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The Benefits of Aging – Most Older Americans Have Higher Credit Scores

Rachel — Fri, 28 Jul 2017 07:13:48 +0000

The Benefits of Aging – Most Older Americans Have Higher Credit Scores Rachel Fri, 07/28/2017 - 03:13

Older Americans usually have higher credit scores
Image Source: Pixabay.com

When you think about getting older, you might focus on the negatives. You may not be able to jog as far as you once could, and you’ll notice a few smile lines and some gray hairs. However, lots of things also get better with age including fine wine, gourmet cheese – and your credit score. If you’ve been careful with your finances, you might have a healthy 401(k) to help with your finances or a well-deserved pension coming your way. Credit scores, in particular, tend to improve as we age.

Older consumers have higher credit scores than younger

A recent credit score study by Value Penguin showed the average Vantage credit score is 673 while the average FICO score is 695, across all age demographics. But if you drill down deeper into the numbers, you see many differences emerge based on characteristics – one of them being the age of the consumer. Across five age groups, there is a noticeable increase in credit scores the older we get.

Generation Z

For the youngest generation of kids, just out of college and getting started, the average credit score is lower than average, at just 631 for FICO. This age group was born in 1996 or later and tend to have one credit card, on average, and carry a little more than $1500 as a credit card balance. This generation tends to have a lower score but also much less debt than later generations.

Generation Y

This generation, born between 1995 and 1982, has double the debt of Gen Y and double the number of credit cards. Their credit score is just a few points higher than Gen Z. This group carries not only double the overall debt compared to the next youngest demo but also double the credit card debt and more than double the retail debt from sources like store-issued credit cards.

Generation X

Gen X’ers are born between 1967 and 1981 and have a much better credit score, averaging around 655 under the FICO calculation. These are consumers that are old enough to be parents and make up the bulk of the US workforce. This group carries the greatest amount of retail debt at almost $1400 and nearly the highest overall non-mortgage and auto debt at more than $42k.

Baby Boomers

Boomers were born between 1966 and 1947 and are on the cusp of retirement, although many are working longer than their parents did because of more restrictive (or non-existent) pension offers and greater debt. Baby Boomers have the greatest overall debt at almost $43k and carry the highest credit card balances at close to $7k while having much higher credit scores at around 700 in FICO terms.

Silent Generation

This generation was born between 1946 and 1925 and represents great-grandparents and retirees. Most are out of the workforce but benefits from the highest average credit score at an average of 730 on the FICO scale. They carry fewer credit cards than Boomers and half the credit card debt. Their overall debt is closer to Gen Y, and they tend to carry much less in retail debt.

Why do credit scores get better as we age?

One of the factors in the FICO calculation is the average age of credit. Older Americans often have credit card accounts they’ve had open for decades which can boost their score. The older you are, the more likely you are to have a diverse mix of credit including a mortgage, auto loan, and credit cards. Having an array of types of credit can also boost your score.

If you’re looking at retirement, but also stuck with overwhelming debt, bankruptcy might help you move into your golden years with less debt weighing you down. After bankruptcy, rebuilding your credit is the next step. To find out more about improving your credit after bankruptcy, talk to Credit Score Keys. Call 919-495-2365 today for a free consultation.

Resources:

Value Penguin study

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Credit Scores Are Better Than Ever – Why It’s the Perfect Time to Improve Your FICO Calculation

Rachel — Thu, 20 Jul 2017 07:10:59 +0000

Credit Scores Are Better Than Ever – Why It’s the Perfect Time to Improve Your FICO Calculation Rachel Thu, 07/20/2017 - 03:10

Now is the time to work on your credit
Image Source: Flickr User Investment Zen

Credit scores are, on average, higher than they have ever been. If you’re coming out of bankruptcy or other tough financial circumstance, now is a good time to work on improving your credit score. Here’s a look at why credit scores are on the rise and what you can do to improve yours.

Recent Change to How Certain Debts Are Reported

This month, a change went into effect on how public records, judgments, and tax liens are reported to the three credit bureaus – Experian, TransUnion, and Equifax. Many consumers saw an effortless boost to their credit score because the three reporting bureaus cleared some items in question off their reports. In the past, creditors, debt collectors, and tax agencies were able to report certain negative items onto consumer credit reports with inaccurate, missing, or minimal information. Once this sloppy practice was disallowed, millions of consumers saw a boost to their credit score.

