credit cards

Tip: Use Your Credit Cards to Protect Your FICO Score

Rachel — Thu, 17 Aug 2017 13:04:17 +0000

Tip: Use Your Credit Cards to Protect Your FICO Score Rachel Thu, 08/17/2017 - 09:04

Your credit card accounts can be closed without notice
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Although it seems counter-intuitive, the fact is that if you do not use your credit cards, it can (indirectly) harm your FICO score. You might think it’s enough to have a few credit card accounts in your name, that you rarely or never use so that you have items on your credit report. However, if you leave your cards unused, you can find yourself slammed by your card issuer out of the blue – and your credit score can drop as a result. Here’s what you need to know.

Credit Card Issuers Expect You to Use the Plastic

First, as a card holder, you are a customer to the credit card issuer. However, if you don’t transact by swiping the card now and then, you’re not a good customer. Card issuers make money in a few different ways. One is if you carry balances month to month and they can charge you interest. Another is off fees like annual fees, over-limit and late payment fees.

But even if you pay your balance in full each month, never run late, and never go over the limit, your credit card provider can still make money off of you so long as you use your card. Stores, restaurants, and any business that allows you to use a credit card pay out a percentage of each sale for the privilege. But if you have no activity, there’s no profit and no incentive for them to stick with you.

Account Closures Can Come with No Notice

If you leave a card account fallow and don’t use it for an extended time, the credit card issuer can close the account without any prior notice. That document with the microscopic fine print that comes with your card and is labeled “terms and conditions” includes a list of a whole host of reasons the card issuer can suspend you as a customer and take back your charge privileges.

You will get a notification that your card account was closed but might not know ahead of time that it’s coming. If you have a pattern of not using your card, the issuer has no profit incentive to keep you on their customer roster, no matter how long you’ve been a card holder. Using your cards, even occasionally, goes a long way to convincing card issuers to keep you as a customer.

Losing an Older Account Lowers Average Age of Credit

Your credit score is a calculation based on several factors. One of these is the average age of credit. This is calculated as a simple average. You add up the numbers of years all your revolving credit lines have been open and divide it by the number of accounts you have. Let’s say you have five cards and the oldest has been open for 12 years, one for seven years, two for five years, and one for one year.

The average age is six years (12+7+5+5+1/5). If you aren’t using your oldest card and the issuer shuts the account, your average age drops to a little more than four (7+5+5+1/4). This can cause your credit score to take a dip even though none of your behavior has changed and you’re not any deeper in debt or delinquent on your obligations. Keeping older accounts open is advantageous.

Any Account Closure Can Wreck Your Utilization If You Carry Balances

Not only can an account closure drop your credit by reducing your average age of credit but it can also cause a major drop if you’re carrying a balance. For instance, if your oldest card has a higher rate of interest because your credit wasn’t as good when you got it, you might not use it. Then suppose you just had a big car repair and couldn’t pay it all off, so you’re carrying a balance.

If the five cards have a combined credit limit of $10,000 and you’re carrying a $2,500 car repair balance, you’re at 25% utilization (2500/10000=20%). Then say the oldest account is closed and it had a $3k credit limit. Note that your utilization is instantly higher at 36% (2500/7000=35.7%). That’s way too high, and your credit score can drop with no other changes to your credit profile.

When It's Okay to Close Accounts

Sometimes when you’re just starting out, you might obtain a credit card with a higher interest rate or an annual fee that you don’t like. If you’re a customer in good standing, you might be able to negotiate better terms and get rid of the annual fee or drop the interest rate. If you don’t carry a balance, the interest rate doesn’t really matter.

So long as you’re not carrying balances and closing the account won’t wreck your average age of credit, it’s no big deal, but be aware of the consequences before you close an account. To avoid having an account closed involuntary, you should use all your cards regularly. Consider setting up small recurring items, one to each card such as your cell bill, Netflix, etc. and then pay off in full each month.

