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The Art of Mortgage Pre-Approval

Buying a home can feel like a cut-throat process. You may find the craftsman style house of your dreams only to be bumped out of the running by a buyer paying in all cash, or moving super swiftly. But fear not, understanding the home buying process and getting a mortgage pre-approval can put you back in the race and help you secure the house you want.

What is Mortgage Pre-approval?

Mortgage pre-approval is essentially a letter from a lender that states that you qualify for a loan of a certain amount and at a certain interest rate based on an evaluation of your credit and financial history. You’ll need to shop for homes within the price range guaranteed by your pre-approved mortgage. You can find out how much house you can afford with our home affordability calculator.

Armed with a letter of pre-approval you can show sellers that you are a serious homebuyer with the means to purchase a home. In many ways it’s competitive to buying a home in cash. In the eyes of the seller, pre-approval can often push you ahead of other potential buyers who have not yet been approved for a mortgage.

Getting pre-qualified for a mortgage is not the same as pre-approval. It’s actually a relatively simple process in which a lender looks at a few financial details, such as income, assets, and debt, and gives you an estimate of how much of a mortgage they think you can afford.

Taking out a mortgage is a huge step and pre-qualification can help you hunt down reputable lenders and find a loan that potentially works for you. Going through this process can be useful, because it gives you an idea of your buying power, or how much house you can afford.

Check out local real estate
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your home-buying journey.

It also gives you an idea of what your monthly payment might be and is a chance to shop around to various lenders to see what types of terms and interest rates they offer. Pre-qualification is not a guarantee that you will actually qualify for a mortgage.

Getting pre-approval is a more complicated process. You’ll have to fill out an application with your lender and agree to a credit check in addition to providing information about your income and assets. There are a number of steps you can take to increase your chances of pre-approval or to increase the amount your lender will approve. Consider the following:

Building Your Credit

Think of this as step zero when you apply for any type of loan. Lenders want to see that you have a history of properly managing your debt before offering you credit themselves. You can build credit history by opening and using a credit card and paying your bills on time. Or consider having regular payments , such as your rent, tracked and added to your credit score.

Checking Your Credit

If you’ve already established a credit history, the first thing you’ll want to do before applying for a mortgage is check your credit report and your FICO score. Your credit report is a history of your credit compiled from sources such as banks, credit card companies, collection agencies, and the government.

This information is collected by the three main credit reporting bureaus, Transunion, Equifax and Experian. Your FICO score is one number that represents your credit risk should a lender offer you a loan.
You’ll want to make sure that the information on your credit report is correct.

If you find any mistakes, contact the credit reporting agencies immediately to let them know. You don’t want any incorrect information weighing down your credit score, putting your chances for pre-approval at risk.

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Stay on Top of Your Debt

Your ability to pay your bills on time has a big impact on your credit score. If you can, make sure you make regular payments. And if your budget allows, you can make payments in full. If you have any debts that are dragging on your credit score—for example, debts that are in collection—work on paying them off first, as this can give your score a more immediate boost.

Watch Your Debt-to-income Ratio

Your debt-to-income ratio is your monthly debts divided by your monthly income. If you have $1,000 a month in debt payments and make $5,000 a month, your debt-income ratio is $1,000 divided by $5,000, or 20%.

Lenders may assume that borrowers with a high debt-to-income ratio will have a harder time making their mortgage payments. Keep your debt-to-income ratio in check by avoiding making large purchases before seeking pre-approval for a mortgage. For example, you may want to hold off on buying a new car until you’ve been pre-approved.

Prove Consistent Income

Your lender will want to know that you’ve got enough money coming in each month to cover a potential mortgage payment. So, they’ll likely ask you to prove that you have consistent income for at least two years by taking a look at your income documents (W-2, 1099 etc.).

For some potential borrowers, such as freelancers, this may be a tricky process since you may have income from various sources. Keep all pay stubs, tax returns, and other proof of income and be prepared to show them to your lender.

What Happens if You’re Rejected?

