Category: Credit

Protect Your Credit this Season: The Dos and Don’ts of Holiday Shopping

Protecting Your Credit

The holidays can be a time of joy.

They can also be a time of enormous stress — especially on your wallet.

This holiday season, the average American expects to spend $967.13. And while 63 percent of Americans report having a holiday savings plan, about 58 percent of families don’t stick to them. Last year, 25 percent of parents took extreme financial steps to pay for the holidays, including dipping into emergency funds and even 401(k) plans.

This holiday season, give yourself the gift that keeps on giving: financial well-being. Here some important dos and don’ts of holiday shopping, so you can avoid debt and keep your credit healthy:

Do:

  • Make a list

This advice isn’t just for Santa. Create a list of every person you need to shop for, and exactly what you plan on getting for each. Set a budget with a spending limit per person and stick to it. If you have a history of impulse buying and know you’re likely to fall back into this pattern, pull out just enough cash to pay for your purchases so you don’t exceed your budget.

  • Keep an eye on prices

If you see a store offering incredible discounted prices, take it with a grain of salt. This is a common retail trick, especially during the holidays, and it doesn’t always mean you’re paying the best price. Do your research to see how prices compare between retailers. There are also apps and websites that will email you coupons and promo codes, like RetailMeNot and CouponSherpa. Sites like Ebates will even pay you back to shop at certain stores.

  • Prioritize security

In the wake of several recent data breaches, it’s important to keep your security in mind. If you can do so responsibly, stick with credit cards rather than debit cards for your holiday spending, as they tend to have more safeguards against fraudulent purchasing. Of course the safest option is to pay for purchases in cash. Either way, keep an eye on all of your accounts and make sure to dispute any fraudulent charges immediately. Remember, it’s holiday season for identity thieves, too.

Don’t:

  • Spend to “save”

Many retailers offer incentives to get you to spend more than you originally planned — from earning store credit after X amount of dollars spent, to free shipping on purchases greater than $X, to buy-one-get-one promotions. Don’t fall for these common retail traps, or you could very well blow your budget.

  • Open new lines of credit

Another common retailer trick is giving discounts if you open a store credit card. Opening a new line of credit is not to be taken lightly. Each time you do, your credit report will be hit with a hard inquiry, which could ding your credit score. Also, if the card has a high APR and you don’t pay it off immediately, you’re opening your credit up to even further risk.

  • Max out your credit limits

It’s best to keep your credit utilization below 30 percent. When you hit all your credit limits, it means your credit utilization is at 100 percent, which is bad for your credit score. Plus, if you struggle to pay it off, you could find yourself caught in a vicious cycle of debt, which will only further damage your credit.

If you need credit help this holiday season, whether it’s with fixing your credit or a credit bureau dispute, consider consulting a credit repair service. Lexington Law offers legal expertise to help ensure that your credit report remains fair and accurate.

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How Your Credit Affects Your Car Insurance

car insurance and credit

The negative effects of bad credit can permeate through nearly every area of your financial life. From utility bills to loan approval, your credit score is a numeric assessment of your likelihood to repay lenders, and it has far-reaching implications.

The credit score “magic number” is used by various industries to understand you as a consumer, and a low score can have looming financial consequences that you might not expect. For example, did you know that a bad credit score can affect something seemingly unrelated to lending, such as your car insurance premium?

Why credit affects car insurance

Insurance companies determine your risk as a driver, and the corollary price of your premium, through a process called underwriting. Countless factors are used to underwrite your policy, including your driving record, age, and the car you drive. But, you might be surprised by some of the less obvious factors, such as your credit score, that affect the cost of car insurance.

Credit is a rating factor within nearly every car insurance company. You might wonder what your credit score has to do with your driving record, but there is actually a proven correlation between the two. Car insurance companies have discovered that drivers with low credit scores tend to file more claims — this finding has since been supported by a Federal Trade Commission report.

If you’re living in any U.S. state other than Hawaii, California or Massachusetts, your credit score will have a significant impact on your car insurance rate. Some experts estimate that an individual with a low credit score (524 or below) will pay twice as much for car insurance than those with good credit.

Okay, so as long as your credit isn’t horrible then it doesn’t make a difference, right? Not exactly. According to Consumer Reports, drivers with “good” credit will pay on average $214 more than those with “excellent” credit.

