Understanding Credit Scores

ReScore Solutions can assist in improving the worst credit scores and even improving healthy credit scores.  Higher credit scores means paying less in interest rates.  Lower credit scores will result in higher insurance premiums and higher interest rates.   approved for credit card

FICO, or Fair Isaac Corporation, has been the leader in credit scoring since the 1950s. The FICO score is used by more than 90% of lenders and is considered the industry standard. Your score will range from 300 to 850, the higher the better. It is calculated as follows:

FICO Scores
How credit scores are calculated

Have you ever been turned down for a loan or an apartment lease and wondered why? It could be due to your credit history. Let’s face it–our credit says a lot about who we are. It is our financial report card, and can affect many aspects of our lives.  If you are experiencing being turned down and high interest rates call us today.  We can help you rebuild your credit and raise your credit scores.

HOW DOES CREDIT WORK

When you apply for credit (say a loan or a credit card), the lender has to decide if you are a good candidate for receiving the loan. The lender’s decision is based heavily on your credit history. They have to assess the level of risk involved if they are to extend credit to you. If you have displayed a poor repayment history, it is less likely that you will be approved for the loan or a line of credit.

The data available through the credit reporting agency that’s been selected to calculate your score (Equifax, Experian or TransUnion) will determine that three-digit number, whether that data is right or wrong. That’s why it is so important to review your credit reports; at a minimum get your free credit reports from all three bureaus once a year look them over to determine if all of the accounts are yours, any late payments that aren’t accurate, liens or judgments that aren’t yours or updated as paid.

One of my former clients did not realize that he had a judgment on his credit reports that was not his.  Mr. Smith’s daughter had provided his name as an emergency contact for the apartment she ;had previously rented.  She defaulted on the apartment rent and was sued and she paid the judgment through a payroll garnishment.

Although this had been taken care of the apartment management placed the judgment on Mr. Smith’s credit reports.  It was illegal and had affected his chances of getting a loan.  We were able to take care of this and had it removed within 35 days or less.

Since the three agencies don’t share information with each other, you’ll want to check all three. After all, you never know which reporting agency a lender will use to obtain your score, so you want all of them to be as accurate as possible.

Better FICO scores
Rebuilding your credit without the high fees and interest rates.

FREE CREDIT SCORES

In an effort to obtain your credit score for free, you may have signed up with Credit Karma or Credit Sesame. But then you applied for a credit card or car loan and realized your FICO score was different than the free score. Why is this?

Both Credit Karma and Credit Sesame calculate your credit score based on proprietary scores from two of the major credit reporting bureaus. However, this is not the same thing as a FICO score. Instead of using the FICO algorithm, the bureaus use their own algorithm for free scores.

I DO and Bad Credit

birmingham red bride100dpiIt’s been so exciting planning the Special Day!  You had a beautiful wedding, the guest celebrated with you, the cake was eaten, the limo whisk you off for the beginning of a relaxing honeymoon, but wait…what about your credit!

After the honeymoon the real fun begins-starting your life together. From a financial standpoint, that involves exciting stuff like buying a home and trading in your sports car for a minivan (okay, maybe not everyone thinks minivans are exciting).

Your FICO scores are a big part of many of your financial decisions now that you are a couple.  Here are a few important facts regarding your FICO scores.

  • You both have individual FICO scores.  You do not have a joint score.
  • When applying for a loan and stating both incomes, the lender will only look at your individual scores when evaluating your loan application.
  • Joint accounts, such as  credit cards or auto loans will affect both of your scores

pink-house-hi When applying for a home loan lenders look at the three FICO scores from Experian, Equifax and TransUnion and your middle score is the score that your approval is based on.

Let’s say that Bob and Sue are married.

  • Bob has poor credit and Sue has good credit.
  • Bob makes more money than Sue.
  • Sue’s income qualifies for a 100K home and Bob’s income qualifies for 300K home, but they want to purchase a home for 375K.
  • Bob would not qualify for a loan because of his low scores.
  • Sue’s credit would qualify her for any home providing that her income is sufficient, but all that she can purchase is a 100K home.
  • Sue can NOT use his just his credit and just her scores.
  • Bob can not use just her credit and just his income.

So what can Bob and Sue do so that they can purchase the home of their dreams?

