Bad Credit? Let's Fix it!

Fact: Poor credit history and a bad credit score can have a serious impact on your life. No one wants bad credit but sometimes mistakes happen. Sometimes factors like medical bills, job loss and tragedy influence our financial profile in ways we never could have predicted. Bad credit can happen to anyone.

photo credit: Wikipedia Commons

Factors that Damage Credit

First let’s clarify what can lower your credit score and damage your credit profile.

• Excessive Debt: If your credit cards are maxed and you have several loans, your debt profile is probably contributing to your low score
• Late Payments: The credit bureaus note any 30, 60, 90 & 120 day payment lates. It is essential that you pay your bills on time.
• Dormant Credit: A dormant credit card is an account that has infrequent or no use. In some cases, if an account has no activity for a period of time, issuers may close the account which revokes future charging privileges. Dormant accounts may not have additional debt but they also don’t help your credit score.
• Collections: If you fail to make a payment or pay off your account – the creditor may send your account to collections. This severely affects your score. Make sure to work closely with your mortgage or credit professional regarding paying off collections. Note: Collections on federal loans such as student loans will prevent you from getting financing from most (if not all) lenders.

Credit Management During the Holidays

Holiday shopping is fun (and stressful) at best but if planned well, it will not affect your credit score.
Below are some important reminders when spending during the holiday season:

Tip #1 

Don't sign up for new credit unless the savings is substantial. Many stores promote 0% interest on a purchase if you sign up for their credit card. This application will result in a credit inquiry which can affect your score negatively – do not add new credit unless the savings is substantial.

Tip #2 

Do not put all your purchases on one credit card – Unless you plan to pay off the balance when the payment is due, charging more than 35% of the total credit allowed, can lower your credit score significantly.

Life After Bankruptcy, Foreclosure & Short Sale

A common questions many home buyers have today is, “How long do I have to wait before obtaining financing after a bankruptcy, foreclosure or short sale?”

Below is an overview based on credit issue:

Bankruptcy 

Conventional
• Ch. 7 or 11: 2 years with extenuating circumstance*, 4 year without and re-established credit
• CH 13 – 2 years from discharge date or 4 years from dismissal date

FHA
• Ch. 7: 2 years from discharge date with re-established credit – no delinquencies for 2 years
• Ch. 13: 1 year of the payout date must elapse and satisfactory payment performance with permission from the court to enter into a mortgage

VA
•  Ch. 7: 2 years from discharge date with re-established credit – no delinquencies for 2 years
• Ch. 13: 1 year of the payout date must elapse and satisfactory payment performance with permission from the court to enter into a mortgage

10 Credit Card Myths Your Mom Might Have Told You

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The best defense against making a credit blunder is to better educate yourself. These are things that our parents didn't tell us because credit has changed and morphed into something that can limit our "pursuit of happiness."

Myth #1: Avoid Using Credit Cards

FALSE! - This may be a good way to get rid of debt, but it's utter destruction to your credit score. Why? Because of the 5 factors that make up your credit score, one is how you use and manage your credit, a factor that makes up 30% of your score. That's 255 points! Use the cards every month for gas, groceries etc. but pay them off.

Myth #2: Consolidate Debt onto 1, Low-Interest Credit Card

FALSE! - Everyone gets the tempting credit offers to consolidate your debt onto one credit card but when you max out that card, your credit score will drop 60-100 points overnight! Do not consolidate your credit card debt UNLESS, the balance will be under 30% of the available limit.

Myth #3: It's Okay If You Go Over Your Credit Card Limit Because The Bank Authorized the Purchase

FALSE! - Going over limit, even if it's just by one dollar deals you a double penalty a 50 point lower score and usually a $39.00 fee.