How to repair your credit?

Are your loan applications getting rejected because of a low credit score?

Are you worried about your monthly installments against student federal loan?

Are you paying more? Can you save on student loans? 

If you do not have money to pay a professional to improve your credit score, you still have the option to improve your credit scores yourself.

Yes, you read it right!

You just need to understand your consumer rights under the Fair Credit Reporting Act and you can repair your credit score.

Before we discuss in detail how to repair credit, we should debunk some common myths about credit cards.

Is it a myth or reality?

Today, with this reading, we will get a deeper understanding on how to use a credit card and how it affects the credit score.

There are many rumors related to credit cards like whether to keep a card open, how to use a credit card, and when to pay it off. Not understanding how credit cards work can inadvertently harm your credit score. 

Let’s discuss them one by one-

1. Myth: Keep only one credit card open

The myth is that people should not keep more than one credit card open.

Check: Having more than one credit card open can decrease the credit score for some individuals but not for everyone. 

In fact, opening more than one credit card will increase the credit score potential over time. This happens because you demonstrate to lenders and creditors your ability to manage more than one credit card at a time. For a responsible individual, multiple credit cards can increase the credit score long-term. 

Suggestion: If you are a responsible individual, the best recommendation is for you to open a few new credit cards every year. Look for cards that will provide the best discounts, rewards, and cashbacks for your type of monthly spending. If you are not responsible and will accumulate unnecessary debt that you cannot pay off in a reasonable timeframe, then you can decrease your score.

2. Myth: Never own a credit card

Many consumers have the misconception that one should not own a credit card because it leads to unmanageable debt that ultimately puts financial stress on them.

Check: For a responsible person to establish credit, owning a credit card is one of the easiest ways. If you can manage your financials and have the capability to stick to your budget, you should be able to handle credit cards easily. Responsible credit card use will build your credit score.

Suggestion: If you can manage your finances and be a responsible credit card user then you should have them. Credit card users may not be aware of the potential risks of overspending, consequently they damage their credit scores. This can occur because they incur unmanageable debt and unpaid credit card bills. This results in lower credit scores.

One thing worth noting is that having no credit payment history results in no credit scores because you will not have any payment history to determine a score. So, it is important to establish a positive credit history.

3. Myth: Never Increase the credit limit

Most credit card users receive offers from credit card agencies stating- You can increase the credit limit on your card!

Check: Such offers are often ignored by cardholders because they assume it is a deception by the lending agencies. This is not the case.

Yet, asking lenders to increase a card’s limit is another way you can help boost your credit scores.

How does it work?

If you have a current limit of $1000 on your card and you spend $100 a month, your utilization will be 10%. 

Let’s assume you receive an offer from the credit card company to increase the credit limit to $1500.

If you do not accept the offer, your utilization score will still be 10% with no impact on credit score.

If you accept the offer, your utilization score decreases to 6.67%, provided your expenditure remains the same.

This can significantly increase your credit score.

Suggestion: Requesting a limit increase on your credit cards will help reduce your overall utilization ratio and will boost your credit scores. Call your lender and ask if this request will result in a hard inquiry on your credit report.

4. Myth: Always go with free credit cards

People consider that they should not own credit cards that charge fees. They prefer to own card without any annual charges. They think that credit cards without annual fees provide more value and benefits than a paid one. 

Check: Credit cards with annual charges offer differential benefits. A long list of benefits includes lounge access at airports, substantial discounts at restaurants, groceries, merchant outlets, show bookings, etc. An important point worth noting is that benefits weigh more than the annual fees. Different categories of credit cards offer different benefits. To gain maximum advantage, you should opt for a card as per your spending.

Suggestion: Gauge your expenditure carefully and own a credit card which suits most with your lifestyle.  

1. Myth: Paying credit card balances and when it is best to pay it off

Many people think that if they carry a balance in their credit card, it will help them to increase their credit score. They pay only the minimum payment each month to show the lenders that they have the capability to pay their debt. 

Check:  This is not true!

