Month: May 2017

7 Ways You May Not Know Bad Credit Can Affect You

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It used to be that a low credit score made it more difficult to buy a home or secure a major loan. And while that can certainly be a problem, for many people not yet ready — or not interested in — home or other property ownership, their credit score was often an afterthought.

Today, things are much different and your credit report and credit score have more far-reaching implications that can impact many things, from your ability to get a job or an apartment, to your ability to find a date (yes, really). Considering the impact it can have on your life, credit can be a source of extreme anxiety.

Here are some of the things that can be affected by your credit score.

Ability to rent or lease a place to live

In the past several years, credit checks have become a routine part of the home rental process. In fact, a 2014 study conducted by TransUnion found that 43 percent of landlords perform credit screening as part of the leasing process, and 48 percent surveyed said that results of a credit check are among the top three factors considered in accepting a lease application. When looking at credit reports, landlords may view an unstable financial past or payment history as a good indication of future behavior. If you do secure a lease, you will likely be subject to higher upfront deposits. For example, while some landlords require first and last months’ rent upfront, you may be required to pay an additional month or two upfront if your credit is poor.

What you pay for utility deposits

Coupled with with the previous point, this can be a double whammy if you’re moving into a new place. Utility companies — electricity, water, cable, phone, and Internet — also check credit as a routine part of the application process. Utility payment history isn’t part of your credit report, so even if you’ve paid your utilities on time in the past, that won’t work in your favor. If you have poor credit, you’ll typically be required to pay a security deposit on these services in order to be granted service in your name. That deposit is required upfront before services will be activated.

Higher insurance premiums

This applies to both car insurance, and property insurance for those who do own homes or other property. While illegal in some states, a number of car insurance providers correlate making late payments with reckless driving behavior and will therefore raise rates or deny auto coverage altogether to consumers with poor credit scores. A study by InsuranceQuotes found that premiums double for drivers with poor credit.

When it comes to home insurance, some providers also place punitive rate hikes on customers because they perceive a connection between low credit scores and high insurance claims. Just as with car insurance, you could see your property insurance rates as much as double unless you live in a state where this practice is illegal, such as Hawaii or Maryland.

Limited job prospects

We’d all like to believe our personal life or circumstances should not impact our professional life, but that’s not the case when it comes to job hunting. As with applying for a lease, it’s now standard practice for employers to conduct a full background screening, including checking a credit report. While a dozen states have enacted laws prohibiting the use of credit reports as a factor in hiring, nearly half of all employers — 47 percent — have reportedly used credit reports when vetting potential job prospects.

Inability to access funds in an emergency

Let’s face it. Even though we know it’s good practice to keep an emergency fund, we all have situations for which we’re financially unprepared and which catch us off guard. These include everything from an unexpected major car or home repair, to a pet’s illness, to our own surprise medical bill. Unfortunately, even smaller loans to get out of a pinch can be unattainable when your credit score is low.

Higher interest rates

Even if you are granted credit, you can expect significantly higher interest rates on credit card and all types of loans with a low credit score. If you do happen to be a homeowner, this can complicate even a simple refinance and prevent your from being able to access equity in your home.

Strain on relationships

On a more personal level, poor credit can also impact the personal relationships in your life. Many people who are denied credit have no other option but to turn to family or friends for financial assistance. If loans aren’t repaid in a timely manner — or worse, aren’t repaid at all — it can strain and even permanently damage relationships.

And if you’re thinking of looking for love online, it seems that dating sites are even now credit conscious when it comes to finding your perfect match.

If a low credit score is negatively impacting your life, a reliable legal expert that specializes in credit repair can help. If you’d like more information from trusted legal experts in credit repair, contact Lexington Law today. We’ll help you understand your rights, and leverage them to ensure that you have a fair, accurate, and substantiated credit report.

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3 Unorthodox Ways to Improve Your Credit Score

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With the increase in the number of companies and websites offering free credit scores, more consumers are becoming aware of their scores than ever before. Despite the buzz, however, those who focus solely on their scores are being shortsighted.

In actuality, your credit reports are the real foundation of your personal credit. Each consumer active in the credit world has a report with each of the three major consumer credit bureaus, TransUnion, Equifax, and Experian. It is the information in these credit reports on which your credit score is based.

Because of this, improving your credit score is really a matter of improving your overall credit health. For instance, credit repair can remove errors and disputable accounts from your credit report, especially when you use one of the top-rated credit repair companies like Lexington Law.