Call reScore Solutions!  We can evaluate Bob’s credit reports at no charge and identify the accounts, collections and overall credit to be repaired, deleted or paid.  We can save you money using our techniques in getting your credit scores lender-ready.

Watch video by clicking link below and see how Bob get’s started on getting his credit back on track.

http://www.kirkpatrickassoc.com/Services.html

Marriage and credit score myths.

  1. Our credit reports will merge together when we get married.   NO
  2. Marriage will lower my credit scores.  NO
  3. When I change my last name my credit history will be erased or deleted.  NO
  4. My spouses poor credit will hurt my credit scores.  NO
  5. I will automatically become a joint user or authorized user of my spouse’s accounts. NO
  6. You will be responsible for your spouse’s previous debt.  NO
  7. Being unemployed while raising children will damage my credit score.  NO
  8. Having a good job improves my credit score.
  9. My spouse filed Bankruptcy and now my credit will be ruined too.  NO
  10. Since we are married, any loans or accounts that we get must be a joint account.  NO
  11. Whew!!  I don’t have to worry about my spouse’s credit.  NO.  This will affect you when you want to purchase a home or other large purchase that both incomes will be needed to qualify.  If you are a co-signor on any accounts or loans with your spouse, you are equally responsible for those obligations as your significant other. Any mishaps, such as a missed payment, will reflect poorly on both of your credit reports.  

So while you were reading the credit score myths, Bob’s credit was repaired and his credit scores are improved.

Being that Bob’s credit is repaired they can now buy the home that they need.  Bob and Sue are now happy and recommend reScore Solutions to their friends and lived happily ever after.happy couple glad their credit is repaired

 

7 Ways To Deal With Bad Credit When Renting

house for rent bham al
Renting a home with bad credit

Bad credit can trigger all sorts of issues when trying to get a mortgage, purchase a car or get a credit card.  But even if you’re just looking for an apartment or house to rent, your credit history can pose problems.

Most landlords check credit reports of potential renters to determine the probability of receiving the rent payments.  This can pose a problem when you may have a repossession, charge-offs, foreclosure, late payments or a Bankruptcy listed on your credit report.  When your credit is damaged, you may have a tough time qualifying for that home or apartment that you and your family need.

At reScore Solutions, we understand that many people have fallen on hard times due to job loss, health problems, or having to close a business.  Bad credit can happen even when we do our best to pay our bills on time.

Call us so for a free no-obligation credit report evaluation.  While you are trying to get your life back on track, we can get your credit scores back up and running.

We specialize in getting your credit reports lender-ready so that you will be approved for a home.   Understanding the ins and outs of lending we know what it takes to get your credit reports repaired and credit scores to the specification of your lender.

credit_report
Raise your credit scores to qualify for loans and credit cards.

What should you do if your credit history is less-than-stellar? Here are seven ways you can overcome your bad credit and still get that rental you’re looking for:

     1.  Be honest and show that you  have been making progress.  

Sometimes bad credit isn’t a reflection of poor money management.  Be upfront with a potential landlord before your credit is pulled.  Don’t make excuses and blame others. Landlords have heard all of the blame games.  If you are able to show a valid reason why your bills were not paid on time, such as divorce, health, job loss; but also show that it was a temporary situation and show how you have been able to get back on your financial feet, you may have a better chance of getting approved.

     2.  Find a guarantor or co-signer     

Ask a trusted friend or relative with good credit to co-sign the rental application with you.  While you may be the only one living in the home or apartment, your co-signer will be financially responsible if you do not pay your rent.  This may give the potential landlord the extra security that he needs to feel comfortable with renting to you.

Of course, you really don’t want your co-signer having to pay your rent, so be sure that you not over obligate yourself to a rent amount that you can’t comfortably afford.

rental agreement
Co-signer for rental agreement

     3.  Pay in advance or increase your security deposit

Bad credit and especially a consistent bad credit history makes a landlord nervous because it indicates that your actions in the past may be repeated, such as defaulting on the rent payments or not paying on time.  By paying a month or more in advance or offering a two-month security deposit, you can possibly alleviate their concerns. Not only does this show your commitment, it also provides them with extra cash that can cover some of the losses and damages, should you skip out on the rent. (Which, of course, you won’t.)

     4.  Get a roommate

Willing to share your space such as kitchen, living room?  If so, a roommate may be a great solution.  If the landlord will allow just one person to sign the lease, see if your roommate is willing to sign it solo. (Alternately, try to move-in with a roommate who’s mid-lease.) This way, the person on the lease is the one with more solid credit.