Information on Your Credit and How Scores are Calculated Is Everywhere

For a long time, it was a hassle to get a look at your credit report or to see the credit score calculated from the reported information. Today, though, there is a wide array of resources to help you get educated on the algorithms used to calculate scores and to see what’s on your credit report, and how to clean it up where possible. Free credit score services proliferate, so it’s not costly to get the information you need to work on your credit score. With easy and helpful info at hand, consumers have been able to get their hands dirty and work to improve their FICO score.

Negative Items Are Falling Off Daily

The most recent recession crashed home values in 2008 and saw a spike in foreclosures that peaked in 2010. As of this year, many of these negative items from the worst financial crash in recent history will fall off your credit report if you had collections actions and a foreclosure in 2010 or prior. After seven years of inactivity or account closure, items come off your credit score. However, you shouldn’t trust that this will happen organically. Educate yourself on when items should come off and check to see that they do. Seven years from the date of your last payment or use of a credit line is the threshold.

Comparison Credit Shopping Is Now Easier

When you’re shopping for an auto loan, mortgage or credit cards, you might apply to several different creditors, and if each runs a hard pull, this can lower your credit score. Ironically, lowering your credit score by applying for credit can then make you less likely to get preferable interest rates. Increasingly, many lenders allow a soft pull rather than a hard pull during the evaluation process. By getting a peek at your credit profile, creditors can let you know if you’re likely to be approved and, if you are, what your interest rate will be. This can protect your credit rating while getting the information you need.

It’s Never Been Easier to Improve Your Credit Score

If you’re coming out of North Carolina bankruptcy and looking to improve your FICO score, the time has never been better. There is a lot of information available to help you understand your credit report, learn which information on your report more heavily impacts your credit score calculation and see how to strategically improve your score month after month until you have the credit score you need to meet your financial goals. Good credit doesn’t just happen – it’s something you must pursue.

To find out more about increasing your credit score after bankruptcy, contact Credit Score Keys.

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When Paying Debt Can Hurt Your Credit Score – And Why

Rachel — Thu, 13 Jul 2017 07:08:30 +0000

When Paying Debt Can Hurt Your Credit Score – And Why Rachel Thu, 07/13/2017 - 03:08

When paying debt can hurt your credit score
Image Source: Pixabay.com

There are lots of reasons to improve your credit score. If you want to buy a new car or get a home loan or refinance your existing mortgage, you’ll get a preferable interest rate with a higher credit score. If you’re hoping for a new job that requires good credit or a security clearance, that’s another reason to better your score. But one thing you might not know is that, in some cases, paying down debt can hurt your credit score. Here’s why.

Paying Off an Installment Loan Can Drop Your Credit Score

Many factors play a role in your credit score calculation. One of them is types of credit. Suppose you have one installment loan, such as a car loan, and the rest of your accounts are credit cards. Paying off your installment loan changes your mix of credit accounts to less diverse, and this can drop your score a bit.

Also, an installment loan benefits your credit less over time which may sound strange. However, it offers a greater benefit earlier in the life of the loan, and your score can drop slightly when you pay it off because it’s no longer actively factoring into your credit score on a monthly basis as a positive and open credit account because it closes once you’re done.

What this means is that if it won’t affect your budget or do other adverse damage, paying off an installment loan early may not be a good idea. If you will see significant savings by paying it off early, that makes sense. But if it’s a wash on your finances and there’s nothing to be gained from paying it off sooner, it may benefit your score to keep paying as planned and not accelerate payoff.

Paying Off a Collection Item Can Worsen Your Score

If you have a collection item on your credit report, you might hope that if you pay off the item, the debt collection firm will remove it as a negative item. However, a debt collector is under no obligation to remove an item from your credit report. Instead, after you pay it off, all they legally must do is report that it’s at zero balance due.

Although it seems like paying off the debt should raise your score, in fact, it could drop it. That’s because activity on a collection account can be interpreted by the scoring algorithm as a bad thing. The smarter approach is to negotiate with the original creditor if you can. For instance, if it’s a VISA account, talk to the card issuer and ask if you can pay them.

If you pay off the original creditor, the debt collector has no right to report to the credit bureaus. If you must work with the debt collection firm, negotiate a payoff that includes them removing the item from your credit score. You should ask for the agreement in writing before you pay them and record conversations with the firm.