Fix your credit and save on car insurance

If you have a poor credit score, you are likely paying the price for it in more ways than one — car insurance is only a small piece of the financial pie. Whether you’re plagued by lofty interest rates, experiencing lending roadblocks, or buried in high car insurance premiums, there are many reasons to get your credit back on track.

Let’s face it: poor credit can’t be be fixed overnight. However, in order to get ahead of costs associated with a low FICO score, and ultimately get your finances in the black, you need to take some proactive measures. But where can you start? Partnering with a professional credit repair company is an easy, affordable, and effective way to reframe your credit report to better represent you as a consumer.

The credit experts at Lexington Law will review your report and advocate on your behalf to credit bureaus for the removal of misleading or incorrect information. In 2016 alone, Lexington Law lawyers removed over 9 million negative credit items from clients’ reports. Contact Lexington Law to learn more about leveraging credit repair to regain control of your consumer identity and get ahead of high car insurance premiums.

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How Identity Theft Can Affect Your Credit

identity theft and credit

Guest article by Alayna Pehrson – Digital Marketing Strategist at Best Company

Identity theft is destructive, especially to a person’s credit score. According to identitytheft.info, approximately 15 million people in the United States experience identity theft each year. The number affected by identity theft crime is on the rise as new technology gets introduced. Hackers continue to find prime targets like those who fail to monitor their credit, use their credit for unsecured purchases, lose track of their social security number, physically lose their credit cards, or fall for phishing scams. Overall, there are multiple ways that identity theft criminals can get their hands on your credit information and your identity. Here’s how your credit can be affected when your information falls into the wrong hands:

High Credit Utilization

When identity thieves obtains your credit information, they will most likely affect your credit utilization rate by maxing out your credit limit. A high credit utilization rate not only significantly hurts your credit score, but also shows lenders that you are a financial risk. Identity theft criminals can ruin your responsible reputation and limit your future credit opportunities.

Multiple Inquiries

Identity theft criminals can open multiple lines of credit under your name. Although credit issuers may see this as a red flag and start rejecting applications for credit accounts, the person using your identity may have done major damage before that happens. Whenever a person applies for a new credit account, a hard inquiry occurs. Hard inquiries can negatively affect your credit score but aren’t usually a problem if you are applying for one new account at a time. However, if an identity theft criminal applies for multiple credit lines, multiple inquiries can lead to major damage to your credit score.

Late Payments

Paying your credit card bills on time is necessary if you want to maintain a good credit score. Although you may make your payments on time, the person who stole your identity most likely will not. Payment history makes up 35 percent of your overall credit score, so having a buildup of late payments can definitely lower your score. When an identity theft criminal abuses your credit card by making extreme purchases, not only does your credit score drop due to missed payments, but you’ll also have higher interest rates, accumulate late fees, and take a hit on your credit report.

Debt Build-up

According to ValuePenguin, the average American household debt is approximately $5,700 and 38.1 percent of households are in some sort of credit card debt. When it comes to identity theft, the average debt can be much more. For instance, identity theft criminals may try to take out loans or go into credit card debt using your name. Debt can harm your credit score and your chances of getting approved for things like loans or new credit cards as it shows a lack of responsibility.

What You Can Do

Although it may seem like identity theft is inescapable, there are some precautionary measures you can take to lessen your risk of becoming an identity theft victim. Some measures you can take include the following:

  • make sure you secure important documents at home
  • shred documents that have sensitive information on them before throwing them away
  • frequently review your credit report
  • check your bank statements
  • be cautious about sharing personal information with others
  • create strong passwords for online accounts
  • install the latest anti-virus software on your computer

If your identity has been stolen and you are worried about how it might affect your credit score, first, report the theft to the police. Then, contact your financial institution and let them know your identity has been stolen. Next, change your passwords for your online accounts, obtain a copy of your credit report, and report the theft to the Federal Trade Commission’s Identitytheft.gov website. This site will help you develop a recovery plan. Consider hiring an identity theft protection service that will monitor your credit, alert you if there is fraudulent activity, and help you recover if your identity is stolen.

If your credit continues to suffer after taking the steps above, look into professional credit repair services so you can get your credit back on track.

