If you are having a hard time increasing your credit score, there may be some good news on the horizon!

Major credit reporting company Fair Isaac (FICO) has been pressured by Washington to change its credit-risk scoring model to give a break to consumers that have had debt turned over to collection agencies!

While this "change" to the basic credit score scoring model is still in the works, it could be a seen as a great idea to consumers, while at the same time, another dangerous, slippery slope by lenders.

Recently, I've reviewed a few articles recently about the changes may be coming to credit reporting agencies.  One of the best was from Paul Sperry for Investor's Business Daily.  I highly recommend you checking out Mr. Sperry's article.

For years, those unfortunate people who for reasons usually beyond their control, found themselves with too much debt and not able to make payments, saw their accounts charged off by the creditors and turned over to a collection agency.

If you've read any of my blogs in the past, you know what I think about most collection agents and agencies.

While there are a lot of debt collection companies out there that are professional and stay (for the most part) within the Fair Debt Collection Practices Act (FDCPA), as with any group or organization, there are always a few "bad apples".

It seems that the Consumer Financial Protection Bureau (CFPB), created by the Obama administration, has been in talks with the Fair Isaac company to "ease up" on some of the weight they give information about your credit to determine your credit score.

Currently, FICO uses the following guidelines (along with a lot of othe information) to produce a credit score:

 As you can see, your payment history is worth 35%, so if you have had debt issues in the past and have had some or all of your accounts  go to a collection agency, your credit score would suffer.

However, under the proposed new guidelines "suggested" by the Consumer Financial Protection Bureau, FICO would no longer penalize your credit score because of delinquent MEDICAL DEBT or ANY DEBTS THAT GO TO A COLLECTION AGENCY THAT GET'S REPAID!

To me, that is great news!

In dealing with people over the last dozen years or so, I would say that the greatest majority of people who wound up in a severe debt situation, did so due to circumstances beyond their control, with MEDICAL DEBT being one of the largest debt!

It's not unusual to see someone with $10,000, $20,000 or more of medical debts.  When you see the (in my opinion) OUTRAGEOUS MEDICAL FEES charged by some doctors and hospitals, it's no wonder that people get into trouble.

If these people can find some relief to their credit score by making some changes to the way a credit score is calculated, then I'm all for it!

I like what the article said, "Obama regulators argue that it's important to insulate consumer credit scores from medical debt, for one, because such bills are "unexpected".

Another important and much needed action by the CFPB was that they released a report (2012) that basically stated that less than 80% of credit reports were accurate.

Inaccurate information on your credit report can really hurt.  The good news is that you can challenge mistakes and get the credit reporting bureaus to change your report, thereby increasing your credit score and/or credit worthiness.

Click here to get a FREE COPY OF YOUR CREDIT REPORT.

If you find yourself with too much debt, or just overwhelmed by all of this, we may be able to help:

Photo Credit:  lendingmemo.com

Photo credit:  http://www.myfico.com/CreditEducation/WhatsInYourScore.aspx

People are always asking...

"Does Debt Settlement hurt your credit score?"

Although this is a simple question, the answer is not as simple.

According to the Fair Issac Corporation (FICO), there are several factors that go into determining your credit score:

• Payment History....................35%
• Amounts you owe.................30%
• Length of Credit History.......15%
• Types of Credit......................10%
• New Credit..............................10%

As you can see, 65% of your credit scores seems to depend on your Payment History and How Much You Owe.  In reality, there are several other factors that go into determining your credit score. 

                                     For example, FICO says:

Your FICO credit score is calculated based on these five categories. For some groups, the importance of these categories may vary; for example, people who have not been using credit long will be factored differently than those with a longer credit history.

The importance of any one factor in your credit score calculation depends on the overall information in your credit report. For some people, one factor may have a larger impact that it would for someone with a much different credit history. In addition, as the information in your credit report changes, so does the importance of any factor in determining your FICO^® Score.

Therefore, it’s impossible to measure the exact impact of a single factor in how your credit score is calculated without looking at your entire report. Even the levels of importance shown in the FICO Score chart are for the general population, and will be different for different credit profiles.

If you are considering a Debt Settlement Program, let's assume that you have several unsecured debts and are behind or starting to fall behind on your monthly payments due to anyone of several circumstances.

And, if this the case, you can see from the information above that your credit score has already been affected.

Enrolling in a Debt Settlement Program and finally getting your delinquent account balances to ZERO will ultimately IMPROVE your credit score.

If you decide (or have no choice) but to file for BANKRUPTCY PROTECTION, then your creditors receive little to nothing.