Only timely payments and paying the full balance can increase your credit score. Pay the minimum payment only if you cannot afford to pay the full amount. Keeping a balance on your credit card month to month never helps you to increase the score, however it can decrease your credit score. This also increases your credit utilization ratio which in turn reduces your credit score. Making minimum payments will also accumulate interest on your principal balance and will end up costing you a lot more when you finish paying off the total balance. 

Suggestion: Always pay your credit card balances in full each month if you can and more importantly always pay them on time. 

How to repair your credit?

When repairing your own credit, you should be aware of some important terms, definitions, and facts. 

Please find the list below- 

1. What is a credit score?
2. What is negative credit information?
3. What is a credit report?
4. How to dispute information on a credit report?
5. How to increase your credit score?

What is a credit score?

When you think of lending money to someone, there is a risk associated with that lending. This is the reason why banks charge some amount of the loan in the form of interest. Even when you deposit some money in your bank account, you get some interest on it. The payment that the bank pays as interest is a lot less than what you pay them on a loan because the deposits in the savings account are almost risk-free.

How will you know the credit worthiness of someone when deciding to lend money or not?

When lending to a friend, you already have an established relationship with them.

When searching for a local bank to partner with, you check the history of the bank, its customer service, and its interest rates.

In the professional world, potential creditors and lenders do not know your ability to pay on time so they check your creditworthiness with a credit score.

A credit score is a three-digit number, used by banks, lenders, creditors, and companies to calculate the potential risk they are taking by lending money to you. Apart from banks and lenders, this score is used by agencies like telephone companies, insurance companies, government organizations, landlords, etc. to check the financial background of a person before offering any service to him.

The major three credit bureaus who calculate credit scores are- Experian, Transunion, and Equifax.

The credit bureaus use different methods of calculating credit scores. FICO scores developed by Fair Isaac Corporation are the most used credit scores in the United States. Consumers enjoy better terms on loans and insurance premiums when they maintain good credit scores.

What is negative credit information?

Any information on your credit accounts that increases your risk of borrowing capital from lenders and creditors is considered negative information. It includes- bankruptcies, late payments, foreclosures, repossessions, collections, etc. 

With time the impact of negative information reduces, but it cannot be eliminated completely until after 7 years have transpired after your last payment. Late payments, foreclosures, Chapter 13 bankruptcies, collections, and charge-offs impact your credit history for seven years while a Chapter 7 bankruptcy does for 10 years.

Under a Chapter 13 Bankruptcy, a person develops a payment schedule to pay debts that are prioritized based on debt amount and debt type. In this case, assets are not liquidated.

Under a Chapter 7 bankruptcy, there is no payment plan but the assets are either sold out to a lender or liquidated to pay off the amounts owed to lenders.

You should avoid any negative credit information on your credit reports when possible. There are some tough circumstances in a person’s life that (s)he cannot avoid. There are ways to compensate for the impact of negative information by building positive credit information. The easiest way is to apply for a credit card and making timely payments each month. This is a great start to re-establishing your credit after a financial hardship.

What is a credit report?

So far, we have been continuously talking about a credit score and how negative information on a credit report affects it.

Now, is the time to understand what this credit report is?

A credit report is a list of your bill payments, current debt, loans, and other important financial information that is important for a lender to know to determine your creditworthiness.

It also contains information on-

1. Where do you live?
2. Where do you work?
3. If you have been sued?
4. Have you filed a bankruptcy?
5. And a lot more information about your financial life.

Credit Report helps lenders to decide-

1. Whether to approve your loan or not?
2. Whether to rent you a property or not?
3. The interest rate for the loan
4. and much more

A credit report is generated by three major credit bureaus-

1. Experian, 
2. Transunion and 
3. Equifax

Every credit reporting agency maintains your credit report based on most of your accounts that they can access. The reports generated by different agencies may deliver different credit scores but the scores and reports that are generated by different agencies are more or less similar.

How to dispute information on a credit report?

Everyone should check their credit scores and examine their credit reports regularly. Get your credit report from a credit repair expert. If you find any incorrect information in your credit reports, then you can dispute it with the credit reporting agency.

