Bad Credit Loan Articles and Blog Posts

Submitted by Alice Bryant  on Fri, 12/12/2014 - 15:32
Historically, mortgage lenders have looked at several key factors when making a decision to approve a loan request, and high on the list of these factors are credit scores and the amount of the down payment that the loan applicant is willing or able to put down. If you did not have a sizable down payment and an excellent credit rating, chances were low that your loan request would be approved. In fact, until rather recently, Fannie Mae and Freddie Mac mortgage loans required borrowers to have at least a 20 percent down payment. The good news for those who are in the market to purchase a new home is that lenders are now loosening their requirements, and this is enabling many who do not comply perfectly with historically stringent requirements to qualify for a home mortgage and to take ownership of a house that they have their eye on. 
 
What Happens When a Borrower Defaults On a Mortgage 
 
Fannie Mae and Freddie Mac essentially were designed to make home ownership more affordable and financing easier to qualify for, and these agencies have been serving this role for many decades. However, Fannie Mae and Freddie Mac also had the right to require lenders who make loans that quickly fall into default status after their closing to buy back their loans. Buybacks can be expensive for lenders, and because of this, lenders typically make an effort to complete thorough underwriting so that the risk of a buyback trigger is minimized.
 
When Fannie Mae and Freddie Mac Back a Loan
 
The guarantee offered to lenders by Fannie Mae and Freddie Mac is supposed to be a benefit to banks and mortgage applicants alike. However, in the past, the rules regarding when the guarantee would go into effect has been fuzzy and often confusing for lenders. Because of this, lenders have been timid about extending credit through the approval of a mortgage loan to some applicants who did not neatly and perfectly fit into the underwriting guidelines. There was little ability or desire by lenders to think outside of the box or to be creative with structuring a loan that would be most beneficial to a home buyer. Recently, however, Fannie Mae and Freddie Mac have defined and clarified their position on guarantees. This gives banks greater comfort and confidence when making important underwriting decisions. 
 
The New Rules Regarding Down Payments 
 
In recent years, both Fannie Mae and Freddie Mac have stated that they will not buy back loans with a very low down payment, such as three percent down loans. It was commonplace over the last few decades for borrowers to apply for a very low down payment home mortgage, but approval of these loans was eliminated in recent years due to the economic recession in 2007. Only recently have both Fannie Mae and Freddie Mac shifted in this area. They have stated that they will back loans with as little as three percent down payment. Up until this point, the primary option available for low down payment borrowers was the t3.5 percent down payment loan available via FHA. The downside to the FHA loans is that borrowers are required to make a mortgage insurance premium payment for the life of the loan rather than only until the equity in the home reaches at least 20 percent of its value. 
 
The Clarification Regarding Buyback Guarantees
 
While Fannie Mae and Freddie Mac have both had a considerably beneficial shift with regards to the minimum down payment requirement in place, both have also clarified their stance on their buyback guarantee. The importance of the buyback is to give lenders confidence to extend loans to home loan applicants, thereby promoting the availability and affordability of home loans to the masses. However, with the uncertainty about when the buyback would actually go into effect, the strength and benefit of this guarantee was minimized. Recently, both agencies have stated that they will buy back loans after36 months if the borrowers make payments on time during this time period. In addition, both agencies will also permit two missed payments during this period of time without forcing a foreclosure. 
 
A Change on Private Mortgage Insurance 
 
Private mortgage insurance is required for all low down payment loans. There have been instances when the PMI requirement was pulled back on some loans due to underwriting issues or errors. In the past, this has resulted in the automatic buyback of the loan by the lender. However, this rule has also been clarified and revised to benefit the lenders. The newly clarified rule states that this type of error will no longer create an automatic buyback situation, and this is yet another benefit to lenders who have been timid about being less flexible with regards to underwriting. 
 
The Effect of These Changes on Underwriting Efforts
 
When lenders extend credit to a borrower for a home mortgage, they typically will underwrite the loan looking for a high level of assurance that the borrower will make timely payments and will not default on the loan. They will review income, expenses, length of time at a place of employment and credit scores in an effort to decrease uncertainty and to minimize risk. Buybacks can be expensive for a lender to deal with, and the guarantee offered by Fannie Mae and Freddie Mac was supposed to provide lenders with the confidence to extend loans to borrowers who do not have a perfect profile but who still are a low risk. The new changes that have been instituted by Freddie Mac and Fannie Mae have firmed up the strength of this guarantee, and this has helped lenders to extend mortgages to borrowers who are not entirely perfect in every area of their underwriting guidelines. They also are able to lend with confidence on low down payment loan requests. Essentially, this has created a more beneficial lending environment for both borrowers and lenders alike. 
 
The unfortunate truth is that some borrowers who have a reasonably good loan application and good credit had been declined when applying for a home mortgage in recent years due to issues created by the Fannie Mae and Freddie Mac guidelines. This is not a free ticket for all potential home loan applicants to obtain loan approval on a home mortgage request, however. Mortgage applicants will still be required to comply with underwriting guidelines and to have extenuating circumstances supported by other strengths in the loan request. If you are thinking about applying for a home loan in the near future, you may consider speaking with a mortgage consultant about how these changes may impact your loan request specifically.
 
Submitted by Alice Bryant  on Fri, 12/05/2014 - 16:41
It would seem as though bad credit is the result of a few poor decisions concerning personal finances, with impulse spending being the most common culprit. While it is a known fact that mental health and physical health often mirror each other, there is also evidence that an individual's overall health may reflect his/her credit score - or vice versa - especially where cardiovascular health is concerned.
 
