CREDIT SECRETS

The Blueprint on how to raise your credit

Score to 100 points

By Brian Mitchell
 Edition 2019
© Copyright 2019 by – All rights reserved
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 Table of Contents
Disclaimer.................................................................................................................... 3
1. INTRODUCTION: UNDERSTAND YOUR CREDIT SCORE..........................5
Procedure - How Do they Work?.............................................................................11
What Credit Score Is Needed...................................................................................12
How 9 Common Actions Can Affect Your Credit Score........................................14
2. THE IMPORTANCE OF A GOOD CREDIT SCORE.....................................19
Poor Credit Vs Good Credit.....................................................................................21
How to Convert Bad Credit to Good Credit...........................................................23
3. CREDIT REPAIR.................................................................................................24
Is there a magic formula to repair your credit?.....................................................24
Credit repair can increase your credit score in just 30 days..................................27
Be Wary Of Credit Scams........................................................................................37
4. STARTING FROM THE SCRATCH AND MAINTAINING IT.....................40
How to build credit score quickly?..........................................................................40
Credit Repair: How To Improve Your Credit Score.............................................43
How To Improve Your Credit Score After Bankruptcy........................................48
Improve Credit Scores After Foreclosure...............................................................50
5. WHAT IS A FICO SCORE?................................................................................53
Understanding The Fico Credit Scoring Algorithm...............................................53
How "FICO 08" Impacts Your Credit Score..........................................................55
myFICO Review: Everything you always wanted to know....................................56
How Credit Queries Affect Your Credit Score.......................................................59
6. RATING AGENCIES...........................................................................................61
Who are the rating agencies?...................................................................................61
7. CREDIT SCORE TIPS.........................................................................................67
Getting Your Credit Score To Work For You........................................................67
CONCLUSION.........................................................................................................73
Appreciation..............................................................................................................73
 1
INTRODUCTION: UNDERSTAND YOUR
CREDIT SCORE

Before you can work to improve your credit score, you must first understand
what it consists of.

Your credit score is like a financial grade point average (GPA). It is a way to inform
lenders, creditors, and sometimes even potential employers how you have handled
your financial responsibilities in the past. A higher score suggests a reduction in the
risks of offering credit; a lower one suggests that it could be a higher risk. A good
credit score can make a difference when you are trying to buy a new car, request the
rental of an apartment or buy your first home, whatever your goal.
The factors that influence your credit score vary slightly depending on the company
you consult. Each of the main credit agencies - Equifax, Experian, and TransUnion -
calculates its own score based on a single algorithm. While these scores are usually
based on the FICO score model (Fair, Isaac and Company), your score will often be
different for each agency.
However, you can greatly influence your credit score by understanding the main
factors that credit bureaus consider. Here are five tips to help you understand and
possibly improve your credit scores.
Factor No. 1 of credit score: payment history
According to FICO, your payment history accounts for 35 percent of your score.
Payment history includes information about your account payments, such as the
number of accounts you have paid on time and any delinquent payments. To improve
this fragment of your credit score, work toward consistently making timely payments
for revolving loans, such as credit cards, and installment loans, such as student loans.
It is also smart to develop a plan to achieve a goal of debt cancellation.
Your payment history also lists adverse public records, such as bankruptcies or
lawsuits. Generally, public records can remain on your report for seven years, but
bankruptcies can appear for up to 10 years.
Factor No. 2 credit score: amounts of debt
How much you must account for 30 percent of your FICO score. This includes the
amount you owe on credit accounts, as well as the proportion of debt to available
credit.
To improve this credit score factor, keep credit card balances low in relation to the
available credit, and pay bills on time. If you tend to maximize your credit cards or
approach your credit limits every month, lenders will consider it a high risk. It is also
useful to find out how much you could have to pay off a credit card before increasing
your balances.
Credit score factor No. 3: duration of the credit history
The duration of your credit history accounts for 15 percent of your FICO score. This
includes how long your accounts have been open and the time since your last account
activity. A longer credit history gives lenders a better idea of their long-term financial
behavior.
If you do not have a credit history, lenders will consider other factors, such as bank
accounts, employment history, and residency history. For example, if you have a
savings account or checking account in good condition, your bank will be more
willing to offer you a credit card or loan. If you still have difficulty obtaining credit,
you might consider creating your credit with a secured credit card - which uses the
money you put in a secured deposit account as collateral - or an insured loan, which is
a loan in which you offer an asset as collateral.
Credit score factor No. 4: types of credit used
The different types of credit you use an account for 10 percent of your FICO score.
Having a variety of account types, such as credit cards, home loans, and retail
accounts, can tell lenders that you have lower credit risk. You can potentially improve
your score by opening new types of accounts, but apply for credit only when you need
it. Never apply for credit just for the purpose of improving your score.
Factor No. 5 credit score: new credit
The new loan accounts for 10 percent of your FICO score. This means the number of
new requests for new credit, including the number of recent major requests (when a
lender reviews your credit) and the number of new accounts you have opened in the
last 60-90 days.
Requesting a high number of new credit accounts in a short period of time can have a
negative impact on your score. Lenders will consider it a sign of risk. Instead of
responding to each card offer with a low-interest introductory rate, apply for new
credit only when it makes financial sense for your situation and objectives. And if
they deny it, take some time to work towards improving your credit score before
requesting it again.

All About The Credit Score

The credit score or FICO score is a score that goes from approximately 300 to 850.
That number is calculated using a secret mathematical formula where our behavior is
taken into account when paying debts.
The credit score is used by banks, insurers, landlords, employers, companies, in
general, to qualify us when they will give us credit, a job or even provide a service.

Credit Score Vs Credit Report:

The FICO score or credit score is given by an agency called Fair Isaac Corporation
and they calculate it based on our credit reports.
A credit score is a number that goes from 300 to 850. Although theoretically, it is only
one (1) credit score, each one of the credit reporting agencies gives one, that is, there
are 3 scores.

What we really call the credit score is the FICO score.

What's in the credit reports:
There are 3 credit reporting agencies: Equifax, Transunion, and Experian. What these
companies do is collect and consolidate information about our life in general:
• Where we live
• Where we work
• What do we buy
• Who we are paying (rent, mortgage, stores, etc.)
• If we have accounts of services or utility accounts (electricity, telephone, water,
TV, etc.)
• If we apply to open any credit card account
• If we apply to any consumer account (furniture, store, etc.)
• If they lent us money for a purchase, etc.
• For how long have we been financially active
Based on that credit report and using a mathematical formula, they calculate our credit
score.
Each agency calculates a score with the information it has and the Fair Isaac Corp
combines the reports of the 3 agencies and calculates in FICO.
You can ask for those free credit reports and see what they are reporting about you.
You will also see if there are errors and you can correct them so that they do not affect
your credit score.
How they calculate the credit score:

FICO Score - Credit Score - As calculated

Payment history 35%

Amounts Due (level of indebtedness) 30%

Long credit history 15%

New credits (debts) 10%

Credit Mix 10%

Although we know the passage of each factor, the exact formula to calculate the credit
score is secret.
Let's see what each one that means:
1. History of Payment of your Debts:
It refers to whether we pay the bills on time. If you never pay late for any receipt this
rating should be perfect. But almost nobody is perfect and even if you always pay on
time sometimes there are mistakes: the receipt was lost or the check arrived late, etc.
It is the most important and what more weight has. If you want to have a good credit
score, have your bills paid on time at goal # 1.
2. Amount owed or Indebtedness level:
Ideally, you use 35% or less of your ability to borrow or your available credit.
For example, if you have credit cards with a credit limit of $ 1,000, ideally, do not use
more than $ 350. If you use more it is considered that you have a high level of
indebtedness and that will take away points in your credit rating.
3. Long credit history:
The longer the better. The agencies still do not know how "good or bad pay" you are.
Based on our behavior over the years they estimate how risky it is to lend us money.
If you start your financial life in the USA, do not worry, it's better to have no history
than to have it bad. A little patience is the only thing you can do here.
4. New Credits:
They refer to whether we are opening accounts or acquiring new debts. This
immediately affects the credit score because it means that we are in need of money.
The mere fact of applying for a loan will lower your score. Be careful in giving your
social security number to get the "credit", just apply when you are ready to buy.
5. The mix of Credits:
They will give you more points if you have different types of credit because they will
be able to better qualify how is their behavior to pay them. The idea is to have a good
mix of debts: housing (rent or mortgage), car, credit card, utilities (telephone, TV,
etc.) and others. This does not mean that you should get into debt just because of your
credit score.
Based on these values of our history, the agencies do their calculations and give us a
credit score
Credit Score Table:

FICO Score Meaning

Exceptional 800 or more

 Very Good or High 740 to 790

Good 670 to 739

Regular 580 to 669

Bad 579 or less

Because there are Credit Scores:

Credit scores are a tool that banks and lenders have to know the risk that each one of
us represents when lending us money.
If my score is high, this tells the lender that I am a responsible person who has
historically paid their bills on time. He/she feels calm lending me money because most
likely he/she will pay it back.
If on the contrary, I have a bad score, the lender is running the risk that I will not pay
him and lose his money. That's why he charges higher interest because apparently, I'm
not so responsible with my debts.

Are there any other criteria for lending money in addition to the FICO Credit
Score?
The lender is free to use the criteria you want. In the USA, 90% of the companies that
lend money use the FICO Score. However, who is going to lend money is who
decides what importance it gives to the score.
Car financing companies are usually more flexible and give credit to people with low
scores or recent payment problems. There is more, they change the formula to
calculate the score when what is going to be done is a car loan.
Banks and mortgage companies, on the other hand, are much stricter when lending
money. And in addition to asking that we have a certain minimum credit score, they
also demand that the credit report be impeccable: no collections (collections),
outstanding debts, etc.
Many of us have to "fix" the credit report first before we can obtain a mortgage loan.

Are there other Credit Score Tables?

Yes, although 90% use FICO every day, a score called the Vantage Score is being
used. This new vantage score is being used by 10% of the companies and they
calculate it differently from the FICO score.
Although the Vantage Score is not as popular as the FICO Score, it is important that
we keep in mind that they are calculating them. As we see, more and more importance
is given to our behavior when it comes to paying bills.

That does NOT influence to calculate the credit score:

Does not influence race, religion, nationality, gender, marital status, age, salary,
occupation, education, employee or employment history, where you live or how much
money you have.
These factors have no influence when calculating your credit score but your lender
can take them into account when approving for a debt.
Some are illegal, such as race, religion, etc, but nevertheless, they are still used. If you
feel you have been discriminated against, there are resources to complain.

Procedure - How Do they Work?

How your credit score is calculated

Know what your credit score is based on and the various ways in which you can
improve it.
Your credit score is one of the most important measures of your solvency. Your Fair
Isaac Company FICO® Credit Report Score is based on the measurement criteria
developed by Fair Isaac Corporation. The higher your score, the less risky you are to
lenders. Fortunately, if you understand what affects your credit score, you can take
steps to improve it.
The 5 pieces of your credit score
Your credit score is based on the following five factors:
 Your payment history represents 35% of your score.
This shows if you make the payments on time, how often you miss payments, how
many days after the due date you pay your bills and when was the last time payments
were missed. The higher the proportion of punctual payments, the higher your score.
Each time you miss a payment, you risk losing points.
  The amount you owe on loans and credit cards constitutes 30% of your
score.
This is based on the total amount you owe, the amount and types of accounts you
have, and the proportion of money owed compared to the amount of credit available.
High balances and credit cards to the limit will lower your credit score, but lower
balances may increase it if you pay on time. New loans with a short payment history
can temporarily lower your score, but loans that are closer to settlement can raise it
because they show a successful payment history.
 The seniority of your credit history represents 15% of your score.
The older your payment history is, the higher your score will be. It might seem wise to
avoid applying for credit and having debts, but in reality, this can hurt your score if
the lenders do not have any credit history to examine.
 The types of accounts you have made up 10% of your score.
Having a combination of accounts, including installment loans, mortgage loans, and
credit cards and retail stores, will increase your score.
 The recent credit activity constitutes the last 10%.
If you have opened many accounts lately or have requested to open accounts, this
suggests a possible financial problem and may lower your score. However, if you
have had the same loans or credit cards for an extended period and pay them on time -
even after having payment problems - your score will increase over time.
Finally, the best way to increase your credit score is to use loans and credit cards
responsibly and make timely payments. The more you demonstrate your credit history
that you can handle credit responsibly, the more willing lenders will be to offer you
credit at a competitive rate.

What Credit Score Is Needed

What credit score do I need to buy a house?

In general, you need a credit score above 620 to qualify for a traditional fixed-rate
mortgage at a good interest rate. To qualify for an Adjustable Rate Mortgage (ARM),
you will generally need at least 600.
However, there are programs available that help first-time homebuyers overcome the
challenges of low credit. With funding through the Federal Housing Authority (FHA),
you can qualify for funding with a score as low as 560.
NOTE: Just because I can qualify, does not mean I have to borrow! You will pay
higher interest rates, than on a mortgage, which equals many thousands more paid
during the term of the loan. Always consider the total cost and the monthly cost
carefully, before taking out a loan.

What credit score do I need to buy a car?

The loans for the purchase of automobiles are quite flexible as the financing
progresses. You can find automatic loans for a bad credit rating, which allow you to
finance with a score as low as 500. However, these loans can be very risky and the
rates can be extremely high. In fact, sometimes your rate can be so high that you
barely pay the capital as you make payments. Your payments will barely make a dent
in the principal or principal of the debt, which in reality will remain with little
variation to the downside.
In general, you will want to have a score of at least 600. For a new car, we
recommend having a score higher than 661 so you will be in the main range. For used
cars, close to the prime score is generally acceptable, so that would be something over
600.

What is a good credit score to lease with the option to purchase (leasing)?
The leasing generally follows the same score ranges to buy. A lease is effectively like
a loan, so the lender will still want to assess your creditworthiness. In general, you
will want to get a maximum score or a good grade for a good rate, any amount that is
greater than 660. However, any amount greater than 600 may be sufficient.

What credit score do I need for a credit card?

Credit cards are also generally flexible when it comes to qualifying for one. In fact,
there are cards available for people who have a bad credit history. These secured
credit cards are designed to help you generate credit if your score is less than 500.
You make a cash deposit to open the account and obtain a line of credit equivalent to
your deposit. You can open these accounts even with a score of 400 or less.
In the case of traditional unsecured credit cards, it will generally be necessary to have
a score higher than 600. If your score is higher than 700, you can generally qualify for
any card you want. However, to get those great offers of advertised credit cards, you
need a score of 720 or more. Only excellent credit scores enjoy the best credit cards
with the lowest rates.
It is also worth noting that you should call periodically to renegotiate interest rates
when your credit score improves. You do not technically refinance the credit card
debt. Instead, it usually only asks for a reduction in the interest rate. Every time your
score improves significantly, call your creditors to negotiate the lowering of the
interest rates that apply to you.

