Understanding Derogatory Marks on your Credit Report

  • Raise Credit Score

A derogatory mark can remain on your credit report for up to 10 years and cause a lot of damage to your credit score. But what exactly is a derogatory mark (also known as a negative mark or derogatory account) and how can it affect your credit score, and can it be removed?

What is a Derogatory Mark on Your Credit Report?

A derogatory mark is a negative mark that appears on your credit report following a financial mishap. It generally refers to any adverse outcome that has a long-lasting impact on your score, which means it includes bankruptcy and missed payments, but not hard inquiries.

Derogatory marks can appear on your credit report via one of two ways:

  • Reported Information: Lenders send information to credit reporting agencies and this information is used to build your credit report and calculate your credit score. It includes all data pertaining to your payment history, including derogatory marks from collection accounts and late payments.
  • Public Records: A credit bureau can add information to your credit report that is public record. This tends to be very damaging and can last for up to 10 years. It includes bankruptcy filings and tax liens, as well as civil judgments.

The many things that can cause derogatory marks include:

  • Miss a payment (can include a student loan, credit card, or any other debt).
  • Allow an account to enter collections or to be charged-off.
  • Settle your debt via a debt settlement company.
  • File for bankruptcy.
  • Your home is foreclosed.
  • You have unpaid tax debts.
  • You owe a debt through the courts.

How Derogatory Items Affect Your Credit

The way that a derogatory mark impacts your credit will depend on a number of factors, including your current credit score and credit history. If you have a bad credit score, the reduction may be minimal; if you have a good score it could remove up 150 points from your total.

This may not sound like much when you consider credit scores run from 300 to 850, but 150 is enough to send a previously “Exceptional” borrower into the “Fair” range, bypassing “Very Good” and “Good” on the way and greatly reducing their chances of securing low-interest loans.

You won’t see as big of a drop if your score is already low, but you could easily become one of the 16% whose scores are in the lowest possible “Very Poor” range, at which point you’ll be rejected for nearly all types of loans and credit cards.

Of course, it also depends on the type of derogatory mark. Bankruptcy, for instance, will impact your score much more than a late payment.

Open and Closed Derogatory Marks

There are two main types of derogatory mark: Open and Closed. These refer to the status of the account. An account that is in collections, for instance, will be classed as “Closed”, as is the case with ones that have been charged-off. An account that continues to receive monthly payments is classed as Open.

Both Open and Closed derogatory marks can seriously damage your credit score.

How Long Does It Take to Get a Derogatory Mark Removed?

There are a few ways you can remove derogatory marks quickly and with relatively minimal fuss. However, in most cases, they will remain for the term, which can vary depending on the type of mark. 

  • Bankruptcy: Whether you file for Chapter 7 or Chapter 13 will dictate whether the mark remains for 7 or 10 years.
  • Foreclosure: If you fail to make mortgage payments then your house may be repossessed, with the derogatory mark remaining for 7 years from the date of foreclosure.
  • Short Sale: A short sale can appear as a settlement or charge-off and will remain on your credit report for 7 years.
  • Collections: A collection will show for 7 years plus an additional 6-months from the date it was due. This may be true even if you clear the account in that time, although this isn’t always the case.
  • Tax Liens: Will remain for 7 years from the date they were filed, providing they have been paid.
  • Judgments: Both paid and unpaid judgments typically remain for 7 years, but it depends on the statute of limitations in your state of residence and on whether or not the judgment has been renewed.

What are the Permanent Effects?

Bankruptcy is one of the most damaging derogatory marks you can have, so let’s use that as an example. The average American credit score is around 700 (based on the latest FICO Score) and based on this score, bankruptcy can reduce it by between 130 and 150 points.

That’s a big hit to take in one go, especially if you have additional problems coming your way in the near future. However, once those problems have been dealt with, your score will gradually improve. There are ways that you can expedite this process and improve your credit score, but regardless of whether you employ a credit repair process or not, the effect of that bankruptcy will gradually reduce over time.

Once the 7- or 10-year period has elapsed, it will disappear completely and will no longer influence your credit report. There’s a good chance your credit utilization score will be low, as high-limit, low-balance credit cards are not exactly easy to come by during bankruptcy, so you’ll need to work on improving your score. But the worst of the process will be over and the effects of that derogatory mark will no longer be felt.

How to Avoid Derogatory Marks on your Credit Report

Everyone is at risk of getting a derogatory mark because no one is infallible. If you have active accounts, there’s always a chance that you will miss a payment or two, triggering a domino effect that ultimately results in a plummeting credit score and a litany of negative marks.

Keep your credit score strong and your credit report positive by following these simple rules:

  1. Be Aware of Your Credit Reports: Check with all credit bureaus at least once a year. You are legally entitled to a free credit report from each one every year and there are multiple free credit report services that can keep you informed all year long.
  2. Follow Through: Contact doctors and hospitals after appointments to make sure there is no remaining balance. As discussed in our guide to Medical Debt and Your Credit Score, medical bills are not added to your credit report unless they enter collections. Some debtors only learn about unpaid medical bills when they receive a derogatory mark or a demand from a debt collector. 
  3. Pay All Debts: Don’t assume you have gotten away with debt just because it doesn’t show on your credit report. It may appear eventually and if you don’t make payments it could enter collections. Pay all debts or at least learn more about them to better understand your options.
  4. Make All Payments: Every monthly payment has to be made on time. The longer you delay, the more damage it will do to your credit score and the longer it will take you to recover and repair your credit.
  5. Use Debt Relief: If your debts are too high, consider debt management, debt consolidation or even debt settlement, but always read about them beforehand and make sure you’re aware of the pros and cons before you commit.

Strategies to Remove Derogatory Entries on your Credit Report

Contrary to what you might have been promised elsewhere, there is no sure-fire way to remove derogatory marks from your credit report if they are accurate. There are companies that promise to do this, but the vast majority are outright scams seeking to sell you on a service that doesn’t exist while the rest offer risky and immoral strategies such as buying tradelines.

