Although I’m normally a person that likes “free” anything, in the case of my credit report I think it is best that you consider what information you are getting and what information you will not see. While reviewing your credit report is important, it can be overwhelming to most consumers. Nonetheless, you should still review the report annually.
A smarter decision for consumers, is to monitor their credit scores each and every month.
Why would I advise this?
Because your credit score is often the underlying factor a lender judges you by for extending credit your way.
The Difference Between Your Free Credit Report & Credit Score
A credit score is simply a number that represents a current evaluation of your credit history that is available within your reports. It is a “cliffnotes” version of your overall credit file. Clearly, this helps consumers quickly digest and evaluate their credit situation. Banks and lenders use the score to decide quickly if you are likely to repay an account or loan, without having to carefully review the credit report on which it is based.
Ideally, you want to improve your scores over 720 because if your score is high, you are likely to be offered credit at good rates. If your score is below the creditor’s threshold for routine approval, it might reject you or charge you higher rates or fees. In the long run, this could potentially cost your tens of thousands of dollars on a loan.
Since your credit scores are based on your credit reports, even more important than knowing your credit scores is knowing what is in your free credit report gov. If you want a better credit score, you need to deal with what is in your credit report.
Credit Report Basics
Credit reports are statements made by credit reporting agencies that document all financial activity for you. Reports might consist of details about a customer’s credit history, worthiness, current standing, credit capacity and payment history. Whereas some lenders will evaluate your credit report directly, others may only evaluate a credit score based on your report. The majority of lenders will review both your credit report and one or more of your credit ratings.
Credit reporting agencies are normally for-profit companies that gather and offer details about an individual’s credit history. All creditors supply information about their accounts making use of a requirement or an electronic reporting system. You may hear it referred to as “Metro 2.” It has a variety of “fields” (that is, boxes or blanks) in which the creditor might place information about you and your credit.
There are three credit bureaus that you need to be aware of because your credit score or FICO score can vary from each bureau. Do not rely on just one for all of your information. Some lenders only report to one while others may report to all three. You are better off to pull each score and check for major problems before you need to apply for a loan or even before you apply for your next job.
P.O. Box 2000
Chester, PA 19022
P.O. Box 2002
Allen, TX 75013
P.O. Box 740256
Atlanta, GA 30374
Keep in mind that each bureau uses a modified version of the Fair Isaacs scoring method. It is important to know that each bureau uses a slightly different scoring method because scores will be different. They all weigh the report about the same as far as what is important and what is less important. Equifax has the BEACON system, Experian has the Experian/Fair Isaac Risk System, and TransUnion has the classic FICO Risk Score system.
The Credit Score Scale
Credit scores typically range from 300 to 850. Anything below 600 is considered poor credit. Scores over 715 are a great sign of your credit worth and qualify for the best rates.
What Not To Do
Do not fall for that silly television commercial about a ‘free credit report’. It is actually anything but “free” and furthermore, it is just a guesstimate of your actual credit standing. It amazes that their company is still around and the amount of confusion they cause for consumers is overwhelming.
What You Should Do
If you still think you only want to see your free credit report from the government and not your actual scores, head on over to www.annualcreditreport.com. In my opinion, you are much better informed if you look at the reports and monitor your scores with a credit monitoring service.
Sometimes people live debt free by having a steady financial flow and feel more comfortable paying cash for their items like cars and renting so they do not have to borrow and owe money to lenders. Yes, this keeps them out of debt. But is being totally debt free a great idea? Not really. There is such thing as positive debt, like car payments, mortgage payments, and having a credit card.
This type of debt helps credit. How is that possible? It shows that you are reliable and responsible enough to make those payments and financially stable enough to commit to such loan agreements.
What can happen when you do not have credit?
When you do not maintain positive credit, you will be faced with problems getting a loan when you might actually need one the most. For an example, imagine a debt free life where you only pay cash for large item and you rent an apartment thus never having to pay a mortgage. Years pass and you decide you would like to open your own business. Not many people have that kind of cash on hand, so naturally you want to take out a business loan to get started.