What credit score do I need to refinance?

In addition to negotiating interest rates on credit cards, you should also consider
refinancing loans if your credit score improves. You can refinance a loan to obtain a
lower interest rate, which will allow you to save money during the term of the loan.
However, just keep in mind that refinancing can generate additional charges, such as
closing costs when refinancing a mortgage.

How 9 Common Actions Can Affect Your Credit Score

Four things that do not affect credit and ... the five that do affect it.
Building your credit history may not be easy, but it may be harder still to keep it clear.
A survey was recently conducted where they discovered that many people do not
know what affects their credit score. For example, the survey revealed that:
▪ 63% of respondents believe that their income affects the credit score when in reality
the income has nothing to do with the credit report.
▪ 60% of respondents think that work history affects the score. The work history does
not influence the credit score at all.
▪ 53% of respondents think that the amount of savings and money in the bank is
proportional to the credit score. Nothing is further from reality.
▪ 39% of respondents have the mistaken belief that age is a factor that influences
credit scores.
Neither the income, nor the work history, nor the savings or the money that is kept in
the bank, nor the age are factors that are used to calculate the credit score.
5 Factors That Do, on the other hand
▪ 35% of your score depends on your credit history: Or what is the same your debt
history. If you do not have debts there is nothing to report, and if there is nothing to
report then you have no credit history.
▪ 30% of the score is based on the debt levels: How much you owe in relation to the
credit limit. Having credit and using a certain part of it does not affect your score, but
if you have more than 30% of debts in relation to your credit limit, then you begin to
affect your score negatively. If your debts go down too much, your score begins to
disappear.
▪ 15% Time: For how long have you had credit. In other words, how long have you
been in debt?
▪ 10% has to do with the type of debt: It is not the same to have a credit card of $ 500
that one with a limit of $ 25,000 or a financed car or a Lease. The more important the
debt, the greater the positive impact on the credit score.
▪ 10% New applications: the last time you applied for the credit. Or what is the same
the last time you applied to get into debt.
As you can see, the credit score only measures the capacity and fulfillment of debt
payments.

Why did my credit rating drop?

In today's financial world, your credit rating is a versatile tool that can help you in
various situations, such as securing loans and other credit products. In fact, your rating
is one of the main items used by lenders to determine your creditworthiness, as well as
the interest rate you will pay for their products once approved. That's why it's
extremely important to keep your credit rating in good shape whenever you can. It
really makes all the difference to the health of your finances, both now and in the near
future. Unfortunately, a decent income and a history of employment are not always
enough to guarantee the credit products you want. However, these elements,
associated with a good credit rating, are usually. The only problem is that your credit
rating fluctuates with each credit-related transaction you make, whether you pay your
credit card bill or simply ask for a new credit product. There are many reasons why
your credit rating increases and decreases. Some things, such as timely payments,
drive up your score, while others, such as missed payments, will eventually make it
fall. Then, once your score goes down, it can be difficult and tedious to restore it,
which is another reason why you should monitor it regularly and keep it as healthy as
possible. whether you're paying for your credit card bill or just asking for a new credit
product. There are many reasons why your credit rating increases and decreases. Some
things, such as timely payments, drive up your score, while others, such as missed
payments, will eventually make it fall. Then, once your score goes down, it can be
difficult and tedious to restore it, which is another reason why you should monitor it
regularly and keep it as healthy as possible. whether you're paying for your credit card
bill or just asking for a new credit product. There are many reasons why your credit
rating increases and decreases. Some things, such as timely payments, drive up your
score, while others, such as missed payments, will eventually make it fall. Then, once
your score goes down, it can be difficult and tedious to restore it, which is another
reason why you should monitor it regularly and keep it as healthy as possible. will
eventually make it fall. Then, once your score goes down, it can be difficult and
tedious to restore it, which is another reason why you should monitor it regularly and
keep it as healthy as possible. will eventually make it fall. Then, once your score goes
down, it can be difficult and tedious to restore it, which is another reason why you
should monitor it regularly and keep it as healthy as possible.

What is a credit rating?

Before moving on to the things that cause your score to fall, it's best to understand
what your credit score is, and to be a useful financial tool, of course. Essentially, your
credit score is a three-digit number that groups all your shares as a credit user, much
like your average. All your negative and positive credit transactions are calculated
together to form a number between 300 and 900. If you have already been approved
for a credit product, such as a credit card or personal loan (mortgage loan, loan of
vehicle, etc.).), this means that you have a credit score. It also means that a credit
report has been opened on your behalf by Canada's major credit reporting agencies,
Equifax and TransUnion. Here, we will use credit cards as an example because it is
usually the first product that allows a credit user to appear on the card. Most people
ask for their first credit card through their bank, which anyone can do once they reach
the age of 18. However, some parents also buy prepaid credit cards for their minor
children as gifts or in an emergency. what everyone can do once they reach the age of
18. However, some parents also buy prepaid credit cards for their minor children as
gifts or in an emergency. what everyone can do once they reach the age of 18.
However, some parents also buy prepaid credit cards for their minor children as gifts
or in an emergency.
Once you have been approved by the card of your choice, the credit card company
reports your activity to the credit bureau with which they are in partnership, which
will then create a credit report. From now on, each time you use your card, the issuing
company records each action and reports it once a month. In most cases, banks and
other lenders only deal with one of the two offices, but some fall under both. In fact,
you have two credit ratings, one with Equifax and one with TransUnion. When
considering a new loan, your lenders review the results with their partner office.
According to TransUnion, 650 is the magic number that you should try to stay above.
With a score of 650 and over, you should have no problem getting approved
regardless of the credit product you need. In turn, once your score goes below 650, not
only are your odds reduced but if you are approved, you will end up paying a higher
interest rate than someone who has a better deal.

Main reasons why your credit rating may go down

As previously mentioned, there are several factors that determine how your credit
rating fluctuates. Some of the most notable areas that can result in your credit score
include, but are not limited to:
 Your credit-related delinquencies
In credit terminology, "delinquency" refers to negative credit-related transactions that
have become more serious than basic late penalties. When credit accounts with large
balances remain too long without being paid, the lender sometimes sells them to
collection agencies. If the situation becomes public, that is to say, it is brought to
court, the collection account will be reported to the credit bureau, where it will remain
up to 6 years. Meanwhile, the user's credit rating will drop. The same type of event
also occurs in claims, consumer proposals, bankruptcies, etc.
 Your payment history
One of the main factors that affect your credit score is, of course, your payment
history to your different credit accounts. Most of the credit products you use have a
minimum balance payment and a maximum payment date that you must comply with
to avoid penalties. For example, each credit card is accompanied by a monthly
statement including an invoice. If you are unable to pay at least the minimum monthly
payment on the due date, you will be charged both penalties and interest on the unpaid
portion of the bill. Late payment, short payments, or missed payments for any credit
product will have a negative impact on your credit rating, especially if the bill lasts
more than 30 days without being paid.
 Recent investigations
Each time you apply for new credit, your lender will extract a copy of your credit
report to determine your creditworthiness. This is known as an "investigation". There
are two types of credit surveys. When you ask for a copy of your credit report
yourself, it is an "informal request" and will not affect your credit score. On the other
hand, a "thorough investigation" is conducted when a lender or other financial
organization review your report during its approval process. In-depth audits lower
your credit rating. Although this does not seem to have much impact, in the beginning,
too many in-depth demands will drastically reduce your score. A serious investigation
can stay on your Equifax report up to 3 years and up to 6 years with TransUnion.
That's why it's best not to ask for too much credit products in a short period of time.
History / Duration of your active accounts the same as asking for too much new credit
can have a negative impact on your credit score, having too many active accounts for
just a short time is not the best way to preserve your credit score. When it comes to
credit accounts, the longer your manager's behavior, such as full / on-time payments,
is, the better your credit score is. That's why it's best not to open and cancel multiple
credit card accounts in a short period of time, especially if they have balances. If you
need to cancel an account, make sure to pay the remaining balance first.
  Your credit use
With each credit account, you activate, a credit limit is set. For products such as credit
cards, you will also have the option to increase your limit after a certain period of
responsible use. However, the closer you get to your limit, the lower your credit score.
This is one of the reasons why it is important to avoid wasting your credit cards or
other accounts. According to Equifax and TransUnion, it's best not to use more than
30% of your available credit.
 The number of accounts you have
Closely linked to credit applications, having too many active credit accounts of all
kinds can be a warning to credit bureaus that you have a debt problem and that you
rely too much on credit. On the other hand, having a variety of well-balanced and
responsibly used credit products can actually be good for your credit score. However,
having too many unpaid accounts at random can certainly ruin it.
 Undisputed errors
The undisputed mistakes made by the credit reporting agencies and the lenders
themselves are another area that can have a profound effect on your credit score. In
fact, this is one of the main reasons to regularly request a copy of your credit report.
Since both credit bureaus operate exclusively online, they generally accept the
information provided by the lenders without verifying their accuracy. As a result, any
mistakes can go unnoticed and negatively affect your credit score. Some of the
common mistakes are:
• Incorrect personal information (name, postal address, date of birth, etc.)
• Invalid social insurance number
• Late payments that were not really late.
• Unauthorized in-depth credit investigations
The most serious mistakes occur during fraud and identity theft. Sometimes, credit
accounts will be opened on your behalf without you even being aware of it. By using
your personal information, an identity thief can open an account and claim all the
credit he wants. Credit bureaus will no longer be notified. If you do not notice it and
the account remains unpaid for too long, it will not only damage your credit score but
could lead to further financial turmoil until the error is corrected. On top of that, the
demands of the lenders in your report, thinking that you have applied it, will damage
your credit score. If you find an error in your report, you can dispute it with the
relevant credit bureau. If he justifies it, it should be corrected within a few weeks. If
you're worried about fraud or identity theft, you can also pay for the proposed credit
monitoring service for a fee from both agencies, which should alert you every time an
account is activated in your name.
 2
THE IMPORTANCE OF A GOOD CREDIT
SCORE

A good credit score is crucial to the financial transaction with attractive terms. A
credit score is a three-digit number reflected in your credit report and is the factor that
will determine your financing capacity, interest rate, loan costs and even maximum
loan amount. Your score will determine whether or not you are approved for the
requested funding, as well as what interest rate will be charged.
A good credit score is generally considered to be 700 or higher.
Agencies that guarantee or insure mortgage loans may have different standards or
conditions of what they consider to be a good credit score, so it is important to
maintain a high score to receive the most favorable interest rates and the cheapest
closing costs.
Clients should know where their credit score is before requesting a loan or having the
intention of acquiring property; to find out if your score will be of help for more
attractive terms since there are penalties that could increase the costs of the loan and
interest rate.
Once you know where your credit score is, the type of financing and offers to offer to
the customer will be determined.
A credit score is a numerical expression based on a level analysis of a person's credit
files, which represent solvency and responsibility by fulfilling terms accepted by a
contract between the creditor and the client.
Lenders, like banks, use credit scoring to assess the potential risk posed by lending
money to consumers.
The credit score is not limited to banks. Other organizations, such as mobile phone
companies, insurance companies, owners, and government departments employ the
same techniques.
If your credit score is low for reasons beyond your control, this could work to increase
in different ways depending on the situation. This exercise can be done by the same
consumer or through an agency dedicated to this. In the case of mortgage loans,
having a low score would affect the type of financing, terms, and costs, according to
the requirements and conditions of the type of loan; for example, FHA loans allow
you to finance the maximum as long as the credit score is greater than 580 points. To
obtain FHA funding with low points, it must be documented that the problem was
caused by a strenuous situation beyond your control, but one that is already in control.
In conventional loans they apply penalties for credit scores that are charged to the
client, this could affect the client applying a higher interest to the requested and higher
costs. Having a high score is an economic benefit in terms of transaction costs. It is
also important to mention that in mortgage loans the score that will define the terms
and costs is the median of the applicant with the lowest score. I explain; There are
three credit companies - Trans Union, Experian, and Equifax - each one of them issues
a score for each debtor, of the three the medians are chosen and of the two medians
the smaller one is used.
If you have a problem with a specific score, you can contact the agency directly, send
the evidence and request a "rescore" to correct any score that you understand was
affected by incorrect information, a debt that does not belong to you or debt that keeps
coming out as active.

Why is your credit score important?

When you apply for credit, insurance, telephone service and even to rent a place to
live, providers want to know if you have a good level of risk. And to make that
decision, they use credit scores.
A credit score is a number. A high score means you have good credit. A low score
means you have bad credit. A higher score means that you represent a lower risk and
that you are more likely to get the product or service - or pay less.
It works as follows: Credit grantors extract information from your credit reports, such
as your bill payment history, the age of your accounts, your unpaid debts and the
collection actions initiated against you. A credit scoring system assigns points to each
of the factors that serve to predict which candidates are most likely to pay a debt. The
total number of points - a credit score - helps predict the odds that you will pay a loan
and meet the payments by the set dates.

Credit scores can be used in various ways. These are some examples.
i. Insurance companies use the information in your credit report and also
combine it with other factors to predict the level of probability that you present
an insurance claim and also to predict the amount you could claim. Consider
this information to decide if they will grant you insurance and how much they
will charge you.
ii. Public service companies use credit scores to decide if they will require a
deposit from a new customer to provide the service. Cell phone providers and
homeowners who rent homes also use scores when considering a new client or
tenant.
iii. Each type of company has different scoring systems and credit scoring models
can also be based on other information apart from the data in your credit report.
For example, when you apply for a mortgage loan, the system can consider the
amount of the advance, the total amount of your debts and your income.
iv. In order to improve your credit score in most systems - focus on paying your
bills by date, cancel outstanding balances and avoid incurring new debts.