These scams prey on the desperate and make a killing by exploiting the debt relief industry. Stay clear of them and trust your instincts—if it sounds too good to be true…well, you know the rest.

Check your Credit Report

Credit reporting agencies aren’t as reliable and flawless as you might think, far from it. They can, and often do make mistakes. An FTC study found that 1 in 4 consumers has an error on their report that is severe enough to impact their score. 20% of these have their reports fixed after filing a dispute with the credit bureau responsible; 80% experience modification of some kind.

The first step in any credit repair process, therefore, is to check your credit report and become acquainted with the specifics. Not only will this allow you to identify and deal with fraud and errors, but it will also ensure you’re fully prepared to tackle your financial issues head-on.

Right the Wrongs

If your credit score has dropped as a result of several derogatory marks, it’s fair to say that you didn’t have control over your finances. You need to change that going forward:

  • Create a list of all outgoings and incomings.
  • Calculate your debt-to-income ratio (DTI).
  • If your DTI is high, acquire a debt consolidation loan or refinance.
  • Start budgeting and making sacrifices.
  • Prepare some emergency funds to cover you in the future.

Rebuild Credit

Unsecured credit card debt and personal loans probably got you into this mess in the first place and should be avoided. However, there are a few forms of credit you can use to rebuild your score without taking a big hit in the process and without being subjected to countless refusals and high-interest rates:

  • Secured Credit Card: A card that is “Secured” against a cash sum. It’s like a phonecard—you place some money on it and then use the card to spend that money. Every month your score will gradually improve and you’ll have a clean, positive credit account to your name.
  • Lending Circles: We wrote an extensive guide to lending circles here, discussing how these programs can help you to quickly and safely build credit, without acquiring costly interest rates.
  • Store Cards: A store card is basically a credit card with a high-interest rate and a ton of perks. These cards can be dangerous if you’re impulsive and have a history of running high credit card bills, but if you’re relatively responsible and have every intention of clearing your monthly balance, they can be useful. They’ll give you an account you can use to build credit and will provide you with additional features and perks. Keep the limit low to avoid temptation and don’t spend more than you can afford to repay. 

Don’t Rush

Credit repair takes time and is not something you should rush into. Doing so could lead to regrettable and costly mistakes, such as opening new accounts you can’t afford or committing to a debt relief program that damages your score. It’s important to take your time.

Wait for 7 to 10 Years

After 7 to 10 years, the derogatory mark will disappear completely, but after just a few years you’ll start to notice its effects much less. From that point on you can begin to rebuild your credit so that when the derogatory mark finally clears, your score is in “Good” or “Very Good” standing.

Conclusion: Derogatory but Not Devastating

Derogatory marks are negative, there’s no denying that, and they can do some serious damage to your credit report. However, all this damage can be reversed with a little patience and perseverance and you can still have a strong credit report even with the odd negative mark.

So, don’t despair if you’re hit with a derogatory mark—stay cool, learn the cause, look at the solutions, and do all you can to avoid additional marks landing on your report.

Source: pocketyourdollars.com

NJM Insurance Review

  • Car Insurance

The NJM Insurance Group was founded way back in 1913 and offers a wealth of insurance products to individuals in New Jersey, New York, Delaware, Connecticut, Maryland, and Pennsylvania.

Find your best rate on Car Insurance!

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Compare free personalized quotes from the nation’s top providers.

It’s one of the highest-rated car insurance companies in the United States and offers a wealth of products in a direct-to-consumer model, with transactions completed over the phone or at NJM.com, and not through insurance agents.

In this NJM Auto Insurance Review, we’ll see how New Jersey business holds up against the competition.

NJM Car Insurance

All NJM Insurance products are offered direct, much like Esurance. This has its benefits and is the preferred method for countless consumers who have grown up in the digital age. But if you prefer dealing with someone face-to-face, the lack of an insurance agent can be a pain.

NJM Insurance offers all of the basic, state-required forms of insurance, including bodily injury and property damage liability cover. It also offers underinsured/uninsured motorist cover, medical payments cover, and both collision and comprehensive coverage. If you opt for the latter, you will receive all the following benefits:

  • Pet Coverage: Always a welcome sight on car insurance policies, this extra feature will payout up to $1,000 if your pet is hurt in a car accident. It only makes sense, because if your dog or cat is in the car with you and you’re in an accident, your repair bills and medical bills aren’t the only things you have to worry about.
  • New Car Replacement: Your new car will be covered if it is completely destroyed or stolen within the first 12 months, providing it has less than 15,000 miles on the clock. NJM Insurance will give you the money needed to buy a replacement vehicle.
  • Car Rental Reimbursement: Not only does NJM Insurance offer car rental coverage if your insured car is in the shop or has been stolen, but this also extends to taxis and rideshares, depending on the policy and the location.
  • NJM SafeDrive: This program works in much the same way as DriveEasy, DriveWise, and the countless other similar programs out there. NJM Insurance tracks the driving habits of all applicants who agree to this program, changing their premiums accordingly.

NJM Insurance Car Insurance Discounts

Like all good auto insurance companies, NJM Insurance offers a wealth of car insurance discounts. These can be added to all applicable auto policies and provide significant savings:

  • Multi-Car and Multi-Policy: Offered when you add more than one vehicle to your policy or purchase a homeowners insurance policy as well.
  • Driving Courses: Available for all applicants that complete a defensive driving course and other safety courses.
  • Paying Upfront: Offered when you pay for your premiums in full.
  • Safety Equipment: Provided for safety equipment such as airbags and anti-lock brakes, as well as anti-theft features.
  • New Car: Obtainable if your car is no more than 2 years old.
  • Good Student: A discount provided to young drivers who maintain a specific grade point average. NJM Insurance also has discounts for students who spend a lot of time on campus.

