credit scores http://www.wisebread.com/taxonomy/term/9780/all en-US FHA Home Loans: You Can Buy a Home Even If Your Finances Aren't Perfect http://www.wisebread.com/fha-home-loans-you-can-buy-a-home-even-if-your-finances-arent-perfect <div class="field field-type-filefield field-field-blog-image"> <div class="field-items"> <div class="field-item odd"> <a href="/fha-home-loans-you-can-buy-a-home-even-if-your-finances-arent-perfect" class="imagecache imagecache-250w imagecache-linked imagecache-250w_linked"><img src="http://www.wisebread.com/files/fruganomics/imagecache/250w/blog-images/house-3624777-small.jpg" alt="house" title="house" class="imagecache imagecache-250w" width="250" height="166" /></a> </div> </div> </div> <p>If you have marginal credit, a moderate income, and little money for a down payment, you can still buy a house with the help of an FHA home loan. Yes, even after the housing boom and crash.</p> <p>Home buyers can obtain FHA mortgages, which are insured by the Federal Housing Administration but made by private government-approved lenders, with a down payment as little 3.5% of the home's purchase price. (See also: <a target="_blank" href="http://www.wisebread.com/buying-a-home-without-a-20-down-payment">Buying a Home Without the Money</a>)</p> <p>FHA home loans can be used to buy single-family homes and duplexes, triplexes, and four-unit homes, condominiums, cooperatives, and manufactured homes. Unlike other home loan programs, the down payment funds can come from a gift from a relative, employer, or charity.</p> <p>They can be used to buy single-family homes for up to $417,000 as of 2013, but the limits are higher, up to $729,750, in high-priced counties, areas that cover much of coastal California the Northeast. To find price limits for your county, visit the FHA's <a target="_blank" href="https://entp.hud.gov/idapp/html/hicostlook.cfm">mortgage limits page</a>.</p> <p>When subprime lending disappeared with the real estate market tumble, FHA home loan programs became the only alternative for borrowers with imperfect credit or low down payments. FHA mortgage standards have tightened recently and may become more stringent as the agency deals with more defaulting loans. Nevertheless, FHA loans are still the best option for some borrowers.</p> <h2>Easier on Credit Scores</h2> <p>Credit score requirements for FHA mortgages are much more relaxed than conventional loans. For that reason, FHA loans may be the only option for home buyers with spotty credit.</p> <p>Minimum credit scores can be complicated because they <a target="_blank" href="http://www.wisebread.com/the-four-cs-of-applying-for-and-managing-your-credit">can depend on different factors</a>, such as the amount of equity the homeowner has in the property.</p> <p>In addition, lenders may have their own credit requirements on top of FHA rules, but they're still likely to be more relaxed since the loans are government insured.</p> <p>The FHA's rules can change over time. For instance, the agency recently started requiring lenders to manually underwrite loan applications from borrowers with credit scores under 620 and total debt-to-income ratios over 43%. That means those with poor credit will need compensating factors, such as large bank accounts, to win approvals. The agency also increased the minimum down payment for loans over $612,500 to 5%.</p> <h2>Borrowers Pay Mortgage Insurance Premiums</h2> <p>It's important to understand mortgage insurance premiums, or MIPs, the FHA equivalent of private mortgage insurance. Unless they put 20% or more down, home buyers pay monthly mortgage insurance that protects the lender if the homeowner defaults.</p> <p>In addition to the monthly MIP, borrowers pay an upfront MIP of 1.75% of the loan amount. The good news is that the upfront premium, as well as other loan closing costs, can be wrapped into the mortgage and repaid over time.</p> <p>The annual premium is currently 1.35% of the loan balance and 1.3% for borrowers putting 5% or more down.</p> <p>Until recently, homeowners were able to dispense with the annual premium when their loan balance fell to 78% of the original loan balance. However, as of June 3, new borrowers will pay the premium for the life of the loan or until they sell the house and move or refinance into a new mortgage.</p> <h2>Mortgage Refinancing and Funds for Fixer-Uppers</h2> <p>Besides helping home buyers, FHA programs are available to help homeowners refinance into today&rsquo;s current low mortgage rates, even if they have little or no home equity, lower credit scores, or low or moderate income.</p> <p>Seniors can use FHA <a target="_blank" href="http://www.wisebread.com/reverse-mortgages-the-best-way-to-eat-your-home">reverse mortgages to cash out</a> equity from their homes without having to make monthly payments, and borrowers can use an FHA home improvement loan to purchase and <a target="_blank" href="http://www.wisebread.com/energy-efficient-mortgages-borrowing-more-to-save">renovate a home</a>.</p> <p>With the FHA 203(k) home buyers can purchase a home with a single mortgage with the FHA home improvement loan that releases funds from an escrow account as home improvement work proceeds. Homeowners can also use an FHA home improvement loan to refinance their mortgage and simultaneously finance home improvement work.</p> <p><em>Have you taken advantage of low interest rates or the FHA to buy or refinance a home recently?