bankruptcy

Larger Credit Limits Can Result in a Better Credit Score (But Be Careful!)

Rachel — Thu, 24 Aug 2017 12:53:59 +0000

Larger Credit Limits Can Result in a Better Credit Score (But Be Careful!) Rachel Thu, 08/24/2017 - 08:53

Use your plastic carefully for a better credit score
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Bouncing back after bankruptcy is a journey and those that racked up big credit card debt that was discharged in Chapter 7 or 13 might be gun shy about plastic. However, rebuilding your credit score after bankruptcy is critical and it’s almost impossible to do without credit cards. If you were burned by credit card debt before, you may not want to have larger lines of credit open to you. But if you keep your limits low out of fear, you’ll cheat yourself out of a better credit score.

Rebuilding Credit Starts Slowly and Is a Process

After you get your bankruptcy discharge, within just a few months, you should see credit card offers in your mailbox. At first, these will likely be low quality offers that come with higher interest rates. Worse than high interest rates, though, are those that come with monstrous fees. Some secured cards will offer a low credit line of $200 (on average), then charge $100 annual fee, $50 account set up fee, and other charges so that you get the card and already owe most of the credit line without buying a thing.

It’s best to not take the first offers that come in and instead wait for better ones to come along, which should happen within six months or so after your bankruptcy discharge. The interest rate is not as important as the fees and other charges if you use your cards wisely. For instance, if you can get a secured card at 25% with no annual fees or set-up charges, that might be better than a card with 20% interest but exorbitant fees.

Interest Rate Shouldn’t Matter If You Pay On-Time

Interest accrues on balances owed at the statement date on your credit card. If you pay off your balance prior to the statement cutting, you won’t be charged interest. For instance, if you use your card to pay your cell phone bill of $100 on April 5 and you know your credit card statement closes (stops for the month) on April 20, you can go online to access your credit card account and pay a few days ahead, say April 12, so that your statement closes with a zero balance and you pay no interest.

By managing your credit cards carefully by date and always paying off balances in full, you can avoid interest charges. You may think the best approach to definitely avoid interest is to get a credit card and not use it at all. That sounds great but if you don’t use your card, the card issuer will close out your account and then your credit score will drop. It’s better to use your cards for normal expenses such as paying utilities, gassing up your car, and your Netflix subscription, then pay off promptly.

How Higher Credit Lines Help Your Credit Score

One of the biggest factors in your credit score calculation is utilization. This is the percentage of your available credit that you’re using. If you have two credit cards with $500 credit lines, you have a total of $1000 in credit. If you have a total balance of $100 on your cards, that’s a 10% utilization (100/1000=10%). If you have $250, that’s 25% utilization. Once you go above 20%, your credit score can drop and one you’re close to 50%, it will drop more. The greater the utilization, the lower your score.

You can groom your credit lines by regularly asking for increases from card issuers. Having a lot of available credit and low utilization benefits your credit score. Plus, if something happens and you must carry a balance, the impact to the utilization factor in your score will be lesser. If you have double the credit line as above, $2000, with a $100 balance, that’s just 5%. With $200, that’s just a 10% utilization. Regularly asking for line increases is critical to a healthy score.

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

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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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Getting a Car After Bankruptcy – Lease or Buy – And What Credit Score Do You Need?

Rachel — Thu, 08 Jun 2017 07:55:51 +0000

Getting a Car After Bankruptcy – Lease or Buy – And What Credit Score Do You Need? Rachel Thu, 06/08/2017 - 03:55

You can buy a car after bankruptcy
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One of the primary concerns for many bankruptcy filers is what happens after their discharge. They want to know what options they will have, whether they can get credit again, how soon they can get credit, and whether they can buy a house or car. When it comes to cars, your options are leasing, buying outright, or financing a purchase. Here’s a look at how bankruptcy and credit scores affect your vehicle choices.

Life After Bankruptcy – Better Than You Expect

When most people file bankruptcy, they are stressed about finances and worried their life is ruined. In fact, filing bankruptcy resets you financially for most unsecured debt. Chapter 7 bankruptcy discharges credit card debt, medical bills, non-collateralized commercial loans, and some older income taxes. Chapter 13 works a little differently because you dig out of debt over time.

The quick answers about getting credit after bankruptcy are contingent on the type of bankruptcy you chose and the effort you put into rebuilding your credit after your discharge. Yes, you can get credit again. Yes, you can get credit fairly soon after your bankruptcy discharge. And, yes, you can buy a home and a car. Chapter 7 is the fastest option and can help your credit score rebound faster.