Other NJM Insurance Products

In addition to auto insurance policies, NJM Insurance offers homeowners insurance with all the following features and benefits:

  • Extra Coverage: Get extra coverage for expensive items, including jewelry, high-priced electronics/equipment, and family heirlooms. If you have anything in your home that carries a substantial value, this feature can ensure it is covered completely.
  • Earthquake Insurance: If your home is damaged in an earthquake, resulting in significant loss, NJM Insurance will ensure you’re covered. NJM Insurance doesn’t offer insurance products in any of the ten states where earthquakes are most common, but they can occur anywhere, so it’s still a good option to have.
  • Water Coverage: You will already be covered in the event your home suffers from internal water damage, such as leaks. But with this feature, you will also be covered for up to $5,000 following an overflown sump pump.
  • Mold and More: Dry rot and mold can spread rapidly and cause serious damage to your home. Before you know it, the fungi have taken over and left you with expensive repair work. Fortunately, with NJM home insurance, you may be covered.
  • Fraud and ID Protection: The amount of money stolen by fraudsters in the United States has remained relatively stable over the last 5 years or so. However, the number of victims has increased significantly, suggesting that fraudsters are now targeting more vulnerable people, including those who have very little to lose in the first place. With these extra protection options, NJM home insurance will cover you for the financial damages that result from fraud and ID theft.

A multitude of home insurance discounts are also available and offer policyholders a chance to save a few cents on their cover. Discounts are available for all the following:

  • Smoke-Free: NJM will shave some money off your policy if you install a smoke alarm or sprinkler system. You can also save some money if you are a non-smoker. There are over 350,000 house fires every year in the US resulting in nearly $7 billion worth of damage. With these two benefits, you significantly reduce the risk of such an issue.
  • Safety Features: There are over 7 million property crimes in the United States every year, leading to the theft of belongings and property damage. By installing features such as burglar alarms, there’s less chance you will be the victim of this type of crime, and your premiums will match this. 
  • State-Only Discounts: In the state of New Jersey, policyholders can save money by installing impact-resistant glass, while a paperless billing discount is offered in Pennsylvania.

NJM Insurance Car Insurance Rates

​NJM Insurance has cheap rates in general, but these rates won’t suit everyone. It’s one of the cheapest car insurance providers in the state of New Jersey and offers especially low rates for drivers with at-fault accidents and other blemishes on their driving records.

However, this usually only applies if those drivers have good credit scores.

With lots of insurance claims, speeding tickets, and other marks, and a bad credit score, you likely won’t get the best insurance rates here or anywhere else for that matter. Still, be sure to get a quote, compare it to other auto insurance quotes, and choose the best one.

NJM Insurance Reviews and Ratings

NJM Insurance has an A+ rating from AM Best and has maintained at least an A rating for several decades. It has also received high ratings from JD Power, who have previously voted this insurer as one of the best for claims satisfaction and customer satisfaction.

You don’t have to look far to find bad reviews and complaints, but the same can be said for all car insurance companies.

The simple fact is, more consumers leave bad reviews than good ones. If a company provides them with the service they expect, they’ll just move on, maybe tell a few friends, and leave it at that. If they falter in any way, the consumer will leave a bad review and maybe even complain, as that’s the only way they feel like they can get through to big corporations.

Contacting NJM

NJM Insurance has several offices, the biggest of which is located at 301 Sullivan Way, West Trenton, New Jersey.

If you have any questions, you can get in touch via a contact form at NJM.com or dial the following phone number: 1-800-232-6600.

As noted already, there are no NJM insurance agents and you will need to go through the website or, if you prefer, to speak with someone directly, opt for a phone call. In any case, the process is quick and easy.

Bottom Line

We definitely recommend getting an auto insurance quote from NJM Insurance, but this shouldn’t be your only quote. As always, it’s important to see what you can get elsewhere, as the chances of you getting the best possible coverage from the very first provider you try are pretty slim.

Get quotes from the likes of State Farm, SafeCo, Allstate, Progressive, Nationwide, and more. If NJM Insurance has the cheapest and the best, great! You can sign up for an auto insurance policy with a very competent and highly reputable provider. If not, other providers are just as reliable.

Source: pocketyourdollars.com

Guide to Credit Card Debt Consolidation

  • Credit Card Debt

If you’re anything like the average American, it’s likely that you are in debt to some degree. If credit card debt is the root of your financial problems, it might be time to consider credit card debt consolidation. 

What is credit card debt consolidation?

Credit card debt consolidation is a plan of action that combines all of your credit card balances so that you can manage all of your credit card debt with one single monthly payment.

While this might seem like a surefire way to approach this issue, there are some drawbacks. For example, depending on what route you choose, it could add marks to your credit score. 

The below information will walk you through the basic ins and outs of credit card debt consolidation so that you can decide whether or not it is the right choice for you. 

Advantages of Credit Card Debt Consolidation

There are three major advantages to consolidating your debt. Let’s take a look at them:

  • keeps things simple: This is a situation where the “less is more” rule applies. Our lives are already busy enough without having to worry about managing multiple credit accounts. Just remember that your loan’s annual percentage rate (APR) needs to be considered too and steering clear of higher interest rates should outweigh convenience, which leads us to our next point…
  • Lower interest rate: It’s possible that consolidating your debt could lead to a lower interest rate. If this works out as a result of credit card debt consolidation, it can scrape years off of your estimated dept repayment time.
  • A higher credit score: When you max out your credit cards, your utilization ratio—or utilization rate, which is the amount of available credit you are using on your credit card—goes through the roof. High utilization rates can negatively impact your credit score big time. When you consolidate your debt into one loan, the utilization on your cards decreases tremendously which will ultimately add points to your credit score. 