</em></p> <a href="http://www.wisebread.com/fha-home-loans-you-can-buy-a-home-even-if-your-finances-arent-perfect" class="sharethis-link" title="FHA Home Loans: You Can Buy a Home Even If Your Finances Aren&#039;t Perfect" rel="nofollow">ShareThis</a><br /><div id="custom_wisebread_footer"><div id="rss_tagline">Written by <a href="http://www.wisebread.com/michael-kling">Michael Kling</a> and published on <a href="http://www.wisebread.com/">Wise Bread</a>. Read more <a href="http://www.wisebread.com/taxonomy/term/"> articles from Wise Bread</a>.</div></div> Real Estate and Housing credit scores FHA home loan mortgage Thu, 09 May 2013 09:48:36 +0000 Michael Kling 973599 at http://www.wisebread.com 10 Surprising Ways to Negatively Affect Your Credit Score http://www.wisebread.com/10-surprising-ways-to-negatively-affect-your-credit-score <div class="field field-type-filefield field-field-blog-image"> <div class="field-items"> <div class="field-item odd"> <a href="/10-surprising-ways-to-negatively-affect-your-credit-score" class="imagecache imagecache-250w imagecache-linked imagecache-250w_linked"><img src="http://www.wisebread.com/files/fruganomics/imagecache/250w/blog-images/woman-returning-library-books-iStock_000020495760Small.jpg" alt="Returning library books" title="" class="imagecache imagecache-250w" width="250" height="166" /></a> </div> </div> </div> <p>A credit score is supposed to be about how you handle <em>credit</em>, so it seems counterintuitive that non-loan actions can bring your credit score down.</p> <p>Unfortunately, the reality is that even if you aren&rsquo;t borrowing money, you could still be hurting your credit score. Here are 10 actions that can bring down your score even though they have nothing to do with applying for or receiving credit. (See also: <a href="http://www.wisebread.com/surprising-things-that-can-kill-your-credit">Surprising Things That Can Kill Your Credit</a>)</p> <h3>1. Skip the Rent</h3> <p>Even though Experian recently started reporting on-time rent payments on consumers&rsquo; credit reports, you probably aren&rsquo;t going to get credit score brownie points for paying the rent right when you should.</p> <p>Don&rsquo;t let that fool you into thinking that you can skip rent payments or pay your rent late on a regular basis without a negative impact on your score, though. If your landlord decides that he or she is sick of your slow payments, you can be reported to the credit bureaus.</p> <p>On top of that, your landlord can ask a collection agency to attempt to collect on your delinquent payments. Once that happens, the credit bureaus find out and report it. Now your non-credit rent payment is dragging your credit score lower.</p> <h3>2. Failure to Pay Medical Bills</h3> <p>With the rising costs of health care, even those with health insurance can find themselves facing high medical bills. Don&rsquo;t ignore these bills, though. Health care service providers can decide to report your unpaid bills to the credit bureaus or send your account to collection. Collection accounts look especially bad on a credit report.</p> <p>Many hospitals and other health care providers are willing to work with you on large bills. If you can pay a large portion of the bill immediately, you might be able to get a discount on your health care. Or, if you can&rsquo;t pay a large portion, you might be able to work out a payment plan. Realize, though, that you might be charged interest, or a fee, for a payment plan.</p> <h3>3. Ignore Library Fines</h3> <p>For many people, the idea that a $5 library fine could be harmful to their financial situation seems silly. However, not paying could cost you even more than what you owe. In order to collect more money and help ease strained local budgets, some <a href="http://www.nytimes.com/2007/12/26/nyregion/26library.html">libraries have been sending unpaid fines to collection agencies</a>.</p> <p>Once your library fines go to the collection agency, it appears on your credit report. On top of that, the collection agency might add its own fees to the fine. Your $5 library fine could easily balloon into a $20 or $30 cost &mdash; and bring down your credit rating on top of it all.</p> <h3>4. Rack Up the Back Taxes</h3> <p>Your unpaid back taxes aren&rsquo;t just a matter between you and the government. If you end up racking up unpaid taxes, the government can place a lien against you. A tax lien is one of those public records items that appears on your credit report and can drag down your score.</p> <p>A tax lien can be especially aggravating, since it will remain on your report for up to 15 years.</p> <h3>5. Miss Utility Payments (or Don't Completely Close Accounts)</h3> <p>Utility bills represent another of those non-credit payments you make regularly that aren&rsquo;t likely to help your credit score. While there are alternative credit reporting agencies that you can ask to collect information on your utility payments, the credit scores that most financial services companies look at don&rsquo;t include on-time utility payments.</p> <p>However, like medical bills and rent payments, if you habitually pay late, or miss a payment altogether, the utility company can report your delinquency to the credit bureaus &mdash; and turn your account over to a collection agency.</p> <p>This happened to me once. When I moved from New York, the final bill slipped through the cracks. I didn&rsquo;t realize I wasn&rsquo;t up to date on the account until I got a collection notice a year later and I doubled-checked my records. My credit score headed temporarily lower on the news.</p> <p>Make sure you pay your utility bills on time. And, if you move, make sure you are completely settled with the company. Even an address forward might not be enough to catch all your final bills; 30 days after your move, call the utility companies and make sure everything is squared away.