Researchers and demographic study consultants have put together a very interesting map overlay of the United States-based consumer spending statistics, creditworthiness, and debt situation as compared to how healthy a particular individual is. The results of the studies indicate what was already suspected by some credit card companies as well as the majority of medical practitioners. A person's health history, especially his/her health forecast for the future, can be correlated to some degree with the individual's credit score or credit rating over the past decade or so. Bad health is reflected in lower credit scores.
 
Why Bad Health Leads To Bad Credit
 
It would be quite easy to argue that bad credit is generally the result of uneducated spending habits, linked more or less to underprivileged persons in the lower classes of society. However, most types of illness and disease show no preference for how much money an individual has. The wealthy are just as likely to suffer from heart disease, liver malfunction, diabetes, and other maladies.
 
The reason for the connection probably has to do with education about good decision making. If a person is taught to be conservative in spending, to look at the overall financial picture before rushing to buy, and to keep as much money in the bank as possible as a means of earning interest and showing responsibility, the person absorbing these teachings is far more likely to be responsible in other areas as well. Healthy adults are the result of healthy children, but healthy adults above the age of 40 are the result of looking far into the future and showing a level of preventative responsibility.
 
Therefore, the better one takes care of personal finance, the more likely he/she is in good health. Those who plan their spending wisely are more likely to plan ahead when it comes to health concerns. One of the most commonly found correlations in these demographic studies has to do with heart disease and overall cardiovascular health.
 
Credit Debt And Heart Attacks
 
No one is saying that a $3000 credit card balance will cause a heart attack. It is true that many will feel their pulse quicken when they realize just how much they are paying in interest charges each and every month. However, the monthly statement is not the direct cause of heart disease, high cholesterol, or myocardial infarction.
 
These studies do conclude that the more debt a person has, the more likely he or she will suffer a heart attack, stroke, or other cardiovascular problem at an earlier age than the national average. Specifically, the person who has a credit score of at least 100 points below average can be considered to be more than a year older in terms of heart health.
 
On the other hand, those who have a credit score - and have maintained their score - more than 100 points above the average are likely to be enjoying at least a year or two more of youthful health, especially in the areas of heart condition, health of blood vessels, and cholesterol levels.
 
The reasonable conclusion is that those individuals who take better care of their finances are also more likely to take better care of themselves. In other words, the educated individual who has been taught the importance of wise spending and conservative spending of at-risk funds is likely to be someone who is looking ahead long-term when it comes to a healthy, disease-free adulthood. These people tend to eat better foods, exercise more often, and avoid alcohol and tobacco. The interesting part of these studies is the demographic correlation between the current age of the individual and his/her age when these good habits were taught.
 
It Starts Early In Life
 
Young adulthood is a time of experimentation. For many, it is also the time of indoctrination into the world of finance. If college-age students are not prepared for how credit card debt works or how financed purchases can mean loads of interest accrual, they will experience stress and anxiety. It is an unfortunate fact that the other experimentation of this period - namely smoking, drugs, and drinking - is often the relief valve for stress, and this can be the starting point of the road to bad health.
 
Various studies have shown that the high percentage of young adults who are experiencing credit card debt in amounts exceeding $2000 also tend to be overweight, have hypertension, do not exercise regularly, have poor eating habits and often do not consume a full breakfast or lunch, and eat a lot of unhealthy fast food.
 
It is therefore no wonder that as these people continue to struggle financially, they also keep their old habits that equate to an unhealthy lifestyle. By the time they are in their 30s, many men and women have given up on the idea of actually taking control of their financial obligations and reward this decision with even more self-abuse in the form of alcohol, tobacco, or dangerous drugs.
 
Personal Health And Creditworthiness
 
Does this mean that credit card companies or other financial institutions are going to be taking a harder look at a person's health history before making a decision on whether to approve a loan? One thing is for certain. Most lenders are now basing their decisions on statistical information that is different from what was considered important just a generation ago.
 
For example, the number of credit cards held by an individual meant next to nothing just 20 years ago, but today it is a primary consideration when an application is received. Even if the majority of balances are well below the credit limit, some lenders are hesitant to add to the number of outstanding balances.
 
It may be that signs of an unhealthy individual are reflected in the total amount of debt versus the amount being paid against the principal and interest each month. One thing is for sure, however. Getting out of debt involves the same commitment as improving one's health. Habits must be replaced with newer, better habits. Once a plan is developed, it must be implemented in way that allows for recognition or reward for a successful attempt.
 
A credit consolidation consultant may be a good choice for finding out about options for debt reductions. It is important to know all the details, however. This type of debt relief for those with bad credit is not for everyone. The same is true with treatment or healing options for a medical condition. In order for things to be all right again, something must be done, but it is highly recommended that those who are suffering from mounting financial obligations or who are inattentive to their health explore all options before choosing a recovery plan. 
 
Submitted by Alice Bryant  on Tue, 11/25/2014 - 16:44

The holiday season is meant to bring happiness. It is a time to share with family and friends. It is a time to indulge in large meals, attend parties, and share gifts. It can also be a time when a person goes into too much debt. Avoiding the holiday debt problem is possible, it just takes a little bit of creativity and some planning.

