Tips for Understanding Your Credit Score

Tips for Understanding Your Credit Score

As you know, your credit score is important. How important? So important that an entire industry exists solely to monitor and report your credit score. 

So, what does your score mean? It tells lenders (companies who offer lines of credit) whether or not you’re good about repaying your debts and paying them back on time. If you pay on time and don’t carry a lot of debt, then you’re a good credit risk, and you’ll get loans, credit cards, mortgages and great interest rates. If you pay late and max out your existing cards, you either won’t be eligible for additional loans or you’ll end up with much higher interest rates.

Understanding Your Credit Score: Who Are the Major Players?

When it comes to credit reports and credit scores, there are three major players: Experian, Equifax and Transunion. These are the three credit reporting agencies, or credit bureaus, that collect information about your lending habits. These credit bureaus compile credit reports, which determine your credit score.

These reports include several factors:

-Your personal identifying information, such as current and past addresses and your Social Security Number.

-Credit accounts called trade lines, which is essentially a list of creditors who report your credit usage and payment history.

-Any public record information dealing with your finances, including bankruptcies, foreclosures, delinquent accounts, wage attachments, and anything from collection agencies.

-Credit inquiries (anyone who requests your credit report) for the last two years.

Understanding Your Credit Score: What’s in a Credit Score?

All the information on your credit report is measured and weighed, and the bureaus assign a score to your report for lenders to use. Each bureau has a slightly different way of determining your score, but they should all be fairly similar. Some factors that weigh into your credit score count more than others:

Payment history (35%). On-time payments mean a higher score. Late payments, delinquent or over-limit accounts, bankruptcies, and liens will significantly lower your score.

Debt-to-Credit Ratio (30%). This is also called “revolving utilization” and is specific to your credit card accounts. If your credit limit is at $1,000, creditors don’t want to see you maxing out the entire credit limit. Try to keep your total revolving utilization ratio as low as possible – 30 percent is good but 25 percent is better and if you really want to maximize your credit score, aim to keep your revolving utilization at 10% or less. This goes for your total revolving utilization and for each individual credit card. Maxing out your credit lines can lower your score. If you have an excess of available credit, ask your credit issuer to reduce the amount on credit lines you’re not utilizing.

 

Length of credit history (15%).  This shows how long you have been using credit and how you have managed your finances in the past. The longer your credit history, the better, so avoid closing accounts which have been opened longer, even if you don’t use them.

 

New credit accounts and inquiries (10%). This includes accounts you’ve opened recently, and recent inquiries from companies you have applied to for credit. Credit inquiries remain on your credit report for two years but are only factored into your credit score for the first 12 months. The main point to remember is that applying for a lot of credit in a short period of time can lower your score.

Diversity of Credit (10%). Having credit cards is a great credit builder, but lenders want to see that you can manage other types of credit as well, such as installment loans and mortgages.

 

Understanding Your Credit Score: Keeping Tabs on Your Credit Score

While creditors and credit bureaus are watching your credit, so should you. Experts recommend that you review your credit reports at all three bureaus at least once a year to make sure there are no inaccuracies. To order a free copy of your credit reports, use the federally mandated website at www.AnnualCreditReport.com or call (877) 322-8228.

If you do find errors, each credit report will direct you on how to file credit disputes with each of the individual credit bureaus.

In the end, your credit score is your responsibility. Making the grade is a lifelong test on which you’re constantly being graded. Turning good payment and credit usage behaviors into habit should be a top priority.

How Do You Know if Your Identity Has Been Stolen?

How Do You Know If Your Identity Has Been Stolen?

Identity theft was likely the number one complaint to the Federal Trade Commission in 2012. I can state that with some conviction because identity theft has been the number one complaint to the FTC for the prior 11 years. The question most of us wrestle with is this…how do I know my identity has been stolen?

Ground Zero…Your Credit Report

The only reason you’d be the target of an identity thief is because you have an identity.  That’s your “value” to a thief and to them it’s as good as currency. And because identity theft is a financial crime, money or access to capital is the crook’s end goal.

