Credit Bureaus Archives - Hanover Mortgages

May 5, 2021

How long does it take to build good credit? – Lexington Law

The information provided on this website does not, and is not intended to, act as legal, financial or credit advice. See Lexington Law’s editorial disclosure for more information.

Building a good credit score takes time, when building your credit from scratch, you can typically expect to see a score within six months. If you’re working to rebuild your credit after financial setbacks that resulted in a drop in your credit score, repairing your credit comes down to ensuring you’re being financially responsible from here on out.

Establishing a good credit score doesn’t happen overnight, and sometimes it can feel impossible to recover from financial setbacks. There’s no solid timeline for building good credit, but it’s important to understand how your credit score is calculated so you know what actions you can take to get your credit in good standing. Read on to find out how long it takes to build good credit, as well as tips on maintaining and building your credit score.

How long does it take to get a credit score?

Building up your credit score starts with the basics—using credit. Opening a credit card or becoming an authorized user are two ways to start building your credit from the ground up. Many people think that you start with a credit score of zero and have to work your way up, but you’ll typically start with a score around 500 to 700, depending on the health of your credit history thus far.

As mentioned, it can take up to six months to build enough credit history to obtain a credit score. Credit scores range from 300 to 850, with a score over 670 being considered a good credit score.

While establishing a score can take up to six months, working your way up to an excellent credit score can take much longer. Your credit score will typically update every 30 to 45 days, and building good credit will take years of consistent and responsible credit use.

It can take up to 6 months of credit history to obtain a credit score.

How are credit scores calculated?

The credit score you receive is calculated based on your borrowing history. There are five main factors that determine your credit score. These factors include:

Payment history (35 percent)
Credit utilization (30 percent)
Length of credit history (15 percent)
Different types of credit (10 percent)
New credit (10 percent)

Since the length of time you’ve been building your credit plays a role in your credit score, building it up to an excellent score can take some patience.

How to increase your credit score now

If you’re new to credit and just beginning to build your credit history, applying for a credit card is a quick way to start building your credit score. Your information is reported to the credit bureaus every 30 days, so it’s an easy way to start building credit quickly.

Besides getting a credit card, make sure you’re making your payments on time every month, since your payment history is worth 35 percent of your credit score. Make at least the minimum payment on time each month and your healthy payment history will be reported to the credit bureaus monthly. This healthy history can help you increase your credit score over time.

Lastly, reducing your available amount of credit can play a significant role in increasing your credit score. If you’re able, increasing your credit limit or paying down your debts in lump sums can help free up some of your available credit. Remember, credit utilization accounts for 30 percent of your credit score—keeping your credit utilization ratio as low as possible is key to improving your credit score.

What to avoid when building your credit score

Unfortunately, when it comes to credit, one financial mishap could end up costing you—sometimes taking years to recover from. To maintain an upward trend of positive credit history, you’ll want to avoid these common mistakes:

Missing payments

Since your payment history accounts for 35 percent of your credit score, missing even one payment can be detrimental, as it can stay on your credit report for up to seven years. Late payments are usually reported 30 days after their due date.

Applying for multiple credit cards or loans

When applying for a credit card or loan, creditors run a hard inquiry to assess credit history and determine the trustworthiness of a borrower. One hard inquiry doesn’t have much of an impact on your credit score and may only drop it by five points. However, having multiple hard inquiries in a short amount of time can hurt your credit score and make you seem like a risky borrower to lenders.

Defaulting on a loan

Defaulting on a loan occurs when you’ve failed to make payments for a consecutive period of time. Your credit score drops every 30 days that you’ve missed a payment, and failure to pay can have an extreme impact on your credit score. If too much time passes, lenders can contact the credit bureaus, resulting in a credit score drop.

If you continue to fail to make a payment on a loan your account could be sent to collections by the loan issuers, where legal action can take place. Depending on the type of loan you have, lenders may try to garnish your wages or take your assets.

Using too much available credit

Your credit utilization accounts for 30 percent of your credit score, making it one of the most important factors contributing to your score. If you use too much of your available credit, your credit score can take a serious hit. For example, if your credit limit is $4,000 and your current balance is $3,000, that puts your credit utilization at 75 percent, which is significantly higher than recommended.

Additional tips for building and maintaining a good credit score

Now that you have a solid understanding of what can hurt your credit score, let’s take a look at how you can increase and improve your credit score.

Open a secured credit card account

Secured credit cards are best for individuals who have no credit or have a low credit score, and they work to help borrowers build or repair their credit. Unlike traditional credit cards, secured cards require the borrower to put down a cash deposit, which can be used to settle any unpaid debt should the issue arise.

In most cases, the amount you put down will be equal to your available credit amount. For example, to get a credit limit of $1,000, you’ll typically need a deposit of $1,000. Credit limits for these cards are traditionally lower than unsecured credit cards and have higher interest rates.

If you’re working on building your credit from the ground up or repairing your bad credit, a secured credit card can be a good option to help build your creditworthiness. Once you’ve built up your credit and have remained a responsible borrower, you can move your way up to an unsecured credit card.

Become an authorized user

If you’re just starting to build your credit, you may not be approved for a traditional credit card just yet. In this case, becoming an authorized user on someone else’s credit card is an easy way to start building your credit history.

As an authorized user, you’ll have access to a credit card and can use it as such, but the primary holder of the account will be legally responsible for the debt. This option is best for those building their credit history from scratch, but it shouldn’t be used as a long-term option.

Apply for a credit builder loan

A credit builder loan is an option for those with no or low credit history looking for a low-risk way to build their credit. Unlike a personal loan, a credit builder loan essentially works backwards—the lender puts your approved loan amount into a savings account, you repay the loan over time and once the loan is paid off, the lender releases the funds to you. This allows you to build a solid payment history, thus increasing your credit score over time.