Rejection hurts. But if you aren’t pre-approved, or you aren’t approved for a large enough mortgage to buy the house you want, you also aren’t powerless. First, ask the bank why they made the decision they did. This will give you an idea about what you might need to work on in order to secure the mortgage you want.

SoFi Mortgage.

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.
SoFi Mortgages are not available in all states. Products and terms may vary from those advertised on this site. See SoFi.com/eligibility-criteria#eligibility-mortgage for details.
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’s website .

SOMG18100

Source: sofi.com

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Getting Good Rate on a Car Loan

Buying a new car? Planning to get a car loan for it? Then keep the following tips in mind to get a good interest rate – and avoid the crucial mistakes that cost you even more money over the long run.

Tip #1: Don’t Get Financing at the Dealership

The vast majority of car buyers get their car loans at the same dealership where they buy the car. Their reasoning: It’s convenient, and/or the dealers give great interest rates. Do you have the same sentiment?

Here’s the problem: As attractive as the dealer’s advertised interest rates are, they’re likely reserved only for buyers with excellent credit scores. What’s more, there’s a pretty good chance you can find an even better deal elsewhere, such as with community banks and credit unions.

Our advice: Do your homework, and get your loan lined up and ready before you visit the dealer. If the dealer offers you an even better deal, you can still have the loan canceled.

Tip #2: Check Your Credit Score

Do you know your credit score? If not – and if you let the dealer come up with your car loan for you – you’re in BIG trouble! The dealer might convince you that your credit rating is worse than it actually is, and jack up your interest rates accordingly.

Get your credit score by requesting your credit ratings from TransUnion, Equifax, and Experian. You can also check your credit score by applying for preapproved car financing. Car loans from banks and credit unions can give you a pretty good idea of the vehicles and interest rate your credit score qualifies you for.

Click here to learn how you can improve your credit score. 

Tip #3: Watch Out For Scams.

Another risk you run when you let your dealer set up your financing for you is getting scammed. A common scam is carried out when, a few days after you sign the dotted line and bring your new car home, the dealer calls you and tells you the car loan “didn’t work out,” and that you’ll need to re-negotiate a new loan with a higher interest rate – or give the car back, losing your deposit in the process.

Protect yourself by getting your car loan elsewhere, or by not buying the car until you’re 100% sure the dealer’s financing is finalized.

Tip #4: Don’t Focus on the Monthly Fee

Lastly, one of the biggest mistakes car buyers make is going for the loan with the lowest monthly fees. Low monthly fees normally mean higher interest rates and longer payment periods. If you’re not careful, you might end up paying over twice the car’s value throughout the life of the loan.

Remember that there are at least two things that go into the monthly fee: The price of the car and the car loan’s premium. (If you’re trading in your old car, that’s an additional factor.) A single monthly fee won’t tell you how much of each is going into it – and there’s no way of knowing whether you’re paying too much for your loan or getting too little from your trade-in.

So if the car salesman asks you how much you can afford to pay each month – you don’t need to answer. Don’t get trapped! Focus instead on the total amount you’ll be paying for the car loan over its lifetime. It’s the best way to save money and get a decent car at the same time.

Source: creditabsolute.com

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Why are my credit scores different? – Lexington Law

woman looking holding and looking at papers.

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.

If you’ve ever checked your credit score across each of the different credit bureaus (Equifax, Experian and Transunion) or through multiple credit monitoring sites, you may have noticed some differences in points.  

Credit scores are three-digit numbers that range from 300 to 850 and are based on five main factors—payment history, credit utilization, length of credit history, types of credit and new credit. Though these factors remain pretty consistent across all scoring models, you may not see the exact same score from every credit reporting agency. 

The difference in scores can seem confusing, making it difficult to understand the credit score range you fall under. Luckily, a difference in scores is common and doesn’t have a huge impact on qualifying for new lines of credit. The important thing is that the same general information is evaluated across all credit agencies. 

In this guide, we’ll answer why your scores may be different, when to be concerned about any discrepancies and which credit scores matter most to lenders. 

