Category: Credit

How Disputing Information on Your Credit Report Affects Your Credit

credit dispute

Every once in a while you might see something on your credit report that you don’t recognize. For those who are actively working towards credit repair, it can be especially stressful to have this happen. While it’s alarming and possibly leaves you feeling a little violated, there are steps you can take to dispute it.

Then, of course, you may also want to dispute information on your credit report that is just plain erroneous or incorrect. Here are some examples of things you can dispute on your credit report:

  • Incorrect personal information: names, addresses, dates, and more can be reported incorrectly to credit bureaus. Wrong spellings of names should also be corrected.
  • Unfamiliar accounts: bank accounts, credit cards, loans, and others may also be incorrectly reported and may show up on your credit report. When this happens, you should take immediate action.
  • Incorrectly reported accounts. Sometimes things can be reported as open when they have been closed, or vice versa. These types of mistakes can be disputed.

How to dispute incorrect credit items

This will depend mostly on the credit bureau, of which there are three major ones: Experian, Equifax, and Transunion. They usually share information, so if you dispute with one bureau you may see changes to your report from another. You should work directly with each one if you see something on your credit report that isn’t accurate. You can also learn more about the disputing process on their individual websites.

The cost of disputing items

Filing a dispute will not change your credit score. The results of a dispute, however, can change your credit report, depending on the nature of the dispute. If you report incorrect spellings of names or addresses, this usually has no impact on your credit.

If you dispute something that changes for the better, it may stay on your credit report indefinitely. If you dispute something and it changes to a negative item, it could stay on your credit report for up to seven years. After that period of time, however, it should fall off of your report. For the most part, people tend to only report things that impact their credit negatively, so there’s a good chance that you may experience a slight increase in your credit score following a successful dispute.

If you disagree with the outcome of your dispute, you can take further action:

  1. Find out who reported the information and contact them. You may still be able to change the outcome.
  2. Add a statement of dispute. While this will not change the outcome of your original dispute, it can help you down the road when potential lenders or creditors review your credit history.
  3. Dispute again with relevant information. If you discover new information related to the disputed item, you have the option to dispute again with more supporting documentation.

If you need more assistance with your credit repair or credit dispute, contact Lexington Law at www.lexingtonlaw.com.

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Is it Harder to Build Credit Today Than it was 50 Years Ago?

rebuilding credit

In the year 1967, the median price for a brand new home was $22,000. Today, it’s almost ten times higher, at $203,400. The median price of cars has also jumped from under $3,000 to over $30,000. The median income, however, hasn’t risen quite as much. In 1967, it was $7,200. Today, it’s $59,000. It’s no wonder that it has become almost impossible to invest in homes, cars, or even education without a loan.

Prices aren’t the only things that have changed since 50 years ago. The very concept of the word “credit” has taken on an entirely new meaning. It used to refer to how reliable a person you were when it came to keeping your word. Now it refers mostly to numbers on a screen.

In 1967, if you needed a loan, there were no official credit inquiries. In fact, in 1967, the concept of a credit card wasn’t even 20 years old. (The first credit card company, Diner’s Club, was created in 1950.) So here’s the question: is it harder to build credit today than it was 50 years ago?

Here are some way in which credit has changed, how it has gotten easier to use, and how to make it work in your favor.

Applying for a Loan

The way people apply for loans, and how they qualify for them has changed since the Sixties. When you apply for a loan today, the process is usually the same no matter which type: you provide a certain amount of information, and the financial institution through which you’re applying pretty much does the rest (though they will often ask for more information at some point during the vetting process). You’re often required to provide proof of income, and then begins the process of someone combing through the last seven years of your credit history.

Back in 1967, it was more common to offer up an asset as collateral than it is today. A person needing a new refrigerator might have had to put their car up for collateral, which can still be an option, depending on the financial institution you’re trying to borrow from. Today, the chances are lower of having to offer collateral, since borrowers today can show better, more concrete evidence of good financial standing and history. Loans are also processed much faster than they were 50 years ago. In some cases, loan applicants can find out immediately if they qualify for a loan, and for how much.

Collateral still comes into play, however, in the forms of mortgages and car loans. The agreement with these types of loans is that, in the event of insolvency, the borrower must then forfeit his or her claim to the property they purchased with the loan. Homes go into foreclosure and vehicles are repossessed. Keep your accounts in good standing, and you’ll get to keep your property.

