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  • Debt Management through Credit Reports

    October 30th, 2011 by Ruth Racey

    Genuinely managing debt can only come from the most precise source of credit information which is consumer reports or credit reports. These reports are made by reporting agencies which are led by the three major CRAs, Experian, Trans Union and Equifax. Debt management so far is the most effective legal way of repairing financial worthiness ratings. This repairs plan attacks the main source of the different financial problems, debts. Debts also bring out interest rates which can further impair borrowers. Dealing with debts should be the priority of account holders to be able to effectively conduct repairs.

    Unfortunately, there are many types of debts which cause financial standing degradations at different levels. Its technicality can even compound the problem by making it too complicated to understand. This is where credit reports come handy. The details and information included in consumer reports make debt management relatively easier for account holders. In using consumer reports as a starting point to manage debts account holders should note the importance of these parts of their reports.

    • Every account holder is entitled to free consumer reports from the three major reporting companies annually. This right is mandated under the Fair Credit Reporting Act or FCRA. Account holders should take advantage of this right to avoid paying extra fees for their consumer reports. Indebted account holders in particular do not need to pay anything to get their debt management basis.
    • Accounted financial information are arranged from the most recent to the oldest. In reading their consumer reports, account holders should carefully check the details of their existing accounts. Everything must be reflected and accounted for including closed, moved and even defaulted accounts. Knowing their accounts will allow account holders to precisely pinpoint the parts of their accounts that they can use to help them manage their debts.
    • In reading their consumer reports, account holders should also double check the name of the issuing company. Discrepancies with the names of their companies are indicators of simple company name change or the devastating identity fraud. Either way, the precision of the information in the consumer report should be flawless.
    • Lastly, account holders should pay close attention to external factors in their consumer reports such as hard inquiries and triggers. While managing debt, account holders should avoid other situations where they can compound their already worsened credit worthiness rating. Negative triggers can limit the financial mobility of the account holder and hard inquiries will also do the same by lowering the account holders’ FICO score. These should be informed services and if they are done without consent, the account holder can dispute its accounting entry.

  • How Credit Triggers changed Credit Reports

    October 25th, 2011 by Ruth Racey

    The financial world will always be the home of the new schemes and procedures that would try to make the existing financial processes more reliable and relatively better. In the financial field of credit worthiness ratings the three major reporting bureaus, which are Experian, Equifax and Trans Union, have devised a new way of indicating changes within the client pools of their paying clients. Credit triggers was the name coined to this new indicating system. It is named as so because of its general feature of predicting future changes with borrowers and future borrowers and immediate reporting.

    The reporting agencies gave the same similar procedures available even a few years ago. But with today’s volatility of the financial market and the economy, the use of credit triggers are becoming highly used by many companies and are continually and persuasively marketed by reporting agencies. Many lending agencies, both individuals and companies, are signing up for this service. Lenders who signed up for this service automatically put their borrowers under the service. This means that changes with the borrowers related to their financial agreement with the lending agencies will be automatically reported and accounted for.

    The immediate reflection of even the slightest changes in the borrowers’ end put a strong question on measuring its effects on the credit reports of the borrowers. Triggers are made to alert and inform the lending agencies on the changes of their borrowers almost instantly. The instantaneous nature of this indicator puts worries on borrowers since changes in their financial related activities can be misinterpreted for something else. To marginalize the occurrence of this dilemma, the reporting companies started to offer categories of triggers that lenders can specify to be included in triggers.

    There are three categories used by reporting companies which are risk alerts, collection assistance and marketing opportunities. Lenders no longer have to make hard inquiries on the reports of its borrowers; triggers automatically notify lenders on notable changes under these categories. However, in the same way borrowers are not given the chance to dispute wrong triggers as compared to what they can do with wrong information in their reports.

    The dawn of credit triggers put borrowers and other account holders in a position that requires more responsibilities. Account holders should pay more attention to understanding the changes in their reports since they could be indicators that would make good financial deals impossible to land. Personally checking and monitoring their reports can even make triggers more beneficial for borrowers. Through their reports, borrowers can note parts of their financial life that appear as positive triggers to their lenders which will soon open new opportunities for borrowers.

  • Managing Debts: Key to Credit Worthiness

    October 22nd, 2011 by Ruth Racey

    Debt management is essential to those who would want to establish good credit worthiness ratings. The logic is simple; debt is the most usual factor that negatively affects FICO scores and credit reports. But no matter how grave his or her debts are account holders should exert all efforts to manage their debts or at least to lessen the effects of their debts to their total worthiness rating. There are seven primary easy steps to manage debts; each of them would require discipline from the account holders’ end.

