Credit Report

What You Didn’t Know About Credit Bureau in the US

Have you ever wondered why there is a difference between your interest rate and your best friend’s? Well, mystery solved: the infamous credit bureau. A credit bureau is a financial information institution that gathers data about an individual’s credit behavior and reports it to lending companies so they can make a smart decision about lending money to relatively complete strangers.

Think about it. If you ask a person for money, your possible loaner will ask around about you, how well you pay, how often do you ‘forget’ your payments, and, in sum, whether it is safe to give you the money or not and how expensive this decision will be.

Is Credit Bureau a Bad Institution?

Not at all. The experts from Caminofinancial tell us that it’s a common misconception that credit bureaus are responsible for accepting or rejecting credit requests but the reality is far from that. In fact, a credit bureau is a private company that collects data from banks, mortgage lenders, credit card institutions, and small loaners.

Sometimes, they even collect data from rent brokers, debt collection agencies, cell phone provider companies, utilities, and public records such as court records. This way, they can have the whole picture of your payment behavior.

Source:self.inc

Mainly, these companies collect all the available data to elaborate a credit report, which they share with any financial institution that requires it. They can even provide this service for you if you need it.

There are three main credit bureau companies in the United States that you probably heard about: Equifax, Experian, and TransUnion. Even though these are quite famous, there are many other smaller ones that have the same function.

What’s in it for you?

Whenever a financial company gets a credit request, they check the information that the credit bureau has about you in order to “get to know you” and understand your credit behavior. So being in the credit bureau isn’t necessarily a bad thing. It just means that you have, in the past o currently, acquire a credit.

Think of it this way: Would you lend money to your cousin even though he never paid back the money he asked your mother a year ago? Definitely no. Would you lend money to a friend who asked you for some cash in the past, and even though he paid back, it took him four years and a lot of phone calls to terminate the debt? Probably, but under certain conditions to protect yourself.

But, what if your sister asks you for some money and promises to pay you back the same way she has done it in the past? On-time and without any drama. You wouldn’t even think about it, right?

The bank is in the same position as you are in these examples, but since the financial institution doesn’t know you personally, they ask the credit bureaus for your records. The institution would lend cheaper money to your sister and way more expensive one to your cousin. Smart decision, right there.

So, the better your behaviour, the best terms you’ll find in your next credit or loan request. And if you don’t take care of your credit history, you’ll receive the opposite.

If you aren’t in a credit bureau…

This means, plain and simple, that you’ve never had a credit or a loan on your name. Not for your residence, your phone or even student loans. You are a bit of a ghost for the banking system.

If you are not in any credit bureau, the bank will assess the risk as an unknown individual and your conditions might not be great. It’s like lending money to a guy on the street that you know nothing about.

This is why it’s important to build your credit history. And the only way to do it is… asking for a loan or credit to a financial institution. And, of course, paying on time so that you get a good credit history and then, a good credit score.

Talking about credit scores…

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As said before, there are different credit bureaus that score credits. You can check your score in the three most common credit bureaus and you’ll find small differences in the final score. That’s because each has its own methodology and algorithms and take different factors into account. But the one thing all of them have in common is the score range.

This is how they’ll rate you:

  • Excellent: 800 points or higher
  • Very good: 740 to 799 points
  • Good: 670 to 739 points
  • Fair: 580 to 669 points
  • Poor: 300 to 579 points

In general, the scores take into account that you pay on time every month, how long you’ve been using the credit, that your debt is no higher than 30% of your income and that you don’t have a bunch of credit lines.

If you are considering asking for a loan and the financial institution requires your credit score, but you don’t know it, don’t worry. Getting it isn’t hard at all. You can even use free services to pull up the three scores from the credit bureaus. You’ll just need to provide your email address, your basic personal information, and the last four digits of your social security number.

An extra tip: it would be a good idea to take all three scores so the lender has all the data right there and then.

Have always in mind that good credit score will open the doors for bigger and better credit opportunities, and a poor one will limit your chances of qualifying for a loan, buying a home, or even purchasing supplies for your business.

Source:bankonus.com

Bottom line

A credit bureau will gather the best and the worst part of your credit behavior and will play an important role in the decision making of a financial institution when you request a credit line. But will never take an active part in that decision. It’s only a data-gathering agency and you’ll also be able to revise your score to make a better decision when it comes to asking for borrowed money.

