Building credit after paying off old debts

You have already done exactly the right thing in paying off your debt. Now you need to demonstrate that you have learned from your mistakes and can manage new debt.

Getting a pre-paid card will not help rebuild credit because pre-paid cards are not reported to credit reporting companies and, therefore, are not part of your credit report. If you can’t qualify for a standard credit card, you should consider a secured card where you deposit funds in a savings account to guarantee that your charges on the card will be paid if you fail to pay as agreed.

Apply with your bank or credit union for a secured card with a small credit limit that is reported to the national credit reporting companies. Use the card sparingly and pay off the balance each month. Over time you will build a history of positive credit management.

Eventually, the negative account information will be deleted, leaving only the positive account details.

Remember, you didn’t get into credit trouble overnight, and you can’t restore a great credit history overnight either. But you are definitely headed in the right direction. Time and patience are now your best allies.

Credit Advice

Reducing high credit card balances should help increase your credit scores because it shows you have better control of your debt and that you aren’t buying beyond your income.

Low balances mean lower payments. That reduces the likelihood that you will miss payments or get into trouble.

Low balances as compared to your credit limits also results in a low debt-to-limit ratio, which I have discussed in previous columns. A low debt-to-limit ratio is an indicator of low lending risk, which will be reflected positively in credit scores.

When you can pay in full each month, you also eliminate those expensive interest costs, enhancing your financial well-being.

The other important fact about reducing your balances is that you will almost certainly improve your physical well-being, too. As your balances go down, so does the pressure to meet the payment requirements, which results in reduced stress and even better physical health.

Participating in a quality credit counseling program is a very good step to take. During the program you should learn how to better manage your debt, establish and live within a budget, and take control of your finances.

In the long term, your credit history will improve and you will be a much happier, healthier individual.

SEPTEMBER 29TH, 2015

How Did That Get On My Credit Report?

One of the first questions that your new client might ask is “Where does the information on my credit report come from?” Credit reports are such a common part of the credit report business that many people often do not give them a second thought.

When starting a credit repair company, being an expert on this type of information will build trust with clients and help grow your business.

First, there are three basic categories of information included on a credit report. These are:

1. Basic Personal Information: This is pretty self-explanatory. Included on your credit report is your full name, date of birth, current address, social security number, and employment information.
2. Collection and Accounts: This is the information most people think of when discussing a credit report. This is usually separated into two buckets of information: All open lines of credit and all accounts that may be delinquent or in collections.
3. Public Financial Records: This can include bankruptcy filings, tax liens, or any judgments that affect your credit status.

All three categories of information are collected and applied to credit reports by different methods.

• Basic personal information is originally reported by the individual borrower when opening his/her first line of credit. This is updated throughout the borrower’s lifetime as new lines of credit are opened.

• Collections and account information is updated most frequently and proactively – usually monthly – by collections agencies and lenders directly to the credit bureaus.

• Finally, public records are the only pieces of information that are proactively collected by the credit reporting agencies solely for the purpose of reporting.

Credit reporting can be a complicated and confusing topic for those who are not experts in credit repair. As a credit repair professional, you have an opportunity to position yourself as a trusted advisor in all things credit repair. How credit reports are made and updated is a crucial component that your clients will surely benefit from learning.  

Additionally, you will want to educate your clients on the entire process, on how to change their habits  and things they can today to speed up the process. Help put them on the path to maintain their awesome credit long after your work is done.

10 tips for managing credit cards in 2015 Read

1. Be proactive about card security

Issuers will be rolling out EMV (Europay, MasterCard and Visa) chip cards -- which are much harder to counterfeit than traditional magnetic stripe credit cards -- over the course of 2015 as the deadline for new network rules on changing fraud liability approaches. But you can play a part in cutting down on card fraud by monitoring financial statements regularly and setting up alerts to readily spot suspicious charges.

