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There are a lot of myths surrounding credit scores and how they are calculated, or, put another way, what information is and is not considered in your credit score. Credit scores are based upon information on the credit report. This is the only information used to calculate scores, and predict credit behavior. Since there is often confusion of what is and what is not used in credit score calculations, below should help out a lot.


Which data is and is not included in a credit report?

Personal Information such as name, address, date of birth, Social Security Number and employment data (where you work(ed) only) are included.

Account information. Account information includes loan amount, credit limit, balance, payment dates, payment rating and history, to name a few.

Collections by 3rd party collection agencies.

Public records like judgements, tax liens, bankruptcy, etc. are reported.

Inquiries, when and where, but not for how much, and why you applied for credit. Inquiries initiated by you are called “hard” inquiries, which are results from applying for new credit such as credit cards, vehicle loans, mortgage, etc. Go here for more on inquiries and the myth surrounding their impact on your credit score.

Information NOT included in credit reports:

No salary or income history whatsoever is included

Medical history is not included, although medical collections via a 3rd party collection agency may be.

No arrest or criminal records are reported.

Property tax records are not included.

Insurance premiums or insurance claims are not reported.

Personal information like gender, marital status, race, religion, nationality, political affiliation and personal lifestyle is not a part of your credit reports.

Payday loans (unless in collection), debit cards and prepaid debit cards are excluded

Inquiries initiated by you online, called “soft inquiries” are not reported and have no effect on your credit score.

Financial Institution accounts like checking accounts, savings accounts, CD’s, or investment accounts. NSF checks will appear if sent to collections.

While some of the above information like income and assets may be considered by lenders such as mortgage banks, and auto finance companies, etc., in their decision process, you need only be concerned about the information that is reported on your credit reports as far as your credit score in concerned. Information not reported on your credit reports does NOT impact your credit score.

By Blair Warner (see About US page for more info.)

So, you are out of debt? How do you avoid going into credit card debt again?

by Blair Warner

You have finally done it! Congratulations! Your hard work paid off! You pulled yourself out of credit card debt and restored your credit rating through credit repair, and now, no doubt, want to avoid making the same mistakes that drove you into debt in the first place. In one sense, it is easy, but, as we all know, it is just as easy to get back into credit card debt again unless some habits are changed, and systems in place to avoid it.

Consider the following simple strategies for credit and financial management.

Make a budget

The best way to avoid going back into credit card debt is by making yourself a budget. You will want to be realistic about your budget. Think about what your spending was before that got you into debt and figure out how you are going to avoid overspending on the same things. The secret to budgeting success is to keep on track with your budget. You may want to enter in your expenses every day, weekly or pre-determined, regular times so that you do not get behind without realizing it. If you spend too much in one area, try to make up for it from another one.

Think about whether you really need all of your credit cards, and possibly get rid of some.

Some people will just spend what they have available. If you do not need all of it, which most people don’t, then you might want to start cutting down on them. This is a tricky one, though. You don’t want to get rid of all of them, yet you have to be a bit strategic on which ones to close and which ones not to, so that the hard work of building a new credit score is not wasted. If done right, it might also help your credit rating. Here are some suggestions:

You might want to start with all of the miscellaneous store credit cards that you have. Not only might this make it less likely for you to go shopping when you really don’t need anything, but store cards often charge more interest, and don’t report to the Transunion, Experian and Equifax as often as credit cards like Visa, Mastercard, Amex, etc. — not adding as much benefit to your credit scores.

You do NOT need a gas card. It is better to use a general credit card and then pay it off each month. Things like gas and groceries really shouldn’t be bought on credit anyway, but if you want to use your credit card as a type of debit card (it is not, though. It is indeed credit), then paying it off each month is important.

During your previous credit repair journey you should have been advised which cards to close and which ones to leave open. If you have not done that yet, consider closing the younger ones first, and/or the ones with higher interest rates. Again, this must be done somewhat strategically. Ask your credit specialist for advice.

Pay with cash most of the time.

