Showing posts with label Credit Report. Show all posts
Showing posts with label Credit Report. Show all posts

Saturday, April 20, 2024

Navigating the Path to Securing a Business Loan for Your Startup

Starting a business is an exhilarating journey filled with aspirations and dreams of success. However, it often requires significant capital, which is not always readily available. 

That's where business loans come into play, offering a lifeline to entrepreneurs eager to breathe life into their ideas. Securing a business loan, though, can seem like a daunting task, especially for first-time entrepreneurs. 

In this blog post, we'll explore the steps to obtaining a business loan, ensuring you're well-equipped to take your business from concept to reality.

Understand Your Needs

Before diving into the world of business loans, it’s crucial to accurately assess your financial needs. Determine how much funding is required to start your business, considering expenses such as equipment, inventory, leasing space, and operational costs. 

Being clear about how much you need—and what it will be used for—will help select the right type of loan and convince lenders of your seriousness and planning.

Know Your Options

For entrepreneurs embarking on the journey of securing financing for their startups, understanding the landscape of available business loans is crucial. SBA Loans, backed by the Small Business 

Administration, are highly sought after for their competitive terms and the support they offer to small businesses, though they necessitate a robust credit history and a comprehensive business plan to qualify.

On the other hand, traditional bank loans present a more conventional pathway, offering various interest rates but often requiring collateral and a solid credit foundation, making approval a challenging endeavor. 

Microloans emerge as an appealing alternative for those seeking smaller capital injections, offering easier qualification criteria albeit at higher interest rates, catering specifically to nascent enterprises with modest financial needs. 

Meanwhile, the digital age has ushered in the era of online lenders, a group characterized by their swift funding processes and less rigorous eligibility requirements, providing a lifeline for many startups, albeit often at a premium in interest rates. 

Each of these options carries its own set of advantages and challenges, necessitating a thorough evaluation based on the specific needs, financial health, and strategic goals of the business seeking funding.

Prepare Your Documentation

Securing a business loan requires thorough preparation and documentation. Lenders will likely request a detailed business plan, financial projections, personal and business credit scores, tax returns, and bank statements. 

Your business plan should clearly articulate the business concept, market analysis, management structure, and financial projections. Ensure your documents are well-prepared and organized to make a strong case to your potential lenders.

Boost Your Credit Score

Your credit score is a critical factor in the loan approval process. Lenders use it to assess your creditworthiness and determine your lending risk. 

Before applying, check your credit report for any inaccuracies and take steps to improve your score, such as paying down existing debt and making timely payments. 

A higher credit score increases your chances of approval and can secure more favorable loan terms.

Shop Around and Negotiate

When it comes to business loans, it's always a good idea to explore multiple lending options before making a decision. Don't be afraid to shop around and compare rates and terms of various lenders to find the best fit for your needs. 

Once you've narrowed down your options, remember that negotiating can often lead to more favorable terms. Whether it's interest rates, repayment terms, or fees, don't settle for anything less than what you feel is reasonable and in line with your financial situation.

Final Thoughts

Securing a business loan is a significant step in starting a business, but it doesn't have to be overwhelming. You can increase your chances of getting a favorable loan by understanding your needs, knowing your options, preparing your documentation, boosting your credit score, and shopping around. 

Remember, persistence and thorough preparation are key to successfully securing the financial support your business needs to flourish.

Sunday, February 18, 2024

5 Things That Up Your Chances of Loan Approval

Applying for a loan can be a daunting process, especially if you're unsure whether you'll be approved or not. Your credit score, debt-to-income ratio, and other factors all influence the approval process. The good news is that there are specific actions you can take to up your chances of approval.

Here are five things you can do to help get your loan approved.

Check Your Credit Report

Checking your credit report before applying for a loan can potentially save you from any negative impacts on your credit score due to inaccuracies. This is why it's crucial to review your credit report from time to time. 

You're entitled to a free copy of your credit report every year as per the law, which can help you identify any errors or discrepancies in the report. 

In case you do find an error, it's recommended that you contact the credit reporting agency and the creditor to request a correction before applying for the loan. 

Being proactive about your credit report ensures that you can make informed financial decisions and maintain a healthy credit score.