We all have the ability to apply for credit. Add over 10,000 creditors in the U.S to the fact that most of us have average to above average credit reports and credit scores and you’ll see that access to easy credit isn’t terribly difficult. That’s not a secret and the fraudsters know this. That’s why your credit identity is always in the cross-hair of an identity thief.

Thankfully the credit reporting system is set up in such a way that consumers can immediately see if their identity has been used to apply for credit on behalf of another person. And while credit reports are not “real time” in their reporting of account information, they are in their reporting of changes to your identification information and credit related inquiries. This makes credit monitoring an effective tool to notify you when fraud has possibly occurred.

What Changes On My Credit Report Could Be Indicative of Fraud?

While it is certainly possible that changes to your credit reports does not indicate fraud, it’s in your best interest to be cognizant of any substantive change to your personal information.  Changes to any of following areas could mean identity theft:

Address Information:

If a new address hits your credit reports it could mean that a fraudster has applied for credit in your name but with a different address. Addresses are updated on credit files when new applications for credit are submitted. This is the reason monitoring the address section of your credit report is so important.

Inquiry Information:

An inquiry is a record of someone or some company pulling your credit report, and the date on which the access occurred. If a fraudster applies for credit in your name and the lender accesses your credit report a record of the access will hit your credit report immediately and trigger an alert from a credit monitoring service.

Account Information:

If a fraudster is successful opening a new account in your name then it’s very likely that account will be reported by the creditor to one, two, or all three of the national credit reporting agencies; Equifax, Experian and TransUnion. Again, the new account will trigger credit-monitoring alerts.

New Collections:

If a fraudster opens a new account in your name he or she is unlikely to make payments, which could result in the loan going into default and to a collection agency. And while the fraudster probably didn’t give the lender your telephone number, collectors have very effective ways of acquiring that contact information. If you start getting calls from collection agents attempting to collect a debt that you don’t recognize, it could be the result of fraud. At this point your problems are significant because you’ll be telling the collection agent the same thing that legitimate debtors in default are telling them…”that’s not my account.”

If you’re worried about becoming a victim of identity theft, you should at the very least check your credit reports on a regular basis. There are also free resources like CreditKarma.com & CreditSesame.com, where you can get your free credit report and free credit monitoring to help you pinpoint any unauthorized inquiries or new account openings that are often the first signs of identity theft.

10 Ways to Minimize Your Exposure to Identity Theft

10 Ways to Minimize Your Exposure to Identity Theft

You don’t help burglars break into your house by leaving the doors unlocked or hand over your car keys to an auto thief. Yet, every day, Americans share sensitive information that can be used for identity theft – an offense that is much more widespread and costly than property theft.

According to the most recent data available, 16.6 million victims of identity theft reported a total of $24.7 billion in direct and indirect losses in 2012. Those damages were far greater than the $14 billion lost from all other property crimes (burglary, motor vehicle theft, and genera theft) that year.

That data comes from the Department of Justice in its Victims of Identity Theft, 2012, report published in December. It found that identity theft losses were more than four times greater than losses due to stolen money and property in burglaries ($5.2 billion), and eight times the total losses associated with motor vehicle theft ($3.1 billion).

What’s more, this data is from 2012 – the most recent data available from the Department of Justice. We won’t know 2013’s numbers for another year, but considering the massive data breaches that targeted several large retailers just four months ago, these numbers will likely be even higher.

With these facts in mind, here are ten measures you should be taking right now to protect your personal information and provide your best defense against identity theft:

1. Shred important documents

Identity thieves love waste baskets and dumpsters. These receptacles can be a great resource for fraud, so it’s important to destroy all of your important documents with a crosscut shredder, which slices and dices, to ensure they’re completely obliterated.

2. Watch your cards

This means actively monitoring your credit and debit card accounts to check for any unauthorized charges or transactions. Don’t wait until your statement arrives to check for unusual activity or unauthorized charges. If you spot any unauthorized or unusual charges, contact your bank or credit card issuer immediately.