To find out more about improving your credit after bankruptcy, contact Credit Score Keys. Call (844)659-3226 to set up a free consultation today to get your credit score on the right track.

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How Using Cash Advances Can Hurt Your Credit Score

Rachel — Thu, 10 Aug 2017 13:04:06 +0000

How Using Cash Advances Can Hurt Your Credit Score Rachel Thu, 08/10/2017 - 09:04

Cash advances come at steep costs
Image Source: Pixabay.com

Most credit cards offer the option to take a cash advance. Some card issuers send out blank checks you can write that, when cashed, will operate as a cash advance. Others provide a pin number so you can easily take out cash at an ATM or while checking out at the grocery store. Others allow you to go to the bank, swipe your card, and walk out with money. No matter the mechanism, taking out a cash advance is something you should consider carefully because of the consequences. If you’re rebuilding your credit after bankruptcy, you should be extra cautious of using a cash advance.

Taking a Cash Advance Won’t Directly Hurt Your Credit Score

The first thing to know is that taking a cash advance will not directly drop your credit score. So, you can breathe easy if you need to take a few hundred dollars on one of your cards in an emergency. There’s no instant and associated penalty on your credit report for using a cash advance. However, there are other consequences of taking cash from a card that can come back to bite you.

Using Cash Advance Increases Utilization

One way that using a cash advance can indirectly lower your credit score is by increasing your utilization. This is calculated as the percentage of your available credit that you’re tapping. If you have $5,000 in total credit line across all your cards and carry no balances month to month then take a $500 cash advance, that’s not too big a deal.

That $500 represents the use of 10% of your credit line and is not high enough to trigger a ding to your credit score. However, given the same credit lines, if you’re carrying $1,500 in card debt and take out $500 in cash, that bumps you to $2,000 which is 40% credit utilization which is way too high and will lower your credit score. So, mind your balances.

Taking Cash From a Card Comes at a Higher Interest Rate

It’s also important to remember that a cash advance doesn’t operate like a regular credit card purchase. Most credit cards offer one interest rate for purchases and a much higher one for cash advances. So, while paying your cell bill with your credit card comes with an average interest rate of about 15%, cash advances run one to seven percent higher (but can be much more depending on the card).

This means you can be charged 16%-22% for a cash advance but with some cards, cash advance interest is much greater. If you must take a cash advance, paying it off ASAP before your statement cuts should avoid the interest charge. Taking a cash advance should be treated as a big decision and one to use only when no other less-costly option is available.

Upfront Cash Advance Fees Are Common

In addition to the steeper interest rate, many cards charge a fee to access the cash advance feature. You can be slapped with a $10-$20 cash advance fee that’s tacked onto your card balance immediately. In some cases, the cash advance may be even higher – the ten to twenty mentioned here is an average. Your card provider may assess a much steeper upfront charge.

That charge is on top of the interest charge, and itself will accrue interest. So, for instance, if you take out a $100 cash advance and your lender assesses a $20 fee, right away that’s a 20% premium charge, and then interest charges pile up on top of that. If you don’t pay the cash advance back ASAP, there’s no telling how much that $100 will cost you in the long run.

Cash Advances Should Be Avoided When Possible

Because of the higher interest rates and fees associated with cash advances, they should be avoided when possible. If you need cash to pay a utility bill, why not pay the bill using your card instead of taking out cash? That way you’ll only pay standard interest. If you need to pay someone back or loan them money in a crunch, consider sending money through PayPal funded through your credit card. That way it’s like a standard purchase rather than a cash advance.

As with any credit card purchase, paying off the balance ASAP, before interest accrues is the best route to avoid getting in over your head with credit card debt and racking up costly interest. Did you know you can pay off your balance before the statement cuts? You can easily access your card accounts online and pay through the issuer’s website a few days before the statement closes to avoid interest charges.

To find out more about rebuilding your credit after bankruptcy, contact Credit Score Keys for a free consultation. Call 844-659-3226 today to talk to one of our credit experts.