Improve Your Credit Score

Your credit score is one of the most significant factors that lenders use to decide whether to approve your loan application. You can improve your credit score by reducing your credit card balances, paying your bills on time, and checking for errors in your credit report. 

It's good practice to avoid applying for new credit in the weeks before applying for a loan to avoid any additional dips in your credit score.

Lower Your DTI Ratio

Your debt-to-income (DTI) ratio is another critical factor that comes into play when applying for a loan. Your DTI ratio is the percentage of your monthly income that goes toward paying off debts, such as credit cards, car loans, mortgages, and other loans. 

The lower your DTI ratio, the more favorable your loan application looks to lenders. Aim to keep your DTI ratio below 43%.

Gather Necessary Documentation

When it comes to applying for a loan, having all your documentation in order is crucial. To give yourself the best chance of being approved, it's important to provide lenders with all the information they need to make an informed decision. 

This includes proof of income, tax returns, bank statements, and proof of residency. Gathering all this documentation can be time-consuming, but it's worth taking the time to ensure that everything is in order. 

By staying organized and prepared, you can make the application process smoother and increase your chances of being approved for the loan you need.

Consider a Co-Signer

If you find yourself in a position where it's difficult to get approved for a loan because of a low credit score or high DTI ratio, adding a co-signer to your application could be a game-changer. 

Essentially, a co-signer serves as an extra layer of financial security for the lender. If you run into financial trouble and cannot make payments, your co-signer assumes responsibility for repaying the loan. 

This is a big commitment, but if you have a friend or family member with excellent credit and a strong financial standing, it could be the key to getting approved for the loan you need. 

A co-signer with a good track record of fulfilling financial obligations can make all the difference when it comes to securing approval for a loan.

Final Thoughts

Applying for a loan can be stressful, but by following these five steps, you can up your chances of approval. Reviewing your credit report for errors, improving your credit score, lowering your debt-to-income ratio, preparing documentation, and considering a co-signer are all valuable ways to set yourself up for loan approval success. 

Remember that it may take some time to improve your credit score and lower your DTI ratio, but taking the right steps now can ultimately save you time, money, and frustration in the long run.

Saturday, January 13, 2024

Best Ways to Seek Help Building Your Credit

Having a good credit score is important for a lot of reasons. Not only does it enable you to get approved for loans and credit cards, but it can also affect your ability to rent an apartment or even get a job. But building your credit can be a tricky process, especially if you're not sure where to start.

Fortunately, plenty of resources are out there to help you on your journey. Here are some of the best ways to seek help building your credit.

Check Your Credit Score and Report

Before you can start building your credit, you need to know where you stand. There are many websites and apps available that can provide you with a free credit score and credit report. These websites, such as Credit Karma or Mint, can help you see what factors are influencing your score and provide suggestions on how to improve it.

Use a Secured Credit Card

A secured credit card is a type of credit card that requires a security deposit, typically equal to the credit limit. This deposit serves as collateral for the card and helps mitigate the risk for the lender. 

These cards can be a great way to build credit because they are easier to obtain than traditional credit cards. Additionally, they report your payment history to the credit bureaus, helping you establish a positive credit history.

Become an Authorized User

Another way to build credit is by becoming an authorized user on someone else's credit card. If the primary cardholder has good credit, this can help you establish credit by piggybacking on their positive credit history. 

However, it's important to note that if the primary cardholder has a negative credit history, this could also negatively impact your credit score.

Make On-Time Payments

One of the most important factors in building your credit is making on-time payments. Late or missed payments can have a significant negative impact on your credit score. Set up autopay or reminders to make sure you never miss a payment.

Seek Professional Help

If you're feeling overwhelmed or in over your head when it comes to building your credit, seek out professional help from providers such as The Credit Care Company. Credit counseling agencies and financial advisors can provide personalized guidance and advice on how to improve your credit score.

Final Thoughts

In conclusion, building your credit may seem like a daunting task, but with the right tools and resources, it's definitely achievable. 

Check your credit score, use a secured credit card or become an authorized user, make on-time payments, and seek professional help when needed. By following these steps, you can be on your way to building a solid credit foundation.

