Authorized User, Does It Improve Your Credit

Good credit is important when applying for loans or even obtaining a place to live. Employers are starting to check employee’s credit history. If you have bad credit, there usually isn’t a lot you can do to fix it quickly. It takes time. Therefore, it pays to open lines of credit early and always make your payments on time. This can take years. You may be wondering if there is anything that can be done to boost your credit quickly. If you’ve ever activated a new card, you’re often asked if you’d like to add anyone as an authorized user.

Boosting Your Credit as an Authorized User

authorized userEvery time a new card is opened your score will take a hit. This affects the average age and inquiries. Since you’re introducing a new credit card, this will affect and lower the age of all your cards. Credit issuers do not like to see too many inquiries on your report. Your score will bounce back by adding a new account and increasing your overall credit limit. However, that is not enough to offset your bad credit.

Being added as an authorized user is just like applying for a new card without the hard inquiry. Some companies will even backdate your card to the original owners ‘member since date’. For example, if you were added to an account that was 10 years old, you would have received the same age. This rarely happens.  As an authorized user, you receive your own credit card that is linked to the main users account. This will allow you to make purchases and payments, but not able to make any significant changes to the account.

It is important to keep in mind there are risks to adding an authorized user. You will be responsible for all charges the user makes. If a user doesn’t pay their bills, your credit is now at risk. To avoid this, you can add a user but not actually give them the card. They will still get the benefits but you won’t take any risk.

Credit Score, Why a Poor Score Costs

Your credit score is more than just a number. It is the lifeblood to your financial opportunities. You should be aware of how a good credit score can get your loans approved fast, can get you a lower interest rate, and save you money in the long run. However, there is likely a lot you don’t know, mainly how far reaching your credit score is.

Costs of a Poor Credit Score

If your credit is not in good standing, you should start using credit repair strategies today. However, here is a look at some consequences of having poor credit.credit score

  • Cell Phone: When upgrading your phone or moving to any cellular plan, the provider is most likely conducting a credit check. If your score is poor, your options could be limited. A credit score is an indication of how reliable you are as a consumer. If your credit report shows regular missed payments, what is to stop you from missing your cell payment?
  • Rent: Everyone knows that you need a good score to consider getting approved for a mortgage. However, a poor score can also impact your renting options as well. The same with cell phones, your report is a sign of how responsible you are.
  • Utilities: Most utility companies require an upfront deposit. Having poor credit may require you to have to pay more money upfront than someone with good credit.
  • Car Insurance: Most car insurance companies are now using your credit score. Driver history and experience is still a factor. However, when it comes to car insurance premiums, most companies have found that a credit core can also help gauge reliability.

As we have shown, your credit score reaches farther than just loan approval and interest rates. This is why it is important to take necessary steps to repair your credit now.

Credit Card Mistakes to Avoid

As of April 2015, Americans had racked up $900 billion in revolving debt. While that is less than the $916 billion in 2009, consumers will not be putting away the plastic any time soon. Credit cards, when used wisely, can help save money and improve your credit score.  This is vital for obtaining the best interest rate and for qualifying for loans. However, buying things with a credit card can be a financial disaster if you’re not careful.

Mistakes to Avoid  When Using a Credit Card

  • Late payments or no payments.If you don’t keep track of your bills, its easy to credit-cardforget or miss a payment. You may think that paying a credit card late or skipping the payment isn’t a big deal, but you could seriously damage your credit score when you don’t pay on time.  About 35% of your FICO score is based on your payment history.
  • Maxing your cards and paying the minimum only. Card utilization ratio is another factor into calculating your credit score. This is the amount of credit card debt you have compared to your total credit line. Lenders prefer you to use 30% or less of your total available credit. Maxing out your card can also hurt your credit score. The total amount owed accounts for 30% of your FICO score. One of the biggest allures to having a credit card is making payments on things, rather than buying outright. While paying the minimum seems manageable, your balance will continue to creep up. Your monthly payments will continue to increase. The debt continues to increase and eventually you have a pile of debt and you can’t afford the payment anymore.
  • Taking out cash advances. When short on money, taking a cash advance may seem like a good idea. However, its a temporary fix. The advance may allow you to cover the gap you run into, but borrowing against your credit line typically comes at a high cost. You not only have to pay interest on the transaction,, but you likely will have a fee.

Landlords and Credit Checks

If you’re in the market for an apartment, you may have been told that the landlord will need to check your credit before you sign a lease. In addition to contacting references, landlords will often run a credit check to ensure potential tenants are responsible. You may have been curios as to what landlords look for when reviewing credit reports.