The other benefit to having a roommate is sharing the utilities.  Saving money will help you to pay down your debts and helping to repair your credit.

     5.  Show solid income and offer to pay via direct deposit

Even if your credit is a little weak, your landlord may feel better if you can show that you have history with a full-time job with good pay.

When applying for an apartment, have proof of income ready, such as recent pay stubs, tax returns and a letter from your employer verifying your employment status and income. Offering to have your rent automatically deducted from your bank account can also help.

     6.  Be willing to pay a little more

Some landlords, even if you are renting from a property management company may charge additional “risk” fees for shaky credit and poor credit scores.  You may want to step up and pay more if you really love the home or have to move in a hurry.

If you are dealing with an individual, you may want to negotiate to pay a higher amount so that your application is not denied.

pay more for renting with bad credit.jpg
Lower credit scores mean higher interest and rental payments.

     7.  Letters of recommendation

Just as your would provide a letter of recommendation for a job, provide one for a potential landlord too.  Ask for letters from current and previous employers, current and previous landlords, and even past roommates who can vouch for your character. Even if your previous landlords were only for short-term arrangements, their endorsement can hold weight.

Tweens Teens and Credit Cards

Is your teen ready for a credit or debit card?  Financial education should begin as a very young age.  Don’t wait for your child to go away to college to learn about money management, credit and budgeting.  He or she should have a good concept about this before they pack their bags.  By all means, don’t arm your children with credit cards and no idea on how to handle it.  Understanding how credit works will help them avoid the trap of revolving credit.  Credit card companies are in the business of making money and keeping you in debt.

What to teach your teen:

  • What is a credit score.
  • How does credit affect me.
  • How do I keep tabs on my credit.
  • How do I protect my credit.
  • How to stay out of debt.
  • Don’t charge for items that you don’t have the money to pay for.
  • Don’t buy what you don’t need.  Credit means debt.  Debt means money that you will have to pay someone until you pay it off.
  • Help your child learn to save for what they want.  This is important to start at a very early age.
  • Teach and assist your child to set a standard for automatic saving.  Like 1/3 allowance and 1/2 of all birthday gifts.
Teaching your tween and teen responsible credit and budgeting.
Teaching your tween and teen responsible credit and budgeting.

As our children are growing up it is imperative that we teach them to be responsible with their finances.  Your teenager is more mobile and you may find that it’s important that they have access to funds in case of emergency or otherwise.  There are  options and a parent needs to consider if their child is responsible enough to be in control of a credit or debit card.  Let’s look over some of the different options to help in making a decision.

 

 

1.  Prepaid cards are a hybrid breed.  Just because it is called a prepaid credit card and works like a credit card does not make it a credit card.  These are cards that are reloadable and works like a debit card.  You choose the amount that you want to load on the card, use it like a debit card and it deducts the amount from your balance.  You can then reload and continue to use.  Being that these cards are associated with major credit card networks, American Express, Visa, Mastercard, these prepaid cards can be used anywhere the major credit cards can be used, whether it’s to purchase groceries, shopping at the mall, paying bills, or online shopping.  This card is ideal for tweens and teens.  No worry for over-drafting checking accounts or being accessed over-the-limit fees with credit cards.  Prepaid cards are an alternative to banks.  There are millions of people that do not want to use banks or traditional credit.  Although these cards are not connected to a checking account, it still allows you to things that require a credit card, such as rent a car or book a hotel room.  With many teens with a part-time job, cards even come with a checking and routing number so that a teen could have their check directly deposited onto the card.  Many prepaid cards offer features to be able to access funds at an ATM.  You also have the option of loading their allowance on the card.  Prepaid fees.  Be prepared to be charged with fees with a prepaid card. Each prepaid card comes with it’s own fee structure. Be sure and find a card that best fits your needs.  You are protected.  Prepaid cards offer the same theft and loss protection that major credit cards offer.  Which makes this a pretty safe bet.

Children and credit cards.  How to stay out of debt.
Children and credit cards. How to stay out of debt.