But, once a settlement agreement has been negotiated and the agreement has been completed, your credit report will show a $0 BALANCE and state something like "paid-as-agreed" or "paid-as-agreed for less than the balance due".

In either case, once all of your debts have been settled and you have not charged up more credit, your credit score will begin to improve!

The WORST THING YOU CAN DO IS NOTHING! 

Debt Settlement may help you finally get back on the right track and avoid bankruptcy.

If you would like a FREE CONSULTATION with NO OBLIGATION, CLICK HERE.

If you are considering filing for bankruptcy, you may be wondering…

How does filing bankruptcy affect my credit?

That is a great questions, and one that we get asked all the time.  The simple answer is, filing bankruptcy will significantly impact your credit score.  However, the question is not really that simple to answer.  If your credit score is high, a bankruptcy will drastically lower it.  On the other hand, if your credit score is already low due to late payment and large unpaid debts, bankruptcy may have a slight negative effect, but the benefits may outweigh the cost.

What to expect when you file for bankruptcy

1.   Bankruptcy will stay on your credit report for a long time.

If you decide to file, you will likely file a Chapter 7 or Chapter 13 bankruptcy. A Chapter 7, which essentially wipes the slate clean and eliminates all of your debt, will remain on your credit report and potentially affect your credit rating for 10 years; a Chapter 13 will remain for seven years.

2.   Bankruptcy will lower your credit score

Once you file for bankruptcy, you may see your credit rating drop anywhere from 80 to 220 points.  I know that is a big range, but as I explained before, bankruptcy does not affect everyone the same. The higher your score is before the bankruptcy, the more points you will lose.

Another surprising fact is that, your credit score is not only affected by what you do.  When determining your credit score, your information will be compared against others who have filed for bankruptcy.  It’s crazy but true!

If you don’t know what your credit score is, you can check it for free at www.creditkarma.com

3.   You will be stuck with some of your debt

Even if you file a Chapter 7 bankruptcy, some debts are still protected.  Except in extreme circumstances, you will still be required to pay student loans, child support, and tax debt. If you are behind on these payments, your credit rating may drop an additional 70 to 120 points.

4.   You can improve your credit score

Within a year or two, you may be able to get your credit rating above 700. Paying all bills on time will greatly help to improve your score. Another suggestion is to use a secured credit card to build your credit.  Apply for a secured credit card, use it regularly and pay off the balance each month.  This will add positive marks to your credit report to start balancing out the negative. 

The bottom line is, bankruptcy should only be used as a last resort.  If you are overwhelmed with debt, there are programs out there to help you such as Debt Consolidation and Debt Settlement.  Both of these options will help you get out of debt fast and save you money in the long run. 

If you have questions about whether bankruptcy is the right choice for you, give us a call at 1-877-492-4109 or click on the link below for a FREE CONSULTATION with one of our Debt Solutions Specialist. 

As you are working to clean up your debt, it is extremely important to order copies of your credit report and credit score.  You can easily get a copy of your credit report for free and your credit score will cost your around $15. The information found on these reports will directly affect the interest rates you're offered on credit cards, mortgages and other loans, so it is best to know what you are dealing with before you start applying!

Everything you need to know about Your Credit Report and Credit Score

There are three major credit bureaus: Experian, Equifax and TransUnion. Each collects information on your credit history which is turned into a credit report. From that report, a credit score is derived. That score is a quick way for lenders to assess how risky you are as a potential borrower. The higher your score, the less risk you pose to lenders and the more likely it is that you'll get their best available rates.

The score most commonly used by lenders is the FICO score, developed by Fair Isaac.

When lenders review your credit reports and FICO scores, they take into account not only how much you owe but also how much credit you have available to you. Too much of either, and they may not loan you any more money.

When you get your reports, check for inaccuracies. The bureaus are required to investigate and correct any issues once you report them. Look for things that may lower your credit score, including open lines of credit you never use or accounts you thought had been closed long ago.

Each of the bureaus may have different information about your credit history, which means your credit score can vary slightly from bureau to bureau. Therefore, it's important to view reports from all three.

You can get any of the bureaus' credit reports free at www.annualcreditreport.com and your FICO score from MyFICO.com.

Improve Your Credit Score

When many people think of credit reports and credit scores, they see them as important if you want to apply for a loan. And of course they are important when you apply for a loan. But your credit report and score are also absolutely critical to getting rid of debt. With a good credit score, you qualify for lower interest rates that can help bring down your total interest charges. With bad credit, you’re stuck paying double digit rates. So let’s look at some tips and tools that can help you:

1. Understand the Importance of Your Credit Score: As noted above, your credit score is an important tool in getting out of debt as quickly as possible. To underscore this, check out these stats from myfico.com for individuals with a FICO score of 660 (fair credit) versus 760 (excellent credit):

   • Mortgage: The average interest on a home loan today is about 4.766% for excellent credit, but 5.379% for fair credit.