Why are my credit scores different on different sites? 

When checking your credit score, different sites may populate different scores. For example, some 3rd party sites report scores from TransUnion and Equifax. These scoring models generally use VantageScore 3.0, which may pull a different score than your bank which offers you free access to your FICO score. 

It primarily comes down to what scoring model is being used. There are many different types of credit scores, but they use two main scoring models—FICO Score and VantageScore. 

FICO Score vs. VantageScore  

Though each credit scoring model is based on similar factors, the impact of the factors on your credit score differs from model to model. 

Your FICO score is based on the following factors:  

  • Payment history (35 percent)
  • Amount owed (30 percent)
  • Length of credit history (15 percent) 
  • New credit (10 percent) 
  • Credit mix (10 percent)

The factors that impact your VantageScore are: 

  • Total credit usage, balance and available credit (extremely influential)
  • Credit mix and experience (highly influential) 
  • Payment history (moderately influential)
  • Age of credit history and new accounts (less influential)

As you can see, the information gathered for each scoring model is the same, with some information weighing more heavily than others. For example, payment history is the biggest factor making up your FICO score, but it’s only considered moderately influential when calculating your VantageScore. 

5 reasons your credit scores are different 

Now that we understand exactly what each credit scoring model looks at, let’s dive into why your credit scores can differ. 

Factors influencing a difference in credit scores: credit scoring model used, information reported to credit bureaus, date when your score was pulled, credit score version used, errors on your credit report.

1. Your score was calculated using a different scoring model

As mentioned, your credit score can be calculated using one of the two main credit scoring models—FICO and VantageScore. Your score could appear different because of the difference in the calculations mentioned above. If you were late on a payment, your FICO score could be majorly impacted, but your VantageScore may not see the same drop. 

2. Information varies between credit bureaus

Credit scores are calculated by using the information that appears on your credit report, which comes from one of the three credit bureaus. When lenders report information regarding your accounts to the credit bureaus, they’re not required to report to all three—some may even report to only one. 

Information that may appear on your report from one credit agency may not appear on another. Because of this, each of the three bureaus can have different information on their reports, resulting in a potential difference in scores. 

For example, if Experian had a record of a payment you missed but the other bureaus didn’t, a score based on your Experian report would likely be lower than a score based on the other bureaus’ reports. 

3. Different credit score version

On top of there being different credit score models, there are also different versions of credit scores. For example, FICO uses different scores depending on the type of loan you’re applying for. If you’re applying for an auto loan, the lender may look at your FICO Auto Score. Or, if you’re applying for a credit card, credit card issuers may look at your FICO Bankcard Score. 

If you’re looking to obtain one of these kinds of loans, you’ll want to know your industry-specific scores ahead of time. While the FICO Score 8 model is most widely used, it’s up to each lender to decide which score they will use when determining your creditworthiness. 

Credit score versions are updated every few years when needed. When a new version is rolled out, certain lenders may be slow to adopt the new versions or may choose not to. Because each updated version has slightly different scoring methods, this could cause a difference in credit scores. 

4. Your credit scores were recorded at different times

Though your credit report is updated monthly, the time at which your credit score was calculated can vary. As new information is reported to the credit bureaus and your report is updated, your credit score can change. Because of this, your credit score can look different simply because it was calculated on an earlier or later day. 

If your credit score was calculated on one day, but new information regarding your credit was reported a day or two later, there could be a difference in scores. 

5. There are errors on your credit report 

As mentioned, information can be reported to credit agencies, but lenders don’t always choose to report to all three. There could be a difference in your scores if errors or inaccuracies appear on one credit report, but not the others. If this is the case, you’ll want to dispute these errors to avoid further impact on your credit score. 

When checking your credit report, you’ll want to look at the following: 

  • Late payments and charge-offs
  • New accounts
  • Increases in card balances 
  • Decreases in card balances 
  • Hard inquiries 
  • Collections 

Which credit score matters to lenders? 