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How Does Refinancing a Home Affect My Credit?

refinancing home and credit

Many people refinance their home mortgage to get a lower interest rate and reduce their monthly payments. You can also refinance your home or switch from an adjustable-rate mortgage to a fixed-rate loan. No matter what your goals are for refinancing, it’s important to think about how your credit could be impacted along the way.

When you applied for your original mortgage, your credit score likely dropped. That’s because any hard inquiry —a credit check — will knock a few points off of your score. If you’re accustomed to building credit, you know the loss of a few points goes hand in hand with getting a loan, and you’re probably not concerned by it. However, it’s not just a hard inquiry that affects your credit score—what happens after you refinance can have an impact, too.

Optimize the rate quote phase

Losing a few points from a hard inquiry is usually not a big deal. The inquiry will drop off your credit report over time and you can earn those points back.

But if you’re like most homeowners, you probably want to get the best rate possible for your new, refinanced mortgage. This usually means rate shopping with multiple lenders. This brings up an important question: will your credit score be impacted every time you get a rate quote from a lender?

The short answer is probably not. Many credit bureaus recognize when homeowners are comparing mortgage rates by the type of inquiry that shows up on a credit report. The bureaus are typically mindful of the fact that rate comparisons are necessary for a major loan like a mortgage. In fact, they ordinarily make the same allowances for car loans too.

So, as long as you do your rate shopping within a certain time period, all the inquiries are collectively recorded as one. The time period differs by scoring model, but it usually ranges from 14 to 45 days. If you’re worried about it, some experts recommend doing your rate shopping within the shorter, 14-day window.

Wait several months between loans

If you’re thinking about refinancing your home, but you just applied for a car loan a few months ago, think again.

Applying for too much new credit raises a red flag with the credit bureaus. To them, it looks like you could be reckless with your finances if you’ve borrowed significant amounts during a short time span. Granted, applying for new credit only accounts for 10 percent of your overall credit score, but small actions add up and you could inadvertently hurt your credit score as a result.

Instead, you’re better off waiting at least six months after your last loan application before you refinance your home. This gives that prior application time to settle into the background of your credit report. It also gives you time to earn back the points you lost from the inquiry.

Consider the age of your old mortgage

One thing that’s easy to forget about during a home refinance is the age of your old mortgage.

When you apply for and receive a new mortgage, your old one will close out. But if you had your old mortgage for several years, there were likely a couple of positive results for your credit:

  • Your old mortgage bumped up the average age of all your credit accounts.
  • You built up a lengthy payment history with it.

Closing the old loan means you’re starting over with a brand-new loan that has no payment history associated with it yet. Since both credit age and payment history are factored into your credit score, your score can drop when that old mortgage goes away. The average age of your credit decreases and that old payment history will no longer be working in your favor.

Of course, some of these negatives to your credit may be unavoidable. That’s why it’s important to carefully weigh how a refinance could affect you, especially if you’re hovering between a good and an average credit score.

Think about the big picture

There are lots of reasons to refinance your home. But it’s not a decision to make casually if you have any worries about your current credit or financial situation. Before you decide, factor in all the financial commitments and conditions of a refinance:

  • Make sure you understand what you’re getting into. Refinancing early in your mortgage might make more sense considering that you’re mainly paying interest at that point. Refinancing later is like starting over with another 30-year loan.
  • Use a mortgage calculator to compare your current mortgage’s interest rate and monthly payments with that of your new loan. Will the cost savings be significant enough that it makes sense to move forward?
  • Don’t forget to add in all your fees. Mortgage refinances come with closing costs including application, origination, and appraisal fees. That amounts to a large amount of cash you’ll need to have on hand.

On a positive note, time is your ally when it comes to credit. Over time, the negative effects of a loan process will lessen, and you can significantly raise your credit score if you make all your payments as expected. In fact, since payment history accounts for the largest percentage of your credit score, the most important thing you can do for your credit is to keep up with your mortgage payments.

Finally, check your credit report

Like going to the dentist, many people either avoid their credit report or forget to check it regularly. Your credit report gives you valuable insight into your overall credit health. It reveals errors and inaccuracies that you may not have known about, but which could be impacting your credit score. Knowing what’s in your report helps you when it’s time to refinance your home or apply for any other loan.

A credit repair company with legal expertise like Lexington Law can help you review your credit report and address any issues. Carry on the conversation on our social media platforms.