In fact, studies by the Federal Reserve showed that after filing bankruptcy, credit scores rebound, on average, by more than 60 points. Why? Most people that file bankruptcy are in a debt free fall, and things are getting worse every month, so their credit score drops every month. When you file bankruptcy, the free fall stops and the discharge of debts often triggers a credit score rise right away.

Getting a Car After Bankruptcy

With Chapter 13 bankruptcy, you usually cannot get any new credit while in your repayment plan which lasts three to five years. However, if you need your car for work and yours is on its last leg, you might be able to convince the Trustee assigned to your Chapter 13 case to let you take on a modest car loan but while in bankruptcy, you won’t get the most advantageous terms.

After Chapter 7 bankruptcy, you’ll have more options available, and they’ll be quicker to access. To purchase a car with a car loan, the longer you can wait after your discharge, the better. Why? As your credit score rebounds and gets to a higher number, the more favorable terms you will get. However, if you must have a car sooner rather than later, you still have options.

Borrow Now, Refinance Later?

One choice is to take the most favorable loan that you can and refinance it later when your credit score is better, and you can get a lower interest rate. Another option is to forego financing altogether, scrape together your pennies and buy a cheap used car that will get you from point A to point B for six months to a year and use that time to save up for a down payment and work on your credit score.

Leasing is another option. Most consumers that take out leases have credit scores that average 720. However, you can get a lease with a lower credit score. The important thing to consider with a lease is that it’s often not as advantageous as buying because you build little equity during the lease period. Plus, you may have to put down a sizable up-front payment plus taxes and fees.

Then, when the lease period is up, you have to hand back the car or pay a hefty redemption cost to keep the car. Also, if there’s any damage to the vehicle or you went over the mileage, you’ll face a steep penalty. Leases may be attractive if your company is footing the bill to reimburse you and will pay any overage on mileage. As a rule of thumb, though, leases should be viewed with caution.

To find out more about rebuilding your credit after bankruptcy, contact Credit Score Keys. Call 919-495-2365

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How Does Medical Debt Affect Your Credit Score?

Rachel — Thu, 27 Apr 2017 09:32:30 +0000

How Does Medical Debt Affect Your Credit Score? Rachel Thu, 04/27/2017 - 05:32

Medical debt can tank your credit score
Image Source: Flickr User Claus Rebler

Medical debt is unique among other types of debt because of the complications of the insurance intermediary. This is also debt you generally don’t get into voluntarily unlike a mortgage, car loan, or credit card bill. Medical debt is a plague on the uninsured and insured alike thanks to changes in coverage that now require hefty deductibles and co-insurance for many consumers. Despite advances like the Affordable Care Act, medical debt continues to be a burden and, yes, it can lower your credit score.

How Medical Bills Drag Your Credit Score Down

Unlike a standard credit card bill or car payment that are reported monthly on your credit report, medical bills don’t automatically report. Medical practitioners don’t report patients that are a few days or weeks behind on a bill. However, once a bill has been outstanding for a few months, the medical provider will generally hand it over to a debt collector and they will report the delinquent debt to one (or all) of the three U.S. credit agencies – TransUnion, Equifax, and Experian.

What If Your Insurance Owes the Bill?

Even if your insurance provider owes the bill, that doesn’t mean they will pay up promptly. The bottom line is when you accept treatment, you sign an agreement saying you are responsible for the cost of the procedure, treatment, etc. There is usually fine print that says the provider will file the insurance claim but that comes with the caveat that the debt is still yours. That means you can be tangling with your insurance company who is delaying payment and the debt winds up on your credit score, dragging it down.

How Many People Have Unpaid Medical Debt?

According to ConsumerFinance gov, nearly one-third of consumers have debt in “collections,” meaning it’s past due and is being actively pursued by a debt collection agency or collection arm of the original creditor. Of all debt in collections, more than half of it is medical debt. That equates to nearly 20% of consumers or more than 73 million Americans who are seeing damage to their credit score because of medical debt in a delinquent and collections status.

Can You Remove Medical Debt From Your Credit Report?

If you have a medical bill that’s reported for debt collections, it can turn into a nightmare. It’s doubly frustrating when you don’t owe the medical bill yet it winds up on your credit report. Once the debt goes into the collections stage, even if you or your insurance firm pays it, the collection entry will stay on your credit report for seven years or more from the date the bill went delinquent. The collection agency doesn’t have to remove it even if you pay the debt, so you may be stuck.