Some people who are survivors of credit card debt want to deal with credit cards as little as possible. They may just take out how much cash they want to spend at any given time and just bring that with them when they go to the store. They will not have the option of overspending.

Do not go shopping. (easier said than done, right?)

Some people just cannot help themselves when they are at the store. Do you get a “Must have it, gotta have it, can’t live without it” mentality when you go shopping? If this is you and caused you problems in the past, then you might want to just avoid the stores altogether. That also goes for the online shopping websites if that is your weakness.

When you get the urge to spend, think about how hard you worked to get out of debt and repair your credit. Be proud of yourself when you see your bank account growing and as you see yourself getting in charge of your finances. This simple tips above will help you stay out of credit card debt for good.

Learn more about this author, Blair Warner.
Click here to send this author comments or questions.

CONSUMER FINANCIAL PROTECTION BUREAU STUDY FINDS CREDIT SCORES USED BY CONSUMERS AND LENDERS CAN DIFFER

One out of Five Consumers Likely to Receive Meaningfully Different Score than Creditor



WASHINGTON, D.C. – Sept. 25, 2012, the Consumer Financial Protection Bureau (CFPB) released a study comparing credit scores sold to creditors and those sold to consumers.

“This study highlights the complexities consumers face in the credit scoring market,” said CFPB Director Richard Cordray. “When consumers buy a credit score, they should be aware that a lender may be using a very different score in making a credit decision.”

The complete Analysis of Differences between Consumer and Creditor-Purchased Credit Scores is available at: http://files.consumerfinance.gov/f/201209_Analysis_Differences_Consumer_Credit.pdf

The Dodd-Frank Wall Street Reform and Consumer Protection Act directed the CFPB to compare credit scores sold to creditors and those sold to consumers by nationwide credit bureaus and to determine whether differences between those scores harm consumers.

THE STUDY DETERMINED:

One out of five consumers would likely receive a meaningfully different score than would a creditor: When consumers purchase their score from a credit bureau. A meaningful difference means that the consumer would be likely to qualify for different credit offers – either better or worse – than they would expect to get based on the score they purchased.

Score discrepancies may generate consumer harm: When discrepancies exist between the scores consumers purchase and the scores used for decision-making by lenders in the marketplace, consumers may take action that does not benefit them. For example, consumers who have reviewed their own score may expect a certain price from a lender, may waste time and effort applying for loans they are not qualified for, or may accept offers that are worse than they could get.

Consumers unlikely to know about score discrepancies: There is no way for consumers to know how the score they receive will compare to the score a creditor uses in making a lending decision. As such, consumers cannot exclusively rely on the credit score they receive to understand how lenders will view their creditworthiness.

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RECOMMENDATIONS:

Shop around for credit. Consumers benefit by shopping for credit. Regardless of the scores different lenders use, they may offer different loan terms because they operate different risk models or face different competitive pressures. While some consumers are reluctant to shop for credit out of fear that they will harm their credit score, that actual negative impact is exaggerated. Inquiries generally do not result in a large reduction in a consumer credit score.

VERY IMPORTANT – Check the credit report for accuracy and dispute errors. Credit scores are calculated based on information in a consumer’s credit file. Inaccurate information may be the difference between a consumer being approved or denied a loan. Before shopping for major credit items, the Bureau recommends that consumers review their credit files for inaccuracies

Thanks to contributions from the California Association of Mortgage Professionals

By Blair Warner

How soon can I buy a home after a Short Sale? This is one of the many questions that buyers ask us before they decide to move forward with a short sale on their home. Many times it is one of the last obstacles to moving forward with a short sale. I heard of a family delaying their decision over a year which ultimately delayed resolving their problem and being ready to buy a new, more suitably priced home the same length of time. The sooner you can move beyond your fears and hesitations and get the information you need, the sooner you will be able and ready to buy again when your credit is repaired.

How soon can I buy a house after a short sale? As soon as 2 years! This will vary from borrower to borrower and from lender to lender but the avg recovery time to purchase again seems to be roughly 2 years after a short sale. Please consult with your mortgage expert to be sure.

