Spring is a time of renewal and rejuvenation, when many people focus on getting their homes cleaned up and ready for the warmer months ahead. It is also a great time to get your finances – including your credit – in order. So, if you’ve been neglecting your credit like those old dusty boxes of clothes you can’t quite part with yet, use the spirit of spring cleaning to spruce up your finances.

Experian has developed four tips to help you spring clean your credit:

1. Know your report and your score
Despite what you may have heard, accessing your own credit report does not affect your credit scores. Reviewing a credit report results in what is called a “soft pull,” or “soft inquiry,” meaning it will only be seen on a personal credit report, not the ones lenders use. Everyone should check their reports at least annually. It’s part of good credit management. You can get your credit report at www.experian.com. Purchasing a scored report will help you identify the factors in your report that are most influencing your credit risk.

2. Pay your bills on time
Paying your bills on time is the single most important contributor to a good credit score. If a bill is not paid in a timely manner, the delinquent payment may be reported as late to a credit bureau. Delinquent payments and collections can have a major negative impact on credit scores. Even if the debt you owe is a small amount, it is crucial that you make payments on time. In addition, you should minimize outstanding debt, avoid overextending yourself and refrain from applying for credit needlessly.

3. Start paying off your credit card debt and leave the account open
Paying down debts and paying off credit cards is always good for your credit, but closing a credit account could have a negative impact on your credit scores, at least for a short time. Some people start with their smallest debt. They can pay it off fairly quickly, which gives them a sense of accomplishment. That payment amount can then be added to the payments for a larger debt so that it can be paid off more quickly. Others start with a large debt and get it out of the way. Getting a big weight off your shoulders can help knock out the remaining debts faster. If one debt has a higher finance charge, it is always smart to pay the most toward the balance of that account. That’s because so much of your money is going toward fees and interest and is not lowering the amount of the debt. When it is paid off, all the money you were paying in interest can be applied to the balance of another account.

4. Use credit wisely
Once you’ve paid down your debts, continue to use your credit cards and pay the bills on time each month, and keep your balances low. Credit scoring systems not only look at individual credit card balances, they also consider something called your utilization rate (or balance to credit limit ratio). Your utilization rate is the total of the balances on all of your credit cards compared to the total of the credit limits on all of your credit cards. For example, if your credit card’s limit is $10,000 and you owe $2,500 – your credit utilization rate is 25 percent. According to Experian, consumers on average are utilizing more of their available credit. At the end of 2009, the average utilization was 22.1 percent compared to the same time last year when average utilization was at 19.1 percent. Closing accounts reduces your available credit, which can increase your utilization ratio or balance-to-limit ratio – a sign of risk that can negatively impact credit scores.

While there is no quick fix for bad credit scores, there are straightforward steps we can all take to help clean up and improve our financial well-being. So when you’re clearing out the clutter in your living room, don’t forget to review your finances and see what else you can do to get organized for the spring season.

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There are two separate ways you can do something to fix your credit report and improve your credit report score. The things that you control is are the surest way to free credit repair. The other way to fix your credit report is by influencing other people to do the right thing to clean your credit report.

In the first part of this report we cover those things you can do that you have control over to fix your credit and raise your credit report score. There are even a couple things you can do that legitimately qualify as instant credit repair when done the right way.

The first step in credit help is understanding the credit scoring system and understanding your credit report score and how it fits into that system. Credit report repair secrets are hiding in the open once you know what to look for.

What is a credit report score?

Your credit report score is a statistical/mathematical calculation made by a computer that scales your credit history into a number between 300-850. The higher the number the better your credit report score. The only data the computer uses when it does your credit report score calculation is the information in your credit report – your credit history. Your credit report score is a snapshot in time that will change every time the information in your credit report changes. The key to managing your credit report score is knowing what kinds of changes in your credit reports will produce the biggest changes in your credit report scores – both positive and negative.

Your employment history, income, age, marital status, medical history and other personal information about you is not included in your credit report and has absolutely no impact on your credit report score. Thus it is not uncommon that a person with a blue collar job and an average income can have a credit report score hundreds of points higher than an executive making six figures. Lenders take income into consideration when making a loan but the credit report bureaus do not when making your credit report score calculation.

