Google Analytics Alternative Credit Zeal - Repair & Improve Your Credit Score With Confidence: August 2017


Going Through a Divorce? What You Need to Know to Protect Your Credit History

Protecting Your Credit History During a Divorce We all know the statistics; half of all marriages end in divorce. Whether the circumstances that brought your marriage to an end are tragic, dramatic or even amicable – it can be a critical time financially.  At a time of deep emotional heartbreak and devastation the easiest thing that can happen is that you neglect or avoid protecting your finances directly, and ultimately harm your credit score, not to mention your future financial well-being.

Typically, filing for divorce itself, does not affect your credit score the way a small claims or civil court judgment or bankruptcy can; rather, it’s the handling of the shared debt and joint accounts that can make a dramatic difference in your credit score and your credit history, if handled poorly.

According to the FTC, it’s important to pay special attention to your joint accounts and make sure they’re paid on time every time during the divorce process. The law states that a creditor does not immediately have to close or convert accounts because of a change of marital status; however, a request from either account holder can accomplish this easily. 

Some lenders may even have you make your request in writing. In some instances, creditors can have you reapply for an individual credit account and based on the application information extend or deny you credit.  With home equity loans or mortgages, lenders may require you to refinance to remove a spouse from the responsibility of paying the loan.

The bottom line is that creditors and lenders don’t care about the specifics of your divorce settlement. It falls on both parties to fulfill their financial responsibility if the account is in both your names, which means if one partner defaults on payments; the other partner is legally liable for the debt. recommends you do the following to protect your credit history and maintain an unblemished credit score:
  1. Check your credit score with all three major credit bureaus (read more).  Basically reviewing your credit report with all three credit bureaus will alert you to any joint accounts or debt that may have been neglected. You’ll also have a better idea of which shared accounts and loans need to be closed.
  2. Open credit accounts in your name only. Obtain individual credit accounts especially if you have not had sufficient time to build your own credit.  If done before the divorce is legally decreed, it will not only help you avoid accruing shared debt, but make it easier for you to get credit cards,  and bank accounts in your name while married and still sharing joint assets, such as credit cards and car loans. That being said, it’s also important to keep those payments to shared accounts you don’t close current.
  3. Call creditors to close joint accounts or accounts where your spouse is an authorized user. Closing joint accounts can protect your assets in the future, not to mention your credit score.
  4. Be mindful that the loan or credit account will still need to be paid off even if it’s in a closed status. This is where keeping a close eye on debts by using credit reports can be useful. Some financial advisors may recommend that you enlist the help of a credit monitoring service.  All three credit bureaus; Experian, Equifax and TransUnion, have a fee-based service that can automatically notify you in the event of changes to your credit.
  5. Close joint memberships including gym memberships or video rentals. These accounts can be reported to any of the three credit bureaus if you or your ex-spouse should fall behind in your payments. Learn how to avoid the small factors that can hurt your credit score.
  6. Document all letters to creditors asking for joint or shared accounts to be closed.  Also document any credit accounts or loans you open in your name.
  7. Assess your financial picture by requesting all three credit reports after the divorce is final to review any possible overlooked accounts.

Four Tips for Avoiding Credit Repair Scams

Four Tips for Avoiding Credit Repair ScamsYou have likely heard several times in your life the adage, “If it sounds to good to be true, it probably is.” You can be assured those words of wisdom apply to avoiding credit repair scams. Unfortunately, however, some unscrupulous persons seek to take advantage of people who are vulnerable because they are faced with the need to rebuild their creditworthiness, which can be emotionally taxing.

After all, the information in one’s credit report can affect the ability to get a loan or insurance, and how much you have to pay for them, as well as the ability to be hired for some jobs. While someone with a less-than-desirable credit rating certainly can be hopeful that repairs can be made, the process does takes time and discipline.