Sunday, June 25, 2023

Is Your CIBIL Score Good Enough? Here's How to Check and Find Out

In today's world, where credit plays a vital role in our financial lives, understanding what is a good CIBIL score and having a good credit score is essential.

Your creditworthiness, as reflected by your CIBIL score, can significantly impact your ability to obtain loans, credit cards, and other financial opportunities. 

The steps of a free CIBIL score check are simple and very useful in evaluating your credit health.

Whether you're planning to apply for credit or want to monitor your financial standing, it is important to gain knowledge of what is a good CIBIL score and the steps of a free CIBIL score check online so that you can assess your CIBIL score and take steps towards improving it if needed.

What is a good CIBIL score?

The CIBIL score, also known as the credit score, is a three-digit number ranging from 300 to 900 representing your creditworthiness based on your credit history. 

Lenders use this score to assess the risk involved in lending you money. A score of 750 and above is considered excellent, and you'll likely have no trouble getting approved for loans or credit cards with this credit score. 

Knowing what is a good CIBIL score is crucial for everyone, from first-time borrowers to seasoned credit users. A good CIBIL score can also impact your interest rate on loans and credit cards. 

Regularly performing a free CIBIL score check on a reliable online service such as Bajaj Finserv Credit Pass can help you stay on top of your credit health.

Important steps for free CIBIL score check online

If you're wondering what is a good CIBIL score and want to know the steps for a free CIBIL score check online, the Bajaj Finserv is a great place to start. 

Checking your CIBIL score with Bajaj Finserv is a straightforward process. You can perform a free CIBIL score check by following these steps:

  • Visit the Bajaj Finserv official website
  • Search for the "Check Your CIBIL Score" section.
  • Click on the "Check Score" link.
  • Enter your mobile number to receive a One Time Password (OTP).
  • Enter the OTP and click the "Submit" button.
  • Fill out the form with your name, date of birth, PAN card number, and other required details.
  • Accept the terms and conditions.
  • Click "Submit" again to complete the process.
  • After submitting, your CIBIL score and report will be displayed on the screen.

Several ways to improve your CIBIL score

Improving your CIBIL score is essential for maintaining a healthy credit profile. A good credit score can increase your chances of getting approved for loans and credit cards at favorable terms.
  • Pay bills on time
Timely payment of your credit card bills, loan EMIs, and other dues is crucial. Late bill or EMI payments can have a negative impact on your credit score. Set up payment reminders or automate payments to ensure you never miss a due date.
  • Keep credit utilization low
Credit utilization refers to the percentage of your available credit limit that you utilize. Aim to keep your credit utilization below 30%. Higher credit utilization indicates credit dependency and can negatively affect your score. Pay off outstanding balances and avoid maxing out your credit cards.
  • Maintain a healthy credit mix
A diverse credit mix, including a combination of credit cards and loans, can positively impact your credit score. It demonstrates your ability to manage different types of credit responsibly. However, avoid taking on unnecessary debt just to improve your credit mix.
  • Regularly check your credit report
Monitor your credit report for errors or discrepancies that could impact your score. If you find any incorrect information, such as inaccurate loan or credit card details, contact the credit bureau to rectify the errors.
  • Limit new credit applications
Each time you apply for new credit, it generates a "hard inquiry" on your credit report, temporarily lowering your score. Avoid making multiple credit applications within a short period unless necessary. Instead, focus on building a positive credit history with your existing accounts.
  • Maintain a long credit history
A longer credit history indicates your creditworthiness over time. If you have older credit accounts, keep them active and in good standing. Avoid closing old accounts, especially if they have a positive payment history, as it can shorten your credit history and impact your score.
  • Use credit responsibly
Practice responsible borrowing and spending habits. Avoid excessive borrowing or using credit for unnecessary purchases. Make consistent payments and demonstrate financial discipline to establish a positive credit history.

Final Thoughts

Knowing what is a good CIBIL score and how to perform a free CIBIL score check is essential for managing your financial health. Bajaj Finserv Credit Pass free CIBIL score check online service allows you to keep track of your credit standing without any hassle. 