Chances are, you going to have a really difficult time find a lender to grant you that kind of loan because of your credit history, or lack thereof. You might think, “I am debt free and have no outstanding financial difficulties on my credit report,” but that is not the case. Having no credit is almost the same as having bad credit to most creditors and lenders. Credit is built to show your financial responsibility and capability. Should you have no credit, there is no proof or reinforcement that you are able and responsible to make such a financial commitment. If a lender of creditor cannot look at your credit history and judge you by it, they consider you high risk. It might not seem to be the fairest way to judge a person and their financial responsibility and capability, but unfortunately this is how the lending world works.
When to establish or good credit and how?
It is best to establish some sort of credit in the formative years, before you are 25. You might not even have a job yet, but during college, you can start your credit history by simply having a credit card. It will only be for credit purposes only and should be treated as so. Be responsible and do not abuse it, as it will result in credit abuse and you will be paying for it a long time in more ways than one. Your credit will suffer and you will be in worse shape that having no credit. In addition to being young and never having credit, there are other situations that are ideal in establishing or reestablishing credit. Some of these would include not only being of a younger age, but perhaps you pay cash for everything to avoid a past history, you are trying to start your credit record slowly, or you just think most attractive credit reports are the ones that are debt free. Keep in mind that creditors and lenders will forgive some past credit mistakes and like to see evidence on your report of positive active credit.
Whether you are establishing good credit or simply trying to start over on your credit from past mistakes, it is always important to remember that it takes time. Good credit is never a shortcut, so being patient is key. There are several ways you can get the ball rolling quicker though. For instance, you can start your credit by being a part of a friend or family member’s good credit. If they have good, established credit and your trust, you could be a cosigner a credit card and even if you never used it, it would start your credit as well. A little risky for the person with the credit, but lucky for you if you know someone well enough that would be willing to help you out with exceptional credit. Make sure that you trust their spending and credit habits as well, since their balances and payment history are likely to appear on your credit report.
If you are able, you can also get a secured credit card for yourself. A secured credit card is offered usually by a bank when you are depositing funds to secure the credit. For an example, if you deposit $300 dollars, you would have credit up to $300. This way, you can gradually increase your credit, but still not charge or use credit that you cannot pay for. With a secure credit card through a bank, you will have the funds to back it up. One thing to keep in mind when getting a secured credit card is to ask your bank if it will show up on your credit report as a secure card. If it will, pass on getting one. A ‘secure’ card can do damage to you credit. Getting a credit card can be simplified and easier to obtain from retail stores. Jewelry stores, appliance stores, department stores, etc. will often offer these cards without considering your past credit history. If you can be responsible with one of these, they can be an easy way to establish credit.
Establish your credit and keep it active!
After you have decided which way is best for you to establish your credit record, it is also important to keep them active. Sometimes when you have inactive accounts, creditors or lenders see this as a way of avoiding existing debt you might have incurred. Paying your balance is important, but also maintain a balance. It will show that you can use the credit while also paying for it.
Always pay on time, that is the number one thing that is judged first and foremost by other creditors or lenders. Remember, there are some forms of credit that future creditors and lenders might never see, so be resourceful in choosing ways to establish. For an example, if you borrow money from a friend or relative, you might be able to pay that loan back on time and you do so, but a creditor or lender would never see or know that because it is a private dealing between you and the person.
Simple, routine payments, like rent or utility payments may not be reported to a credit agency as well. A rule of thumb whether you are establishing credit is to always do your research before applying for any type of credit or before accepting any type of credit offer. Ask the lender, creditor, or business whether the credit will be reported to a credit agency. This can help save you from taking out credit that is not needed or will perhaps be frowned upon by future creditors and can also help in distinguishing between positive and negative credit.
Anyone dealing with the stress of mounting debts can attest that you often feel overwhelmed. Sometimes we choose to simply ignore the issue. Others might opt for skipping payments or borrowing more money to pay off current credit cards. The important thing to remember is that there are options available for you.
Most likely, more options for dealing with your debt than you ever imagined.
Finding Money To Pay Down Your Debts Faster
If you can come up with a enough cash to pay off some of your debts, your financial burden is sure to improve. The key here is not to jump at every opportunity to get cash fast. Most of these payday loans or cash advances have serious problems and if you make a poor choice, you’ll only find yourself in a worse situation- financially speaking.
