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Preparing Your Credit for a New Mortgage

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Preparing Your Credit for a New Mortgage

So you are ready to take the plunge and apply for a new mortgage loan this year? Great! Congratulations on making the decision to become a homeowner. With low interest rates, tax advantages, and a host of other benefits that come along with purchasing a home, you have about a million reasons to break free from the shackles of renting.

You can set yourself up for success during your entire home buying experience by knowing what to expect ahead of time. Most importantly, you should be sure that your credit is in tip top shape so that you can qualify for the most attractive rates and terms available on your new mortgage. Check out these 5 steps to help you get started.

1. Check Your Credit

There’s nothing worse than filing out a mortgage application only to find that some unwanted “surprises” have shown up on your credit reports. Unfortunately, this is a very common problem. However it doesn’t have to be since you can access your own credit scores and reports online 24/7. Plus, contrary to a popular credit myth, checking your own credit does NOT harm your credit scores whatsoever.

CLICK HERE for a list of great resources where you can access your 3-bureau credit reports and scores. Finding out exactly what is on your credit reports prior to your loan application should definitely be the first item on your “to do” list during the home buying process.

2. Dealing with Surprises

If your credit reports were all 3 squeaky clean when you checked them in step 1, then skip down to step 3. However, if you found errors or blemishes on your credit reports then you may have some work to do before applying for a mortgage.  Remember, you have the right to dispute inaccurate and unverifiable accounts with the credit bureaus. You can dispute accounts on your own, but you also have the right to work with a professional if you are too busy or feel overwhelmed by the process. CLICK HERE to schedule a no-obligation credit analysis to develop a professional plan to help you work toward cleaner credit reports.

3. Optimize Your Scores

Even if you have no errors or derogatory items on your credit reports (i.e. collection accounts, charge-offs, tax liens, judgments, etc.), it may still be possible for you to improve your credit scores. Take a long hard look at your credit card balances. Paying your credit cards down to $0 can potentially have a very BIG impact upon your scores. (CLICK HERE to read “The Perfect Credit Card Balance.”)

Can’t afford to pay off all of your credit cards? You still have options. Paying down even a few of your cards to zero might still be beneficial to your credit scores. Plus, you can always consider a debt consolidation loan to transform that score-lowering, revolving credit card debt into much more credit score friendly debt – an installment loan.

4. Avoid Mistakes!

When preparing to apply for a mortgage, you need to be a credit boy scout. You don’t want to make any credit mistakes which could result in lower credit scores and a loan denial. Some of the most common mistakes you will want to avoid include making late payments on existing accounts, charging up your credit card balances, opening new accounts (that new car loan needs to wait!), and having your credit reports pulled excessively by lenders.

5. Monitor Your Credit Reports and Scores

There is no better time to keep a close eye on your credit scores than while you are preparing to apply for a mortgage. However, with so many credit monitoring options available, it can be difficult to choose. Keep in mind that a credit monitoring service which allows you to keep an eye on just one credit bureau and one credit score is not going to be enough. After all, when you apply for your mortgage the lender is going to take a look at all 3 of your credit scores and all 3 of your credit reports – Equifax, Trans Union, and Experian. CLICK HERE for a list of several different 3-bureau, 3 score credit monitoring services to see which one is the best fit for you.

Buying a new home is an incredible and exciting experience. However, credit problems during the mortgage application process can often turn what could be a wonderful experience into a nightmare. Follow these 5 steps above and set yourself up for mortgage success. It can be tempting to take shortcuts, but putting in the work on your credit ahead of time will pay off every time.

michelle-black-credit-expert

Michelle Black is an author and a credit expert with over a decade of experience, the credit blogger at HOPE4USA.com, a recognized credit expert on talk shows and podcasts nationwide, and a regularly featured speaker at seminars on various credit and financial topics. She is an expert on improving credit scores, credit reporting, correcting credit errors, budgeting, and recovering from identity theft. You can connect with Michelle on the HOPE4USA Facebook page by clicking here.

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7 New Year's Resolutions to Improve Your Credit

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7 New Year's Resolutions to Improve Your Credit

Whether or not you are a believer in New Year's resolutions it is a smart idea to take an honest look at your credit from time to time in order to see how it can be improved. Good credit can help you to save tons of money, get approved for the loans you need, and can even help you to land a better job. It is 100% worth your time, energy, effort, and money to work towards achieving and maintaining the best credit possible.