Regularly doing a free CIBIL score check and taking steps to improve or maintain your score can open up financial opportunities. 

So, don't wait; perform a free CIBIL score check with Bajaj Finserv and stay on top of your financial game.

Friday, July 1, 2022

5 Consequences that You Have to Face for Defaulting a Personal Loan

A personal loan is one of the most beneficial financial products that can help align finances effectively. Choosing a personal loan can help meet urgent financial obligations without any worries.

Borrowers can choose the repay their loan amount as per the repayment capacity through EMIs. Every personal loan comes with a financial commitment to repay the outstanding amount.

Borrowers must comply with the terms and conditions of the loan to avoid default. Choosing the best personal loan rates and the right EMI amount is crucial after assessing factors such as projected income, expenses, existing loan obligations, etc. 

Defaulting on loan repayment can have grave legal and financial repercussions. Read on to learn more about defaulting on personal loan default and its consequences.

Understanding a Personal Loan Default

In the financial world, the term default is used for situations where borrowers fail to comply with the legal obligations of a loan. Failing to make the repayment through EMIs is a case of default. 

Defaulting on the repayment of a personal loan for over 60-90 days is a serious concern for lenders. After a period of 90 days, the financial institution can issue a notice and take legal action against the defaulter. 

It is also crucial to note that defaulting on a personal loan for such an extended period can damage a person’s creditworthiness and reduce the credit score significantly.

5 Consequences of Defaulting on a Personal Loan

The lending institution which has offered the personal loan can take various actions against the defaulters. The extent of financial and legal damage depends on the terms and conditions of the loan. 

Let’s take a quick look into some significant consequences of defaulting on a personal loan.

A major dip in the credit score

Defaulting on a personal loan for an extended period can seriously damage the borrower’s credit score. A credit score is a 3-digit number that can range between 0 to 900, depending on the person’s credit history. 

It is a quantitative measure used to compute a person’s creditworthiness. A higher credit score indicates better creditworthiness. Multiple factors are considered before calculating the credit score. 

Repayment of the borrowed credit has the maximum weightage. Therefore, defaulting on a personal loan can seriously dip the credit score.

Reduces the future borrowing capacity

Defaulting on a personal loan will lead to a decrease in the credit score. Your credit report will also show that you have defaulted on a loan. This will limit the borrowing capacity of defaulters in the future. 

Lenders will perceive borrowers who have defaulted on a loan in the past as high-risk candidates. Therefore, they can limit the loan amount for past defaulters. Lenders can also increase the interest rate on these loans to hedge their risks. 

In short, your borrowing capacity will be pretty limited in the near future. Also, you won’t be eligible for great loan offers and the best personal loan rates. In some cases, defaulters are unable to get any amount of loan, given their poor track record.

Debt accumulation

Not repaying the borrowed amount punctually as per the agreed terms and conditions of the loan can lead to a massive debt pile. This can also lead borrowers into a debt trap. 

Defaulting a loan obligation means adding more burden on the next payment cycle. You will have to pay additional interest charges and late fees (if any) for defaulting along with the last outstanding amount. 

If you keep on defaulting for a more extended period, the debt will amplify, and this will put more strain on your finances.

Legal consequences

In case of default, the lender can issue a legal notice to borrowers and take matters to court. The lending institutions have several legal ways to recover the borrowed amount. 

However, they don’t take such extreme actions in the first 2 to 3 months to maintain a healthy relationship with the borrowers. 

However, after a duration of 90 days, they might exercise their legal rights to recover the loan amount. It is vital to avoid these legal hassles and repay the outstanding balances timely.

Confiscation of collateral

Some lenders might ask prospective borrowers to pledge collateral for issuing a personal loan. In this case, there is an added risk for borrowers. 

It is important to note that defaulting on a personal loan for an extended period can lead to confiscation of the security/collateral offered. Therefore, you must not default on secured loans at all.

However, new-age lending institutions offer collateral-free personal loans that reduce the risk to some extent. However, you must always repay the loan amount timely. A personal loan EMI calculator can help you find a suitable EMI amount.