Sell Off A Major Asset
Selling your car or other big investment is one of the best ways you can quickly get cash. Particularly if you are no longer able to afford your car payments. If you have any type of public transportation available, this can often times be a quick help for the bulk of consumers’ debt.
With the proceeds, you should have enough to pay off outstanding debts owed on the vehicle. Use what’s left to help pay down your other debts. One note of caution is to be realistic before you sell off your car. If you think you can just get a new loan and a new car, you might be better off considering a different path. We want to get you out of debt for good and not just into a new shiny car.
Cut Back On Your Budgeting For Non-Essential Items
Cutting your expenses is almost a no brainer at this point. Showing your creditors that you are trying to live frugally and are making an effort can go a long way with getting them to work with you, it can also help with your annual credit report rating.
- Become A Extreme Couponer – Clipping coupons like they are gold. Stack them with in-store deals and buy generic products if possible. If you’ve never tried this before you might be shocked at how much you can lower your grocery bill each month.
- Cut Back On Luxuries – Cancel your cable TV, internet subscriptions immediately. You can get most major networks with a good old-fashioned set of ‘rabbit ears’ and free wireless hubs are abound everywhere now-a-days.
- No More Eating Out – Start bringing your own lunch to work and cooking for yourself at home.
- Sell Of Your Old Clothes – eBay is often overlooked for actually selling stuff we no longer use. By the same coin, if you need to buy something use second-hand shops or thrift stores if possible.
Tap Into Your 401k
If you have an 401k or other retirement account, you can get cash to pay off debts by withdrawing money from it before retirement. In essence, you are borrowing from yourself and in most cases you will have to pay withdraw fee and taxes on any amount you remove.
Apply For Equity Line Of Credit
Most lending institutions such as banks, credit unions and other mortgage lenders offer home equity lines of credit. Sometimes called a 2nd mortgage, these loans require that lenders re-assess the value of your property and this determines how much you can borrow against up. Basically, you are putting up your property as collateral. The amount extended will vary, but is usually a percentage of the market value of your house.
A equity line of credit doesn’t come without any risks though. If your debts are unsecured and your house is exempt from collection, it’s almost never a good idea to put your home up because you are then jeopardizing it by getting a s borrowing against it.
On the other hand, if your like a large chunk of US homeowners these days your mortgage may be the main culprit in your debt problems. When the housing market burst in 2008, the crisis sent shock waves around the globe and nearly brought our financial markets down. If you are in a situation like this a mortgage modification or re-fi might be better suited to help you get back on secure financial ground.
We hope that you realize now that you have options available to start fighting your debts. Other sometimes unpleasant (we didn’t even mention asking friends of family members for help), getting started paying down the total amount you owe is always the smartest choice. In the long run, you will be much better off for improving your credit ratings.
If you are considering learning more about your credit history this, you are not alone. Plenty of residents of the United States and other countries all over the world are overwhelmed with the amount of credit card debt they carry. You may feel confused or overwhelmed at the start, but we are living proof that with some dedication, discipline and smart tools you can get on the path to financial freedom.
As we head into the new year, we all realize that it is no longer a wise choice to continually increase our credit card debt because many people do not have job security like they used to and credit cards require monthly payments to be made. There are many people who want to learn how to consolidate credit card debt, so they can reduce their bills and pay off the debt faster. Moreover, you will be well on the path to financial freedom and improving your credit report scores forever.
Learn the Facts About Debt Repair Companies Before You Get Started Consolidating Your Credit Card Debt
As you try to consolidate your credit, be sure that you understand any fees and issues that may come with signing up with a company for assistance. Always, look at the fees and conditions regarding the debt company and how they work with you and keep your situation private. You should also receive a timeline of your results; the organizations are required to let you know this in advance. You should also learn about how much money you will need to pay before you start to save any money through consolidation.
The idea that paying back debt will help increase your finances is a harsh reality for many people. When you have settled debt with credit cards companies, they might send the debt to the IRS who will think it is income. No one wants to pay more taxes, especially if you have been paying that money to someone for a long time. If you plan to work with consolidation, talk your accountant for a full take on the idea.