Please follow the step by step approach given below-

1. Get your credit report from a credit-reporting agency
2. Examine your report thoroughly
3. Identify disputable information or entries in your credit report
4. Write a letter to the credit reporting agency for the inaccurate information
5. Write a letter to the lender that submitted the inaccurate information
6. Keep a copy of all the letters with you
7. If your request is accepted and information is corrected, you are done
8. If your request is not approved immediately, get help from Consumer Financial Protection Bureau
9. If the issue is still not resolved, contact a credit repair specialist. 

How to increase your credit score?

First, resolve all the disputes on your credit report. Once that is completed then work on building positive information on your credit reports. You may need the guidance of a credit agent for this.

Here is an effective quick guide for you to follow-

1. Pay your utility bills on time 
2. Pay your current accounts on time. If you don’t have a credit card, apply for one, and ensure to make timely payments.
3. Pay down your debts
4. Resolve debts in collections
5. Be a responsible and organized person and manage all your credit accounts wisely
6. Avoid opening multiple credit accounts if you will spend beyond your means

Financial awareness is very important for a person to maintain a good credit score, to improve/ increase a credit score, and to build positive information on your credit accounts.

MISCONCEPTIONS ABOUT BANKRUPTCY AND ITS EFFECT ON YOUR CREDIT SCORE

Bankruptcy is a legal process where individuals or organizations who are unable to repay creditors can seek relief from their debts. In various instances, a court order imposes bankruptcy, which is often commenced by the debtor. Bankruptcy may help you get debt relief, but it’s important to remember that declaring bankruptcy has a significant, long-term effect on your credit.

This is also a significant reason why people tend to be hesitant about filing for bankruptcy. But not filing for bankruptcy and allowing the accumulated debt to go to collections will also have a negative impact on your credit score.

Although the bankruptcy information stays on your credit report for a long time, there are numerous ways to repair your credit. The effect of bankruptcy diminishes over time, and being responsible for new debts after bankruptcy will make it possible for you to secure a loan in the future.

Bankruptcy lets you start over with a clean slate, it’s giving you a second chance. However, it comes at a price, as well. It hampers your credit score, reflects on your credit report, and therefore hurts your ability to secure future credit.

Filing for bankruptcy is not the common man’s cup of tea. It includes a lot of complicated legal procedures and preparation of various documents and financials. People hire attorneys to help them through the entire process of filing for bankruptcy.

People often get deluded about the entire situation because many myths and common misconceptions are surrounding the process and its effect on your credit. Let’s debunk those myths and understand how filing for bankruptcy affects you and your credit:

Myth 1: When you do not have negative information in your credit report before bankruptcy, you might have a higher credit score after bankruptcy than if your report held negative information before it was filed.

Truth: Healthy payment history and lack of unfavorable details do very little to mitigate the effect on your credit score after a bankruptcy. The existence of bankruptcy, and the amount of time that the bankruptcy has been on the report, are the most important determinants. The impact of bankruptcy may decrease over time, which can contribute to an improved credit score, along with favorable records post-bankruptcy.

Myth 2: Every bankruptcy detail, without exception, stays on your credit report for ten years.

Truth: Only the public record of bankruptcy under chapter 7 lasts ten years. All other references to bankruptcy remain for seven years on your credit report including:

• Trade lines that say “account included in bankruptcy.”
• Collection of debts by third parties, judgments, and tax obligations dispensed via the bankruptcy Section.
• Chapter 13 Articles of public record.

When the above things start disappearing, your credit score can see a more significant boost.

Myth 3: You will have weak credit as long as the details about bankruptcy stay on your credit report.

Truth: Although following bankruptcy, you can expect a significantly lower credit score, you can start building your credit back-up with wise credit management. You may also be able to penetrate the successful credit score range (700-749) after four or five years. After the bankruptcy, you can start building your credit back up immediately by:

• Mitigating the negative details on your credit report by adding new credit, such as secured credit cards or small installment loans.
• Enable on-time payments on both current and existing debts.
• Maintain credit card balance usage at 30 percent.

Consulting a credit repair expert will help you plan and restore a good credit score, which allows you to secure future credit.

Myth 4: Bankruptcy affects all consumers’ credit in equal measure, regardless of the amount of debt or the volume of debts included.