</p> <h3>6. Buy a New Cell Phone (or Sign Up for Utilities)</h3> <p>Increasingly, cell phone providers are checking your credit when you sign up for a contract. In some cases, the company performs a soft inquiry, and your score isn&rsquo;t damaged. Other times, though, the provider runs a hard credit check. It looks as though you are applying for credit &mdash; even though you don&rsquo;t think that you are.</p> <p>These types of hard credit inquires can weigh on your credit score, pulling it down. A similar effect can be seen when you sign up for cable or satellite TV services, as well as for Internet service. When you sign up for a new telecommunications service and the company asks if they can run a credit check, ask if it&rsquo;s possible for a soft inquiry instead of a hard inquiry.</p> <h3>7. Open a Bank Account</h3> <p>Not all financial institutions check your credit before you open an account, but some banks and credit unions do. Indeed, one of the reasons that your checking account might be denied is due to your credit report.</p> <p>Once again, you need to find out whether the bank is performing a hard credit pull or a soft credit pull. A soft pull isn&rsquo;t going to bring your score down, but if the bank performs a hard inquiry that looks like you are applying for credit (even though you are just trying to open a checking or savings account), it could ding your credit score.</p> <h3>8. Cancel Your Gym Membership Improperly</h3> <p>Many consumers choose to pay for a monthly gym membership automatically using an <a href="http://www.wisebread.com/how-to-set-up-automatic-payments">automatic withdrawal</a> or putting the monthly fee on a credit card. This streamlines the process, but it can also cause problems down the road if you aren&rsquo;t careful.</p> <p>Gyms often have cancellation procedures that you are supposed to follow, usually involving paperwork. If you don&rsquo;t fill out the paperwork to cancel, but contact the credit card or the bank to stop allowing the automatic payments, you could find yourself in trouble.</p> <p>Your gym might report it as non-payment to the credit bureaus. Additionally, your account could be turned over to collections. Even if you don&rsquo;t have an automatic payment arrangement, some gyms might take these actions if you don&rsquo;t fill out the appropriate cancellation paperwork.</p> <p>When you sign your gym membership agreement, make sure you understand what actions you need to take in order to cancel your gym membership &mdash; and find out what the gym will do if you don&rsquo;t follow proper procedure.</p> <h3>9. Disregard Traffic Tickets</h3> <p>Are you a traffic scofflaw? If you have unpaid parking tickets or you ignore speeding tickets and other violations, your credit score could suffer. Not only will city and state governments add more penalties the longer you ignore your tickets, but they could decide to report them to the credit bureaus as debts. And, of course, there is always the risk that a collection agency will get involved.</p> <p>Don&rsquo;t think that a violation in another state can be safely ignored, either. Whenever a ticket is written out, your license plate number is recorded, and it is run. They know who you are, and they aren&rsquo;t afraid to report you. It may take a little longer, but unpaid tickets will eventually catch up to you.</p> <h3>10. Close Unused Credit Accounts</h3> <p>When you aren&rsquo;t using your credit accounts, it makes sense to close them, right? After all, it&rsquo;s not like you are borrowing money with those accounts anymore. Unfortunately, closing those unused credit accounts can have a negative impact on your credit score.</p> <p>First of all, those credit accounts are contributing to the amount of credit you have available. Because your credit utilization and available credit matters to your credit score, you want to show that you aren&rsquo;t using up as much of credit as you could be. Once you close those unused accounts, you suddenly have less credit available. And, if you occasionally carry a balance on your other cards, your credit utilization has increased.</p> <p>Next, you have to consider the length of your credit history. The older your credit accounts, the better it is for your credit score. Your credit accounts have an &ldquo;average age,&rdquo; and if you close your older accounts, you could find yourself with a shorter credit history. The result could mean a <a href="http://www.wisebread.com/how-to-rebuild-your-credit-in-8-simple-steps">lower credit score</a>.</p> <p>Before you close an old, unused credit card, reconsider. Think about how long you&rsquo;ve had the account, and how it has been helping your credit history length.</p> <h3>Most Financially Related Actions Affect Your Credit Score</h3> <p>Even when you aren&rsquo;t borrowing money, your financial actions can impact your credit score. Missing a utility payment or skipping out on a library fine might seem like no big deal, but if you don&rsquo;t take care of it, and let it sit, the end result can be a lower credit score.</p> <a href="http://www.wisebread.com/10-surprising-ways-to-negatively-affect-your-credit-score" class="sharethis-link" title="10 Surprising Ways to Negatively Affect Your Credit Score" rel="nofollow">ShareThis</a><br /><div id="custom_wisebread_footer"><div id="rss_tagline">Written by <a href="http://www.wisebread.com/miranda-marquit">Miranda Marquit</a> and published on <a href="http://www.wisebread.com/">Wise Bread</a>. Read more <a href="http://www.wisebread.com/taxonomy/term/"> articles from Wise Bread</a>.