Though each lender has their own method of determining creditworthiness, FICO is one of the most used credit scoring models. In fact, 90 percent of lenders use the FICO scoring model when making lending decisions. While FICO remains the most widely used scoring model, you should still monitor your other credit scores since the models used vary from lender to lender. 

Can your credit score be wrong?

Yes, there is a chance your credit score could be wrong because of fraudulent activity or an error on your credit report. If you see a major point difference between your credit scores, you may want to look a little further into what happened. You can do this by accessing each report and analyzing it for errors and discrepancies. If the information on your credit reports is inconsistent, you may need to look into this further. 

If information that can significantly impact your credit score—like paying off a large amount of debt or noticing an error in payment history—is only reported to one credit agency, you’ll definitely want it reported across all bureaus. You can do this by filing a dispute or submitting a rapid rescore. 

Remember, you can access one free annual credit report from each of the three credit bureaus by visiting www.AnnualCreditReport.com. 

Not all credit scores will be the same, but you do want to be sure you’re properly monitoring your credit report so you understand all of the factors impacting your credit score. Small differences in credit scores are nothing to worry about. Focus on maintaining positive credit habits so you can set yourself up for success when qualifying for new lines of credit and loans. 

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.

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

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How to Opt Out of Junk Mail and Cut Down on Clutter

If there’s one surefire, fail-safe, must-do secret to keeping your apartment clean, it’s this: Cut out the clutter. Unnecessary knick-knacks, piles of magazines, and clothes you don’t wear anymore only add to the general eau de slob around your place. So what can you do to keep the clutter under control? The first step is to cut the amount of stuff that comes into your place every day. And one of the biggest sources of clutter is junk mail.

Chances are, your mailbox is filled with unwanted catalogs, credit card applications and all sorts of other junk. Even worse, you might lose track of something important – like a bill – with all that other stuff to wade through every day.

So what’s the solution? Nip it in the bud. Opt out of junk mail so you don’t get all that unnecessary paper every day. Your apartment will be cleaner and your life will be a little simpler. Here are four websites that’ll help you do it.

This non-profit website streamlines the opt-out process so you don’t have to contact companies individually. Just create a free account and Catalog Choice (also known as TrustedID) does the work for you – just log in, search for the company sending you junk mail, and submit the opt-out. It works for unwanted phone books, too.

You’d think the Direct Marketing Association, a trade group for organizations that send direct mail, would want you to get as much mail as possible. But DMA Choice believes direct mail works best when consumers have a healthy relationship with marketers. You should be able to opt out of the mail you don’t want so the mail you do get is beneficial to you.

All you have to do is keep track of what companies are sending you junk mail over a few weeks, then log in to DMA Choice and set your preferences so you’re eliminated from that company’s mailing list. You can change your preferences anytime your needs or wants change.

Most of the junk mail you receive is probably credit card or insurance policy advertisements. Credit reporting companies such as Equifax and TransUnion are required by law to give you the option to protect your information from being shared with marketers. Through OptOutPrescreen, you can choose to stop receiving junk mail for five years or permanently. You can also choose to start receiving credit card and insurance policy offers again if you’ve previously opted out.

This is another association of direct-mail marketers that know the benefit in sending ads only to people who want them. Just log on to this site and put your information in the form on the right side of the page, then choose your mail preferences.

Have you opted out of junk mail yet? Which service will you use?

Photo credits: Shutterstock / kao

Comments

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Source: apartmentguide.com

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Why are my credit scores different?

woman looking holding and looking at papers.

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.

If you’ve ever checked your credit score across each of the different credit bureaus (Equifax, Experian and Transunion) or through multiple credit monitoring sites, you may have noticed some differences in points.  

Credit scores are three-digit numbers that range from 300 to 850 and are based on five main factors—payment history, credit utilization, length of credit history, types of credit and new credit. Though these factors remain pretty consistent across all scoring models, you may not see the exact same score from every credit reporting agency. 

The difference in scores can seem confusing, making it difficult to understand the credit score range you fall under. Luckily, a difference in scores is common and doesn’t have a huge impact on qualifying for new lines of credit. The important thing is that the same general information is evaluated across all credit agencies. 