Poor Credit Vs Good Credit

Poor Credit:
Poor credit describes an individual's record as a consumer when it specifies that the
borrower has great credit risk. A poor financial assessment indicates bad credit, while
a high FICO (Fair Isaac Corporation) score is an indicator of positive points. Creditors
who lend money to a person with terrible credit face a superior risk of that individual
missing payments or defaulting than creditors who lend to people with great credit.
Good Credit:
A capability of a person's record as a consumer that specifies that the borrower is
protected credit hazard. A high assessment score is a sign of good credit score, while a
low FICO score indicates a bad rating score. A person's credit history relies on a
number of factors, including the amount borrowed, the amount of accessible credit
remaining and the timeliness of payments.
Cost of Poor Credit:
When it comes to your credit score, if you aren't making the suitable or apt financial
decisions to keep it as high as possible, you are playing with fire that could cost you a
lot of money.
In recent times creditors have had to become more selective about who they loan to.
As a result, the difference someone will pay with bad credit versus good credit is
considerable. Lower scores can extremely change your financial position for your
whole life.
Poor FICO rating points can really take a fee on a person's life - and in a bad way. In
fact, the effects can be worse than one might think.
A poor score can make it next to terrible to attain a new car, an apartment, a personal
loan for any small requirements too. Even something as simple as getting a new credit
card will be out of the question for a consumer with a negative history.
Cost of Good Credit:
The situation between two who make the same financial acquisitions and moves over
the phase of their life. They may work in the same place; they live in the same area
and have similar income and family. The only difference between the two is their
credit score.
• If one maintains the good score by:
• Never max out the credit cards.
• Applying for credit sparingly.
• Paying bills on time.
Creditors value this type of borrowing and reward the one by offering more credit,
improving credit limits, which permits the one to spread her balances across numerous
cards. One should know how important ones be in debt and how should take the
necessary steps to protect it.
• People can get loans faster.
• Credit decisions are fairer.
• Credit rates are lower overall.
• More credit is available.
How to Convert Bad Credit to Good Credit

Nowadays, the actual worth of an individual is measured by his or her having bad
credit or good credit. A person who pays all the bills on time will end up with an
excellent credit rating, while a person who is casual about payments will almost
always end up having bad credit. A bad loan credit will create a lot of problems in the
long run and the person may not be able to get any future loans not just from the bank
he or she has earlier borrowed but from any other bank as well. Even if he or she is
able to get a loan, it will be on an extremely high-interest rate.
Hence, it is best to follow the following steps to ensure that you do not have poor bad
credit or are slowly able to convert it into good credit.
1. The first and the most important thing is to pay all the bills on time, every time.
Always remember that if you pay your bills more than 30 days after the last date of
payment, not only is there an extra charge but also your credit rating is spoilt.
2. All of us need to understand that the rate of interest that we pay on credit cards for
exceeds any other rate of interest that we may pay for any other loan. People boast of
having a large number of credit cards and also pay just the minimum balance to keep
the card active. This can really get you in big trouble. Hence, reduce the number of
credit cards you have and try to pay the amount in full. This will help you save money
and also enhance your credit ratings.
3. Avoid any kind of tax liens and bankruptcies as they are bad for credit and remain
on your credit report for at least 10 years. During this time you will not be eligible for
taking any loan from any bank or financial institution. This can put you in serious
trouble as it will become extremely difficult to own a vehicle or a home.
4. A number of times we get ready to become a co-borrower with a friend or a relative
to help them out. Always remember that if you co-sign a particular loan your credit
history will be impacted by no payment or late payment of that particular loan.
Therefore, become a co-borrower, if and only if, you are sure that all payments will be
made on time.
It does not matter whether you have a road loan bad credit or a bad mortgage credit,
work towards rectifying your situation and you will be happy with the direction your
life will be taking.
 3
CREDIT REPAIR

Is there a magic formula to repair your credit?

No. And be careful of the companies that claim to have it.

Do not trust those agencies that ask you for money in advance to help you clean up
your credit. In short, you cannot.
Having bad credit negatively affects several aspects of a person's life. Beyond not
being able to get a loan or have very high-interest rates on credit cards, it can also
impact the ability to rent a home or even get a job.
Often, someone with bad credit is desperate to improve or try to resolve their
situation. Unfortunately, there are unscrupulous people and companies trying to take
advantage of that vulnerability.
Credit repair service ads that offer to erase bad credit records or eliminate unpaid liens
or debts from your credit file, all with guaranteed results, are very common. But the
reality is that most of that advertising is false and those who go to companies that
offer these services can become the target of scams.
"You have to be very careful. We must not believe the promises that are going to save
us from the problems, "says Rigo Reyes, head of research and consumer protection for
the Los Angeles County Department of Consumer and Business Services. "They use
the need and desperation to swindle us and deceive us so that we pay them money for
a service that they will not provide us."
According to a study by the Federal Trade Commission (FTC), Hispanics are more
likely to be victims of debt-related fraud but tend not to report it.

Can you repair the credit?

In summary, no.
But you can correct errors in your credit file such as accounts, bankruptcies or legal
actions that are not yours, debts more than seven years old, unchecked debts, incorrect
dates and misspellings on your behalf.

Savings for you

There are legitimate companies offering services to "repair the credit". But all they
can do is review your credit files, report disputes and follow up with the agencies that
collect your credit information. That is, they do the same thing that you could do on
your own.
You can make these corrections yourselves directly with the credit agencies without
the need to pay someone. And that's not repairing the credit. That's just updating your
credit report because, by law, the information in your credit reports must be correct.

How the "credit repairmen" cheat

In addition to charging a high initial fee and monthly payments to supposedly fix a
client's credit, many "credit repairmen" dispute accounts and debts even if they are
true to pretend that credit problems were erased from your report.
They make that maneuver because, by law, the credit agencies must investigate the
dispute and while they are doing it, they have to remove the negative information
from the report. But once the investigation is over and the original creditor shows
evidence that the consumer did have that debt, that information has to go back to the
credit report.

Calculator
Determine how much monthly income your retirement savings could provide you by
withdrawing.
If you still decide to get help from one of these providers, you should know your
rights. Under the Federal Consumer Credit Protection Act, specifically the statute of
Credit Repair Organizations (CROA), it is illegal for credit repair companies to
mislead and lie about what they can do. In addition, they are prohibited from charging
their services in advance.
Despite the existence of this law, many credit repair companies ignore you. Every
year, hundreds of complaints of abuses committed by these businesses are reported to
the FTC (Federal Trade Commission) and the Office for Consumer Financial
Protection Bureau (CFPB). Although the FTC cannot resolve individual disputes on
credit issues, it can initiate legal action against a company when multiple complaints
are reported and possible violations of the law are identified.
Instead of going to a "credit repairman", it is preferable to consult with a financial
advisor or credit counselor of a non-profit organization to analyze your situation and
help you organize your finances and make a plan to pay your debts.

Monitor your credit report

A study by the FTC found that one in five people have errors in their credit reports
that could reduce their credit ratings. Therefore, it is important to review your file
periodically to be sure that there is no incorrect information that affects your credit.
The financial and credit information compiled by the credit reporting agencies
-Equifax, Experian, and TransUnion- is entered into a file that determines each
person's credit score or rating. The Fair Credit Reporting Act (FCRA) stipulates that
you are entitled to receive a free copy of your credit report from each of the three
agencies once every 12 months. It is recommended that you request your credit report
from the agencies in a phased manner: one agency every four months.
If there are erroneous data, you must report them to these agencies to update the
information. By law, credit reporting agencies must investigate discrepancies within
30 days, unless they consider the disputed items unfounded.
The best way to obtain a copy of your report is at www.annualcreditreport.com, a
website established and managed by the FTC. On the site, you can choose which
agency you want your report from. Avoid using websites like freecreditreport.com and
creditscore.com because they are not from a government agency but from a private
company. You will have to subscribe to a plan and provide your credit card number to
receive your information "for free". Then, if you do not cancel the plan, they will
charge you monthly until you do.
It is possible to improve a person's credit if the information that is affecting the credit
is incorrect. If the information in our records is correct, it can not be removed. Only
time allows it to be erased.

Credit repair can increase your credit score in just 30 days

Credit and debt go hand in hand. If you have faced challenges with debt, then you
probably have also affected your credit. In many cases, you need credit repair to
correct mistakes and mistakes in your credit report that you may have picked up on
the way out of your debts. Only by eliminating these errors can you increase your
credit score instantly with each successful dispute. There are some ways to repair your
credit and some things you should know before you begin.

What is credit repair?

Credit repair refers to the process of a dispute of mistakes and errors in your credit
reports. Each credit agency maintains its own version of your credit report. They
strive to keep accurate information, but mistakes can occur. Credit repair is the
process used to correct those errors by sending a dispute to the credit agency that
issued that report. If the information can not be verified within 30 days, the credit
bureau must remove the item you challenged.

A brief history of credit repair

Credit reports began in the 1960s in the tri-state area of Pennsylvania, Delaware and
New Jersey. The small local agencies maintained the profiles of the consumers, to
track their habits of indebtedness and payment of the debt. Local banks used this
information to help them during the subscription, to decide if a person should be
approved for a new loan.
In 1970, Congress passed the Fair Credit Reporting Act (FCRA). This law protected
the rights of consumers and guaranteed the right to a fair and accurate credit report.
Part of that protection was the right to dispute information that the consumer considers
inaccurate. Therefore, he was born there, the credit repair.
During the next decade, the credit reporting agencies went from being localized
companies to the national credit reporting agencies that we know today. Almost all
lenders and creditors go through the three credit agencies (Experian, Equifax, and
TransUnion) to receive consumer credit reports. That's good for consumers because it
means they only have to worry about three credit reports. As long as you review these
three reports regularly and make sure they are error-free, you can present the best
possible credit profile when someone checks your credit.

What does the credit repair do?

Credit repair allows you to correct negative items on your credit report that could be
hurting your credit score. If you have been working to get out of debt, there is a wide
range of errors that can potentially arise.
• Overdue payments made on time, which often happens when you organize a
payment plan with reduced payments.
• Incorrect account statements, such as an account that says "Complete settlement"
instead of "Full payment".
• Accounts in collections that he resolved with a payment cancellation clause during
the negotiation of the debt.
• Sanctions that should have expired, since the negative information can only remain
in your credit report for a certain period.
• Accounts that were not pre-agreed upon, as agreed, which is another benefit in the
credit that can be obtained through the negotiation of the debt.
Credit repair does not provide a way to eliminate negative information that is accurate
and verifiable. Therefore, this is not a magic bullet that can guarantee you a clean
credit report without negative items. If a negative item can be verified by the creditor
or the lender, repairing the credit cannot help you eliminate it.
But omissions and/or errors occur in credit reports. In fact, they happen more often
than you think, especially when you face challenges with debt.

Increasing your credit score is a wonderful side effect of credit repair

It is worth noting here that there is no guarantee that the credit repair will increase
your credit score. First, if there is nothing to correct on your credit report, the credit
repair will not be able to help you. In addition, credit repair is intended to correct your
credit report. Any positive change in your credit score that results is really a happy
side effect of having your report corrected.
In many cases, people who have errors in their credit reports that correct, see that their
scores improve. However, the amount that increases your score varies according to:
• Where your score started: high scores tend to increase more slowly than low scores
• How many other negative items do you have, and how long have you incurred
them?
• When he incurred the negative item he disputed
But for people who have recently faced debt problems, the potential increase in the
credit rating of credit repair can be enormous. It only depends on your particular
financial situation.
How to repair your credit
There are some different ways to repair your credit. The route you choose will depend
on:
• Your budget, that is, how much you can pay
• Your level of confidence in resolving disputes on your own
• The number of negative items that you want to dispute
The more mistakes you need to correct, the greater the potential you have to increase
your credit score. If you do not have to correct, more than a few mistakes, it could be
worth the money you spend on a professional credit repair service. The money you
save through lower long-term interest rates may justify a little money spent now.
However, it is possible to repair your credit on your own for free. This is also part of
the rights protected by the Fair Credit Reporting Law. Just keep in mind that the
results of "doing it yourself" may vary, even if you think you know what you are
doing.
Even so, whether you use the free credit repair process or work with a credit repair
company, the steps to repair your credit are basically the same.
1. Obtain your credit reports from each of the three credit agencies.
2. Review your reports to identify possible errors and/or omissions.
3. Discuss any errors you encounter with the credit bureau that issued the report.
4. Wait 30 days while the credit agency tries to verify the information with the
issuer of the credit.
5. If the credit agency cannot verify the item, it must be eliminated.
6. The agency must provide a new copy of your credit report so you can confirm that
you have the correct information.

The process of free credit repair

If you perform the credit repair process for free, you must complete all of the above
steps on your own. This is how your part of the process will look in practice:
1. You can download your credit reports for free once every twelve months. Simply
go to annualcreditreport.com to get your free copies every year.
2. Then, check your reports for errors, and focus on the section that lists negative
information, since those are the elements that are hurting your score.
3. Send your disputes online or by physical mail, making sure to provide
documentation that demonstrates your case.
It is important to keep in mind that there is a certain art of making credit repair done-
for-yourself (DIY, for its acronym in English). Therefore, if you decide to repair your
credit on your own, you will need some additional guidelines. Debt.com provides
complete instructions and tips on how to successfully repair your credit in our Free
Guide to Repairing Your Credit.

How do credit repair services work?

Although you can repair your credit on your own, we do not recommend it. If you
have the funds to pay for a professional credit repair service, you should use one. You
are more likely to get the results you want, and it will be much less complicated. So,
just as people choose to hire professionals to manage their retirement funds or to buy
or sell their homes, we also recommend opting for professional credit repair.
This is how professional credit repair services work:
1. Find a reputable credit repair company, with state-licensed attorneys among your
staff. A company must have a lawyer licensed in their state to make disputes on their
behalf, legally.
2. Then, you authorize said attorney with a state license to withdraw your credit
reports and resolve disputes on your behalf. This usually comes with an initiation fee
of around $ 15- $ 20.
3. The credit repair company has your team review your reports and gather the
necessary documentation.
4. They make disputes on your behalf and keep you updated on progress. Generally,
there is a monthly fee that ranges from $ 80 to $ 120 per month.
5. Once all disputes have been closed, they provide you with a free copy of your
credit report so you can review it.

Why credit repair software is not a "happy medium"

There is another way through the credit repair process that is often advertised as a
"happy medium". The credit repair software aims to reduce the hassle of free credit
repair and avoid the higher cost of a credit counseling "counselor" service. Credit
repair software has a unique cost that generally ranges from $ 30 to $ 399. Usually,
they provide a good dashboard to track disputes and models of cards to use so you can
file them.
But make no mistake, this does not help you. You still need to identify possible errors
in your reports. He enters them into the software and then informs him when he
presents a dispute (in other words, the software is not connected to the online dispute
portals for the credit bureaus). So, this is basically a high-tech way to track progress.
As for the models, there are many free models of online credit repair letters. Debt.com
offers a free credit repair letter model that you can use if you want to repair your
credit on your own. The letter model files simply change some words according to
common situations. But if you are not sure about making disputes and how to write
important things (which are the things you must complete with any model), then all
the models in the world will not help you.
The first-line software offers functions such as autocomplete models. But the cost of
this software is comparable to the cost of a credit repair service. That is why we
recommend going directly to a service if you are not sure of making the disputes
yourself. You can try the software, but you may not yet know how to proceed. If you
are going to pay for the credit repair, it is better to do it right the first time!