1. Take Advantage Of Your Credit Card Rewards.

Many credit cards give you points or cash back options on your credit cards as a reward for using their card. Take advantage of the rewards that you have accumulated by cashing them in for gift cards that you can give as gifts or taking the cash to use for holiday spending. offer. Many cards will offer special discounts to their card members if they shop at that store. You should also look at different reward programs that your credit or debit cards may certain stores using the links from the credit card page. You can find percentage off discounts, free merchandise discounts, and free shipping for your purchases. As an additional bonus, the money that you spend on the card will help you accumulate more rewards that you can use during the next holiday season.

2. Watch For Real Discounts.

Black Friday is not always the best day to shop for the holidays. Retailers may offer some discounts on this day that are truly deals, but overall pricing throughout the stores are the same, if not higher, on regular merchandise. Watch for deals throughout the year for holiday gifts and stash them away until the holiday season. If you are not they type of person to store gifts all year, wait to go holiday shopping until the first week of December. Retailers begin to rapidly drop prices at this time to move more merchandise…

Another way to reduce holiday spending is to shop online. You can use comparison websites to find the best deals on the products that you wish to purchase. You can also take advantage of your search engine by searching for online codes for additional discounts and free shipping. Make sure that you jump online on the Monday after Thanksgiving. Known as Cyber Monday, retailers offer unbelievable online-only deals on holiday gift items.

3. If gift cards are your favorite choice of gift, there are several ways that you can reduce the cost of giving these gifts.

If you are going to give a gift card that is not for any specific store, such as a Visa or American Express gift card, you should reconsider. Both of these types of cards often charge you a fee just for purchasing the card. Most bans will sell you these same types of gift cards at no cost. Five bucks may seem trivial, but if you are handing out 10 or 20 cards, these fees can add up quickly.

Gift card exchanges can also be very beneficial to your holiday costs. If you received gift cards that you do not want to use, you can cash them in or trade them for others that you can use for gifts. Even if you do not have any old cards that you want to trade, you can still visit these gift card exchange sites and purchase gift cards at below face value. These cards are guaranteed to be worth the face value on them, and no one will ever know that you bought them at a discount.

4. Avoid Store Charge Cards.

Many stores will have very loose credit approval standards during the holiday season. They will offer an immediate discount if you sign up for one of their charge cards at time of purchase. When you are making a very large purchase, the discount and thought of paying for the purchase over time becomes very tempting. It is important to avoid that temptation. Store credit cards often carry a very high interest rate. Any discount that you receive during your shopping trip will be quickly wiped out by the interest on the debt.

The best way to take advantage of “store credit” is to use their layaway service. Many stores offer layaway plans that cost only a few dollars to use. You can pay for the merchandise over time, and then you can have the merchandise out in time for the holidays. Many stores will even adjust pricing if the products you have on layaway go on sale or have their prices reduced, giving you additional savings.

5. Take Advantage Of The Dollar Store.

You do not have to go on a shopping spree for gifts at the dollar store, but they are a great place to save money on other holiday necessities. You can find boxes of holiday cards, tissue paper, wrapping paper and shipping supplies all for a dollar. You may find some great holiday decorations and stocking stuffers while you are there. There is no reason to spend a lot of money on these holiday expendables.

Of course one of the best ways to control your holiday debt is to save for the holiday season throughout the year. Start a Christmas Club at your bank or credit union and put money into the account every payday. If your bank does not offer this service, open up a free savings account and use it for holiday money. If possible, have the money directly deposited from your paycheck so that there is never any risk of it not making it into the account. Being prepared for the holidays and knowing what you have to spend can help keep you out of debt.

Submitted by Alice Bryant  on Fri, 11/14/2014 - 18:20

Having a competitive credit score is crucial for a consumer’s success in the world of debt. Traditional lenders weigh credit scores heavily when they leaf through applications for credit cards, auto loans and mortgages. A consumer who does not have a good credit score will have difficulty receiving fair interest rates and terms. A secured credit card is an excellent product for helping a consumer who has poor or non-existent credit to grow his or her credit score. A consumer’s credit score can change drastically within six to 12 months just because someone issued that person one secured credit card.

What Is a Secured Credit Card?

A secured credit card is a special card for people with bad credit. Consumers who do not have any credit history may obtain a secured credit card, as well. The secured credit card gets its name from the security deposit that consumers have to submit to qualify for the card. Secured card applicants have to deposit funds that the card company can hold for a specific period. The fund serves as security for the lender in case the debtor ends up defaulting on the card.

Does the Credit Card Company Keep the Deposit?

The credit card company will not keep a debtor’s security deposit forever. The lender will state its intended period in the terms when a person applies for the card. Many providers return security deposits after one year of faithful payments. The consumer has to keep the credit card account in good standing for the provider to return the deposit. Some credit card companies may hold the deposits for a long period, and others may have shorter periods. Nevertheless, the deposit stays in a bank account until the time comes when the cardholder meets the return requirements or terminates his or her account.

Does the Security Deposit Earn Interest?

Many credit card companies place security deposits into accounts that accrue interest for the consumer. However, not every company does that. Therefore, a consumer who wants to earn interest will have to examine the terms carefully to see if interest earning is an option. The person may want to select an alternative credit card company if he or she finds that one company does not earn interest on the security deposits.

How Much Is the Credit Line on a Secured Card?

In most cases, the consumer’s credit line is equal to the amount of money that he or she submits to the credit card provider. A consumer can usually request credit line increases with the submission of an additional deposit. However, a few providers offer their customers additional unsecured credit lines. For example, a person may submit a $49 security deposit and receive a $200 credit line. The credit line depends on the provider’s rules and the consumer’s history. New applicants should always research several providers before choosing one.

