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7 Ways You Can Kill Your Credit Score

Rachel — Thu, 25 Aug 2016 07:34:41 +0000

7 Ways You Can Kill Your Credit Score Rachel Thu, 08/25/2016 - 03:34

Don't kill your credit with sloppy mistakes
Image Source: Flickr CC User Ken and Nyetta

When you’re just coming off a Chapter 7 or Chapter 13 discharge, rebuilding your credit is imminently important. And even when your credit is back on track, you must work at keeping it high. Here are seven of the fastest ways to kill your credit score – avoid these actions to keep your FICO score from tanking.

#1 Missing a Bill Payment That Reports to Credit Bureaus

You may think that missing payment after payment will erode your credit score over time. But in fact, a recent study by FICO (the company that develops credit score calculations) showed that the first time you miss a payment that reports to the credit agencies, your score can drop by up to 100 points (or more). Subsequent late payments actually don’t hit as hard as that first missed bill.

#2 Getting Too Many Credit Cards

This is a double-edged sword. If you don’t ever get new cards, your score can drop because having new accounts tends to boost your score. But if you have too many, your credit can also take a beating. Plus, if you have a large number of cards in your wallet and then run into a financial hiccup like a job loss, you might be tempted to max out those cards to get out of trouble – landing yourself deep in debt once more.

#3 Getting Rid of Credit Cards

Closing older accounts can also hurt your credit. Part of your credit score is calculated by averaging out the length of your credit history. Getting rid of an older card usually drops the average age of your credit – resulting in a dip in your score. Instead of closing an older card that may have less than favorable terms, talk to the card issuers about making your terms better or converting the account to another type of card.

#4 Running up Credit Cards

The best credit score will come from having multiple credit cards and lots of available credit – and NOT using all of it or carrying any balances. Not only can carrying balances cause costly interest charges, but carrying debt month to month tends to be a slippery slope. You’ll accumulate more and more interest charges, rack up debt, and end up lowering your credit score.

#5 Applying for Too Many Cards at Once

When you apply for new credit, your application generates an inquiry that shows up on whatever credit report the creditor relies upon (they'll typically check with just one of the three agencies – Equifax, Transunion and Experian). Each inquiry can lower your score a bit, and the more inquiries, the harder the hit to your score. After a few months the impact lessens, but sending off a bunch of applications at once isn't a good idea.

#6 Failing to Monitor Your Credit Reports

You should check on all three of your credit reports every so often to make sure there are no errors, no one has taken your identity and opened fake accounts, and that there are no collection items showing that need to be taken care of. It’s a good idea to pull each of your reports at least twice a year and go through them with a fine-toothed comb.

#7 Assuming Your Credit Score Is Good

A shocking number of consumers don’t know what their credit score is and don’t realize they need to monitor it. Your score can change and you won’t know it. It’s a good idea not only to check all three of your credit reports periodically but to sign up for a monitoring service that will notify you if your score itself changes. This can alert you to situations you need to correct.

Having good credit is something you need to work at – it doesn’t just happen. To find out more about improving your credit score after bankruptcy, contact Credit Score Keys today. We help North Carolina consumers get their credit back on track after a Chapter 7 or Chapter 13 bankruptcy.

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3 Simple Steps to Improve Your Credit Score – How to Keep Your FICO Climbing After Bankruptcy

Rachel — Thu, 21 Jul 2016 07:30:28 +0000

3 Simple Steps to Improve Your Credit Score – How to Keep Your FICO Climbing After Bankruptcy Rachel Thu, 07/21/2016 - 03:30

Credit cards can help your credit score
Image Source: Flickr CC User Ed Ivanushkin

Many consumers don’t truly understand how credit scores are calculated and are surprised that their scores don't improve despite their best attempts. That’s because the FICO calculation is complex and involves factors that North Carolina consumers might not be aware of. Here are three simple steps that can help improve your score.

#1 Pay Down Credit Card Debt – Then Keep it Low

Credit card utilization is an important factor in your credit score. You need credit cards and a mix of other credit lines and debt to keep your credit score on the rise. After bankruptcy, some NC consumers don’t want to end up in credit card trouble again and may try to avoid them altogether. That’s admirable, but without credit cards, your score will never be as high as it could be.

Instead, having credit cards and learning to use them with restraint and discipline is key. First, you should never have more than 30 per cent of your credit line consumed when your credit card statement closes each month – but even that amount can lower your score depending on your income, credit score range and other factors.

The safest approach is to use your credit cards each month, then pay off the balances in full. To do that, don’t use your plastic for things you don’t need. Use your cards to fill your gas tank, buy groceries and pay bills since that’s money you'd need to spend anyway – then turn around and pay off the card in full on your payday just as you would use the money to pay those bills. That way, you’re using your card without amassing debt.