In this guide, we’ll answer why your scores may be different, when to be concerned about any discrepancies and which credit scores matter most to lenders. 

Why are my credit scores different on different sites? 

When checking your credit score, different sites may populate different scores. For example, some 3rd party sites report scores from TransUnion and Equifax. These scoring models generally use VantageScore 3.0, which may pull a different score than your bank which offers you free access to your FICO score. 

It primarily comes down to what scoring model is being used. There are many different types of credit scores, but they use two main scoring models—FICO Score and VantageScore. 

FICO Score vs. VantageScore  

Though each credit scoring model is based on similar factors, the impact of the factors on your credit score differs from model to model. 

Your FICO score is based on the following factors:  

  • Payment history (35 percent)
  • Amount owed (30 percent)
  • Length of credit history (15 percent) 
  • New credit (10 percent) 
  • Credit mix (10 percent)

The factors that impact your VantageScore are: 

  • Total credit usage, balance and available credit (extremely influential)
  • Credit mix and experience (highly influential) 
  • Payment history (moderately influential)
  • Age of credit history and new accounts (less influential)

As you can see, the information gathered for each scoring model is the same, with some information weighing more heavily than others. For example, payment history is the biggest factor making up your FICO score, but it’s only considered moderately influential when calculating your VantageScore. 

5 reasons your credit scores are different 

Now that we understand exactly what each credit scoring model looks at, let’s dive into why your credit scores can differ. 

Factors influencing a difference in credit scores: credit scoring model used, information reported to credit bureaus, date when your score was pulled, credit score version used, errors on your credit report.

1. Your score was calculated using a different scoring model

As mentioned, your credit score can be calculated using one of the two main credit scoring models—FICO and VantageScore. Your score could appear different because of the difference in the calculations mentioned above. If you were late on a payment, your FICO score could be majorly impacted, but your VantageScore may not see the same drop. 

2. Information varies between credit bureaus

Credit scores are calculated by using the information that appears on your credit report, which comes from one of the three credit bureaus. When lenders report information regarding your accounts to the credit bureaus, they’re not required to report to all three—some may even report to only one. 

Information that may appear on your report from one credit agency may not appear on another. Because of this, each of the three bureaus can have different information on their reports, resulting in a potential difference in scores. 

For example, if Experian had a record of a payment you missed but the other bureaus didn’t, a score based on your Experian report would likely be lower than a score based on the other bureaus’ reports. 

3. Different credit score version

On top of there being different credit score models, there are also different versions of credit scores. For example, FICO uses different scores depending on the type of loan you’re applying for. If you’re applying for an auto loan, the lender may look at your FICO Auto Score. Or, if you’re applying for a credit card, credit card issuers may look at your FICO Bankcard Score. 

If you’re looking to obtain one of these kinds of loans, you’ll want to know your industry-specific scores ahead of time. While the FICO Score 8 model is most widely used, it’s up to each lender to decide which score they will use when determining your creditworthiness. 

Credit score versions are updated every few years when needed. When a new version is rolled out, certain lenders may be slow to adopt the new versions or may choose not to. Because each updated version has slightly different scoring methods, this could cause a difference in credit scores. 

4. Your credit scores were recorded at different times

Though your credit report is updated monthly, the time at which your credit score was calculated can vary. As new information is reported to the credit bureaus and your report is updated, your credit score can change. Because of this, your credit score can look different simply because it was calculated on an earlier or later day. 

If your credit score was calculated on one day, but new information regarding your credit was reported a day or two later, there could be a difference in scores. 

5. There are errors on your credit report 

As mentioned, information can be reported to credit agencies, but lenders don’t always choose to report to all three. There could be a difference in your scores if errors or inaccuracies appear on one credit report, but not the others. If this is the case, you’ll want to dispute these errors to avoid further impact on your credit score. 

When checking your credit report, you’ll want to look at the following: 

  • Late payments and charge-offs
  • New accounts
  • Increases in card balances 
  • Decreases in card balances 
  • Hard inquiries 
  • Collections 

Which credit score matters to lenders? 