Even If You Pay, Medical Debt Can Ravage Your Credit Report

The same report by ConsumerFinance showed that even if customers disputed an inaccurate delinquent medical debt account or paid it in full, creditors and collection agencies often fail to update the credit report to show that there is no balance owed. Credit card companies, mortgage lenders, and auto finance companies update accounts monthly, but those that don’t report regularly, such as collectors for medical debt, utilities, and cellular accounts, are more lax and can leave damaging info on your credit.

New Credit Score Models Will Change Things (Maybe)

Fair Isaac Corporation (FICO) has downgraded the weight of medical debt in its latest calculation, FICO 9, because they’ve undertaken studies that indicate overdue medical debt is not an accurate predictor of overall credit worthiness. However, many lenders don’t enroll in the latest score calculation subscription so this might not help you. VantageScore is also updating their latest score towards trending data which will put less emphasis on medical debt but, again, new models take a while to take hold.

Bankruptcy Can Help With Medical Debt

Because medical debt is unsecured debt, it can be wiped out totally with Chapter 7 bankruptcy and with Chapter 13 bankruptcy, unsecured debt is usually greatly diminished. For consumers mired in medical debt that insurance doesn’t cover, bankruptcy may be the answer. Many medical bankruptcies are triggered by a serious accident or illness (such as cancer) that skyrockets expenses while simultaneously decreasing income. Once recovered, the debt left over can be crippling. Bankruptcy can help.

After bankruptcy, when your medical debt is cleared up, along with other obligations, it’s time to focus on rebuilding your credit. That’s where Credit Score Keys comes in – and we’re ready to help you today. Call 919-495-2365.

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What Credit Card Activities Can Benefit or Harm Your Score?

Rachel — Thu, 06 Apr 2017 07:24:40 +0000

What Credit Card Activities Can Benefit or Harm Your Score? Rachel Thu, 04/06/2017 - 03:24

Use credit cards wisely to benefit your score
Image Source: Flickr User 401(K) 2012

Credit card activity and debt are major contributors to your credit score. If you’re rebuilding your credit score after bankruptcy, it pays to know how your score is calculated and how your decisions about your credit cards can affect your score for the better or worse.

#1 Opening a Secured Credit Card After Bankruptcy

When you file bankruptcy and get a discharge, much of your unsecured debt should be eliminated. Because your credit card accounts were closed as a result of the bankruptcy, you’re at ground zero with a lower credit score. But bear in mind, if you were maxed out and making late payments, your score was already in trouble.

Opening a secured credit card account is often the first step toward rebuilding credit after bankruptcy. The initial inquiry will drop your score slightly as will opening a new account. However, if you use the card responsibly, keep your balance low or pay off in full each month, your score should increase over time, so it can be a good thing.

#2 Closing an Older Credit Card Account

When you first start rebuilding your credit after bankruptcy, a secured card is usually the starting point but these can come with annual fees and higher interest rates. Once you have an unsecured credit card, you might be tempted to close your other secured account, but you should think twice before you do so because it could lower your score.

First, closing it will lower your average age of credit, which can hurt. Second, closing it will reduce the total credit limits you have, which can also ding your score. Third, if you’re carrying any credit card debt, closing it can greatly increase your utilization (the amount you owe vs. credit lines), which can hammer your score. It may be better to keep it open and use it sparingly so it stays active.

#3 Missing Payments or Paying Less Than Minimums

Ideally, paying off your credit cards in full each month is the best way to keep your debt under control. However, if you must carry a balance due to an unexpected expense, vacation, home or car repair, etc., the next best thing is to pay it off as soon as possible and never miss a payment. Each time you miss a payment, your credit score will drop.

Also, if you pay less than the minimum, your credit score will take a hit. Make sure you pay on time and always pay more than the minimum, even if it’s only by a few dollars. A maxed out card will hurt your score as will late or missed payments or paying too little. If you’ve struggled with credit card debt in the past, avoidance may be your best plan for the future.

#4 Opening a New Unsecured Credit Card

If your credit score is heading in the right direction, you might wonder how opening a new unsecured credit card account will affect it. A hard inquiry from the card issuer will initially lower your credit score, as will opening a new account the first month or so it’s on your credit report. But, overall, if managed wisely, a new account could help your score.