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Costs of cash advances

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Three Changes to the Latest VantageScore That May Help You

Rachel — Thu, 30 Mar 2017 07:21:32 +0000

Three Changes to the Latest VantageScore That May Help You Rachel Thu, 03/30/2017 - 03:21

When you think of your credit score, you most likely think about your FICO (Fair Isaac Corporation) score, but that’s not the only calculation out there. VantageScore is another big player in the credit score game. VantageScore Solutions just announced the release of their fourth-generation score, and it’s a game changer for many consumers.
Credit Karma and other services use VantageScore, and it’s a growing competitor for FICO that many lenders and creditors are increasingly using. If you’re applying for credit and have some negative items, you might get a better outcome from a lender or creditor that uses VantageScore 4.0 than a FICO calculation product. Here’s why.

#1 VantageScore 4 Puts Less Weight on Medical Collections

Medical debt can knock a considerable amount of points off your credit score. If you have medical debt collections on your credit report, it can hurt you even if it’s a bill owed by your insurance company but they’re dragging their feet on paying. Medical debt collectors don’t care if it’s your insurer’s responsibility and if it’s legitimate debt, it can hurt your score.

The new VantageScore doesn’t take into account medical debt that are 180 days and less since those can reasonably attributed to insurer delay. Some other negative items including some public records, will also weigh less on your score under VantageScore 4.0. This means that some tax liens and civil debts may not hit you as hard if your creditor is using this calculation instead of FICO.

#2 Artificial Intelligence Can Help Those with Little Credit

If you don’t have a lot of credit, you have what’s known as a “thin file.” This can happen for young people just getting into their first jobs and first credit. It can also help those who are restarting with their credit after bankruptcy or an extended period of credit inactivity. It sounds strange that AI (artificial intelligence) would play into this but it’s not sci-fi, it’s a tangible application.

VantageScore’s new AI modeling can offer a significant lift to thin files. This is a new arena for AI and credit scores and this new model may or may not take hold with creditors. A VantageScore Solutions rep says that using AI and “the most recent, cutting-edge model development and data techniques available” can expand borrower opportunities.

#3 Today’s Data vs. Trending Data

The FICO score is largely based on static data meaning it’s data from right now, a week ago, or a month ago. One example is credit utilization, which looks at the amount of credit card debt you have versus your total credit lines. If you pay for a car repair just before your credit card statement closes, you could have a high utilization and your score drops.

Then, a couple of weeks later, when you pay off your debt in full, your utilization is smaller and your credit score rebounds. You did nothing wrong, yet your score dropped, then raised. Trending data used in the latest Vantage Score looks at your credit habits over time rather than in just one moment, one week or one month. This helps creditors better assess your risk.

How to Benefit from the New VantageScore

Although it’s sometimes slow for lenders and creditors to adopt new credit score models, it’s still best to be aware how to take advantage of this new calculation when it does come online and begins adoption later in 2017.

Pay Your Credit Cards in Full

Because trending data better differentiates between those that occasionally have higher utilization and those that have occasional higher balances, you should try and pay off your cards in full every month. Those that carry balances are more likely to default according to these models, so paying off will give you a higher score predictably.

Stay on Top of Medical Bills

Because this new model only looks at medical bills older than six months, it’s imperative that you follow up aggressively with your insurance company to ensure they issue timely payments to your medical providers. Don’t sit back and hope they do right. Call and bother them until they pay so your credit score doesn’t take a hit.

If you’re just finishing up bankruptcy or have had your discharge for a few months, it’s time to get serious about improving your credit. Contact Credit Score Keys to find out more about rebuilding credit after bankruptcy.

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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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Will A Balance Transfer Help or Hurt Your Credit Score?