How Is the Secured Card Different From a Regular Credit Card?

The only difference between a secured card and a regular credit card is the invisible security deposit that the consumer places. Secured credit cards have Visa and MasterCard emblems on them just as regular credit cards do. The consumer can use a secured Visa or MasterCard at any location that accepts regular Visa and MasterCard products. Additionally, the credit card companies report the payments the same way they report them for regular cardholders. Most secured accounts show up as regular credit card accounts. However, a prospective cardholder should always verify that information with the credit card company first.

How to Get a Secured Credit Card

The first step in getting a secured credit card is finding one that suits the consumer’s needs. The person will want to compare at least three secured cards to ensure that at least one of them has some of the features for which the consumer is searching. For example, one consumer may want a secured credit card with a low APR. Another consumer may be more concerned with the annual fee than he or she is about the APR. A different person may be interested in transitioning from a secured card to an unsecured card. Not all card companies offer unsecured versions of their secured cards.

Applications for secured credit cards are usually very short. The person will need to supply basic personal information such as social security number, telephone number, address, employment information and the like. Some providers will run a credit check while other providers will base their decisions on the person’s ability to pay. Once the applicant obtains an approval, the system will prompt that person to send a security deposit. The credit card company will place the security deposit in the bank and then issue a card with a credit line that equals the security deposit.

How to Use a Secured Credit Card to Improve Credit Score

A consumer may notice a credit score increase as soon as the new credit card account opens. The number of accounts does factor into a person’s overall credit score. Therefore, a person with bad credit may see an initial spike after obtaining a secured credit card. However, the person will have to practice responsible credit usage to keep the spike and to raise the credit score further. Timely payments are one of the most important parts of a person’s credit score. A consumer will want to avoid making late payments at all costs. Late payments can make a credit score plummet. Therefore, the secured card payments have to be on the top of the debtor’s priority list.

Utilization is another factor that affects credit score. Having a credit card and not doing anything with it can affect a credit score negatively. A cardholder should always use his or her credit card even if it is for small purchases such as fuel purchases. Furthermore, the individual will want to pay close attention to the overall balance and the amount of money that he or she is borrowing. Using the entire balance of a credit card is a harmful move. A smart debtor will keep his or her utilization down below 50 percent. A 30 percent utilization number is ideal, but anything under 50 percent will show the creditors that the person is not desperate.

Building one’s credit score takes time. Credit score boosting is not something that happens overnight. However, a consumer can cause a consistent rise in credit score by following some of the above-stated strategies. The person should see significant credit score results after six months to one year of timely payments. Eventually, unsecured providers will send offers for the person to apply for their cards.

Submitted by Alice Bryant  on Fri, 10/10/2014 - 13:59
If you don’t take care of their finances, how hard will it be to get a credit card with bad credit? Learn what things can affect your credit and how it may be very possible to get a credit card even with bad credit. 
 
Can a Person Get a Credit Card with Bad Credit?
 
There was a time awhile back when it was almost virtually impossible to get a credit card, or any type of credit for that matter, if you had bad credit. For awhile the financial crisis experienced around the country made credit availability very limited. Banks and financial institutions were tightening their belts and only giving credit to borrowers with very good credit. 
 
Once the credit card markets started to open up again, it became easier for those with less-than-desirable credit to get credit cards. More and more credit cards became available to people with poor credit. Although credit card limits and interest rates are based mostly by the applicant’s credit scores, the applicant may still get a card. 
 
The downside is that the card may come with high interest rates and a low credit limit, at least until the consumer can prove his or her creditworthiness by continuously making the payments on time. 
 
What Type of Credit Cards are Available for Those with Bad Credit?
 
Today there are various credit cards available to consumers with bad credit, both unsecured and secured. The secured credit is very common for consumers with poor credit. With a secured card, the consumer must make a deposit, which goes into an account. The amount of the deposit is generally the amount of the credit limit. 
 
Secured credit cards are an ideal way for consumers to rebuild their credit. Once the credit scores are better, the individual can get an unsecured credit card, close out the secured card and get the deposit back. There are other credit cards for consumers who have bad credit; these credit cards are actually referred to as bad credit credit cards. 
 
What is the Best Type of Credit Card for a Person with Bad Credit?
 
People with bad credit sometimes have such a difficult time getting a credit card that when they do find a credit card company that will issue them a card, they grab the first card they can get without reading the fine print. This can be a bad idea because often these cards result in the following.
 
Very high interest rates
Low credit limits
High annual fees that eat up a lot of the credit limit
Possible over-the-limit fees resulting from the other fees
 
Despite their eagerness to get credit cards, consumers with bad credit should still be selective when choosing a credit card. Secured cards are often the best option because they may offer interest rates lower than unsecured cards. 
 
With the credit card industry extending their limits to include those with bad credit, consumers would benefit by researching cards to find the best one for their financial situations. However, they should not apply for several cards with the hopes of getting approved for one because each new inquiry into his their credit report is lowering their credit scores. 
 
How Your Credit Scores are Calculated
 
Consumers are often confused as to why their credit scores are not as high as they'd hoped despite paying all their debts on time. This is because credit scores are calculated by more factors than just how diligently they are about paying their bills on time. Here are the factors that FICO uses when calculating a consumer’s credit and how important each part is. 
 