Here are 7 steps that every single person can take to make steps toward having better credit this year.

1. Pay every bill on time.

The importance of paying your credit obligations on time, every time cannot be overstated. In FICO's credit scoring model a whopping 35% of a consumer's credit scores are assigned based upon factors included in the "Payment History" category of a consumer's credit reports. If late payments do occur you can bet the bank that they will have a very negative credit score impact.

2. Cut spending.

Overspending is perhaps the #1 cause of credit problems for most Americans. When consumers charge more than they can afford to pay off in any given month not only do they hurt their credit scores by doing so (yes, credit card debt can in fact lower credit scores even when payments are made on time), but they also set themselves up for financial problems and serious credit problems in the future. In fact, overspending can lead to late payments, collections, judgments, and even bankruptcy if the problem is left unchecked.  

3. Make a plan.

Failure to plan is the same as planning to fail. A well planned budget is a crucial step towards healthier credit. Smart consumers tell their money where to go instead of wondering where the money went after it has already been spent. CLICK HERE for a free copy of the HOPE4USA Basic Budgeting Worksheet to get started.

4. Establish credit.

Credit cards can be extremely useful tools in building or rebuilding better credit, as long as they are managed properly (on-time payments and never revolving a balance from month to month). Even consumers with credit issues can qualify for many secured credit cards. CLICK HERE for a list of credit cards to compare and see which ones might be a good fit for you.

5. Become familiar with your credit reports and scores.

Every consumer should be in the habit of checking all 3 of his credit reports often. The credit bureaus and your creditors are obligated by law to report accurate information on consumer credit reports. However, it is up to you and you alone to ensure that the information contained on your credit reports is actually correct.

You can access your 3 free credit reports each year at www.annualcreditreport.com (credit reports only, not scores). You can also access your credit scores for a fee or as part of a free trial offer from a credit monitoring service. CLICK HERE to compare credit monitoring services which may offer free or low cost credit scores as part of their introductory offer.

6. Correct errors.

Errors occur on credit reports all the time. In fact, in 2013 the Federal Trade Commission released a study which found over 40 million errors to be present on consumer credit reports. If you discover incorrect or suspicious information on your credit reports then you have the right to dispute that information according to the Fair Credit Reporting Act.

Disputes can be handled yourself or you also have the right to hire a professional credit expert like our HOPE4USA team to assist you. CLICK HERE to schedule a no-obligation credit analysis with a HOPE4USA credit expert to learn more about how our team can help you fight for the better credit you deserve. Fixing credit problems can certainly be a difficult job, but it is not a job that you have to do alone.

7. Establish goals.

The final tip is perhaps the first step that you should take as you set out on your journey toward better credit. Identify the reason why you want to achieve better credit. Do you desire to purchase a home for your family? Is your goal to have the strong credit you need to finance your education or the education of your children? Do you need better credit to start or build a business? Building better credit can be a long, hard journey (especially if you are working alone without professional help). Your "why" can help you to stay the course even if you feel frustrated or impatient at certain points within your journey. Your "why" is also the reason that all of your hard work will be worth it in the end. 

michelle-black-credit-expert

Michelle Black is an author and a credit expert with over a decade of experience, the credit blogger at HOPE4USA.com, a recognized credit expert on talk shows and podcasts nationwide, and  a regularly featured speaker at seminars up and down the East Coast. She is an expert on improving credit scores, credit reporting, correcting credit errors, budgeting, and recovering from identity theft. You can connect with Michelle on the HOPE4USA Facebook page by clicking here.

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Tackling Your Holiday Credit Card Debt

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Tackling Your Holiday Credit Card Debt

You may have began the holiday season with a firm conviction: I will not overspend this year. I will only spend what I can afford. I will not go into debt. Yet the truth is that despite the best intentions, we Americans are notorious for digging ourselves into big financial holes during the holidays.

If you find yourself wanting to run away and hide from your impending credit card statements, this article was written specifically with you in mind. It is too late to undo the damage your holiday spending sprees may have caused, yet that is no excuse for wallowing in self pity for the next few months and allowing the damage to fester.

Excessive credit card debt can place a burden upon you financially and can damage your credit scores as well. As a result, it is important for you to take action immediately so that your credit and your finances can start to recover.

