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Mar 29, 2009

Credit Repair During a Recession

With the credit market dwindling, only the people with the very highest credit scores are likely to remain unaffected. For the vast majority of Americans, buying a car, getting a mortgage, or even qualifying for a credit card with a reasonable interest rate has become more and more difficult. Now, more than ever, it is important to realize that errors in your credit report can cause significant financial difficulty down the line. Should you be considering a credit repair service? If you fall into any of the following categories, credit repair may help you attain your financial goals:

You are Looking for a Job:

If you’re in the job market, having a clean credit record will put you a step ahead of other candidates with similar skills and experience. Employers now, more than in recent years, are scrutinizing potential hires more closely in an effort to make certain that any potential employee will be of the best benefit to the company. Leaving your credit report to chance could leave you out of the running for your next position. Having a good credit score will reflect well on how you will handle the responsibilities of a new job, and allows potential employers to feel confident that you can handle your position effectively if hired. Conversely, people who have problem credit may find it more difficult to get a job as employers look to hire only those who seem to be a ’safe’ investment.

You Want to Buy a Home:

The market for subprime mortgages is virtually nonexistent now, but buying a home in the current conditions could be ideal if you have a strong credit score. Low interest rates, coupled with the current drop in housing prices could mean that the home you want is finally affordable. However, if your credit isn’t in the best condition, this favorable market could pass you by. Removing negative information that is too old, incorrect or incomplete could help you to qualify for the home of your dreams sooner than you realized.

You Need to Buy Insurance:

Believe it or not, insurers also look at your credit score, and a better credit history will net you lower premiums than someone who looks like a credit risk. The savings you receive as a result of a good credit score could allow you to afford more coverage at a higher tier. Having adequate insurance is essential in a troubled economy, whether that insurance is for you, your house, or your car. Keeping the premiums affordable is just another added benefit to a clean credit report.

These are just a few of the main reasons you might want to look at getting your credit repaired sooner, rather than later in the current economic climate. Now, more than ever, a good credit score can help you to reap the benefits that can be found while companies are tightening their lending policies. A good credit repair company can help you get rid of errors, or debts that should have been removed due to age. By taking advantage of a reputable credit repair service, you can open the doors to financial opportunity even in a troubled economy.

Posted in credit, credit repair, credit repair services, credit report errors, credit scores, subprime mortgage | No Comments »



Mar 16, 2009

Paid to Cancel Your Card? Why Taking the Offer Can Hurt Your Credit

American Express recently began offering $300 to certain cardholders if they pay off the balance owed on their cards and cancel the account. While this may seem like a great deal on the surface, this type of paid encouragement to close your account and pay down your debts can actually make your credit situation worse. While American Express seeks to entice some of its customers to say goodbye willingly, other credit card companies have begun closing accounts for lack of activity, certain types of buying patterns, or other activity that has been deemed ‘high-risk’. While the credit card companies’ terms of service often state that an account can be closed for many reasons, consumers often don’t pay attention to the fine print until it’s too late.

If you are one of the “lucky” ones who received the paid offer, you may be tempted to cancel your card and cash in while you can. However, if your credit score is already marginal, closing an established account could send your scores dropping even further. Even if you have good credit, canceling an established account will lower your score, possibly placing you in a different risk category, which could trigger further adjustments from other credit card companies. And if for some reason you don’t pay off your balance by the deadline, the $300 incentive is lost, leaving you with a damaged credit score and no reward for your efforts to pay down your debt. Of course, if you paid down your debts without taking the incentive to close your account, your savings in interest alone could top $300 depending upon your initial balance.

Because credit card companies often raise rates, fees, and other costs based upon activity on another account, closing your already established account may cause you to have higher interest rates on the cards you do decide to keep open. This can create a cascading-effect that lowers your overall available credit, which, in turn, can lower your scores even further if your debt-to-available-credit ratios fall below a certain margin. This can make it difficult for you to get a new credit card if you decide to open another account to replace the one that you’ve closed. Even if you don’t decide to open another account right away, the hit to your credit score can cause problems in other areas, such as insurance rates, interest rates on loans, and interest rates on any existing lines of credit.

Your best bet when it comes to keeping your credit score healthy is to pay off your credit cards, and leave the accounts open. Use the cards for incidental purchases, and pay them off again as quickly as possible. Keep your card active, and your balance low, and you may be able to avoid getting hit with a rate spike, or an unexpected cancellation. Getting free money may seem like a great incentive to cancel your card, but when compared to the potential downsides to your credit score, your best option may be to turn down free money in exchange for a little extra financial discipline.

Posted in american express, credit, credit card companies, credit cards | No Comments »



Mar 7, 2009

Debt Relief Companies and Your Credit

When bills start to pile up, some people look to debt relief companies in order to find a way out and improve their credit at the same time. Unfortunately, not all debt relief companies have the best interests of their customers at heart. Depending on the situation, the practices used by some debt relief companies can actually worsen your credit score, even if you are paying down debt. So how can you tell if a debt relief company is reputable, and if the strategies they offer will work for you? Here are some tips to ensure that you aren’t burned by deceptive debt relief practices:

1. Talk to your creditors! Some creditors report the use of a debt relief company in such a way that it negatively impacts your credit score. Some creditors won’t work with a debt relief company at all. If you are looking to settle debt for pennies on the dollar, be aware that even if your creditor does accept such a proposal, settling a debt for significantly less than the amount owed will be a serious blemish with regards to your credit score, and will stay on your credit report for up to seven years.

2. Shop around. There are literally thousands of debt relief companies, with more springing up as the current economic downturn worsens. Some of these companies are little more than scammers, looking to take your money and provide little or nothing in return. So, when you’re looking for a debt relief company, take the time to evaluate several – don’t just choose the first one that seems promising.

3. Nonprofit may not mean reputable. Nonprofit debt relief firms may seem to be a safer option, but beware – in some cases, these nonprofit debt relief organizations funnel money to a for-profit companies, while providing you with little or no real benefit. A true nonprofit credit-counseling organization will help you to get concessions from your creditors such as a lower interest rate or waived late fees, and will provide solid advice on how to improve your situation.

4. Ask questions. When you are deciding on which debt relief company to use, make sure to ask questions regarding how the service works. Be certain your credit counselor spends at least 20-30 minutes evaluating your particular situation, and offers advice based upon that evaluation, rather than canned responses. Be wary of any promises that seem to be too good to be true, or that don’t take into account the reality of your situation.

5. Get it in writing. Make certain that your agreement with the debt relief company says the same thing on paper as you discussed over the phone – ask for clarification of any points that you do not understand, and make certain they discuss the impact that their service could have on your credit score.

6. Be wary of upfront fees. Most reputable debt relief companies won’t charge a large start-up fee in order to enroll you in their program. If it costs more than $50 to start, it may be a scam.

7. Check the BBB. No matter which company you decide to use, always check their standings with the Better Business Bureau – excessive complaints are a sure sign that the company may not have its clients’ best interests in mind.

Debt relief companies can seem like a good idea when you find yourself in over your head with creditors, but the truth of the matter is that these companies can often be risky investments at best. At worst, you could see your credit score plummet and interest rates increase due to late fees and other penalties imposed by your creditors. The best advice when dealing with debt relief companies is to do your research and be certain that the services the company offers are worth the potential consequences.

Posted in credit, credit counseling, credit scores, debt relief, debt relief companies, debt settlement | No Comments »