Friday, June 3, 2022

What You Can Do to Prepare to Qualify for a Home Loan

Now that you have decided the time is right to buy a home, your next step is getting yourself in the best possible position financially so that lenders will be eager to approve you for a home loan.

Since doing so will get you a mortgage that has excellent terms regarding interest rates and other costs, you want to give yourself plenty of time to get everything in order before applying for your loan. 

To make sure you get an excellent loan that lets you buy your dream home, take the following steps right away.

Check Your Credit Report

Believe it or not, most credit reports contain errors. If yours has errors, such as stating you were late on payments or failed to pay off a previous loan, you can forget about most lenders giving you a home loan. 

Since lenders will always check a loan applicant's credit report when considering a loan application, beat them to the punch by checking it yourself. Should you discover errors, get these fixed before seeking your home loan.

Pay Down Your Debts

When you seek a home loan from a lender such as Fairway PNW, they will always look at the amount of debt you already possess in comparison to your income. 

If you can pay down credit card debt and other debts before applying for your mortgage, your debt-to-income ratio will be much more favorable, increasing your chances of being approved.

Save Up a Large Down Payment

If you start planning early on to buy a home, one of the best things you can do to get the best home loan is to save up as much money as possible to provide a down payment on your dream home. 

For example, if you can save up 20-25 percent of the home's price as a down payment, most lenders will believe your financial position is strong enough to allow you to make monthly mortgage payments.

Know What You Can Afford

Finally, take time to think about how much house you can really afford. By doing so, this will let you know how much money you will need for a down payment, what type of home loan you should seek, and which lenders will likely be willing to work with you to help you get approved for your loan.

Though it will take some work on your part, preparing ahead of time for a home loan will soon have you getting a mortgage you can afford. Before you know it, you will be walking through the front of your new dream home.

 door of your new dream home.

Monday, March 1, 2021

10 Major Benefits of Using a Credit Card

A credit card is one of the most powerful financial tools that we have at our disposal and if used responsibly, it can provide many benefits in the long run. Today, we are going to look at top reasons why everyone should use a credit card for their expenditures

1. One-Time Bonuses

People with good credit scores can get their cards approved with added bonuses. You can avail of these bonuses by spending a certain amount in the first few months when your credit account is open. Other bonuses may include travel points, gift cards, and more.

2. Convert transactions into EMI

This is a great benefit that every credit card comes with. When you make a big purchase using your credit card, you don’t have to make full payment, you can easily convert that transaction into monthly installments, which gives you time to pay off the money over a period of time. This benefit allows you to fulfill your wishes without the burden of paying all the money at the same time.

3. Cash Back

The most significant benefit of using a credit card is cash-back. Whenever you use a credit card for making a purchase, you receive a percentage of total expenditure in the form of cashback. This allows you to save a lot of money in the long-run. 

If you are a platinum member, you might get cash-back offers up to 2% to 3%. So, before applying for a credit card, look at the list of partners that a financial institution is associated with.

4. Rewards Points

Another major benefit of using a credit card is the reward point system. The more you spend using your credit card, the more points you earn. These points can redeem to earn discounts, buy merchandise, groceries, and more. 

For example, if you get Citibank credit card, you can earn reward points when you spend money on fuel, restaurants, movies, and more. Contact your bank to learn more about the reward points.

5. Frequent-Flyer Miles

This point is for those who travel a lot. When you purchase your flight tickets using your credit card, you get flyer miles that can be used for either discounts or purchase tickets (if you have enough points). 

All major airlines have at least one bank that is partnered together and offer this benefit to their customers. So, make sure you check whether your credit card has this benefit or not.

6. Safety

Paying with your credit card is much safer than your debit card. When you use your debit card, the money is deducted from your account instantly. 

Similarly, if you lose your debit card, you are at major risk of losing your hard-earned money. But when you use a credit card, and you encounter any fraud, the bank will take it immediately. Plus, your money is also secured.

7. Grace Period

When you make a purchase using your debit card, your money is gone instantly. On the other hand, when you spend money using your credit card, your money remains in your account until your due date. 

This time between the end of the billing cycle and the due date is called the grace period. This allows you to repay your credit card while having the luxury of keeping your money in your account as well.