An increase in available credit lines can boost your score and the impact of your hard inquiry on your credit report won’t last too long. A new account, used sparingly and paid off each month, should increase your credit score more and more each month if nothing else negative shows up on your credit report.

If you’re just coming out of bankruptcy, now is the time to work on improving your credit score. That’s where Credit Score Keys can help. Contact us today for a free consultation on rebuilding your credit score after bankruptcy. Call 919-495-2365 today to talk about your credit.

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6 Ways to Kill Your Credit Score Fast – Part 2

Rachel — Thu, 23 Mar 2017 09:17:37 +0000

6 Ways to Kill Your Credit Score Fast – Part 2 Rachel Thu, 03/23/2017 - 05:17

Don’t kill your credit score
Image Source: Flickr User CafeCredit.com

Consumers want to shield their credit score from damage, but you may not know some things that will kill your credit score faster than you could imagine. This two-part series examines six top credit score killers. You can read the first three in part one right here. Below is part two. These are important to know so you can avoid unnecessary hits to your credit score.

#4 Missing Just One Payment

You might think that missing just one payment is no big deal and for something that doesn’t report to the bureaus like your gas or cable bill, it might not be a disaster. You can catch up on the past due and move on from there. But for anything that reports to the credit bureaus including your credit card, mortgage, or auto loan, missing just one payment is a big deal to your creditors and your credit score.

The higher your credit score, the greater the fall if you miss a single payment. One missed payment can cost you between 60 and 110 points (or more) on your FICO score. That is a devastatingly large drop. Bear this in mind and don’t ever think “missing just one payment won’t matter.” It matters a lot. Subsequent missed payments have an impact as well, but none so much as that first one. Pay your bills on time!

#5 Tax Liens or Judgments

The IRS doesn’t report to the credit bureaus unless you fall so behind that they have to garnish you or take out a lien. If the IRS reports you to the bureaus, you can see a drop of anywhere from 50 to 200 points. With a tax lien on your report, you can be refused new credit or credit line increases. If you work out a deal to pay the tax and remove the lien, your score will come up, but not as much as it dropped.

Similarly, if a creditor takes you to court and wins a judgment, that will also wind up on your credit report and will stay there from seven to ten years from the date it was issued. The longer the time after the filing, the less impact it will have but it does lower your score and can cause creditors to think twice before granting you approval. Negative public records including liens and judgments are always killers.

#6 Carrying High Balances

This one can be a shock for some consumers. You can pay your credit card bills on-time every month like clockwork and see your credit score drop. You can pay more than your minimum amount due each month and do it on time and still see your credit score drop. Why? It’s called utilization. Nearly one-third of your credit score is based on your credit utilization which is an indicator of responsibility.

Some financial blogs will tell you that you’re okay as long as you don’t exceed 30% utilization, but that’s not a hard and fast rule. But if you go over that, your score can drop every month that you’re over-utilizing your credit lines. Utilization is the amount you owe on your credit cards divided by the total amount of your credit lines. If you routinely keep cards close to the limits, your score will suffer as a result no matter if you pay promptly and never max out your credit cards.

Be aware of these credit score killers so you don’t let your FICO score drop! If you’re coming out of bankruptcy, it’s time to rebuild your credit score so you can have a better financial future.

Contact Credit Score Keys today for a consultation on improving your credit score after bankruptcy.

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Can Your Credit Score Change For No Reason?

Rachel — Fri, 17 Mar 2017 09:13:38 +0000

Can Your Credit Score Change For No Reason? Rachel Fri, 03/17/2017 - 05:13

Wondering why your credit score changed?
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If you’re a credit score watcher, you may know that all-important three-digit number at any given time. If you don’t keep track of your credit score, you should. Monitoring services are inexpensive and can keep you on top of your credit score and alert you to any issues. But can your credit score change if you haven’t done anything to change it and your financial behavior has been constant? The answer is yes. Here’s why.

What Determines Your Credit Score?

Your credit score is a calculation based on your credit report. You have three different versions of your credit report. One is with Experian, one with TransUnion and the other with Equifax. These reports are usually not identical and the three may never align perfectly. Also, depending on what calculation method is used to determine your score, it won’t be consistent across all three reports at any given time.

Despite minor differences in scoring, there are five primary factors that drive your credit score. Your payment history, the amount of money you owe compared to your total lines of credit, and how long you’ve had a credit history matter. The age of the accounts also factors into the calculation. The final two components are the mix of types of credit you have and whether or not you’ve opened any new accounts.