Of course, the best approach for increasing your credit score is to use a variety of techniques designed to improve each aspect of your report used in your credit score calculation. This includes your payment history, your total debt, the length of your credit history, and your current credit mix.

  1. Set Up Automatic Payments

Regardless of which credit model is used, one of the most important considerations in your creditworthiness is your payment history. In particular, the FICO scoring model counts your payment history as 35% of your FICO credit score.

Under most scoring models, the types of accounts that contribute to your payment history include credit cards, retail accounts (store cards), installment loans, mortgages, and finance accounts. Keeping all of these accounts in good standing is the key to securing a solid payment history.

This means avoiding certain negatives, such as bankruptcies, foreclosures, and certain types of lawsuits, as well as ensuring you don’t default on any of your accounts. It also means building a history of paying on time, perhaps through responsible use of one or two easy-to-get credit cards — keyword, responsible.

For many, the hardest payment history negatives to avoid are delinquencies, which are late or missed payments. Future delinquencies can be easily prevented, however, if you set up automatic payments on your credit accounts. By setting your accounts to automatically pay your balance each month, you never have to worry about forgetting a due date again.

Because late and missed payments lose impact on your score over time (and drop off completely in seven years), the longer you go without a delinquency, the more you’ll see your credit score improve.

  1. Ask for a Raise

The second most important aspect of your credit score, 30% under the FICO scoring model, is your total amount owed. This segment looks at your total debt by summing the balances of all of your credit accounts. While lower is better, your total debt itself isn’t the only factor considered in this segment.

Also, part of your amount owed is your utilization ratio, which is the total amount you owe divided by the total amount of credit you have available. For example, if you have a total credit limit of $10,000 between two credit cards and a loan, and you owe a total of $6,000, your utilization ratio is 60%.

The most effective way to improve how you rank on your amount owed is to decrease your total debt. Unfortunately, this can be difficult when already dealing with a tight budget. When it comes to determining how much of your budget to dedicate to paying down debt, sometimes the answer isn’t to trim your expenses, but, simply, to increase your income.

One straightforward method of scoring an income boost is to obtain a pay raise in your current position. Even a modest raise of $0.50 an hour can equal over $1,000 a year that can be used to decrease your current debt.

If a raise isn’t a possibility, try taking on overtime hours; most hourly positions offer time-and-a-half for overtime worked. You may also want to consider an additional part-time job to really jumpstart your earning potential.

  1. Become an Authorized User

Although how much debt you have and how good you are at paying it back will make up more than half of your credit score calculation, an assortment of other factors will also have an impact. These include the length of your credit history, the types of credit you have, and how many new credit accounts you’ve opened.

The length of your credit history counts for 15% of your FICO calculation and is taken into account in two ways. First, creditors will look at the age of your oldest credit account. Second, they’ll look at the average age of all of your accounts. In both situations, older is better.

Furthermore, another 10% of your credit score is dedicated to the number of recent inquiries and new accounts you have. Any hard credit pulls within the last 12 months can be taken into consideration here. In practice, this means that, while it’s all well and good to apply for one or more post credit repair credit cards, new cards will impact both your average account age and recent credit inquiries.

For the most part, time is the primary way you can improve the length of your credit history. That said, you can help your average age by becoming an authorized user on someone else’s established credit card account (providing it is older than your oldest account).

In fact, in addition to increasing your average age of accounts, becoming an authorized user for a credit account in good standing can also help improve your credit utilization rate by increasing your available credit.

The trick here is that being an authorized user on an account only helps your credit if the primary account holder maintains healthy financial habits. If the account on which you are an authorized user has a high utilization rate, it will negatively impact your credit scores, too.

   Battle Bad Credit on All Fronts

Discovering your credit isn’t in the shape you thought it was can be a blow, but it doesn’t have to be the end of the world. You can improve your credit by using a variety of techniques to improve each important credit factor.

A good first step in repairing tarnished credit is to shine it up with credit repair, done by an experienced credit repair company. After that, really make it gleam by addressing each aspect of your credit, from the ones with big impact — your payment history and utilization rate — to the factors with smaller impact, including the length of your credit history and average age of accounts.

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Do I Need a Lawyer to Help Fix My Credit?

