Fixing problems with FICO score (and enjoying a better life as a result)

Many of us create a list of resolutions for a new year.

Life brings many different types of problems and for some people it is a number on their bathroom scales which is too big and for the others it can be a number of their FICO score which is too small.

You probably are in the group of, let us call it, “financial troublemakers” if you read this article. We will try to help you analyse the problem and fulfill your financial resolution of lifting up your score.

Problems and solutions.

In general, saving money is not as easy as spending it and, unfortunately, the first and the most important solution is to start saving. The good news is that some of the problems can be solved faster. But the whole rest demand a good long term strategy.

Problem no. 1 – Using too much credit.

It concerns you if your habit is to buy too much, impulsively and not necessarily really needed goods.  The habit of spending more than you earn is even worse. Look into your credit report and find out where the problem lies. It can show that, for example, you owe too much on your account, you have too many accounts with balances/retail accounts or the balance to limit proportion is not right. As the 30 percent of the score is influenced by the amount of your debt, the situation in which you continue spending more than you earn is unacceptable and becomes a deterrent for any possible lenders.

Problem no. 2 – Too little credit history.

First of all, such an option is still better than having a bad credit history. Do not get upset if you do not have much credit. Lenders can use a non-traditional credit report, which will show the accounts that are not reported in credit bureaus. These would include for example leases,  student loans, peer to peer loans,  or some utility payments. Also thanks to a regular savings deposit you make, your financial situation will be found settled.

Moreover, you can open one or two credit cards (the limit should be low) and use it to pay while shopping. Yet, it is significant to pay it off regularly on time. Apart from that, another option is to benefit from the good credit history of your family members or friends. When you become an “authorized user” on their account, their credit card history will be also added to your account.

Problem no. 3 – Bad history.

It needs time to rebuild your credit history. If you have collected some “sins” on your account, such as foreclosure,, you must reorganize your current management of finances. The impact your “sins” have on your score lowers with time, so calm down and cool your heels. 12 months of patience and better management will help you pay off your bad actions from the past.

You can deal with it yourself or call for help.

Your finances have 5 years to recover. After this time, you may consider bankruptcy and use court solutions. But first, if you feel that you may not be able to cope with the problem yourself, you can consider professional help. A consumer credit counselor (working non-profit) can give you a lot of useful advice and help you get back on your feet faster.

In conclusion, you should remember that a good plan is crucial. Find out what the problem is, set goals and start building up your score.

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600 credit score – not the best, not the worst. Find out how to improve.

Generally, a credit score lesser than 650 is considered poor, but there is always room for improvement.

With a credit score of 600 and odd, lenders may think that you have defaulted in the past and more likely to do so in future and your application for credit card and loans may be denied.

Many people do not even know about credit scores until they apply for a loan and got rejected for having a bad score.

People just live their lives and making transactions at will never knowing how it is affecting their score. Some think that their credit score is in good shape as they don’t miss any payments, but there more than just payment history alone, event hough it is a significant portion of your score.

Along with your payment history, your credit utilization, types of credit card you hold, how much time your accounts are open etc.

According to a recent report from credit Bureau Experian, more than 10% of people fall in the range of 600-650 and 12% fall between 500-600.

But people with a credit score can qualify for some loans but at the cost getting the loan at huge interest rates. Let’s see some of the credit score range and how they qualify with the lenders:

Credit Score Quality How Lenders view Your Score
300-500 Very Poor Lenders will straight away reject your application. Better start to rebuild your score by making on time payments
500-600 Poor You are still not in the qualifying range, but you are in the edge and within 3-6 months of regular payments, your score will improve considerably
600 – 650 Bad You can qualify for some loan but at the cost of heavy interest rates
650 – 750 Good Loans are available easy and you are also eligible for valuable benefits in the form of low interest rates and wide ranging perks
750 – 850 Very Good You are on top of the list and you’ll be flooded with offers for loans at very low interest rates and terms favourable to you.