   • Car Loan: With a credit score of 760, you can expect a car loan interest rate of about 6.3%. With a score of 660, the rate increases to about 9.8%.

   • Home Equity: Excellent credit can expect a rate of around 8% or lower, while fair credit borrowers will pay as much as 11% or higher.

2. Get your Free Credit Report: The starting point is to get your free credit report and check it for errors.
3. Get your Free Credit Score: Next you should get your free FICO score. You can’t get this from annualcreditreport.com, but there are several sources that offer your real FICO score in exchange for signing up for a free trial of a credit watch program. You can always cancel before the end of the free trial if you don’t want to keep the service.
4. Pay Your Bills on Time: There are a number of factors that go into a credit score, but one of the most important is paying your bills on time. Do whatever is necessary not to forget a payment, and make sure you make the payment far enough in advance of the due date so that there is no chance it will be late.
5. Don’t Close Accounts: As a general rule, don’t close credit card and other revolving accounts. One of the factors in determining credit score is the amount of debt you have in comparison to the amount of available credit. The greater the available credit, the better. You can always cut up some of your cards if you don’t want to risk using them, but don’t cancel them. Here are some other tips to improving your credit score.

phot by: Horia Varlan

The most important thing you can do to IMPROVE YOUR CREDIT SCORE is to eliminate debt!

One of our customers resently sent us an email stating:

"My credit score according to my credit tracker just JUMPED to 693! That's the highest it has been in fifteen years."

This client had just completed the DEBT SETTLEMENT program, and his credit report showed all of his accounts had ZERO BALANCE! 

According to the FICO, there are several factors that determine your credit score:

PAYMENT HISTORY

This makes up 35% of your score and is determined by:

• Past due accounts
• Bankruptcies
• Judgments
• Wage garnishments
• Paid as agreed accounts

AMOUNTS YOU OWE

This will account for at least 30% of your credit score and includes:

• The total amount you owe on all of your accounts

• The number of accounts you have opened with outstanding balances.  (Too many accounts hurts your score, so be careful when offered the next STORE CARD!)

LENGTH OF CREDIT HISTORY

• If you have established a decent credit score for several years, you will be rated higher than someone with little or no credit history. 

• If you have not established credit (credit card, auto loan, home loan), then you should consider opening a couple of accounts.

BE CAREFUL!  Many people get caught up in the nightmare of too many credit cards and not enough money to keep up.  The best way to start establishing your credit history is to open ONE CARD, use it wisely, and pay it off each month!

Your are  proving that you have the ability and discipline to manage your credit and will be rewarded with a higher score in the future.

NEW CREDIT

This goes with the previous category, but is a little different and makes up 10% of your credit score.

If you open too many accounts in a short period of time, this is seen as a negative on your report, so take it easy! Also, if there are several inquiries about your credit score in a short amount of tim, this will hurt your credit score.

On the other hand, if a creditor inquires about your credit in order to offer you a "pre-approved" card, this will not hurt your credit.

Too learn more about how inquiries affects your score, click here.

TYPES OF CREDIT USED

This accounts for 10% of your score.

• Having too many store cards and "easier-to-get" credit cards will hurt your score.

• If you have a home mortgage and have a good payment history, this will be a positive for your credit score.

The best way to improve your credit score is to eliminate debt!

If you would like to find out what options are available to you, we can help!

1-877-492-4109

It is important to know what is not a factor in a credit score as well as what is included!

We get asked this all the time and it is important that you understand not only what is in your credit score, but also what is not.

According to FICO, they consider several different factors when to determine your credit score.  But, they do not consider:

Race, color, religion, national origin, sex or marital status.

This would also not include whether or not you receive public assistance or if you exercise your rights under the Consumer Credit Privacy Act.

Your occupation, title, employer or salary as well as the date you were employed or employment history.

But, although this may not be a factor in determining your credit score, lenders may consider this information.

Your age.

Even though some types of scores may consider your age, FICO scores do not.

Where you live.

Any items reported as child/family support obligations or rental agreements.

Certain types of inquiries or requests for your credit report.

There is a misunderstanding that if you make a personal request for your credit report that it will have a negative impact on your score.  NOT TRUE!

Your score does not count "promotional inquiries"or requests made by lenders in order to make you a "pre-approved" credit offer.