Payment history – Thirty-five percent – Paying bills on time is the best thing a consumer can do to have good credit.
Amounts owed – Thirty percent – The more available credit a consumer has, the better it will help their scores. 
Length of credit history – Fifteen percent - Paying on the same credit card for several years will do more for credit scores than closing it and opening several new cards.
New credit – Ten percent – Opening up new credit lines may have a lender believing the consumer is getting additional credit. 
Types of credit used – Ten percent – When a consumer to have a mix of credit such as credit cards, loans, mortgage, etc. rather than several of just one it tells a creditor more about how a consumer handles different types of credit. 
 
What Things Affect Your Credit Scores
 
Although consumers may be aware of the different things that determine what their credit scores are and what role they play, they may think they know what to do to improve their scores. However, it’s an even more complicate process than what one might think. 
 
In addition to specific things contributing to the credit scores given by FICO, there are also other factors that affect credit scores. In other words, some things that are not only more damaging to a person’s credit but also stay on their credit report for a longer period of time. 
 
Late payments
Closed accounts
Charged-off accounts
Collection accounts
Bankruptcy
Judgments
Tax liens – These may stay on a credit report indefinitely. 
 
Another thing consumers don’t realize is how harmful certain inquiries into a credit report can be. There are “soft inquiries” and “hard inquiries”. For instance, if a person already has a credit card with a company and the company does an inquiry into the person’s credit perhaps for the purpose of increasing their credit limit, this is a soft inquiry and doesn’t hurt their credit scores. 
 
When a person applies for new credit and the company does an inquiry into their credit history for the purpose of new credit, this is a hard inquiry and shows up on the person’s credit history. When several hard inquiries show up on a person’s credit report in a short amount of time, it can damage the person’s credit and make it even more difficult to get new credit. 
 
This is why it’s very important that consumers trying to get credit cards do NOT apply with several credit cards companies in a short period of time. All it will accomplish is to give them even worse credit. Although it may seem like a vicious cycle, there is light at the end of the tunnel for consumers with bad credit.
 
Submitted by Alice Bryant  on Fri, 10/03/2014 - 07:22
While many individuals are unaware of their credit scores, having bad credit can truly have some nasty implications in today's world. To take out a mortgage or borrow a car, individuals will need to have established credit. Credit can also impact an individual's ability to find a job. Finally, studies have shown that people with poor credit scores often have a difficult time finding a spouse. Below is a full explanation of how bad credit can ruin your life.
 
1. Loans and Leases
 
The ability to borrow is one of the primary reasons why modern society has become so advanced. Without loans, businesses would be unable to get funded and individuals would have to save for a lifetime in order to purchase a home. However, lenders are rational individuals who are not going to let someone borrow their money unless they have a likely probability of paying it back. Since collection costs can be very expensive, lenders are constantly looking for new ways to avoid bad borrowers. In today's world, the credit system is key for helping lenders to identify borrowers that could potentially have a difficult time paying loans back.
 
While many people worry about how the credit system could hurt them, the reality is that can help as well. Individuals with good credit scores can expect to get better rates on new loans. Instead of paying heavy interest rates each year, individuals can pay a more affordable rate that takes into account their credit history. In some cases, credit cards may even be available with rates as low as just a couple of percentage points. In contrast, borrowers with bad credit can expect their interest rates to be astronomically high. In some cases, it is not uncommon to see interest rates as high as 30 percent for borrowers with bad credit.
 
In order to take out a loan or sign a lease, individuals will need to demonstrate that they have a good credit score. Studies have shown that this is the most important factor that lenders tend to look at. Since accounts in default can be very expensive to the lender, credit score is considered to be extremely important. Without a good credit score, it may be impossible to borrow just about anything. While cosigners can be of assistance, individuals should aim to build up their own credit in order to depend on themselves.
 
Many borrowers often wonder why credit score is weighed so heavily in the lender's willingness to agree to a loan. The reason for this is because credit scores are remarkably indicative of an individual's ability to pay back a loan. Borrowers who fail to make their payments on time also tend to be the same individuals who see nothing wrong with walking away with the creditor’s money. In order to avoid these types of individuals, lenders carefully evaluate credit scores and historical information presented by credit agencies.
 
2. Finding a Job
 
Businesses looking to stay competitive in today's world are increasingly searching for new opportunities to find better talent. In most employment applications, individuals are required to provide their Social Security Number. While this is primarily used for compliance purposes, businesses are increasingly taking advantage of this to run credit checks. Since these cost just a couple of dollars, businesses are viewing the credit system as a cost-effective way to filter out bad job candidates.
 
On a statistical basis, individuals with bad credit tend to be less ethical and more likely to commit fraud. In contrast, individuals with good credit are often more worthy of higher positions and less likely to engage in questionable behavior. Bad credit scores can also make individuals more distracted in the workplace. Since this can lead to reduced productivity, businesses want to hire employees that are less likely to have problems with their personal financial situations. As a result, businesses view hiring individuals with good credit scores as a key to organizational success.
 
It may seem very discouraging to an individual with poor credit to consider the possibility that this could make finding employment difficult. However, individuals should keep in mind that this can be an advantage as well. When job candidates with poor credit scores are being filtered out, there will be more positions available to individuals with good credit. This means that prospective employees should make sure that they take every step possible to maximize their credit score. Individuals should always make their payments when required and satisfy the obligations of old accounts. By consistently doing this, it can be much easier to find a job in an employment environment mandating that individuals have good credit scores.
 