Understand why you have such low score

If you don’t know why you have such a low credit score, then better check your credit reports. From each of the credit reporting agencies, you can get a free credit report every year. See if there is any mistake in your report like payment done on the due date being marked as late payments or any issues, which can be fixed easily with the credit bureau. If your low score is attributed to many delinquencies or high utilization of credit, then you should really look into rebuilding your score by making on-time payments and maintaining your credit utilization limits etc.

If your credit score is rising?

In  case you are building your profile score and finally made it to 600 till now, lenders may notice that and would allow you to qualify for some products that were once deemed ineligible for you before, but you might need to pay higher interest rates. But if you are badly need of money, then you can very well take these.

RELATED: Have a 600 credit score? Check how to get a peer to peer loan.

People less than a credit score of 630 might qualify for some secured cards or retail cards which might require lower scores than that of the banks. If you are going for car loans, chances are that might your foot on some wheels as auto loans are different than personal loans, as the vehicle is the collateral here and you may qualify if you have the required income levels to repay the loan, irrespective of the lower credit score.

If your credit score is on the decline?

If your score is at 600, but you are on the decline, it’s a different story altogether. It means you had made some late payments or defaulted on some recently and your account is unstable as of now. So lenders will definitely think twice to give you loans even at higher interest rates at this time.So better clear all your debts and pay the pending balances on your credit card bills and hope for the best in the next 2 or 3 months.

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8 Tips To Help You Avoid Foreclosure

foreclosure-for-sale

If you can’t keep up with your mortgage payments, then you’re at risk for foreclosure and a lender may send you paperwork to contact them. Here’s how you can avoid foreclosure.

You Can’t Ignore the Problem

You have to address this issue as you can’t get further behind in your payments. It will be harder to reinstate your loan and more than likely, you’ll lose your home. If you have a problem, contact your lender right away to work through your issues with them. The lender wants you to keep your home and have option to help you with difficult financial matters, but you have to contact them to discuss your individual issues.

Respond to Lender Mail

The first letters you get will provide options about foreclosure prevention. You need to heed these options as they can help you get out of a hard financial situation. Later letters may point to pending legal action, so you have to address the issues right away. If you fail to open the mail, this is not going to be an excuse you can use in foreclosure court.

Understand Your Mortgage Rights

Have a look at your loan documents. Tis will tell you what the lender may do if payments aren’t made. You need to understand foreclosure laws and the timeframe in your individual state as each one of the states is different. You can do this by contacting the State Government Housing Office. There’s foreclosure prevention which is also called loss mitigation that you can read about online as this will show you valuable options.

Contact a Housing Counsellor That’s HUD-Approved

HUD or the U.S. Department of Housing and Urban Development funds low cost or free housing counselling across the nation. These counsellors can help you understand the options you have and how the law works. They can organize your finances and will represent you in negotiations you have with your lender. To get assistance call (800) 569-4287 or TTY (800) 877-8339 to speak with one of these counsellors.

Get Your Spending Prioritized

You want to keep your home as this is a top priority. Make sure you review your finances and see where cuts to your spending can be made. You want to make your mortgage payments. You should cut down on optional expanses like television, entertainment, memberships and so on. Delay other payments until you’re able to make your mortgage payment and then work on the other bills.

Use Assets

If you have assets like a car, while life insurance policy, or jewelry that you may be able to sell for cash. This can help you reinstate your loan. You might be able to get a second job so you have more income to put towards the payments. If you can demonstrate to the lender that you’re making sacrifices, you may still be able to keep your home.

Don’t Work with Foreclosure Companies

Foreclosure companies charge you fees and you don’t need to do this. You will get companies looking to work with you, but this all costs money that you can’t afford.

READ NOW: How To Avoid Collections?

Put this cash down on your payment instead as these companies will charge you high fees, even as high as several months of your mortgage. Talk with a HUD counsellor as this is free.

Avoid Scams

There are companies which claim they can stop the foreclosure right away. If you sign paperwork that appoints them to act for you, then you just might be signing away the title to your property and become a renter in your own residence. Make sure you never sign documents until an attorney or a real estate professional has looked it over and that all the terms are understood. You should also discuss this with a HUD counsellor.

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