Your Credit Score May be Too Low
Before the economy took a turn for the worse and credit became harder to obtain, good credit and a good credit score was a fairly well established number or close range of numbers. Now when it comes to the topic of a good credit score, that well defined range of credit scores that creditors and consumers would agree on is elusive. Tougher credit and greater credit awareness has elevated those numbers and what was once a good number is now reduced to a fair or poor credit score.
A wide range of credit scores will still be good enough for most consumers to obtain a credit card or obtain a cell phone or avoid problems with an insurance contract but scores are certainly higher now for consumers that want to save money with lower interest rates as well as obtain access to credit when they need it.
Credit scores generally range between the low 300’s and the mid 800’s. In between these numbers, credit evaluators look for different ranges of credit risk. Credit scores are going to directly affect how much money an individual can borrow as well as how much it will cost and the low barrier to receive the best rate and terns has risen dramatically.
In 2002 a number of articles were written extolling the value of a credit score that was just above 600. Businessweek in Nov 25, 2002 wrote “…a credit score under 620, generally the cutoff for a prime-rate loan. “ The prime rate is the interest rate banks offer their most creditworthy customers. Bankrate.com in Dec. 2002 stated that “As a general rule, those with a score above 650 will receive the lowest interest rate loans.”
Jump ahead to June 2010 and one of the largest bank mortgage lenders in the U.S states in their mortgage marketing material that the mortgage rate will increase for all borrowers that have a credit score below 720. In fact the costs for the home loan increase for every 20 points the score drops below 720 to the point where a credit score under 620 is considered non-traditional.
A score of 600 is now clearly considered a bad credit score. A score above 720 is now normally considered a good credit risk, while a score under 660 is considered a high risk. More and more Americans are experiencing the consequences of low credit scores and bad credit first-hand as the standards for good credit has risen.
With the value of a good credit score rising it is becoming increasingly imperative that consumers evaluate their credit history and start fixing and improving their credit profile. For most consumers, working on a good credit score starts with obtaining a copy of their credit report to determine any weak spots in their credit history.
Improving or fixing a credit score often requires consumers to work on any erroneous information or outdated information in their credit report including items such as outstanding judgments, bad credit history items, and any other derogatory remarks in their credit record. It may also be prudent to work on building a good credit history going forward while fixing previous credit problems.
Credit and Credit Scores after Bankruptcy
Filing bankruptcy is a series decision that impacts an individual’s credit and credit score for quite some time. Bankruptcy doesn’t have to shut off credit access altogether nor does filing bankruptcy have to be significant detriment for financial success. There are certainly numerous cases of individuals that have filed for bankruptcy and rebounded stronger and gone on to create significant wealth.
A bankruptcy is always one of the biggest negative factors that impact a credit score. How much of an impact it will have on an individual score will depend on the entire credit history and data in the credit report. As time passes, the negative impact of the bankruptcy decreases and the credit score will improve. A credit score can improve significantly faster with a little help and work.
Consumers who file for bankruptcy, file for a variety of reasons ranging from job loss, divorce, medical costs to poor credit decisions. In general, the reason for the bankruptcy doesn’t matter to future lenders and or the credit score calculation. If an individual filed for bankruptcy protection regarding only medical services this would have somewhat of a slighter impact than a bankruptcy that affects all credit. But bankruptcies that only include medial costs are rare and the credit score is going to take a big hit do to the bankruptcy record in most any situation.
The impact to an individual’s scores regarding future credit prospects are the same since most all loan decisions no longer look at qualitative factors such as why an individuals credit is poor rather banks and lenders just numbers such as the credit score and debt ratios, etc…
A credit score takes a big hit from the records of the bankruptcy on the credit report; the impact is different for all cases since the credit history of the individual is different before the bankruptcy. The credit reports of individuals that file bankruptcy often look bad with numerous late payments, collections, and judgments. The credit scores in these cases are already hammered pretty hard before any bankruptcy filing hits the credit report.
After a bankruptcy has been filed, the sooner the individual begins reestablishing credit in good standing, the sooner the credit score will rebound.
