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What is a Credit Bureau

“What is a Credit Bureau? Most of us are still wondering what it does and why it’s important. Let this article help. Read more now!”

Credit Bureau Definition

Credit Bureau

A credit bureau is an organization that tracks the credit histories and related information of individuals. Whenever someone applies for credit, housing, employment, or anything else that their credit history could have an impact on, their potential creditor, landlord, or employer can check the information on file. If the bureau shows less-than-satisfactory information in its report on the person, it may affect the person’s chances of receiving the credit, lease, or job. A poor credit report can also result in higher interest rates on a loan or credit card.

There are three major US credit reporting agencies: Equifax, Experian, and TransUnion. Although the three companies share information, each maintains its own report and credit score on each individual. When someone applies for a line of credit, housing, or employment, the creditor or employer may look at the report and score from all three. For this reason, if an individual is monitoring his or her credit report for fraud or false information, it is a good idea to request a copy of the report from each agency.

A credit bureau gets the information for their reports from the individuals’ creditors. For example, if someone has a line of credit with his bank, that bank will report information regularly to the credit agency — good or bad. If the individual is always on time with payments, that fact will show on the credit report; however, if the individual has been more than 30 days late on one or more payments, the report is sure to reveal that, as well.

A variety of information gets reported to each agency. They all have personal information for each person who has gotten credit or opened a bank account on file, including their name, date of birth, Social Security number, current and previous addresses, and employment history. All of this information is collected by tracking people via creditor reports and Social Security numbers.

Account information is listed on the report, including the business handling the account, the date the account was opened, the credit line limit, the current balance, and the payment history. Even if an individual closes an account or the account becomes inactive, the report will still show this information for seven to 11 years. The accounts that each bureau includes on a credit report can be anything that is credit related, such as checking and savings accounts, credit cards, loans, and leases.

Each agency also reports any inquiries made into a person’s credit report. The report will show the type of inquiry and who made it. If too many inquiries are made within a certain period of time, the person’s credit rating can be negatively affected.

A credit bureau also includes public records on an individual’s credit report, if they are deemed related to a person’s credit worthiness. For example, if a person has declared bankruptcy, he or she will not be considered reliable, and companies may be hesitant to give him or her a line of credit. Bankruptcies are included on credit reports as a result. Even unpaid child support is considered to pertain to an individual’s dependability. This sort of information typically remains on a credit report for seven years. More at What is a Credit Bureau?

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How to Raise Your Credit Score

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Tips on How to Raise Your Credit Score

If you’re like most people, the recession took a toll on your finances and probably your credit score. So how do you get it back to where it needs to be? While it usually takes seven years for any negatives marks to be removed from your credit report, there are a couple quick and simple ways to you can raise your credit score now. Here are a couple to keep in mind.

1. Keep paying things on time: The most important thing to remember is to keep your credit report clean from here on out. Pay your bills on time. Make sure you aren’t over your limit on any of your credit cards. Keep the balances on your credit cards low. Keeping your finances clean is the best way to raise your score.

2. Don’t cancel any of your credit cards: This may seem counterintuitive, but canceling credit cards actually lowers your credit score. Part of your credit score is based on how much credit you utilize (your credit utilization score), so the more credit you have available, the higher your credit score. If you cancel a credit card, you no longer have that credit available, which lowers your credit utilization score, which in turn lowers your credit score. Even if you’ve paid off a credit card, keep it open and gather up the extra points you get from having that extra line of credit. If you qualify, you can also apply for a new credit card to raise your credit utilization ratio, although don’t apply for more than one. Applying for too much credit at once can lower your score. Here is a good list of the best rewards credit cards that can help you save money and raise your credit score.

3. Open the lines of communication with your credit card lenders: If a bunch of credit card debt is keeping your credit score down, talk with your credit card lenders to see if you can strike a deal to pay off that debt. Many lenders are open to making deals with you, since all they are really after is the money you owe. Just remember, if you do make a deal with a lender, ask them how they will be reporting it to the credit bureaus. They have two options: “Paying as agreed,” which won’t hurt your credit score, or “Not paying as agreed,” which could bring your credit score down. Make sure they are reporting it as “paying as agreed” before you agree to any deal.

