Bad Credit – A Brief Guide

Filed under: Your Credit Score

If you’ve ever applied for a loan but been rejected, it might be because you’ve got bad credit on your credit history. Believe it or not, it’s actually a problem that many people suffer from, sometimes without even knowing it – latest reports suggest that around 25% of people applying for loans have bad credit on their credit history! Even worse, it can appear on your record in several ways, including some you might not have realised…

Some ways of it being generated are obvious: for instance, if you take out a credit agreement or loan and fail to make the repayments, you’ll default on what you agreed to pay. The same also goes for paying bills like gas, electricity and telephone late, meaning suppliers have to send you red bills. However, it can also be gained by regularly applying for credit (loans, credit cards, hire-purchase and more) and being turned down. This is because applying for credit causes a check to be made on your credit history – more checks means more activity on your credit record, which can ultimately lower your credit score. Bet you didn’t know that being turned down for the credit on that washing machine could lead to bad credit, did you?

Unfortunately, many people think that the problem will fix itself with time. While that’s technically true, bad credit can actually stay on your record for between 7 and 10 years – that’s an awfully long time to avoid getting credit in. Thankfully, there are ways of repairing a poor credit rating, some of which are very easy. Registering to vote, for example, is one element taken into account on a credit record, as is having utility bills registered in your name with a fixed address. Debt consolidation can also help, as it reduces your monthly outgoings into one manageable monthly payment and adds a sense of reliability to your previously bad credit score. And while you don’t want to be snowed under with credit cards and loans, it’s often wise to at least have some credit that you manage easily – this can help repair your credit rating, since it proves to lenders and loan providers that you can be trusted to repay money that you’ve borrowed.

Of course, even if you’ve had financial problems in the past, it’s not totally impossible to get a loan; many lenders and loan providers have allowances for Bad Credit Loans (loans given to people with bad credit that usually have a higher rate of interest on repayments). These can also help to repair a bad credit rating, so they’re worth considering as an option if you have nowhere else to turn. There are also a select number of credit cards designed for people with bad credit, although these too have higher-than-usual interest rates and are usually quite restrictive on the credit limit offered too.

If you think that you might have bad credit, it’s worth getting hold of your credit report to check for what might have caused it. You can do this easily online through one of the main credit reference agencies like Experian or Equifax – it’ll only cost £2 for the report and can help you understand exactly what’s going on behind the scenes.

In Summary

Bad credit can…

  • Prevent you from being accepted for loans and credit cards
  • Be earned by not repaying loans or regularly applying for loans without success
  • Stay on your credit record for up to 10 years
  • Be repaired by taking out a Bad Credit Loan or other form of secured credit
  • Be avoided by paying your bills and other debts on time!

Copyright: Individual Finance, 2010
About the Author:   IF’s Martin Mathers is a professional journalist with 12 years of experience, covering everything from finance and business to movies, music and technology.

Individual Finance has informative articles on a wide number of aspects relating to UK finance. It also keeps users up to date with the latest money-saving offers and vouchers through regular e-mail newsletters.

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How is Your Credit Score Calculated?

Filed under: Articles, Your Credit Score

Ever wonder how your credit is scored?  To those of us who don’t actually do the figuring, it seems like a deep dark secret…how do they arrive at those numbers? 

While each of the three major companies that report credit scores has their own method, there are some factors that each one takes into consideration when they calculate your credit score, and you can use these same factors to estimate your own credit score. 

For example, if you have never had a credit card, car loan, student loan, or any type of bill in your name, your credit score can actually be zero, meaning that you have no credit history.  At some point, each of us started at zero, and there are even those among us who have been debt free for enough years that their credit score has actually returned to zero, or no credit. 

Unfortunately, if you have no credit, it can be just as hard to get a loan as it would be if you have bad credit, so it’s a good idea to build your credit slowly, beginning at an early age, and even though you may not actually need credit in later years, continue to maintain good credit standing by using credit cards responsibly. 