Steer Clear of Outrageous Claims

Do not use the services of any company that tells you restoring your creditworthiness is “no problem,” that your bad credit can be “erased,” or other similar claims that simply do not reflect reality, the Federal Trade Commission (FTC) states. If the negative information on your credit report is accurate and current, no one can remove it; it must stay there for a required amount of time.

Remember that Reputable Firms Educate Prospective Clients

The first action a legitimate, well-meaning credit-repair firm will take is to inform you that credit repair is something you can do on your own, if you have the time, dedication, and discipline; and that credit reports are available to inform you of the data in your credit history that new potential creditors, insurance companies, or employers can see if you seek to do business with, or work for, them.

If a company denies you such things as credit or a loan, insurance, or employment because of your credit history, you are also entitled to receive a free credit report within 60 days of the denial, if you request the report.

You are also legally entitled to receive a free copy of your credit report once every 12 months from the three national credit reporting companies, if you request it. The requirement for providing that information is from the Fair Credit Reporting Act.
If a credit-repair company attempts to persuade you not to contact the major credit reporting companies directly to discuss a concern you have, do not do business with them, because they do not intend to serve your best interests.

The exception to that advice is when making your request for your free annual credit report. You have to be careful to go through the proper communication channel to receive the report at no cost, and contacting any of the three national consumer credit reporting companies individually or at another address other than the following could result in your being charged for your credit report:

Annual Credit Report Request Service
P.O. Box 105281
Atlanta, GA 30348-5281

Do not Pay for Credit-repair Services up Front

A legitimate credit repair firm will not ask you to pay for their services before the work they have promised to do for you is complete, notes the FTC. In fact, the Credit Repair Organizations Act provides the legal support for you to take that position relative to paying.

Do not be Influenced to Attempt to Change Your Credit Identity

The FTC warns that a tactic of some illegitimate credit-repair companies is to suggest to clients that they invent a “new” credit identity and then a new credit report by applying for an Employer Identification Number to use instead of their Social Security Number. This is terribly bad advice because such action constitutes fraud and is a federal crime for which any clients following the advice will be liable.

So What can You Do if You Need Help?

First, as has already been conveyed, familiarize yourself with your rights and avail yourself of your credit reports so you know exactly the state of your creditworthiness. If you think certain adverse information in a report is inaccurate, compose a dispute letter and send it to the consumer reporting company. The FTC provides a template or example letter on its website to guide you.

Consumer reporting companies must investigate within 30 days any items you question. As the FTC states, “When negative information in your report is accurate, only the passage of time can assure its removal. A consumer reporting company can report most accurate negative information for seven years and bankruptcy information for 10 years.”

If you have poor credit, you may still be able to get credit; standards vary among creditors. But, regardless, you will want to educate yourself and develop a plan of action to set yourself on a course that will ultimately lead to your having greater creditworthiness.
Be of good cheer in the process and consider whether you have the discipline to develop a budget and negotiate repayment plans with creditors. If not, look for a free or affordable, legitimate credit counseling organization to assist you. An organization that offers in-person credit counseling programs is ideal.

Rebuilding Your Credit Score After the Repair Work is Over

Rebuilding Your Credit ScoreIf the last two years have shown consumers anything, is that it’s wiser to hold onto those credit cards than to let them gather dust, or else you’ll find yourself with lowered credit lines or closed accounts. Neither is very good to your credit score. As credit card rates reached record highs early this year, some as high as 79.9%,  consumers are taking a second look at other methods when rebuilding their credit. While paying off your debt does increase your credit score, you may find receiving better interest rates or getting a loan approved requires an even higher rate than the one you currently hold.  Here are ways to rebuild your credit, with and without plastic, after the hard work of repair is finished.

Credit Unions

Often ridiculed for lack-luster, online banking applications and a lack of convenience when it comes to the number of available branches, credit unions have seen a resurgence of customers.  It could be because of their lower interest rates on loans and credit cards, no annual fees and in some instances, no fees for cash advances within certain ATM networks. I opened my first checking account with a Credit Union.