Keep balances low

A credit utilization ration below 30% is recommended to help keep your credit score in good standing.

Experts suggest that your credit utilization ratio should always be below 30 percent to maintain a positive credit score. If you can, consider paying more than the minimum payment each month to ensure your credit utilization ratio stays as low as possible. So long as you’re paying off high balances before the next reporting period, your credit score should not be negatively impacted.

Pay credit card bills on time

Since payment history is the leading factor in your credit score, it’s important to be on top of your monthly payments. If needed, set up an automatic payment system so you never have to worry about making your payments on time each month.

Don’t close unused credit cards

If you’re not using a credit card, keeping the account open won’t hurt your credit score, but closing the account can. The length of your credit history impacts your credit score, so keeping any accounts open can help build your credit history and increase your total available credit, boosting your score over time.

Monitor your credit report

If you’ve been a responsible borrower and see sudden drops in your credit score, check your credit report and look for any discrepancies. If there are errors on your report, dispute the errors immediately to get them removed. The longer those errors stay on your report, the more damage they can do to your credit score.

Building credit takes time, and getting your credit score in good standing takes years of consistent and responsible credit management. Make sure you understand the ins and outs of credit score ranges, and follow the tips in this article to help build and maintain good credit.

Reviewed by Miriam Allred, an Associate Attorney at Lexington Law Firm. Written by Lexington Law Firm.

Miriam Allred was born and raised in Southern California. After high school she joined the US Navy. She then went on to get an Economics degree from Chapman University where she got to enjoy an internship at the United States Supreme Court. Miriam then went to Brigham Young University where she received her Juris Doctor. Prior to joining Lexington Law, Miriam worked as a civil rights attorney dealing with discrimination and sexual harassment. In this role she helped write and create policies and investigate sexual harassment and discrimination complaints. Miriam also has experience in family law. Miriam is licensed to practice in Utah.

Note: Articles have only been reviewed by the indicated attorney, not written by them. The information provided on this website does not, and is not intended to, act as legal, financial or credit advice; instead, it is for general informational purposes only. Use of, and access to, this website or any of the links or resources contained within the site do not create an attorney-client or fiduciary relationship between the reader, user, or browser and website owner, authors, reviewers, contributors, contributing firms, or their respective agents or employers.

Source: lexingtonlaw.com

May 5, 2021

Understanding credit card security codes – Lexington Law

The information provided on this website does not, and is not intended to, act as legal, financial or credit advice. See Lexington Law’s editorial disclosure for more information.

Credit card security codes are an important security measure to prevent fraud and identity theft. They add an additional layer of safety when making purchases and help ensure the buyer is, in fact, the cardholder.

These security codes—often called CVV codes, short for “card verification value”—are three- or four-digit codes located directly on your credit card. They’re typically, but not always, asked for when making card-not-present transactions, such as those made online and over the phone. Here, we detail where to find them, how they work and why they’re important for consumer protection.

Where to Find Your CVV Code

The location of your CVV code depends on the credit card issuer:

Visa, Mastercard and Discover: The code will be three numbers on the back of the card to the right of the “authorized signature.”
American Express: The code will be four numbers on the front of the card above and to the right of the card number.

Where to locate your card's security code.

How to Find Your CVV Code Without the Card

Credit card security codes were designed to ensure that the person making a purchase actually has the card in their possession. Because of this, it’s impossible to look up your CVV code without having the physical card. This is why it’s important to have the physical card on hand if you need to make a purchase that requires a CVV code.

If an identity thief obtains your credit card number—for example, via shoulder surfing—may try to call the bank and pretend to be you in order to get the CVV code. However, banks typically don’t give out this information. Each financial institution has their own policies, but if you can’t read or access your CVV code, they will usually issue you a new card.

While most retailers require a CVV code when making card-not-present transactions, many don’t. In these instances, crooks would still be able to use your card.

How Are CVV Codes Generated?

According to IBM, CVV codes are generated using an algorithm. The algorithm requires the following information:

Primary account number (PAN)
Four-digit expiration date
Three-digit service code
A pair of cryptographically processed keys

Other Names for CVV Codes

Depending on the credit card company and when your card was issued, your security code may go by a different name. Even though there are many different abbreviations, the basic concept remains the same. Below are all the abbreviations and meanings for credit card security codes:

CID (Discover and American Express): Card Identification Number
CSC (American Express): Card Security Code
CVC (Mastercard): Card Verification Code
CVC2 (Visa): Card Validation Code 2
CVD (Discover): Card Verification Data
CVV (All): Card Verification Value
CVV2 (Visa): Card Verification Value 2
SPC (Uncommon): Signature Panel Code

Credit Card Security Code Precautions

While CVVs offer another layer of security to help protect users, there are still some things to be aware of when making card-not-present transactions.

Sign the back of your credit card as soon as you receive it.
Keep your CVV number secure. Never give it out unless absolutely necessary—and if you fully trust the person.
Review each billing statement to ensure there are no transactions you don’t recognize or didn’t authorize. If there are, contact your financial institution immediately and consider freezing your credit.

Protecting your identity requires constant vigilance—but emerging technology may have the potential to mitigate some of the risk of credit card fraud.

Shifting CVVs: The Future of Credit Card Safety?

Since chip-enabled cards replaced magnetic stripes, in-person credit card fraud has taken a big dip. Crooks are turning toward online and card-not-present methods of fraud. CVV codes are good at combating this type of fraud—but shifting CVVs, also referred to as dynamic CVVs, may be even better.

The technology works by displaying a temporary CVV code on a small battery-powered screen on the back of the card. The code regularly changes after a set interval of time. This helps thwart fraud because by the time a hacker has illegally obtained a shifting CVV code and tried to make a purchase, it will likely have changed.