8. Insurance

Credit cards come with a number of customer protections that people are not aware not like insurance. Many banks offer insurance services to their customers who use their credit cards. This benefit is usually available to those who have a high credit limit.

9. Universal Acceptance

This is by far the main benefit of why everyone should have at least one credit card. All credit cards are accepted universally, this means if you are traveling, you can easily make payments in a foreign country using your credit card. 

You can rent a car, spend money on shopping, use to pay your hotel bills and more. You don’t have to worry about carrying the foreign currency with you all the time. Simply swipe your credit card and you are done.

10. Building Credit

A credit card helps you in building your credit score, which shows that you are responsible and can handle your finances. This is great for people who started working and looking to build their credit. When you spend money using your credit card and make timely and full payments, it impacts your credit score positively, which helps you in increasing your credit limit and enables you to apply for loans and more credit cards.

There are many other small benefits to why you should use a credit card, but these above-mentioned points are the main benefits that you get to enjoy when you use your credit card responsibly.

Monday, June 24, 2019

5 Easy Precautions You Can Take Against Identity Theft

Did you know that on average, victims of identity theft spend at least 600 hours trying to clear their name? In addition to repairing the financial damage that’s been done, victims also have to prove that they are who they say they are. How unnerving is that?

As horrible as it sounds, there is a bright side to identity theft. Although you can’t be 100 percent sure it will never happen to you, there are things you can to protect yourself.

Monitor Online Accounts

If your bank offers online banking, sign up for it. Frequently log in to make sure you have no unauthorized transactions. Also, make sure to keep your login information safe. Never write it down or save it in your phone. also, never enable automatic logins.

Order Annual Credit Reports

You’re eligible for a free credit report from all three major bureaus. However, there are also apps that allow you to check your credit as often as you like. Credit Karma gives you instant access to your credit report for free. 

Sign up and check your report once a month for anything that looks out of the ordinary. You’d be surprised how many unauthorized accounts slip through the cracks.

Memorize Your Social Security Number

If someone gets a hold of your social security number, your credit can be destroyed in an instant. Play it safe and memorize your social security number. Make sure you contact a criminal defense group if your identity is indeed stolen. 

 Furthermore, make sure to be mindful of your surroundings when giving your social security number to customer service representatives.

Opt Out of Pre-Approved Credit Card Offers

You know those pre-approved credit card offers you get in the mail from time to time? Do not accept them. Tear them into pieces and throw them away. Thieves are notorious for using these kinds of offers to obtain other people’s credit card information. You can also opt out them to ensure you never get the offers again.

No matter how vigilant you are, there’s always the risk of identity theft. Even a disgruntled waiter can snap a photo of your credit card and go on a shopping spree. Play it safe and stay on top of your finances and purchases. 

If something doesn’t look right or you don’t remember giving that aforementioned waiter a tip, act upon it. The sooner you identify an issue, the sooner you can rectify it.

Sunday, March 25, 2018

5 Common Credit Score Myths to Consider

When it comes to credit scores and credit reports, the so-called “conventional wisdom” is full of common myths and flat-out inaccuracies. The fact is, some of the most common misconceptions can actually hurt your score. With that said, here are five common credit score myths to consider.

Myth: Improve Your Score by Closing Unused Credit Cards

Many consumers believe their credit scores will improve if they close unused credit cards. The truth is, closing an unused account could hurt your score. Credit scoring models place a big emphasis on your credit utilization ratio. 

This is the ratio between the amount of available credit to you and the total credit you actually use. If you have a low credit utilization ratio, you will have a higher score. 

If you close an unused credit card, that reduces a portion of your available credit, which can increase your credit utilization ratio and lower your credit score.

Myth: There’s Only One Universal Credit Score

The truth is, there is a wide array of credit scoring models that issue countless credit scores. However, the most recognized credit score is the one issued by FICO. For example, most mortgage lenders will use your FICO score to determine your creditworthiness. 

By contrast, if you are looking for a bad credit auto loan, a lender might use the VantageScore 3.0 credit scoring model. The point is, there is not one score that applies to every consumer.

