You’ve seen the ads, “Get your credit score now” “Instantly get your credit score” and so on. Buyer beware! Not all credit scores are created equal. Fair Issac and Company set the standard for the credit scoring model that we use in the United States. Most lenders will use the FICO score to determine your credit worthiness.
In an attempt to compete with FICO the big three credit reporting agencies, TransUnion, Equifax, and Experian have come up with their own scores. On the surface this does not sound like a bad idea. But, here’s the rub. Many lenders only use the true FICO score. So, the score most consumers buy is worthless.
I have many clients come to me not understanding why when they pull their credit they have a different score than what the lender has. Typically this is because the client bought the wrong score. True FICO scores can be purchased from myfico.com .
I urge my clients to concentrate not on their credit score, but on managing their credit. I urge them to pay their bills on time, keep revolving credit balances low or at zero dollars, and do not open unnecessary lines of credit. Unless you are looking to purchase a home, auto, or need to take out additional credit, you do not need your credit score.
We all make them – MONEY MISTAKES. It’s easy to fall into the traps and snares that credit card companies, banks, and other lending sources are so good at enticing consumers with. We are inundated with special offers, cash back, rebates, guarantees, rewards and so on. Buyer Beware! These tactics and offers are designed to keep you in debt. We recently did an episode on The Credit and Finance Show about common money mistakes.
These mistakes include:
Paying on minimums on your credit cards. This can cost you thousands of additional dollars in interest and fees.
Buying a brand new car. AAA auto in a study states that concluded that the average new car depreciates $3,392 per year.
Smoking. This is a costly habit that costs an average of $2000 per year. The health costs are immeasurable.
Keeping a drafty attic. You can often find low cost services that can help with insulation if you cannot do it yourself. Beware of spending too much on high dollar energy savings items. Weigh the costs against the savings.
Ignoring your student loan. Student loans do not go away. If you are unable to make your payments call the lender and let them know.
Many of us make common money mistakes that can not only cost us thousands of dollars, but can also affect our credit rating rating. If you have made financial mistakes, like many of us have, we can help. Call us today and start changing your life from fear and frustration to happiness and relaxation.
Effective May 21, 2010 – Housing and Urban Development (HUD) has issued a one year temporary waiver of the “flipping rule” permitting FHA financing of a resale within 0-90 days of the seller’s acquisition of the property.
On April 12, 2010 at 10:00am on BlogTalkRadio on The Credit and Finance Show Credit Expert Victoria Finch and Finance Coach Jeff Dalverny will be joined by special guest Chuck Bricker of Bank of America.Chuck has been in the banking industry for over a decade and will provide insights into home ownership, lending changes, and information for those facing possible foreclosure. For more information click here.
There were several nuggets from the show that I thought were very important.
Families need to budget monthly not yearly and divide by 12. Each month your needs change. For example, some months children are out of school and usually requires more food to be brought into the home.
Put your budget on paper. By writing down your budget, adjustments can be made if necessary.
Look at your cash flow. Many people do not know how much they actually make and/or bring home monthly.
Have a goal. Studies show that when we have set goals and we write down our goals we are more likely to achieve them.
I also promised the link regarding Parents’ 5 other card choices for college-age children. Click here to read the article in full posted on creditcards.com.
For more information contact The Finance Coach at 317-858-7270 or call Integrated Credit Specialists LLC at 317-527-1440.
I know you are wondering how in the heck can paying off an account lower my credit score. Yes, I know it sounds backwards that by trying to do the right thing you get penalized. Here is he scoop. I have long taught that 35% of your credit score is past delinquencies. Obviously, paying your accounts in full and on time has the greatest positive impact on your score. So why would paying a collection potentially lower your score?
Here’s why, the last 24 months of activity has the greatest impact on your score. The newer the item the more impact it has. The credit scoring model uses the date of last activity to determine when the 24 month countdown starts. (Note: accounts older than 24 months still have an impact on your credit score). If you have an older collection that has not had any activity on it and you make a payment, you have restarted the clock because you have moved the date of last activity.
Many times collection agencies will try to contact you in order to have you make a payment so that they can keep the account on your credit bureau longer. Per the Fair Credit Reporting Act, collections can stay on your report up to 7 years plus 180 days from the date of last activity. Do not fall for it!
I am not suggesting that you not pay your debts. I am letting you know that there is a strategic way to handle past collections. Here are 3 simple steps:
Begin with accounts reporting in the last 12 months.
Before you pay anything, write to the credit bureaus and request validation of the debt. Validation is not verification. Federal law specifies what is considered validation. See Fair Debt Collection Practices Act for more information.
If debt comes back verified, contact the collection company and negotiate for a lower payment. We suggest that you ask for a pay for delete. A pay for delete is a request that the collection company deletes the entry from your credit report when payment is received. Pay for deletes are becoming increasingly more difficult to get. But, a paid collection is better than an unpaid one.
If you are applying or going to apply for a home, we suggest you wait until you are instructed by your lender to pay off ANY collections. If your lender tells you pay off a particular account, then they have prepared for the impact it may have on your credit score.
There is nothing anyone can do for you that you can not do for yourself when it comes to your credit. However, if you want guidance and education about credit please contact us at info@intcredit.net.
Don’t let your credit keep you in bondage. You are more than your credit score. Do not let a three digit number stop you from realizing you financial dream. This is an open forum where we invite listeners to call in with their questions. http://www.blogtalkradio.com/victoriafinch
Past delinquencies make up 35% of your credit score. Obviously paying your bills in full and on time will have the greatest positive affect on your credit score. The credit scoring model looks at the level of delinquency. For example a judgment will have a greater negative impact on your score than a collection. Always try to avoid public records such as bankruptcy, tax liens, and judgments.
Also, activity in the last 24 months has the greatest affect on your score. When looking a credit repair strategies concentrate on activity in the last 24 months first. Pay off collections in Escrow NOT before. By paying an old collection you will make it new again because the date of last activity will change.
If you would like to learn more about credit scoring and how past delinquencies affect your credit score, please contact us at info@intcredit.net.