</div></div> Credit Cards Debt Management credit scores Mon, 15 Oct 2012 10:36:40 +0000 Miranda Marquit 955073 at http://www.wisebread.com 5 Things You Need to Know About Credit Scores http://www.wisebread.com/5-things-you-need-to-know-about-credit-scores <div class="field field-type-filefield field-field-blog-image"> <div class="field-items"> <div class="field-item odd"> <a href="/5-things-you-need-to-know-about-credit-scores" class="imagecache imagecache-250w imagecache-linked imagecache-250w_linked"><img src="http://www.wisebread.com/files/fruganomics/imagecache/250w/blog-images/3815533391_9d6f42c1eb_b.jpg" alt="man using laptop" title="man using laptop" class="imagecache imagecache-250w" width="250" height="141" /></a> </div> </div> </div> <p>Over the past few years, consumers have been increasingly aware of the importance of a credit score. If you plan to borrow money (i.e., car loan or mortgage), your credit score is a major factor that determines your ability to get the loan and the interest rate you are eligible for. With a better credit score, you will be able to enjoy the best rates available. Your credit score could even impact your insurance rates and your ability to get certain jobs. As such, it is a good idea to learn as much as you can about this important number. (See also: <a href="http://www.wisebread.com/how-to-improve-your-credit-score" title="How to Improve Your Credit Score">How to Improve Your Credit Score</a>)</p> <h3>1. Your credit score is a number</h3> <p>Your credit score is a number reported by various credit bureaus. There are three major bureaus that you should be know: Experian, TransUnion, and Equifax. These credit reporting agencies use different algorithm to determine your score, and they also have slightly different credit score ranges. In general, your score ranges from 300 to 850, and anything above 700 is considered good.</p> <h3>2. You can get your credit score for free</h3> <p>There are many websites that can provide you with <a href="http://www.wisebread.com/redir/creditkarma">free credit scores and reports</a>. But some are better than others, and if you are not careful, you could end up paying a lot more than you bargained for. To be on the safe side, here are two sites that provide you with absolutely free information. These sites are:</p> <ul> <li><a href="http://www.quizzle.com/">Quizzle.com</a> gives you free access to your Experian credit score and report.<br /> &nbsp;</li> <li><a href="http://www.wisebread.com/redir/creditkarma">CreditKarma.com</a> gives you free access to your TransUnion credit score and provide a proprietary credit report.</li> </ul> <p>As an aside, if you want to see your credit reports from the three agencies for free, you can check out <a href="http://www.annualcreditreport.com/">AnnualCreditReport.com</a>. It is the only government-recommended website for obtaining your credit reports. Through this website, you can get one free credit report from each bureau per year. And here's a tip: You can stagger your reports four months apart and have up-to-date access to your credit reports year-round.</p> <h3>3. Good number, bad loan?</h3> <p>Occasionally, you will be surprised by a bad loan offer despite your good credit score. This is not that uncommon, especially with the recent credit crisis. If this happens to you, ask your lender to explain why your interest rate is unexpectedly high and ask to see your credit information. There may be a mistake on the report, your lender may be looking at a different score, or your lender may not have your best interest in mind. You can ask your lender to check with other bureaus and negotiate, or you can go to a different lender.</p> <h3>4. Your credit score can be improved</h3> <p>If your credit score is below where you want it to be, there are many things you can do to improve your credit score. Some of these methods include:</p> <ul> <li>Do not borrow what you cannot afford to pay back. Borrowing more than you can afford puts you in bad financial strain, and one misstep could cause you to miss your payment, resulting in a lower credit score.<br /> &nbsp;</li> <li>Pay all your bills on time. A good payment history shows that you are responsible with your finances, and will help improve your credit score.<br /> &nbsp;</li> <li>Do not close your old credit card accounts as long as you are not paying any fees. A longer credit history is good for your credit score.</li> </ul> <h3>5. Your credit score can be lowered</h3> <p>On the other hand, there are things that will hurt your credit score. There are many little things that can ding your credit score, but the major ones are declaring <a href="http://www.wisebread.com/debt/bankruptcy" title="How to File For Bankruptcy">bankruptcy</a>, letting your debt go into collection, and having a tax lien against you. Whatever you do, avoid these three like the plague.</p> <p>Obviously, there are a lot more to know about managing your credit, which goes hand in hand with managing your finances. However, this article should serve as a good starting point. If you have any questions, or simply want to add your own thoughts, please leave your comment below.</p> <p>For more information about good credit scores, please see <a href="http://www.moolanomy.com/1805/what-is-a-good-credit-score/">What is a good credit score?</a> to get your score and see how you stack up.</p> <a href="http://www.wisebread.com/5-things-you-need-to-know-about-credit-scores" class="sharethis-link" title="5 Things You Need to Know About Credit Scores" rel="nofollow">ShareThis</a><div class="field field-type-text field-field-guestpost-blurb"> <div class="field-label">Guest Post Blurb:&nbsp;</div> <div class="field-items"> <div class="field-item odd"> <p>This is a guest post by Pinyo Bhulipongsanon. Pinyo is the owner of <a href="http://www.moolanomy.com/">Moolanomy Personal Finance Blog</a>, a website dedicated to help you improve your finances and money management skills. Moolanomy also features <a href="http://reviews.moolanomy.com/">reviews of popular financial products</a> and a <a href="http://answers.moolanomy.com/">community-based questions and answers section</a>.