North Carolina is a “one party consent” state, meaning you can record your personal phone calls without the consent of the other party. Once you pay, follow up to ensure they remove the item from your credit report as promised. But without an agreement and assurance first, the collection agency is not obligated to remove the item even though you paid.

Paying Off an Older Item Close to Aging Off of Your Report

It’s important to know the delinquency dates of your debt in collections so you can avoid making a big mistake by paying an older item just before its status is set to change. The first date to know is the statute of limitations. In North Carolina, most debt has a three-year statute. What this means is that from the date you stop paying the debt, the legal enforceability expires in three years.

For instance, if you have a VISA card and stopped using the card and stopped paying it in January 2014, that is when the statute of limitations clock started ticking. It’s from the date of last activity which means a payment by you or a charge by you on the card. In January 2017, if you didn’t use the card again or make any further payment, the statute of limitations expires.

That means the card issuer or a collection agency they sold the debt to cannot sue you after that three years. They can still ask you to pay, but it’s voluntary. The problem is that if you decide to pay the debt, it can restart the statute. The second date to know is when it drops off your credit report. That comes seven years after the last activity.

If the creditor can convince you to pay them even $5, it’s a trick to get the statute and credit reporting limits to start over again. So, before you pay any old debt, educate yourself on the ticking time limits for legal enforceability and credit reporting or else you could damage your credit score for years to come with an ill-timed mistake.

If you’re rebuilding your credit score after bankruptcy, Credit Score Keys is here to help. Call us at 919-495-2365 today for a free consultation.

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5 Ways to Improve Your Credit Score This Year

Rachel — Wed, 05 Jul 2017 07:05:57 +0000

5 Ways to Improve Your Credit Score This Year Rachel Wed, 07/05/2017 - 03:05

Good habits protect your credit score
Image Source: Flickr User Araí Moleri Riva-Zucchelli

After bankruptcy, one of the first things to do to take full advantage of the fresh start you have is to begin rebuilding your credit as soon as possible. Within just a few months of your bankruptcy discharge, it’s time to start working on your credit. For most people, that starts with a secured credit card, then an unsecured one, and moves on from there. From there, it’s a matter of slow and steady. Along the way, there are some things you need to know about getting and keeping your credit score as high as it can be. Here are five ways to improve your credit score.

#1 Keep Balances Low or At Zero

If you’ve ever been in over your head with debt, you know it’s a terrible feeling. Not only that, but it’s a slippery slope. Paying off your credit cards in full each month is the best way to keep your credit cards from getting out of control. But it’s more than that. Balances determine utilization.

A big part of your credit score is utilization, which is the amount you’re using on your credit lines. If you use too much of your available credit, your credit score will drop, and you might not be offered future credit line increases. Creditors want to see that you use credit responsibly and pay promptly.

#2 Never Pay Late or Less Than You Should

You might think paying a credit card bill late now and then is no big deal. You might think it’s not such a hazard if you pay just one car loan payment or one mortgage payment late. In fact, it’s that first late payment that hits your credit score hard and causes it to drop.

Subsequent late payments will continue to erode your score, but it’s the first missed payment that takes the biggest toll, in most cases. You should also never pay less than the minimum due on a credit card or less than the installment owed on your car loan or mortgage loans.

#3 Don’t Close Old Accounts

Another aspect of your credit score is your average age of credit. It is calculated by totaling the years that your credit card accounts have been open divided by the number of credit cards. Suppose you have one card that’s six years old, two that are two years, and one that’s one year old.

That’s a total of eleven years of credit divided by five cards for an average age of 2.2 years. If your oldest card is a secured card and you decide to close it in favor of your newer accounts, you would drop to an average age of 1.25. That’s not nearly as good, and your score will drop just from closing it.

#4 Don’t Apply for Credit Haphazardly

You should not apply for credit unless you’re pretty certain that you will be approved. Many credit monitoring services will alert you when your score has improved enough to qualify for specific offers. By doing some research, you can make sure you meet the criteria.

For instance, some card issuers won’t work with bankruptcy filers until a certain amount of time has passed. Others won’t approve you if you’ve opened too many accounts recently. Only apply for credit when you meet the known criteria and don’t apply needlessly or often.

#5 Be Consistent with Credit Behavior

One of the things that creditors look for is consistent behavior. Suddenly running up your credit cards is a red flag that there’s a problem. Suddenly paying only the minimums is another warning sign. Missing a payment is an issue as well that can make a creditor think something is wrong.