3. Getting Married
 
Studies have shown that 79 percent of women view a steady job as the most important attribute of a man. The reality is that poor credit scores can actually be indicative of whether an individual maintains a job in the long-run. Men who engage in behaviors that often lead to poor credit scores could therefore be more likely to potentially lose their job. The same study also showed that a majority of men viewed a steady income as the most important attribute of a female. Especially with employers increasingly viewing credit scores is important, individuals with bad credit could have a difficult time holding down a job. For these reasons, bad credit could truly jeopardize the longevity of a marital relationship.
 
There have also been studies conducted that measured the importance that marital partners placed on their spouse's credit score. The study found that 53 percent of individuals were at least somewhat less likely to date a person with a bad credit score. Since trust is key to a good relationship, it is inevitable that both partners will need to disclose their credit scores. If an individual has bad credit, they will probably have a difficult time finding a relationship and staying in one. Since long-term dating is key to a lasting relationship, it is therefore unlikely that individuals with poor credit scores will eventually get married.
 
The increasing importance of credit scores in the modern world means that all individuals need to do everything that they can to improve their credit scores. 
 
Submitted by Alice Bryant  on Fri, 09/26/2014 - 07:49
Many Americans may not be aware of the new scoring system for credit scores called FICO 9. The new system, coming this fall, could potentially affect millions of people whose scores are negatively impacted by certain collection debt information. For people who have negative information related to medical collections, paid off debts or collections or who have limited credit histories, the new FICO 9 scoring model has the potential to raise credit scores by as much as 25 points according to Fair Isaac Corporation. 
 
New FICO 9 Announced by Fair Isaac Corporation in August 2014
 
Fair Isaac Corporation, the San Jose, California-based company that provides credit scores, announced their new credit scoring system, FICO 9, in August 2014. The new scores are supposed to help people whose primary problematic credit issues have been medical collections or who have limited credit histories. The new system also treats collections that have been paid off differently than those collections that have not.
 
How FICO 9's Scoring Model Differs from the FICO 8 Scoring Model
 
FICO 8 is the credit scoring system that has been used by lenders for underwriting purposes for the past six years. The scoring model is used to determine an individual's creditworthiness and is used by Experian, Transunion and Equifax, the three major credit reporting agencies, in determining their own credit scores. The FICO 8 scoring model accords equal weight to both paid and unpaid collections of over $100 dollars for seven years. The scoring model does not take into account the different types of debt collections or credit information from other sources, such as rental history and utility payment history. FICO 9 will differ in that regard in several ways.
 
1. Medical debt collection account information
 
The FICO 9 scoring model will accord less weight to medical debts and collections. Millions of Americans who have had a major medical event resulting in difficulty paying medical bills could thus benefit by receiving higher scores. For the best mortgage rates, most lenders require FICO scores above 740. Since the weighting difference for medical debt could result in scores higher by up to 25 points for some people, this could potentially be a significant help, especially for individuals whose only negative information is due to the inclusion of a medical collection debt account.
 
2. Score consistency across credit reporting agencies
 
Fair Isaac Corporation will release the FICO 9 scoring system to all three major credit reporting agencies, allowing for better score consistency across the board. Fair Isaac will release FICO 9's scoring model to the three agencies later this year for them to test and validate the system before it is implemented by them. There is no word on how long the testing and validation process will take, however, before the new model will be used by the three agencies. 
 
3. Paid off collections account information
 
Unlike the FICO 8 scoring model, FICO 9 will treat collections and debts that have been paid off differently than those that have not. Previously, paid off collections still appeared on credit reports and were taken into equal account as non-paid collections and debts, appearing for seven years. FICO 9 will give paid off collections much less weight than those that have not been, lessening their negative impact and thus potentially raising credit scores for affected individuals.
 
4. People with limited credit histories
 
Many people have limited credit histories which in turn result in lower scores. In weighing credit histories, the length and number of open accounts determines overall scores with longer accounts providing more information regarding individual's payment histories. 
 
FICO 9 will look at more information to include in its scoring model. People who have few credit accounts but who have always paid their rent in a timely manner will now have that included in their credit scores. Other types of credit information, including such things as timely payment of utilities, will also be factored in. This will allow greater flexibility in the provided credit scoring model and could help people obtain loans.
 
Mortgage Lenders and Their Use of Fico 9
 
Although FICO 9 could potentially benefit millions of Americans, there is no guarantee lenders will adopt it. Lenders have automated underwriting systems in place for determining loan creditworthiness of individuals. Incorporating FICO 9 will be expensive as those systems would need to be updated. Lenders take more than an individual's credit score into account when making underwriting decisions as well. Fannie Mae and Freddie Mac have both indicated they do not plan to use FICO 9 anytime soon. Major private mortgage lenders, including banks and mortgage companies, also do not appear to be ready to adopt the new scoring model soon either.
 
It is unlikely that mortgage lenders will not use FICO 9 for quite some time, at least until Fannie Mae and Freddie Mac change their own underwriting programs to use FICO 9's scoring model. Some lenders already insist they discount medical collection debt already and so do not see a need to adopt FICO 9 as the benefits, according to them, will be small. People may thus not realize the full benefit of the consumer-friendly changes of FICO 9 for several years. 
 
Information Will Still Appear on Credit Reports
 
Although the scoring model will weigh medical collections and paid off debts differently, consumers must still understand that the collection information will still appear on their credit reports for seven years in most cases. Lenders look at both credit scores as well as information appearing on credit reports in making their decisions. When paying off a collection, it still makes sense to try to get an agreement with the company in writing that they will remove the negative information from the credit report upon payment of the account. Although the debts will not be accorded equal weight under FICO 9's model, there is nothing preventing lenders from using the information on the credit reports in making their determination separate from the score itself.
 
