The Most Common Credit Mistake People Make, Besides Non-payment

July 11, 2013 | Posted by Blair Warner | 1 Comment

Don’t make this credit mistake!

This is going to be a really short post, but one of the most important you could read concerning maintaining, or building a good credit score. What is the worst mistake people routinely make related to their credit and credit reports? You may be surprised, for it is not obvious, and on the surface actually seems like a good thing to do. In fact, most people make this mistake when actively trying to rebuild their credit scores, and reduce their debt, making it very frustrating, to say the least. Click to Tweet

What is this mistake? drum roll…..Closing credit card accounts. Go ahead, admit it. You have thought about it at least once, and understandably so. For a lot of us, it’s those darn credit cards that got us in trouble in the first place, (so we like to say). Therefore, why not just close them and cut them up? That’s what some of the financial and money management gurus on the net will say. Depending on your financial situation and goals, for most of us there is a very important reason you don’t want to close out your credit card accounts, especially if your goal is to repair and build your credit score. If you have other goals, like getting out from under an ill-controlled mountain of debt, and curtailing credit card spending, then you will want to talk with a credit and debt counselor first to put in place a comprehensive money management plan, including a budget. For this particular credit blog post with emphasis on credit score repair and building, closing out your credit cards could be a mistake. I am going to direct you to a well written CBS article by Adam Levin of credit.com that does a great job explaining why you don’t want to make this most common credit mistake.

Go here for the CBS News article

Check out this previous article for more information on How FICO Scores Are Determined

It is our sincerest desire that you found this article helpful for your journey to restoring your credit and reducing your debt.

By Blair Warner and the Upgrade My Credit team.

Does my credit score consider information not on my credit report?

March 28, 2013 | Posted by Blair Warner | 2 Comments

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.)

Credit Scores Used By Consumers and Lenders Can Differ

October 1, 2012 | Posted by Blair Warner | No Comments

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:

Score discrepancies may generate consumer harm:

Consumers unlikely to know about score discrepancies:

RECOMMENDATIONS:

Shop around for credit.

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

Cut Utility Costs – Improve Your Credit

August 2, 2012 | Posted by Blair Warner | 2 Comments

Click for a free credit evaluation

I admit, the title was designed to get you to read this posts. However, it’s true; when trying to get out of debt and improve your credit profile, it is often important to look at your finances and expenses and come up with ways to save money so that you can pay down any debt you may need to in order to increase your score and reach your financial goals. One of the biggest expenses we have, besides food and shelter, are utility bills like electricity, water, telephone, etc. Today’s blog looks at some tips for saving money on your electric bill, the biggest portion of your utility bills.

First, Reevaluate your monthly electric bills. Read through your bills and understand what all the charges are for. Start by determining how much electricity you use. Understand what each itemized fee is, and even look at the kilowatt usage. Compare each month and season’s usage, and use the monthly usage from the previous 12 months to determine the approximate value. (Follow the same process for your water bill, telephone bill and internet bill. Some people have an HOA bill as well.)

Consider the amount of energy you use at night. Many people burn a great deal of energy at night, leaving lights on and appliances running while they sleep. Make sure your T.V., computers, and any unused ceiling fans are turned off, as well as unplug gadgets such as cellphone and radio devices, as they can suck energy. (It’s not good for your device batteries anyway, to keep charging after a full charge).

Change your lighting. If you use a particular light more than 30 minutes a day it is economically worth it to replace the bulb with a high-quality LED or compact flourescent bulb to save money.

Pay attention to heating and air-conditioning. The heating and air-conditioning systems probably account for the largest portion of your monthly electric bill. There are several good tips you can follow to save electrical use for these items.

Make sure and change your filters regularly. Don’t use the so-called permanent filters. They can cause your system to not function at full capacity, and put strain on the unit, even requiring a sooner-than-normal replacement.

Is your house properly insulated? A well-insulated home will not leak heat or cool-air.

Use a fan instead of an air-conditioner when you can. It is far less costly. Also, turning your thermostat up a little, to even 77 or 78 degrees and using a fan will do wonders in cutting costs.

Decrease energy use by your refrigerator and freezer. They use a great deal of energy. Of course, you can’t very well turn off the refrigerator. There are a few things you can do. Make sure the door is closed when not in use, and check all the sealing gaskets around the doors to make sure they seal well. Lastly, make sure there is plenty of ventilation by leaving plenty of space between the refrigerator and the wall.