Avoid credit repair scams

One of the reasons why people distrust credit repair companies and, in general, credit
repair, is that the industry has a reputation as a scam. It is not so surprising. Scammers
love to exploit the despair of people. The more you get nervous about a situation, the
easier it will be to convince you to make a hasty decision.
That's why many scams revolve around problems of debt and consumer credit. It's not
just credit repair. There are debt relief scams, debt settlement scams, credit score
frauds, and the list goes on and on. People despair to get rid of debts and fix their
credit so there will be in the market, who will take advantage of any opportunity that
comes their way.
Warning: Better Business Bureau does not rate credit repair companies
One of the easiest ways to know if a financial service is legitimate is to consult with
the Better Business Bureau (BBB). If a company has an A + rating, then you can have
more confidence that they will provide you with legitimate help. Unfortunately, this
protection is not available with credit repair companies. The BBB does not qualify any
company whose main service offer is credit repair.
The reason the BBB gives is that they will not qualify the companies given the
number of complaints received from the industry, as a whole. They do not feel
confident about giving grades, so they completely avoid the credit repair industry.

Does that not mean that the credit repair is bad?

Yes, it is! And it's bad for consumers to think that credit repair is bad because of the
scams. Some rotten apples make it appear that the credit repair process, in general, is
fraudulent. But credit repair is a federally protected consumer right. And if you avoid
credit repair because you are worried about scams, you may miss the opportunity to
easily increase your score.
The solution is not to completely avoid credit repair or even avoid professional credit
repair services. You simply need to take additional steps to ensure that the service you
choose is legitimate. And you can do it even without a BBB rating.

Tips to avoid scams with credit repair

• Verify the company in the Scam Report and in the Consumer Reports
• Check independent third-party review websites for unbiased customer reviews.
• Use an accredited referral service, that independently verifies reputable credit
repair services.
• Make sure the company has a lawyer on its staff who is licensed to resolve
disputes on your behalf, and in your state
• Check to see when fees are charged and if the company offers a money back
guarantee
• Review all company claims and be careful with absolute values, such as a
company that guarantees that you can improve your credit score by a certain amount
of points.
Most companies offer a free evaluation to answer any questions you have. Use this to
your advantage, to get an idea of the company and make sure it is the right one. If you
do not see very well, thank them for their time and tell them you need time to make up
their minds. Then you can continue to investigate your options and talk to other
companies. Do not make a decision, unless you feel comfortable.
And do not worry. As long as you do not authorize the company to obtain your credit
reports, these initial inquiries will not affect your credit to repair your credit.
From a higher credit score to lower interest rates, there’s plenty of reason to repair
your credit.
Credit repair doesn’t exactly have the best reputation as a financial service. Scammers
love to prey on people’s desire for a quick fix for their credit scores, which had led to
a lot of fraud in the industry. But make no mistake. Credit repair is a legitimate service
that’s protected under federal law. You have a right to repair your credit and there’s
plenty of good reason to do so.

With that in mind, here are the top 12 reasons why you need credit repair.
Reason #1: There’s a 1 in 4 chance your credit report has an error
That’s not some made-up statistic. It comes directly from a consumer credit report
study by the Federal Trade Commission. In 2013, the FTC found that one in four
reports contains some kind of error. Even worse, one in five reports has an error that
would affect a consumer’s credit score. And one in twenty has an error that would
drag down your score by 25 points or more.
So, this is not some small problem that doesn’t affect many Americans. To put it in
perspective, you also have a one in four chance of becoming a victim of credit card
fraud. So, think about all the steps you take to prevent fraud. If you’re not putting the
same effort into keeping your credit reports error-free, you’re almost certainly leaving
money on the table.
Reason #2: You can boost your credit score if you repair your credit
To be clear, the goal of credit repair is not to boost your credit score. The goal is to
remove errors in your credit report. But more often than not, doing so improves your
score. Again, there’s a one in twenty chance that you have a mistake that’s dragging
down your score by at least 25 points.
That means that with one credit dispute, you could see a pretty big jump in your score
in as little as 30 days. If you’re looking for a fast way to build credit and get on the
road to an excellent score, this is it. Although improving your credit score is more of a
happy side effect of credit repair, it’s often the fastest way to boost your score.
Reason #3: You can refinance all your loans for lower interest rates
One of the main benefits of better credit is lower interest rates on all your loans. The
interest rates you can qualify for are directly tied to your credit score. Better credit
means lower rates. It also means that you can get in while the getting is good on low-
interest rates available now.
Lenders set interest rates based on several factors, starting with your credit score. But
the strength of the economy is another big deciding factor. When the economy is
strong, the Federal Reserve raises its prime rate. This, in turn, causes lenders to
increase their interest rates as well.
Currently, the economy is doing well the Federal Reserve has raised rates about half a
dozen times since 2017. They say they plan to continue increasing rates as well. That
means it’s in your best interest to get any loans you have refinanced as quickly as
possible. You don’t want to procrastinate on this! Fix your credit through credit repair,
then call your lenders.
You can refinance most types of loans if you achieve a better credit score:
1. Personal loans
2. Mortgages
3. Auto loans
4. Consolidation loans
5. Private student loans
The only time a better credit score won’t lower your interest rates on a traditional loan
is with federal student loans. Federal school loan rates are not set based on your credit
score. But every other type of traditional financing is, so it’s worth your time to repair
your credit now and then see about refinancing any existing debt.
Reason #4: You can negotiate lower credit card interest rates, too
Almost all credit cards have variable interest rates. The rates on your existing credit
cards rise and fall based on different factors. Right now, as the Fed raises the prime
rate, your creditors are probably also increasing your credit card APR, too. The good
news is that you can call your creditors to request lower rates. The key to making that
happen is a good credit score and error-free credit report.
If you repair your credit within the next 3-6 months (that’s usually how long credit
repair takes) then you can call your credit card companies to ask for rate reductions.
Reason #5: Getting approved for new financing will be far less stressful
There’s nothing more stress-inducing that waiting to hear from a lender if you’re
approved for a loan. It’s nerve-wracking sitting around wondering if your credit score
is strong enough to get you the loan you want. And getting rejected for financing is
heart-breaking.
The good news is that fixing your credit through credit repair is an easy way to
increase your chances for loan approval. The two biggest factors in financing approval
are credit score and debt-to-income ratio. Credit repair helps you fix your credit score.
Then you just need to worry about Debt-to-Income Ratio (DTI), which is something
you can check fairly easily online for free. Once you know your DTI is good and
you’ve fixed your credit, you can apply for loans with confidence.
In addition, you can get the best credit cards, too. Although there are credit cards for
bad credit, they usually:
1. Require you to put down a down payment to open the credit line
2. The interest rates tend to be really high – as in 25% APR or higher
If you have better credit, you get access to better credit cards. The best credit cards
with the most rewards and lowest interest rates are reserved for consumers with
excellent credit scores.
Reason #6: You can become mortgage-ready
Buying a home is still a big part of the American Dream. And with rising rent prices,
homeownership has become the more affordable option in many place, as long as you
can qualify.
Getting your credit right is a big part of becoming mortgage-ready. And when it
comes to lower interest rates on loans, no loan is more important than your mortgage.
Interest charges on mortgages add up to tens of thousands of dollars over the life of
the average loan. Just half a percentage point difference in a mortgage interest rate
means big money paid out of pocket.
Consider total interest charges on a 30-year fixed-rate mortgage for $300,000 with a
20% down payment:
• At 5.0% APR, your monthly payment would be $1,288.37 and the total interest
paid would be $223,813.88 over the life of the loan.
• At 5.5% APR, the monthly payment would be $1,362.69 and total interest charges
would be $250,569.70 over the life of the loan.
That 0.5% difference in your interest rate means almost $75 more per month and
$26,755.82 more in interest charges. This is why you want your credit score to be as
high as humanly possible before you apply for a mortgage. Leave no stone unturned
and start by repairing your credit.
Reason #7: You can take advantage of advertised dealership offers
Car dealerships are notorious for advertising some really sweet incentives to get you
on the lot for your next auto purchase. They’re also notorious for turning most people
down for these offers because their credit score is too low to qualify.
All those no-money-down, no-interest for X years offers aren’t available to most
consumers. But they don’t tell you that until you’re there. Then they basically bait and
switch you into a different loan that doesn’t offer nearly as much value.
With a good or excellent credit score, you can qualify for all those dealer offers as
advertised. You can also use your good credit score to shop around for the best
financing. First, hit up your bank, credit union or favorite online lender. Tell them you
want to prequalify for an auto loan. They’ll check your credit and tell you how many
cars you can really afford.
Then, you take that knowledge to the dealership so you can compare financing. Make
sure to compare the total cost and monthly cost of any dealership offer to the
traditional financing through your preferred lender. This ensures you get the best
value.
Reason #8: You’ll also get discounts on car insurance
Low-rate auto loans aren’t the only way that better credit helps you save money. You
can also qualify for better rates on your car insurance policy, too. Most auto insurers
use what’s known as a credit-based insurance score. Essentially, a low credit score
means you pay more for insurance, even if you’re a good driver with a clean record.
If you improve your credit score, you can call your agent to see if you qualify for a
discount. It could decrease your premiums, deductibles or both, meaning your out-of-
pocket costs for insurance would be lower.
Reason #9: Property rentals will be easier
Whether you want to rent an apartment or care for your vacation, the property owner
will run a credit check. Bad credit means you can get rejected if you try to rent an
apartment. Even renting a car can be problematic. If you have bad credit, they may
make you put down a deposit to rent the vehicle, which could throw off your vacation
budget.
Most people don’t consider how much bad credit can make life more difficult. But
fixing your credit is the best way to get the property rented without any hassle.
Reason #10: You can avoid deposits on utilities, too
Most companies that provide a monthly service will also check your credit when you
apply for a new account. That includes:
1. Electric companies
2. Utility companies
3. Mobile service providers
4. Internet providers
Anytime you apply for one of these services with bad credit, you end up paying a
deposit. This makes moving into a new place more expensive because you need
deposits for all your bills. Fixing your credit means a higher credit score, which can
help you avoid these deposits.
Reasons #11: You may be able to get out of collection actions
Credit repair is 90% about correcting errors in your credit report, but there’s a little-
known use for the service, too. It comes down to the legal definition of when and why
a credit bureau must remove a negative item from your credit report. By law, an item
must be removed if the credit bureau cannot verify the information about the debt with
the owner of the said debt.
Basically, anytime you make a credit repair dispute, the credit bureau goes to the
holder of that debt to ask them to verify the information. They have to be able to prove
it’s your debt and that you owe the amount they say you owe. If they can’t and the
information can’t be verified, by law it must be removed.
This means that there’s a potential to use credit repair to get out of debt collection. If
you believe that a collector does not have complete information about your debt, ask
the credit bureau to verify it. If they can’t, then it’s basically not your debt to repay.
The collection account disappears from your credit report and stops dragging down
your score.
This is true, even if you legitimately owed the original debt. Debt buyers buy and sell
debts all the time and they often do it with incomplete information. If you question
them and they can’t provide all the details necessary to verify the debt, you get off the
hook.
Reason #12: You can avoid risky alternative financing solutions
If you need cash, financing is a good way to get it when you’re running short on
income. You can finance a home renovation or a car repair or even an investment if
you know how to make your money really work for you. But you always want to stick
with traditional financing. To do that, you need good credit.
There are plenty of “alternative financing solutions” (AFS) available that promise you
instant cash in your checking account with no credit check. You can get payday loans
or cash advances or short-term installment loans. All of these are effectively the exact
same type of lending tool. And the trade-off for no credit check is that you pay
extremely high finance charges for these types of credit.
Short-term loans tend to have interest rates that are 300% or even 3000%. You can
pay as much as $30 for every $100 that you finance. These lenders also have
notoriously terrible customer service. They use ACH Direct Debit to withdraw funds
to pay the loan off directly from your checking account. It can be impossible to cancel
or stop payment if you don’t have funds available, leading to NSF fees on the loan and
overdraft fees on your account.
Alternative financing solutions are never a good solution and should be avoided at all
costs. This means that you need good credit to qualify for traditional financing.
Otherwise, your fast-cash solution could leave you in a much worse financial position
than when you started.

Be Wary Of Credit Scams

In today's times, many people look for any way to survive, families and small
businesses are looking for ways to keep their needs, something that unfortunately
makes many people fall into the hands of unscrupulous scammers doing a business of
up to thousands of dollars for a loan that never comes.
While some scams can be easily identified, many of them are not and can cause
disruption to the victim's financial life.
Several loans offer, especially those that operate outside the law and promise to
comply quickly with the application, but the problem lies in identifying which of them
are really reliable.
Many payday loans offer work out of the law and promise fast service, but how can
you know which ones are real? There are even many cases where you have to pay for
"paperwork" expenses, that is where many people fall.
Fortunately, there are some ways and methods to determine if you are falling into a
false ground that leads to a scam or you are carrying out a legitimate process.
The best thing you can do in most cases is to follow your instinct. If you think
something is too good to be true, even though it may be so, you must act with caution
before providing personal information.
Watch the red flags
You should be aware of emails that say they have been previously approved for a loan
they never applied for. In most cases, these unsolicited emails can lead to scammers
and even identity theft.
Unscrupulous lenders will avoid revealing where you are located and your contact
information, so if it is not available, be careful what you are offering.
Another very important aspect to take into account is the request for credit checks,
which are almost never necessary for the application of personal credit, the cheater
lender is only looking for information from your bank account where you can be in
danger of being vilely cheated.
If the lender does not have an office location and offers to contact you, instead of the
opposite, you should probably look for another option.
You should never pay any money in advance to receive a loan. If the lender asks for
money before depositing the promised loan, it is better to cancel any transaction.
Check out the spelling and grammar used in the body of the email. Scammers usually
have poor writing skills because they are based in other countries.
When you are asked to reply to an email other than the one in the header, you may be
looking for a scam. If this is the case, it is best not to respond at all and report the
email to your Internet service provider as a phishing attempt.