The credit report score formula is a secret but the effects are not

The exact formula for calculating your credit report score is a trade secret. Fair Isaac & Co., the company that invented credit scores and remains the leader in the credit reporting industry with its FICO Score, does provide some guidance about the factors that go into the calculation.

The median FICO credit report score in the USA is 723. Half the people have FICO scores higher than 723 and half have lower FICO credit scores. The average FICO score is about 687. There is no universal definition of “good” credit but this credit report score chart is good guidance for where different FICO credit scores fall on the scale between excellent and forget-about-it.

A person with a credit report score at the high end of the chart is just about guaranteed for approval at the lowest interest rate on a mortgage loan, a car loan, or any other credit purchase that their income could support. A person at the bottom end of the chart will have difficulty getting approved on any credit purchase – regardless of their income. Any loan they do get will be rated as a bad credit loan and charged high interest rates. The difference in total interest paid between a bad credit mortgage and a good credit mortgage is enormous – several $100,000 over the life of the loan.

In a tight credit environment the lowest bad credit categories could get completely shut out of the credit market and not be able to buy a home or a new car on reasonable terms.

Two things you can do today to raise you credit report score tomorrow…

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Does your monthly stack of bills leave you wondering where your bailout is? For many Americans, money is tight and spending has become more conservative, but this does not mean that you lack options when it comes to reducing your debt.

“Getting out of debt is a viable possibility for most people,” says Daniel Wesley at creditloan.com, a comprehensive Web site on personal finance. “The way America views debt and money is changing, and many people are taking advantage of resources so they can become financially secure today and in the future.”

Here are some easy steps to consider for managing debt in any economy:

1. Assess all your debts and loans

The only way to start fixing your debt problem is to see where you realistically stand. Write down all your loans and credit card debts along with their interest rates and monthly payment requirements. Federal law states that you can print out a free credit report once a year, so this would be a good time to review and fix any errors.

2. Set a manageable budget

Determine what your expenses are each month. Food, fuel, insurance, utilities — be sure to include everything with a regular expense. After you know your cost of living, you can see how much you have left to go toward your debts.

3. Be credit card smart

It’s best to keep only one or two credit cards for your personal use and pay off debt monthly. If you have rotating debt like many people do, find out if you can negotiate better terms with your credit card company. It’s possible to reduce your interest rate or settlement on some debt just by asking. Be firm yet courteous when negotiating with a customer service representative.

4. Is debt consolidation an option?

The concept of debt consolidation is very attractive: bundle multiple monthly payments into one single payment to make paying bills easier. Usually these payments are at a reduced interest rate, so you can also save money. If you have significant debt, this can be a good option, but there are some things you should remember.

Debt consolidation does not write off your debt, it simply transfers the debt to a new lender who will work with you to find a manageable payment plan. A debt consolidation loan is typically a secured loan with your home as collateral, effectively making it a second mortgage. Some loans are unsecured without collateral, but the interest rates are typically much higher.

“If you decide to consolidate debt, you must analyze your spending habits immediately and act responsibly,” says Wesley. “For example, if you consolidate your credit card debt, don’t start spending on those cards again once you clear the balance. You must make the commitment to live within your means, no matter what your financial situation.”

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Spring is a popular time to begin home improvement projects, especially if they’ll upgrade outdoor living spaces. With the economy keeping more homeowners in place, rather than moving up to bigger, grander digs, improving your home can elevate both your enjoyment and its eventual resale value.

A great home improvement can enhance your enjoyment of your home and its eventual resale value. Even if you choose just the right improvement — one that makes you love your home even more and will woo potential buyers come selling time — you may still be frustrated wondering how you’ll pay for your project.

Before you dive into your spring home improvement, keep a few points in mind:

Your Finances

First, get your free credit score and report. Any significant home improvement, such as building an addition or turning your backyard into an oasis, is probably going to require you to find financing. Before you make a single phone call to a potential lender, it pays to know your credit score and what is on your credit report. Generally, the higher your credit score, the more leverage you will have to negotiate a good financing deal, including a lower interest rate.

Enrollment in membership based products like Suze Orman FICO Kit give you access to your and score, which potential lenders will almost certainly use to determine if you’re a good credit risk. You’ll be able to see what finance companies see when you look at your credit report, including your payment history and whether there are any errors or other blemishes on your report.