4. Sign up for a secured credit card: If your credit is so bad that you keep getting denied for a credit card or loan, try signing up for a secured credit card. Traditionally, you put down a “deposit” for a secured credit card that ends up being your credit limit, so it doesn’t matter how bad your credit is, secured credit cards are available for everyone. Just make sure to apply for a card that reports to all three credit bureaus, otherwise having the extra line of credit won’t affect your credit score.

5. Make sure there are no mistakes on your credit report: Over 42 million people in this country have errors on their credit report, and 10 million of those have errors that affect their credit score. Make sure you are regularly checking your credit report to make sure there are no mistakes and that you haven’t been a victim of identity theft. Fixing simple mistakes on your credit report can be a quick way to boost your score. Each of the different credit bureau has instructions on their web sites on how to fix an error, or you can hire a credit repair service to do the work for you (as well as try other methods to raise your credit score.) More at Simple Ways to Raise Your Credit Score

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Credit Score Range: Understanding the Different Credit Score Ranges

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Different Credit Score Ranges

Your credit score is important. Very important. That three-digit figure is so influential that it determines your eligibility for credit cards, home and auto loans, student loans, apartment rentals and even some jobs. It’s vital to know your credit score range so you can decide which loans to apply for, know when you’re settling for less than you could get and, if necessary, take steps to rehabilitate your FICO score. Your credit score gives lenders an idea of whether they can rely on you to pay back your debts. It follows that your credit history, past and present, is among the data that credit bureaus use to calculate your score. If you’d like to get a grip on your score’s implications, read on: the nerds will clarify the finer points.

Lower score, higher interest
More than determining your eligibility for a loan, your score affects the cost to you, too. In fact, the score and the interest you pay are inversely proportional, roughly at a one-to-one ratio. So, as you boost your score, your monthly payments will generally decrease at the same rate. Let’s say you want to get some new wheels. To finance your slick new ride, you take out a 60-month fixed-rate auto loan of $15,000. If your score is in the gutter, say a 610, you’d pay $357 a month, according to myFICO.com. The guy next to you in the lot, with the Ray Bans on, has a superb score of 800. His score is about 30% better than yours—31.15% better, to be precise—as his monthly payment, at just $277, a 28.88% markdown. It’s clear that you’d rather be that other guy, who pays on time and keeps his debts low. Because once you start digging yourself a hole with late payments, it becomes harder to climb out, with the high rates weighing you down.

Understand your FICO score
The breakdown of credit score ranges is as follows:

630: Bad credit
You likely landed her because of bankruptcy, or because you’ve missed payments consistently—or, as is often the case with younger folks, you have no credit history at all. You’ll face higher interest rates and fees, and your choice of credit card is restricted. If you find yourself in this bracket and still want a credit card, a secured card is likely your best bet.

630-689: Fair (average) credit
Your score is average, and it’s probably because you have too much “bad” debt. If you’re holding onto some credit card debt or if your balance often grazes your credit limit, bureaus won’t trust you, and therefore lenders won’t either.

690-719: Good credit
Your rates are low, and you can choose from most cards, including those that earn rewards.

720-850: Excellent
If you’re in this bracket, take a look at cards with great fringe benefits. American Express, for example, offers premium cards that better accommodate the ritzy life.

Although these four categories are the standard, credit scores are still somewhat fluid, especially since the recession began. Since 2007, scores’ effect on consumers has become more severe, too, according to Paul Oster, the CEO of Better Qualified, LLC, which specializes in business and consumer credit services. “The impact of scores has changed dramatically,” Oster wrote in an e-mail. “Consumer’s credit scores can cost or save them hundreds of dollars a month. The ‘magic number’ has been increasing since the ‘R’ [the recession]. I know that 5 years ago 620 was a good benchmark, then it went to 640, 680, 720, and now 740. The average credit score is around a 685. Remember that scores are fluid and changing all the time. Studies show that individuals with an average credit score would reduce card finance charges by $76 annually if they raised their score by 30 points.” More at What are the Different Credit Score Ranges? Bad to Excellent and Everything In Between

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