Myth: Income Determines Credit Scores

Your income has nothing to do with your credit score. Most credit scoring models do not consider your income when issuing a credit score. What does impact your score is your payment history, credit utilization ratio, age of credit and credit inquiries. 

However, if you earn plenty of income, a credit score may not matter much in terms of your buying power.

Myth: The Federal Government Runs Credit Bureaus

Although there are laws that regulate how the three major reporting agencies, TransUnion, Experian and Equifax report credit, the federal government has nothing to do with the day-to-day operations of the reporting agencies. 
FICO is also an independent company that has no ties to the government.

Myth: The Credit Bureaus Report Good and Bad Credit

This myth really confuses many consumers. In truth, the credit bureaus make no determination that your credit is either good or bad. The bureaus merely compile credit information provided to them by lending institutions. From there, other lenders will use the information in your credit report to determine your level of creditworthiness.

There are many other common misconceptions in the world of credit reports, so it is vital that you do your homework before applying for your next loan or credit card. Arm yourself with the facts, and do not believe everything you hear or see about credit scores and credit reports.

Thursday, July 6, 2017

An Easy Guide to Understanding Your Credit Report

Credit is a major driving force in today’s economy, giving people the purchasing power that they need to buy a home, start a family, and build a career. 

Landlords, employers, utility companies and more use credit reports when deciding whether an individual is responsible and reliable. A good credit score can open the door to better deals and lower interest rates, but unfortunately, many of us have a less than perfect credit score.

This July, around 12 million people can expect to see a slight bump in credit scores as credit reporting agencies nationwide wipe tax liens and civil judgments from their records. 

However, much of those affected should only expect to experience an improvement of 20 points or less. If you’re looking to improve your credit even further, it’s important first to understand the basics of how credit reporting works.

Finding and Checking Your Credit Report

Keeping an eye on your credit report can help you to stay on top of your finances and improve your overall fiscal health. An unusual credit report can also give you an early indication of fraud or theft, allowing you to nip the problem in the bud. 

Ideally, you should check your credit report on a monthly basis to ensure that all of the information is up-to-date and accurate. A mistake in your report could adversely affect your overall score. You may have to pay a small fee to check your report, or you may be able to access your credit scores for free through your bank.

What the Numbers Mean

FICO scores created by the Fair Isaac Corporation, are one of the most popular measures used by banks and lenders to assess the risk of doing business with a particular person. 

Lenders may also check your VantageScore, which is a measure developed by three major credit bureaus, including Equifax, Experian, or Transunion. Scores are influenced by a number of factors, including:
  • Late payments
  • Credit utilization rate, or the amount of credit you use versus how much credit you have available
  • Number and age of credit accounts
  • The types of credit you use

If you keep your account active and pay back your debts on time and in full, you can build up your credit score and enjoy access to lower rates on insurance plans, business loans, mortgages, and more. Credit scores can range anywhere between 0 and 850, with higher scores indicating fiscal responsibility.

Excellent Credit: 720 to 850

Consistently responsible borrowers with a score in this range can get some of the best interest rates when making a purchase. Most lenders require a FICO credit score of over 740 for a low interest rate on a mortgage.

Good Credit: 690 to 720

When most, but not all payments are made on time, a borrower is considered to be fairly reliable. People with credit scores in this range tend to get decent interest rates from banks and lenders.

Problematic Credit: 650 to 690

Credit that dips below 700 begins to raise a red flag for any agency checking a credit report. Borrowers may be denied future credit if they have a history of making late or short payments.

Poor Credit: 350 to 650

A poor score can be the result of anything from bad spending habits to bankruptcy. Lenders will often deny credit to anyone with a score in this range.

No Credit: 0 to 349

People who have no credit history will have a score of zero. Opening a credit account allows individuals to start building their credit up so that in the future, they can make large purchases such as a house or car.

Improving Your Score

If your score is in the low range, over time, you can work to build your credit up again. It’s a good idea to start the process as soon as possible since you never know when you might have to borrow money, move apartments, or switch insurance plans.

How to Improve Your Credit Utilization Rate

Your credit rate indicates how much you’re spending compared to how much credit you have available. Lenders look for a low ratio, meaning that borrowers use less than the amount available to them. By paying off your debts and reducing your spending patterns, you can improve your credit utilization rate, and thus your score.