Rachel — Thu, 23 Feb 2017 16:58:11 +0000

Will A Balance Transfer Help or Hurt Your Credit Score? Rachel Thu, 02/23/2017 - 11:58

Be wary of balance transfers
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You may regularly see credit card balance transfer offers, but are these a good idea? Can a balance transfer hurt your credit score? Here is a look at how balance transfers work, how they can help or hurt your credit rating, and whether a balance transfer is a good idea.

How New Credit Cards Affect Your Credit Rating
When considering a balance transfer that’s a new card, you should know that opening a new account can both help and hurt your credit score. To apply for a new line of credit to use for a balance transfer, the card issuer will pull a hard credit inquiry to make sure you meet their specifications.

A “hard pull”, as it’s called, will lower your credit score a bit but, over time, its impact will matter less and less. However, if you are considering several offers and apply to more than one card, several hard pulls can drop your credit score from the impact of the inquiries alone.

Occasional New Accounts Can Boost Your Score

Opening new accounts every now and then can help your score but opening too many at once can lower your score. It’s a balancing act. Plus, 15% of your credit score is your average age of credit. Opening new accounts lowers your average age and that can drop your score.

Because a new account lowers your average age, staggering how often you open new accounts is wise. This is why you also shouldn’t close your old account even after you transfer the balance to a new card. Keeping older accounts open helps this aspect of your credit score stay strong.

Increasing Total Credit Lines Can Improve Your Score

Another facet of your credit score is utilization. This is the amount of your total credit lines you’re using. Opening a new account for a balance transfer can be quite helpful in this regard. If you have a $4,000 balance and have total credit lines of $10,000, you’re using 40% which is far too high.

Opening a new credit card with $10,000 available credit and transferring the $4,000 balance will lower your utilization to 25% because the $4,000 is now based on a total credit line of $20,000. The lower your utilization, the better and if opening a new line can help, it could be a workable strategy.

Consider the Introductory Period Before Transferring

Most balance transfer offers come with a competitively low interest rate but only for a certain period. If you apply for an offer with 0% interest that lasts for 12 months, that sounds good but what happens if you can’t pay off the balance within that period? Is the post-promotion interest rate unreasonable?

Whether a balance transfer offer is right for you depends on your income, credit score, the specifics of the offer, how large the balance to be transferred, the current interest on the debt and interest rate offered, and other factors. There is no set answer and balance transfer isn’t right for all people.

The Hazards of a Balance Transfer

In addition to the potential impact on your credit score, another thing to consider with a balance transfer is what you will do after the balance is transferred. Opening a new line of credit can be good for your credit score, but only if you don’t use the additional credit to get yourself deeper into debt.

Carrying card balances can start financial ruin if your debt, spending, or expenses are out of control. The best for your credit score is to keep your utilization as low as possible. If a balance transfer helps you clear the debt for good, it can be a good idea, but if it digs you deeper, then it’s not wise.

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.

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6 Ways to Kill Your Credit Score Fast – Part 1

Rachel — Thu, 16 Feb 2017 14:08:09 +0000

6 Ways to Kill Your Credit Score Fast – Part 1 Rachel Thu, 02/16/2017 - 09:08

Don’t let your score drop!
Image Source: Flickr User CafeCredit.com

When you think of ways to wreck your credit score, you might think of major events like foreclosure on your home or repossession of your vehicle. But there are other actions that can kill your credit score. You might not be aware just how significant the impact is on your report and FICO calculation for these incidents. This two-part series examines six credit score killers. Check out the first three now.

#1 Errors and Fraud

You can do absolutely nothing wrong and still see your credit score wrecked. How? Errors and fraud can cause big problems. Errors are misreported items. For instance, a credit card issuer might report a late payment when you paid on time. You might pay off a loan, but the lender shows a lingering balance that’s aging and appears to be past-due. You should monitor your credit report regularly to ensure there are no mistakes.

Fraud occurs when someone steals your identity, opens an account in your name, or otherwise uses your credit information for profit. You’d notice if someone steals your credit card and starts running amok with it, but if someone opens a new account in your name, you might not know until you start getting collection calls for unpaid debt. Regularly monitoring your credit report helps alert you to identity theft and other issues.