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It’s not uncommon for financial difficulty to lead to a less-than-ideal credit report. The good news is: you don’t have to live the rest of your life with negative events on your report. You can rectify those negative events over time by making payments regularly and handling your debt responsibly.

On the other hand, some of us don’t have the luxury to wait seven to 10 years as we build a strong credit history and past negative events fall off our reports. If you need a home mortgage or car loan in the near to medium-term future, or simply can’t afford the high interest rates you’re paying due to your poor credit history, it might be time to think more proactively about credit repair.

Some credit issues can be handled on a do-it-yourself basis. For more complex issues, it helps to call in the experts. In some cases, you might benefit from working with a lawyer for credit repair services. Let’s take a closer look at which option is right for you.

Do-it-Yourself Credit Repair 

You can file a dispute with the three major credit bureaus (Equifax, Experian, Transunion) if you check your credit report and see an incorrect or incomplete item. Errors to look out for include incorrect identification information like your name or address, or account related mistakes like late payments more than seven years old or a collections account that’s still listed as outstanding after you’ve paid it off. Filing a dispute is free and in straightforward cases disputes are addressed within 30 days.

If your reports are free of disputes and you have the luxury of time to work on your credit, you may not need additional credit help. You can improve your credit on your own by taking conscious steps, including:

  • Paying all bills on time
  • Paying down credit card debt
  • Avoiding applying for new credit

When to Call in the Professionals 

Even a single late payment can have significant impact on your credit report and prevent you from getting the best interest rates. In severe circumstances, a negative credit report could result in astronomical interest rates (think 18 percent) or even prevent you from receiving approval for a loan at all.

If you urgently require credit repair services, working with professionals can help you quickly repair your credit. Working with law firms and lawyers is one effective way to do that. Lawyers can help you with even the most complex and difficult credit issues, including bankruptcies, foreclosures, and tax liens.

When you work with a law firm to repair your credit, the attorneys and paralegals assigned to your case review your credit reports and direct appropriate correspondence to your creditors and the credit bureaus. Your credit report items are carefully prioritized and matched with the right credit repair strategies to help your specific case.

Lawyers understand the consumer protection laws applicable to your case, and can help leverage those legal rights so that your credit reports remain fair and accurate.

Working with lawyers to repair your credit costs more than the DIY path, but certainly saves you money over time. Improving your credit and reducing interest rates from 18 to 5 or 6 percent can save you tens of thousands of dollars over time.

Learn more about credit repair services here.

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10 Habits of Financially Secure People

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Income isn’t a direct factor in credit scoring. That said, financial management plays a vital role in your ability to pay bills, reduce long-term debt, save, and avoid credit damage. If you crave the taste of financial freedom, adopt these habits followed by the financially secure.

  1. Save As Much As Possible:

    It’s not flashy or even fun, but saving as much as possible can help you create financial safeguards now and in the future. Begin with:

    • Income: Saving for emergencies and for long-term retirement is crucial. Talk to your financial planner about how to split your savings into liquid and growth accounts, and consider using direct deposit. This strategy allows you to automate the saving process in order to achieve your annual goals.
    • Necessities: The financially savvy aren’t blessed with luck: they simply know how to use their resources. From negotiating lower service prices to using coupons for every purchase, there are several ways to save on your monthly bills. Don’t miss an opportunity to preserve your income.
    • Interest Rates: Borrowing money is usually unavoidable when it comes to buying a home or car, but it’s a good idea to think twice about paying interest on affordable items. For example, rather than charging a $1,500 sofa on your credit card, why not save and pay cash rather than accruing unnecessary interest?
  2. Change Your Credit Perspective:

    You view credit as a tool rather than a bottomless bank account. You don’t carry revolving balances from month to month and you pay attention to your budget. You understand that a high credit score can open financial doors and provide savings where none existed before. You’re no stranger to ordering free annual copies of your credit reports and reviewing your credit scores to spot room for improvement.

  3. Pay Off Your Credit Balances:

    As a tool, you understand that credit use should never become a burden. You are committed to assigning expenses to each credit card and paying off your balances every month to establish positive habits.

  1. Be Proactive…About Everything:

    When it comes to life, nothing gets past you. You visit the doctor for annual check-ups. You never miss a car tune-up. When your bills arrive, you pay them immediately. Put simply, you are proactive about everything. While this may sound exhausting to some, it also eliminates your chances of losing money to unexpected circumstances.