Use the oven and stove in ways that uses less energy. When using the stove, use the right pots for the right burner size. Turn the stove off five minutes before the cooking time ends. Keep the oven door closed as much as possible and try not to preheat it if possible. Finally, turn off the oven 10 minutes before the food is ready.

Use energy-efficient appliances. Technology has come a long way in developing energy-efficient appliances, especially for the most often used ones.

As a last tip, make sure the washing machine and dish washer are as full as possible before each use so as to reduce the number of times they are used. Furthermore, in most cases, it is ok to use cold water which will reduce energy use more than you would think.

As David Horowitz says “Being energy-efficient is not only good for the environment, but is one of the most important ways in which you can cut costs.”

I know this is not your typical blog topic you see on a credit repair and credit counseling website, but I hope you received some great ideas on how to save money.

By Blair Warner

How Are FICO Scores Determined?

March 28, 2012 | Posted by Blair Warner | 2 Comments

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, with the strongest emphasis on recent activity (2 years or less.) Paying all your bills on time is good. Paying them late is not, and particularly on a consistent basis. Few things hurt your score as heavily as past due payments. Having accounts that were sent to collections is even worse. Declaring bankruptcy is the 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, with emphasis on revolving credit. Revolving credit is credit cards, and lines of credit. Installment loans include car loans, personal loans, mortgages, etc.). The ratio of available credit to debt (account balance) is an important ratio. Try to keep the ratio of available credit to credit used, also called utilization ratio, below 30%.

Some underwriters place importance on 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. However, please note, this is less important to FICO’s credit score algorithm.

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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Strategic Partnerships

December 16, 2010 | Posted by Blair Warner | No Comments

The following is an article on strategic partnerships by Donnie Keller of Reata Realty. Strategic partnership, referral partner, affiliate, it is called by many names, but it all boils down to working together toward success that better serves the customer.

Strategic partnerships article link

Happy reading, and if you want to explore partnering with Upgrade My Credit, see our Affiliate Area.

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Financial and Credit Advice After Divorce

December 7, 2010 | Posted by Blair Warner | 2 Comments

Getting through a divorce is one of the most challenging situations in life. It can be both emotionally and mentally draining. Add to that, there are financial issues involved. If you have just been through divorce procedures, what can you do to avoid the threat of bankruptcy?

Find a new home. Some couples may agree to sell their home and find separate properties. If you plan to purchase a new house, make sure that you do not make decisions in a hurry. Do extensive research and consider your repayment capabilities before applying for a loan. It is also wise to get a pre-approval so you can have a more realistic idea as to the price of home you can afford.

Be financially independent. If you have joint bank accounts or credit card extensions, it is best to have these separated. Thus, possible issues or problems on money matters can be avoided.

If you haven’t done so, open your own savings account right away. Be sure to save up for minor emergencies as well. Build your savings account fund which can last you for a least six months or longer just in case you need to take a leave from work or find a new job.

Create a new budget system. Budgeting your money will be different now that you and your spouse are separated. Study your monthly expenses and find practical ways to cut back on your costs. If you have unpaid debts with any creditor, debt repayment should be put on top of your priorities.

Get an insurance policy. Do you have a health insurance plan for you and your kids? Even if it means getting a second job, having an insurance coverage gives you financial protection during times of need.

Get help. Seek advice from an attorney regarding your rights and obligations, particularly with regards to giving financial support to your kids. A trusted credit counselor can also give you better strategies in managing debt and finances.

Upgrade My Credit can help!

Plan ahead.

Blair

Welcome to the New Upgrade My Credit Blog! What do you think?

November 26, 2010 | Posted by Blair Warner | 2 Comments

Welcome to our new site and blog! It can truly be said that this website is a creation in the making. it will probably always be in a state of flux–for the better, of course. However, the basic layout and content is here, ready for all eyes, and your feedback. Yes, your honest feedback is desired, both positive and, well, hopefully not too negative, but “constructive” at least. Your suggestions of how it can be better, what content you would like to see, visual layout, etc. are all welcome, for in actuality, websites are for you, the viewer.

If you don’t want to comment publicly, feel free to send us an email or send it through our support desk on the far left of the screen. And the blogging begins!

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