</p> </div> </div> </div> <br /><div id="custom_wisebread_footer"><div id="rss_tagline">Written by <a href="http://www.wisebread.com/pinyo-bhulipongsanon">Pinyo Bhulipongsanon</a> and published on <a href="http://www.wisebread.com/">Wise Bread</a>. Read more <a href="http://www.wisebread.com/topic/personal-finance">Personal Finance articles from Wise Bread</a>.</div></div> Personal Finance credit credit scores interest rates loans mortgages Mon, 18 Oct 2010 14:00:07 +0000 Pinyo Bhulipongsanon 262649 at http://www.wisebread.com How to Improve Your Credit Score http://www.wisebread.com/how-to-improve-your-credit-score <div class="field field-type-filefield field-field-blog-image"> <div class="field-items"> <div class="field-item odd"> <a href="/how-to-improve-your-credit-score" class="imagecache imagecache-250w imagecache-linked imagecache-250w_linked"><img src="http://www.wisebread.com/files/fruganomics/imagecache/250w/blog-images/2320568188_e754c5babc_z.jpg" alt="computer" title="computer" class="imagecache imagecache-250w" width="250" height="188" /></a> </div> </div> </div> <p>There is such a thing as spending too much time, effort, and energy on trying to improve your credit score. Yet, if by following a few simple steps it can help you improve your financial situation <em>and</em> your credit score, then it makes sense to try to boost your credit. (See also: <a href="http://www.wisebread.com/10-surprising-ways-to-negatively-affect-your-credit-score">10 Surprising Ways to Negatively Affect Your Credit Score</a>)</p> <p>Despite the claims of people like Dave Ramsey, FICO scores matter. Your credit score may impact your insurance rates, home loan rates, credit card rates, and even if you can get a cell phone (without a deposit).</p> <h2>Tips to Improve Your Credit Score</h2> <h3>Get a copy of your credit report and credit score</h3> <p>You can get a <a href="http://www.annualcreditreport.com/">free copy of your credit report</a>, but expect to pay for your credit score. However, for most people, you can get a good idea of your credit score for free from <a href="http://www.wisebread.com/redir/creditkarma">Credit Karma</a>.</p> <h3>Review your credit report</h3> <p>It is important to verify active accounts and other facts that have been reported on your credit report. If there is a charge that is not correct, you will need to contact a reporting credit agency. Let them know that an item has been inaccurately reported on your credit report, and give them the necessary proof. They are then required by law (if it was inaccurately reported) to remove the item from your credit report within 30 days.</p> <h3>Set a budget and make payments on time</h3> <p>The biggest positive influence on your credit score is your ability to make payments on time. Learning how to make a budget that helps you live within your income is the key. If ou&rsquo;ve never set up a budget, just be sure to put a name on every dollar. Your money should have a purpose and a mission. It is the budget that dictates where every dollar goes. Once the budget is set, you could use something like the envelope system to help you live within your means.</p> <h3>Use credit cards sparingly and pay off the balance in full every month</h3> <p>One of the best ways to improve your credit score is by using credit cards and paying off the balances in full every month. Dave Ramsey claims your credit score is an &ldquo;I love debt score,&rdquo; but I disagree. Your credit score reflects how you interact with debt. If you are responsible with credit, your score improves. If, however, you really just love debt and don&rsquo;t responsibly handle your debt, then your score goes down.</p> <p>The reason credit cards are a great way to build credit is that you only need to interact with debt instead of going into debt. If you use credit cards, you can have no debt and a good credit score.</p> <h2>Credit Score Cautionary Notes</h2> <h3>Avoid sneaky tips and tricks</h3> <p>It is not unusual for articles on how to improve your credit score to introduces secrets, tips, or insider tricks. The fact is that there is no fancy footwork required. Simple and disciplined personal finances coupled with a basic understanding of how credit scores work is all that is required.</p> <h3>Go for a better financial situation &mdash; not a better credit score</h3> <p>While you might be taught to build credit for credit sake, I suggest that you only do activities that improve your financial situation <em>and </em>your credit score. At one point in my life, someone suggested I buy something with a credit card and pay for it over a three month period &mdash; just to build credit. I said, &ldquo;No, thank you.&rdquo; If at any point doing something builds your credit score but does not improve your personal financial situation, then do what is best for your finances, not your credit.</p> <p>As a positive example, if you can get on a plan where you learn how to pay off credit card debt, this will help your financial situation <em>and</em> your credit score.</p> <p>Don&rsquo;t blindly build credit for credit&rsquo;s sake.</p> <h3>Choose financial peace over a credit score</h3> <p>Some people have debt allergies. The idea of having a credit card or any debt makes them extremely uneasy. In those cases, there is no need to interact with credit because of the emotional cost.