Conclusion
 
Fair Isaac's new FICO 9 scoring model provides some new consumer-friendly credit protections. Potentially, many people could realize an improvement in their individual scores and be able to obtain better loan rates as a result. The benefits may not be realized by Americans for several years, however, as lenders and banks will first need to update their automated underwriting systems to incorporate FICO 9 and none have announced any plans to do so in the foreseeable future.
 
Submitted by Alice Bryant  on Fri, 09/19/2014 - 10:08
Anyone hoping to get a car loan or mortgage will need to know what's on their credit report. This is what creditors use to determine the borrower's eligibility because it lets the creditor know whether a borrower is trustworthy and will pay back the loan. 
 
Everyone should check their credit report once every twelve months. There are three agencies that provide credit reporting; Experian, TransUnion and Equifax. The three credit reporting agencies provide a free copy of the consumer's report once per year at AnnualCreditReport.com. Borrowers should take advantage of this fact and request a report once per year. Each company's report may be different or have inaccuracies that should be disputed. 
 
Credit reports can be used in job applications, apartment rental applications as well as loans and mortgages, so an inaccurate entry can have consequences in many areas of a consumer's life. 
 
Some consumers might be eligible for a free credit report more than once in a 12-month period. If they have had an application of credit denied, the consumer can request a report to check the problem. In cases of identity theft, credit agencies can allow a consumer free reports to keep current with an investigation. Otherwise, the requester will have to pay for a report. 
 
The credit report will list many items such as the consumer's current and previous addresses. Other items include:
 
  • The consumer's full name
  • Account number
  • Company name
  • Date the account was opened
  • The date it closed
  • The highest balance on the account
  • Payment Status
  • Account Status
This may take some investigation, but any inaccuracies should be challenged with the credit reporting agency as well as the company that reported the account information. 
 
Correcting Errors
 
The government requires that the credit reporting agency as well as the company that reported the information make changes if there is an error. The information provider has to supply complete and correct information about its customers. 
 
First Step
 
After obtaining a credit report from all three credit reporting agencies, the consumer should go over the details carefully to ensure accuracy. The dates of the accounts might seem unimportant, but they could play a large role later when a debt has expired and should be removed. It's essential that every detail be completely accurate. 
 
When finding an error, the consumer should send the reporting agency a dispute letter. This letter will detail exactly where the error occurs, and what the correct information should be. Any documents that can help illustrate the mistake should be sent with the dispute letter. The consumer should keep the originals and send copies in case the letter gets lost. The report should be sent back to the agency with the disputed areas circled or highlighted. The letter should be sent by certified mail, so the consumer will know it was received. 
 
The credit agency has to investigate the error unless they consider the person's dispute frivolous. As long as there are documents to support the consumer's argument, it won't be considered frivolous. All the information provided will be sent to the company that reported the information. The company must investigate the potential error and report back to the agency within a certain time limit. 
 
After completing its investigation, the agency will make a determination regarding the reported error. If there is a change made to the person's credit report, the agency must provide another report free of charge. If the error is proven, the agency cannot put the error back into the credit report. 
 
If the reporting company reports that the information they provided is accurate, the agency may decide to leave the disputed charge on the account. The consumer can ask to have the dispute recorded on the account too. There's a fee for this service, but it might be worth the extra money. 
 
Second Step
 
The consumer can also contact the company that provided information about the account and provide copies of documents that bolster the consumer's argument. Credit report errors can be removed by contacting the reporting company. Even if there are no errors, the consumer can contact the reporting company and ask that late payments or collections are removed. This can work if the customer is current active with the reporting company. The company might want to keep the customer's business and will remove the late payments. 
 
If the company refuses to remove the offending entry, the consumer can negotiate to pay the amount to have it deleted from the account. This is a step many people use when trying to clean their credit. Often, the reporting company can work with the consumer to remove the debt if it's paid immediately. The consumer should contact the company in writing regarding this option and request that the entry be removed after payment. This negotiation can be the best way to resolve an entry on the credit report that isn't an error but is negatively impacting credit status.
 
When negotiating with the reporting company, the consumer should ask about a partial payment as well as removal of the entry on their report. Companies can be eager to resolve the issue and will take a partial payment instead of paying more money to take the person to court. Consumers should explore this option with the company in writing to ensure that the company sticks to the promise.
 
Third Step
 
After seven years, debt should be wiped from an account because the statute of limitations has run out for the company to get a judgment against the consumer. These debts might still remain on the credit report unless the consumer requests they are removed. This is why the date of the accounts is important. Negative account information that has been on the consumer's account for years might be removed, but consumers can't expect that to happen naturally. The reporting agency should be contacted in writing to have the entry removed. 
 
Consumers should ask to receive their free credit report once every twelve months to check for inaccuracies and to guard against identity theft or fraud. The sooner the consumer sees an error, the quicker the error can be disputed and fixed so it doesn't impact the person's credit score.
 
Submitted by Alice Bryant  on Thu, 09/11/2014 - 12:12
People spend most of their daily lives in the pursuit of money, thinking about money or spending money. It's tied into a sense of self-worth and happiness for most people, so when there's a problem with money, it can impact their emotions negatively. 
 
While everyone has money problems at one time or another, the majority of people in debt find themselves under huge pressure. Serious debt is a big problem, and some people don’t learn how to manage it until it’s too late. Recognizing these emotional signs of debt can help you acknowledge the problem so you can get back on the right track to financial success.
 