Credit Scores

Credit scores didn’t come into existence until the 1970s. When banks checked a person’s “credit” in 1967, it usually took a few phone calls to utility companies or other types of service providers. Your “credit” was based solely on your reputation. If your financial reputation was good, chances were, you would be approved for the loan you wished to take out. However, on the flip side of this, there was a chance that anyone with a personal vendetta against you, for any reason, could lie and say no, you didn’t pay your water bill on time very often. Although this was the exception, instead of the rule, the current system is actually favorable for consumers in many ways.

While this scenario was probably rare, it’s one reason that a standardized credit reporting system works in your favor today. If you’ve worked hard to raise your credit score, and you’ve paid down a significant amount of debt (or never accrued much to begin with), then no one can dispute your credit-worthiness, or try to take it away from you. Just make sure to keep your credit protected by monitoring your credit to ensure your identity hasn’t been stolen.

Credit History

Applying for a loan in 1967 was much different than it is today. Without a database of a loan applicant’s credit history, or even a computer, banks and other types of creditors were forced to do a lot of leg work to find out about a person’s ability or willingness to take out loans. This meant having the applicant list all current debts owed and then calling each place to find out about the applicant’s payment history.

Today, all a potential lender has to do is type your information into a database, and they can find out all they need to about your payment history. Ever defaulted on a loan? It’s in there now. Fifty years ago, an applicant might have succeeded without revealing that information. Now, that just isn’t possible, which works in the favor of lenders.

However, it can also help you as long as your credit looks good on paper. For those who have put a lot of effort into making sure they remain in good financial standing, this is a positive change.

The concept of credit has moved further away from being reputation-based. Today, the results of a credit check are about as accurate as they have ever been. However, identities are more vulnerable to theft, and those with less-than-perfect credit find themselves having a harder time being approved for various types of loans. Credit repair companies can often help with this, and can help you get back on track financially.

It’s much faster and more efficient for banks to check on credit today, but it’s more difficult to hide past credit infractions, no matter how minor. The easy solution is to keep your credit in good standing. However, if you’re having trouble with credit repairs, Lexington Law can help.

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How Does a Loan Default Affect My Credit?

loan default

Nobody takes out a loan expecting to default on it. Despite their best intentions, people sometimes find themselves struggling to pay off their loans. These types of struggles happen for many reasons, including job loss, significant debt, or a medical or personal crisis.

Making late payments or having a loan fall into default can add pressure to other personal struggles. Before finding yourself in a desperate situation, understanding how a loan default can impact your credit is necessary to avoid negative consequences.

30 days late

Missing one payment can further lower your credit score. If you can pay the past due amount plus applicable late fees, you may be able to mitigate the damage to your credit, if you make all other payments as expected.

The trouble starts when you (1) miss a payment, (2) do not pay it at all, and (3) continue to miss subsequent payments. If those actions happen, the loan falls into default.

More than 30 days late

Payments that are more than 30 days past due can trigger increasingly serious consequences:

  • The loan default may appear on your credit reports. It will likely lower your credit score, which most creditors and lenders use to review credit applications.
  • You may receive phone calls and letters from creditors demanding payment.
  • If you still do not pay, the account could be sent to collections. The debt collector seeks payment from you, sometimes using aggressive measures.

Then, the collection account can remain on your credit report for up to seven years. This action can damage your creditworthiness for future loan or credit card applications. Also, it may be a deciding factor when obtaining basic necessities, such as utilities or a mobile phone.

Other ways a default can hurt you

Hurting your credit score is reason enough to avoid a loan default. Some of the other actions creditors can take to collect payment or claim collateral are also quite serious:

  • If you default on a car loan, the creditor can repossess your car.
  • If you default on a mortgage, you could be forced to foreclose on your home.
  • In some cases, you could be sued for payment and have a court judgment entered against you.
  • You could face bankruptcy.

Any of these additional consequences can plague your credit score for years and hinder your efforts to secure your financial future.