2.  Store card / major credit card.  While credit cards have a credit limit and you are able to use the card until the limit is exhausted.  Credit card companies may extend additional credit at a cost of an over-the-limit fee.  Eve with a credit card, it is important to keep tabs on your spending.  With interest rates charges it may become very difficult to get out of debt.  No one wants to head off to college in credit card debt and parents should not be left to clean up their teens out of control spending.  Choosing between a store card or credit card may be a challenge when trusting your tween or teen to spend sensible and not send you soaring into uneeded debt.  If you feel that your teen has not shown financial responsibility with their money and allowance, then you may want to rethink handing them a card to carry on a full-time basis.  You may choose to allow them to use the major credit card on a temporary basis and for particular purposes and allowing the to view the invoices and pay the payments.  Also educated them to understand the reality of charging and paying with money they earn from their job or allowance.  Although there are fees for reloadable prepaid cards, there are over-the-limit fees for many credit cards.  Just being charged one $39 over-the-limit fee is a large amount compared to prepaid card fees.

Teens learn from their parents money management.  By gradually graduating their freedom to using your credit cards you will be able to build good spending habits and trust.

So while there are differences in choosing a card, education and holding your teen responsible for their spending is the answer.   

 

 

Obtaining a mortgage loan with poor credit.

Do you have poor or weak credit but would like to purchase a home?  You may have been told that it’s not possible. You may have applied for credit and was denied and now you are convinced that obtaining a mortgage loan is not possible.  Well, it may be more possible than you think..  Of course your credit will need some attention. Kirkpatrick & Associates specializes in getting our clients lender-ready, but of course we will work with clients for most any purpose.

A lender qualifies a borrower based on a credit history and credit scores.  There are three major credit reporting agencies; Experian, Equifax and TransUnion.  You score ranges roughly between 500 and 850.  Lenders most often receive FICO scores, which are not the same scores or based on the same scoring models as the scores a person purchases or receives from the credit reporting agencies.  I recommend FICO.com to obtain the same scores that lenders get.  There are three scoring models for FICO scores.  Mortgage, revolving credit and auto loans.  They provide all three scoring models.

Bad credit loans
Home Sweet Home

 

EDUCATIONAL LOANS:  Once educational loans are being paid current it is possible to qualify for a mortgage, even if delinquent payments are being reported from the past.

CREDIT CARDS:  These payments need to be current and no late payments in the past 12 months.  Some lenders will allow a letter from consumer, explaining late credit card payments.  Credit cards balances need to be paid to below 19% of the credit limit.  IE:  $1,000 limit should have a balance of $190 or less.  Paying credit cards down will improve credit scores.

BANKRUPTCY:  A consumer can technically qualify for a mortgage two years after a bankruptcy.  3 years if the Bankruptcy included a foreclosure.  Do keep in mind that credit has to be rebuilt during this time period.

LIENS AND JUDGMENTS:  These must be paid and showing satisfied with all credit reporting agencies that are reporting these on your credit reports.  Just because they are paid doesn’t mean they are reporting paid.  If this is an issue, this is a service that we can assist you with.  Call us at 205-352-3448

CHARGE-OFFS:  These may or may not need to be paid to qualify for a mortgage.  If there is one charge-off and otherwise good credit, then you may not have to pay.  If the charge-off is old and under a certain dollar amount, it may not have to be satisfied to qualify.  Worse case situation, you can contact the original or 3rd party debt collector and work out a settlement.  They may not remove it from your credit report, but it will show that it was paid, and thus helping you to qualify for a loan.  This can be a confusing process and we recommend that you call us when handling these situations.

MEDICAL COLLECTIONS;  Many times all medical collections do not need to be paid to qualify.  We at Kirkpatrick & Associates can help with this.  We specialize in helping with 3rd party collections.  If you are receiving too many or unwanted phone calls, we can stop the collectors from calling.

RENTAL HISTORY:  Yes, a potential borrow can use rental history for credit when applying for a home loan, even when it’s not reflecting on your credit reports.  Be sure and pay rental payments on time.  Mortgage underwriters will require your rental history.

SELF-EMPLOYED OR 1099:  You will need two years work history.  Check with your lender for their guidelines.  These can vary between lenders.

Do keep in mind that after taking care of all of these areas on your credit, you must have good accounts reporting on all of your credit reports.  You credit score must be at least 580 for some lenders and 620 for others and 640 for most any lender.  If you score is between 580 and 639 be prepared to have a larger down payment.  A down payment is usually 3 to 3-1/2%.  A lower credit score would require a much higher percentage for down payment.  Please note:  Do not depend on the scores from Credit Karma or any other 3rd party credit score service that does not specifically provide FICO scores.