Though each lender has their own method of determining creditworthiness, FICO is one of the most used credit scoring models. In fact, 90 percent of lenders use the FICO scoring model when making lending decisions. While FICO remains the most widely used scoring model, you should still monitor your other credit scores since the models used vary from lender to lender. 

Can your credit score be wrong?

Yes, there is a chance your credit score could be wrong because of fraudulent activity or an error on your credit report. If you see a major point difference between your credit scores, you may want to look a little further into what happened. You can do this by accessing each report and analyzing it for errors and discrepancies. If the information on your credit reports is inconsistent, you may need to look into this further. 

If information that can significantly impact your credit score—like paying off a large amount of debt or noticing an error in payment history—is only reported to one credit agency, you’ll definitely want it reported across all bureaus. You can do this by filing a dispute or submitting a rapid rescore. 

Remember, you can access one free annual credit report from each of the three credit bureaus by visiting www.AnnualCreditReport.com. 

Not all credit scores will be the same, but you do want to be sure you’re properly monitoring your credit report so you understand all of the factors impacting your credit score. Small differences in credit scores are nothing to worry about. Focus on maintaining positive credit habits so you can set yourself up for success when qualifying for new lines of credit and loans. 

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.

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

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Credit card chips can fall Out—and into the wrong hands

rebuilding credit

Protecting your personal information is important to protecting and repairing your credit. Security risks are everywhere, including your wallet. By now, you probably now have a credit or debit card that uses a chip. Those chips, however, can fall out of the plastic card. An intact chip could be placed onto another card, allowing an unauthorized person to access the account or personal information. Consumers should be aware of this issue to protect their security and identity.

When it comes to security, losing a credit card chip is equivalent to losing the entire card itself. Glue holds the chip in place, and normal wear and tear can loosen the adhesive. In an extreme scenario, a thief could remove a card’s chip and replace it with a dummy chip. With the stolen chip, a thief could make purchases without raising suspicion. Recovering from credit card theft is a time consuming process. Depending on the extent of the damage, the effects could have a long-term impact on your credit, especially if an account becomes delinquent.

Tips to Protect Yourself

Security risks always exist, but you can take measures to protect yourself. Bankrate compiled five easy techniques for consumers to protect their accounts and information:

  • Set up mobile banking alerts for your phone from your financial institution. You can discover unusual activity as quickly as possible.
  • Regularly monitor your accounts online. Being familiar with your activity can help identify fraudulent transactions faster.
  • Avoid public computers. Do not log on to your email if your bank corresponds with you there. Set up a separate email account just for your finances and checking it from safe locations.
  • Avoid doing business with unfamiliar online companies. Stick to established merchants and websites.
  • If your information has been compromised, notify your financial institutions and local law enforcement. Remember to notify any of the three credit bureaus—Experian, Equifax and TransUnion—to place a fraud alert on your credit reports.

Lexington Law can help you monitor and repair your credit. You can learn more here, and carry on the conversation on our social media platforms. Like and follow us on Facebook and leave us a tweet on Twitter.

Sources

http://abcnews.go.com/US/chips-potentially-fall-chip-credit-cards-leaving-consumers/story?id=49103435

http://abc7chicago.com/finance/credit-card-chips-can-fall-out-posing-a-security-risk/2284510/

Chip in credit cards can fall out, be removed and stolen

https://www.bankrate.com/finance/credit-cards/5-ways-theives-steal-credit-card-data/

Source: lexingtonlaw.com

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Does Checking Your Credit Lower Score Lower It?

Your credit score is an important financial metric that can have a significant impact on your life. Good credit makes it easier to qualify for loans and makes borrowing money cheaper by reducing the interest you pay. If you have poor credit, you’ll have to pay higher interest rates when you get a loan or might have trouble borrowing money at all.

Checking your credit report regularly can help you have an idea of the loans and credit cards you can qualify for, as well as what you need to do to boost your score. It’s also a good way to monitor for identity theft or to notice incorrect information on your credit report.