What do Landlords Look for in Credit?

landlordsWhen landlords run credit checks, they’re wanting to learn as much as then can about your financial habits. They do not expect tenants to have perfect credit scores, but having a good score can make the application stand out. In a lender’s eyes, applicants who have a good credit score seem more reliable and responsible. There are, of course, other credit-related factors that landlords consider. Credit checks can reveal if someone has been evicted, sued, or has a history of making late payments. These issues, along with others, like delinquent accounts, foreclosures, or bankruptcy filings, can make your application unattractive.

While your entire credit history can be viewed, landlords often focus on recent transactions. Someone who has a lot of open credit accounts is likely to use a large percent of their income to pay off debt. This may be a red flag. However, keep in mind not all landlord care about the same things when running credit checks. FICO scores are most widely used, but some use other credit scores like VantageScores. There are multiple tools when looking to run credit checks. Once you have provided permission, they can get credit reports and credit scores through tenant screening services.

For a landlord or property manager to run a credit check, they will need your name, social security number, and current address. In some cases, you can provide your own credit report, and landlords must accept these if they were pulled within the last 30 days.

Pre-approved Mortgage, Credit Score Tips and Tricks

It’s that time of the year where there is an increase in real estate activity. Spring and Summer are ideal for buyers to hunt for their home. Before you buy, you need to be pre-approved. However, getting pre-approved can be easier for some, harder for others. Some buyers need to have credit repair to increase their credit score before they can be approved.

Improve Credit Scores for a Pre-approved Mortgage

pre-approvedThere are a few options you have to improve your credit score quickly. It’s important to remember these tricks will only work if you have something minor like a late payment. More severe issues like a defaulted payment will require much more time to repair. Don’t fret, there is hope to eliminate minor problems that can be preventing you from being pre-approved.

The first step is to contact the company that reported the late payment and explain the situation. If you thought you made the payment, or it it was an honest mistake. Regardless of the situation, explain what happened. The lender may review the case, analyze your credit, and determine if they want to reverse the decision. Lenders want to keep your business, work together with them and your chances are good.

Should you not get anywhere with the lender, you can write the credit reporting agencies. Explain the situation to them, they then will conduct a 30-day investigation to determine if the lenders decision should be reversed. This method does take longer than working with the lender. If the agency rules in your favor, it can help improve your FICO score. With the improvement, you may be able to get pre-approved.

Unfortunately, not all consumers will have great credit. You may not be able to fix your credit issues by contacting the lender or the credit reporting agencies. If this were the case, it is best to start establishing good financial behavior. This does include making on time payments and keeping a low balance on credit cards.

Identity Theft, Protect your Child

Identity theft has little mercy. Anyone can be a target and have their information stolen. This is the same for minors. It’s important to monitor not only your own credit report, but also your children’s. You must be vigilant and ensure your child does not become a victim.

How to Protect your Child from Identity Theft

  • Include your child. Identity theft should always be a concern. One of the best ways to protect identity theftyour child is to explain why security is important. Even children as young as five can understand the risks that come with giving out private data. You should encourage your child to talk to you when they see something unusual. You can keep your child safe by setting up parental controls online.
  • Watch for unusual activity. There are many signs of child identity theft. When opening a checking account for your child and they are denied due to poor credit, or there is one already open. If the IRS states your child owes taxes and if your child receives credit card or loan applications in the mail.
  • Keep information secure. It’s best to store personal documents in a safe place. You should shred paperwork with private information.
  • Check for a credit file. It is a major red flag if your child has a credit report with accounts. You can access your child’s report to check for fraud. Each credit bureau has their own process for parents to check. Experian and Equifax require parents to mail in copies of the child’s birth certificate, social security number, and proof of address to confirm if there is a credit file. TransUnion has an inquiry form you can fill out.
  • Consider a credit freeze. Freezing a child’s report may be possible to eliminate the threat of theft. This has been difficult in the past. However, Equifax now allows parents to credit reports for their child and then freeze them. A freeze will only prevent new lines of credit.

Does Selling My Home Improve Credit Rating

When you’re trying to maintain a good credit score, it isn’t easy. Making late payments and maxing out credit cards are just a couple of ways you can hurt your credit. Selling your home could potentially impact your credit. If you are making good financial decisions, you can use your home to boost your credit score. With the FICO credit scoring model, 35 percent of your credit score is based on payment history. When making on-time payments every month, over the course of your mortgage, you can expect you credit score to rise.

However, if you tend to miss your mortgage payment or make a late payment, this could prevent you from qualifying for another line of credit. Mortgage loans are installment loans. This means they are paid on a fixed schedule. Credit cards are revolving credit. Missed or late payments on credit cards affect your credit more than mortgage payments.