#2 Accounts in Collection

Unpaid debt usually triggers collections activity and this can wind up on your credit report. On a monthly basis, things like utilities, your cell phone, and medical bills don’t report to the three credit bureaus – Experian, TransUnion, and Equifax. Years of on-time payments won’t help your credit score no matter how long you’ve been a good-paying customer. But if you don’t pay, everything can change.

If you don’t pay a balance for a utility, medical bill, or other debt that doesn’t usually report to the bureaus, that can change if they must put your account into collections. The collection agency will record an item on your report that can drop your score by up to 100 points and can stay on your report for up to seven years. Don’t skip out on bills, even ones that don’t usually go on a credit report.

#3 Maxing a Credit Card

The second biggest factor in your credit score, after your payment history, is your credit utilization. This is determined by looking at the percentage of credit card debt you have outstanding versus your total revolving credit lines. If you have $2,000 total owing on credit cards and $10000 total in credit limits, that’s a utilization of 20% (2,000/10,000=.20). That’s a bit on the high side. You should never exceed 30%.

However, the ideal is 10% or lower. Maxing out even one credit card can push your utilization too high and into the danger zone. This can cause your credit score to drop every month that you’re at the limit. Plus, if you go over the limit, you can be charged a fee plus all the interest you’ll pay. That can put you into a downward spiral of a plummeting credit score and a financial mess.

What Can You Do to Clean Up These Problems?

If you’ve chosen bankruptcy to deal with your debt, many of these items will be discharged and you’ll get a clean slate. From there, you can gradually begin to rebuild your credit. For those dealing with credit issues but not turning to bankruptcy, it’s a matter of clean-up. If you missed a payment, make it ASAP then call the creditor to see if they will cut you a break and not report the delinquency.

To avoid errors and fraud, sign up for a free or low-cost credit report monitoring service. You’ll be alerted when new accounts are opened or there are inquiries for your credit report. If you didn’t apply, you’ll know right away you were a victim of identity theft and can shut it down. Regularly scanning for errors is made easier when you’re using a monitoring service as well.

To find out more about rebuilding your credit after bankruptcy, contact Credit Score Keys today for a free consultation. Call 919-495-2365 to speak to a credit expert. Be sure to come back next week for part two of this series on credit score killers.

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How Does Your Credit Score Stack up to the Average American’s?

Rachel — Thu, 09 Feb 2017 08:07:29 +0000

How Does Your Credit Score Stack up to the Average American’s? Rachel Thu, 02/09/2017 - 03:07

Is your credit score above average?
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The latest survey by FICO (Fair Isaac Corporation) shows that, in general, American consumers’ credit scores are on the rise. In case you’re wondering how your credit score compares to others, the average in the United States is a 700 FICO score. Here is more info from the FICO survey and what you can do to increase your credit rating.

FICO Survey Results
Based on the latest score calculation, FICO 9, those aged 43 and up have the highest credit scores averaging at about 816. For those aged 29 and under, scores average closer to 770. Those with the highest scores have an average of 128 months of history.

The average age of credit is critical to a higher credit score, and those with the best scores have 305 months on their oldest lines of credit. That’s a whopping 25 years of credit history that can boost your score - but length of history and the average age isn’t everything.

Those with higher scores open new accounts less frequently and have an average of nine months between hard pull credit inquiries. Not surprisingly, those with higher scores also have a track record of on-time payments. Close to 95% of those with the highest scores have no delinquencies.

What Drives Your Credit Score?
FICO keeps the exact algorithm of its credit score calculations - they do share the factors that weight into the score. FICO scores range from 300 to 850. The largest chunk of the calculation derives from your payment history – it makes up 35% of the score.