    1. Account holders should try to assess how deep are their debt problems by truthfully assessing their debts through taking everything into account. No matter how small a debt is, it will be equally reflected by crediting bureaus.
    2. Categorizing the type of debts will help the account holder to prioritize his or her debts based on reasonable need and timeliness. This step is essential since not all debts equally bear the same weight and bearing on reports; knowing which to deal first is good for the account holder.
    3. Account holders should be critical in choosing their financial agreements. There are companies that offer supposedly low interest rated deals but surprisingly it is loaded with additional fees and other charges. These additional expenses can even make it more costly as compared to averagely rated deals.
    4. Budgeting is indeed an old practice, but it is still highly advisable to those who would want to repair their credit worthiness ranking by effectively managing debts. Setting up a cash budget would allow account holders to purchase commodities and needs through their allowed cash only.
    5. After setting up a cash budget, account holders should reinforce the deed by avoiding the use of credit card in purchasing. However, account holders should still remember that closing down existing accounts of this type would negatively affect his or her rating in the long run. Using this card to purchase small amounts can effectively increase the account holder’s ranking if paid on time.
    6. As a part of self discipline, account holders should try to accustom themselves in creating shopping lists and prioritizing expenses. Through these simple practices, account holders can contemplate if their expenses are indeed worth their money. Making wise and needed purchases is one the most effective key to start a new financial life even after being indebted.
    7. And lastly, account holders should appreciate the importance of what they are doing. Understanding their efforts is the most effective motivation in striving up to maintaining a healthy financial life.

    If account holders can do these seven simple steps, managing debts no matter how big they are will be relatively easier. But still, these steps need to be maintained as part of the account holder’s total character to avoid being indebted yet again.

  • The Effects of Inquiries to Credit Worthiness

    October 18th, 2011 by Ruth Racey

    Account holders are constantly advised by finance experts to practice checking their finance stability through credit reports. The actions of requesting for a report to check one’s financial stability and capability are called inquiries. Checking for them too much can result to devastating worthiness ratings depreciation. On the brighter side of things, not all inquiries cause such dire effects to the worthiness rating of individuals. The reason is simple; there are different types of inquiries which imply the reasons for requesting it. Each of the type has a different impact to the account holder’s total credit worthiness.

    The two types of inquiries are soft inquires and hard inquiries. Soft inquiries are inquiries made by the owner of the credit report for his or her own personal reasons. This type of inquiry is usually availed by those who would want to personally see his or her current report for purposes such as preemptive repair strategies and FICO score adjustments. On the other hand, hard inquiries are those which are made by lending agencies such as lending companies, realty companies and even residential landlords. This type of inquiries is made to assess the credit worthiness of their potential borrowers and debt consumers.

    Soft inquiries if properly accounted for should not have any effect to the reports of its owners.   They are reports pulled for personal and non business motivated reasons and should be considered as non implicative. On the other hand, if an account holder has too many hard inquiries he or she is considered to be financially unstable and incapable of managing debts. The logic for this assumption is simple; those who have more hard inquiries are shopping for too much credit which means that he or she is financially troubled. The existence of too much hard inquiries can make FICO scores drop at great range.

    Even if hard inquiries are troublesome for account holders, these inquiries can still be challenged and refuted. Hard inquiries should be conducted with informed consent from the account holders. Inquiries made without the knowledge of the account holders should be deleted from the account holders’ reports.

    Dealing with inquiries can only be done through proper documentation of financial transactions. Through this record, account holders will be able to see clearly the possible erroneous points that they can contest to improve their worthiness ratings. Account holders should also avoid dealing with companies and parties with suspicious offers and deals. These companies at most times pull out inquiries from account holders for reasons such as marketing strategy and even identity theft.

  • Low Interest Rates through High FICO Scores

    October 16th, 2011 by Ruth Racey

    FICO score is the numerical equivalence of the long years of accounted financial transactions and payment history found in credit reports. These two are the internationally accepted and used worthiness rating schemes which are ordered by lending agencies to assess whether the potential borrower is worthy enough to be entrusted with the company’s money and assets. The strong importance of these scores and reports to lending agencies was further ratified by its direct relationships to the definition of the interest rate to be charged to its owners.

    Experts in this financial aspect can only speculate as much as they would want to because the specific calculations in the correlation of interest rates with scores and reports are classified corporate information. However, the years of experience that credit experts have spent studying this relationship resulted to precise approximations in the equivalent effects of reports and scores with interest rates.

    FICO scores are rated from 300 to 800, the latter is considered to be the sainthood mark for this type of worthiness ranking system. Those who are trying to improve his or her FICO score would require undivided diligence in finding points of possible improvements in his or her report. An account holder’s report from any of the three major reporting companies would reflect the account holder’s use of his or her finance through five categories. Payment history accounts for 35%. Existing and unpaid debts are considered at 30%. The duration and timeframe of the existence of accounts is accountable for 15%. Categories of available debts and categories of debts used individually accounts for 10%.

    The differences in the FICO score may seem too small for many account holders and consumers. But even the tiniest difference can make the best and cheapest lending deals unavailable to those who would want it. A shortage of 20 points between FICO score categories can increase the interest rates of its owner increase up to 1% which will translate to at least a few more hard earned dollars.

    Those who suffer from this problem can opt to practice credit repair plans that would instantly increase his or her FICO score. The most common strategies in this area are the lessening of existing accounts and closing down debt related accounts. These steps prove to be effective FICO score boosts but their effects are deemed to take long term negative effects such as over utilization. Those who would want to lessen their interest rates by establishing good FICO scores must assess what they are giving up in the long run for a few scores up the worthiness scale.

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