How to Get Started with Credit Card Debt Consolidation 

Credit card debt consolidation isn’t a one-size-fits-all strategy. The best way to go about consolidating your debt is going to depend on:

  • How much debt you have
  • Your credit score and credit history
  • Whether or not you have investments or home equity in a 401(k) account.
  • Self-discipline

Credit Card Refinancing 

Credit card refinancing can be a good option to managing personal debt for those of us who have a good credit score—think 690 and above on the FICO scale. With credit card refinancing, your credit card debt will transfer to a balance transfer credit card with no introductory APR, meaning that you won’t be charged interest for the first 12 to 18 months. 

It’s more than likely that the issuer is going to charge a balance transfer fee, which is usually about 3% to 5% of the transferred amount. Keep this in mind before getting your heart set on a card and make sure to do the math on the interest.

A couple of things to ask yourself if you are considering this as an option:

  • Will the 0% interest make up for the balance transfer fee?
  • Can I come up with a budget that would allow me to pay off my debt in a 12-18 month period before the APR kicks in? 

Credit Card Consolidation Loan

Taking out a personal loan from a bank, online lender, or credit union is another common way of consolidating credit card debt. Through this method, it’s more than likely that you will receive a lower APR on your debt. So, which entity should you go through to apply for your loan? The short answer is that there are benefits to each: 

  • Credit unions are non-profit lenders. A lot of times, they are able to propose more workable terms and much lower rates than the other contenders. This is a good option for those of us with bad to fair credit. 
  • Online lenders will usually allow you to pre-qualify for a loan without costing you any wear and tear on your credit score. A lot of online lenders will present you with an estimated rate accompanied by a soft inquiry on your credit. Most banks and credit unions won’t do this. Additionally, they might offer to directly pay your creditors for you, which makes this process that much easier for you. 
  • Bank loans are good at offering low APRS to customers with good credit. If you borrow from a bank that you are already a member of, they might be able to offer you a heftier loan as well as discounts on certain rates. 

A couple of things to keep in mind when considering a consolidation loan are:

  • It’s going to be harder to get a lower monthly rate if you have a bad credit score.
  • In the event that your interest rates increase with this option, will convenience be worth the extra monthly rates? 

Home Equity Loan or Line of Credit 

This route strictly applies to those of us who are homeowners. If you own a home, you might have the option of taking out a home equity loan. A home equity loan, otherwise known as a second mortgage, is when homeowners are able to borrow money using the equity in their homes. These are large loans with a fixed interest rate. 

Homeowners may also be able to fork out a line of credit on their equity. A homeowner line of credit (HELOC) functions similar to a credit card and has a variable interest rate. 

A couple of things to think about when considering a HELOC or a home equity loan:

  • The loans are secured by your house, which means that losing your home is a possible consequence of not staying up to date on your payments. 
  • HELOCs will typically necessitate that you make interest-only payments during the first 10 years. In this case, it would be wise to pay more than the minimum amount due to start carving away at your debt. 

401(k) Loan

You can also take a loan from your employer-sponsored retirement account, such as a 401(k) plan, but it might be best to consider this option a last resort if you are unable to get a different type of loan.

 The most obvious pitfall of taking out a 401(k) loan is that it can really make a dent in your retirement fund, but there are other obstacles too. If, for whatever reason, you are unable to pay back the loan, you will need to pay a large penalty. Borrowers usually have about five years to pay back their 401(k) loans, but if you quit your job or get fired, you’ll only have 60 days. 

The silver lining: A 401(k) loan won’t be displayed on your credit report, meaning that it causes no harm to your credit score.  

If this sounds like a viable option for you, it’s important to be sure that you can pay it back. 

Debt Management Plans

A debt management plan is a debt repayment strategy that combines multiple debts into one monthly payment at a low interest rate. This is an option worth looking into if your credit score isn’t looking so hot. 

To qualify for a debt management plan through a credit counseling agency, you will need to have a regular income. Usually, these plans come with startup fees and/or monthly fees tacked on, and it will probably take anywhere from three to five years to pay it off. However, the monthly payments are fixed and your interest rate could be reduced by half. 

Tips for Getting Approved for a Credit Card Debt Consolidation Loan

If you are convinced that a credit card debt consolidation loan is the best choice for you, the next step is to do some planning. The proper preparation and forethought can mean the difference between getting approved and not. Here are some tips you can follow to increase your chances of getting approved:

  1. Decide between secured and unsecured: 
    1. With a secured loan, you will need collateral, like your car or home. If your credit is isn’t exactly up to par, you might want to look into it, as secured loans tend to be more forgiving in terms of credit scores and interest rates. Nevertheless, you risk having your property compromised if you are unable to pay.
    2. An unsecure loan doesn’t require you to put anything up as collateral because it’s based off of your credit. Look into this if you have a decent credit score and save yourself the extra stress of putting your property at risk. Just be aware that interests rates on unsecured loans are sometimes higher.
  2. Figure out how much you will need to borrow: It’s in your best interest to add up all of the debts that you are hoping to consolidate. Though this isn’t necessarily a requirement, it’s helpful to know this in order to shop for the right lender. This way, you won’t have to worry about asking for too much or too little. 
  3. Familiarize yourself with your credit report and score: Knowing where you stand in terms of your credit will save you a lot of time once you’re ready to start applying. The best loan options for your situation are largely dependent on how your credit is doing. 
  4. Shop for the best lender:  Just as we discussed above in our “How-to” section, financial lenders aren’t one in the same. There are pros and cons to each one and it’s important to choose one you feel comfortable with. Take your time and remember that it’s okay to pick your lender based off of how likely it is that you will get approved. Do your best research, read the fine print and then compare. 

Make a checklist: There are a lot of documents that you will need to gather in order to start the application process. To do this, you might need to get some information from your creditors and your employer so the earlier you start planning, the better. Give yourself as much time as possible to get everything together.