Make a List, and Check It Twice

The first component in your post-holiday recovery plan needs to be a detailed list of the damage which has already been done: aka a list of your outstanding credit card balances. You should begin the list by writing the smallest balance at the bottom and working your way upward. Here is an example to help you get started.

·        ABC Bank Card: $2,000 Balance

·        XYZ Bank Card: $1,500 Balance

·        QRS Bank Card: $800 Balance

Start at the Ground Floor

Credit card debt harms your credit scores even when you make all of your monthly payments on time. The reason why credit card debt can cause so much credit score damage is because 30% of your FICO credit scores are largely based upon your revolving utilization ratio (aka your credit utilization). Your credit utilization is basically the relationship between your credit card limits and your credit card balances. The closer your balances climb to your limits the worse the impact will be upon your credit scores.

Credit scoring models like FICO and VantageScore pay attention to the credit utilization ratio on all of your credit cards combined and also to each of your credit card accounts individually. This means that each time you pay a credit card account off you will probably see at least some credit score increase. In fact, when you pay a credit card balance down by even a mere 10% you might begin to see some positive credit score movement.

By paying off your lowest credit card balances first you may be able to bring about a positive increase in your credit scores more quickly. For example, paying off the $800 on the card with the smallest balance in the example above (QRS Bank) would probably help your credit scores more than if you paid the same $800 on either of the cards with the higher balances (ABC Bank or XYZ Bank). Starting at the ground floor and working your way up as you pay off your credit card debt will give you a lot more bang for your buck.

A Commitment to Change

The most important step you can take as you work toward eliminating your holiday credit card debt is to resolve to break the bad habit of overspending once and for all. In fact, if you will cut your spending in other areas you could free up additional funds to help you wipe out your credit card debt much more quickly. Paying off your credit card debt may not be easy and no one ever said that cutting spending is fun, but making a positive financial change is worth the sacrifice. Take control of your finances so that your finances won't control you.

 

michelle-black-credit-expert

Michelle Black is an author and leading credit expert with nearly a decade and a half of experience, a recognized credit expert on talk shows and podcasts nationwide, and a regularly featured speaker at seminars across the country. She is an expert on improving credit scores, budgeting, and identity theft. You can connect with Michelle on the HOPE4USA Facebook page by clicking here.

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Equifax Data Breach: How to Find Out If You're Affected and What to Do About It If You Are

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Equifax Data Breach: How to Find Out If You're Affected and What to Do About It If You Are

Last week credit reporting giant Equifax announced some very unsettling news. Equifax fell down on the job. There is no other way to put it.

The credit reporting agency experienced a massive data breach which unfortunately compromised the personal identifying information of approximately 143 million people. For a company which makes billions of dollars collecting, storing, and selling your private information this breakdown in security is not just negligent, it is inexcusable. 

If you understandably missed this disturbing announcement last week amidst all of the news coverage about Hurricanes Harvey and Irma, here is what you need to know right now.

Why This Breach Is a Big Deal

Data breaches have occurred with increasing regularity over the past several years. Insurance providers, hospitals, retail chains, online gaming services, and many other businesses have experienced cyber theft which compromised the personal information of millions. In fact, it almost feels as if you cannot turn on the news or log into your favorite social media newsfeed without hearing about a new breach of security.

The regularity of these data breaches can unfortunately be desensitizing. It can cause you to drop your guard. That, however, could be a dangerous mistake especially if your information has indeed been compromised in the Equifax breach.  

Equifax's breach does not simply involve credit card information which can be easily changed to prevent fraud. Instead, the breach involves exposed information you are not going to be able to change: names, social security numbers, dates of birth, etc. The hacked information could be sat on for years, allowing you to forget about the danger, before any actual fraud or identity theft is even attempted. The stolen information will be just as valuable to thieves in the next week, the next month, the next year, and even potentially the next decade to come. If you were among the 143 million consumers compromised, your exposure to identity theft is now a long term risk.

Action May Be Needed. Panic Is Unnecessary.  

Now that you have digested the bad news, let's talk about what you can do to protect yourself. Panic is not going to solve anything, but a solid plan can go a long way.

