Rebuild Your Credit and Credit Knowledge
We have 2 critical functions as your credit specialist. First is reviewing and going through the process of disputing negative items in your credit history reports. Second is to provide you with recommendations that you have to carry out to hasten the process of achieving higher credit score and maintain it.
While we do the work above, here are important things that you should know about credit repair, credit report, ways to increase your credit score, and what you should do when denied credit:
- It is completely legal and legitimate business.
- It is anchored on “The Fair Credit Reporting Act”. This law gives you the right to dispute any item in your credit report. It allows for the removal of any entry that cannot be verified within a reasonable amount of time (about 30 days). This law also allows removal of accurate negative items through negotiation.
- It consists of your profile and credit payment history.
- It is kept and sold by “consumer reporting agencies” such as a credit bureau. The 3 most prominent credit bureaus include Equifax, Experian, and Transunion. Once you applied for a credit or charge account, a job or personal loan you already have a credit record in these three bureaus. A credit record contains information on your income, debt, credit payment history, if you have ever defaulted on any debts, if you were ever bankrupt and even information of any pending judgment or child support.
- By law, you are entitled to receive a free credit report from the aforementioned agencies. The report that will be forwarded to you, however, will not contain credit scores.
- 4 Types of information that Credit Bureaus collect and sell:
- Identification and employment information – this includes your name, date of birth, Social Security number, employer, as well as name of your spouse. It may also contain information on history of your employment, home ownership, income, and previous address (if requested by creditor).
- Public record information – this includes all events that are considered public record like foreclosures, bankruptcies, or tax liens.
- Inquiries – this is a record of all creditors who requested your credit history within the past year. It would be to your advantage of the inquiries are kept as low as possible.
- Payment history – this includes your accounts with various creditors together with balances, high balances, and outstanding balances. This may also contain referral of overdue accounts to a collection agency, charge off accounts, other delinquencies and similar events
- It is a number generated through a mathematical formula that is used as gauge for credit worthiness.
- The score ranges from 300-850. The higher the score, the higher the chances of being granted a loan. The lower the score, the lesser the chance to secure a loan. If you managed to get a loan despite a low credit score you will pay a higher interest rate compared to someone with a high credit score.
- A high credit score can mean savings of up to thousands of dollars when getting auto loan, credit card or home loans.
- Credit Score range and description:
|800 and higher||Excellent||- Your loan application will always be approved
- You will get the lowest Annual Percentage Rate (APR) on your credit cards
- This implies that you exercise good financial knowledge and discipline and you utilize a significant amount of credit monthly, repaying it in advance.
- This is a good range for long term loans such as mortgage since the long term savings will be significant.
|700 - 799||Very Good||- You will be given good rates and you will most likely be approved in any type of credit or loan application.
- 27% of the people in the US are in this range.
|680 - 699||Good||- Your loan approval is most likely assured albeit with a higher interest rate.
- This is the average credit score.
|620 - 679||Fair||- There’s a great chance that your rates wouldn’t be the best depending on the kind of loan or credit you are applying for.
- Should your applications be approved there will be specific restrictions that will be added to the loan term.
|580 - 619||Poor||- You can still get unsecured personal loan or even mortgage approval but the terms and interest rates would not be favorable.
- You will need to pay more because of longer payment period and high interest rate.
|500 - 579||Bad||- You can still get a loan but it would be highly unfavorable.
- If you have credit score of 500 you should ensure that you will make payments, if not it will make matters much worse for you financially. You may even risk bankruptcy.
|499 - below||Very Bad||- This is a red flag for you to get professional help on handling your credit.
- Should you manage to find a sub-prime lender, you will be given very high rates and very strict terms.
- It is best to improve your credit score before applying for any loan.
- Criteria of Credit Bureaus for determining credit score:
Payment History - 35%
Debt Ratio - 30%
Length of Credit History - 15%
Types of Credit - 10%
Number of Credit Inquiries - 10%
Note: As your credit specialist, we will assist you in deleting negative entries in your payment history. We will also guide you on maximizing your debt ratio score even if paying off credit cards is not applicable.
- Factors that Credit Bureaus consider in determining your credit score
The models for credit scoring are often complex and varied depending on the creditors and the types of credit. A change in a single factor can affect your credit score. On the other hand, improving your score usually depends on how that one factor relates to other factors being considered by the model.
Generally, scoring models use the following factors to assess your credit report:
- Payment history – this is a major factor in credit scoring. Basically, they want to know if you are paying your bills on time. If you have history of paying late, have pending collections or have declared bankruptcy, the same will negatively affect your credit score.
- Credit history – it seeks to know if you have a long credit history. In general, the longer you are able to hold your accounts the more trusted you are as a borrower.
- Number of inquiries – many inquiries can be negatively interpreted by credit reporting agencies. That is why you should only make queries or application when you are serious about it.
- Outstanding debt – this will reveal if you are managing your debt wisely. Maxed out credit cards give a negative impression.
Given the above factors you need to ensure that you always pay your bills on time; you don’t close old accounts; you don’t always apply for new credit; and you avoid using more than 30% of your available credit in your credit card so you can achieve a higher credit score.