3. Check your credit reports

Your credit report is often the first place you’re likely to identify potential signs of identity theft. By law, you’re entitled to a free copy of your credit report from each of the three credit reporting agencies once every twelve months. The Fair Credit Reporting Act gives you this federally mandated right, and if you’re not taking advantage of it – you should be.

4. Monitor your credit

Checking your credit report once a year is a given, but monitoring it regularly is one of the most effective ways of catching the first signs of identity theft. Think of your credit as the canary in the coalmine. By keeping an eye on it with regular monitoring, you can quickly spot the sorts of discrepancies that signal identity theft. Most monitoring services provide real-time alerts to help you pinpoint possible signs of fraud before they cause major damage to your credit reports and scores. And while most credit monitoring services will cost you a small monthly fee, by taking advantage of free resources like CreditSesame or CreditKarma, it doesn’t have to cost you a dime. 

Our choice for a paid credit monitoring service with alerts has always been: www.PrivacyGuard.com.  For $1 initial introductory price (14 day trial), you can download and view your tri-merged credit reports.  If you decide to continue your service, it’s only $14.95 per month and well worth the small investment.

5. Use strong passwords

Make sure you protect all of your important hardware and sensitive accounts by using a strong password. Experts suggest you create passwords by mixing uppercase and lowercase letters with numbers and symbols. It’s also a good idea to change passwords regularly and never use the same password on all your accounts.  It may be convenient for you to use the same password containing the name of your cat and the numbers of your house, but anyone that knows personal information about you could quickly figure out your password and be tempted to help themselves to your credit.

6. Don’t take the bait

Never respond to phishing emails, or unsolicited emails of any kind, asking for personal data or information, and never click a link in those kinds of communications. If there is an offer you would like to pursue, conduct your own Internet search before doing so and follow the links you find from it.

7. No card carrying

You’d be surprised by how many people carry their social security card around with them in a purse or wallet. This presents a tremendous opportunity for identity theft. A social security number can be used to apply for credit cards, open a bank account or get a loan. Obviously, you don’t want yours out in public unless it needs to be. Find a safe place for your social security card and keep it there.

8. Lock and block

If you are going to send sensitive information over the Internet, make sure to use encryption software that scrambles the data and keeps it safe from prying eyes. You should also make sure to look for the “lock” icon in the status bar of your browser when sending data. This is an indication that you have a secure connection with the recipient.

9. Don’t be too social

Everyone loves to talk and share news about themselves on social media. But too much information isn’t just an annoying catch-phrase. It can also be a problem. An identity thief can learn enough about your life to answer challenge questions on accounts and get access to money and other personal data. Never post your full name, date of birth, address, phone number, Social Security number or account numbers on any publicly accessible site, and be sure to limit access to your networking pages.

10. Recognize security differences

A secure website is not the same thing as a secure network. An encrypted website only protects data you send to that site. Don’t mistake a secure website for an unsecured network. This is especially important when using a wireless network or free Wi-Fi in a coffee shop, airport or other public space, which are prime targets for identity theft.

Why Don’t My Credit Cards Ever Show a Zero Balance on My Credit Reports?

Why Don’t My Credit Cards Ever Show a Zero Balance on My Credit Reports?

You’ve done your homework and you know that paying off your credit cards in full each month is the smart move.  You’re avoiding expensive interest charges and you’re avoiding excessive credit card debt. And, you know that maintaining a low balance relative to the credit limit is a great way to earn solid credit scores.  The cherry on top is that you check your credit reports several times each year to ensure the data is accurate.

By all accounts you’re well engaged with the important facets of all things consumer credit. But, one thing has you baffled. Every time you check your credit reports the credit cards that you use always show that you have an outstanding balance. How can that be true given that you pay them off each and every month?

The answer is…

Credit card issuers update the information in your credit files only once each month. And, their update occurs soon after your statement closing date. The statement closing date is the end of you monthly billing cycle.  It’s also the same date that your balance due is determined, which is what’s included in your billing statement.

You’ll notice that the balance on your credit report is the same balance as was on your prior month’s billing statement. So, if your balance due in September was $1,000 then the balance reported to the credit bureaus as of September will also be $1,000. That’s not a coincidence. As long as you get a statement will a balance greater than zero, your credit reports will always show that there’s a balance due on your credit card accounts.