When a lender checks your credit, it usually reduces your credit score by a few points. However, checking your score on your own is typically safe. Let’s explore why.

What Is a Credit Inquiry?

Your credit report contains a history of your interaction with credit and debt. That includes information about your history of making on-time versus late payments, the amount of debt you have, how many loans and credit cards you have open, and recent applications for credit.

When you apply for a credit card or a loan, the lender usually reaches out to one of the three major credit bureaus — Experian, Equifax, and Transunion — to ask for a copy of your credit report. The lender uses the information in that report to make its lending decision and to set the interest rate if it decides to offer a loan.

The credit bureau that supplied your credit report makes a note of that application on your credit report. Other lenders who request a copy of your credit report from that credit bureau can see your recent application for a loan through that note.

Hard Inquiries vs. Soft Inquiries

When a lender asks a credit bureau for a copy of your credit report to make a lending decision, that’s called a hard inquiry. Hard inquiries show up on your credit report, and other lenders that check your credit can see hard inquiries in your credit history.

Lenders don’t check your credit only when you apply for a new loan. Lenders can check their customers’ credit at any time and often do so when the borrower asks for an increased credit limit or as part of regular risk assessments of their borrowers.

Individuals can also check their own credit reports using the many free credit tracking apps and websites on the market. These apps need to reach out to the credit bureaus to request copies of customers’ credit reports, but aren’t using those reports to make lending decisions.

In general, when you ask a credit bureau for a copy of your own credit report, it’s counted as a soft inquiry. Occasions when a lender checks someone’s credit to pre-approve them for an offer or as part of regular risk assessments — rather than as part of an application for a new loan or credit card — also count as soft inquiries.

Soft inquiries do not appear on credit reports, which means they don’t affect credit scores. This means that you can safely check their own credit reports without having to worry about damaging your credit.

How Credit Inquiries Affect Your Credit

Each hard inquiry on your credit report drops your score by a few points, usually between five and 10 points. One hard inquiry won’t have a large impact on your score, but they can quickly add up, so having lots of inquiries on your report can really damage your score.

This is because frequent applications for loans are a red flag for lenders. Someone who needs to borrow money repeatedly is likely to be having financial difficulties, meaning they’ll struggle to repay their loans.

The impact of each credit inquiry decreases over time. After a few months, an inquiry’s impact is relatively small and is usually offset by other positive factors on the credit report.

Credit inquiries stay on a credit report for two years, after which they fall off the report. That means that each inquiry only affects a person’s credit score for a maximum of two years.

Reducing the Impact of Credit Inquiries

People who are applying for large loans, like mortgages or auto loans, often want to shop around and get offers from multiple lenders so they can find the best deal. Even a small difference in the interest rate on a large loan can save thousands of dollars over the life of a mortgage, so shopping around is more than worth the effort.

Credit bureaus and FICO, the company behind the most popular credit scoring models, understand the importance of rate shopping, so most scoring models account for it when generating your credit score.

Depending on the model used, all credit inquiries for loans like mortgages, auto loans, or student loans that happen within a 14- to 45-day period are combined when calculating credit scores. If someone applies for four mortgages in a week, it will only count as a single hard inquiry.

That means you don’t have to worry about tanking your credit by shopping for the best interest rates when applying for a large loan.

Does Checking Your Credit Lower Your Credit Score?

The majority of credit monitoring apps, websites, and services use soft inquiries to check your credit report and provide that information to you. That means it’s safe to check your credit using one of these services.

Credit bureaus only take note of hard inquiries into your credit by lenders making lending decisions. Soft inquiries do not impact your credit score or appear on your credit report.

Final Word

Healthy credit is an essential part of healthy finances. Your credit impacts your ability to borrow money and how much interest you have to pay.

If you want to keep track of your credit score, there are many services you can use to help, all without impacting your credit. One way to keep your score high is to only apply for loans and credit cards that you need, which reduces the number of inquiries that show up on your credit report.

Source: moneycrashers.com