And now, for the rest of us, here’s an approximation of credit scoring methods:

  • 35% of Credit Score:  Credit history                                                          
  • 30% of Credit Score:  Current amounts owed to creditors               
  • 15% of Credit Score:  Length of credit history                                       
  • 10% of Credit Score:  Open accounts and applied for accounts
  • 10% of Credit Score:  Other factors                                                            

Your credit history, which makes up 35% of your credit score, is defined as the bills that you have or have had in the past, and whether or not those bills have been paid. If you’ve always paid your bills on time, every time, and have never defaulted on a car loan, been evicted from a home, or paid your credit cards late, then your credit history should be okay.  However, if you do have a record of slow payment, repossessions, or bankruptcy, expect it to affect your credit for seven to ten years.

Your current debt load, which makes up 30% of your credit score, is defined as how many loans you have, how many credit cards you have (and the amount that you owe on each card), whether or not you pay your bills on time, and whether or not you are carrying too much debt.  Hint: Pay off and/or pay down the balances on your loans, credit cards, etc., to see a higher credit score in this area.

The length of your credit history, which makes up 15% of your credit score, is defined as how long you’ve had a credit history, how long you’ve lived at your current address (including length at previous addresses), and even how long you’ve been employed at your current and previous positions. Hint: The more stable your lifestyle, the better your score will be in this area.

Open accounts and applied for accounts, which make up another 10% of your credit score, are defined as how many open accounts you currently have (even if the balance on the account is $0.00), and how many new accounts you have either applied for or opened recently.  Hint: Opening too many new credit card accounts can damage your credit score.

And, finally, the other factors (10%) that will be taken into consideration include things like joint ownership of accounts, other information that has been collected with regard to your financial history, and the individual practices of each credit reporting company.

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How Prepaid Debit Cards Can Help Establish Credit

Filed under: Credit Tips, Your Credit Score

If you’re having trouble getting approved for a credit card, a prepaid debit card may be just what you need. Unlike many regular credit cards, prepaid debit cards do not perform a credit check when you apply. So if you’ve had trouble with credit or have no credit, you’ll still be approved for a prepaid debit card. And these cards come with other benefits as well. A prepaid credit card can be the first step down the path to better credit.

How Prepaid Debit Cards Work

Prepaid debit cards are similar to both credit cards and debit cards. After getting approved for one, you’re able to deposit money into your new account. This is often referred to as “loading.” The amount of money you load on to your card is equal to your line of credit. When you swipe the card, the money is subtracted from the amount you deposited. As long as you have money on your card, you can make purchases. You can use the card anywhere that debit cards are accepted.

Having a prepaid debit card is similar to opening a checking account on a card. You can deposit money whenever you need to, and spend within your account limits. This system helps keep you far away from credit card debt.

Benefits of Prepaid Debit Cards

One big advantage of prepaid debit cards is that they are safer to carry than cash. You can shop for groceries, get gas, and purchase other items without the hassle of dollar bills crowding your wallet. And prepaid debit cards are accepted all over. If you have a card with the MasterCard or Visa logo, it can be used worldwide.

Another benefit of a prepaid debit card is that you don’t have to worry about paying monthly credit card bills. Since the amount at your disposal is equal to the balance in your account, you don’t spend money that you don’t have. This saves the headaches involved with high monthly bills and balances.

It’s easy to load money on to your prepaid debit card. Most cards let you reload any amount of money by calling and authorizing a transfer of funds. You can also do this online or through an ATM. This lets you control how much you want in your account.

Exploring your Options

Companies offer different types of prepaid debit cards. Before you sign up for one, check for additional fees and features. One card that lets you transfer money for free is the ReadyDebit card. With no credit checks and no security deposits required, you can begin using the card right away. It’s issued through Visa, so you can use it wherever Visa is accepted.

Another one to check out is the Prepaid Visa RushCard. With this card, there are no annual or monthly fees. You can use the card online or over the phone to make purchases. The Prepaid Visa RushCard also offers some shopping discounts at participating retailers.

A prepaid debit card may be just what you need to give your credit a boost. Check through the different options through credit card websites. The application process is easy. Once you get the card, you can start taking steps to get back on track in the credit card world.

Click here to compare current prepaid credit & debit card offers!

About the Author:  Robert Guthrie invites you to find out about chronic fever, constant hunger and other information? Get tips from the Health And Nutrition Tips website.