Source: pocketyourdollars.com

Does Using Credit Cards vs. Cash Help My Credit Score?

Cash vs Credit

Building your credit score is a lot like building a good reputation. It takes years of consistency and work. It can be disheartening news if you have a bad credit score, but that doesn’t mean you are completely out of options. The best way to take control of your credit score is to start good habits today, and by making a commitment to those good habits for years to come.

If your credit score is less than favorable, you’re probably looking for ways that you can improve it. You may hear a lot of conflicting advice about the use of cash or credit to help your credit score. We’re here to set the record straight.

How Credit Works

The very first step to understanding your credit score is knowing how it is reported. When you are given a credit line from a credit card company or loan from your bank, you are permitted to use it within the set limitations while paying it back. It is your credit usage, on-time payment history, and credit habits that get reported to three governing credit bureaus: Equifax, Experian, and TransUnion.

A credit bureau is a company that collects information reported by creditors, lenders, and consumers in the form of a report – ultimately determining your credit score. In addition to your payment history and credit usage, your credit score is determined by the number of credit accounts, type of accounts, credit age, and credit inquires. A complex algorithm is then used to determine your unique credit score, which is updated on a monthly basis.

Cash vs. Credit

As you can see, cash is not directly involved in determining your credit score, but that doesn’t mean it should be avoided. Depending on your personal financial standing it might be better to operate with cash over credit. For example, if you have high balances on your cards or you don’t have a particularly positive credit history, it’s better to pay your bills in cash and make payments to get your balances down.

While this doesn’t directly affect your credit score, limiting your credit usage and paying your balances down will help you start down the path to repairing your credit and do wonders in raising your credit score. In general, your lenders and creditors like to see a credit usage less than 30% of your credit limit. This shows responsibility and self-control when it comes to being given credit.

On the other hand, you can’t have a credit score without some type of credit history. If you have no history with lenders or creditors, the three bureaus will not be able to determine your creditworthiness, therefore they will not be able to generate a credit score. If you have never been given any credit, it’s recommended that you start with a secured card or a secured loan, typically meaning they are backed by your savings, to start building good lending habits and trust. Just remember to adhere to all terms of your credit agreement and practice good credit habits in order to prove yourself to lenders when the time comes. It’s also a good idea to start monitoring your credit report to see where you stand financially and develop a strategy to get to where you want to be.


So, is cash or credit better at helping improve your credit score? The answer is, it depends on your personal financial situation. While it is true that you cannot build your credit score without having some type of credit from lenders, cash might be the right choice to take control of the debt that you already have and start displaying positive financial habits. Regardless of the strategy you choose, the first step is knowing exactly what’s on your credit report and monitoring it on a monthly basis.

Source: creditabsolute.com

What Is A Bad Credit Score? (and What You Can Do To Fix It)

Maybe you already know your credit score is lackluster, or maybe you’re dragging your feet to find out because you don’t want to know just how bad it is.

425 poor

Before worrying anymore about that dreaded three-digit number, find out just what is a bad credit score and what your financial options are if you have one. Bonus? We’ll even give you a few tips on how to improve your credit score.

What are the different credit scoring models?

Before you can figure out what exactly a bad credit score is, you need to understand the range of possible credit scores. And that depends on which credit scoring model you use.


The most popular model is the FICO score, which was created by the Fair Isaac Corporation and is used by the majority of lenders in the U.S.

FICO scores range from a low of 300 to a high of 850. The most influential factors are your payment history and the amount of debt you owe.

Together, these two categories comprise 65% of your FICO credit score. The remaining 35% is spread out amongst the length of your credit history, your credit mix, and new credit/inquiries.


An increasingly popular scoring model is called VantageScore. The older credit scores ranged between 501 and 990, but the latest version, the VantageScore 3.0, scores between 300 and 850 just like FICO.

This makes it easier for consumers and lenders alike to have the same base level understanding of a credit score regardless of which model is used.

For VantageScore, the most influential information is your payment history. The next most important factors are the age and types of credit you have, combined with how much of your credit limit is in use.

The model then takes into account your total balances and debt, followed by recent credit inquiries and your available credit.

Why does your credit score matter?

Your credit score isn’t just some arbitrary number that sits in a file somewhere. It’s constantly changing based on how you handle your finances.

When you pay your bills on time and don’t carry a lot of credit card debt, you should have a good credit score the next time it’s pulled. On the other hand, if one of your accounts has gone to collections, you can expect to see your credit score plummet.

All of this matters because lenders and other creditors use your credit score to determine how likely you are to repay a potential loan. When your credit score is good, a lender determines that you are creditworthy, approves your loan application, and offers you favorable interest rates and terms.

If however, you have a bad credit score, you’ll be offered higher interest rates over longer periods of time, resulting in higher monthly payments and more money spent on interest. Alternatively, with bad credit, you might not even be approved for a loan at all!

But credit scores don’t just matter the next time you need a loan or a credit card. Many other situations in life require a decent credit history. Landlords, for instance, might request your credit score as part of the application process to check if you’re likely to pay your rent on time.

Even employers can pull your credit report if you’re applying for a job that requires you to handle money. When you have bad credit, so many different areas of your life can be negatively impacted, so it’s best to avoid getting yourself into that situation in the first place. If you’re already there, now might be the right time to fix it.

So what is a bad credit score?

Most financial experts define a bad credit score as anything below 600, but each lender has its own standards when reviewing applications. The average American has a credit score of 687, which helps put the range into perspective.

If you have poor credit, you’ve probably had a combination of negative items on your credit report, like missed payments, delinquencies, or maybe even a bankruptcy or foreclosure.

You can always request a free credit report to figure out what exactly is keeping your credit score so low. In fact, we recommend checking your credit report every year.

Federal law allows you access to a free copy of each of your three reports every 12 months, so there’s no reason not to take advantage of this benefit. Just visit AnnualCreditReport.com to request your copies from Equifax, Experian, and TransUnion.