A Few Easy Tips On How To Consolidate Your Credit Card Debt Fast
Debt Counseling Service
If you have difficulty with budgets and making your payments on time, there are organizations, called debt counseling services that can help you with paying back your loans and managing your money. You meet with a counseling service for approximately an hour, as the counselors will help you with plans to reduce your credit card debt and still have a satisfactory life. Check out the references and reviews of any credit counseling service that you might be considering.
Talk with a Banker
One of the best ways to consolidate debt is to visit with a banker. The bankers might be able to offer you a low interest loan with low monthly payments that you can use to pay off the credit card debt. You might have to cut up your credit cards as the loan is being issued as a requirement from the bank.
It is important to remember that banks will not give loans to people with bad credit, so if you have bad credit, you might not have this choice as an option. You can also try to make a budget and stick to it so you can get your credit card balances lower. Many financial planners suggest that you pay off of the smallest cards first, so you do not have as many to worry about while you are working on your debt.
Debt Management Planner
Another great way to deal with excessive credit card debt is to work with a debt management planner who will help you if the credit counseling program did not work for you. Instead of finding a loan or credit card to pay off all of your credit cards, you give the debt management program your money and they pay your loans. They will teach you how to manage your money and they will work with your creditors to reduce interest rates and balances, too.
When you make an arrangement with a debt management planner, you are in a sense consolidating your debt and paying it off quickly and easily the planner also takes care of postage, so you actually save money while paying back the loans. Unfortunately, many people are not successful with this type of debt consolidation program.
Home Equity Line of Credit
Another possibility for anyone who is learning how to consolidate credit card debt is the getting a second mortgage or a home equity credit line. Since most credit cards have high interest rates, approaching 20%, borrowing money from your home may not be the worst idea. The interest rate in a home equity credit line is usually much lower than that of other lenders. This helps you keep your life style the way you want it, while working to reduce stress in your life.
Now that you have come to terms with your bad credit and realize that it is going to take much time and patience to work on it, you can make the commitment to get a good credit report rating. It will take a little work on your end, but it is possibly to get back into the good graces of having decent credit. Here are few tips on how to approach your credit slowly and improve your credit history.
First, you should realize that all negative hits on your credit history, such as collections, bankruptcies, or any past debt will stay on your credit report for at least 7 years if not more. It is the law and there is nothing you can do to erase it, so just get past it and start the process.
You should take a look at your credit report and get acquainted with it. To accurately assess your financial and credit status, obtain a copy of your report from Equifax, TransUnion, and Experian to cross examine and compare all three. This will allow you to look for discrepancies and any other information that you might question or feel there may have been an error. As you are assessing your credit report, look for any negative records that are still on your credit report that could possibly be passed dated. If you feel it has been at least 7-10 years since that record was recorded, you can attempt to have it removed. If they are not expired, all is not lost. Be aware of the dates when they will fall from your record and you should start to see a little improvement in your score, which will in turn help you with your credit. Any amount of progress is a start and will help tremendously!
Should you find any discrepancies in your report that you are not familiar with; you should make it a point to fight them. All three credit bureaus listed above will require a dispute letter and you should know something within thirty days of their receiving it. It is your right as a consumer to dispute and fight any charge or collection that you feel in inaccurate and you should exercise that right when it comes to credit! You might be correct and that is just another step in the process of establishing good credit.
Now that you have sorted out your credit history and have a better understand of your credit report and scores, it is time for you to move forward and take action on your credit. You can do this in the most simple, positive ways. For instance, get a credit card, use it, and pay your monthly balance. It’s that simple, showing you are financially responsible and consistent with you payments will only help your credit. After you are demonstrating your ability to maintain your credit responsibilities, you can seek bigger opportunities, like taking out a loan.
While you are in the process of getting good credit, it is important to know where you stand. Since credit scores are updated monthly, you should periodically check your credit report to track your progress. This way you can see just how successful or unsuccessful your improvements are. Do not be afraid to check your report periodically, there is not a penalty for requesting your own report and scores. Some consumers find it easier to have help from a credit monitoring services, like Credit Keeper, which will help you track and monitor your scores from all three credit bureaus and will also alert you should there be any new information that requires attention on your part. This sounds great, but agencies and services like this are not always accurate and there are fees as well. That is just more money out of your pocket for services that- with a little more time and effort- you can do yourself. Getting out of debt and a bad credit status is difficult, but remember it is possible, you can do it, and stay positive!