Other warning signs that could cause a creditor to lower your credit line or refuse an increase is using your card for a cash advance or using your credit cards at places like pawn shops, gambling establishments, or other outlets that are a warning sign of risky behavior.

Once you start rebuilding your credit after bankruptcy, it’s important to stay on the right track. Re-establishing credit is a slow and steady process that requires diligence and patience. To find out more about rebuilding your credit score after bankruptcy, contact Credit Score Keys.

Call 919-495-2365 today for a free consultation with the credit experts at Credit Score Keys.

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Your Credit Score May Go Up July 1 – Here’s Why You May Have More to Celebrate Soon

Rachel — Thu, 29 Jun 2017 07:02:44 +0000

Your Credit Score May Go Up July 1 – Here’s Why You May Have More to Celebrate Soon Rachel Thu, 06/29/2017 - 03:02

Some credit items will be purged Saturday
Image Source: StockSnap.io

On Saturday, July 1, many Americans will get a pre-Independence Day reason to celebrate when their credit score goes up without them changing a thing they’re doing. Both FICO and VantageScore have estimated that up to 20 million consumers will get a boost this weekend from a radical shift in the way some items are reported to the credit bureaus.

Do You Have a Civil Judgment on Your Credit Report?

As of Saturday, if you have a civil judgment on your credit report, it should be stripped off which could improve your credit score. A civil judgment is a court order demanding you pay money as a result of a lawsuit. This can come if you’re sued by a creditor over an unpaid debt. For instance, a credit card issuer might take you to court for an unpaid balance.

The reason many civil judgments are issued is that the consumer doesn’t show up to court. For many, they’re scared to go to court or don’t realize what will happen if they don’t appear. Even if you don’t have the money to pay the debt, showing up to court and telling that to the judge might help you out. If you didn’t show, the creditor got a default judgment.

The rationale in stripping off civil judgments is because they’re often erroneously reported to a creditor’s report. In some cases, the wrong person is sued, or there’s an error in the lawsuit itself. The debt action might have been time barred, the consumer might not have been notified, or the litigator didn’t have the right to file the suit. These will be removed across the board.

Do You Owe a Tax Lien? You Might Get Relief

More than 60% of tax liens are estimated to be removed from consumer credit reports as of Saturday, July 1. A tax lien is an encumbrance on an asset due to a tax debt that prevents you from selling the property without settling the tax obligation. This can come from property taxes, federal income tax, or North Carolina state income tax.

Not all tax liens will be removed as a part of this effort by the credit bureaus to clean up inaccurate reporting that has unfairly damaged some consumers’ credit scores. If your credit score is lower than it should be, you’ve likely paid more for some credit score-sensitive services like utilities or insurance. A lower score will push interest rates higher on credit cards and loans or trigger denials.

Consumers that have been fighting to get errors corrected related to these types of items should check their credit report after Saturday to see if their tax liens or civil judgments are gone from their report. This can be a big morale boost if you’ve been stressed about these negative items and their impact on your credit score – and your finances.

How Much Will Your Credit Score Improve?

The prediction of credit score improvement varies by which credit score calculating entity made the prediction. Representatives from VantageScore estimated that consumers with these items on their credit report could expect a 10-point boost, on average, after the Saturday, July 1 purge. FICO estimates are better with an estimated boost of up to 20-points.

The higher your credit score, the less likely that you have negative items like this lingering on your credit report, so the less likely this shift in reporting will impact your score. However, for those with poor credit scores, the odds of a lift are much higher with those with scores less than 500 most likely to benefit.

More credit report changes are coming soon as well. Credit bureaus will require enhanced levels of debtor identification before they allow debt collectors to record collection accounts because of the high rate of errors. Medical debt collections less than six months old will stop reporting. Plus, medical collection accounts that were paid by insurance will be removed.

These are all steps in the right direction. If you’re rebuilding your credit score because you’re coming out of bankruptcy, Credit Score Keys can help. Contact us today to find out more. Call 919-495-2365 for a free consultation today.

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7 Truths About Your Credit Score You Might Not Know

Rachel — Thu, 15 Jun 2017 07:58:33 +0000

7 Truths About Your Credit Score You Might Not Know Rachel Thu, 06/15/2017 - 03:58

Things you need to know about credit
Image Source: StockSnap.io

There’s a lot of misinformation out there about credit scores. Even people that consider themselves savvy about their credit score might believe some myths that have gained traction online. Understanding how your credit score is calculated and what impacts your credit report is critical to know so you can protect and improve your score to improve your finances and options in life. Here’s a look at seven truths about your credit score you might not know.