Tips to investigate the possible fraudster

Even if you are very desperate to get a loan or credit quickly, it is always better to take
the time to do an investigation to potential lenders who can become a scammer.
One of the ways to do this is to search the Internet by placing the name of the lender
or the alleged lending company with the word 'scam', 'complaint' or 'reputation'. Doing
this will show them the reputation and opinions of other people who have worked with
these lenders or companies and will help them make a decision.
In many cases, a lender may not have information online so you may not have a
reputation established. In these cases, you can choose to do a thorough review with the
financial regulators of your state to give you a good idea of who you are dealing with.
It is always recommended to work with established and registered lenders, as they
have a reputation to maintain and most likely will not be a scammer anymore.
On many occasions, scammers can use a website for a few weeks and then disappear
with the money of your victims, so be cautious with any new company and look
carefully before deciding to accept their offer.
Using Google Maps can be a very valuable ally when you are investigating personal
lenders. Do a search for the address of the company and look at it at the level of street
view. If it turns out to be a vacant lot, the house of someone or something does not
feel legitimate, I recommend that you move away from that option.
It is always important to conduct an investigation so as not to fall into these
vagabonds that take advantage of people's needs. Make sure you feel comfortable with
the company or financial institution that offers you a loan.
Be sure to carefully analyze your options and look for alternative solutions before
getting involved in a personal loan, especially since it is the most expensive financial
product on the market, and you may end up paying much more than you expected.
 4
STARTING FROM THE SCRATCH AND
MAINTAINING IT

How to build credit score quickly?

It is nothing but the "score" you accumulate over time and which defines you as a
good or bad debtor. I'll explain. If you have a loan of any kind, the more you pay on
time and the more your Credit Score goes up if instead, you accumulate delays or
unpaid installments your Credit Score drops one round of hell at a time (I think
Dante's Inferno he referred to this when he wrote it!)
It is important that you take care of your score consistently because over time it will
be the first thing that banks, or loan companies, will see when you ask for a loan to
buy a house, a car or anything else. At the moment, it may not seem important but
trust me, you will change your mind. I've been there. I didn't give enough importance
to it, and when it was time, I regretted it.
The credit card is not the prerogative of Dad's children (except for some cases), but
something that young people use to start building their Credit Score from an
adolescent age. Unfortunately, we are not 16 years old so we must try to catch up as
soon as possible. The problem with the Credit Score is that it is difficult to build when
you have no loans or credit cards and it is almost impossible to get either of these if
you do not have a Credit Score. In practice, a cat that bites its tail.

How to build a Credit Score from scratch?

There are several ways and all of them are effective.
1. The first is to open a bank account. Having an account open in itself will not
increase your score, but it will give you a starting point to show regular income. After
a few months, you can ask your bank (remember to show off your best smile) what
services they offer to increase your Credit Score. My bank, for example, offers a mini-
loan of $ 500 tied up to be returned in 6 months. It means that you deposit $ 500, they
re-loan them to you at a favorable rate and when, in 6 months, you finish paying the
installments, they give you back the $ 500 in the barrel. Practically in 6 months, you
paid interest as a "tax" with the sole purpose of accumulating points. To put it in
simpler words: from 500 and 500 you return, then you pay 500 in installments +
interest and you return 500 at the end. It is an expense, but this type of loan guarantees
you a considerable accumulation of points, but only if you are regular in payments.
2. The second, and in my opinion the best, is to apply for a Secured Credit
Card. Unlike traditional credit cards, you do not have to show any kind of entry to get
approval, but you also have a usage limit. The only thing required is a deposit which is
returned to you after a year of regular use. Until a couple of years ago, the deposit was
around 200 euros, but with the debt problems that developed after the recession, all
the major credit companies have lowered the costs. For example, I applied with
Capital One (but there are many others like Discover). The deposit was only $ 49 and
the card limit was $ 200 a month with the option of 2% cash back on gas or restaurant
expenses. I started using it regularly every month ONLY for these two things and,
after a year, my Credit Score was already considered very good, they also returned the
deposit and the cash back and the credit limit rose to 500 dollars after only six months.
We clarify that you are not obliged to use it only for these things, but I have limited
myself for two reasons. The first is to accumulate cash back (i.e. a refund) at the end
of the year. The second is to make sure I never use more than 30% of the card limit.
Which brings me to the next point.
3. Never exceed 30% of the credit card limit. Believe it or not, it is essential that
you show that you do not need a credit card to pay for your things, but that you use it
only when strictly necessary or as an accurate choice. The more you use it constantly
the better, but judiciously.
4. Pay your installments regularly. All the above points have absolutely no value
if you are not constant in payments. No one here scales your loan or credit card debts
from your salary. It is your responsibility to remember when you have to pay or set up
an automatic payment from your bank account. I decided to set up automatic
payments. As long as he has a good memory, you never know what can happen that
can put you off your mind on the expiry day. So I strongly suggest you do the same
because even a missed payment will negatively affect your score.
5. Vary the types of debt as much as you can. If you can make the Secured Card
And the mini-loan with the bank at the same time, do it. The more options you have,
the faster your Credit Score will grow. Of course, always keep in mind that if you
don't pay on time, they show up at home with the Pit bulls (so to speak or almost). So
if you're not sure you can do better, don't risk it and wait a little longer.
6. Add your name to someone else's credit card as an "authorized user". If, for
example, if you are married to an American who has had much more time than you to
accumulate a decent score (as in my case), it might be a good idea for him to indicate
you as an authorized user of his credit cards. This does not mean that you will actually
have to use his credit cards, but the more his score improves, the more he will
positively influence yours. Be careful though! If you go down, he comes down with
you. This type of choice involves a fat, large demonstration of trust so be careful not
to betray it. If you mess up the Credit Score that has been sweating so much since he
was in swaddling clothes, well I wouldn't want to be in your shoes!
7. Check your Credit Score regularly to make sure there are no problems you
are unaware of and have such nasty surprises. Even a late paid bill can affect your
payer profile. Now pay attention to the following because it's important. There are
several ways to check where you are with the economic 'pregnancy'. The first is to
apply here for your Annual Credit Report, but you are entitled to a free check only
once a year. The second is to check directly in Credit Bureaus such as Transunion,
Equifax or Experian. Also in these cases, you can have a free check per year, or pay a
monthly installment to keep your score constantly under control. Obviously, the
annual checks have their advantages, but be careful not to take too much advantage of
their services. Believe it or not, every time you request a check this will lower your
Credit Score. Crazy, right? And this brings me to the only sensible solution that
remains to keep the score under control.
8. Download the free Credit Karma app. Not only does it constantly give you a
detailed report of your score, but also what has positively or negatively influenced,
which credit cards or loans are best suited to your situation, your progress, and many
other functions. It's all free and, although not updated to the minute, rather accurate. It
does not lower your Credit Score and also offers you many other services such as
online and free tax returns. Due to Credit Karma, other major credit companies have
also had to adjust to offer the Credit Score free check. For example, Capital One and
Discover have now integrated this service into their offers (although in a more limited
way being a cost to them).
If you follow these tips in a year you can afford to ask for a car loan without having to
pay disproportionate interest or even more, depending on your income and your
general receivables/payables situation. This reminds me of how important it is to start
as soon as possible. Remember that this is the first thing they look at when you need
to apply for a loan!

Credit Repair: How To Improve Your Credit Score

If you're short of money and having trouble making ends meet, improving your credit
score could be the last thing on your mind. Millions of Americans are suffering from
dinged-up credit: the persistent result of the recession, the lack (until recently) of real
wage increases, the slow growth of the economy. But a strong credit score is the
backbone of an individual's financial health. With low or no credit, you can end up
finding yourself paying a lot more for the essentials of life than those who have strong
credit. The importance of a good credit score goes beyond just getting a low-interest
rate on a loan. Driving credit score, for example, is an important factor in car
insurance prices.
Regardless of what happened to you financially - if you have gone through foreclosure
or bankruptcy, got behind on credit card payments or collected a lot of debt - you can
rebuild your credit. Here's how:
 Check the credit report
The credit score (often referred to as your FICO score) provides a snapshot of
your credit status. It is determined by a series of factors that can be divided into
the following categories: credit history - How long have you been using credit?

 Payment History - Do you have a history of paying on time?

Credit amount - How much do you do and how much do you owe?
So the first thing to do is to assess the damages by looking at a current credit report
issued by one (or all) of the three main credit agencies: TransUnion, Equifax or
Experian. Under the Fair Law and Accurate Credit Transactions, every American has
the legal right to receive a free report from each of the businesses per year, which will
save you money for handling fees.
 Check over your credit report with a fine tooth comb: verify that the
amount due for each account is accurate. And look for all the accounts you paid
 off that still show as outstanding issues. If something seems correct or you are
not sure of all the elements, then it is your right to contact the credit agency in
writing and ask them to investigate the problem and make a change. The
Federal Trade Commission recommends sending the letter by certified e-mail
and requesting a return receipt so you know the office has received. According
to the FTC, companies generally must investigate disputes within 30 days of
receiving a request for correction.
 Pay particular attention to any requests for recent information that you
have not authorized. Before an endorsing creditor, or someone pretending to
be you, for an account, they will make a request that will be indicated on your
credit report. If there are any requests that you have not authorized, inform the
credit bureau immediately.
 Checking your credit report on a regular basis, at least once a year, is a
good way to collect any cases where you could be the target of identity theft -
or the credit bureau has accidentally mixed your story with someone similar
name (happens more than you might think). If you are concerned about others
accessing your credit report without your permission, you can freeze it, which
will limit who can access the information and under what circumstances. If you
think you are a victim of identity theft, contact your local police authority
immediately.
 Contact Your Lenders
It is always best to contact lenders, creditors or service providers (for example, your
service or medical company) as soon as possible when facing financial difficulties so
as to get their help to stay current on your account. Collection agencies and legal fees
cost lenders a lot of money, so they are often open to negotiations, which are free.
Call, email or write to explain your financial situation (for example, if you had an
unexpected loss of job or series of expenses due to medical emergency). Discuss a
new payment plan and make a good faith payment to start improving your account
status.
Assuming unemployment is not the problem, job stability is a good indicator of
lenders that you will do well on your debts. If you have a lackluster resume, make the
choice to stay in your current position for at least a year or two to build trust in
lenders. Of course, do not hesitate to take a new position if it is a substantial salary
collision.
 Pay early and often (or at least, on time)
Once you know what you have to work on, make sure that all your accounts are
current, and up to date. Were you a bit late paying that MasterCard bill last month?
Well, this will go on your credit report and lower your credit rating. The longer and
more often than not you make bill payments on time, the lower your credit rating will
become. And many lenders do not give credit to people with a history of recently
missed payments on other credit accounts (with recent conversion two years ago).
Missing enough payments that your account is turned over to a collection agency is
another safe way to tank your score, not to mention restricting access to affordable
credit - or making it cost more than it should.
Credit reports record payment habits on all types of bills and extended credit, not just
credit cards. And sometimes these objects show up on their own official report, but
not that of another. Old, unpaid gymnastic odds that only appear on a relationship
could be affecting your score without even realizing it.
A full one-third of your score depends on whether you pay your creditors on time. So,
make sure you pay all your bills by their due dates, including rent/mortgage, utilities,
doctor's bills, etc. Keep documentation (such as checks or canceled receipts) to be able
to prove that you've done the punctuality of payments.
The Fair Isaac Corporation, which calculates FICO scores, recommends signing up for
payment notices if the lender makes them available. You will receive an email or text
message announcing the upcoming expiration date, making it more difficult to forget a
payment. Another approach is to create automatic drafts from your bank account.
There is no need to pay the bill in full to have the payment counted as time; you just
have to pay the minimum (although this is not there to do any favors - that is there to
keep you in debt: you'll be paying a lot of interest, and paying the balance for years).
However, if it's all you can afford, it's best to make the minimum payment on time to
not make a payment at all. The important thing to remember is that a consistent
history of timely payments will cause the credit rating to rise.
 Pick up a payment order
When using your cards, try to pay them off as soon as you can (you don't need to wait
for the instruction in the mail, but you can pay online at any time). When you have the
extra money to pay your balances, focus on the cards that are closest to being maxed
out, to benefit your most credit score. Next, zero in credit card balances that are over
50% of your credit limit. Borrowers who have used up more of their available credit
are considered higher risk.
Having said that, if these are the cards with the lowest interest rates, perhaps because
you took advantage of a low balance transfer offer in April, the savings you get from
paying your debt the highest interest rate can first be more important to improve your
credit score.
When a card is paid, take the payment you were making to the paid-off card and add
that to the next card.
 Don't open too many accounts
The number of credit accounts you have opened is also important for control. Credit
cards are easy to open. Almost every store has a quick, convenient way to get a new
card. interesting incentives, such as discounts on the purchases of the day you sign up,
add to the temptation. If you shop at that store, it can often be worth getting your card;
otherwise, resist the temptation.
It's not just that the new plastic can encourage spending. Having too many cards can
damage your credit score. Loan lenders will look at the total amount of credit you
have available to you. If you have 10 credit card accounts, and you have a credit line
of $ 5,000 each account, then that will amount to a total of $ 50,000 in potential debt.
Lenders take a look at this potential debt load - as if you were going to get out and
maximum all of your cards tomorrow - before considering how much they lend. They
also worry about whether you will be able to meet your financial obligations.
What's more, every time you apply for credit, the potential lender will check your
score. Whenever the credit is selected, other potential lenders worry about the
additional debt that they can take on. Sometimes, the act of opening a new account, or
even applying for one, can lower the score; have a lot of recent inquiries about your
credit report dings your score temporarily. So don't ask for the card often if you want
to increase your credit score.
 Don't close credit cards
A good idea would be to keep three or four credit card accounts open, but use only
one or two of them; put away or cut the others. Once you have paid a card, however,
keep the account open, even if you don't want to use it anymore. Closing a credit card
will lower your credit score, even if it is always paid on time and I have not had a
balance. If you feel like closing a card for its high annual fees, try calling the credit
card company and ask them to downgrade to one of their free cards. This allows you
to keep a longer history with the company, which is important for a healthy credit
score. The credit card company will report to the credit bureau that you have a good
record with them, which will increase your credit rating.
In closing, late accounts or those with a history of late payments can also help, as long
as you have paid them in full. Because history is important if you decide to close a
couple of accounts, close the most recent ones. The length of your credit history is
15% of your score, so even after paying the sales down, keep the oldest cards open.
Be sure to use these cards to make occasional purchases (so pay the bills in full), so
the card company does not close the account due to inactivity.
 A card to consider
If you need more plastic, experts recommend applying for a real estate credit card,
where the balance is linked to the money held in a specified account. These cards
often come with high fees, a high-interest rate, and a low credit limit, but they do
report the repayment history for the three major monthly credit agencies. Use your
card to build a positive credit history and wait: as you make payments on time, your
credit score will improve after a few months of constant use.
If you opt for this method, screen the card issuer carefully, as the annual or application
fees between different providers may vary (this also applies to unsecured credit card
providers). Try to find a credit issuer that does not charge a registration fee and allows
you to convert your unsecured card for a normal credit card after 12 to 18 months of
the established payment history, and report the history on all three credit agencies.
After all, if the issuer does not report to the credit bureaus, the card will not help build
your credit history.
 Increase the credit limit
There is a way to increase your credit score that does not involve paying a debt or any
of the other more traditional credit score tactics by increasing. Since credit scores are
determined, in part, on the difference between the credit limit and the amount of credit
used, ask for a higher credit limit. Your chances of increasing it are probably better
than you think. Of those applying for a higher credit limit, 8 out of 10 have been
approved, according to a recent money survey. While it helps to be over 30, there is a
good chance for all adults. To prevent the credit decreased with the request for a
higher limit, to ask for the highest credit line increase that does not trigger what is
called a difficult request.
By increasing the credit limit, the differential between the amount you are allowed to
borrow and the amount you actually make is automatically increased. The larger the
spread, the higher the credit score.
 The credit utilization report
This spread, known as the credit utilization ratio, is expressed as a percentage. For
example, if the limit on the MasterCard is $ 5,000 and you have a budget of $ 4,000,
the usage ratio is 80%. If you request a credit line increase and the limit goes up to $
10,000, suddenly your use is only 40%.
Obviously, the higher the percentage, the worse you look. Experts have long said that
using 30% of available credit is a good way to keep your credit score high. More
recently, this recommendation has been reduced to 20%. In the $ 5000 MasterCard
limit example above, 30% usage would represent a $ 1,500 balance. Increasing the
credit limit from $ 5,000 to $ 10,000 would allow a $ 3,000 balance and still maintain
30% utilization. (This, of course, is just one example: it is not likely that you would
get a 100% increase in your credit line. But any amount will help increase the spread
and lower the utilization ratio).
One-third of your total credit score is based on the credit utilization ratio in all your
cards. Due to the way the credit scoring works, it is better to bring a $ 1000 balance on
a card with a limit (20% credit usage) $ 5,000 than to make a $ 500 balance on a card
with a limit (use of credit 50%) $ 1,000. That's why, in discussing the payment
hierarchy, we recommend paying the cards closest to be maxed out. This is also the
reason why you should not close your accounts; which will increase the percentage of
total available credit that you are using - and which will reduce your score.
 Negotiate a lower interest rate
However, the key to this strategy is getting more credit, but no longer using credit. In
other words, if the limit goes up to $ 1,000, don't go out and half responsible for it.
Think of the push as a way to save money later, when applying for a car loan, home
loan or another form of long-term debt where a high credit score will probably lead to
big savings through a rate of lower interest.
While you are in it, ask the credit card company if they could lower the APR on the
card. With a lower interest rate, your existing credit card debt stack will not grow as
much every month, and you will be able to pay down the balances faster.
 Diversify the types of credit
A good credit score has a mix of both debt/credit installment, such as a car loan,
student or mortgage loan, and revolving credit, such as a credit card line or home
equity credit. This balance of credit types represents 10% of your FICO score, which
is significant enough not to be overlooked.
 Beware of scam artists
If you are having trouble paying some of your bills in a timely manner, then maybe
debt consolidation is right for you. (See digging up personal debt.) But with caution:
This is a mature field, with scam artists rebuilding nothing but their bank accounts. If
you approach with an offer to help negotiate the debt, make sure that you receive a
copy of the consumer credit file rights under the federal condition and law and a
detailed service contract including contact information has declared guarantees and an
outline of taxes and services before providing personal information or turning
financially linked documents. Request references, do online research and keep copies
of all documents and correspondence in case a dispute arises.
Moral of History
The most difficult part of getting out of debt and improving your credit score is
patient; it can have an appreciable effect, but it will take time for your score to reflect
your efforts. Unless there are big mistakes on your credit report that can easily be
deleted, there is no quick fix for a bad credit score. Often, it takes at least a couple of
years to go from a low score to a high one.