If a current lender makes an "administrative inquiry" - requests made by lenders to review your account with them, this is not a factor of your credit score.

Nor are inquiries from your employer.

For a more complete explanation about the effects of inquiries about your credit report, click here.

If you have enrolled in a credit counseling or debt management program of any kind. 

That's good news if you are enrolled in a DEBT MANAGEMENT PROGRAM OR If you are considering a DEBT MANAGEMENT PROGRAM.

We get asked that question all the time, and for good reason!

To answer "What is included in my credit score?", let's look at what FICO says.  

Fair Isaac Corporation (FICO) calculates credit scores for the major credit reporting agencies like TransUnion, Experian and Equifax.

So how do they determine your score?

Basically, FICO uses 5 different categories by various weighted percentages:

PAYMENT HISTORY:   35%

Major categories:

• Past due accounts
• Bankruptcies
• Judgments
• Wage attachments
• Paid as agreed accounts

AMOUNTS OWED:   30%

• Amounts owing on all and specific types of accounts
• Number of accounts with balances
• Proportion of credit lines and installment loan amount used

LENGTH OF CREDIT HISTORY:  15% 

• Time since accounts opened
• Time since account activity

NEW CREDIT:   10%

• Number of recently opened accounts, and proportion of accounts that are recently opened, by type of account
• Number of recent inquiries
• Re-establishment of positive credit history following past payment problems

TYPES OF CREDIT USED:   10%

• FICO weighs different types of accounts and it is not very clear which type has more weight.
• Large accounts such as your home mortgage are not as adverse as say too many small credit cards with very high interest rates.

FICOtakes into consideration all of these categories, not just one or two.  In other words, no one piece of information or factor alone will determine your score.

A lender will look at other things when making a decision:

• including your income
• how long you have worked at your present job
• the kind of credit you are requesting.

Finally, your score considers both positive and negative information in your credit report.

For example, late payments will lower your score, but re-establishing a good track record of timely payments will raise your FICO credit score!

If you feel overwhelmed with too much credit or would like to know how to improve your credit score, please request our FREE, FINANCIAL ANALYSIS.

We will help you determine the best course of action with no obligation!

Call 877-492-4109 TODAY

photo by: SMJP

I need to know about Do It Yourself Credit Repair.

I've been told that there are credit repair companies that can remove all of the bad things from my credit report and raise my scores dramatically...FOR A LARGE FEE!

No company has the ability to remove negative items on you credit report without proof that they are in fact mistakes.

A credit score in the US is a number representing the creditworthiness of a person or the likelihood that this person will pay their debts.

Lenders, like banks and credit card companies, use credit scores to determine if in fact a person should be given a loan and based on the score, what interest rate they will charge.

The most widely used credit score model in the US is FICO or Fair Isaac. 

In 2006, the three major credit reporting agencies, Equifax, Experian and TransUnion, introduced VantageScore. 

Regardless of which reporting agency is being used, they all use a somewhat similar formula to determine a CREDIT SCORE. 

This score is based on:

• Payment History (highest weighted percentage)
• Credit Utilization (debt-to-credit ratios as well as how much debt is available) This is the 2nd highest weighted percentage.
• Current and and Delinquent Balances The total amount you owe relative to your employment/income history plus bad debt will impact your score.
• Length of Credit History If you have little or no credit history, it could be a negative to your score until you establish a credit history.
• Types of credit used (installment, revolving, consumer finance, mortgage) A variety of types of debt and a good history of management helps.
• Recent searches for credit.  Credit inquiries that were made yourself (say, to check your credit score), by your employer (to check prior employment history), or by companies initiating prescreened offers of credit or insurance do not have any impact on your credit score.

 OK, so what do you do if you see mistakes on your credit report?

You can contest and correct legitimate errors on your credit report by contacting each reporting agency.

You will need one or more of the following:

• A statement from the company showing that you indeed paid off this account
• Letter from the company if you negotiated a settlement
• Canceled check showing payment was received and processed

 You can contact each yourself:

FICO  (877) 434-7877 or www.support@fico.com

Equifax  (800) 238-8067 or 

https://www.ai.equifax.com/CreditInvestigation/jsp/ECC_Dispute_Login.jsp

Experian (714) 830-7000 or  

https://www.experian.com/consumer/cac/InvalidateSession.do?code=DISPUTE

TransUnion  (800) 916-8800 or 

http://annualcreditreport.transunion.com/entry/disputeonline

The process may take time, so be patient and persistant.

But, if you just don't have the time, you may consider seeking professional help...AT A PRICE!