How does selling my home affect my credit?

sellingSelling your home will not automatically hurt or help your credit score. However, the impact is all dependent on the state of your credit history before you sell. If you have a negative credit score, selling will not help. Black marks can remain on your score for up to seven years. Past mistakes can continue to haunt you for long after you’ve sold. This can hurt you if you’ve sold with the intent of purchasing a new home.

With your FICO score, 10 percent depends on the type of credit accounts you have. If a mortgage is your only installment loan, you should expect your score to drop a bit. However, remember that if even you no longer have your mortgage it can stay on your credit history for up to 10 years after it is paid off. In conclusion, it comes down to how you handle your payments. If you have a negative payment history, you will continue to have negative marks after you’ve sold your home.

A Perfect Score, Why It’s Not Necessary

There is a small percentage of people who have ever hit 850 for their credit score. Having a perfect score is a lot of work. While this opens doors for loans and credit cards, a perfect score isn’t necessary to qualify for financing. If you’re focused on getting a perfect score, you may want to rethink your strategy.

Why you don’t need a perfect score.

perfect scoreOne think people assume is that with a perfect score, you’ll get the lowest rates. Lenders don’t distinguish between someone with an 850 score and someone with a score between the high 700s and low 800s. Once you get to a certain point, you fall into the best credit risk category. This means even if you don’t have an 850 you still qualify for the best rates. Having an 850 score does not put you above someone between 770 and 800.

Your score can change overnight. They are not fixed, they can change from day to day. Under the FICO scoring model, payment history and the amount of debt you have make the most impact. If you miss a payment or carry a high balance on a card, your score is going to dip. Even applying for a new card, or taking a loan can knock your score down. In reality, you have more than one score. Each of the credit reporting bureaus have their own version of the FICO score. So, your score can vary widely. The chances of getting an 850 on all three at the same time is very slim.

You score reflects how you are at managing your money and handling your debt. The lenders goal is not to pick borrowers who have a perfect score but to find those who are most likely to pay their debt. Paying your bills on time, keeping a low debt balance and using a mix of debt types show that you’re a good candidate for a loan.

Why is your Debt-to-Income Ratio Important?

We all know that having more income than debt is a good thing. But the question is, what is ideal ratio between income and debt. This is where you need to consider your debt-to-income ratio. If you have to high of debt-to-income, and any thing negative effects your income, you could be swimming in debt. This does not mean you want to completely avoid debt. Debt-to-income ratio, also known as DTI, is the direct relationship between your monthly debt and your gross monthly income.

Every month you must budget with what you have coming in and what you have going debt-to-incomeout. You have recurring bills such as phone and internet. Regular expenses such as groceries. Then there is your debt. This includes rent, car loan, student loans, and any personal loans or credit cards you may have. If you feel like you’re living paycheck to paycheck, or that all your income goes to making credit card payments, you may have a high debt-to-income ratio. The formula is DTI = total monthly debt payment/gross monthly income.

Why is Debt-to-Income Important?

DTI is an extremely important number to keep an eye on. This is going to tell you about your financial situation. The higher the debt percent, the harder time you’re going to have making payments if your financial state changes in a negative way. From a creditor or lenders perspective, DTI is a measurement of risk. Those with a higher DTI are more likely to default on a mortgage or miss credit card payments. Assessing your DTI is part of the mortgage underwriting process.

So, what counts as a good DTI? Generally, you want this to be under 36%. The bottom line is, your DTI is an important measure of your financial security, and responsibility. The lower the ratio, the more affordable your debt is, and the more wiggle room you have should your finances change.

The Importance of Good Credit

The economy runs on credit, more so good credit. If you want to be able to get a mortgage loan, car loan and even in some cases a job you need to maintain good credit. Creditworthiness is defined by your credit store and is the key to your financial life. Your credit score is used to determine what rates you’ll pay for big purchases such as auto and home. Good credit can also be the determining factor on whether you will get the loan or not. Bad credit will make it more difficult for you to get a credit card with a low interest rate, credit limit increases, and will make it more expensive for getting loans for any reason.

credit cards

Even if you’re not in the market for a loan, credit can have a major impact on other areas. Your credit information can be a factor when it comes time to rent an apartment, how much you pay for insurance, and in some cases certain jobs require good credit. Employers, landlords, and insurers use credit information as a guide to determine if people are reliable and responsible. Bad credit can suggest that you are a risk. However while bad credit may only show how you deal with debt some will use this characteristic of your financial life and apply it to other situations.

The most known type of credit score is a FICO score. FICO is short for Fair Isaac Corporation, and is considered to be the most accurate. There are three major credit reporting agencies Equifax, TransUnion, and Experian. These agencies also calculate credit scores based on their own statistical models. There are ways to improve your credit score, such as paying down debts, paying your bills on time, as well as monitoring and disputing possible errors on your credit report. Good credit can signify that your financial situation is on the right track.