Once you’re confident of your credit score, you can evaluate your financing options, whether it’s a second mortgage, a personal line of credit or a home equity line of credit.

Smart Choices

Some financed home improvement projects pay off more than others in terms of enhancing your home’s value and your enjoyment of your house. If you’re opting for improvements to your outdoor living spaces, consider ones that will deliver the greatest return for your investment, such as patios, decks or screened porches. In fact, the National Association of Realtors’ 2008 Remodeling Cost vs. Value found that outdoor improvements, such as wood decks, continue to recoup 80 percent or more in value upon resale.

Landscaping, it seems, is also popular with potential buyers – a University of Michigan study found that potential buyers scored a well-landscaped home 11.3 percent higher than the same home without good landscaping. The trend for more Americans to stay home and invest in their surroundings, rather than spend on pricey vacations, has spurred interest in grand backyards that evoke the look and experience of a resort. From in-ground pools with water slides to lavishly tiered patios that feature built-in hot tubs, a growing number of homeowners are focusing on outdoor improvements that improve resale value and their current enjoyment of their homes.

Before you make your summer remodeling plans, check your credit report with the Suze Orman FICO Kit. If you plan to sell your home within five years, it might pay to check with your realtor as well to see if he or she can give you an idea of how much your investment might affect the eventual sale price of your home.

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You can easily and quickly apply for the credit card of your choice with links to easy application information. Companies usually respond quickly, in less than forty-eight hours for sure. Be careful as to the number of offers you respond to while you compare credit card rates. You may be applying for a card, or allowing the company to check your credit, and several inquiries into your credit over a short period of time can count against you and knock down your credit score.

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Research by home insurer LV=, undertaken by the Centre for Economics and Business Research (CEBR), includes views from over 6,000 adults who were questioned about their experiences in applying for credit cards and other services.

Key findings of the report:

* CEBR analysis based on CIFAS (the UK’s Fraud Prevention Centre) data reveals that there has been an annual 33 per cent increase in identity fraud over the past 8 years (9,000 cases in 1999; 77,500 cases in 2007).
* The CEBR’s research for LV= asked 6,000 adults about their experiences applying for credit cards and other services, and found that 46 per cent had experienced some form of credit problem.
* Of those who had experienced credit problems, 27% blamed mistaken identity or being linked incorrectly to another person, and 29% said they had no idea why they had encountered a problem.
* The full repercussions of being targeted by identity fraudsters include being refused banking services such as a credit card (40%), having to pay legal fees to sort the problem out (8%) and even being denied a mortgage (6%).
* Previous occupants of a property can also cause problems with more than a quarter of people (27%) receiving bills meant for a former resident.
* One in ten (9%) have received a court summons intended for a previous occupier, and 8% have even had bailiffs knocking on their door looking for someone who lived there before.
* The research also reveals that victims of identity fraud face average costs of over £2,100 to clear their name.

John O’Roarke, managing director of LV=, says: “Our research shows that an unfair credit rating is a common problem for many and more worryingly, identity fraud is likely to rise sharply in the coming years.

“That’s why we’ve set up the LV= Identity Fraud Helpline, free to all our home insurance customers, so that anyone who thinks they might have become a victim of identity theft has somewhere to go for help and support.”

Source:http://www.findaproperty.com/displaystory.aspx?edid=00&salerent=0&storyid=23091

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Source: StatesmanJournal

A recession-era warning: Be careful your efforts to cut spending don’t slice into your credit standing too.
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Setting your credit cards aside and paying only with cash may be a great way to help rein in spending, but it can actually hurt your credit scores.

A lot of consumers aren’t aware of that risk — and that typifies a gap in knowledge about credit scores, according to Liz Pulliam Weston, author of the newly updated edition of “Your Credit Score: Your Money and What’s at Stake.”

“There’s a persistent idea that if you handle your finances responsibly, your credit scores will take care of themselves,” said Weston, a nationally syndicated personal finance columnist. “That’s not necessarily true.”

Failing to fully understand the impact of credit scores can have especially adverse consequences during the current recession and credit crunch. Weston says that even people who never plan to take out another loan should pay attention to their scores and know how to fix, improve and protect them.