How to avoid a loan default

Your options to avoid a loan default depend upon the type of loan you have and the nature of your personal circumstances. For example:

  • For student loans, research deferment or forbearance options. Both options permit you to temporarily stop making payments or pay a lesser amount per month.
  • For a mortgage, ask the lender if a loan modification is available. Changing the loan from an adjustable rate to a fixed rate, or extend the life of the loan so your monthly payments are smaller.

Generally, you can avoid a loan default by exercising common sense: buy only what you need and can afford, keep a steady job that earns enough income to cover your expenses, and keep the rest of your debts low.

Clean up your credit

The hard reality is that defaulting on a loan is unpleasant. It can negatively affect your credit profile for years. Through patience and perseverance, you can repair the damage to your credit and improve your standing over time.

Consulting with a credit repair law firm can help you address these issues and get your credit back on track. At Lexington Law, we offer a free credit report summary and consultation. Call us today at 1-855-255-0139.

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5 Credit Card Trends to Look for in 2018

credit card trends in 2018

Heading into 2018, we’ve seen total revolving consumer credit in the United States reach an all-time high, and there’s no reason to believe that trend will slow down in the new year. In fact, conditions are ripe for American consumers to continue expanding their purchasing power as the economy remains robust and confidence is high.

At the same time, interest rates are on the rise, security remains a serious concern for individuals and businesses alike, and the level of competition for the consumer’s attention is as fierce as ever.

With these conditions in mind, what trends can American consumers expect to see heading into the new year when it comes to credit cards?

Revolving credit more available than ever before

Because of the high demand for credit, combined with the healthy economy and high level of optimism going forward, issuers are more willing to approve credit card applications than they’ve been in decades.

This will lead to a large number of cards being issued, but also to increased competition among lenders to make their cards stand out in some way so they can attract and keep customers without overreaching and falling victim to excessive risk.

Higher interest rates make this an issuer’s market

The federal interest rates have been incredibly slow to react to the burgeoning economy in the last several years, but recent rate hikes have served to make up some of that ground, and set a precedent for future adjustments as well. This puts card issuers and consumers in an interesting position.

Normally, as interest rates rise, consumers tend to scale back on their spending and seek out less overall credit. That’s not going to happen at this point, though, because all other economic signs are pointing to continued rapid growth throughout the economy, and consumer spending is riding that wave.

So, it actually means 2018 will be a potentially great year for credit card issuers who will be able to secure larger members and balances — at a higher interest rate (which means a higher profit margin) — than before. To compete successfully under these conditions, though, card issuers will need to pay close attention to what consumers want and accommodate them.

Branded cards on the rise

One example of this accommodation involves co-branded credit cards, such as the relatively new Starbucks and Amazon Prime Visa cards. Issuers and retailers are working together to attract loyal customers with an established relationship and “sweeten the deal” by offering special perks, discounts, or exclusive offers if those customers open a co-branded credit card account.

This is not a new trend by any means, but we’ll see it expand in many creative ways throughout 2018.

Card rewards and loyalty programs keep evolving

Hand-in-hand with co-branded cards and retailer-specific loyalty programs, credit card issuers will continue to evolve their rewards and loyalty programs to give increasingly picky consumers what they want from their credit cards.

Whereas the simplest cash back programs saw the biggest gains in 2017, many issuers are actively experimenting with unique rewards programs that we haven’t seen before, all in an effort to stand out in the crowd.

Issuers start focusing on keeping rather than gaining customers

One of the main reasons these new and unique rewards and loyalty programs are so important is because issuers in 2018 need to start adjusting their focus from obtaining new customers to keeping the best customers they have and expanding their share of each customer’s wallet.

This change of focus will manifest itself in dramatic perks and rewards being offered to those with longer-standing accounts and more a robust history of smart credit use.

Security remains a top concern

The specter of data breaches, credit card fraud, and identity theft is bigger and scarier than ever after the long list of headlines we saw in 2017. Across the United States, issuers and retailers both have accelerated their move over to more secure “chip cards”, and that particular trend will continue into the new year.

Beyond that, the entire credit community is going to be hyper-focused on diligently protecting consumer information, and — perhaps just as importantly — convincing wary consumers that proactive and adequate security measures are in place. From a marketing perspective, the issuers who are able to make the most convincing case for security may well win an otherwise very close race for dominance in 2018.

Credit repair and more strategic credit management become paramount

This final trend really focuses on you — the consumer — rather than on the credit card issuers or retailers who want your money.