Despite the security benefits, shifting CVVs haven’t been widely implemented due to high cost, and it remains to be seen if the technology and process can scale. Financial institutions have many measures in place, such as fraud alert, to notify you of potentially suspicious activity.

If you suspect you’ve been a victim of identity theft, call your credit card company, change your passwords and notify any credit bureaus and law enforcement agencies. By regularly checking your credit card statements, being careful about who you give your information to and being vigilant when making purchases, you’ll help do your part in keeping your identity secure.

Reviewed by John Heath, Directing Attorney of Lexington Law Firm. Written by Lexington Law.

Born and raised in Salt Lake City, John Heath earned his BA from the University of Utah and his Juris Doctor from Ohio Northern University. John has been the Directing Attorney of Lexington Law Firm since 2004. The firm focuses primarily on consumer credit report repair, but also practices family law, criminal law, general consumer litigation and collection defense on behalf of consumer debtors. John is admitted to practice law in Utah, Colorado, Washington D. C., Georgia, Texas and New York.

Source: lexingtonlaw.com

May 5, 2021

How you get bad credit

No one likes having a low credit score or bad credit and in many cases you may not even know why you have bad credit. While it is more common for young adults to find themselves damaging their credit without realizing it, it can happen to anyone at any age. If you want to avoid having bad credit, it’s important to know what causes your credit score to go down and how you get bad credit.

First of all, it’s also important to know the difference between bad credit and no credit. If you’ve never had a credit card, car loan, mortgage or any other type of loan or any credit history, then you’ll likely be deemed as having no credit and could be denied by lenders as being high risk, simply because they have no data to show whether you’re a reliable borrower. This is not the same thing as having bad credit which looks as bad or worse than having no credit. Bad credit is caused by a bad credit history, large amount of debt, or other issues on your credit report.

Top 4 Reasons You Have Bad Credit

To help you better understand why your credit is bad, here are 4 of the most common reasons that you may have damaged your credit:

Too Many Credit Checks: Likely the most common reason that your credit score is lower than you’d like is due to frequent credit checks. If your credit is checked more than once per year, then you will likely lose points on your credit score. This can be caused by applying for credit cards too often, checking your credit score frequently, or even from checking mortgage rates from multiple lenders in an attempt to get the best deal on your new home. Credit checks are very common so it is imperative that you keep track of how often you have having your credit checked to avoid this common mistake.

Large Amount of Debt: Another reason that many people have bad credit without realizing it, it due to a large amount of debt. You may be paying your credit card payments on time, have little or no negative instances on your credit report and may have even been very careful to not check your credit too often but may still have bad credit. This is often times caused by a poor debt to credit ratio which is when you use all of your available credit for your debts. In other words, if you have a credit card with a $3,000 limit and you continually have it maxed out or more than 50% (below 30% is optimal) of your available credit is used, then you will likely damage your credit. You may also be declined for loans if you have a large amount of debt compared to your income which is very common with someone who has a mortgage, car loan, and other forms of debt which consumes a large percentage of their income.

Past Delinquencies: If you’ve had trouble with debt in the past, such as a foreclosure, repossession, bankruptcy, neglected loan or other similar derogatory mark on your credit in the past, it could be keeping your credit score down and causing you to have bad credit. Many of these types of delinquencies can stay on your credit report for 7 to 10 years so, while you may have forgotten all about it, it may still be showing on your report and handicapping your ability to rebuild your credit.

Late Payments: It can be surprising how many people actually do not realize how their payment history can severely impact their credit. This is likely because many lenders will provide a due date for monthly payments but will provide some type of grace-period before late fees are assessed. This can often-times cause complacency, leading to occasional late payments by borrowers simply because they think they have a couple extra days after the due date to get their payment in. Well, unfortunately, many lenders will report late payments to the credit bureaus which will result in a negative mark on your credit report and a lower credit score. This is very common with credit cards and mortgage payments and any late payment can severely damage your credit and could even increase your interest rate.

How You Can Repair Your Bad Credit

While bad credit can be a complete nightmare and it may seem impossible to improve your credit again, there’s still hope. It will take time but you can certainly repair your credit and get your credit back on track. First of all, going forward, you’ll want to make sure that you avoid the common mistakes listed above but you can also work on adapting some best practices to improve your credit score. Make sure that you make your payments on time, keep a low debt-to-credit ratio – only using about 30% of your available credit on your credit cards – and make sure that you keep using your cards at least a few times a year. Rather than cancelling old cards that you don’t use anymore, it is also beneficial for you to hold on to old cards, using them occasionally, as older cards will help your credit more than new cards which no history.

Lastly, you should check your credit report for errors or inconsistencies which could allow you to dispute negative items on your report which would help to repair your bad credit. While this can be done manually, it is usually recommended that you hire a credit repair company who can go to bat for you against the credit bureaus which will give you much better chance of finding errors and getting negative items removed from your credit report. Most people see an increase in their credit score in less than 45 days when using a credit repair service.

Source: creditabsolute.com

May 3, 2021

Will Becoming an Authorized User Help You Build Credit?

Authorized users are secondary account holders on another’s credit account. It usually benefits those that have little credit history and are looking to build it.

Being an authorized user means the account is yours to use, but you won’t be listed as the primary account holder. And therefore, you’re not responsible for bill payments. However, you get all credit benefits of the account, which, if done right, can help boost your credit score and credit in general.

Let’s delve into the world of authorized users to learn how and when it’s done.

How Does an Authorized User Work?

It denotes having someone share their account with you. So, you can get the credit benefits of the account.

Why would you need someone else’s credit benefits? The reason people do this is when they need their credit score boosted, or raised, in a way they’re unable to do on their own.

For example, Danny needs a high credit score within the month to be approved for a mortgage loan. Danny has zero credit cards open so his credit score is very low, in the 500’s.