Balances owed makes up 30%, and that’s the utilization factor. It’s not just how much you owe but the percentage of how much you owe compared to your available credit lines. Credit mix counts for 10%. That is the blend of revolving credit and installment loans.

Another 10% is new credit so periodically adding new accounts to your credit roster can boost your score, but isn’t the most critical factor. The final 15% of the calculation is the length of credit history. That means it’s wise to keep older accounts open and in good standing.

How Can You Improve Your Credit?
When you’re rebuilding credit after bankruptcy or striving to improve your credit, you must be very mindful of your habits and the choices you make. Paying your bills on time is the foundational behavior that will help keep you on track.

Avoid credit card overuse and carrying large balances. Keep your utilization low and don’t charge things that you can’t afford. Using credit to live a lifestyle above your income level is never a wise financial move. Use cards and pay off in full each month where possible.

Occasionally open new accounts, but only apply for things you’re certain you’ll be approved for – and that means doing your homework. Improving your credit is a process that takes time, diligence and patience, but can be quite rewarding.

Work on Your Credit ASAP After Bankruptcy
Credit Score Keys works with people that have filed bankruptcy and are looking to boost their credit scores now that their debt is under control. There is a persistent myth that filing bankruptcy wrecks your credit for a decade but that is not at all accurate.

Within a couple of months of receiving your bankruptcy discharge, you can start working on your credit. Step one is to check your credit report for errors. Step two is to research a secured credit card that will accept your bankruptcy past. Step three is to use the card wisely.

The next step is to work on getting an unsecured credit card and build from there. Re-establishing your credit score after bankruptcy is a slow process but one that should be started as soon as possible after your discharge to get you on the right track.

To find out more about improving your credit score after bankruptcy, contact Credit Score Keys today for a free consultation. Call 919-495-2365 today to discuss your credit and how we can help.

Resources:
FICO score survey

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7 Credit Score Myths Debunked and the Truth You Need About Improving Your FICO Rating

Rachel — Thu, 12 Jan 2017 08:11:36 +0000

7 Credit Score Myths Debunked and the Truth You Need About Improving Your FICO Rating Rachel Thu, 01/12/2017 - 03:11

Credit score myths debunked
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Many people think they understand their credit score, how it’s calculated, and how to improve it, but thanks to a lot of misinformation that’s been perpetuated, their understanding might not be as accurate as they believe. Here’s a look at seven common credit score myths debunked and the truth you should know instead.

#1 You Should Close Credit Card Accounts You Don’t Use
If you started rebuilding your credit with a secured card, as most people do, you might think closing it once you get “real” credit card is a good idea since you don’t need it anymore. However, closing older accounts can damage your score.

An important component of your credit score is your average age of credit. Older accounts are, therefore, of great value. If you close an older account, even if it’s always been in good standing, you’ll likely see your score drop – and this can hurt.

#2 Paying Your Bills on Time Boosts Your Credit Score
Paying your bills on time is one of the best habits to have, particularly if you’re re-establishing your credit. However, unless the creditors to whom you pay the bills report to one of the three credit bureaus, paying on time will not boost your score.

Paying your gas, electric, and water bills on time is great, but won’t help your score. Do know that if you fall behind on an expense that doesn’t report to the bureaus and they turn the account over to collections, then it could wind up as a negative on your credit report.

#3 Paying Your Credit Card Bills on Time Boosts Your Score
Paying your credit card bills on time is essential to maintaining good credit, but depending on how you use your cards, you can pay on time and your credit score can drop. How is that possible? If you pay as required, shouldn’t your score go up?

Not necessarily. Here’s why. If you heavily utilize your credit line, more than 25-30%, your score can drop. If you use more than 50%, it will drop more and if you max out your cards, even if you pay on time, the hit can be worse. Underusing your credit lines is best.

#4 You Only Need One Credit Card to Build Credit
One credit card can be enough to get by with for purposes of renting cars and other activities that require a credit card rather than a debit card. However, having just one credit card won’t help you build your credit card if you want a good FICO score.