What Company Insolvency Means and How to Notice it Early

It is almost impossible for a company to totally avoid debts; in fact it is usually seen as an important part of financing a business. However, most of us make the mistake of thinking all debts are bad. This is wrong because there are debts, and then there are bad debts. How can debts be bad? Debts become bad when the amount you have borrowed becomes overwhelming to the point where cash flow issues arise. Not just debts can cause cash flow problems, a number of other factors could lead to this, but when these factors become consistent, it can lead to a serious issue. Also, we often confuse the term “insolvency” and “bankruptcy” as meaning the same thing. First of all, we will explain the difference between these two terms, and how best to identify them and properly avoid them.

Insolvency and Bankruptcy

Insolvency is a term used by financiers to describe the situation of a company when this company is unable to pay its own debts. It means the company is unable to pay bills when due, and it has more liabilities than assets. As a limited company, experts have adviced that trading should stop the moment the company begins tilting towards insolvency. Also, it is against the law and is called Wrongful Trading. This is a situation whereby the company continues trading in the event of an insolvency in spite of the damaging effects it will have on creditors. This is defined in the Insolvency Act of 1986.

Source:lpc-law.co.uk

When the authorities find out about this, and Wrongful Trading is proved, henceforth the directors will be responsible for the debts of the company from the moment they knew about the insolvency status of the company. Another term that exists in Fraudulent Trading, and this refers to a situation whereby directors continue trading while having no intent to repay debts.

Bankruptcy on the other hand is when a company makes a legal declaration of its inability to repay debts. Naturally, bankruptcy can be a solution to insolvency. There’s another term that is closely related with these terms, and it is Liquidation. Liquidation occurs when a business pays off its debts by selling off its business assets after being audited.

Source:westbrooklawtexas.com

After a year (sometimes more) of applying for bankruptcy, the debts of a company are written off. A company can apply for bankruptcy, or a private individual, even a creditor can do so on your behalf. But before you can apply, you must owe at least £5,000 or more. The petition for a bankruptcy gives the court a right to take your assets and sell it to pay your debts.

Now, let’s circle back to the subject, how can my business survive being insolvency? First of all, you should know that insolvency is not the end of the world, or even the end of your business. Your biggest motivation should be not to enter liquidation, because that is the point of no return.

Here are a few things you could do:

1. Speak with all creditors and see if you can secure an agreement off the books: This means you should try to secure an informal agreement that states that the debt will be paid on an agreed date, this could be full or part payment. This works even better when you are going through a temporary financial problem.

2. Hand the company over to an administrator: Be rest assured that this does not mean selling your company, or choosing to be              liquidated. What it means is handing your company over to the hands of an insolvency practitioner or an administrator. The job of this administrator will be to help you manage your company’s debts and even find a way to prevent liquidation. Most times, these experts try to pay your debts from your assets.

Source:bestdealfor21.life

Now that we have identified how to tackle insolvency when it rears its ugly head, it is important that we also discuss ways you can avoid bad debts in the first place. There are several precautions you can take to prevent your company from having a bad debt (which is a kind of debt that you are incapable of paying to your creditor and vice versa.

According to a survey conducted by Reporting Accounts with 100 businesses. It was discovered that 68% of these businesses have had a late payment issue, while another 53% have been in a position where they had to write off a bad debt.

Also, a great way to prevent an issue of a bad debt is to run a comprehensive background check of companies before you work with them. The most important is the credit check which companies can also use to check their own business, and see how healthy its finances are. Credit reports provide you with comprehensive and detailed information filled with graphs and reports of assets and liabilities over a period of them. You can also check your Credit Risk Score which is a score that tells you the likeliness of your company becoming insolvent in the next one year.

Source:debt.org

Checking your credit report can also be used to discover potential customers. A credit report also gives you the general “health status” of your business. It tells you how much debt the company is in, and how much the company is making in terms of profit, plus the company’s level of liabilities in comparison to assets. Whatever these reports suggest to you, it is important that you take steps on it.

Freezing Your Credit Report Through Credit Repair Companies

In recent times, there has been an increase in identity theft and credit card fraud. In the United States alone, 14.8% of consumer fraud complaints in 2018 were about identity theft. 444,602 of these cases were reported. That same year, credit card fraud accounted for 35.4% of identity theft cases, ranking it as the first type of identity theft fraud – a credit card fraud statistics generated by SH/FT Credit Card Processing.