We, at ReScore Solutions eat, think and obsess over credit related stuff.  We would love to help you through the credit maze.  It can be confusing and intimidating when trying to deal with credit related matters and paying collections.  We view your credit reports for any violations of the Fair Debt Collection Practices Act and the Fair Credit Reporting Act.  While you are spending time with your family we are working hard for you.

Help with bad credit
Family time!

BLOGS

First of all ReScore Solutions offers free credit report evaluations.  For us to provide this service you will need current credit reports.

Sign-up online.

You paid off a balance last summer and it still reports a balance.  Maybe there are  accounts that aren’t yours, addresses that you have never lived at, credit inquiries that you didn’t authorize, collections that you weren’t aware of and the list goes on.  We can possibly help you and get your credit cleaned up and raise your credit scores.

Here at ReScore Solutions credit report evaluations are free….yes, another free!  We want the opportunity to educate you in having a chance at better and stronger credit while educating you to keep it strong.  We don’t do gimmicks, nor do we have a magic wand to poof all kinds of accurate bad stuff from your reports, but we will explain what our services cover and how we can repair negative information and how our services can benefit you, for now, and your future.

We also specialize in assisting with all types of credit issues.  Possibly avoid

  • Bankruptcy
  • Foreclosure
  • Charge off accounts

We can assist with dealing with collections, as well as getting you lender-ready for a mortgage.  You may not have credit or collection issues and just need to build or rebuild credit.  There’s help for that too.  I know, you want to know how much will this cost you.  After all, you may be living on a budget and paying hundreds or a couple of thousand $$$ is not possible.  Fear not, we have low month to month payments and you can cancel or place you account inactive at any time.  We eat, sleep and obsess about credit related stuff.

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There are other companies that provide credit repair, but we go beyond with excellent customer service and educating our clients which means you can spend more time relaxing and with your family, while we take care of you.  Call today.  205-352-3448

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Know Your Rights When Shopping for Credit

Ready to purchase a car or mortgage?  Shopping around for a great rate can save you thousands of dollars over the life of the loan, not to mention that some banks charge application fees where credit unions usually to never charge extra fees.  Credit unions can be a great source of lower interest rates and easier qualifications for getting the loan.

When shopping for great rates and services ask as many questions as possible before having your credit reports pulled.  These are considered “hard” pulls and will lower your FICO scores.

The Equal Credit Opportunity Act protects you when dealing with obtaining new credit with anyone who regularly offers credit.  This includes banks, finance companies, stores, credit card companies and credit unions.  When you apply for new credit, a creditor may NOT:

Credit rights
Applying for credit?  Know your rights.

1.  Ask about your marital status or your spouse, unless you are applying for a joint account or relying on your spouse’s income, or you live in a community property state.  ( Arizona, California, Idaho, Louisiana, Nevada, New Mexico, Texas, Washington or Wisconsin)

2.  Ask you if you plan to have children or if you plan to raise children.

3.  Ask about or consider your race, sex, religion or national origin.

4.  Refuse to consider public assistance income or regularly received alimony or  child support as income.

5.  Refuse to consider income because of our sex or marital status or because it is from part-time work or retirement benefits.

You have the right to:
1.  Have credit in your first name, birth name,and your spouse/ partner’s last name, or your first name and a combined last name.

2.  If a co-signer is necessary, it can be someone other than your spouse.

3.  After you change your name you can keep your own accounts or marital status or retire, unless the creditor has evidence you are unable or unwilling to pay.

4.  Know why a credit application was rejected.  The creditor must give you the specific reasons or tell you where and how you can get them if you ask within 60 days.  Once you receive the letter from the creditor, the letter usually will inform you of your FICO credit score and give you reasons why you were turned down.  The letter will also state which credit reporting agency the creditor requested your credit reports.  You have the right to contact that credit reporting agency and request a copy of your complete credit report so that you can review it for any inaccuracies.

5.  You have the right to have accounts shared with your spouse reported in both your names.

6.  You have the right to know how much it will cost to borrow money.

7.  YOU HAVE THE RIGHT TO A FREE ANNUAL CREDIT REPORT .   You can request these once every 12 months.  When denied credit you are entitled to an additional, free, credit report from the credit reporting agency that the creditor requested your credit report.

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