Truth: Your credit score will account for details such as the amount of debt dispensed and the proportion of negative to positive accounts. If you have a relatively small amount of debt and your bankruptcy contains just a few accounts, your credit score would be higher than those with a more extreme bankruptcy.

Myth 5: All bankruptcy claims are wiped off your credit report.

Truth: Although bankruptcy can help you remove or cover past debts, those accounts won’t vanish from your credit records. All bankruptcy-related obligations may stay on your credit report and affect your credit score for 7 to 10 years, but their effect may diminish with time. Additionally, federal student loans may still not be dispensed after bankruptcy, and you might still be on the leash for those.

Myth 6: After bankruptcy, you can’t get a credit card or a loan.

Truth: Credit cards are one of the easiest ways to add credit, and for those with a checkered credit background, there are choices out there. Secured credit cards, which require an initial security deposit, have a lower entry barrier, but just like a conventional card, they spend and create credit.

Likewise, loans – such as passbook, CD, or credit builder loans – are available that are backed with a deposit or collateral that can help you create credit while you pay them off. These loans are much easier to get through like secured credit cards since the lender is protected in case you can’t pay. Several creditors will begin providing credit immediately after the discharge. You will get new credit much earlier than expected with proper approach and counseling.

Myth 7: Bankruptcy will permanently destroy your credit.

Truth: In the near future, bankruptcy will do serious harm to your credit but will only reflect on your credit report for a period of 10 years. Any adverse activity, including tax, late payments, collection payments, and attorney fees, will terminate. The bankruptcy will be deleted from the credit record ten years after filing, creating a new slate. You are then safe and secure. Consult experts in your area, and work with them to develop your credit score, look for credit repair specialist California.

Myth 8: If you file for bankruptcy, lenders will avoid you.

Truth: False. Most of the stigma associated with bankruptcy disappeared after Congress passed the new bankruptcy laws in 2005. Most creditors understand our economy ‘s challenges and the impact of this crisis on consumers. So, many would give credit to the bankruptcy-affected ones. Although interest rates may be higher, following a bankruptcy filing, you can still get a loan.

Myth 9: Those who file for bankruptcy are stealing and might go to prison.

Truth: More than a million people elect to file for bankruptcy each year, whether via Chapter 7 or Chapter 13. There are decent people in tight financial circumstances. While there is always a bad apple in each category, most bankruptcy filers are in desperate need of relief and turn to bankruptcy advantages to get them through this challenging period. If you have lost your livelihood and are unable to pay for your credit cards, or have been sick or disabled and have incurred significant medical bills, you are not a criminal to choose relief from bankruptcy. Congress created the federal insolvency laws to help hard-working families get rid of their debts and move on with their lives.

Myth 10: Bankruptcy filing is very complicated and could result in an audit.

Truth:   It is now much more comfortable to file for bankruptcy than in the past. Although the statute involves filling out and sending different paperwork to the court, most of this work is performed online due to electronic filing. In most cases, it merely needs a completed intake form, values for your property, 3-month bank statements, 2-year tax returns, a list of your debts, etc. The rest will be handled by your lawyer or legal firm. A bankruptcy trustee appointed to your case may require additional financial reports after filing, but audits are exceedingly rare (the actual audit rate is around 1 in every 1000 cases filed).  In the rare case of an audit, legal firms help their clients through the inspection with no problems.

Myth 11: If you are married, you cannot file bankruptcy by yourself.

Truth:   The bankruptcy laws authorize anyone to apply for bankruptcy, either individually or jointly. If you are married, you and your partner must decide whether to make a joint filing. For example, you and your partner have joint debts, such as a mortgage, credit cards, loans, etc., then it makes sense to file together. The bankruptcy will either remove these mutual debts or restructure them. For new marriages, however, where one partner has good credit or no joint debt, it could be more prudent for the other partner to file separately to eliminate their own debt.

Myth 12: You can file bankruptcy only once.

Truth: Although the bankruptcy rules were strengthened in 2005, you can still file more than once for bankruptcy, depending on when you filed and the form of bankruptcy.

You can get a discharge once every eight years in Chapter 7, and every two years in Chapter 13. If you are discharged through Chapter 7, you must wait six years before you get a discharge through Chapter 13. When you get a discharge in Chapter 13, you will wait four years before you get a release by Chapter 7.