</p> <p>For example, when considering if you should pay off the mortgage or invest, you should know that paying off the home would (eventually) likely result in a lower credit score. Nevertheless, some people just feel better about the idea of paying off the house. In this case, do what brings financial health and peace &mdash; not an improved credit score.</p> <p><em>What do you do to build your credit score? Any other tips on how to build credit?</em></p> <a href="http://www.wisebread.com/how-to-improve-your-credit-score" class="sharethis-link" title="How to Improve Your Credit Score" rel="nofollow">ShareThis</a><br /><div id="custom_wisebread_footer"><div id="rss_tagline">Written by <a href="http://www.wisebread.com/craig-ford">Craig Ford</a> and published on <a href="http://www.wisebread.com/">Wise Bread</a>. Read more <a href="http://www.wisebread.com/topic/personal-finance">Personal Finance articles from Wise Bread</a>.</div></div> Personal Finance credit scores Wed, 16 Jun 2010 12:00:04 +0000 Craig Ford 135360 at http://www.wisebread.com Credit Scores http://www.wisebread.com/debt/credit-scores <div class="field field-type-filefield field-field-blog-image"> <div class="field-items"> <div class="field-item odd"> <a href="/debt/credit-scores" class="imagecache imagecache-250w imagecache-linked imagecache-250w_linked"><img src="http://www.wisebread.com/files/fruganomics/imagecache/250w/blog-images/iStock_000009122819XSmall.jpg" alt="credit history" title="credit history" class="imagecache imagecache-250w" width="250" height="166" /></a> </div> </div> </div> <p>A good credit score can get you good rates on <a href="http://www.wisebread.com/credit-card-guide" title="Credit Card Guide">credit cards</a>, encourage landlords to rent to you, and even help an employer decide to offer you a job. A bad credit score, on the other hand, can significantly reduce your ability to take out a loan, from getting a mortgage to a credit card. Maintaining a good credit score is important, no matter what your financial goals are.</p> <h2>What Is a Credit Score?</h2> <p>Your credit score signifies the kind of credit risk the three main credit-reporting agencies &mdash; <a href="http://www.equifax.com">Equifax</a>, <a href="http://www.experian.com/">Experian</a> and <a href="http://www.transunion.com/">TransUnion</a> &mdash; think you are.</p> <h3>FICO</h3> <p>The number is calculated with a formula developed by <a href="http://www.fico.com" title="FICO homepage">Fair Isaac Corp</a>, which is why your credit score may also be referred to as a FICO score. Fair Isaac uses a variety of information about your credit history, from the length of your credit history to how quickly you repay debts, to determine the risk a lender would face by extending credit to you.</p> <p>But there are other factors your credit score takes into account, such as the amount of credit available to you and the types of credit you use.</p> <h3>Good and Bad Credit Scores</h3> <p>Credit scores range from 300 to 850. In general, you want to keep your score above 700, especially if you're planning to apply for a mortgage, car loan, or another form of credit. The best interest rates and terms are available only to individuals with excellent credit scores, typically considered to be about 760 (very few people actually receive a credit score of 850). An individual with a credit score below 620 would be considered a risk by most lenders and will usually be charged sub-prime interest rates &mdash; if offered credit at all.</p> <h3>Free Credit Report</h3> <p>While you are legally entitled to a free copy of your credit history from each of the three major credit reporting agencies every year, your credit score is not listed on those reports. Typically, you'll be required to pay to access your credit score. (<a href="http://www.wisebread.com/get-free-credit-score-monitoring-with-credit-karma" title="Review of Credit Karma">Credit Karma</a> gives you your credit score for free.) Each of the credit bureaus offers different tools to purchase your credit score, along with their version of a FICO score. There are both options for a one-time purchase and to subscribe to a monthly report. However, your free credit reports can also be useful in understanding your credit score, as well as improving it. You can receive your free copies through <a href="https://www.annualcreditreport.com" title="Official site for free credit reports">AnnualCreditReport.com</a>.</p> <h2>How to Improve Your Credit Score</h2> <p>There are steps you can take to raise your score, but it's worth noting that your credit score won't be immediately improved. It's a process that takes time, which is why it is important to maintain a high score in the long-term, as well as when you're getting ready to get a loan.</p> <p>The most important step you can take is to pay down any balances you have on existing lines of credit. The percentage of your available credit that you use is a determining factor in your credit score and should be below 30 percent if possible. Even if you pay off your balance every month, keeping your spending below that 30 percent mark can help significantly. Paying your bills on time and in full is also crucial to raising your credit score. Even one late payment can drop your score by 100 points &mdash; and late payments can affect your score for seven years.</p> <p>For those individuals with low credit scores who find it difficult to make payments on time and in full, it may be worth consulting a <a href="http://www.wisebread.com/dealing-with-debt-credit-counselors">credit counseling service</a>. Such consultations do not damage credit scores and may help create a strategy that will reduce or eliminate debt &mdash; which in turn improves credit scores.