How soon can I buy a house after a foreclosure? 3-7 years depending on circumstances and the original lender and loan. It is VERY IMPORTANT to speak with a specialist in the areas of real estate, mortgage lending and credit before making any decisions about a short sale or foreclosure. It might even be wise to consult your attorney if he is familiar with short sales.

In many cases (not all) buyer’s have worked with a credit repair organization to move the process along further and faster. This may or may not be the best option for you and your family. We would encourage you to get the information you need by taking advantage of our FREE consultation so you can make an informed decision. Additionally, after a short sale, take your time, save and prepare yourself for the right buying opportunity.

We would love the opportunity to chat with you about your unique situation and about your buying options after a short sale. Give us a call at 888-586-2261 or contact us through the form on this page of our website and we will be in touch.

I hope you found this helpful.

By Blair Warner

There are five factors that contribute to determining your credit score:

Payment History
Amount Owed (ratio)
Length of Credit History
Taking on More Debt (Inquiries)
Types of Credit in Use

1. How you pay your bills – Your credit history (35 percent of the score)
This is the most important factor; how you’ve paid your bills in the past. The strongest emphasis is on recent activity (2 years or less.) Paying all your bills on time is good. Paying them late on a consistent basis is not. Few things hurt your score as heavily as past due payments. Having accounts that were sent to collections is even worse. Declaring bankruptcy is worst. Think long and hard before filing for bankruptcy. It most cases, it simply isn’t worth it.

2. Your debt to your available credit ratio (30 percent)
The second most important area is your outstanding debt — how much money you owe on unsecured and secured loans, (Credit cards, car loans, mortgages, home equity lines, etc.). The ratio of available credit to debt (account balance) is an important ratio. Try to keep it below 30%.

Also of importance is the total amount of credit you have available. If you have 10 credit cards that each have $5,000 credit limits, that’s $50,000 of available credit. Statistically, people who have a lot of credit available tend to use it, which makes them a less attractive credit risk.

3. Length of credit history (15 percent)
The third consideration is the length of your credit history. The longer you’ve had credit — particularly if it’s with the same credit issuers — the more points you’ll get.

4. Types/Mix of credit (10 percent)
The best scores will have a mix of both revolving credit, such as credit cards, and installment credit, such as mortgages and car loans. “Statistically, consumers with a richer variety of experiences are better credit risks,” Watts says. “They know how to handle money.”

5. New credit applications – Also called inquiries (10 percent)
The final category is how many credit applications you’re filling out, called intquiries. The scoring model compensates for people who are rate shopping for the best mortgage or car loan rates, but not for revolving type loans, payday loans, etc. The only time shopping really hurts your score is when you have previous recent credit stumbles, such as late payments or bills sent to collections.

It is our greatest desire that our blog posts are helpful to you. Your comments and thoughts are welcome.

By Blair Warner
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Upgrade My Credit Home Page

It seems like a new business networking group springs up every week. This last week, I was asked to join a new group by the name of Cup of Coffee Networkers. From what I can tell, it is primarily an online group, so I am still trying to figure out how this avid coffee-drinking connoisseur is going to get his cup of coffee. Actually, I think the goal is to start online and then organize groups offline step by step. Are they going to meet at coffee shops?

All humor aside, it is a fact that business networking groups are the in thing these days. A popular one that I personally attend is Netweavers– SAKM Netweavers (South Arlington, Kennedale, Mansfield) . You are probably asking “what does this have to do with the title ‘What is credit repair anyway?’” Well, I am glad you asked. One of the key components of any networking group is to meet with other members one-on-one in order to get to know each other and their respective businesses better. Without fail, whenever I do a one-on-one with someone they either ask “what is credit repair anyway?” or, “so, how does credit repair work?”. That is the question I am waiting for them to ask. I love to answer it.

Credit repair in a nutshell:

The first step is to obtain your credit reports and get them to us. Once we’ve received your credit reports, we will analyze your credit history to identify items that are responsible for bringing your credit score down – including not having enough current positive credit.

We will recommend and provide ways to increase your score, as well as draft letters to dispute the negative items on your behalf. Upgrade My Credit’s letters are expertly designed such that credit bureaus will accept the dispute and conduct an investigation.

