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Credit Score Problems? We Have Some Suggestions

Credit problems are nothing new. But what makes it worse these days is the number of errors, inaccurate reporting, and systematic flaws in the credit scoring structure. Traditional scoring methods that were used decades ago are no longer reasonable in today’s environment because of the changes in the financial industry and the country’s macro-economic structure. As a result, many Americans are experiencing credit difficulties.

It is, for this reason, that credit repair has become a widely popular service in the country. Many might argue about the legitimacy of this service. After all, credit repair is not really as difficult as many credit repair companies make it look like. Even ordinary Americans can take specific measure to improve their credit. However, there are also people who champion the concept of credit repair services because it can potentially improve your credit drastically.

Banker @ Money Ning wrote a very informative post “Carry Debt to Improve Credit Score”. The specific techniques that were highlighted in this blog can be very helpful for individuals with moderate to bad credit. The blogger was confident enough to contradict some popular advice in the market. After all, even bankers can be wrong. Following his tips can get you on the road to financial recovery.

The blog Personal Finance Ezine uploaded an article titled “Never Pay Strangers to Raise Your FICO Credit Score”. Basically, it reasoned out that the legislation known as the “FACT Act” states that all Americans are entitled to one free copy of their personal credit report annually. The information available on this report includes your credit history (past and current debts), bankruptcy, and payment history among others. Proofing this report and calling the credit bureaus if there are any errors can give a significant improvement to your credit score.

Meanwhile, the site Get Student Loan Now has a blog entry “The Credit Repair Road to Success”. In essence, it highlights the three steps Americans need to go through in order to locate inaccurate information about their payment and credit history. It gives tips on how to get credit repair help. At the end, the article provides encouragement so that those who are deep in debt will not give up hope.

Credit Score and Credit Rating – Weekly Round-Up

As everyone probably knows, credit scores play a very important role in an individual’s personal finances. It can determine how much interest one will need to pay and even whether they will be granted a loan or not in the first place. The credit score, though most might not be fully aware of it, affects a person’s lifestyle and standard of living simply because of the number of financing options available to you depends on it.

This week’s round-up will focus on the blogs that talked about credit history, credit rating, and the tips that will help your record. Essentially, the important aspect that can affect your credit score is outlined here:

Jim Wang @ Bargaineering wrote a useful post titled, “How to Build Your Credit History with Tradelines“. He starts the blog post by simply stating that getting a good credit history depends on how you act when given credit. This particular article goes into the core of what goes on in establishing credit history. Tips on how you can use tradelines to build a good record are also outlined here.

David @ My Two Dollars tries to help a reader prevent their credit record from being damaged in his post, “What Damages Your Credit Score the Most?” His answer to this is straightforward: late and missing payments. The credit score always comes back to a person’s ability and willingness to pay their financial obligations. This ability will show in one’s payment history.

JC @ Get Rich Slowly posted an interesting article, “Should Repaying Debt Be an Obsession?” As mopst are probably aware, the economic crisis today occurred not only because of banks’ careless behavior, it actually became worse because the average American simply has too much debt. So is going to the other extreme the solution to today’s problem? JC doesn’t seem to think so; he states that balance is important.

Carrie Reader @ Hints Club shares her thoughts about getting a good FICO Score with her article, “Good FICO Credit Score? Tips to Getting the Most Out of Your Home Mortgage Loan with Good Credit“. Well, the title actually says it all. The blog post basically talks about how homeowners can take advantage of their good credit history with the four tips outlined in the article.

Your Credit Score and Borrowing Money

For the first entry in Friday’s Financial Fitness series, we thought it would be appropriate to discuss how your credit score impacts your borrowing opportunities.  You hear everyone talking about the importance of raising your credit score to “improve your credit.”  But what does this improved credit bring?  Which specific advantages will you have by doing so?  Bottom line: why should you be motivated to raise your credit score?  Let’s take an in depth look at an important advantage you will have-why raising your credit score increases the amount of opportunities you will have to borrow in the future.