Where can I find out my credit score?

When you request a copy of your credit report, you’ll see your financial history listed out over several pages (or more or less, depending on how much history you actually have). However, you won’t get your actual credit score when you order your report.

Lenders look at both pieces of information to determine your loan offer, so it’s essential to know where you stand in terms of both your credit report and credit score. So how can you get your credit score?

Educational Credit Scores

Lots of websites offer free credit scores, although they are known as educational credit scores, or even “FAKOs,” because they’re not your actual FICO score. When it comes time to apply for a loan, you might be surprised to see a wide discrepancy between your free educational credit score and your FICO score.

Real FICO Scores

To find out your real FICO, you can purchase it from the company’s website. You can also sign up for a credit monitoring service if you expect to work on your credit over time and want to view your progress on a regular basis. Just be sure to select a company that does indeed use the real FICO.

You can also check to see if you’re eligible to receive free credit score updates from one of your existing credit cards. Many companies now give this service away as a cardholder benefit. Check out this comprehensive listing of credit cards offering free credit scores and see if yours makes the list.

What credit score do I need for a personal loan?

A lot of different factors go into determining your eligibility for a personal loan. The type of lender you choose also affects whether or not you’ll be approved. Obviously, the better credit score you have, the better your interest rate will be. But it’s important to know that some lenders specialize in offering loans for people with bad credit.

You’ll probably qualify for a smaller loan amount, but it can still be helpful if you need to finance a large purchase that you can’t handle with your normal cash flow.

You might also need to provide collateral for a personal loan since an unsecured loan represents more risk to the lender. Be sure to shop around for the best loan possible before making a final decision.

See also: Best Personal Loans for Bad Credit for 2021

Can I get a mortgage with bad credit?

Most mortgage lenders have strict guidelines they must adhere to. If you don’t meet their eligibility requirements, there’s not much you can do to get a home loan until you improve your credit. But you do have a few mortgage options, even if you have a bad credit score.

A conventional loan typically requires a minimum credit score of 620.

FHA Loans

An FHA loan, however, allows borrowers to have as low as a 580 with just a minimum 3.5% down payment.

Technically, you could still qualify for an FHA loan with less than a 580, but you’d need to put down at least 10% of the home’s sales price.

Of course, you’ll also need to demonstrate other financial capabilities other than your credit score when applying for a mortgage.

For example, your monthly debts should be no more than 43% of your gross monthly income — this formula is known as your debt to income ratio. Lenders also look at your employment and assets.

See also: How to Get a Mortgage with Bad Credit

How can I fix my credit score?

Credit naturally repairs itself over time, usually within around 7 to 10 years. But there are several ways you can help expedite the process while waiting for those items to drop off on their own.

Dispute Inaccuracies

Start by making sure everything listed on your credit report is indeed accurate. If there’s an incorrect item, it’s fairly easy to dispute it with the credit bureaus. The Fair Credit Reporting Act states that any items that can not be verified must be removed from your credit report within 30-45 days.

Having many negative marks on your credit report is one of the main reasons people have bad credit. It may be worthwhile to enlist the help of a professional credit repair service.

Work on Your Credit Utilization Ratio

Another easy idea is to work on paying off your debt to decrease your credit utilization. This helps both your credit score and your overall loan or credit application.

Get a Secured Credit Card

You probably won’t be approved for a regular credit card, but there are some banks and credit unions that offer secured credit cards. These types of credit cards allow you to put down a deposit that is equal to your credit limit. That way, the banks aren’t actually lending you money. You are actually kind of just borrowing from yourself. But, the payments get reported to the credit bureaus.

Bottom Line

With a bad credit score, there are only so many quick fixes you can implement before hitting a wall with your progress. But a credit repair company can help you fully exercise your rights when it comes to removing negative accounts and fixing your bad credit.

Bad credit doesn’t have to make you feel like you’re backed into a corner. You may still have credit options available to you now, and there are also concrete steps you can take to get back on a better financial path.

How Much House Can I Afford

May 12, 2019 Posted By: growth-rapidly Tag: Buying a house

Unless you expect to rent all of your life, you’re going to need to buy a house of your own. You will need to figure out in what neighborhood to live in.

You’ll need to figure out how long you expect to live in the house. However, this is only one piece to the puzzle.

The main thing you will need to determine is how much house you can afford.

After all, and as any financial advisor will tell you, taking a 30-year home loan for a house is a major financial. And it should not be taken lightly. The worst thing you can do is to get a loan that is too expensive for your budget.

So knowing how much house you can afford can help you determine whether or not you’re ready to buy a house.

LendingTree: A Better Way to Find A Mortgage

LendingTree.com is making getting a mortgage loan simpler, faster, and more accessible. Compare the best mortgage rates from multiple mortgage lenders all in one place and at the same time. LEARN MORE ON LENDINGTREE.COM >>>

Here are some strategies that can help you determine how much house you can afford.

Related topics:

5 Signs You’re Not Ready to Buy a House

10 First Tome Home Buyer Mistakes to Avoid

1. Do a Budget.

First up, do you have a budget? As any financial planner would say, buying a home is perhaps the biggest expense you will ever make in your life. When you are a homeowner, not only will you have to account for basic expenses like food, transportation, entertainment, etc, you will also have to account for monthly mortgage payments, home repairs, etc…

So, having a budget is an important step in determining how much home you can afford.

2. Increase your Credit Score.

How much house you can afford also depends on your credit score. In fact, mortgage lenders aren’t likely to offer you a mortgage loan if you have a bad credit score.

Although you can get an FHA loan with a 580 minimum score, but there are things to consider when taking an FHA loan, like paying for a private mortgage insurance (PMI).

So, a good credit score will not only help you get qualified for a loan, but it will also help you get the best terms and rates possible. So the higher your credit score, the better.