Here’s where Danny would be added onto his brother Leo’s credit. Leo, who has a Capital One credit card open for the past 12 years and pays it on time every month, is going to ask Capital One to add Danny as an authorized user to this card. Within the next few days or couple of weeks at most, Danny will see the Capital One card on his own report, with himself reported as an authorized user of the account.

Danny will notice his score shoot up. How? Because Leo’s card has been open for 12 years and is in good status, which are excellent factors for a credit score. Because Danny was added as an AU to this card, his credit report now boasts a 12 year old account. FICO sees that and calculates it into his score, bringing Danny’s score up.

Danny is now eligible to apply for a loan because his score is high enough.

Those are the major benefits of being an authorized user.

How Is It Done?

Whoever is adding you to their account, be it a relative, friend, or acquaintance, will call up his/her bank with your personal information on hand. This includes your legal name, home address, date of birth, social security number. And they’ll ask the bank to add your name to his/her credit card.

Once the request has been processed and the info is reported to the credit bureaus, which can take up to 30 days, the credit card account will show up on your credit report. You’ll be labeled an authorized user of the account.

The responsibility of the account is not yours, only the primary account holder’s. Moreover, the actual credit card will be delivered to the primary account holder’s house, and not to yours. Your relationship to the account is really just that your name is being labeled on the account as an authorized user. That’s enough for you to get the account details onto your own report.

Your credit history will automatically update according to the account. If the account’s been open for 10 years, your credit history will now include a 10 year old account. Even if the account has been added to your report just a few days earlier, you still get the full credit history of the account.

To get maximum benefit, the card you’re being added to should be open for at least 2 years and have absolutely no delinquency or late payment marks. Otherwise, that would just pull your credit down.

Why Is This Really Done?

Authorized users were created to offer a parent, spouse or child a chance to start building credit. By adding a parent, spouse or child to your credit card, you give them a head start on their credit. That’s because they get your credit card reported to their credit report, adding that credit history to be considered in their score.

When Is the Appropriate TIme to Add a Child to a Credit Account?

Some banks have a minimum age from when you can add your child to your account.

	Minimum Age
Amex	13 years old
Barclay	13 years old
Bank of America	No minimum age
Chase	No minimum age
Citi	No minimum age
Capital One	No minimum age
Discover	15 years old
US Bank	16 years old

Authorized User Services

When this idea was popular, way back then, it was making waves for consumers in the credit world. People were adding authorized users not just for a spouse, parent or child, but also for acquaintances who needed their scores boosted. It got so popular that some companies even started making money. They would charge a fee to officially match up individuals to account holders of good status and credit, and have them added to the third party’s card. These companies’ clients would see instant score boosts of 100 plus points.

What’s about Authorized Users Now?

FICO were feeling that any consumer was able to boost his or her credit, regardless of their creditworthiness. FICO decided to therefore stop including authorized user accounts as part of a borrower’s credit file. The change was implemented as of the FICO 8 model.

But, the Equal Lending Act (12 CFR § 1002.6 (b) (6)) states: “In evaluating the creditworthiness of an applicant, a creditor shall consider the history, when available of accounts designated as accounts that the applicant and the applicant’s spouse are permitted to use or for which both are contractually liable.”

What that means, scoring models must include authorized user accounts as part of the account history if they’re the primary account holder’s spouse.

To this, FICO claims they can differentiate a legitimate authorized user account from a random party, and are allowed to decide per account.

Still, that cuts down on borrowers’ chances to boost their credit through authorized use.

When Is It Still In Use?

Now that authorized users were no longer an option for many, it slowed down, almost stopping completely. The only time it’s still being used is when applying for mortgages. Mortgage loans use FICO scoring models older than FICO 8. That means authorized user accounts all still get included, just like the older models always were. So, if you’re applying for a mortgage loan and you need a score boost, you may be able to be on someone’s credit and potentially boost your score, saving yourself lots of dollars in interest once the mortgage goes through.

Does Every Bank Allow Authorized Users?

As exciting as it’s made to be, for home buyers going for mortgages, even so, not every bank accepts authorized user accounts as if the account belongs to you. And they don’t count authorized user accounts as yours. Therefore, they often don’t report it to the credit bureaus. In addition, not all banks will report the complete account history. They will report the account history as of when it’s been added to your report, and not the back dated history.

Back to Danny, knowing this, he would have to make sure that the credit card Leo is adding him to, is issued by a bank that reports authorized user accounts to the credit bureaus, with the accounts complete history. Otherwise, if it was a bank that wouldn’t count authorized user accounts into the borrowers report, Danny would get nothing out of being added to the card. The bank would not report it to the credit bureaus, FICO would never see such an account on his report, and they would not include it when calculating his credit score.

It’s therefore important to know which banks report authorized user accounts to the credit bureaus. Here’s a list of those that do:

Card Issuers Who Report to Credit Bureaus

Credit card provider	Reporting to credit bureaus
American Express	Yes, if the authorized user is at least 18
Chase	Yes
Wells Fargo	Yes, if the authorized user is at least 18
Bank of America	Yes
Discover	Yes, if the authorized user is at least 15
Capital One	Yes
Citi	Yes
Barclaycard US	Yes, if the authorized user is at least 16
US Bank	Yes, if the authorized user is at least 16
TD Bank	Yes

Source: https://www.finder.com/which-credit-card-companies-report-authorized-users

Source: credit.com

May 3, 2021

Repairing Your Credit After Bankruptcy

In 2013 there were over a million bankruptcies filed in the US. So, while the median credit score is over 700, there are a lot of people who have been forced into filing bankruptcy, severely damaging their credit score.

There’s no sugar-coating the situation and it’s understandable to be concerned. It is better that you be concerned about the situation that you’ve found yourself in, rather than being apathetic.