#1 Paying Off Debt Can Drop Your Credit Score

It seems like paying off a loan should be counted as a good sign for your financial responsibility. Logically, that seems sound but when it comes to your credit score, paying off an installment loan can trigger a credit score decrease. Why? Part of your credit score is the mix of credit types. Paying off an installment loan decreases your debt mix and your score. Potential lenders like to see a diversity of credit types so they know you can handle all types of debt responsibly.

#2 An Old Account Closed or Canceled Can Harm Your Score

Do you have an older secured credit card from when you started rebuilding your credit or a store card from a retailer you no longer frequent? If you close an older account or a card issuer closes your account for inactivity, it can decrease your average age of credit which can, in turn, drop your credit score. Also, if you’re carrying any credit card balances, the closure of an older account can drop your score because your overall credit lines drop and your balance then represents a higher utilization.

#3 Not Using Credit Can Hurt Your Credit Score

It might seem like avoiding using credit cards is a good thing and will keep your credit score higher. It’s not true and here’s why. If you never use your credit cards, your card issuer can close your account for inactivity (see #2) or can lower your credit limit or refuse to raise your limit. You might think credit limits don’t matter if you don’t use your cards, but if you ever have to carry a balance and have only lower limits due to low usage, your score can drop because of higher utilization.

#4 Paying Your Bills on Time Doesn’t Raise Your Score

Some people think paying your bills on time ensures a good credit score. That’s true when it comes to debt that routinely reports to the credit bureaus like your mortgage, car loan, and credit cards. Other bills like your water and electric don’t report and won’t affect your score unless the debt gets so delinquent that you’re reported to a collections agent. Paying all your bills on time is the best financial practice, but it won’t raise your credit score.

#5 Your Credit Score Will Not Just Take Care of Itself

You might think if you pay your bills and don’t exceed your card limits, your credit score will be just fine. That’s not always true. Credit report errors, which are fairly common, can throw off your score. Also, unauthorized hard inquiries, identity theft, and mistakes can all drag down your score. In fact, you should monitor your credit routinely to make sure there are no mistakes, fraud, or other issues. One of the easiest ways to accomplish this is to sign up for a free or low-cost monitoring service.

#6 Other People’s Actions Can Impact Your Credit Score

If you co-signed a loan or had a joint account for utilities or other financial responsibilities, the other person involved in that financial transaction can mess up your credit if they fail to meet their obligations. For instance, if you co-signed an auto loan and the borrower doesn’t pay the debt, your score will take a hit. You might not even know until they’ve missed a few payments and your score has already dropped. Monitoring your credit (see #5) can alert you to an issue before things get too dire.

#7 Credit Scores Matter for Many Reasons

You may be one of those people that don’t worry too much about your credit score because you like to operate on a debt-free basis, so you don’t concern yourself with your FICO score. Not wanting to have debt in your life isn’t a bad thing but having a good credit score carries other benefits. You’ll pay less for car and homeowners insurance and certain utilities if you have a better FICO score. A good score can also help you get a job you want if a credit screening is part of the background check.

If you’re rebuilding your credit after bankruptcy, contact Credit Score Keys for help improving your FICO score to make the most of your fresh financial start. Call 919-495-2365

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What You Must Know About Credit Utilization

Rachel — Thu, 15 Jun 2017 07:00:34 +0000

What You Must Know About Credit Utilization Rachel Thu, 06/15/2017 - 03:00

Credit cards can help or hurt your credit
Image Source: Flickr User CafeCredit.com

You know the old saying, use it or lose it? To some extent, that’s true with credit utilization and credit cards, but you can also lose it if you use it too much. Card issuers won’t like it if they approve you for a credit card and you never use it. Likewise, card issuers won’t like it if they send you a credit card and you max it out and then don’t make the payments. Somewhere in the middle is the sweet spot of credit utilization and keeping yourself out of unaffordable debt. Here’s what you should know.

What Is Credit Utilization and Why Is It So Important?

Credit utilization is the second greatest factor that drives your credit score. Payment history carries the most weight because it counts for 35% of your score. But utilization is a close second at 30% of your score. But what is credit utilization, why is it so important and how can you use credit wisely to leverage this factor for a better credit score?