To build your credit, ask about a secured loan. Of course, these loans are secured with a deposit from you into a CD or savings account, but if you’re looking to start from ground zero it may prove to be beneficial.  Credit Unions look at more than just your credit scores, they look at how you manage your accounts, how you plan for retirement or your child’s education as well as your employment history. Credit unions also report to all of the three major credit bureaus: Experian, TransUnion and Equifax (learn more here).

Federal Student Loans

To use this option, you must be a college student with at least a half-time status.  This type of loan has one disadvantage: your payment history is not reported until you begin repaying the loan. But if you’re in a career transition, due to a layoff or just changing careers, this is one way to rebuild that credit history on a solid foundation with no credit checks, low rates and great terms. As long as you haven’t defaulted on a previous student loan, or borrowed the maximum loan amount, this loan is obtainable. There are many types of student loans available. As with all loans, do your research and read the fine print.  To get the basics on student loans, check out the American Student Assistance.

Secured Credit Card

Secured cards require you to make a cash deposit up front. That deposit is then the credit line for the secured card account.  There are many plans out there, but do your research first.  Some banks allow depositors to add money to the account which adds to the credit line, while others reward consistent payment history with lower rates. 

Obtain a Gas Card or Department Store Credit Card

Go back to the beginning. How? My first credit card was a department store credit card, and with a good payment history, it allowed me to acquire a Visa card through my local bank.  Gas cards also work.  Everyone, or nearly everyone I know, commutes to work.  But you need to use these cards properly. Since these cards carry a high interest rate, it’s to your advantage to pay the bill in full every month.  When rebuilding your credit, remember higher balances can lower your credit score, so never carry more than 30% of the limit allowed on the gas card. For example, a $500 limit allows you to carry $150 balance on a gas card.

The 411 on FICO Scores

The 411 on FICO ScoresA FICO score is at the root of whether or not you are accepted or denied credit or a loan and whether you will receive higher or lower home and auto insurance rates. Short for Fair Isaac Corporation, the company that invented the credit risk score, the three-digit number defines your creditworthiness or the likelihood that you will pay your debts. Your FICO score is calculated from information contained in your credit reports. That’s why it’s so important that all information listed in your credit reports is correct and complete.

The Makings of a FICO Score

A FICO score ranges between 300 and 850, with scores on the higher range of the scale the best for obtaining credit and low interest rates. Because each of the three credit rating agencies – Experian, Equifax and TransUnion – operate separately and collect data about your credit independently from each other, you actually have three FICO scores. The scores may be different because information in your credit report may vary between credit reporting agencies.

According to FICO, a FICO score is a calculation comprised of various elements and formulas, including the following:

Payment History – 35% (how often you pay your bills on time);

Credit Utilization – 30% (the amount of debt in use versus the total amount of credit available);

Credit History – 15% (the length of time from when you first established credit, such as a loan or credit card);

Credit Types – 10% (the different types of credit you have, such as a mortgage, revolving credit, installment loans, etc.);

Credit Inquiries – 10% (the number of credit searches conducted by lenders).

The Highs and Lows of FICO Scores

FICO scores can increase and decrease according to various activities that fall under the elements listed above. For example, if you made one or more late payments, your FICO score could go down. On the other hand, if you pay your bills on time, over the years your FICO score will go up. When you request your FICO score, it includes an explanation about the positive and negative areas that affected your score. Keep these reports from year to year to compare these factors.

Some other factors that impact your FICO score are:

  • Closing credit card accounts;
  • Reduced credit limits;
  • Increased credit card balances;
  • Collections, tax liens, or debt-related judgments made against you;
  • Repossessions or foreclosures;
  • Opened new credit accounts.

Sometimes, your FICO score will drop through no fault of your own. That’s when you need to check your credit reports to see if they contain any errors. You can do this on your own or by using a credit repair service. Whichever avenue you choose, it’s important to act fast and repair your credit before your FICO scores are severely impacted.