</p> <p>It's also important to limit the number of requests you make for new credit: each credit card application or other request can take off five points. If you don't have a credit history at all, you will need to get a credit card to start with, but try to limit the number of lines of credit you open. Your credit score will remain low until you've built up a solid credit history.</p> <h2>How to Maintain a High Credit Score</h2> <p>If you already have a high credit score, it's important to maintain that score for the future. In general, maintaining your credit score is a matter of common sense: pay your bills on time, keep balances to a minimum, and don't apply for credit you don't need. But because there are so many factors that can affect your credit score, there are a few other techniques to keep in mind that will help you keep your credit score up.</p> <p>While it might seem that having fewer credit cards would improve your credit score, the truth of the matter is that you shouldn't close any credit card accounts, even if you don't routinely charge any purchases to those cards. The length of your credit history is an important factor in your credit score and closing accounts, especially those that have been open for a long time, can reduce your credit history and therefore drop your score. It makes good financial sense to make sure that you don't carry a balance on your credit cards, but to keep accounts active make a purchase with each card once a month or so. Pay it off in full &mdash; after all, you want to have as much credit available as possible.</p> <p>You should also check your credit history on a regular basis. Mistakes can affect your credit score, even if you didn't make them. As long as you look through your credit report on a regular basis, you can identify any errors and request that the credit bureaus address them. While you are only entitled to one free copy of your credit report from each of the three credit bureaus each year, you can choose to stagger when you request your credit report from each agency. For instance, you can request your report from Experian in January, from TransUnion in May and from Equifax in September. That way, you can review your credit history every four months, without paying for extra copies of your credit reports.</p> <a href="http://www.wisebread.com/debt/credit-scores" class="sharethis-link" title="Credit Scores" rel="nofollow">ShareThis</a><br /><div id="custom_wisebread_footer"><div id="rss_tagline">Written by <a href="http://www.wisebread.com/thursday-bram">Thursday Bram</a> and published on <a href="http://www.wisebread.com/">Wise Bread</a>. Read more <a href="http://www.wisebread.com/taxonomy/term/"> articles from Wise Bread</a>.</div></div> Consumer Affairs credit report credit scores debt management fico Mon, 04 Jan 2010 19:17:24 +0000 Thursday Bram 6319 at http://www.wisebread.com Get Your Free Credit Score from Credit Karma http://www.wisebread.com/get-free-credit-score-monitoring-with-credit-karma <div class="field field-type-filefield field-field-blog-image"> <div class="field-items"> <div class="field-item odd"> <a href="/get-free-credit-score-monitoring-with-credit-karma" class="imagecache imagecache-250w imagecache-linked imagecache-250w_linked"><img src="http://www.wisebread.com/files/fruganomics/imagecache/250w/blog-images/compare.jpg" alt="" title="" class="imagecache imagecache-250w" width="250" height="117" /></a> </div> </div> </div> <p><a target="_blank" href="https://www.creditkarma.com/partner?id=Wisebread">Credit Karma</a> offers free credit scores to consumers with no strings attached. It is a truly free service: There's nothing to cancel and they don't ask for your credit card number.</p> <p>The sign up process is painless. I was able to receive my free score in less than two minutes.</p> <p>As you can see from the screenshot above, the only &quot;catch&quot; is that under your free credit score report, Credit Karma will show you offers from various companies like Road Runner, Upromise, and Discover. You can organize the offers based on ratings from other Credit Karma users (think of it as a Digg for financial product offers). According to <a target="_blank" href="http://www.usatoday.com/tech/columnist/kimkomando/2008-05-22-web-money_N.htm">USA Today</a>:</p> <blockquote><p> Credit Karma provides you with special offers based on your credit score. For example, you can get a lower interest rate on credit cards. You may also apply for offers from cable companies and other businesses. </p></blockquote> <p><a target="_blank" href="https://www.creditkarma.com/partner?id=Wisebread"><img width="600" height="280" src="http://www.wisebread.com/files/fruganomics/compare.jpg" title="credit karma score example" alt="credit karma score example" /></a></p> <p>There are no annoying pop-up ads and Credit Karma claims it will not sell your information to anyone. The ads are not a bad trade for a free credit score. In comparison, <a target="_blank" href="http://myfico.7eer.net/c/27771/87523/2185?subId1=2425">FICO's official credit score monitoring service costs $14.95 a month</a>.</p> <p><a target="_blank" href="https://www.creditkarma.com/partner?id=Wisebread"><img width="367" height="196" src="http://www.wisebread.com/files/fruganomics/Score.png" alt="credit rating" /></a></p> <p>If you're not familiar with <a href="http://www.wisebread.com/debt/credit-scores" title="Wise Bread's Guide to Credit Scores">how credit scores work</a>, the raw numbers might not be very helpful. This is where Credit Karma's comparison charts come in handy.