It is very important to have your credit information fully secured. It is always better to do everything in your power to prevent a scenario like this from happening to you. However, sometimes things like theft or fraud happen despite your efforts to prevent it. There are plenty of ways in which someone can access your information and commit a fraud, even though you were careful. Therefore, you need to prepare for the unexpected. How can you protect your credit? One of the viable ways you can beef up credit information security is to freeze your credit reports.

Are you wondering if this can be done? Sure, you can implement a credit report security freeze on your account. However, you need to know what it is and how it works.

Activating A Freeze On Your Credit Report

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Freezing a credit card report if often one of the first steps people take once they find themselves in such a unpleasant situation like fraud. There is a good reason why this is an advisable first step. When something like this happens, the most important thing is that you sort out your thoughts and act rationally, but even more importantly, you need to act fast. This when the need for freezing the credit card report kicks in – it is a very fast and effective way to prevent things from getting worse. In that sense, you can prevent your credit report from being accessed by fraudsters by activating a credit report security freeze. Although, it may not totally prevent new accounts from being opened in your name, it limits the chances. Consider it to be an extra security layer or firewall that gives fraudsters a tough chance manipulating your account.

Even with sensitive information like a social security number (SSN), identity thieves would find it very difficult to get approved for new credit. The credit freeze feature prevents anyone from accessing your reports.

In a situation where a fraudster forwards a credit application in your name to a credit company, the company would request a hard pull from your credit report. This makes the culprit unable to proceed further. You can request a freeze on each report you get from the three credit report bureaus:

  • TransUnion: 1 (888) 909-8872
  • Equifax: 1 (800) 349-9960
  • Experian: 1 (888) 397-3742

You would be required to verify your identity by supplying personal information such as your social security number. Once you are verified, a pin will be sent to you via mail. You can unfreeze your credit reports at any time using the pin.

What Is The Cost Of Unfreezing Your Credit Report?

Source:thebalance.com

Up until 2018, individuals paid small amounts to have their credit reports frozen. There were various factors that determined the amount one had to pay. Depending on where you lived, there were laws regarding the service charge of credit bureaus.

Albeit, you were expected to pay between $5 and $20 for each credit bureau service you receive. This could be costly, especially if there are two or more adults in your household. In some states, the fee was waived for senior citizens.

However, in September 2018, freezing and unfreezing a credit account became free for all United States Citizens. This change made the whole process more approachable, and therefore it affected the overall security of the citizens. On the top of that if you have family which includes two adults; you don’t have to worry about paying double fees. Furthermore, even children have free rights to these services, especially those targeted by identity thieves, which very often affect children or teenagers. Nevertheless, there are still records of security breaches in various institutions, including health insurance companies.

Hence, it is possible for a child’s SSN to be compromised. However, implementing a long-term credit report security freeze on their accounts can help secure credit information and history. If you would like to know more about how to implement this security feature, please click this. The best thing about the Internet presentation of different companies is the fact that you can see the reviews from other users, and decide for yourself which company works best for your needs and expectations.

Conclusion

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To conclude, being careful with your finance protection is one of the top responsibilities of every citizen. Even though we all seem to think that the theft will not happen to us, credit cards frauds unfortunately occur very often. However, there is no reason to panic. In order to protect yourself and to keep your information safe, you can act according to the few steps. In case something like this happens to you, you can always freeze you credit card. One of the most beneficial advantages of freezing or unfreezing your credit card lays in the fact that it is completely free. Therefore, if you are suspecting that somebody has stolen your credit card, or that your identity is compromised, you can simply freeze it. Thanks to the credit repair companies, the whole process is a lot simpler and more effective. Due to the fact that you will get all the necessary information and help of the experts there, there is no need to worry if a situation like this happens to you.

Fix Your Bad Credit Score Now: Here’s How

You might have tried applying for a new loan or credit card account, but the lender or banker will not approve it. Chances are, you have a bad credit score. Your loan history and repayment history might have affected your loan application.

You need the money, and you’re frustrated with how to get approved for that loan application. Do not lose hope. There are still ways to fix your bad solvency rate. This article will tackle how you can fix it.

Understanding Your Credit Report

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Your financial report contains your financial history and your past and present payment of debts. Bureaus use your financial history to know your borrowing risk, which is your credit score.

A few late payments or a payment default might have affected your score. Debt agreements and your bankruptcy will also be listed in your file, which can then result in a low or bad solvency rate.