Changes Due to Credit Utilization

Utilization is a ratio of how much you’re carrying on your credit cards compared to your total credit limits. If you have a total of $20,000 in credit lines and are carrying $4,000 in credit card debt, that’s a 20% utilization. It’s better to keep it lower than that, but that’s not terrible. But say you have that $4,000 in debt and you decide to close a credit account with a $4,000 limit.

That changes your utilization from 20% to 25% and can lower your score. On the other hand, if you open a new account or have credit limit increases so you now have $40,000 in credit and the same $4,000 in debt, that drops your utilization to 10% and can boost your credit score. With no change in debt, but a change in your credit lines, your score can shift when all else is the same.

Changes Due to a Negative Item

Paying your bills on time is great but for most bills such as rent, utilities, cell phone, and cable, an on-time payment doesn’t benefit your credit score. However, if you miss a payment and get behind or forget to pay a medical bill, if the creditor hands your account over to a collection agency, you can have a derogatory item reported on your credit and your score can drop.

Change Due to Credit Inquiries

There are two types of credit checks – a hard pull and a soft pull. A soft pull may occur when you’re being considered for a pre-approved card or other offer and you don’t even know you were being evaluated. Soft pulls will not be recorded on your credit history and don’t have a negative effect. A hard pull is when you apply for a new account and a creditor runs a credit check on you.

A hard pull will temporarily lower your credit score whether you open the account or not and whether you were approved or not. A hard inquiry can knock five to 20 points off your FICO score. If you have several hard pulls, that can decrease your score even more when nothing about your spending or other financial behavior changed. Over time, the effect of a hard pull will lessen.

Monitor Your Credit Report So You Know If Something Changes

It’s not safe to assume that your credit score is static. Signing up for a low-cost credit monitoring service is the best way to know if your credit report is healthy and one of the best ways to alert you to an issue. If someone opens up an account using your identity, you’ll be notified of the new account and can shut it down. If a creditor reports something erroneous to your report, you’ll know and can correct it.

For those consumers just coming out of a bankruptcy, embarking on a plan to improve your credit and monitor your score so that you can get it back to the level you want is critical. To find out more about improving your credit score after bankruptcy, contact Credit Score Keys today. Call 919-495-2365 today for a free consultation about cleaning up your credit and getting back on track.

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7 Habits of People With Excellent Credit Scores – And How To Improve Yours

Rachel — Thu, 09 Mar 2017 09:09:54 +0000

7 Habits of People With Excellent Credit Scores – And How To Improve Yours Rachel Thu, 03/09/2017 - 04:09

You can learn healthy financial habits
Image Source: Flickr User Niklas Morberg

Getting and keeping a good credit score is not a matter of chance. Those with excellent credit work hard at protecting and improving their score. You can’t just hope for the best. A good credit score is the result of intention and healthy financial habits. Here is a look at seven habits of people with excellent credit scores and how to improve your credit score after bankruptcy or other financial upset.

People with good credit…

1 – Check Their Credit Reports Often for Errors

You can do everything right but see your score drop because of an error by one of the credit bureaus or a creditor. If a credit card issuer accidentally reports you missed a payment, were over the limit, or paid less than owed, that can hurt your score. Any mistake can hurt your score, so keep an eye out.

2 – Don’t Close Old Revolving Accounts

One of the biggest factors in your credit score is the average age of credit. That looks at how long all your credit accounts have been open on average and the older, the better. Closing old credit card accounts can lower your credit score even if all your other financial behavior is top-notch. Think twice before closing.

3 – Never Miss a Payment That Reports to the Bureaus

The first problems on credit reports are often when you miss just one payment on an account that reports monthly such as a credit card, car loan, or mortgage. That first missed payment can drop your score by 100 points. Smart consumers always pay these bills on time, every month, like clockwork.

4 – Don’t Pay Any Bills Late

Although the bills and debts that report to the three credit bureaus monthly have the greatest ability to impact your credit score, skipping out on any bill is a bad habit. Even bills that don’t routinely report, like medical invoices, can wind up in debt collections and on your credit report dropping your score.

5 – Keep Debt Levels as Low as Possible

Forget the adage about never going over 30% of your credit lines. In fact, it’s better to keep your debt levels as close to zero as possible. If you use your cards, pay them off in full each month, so you never get trapped in a debt spiral. People with excellent credit use their available credit lines sparingly.