</p> <p>You can check your credit score for free as many times as you want. Credit Karma will keep track of your scores over time, which can help you identify overall trends in your credit score.</p> <p><img width="459" height="218" src="http://www.wisebread.com/files/fruganomics/cash flow.png" alt="cash flow" /></p> <p><img width="447" height="201" src="http://www.wisebread.com/files/fruganomics/money spending.png" alt="money spending" /></p> <p><strong>What information do I have to provide?</strong></p> <p>You have to verify your identity by providing your address, phone number, and social security number.</p> <p>In order to verify your identity with TransUnion, Credit Karma requires standard personal information that anyone would need to access your credit report, including your address, date of birth, and social security number. Since they realize that providing such confidential information may make some people uneasy, they&rsquo;ve put many security measures in place to ensure your safety.</p> <p><strong>Is it safe?</strong></p> <p>Yes. Credit Karma is committed to protecting your information. They have a variety of security precautions in place, including encryption, monitored servers, firewalls, read-only access, and more. More importantly, they won&rsquo;t share your information without your explicit permission. You can learn more about their TRUSTe-certified privacy policy <a target="_blank" href="https://www.creditkarma.com/about/privacy">here</a>.</p> <p><strong>Does checking my score negatively affect my credit?</strong></p> <p>Checking your score with Credit Karma won&rsquo;t lower your score. Since they&rsquo;re making the credit score request on your behalf, these inquiries aren&rsquo;t shown to creditors and don&rsquo;t affect your credit at all.</p> <p><strong>How can this be free? Are they going to sell you anything?</strong></p> <p>Credit Karma is ad-supported. However, they&rsquo;re not the pop-up ads that you might be picturing. Instead, Credit Karma provides targeted offers they think might be helpful to you based on your current financial situation. You&rsquo;re not obligated to take advantage of these offers to continue using Credit Karma, and can even opt-out of receiving email offers.</p> <p><strong>Is this my FICO score?</strong></p> <p>The scores Credit Karma provide are real scores straight from TransUnion. However, they are not FICO scores. Because you have so many different scores (there dozens of FICO scores alone!), the type of score, or even the number you get isn&rsquo;t that important&mdash;what matters is the changes that you observe over time in a single score, and where that number puts you in relation to other consumers. You can learn more about the scores Credit Karma provides <a target="_blank" href="https://www.creditkarma.com/article/guide-to-credit-karma-credit-scores">here</a>.</p> <p><strong>Can I trust the people behind Credit Karma?</strong></p> <p>Yes. Credit Karma is an honest company whose mission is simply to provide financial information and tools to everyone free of charge. They&rsquo;ve provided scores to millions of members and are continually growing and improving its service. They have an A rating from the BBB, are certified by <a target="_blank" href="https://privacy.truste.com/privacy-seal/Credit-Karma/validation?rid=397b697b-5c32-4826-828c-0b36aee9fb6c">TRUSTe</a>, and have been featured on <a target="_blank" href="blogs.wsj.com/digits/2010/02/12/sites-that-help-you-fight-the-fees/">The Wall Street Journal</a>, <a target="_blank" href="usatoday30.usatoday.com/money/perfi/columnist/block/2009-12-21-credit-profile_N.htm">USA Today</a>, <a target="_blank" href="finance.fortune.cnn.com/2012/01/03/the-end-of-paid-credit-report-monitoring/">CNN</a>, and a <a target="_blank" href="https://www.creditkarma.com/about/press">multitude of other sites</a>.</p> <p><strong>Are there other ways to get free credit scores?</strong></p> <p>Yes, here are some options:</p> <ul> <li><a target="_blank" href="http://www.wisebread.com/redir/creditsesame">Credit Sesame</a></li> <li><a target="_blank" href="https://www.annualcreditreport.com">AnnualCreditReport.com</a></li> </ul> <p><strong>More information about Credit Karma and credit scores:</strong></p> <ul> <li><a target="_blank" href="https://www.creditkarma.com/article/guide-to-credit-karma-credit-scores">A Guide to Credit Karma&rsquo;s Free Credit Scores</a></li> <li>Discussions about Credit Karma at <a href="http://forums.slickdeals.net/showthread.php?t=745830">Slick Deals</a> and <a target="_blank" href="http://www.fatwallet.com/forums/finance/804336/?start=80">Fat Wallet</a>.</li> <li>Nora's comprehensive guide to <a target="_blank" href="http://www.wisebread.com/the-four-cs-of-applying-for-and-managing-your-credit">applying for and managing your credit</a>.</li> </ul> <p><strong><a target="_blank" href="https://www.creditkarma.com/partner?id=Wisebread">Click here to sign up at Credit Karma now</a></strong></p> <a href="http://www.wisebread.com/get-free-credit-score-monitoring-with-credit-karma" class="sharethis-link" title="Get Your Free Credit Score from Credit Karma" rel="nofollow">ShareThis</a><br /><div id="custom_wisebread_footer"><div id="rss_tagline">Written by <a href="http://www.wisebread.com/will-chen">Will Chen</a> and published on <a href="http://www.wisebread.com/">Wise Bread</a>. Read more <a href="http://www.wisebread.com/taxonomy/term/"> articles from Wise Bread</a>.</div></div> Credit Cards credit karma credit scores fico TransUnion Mon, 15 Sep 2008 14:04:21 +0000 Will Chen 2425 at http://www.wisebread.com