How To Improve Your Credit Score After Bankruptcy

To take advantage of the credit in the future, it is very important to improve your
credit rating after filing for bankruptcy.
Bankruptcy is paralyzed on several fronts. Not only does it damage your financial
position, but it also affects your confidence. But after failure, you need to learn how to
move forward. Unfortunately, it is difficult to get out of the mental abyss that recedes
into after a failure. However, what a person needs is a well-planned approach in such
a situation.
Need to improve the rating
The reasons for improving your credit rating or score quickly are twofold. First, a
bankruptcy pounds the credit score, which reduces the chances of availing credit in the
future. So unless you bring it up to an acceptable level, the chances of you getting the
credit you need to rebuild your life are pretty low. Secondly, it is well known that
people with a better score can get a loan at a lower interest rate. So when you improve
your score, you not only become eligible for a loan again, but you can get a lower
interest.
Ways to improve it
It may be relevant to understand the factors that determine the FICO credit score and
their individual weight. Here are the factors that determine it.
 Payment History- 35%
 Debts - 30%
 Credit History Length - 15%
 New Credit -10% Credit
 Types Used - 10%
It can be noted that most of the emphasis is on payment history and the amounts
currently due to others. Moreover, the longer your credit ratings will be, the more
successful your ratings will be. It should be noted that a large number of new accounts
will negatively affect the score, while the competence to effectively visualize different
sorting credit forms will be positively evaluated. Here are some suggestions for
improving your rating.
Pay your debts
Simple and direct. Pay all the money you owe to banks, credit card companies, and
other assorted lenders. The faster you reduce your debts, the faster your score will
improve. After all, a lot depends on your debts. 30% to be precise.
Credit Display
Paying debts is fine, but where will the money come from? You could avail bad credit
loans or request a credit card company to give you a credit card. Systematically
availing and paying credit will help improve the score. From the moment, the types of
credit in use are also taken into account, this approach can benefit. Also, ensure to pay
mortgages/bills regularly.
Strategically reduce debt
It is very important to plan a debt strategy. Such as? Get a short term loan or a loan
with a negotiable rate of interest. This way, if you keep paying bills, your rating will
improve and it will be applicable for credit at a low-interest rate. You can use credit
financing to reduce debt by paying off. You could also use a credit card instead of a
loan.
Do not close Zero Balance Accounts
If there are accounts or cards whose balance you have successfully paid out, do not
close them. It is always good to view the clean criminal record. This phase has a triple
advantage. First, it seems they have paid their debts. Secondly, it shows your expertise
in paying more types of credit and thirdly, it shows a longer credit history.
Building Not Activities Passivity
This may not be explicitly mentioned anywhere, but it is just common sense.
Increasing assets increases reliability. If you have sufficient resources, you will be
able to mortgage them for credit. So creditors will give you credit for getting a good
guarantee in exchange for their risk. Avoid construction liabilities like credit card bills
as it will affect your negative rating.
Keep in touch with credit institutions
Always be truthful about your financial situation and be in good "books" of your
credit institutions. Always keep in touch with them and express your inability to pay,
if that is the case, and see if it is possible to make an agreement in any way. After all,
they want their money and not the rating to fall.
Keep an eye on credit reports
There are chances that there may be some error in the credit report. If you feel this
way, contact the rating agency right away and get it reviewed.
Failure is an experience that no one would like to go through. However, with a good
plan and guidance, you will be able to overcome it.

Improve Credit Scores After Foreclosure

Foreclosure can drop a consumer's credit scores with a huge margin. If you have had
the misfortune of going through a foreclosure, then the following article will tell you
how to rebuild your credit score.
A fall in house prices, the subsequent recession, and the high unemployment rate has
caused a number of people to default on their mortgage payments. Bankruptcies and
foreclosures followed as a result of defaulting on capital and interest on home loans.
Since the consumer payment history is one of the most important factors affecting the
calculation of credit scores, a foreclosure was intended to have a negative impact on
the credit rating of the former home. Hence, the topic of improving credit scores after
the foreclosure has taken on great significance.
A creditor can initiate the foreclosure procedure and complete the entire process
outside the court system, assuming that the mortgage deed has a sales clause power. In
the absence of a sales clause power, the lender has no choice but to take the borrower
to court. In other words, judicial foreclosure is predictable. Regardless of the nature of
the proceedings, the details are listed in the public record and the consumer's credit
report. The information remains firmly positioned in the consumer's credit report for a
period of 7 years.
As mentioned above, the consumer's credit score decreases from 350 to 400 points
following a foreclosure sale. Although a spotted credit report and a low credit score is
a double whammy, a number of creditors give proper credit to the consumer's efforts
to improve credit scores. Good credit scores are a must to procure loans at a favorable
interest rate, for availing insurance, and for the sake of applying for jobs that require
the applicant to assume managerial and financial responsibilities.

Improve post-foreclosure credit score

In order to improve credit scores after foreclosure, you should avail either installment
or revolving credit and make it a practice to pay interest on a regular basis.
Establishing a history of regular payments can go a long way in helping the consumer
build his / her credit scores. The same approach can be adopted by a consumer who is
interested in improving credit scores after bankruptcy.
Guaranteed credit cards
People can opt for secured credit cards to rebuild credit since consumers can be
approved for these cards within 6 months of a foreclosure sale or discharge failure.
These credit cards are guaranteed by a CD which acts as a guarantee for credit card
companies. The credit line is usually 50 to 100% of the deposit amount. A practice of
repaying the entire balance on the credit card on a monthly basis will result in the
credit card company extending further credit lines to the consumer without further
deposits as collateral. A secured credit card is converted into an unsecured credit card
within 18 months, assuming that the consumer is careful with payments.
FHA secured loans
People whose homes have been foreclosed are required to wait for 3 years from the
date of a foreclosure sale to avail themselves of an FHA insured loan. Assuming that
the consumer is approved for a secured credit card and brings his / her credit score by
620 points, FHA secured loans can become the springboard for further improvement
in credit scores. The Federal Housing Administration (FHA) offers secured
government mortgages that protect the lender in the event that the homeowner's
default values on the mortgage. Thus, the consumer can take advantage of a down
mortgage by paying only 3.5 percent of the home purchase price.
These measures are not only useful for consumers who are interested in improving
credit scores after foreclosure, but also essential for people who are eager to improve
their credit rating after debt settlement since a debt settlement does not cancel out.
completely delinquent information from the consumer credit report. The net result is a
good credit report and satisfactory credit scores.
Anytime you apply for one of these services with bad credit, you end up paying a
deposit. This makes moving into a new place more expensive because you need
deposits for all your bills. Fixing your credit means a higher credit score, which can
help you avoid these deposits.
 5
WHAT IS A FICO SCORE?

Understanding The Fico Credit Scoring Algorithm

History: The method that changed the credit scores

The small company created in 1956, FICO, would change in just two years the way in
which banks granted credit to the average American.
In the United States, in 1956, the engineer William Fair and the mathematician Earl
Isaac met while working at Stanford Research Institute. Soon after, they launched the
company Fair, Isaac and Company, which would later become FICO.
The FICO credit score is a score of 300 to 850 that assesses the level of risk the
applicant has when it comes to returning a loan. Before its creation, financial
institutions had little information and internally assessed whether or not they granted
credit to the applicant.
This method focuses on the analysis of data in general and on credit rating services in
particular. They sold their first credit scoring system two years after the birth of the
company. The FICO system was well received. He launched his system to 50
American lenders. This method of scoring, FICO, understood as a measure of
consumer credit risk has now become a complement to consumer loans in the United
States.

How does FICO work?

The information on which this system is based is objective and consistent. By law,
creditworthiness cannot be based on the applicant's race, religion, sex or nationality.
Therefore, it is a non-discriminatory system.
The points to be evaluated are three, one for each of the three risk centers: Experian,
TransUnion, and Equifax. According to MyFico, the scores are based on the
information that the credit bureau has about a person. If this information changes, the
credit scores also change. In addition, the three scores on which they are based also
affect loan conditions that loan institutions will offer us. So, what happens if we
improve our scores? Well, we will have better interest rates from the institutions. It is
important to be clear that new debts will have a negative impact on our score.
According to Lawyers Title, the search for new credit and the opening of new credit
accounts to pay previous accounts will also affect the score.
It is necessary that the three credit reports have, at least, an updated account in a
minimum of six months, each one. This ensures that there is enough updated
information to calculate the FICO score. There is a relationship between the risk of
return and the scores: the higher the score, the lower the risk. Each lending institution
has the right to choose the level of risk it is willing to accept for each loan.
Most of the scores of risk centers used in the United States are called FICO, as they
are created by software developed by Fair Isaac and Company.

Credit score: what is and what is taken into account

Maybe you've heard about the credit score. This index is a rating made based on your
history as a payer, that is, an operation similar to the US FICO. For example, when
you are going to ask for a loan in a financial institution, the approval or not of that
financing will depend on your credit history.
This history is summarized in what is known as a credit score. Therefore, it is an index
that indicates how solvent a person is, what their financial health is like and how
qualified they are to repay a loan. In order to determine the credit score, several
variables are taken into account:
• The money that remains available, once the fixed expenses have been paid.
• The punctuality with which you make the payments.
• The possibility that you do not make a payment (the default).
• If you have had credits or not. In the event that you have had to observe if you paid
regularly if you had problems to deal with them ...
• Debt capacity. This is how much you could get into debt.
When it comes to requesting a loan, it is important to bear in mind that, the higher our
credit score, the better the conditions they will give us. The banks will also observe if
we have been granted a loan in advance. In the event that we have not had previous
loans, it will be more difficult to predict what our credit behavior will be.
Therefore, the credit score is a system that benefits both parties. To the banks to have
an efficient system to know the financial health of the clients, and for the consumers,
in order to obtain more favorable financing conditions.
The FICO scoring system has been extended from the United States to many countries
as well. With this score, the users of this app can know your note and negotiate better
conditions with your entity. So it is no longer necessary to go blind when it comes to
asking for a loan. An option that brings the transparency we need.