  2. Live Below Your Means:

    Affordability is relative, and it’s wise to keep an eye on your long-term goals rather than using all your extra cash on unnecessary expenses. Sure, you can afford a 3,000 square-foot home, but 2,500 square feet will suit your family just fine. You’d rather give your budget a little wiggle room to avoid financial risk and potential credit damage.

  3. Don’t Be Enticed by Labels:

    Keeping up with the Joneses is an expensive pursuit, and it’s easy to drown in debt in the process. Financially secure people understand that living large comes at a greater cost. You temper expensive taste by mixing affordable things with a few prized items to create balance in your life.

  4. Prioritize Health:

    Less than 3% of American adults live a healthy lifestyle according to a 2016 Mayo Clinic study. Diet, obesity, alcohol abuse and smoking all contribute to poor—and costly—health conditions. While you may not be a star athlete, you take care of yourself and seek preventative and active treatments for your ailments. You also keep tabs on short and long-term disability benefits provided through your employer.

  5. Focus on a Pay Raise:

    A steady and lucrative job is important, and you pursue career mobility as another way of maintaining financial strength. An annual raise can help you keep up with inflation and upgrade your lifestyle without threatening your budget.

  6. …But Don’t Fear a Pay Cut:

    You won’t fear financial collapse if you are laid off or suddenly forced to work for less income. In fact, you’ve saved six months’ worth of liquid income to prepare for life’s financial surprises. This safety net allows you to find a new job without worrying about overdue balances and feeding your family.

  7. Take Control:

    The value of control can be felt when you plan expenses, learn to invest and generally feel comfortable in your lifestyle. While you may not live a life of opulence, you understand that living well is the ultimate goal.

If you’re looking to improve your credit situation, learn about our services here. You can also carry on the conversation on our social media platforms. Like and follow us on Facebook and leave us a tweet on Twitter.

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Don’t Let Student Loans Ruin Your Credit

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By the fourth quarter of 2016, Americans held $1.3 trillion in student loan debt. The delinquency or default rate for the same period was 11.2 percent, worth nearly $147 billion. These statistics indicate the growing influence of student debt in American life.

Despite helping borrowers earn their degrees, student loan debt stifles the American dream after graduation for many individuals. Making loan payments means less money to put toward buying a home, starting a family, or simply paying rent. For those Americans who become delinquent on payments — or worse, default on their loan — the damage is even greater because their credit score suffers.

Losing control of your student debt and failing to regularly make payments can put you behind the eight ball for future plans and restrict your financial freedom. But all is not lost if you’re struggling to meet your student loan obligations.

How Student Loan Debt Impacts Your Credit 

Like a mortgage, auto loan, or credit card debt, student loans can both help and hurt your credit score. Making required payments in full and on time boosts your credit score and shows future lenders that you’re a reliable borrower. However, failing to make your payments on time will result in a falling credit score and could lead to future borrowing problems.

Missing payments or defaulting on your student debt can have a domino effect on your finances. In addition to making it more difficult to secure additional credit or loans in the future, a lower credit score can negatively affect your ability to obtain insurance, sign up for utilities, and get a cell phone plan. Additionally, some employers may not hire applicants who have previous debt problems and federal employees may be denied a security clearance.

What Happens if You Can’t Make Payments on Your Student Loan?

A 90-day late payment is considered delinquent and is reported to the three major credit bureaus. A federal student loan goes into default if you don’t make a payment for 270 days.

If you find yourself struggling to make payments, default should be the last resort. Depending on whether you hold federal or private debt, your best option is deferment or a modified payment plan, which can adjust your monthly payments based on your income. A deferment allows you to temporarily stop making payments and won’t impact your credit score.

Alternatively, some programs facilitate student loan forgiveness for borrowers who follow certain career paths, including entering public service or becoming a teacher.

What Should You Do if You Default on Your Student Loan?

Becoming delinquent or defaulting on your student loan is a serious event, but there are resources you can use to help repair your credit and limit the event’s impact on your future plans. Reputable credit repair services can help you leverage your legal rights under consumer protection laws so that your credit report remains fair and accurate.

Effective credit repair requires taking appropriate action with your creditors rather than simply creating ineffective disputes.

If you’ve found yourself in credit trouble due to student loans, the credit repair professionals at Lexington Law® can help. If you’re concerned about your credit report and the effects of your student loan payment history, contact us to learn more.

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