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Choosing The Right Credit Cards After Bankruptcy

Filed under: Your Credit Score

There is life after bankruptcy and once you have dissolved all your debts and the judge has dismissed the case. In a short matter of months, you will be inundated with offers to apply for new credit cards.

Sounds simple enough – right? Fill out a quick application online, cross your fingers, and push the submit button. Wait a minute. When applying for that new credit card after a bankruptcy, you should know where to apply before just arbitrarily thinking: “Here’s a credit card company. Let’s try this one.” You have to choose the right credit card companies before hitting that submit button.

You will get a lot of credit card offers but the bad news is these are not the credit cards you want. They are vultures ready to pick on the leftover meat.

Do Not Fall Into The Credit Trap Again!
Soon your mailbox will receive a credit card notice from several companies in North Dakota saying you’re preapproved for a new card. Problem is, these cards have annual fees with high interest rates. Or perhaps they want you to pay and upfront fee in order to get your application filled out. There are scams galore but you have to look pass these tempting offers of fast and easy credit. Their tactics are to send out as many letters to vulnerable bankruptcy victims and hope that one catches their bait.

Applying for credit cards after a bankruptcy is important since it’s a second form of identification other than your picture ID driver’s license or passport. Without two ID’s you’ll have problems at most stores.

Here are two legitimate banks/lenders to make application for credit cards. Both welcome new customers because they know that you are fresh out of a bankruptcy with little or no debt remaining, so you’re a nice target. The initial card limit will be less than $1,000 but there are NO upfront fees and if you pay on time, in several months they usually raise the limit. You can make that happen faster by paying more that the card asks for. Once you get your new credit cards, apply at several large retail stores, show them your new bank card, get their card, now you have more ID. Orchard bank and Household bank are two places to apply, so you can restart your credit history.

Focus on yourself and figure out how you will pay off future debt. Getting preloaded debit cards will help you with your spending. Getting credit from department stores will also help your credit as long as you do not spend what you do not have. Apply for secured credit cards as a last resort.

Once you have these cards in your arsenal, let time be your friend and your credit scores will slowly regain its former health.

About the Author:  Derrick Kings invites you to get more information about how to improve your credit scores and what steps you can take to to evaluate your credit worthiness.

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Getting Over Personal Bankruptcy

Filed under: Articles, Your Credit Score

When you file for bankruptcy, it can have a very traumatic effect on you. The process of bankruptcy is such that the fact remains on your credit card report for a period of 10 years. Besides this, it can also lead to social isolation from your peers. Being branded bankrupt can have a very negative impact on your personality as well as your character, which need not always be the right perception. But through it all, bankruptcy is something that you can overcome.

One of the first things you need to do is to come to terms with the fact that you have declared bankruptcy. Once done, you have to face all the consequences that come along with it. There are several psychological aspects that get related to declaring bankruptcy. For one, you may retain the fear of purchasing anything at a retail store or from indulging once in a while. For some other integrating back into society can be difficult, leading to a lack of a social life. You first have to accept that the episode is over and done with and you need to move on. It is a learning experience and a lesson that you will adhere to for the rest of your life.

After bringing yourself back to reality, the next step is to work on your credit score. Once declared bankrupt, your credit reports will be a mess for a decade. You need to slowly work at fixing it. You have to work on aspects that will improve your credit rating. If you are looking for a loan, try approaching those lenders who take into account your credit rating for a short while prior to handing out the loan. A financial advisor or some serious Internet browsing is what can help you work on your credit scores.

The minute you are approved for a credit card or for a bank account, know your payment schedules well. Make written notes of them if necessary. Keep an accounts diary to track where you are using the card and how much you have spent. Knowing where the money goes, helps you keep a closer watch on your expenses. You will be able to monitor your spending habits this way. When you receive your bill, pay more than the amount due. This move will be noticed by the credit service. You can also make use of options such as standing orders or direct debts to ensure that you do not miss a payment date at all.

About the Author:  Brian Joneta also writes about Bankruptcy and Credit issues including Declaring Personal Bankruptcy and Bankruptcy Lawyer

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How Do I Improve My Credit Status?

Filed under: Your Credit Score

Whether we know it or not, we all have our own personal credit status. For some of us it’s good, and enables us to get a mortgage, a loan or a credit card with a good rate of interest. For others it isn’t as good, and those people may experience trouble getting financial products when they need them.

