Category: Credit Repair

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.

The lawyers and paralegals at Lexington Law understand your rights and can help you repair your credit so you can secure your financial future. Contact us for a free credit repair consultation, including a complete review of your credit report summary and score.

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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.

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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Is Credit Repair a Scam?

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If you automatically think, “Scam!” every time you hear or see a commercial for a credit repair company, you’re not alone. Credit repair has certainly gotten a bad rap among many consumers — and it’s not difficult to understand why.

For many people, credit repair is synonymous with companies taking advantage of consumers who don’t know where to begin to clean up their credit report and improve their credit score. Unfortunately, it’s when consumers are at their most vulnerable that scam artists can swoop in.

But ultimately, whether or not credit repair is a scam comes down to the firm you select to help you.

With so many companies claiming to offer the best credit repair services, it’s important to understand how to determine which are legitimate and how to weed out potential scams.

Let’s take a look at three ways to help you differentiate legitimate credit repair from credit repair scams.

  1. Legitimate credit repair companies will only charge for credit repair services after they’ve been performed. Beware of any company that asks for money upfront.
  2. You should be able to speak to a person when you call your credit repair agency and you should steer clear of any company with a Web-only presence or one that doesn’t provide a phone number where you can reach a real, live person. The bottom line is your credit repair agency should want to talk with you directly so that they can fully understand your needs and situation in order to effectively assist.
  3. You’ll also want to beware of services that offer you nothing more than a credit report. By law you are already entitled to one free credit report each year, without paying anyone a dime. You can also request your scores from each of the three bureaus individually, for a fee. Whether or not you choose to pay for your credit score, it is still a good idea to check your report at least annually so that you can be diligent in disputing credit items that are erroneous or fraudulent.

Consider a Legal Approach to Credit Repair

Despite the negative perceptions, there are reputable, trustworthy credit repair services you can rely on.

When it comes to credit repair, a legal approach is the safest and most effective. Partnering with a consumer advocacy law firm means you’re always working with real, live, legal experts. It also empowers you with tools and education to maintain good credit for life and exposes you to other financial and legal services from which you can potentially benefit.

Many consumers are unaware that credit protection laws exist when it comes to ensuring your credit report is fair and accurate. Laws also exist pertaining to credit problems that have arisen as a result of life circumstances, such as divorce or military deployment. Partnering with a law firm that specializes in credit allows you to understand and leverage these laws.

Don’t Go it Alone

While do-it-yourself credit repair is possible in theory, it requires a significant amount of time and legal knowledge. Effective credit repair is complex, and is better left to a trustworthy firm that understands all of those complexities and legalities. The best advice when it comes to credit repair is to partner with a firm that can help you repair your credit and offer you the knowledge and services to maintain good credit going forward.

Learn how you can start repairing your credit here, and 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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What Does The Lack in Savings of 3 in 10 Americans Say About Debt and Credit

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Recently I was out on the town with a few of my friends enjoying some food and good conversation. A topic came up about a friend of a friend who suffered an unexpected financial emergency and could not come with the funds to cover the cost. This got me to thinking – How many people really have enough extra money saved to weather an unexpected emergency? I’m taking about available cash – not just using available credit on a credit card.

According to a study released by the Federal Reserve Bank of New York in February 2017, just over 30 percent of responders felt they might need $2,000 to cover an unexpected expense in the coming month, but said they could not come up with the money to pay for it. To put that into perspective, 3 out of every 10 people would not be able to come up with $2,000 in 30 days to deal with an emergency such as a home repair, visit to the veterinarian, root canal, or a trip to the emergency room.

One of the most common financial emergencies is an unexpected medical expense. In a study by Amino, 37 percent of people said they could not afford an unexpected medical bill greater than $100 without going into debt. Only 23 percent of Americans said they were able to cover an unexpected medical bill of more than $2,000. That is a very sobering statistic – not only on the state of our health care (a topic for another day), but also on the state of our ability to save money.

So, what does this all say about our finances? Does this only affect the middle to lower class workers or does this also pertain to the upper class as well? With so many Americans living so close to the edge, financially, how does this affect other aspects of everyday life?

Lack of Savings Can Increase Your Debt

When someone does not have enough available cash in a savings or checking account, paying for an unexpected expense may have to be dealt with by using a credit card. Using credit cards has become a type of “safety net” for those unable to save money for a rainy day. The problem with using credit cards for these types of expenses is that it may negatively affect your FICO Score. According to myFICO, the amount you owe on all accounts (your credit utilization) makes up 30 percent of your credit score. Therefore, if you have a lot of debt on a lot of different credit card accounts, your credit score is going to take a hit. Taking credit utilization to the extreme, maxing out your credit cards to pay for these expenses can drop your score by up to 100 points.

Same holds true for paying for emergencies by taking out a home equity loan, for example. This is just another way of getting further into debt and possibly lowering your credit score. As stated by Bruce McClary of National Foundation for Credit Counseling, “When you combine high debt with low savings, what you get is a large swath of the population that can’t afford a financial emergency.”

Lack of Savings Can Cause Late Payments

When faced with a large unexpected expense and no savings to pay for it, one is forced to do a juggling act with available money and bills due. Living paycheck to paycheck, as many working Americans are doing these days, leaves very little wiggle room when it comes to fitting in another bill to pay. Next comes the decision on whether or not to pay a bill on time or maybe leave it go until next month. But choosing to make a late payment is probably one of the worst things you can do for your credit. Payment history is the biggest factor of your credit score (35%) so having just one 30-day late payment may cause your score to decrease. Once you break the rule of always paying your bills on time, you might fall into the habit of making other payments late or not at all. As you can see, there is a downward spiraling effect going on and it will only go further down from there.