What Is Credit Utilization?

Credit utilization is a ratio of the total credit you have available versus how much of it you’re using. For purposes of simplification, let’s say you have one credit card with a $3,000 total line of credit. If you charge $2,000, your using two-thirds of your available credit which is 66% percent. That’s way too high, and even if you make the payments on the card account on time, your credit score will suffer until you drop down to a preferable level.

Why Is Credit Utilization So Important?

If you’re tapping into a lot of your credit line, the card issuer might assume you’re having problems managing your money and are over-extending yourself by over-spending and they might lose out if you can’t afford to pay your debt. Card issuers prefer to see you use your credit cards regularly, pay a good bit of the balance off each month and never run late on a payment or give them cause for concern about your creditworthiness. It’s a measure of your ability to use credit wisely.

Should You Just Avoid Using Your Credit Cards?

Things can get tricky with credit utilization. The way to keep your utilization low is to pay off your cards in full each month or as close to full as you can. However, simply avoiding using your cards to keep your utilization low is not the best answer in most cases. Why? Card issuers want you to use your cards. If your accounts sit inactive, they will close them, and that can damage your credit score.

Plus, if you use your cards regularly and pay off responsibly, you’ll get increased lines of credit which can keep your utilization lower if you ever do have to carry a balance. The ideal sweet spot is for you to have lots of available lines of credit that you don’t tap with as little of a balance carried over each month as possible – while still utilizing your credit cards to keep the issuers happy with you.

What Is a Good Level of Credit Utilization?

Some websites will tell you that as long as you’re under 30% utilization, you’re fine. However, both FICO and Vantage Score advise you to keep utilization under 20%. Also, there are two ways to look at utilization. First, is on individual cards and second is overall. For instance, if you have that $3k credit limit from the example above and a $2k balance, that card’s utilization is at 66% which is too high. If you have two more credit cards with healthy credit lines, so you have a total available credit of $10k, but you only have that $2k balance, your overall utilization is 20%. The latter number is important but maxing out even one card is not a good idea because that card issuer might cut your credit limit.

Because you need to use your cards to keep the card issuers pleased and offering ongoing credit limit rises, one approach to consider is using credit cards for things you’d pay anyway, then pay off in full on your payday. For instance, if you use a card for your monthly Netflix, it gives activity without driving a balance. You can do the same for utilities or your cell bill. That allows you to use your cards responsibly without getting in over your head.

To find out more about using credit responsibly to rebuild your credit score after bankruptcy, contact Credit Score Keys. Call 919-495-2365 for a free consultation.

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Good News! U.S. Credit Scores Have Never Been Higher – But Debt Is Climbing Too

Rachel — Thu, 01 Jun 2017 08:52:13 +0000

Good News! U.S. Credit Scores Have Never Been Higher – But Debt Is Climbing Too Rachel Thu, 06/01/2017 - 04:52

Credit score rising, but so is debt
Image Source: Flickr User Investment Zen

The Wall Street Journal (WSJ) recently shared the good news that this spring, U.S. credit scores reached their highest levels since FICO started tracking scores (which began back in 2005). The average American’s credit score is now 700. That’s impressive on the scale of 300 to 850 used by Fair Isaac Corporation. It’s not perfect credit by any means, but it’s good enough to get a consumer into a decent car loan, mortgage, and credit card deals with favorable interest rates.

Credit Scores Are On the Uptick All Around

A FICO score of 700 ranks as “good,” which is defined as roughly 670-739 points. Even those consumers that don’t average 700 are sitting better than they were a few years ago. WSJ also reported that the percent of consumers with fair credit has dropped. The range for “fair” is 580-669. As of the most recent report, just 20% of Americans have fair credit compared with 25.5% in that range back in 2010. Scores from 300-579 are considered “very poor.”

The Great Recession Made Us More Careful About Debt

After the recession tore family finances apart in the late 2000s, many people are now gun shy about racking up debt. Not only that, but Americans have been saving more of their money. Personal savings now average 5.3% from recent surveys, which is far and above savings statistics from pre-recession numbers. Consumer default rates on debt are also much lower than in recent years which means people are handling their debt load more responsibly. These are all good signs.

Other Debt on the Rise, Cause for Concern?