If there is one thing worth remembering about your own credit status, it’s this – however bad it might be, you can improve it given time and effort. By doing this you will make yourself more appealing to lenders of all shapes and sizes in the future.

Here’s how it works. Every time you make a payment on your credit card, for example, that payment is recorded by the main credit agencies. If you meet your payments every month you will generally be regarded as a good credit risk, even if you don’t always clear your balance. Similarly, if you miss a payment – for whatever reason – that also gets noted down, and if missing payments starts to become a habit you will find it increasingly hard to get credit elsewhere.

It is advisable to check your own credit history to see how you are likely to be regarded by others when applying for loans and mortgages. It’s also worth checking to see whether all the facts are correct. Mistakes do happen and they can mean you are unfairly turned down for financial products, so if you spot an error make sure you contact the credit agency who provided you with your report to get it corrected.

If you need to apply for a loan at any point and you are turned down, don’t do what many people end up doing and immediately apply for others with other lenders. Having too many applications in a short period of time can throw up a red flag, as lenders will start to wonder why you are applying for several loans at once.

Educating yourself about your credit status is a good way to start improving it, especially if you are taking a fresh look at your finances and starting to clear some debt. Remember that it isn’t necessarily how much debt you have that prevents you from getting credit, it’s how much of a risk you are. If you have several credit cards but pay back the balances in full – or at least on time – each month, you may still be regarded as a good risk.

In the final analysis, your credit history will follow you around all your life. However good or bad you are with money, your credit record will tend to mimic your habits. If there was ever a good reason to be responsible with money, this reason should be top of the list.

 
About the Author:  Paul McIndoe is an online, freelance writer from Scotland. When not writing, he enjoys playing golf and is a keen gardener.
 
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How to Improve a Credit Score after Bankruptcy? What is a Good Credit History Score?

Filed under: Your Credit Score

Concerned Consumers Ask How to Improve a Credit Score after Bankruptcy

While it may not be possible to erase bad credit reports, there are steps you can take to improve the overall health of your credit report and improve your credit history.

The February issue of Realtor magazine divulges seven tips to shore up your credit well being.

The article by Patrick Ritchie recommends identifying any mistakes on your credit report and attempting to have those rectified.

When reviewing your credit report, Ritchie advises looking at credit history such as late payments, collections, payment records, unusual accounts, original dates, available credit, types of accounts, and reason codes.

He suggests retaining a copy of your credit report for seven years to track the date of new additions or removals. Collections and chargeoffs should no longer be a part of your credit history or report after that length of time.

Unfortunately for some, review and maintenance of the credit report is not enough. Money and finance experts at media company AOL are fielding more and more bankruptcy questions from worried consumers asking how to improve a credit score after bankruptcy.

According to the media company’s personal finance site WalletPop, Chapter 7 bankruptcy filing remains on your report and is reflected in your credit score for 10 years after filing bankruptcy. One step to rebuilding and improving credit history includes eventually obtaining a new secured credit card and making payments in full, they say.

What is a Good Credit History Score for Lower Auto Rates?

Cautiously opening credit cards in college could spell benefits in the long-run.

One perk from building good credit history in college could be lower rates on auto insurance in the future.

“Despite all the criticism about college students and credit, now [during college] is a good time to get your first card and start building your credit history, as long as you can be sure to pay off the card each month,” says Kimberly Palmer, senior editor for U.S. News and World Reports.

According to national insurers, financially responsible applicants with a good credit history are eligible for savings on auto insurance plans.

A credit-based insurance score – which examines the likelihood of involvement in a future insurance claim – is used to determine auto plan rates. Factors like credit payment history and length of credit history can affect these calculations.

GMAC Insurance suggests paying bills on time and minimizing balances carried on credit cards as two ways to improve credit history and an insurance score.

According to research firm Conning & Co, 92 percent of insurance companies consider credit history information when evaluating new policies.

About the Author:  This article is brought to you by Allison Tomek for NationalCreditReport.com. NationalCreditReport.com offers credit reports and monthly and annual credit monitoring services to help prevent identity theft. Our service accurately identifies your credit score and credit history.
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