Could You Raise $2,000 in 30 Days?

The National Bureau of Economic Research published a paper based on this simple question, “If you were to face a $2,000 unexpected expense in the next month, would you be able to get the funds you need?” Here is what they found:

  • 9% of respondents reported they would be able
  • 1% probably able
  • 2% probably unable
  • 9% certainly unable

It makes you stop and think – what would you need to do to raise $2,000 in 30 days? Sell some jewelry, your vintage guitar, or liquidate some other personal possessions? Or would you be able to dip into your savings account and come up with the cash? If you can relate to the first scenario, then it may be time to re-evaluate your financial goals.

If you had started an emergency fund three years ago by saving $50 per month, you would have almost $2,000 saved for unexpected emergencies. Having this emergency fund would keep you from adding new debt while trying to pay down the old debt. It would mean no more borrowing, no damage to your credit because you can pay your bills on time.

Even those of you making a six-figure salary are not immune to this lack of better judgment. David Johnson, an economist at the University of Michigan who studies income and wealth inequality, sees that when people get money – a bonus, inheritance, high salary – they are more likely to spend it than to save it. So, no matter if you earn $20,000 year or $200,000, the struggle to save money is the same. If you don’t have an emergency fund, it’s not too late to start one. Make a plan to start saving and stick to it – before you know it you will have a nice little nest egg all ready for the next unexpected emergency that may come up in your life.

If you’ve had trouble saving money in order to cushion yourself from emergencies and your credit is suffering as a result of missed payments or high credit utilization, it may be time for professional credit repair services. 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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What You Need to Know About Credit Utilization

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Credit scoring is a mystery to many people, and for good reason. The average consumer has more than 50 scores to their name, and it’s not easy to understand the grading process or which factors matter most.

While every lender has their own method of deciding which customers are worthy of financial trust, and more than 90% of businesses rely on the FICO score when reviewing credit and loan applications. Of course, you have more than one FICO score, so you might be feeling confused all over again, but there’s good news: When it comes to credit health, it’s best to narrow your focus to five main factors:

  • Credit length
  • Payment history
  • Account diversity
  • Inquiries
  • Credit utilization

Why Is Credit Utilization So Important?

Every factor of credit scoring is crucial, but credit utilization is responsible for 30% of your overall score, second only to your payment history’s weight of 35%. Credit utilization measures your revolving balances against your total credit limit. Lenders and credit card issuers rely on credit utilization to predict risk and future behavior. In general, the higher your utilization ratio, the greater your risk of defaulting on your balances. Risky behavior isn’t rewarded in the world of credit scoring, and you may see a decrease in your scores as your utilization ratio goes up.

To understand credit utilization, you first need to understand your line item and aggregate calculations.

Line Item Utilization

Line item utilization measures your individual credit card balances against your individual limits. For example, suppose you have three credit cards, each with a $10,000 limit. Based on your current balances, your line item utilizations break down like this:

  • Card A:
    • Balance: $4,500/$10,000=0.45×100=45% utilization
  • Card B:
    • Balance: $2,000/$10,000=0.20×100=20% utilization
  • Card C:
    • Balance: $3,300/$10,000=0.33×100=33% utilization

Aggregate Utilization

The average of your credit card utilizations is called aggregate utilization. Calculate yours by combining your current balances and dividing them by your total credit limit. In the example above, your total balance is $9,800 and your total limit is $30,000; therefore, your aggregate credit utilization is $9,800/$30,000=0.32×100=32.6%

Which One Matters? 

Line item and aggregate utilization are both important factors in overall credit health, and FICO recommends keeping yours as low as possible.

How to Benefit from Credit Utilization

Credit utilization has an undeniable effect on your credit score, and there are ways to harness its influence in your favor:

  • Keep Your Balances Low: If you struggle to curb spending or rely on credit cards to make ends meet, overhauling your budget is the first step. A few monthly changes could help you avoid overwhelming debt and related credit damage. Download our free template to help you get started.
  • Check Your Credit Reports for Accuracy: Your credit reports tell the larger story of financial history and responsibility, and accuracy is key. For example, suppose Card A’s $10,000 credit limit is mistakenly listed as $6,500 on your credit reports. While it may seem like a small issue, an incorrect credit limit can drastically alter your utilization ratio and damage your credit score in the process. In this case, your line item utilization would increase from 45% to 69.2%, and your aggregate utilization would increase from 32.6% to 39.6%. You can’t afford to ignore the details. Order free copies of your credit reports to ensure that they accurately reflect your credit card balances and limits.
  • Request a Limit Increase: If you’re working on debt reduction but need a quick fix, consider asking your lenders for limit increases on each of your cards. For example, increasing Card B’s limit to $15,000 would automatically lower your line item utilization from 20% to 13.3%, and your aggregate ratio from 32.6% to 28%. Requesting a limit increase could place a hard inquiry in your credit file, costing you a few score points, but the benefits of lower credit utilization are usually worth the temporary ding.
  • Change Your Bills’ Due Dates: It’s difficult to benefit from credit utilization if you are constantly battling with the clock. If your credit card issuers report customer balances to the credit bureaus before you pay your bill, it may seem like your utilization ratio is constantly high. The fix? Contact your issuers and ask them when they typically report to the credit bureaus, and then move your bill’s due date to the week before. This strategy allows you to take full advantage of low credit utilization by giving you time to pay your balances before the reporting date.

If you’re interested in learning about credit repair, click 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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