Although average credit scores are higher and delinquency rates lower, there are other concerning statistics. Student loans and credit card debt are both on the rise, both no exceeding $1 trillion. U.S. News reports that the average American’s debt profile is starkly different from a decade ago with student and auto loans plus credit cards taking precedence over mortgage debt as many struggle to step into home ownership. Household debt at its peak in 2008 was $50 billion less than it stands today at $12.7 trillion.

Consumer Confidence Up, but Debt Mitigates Spending

Despite consumer confidence in the economy, Nasdaq retail analyst Josh Elman is concerned. Elman told U.S. News that the average consumer “isn’t spending as robustly as everyone had hoped for, especially given the strong employment situation” and added, “recently, I’ve started to think about whether the consumer’s too stretched.” By this, he means that despite the healthy job market, people might be too tapped out by existing debt to spend which can slow consumer and economic growth.

Caution: Credit Card Delinquency on the Rise

While debt delinquency overall is lower than it has been in years, credit card delinquency is on the rise which might indicate consumers have overspent and are now struggling to pay the piper. But the flip side of the booming credit market is that if you’re rebuilding your credit after a bankruptcy, this could be a perfect time to get into new credit card accounts while the market is wide open. However, the key to using credit cards to improve your credit is to use them sparingly and pay off in full each month.

A Healthy Economy Is a Good Time to Re-establish Credit

If you’ve just come out of a bankruptcy or are considering bankruptcy to shed debt you can no longer manage, now might be a very good time for you to get out from under debt and kick-start a new and improved credit score. The sooner you get rid of your old debt and get a clean financial slate, the faster you can be on the road to financial recovery and a credit score rebound. Federal Reserve research shows that those that choose bankruptcy see higher credit scores sooner than those that muddle on in debt.

To find out more about improving your credit score after bankruptcy, contact Credit Score Keys. We help North Carolina consumers coming out of bankruptcy to regain their financial footing and re-establish their credit. Call 919-495-2365 today for a free consultation.

Resources:

US News

Wall Street Journal

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Did You Know Bankruptcy Discharge Can Increase Your Credit Score?

Rachel — Thu, 25 May 2017 06:48:38 +0000

Did You Know Bankruptcy Discharge Can Increase Your Credit Score? Rachel Thu, 05/25/2017 - 02:48

Bankruptcy can help improve your credit score
Image Source: Flickr User CafeCredit.com

Most consumers considering filing bankruptcy wrongly believe that doing so will wreck their credit score for a decade. Nothing could be further from the truth so long as you take advantage of the fresh start offered by bankruptcy and work to improve your credit score. In fact, most bankruptcy filers find that their score begins to rebound organically after a Chapter 7 bankruptcy discharge. Here’s why.

Financial Problems Sabotage Your Credit Score

When you’re in over your head with debt, your credit score can take a beating. One missed or late payment can send your score plummeting. If you max out credit cards, miss payments continually, and run over your limits, your score can continue to drop every month. Although it’s the first missed payment that drops your score the most, ongoing issues will continue to send it downwards.

When you file Chapter 7 bankruptcy, your credit card debt is gone within months, and that means the constant negative reporting to your credit report stops. That alone is a relief. Most people that file bankruptcy are in a credit score free fall before filing. And for those that muddle on with debt and don’t file bankruptcy will see their scores continue to drop.

Federal Reserve Research Shows Discharge Helps

The Federal Reserve of Philadelphia published research last year that showed before filing Chapter 7 bankruptcy, the average consumer credit score was 538. But by the time discharge was achieved, their score had risen to an average of 620. That’s more than an 80-point increase with no action taken aside from filing bankruptcy and seeing it through to discharge.

From there, the discharge can have an increasingly positive effect on your credit score if you take strategic steps to improve your credit. Aside from filing Chapter 7 and getting a discharge, you must take specific steps to keep your credit score on the right track. But the research clearly shows that filing bankruptcy represents the opportunity for a rapid increase in your credit score.

Don’t Believe the Myth About Bankruptcy and Credit

While it is true that a Chapter 7 bankruptcy will continue to appear on your credit report for up to 10 years, what is not true is that it will continue to drag down your score as long as you’re working to rebuild your credit score. After the initial rebound offered by bankruptcy discharge, you can improve your credit score month after month until it’s as good or better than before your finances went awry.

For those struggling with more debt than they can service, Chapter 7 bankruptcy can offer the fastest and easiest way to get a fresh financial start. Chapter 7 eliminates not only credit card debt but also medical bills, signature loans, and some older income tax obligations. It will not help with secured debt, child support, alimony and, in most cases, student loans. However, the debt relief under Chapter 7 is impressive.

