offer for the user's benefit. The key is to pay all the balance off at the end of the month to avoid interest for purchases which can lead you serious financial problems.

If you follow these steps to either generate credit or keep your current one, the time you really need to borrow for something important, you will have the credit score necessary to prove you can behave correctly with credit.

2eCredit repair refers to the process of reviewing your credit reports from each of the three main credit bureaus to rectify any possible mistakes and discrepancies that often appear in these files.

To quote a relevant study by the United States Public Interest Research Group (US PIRG): "79 percent of all credit reports contain a mistake, error, or discrepancy of some kind." Additionally, 25 percent of credit reports contain a major error that could result in the denial of new credit.

With such a high prevalence of errors, and one in four chances that the error could cause you to be denied a new credit line, it is important that you take the necessary steps to review your reports on a regular basis and work to correct your mistakes to maximize your credit scores and borrowing potential.

That said, you should bear in mind that repairing your credit is a time-consuming activity that will also require a high level of attention to detail. So, you will probably need to hire a third party to act as your proxy and attempt to identify and remove any negative information from your credit report. The parties that offer these services are known as credit repair companies or organizations, and their contractual, billing, and advertising activities are controlled by the Credit Repair Organizations Act (CROA).

When to consider a credit repair company

There are many ads of companies claiming that they can fix your bad credit. And while many of them are a scam, there are some that have been in the business for a while and know the rules surrounding the process. These companies know how to identify errors and navigate the rules to help raise your score, but there's certainly no magical formula that works in every case.

That said, there are certain instances when credit repair companies can be of assistance, like:

1. When you have legitimate errors on your credit report

The primary function of any credit repair company is to remove errors from a faulty credit report.

2. When you have errors that can't be verified

If you have a negative statement on your credit report that cannot be verified, like when the lender concerned was bought out or went out of business, then it should be removed.

3. If the lender is willing to negotiate and work with a credit repair agency

Strict lenders don't like to work with credit repair companies, but some are willing to listen and negotiate so your score can be raised.

Final note

When it comes to fixing your credit, clients typically fall into one of three groups: those trying to build credit for the first time, those looking to maintain their current credit score, and those looking to fix bad credit. Regardless of your goal, you need a solid plan for reaching it, and finding the right company can provide you with the necessary expertise to achieve your credit goals.

drWhat can you do if you want to give your child a head start by helping them to build good credit from the beginning? Can you open up accounts in your child's name, build that credit, and still protect your child from potential identity theft?

Where to Begin

A gift of excellent credit is one of the best things that you can give to your child. There are a few ways to help your child create a great credit report including the following:

  1. Allow your child to become an authorized buyer on your credit card. Even though you will be responsible for paying for all purchases, you will help to build your child's credit when paying off all balances in full. This is one of the easiest ways to show your child how to handle credit responsibly as well.
  1. If your child is old enough, you can cosign on a credit card for him or her. All people under the age of 21 must have a cosigner according to the law, so this is the perfect opportunity to help your child build credit while also displaying responsibility credit-wise.
  1. If your child is not old enough for a credit card of their own, you can also open up a store credit card under your child's name - again, you will have to pay the bill (or work out an arrangement with your child), but these cards provide a good way to build credit quickly.

Protecting a Small Child

Identity thieves don't discriminate when it comes to the demographics of their many victims - they will go after the credit of an adult, or a child at any age. Even if your child is too young to open up a credit card account, there are still some things that you can do to protect your child's credit.

1. Always check your child's credit report - twice or three times per year. If you see anything strange, make sure to report it right away.

2. Open a credit account with a major credit reporting company like Equifax for your child. Then, freeze the account until your child is ready to build her own credit.

3. Make sure that you report anything suspicious right away. It can take time and there might be a process to it, but acting quickly when you see that something is not right about a credit report is important.

mGetting married, has no impact on the CIBIL Score of either partner directly. As of now we have not reached a situation where prospective life partners, check each other's credit score before getting married. Employers have begun to ask prospective employees for their credit reports as part of a background check for top management positions and in the financial sector. This trend though common in highly credit driven economies is still in its nascent stages in India.

So coming back to marriage; though there is no direct co-relation between marriage and credit rating.

Credit Rating is an Indicator of Overall Financial Health:

A credit score is an indicator of overall financial health of a person. So whether you are seeking to apply for a loan or not keep an eye on the credit rating. A low credit score could indicate one or more of these; poor financial discipline, a high debt to income ratio, being to card happy or simply poor financial management. Either of these factors, whether alone or in combination with something else does not bode well. When one is getting married and looking at starting a new life with your life partner, then it makes sense to start on a healthy note. If you can identify the problem the sooner you start working on it to remove it the better it is for being credit healthy. Marriages usually bring more than usual expenditure with them; if you are already in a financially tight spot additional burden could put you in a bigger mess.

Be Prepared to Shoulder in More Responsibilities:

When one gets married you are responsible not only for yourself, but for somebody else too and this works both ways. In today's world when usually both partners are working and financially independent poor financial decisions can still impact the lives of both. Financial planning goals also change post marriage, one may seek at buying a house together or get a vehicle together or add things to their existing setup. If only one partner is working, then that partner's shares a bigger responsibility financially and he needs to make sure that he is in a position to shoulder the additional responsibility. If both are working, then each should make sure that their credit health should add synergy to the partnership; if required and if both have a healthy credit score, then they can apply for a joint home loan to get a better deal.

With marriage priorities and responsibilities change, for somebody who is already struggling financially or has poor credit habits bearing the additional burden could be a challenge.

A Good Credit Score can help in Saving Money and Time:

Whether single or married an option that can help you in saving money should never be ignored. So when you look for any loan home/auto/personal then a good credit score can get you a good deal on rates and help you save money. A healthy credit score also ensures that your application is processed faster and you are not forced to go from one lender to another because your loan application was rejected.

Starting a new partnership well is important and that works in all areas. So look at your CIBIL report and if required look for a credit solution or follow a few simple yet effective tips to improve your credit score.