For those consumers that have credit available after the bankruptcy, they should keep that credit open. If an individual was able to keep a credit card that was not included in the bankruptcy because there was no balance on it, keeping the line of credit on the credit card open will help rebuild the credit score.
A good start for new credit is to obtain a secured credit card. In may help to even obtain more than one card and continually make monthly payments on time without running up new long term debt. As more time goes by after the bankruptcy the impact of the bankruptcy on the credit score lessens, and it may be possible to apply for a traditional credit card without security.
In general, the derogatory account information reported on a credit report has the most adverse affect on a credit score for the first 24 months after it is recorded. Once an individual is discharged from bankruptcy, they can apply and open new credit whether it’s a bank credit card, retail charge card, gas card and loan.
The nest step after establishing new credit, whether it be on existing accounts or secured credit cards, is to credit any inaccuracies in the credit report that may be holding the credit score down. If an individual finds inaccurate records on accounts that should be removed due to the dates or balances or amount owed, they have the right to dispute these errors. A dispute letter should be sent to each of the credit reporting agencies to correct the errors at Equifax, Experian, and TransUnion no matter how small the error is.
For each of the derogatory records or accounts on a credit report such as collection accounts or judgments or late payments, it is always helpful to check the dates and balances to see if either the amount is wrong on these accounts or to see if the account is past the deadline to remain in the report. Credit scores often have the greatest improvements when expired, derogatory data is removed or inaccurate derogatory data is removed. A key element regarding inaccurate balances is that if the creditor can not validate the amount to the credit reporting agency it has to be removed.
As a final note, always be extra careful not to make any late payments, using new credit responsibly, and don’t apply for too much credit without a purpose. Overtime a credit score will improve as new positive records are posted to the credit report.
The information about bankruptcy is for educational purposes only and is believed to be accurate but is not complete. Freecreditscorehelp.com does not offer legal advice. It is strongly recommended that individuals seek professional legal advice in the event of a bankruptcy filing.
Credit Repair Scams Halted by FTC
In October, 2008 the Federal Trade Commission sent out a press release regarding charges brought against another credit repair scam operation. Credit report repair services that offer to repair credit for consumers have popped up across the nation. Unfortunately, many of these organizations fail to help consumers and in some egregious cases, violate the law by taking money in advance and deceiving consumers regarding the services they perform to improve credit histories and credit scores.
In October, the FTC announced that two bogus credit repair companies and their principals settled Federal Trade Commission charges that they falsely claimed they could clean up consumers’ credit reports and collected up-front fees for their services, in violation of federal law. In one case, the FTC alleged that the defendants marketed their services via Web sites and real estate investment seminars and falsely claimed that their special relationships with creditors, collection companies, public records providers and credit bureaus enabled them to remove derogatory information from consumers’ credit reports.
According to the FTC’s complaints, all of these defendants falsely promised to remove negative information from consumers’ credit reports, such as late payments, charge-offs, collections, tax liens, repossessions, bankruptcies, and judgments, even when the information was accurate and not obsolete, in violation of the FTC Act and the Credit Repair Organizations Act (CROA). The Commission also charged them with violating the CROA by charging and collecting payment for their services before doing any work.
In the first case, Successful Credit Service Corporation, also doing business as Success Credit Services, and Tracy Ballard, also known as Tracy Ballard-Straughn, the settlement order prohibits them from collecting additional money from consumers who purchased their services before October 16, 2008, when the court halted their business practices.
The defendants in the second case are Rudolph Joseph Strobel, a/k/a Lee Harrison, and Leanna Ruth Harrison, both doing business as Lee Harrison Credit Restoration, Credit Restoration, and Lee Harrison Associates Credit Restoration. The order bars them from collecting money from consumers who purchased their services before August 28, 2008, when the court halted their business practices, and requires them to return any money orders or other negotiable instruments received after that date.
Understanding your credit situation and the facts on how to clear up credit problems and improve a credit score is the first step to solving credit problems. Rushing into a quick fix scheme can often lead to less than satisfactory results. Know that facts before working with a credit repair organization to help your credit score.