August 28, 2008
by Edward Jamison, Esq.
A lot of homeowners have the mind set that making payments on time automatically equates to good credit and credit scores.
Unfortunately, this couldn't be further from the truth.
While paying your bills on time accounts for a large portion of your credit score, there's still a lot more to it. In fact, paying your bills on time only drives 1/3rd of the points in your credit score, which means that 2/3rds of your score has nothing to do with making on time payments.
Five main categories go into making up your overall credit score calculation. Let's briefly review each category and how much they count:
1. Payment History - The Most Important Category
This category is pretty self-explanatory. It doesn't take a rocket scientist to figure out that if you pay your bills on time, you'll do well in this category. Likewise, if you have a history of late payments, collections, chargeoffs, public records, etc. - you're not going to do so well in this category.
In addition, the number of negative items on your credit reports is important. The more incidents of credit transgressions, the more your score will suffer. And if you have recent negative information that will punish your scores more than if they are several years old.
2. Debt - A Very Close Second
The most important non-payment category in your credit score is, by far, the amount of debt that you carry. And while your installment debt (auto loans and mortgages) are factored into your scores, it's really your credit card debt that's most important.
This includes anything from Visa, MasterCard, Discover, American Express, gas cards and/or retail credit cards like Macy's or Target. The balances that you carry on your credit cards can affect your scores almost as much as whether or not you make your payments on time.
This category calculates the proportion of balances to credit limits on your revolving credit card accounts — also referred to as "revolving utilization". Simply put, the higher your revolving utilization percentage, the fewer points you will earn in this category.
So what is revolving utilization and how is it calculated?
Click Here to Read On...
Thursday, August 28, 2008
Thursday, August 14, 2008
How to Go from Bad to Great
August 14th, 2008
by Edward Jamison, Esq.
Do you have a client with bad credit? Not quite sure just how bad it really is? Frustrated and confused when it comes to deciphering the mess and trying to figure out what to do about it?
Well, you're not alone.
In this article I'm going to help you figure out exactly how bad their credit is and what you need to do to help them raise their scores and retake control of your sale.
The first step to figuring out where they stand is to find out what their lenders are reporting to the credit reporting agencies. To do this you'll need to order their credit reports from all three of the major credit reporting agencies. Although there are numerous websites to order reports and scores from, they don't need to spend a dime.
Thanks to the Fair Credit Reporting Act, everyone in the U.S. is entitled to one free copy of their credit reports once a year from each of the credit reporting agencies. To claim their reports they can go to www.annualcreditreport.com or call 1-877-322-8228. If they'd rather do it the old fashioned way, they can even mail in this request form - https://www.annualcreditreport.com/cra/requestformfinal.pdf - and they'll mail their reports to them.
After you've obtained their credit reports, you'll need to assess the information and determine the following, primarily:
by Edward Jamison, Esq.
Do you have a client with bad credit? Not quite sure just how bad it really is? Frustrated and confused when it comes to deciphering the mess and trying to figure out what to do about it?
Well, you're not alone.
In this article I'm going to help you figure out exactly how bad their credit is and what you need to do to help them raise their scores and retake control of your sale.
The first step to figuring out where they stand is to find out what their lenders are reporting to the credit reporting agencies. To do this you'll need to order their credit reports from all three of the major credit reporting agencies. Although there are numerous websites to order reports and scores from, they don't need to spend a dime.
Thanks to the Fair Credit Reporting Act, everyone in the U.S. is entitled to one free copy of their credit reports once a year from each of the credit reporting agencies. To claim their reports they can go to www.annualcreditreport.com or call 1-877-322-8228. If they'd rather do it the old fashioned way, they can even mail in this request form - https://www.annualcreditreport.com/cra/requestformfinal.pdf - and they'll mail their reports to them.
After you've obtained their credit reports, you'll need to assess the information and determine the following, primarily:
- Are there any negative/derogatory items in the report; and
- How much debt do they have?
Let's focus on the first question. It's safe to assume that if they have negative information in their credit reports, it's hurting (not helping) their credit rating. It's also safe to assume that if they have a lot of this information; it's likely causing their situation to be even worse.
To interpret the derogatory information in their credit reports, you can follow these general rules:
Monday, August 11, 2008
Credit Alert
August 11, 2008
by Edward Jamison, Esq.
Most people have never checked their credit score. They have always used credit wisely and have probably never been denied a loan. Long story short, they have never really had a good reason to worry about their credit score.
They do now.
Why? Because banks are systematically lowering credit limits on credit cards and HELOCS, even for borrowers with spotless credit records.
So when they receive notification from their bank of a drop in their available credit, they usually don't think too much about it at first. They say to themselves that they had no plans to max out their credit cards anyway. And besides, they just got their HELOC as a financial safety net or they only used it to finance a new car at better rates with a nice tax deduction.
But what the banks aren't telling them is the negative impact lowering their credit limits will have on their credit score.
As soon as a borrower's credit limit is lowered, it changes their Credit Utilization Rate, (CUR), which is a major component of their credit score. Credit Utilization Rates are calculated by dividing outstanding loan balances by the amount of credit available.
Click Here to Read On....
by Edward Jamison, Esq.
Most people have never checked their credit score. They have always used credit wisely and have probably never been denied a loan. Long story short, they have never really had a good reason to worry about their credit score.
They do now.
Why? Because banks are systematically lowering credit limits on credit cards and HELOCS, even for borrowers with spotless credit records.
So when they receive notification from their bank of a drop in their available credit, they usually don't think too much about it at first. They say to themselves that they had no plans to max out their credit cards anyway. And besides, they just got their HELOC as a financial safety net or they only used it to finance a new car at better rates with a nice tax deduction.
But what the banks aren't telling them is the negative impact lowering their credit limits will have on their credit score.
As soon as a borrower's credit limit is lowered, it changes their Credit Utilization Rate, (CUR), which is a major component of their credit score. Credit Utilization Rates are calculated by dividing outstanding loan balances by the amount of credit available.
Click Here to Read On....
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