First, it is important to review what your credit score represents.  Your credit score is basically a snapshot that assesses your financial stability.  It tells a story of how much outstanding debt you have, how much debt you have already paid off, as well as the likelihood that you will pay your bills on time in the future.  Ranging from 300 to 800, the higher your credit score, the better.

Raising your credit score puts you in healthier financial standing, which in turn makes it easier to borrow.  How does this work?  Let’s say you are looking to buy a house.  You have a plan-you have been looking at houses and you’re ready to take the plunge.  After assessing the amount of money you have in the bank to pay your down payment and your future mortgage, you realize that in order to make your dream of owning a house a reality, you need a loan.  When you meet with a potential lender, they will be basing their decision about whether or not to grant you a loan on the amount of risk you present.  Banks need to have a certain level of confidence that you are going to be able to pay back this loan over time, which comes in the form of your monthly mortgage payment.

So where can they look to determine the risk they’re taking?  Banks go straight to your credit report.  They want to see how much debt you have and how on-time you are with other payments.  Since they may know nothing about you prior to your loan appointment, this is a sure-fire way for them to assess your financial situation.  With good credit, you will increase your chances of getting that loan approved in the first place.  Also, once your loan is approved, having good credit will lower the interest rate the bank charges you each month.  Over the life of a 15 to 30 year mortgage, a lower interest rate can save you thousands and thousands of dollars!  If you have what the bank considers bad credit, they may not approve the loan in the first place, as they may feel that your payment history is not reliable.  If they do approve your loan, despite your bad credit, your interest rate will certainly be higher.  Furthermore, the initial down payment on your dream house will be higher because of your low credit score.

So the next time you hear someone mention the importance of raising your credit score, know that doing so will not only give you peace of mind; it will also increase the amount of opportunities you have to borrow money in the future-at a lower interest rate!

Peer to Peer lending – Where Did it Go?

Peer to peer lending is now all but gone; however, for a while, peer to peer lending was the last resort for many in getting a loan.  Since banks began reducing the number of loans and stopped taking new applicants, peer to peer lending communities were often times the last place to go.  One of these communities, Prosper.com, has changed the language on their application page.  It now reads “We are unable to fund your loan at this time. However, Prosper has agreements with trusted partners who will work with you to determine if you can get a loan. If you would like to proceed please fill in the application below.”

So what happened to peer to peer lending?  Well, the government basically came in and said individual people cannot judge whether or not to lend other people money.  I find this both upsetting and amusing.  I was involved in one of these peer to peer lending communities, both as a lender and as a borrower.  I thought I was a great judge of who to lend money to! If I had an issue or concern, I could always ask the borrower.  I used a loan that I received from a peer to peer lending community shortly after college to consolidate my debts into a lower rate.  I am a big fan of the entire experience-from setting up my profile and loan request, to navigating the bidding process-all the way to funding.  I received a fixed rate loan, unlike the credit cards, that I planned to pay it off in three years time, unlike the credit cards.

The more and more I look around the web, the less and less places I find that enable consumers to go and get loans.  Credit cards are disappearing left and right.  Straight up unsecured personal loans are all but gone. Peer to peer lending was the last stop for most people, and now that is gone.  With regulators finally getting involved, I guess it was inevitable.

Banks say they are lending again-it’s just that most people are scared to apply.  I have actually heard otherwise from the lending community.  Banks are just forced to be picker with the criteria of their borrowers.  It looks like pay day loans and their dangerous pitfalls are all that is left for most American borrowers who are desperate for money.

What can you do if you are in these tough situations?  Before making any move you should always know where your credit stands.  You can always sign up for a free online credit report if money is tight.  If you find out your credit is in bad condition you are going to have trouble trying to get a loan.  Debt management help may be your last resort.  Be sure to compare the companies and programs that are out there as some specialize in debt settlement, credit counseling, and bankruptcy.

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