#2 Work Toward Credit Limit Increases

Having higher lines of credit can increase your credit score, as can using only a small percentage of them. If you must carry some credit card debt, having high limits means that the debt represents a smaller percentage of your total line of credit.
For instance, if you’re stuck with $2000 of debt you’re trying to pay down on a total credit line of $5000, that’s 40 per cent utilization. That’s high and can lower your score. But if your credit lines are bumped to $10,000, four grand is just 20 per cent utilization. With a $20,000 credit lines, that $2000 is just 10 per cent utilization. That’s even better.
So how do you get your credit lines increased? Simple. Use your cards often. Pay off your balances. Never make a late payment. Never make a payment lower than the minimum. Sometimes credit limits are raised automatically to reward good customers, and sometimes you have to ask. Don’t be afraid to ask for a credit line increase – the worst the card issuer will say is no. If you’ve been making on-time payments and using your cards, make the call to all of your card issuers to ask for increased limits. In some cases, you can request a credit line hike via their website.

#3 Set up Alerts for Your Credit Reports and Card Statements

Keeping inaccurate info off of your credit reports and protecting yourself from fraud and reporting errors is important, especially since it can be much harder to clean up mistakes, errors, or identity theft the longer it goes on. By signing up for credit score and credit activity alerts, you’ll know right away if something changes on your credit score.

Careful monitoring will let you know if your credit score is increasing or decreasing, which is important. But it also lets you know when new accounts or credit cards are opened. If you didn’t open them, you can get them shut down ASAP so that fraudulent activity doesn’t ruin the credit score you’re working hard to improve.

Use text alerts on your credit cards as well. By setting these up, you’ll know instantly if someone has stolen your card (or card info) and is using it for unauthorized activity. You can also set alerts to let you know if you’re getting close to your card limit, or to notify you about payment due dates so you never run late on a bill.

To find out more about improving your credit score after bankruptcy, contact Credit Score Keys. We help North Carolina consumers get their credit scores back on track after you get debt relief from Chapter 7 or Chapter 13 bankruptcy. Call 919-495-2365 to learn more today.

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How to Get Rid of a Judgment Lien with Chapter 7 or 13 Bankruptcy

master — Mon, 19 Jan 2015 15:20:59 +0000

How to Get Rid of a Judgment Lien with Chapter 7 or 13 Bankruptcy master Mon, 01/19/2015 - 10:20

When you are sued over an unpaid debt – typically for credit card debts, medical bills or the remaining balance after a car was repossessed – if you lose the lawsuit, the court can issue the creditor a judgment against you. With this judgment in hand, the creditor can pursue you more aggressively. In many states, judgments can be used to obtain wage garnishments. In North Carolina, creditors generally aren't allowed to garnish wages except for support payments, incomes taxes or student loans. But that doesn't mean they can't go after other assets and that's where the judgment lien comes into play.

How a judgment lien affects you
Once a creditor obtains a judgment they can get a lien against any real property you own. This means they can apply the lien towards your home and try to force it into foreclosure in order to recover the amount you owe them. Judgments are particularly devastating because they are good for a period of 10 years with a 10 year extension available. This means that while there may be no equity in your home now, the creditor can wait you out and hope your circumstances turn around and then come after you.

How bankruptcy can help with judgments
If you have been hit with a judgment but it hasn't yet gone to the lien phase, bankruptcy can typically void the judgment out and stop the process from getting more serious. But if there has already been a lien attached to your property, the bankruptcy can void the judgment but the lien can linger on and complicate your bankruptcy. If the lien is on your home and you surrender the property as part of your bankruptcy because you have no equity in the home and can't afford to keep it, the lien will follow the property. But if you keep your home after bankruptcy, that lien can survive and the creditor can later push for foreclosure to satisfy the debt owed to them.

When a lien can be avoided in bankruptcy
If you have a lien on your home or other real property such as land, a lien may be able to be avoided in bankruptcy depending on your circumstances and so long as your attorney files a Motion to Avoid the Judicial Lien. Your bankruptcy attorney will evaluate your situation to see if you're eligible to have the lien avoided. This is done by looking at the available bankruptcy exemption on your property, any creditor liens and other liens. This is then compared to the value of your real property. If the total exceeds the property value, you may be eligible to have your lien avoided (i.e. gotten rid of).