You also can change any behaviors, like throwing paper statements in the trash, leaving smartphones unlocked and responding to unsolicited requests for bank information, that make you more susceptible to fraud.

2. Pull your credit report

Mysterious line items are a good indication that identity theft is occurring. Federal law entitles everyone to one free credit report from each credit bureau every year. You can obtain three reports -- one from each credit bureau -- all at once or you can spread out the requests across the year to keep an eye on your affairs.

3. Assess whether that annual fee card is worth it

Some annual fee credit cards are worth it; others are not. Often, the value of these products hinges on your lifestyle and your spending habits. For instance, if you travel often, you're more apt to appreciate a credit card co branded by your favorite airline that offers free checked bags, lounge access and complimentary upgrades.

Do a little number crunching to figure out if you're benefiting from the fee. This Bankrate calculator can help you determine if you're losing points or miles to interest. If you are, it may be time to switch to a more cost-effective payment method.

4. Don't be afraid to ask

If you do decide an annual fee card isn't worth it, don't be afraid to call your issuer to see if they will waive the fee. They alternately may be able to move you to a fee-free version of the card that will preclude you from closing the account, which will preclude the closure from affecting your credit score.

5. Learn what ancillary benefits your card may offer

In addition to rewards, many credit cards offer ancillary benefits, including extended warranties, price protection, purchase protection, trip cancellation insurance and even car rental insurance. These benefits can come in handy when you're out shopping or planning a vacation.

Figure out what perks your credit card entitles you to by reading through its terms and conditions. If the answer is "none" (and your credit score is in good shape), it may be time to shop around for a superior piece of plastic.

6. Read your credit card contract cover to cover

Now may be the perfect time to read through all the fine print of your current credit card contract. It's great to know about the perks, but you also should know about any lesser-known fees attached to the product.

You'll want to check whether your issuer has included in the terms and conditions an arbitration clause, which requires customers to settle disputes with the bank through an arbitrator rather than the courts. Plus, determine if your issuer is permitted to share any of your data with third parties as part of the card's privacy agreement.

7. Make a dent in your credit card debt

One of the best ways to trim your credit card debt is by prioritizing credit card payments. For instance, make larger payments on the card with the highest annual percentage rate first and minimum payments on cards with lower interest rates to curb costs.

You also should consider opening up a balance transfer credit card, which lets you move expensive debt over to a new card that features a limited-time, interest-free period on the balance and even on new purchases. Just make sure to read offers carefully. There could be caveats that prematurely render the interest-free period null and void.

8. Talk to your millennial about building credit

A recent Bankrate survey found 63 percent of millennials (ages 18 to 29) are foregoing credit cards completely, largely to avoid the debts that plagued many of their parents during the Great Recession. While a generation of debt-averse consumers isn't the worst thing in the world, it could cause problems for your millennial down the road. Namely, they could have a tougher time buying an affordable home or getting an auto or personal loan later in life.

Other data suggest the demographic may not be aware of these ramifications, so you might want to sit your college student down this year and go over the finer points of credit reports and credit scores.

9. Pay your credit card bill more than once per month

If you're deep in debt, it's a good idea to keep that credit card on ice for a while. But if you're simply worried about unconsciously running up a big bill you can't pay off at the end of the month, try a different strategy. Link your credit card to your debit card account and pay down the balance as often as every day, once a week or even twice per month.

This tactic keeps you on top of how much money is actually in your bank account and lets you take advantage of the benefits a credit card affords that other payment methods do not, including better fraud protections and rewards.

10. Figure out what type of credit card is best for you

Contrary to popular belief, there is no singular best credit card in the marketplace. Instead, the best product varies from person to person. For instance, if you need to make a big purchase, you should look for a low-interest credit card. On the other hand, if you pay your balances off in full every month, you'll want to look into a rewards card.

This Bankrate quiz can help you figure out what piece of plastic best fits your lifestyle. Compare credit card rates to get the best deal.