Scores that are between 0 and 459 are generally below average and weak solvency rates. Having a low or bad solvency rate will then send a red flag to the lender or bank if you apply for a loan. Having a bad solvency rate means that there is a high chance that your loan application will be rejected. You will also run the risk of getting a loan from loan sharks with high-interest rates.

The listings that leave you in bad financial report are the following:

  • Bankruptcy – listed in your report for two years
  • Debt agreements – listed for five years
  • Defaults – listed for five to seven years
  • Writs, court judgments, and summons – listed for five years
  • Missed and late payments – listed for two years
  • Multiple loan inquiries in a short period – listed for five years

Can you still get a loan with a bad score?

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Yes, you can! Although a bad solvency rate will lessen the chances of your loan application being accepted, this does not mean that you will have no other options. You can still take out a personal loan and home loans.

It is still possible for you to take out a personal loan even if you have a bad lending capacity. Some lenders in Australia will let you borrow up to $10,000. You can also consider getting a short-term loan if you need instant cash with fast approval. However, since you have a bad lending capacity, the lender might charge you with a high-interest rate.

As for home loans, there are still lenders who will approve your home loan application even if you have a bad lending capacity. Ask help from a mortgage broker to look for lenders that suit your financial status.

How to fix your bad score?

Fixing your borrowing capacity is not easy and may take up a significant amount of your time, and require a long period of financial responsibility on your part. With that mentioned, here are ways to fix your bad lending capacity.

1. Change errors in your credit report

Source:domain.com.au

Get a copy of your report and check the information and financial history stipulated therein. See if there are errors in the entries in your report because some reporting agencies might have made errors in your report.

The most common mistake is that your family member’s loan or stranger’s loan might have been listed to your report because of very similar names. Your income might have typographical errors, or debt may have been entered twice.

To have this error fixed, contact your reporting agency and ask them to fix the mistakes right away. Your lending capacity will probably improve if you have these errors changed.

2. Pay bills on time

This strategy is the most obvious answer when people ask how to improve their solvency rate. Your borrowing capacity will improve if you have consistent and on-time payments on record. Staying on top of your loan repayments will surely help improve your borrowing capacity and will show that your financial discipline has grown.

Paying bills on time is also essential, especially if one of your debts is more than $150 since nonpayment or late payment in paying such debt can result in default in your financial report for 60 days.

A strategy in paying bills on time is consolidating all your loan bills so that they will be paid only on one day, and you will be sure that you will not miss a paying day. Another strategy is to set up an automatic paying system with your employer or bank account.

If you do not like the two strategies mentioned above, then if you have multiple loans, budget your income and pay these loans one by one. The best technique is to pay off the loan that has the highest interest rate. If you have leftover money, then work on paying off your other debts to lessen them.

Source:coinrevolution.com

3.  Avoid making multiple loan application

Having multiple charge card applications will indicate that you are under a financial blunder and that you might not be able to pay off one of your affinity card loans because of your financial status. But if you want to have a charge card, then do not make applications too often in a short period.

4. Completely cancel your credit card

Having a charge card might be one of the reasons why you are drowning in too much debt since you will be tempted to swipe the card whenever you make a big-ticket purchase.

Make sure to completely close down your account so that your borrowing capacity will not be affected by the account anymore.

5. Get help

Doing all these things by yourself can be torturing and exhausting. It is good to ask for help from a financial counselor. These people will also help you repair your solvency rate and keep your financial stability back on track.

Takeaway

Discipline yourself to fix your bad lending score. Resolve any financial problems you might have using the tips mentioned above. Look for a solver or financial counselor in your area at creditsolvers.com.au to help you in fixing your score. Maintain proper financial habits, and you will be sure that your rating will be better than what it was before.

Creditworthiness: What’s In It for Borrowers?

You probably have read or heard about the term “creditworthiness” many times when researching a loan or credit cards. It’s not surprising as it has a very important part of every loan application there is.

The term is pretty self-explanatory as it’s basically a term describing how worthy the borrower is off the loan as well as his or her likelihood to default on the obligation.

How Do Lenders and Creditors Get Your Information

You need to render some personal information first to qualify for a loan. This should include necessary details like your name, contact information, and address. The lender or creditor like CreditNinja Financing might also ask finance-related questions to you to better gauge your eligibility, such as your employment status and income.

After submitting your application, they will run a hard credit check that will affect both your credit report and score.

For instance, a lender might check how much debt you currently have and what your income to help them ascertain your capacity to repay the loan that you’re applying for.