Occasionally opening new credit cards will help the portion of your credit score calculation that weighs new credit. It can also help your utilization because having new lines of credit means if you do carry a balance, it will be mitigated by more available credit.

#5 Your Credit Score Can Improve on Its Own
Taking a hands-off approach will not help your credit score. Simply paying your bills on time and keeping the credit cards you have can keep your score at status quo, but, eventually, it will erode some if you don’t keep working at it.

Improving your credit score takes work and it’s not something you can leave alone and expect to get better. There are specific steps you can take to improve your credit score methodically, but doing nothing at all is no help.

#6 You Can Rebuild Your Credit Score Fast
Anyone that promises they can improve your credit score overnight is selling you a lie. It’s impossible to repair or raise your FICO score instantly. However, you can trash your credit score very fast. All it takes is a few mistakes and your score can plummet.

If you max out your credit cards, miss a few payments, have some debts go into collection, your score will drop like a rock. Rebuilding takes time and patience and work. However, if you’re willing to work at it, you can see your score progress every month.

#7 Bankruptcy Ruins Your Credit Score for 10 Years
One of the biggest myths about your credit score is that bankruptcy ruins it for a decade. This myth has persisted because a bankruptcy filing can stay on your credit report for up to 10 years, but that doesn’t mean it will keep dragging down your score.

The longer after your bankruptcy filing, the less the impact will be on your FICO score. For those in financial trouble, bankruptcy can put an end to a credit score free fall and give you a fresh start and a chance to rebuild.

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

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Why You May Be Turned Down for Credit Even With a High FICO Score

Rachel — Thu, 01 Dec 2016 08:29:30 +0000

Why You May Be Turned Down for Credit Even With a High FICO Score Rachel Thu, 12/01/2016 - 03:29

Turned down for credit?
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When you’re coming out of bankruptcy, rebuilding your credit score is important, but you also need to understand that the number alone won’t guarantee your approval. Here is a look at why you could be turned down for new credit even if your FICO score is pretty good—and how to combat these rejections.

Length Of Credit History

One of the aspects of the credit score calculation is how long your credit history has been active. Since bankruptcy typically closes down existing credit accounts (unless you are able to keep a car or home loan through bankruptcy), it resets your credit clock.
This is why it’s important to start rebuilding your credit score as soon as possible after bankruptcy. You’ll likely have to start with a secured credit card unless you can get someone to add you on as an authorized user to one of their credit card accounts. But no matter how you choose to begin, start rebuilding as soon as you can.

Bankruptcy Filing

This is a double-edged sword because filing bankruptcy can be the trigger that helps you get your financial house in order and stops a credit score free-fall due to ongoing late payments and overdue balances. It’s a myth that bankruptcy wrecks your credit score for 10 years. Instead, it provides a new financial start for you.
With that in mind, some creditors won’t open an account for you if you recently filed bankruptcy. This is where it’s important to do your homework so you don’t apply to a creditor that bans bankruptcy filers. Also, the longer after your bankruptcy, the less impact it has with creditors.

Insufficient Income

Your credit score is just one of the factors that lenders consider. They might be more flexible when it comes to credit card requirements, but for a home or car loan, income is a considerable factor. No lender wants to loan to someone who can’t afford to make the required payments.
When a potential lender accesses your credit report, they can see how much outstanding debt you have and the monthly installments you must pay. They also verify your income with your employer and, from there, it’s easy to tell whether you can afford the new credit. If not, you could be turned down.

Cheating The Bonus System

Credit card issuers are getting savvier about finding out which card holders sign on with them just to rake in big sign-on bonuses and then quit using the card, making the transaction a one-sided advantage rather than a win-win for both customer and card issuer.
Some examples are airline miles bonus cards which offer a hefty bonus if you spend a certain amount within the first few months. If you don’t use the card again after that, you’re “gaming” the system as far as card issuers can see. This might trigger them to turn you down.