Rebuilding Credit After Bankruptcy Discharge

After the initial jump that most Chapter 7 filers see after discharge, you can start to work on re-establishing your credit proactively. Usually, it’s a secured credit card that will be the place to start. In some cases, you might be able to leap straight to an unsecured card depending on your credit score after bankruptcy. It’s important to sift through offers and find one with fewer costs and preferably, no annual fee.

From there, you can add credit accounts wisely so that your credit score is always improving. By using credit accounts and paying them off in full each month, you will encourage creditors to continually increase your credit lines, which boosts your score as well. To learn more about improving your credit score after bankruptcy, contact Credit Score Keys.

Call 919-495-2365 for a consultation on improving your credit score after bankruptcy, getting new credit, and increasing your lines of credit to boost your score.

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How Can You Take Action to Improve Your Credit Score?

Rachel — Thu, 11 May 2017 07:42:02 +0000

How Can You Take Action to Improve Your Credit Score? Rachel Thu, 05/11/2017 - 03:42

Make a plan to improve your credit
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Your credit score is made of five components – credit utilization, payment history, average age of credit, mix of credit, and new credit. Some of these facets of your score are easier to impact and control while some are more of a challenge. Here’s a look at how you can work on your credit score.

How Do You Adjust Your Credit Utilization?

Credit utilization is a big part of your credit score. With payment history, utilization makes up the most of your credit score. If you can moderate your spending or have the money to pay down your debt, you can adjust your credit utilization and boost your score swiftly. Some blogs recommend not going over a 30% utilization on your credit cards, but sticking to a lower percentage may be better.

If you have a total of $20k of credit lines on your cards, $6k in total balances would put you at 30% utilization. If you’re carrying more than that, paying it down to at least 30% should boost your score once the lower utilization is in place for a month. However, maxing out even one card, even if your other cards have low balances, can be bad, too. If possible, pay off all cards in full each month.

How Can You Affect Your Average Age of Credit?

According to The Motley Fool, to have a high credit score, you need to aim for an average age of credit of five years or more. This is a fairly simple piece of your credit score to calculate. Say you have five credit cards – two were opened five years ago, one was opened four years ago, another from two years ago and the last was opened about a year ago. You add the years (5 + 5 + 4 + 2 + 1 = 17) up first. Then you divide that by the number of card accounts (17 / 5 = 3.4 years).

Three years isn’t bad, but it’s not great either. Every time you open or close a credit card account, this average will change. This is why you should think carefully before you close out an older account that you might not use often or has a less than favorable interest rate. In the same way, opening a new account can drop your average. However, once your average is over five, you have more latitude.

How Can You Impact Your Payment History?

Payment history is another big part of your credit score and it’s not something you can alter after the fact. If you’ve missed a payment in the past or made a late payment, that impacts your payment history. The key word there is “history and it’s hard (even downright impossible) to rewrite the past. However, if you recently missed a payment and never have before, there’s a slight chance you can change your fate.

If you’ve always been a conscientious card holder and pay a few days late, you might be able to call customer service at your card issuer and offer an explanation, promise it will never happen again, and make the payment ASAP, and they might give you a one-time pass and not report you to the credit bureaus. Even a one-time late payment can cause your credit score to drop significantly.

How Can You Change Your Credit Mix?

Both your credit mix and new credit each represent 10% of your credit score and both of these are things you can affect with relative ease. Adding new credit to your report can boost your score, but if you add too much new credit, it can lower your score, so it’s a balancing act. Some credit monitoring services can advise you on when it’s optimal to add new credit.

Another 10% is your mix of credit. If you have only credit cards, that’s not much of a mix. However, if you take out a car loan, that adds to your mix. If you add a mortgage to that, that’s more of a mix. However, taking out credit you don’t need is never a good idea. But if you do need a car and can get an advantageous loan, it could boost this part of your credit score.

If you’re not certain what components of your credit score are dragging it down, enrolling in a high-quality credit monitoring service can help you educate yourself on how your actions and choices affect your score. Some services also offer tips on what actions you can take to boost your score and recommend financial productions for which you may qualify.

To find out more about improving your credit score after bankruptcy, contact Credit Score Keys for a free consultation. Call 919-495-2365 today.

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