If you have been denied credit or you didn’t get the terms that you want, you have several options. For one, you can request the creditor to provide you with the specific reason on why your application was denied. This request is supported by the Equal Credit Opportunity Act which mandates the creditor to provide you with the reason for credit denial if you made the request within 60 days. Please note that vague reasons for denial are considered illegal, such as “not meeting minimum standards” or “not having enough points on our credit scoring system”. Reasons that are acceptable include “You have low income” or “You haven’t been employed long enough.”
If the reason for credit denial was you being too near your credit limit on your credit cards or you have too many credit cards, you can consider re-applying after closing some accounts and paying your balances. Credit scoring system can be changed over time especially if there is change on information.
If you didn’t get the rate or terms that you want or have been denied altogether, you can ask the creditor what credit scoring system they used; the factors used in that system, and what you can do to make application more favorable. If your credit application has been accepted you can ask your creditor if you have been given the best rate and terms. If the answer is no, you can ask the reason why. If the reason is because of inaccuracies in your credit report, you have the rate to dispute them.
7 Steps to Improve Your Credit Report to Avoid Credit Denial
(Please note that we can assist you on Steps 1-3)
- Request most recent copies of your credit reports from all 3 bureaus (Equifax, Experian, and TransUnion) – it is critical to get the most recent copies of your credit report since the same is always changing. Keep in mind that if another person will run your score or report it would most likely hurt your score; if you order it yourself, your score will not be affected. You may also consider signing up for credit monitoring to track your report in real time.
- Make sure to correct all inaccuracies in your credit reports – you need to carefully review your credit reports. Be mindful of negative items that can influence your score away from your favor. The same include the following: late payments; charge-offs, collections or other negative items that are not yours, accounts listed as “settled”, “paid derogatory”, “pad charge-off” or other things that are not labeled as “current” or “paid as agreed”; accounts listed as unpaid but were included in bankruptcy; and negative items that are more than seven years and supposed to have been automatically deleted in your report (exercise caution on this one because there are instances wherein scores go down when bad items fall of the report). You also need to make sure that you don’t have duplicate collection notices listed (duplicates should be removed). You should ensure that your proper credit lines are posted to avoid negative effects (some creditors do not post your correct credit line to make you appear less attractive to their competitors); should this happen in your credit report, you need to officially bring this to their attention. Moreover, you have to make sure that bankruptcies (if you have any) will reflect 0 balance. Oftentimes a creditor will not report a “bankruptcy charge-off” as zero balance unless it’s been disputed.
- Negotiate to remove any negative marks in your credit report with your creditor – if you are a loyal customer and have good relations, creditors are normally open to deleting simple negative entry like one-time late payment if you make a request. For serious remarks however like overdue bill that have gone to collection, you can negotiate by paying a specific amount to remove the negative item. If you are going to resort to this make sure that your agreement is in writing. Avoid paying unless the creditor agrees in writing that they will delete the negative item from your credit report. Nevertheless, you need to be careful with the wordings; make sure you do not admit that the debt that has gone to collection is yours. If you make an admission of debt the stature of limitations can start again, giving the creditor the option to sue you. We will help you to carry out this complicated step as your credit specialist.
- Make sure all your credit cards have credit below 30% of the available credit line – this act alone can greatly improve your score. Remember that the credit scoring system wants to make sure that you are not over-debt but they also want to ensure that you are truly using your credit. The 30% if the available credit line appears to be the perfect “balance to credit line” ratio. For instance your credit line for a particular credit card is $10,000 you should make sure that your credit is not beyond $3,000 even if you are paying full each month. If your balance is higher than 30% pay them down. You can also try requesting your creditor to increase your credit line without referring to your FICO score or your credit report. You can tell them that you are buying a house and you cannot afford to have any hit on your credit report. You might be rejected but since you asked there is always the chance of being approved.
- Refrain from closing your old credit card accounts and avoid applying for new ones– your old credit card accounts will favorably support your credit history. If you no longer want to use them, just keep the cards but never close the account. At the same time, avoid applying for new credit cards because it will not help your credit score. Moreover, your credit report gets reviewed every time you apply for new credit cards. Do not forget to keep your credit card use to the minimum until the next credit scoring.
- Make sure that your credit report contains at least three revolving credit lines and one active installment loan – the scoring system is favorable if you maintain different credit accounts and if you have 3 revolving credit lines. Consider opening credit cards if you currently don’t have three active credit cards. If due to poor credit ranking your credit card application has been rejected, try setting up a “secured credit card” amount. This means that you need to make a deposit that is at least equal to your credit limit. This serves as guarantee that you will be able to repay the loan. This is a good way to establish credit. With regard to installment loans, furniture, major appliance of mortgage will result to higher score.
- Exercise patience at all times – there is waiting time of up to 30 days for all the above mentioned items to get reported and a much longer time for them to be reflected on your credit history reports. Be patient and endure the process. Be comforted in the fact that you can save a lot of money if any of the above process produces favorable results.
Metro NY Credit Repair
Brooklyn, NY, 11203
Call Us: 347-391-0295
- In Your Local Area anywhere Nationwide
- The Experience You Want
- The Service You Expect
- The Quality You Deserve!
- Call 347-391-0295 for Free Estimate