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5 Ways to Avoid Holiday Debt

holiday debt

Guest article by AAA Credit Guide

The holiday season is upon us and that means…spending tons of cash, right? After all, your Facebook feed is probably blowing up right now with friends and colleagues trying to figure out when to celebrate together, where to go out, and what to get everyone for Christmas.

But if your finances are tight or you simply don’t want to take on the extra monetary burden of extreme holiday spending, you do have some options that don’t involve taking on extra debt.

Here are our top tips for avoiding holiday debt this year.

#1: Get Creative with Your Gift Giving

It might be tempting to pull out all the stops around the holidays and treat everyone around you. But spending too much on gifts is one of the easiest and fastest ways to spiral out of control with your budget.

Instead of hitting up your local department store or filling up your Amazon cart, consider a new way of gift giving this year. If you have a large family or group of friends, consider doing a Secret Santa instead of gifts for every individual. If you’re a competitive bunch, try a white elephant swap. Everyone brings a gift and as each person unwraps a random one, they can keep it or trade with someone else. This one can add a lot of fun and commotion to any holiday party.

For some friends and family, think about giving them the gift of a personal service so that you’re essentially giving them your time instead of your money. Anyone with kids would love the gift of free babysitting and the same holds true for someone with pets who likes to travel — offer to keep their furry friend the next time they need a weekend getaway. Be creative, but more importantly, be thoughtful.

#2: Don’t Get Caught in the Black Friday Trap

If you do decide to do some holiday shopping, don’t get wrapped up in Black Friday deals, especially if it’s not something you were already planning on buying. The best thing to do is to look at ads ahead of time and be strategic with your purchases.

Refrain from making an event out of Black Friday morning, because that tends to legitimize spending for the sake of spending. If you can find some truly good deals that fulfill your needs, then go for it. Just be sure to limit yourself specifically to those purchases.

The same holds true for Small Business Saturday, Cyber Monday, and every other holiday savings ad you’re bound to be inundated with. Never get a deal for the sake of a deal — make sure it’s a legitimate purchase.

#3: Host a Potluck Dinner

Dinner invitations run amok around Christmas time and while it is a great time to celebrate and catch up with loved ones, you don’t have to charge up countless fancy dinners. Even hosting a holiday party at home can add up when you consider all the food and drinks you’d need to buy.

An easy way to solve this problem is to host a potluck dinner. It’s a fun way to really bring people together and celebrate your community. It can also result in diverse, tasty food that’s fun to experience with each other.

Make it even more altruistic by asking everyone to bring a donation for your favorite local charity, whether it’s non-perishable food items for your town’s food bank or a gift for a needy child. You’re certain to make some memorable moments while also helping other people in your broader community get through the holidays.

#4: DIY Your Cards and Decorations

It seems like just about every retail store sells some type of Christmas decorations, and they often start setting up displays well before Halloween even arrives. That gives us all way too much time to be tempted to purchase more decorations than we really need.

Don’t give into the temptation! First, check out to see what decorations you have leftover from last year. That could easily be enough to make your home feel extra festive for the season. Plus, the fewer decorations you put up, the less you’ll have to take down when the New Year hits.

If you still need some extra pizazz, spend and afternoon DIY-ing your own decorations. This is especially fun for kids, but can be entertaining for all ages. Classic ideas include popcorn garlands and paper chains, but you can get more sophisticated ideas from Pinterest and the blogosphere.

While you’re there, check out ideas for homemade gift ideas. These are great for teachers and other people you want to thank without spending a ton of cash.

#5: Start Your Financial Preparation Early

No matter what kind of holiday plans you have, the best way to prepare a debt-free season is by thinking ahead. If you know you’ll need to travel to visit friends or relatives, book your tickets and lodgings as soon as possible. No one ever heard of getting an amazing last-minute travel deal the week before Christmas.

Also consider creating a mini savings account throughout the year that is designed to fund your holiday expenses. By transferring just a bit of cash each month, you can actually save up quite a bit. Then you won’t have to worry about being tempted to charge anything because you’ll have a nicely cushioned savings account waiting right there for you.

After all, peace of mind is one of the best gifts you can give yourself.

If you’re still stuck with heavy debt and bad credit by the end of the year, consider getting Lexington Law to help repair your credit. It’s never too soon to start a New Year’s resolution!

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