Find out more about judgments and liens in bankruptcy

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Why Chapter 13 Bankruptcies Sometimes Don't Work Out and How to Make Sure Yours Does

master — Wed, 27 Aug 2014 18:04:12 +0000

Why Chapter 13 Bankruptcies Sometimes Don't Work Out and How to Make Sure Yours Does master Wed, 08/27/2014 - 14:04

The Midwestern Bankruptcy Institute conducted a study on Chapter 13 bankruptcies to examine how many filings succeeded, how many didn't make it to completion and what drove either the success or failure to make it all the way through. According to data in the study, one in three Chapter 13 bankruptcy filings makes it all the way to discharge. But even knowing that two-thirds of debtors don't complete the process doesn't necessarily mean that those filings didn't meet the debtor's financial needs. They may have served their purpose without completion, so it's not fair to label them failures.

The study was conducted by Harvard Law Professor Katherine Porter and she decided to dig in and examine why Chapter 13s didn't reach completion and if not, whether they were in fact a “failure” or a “success.” Here are some of Porter's findings:

#1 For some, plan payments weren't affordable. Chapter 13 repayment plans are financially strict, but they are doable for many debtors that are willing to commit to three to five years on a tight budget in order to keep their home or accomplish some other goal.

#2 For most, it was a change in financial circumstances that made what started out as an affordable repayment plan become unaffordable at some point in the process either due to a loss of unemployment, medical crisis, lessened income or increased expenses.

#3 For about 30% of debtors that had their cases dismissed without discharge, they still saw their Chapter 13 experience as positive because they were able to pay off some debts, buy time to make other arrangements or negotiate with creditors to restructure their debt.

#4 Another percentage of debtors felt their goals were accomplished without receiving a discharge because they were able to negotiate direct repayment plans with their creditors after suspending their Chapter 13.

#5 A significant factor in debtor experience with their Chapter 13 was associated with their choice of attorney. Those that had a good relationship with their attorney and experienced open communication reported a better outcome and process.

#6 There were three recurring recommendations that Chapter 13 filers had for those in debt – to go ahead and file sooner rather than later before things got worse, to try and work things out with your creditors instead of filing Chapter 13 or to go ahead and opt for Chapter 7 and get rid of as many debts as possible rather than taking the longer road of Chapter 13.

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Why Debtors Choose Chapter 13 Over Chapter 7 Bankruptcy and Why It May Be Better For You

master — Wed, 14 May 2014 13:05:08 +0000

Why Debtors Choose Chapter 13 Over Chapter 7 Bankruptcy and Why It May Be Better For You master Wed, 05/14/2014 - 09:05

Many of our clients that come in for their initial free consultation aren't sure which type of bankruptcy is best for them and many aren't clear on the differences between the most common chapters – seven and thirteen. Our first job is to educate you on both of the plans and then look at your unique financial situation and explain what each plan offers to you and the benefits and downsides to each. From there, we make a recommendation but, ultimately, it's your decision because it's your financial future. For our clients that choose Chapter 13, there are two primary reasons we recommend this plan over Chapter 7.

First, there are those clients that cannot pass the Means Test that would allow them to file a Chapter 7. Ever since the bankruptcy code was amended in 2005, it has become more difficult to file Chapter 7. Those that have higher incomes will not pass the first phase of the Means Test, but they may pass the second part if they have minimal disposable income.
For those that have expenses above and beyond those “allowable” for calculation of disposable income, it may appear that they have more disposable income to pay bills than they actually do. But the Means Test is a hurdle that is mandated by law. Those of our clients that cannot pass it but still need debt relief are often well served by filing a Chapter 13. This allows them time to get caught up on payments and typically see some of their unsecured debts discharged at the end of their repayment plan.
The second type of client that ends up with Chapter 13 is one that has secured debts they are behind on and want the opportunity to catch up on to preserve the asset. If you are behind on your car loan or mortgage and are being threatened with repossession of your vehicle or foreclosure on your home and you want to prevent it, Chapter 13 can help, depending on your other circumstances.
With a mortgage, the payments you have missed plus any late fees or additional interest can be paid off over the length of your repayment plan – anywhere from three to five years. You may also be able to work with your lender to refinance your loan so that your current payments are more affordable. Filing a Chapter 13 also has the added benefit of shutting down any foreclosure action which can give you more time to negotiate with your lender to get the best deal possible to keep your home.
When it comes to a vehicle loan that's delinquent, you'll still have to catch up the arrears, but this can be done through your payment plan over time rather than as a lump sum. And what's even better is that if you owe more than your car or truck is worth, your attorney can request that your loan amount be reduced to the fair market value of your vehicle. They can also push to get your interest rate lowered. This can leave you with time to pay off the back balance and much lower future payments, which can make a huge difference in your budget and ability to pay your bills.
Contact the law offices of John T Orcutt for a free consultation to discuss your financial difficulties and to find out how bankruptcy can help. We have several convenient North Carolina locations for you to choose from.

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