Repairing credit after bankruptcy Many people who have gone through a bankruptcy have chosen to accept their fate and tend to avoid credit situations or even checking their credit score. However, there are ways to repair your credit score after a bankruptcy, but you must be proactive about the situation if you want to get your credit score back on track – and it won’t take as long as you might think if you are proactive in taking control of your credit.

Where to Start After Filing for Bankruptcy

While many consumers, after filing bankruptcy, avoid new credit at all costs due to the fear of repeating past mistakes, it’s crucial to your credit restoration success that you begin rebuilding your credit by opening a secured credit card, retail or gas card, or purchasing a new vehicle – if your previous vehicle was relinquished during the bankruptcy.

Once you’ve acquired some form of credit (e.g. secured credit card, retail/gas card, car loan, ect..), make sure that you make your payments on time every month, possibly by setting up online bill pay through your checking account, and make sure that you use your new credit card every month while also paying it off each time. Many people find it helpful to use their new credit card on a typical, small monthly bill like a phone or electric bill and pay off the credit card shortly after.

Should you have filed your vehicle or car loan into your bankruptcy, you will likely be able to apply for a new car loan fairly easily, albeit at a high interest rate. You should definitely ensure that if you purchase a new vehicle that the monthly payments will not cause you financial burden and that the creditor will, in fact, report the loan to all 3 credit bureaus. Making a monthly payment on a car loan will help to rebuild your credit after a bankruptcy and will show that you are being financially responsible.

Check Your Credit Report for Errors

While rebuilding your credit after a bankruptcy can be slow and tedious and requires a ridiculous amount of patience and dedication, you may also be able to speed up your credit repair by disputing negative items on your credit report. You can request a copy of your credit report once each year from each credit bureau and reviewing your credit report following a bankruptcy can be a vital part of your credit recovery following a bankruptcy.

Once you’ve received a copy of your credit report, review it for discrepancies or errors. If you find errors in your credit report, you can dispute the negative listings and potentially have them removed from your credit report. If, for instance, your credit report is showing that you were late on a credit card payment in the past but you’re able to prove that you weren’t, you may be able to dispute that record and have it removed from your credit report, thereby helping to improve your credit score much quicker. In some cases even a bankruptcy can be removed from your report if errors in the details are discovered and the item is disputed. For more information or assistance with credit report disputes, contact Credit Absolute today!

Source: creditabsolute.com

May 2, 2021

How does a discharge of bankruptcy affect my credit? – Lexington Law

The information provided on this website does not, and is not intended to, act as legal, financial or credit advice. See Lexington Law’s editorial disclosure for more information.

A bankruptcy discharge relieves a borrower from their legal obligation to pay certain debts. Not all types of debt can be discharged, but those that can may not be pursued by creditors—via phone, letter or other communication. This is because a bankruptcy discharge relieves the borrower of personal liability to pay certain debts.

A bankruptcy discharge relieves the borrower from their legal obligation to pay certain debts.

How Does a Debt Discharge Work?

The goal of a bankruptcy discharge is debt relief. However, when and how your debts will be relieved largely depends on which type of bankruptcy you file and the amount of outstanding debt.

For Chapter 7 bankruptcy, your nonexempt assets—like investments, valuables and property that is not your primary residence—may be divided among your creditors. Any remaining debts may be discharged. For Chapter 13 bankruptcy, you propose and prosecute a chapter 13 plan to repay certain debts. If approved by the bankruptcy court any leftover debt that is not repaid at the end of your plan may be discharged.

Debts Subject to Discharge

When considering bankruptcy, consider the type of debt from which you’re seeking relief. If credit card debt or medical bills are overwhelming, bankruptcy discharge may help. Some common discharged debts include:

Credit card debt
Personal loans
Past rent payments (if vacating the rental property)
Utility payments
Some business debt
Attorney fees
Medical bills
Some unsecured debt
Certain older tax debts

Debts Not Subject to Discharge

Contrary to popular belief, bankruptcy is not always the best option for relieving debt. This is because there are many forms of debt—19 forms, according to the United States Courts—that cannot be discharged. Below are 10 common examples:

Child support
Alimony
Student loans
Car loans (If you are retaining the car)
Mortgages (If you are retaining the real property)
Condo fees
DUI debts
Criminal fines
Court costs
Retirement plan loans

When Does a Bankruptcy Discharge Occur?

The timeline for a bankruptcy discharge varies greatly depending on the bankruptcy chapter. Chapter 7 bankruptcy discharge occurs relatively quickly—60 to 90 days after the scheduled meeting of creditors. The timeline for Chapter 13 bankruptcy is much lengthier, as discharge only occurs at the end of a successful repayment plan. This typically takes three to five years.

What Happens After a Bankruptcy Discharge?

After your bankruptcy discharge, it’s important to be aware of your rights and options. This way, you can start your path towards rebuilding your finances.

Notify Cosigners and Joint Account Holders

Even though you’re no longer personally liable for repaying discharged debts, any cosigners or joint account holders may be. They should be listed in your bankruptcy schedules as “Co-Debtors” and notified by the Bankruptcy Noticing Center when creditors are notified of your bankruptcy filing.

Save a Copy of the Discharge Order

Once your discharge goes through, you’ll receive a copy of your discharge papers. Be sure to keep this copy safe, as court clerks may charge a fee to obtain future copies. Additionally, your discharge papers (coupled with copies of your bankruptcy schedules that list your creditors) act as proof of the entry of a discharge and protect you in case a creditor attempts collection in the future.

There were over 750,000 non-business bankruptcy filings in 2019 alone.

How Does a Bankruptcy Discharge Affect Credit?

Generally, a bankruptcy discharge itself does not affect your credit score as much as the bankruptcy itself does. A bankruptcy discharge does not reset your credit history, nor does it affect the length of time in which a bankruptcy remains on your credit report. After a bankruptcy, no matter how high your credit score was, you’ll likely see a dip.