A disputed credit listing must be verified as accurate and within the correct time constraints for it to remain on the credit report. If the credit listings contain an error, the credit bureau may simply correct the item, but, very often, disputed credit items cannot be verified because either the creditor no longer possesses necessary information or does not to go to the effort of verifying it. Furthermore, the investigation must be completed within 30 days or the listing must be removed. For these reasons, properly disputed credit listings are removed from your credit report with remarkable frequency.

At the conclusion of the credit bureau’s investigation, a new copy of the credit report is sent to you along with any deletions or improvements. You then provide us with a copy of the new credit report and the cycle repeats itself at strategic intervals and according to a personalized plan for reaching your goals.

The above process can be done DIY (Do it yourself), as the laws used by Upgrade My Credit and all credit restoration companies were written for the consumer. However, for some reason, the government did not write the laws consumer-user friendly. And, just like we need a CPA or even have someone mow the lawn for us, often times, it is more efficient and quicker to let a professional help.

In addition to credit repair, Upgrade My Credit offers many more financial and credit services to help you build and manage your financial future well, such as personal budgeting help, debt reduction programs, classes and workshops, bankruptcy counseling, etc.

Well, that is it in a nutshell. Hope it has answered the question “what is credit repair?”.

Here’s to your financial future!

Blair Warner – Founder and Sr. Credit Consultant

I met with a past client the other day whose story inspired me, and I want to share it with you toward that same end — that you will be inspired. At the beginning of this story this person was in her late 30′s, had 3 children (not 2.3) and a hard-working, devoted husband. Things were rolling along uneventful, so to speak, when her husband was suddenly killed, almost instantly, when hit by a speeding car while checking the mail. Needless to say, her life was turned upside down and very challenging on many fronts for a while. Fortunately, Spring comes after Winter, and she is well on her way to a happy ending.

continue story           Click “return to original post” to return here..

Everyone has a story. In fact, it is your story that makes you unique. Stories offer the listener a new perspective, new experience, even a new adventure of sorts, while at the same time often sounding a ring of familiarity to each one of us as a common member of the human race. That’s why it is said “everyone LOVES a story” — and stories are not just for children. Look at how many movies and novels are pumped out every year. It is also said that “‘everyone has a story”. What is your story? Have you thought about what you would share with someone if you had 5-10 min to share a story of your life in a way that would leave the listeners …… kind of a “Personal Chicken Soup”? Of course, there are stories of the personal, private nature. I am not asking for stories reserved for those closest to us, but for those that if shared will inspire and encourage. Inspire us! Share it as a comment.

At Upgrade My Credit we get to hear, and be a part of many people’s stories as they come to us with credit, debt and budget problems affecting their financial lives and futures. It is our privilege to help.

Cheers,

Blair Warner

Well, another year is upon us. I remember last year everyone saying “Let’s Win in 2010!”. Did you win? I’ve been thinking of a slogan for 2011, and the only one I can come up with is “2011 is made in Heaven!”. If you can think of any share it with us.

2011 marks 4 years since the announcement of the end of sub-prime lending, and 3 years since the whole mortgage and real estate industry turned upside down. Many changes have taken place, and this year will see the last of them implemented, for the most part. What does that mean for us. First, it will mark the beginning of a semblance of stability, and people like stability. Most of us like predictability with a dash of adventure, not the other way around. I believe this feeling that things are becoming more stable and predictable again will trigger the move into trying new things again, which is what America needs at the moment.

Hopefully, one of the movements we will see as confidence increases is home buying–especially by first time home buyers. This is still a good time to buy!  Rates may go up a bit, but will still hover around 5%, which is a whole percent lower than I got in 2002 for my current house.

If you are thinking about buying a home this year, first get your credit and debt situation worked out. There is no use of looking at houses with your Realtor if you are not sure if you qualify for a home loan. Upgrade My Credit specializes in helping people improve their credit and lower their debt so that they can get a home loan. This can be your year! Give us a call.

Best to you,

Blair
www.upgrademycredit.com