How to Get a Late Payment Removed from Your Credit Report

If you have a good history with your creditor, then you may be wondering how to get a late payment removed from your credit report. In some cases, it might be as simple as calling them up and requesting that a late payment gets removed as an act of goodwill. 

You may also be able to get it removed by agreeing to set up an automatic payment schedule in the future. If a creditor refuses to remove a late payment, you may be able to dispute the issue or hire the help of a professional credit repair agency.

Many people focus too heavily on the past when it comes to matters related to credit. While it’s true that you can’t change any historic mistakes (such as late payments) that you’ve had problems with, there’s a lot you can do to improve your credit score in the future. 

Knowledge is key, so begin by finding out your current score and then work on the ways described here to start improving your rating bit by bit.

Thursday, February 11, 2016

How To Score With FICO

When it comes to getting a loan for a new car, new home, or new business, you've got to be fully prepared. This preparation involves many things, but the biggest issue at hand is having a credit rating that will enable a bank or lender to judge you as an acceptable prospect for a major loan. 

If you don't have a good enough score to back up your claims, you'll quickly find yourself rejected and out of luck. So, before you even think of applying for a loan, it's an excellent idea to know exactly what you need for a good credit score. 

What Exactly Is Your FICO Score?

FICO is an acronym that stands for Fair Isaac Score, the company that created this credit scoring system. This is the system by which your credit score will ultimately be calculated. Banks and lenders will use your FICO score as the primary means of judging whether or not you are a good risk for a loan. 

If your score is anywhere from average to high, you'll have a good chance of securing a loan. If your score is less than average, you're going to have to do some serious repair work before you can even think about getting a loan in the near future.


How Is Your FICO Score Calculated?

The components that go into measuring your ultimate FICO score can be broken down in the following manner:

  • Your payment history will count for 35 percent of your score. This includes all of the payments you have made via the medium of credit, as well as a complete record of whether you have made all of these payments in a timely manner.
  • 30 percent of your FICO score will be determined by the amount of money you still owe via the medium of credit.
  • 15 percent of your score will come from the length of your credit history. A person with a long history of paying by credit in a timely fashion will have an advantage over someone who has a bad credit history, or very little credit history.
  • 10 percent of your score comes from what is termed "credit mix in use." This term covers the mix you may have of credit cards, credit accounts from retail stores, any loans you may be paying off via installment plans, whether or not you are currently paying off a mortgage loan, and any open accounts you may have with a finance company. 

The final 10 percent of your score will come from whether or not you are considered "new credit", i.e., whether you have a very recent and limited credit history, or whether you have taken out credit with a variety of sources in a very short and recent amount of time.

What Is In Your Credit Report?

The best way to get an accurate look at your FICO score and overall state of credit is to apply to receive your credit report. This credit report will consist of the following items:

  • All of your basic information (name, address, Social Security number, date of birth, employment history).
  • Trade lines. These are all of your credit accounts, including a full history of when you opened your account, your credit history, all of your outstanding payments, your maximum line of credit, etc. 
  • Credit inquiries. A complete list of everyone who has accessed your credit report within the past two years. You authorize this inquiry when you apply for a loan.
  • Public Record and Collections. Credit reporting agencies are authorized to collect information from state and county courts concerning bankruptcy proceedings, property foreclosures, wage attachments, settlements of lawsuits, foreclosures, liens, and other related matters.

Get Your Credit Report Today

If you have any doubts about the accuracy or the overall strength of your credit, it's an excellent idea to obtain your free credit report today. The sooner you do so, the sooner you can settle all doubt on the issue and get a realistic, accurate assessment of your credit. 

This way, if there are any areas that you care to dispute, you can do so in a timely manner. If there are other areas that are accurate, but definitely cast your credit in a bad light, you can work to improve them before applying for a major loan.

You can apply to observe your credit report today. It will give you a complete look at all of the above listed components that make up your FICO score. The sooner you have this information, the sooner you can make all of the necessary adjustments in order to render your score as strong as possible. 

Getting your credit report is the first step toward positioning yourself for success in all of your future financial and business pursuits.

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