If you default on just a few accounts with low balances—and have other accounts still in good standing—it’s likely that your credit score won’t be as damaged as it would have been if you had defaulted on many high-balance accounts.

It takes time and effort to rebuild your credit score after bankruptcy, but the good news is that it can be done. Consider the following best practices:

Continue to make on-time payments on your post-bankruptcy accounts.
Ensure these payments are reported to the three major credit bureaus.
Consider applying for new credit if you think you can manage the payments.
Stay at your job. Borrowers with steady employment are seen as less risky.
Keep credit utilization low. Aim for 30 percent utilization to avoid a credit score dip.

It’s also important to continue monitoring your credit report after a bankruptcy discharge. Discharged debts should show up as “discharged” with a balance of zero. Any debts that are mistakenly reported “late” or “active” may wrongfully harm your credit score. You’ll also want to ensure that Chapter 7 bankruptcy is removed from your report after 10 years and Chapter 13 after seven years. If you spot any of these errors, dispute them as soon as possible. Lexington Law can help do the legwork to get questionable items removed from your credit report. Contact our team to learn more about credit repair.

Reviewed by Cynthia Thaxton, Lexington Law Firm Attorney. Written by Lexington Law.

Cynthia Thaxton has been with Lexington Law Firm since 2014. She attended The College of William and Mary in Williamsburg, Virginia where she graduated summa cum laude with a degree in International Relations and a minor in Arabic. Cynthia then attended law school at George Mason University School of Law, where she served as Senior Articles Editor of the George Mason Law Review and graduated cum laude. Cynthia is licensed to practice law in Utah and North Carolina.

Reviewed by Vince R. Mayr, an Associate Attorney at Lexington Law Firm. Written by Lexington Law.

Vince has considerable expertise in the field of bankruptcy law. He has represented clients in more than 3,000 bankruptcy matters under chapters 7, 11, 12, and 13 of the U.S. Bankruptcy Code. Vince earned his Bachelor of Science Degree in Government from the University of Maryland. His Masters of Public Administration degree was earned from Golden Gate University School of Public Administration. His Juris Doctor was earned at Golden Gate University School of Law, San Francisco, California. Vince is licensed to practice law in Arizona, Nevada, and Colorado. He is located in the Phoenix office.

Source: lexingtonlaw.com

May 2, 2021

Understanding credit card security codes

The information provided on this website does not, and is not intended to, act as legal, financial or credit advice. See Lexington Law’s editorial disclosure for more information.

Where to Find Your CVV Code

The location of your CVV code depends on the credit card issuer:

Visa, Mastercard and Discover: The code will be three numbers on the back of the card to the right of the “authorized signature.”
American Express: The code will be four numbers on the front of the card above and to the right of the card number.

How to Find Your CVV Code Without the Card

While most retailers require a CVV code when making card-not-present transactions, many don’t. In these instances, crooks would still be able to use your card.

How Are CVV Codes Generated?

According to IBM, CVV codes are generated using an algorithm. The algorithm requires the following information:

Primary account number (PAN)
Four-digit expiration date
Three-digit service code
A pair of cryptographically processed keys

Other Names for CVV Codes

CID (Discover and American Express): Card Identification Number
CSC (American Express): Card Security Code
CVC (Mastercard): Card Verification Code
CVC2 (Visa): Card Validation Code 2
CVD (Discover): Card Verification Data
CVV (All): Card Verification Value
CVV2 (Visa): Card Verification Value 2
SPC (Uncommon): Signature Panel Code

Credit Card Security Code Precautions

While CVVs offer another layer of security to help protect users, there are still some things to be aware of when making card-not-present transactions.

Sign the back of your credit card as soon as you receive it.
Keep your CVV number secure. Never give it out unless absolutely necessary—and if you fully trust the person.
Review each billing statement to ensure there are no transactions you don’t recognize or didn’t authorize. If there are, contact your financial institution immediately and consider freezing your credit.

Protecting your identity requires constant vigilance—but emerging technology may have the potential to mitigate some of the risk of credit card fraud.

Shifting CVVs: The Future of Credit Card Safety?

Reviewed by John Heath, Directing Attorney of Lexington Law Firm. Written by Lexington Law.

Source: lexingtonlaw.com

May 2, 2021

How To Build Business Credit Fast The Right Way

As a company owner, several items are always struggling to get your attention. At times, a task doesn’t come to the forefront until you absolutely have to take action. Business credit is not one of those things you want to wait to deal with until the last minute.

Your business may require access to credit to grow or you may want to take out loans to build inventory or purchase office space. Other companies may need funds to buy software to help their businesses run more efficiently and make more profit.

To build business credit, you need to make sure you separate your personal and business expenses – start with Novo, and earn interest on your money

Without business credit, it may be more challenging to get these loans or you may have to pay more for them. Here’s what you should know about business credit and how to begin building it to help your company get the financing it may need down the road.

What’s Ahead:

What is business credit?

Business credit is like personal credit in some ways but very different in others. Like personal credit, business credit is one way lenders assess whether they should lend money. For many firms, it’s important to keep their business credit healthy so they can borrow money to fund future growth.

Where business credit is different is how it is tracked and how the scores are calculated. Unlike personal credit, different companies offer different versions of business credit scores. They don’t all follow the same general methodologies.

To make matters more complicated, your business credit isn’t always reported. In some cases, it may even be mixed with your personal credit depending on how you applied for the credit. That’s why it is crucial to understand how business credit works and how to start building it.

How to begin building business credit

In the beginning, the best way to start building business credit takes some effort on your part. That effort will pay off as your business credit history grows and you gain borrowing opportunities you wouldn’t otherwise have access to.

You’ll need to establish your company before you can begin building credit. Some common sense things you should do include getting a business bank account and a business phone number.

Your firm can technically be any structure. It helps to have an official company, such as a corporation, partnership, or LLC, rather than a sole proprietorship. While these items won’t impact your business credit score, it helps verify your firm is legitimate.