How "FICO 08" Impacts Your Credit Score

Changes Planned in FICO 08

The primary reason for the switch to FICO 08 had to do with the forecasting powers
of the new model. Fair Isaac believes that FICO 08 will do a better job at predicting
the likelihood of default on a loan by making two changes to its existing model:
Authorized Users - An authorized user is a person that is permitted by another
account holder to use their account. Normally, this situation applies to a family
member who is trying to manage credit for the first time, such as a college student.
The new scoring model eliminates "piggybacking" which allowed individuals with
bad credit to leverage the payment histories of "stronger" credit card holders by
becoming an authorized user on their accounts.
Delinquencies - The second change in the scoring model has to do with payment
patterns - especially those that are greater than 90 days late in making a payment. The
FICO 08 model will be more forgiving to consumers that are in arrears in one area but
have a number of other accounts that are in good standing.
Fair Isaac predicts the above two changes will reduce the default rates on consumer
debt by 5 to 15% for those companies switching to the new model.

How will FICO 08 affect your credit score?

Keep in mind that credit scores are used by many lenders to determine the amount of
credit to extend a borrower. These creditworthiness thresholds are usually based on
predetermined bands of credit scores. To make it easier for lenders to adopt FICO 08,
the new scoring model will retain the same numerical range (300 - 850), minimum
scoring criteria, and parameters as the prior model.

Credit Score Examples

The following examples help illustrate the rules-of-thumb that apply to FICO 08, and
how this model might change individual credit scores:
If you have at least one major account in delinquency, but you also have a number of
accounts in good standing with creditors, then your credit score would likely
increase/improve with the new model.
If you have at least one major account in delinquency, and you demonstrate a poor
payment pattern with several other accounts with creditors, then your credit score
would likely decrease/deteriorate with the FICO 08 model.
The consumers might experience a 20 to 25 point adjustment to their credit scores
where the above situations apply. The most effective way to improve your credit score
is by ensuring the information used to generate the score is accurate. This includes
obtaining a copy of your credit report and looking for errors.

myFICO Review: Everything you always wanted to know

Recently I was able to spend a good deal of time visiting the myFICO website. Here
you can get the most updated FICO score for only $ 19.95. But the site offers much
more than your score. They have several other "tabs" on their home page that provide
everything from a variety of monitoring and FICO score protection products to the
latest low-interest credit cards.
FICO score defined
First, let's define what we're talking about. In today's "credit-focused" world, all the
different scores and reports can be confusing. The FICO score is determined by the
Fair Isaac Corporation (hence the FICO name) and is a way to measure a person's
creditworthiness. It's a score that can range from 350 to 850. There are many things
that determine your score (the whole process is complex and very well guarded).
Among other things, it includes the default history, the current amount of debt you
have and the length of your credit history.
This number is used to determine everything from mortgage rates to credit card terms
to car loan interest rates and is used by around 90% of banks in this country. And for
the most part, your FICO score is the only thing that matters when it comes to
determining these rates in your financial life. Any other so-called "score" out there is
actually just fakes.

The site itself

myFICO offers you immediate access to your FICO score for only $ 19.95. As I dug
into the history of myFICO, I discovered that some time ago, access to this score was
free, but not anymore. I've read in many places now that it's considered "not free, but
the only score that counts". As an example they give, only a score of 100 points in the
FICO score could mean a difference of $ 40,000 in additional interest for the life of a
thirty-year mortgage.
myFICO is simple and easy to navigate the site. There are four tabs on their home
page, all offering different products related to your FICO score. The FICO scores and
credit reports list all the products they offer, all of which offer a number of scoring
advantages. The Financial Assistance Center tab provides a description of why your
score is so important and links this information to the different products offered.

One of the most important pages on the Internet

The Education tab for me is one of the most complete pages on your credit score I
haven't seen on the Internet yet. Here you can get an in-depth explanation of what
your score is, what your credit report is and what it affects and does not affect them.
They give you tips and suggestions to improve your score, correct mistakes in your
report, how to prepare yourself for big purchases, along with forums, videos and a
question and answer section on everything that is financial. They also offer several
interactive "calculators" that can help you determine everything from how much it
would take to pay a credit card to how much money you can afford to borrow for a
home loan.
And more
The site has a card called Credit Card Center which offers you a fairly complete list of
any type of credit card you may need. Here they list credit card balance transfer offers,
credit cards with the best reward programs, cards to help you build your credit,
business credit cards and a consulting section to help you decide which card is right
for you.
Finally, they have a Community tab that contains forums on topics covering virtually
everything that is financial.

The bottom line

myFICO is basically your one-stop-shop for everything related to your credit score. I
really can't think of anything they left out. There are many places on the Internet that
offer you different types of scores and reports, and so on, but your FICO score is the
only one that really matters. Most other sites are simply out there to sell you products
that you may or may not need, while myFICO, in addition to offering you the most
up-to-date credit score, provides you with relevant information on everything related
to the determination of that score.
If nothing else, the Education page should be on everyone's favorite list. The
information provided is simple and does not aim to try to convince you to buy a
particular product or a credit card. It offers objective advice on everything that is
positive or negative with respect to your credit score.

Would I buy it?

I don't always recommend spending extra money when it comes to managing your
debt or credit. However, I think I would definitely give FICO my test if I ever had
questions or doubts about my FICO score. It's a great tool to have available if you're
trying to get rid of debt, if you're trying to figure out your score, or if you're preparing
to make a big purchase of any kind.
But let me quantify it a little. Your FICO score is based largely on information
contained in your credit report. I would NEVER pay my credit report because you can
get this report for free once a year from one of the three major reporting agencies.
However, I have not yet found any site that can give you your score for free. All the
sites that claim to do this more than likely will not provide you with your real FICO
score.
The world of credit reports and scores and credit management can be overwhelming
and intimidating. One of the best ways to navigate through all the information you
need to make informed decisions about your credit can be found on myFICO.

How Credit Queries Affect Your Credit Score

Have you noticed any queries on your credit report? Not sure what they mean? Soft
and hard investigations are the result of potential creditors who evaluate your credit
report after requesting something like a credit card, a mortgage or a car loan. Hard and
soft investigations each affect your credit differently.

"Soft" inquiries about your credit report

Do not worry. Soft inquiries do not affect your credit score. Normally, soft inquiries
occur when your credit report is requested for a background check. This can happen
when you are applying for a new job, get pre-approved for loan offers, and even when
you verify your own credit score.
While they usually show up on your credit report, this is not always the case. Also,
they will not affect your credit score, so you do not need to worry about them.

"Hard" queries on your credit report

These investigations are more important and could affect your credit. Hard
investigations occur when a lender pulls your credit report to make a loan decision.
This happens most commonly when you apply for a loan, a credit card or a mortgage.
However, there are other reasons why your credit may reflect a difficult investigation,
such as when you request an increase in the credit limit.
They can, in some cases, lower your FICO score from one to five points and can
remain on your credit report for up to two years. Normally, the hardest questions on
your credit report will most likely affect your score.
Multiple difficult consultations in a short period of time can cause significant damage
to your credit. When multiple hard investigations come through at once, the credit
bureaus assume that you are desperate for credit or can not qualify for the credit you
need. Any future creditor can also take this information and assume that you are a
high-risk borrower, which will reduce your chances of getting the credit you need.
In fact, according to myFICO, people with six or more hard questions in their credit
are up to eight times more likely to file for bankruptcy, compared to people without
questions, which means that more inquiries usually means greater risk.
What does this mean to you?
There are certain cases that can result in a mild or difficult investigation depending on
the situation (for example, when you rent a car or sign up for a new cable or Internet
service). If you are not sure if your actions will lead to a mild or difficult
investigation, you can simply ask the financial institution that is requesting funding.
Another exception is when you are making rate purchases. Generally, your FICO
score will record only one investigation within a period of 14-45 days if you are
shopping for the best mortgage, auto loan, or student loan rates. By making all your
purchases for the same type of loan within a two week period, you can reduce the
effect on your credit.
If a difficult investigation was done without your permission, you may be able to
dispute it. This can be done by calling or writing to the creditor and asking them to
eliminate the unauthorized investigation of their credit report. You can also dispute
them directly with the credit bureau. Otherwise, if you have authorized the difficult
investigation, it may take up to two years to disappear from your credit report.
As is the case with anything that negatively affects your credit score, investigations
can affect your ability to obtain good loan rates. More hard research means a lower
credit score, which means fewer credit options or a higher interest rate. This
ultimately means that you will pay more over the life of the loan.
The good news about a difficult investigation is that if you are not doing it often, it
will not have a big effect on your credit. For example, factors such as your payment
history, credit history, and credit rate are weighted much more. Continue monitoring
your credit every month to make sure there are no unauthorized hard investigations or
other problems so you can continue to maintain the highest score possible.
On the other hand, if you already have bad credit, then a further hard investigation can
have an even greater impact on your score. Try to keep your hard questions to only
one or two a year, if possible.
 6
RATING AGENCIES

Who are the rating agencies?

Credit rating agencies (CRA) are private companies whose main activity is to assess
the ability of debt issuers to meet their financial obligations. Contrary to what the term
"agency" might suggest, these are private for-profit organizations and not regulatory
or government organizations.
The main agencies on the market are Moody's, Standard & Poor's and Fitch Ratings.
These three agencies alone hold about 85% of the market. There is virtually no
competition in this market because the barriers to entry are very high.
The rating agencies' business model is based primarily on remuneration paid by rated
entities, advisory activities and the dissemination of rating data.
What is the notation?
The rating gives an opinion on the ability of an issuer to meet its obligations to its
creditors, or security to generate payments of principal and interest in accordance with
the schedule. Registered entities are therefore potentially all financial or non-financial
agents issuing debt: governments, public or semi-public bodies, financial institutions,
non-financial corporations. The rating may also relate not to an issuer in general, but
to a security (bond, ABS, and MBS, etc.) in particular. The rating of securitization
operations expanded considerably before the 2008-2009 financial crisis.
Different rating scales exist depending on the agencies, entities rated and the period
considered (long-term or short-term).

Notation Description
AAA  The rating 'AAA' corresponds to the lowest possibility of
Best credit default risk. It is only awarded in the case of an unusually high
quality capacity to meet financial commitments. It is highly unlikely
that this ability will be negatively affected by predictable
events.
AA  The notation 'AA' corresponds to a possibility of very low risk
Very high credit of default. It denotes a very high capacity to meet financial
quality commitments. This capability is not significantly vulnerable to
predictable events.
AT  The notation 'A' corresponds to a possibility of low credit
High credit risk. The ability to meet financial commitments is considered
quality strong. This capacity may nevertheless be more vulnerable to
adverse commercial or economic conditions than in the case of
higher ratings.
BBB  The notation 'BBB' indicates that credit default possibilities are
Good credit currently low. The ability to meet financial commitments is
quality considered satisfactory, but adverse business or economic
conditions are more likely to undermine this capacity .
BB  The 'BB' rating indicates a high vulnerability to default risk,
Speculative especially in the event of adverse changes in commercial or
economic conditions. However, there is room for commercial
or financial maneuver and to support the service of financial
commitments.
B  The notation 'B' indicates that the risk of concrete defect is
Highly present, but a narrow margin of safety remains. Financial
 speculative commitments are currently maintained; however, sustainable
payment capacity is vulnerable to a deterioration of the
business or economic environment.
CCC  Lack of payment is a real possibility.
Substantial
credit risk
DC  A payment default of any kind appears likely.
Very high credit
risk
C  The default of payment is imminent or inevitable, or the issuer
Exceptionally is in suspension of payment (standstill).
high level of
credit risk
RD  The issuer has been in persistent default on a bond, loan or
Restricted other tangible financial debt, but has not entered bankruptcy,
Default receivership or any other official liquidation procedure, and has
not Moreover, it has not stopped its activities.
D  The issuer is in bankruptcy, under administration or other
Default of official liquidation procedure, or otherwise ceased operations.
payment

What does the notation, not say?

Agencies insist a lot on the fact that rating is an opinion, not some form of guarantee
or commitment on their part, which under US law shelters them from lawsuits from
investors. In addition, the rating allows a relative valuation of the different issuers but
does not constitute an assessment of the probability of absolute default of an issuer.
This remark has a certain relevance if one considers that, in the absolute, adverse
economic conditions may be likely to weaken all agents without necessarily changing
their relative positioning.
The rating is an assessment of credit risk to the exclusion of all other risks. It gives no
indication of the potential profitability of an investment, nor the volatility of securities
issued. The rating does not say anything about the liquidity of a security, that is to say,
the possibility of finding a price and a market counterparty to buy or sell this security.
This aspect was badly felt during the last financial crisis when many investors were
unable to liquidate their positions on securities rated "triple A".
The rating gives no indication of the probability of default of an issue, nor the
potential loss in case of default. Nor does it provide an opinion on the quality of an
issuer as a counterparty, other than the credit risk it represents.
The rating process
The rating is generally established at the request of the issuer, but it can also be
triggered by the rating agency itself.
A rating committee consisting of analysts, directors and junior analysts is formed.
This committee collects available data, public or not, on the issuer and its market.
Once the rating is established, the agency continues to follow the issuer and may need
to revise it periodically.
The rating of structured products such as ABS or MBS follows a different process.
Indeed, the product is built ("structured", as its name indicates) by the sponsor, who is
always at the origin of the request for rating, in order to obtain a certain rating (for
more details, see the page on securitization ). The rating process then becomes
iterative, the agency advises the structurer, the latter submits a proposal if the rating
goal is not reached he reviews his copy ... or goes to another agency. We then clearly
see what conflict of interest agencies are facing, and it is not surprising that some have
given in to a certain complacency vis-à-vis their customers who are, remember, the
same ones that they are supposed to note, and who will pay them only if the rating is
finally published.
More objectively, the rating of structured products is based firstly on an assessment of
the pool of collateral on which the product is backed up (stress tests, simulating loss-
in-default scenarios are implemented), and the other hand on the proposed capital
structure (tranches). The objective is to determine what amount of credit enhancement
is required for each tranche to achieve the desired rating.
As in the rating of issuers, the agency continues to monitor the rated security after
having published its initial rating, especially the behavior of collateral pool in the face
of economic conditions and may need to review the rating.
The information and models used to establish the rating of structured products are
rarely made public, unlike corporate bonds, which are required to disclose a certain
amount of data (balance sheet). , income statement) concerning them.