1. Find Out If You Are a Victim

Equifax maintains credit files on over 200 million consumers. That means that approximately 29% of you were fortunate enough not to have your personal information compromised. You can find out if you were exposed to the data breach here:

https://www.equifaxsecurity2017.com/.

(NOTE: Equifax initially came under fire on social media and from several lawmakers, including New York Attorney General Eric Schneiderman (D), for including fine print in the terms of service on the above webpage which reportedly may have attempted to dupe consumers into waiving their rights to enter a class action lawsuit or to sue Equifax over the breach. Equifax has since changed their terms of service to remove the offending clause. Really, Equifax?!)

2. One-Call Fraud Alerts

If you visit the website above and discover that your "personal information may have been impacted by this incident" then placing a fraud alert on your credit reports may be a good next step. You can easily place a 90 day fraud alert on all 3 of your credit reports by requesting an alert with Equifax, TransUnion, or Experian. Per the Fair Credit Reporting Act (FCRA), once any of the credit bureaus receives a request for a fraud alert they must communicate that request to the other 2 remaining bureaus on your behalf.

The FCRA also gives you the right to place an extended, 7 year fraud alert on your reports as well. However, you will first need to prove that you have actually been a victim of identity theft (aka someone has opened or tried to open a fraudulent account in your name). Both types of alerts are free under the FCRA.

3. Credit Monitoring

Equifax is offering free credit monitoring (TrustedID) for 1 year to anyone who wants to take advantage of the offer. It is not a bad idea to take advantage of this offer, but it is probably not going to be enough. You need to keep in mind that this is a 3-bureau credit monitoring service but you will only have access to your Equifax credit report. Additionally, the service is only free for 1 year and you will need to monitor your reports for much longer than that (forever essentially) if you were a victim.

If you want to truly keep an eye for fraud on your credit reports then a 3-bureau monitoring service with access to all 3 of your credit reports is probably best. However, you will probably have to pay a fee for such a service. There are a lot of good services out there which offer 3-bureau and 3-score monitoring with 3-report access. Some are more expensive than others. If you are looking for some comparisons of available services, visit http://www.greatcredit101.com/credit-reports-and-monitoring/.

It has always been important to routinely check, monitor, and review your credit reports for fraud and errors. If your information has been exposed in the Equifax data breach, that importance has simply become magnified for you more than ever before.

4. Credit Freeze

Fraud alerts can potentially help to prevent identity theft and credit monitoring can help you to quickly discover fraud when it occurs. However, if you want a tool which can help to prevent fraudulent accounts from being opened in the first place then a credit freeze is the biggest gun you can use to defend yourself.

When you place a credit freeze your credit report is taken out of circulation. This means that no future lender will be able to access your reports. If a scammer tries to use your information to open a fraudulent account then the freeze will stop a lender from pulling your credit and, viola, any future loan applications will most likely be denied as a result. Almost no lender is going to approve a new application if they cannot pull your credit.

It is worth pointing out that it is not free to place a credit freeze unless you have actually already been a victim of fraud. However, credit freezes are relatively inexpensive (under $10 per credit bureau at the time of publication). Unlike fraud alerts, you must place an individual freeze at Equifax, TransUnion, and Experian.

Additionally, the credit bureaus also offer a service known as a "credit lock." Equifax has even announced that it will be giving away credit locks for free to victims of the breach. While credit locks are advertised by the credit bureaus as more convenient than freezes,  it is unclear whether or not they offer the same protections. Credit freezes are generally covered by state law, potentially giving you more protection in the event that there is a problem.

5. Keep It In Perspective

The truth is that identity theft is a growing crime. Over $16 billion dollars was stolen by fraudsters and approximately 15.4 US consumers were affected by identity theft in 2016 alone. Even before this Equifax data breach, your personal information may have been vulnerable to thieves in one way or another.

It has always been and will continue to be your personal responsibility to check your credit reports regularly in order to verify that they contain only accurate information about accounts you really applied for and opened yourself. (Remember, you can check your 3 credit reports every 12 months for free at AnnualCreditReport.com.) If you ever discover fraudulent accounts on your credit reports the Fair Credit Reporting Act (FCRA) gives you a long list of rights with a lot of teeth to help you recover from the identity theft.