What is a Credit Score?

Img source: creditsesame.com

It consists of a three-digit number ranging from 300 to 850. A high score means your creditworthiness is good. It also implies that you manage and pay your debt and obligations on time.

The biggest factor that affects it is how often you settle your bills on time. Delayed payments and other financial misconducts lessen it.  As a consequence, it will be difficult for you to get approvals on loan and credit card applications.

Besides financial and debt management, the amount of debt you’re carrying is also a big factor. For example, having a high balance can make it hard for you to get loan approvals.

That being said, pay down your loan balances and keep your balances below 30% of the limit. Also, lessen your applications for a new card and only apply for new items if necessary.

What Your Credit Report Contains

It houses important personal details about you that lenders check when evaluating your creditworthiness. Apart from basic information, you’re probably wondering what else is written on the report and how you can check it out yourself.

In case you don’t know, you’re entitled to one credit report every year. The three major bureaus namely; Experian, Equifax, and TransUnion, will allow you to check your report through visiting their websites.

Know it that this report doesn’t include your credit score. But you can check it separately and for free through financial sites that provide credit score checking services. Another way to check your score is by taking a look at your current loan statements.

Below are the pieces of information that you can find in your credit report.

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  • Personal details such as your name, birth date, address, social security number, and phone number.
  • New and old accounts information, including payment history, account balances, account types, creditors’ names, and available
  • Public records like bankruptcies, foreclosures, liens, and civil suits.
  • Inquiries from companies from companies that checked credit report.
  • Debt collections

At this point, you’re now aware that lenders who run a hard credit check on your report can see just about everything related to your finances. All of these metrics come together so they can gauge how risky you are as a borrower.

Creditworthiness Varies

It’s important to know that it also varies depending on the type of loan you want to apply for.

For example, payday loan lenders have more lenient standards and requirements than mortgage loan lenders. The reason is that mortgage loans pose higher risks for the lenders because they involve bigger money with nothing to back them up in case the borrower defaults the loan. Good thing you can secure a loan with collateral which helps minimize the risk so you can qualify.

On the other hand, applying for a credit card is easier and have a higher approval rate, even if you have a shoddy credit history or a low score. However, when such is the case, the loan comes with a higher interest rate.

How to Improve Your Creditworthiness

Img source: consumerreports.org

To stay on top of your creditworthiness, it’s important that you monitor your score regularly. You can do so by using credit checking platforms online. These platforms will grant you access to your score and give tips on improving it.

Now, if you’re having a hard time getting approved for loans, you need to polish it. Prove to the lenders that you’ll not default on debt obligations.

Get a Credit Card

You need to build credit if in order to build your score. It doesn’t necessarily mean your card should carry to improve your score. It means you need to make purchases that you can afford to pay once your billing cycle ends.

Paying your bills in full every month will showcase your capacity to repay a debt on time, which is crucial in establishing good credit. If you can’t acquire a regular credit card, you can get a secured version from a lending institution or a bank. They can also give you a card limit that’s equivalent to the money you deposited into an account.

Be Responsible with Using Your Credit Card

Don’t max out your card and always pay your bills on time. Remember that having a high balance on your card can harm your score even if you’re paying it every month. It’s ideal to keep your monthly expenses within or less than 30% of your credit limit.

In case you exceed your limit, settle the balance right away. It must be done before your statement closing date to minimize the balance that’s going to be reported to the credit bureaus.

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Apply for a Loan

Credit comes in two types: revolving and installment credit. If you want to get the best possible score, you need to build your creditworthiness with both.

Know that a credit card falls under the revolving credit type. Thus, if you don’t already have installment loans such as mortgage, car, or student loan, consider applying for a small personal loan that you can easily pay.

Stay on Top of Your Credit Report

To make sure that you don’t have any negative marks on your reports, you must regularly monitor it. If you find inconsistencies, errors, or unauthorized accounts or reports on your report, dispute them right away.

Takeaway

If you feel like there’s still room for improvement for your credit history and score, there are steps you can do to fortify them as well as your overall creditworthiness. Just put in mind that it is a loose term whose definition can vary depending on what kind of loan you’re seeking and on the lender.

While it’s difficult to determine what do lenders care about the most in your credit report and how strict they can get in terms of requirements, knowing what information they use to gauge your eligibility is the first step in increasing your likelihood in securing a loan and in improving your financial health.