The role of rating agencies in the financial system

Rating agencies are key players in the markets. In fact, ratings are widely used in the
regulatory framework on the one hand, and also in the strategies of many investors.
At the regulatory level, the so-called "standard" approach for applying the solvency
ratio is completely based on the ratings of credit agencies.
To be eligible for central bank refinancing operations, the securities must have a
minimum rating.
Similarly, the management objectives of many investors are based on ratings: for
example, a UCITS (Undertakings for Collective Investments in Transferable
Securities) may have in its objectives to hold 80% of assets issued by issuers rated at
least "BBB". The indicators for monitoring credit risk in corporate and investment
banks are also based on ratings.
Lastly, ratings condition the risk premium that an issuer seeking to finance on the
markets will have to pay. This risk premium determines how much the rate it will
have to serve investors must be higher than the rate of issuers rated "triple A" for its
securities to be subscribed.

Rating agencies and the financial crisis

Rating agencies are accused of participating in the outbreak of the 2007-2009
financial crisis for two reasons. First of all, they tended to note too much complacently
titles that eventually turned out to be "toxic", despite (or because of?) The
sophisticated financial packages on which they rested. When real estate market
conditions began to deteriorate in the United States, they reacted by sharply lowering
the rating of many issues ("downgrading"), contributing to the downward spiral in
which the market was driven.
Previously, the agencies had already aroused criticism during bankruptcies that they
had been totally unable to anticipate: Parmalat, Enron, Worldcom, etc. Subsequently,
they were again singled out during the Greek debt crisis.

The regulation of rating agencies

In the United States, rating agencies are overseen by the SEC (Securities and
Exchange Commission) which grants the status of NRSRO, Nationally Recognized
Statistical Rating Organization.
The European Union has also adopted its own rules, which will apply from April
2010. This regulation provides for a procedure for registering agencies with CESR
(Committee of European Securities Regulators), which became ESMA, the greater
transparency on the methods used, how conflicts of interest are managed, etc. Finally,
the regulation provides for the creation of a historical database, which should make it
possible to monitor the performance of ratings over time.
The International Organization of Securities Commissions (IOSCO ) publishes a code
of conduct that agencies tend to follow.
As for the investors, it is in principle recommended to them not to trust the ratings of
the agencies blindly, but at the same time, as long as the supervisory authorities
continue to use these same ratings in the regulations, it is difficult to see how could do
without it!
 7
CREDIT SCORE TIPS

Getting Your Credit Score To Work For You

How to take advantage of an excellent credit score

Whether you are buying a new car, requesting a credit card or entering into a credit
line with your bank to improve the home, lenders want to know what the risk is of
investing in you. If you have a high FICO score, you've done a lot of hard work to get
there, and now it's time to reap the benefits. Our experts evaluate how having a stellar
credit score can save you money.
The FICO score is a standard credit score in the United States and is used in over 90%
of the decisions involving a loan. Generally, anything above a 700 is considered good,
and if you are over 800, then you have excellent credit. But what does it mean, and
how should you take advantage of this ideal three-digit number?

Sign up bonus
Chances are that if you have a good credit history, you've heard from credit card
companies that they want your business. Rosemarie Clancy, editor in chief of
rewardexpert.com, says that one of the most rewarding things you can do is take
advantage of the huge sign-up bonuses available on credit cards.
Some credit card companies offer thousands of points to customers with the best
credit points that can be exchanged for cash or return flights abroad. "It offers some
great earning opportunities for building your bank points, which I consider a piggy
bank," says Clancy.

Low-interest rates
Whether you have average credit or excellent credit, you will probably be able to buy
a car or a home. However, your credit score can mean the difference in saving or
spending thousands of dollars on the life of the loan you take out for that car or home.
Higher credit scores generally mean lower interest rates.
Having a good credit score also gives you greater bargaining power. If you have a
credit card in the excellent range - over 800 - you have some bargaining power and
you shouldn't be afraid to contact your credit card and lenders to explore opportunities
to lower interest rates.

Fastest loans
Do you need a home repair, or have you just seen your dream home and want to act
fast? If you have a high FICO score, creditors can quickly track your credit request,
your second myFICO. In fact, in the current high-tech world, many credit applications
can be approved almost instantly.

The best credit cards

If your credit score is the cream of the crop, you may receive credit card offers that are
difficult to refuse, says Sweet. Since your credit score is high, you are considered low
risk by companies and therefore you can generally get higher spending limits, lower
interest rates, and more benefits: cards that are only offered to their favorite
customers.

Monthly bills
We all have the daily bills we have to pay: rent, insurance, public services. But did
you know that having a low credit score can cost you more in these monthly costs?
You can pay lower security deposits for leases or utility services, and good credit
scores can qualify for lower insurance premiums.
Are you thinking of changing the telephone operators and want to explore your
possibilities? If you have a good credit score, chances are you won't have any
problems and you may not have to pay any upfront fees.

A job
That's right - your credit score can also affect your ability to land a job. According to
the Michigan State University Extension, a credit score can be used as a tool by
potential employers to eliminate the employability of applicants and report the likely
performance of an employee at work.

What is a good credit score?

Understanding of credit ratings and ranges

When it comes to your credit, it's important to know how you stack up. Do you have
good credit? Excellent credit? Poor credit? How can you find out?
In most cases, the simplest way to determine the status of the credit is to look at the
credit score, a numerical value that reflects a mathematical analysis of the debt, the
history of payments, the existence of privileges or other judgments and others
statistical data collected by credit agencies. In other words, your credit score is the
compact and simplified version of the entire credit history, all rolled up into an
ordered three-digit number.

Why do you need good credit?

The importance of having good credit cannot be underestimated. From helping you
get a loan, to qualifying for a great job, good credit simplifies life and costs less.
In the eyes of credit institutions, employers, insurance agents and a myriad of other
people and entities, the status of your credit represents how responsible and even
ethical it is. For example, creditors look at your credit score to determine not only
your ability but your willingness to repay a loan. Insurance companies see an
individual with a good credit score as someone who is reliable and less prone to
commit insurance fraud. Even many employers perform a credit check to determine if
a candidate is likely to be a responsible employee. (However, it should be noted that
employers only have access to a modified version of your credit report that omits
some personal information, including your account numbers and the year of birth.)
Bad credit can prevent you from being able to buy a home, work in some areas, and
will end up costing a package in higher interest rates and commissions. However, if
you understand what hurts your credit score, you can make an effort to correct bad
habits and improve your credit rating.

The three main credit agencies

Experian, Equifax, and TransUnion
There are three major credit bureaus that provide consumer credit information
(including credit scores) to most stakeholders: Equifax, Experian, and TransUnion.
Each reporting agency collects information about your credit history from a variety of
sources, including credit institutions, landowners and employers, as well as other
sources. These include public records, current and past loans, payment history and
other data. They then evaluate your performance using a proprietary scoring system to
get a credit score.
Since each agency can access different information and has its own solvency
calculation formula, it is not uncommon for someone to have three different credit
scores.
Understanding credit scores to detail.
Your credit score is a three-digit number that represents the status of your credit. If
you know your score, you can get an idea of how creditors, insurance agencies and
interested employers see your credit:

Excellent credit: credit score over 800

If your credit score is above 800, you have an exceptionally long credit history that is
not marked by payments like late payments, collection accounts, privileges, judgments
or bankruptcies. Not only do you have multiple credit lines established, but you have
or have had experience with different types of credit, including installment loans and
revolving credit lines. Generally, you have a stable work history, usually with a
company.
Simply put, you are a borrower of A + in the eyes of all large and small creditors and
you will have no problem getting a loan of your choice. Get ready to receive the best
interest rates, repayment terms, and lowest available rates. Insurance companies love
people like you because they are sure that you will pay the premiums on time and
carry virtually no risk of insurance fraud. Furthermore, prospective employers love
you because you have shown that personal and financial responsibility is of the utmost
importance to you.

Very good credit: Credit score between 750 and 800

If your credit score is between 750 and 800, you have a long and distinct credit history
that shows a responsible payment history and the ability to handle multiple types of
credit responsibly. In reality, for the most part, you are considered to be on the same
level as borrowers with excellent credit history, with the exception that you could
have a higher debt to income ratio.
In the eyes of creditors, insurance companies and employers, you are just as good as
anyone with excellent credit and, for the most part, will receive the same red carpet
treatment. Ultimately, having great credit will qualify you for some of the best deals in
the city.

Good credit: Credit score between 700 and 750

Having good credit means that you have built a solid credit history by working hard to
keep your accounts in good standing - however, there may be a late payment or two
somewhere in the past. Things happen sometimes, but they are nothing you can't
handle. You may have registered a collection account, but you paid for it. And you
know you have an extra debt with your credit card, but you've taken great steps to get
it under control.
In general, creditors will have no problem lending money to someone like you. Your
good credit score will land you competitive interest rates and low origin costs,
although certainly not as good as you could have achieved with a few more points on
your score. You won't even have trouble getting an insurance policy for any need, but
you should expect your premiums to be slightly higher than those with excellent or
even very good credit.
Furthermore, your good credit should not have any negative effect on your ability to
be hired.
Fair Credit: credit scores between 650 and 700
Having fair credit means you have hit some bumps in the past. Late payments,
collection accounts and perhaps even an old public record mark your credit history. Or
maybe you just have too much debt.
Regardless of the reason for the less than stellar score, it will be more difficult to find
a lender willing to lend, especially if the low credit score is the result of slow
payments. It will represent a greater risk of default for a creditor and may, therefore,
be required to guarantee the loan with a deposit or tangible personal property
(otherwise known as a "guarantee") before the loan offer is extended.
Furthermore, unsecured revolving credit will be very difficult to obtain. Insurance
companies will tend to evaluate insurance policies for people in your credit category
because of the potential for non-payment of premiums or above-average risk of
committing insurance fraud. Furthermore, some jobs may not be available to
candidates with fair credit, such as jobs in the financial sector.
Having fair credit means that you have work to do to get you back into good financial
shape. It is absolutely necessary to take action now to avoid further damage to your
credit report and get back on the road to good financial health. By reducing your credit
card debt, making sure you get your bills paid on time each month, and paying all
open collections, your credit score will move enough in the next three to six months to
get you back into the realm of a good credit rating.

Bad Credit: Credit score between 600 and 650

Having bad credit is not a pleasant experience. In the past, you have had more credit
problems, most likely with the payment history on one or more accounts. You
probably also have an account or two in collections and you could have a bankruptcy
deposit.
It will be extremely difficult to find any lenders willing to lend to you without a
significant down payment or collateral to guarantee the loan against insolvency.
Insurance agencies will continue to take out insurance policies for you, but the
products will be limited and cost much more than the same products for customers
with better scores. You may also have higher car insurance costs.
Some employers - especially those in the financial, defense, chemical, and
pharmaceutical industries - will make you not hire if you haven't built or maintained a
solid credit. They may believe that you represent a greater than average risk of
employee theft or fraud, which could also make it difficult to change position or get a
promotion with your current employer.
Having bad credit means it's time to roll up your sleeves and get information on your
current financial situation. Even if your current position may not be your fault - thanks
to the loss of work, illness or other unforeseen circumstances: it is your responsibility
to take the necessary steps to reverse the course you are on. Watch carefully where
you are in your life and take the necessary steps to reverse the trends that led to your
negative score.

Very bad credit: credit scores below 600

If you have very bad credit, you are more than likely a delinquent on more than one
account. You have accounts of active collections and you probably have at least one
judgment, repurchase or bankrupt in your file. If you have credit cards, they are out of
print or closed for non-payment.
This is as bad as it gets, as this will have many negative effects on your life. Lenders,
with the exception of those who specialize in loans to bad credit borrowers, do not
approve you of any loan product, even if you can provide a substantial down payment
or a guarantee, and insurance agencies will probably refuse you based on risks that
pose. Often, employers who check your credit will not hire you, regardless of whether
there is another valid candidate or not.
Bad credit, no matter how bad it is, is still a temporary condition. Late payments will
vanish from your archive after 7 years and public records will be deleted after 10.
Although it can be difficult to be patient, know that time is on your side when it comes
to managing bad credit. Now is the time to start making good financial choices: pay
the bills on time, pay the collections accounts and refrain from taking on additional
debts. In a few years, you can say goodbye to your bad rating and say goodbye to a
world of financial possibilities.

Final word
Your credit score is an extremely important part of your overall credit file, but it's just
a piece of the pie. Lenders, insurance companies and some employers will put a lot of
weight on your credit in determining your dignity.
However, other factors also enter the decision-making process. If you have credit from
good to excellent, make sure you take the necessary steps to protect it by repaying
your loans on a monthly basis, avoiding getting more debts than necessary and
keeping other bills paid in time to avoid collection accounts.
If you have bad credit, don't despair - make a snowflake on your debt, try to pay the
collections accounts and start paying all your accounts on time every month.
CONCLUSION
Can you get a "perfect" credit score?

Perfection is overrated
For most borrowers, a score of 720-850 is considered excellent, which will help you
get the best loan offers at the lowest rates. If you have between 681 and 720, that's
fine, and you'll still qualify for a lot of credit. So, in this case, perfection is overrated.
Once your score is above 700, any improvement in your score is, for the most part,
pointless.
Think of it this way: a perfect SAT score for college admission applications is 1,600,
of the 1.7 million young people who take the test each year, only 300 are the kind of
"unicorns" who score a perfect score. And yet, millions of them still enter the
university despite not being "perfect". The same goes for your credit score.
With a credit score, lenders consider your credit usage history, your payment history
on time, the amount of credit you use and some other influencing factors, whether it is
a good bet to expect to receive back the money you lent him Once you have
established that you are good at all of these factors, you do not need to be a financial
"Eagle Scout" to get a loan.
Also, if you are looking for a perfect score, you must specify which one. There are
dozens of commercially used credit scores that consider or ignore various aspects of
their finances, such as paying rent and utilities on time, which gives younger
borrowers and those with limited credit histories a better opportunity to pay. be
evaluated fairly. Beyond standard scores, many large lenders use their own internally
calculated scores, because what is important for a mortgage lender is not as vital to a
car dealer.

Perfect is possible
However, you can achieve a perfect credit score. Last year, according to Bloomberg,
Fair Isaac discovered that of the more than 200 million qualified US consumers with
FICO credit scores, less than 3 million, or just 1.4 percent, scored a perfect score. 850.
And while you may not get a loan better than if you had obtained 775, a perfect score
at least gives you the right to brag. In addition, everyone needs a hobby, and aiming
for a perfect 850 is safer than diving into the water from a cliff.
To achieve perfection, you must understand the important factors involved in a credit
score and how they are qualified. While it will vary from the score to score, the
structure of the classic FICO score will give you a very good guide to attain a great
feat in the business world.
Appreciation
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Thаnkѕ!
Brian Mitchell.