Get a copy of your credit report for FREE and address any mistakes immediately. You can call the 3 credit bureaus (equifax, equinox, and transunion) to report any inaccuracies. Once you do that, the next step is to try to raise your credit score.

One of the ways to improve your credit score is to pay all of your bills on time. Payment history accounts 35% of your total credit score. So, it’s crucial not to have late payments.

Another way to raise your credit score is to keep your credit balance under 30%. For more information, read: How To Raise Your Credit Score to 850.

Feeling Overwhelmed With Your Finances?, You have options and there are steps you can take yourself. But if you feel you need a bit more guidance, simply speak with a financial advisor. SmartAsset’s free tool matches you with fiduciary advisors in your area in 5 minutes. If you are ready to meet your goals, get started with Smart Asset today.

3. Down Payment.

Your down payment is crucial in figuring out how much house you can afford. It is so because the larger the down payment, the less financing you will need, which also means the lower your monthly mortgage payment will be.

So although you can put a down payment as low as 3.5%, the rule of thumb is to put 20%.

Click here to compare mortgage rates through LendingTree. It’s completely FREE.

4. Beware of Closing Costs.

In addition to coming up with a sizable down payment to purchase your home, you will also need to think about the closing costs. Closing costs typically cover the home inspection fees, attorney’s fees, appraisal fees, etc.

Closing costs can range from 2 to 4% of the home purchase price. Depending on the home, closing costs can cost you a lot of money.

5. Get Pre-approved for a Morgage.

One way to know if you can afford a house is to get pre-approved for a mortgage. Mortgage lenders will gather your financial information like your salary, debt, employment history, and credit score, before they decide to give you a loan. Getting pre-approved is important, because at least you know you’re shopping for a house within your budget.

One word of caution though, a mortgage lender can give you a bigger loan. So make sure you can afford it. In other words, just because you’re qualified for a specific amount of money, does not necessarily mean you can afford it. So, review your budget before making a decision.

Related: Apply for a Mortgage Loan Today

Not All Mortgage Lenders Are Created Equally

When it comes to getting a mortgage, rates and fees vary. LendingTree allows you to view and compare multiple mortgage rates from multiple mortgage lenders all in one place and at the same time, so you can choose the best rates for your needs. LendingTree makes getting a loan faster, simpler, and better. Get started today >>>

Related Resources

Get Pre-qualified For A Mortgage Online Now

Compare Mortgage Rates All in One Place

Check Your Credit Score For Free

Source: growthrapidly.com

How To Buy A Home With A Low Credit Score

July 23, 2019 Posted By: growth-rapidly Tag: Buying a house

Life is full of surprises. Just when you think you have everything figured out, a roadblock, like losing your job, presents itself. And a few months later you realize that you have missed on a few credit card payments.

When applying for a mortgage loan, mortgage lenders not only assess your ability to repay the loan, but they also review your credit report.

Click here to find the best mortgage lenders for low or bad credit score.

And if your credit report does not reveal a good credit score, then getting a mortgage loan to finance your property can be quite difficult. If you’ve found yourself in this situation, do not despair yet. There are a few things you can do to overcome a low credit score. Here are a few tips to get started:

1. Meet face-to-face with a lender and be transparent

When you have a low credit score and you have run out of time to fix it, one of your best options is to meet face-to-face with a lender and explain your situation.

Indeed, there are some lenders out there who are inclined to offer you a home loan despite bad credit after taking into consideration your unique circumstances.

LendingTree: A Better Way to Find A Mortgage

LendingTree.com is making getting a mortgage loan simpler, faster, and more accessible. Compare the best mortgage rates from multiple mortgage lenders all in one place and at the same time. LEARN MORE ON LENDINGTREE.COM >>>

Related Resources

When a lender runs your credit through a computer, you risk to be automatically rejected if you don’t meet the computer’s prerequisites.

But when you sit down with a lender and explain your poor credit, the lenders will be able to reach a deeper understanding on whether you are able to repay the loan.

So if you have a bad credit score, it’s best to be transparent and upfront about it.

2. Show that you have a full time, stable job.

Although your credit score is an essential lending requirement, it’s not the only thing a lender looks at.

Being able to show that you have a full time, stable job is another way to increase your chance of getting a loan even if you have a low credit score.

A good income will show that you’re able to make the payments on the loan despite a bad credit score.

Related: Apply for a Mortgage Loan Today

3. Have a bigger down payment.

A bigger down payment, say 20% + of the home purchase price, makes it more likely to get approved for a loan despite having a low credit score.

Furthermore, and more importantly, putting at least 20% down will allow you to avoid paying private mortgage insurance (“PMI”), which is an additional monthly payment you make on top of your monthly mortgage payments.

A PMI is a way to assure the lenders, that if you, as a borrower, default on the loan, the bank will be covered by mortgage insurance.

Feeling Overwhelmed With Your Finances?, You have options and there are steps you can take yourself. But if you feel you need a bit more guidance, simply speak with a financial advisor. SmartAsset’s free tool matches you with fiduciary advisors in your area in 5 minutes. If you are ready to meet your goals, get started with Smart Asset today.

4. Consider applying for an FHA loan.

Since you have a low credit score, you may assume that you have little to zero chance with a lender. But did you know that you still can get approved for an FHA loan?

Depending on the amount of money you’re seeking as there are limits, an FHA loan may be the right loan for you.

An FHA loan is loan that’s insured by the Federal Housing Administration. FHA Loans are very popular among first time home buyers because they require a much lower down payment (3.5%) and a very low credit score (580).

So if you have a low credit score of 580 and can meet the other FHA loan requirements, you should be able to a home loan.

Click here to compare FHA loan rates

For more information see: FHA Loan Requirements – Guidelines & Limits.

5. Avoid applying for more credit prior to loan approval.

A low credit score is itself not a good sign. But the more debt you’re applying to prior to seeking loan approval can significantly damage your file.