How to Maintain Healthier Credit

How to Maintain Healthier Credit

So what can you do?

Before one of these bills winds up in collections, to the extent possible, try to be very proactive about your medical bills. Even if you have good health insurance, don’t assume everything will be taken care of. Review your EOBs (Explanation of Benefits) carefully and contact the provider and/or your insurance company quickly if it’s not being taken care of.

If you are contacted by a collection agency about a medical bill, ask them not to report it if you pay it right away (assuming you believe you owe the bill). Some won’t report if the bill is resolved quickly.

Again: Having a collection account updated as “paid” generally does not help your scores, unless a lender is using one of the newer credit score versions. So aim for removal of the item if possible. Some agencies will work with you, others won’t.

If you feel the situation is highly unfair — you never got a copy of the bill, for example — you can try two things. One is to file a complaint with the Consumer Financial Protection Bureau. The other is to contact the original provider and try to get them to pull it back from collections so you can pay them directly. If they do, the account will usually no longer be reported.

If you are contacted by a collection agency and you don’t believe you owe the bill, you have the right under the federal Fair Debt Collection Practices Act to ask the collection agency to validate the debt. You also have the right under the Fair Credit Reporting Act to dispute it with the credit reporting agencies reporting the account.

How Medical Debt Can Impact Your Credit Score

Medical bills can be painful, and even more so when they hurt your credit. The damage can be significant. Doctors or hospitals don’t usually report medical debt to credit reporting agencies. Instead, they turn unpaid debts over to a debt collector, and it is the collection agency that reports them.

In fact, according to the Consumer Financial Protection Bureau, roughly half of all collection accounts on credit reports are due to medical debt, and these accounts can significantly damage consumer credit scores. A single collection account can cause a good credit score to drop 50 to 100 points — or more!

Many patients don’t realize how easy it is for a medical bill to damage their credit. They don’t understand that:

• Even if you are making payments on a medical bill, it may be sent to collections. (It’s a common misconception that if you pay something, they can’t send the debt to a collection agency. That’s not true.)
• Medical bills sometimes turn up in collections before the patient even gets a bill. At that point, the damage may have been done.
• Collection accounts are usually damaging, regardless of whether they are medically related. (More on this in a moment.)
• Paying the collection agency may not fix your credit. In most cases, those accounts are reported for 7.5 years and are often very damaging — paid or unpaid. (See the caveats below.)
• The size of the debt is not as important as the status of the debt. In other words, even a relatively small bill that winds up with a bill collector can harm your credit scores.

It is critical that you review your credit reports annually, and monitor your credit scores on a regular basis. (Think of it as a checkup for your credit health.) You can get a free credit report summary and score, updated monthly, at www.creditchecktotal.com. One survey by Credit.com found that 10% of those who reviewed their credit reports discovered a collection account they didn’t know about.

You have many different credit scores, not just a single one. (Even among FICO scores, there are many different versions.) The newest version of the FICO score, FICO 9 — ignores paid collection accounts, and medical collection accounts carry less weight under that model.VantageScore 3 also ignores paid collection accounts of all types.

But most lenders still use older versions of credit scores that do not give medical collections any special treatment. For that reason, you should assume that if you find a collection account on your credit report, it will likely be viewed negatively when you apply for credit, insurance or employment.

All Credit Repair Companies Are Not Created Equal

With thousands of credit repair companies conducting business opposite the country, anticipation the  correct way may be tough and intimidating but it is needed that you take the time compulsory to not usually find a creditable, but moreover find that the knowledge, experience an skill ti give the time of service you designed the optimal results you deserve. Your preference should not be impulsive. Choosing a bad credit repair firm will leave you exposed and increase the luck that serve damage will be caused to your personal credit record but on the other hand, selecting a great credit repair firm has the prospective to be of the most appropriate financial decision of your life by dramatically cleaning up your personal credit record and enhancing your credit score.