To continue to benefit from all the opportunities and options credit cards make available to you, your family, your business, and more, it’s going to be even more vital than ever before that you focus on achieving and maintaining an excellent credit score and credit history in 2018.

If you’re already there, being smart and strategic with the readily-available credit coming your way in the new year and consciously avoiding common traps like overspending should allow you to maintain, and even improve, your credit score this year.

If you need to fix your credit score or other issues with your credit history, now is definitely the time to explore professional credit repair services and actively begin working toward managing your money more effectively in the new year. By doing so, you’ll be in the best position to take the most advantage of what looks to be a stellar year for American economic expansion in 2018.

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The Credit Card Churning Trap

credit trap

Guest article by BadCredit.org

Since the days of the first rewards credit cards of the 1980s, credit card use — and the rewards you can earn from it — has skyrocketed. Millions of US consumers now use plastic to make their purchases, both for the single-swipe convenience and the savings offered by credit card purchase rewards.

As popular (and valuable) as rewards can be, however, it wasn’t until nearly every rewards card started offering lucrative signup bonuses that obtaining a new credit card became a truly effective way to score free stuff. Frequently offering hundreds of dollars in cash back, rewards points or airline miles, signup bonuses can often earn you a free flight or hotel stay in no time, particularly if you save up the rewards from multiple bonuses.

Hence, credit card churning was born. Those who participate in this potentially rewarding hobby obtain a new credit card, earn the signup bonus by meeting the specified spending requirements, then typically cancel the card after several months. In this way, card churners can amass hundreds of thousands of rewards points (or cash back, or miles) in a very short period.

Churning Can Have Many Credit Impacts

Given that many of the most valuable signup bonuses are generally offered by cards that require you to have at least good credit to qualify, you need to start out your churning career with a decent credit score. And since a credit score in the 700s range can usually rebound quickly from the impacts of a hard credit inquiry and/or new account opening, credit card churners can typically maintain a good credit score with responsible card use.

But therein lies the kicker. Depending on the size of the bonus being offered, signup bonuses can have minimum spending requirements in the thousands of dollars. While it may be easy enough to meet one or two four-digit spending requirements in a period of months, doing so on one card right after another — or even concurrently, if you’re in a hurry — may be beyond the reach of many budgets.

Drawn in by the promise of free flights or cash back, many consumers may be tempted to spend more than they can afford simply to earn the bonus, racking up debt they can’t pay back. And unless you happen to be churning introductory 0% APR credit cards, the interest fees will begin to pile on after the grace period ends; fees that can eat into that signup bonus you spent so much to earn.

Furthermore, carrying thousands in debt can easily make your utilization rate skyrocket, which will send your credit score in the opposite direction. Worse, should you fall behind on that debt and your delinquent payments are reported to the credit bureaus, your credit score can drop 100 points or more. And though your score may bounce back quickly from one or two inquiries, a series of inquiries in a short span can have a bigger negative impact.

Getting Out of the Trap Takes Time

As alluring as a giant signup bonus can be, unless you know you can easily pay off the purchases required to meet the spending requirement, you may really be signing yourself up for a damaged credit score and years of recovery. That’s because most negative items take seven years to fall off your credit report, and while the best credit repair companies have the expertise to remove many types of items, they won’t be able to do anything about legitimate debts and inquiries dragging down your score.

But it may not need to reach that point, provided you take action before you fall behind. For those churners in over their heads, the first step is to stop churning. Don’t take on any additional credit cards — or even look at their applications, if you are easily tempted. Instead, focus solely on paying down the debt you’ve accrued on the ones you have already.

If your credit score is still in good shape, you may be able to use introductory 0% APR balance transfer offers to move your debt and lower your interest rate, making that debt easier to pay off. Be aware that many credit cards charge balance transfer fees, usually 3% to 5% of the transferred amount, though the APR savings is usually more than the fee when transferring from a high-interest card to one with a lower APR.

If your credit score has already fallen due to churning damage, the only things you can really do are pay down your debt — and wait. Provided you continue to make at least the minimum required payment for each card on time every billing cycle, you can rebuild positive payment history to help offset your mistakes, and your credit score will recover with time.

If you’re concerned about your credit being negatively affected, learn how you can start repairing your credit here.

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