6 – Don’t Open New Accounts Too Often

The more new accounts you open, the more it drops your average age of credit and your credit score with it. Occasionally opening a new account isn’t bad, but you must consider the impact of opening too many on this important facet of your credit score. Sticking with older accounts may benefit you more.

7 – Keep a Close Eye on Their Credit Score

People with excellent scores know their score and keep an eagle eye on it so that it doesn’t drop. Monitoring services can be a low-cost way to monitor your credit report activity, so you’re alerted if your score rises or falls so you can address any issues before they get out of hand and wreck your credit.

How to Improve Your Credit After Bankruptcy

If you have had a life event, like unemployment or an illness that keeps you out of work, your credit score may suffer. For those that choose bankruptcy to help deal with their debt, the next step is to rebuild your credit score. That starts with always paying bills on time and then rebuilding your credit starting with a secured credit scared and working towards a goal of rebuilding your score to better than it was before.

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

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What Helps Your Credit Score and What Harms It?

Rachel — Thu, 02 Mar 2017 15:04:01 +0000

What Helps Your Credit Score and What Harms It? Rachel Thu, 03/02/2017 - 10:04

Do you know what’s good for your credit?
Image Source: Flickr User: Doug Hay

A recent study by Capital One called the “Credit Confidence Study” surveyed more than 2,300 people establishing or rebuilding their credit. Unfortunately, not everyone understands what impacts their credit score and which habits can help or hurt their credit. Here is a look at the study findings and a roster of activities that can help or harm your score so you can choose wisely.

Capital One Survey Results

Of those surveyed, 86% want to build their credit score and 82% are willing to do what it takes to meet that goal. Most interesting is that 90% of respondents in the age bracket of 18 to 24 would give up their access to social media if it meant they could have excellent credit. Roughly 70% believe good credit is the key to the “American Dream.”

#1 Opening New Accounts Can Help Your Credit Score, but Closing Old Ones Can Hurt It

One of the components of your credit score is average age of credit. This is calculated by examining the opening date of all your credit accounts and averaging them. The older the average age is, the more your credit score will benefit. That’s why you should not close older credit card accounts.

If they have a higher rate of interest, use them rarely, and don’t carry a balance. If they have a high annual fee, try and negotiate it down with the card issuer. If you have other accounts that old, closing one might not hurt. But, overall, older accounts in good standing are beneficial to your score.

Opening new accounts every now and then is also good for your score. However, opening too many can harm your score and lower your average age of credit. When you apply for credit, a hard inquiry goes onto your credit report and makes it dip slightly. Too many and your score can take a hit.

#2 Using Your Credit Cards Can Help Your Credit Score, but Carrying Balances Can Hurt It

If you get credit cards then don’t use them, the card issuer may close your account. Closed accounts lower your available lines of credit, which can hurt your credit score. Also, if you don’t use your credit cards, you won’t get credit lines increases, which can boost your credit score.

On the flip side, if you do use your credit cards but carry too large of a balance, you can harm your credit. Some credit forums advise carrying no more than 30% of your available credit but this may be too high. What’s wise is to use then pay off in full each month for best results.

Even worse, if you max out your credit cards, you can pay overlimit fees, lots of interest, and this will throw off your utilization, further lowering your credit score. If you do have to use your cards and can’t pay them off within the month, spreading among a few cards so you don’t max may be better.

#3 Checking Your Credit Report Will Not Hurt Your Score, but Failing to Check It Can Hurt It

Some people think that checking your credit report is the same thing as when a creditor pulls your credit and can lower your score. This is not true. You can check your credit report as often as you like with no negative consequences. In fact, not checking your report may do more harm.

It can be a hassle to remember to check your credit reports regularly, so a better way may be to sign up for a low-cost monitoring service. A service will monitor your reports and update you when there are changes such as a new account added or a bump to your score.

The monitoring program will also alert you if your credit score drops, there’s a negative entry, or any changes so you’ll know if someone has used your credit for fraud or you’ve been the victim of identity theft. It can also alert you to past-due accounts that may impact your score.

Building up and maintaining a good credit score is a matter of effort, not luck. You can’t just leave your credit alone and hope for the best. If you filed bankruptcy recently, it’s time to get your credit score back on track.

Contact Credit Score Keys today for a free consultation about improving your credit after bankruptcy. Call (844) 659-3226 today.

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