“Most of us need access to credit, or at least want to have the option of being able to borrow money should we need it,” she said.

Here are some questions and answers from Weston’s recent interview with The Associated Press.

Q: Have scores become important because of the troubled economy?

A: It’s accelerated beyond what I could have expected. What’s happened now with the credit crisis is that lenders are fleeing any hint of risk. So what we’ve got now is a real world of credit “haves” and “have-nots.”

And the line for good scores has moved up. It used to be if you had scores of 700 to 720 and up, you got pretty good rates and terms. It’s probably moved up now to where you probably want to have a credit score of 740 or above to get the best rates and terms, sometimes 760.

If you’re in the 600s and below, all of a sudden you are in a world of hurt. You’re having more trouble getting financing, you’re paying more for it when you get it.

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photo credit: angela stack

Most still get approved, but even prime-risk customers are having a harder time getting auto loans approved in the current credit crisis.

That’s according to CNW Marketing Research, which said that the share of auto loan applications that got final approval dropped for all three of the main credit-risk categories — prime, near-prime, and subprime.

“Even a prime customer is having a significantly harder time getting a loan approval. And those loans that are approved have to be submitted to more financial institutions,” said CNW President Art Spinella, in a Sept. 25 note.

In 2008, about 81 percent of prime-risk loan applications eventually got approved, down from about 91 percent in the year-ago period, from Jan. 1 to Sept. 20, CNW said. Near-prime approvals fell to 77 percent, from 86 percent.

The subprime auto loan category fell the most, as might be expected, considering that the disaster in subprime mortgages helped kick off the credit crisis in the first place.

Spinella didn’t say so, but that extreme turnabout helps suggest how the finance industry got into the current mess. A year ago, more than two-thirds of the riskiest customers, paying the highest interest rates, got approved. A year later, the industry is turning down three out of four.

Source: BNET

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That said, anytime there is at least a half-point drop in interest rates, taking on a new loan or refinancing is worth considering, said Steve Higa, a Honolulu-based mortgage broker with Point Financial.

For those whose credit scores and loan-to-value ratios still allow them to obtain new mortgages or refinance under better terms, the gains can be substantial, Higa said.

Source: Honolulu Star

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Here is an example of terrible credit repair advice from the Independent, a major UK newspaper. In an article titled “If there’s a stain on your name, erase it yourself…” the paper said “Put simply, these firms do nothing more than you can do yourself with very little effort and at a fraction of the cost. .. For example, does the report say you failed to make certain repayments, when actually you did? If you find an inaccuracy then you ask the reference agency to correct the entry.”

The Independent goes on to say that what we call the credit reporting bureau will fix the problem, and with a smile apparently. I suppose the credit bureaus could be more cooperative in England than in the USA, but I doubt it. They are owned by the same big American firms and their systems are modeled after their American cousins, if not exact duplicates. Consumer credit disputes are not a profit making activity of the credit reporting companies. These departments are run as efficiently, and cost effectively as possible. They cannot afford to spend more than a couple minutes on any credit dispute letter.

The worst, however, is the advice that “…the credit reference agencies do allow people to add an entry explaining any mitigating circumstances surrounding the CCJ, such as you were in dispute with the firm that placed it there because of an unpaid bill.” This is terrible advice. It is the same as pleading guilty to a crime before the bailiff even reads the charges and you know the evidence against you.

The law, in America at least, is that the credit reporting bureaus can keep negative items on your credit report only if they can verify the accuracy of each disputed item.

Here’s an example. You make the call. You defaulted on a personal loan from ABC Finance Co. three years ago. The account is in collection and appears as such on all your credit reports. You learn from your sister in law’s neighbor that ABC Finance Co. just went through a merger and to make their database compatible purged all inactive customer records older than two years.

If you send a properly drafted dispute letter to the credit reporting bureaus telling them to remove the negative ABC Finance Co. tradeline they would be required by law to remove it because it cannot be verified. If you had done what the Independent columnist recommended and gave the credit reporting bureau a written explanation of why you defaulted on that ABC Finance Co. loan – you’re screwed – because you have provided all the verification to keep that negative item on your credit report that the credit bureau could not otherwise get.

Credit repair is not for amateurs. Let the professionals do it.

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