If you want some tips on how to recover from identity theft, CLICK HERE. You have the right to try to correct identity theft issues on your own, but you can also hire a professional credit expert to work on your behalf if you are too busy or feel too overwhelmed by the process.

michelle-black-2017.jpg

Michelle Black is an author and leading credit expert with a decade and a half of experience, a recognized credit expert on talk shows and podcasts nationwide, and a regularly featured speaker at seminars across the country. She is an expert on improving credit scores, budgeting, and identity theft. You can connect with Michelle on the HOPE4USA Facebook page by clicking here.

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Credit Scams You Should Avoid

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Credit Scams You Should Avoid

Poor credit can lead to a lot of painful and embarrassing moments. If you are currently struggling with credit problems then you already know just how miserable bad credit can be. Credit problems can make it difficult to secure a place to live, to finance a vehicle, to qualify for a credit card or loan, and even to do something as simple as opening a new utility account without a sizable deposit.

Unfortunately, scammers are very aware that bad credit makes life hard too. They know that many consumers are absolutely desperate to change their credit situations and they eagerly try to prey upon this desperation. Thankfully, you can help to protect yourself from these con artists by learning a little more about some of the most common credit scams you need to avoid.

The New Credit Identity Scam

One of the most popular credit scams involves the practice of paying someone to create a "new" credit identity for you. On the surface, it is understandable why the idea of a fresh start might sound attractive to you. Unfortunately, what a scammer will not tell you is that by using a "new" identity you could actually be guilty of committing a number of different crimes.

The new credit identity scam, also known as file segregation, typically involves a few steps. First a fraudulent company, likely pretending to be a credit repair outfit, will offer to sell you a new credit identity number (typically an EIN number or a CPN number) which you can use in place of your social security number on future credit applications. By using this alternative number you will be creating a separate or segregated credit file with each of the credit bureaus which will supposedly replace your old, damaged credit files. Yet not only is this file segregation scheme typically illegal, it can also be expensive and ineffective.

Fees for new credit identity services often run into the thousands of dollars, although the scammer will probably try to argue that the fee is a small price to pay for an instant fix to all of your credit woes. Be careful not to be fooled by such tactics.

Additionally, when you use an EIN or CPN number in place of your social security number on a credit application you are likely guilty of bank fraud. If you submitted a fraudulent application over the phone, online, or via mail then you might be guilty of wire fraud or mail fraud as well. Furthermore, that EIN or CPN number you thought you were purchasing could actually be a real social security number which has been stolen from someone else. (Are you really surprised that your friendly neighborhood scammer might be an identity thief as well?) If you use someone else's social security number on a credit application then you might just be guilty of committing identity theft yourself.

The Tradeline Rental Scam

Piggybacking is a term which refers to the process of being added to someone else's existing credit card account as an authorized user. Becoming an authorized user on someone else's credit card account can sometimes be a wise part of your overall credit improvement strategy. If you are added onto an older, well managed credit card account it certainly has the potential to help improve your credit scores when (and if) that positive account shows up on your credit reports. However, the authorized user strategy is only really safe and effective when done with someone whom you know personally.

Tradeline renting describes the process of paying to piggyback on a stranger's credit card account in an attempt to trick the credit scoring system. Typically you pay a middle man (most likely a sizable fee) who will then act as an agent to connect you with someone who is willing to add you onto their account as an authorized user. The bad news if you fall for the tradeline renting scam is that you could be guilty of bank fraud and a number of other associated crimes as well. To add insult to injury, newer versions of FICO's credit scoring models have been designed with logic that helps to detect fraudulent tradeline renting. So, not only can tradeline renting be expensive and illegal, there is a chance that it might not even work. 

Legitimate Credit Help

Although you should be careful not to fall for credit scams, the good news is that there are legitimate credit repair professionals who may be able to help you with your credit problems. Remember, a trustworthy credit repair company will never ask you to change your identity, rent a tradeline from a stranger, or to pay upfront fees for services.

CLICK HERE or call 704-499-9696 to schedule a no-obligation credit analysis with a HOPE4USA credit expert today.

michelle-black-credit-expert

Michelle Black is an author and leading credit expert with a decade and a half of experience, a recognized credit expert on talk shows and podcasts nationwide, and a regularly featured speaker at seminars across the country. She is an expert on improving credit scores, budgeting, and identity theft. You can connect with Michelle on the HOPE4USA Facebook page by clicking here.

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