You see, every time you’re applying for a new credit, it can be a credit card, a car loan or a personal loan, it goes to your credit report. And the more inquiries you have on your credit report raises a red flag that you’re experiencing financial difficulty.

These are just a few tips to consider when shopping for a home loan with a low credit score.

Tips to raise your credit score:

Although you still can get a loan despite having a low credit score, it’s not always the best decision. For one, it comes with higher interest rates.

So if you’re not in a rush, your best bet is to put buying a house on hold and work on improving your credit score. Here are a few tips to improve your credit score. For more information, read: How To Raise Your Credit Score To 850.

Always pay your bills on time and in full. Payment history accounts for 35% of your total credit score. So whether it’s a credit card or a phone bill, stay on top of these payments

Keep your credit card utilization rate below 30 percent if your total balance.

Be stable. One thing that may make you a low risk borrower before a lender’s eyes is having a stable job. Lenders love stability. So if you have been with your current job for a while, that will work in your favor.

Get a credit card if you don’t have one. You may think having a new credit card may hurt you, but it can actually help you if you’re able to manage it properly.

Click here to compare mortgage rates through LendingTree. It’s completely FREE

Related Articles:

5 Signs You’re Not Ready To Buy A House

Top 6 Home Buying Risks To Avoid

The Biggest Mistakes Millennials Make When Buying A House

How Much House Can I afford

Related Articles

Not All Mortgage Lenders Are Created Equally

When it comes to getting a mortgage, rates and fees vary. LendingTree allows you to view and compare multiple mortgage rates from multiple mortgage lenders all in one place and at the same time, so you can choose the best rates for your needs. LendingTree makes getting a loan faster, simpler, and better. Get started today >>>

Source: growthrapidly.com

Can an Employer Check My Credit Score?

  • Raise Credit Score

When we interview for a job, employers are usually evaluating us based off of our past experience, subject knowledge, personality, and skills. Every employer has their own checklist of things that they are looking for in a new hire. This process is stressful enough as it is. But can employers check our credit report too?

While potential employers only have access to a condensed version of your credit report, which means they do not have access to your comprehensive credit report. For many employers, a resume and an interview is enough to close the deal, but it’s still good to be fully aware of the information that they could have access to. 

How your credit report can affect your employment 

If you have good credit, this probably isn’t an issue for you. But if the thought of a potential employer pulling up your credit report makes you uneasy, here is the good news: They won’t be able to see your three-digit credit score. In fact, the information that is found on your credit report during a pre-employment credit check is much different from what that lenders see. 

When employers check your credit report, they will be able to see a version that excludes information such as your date of birth, account numbers, information about your spouse, and any other personal information that could violate the terms of equal opportunity employment laws. 

Your actual credit score, which is used to decide whether a person can and should be issued credit, doesn’t show up on the report because it’s not relevant for making hiring decisions.

 Here are some of the things that a potential employer will see during one of these modified credit checks:

  • Name.
  • Social Security number.
  • Information about debts including:
    • Mortgages.
    • Credit card debts.
    • Student loans.
    • Payment history. 

If credit checks make you nervous, it doesn’t hurt to check your credit from time to time so that you know what your potential employer might see. Request a free credit report from any of the three major credit bureaus so that you can stay ahead of the game and keep your job-search stress at a minimum. 

Why employers check your credit score

At this point, you might be wondering why a potential employer would want to take a peek at your credit report in the first place. A candidate’s credit history could raise some red flags indicating possible problems that an employer might want to steer clear from. Here are some examples:

  • A history of late payments could send the message that you are forgetful or unorganized, which could be important if you are expected to do detailed administrative work or meet strict deadlines. 
  • Excessive credit card usage or credit card debt could indicate that you aren’t financially responsible. This is especially important if you are applying for a job where you will be handling money or given a company credit card. 
  • Any information on your credit report indicating that you are financially irresponsible might cause an employer to consider their other options. 

A nationwide survey by the National Association of Professional Background Screeners and HR.com found that 25% of companies ran credit checks on potential employees for some positions, while only 6% ran pre-employment credit checks on candidates for all positions. 

Unless you are applying for a job that involves a security clearance, being responsible for company money, collecting sensitive information from customers, or having access to private company data, it’s highly likely that you are in the clear as far as employment credit checks go. 

How does an employment credit check affect my credit score?

Now that you know that potential employers are taking a glance at your credit history, here’s the silver lining: The credit checks that employers conduct are considered a “soft inquiry.” This means that it does not negatively impact your credit score or show up on your credit report the way it might if you were to apply for a credit card. 

Furthermore, your credit report won’t show any other soft inquiries, which means that employers won’t be able to see if a different employer has recently checked your credit report. 

What are your legal rights 

Fortunately, if you have to undergo an employment credit check, there are some legalities that work in your favor including:

  • You must be notified by the employer before it conducts a credit check: Different states have different restrictions surrounding pre-employment credit checks, and some have laws banning them altogether.
  • The employer must warn you if they are denying you employment based solely or partly on the information found on your credit report. 
  • The employer must give you a reasonable amount of time to respond before taking action so that you can properly explain your situation or in case the information on the report is inaccurate.
  • After the credit check is done, the employer has 60 days to follow up by providing you with the name of the credit report agency and information on how to access a free copy of the report they used.

How to prepare for employment credit checks

Even if you have a bad credit score, staying on top of your credit report by checking it regularly is one way that you can prepare yourself for future credit checks to come. 

You have access to one free credit report per year which you can get from any of the three major credit bureaus by using the annual credit report website. 

Checking your credit score keeps you on the offense, but here are some ways you can maintain or achieve good credit:

  • Stay up to date on your bills.
  • Don’t overuse your credit cards.
  • Check your credit report regularly.

Source: pocketyourdollars.com