With all the hustle and bustle, what else could we possibly worry about now? Life is hectic enough without having to worry about someone accessing your credit information and stealing your identity. I remember during the 80’ you did not hear about all of this. The only worry we had was Russia sending over a nuclear bomb. With the evolution of how information travels, and a paradigm shift in theft, we have to stay on top of our credit reports. Thank goodness technology allows us to access our personal information fairly quickly.

Until recently if you wanted a copy of your credit report, it took an act of congress to get one. Plus the credit report you got was almost impossible to read. Luckily with the new Fair Credit Reporting Act (FRCA) you are entitled to a free credit report once a year. This opened the gates of other credit report offers which will provide you with your credit scores. The free credit report you get once a year gives you a 3-1 credit report with no credit scores.

With the internet presence and the ease to access personal information you cannot afford to check your credit report only once a year. Did you know that identity theft could be happening to you right now? If you waited a year to access your free credit score report 12 months from now your good name would be ruined. So yes with the internet technology two things have happened, it opened up avenues for identity thieves. The internet also opened the ability to access your personal information securely and fast over the web.

The internet is safe as long as the site you are visiting is secure. Believe it or not most identity theft does not take place over the web. It takes place in places like your trash and at companies that have your personal information on file.

So identity theft has added extra stress to our lives, but if you stay on top of your credit report it’s definitely a piece of mind.

CreditScoreQuick.com

No credit can sometimes be just as damaging to you as “no-good” credit.

It sounds crazy, and many who have always responsibly paid cash for everything become more than a little angry when told they can’t get a mortgage loan because they have no credit. At least folks who have had bad credit know the reason why they’re having trouble.

The fact is, if you have no credit, lenders have no way to determine if you’re a responsible bill-payer. You have no reputation – no history to offer to show that you do indeed pay your accounts on time. That makes them nervous.

If you find yourself in the position of needing to either build or re-build credit, you’ve probably been told that you must first establish a record of paying debts on time – by getting a line of credit somewhere.

Where? Who is going to give you that line of credit? A company that offers a secured line of credit, that’s who.

In this instance, you offer some kind of collateral or deposit for the amount of credit desired. This gives the lender security in case of default. It could be a deposit into a savings account, a certificate of deposit, or a money market account.

Secured credit cards are a very effective way to build or re-build credit, but there are two things you must consider.

First, use the line of credit, but pay it off on time each month. Don’t use it to go further in debt. The goal here is to show a history of responsible money management. It might be tempting when money is tight to just let the lender take your security – but that will only serve to damage your credit score.

Second, look before you leap. Different lenders have different policies, so investigate each one you’re considering. Read the fine print and ask questions. Make sure you understand the interest rate that will be charged if you don’t pay the balance in full each month. Learn their grace periods, their penalties for late payments, and any other fees that may be associated with your account.

After 6 months to a year of responsible use, many lenders will increase your limit, which will further improve your credit score. When you continue to pay off the balance each month your credit repot will show that you have more credit available than you are using, and you will be seen as a responsible money manager.

Q:
Is there a difference with respect to a credit score between a house going into foreclosure and a house actually being foreclosed upon? The situation is this. House goes into default and is scheduled for foreclosure sale. Is one’s credit going to be damaged worse if the foreclosure sale occurs? Will one’s credit be better if they are able to pay off the entire loan without incurring additional debt prior to the bank redeeming the property at the foreclosure sale? I realize that there is a negative impact because of the late payments and the foreclosure process being commenced, is that as bad as it gets or does further negative impact result after the redemption? Stated another way, does paying the entire balance off prior to the foreclosure and redemption by the bank improve one’s credit in any way, or at least prevent it from getting worse?

Thank you for your help.

Todd S. Rayan

A:
Hi Todd,
This is a great question. Once you start being late on a mortgage payment the damage is already done to your credit score. I have not seen a difference in credit scores whether you foreclose or if a possible sale takes place before an actual foreclosure. But your creditworthiness to get future mortgage loans is affected if the home actually forecloses. If your home forecloses it will be a minimum of 3 years from foreclosure date before you can buy again. If foreclosure proceedings have started, in the eyes of some lenders this is considered a foreclosure anyways. HUD also says that if foreclosure proceedings have started and you have 120 mortgage late payments on your credit report, it’s counted as a foreclosure. In my professional opinion its better to sell before you foreclose on your home. It just looks better. It does not really matter which happens as far as your credit score is concerned because the damage is already done due to all the late payments.

CreditScoreQuick.com

Everything you do in life adds to your reputation – and your finances are no exception. The difference is, instead of word of mouth among your peers and business contacts, your credit score is recorded in black and white for any potential creditor, landlord, employer, or insurer to access.

That’s why it’s important to protect it, and to keep it accurate.

Your credit score tells everyone how you’ve handled your finances for at least the past 7 years. The better you’ve done with paying bills on time, and the lower your debt level in relationship to your income, the better score you’ll have.

The better score you have, the better for you when you want to borrow money. Higher scores get you lower interest rates, longer pay-off periods, lower fees, and less paperwork when attempting to get a loan.

Low scoring applicants are often rejected completely, or offered high interest rates, high minimum payments, and more fees. Why? Because they’re considered a poor risk. Creditors get all they can up front because they know that a person with a low score is more apt to default on the loan.

What’s a good score? Scores range from a low of 300 to a high of 900. 650 or higher is a good score and will usually earn you the best terms when applying for a loan. 620-650 is still considered “pretty good” and indicates a few minor problems with your credit history. You’ll get a little higher interest, but not too bad. Scoring under 620 puts you into the risk category, and the lower it gets, the bigger the risk. You may still get a loan, but don’t count on it.

Things that affect your credit score are:
• Your payment history
• Debt to income ratio
• Debt relative to credit card limits
• A long history of revolving debt
• Credit inquiries

That last one is something you can and should control immediately. If you’re shopping for a new car, for instance, do not let every car dealer run your credit. Refuse to discuss the financing and do not hand over your Social Security number until you’ve chosen the car you want and come to an agreement on the price. Ditto for furniture stores, appliance stores, etc.

Additionally, don’t respond to every credit card offer that comes in the mail. It might be fun to have a wallet full of cards you’ve never even used – just in case. But they will come back to bite you. Multiple inquires indicate that you are about to start spending way over your head – and that’s a red flag that can and will lower your score.

CreditScoreQuick.com