Here’s how to beat the system

It’s true that if you continue to simply pay your bill in full by the due date you’ll never have a zero balance on your credit reports. However, there are a few legitimate ways to beat the system but they’re going to require some strategy on your part.  Here are the two ways to ensure a zero balance shows up on your credit reports.

1.  Stop using the card for one full billing cycle.

If you pay your balance in full each month BUT then use the card again you’re always going to have a balance the following month and, therefore, will always have a balance on your credit reports. But, if you’ll pay your bill in full and also stop using the card your next statement will have a zero balance due.

This isn’t an optimal strategy because those of us who use credit cards responsibly recognize that they make our lives much more efficient and not using it just to force a zero balance on our credit reports isn’t a viable long term strategy.

2.  Pay the balance in full by the statement closing date.

Your statement balance is a product of any unpaid balance carried over from the prior month + interest + fees – payments – credits.  If you can get that math to equal $0 then your statement will also have a $0 balance due.

This isn’t very hard to accomplish because all you have to do is pay off your existing balance online a few days before the statement closing date. That will result in your balance being zero on your statement. And, it will also result in a zero balance on the account as reported to the credit reporting agencies. This strategy is much more attractive because you can still use your credit card. But, you will forgo the grace period because you’re paying off the balance even before the billing statement has been generated.

Sign up for a secured card to help rebuild your credit by clicking on one of our links on the right. 

Email us at: info@CherokeeFinancialinc.com for the opportunity to make money from your excellent credit on any of your high limit credit cards that have at least 2 years payment history.  You'll be surprised to find that doing something simple will put money in your pocket to pay down your

debt or use however you want.

When You Pay Off A Credit Card, How Long Does It Take To Show On Your Credit Report?

Paying off credit card debt is a major stress reliever and a financial achievement for anyone who has previously struggled with debt and credit score problems. It often takes years or even decades to get out of debt. Significant credit card debt can negatively affect your credit for a long time, denying you the ability to buy a house or car or secure another type of loan. Thankfully, credit card debt and its effect on credit scores are temporary. Your credit score improves once the debt is paid, though the amount of time it takes to improve varies by situation.







Billing Cycles

A paid-off balance usually will show up on your credit report within one to two billing cycles, or 30 to 60 days. Sometimes it shows up faster; it depends on when the credit card company reports the payment to the credit bureaus. Check your credit report a month after paying off your credit card. If you do not see the payment reflected on your credit report, call the credit card company to find out when they will be reporting the payment. Request that they report it as soon as possible.
   
Negative Records

If your credit card was seriously delinquent, it might take more time for the delinquency to disappear from your credit report. Credit card accounts that are charged off or sent to collections are reported to the credit bureaus. Those charges stay on your credit report for seven years. Bankruptcies stay on your report for 10 years. If you pay the card off, it will be marked as "paid" on your credit report, but the
charge-off or collection status remains for seven years.
   
Errors

If you paid off a credit card but the payment has not shown up on the credit report for several months, it might be due to an error on your credit report. Call the credit card company to make sure they reported the payment to the credit bureaus. If that does not resolve the issue, send a letter to the credit card company requesting that they review the situation and include all supporting documents, such as bank statements that verify the payment amount and date. The credit card company is legally required to investigate and report back to you within 30 days. If an error is determined, the credit card company will contact the credit bureaus to update your credit report.
   
Effects of Paying Debt

In almost all cases, paying off your credit card will improve your credit score. It might improve it slightly, or it might improve the score significantly. Several variables affect how much your score will change, including the limit on the credit card and your overall debt and financial history. It might be more beneficial for you to pay off the card but keep the account open rather than close it completely. Use the card to make purchases, then pay off the debt immediately each month. This will demonstrate responsible use of the card, which will help your credit report and credit score.

For All Your Credit & Prepaid Debit Card Needs as well as Personal Loans, Auto Loans & Credit Monitoring, Visit:
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