If the previous case has been dismissed, there will usually be no waiting period for refiling (although a case dismissed “with prejudice” would have an attached waiting period). In these cases, finding a competent bankruptcy attorney is essential, because there are some motions that need to be filed to expand the bankruptcy protection of your current case.

Myth 13: Some creditors are unaffected by bankruptcy and can press charges against you.

Truth: One of the critical reasons for filing bankruptcy is the termination of ALL collection operations. Once you file the application for bankruptcy, whether by Chapter 7 or 13, you and your properties obtain automatic immunity from the court from your creditors (known as the “automatic stay”), which also includes attorneys, collection companies, representatives and/or agents from the creditors.

Specifically, federal law forbids your creditors from contacting you for any cause, including written communications, monthly bills, or telephone conversations. Creditors must abandon all collection activities against you, which means they cannot file a new complaint, prosecute a prior case, or collect on a previous legal verdict.

Myth 14: Means test obstructs people from qualifying for bankruptcy.

Truth:  By the time the revised bankruptcy laws were enacted in 2005, many debtors were frenzied. Creditors tried to persuade the nation that bankruptcy would extend only to a small percentage of the poor and the vulnerable. It was a massive distortion of the new rules. In reality, the 2005 legislation changed the method by which debtors meet the criteria for bankruptcy under the Means Test, but it did not deter people from filing. Indeed, bankruptcy filings have significantly increased since the new laws were passed, particularly in the light of the foreclosure crisis. Don’t just believe anything you’re hearing — whether on TV, in the magazine, or from friends or family. 

Myth 15: Personal bankruptcy will lead your family to ruin.

Truth: Various things lead to family issues, but bankruptcy might help fix some of your problems. Owing to financial difficulties, you might be on the verge of divorce. In some instances, by filing for bankruptcy and getting a new financial start, you can end the family problem. While filing for bankruptcy can be a very tough decision in your life, the absence of all that tension will give your relationship a chance to survive.

While these realities make it easier to file for bankruptcy, it is still a decision that is emotionally taxing and mentally exhaustive. It can have unfavorable effects on your credit securing ability for the long term and might even hinder some of your life plans. Being cautious about your money and loans is of utmost importance; however, if you can’t keep up, it may be your best option to file for bankruptcy. To mitigate the damage, contact a credit repair specialist and get a start on resetting your credit after filing.

What is a credit score?

Individuals are forever on a spree to manage their wealth effectively and want to have control over their finances. In this process, it is of utmost importance to maintain creditworthiness. This essentially means being in a financial position that makes one reliable enough to receive financial credit. This can be judged majorly through past instances of paying back money to creditors. The reason behind maintaining creditworthiness or rather the pros of doing so are immense. Among the plethora of benefits that a good credit score offers, the most important ones are higher eligibility for loans and fixed credit card Fullerton in California, lower rates of interest, higher credit card limits, quicker loan approvals, added weightage to visa applications. Thus, it is important to maintain a good credit score throughout to be able to get good credit opportunities.

To shed some light on what is a good credit score, one needs to know what is exactly meant by a credit score. A Credit score is a financial tool that helps lenders assess the creditworthiness of an individual. It is used by lenders or banks to evaluate the risk associated with providing credit to an individual and hence, it shapes their decision regarding extending credit.

Credit scores are only for individuals while another tool called credit rating is for businesses, organizations, governments. A Credit rating is a tool to measure creditworthiness for companies. There are various credit reporting agencies such as the Standard & Poor’s, Moody’s, Fitch which assign credit ratings to companies from the range of AAA to D which signifies very good credit rating and poor credit rating respectively.

Coming back to credit scores, there are three main credit reporting agencies in the United States namely Equifax, Experian, TransUnion which assign the credit scores. These credit scores are in range from the 300 to 850. These scores are derived using the FICO (Fair Isaac Corporation) credit scoring.

It should be noted that individuals don’t start directly with a good credit score, in fact a good credit score is built over time.

To get more information on credit score and credit ratings please visit website- https://007creditagent.com/ Feel free to call at +1 949 258 7026