Get an employer identification number for your business

As a company owner that wants to build business credit, there is one number you must get. That’s an employer identification number (EIN). I signed up for an EIN when I started my company and it was a super simple process.

An EIN identifies your business when you apply for business credit. You also use it to file tax returns and fill out W-9s. While some companies may allow you to apply for credit using your Social Security Number (SSN), that won’t help you build business credit.

Always apply for business credit using your company’s name and your company’s EIN. Doing so gives you the best shot at building your business credit.

Establish your company with Dun & Bradstreet

Other business credit bureaus usually start your credit file when creditors report business credit information. You can begin the process yourself with Dun & Bradstreet. You can get a D-U-N-S number, their way of tracking your business credit, here.

Even if you don’t get a D-U-N-S number, they will eventually start a file on your behalf if data is reported to them. I know this because they’re tracking my company and I never applied for a D-U-N-S number. Getting a number manually may speed up the process, though.

Getting a business line of credit

Once you’ve established your business and have received a D-U-N-S number, start applying for business credit. The only way to build credit is to have credit information reported to the business credit bureaus.

In the beginning, you may have to guarantee your business debt personally. That means if your firm can’t repay the debt, you will have to do so. Creditors do this to make sure they get paid, especially for new companies without a credit track record of their own.

Even if you do this, make sure you apply for the credit in your business’s name. Otherwise, it may show up on your personal credit report or not at all.

One of the easiest ways to build business credit is to take out a small business loan or line of credit from a company that reports to the credit bureaus. BlueVine is one of those companies. You can take out a Line of Credit (of up to $250,000) through BlueVine that you can draw from when you need cash right away. With interest rates as low as 4.8%, this Line of Credit is a good low-cost way to get cash when you need it, all the while building your credit.

Pay early and ideally in full

Once you have a business credit line open, you must use it responsibly. Some business credit scoring models only consider whether you made your payment on time or not.

However, one model focuses on how early you make your payment. The faster you pay your reported bills, the higher your score will be. For this reason, it makes sense to pay your company bills that get reported to the credit agencies as early as possible. This helps you start earning a higher score for this business credit score model.

When paying your bills, you also want to keep your credit utilization low to build a great score. Ideally, you allow your balance to hit your account’s billing statement. Make sure the balance doesn’t max out your credit limit, though.

If it does, pay the balance down to a more reasonable percentage of your limit before your statement is generated. It is important to still show a balance on your statements so the reporting companies can see you’re using your credit lines.

Once the statement generates, pay the remaining balance off in full each month to avoid interest or other charges. This also helps you keep your utilization lower than if you allow your balance to grow over time.

Accounts to help you start building your business credit

You’re probably wondering what types of accounts can help you build your business credit. Here are a couple of easy options to get started with.

Make sure you can pay your business bills properly with a business bank account

When you’re a company owner, it’s often best to keep your personal and firm’s finances separate. For that reason, having a business bank account can make it much easier to pay your company’s bills.

It can also help business credit reporting agencies feel like you’re a more established company than one without a business banking account. Here are a couple of bank account options for businesses that may fit your needs.

Bank Novo

Bank Novo is an online small business banking solution. It tends to work best for those that don’t need to visit a bank branch for in-person transactions, such as depositing large amounts of cash regularly. The best part is you can apply for an account in minutes, which is much faster than what I experienced when opening a business bank account at a brick and mortar bank.

Bank Novo makes it easy to manage your company’s finances because it connects with several apps or software programs your business may already use. These currently include Stripe, Zapier, Quickbooks, TransferWise, Xero, and Slack. You can even deposit checks with their app by taking photos rather than mailing them in.

Learn more about Bank Novo or read our full review.

Introducing Chase Business Complete Banking^SM

If your company needs a bank account with physical branch locations, you may want to consider the Chase Business Complete BankingSM account. You can make business payments with Chase online bill pay or your Chase business debit card. You can send wire transfers, as well.

The account offers 100 transactions per month without fees and gives you unlimited electronic deposits. You can deposit up to $5,000 in cash per statement cycle without extra fees. There is a $15 monthly fee and it can be waived.

Learn more about Introducing Chase Business Complete BankingSM or read our full review.

Apply for a small-business credit card

A credit card can be a smart way to begin building your business credit. Make sure the cards you choose report your activity to the business credit scoring company you’re focusing on before applying. Here’s one you might want to consider.

American Express® Blue Business Cash Card

The American Express® Blue Business Cash Card is a no annual fee business credit card. It offers a 0% introductory APR on purchases for the first 12 months. You can also get up to $100 in statement credits for the first $100 spent at each Dell Technologies, DocuSign, and FedEx within the first three months of card membership for a total of up to $300.

You’ll earn 2% cash back on up to $50,000 in eligible purchases each calendar year. After that, you’ll earn 1% cash back on purchases for the rest of the year. You can apply today and get a decision in as fast as 30 seconds.

There are no fees for extra cards for your employees. You can even set individual spending limits, alerts, and get summary reports for your employee cards. The best part is, employee cards earn cash back, too.

Credit accounts with vendors

Vendors often offer credit terms to their customers as a way to ease the purchasing process. The types of vendors will depend on your industry. Common examples of companies that may provide credit terms could be parts suppliers, office supply companies, or even material suppliers.

Make sure to ask the vendors if they report your payment history to the business credit scoring companies before you bother setting up an account. If they don’t, there isn’t much point in opening a credit account unless you were going to do so anyway.

Summary

While business credit isn’t as uniform as personal credit, it isn’t difficult to get started. Establish your company properly, get an EIN, and get a business credit card or supplier credit line to start building business credit.

Make your payments on-time or early, if possible, and focus on practicing good credit health, such as keeping a low credit utilization ratio. Over time, your business credit will build. Then, you’ll have an established business credit history to help you when you need to borrow money to grow your company.