Too Many Inquiries

If you’re shopping for a major purchase like a home or auto and you have several inquiries within a two-week period, the credit scoring system will typically treat these as a single inquiry since you will only wind up with one loan.
But for credit cards, if you apply to a bunch in the hopes of possibly opening a number of accounts, these will count individually and can lower your score. It also looks to creditors like you’re trying to open a number of accounts at once which can seem suspect to creditors.

To find out more about improving your credit score after bankruptcy and how to avoid being turned down for credit, contact Credit Score Keys today. Call 919-495-2365 now for a free consultation with one of our credit experts.

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Raise Your Credit Score Strategically: Credit Utilization Hacks to Boost FICO Calculation

Rachel — Thu, 03 Nov 2016 08:12:50 +0000

Raise Your Credit Score Strategically: Credit Utilization Hacks to Boost FICO Calculation Rachel Thu, 11/03/2016 - 04:12

Raising your credit score just takes a bit of strategy.
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Credit utilization is the amount of your revolving credit lines you’re using. It makes up 30% of your credit score calculation, so it’s a big deal. Your credit lines are the credit limits on your credit cards, and utilization means how much of these credit lines you’re using. Here’s what you need to know to hack this part of your credit score and raise it strategically.

The Myth Of The 30%

You may have heard that if you don’t go over 30% of your credit lines, then you’re golden. At face value, this means you could run up one card but not use the others and still stay below your 30% ratio.
The problem with this kind of thinking is that, first of all, 30% is not set in stone.The level at which your balance utilization will begin to negatively affect your score varies based on your credit score. Second, going over that amount on a single card can hurt your score calculation, depending on which calculation method is used. Some calculate overall and some per card. But although the 30% rule can be misleading, we do have some tips to make the most out of credit utilization.

#1 Track Your Card Usage To Avoid A Spike

If you regularly use your cards and then pay them off each month, particularly with rewards cards, then just track and keep an eye on your credit lines. Make a simple spreadsheet, track your spending on a card, and then cut it off before it goes over 30%.

#2 Pay On Your Card Before The Statement Cuts

The amount spent during the month as you use your credit card doesn’t usually report to the credit bureaus until your statement cuts. If you go over the balance during the month but you pay it down (this is simple to do via your card issuer’s website) prior to the statement, then you should be good.

#3 Use Balance Alerts

Many credit card websites offer a feature to email or text you when you hit a threshold that you set. You can set an alert for 25% or a certain dollar amount so you know to stop using that card and switch to another to avoid utilization dings on your credit score.

#4 Higher Limits Help

The higher your credit limits, given the same level of usage, the lower your utilization. For instance, if your card has a $500 limit and you have $250 on it, that’s 50% utilization. But if it’s raised to $1k, that’s just 25%. Using your cards regularly and paying on time encourages card issuers to raise limits.

#5 Know When The Issuer Updates Your Credit Report

Card issuers have customers with statement dates spread throughout the month, but they may report to the credit bureaus on a fixed day each month. Call and ask so you know how your issuer does it. If the report date and statement date don’t align, you may need to adjust your spending around the report date.

#6 Pay Often, And Never Miss A Due Date

Maxing out cards, missing due dates, or going over limits can all come with stiff financial penalties. To avoid this, consider paying each payday so you never hit the end of the month with balances you might be unable to pay. Using the card issuer’s website, you can make multiple payments each month.

#7 Be Savvy About Rewards

Rewards cards can be beneficial, but know this: if you’re carrying a balance as of your statement date, you will trigger an interest charge. If that interest charge outweighs the rewards on your card, the reward is meaningless. Be savvy with rewards cards to get the most out of them.

If you’re rebuilding your credit score after bankruptcy and need help, Credit Score Keys is here for you. Call 919-495-2365 today for a consultation at one of our North Carolina offices and get your FICO score on track to make the most of the fresh start that bankruptcy offers.

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