Source: moneyunder30.com

May 1, 2021

Defaulting on Student Loans: What You Should Know

“Student loan default” might be about the scariest combination of words possible. More young people than ever are starting their careers with large amounts of student loan debt, and for some, figuring out how to make the required monthly payments can be a struggle.

Student loan default is basically just a term for when you completely stop paying your student loans. You get a bill, hide it under the mattress, and go back to binging true crime TV—and that pattern repeats for several months until your student loan provider turns your debt over to a collection agency.

To get more technical, defaulting on federal student loans is a process that takes place over a period of non-payment . When you first miss a payment, the loans are delinquent but not yet in default. At 90 days past due, your lender can report your missed payments to credit bureaus. And when you reach 270 days past due, your student loans are officially in default.

get your student loans out of default.

First, stop avoiding those collection calls. If your student loan provider or a collection agency is calling, your best bet is to meet your lender or the agency head-on and take charge of the situation. The lender or the collection agency will be able to talk through the repayment options available to you based on your personal financial situation. They want you to pay, which means that they might be able to help find a payment plan that works for you.

The lender may be able to offer a variety of options tailored to your individual circumstances. Some of these options might include satisfying the debt by paying a discounted lump sum, setting up a monthly payment plan based on your income, consolidating your debts, or even student loan rehabilitation for federal loans. Don’t let your fear stop you from reaching out to your lender or the collection agency.

How to Avoid Defaulting on Student Loans

Of course, even if you can get yourself out of student loan default, the default can still impact your credit score and loan forgiveness options. That’s why it’s generally best to take action before falling into default. If the student loan payments are difficult for you to make each month, there are things you can do to change your situation before your loans go into default.

First, consider talking to your lender directly. The lender will be able to explain any alternate payment plans available to you. For federal loans, borrowers may be able to enroll in an income-driven repayment plan. These repayment plans aim to make student loan payments more manageable by tying them to the borrower’s income. This can make the loans more costly over the life of the loan, but the ability to make payments on time each month and avoid going into default are valuable.

Refinancing student loans could potentially help you avoid defaulting on your student loans by combining all your student loans into one, simplified new loan. When you refinance, qualifying borrowers may be able to secure a lower interest rate or loan terms that work better for their situation.

If a borrower is already in default, refinancing could be difficult. When a student loan is refinanced, a new loan is taken out with a private lender. As a part of the application and approval process, lenders will review factors including the borrower’s credit score and financial history among other factors.

Borrowers who are already in default may have already felt an impact on their credit score, which can influence their ability to get approved for a new loan. In some cases, adding a cosigner to the refinancing application could help improve a borrower’s chances of getting approved for a refinancing loan. Know that if federal student loans are refinanced they are no longer eligible for federal repayment plans or protections.

The Takeaway

Student loan default can have serious negative effects on your credit score and financial stability. If you’re worried about defaulting on your student loans, or you have already defaulted, consider taking immediate steps to remedy the situation before it gets worse. Contact your lender or servicer to learn about options available, and consider refinancing your loans to secure a lower interest rate or monthly payment.

If you’re ready to take control of your loans, learn more about how SoFi student loan refinancing may be able to help.

SoFi Loan Products
SoFi loans are originated by SoFi Lending Corp (dba SoFi), a lender licensed by the Department of Financial Protection and Innovation under the California Financing Law, license # 6054612; NMLS # 1121636 . For additional product-specific legal and licensing information, see SoFi.com/legal.
External Websites: The information and analysis provided through hyperlinks to third party websites, while believed to be accurate, cannot be guaranteed by SoFi. Links are provided for informational purposes and should not be viewed as an endorsement.
Financial Tips & Strategies: The tips provided on this website are of a general nature and do not take into account your specific objectives, financial situation, and needs. You should always consider their appropriateness given your own circumstances.
SoFi Student Loan Refinance
IF YOU ARE LOOKING TO REFINANCE FEDERAL STUDENT LOANS PLEASE BE AWARE OF RECENT LEGISLATIVE CHANGES THAT HAVE SUSPENDED ALL FEDERAL STUDENT LOAN PAYMENTS AND WAIVED INTEREST CHARGES ON FEDERALLY HELD LOANS UNTIL THE END OF SEPTEMBER DUE TO COVID-19. PLEASE CAREFULLY CONSIDER THESE CHANGES BEFORE REFINANCING FEDERALLY HELD LOANS WITH SOFI, SINCE IN DOING SO YOU WILL NO LONGER QUALIFY FOR THE FEDERAL LOAN PAYMENT SUSPENSION, INTEREST WAIVER, OR ANY OTHER CURRENT OR FUTURE BENEFITS APPLICABLE TO FEDERAL LOANS. CLICK HERE FOR MORE INFORMATION.
Notice: SoFi refinance loans are private loans and do not have the same repayment options that the federal loan program offers such as Income-Driven Repayment plans, including Income-Contingent Repayment or PAYE. SoFi always recommends that you consult a qualified financial advisor to discuss what is best for your unique situation.
Disclaimer: Many factors affect your credit scores and the interest rates you may receive. SoFi is not a Credit Repair Organization as defined under federal or state law, including the Credit Repair Organizations Act. SoFi does not provide “credit repair” services or advice or assistance regarding “rebuilding” or “improving” your credit record, credit history, or credit rating. For details, see the FTC’swebsite .

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Source: sofi.com

May 1, 2021

How does a discharge of bankruptcy affect my credit?

The information provided on this website does not, and is not intended to, act as legal, financial or credit advice. See Lexington Law’s editorial disclosure for more information.

How Does a Debt Discharge Work?

The goal of a bankruptcy discharge is debt relief. However, when and how your debts will be relieved largely depends on which type of bankruptcy you file and the amount of outstanding debt.