Denial
 
Denial is the easiest way to deal with any problem. It's a coping mechanism that allows people to look past many problems, including debt. It can be too difficult to deal with the consequences of bad spending, so people rack up high credit card debt and use various ways to avoid paying their old debt. They'll borrow from one person to pay another and believe they have it under control. They may not look too closely at their expenses or may deliberately avoid facing their problem head on and dealing with it. 
 
Signs of Denial
  • Not having exact numbers of what's owed
  • Rationalizing the debt and purchases made while in debt
  • Paying the minimum on credit cards without having a budget
  • Not opening bills
  • Avoiding disclosing purchases to friends or family
Solutions
 
A person in denial has to learn how much debt they actually have. Before they can hope to dig out of the hole of debt, they have to know how deep the hole actually is. A listing of the bills and amounts is the first step to confronting the debt. This will involve dismissing the habits of denying the amount of debt and that there is a problem. 
 
Anxiety and Fear
 
As a person in serious debt tries to confront their debt, they might experience anxiety and fear. They'll see the problem without the shroud of denial. It can be a daunting and scary task to confront the debt. They fear that the debt is too heavy, and there won't be a way out of it. This can cause them to move back into the stage of denial.
 
Signs of Anxiety and Fear
  • A feeling of hopelessness and the desire to shove more unopened bills out of sight
  • The inability to dig deeper into the level of debt
  • Unwillingness to call creditors with repayment plans
Solutions
 
The level of debt can be overwhelming when it's been ignored for so long. Most people have no idea where to start, and they'll want to go back to denying the debt exists. It's hard to confront failings, but there are ways to make things feel more manageable by creating a budget based on a realistic accounting of what's owed. A budget is the first step. Canceling credit cards is another step in the road to financial and emotional recovery. If buying excessively brought about the debt, selling most of those extra things can help pay off some debt too. 
 
Stress and Anger
 
Once a budget is in place, the stress of sticking to that budget and finding ways to make repayments can be extremely stressful. Many people don't want to face the fact that they created this situation themselves, and want to find another to blame. 
 
Signs
  • The urge to throw up their hands and go back to what's easier
  • Each bill adds another bit of stress to their lives
  • They start to take out the stress and frustration on others
Solutions
 
It's hard to analyze the anger while still in the middle of it. Anyone angry about bills and money should take a moment to think about why it's been a problem in the past. It's important that anyone who is that angry not to take it out physically or emotionally on those around them. It's stressful for anyone associated with the person in debt, especially family members. 
 
Depression
 
When living in a state of negativity for a length of time, the weight of it can cause depression. Money worries are depressing for many people. There's a feeling of hopelessness like the debt will never be lifted, and it will last forever, and while that may be an exaggeration, it feels very real to the person impacted by debt. The thought of bad credit for the rest of their lives can bring about depression too. 
 
Signs
  • The person withdraws from their friends and family
  • They turn to drugs or alcohol to numb the pain
  • They sleep more than normal
  • It's hard for them to drag themselves out of bed
  • The person doesn't care about things they once loved
Solutions
 
Depression treatment for debt is the same for any other reason for depression, and the person may need to seek professional help. They should see their doctor to discuss the depression and talk about solutions. If a family member sees a person who is depressed, they should intervene and discuss seeking medical help. It can help to set small goals and stay positive in the face of debt. 
 
The fifth emotion is relief. After all the stress, depression and struggle, there comes a point when there's a light at the end of the debt tunnel. It could come when the person feels like they have a proper plan in place, or when they are almost free of their debt. They have happier and healthier interactions with family and friends. There's no more denial of the debt because the debt is close to being repaid. They have a proper plan in place, but they also have the tools to keep themselves out of further debt.
Submitted by Alice Bryant  on Fri, 08/22/2014 - 09:55
There are several websites touting the easiest ways to get rich as gambling and playing the lottery-- but how much would you have to spend on these highly addictive behaviors to earn what might be only a little money? And perhaps develop a gambling addiction. 
 
See the easiest way to immediately get richer is to save, save, save on literally everything you spend money on. 
 
In truth, the easiest ways to get rich, or richer, are right under your fingertips-- just take them OFF your cash and try to do one or all of the following. 
 
1. Save Your Money.
 
Get a savings account--not just a checking account--one that will earn some interest and start saving for your future TODAY. Tomorrow comes much quicker than you think. Figure out the minimum amount you need to live every month, add perhaps $50 to $100 dollars to that and live off of this and this only. Try this for six months. Then you will be motivated to save even more. 
 
Look into a bank that will give you maximum interest and look for any monthly fees that will take it right back away from you first. Then start saving. 
 
2. Pick up a second job.
 
Pick up a second job you can do from home, perhaps. Look into crowd sourcing. You only have to do this four hours a day several days a week and it pays well. There are all types of crowdsourcing sites hiring now. You can make as much as $15.00 an hour and set your own hours. Perhaps come home from work., log in some hours, rest, and work some more!
 
Or, pick another job that is not heavy work. Most library clerk jobs are just sitting at a desk, for example checking out books. You could rest up from your first job and work at the same time! Think of a job like this that is low effort for at least minimum wage. You can put that extra money directly into your savings account and watch it add up. 
 
3. Renting Out/Selling Belongings.
 
Consider how much money you could make renting out that extra bedroom to the elderly or perhaps someone single--A basement could work really well as well. You could actually set up your basement in such a way that you and the renter could rarely see each other. 
 
Renting out room can your rent/mortgage and you could save more of your money. 
That could pay your rent Do you have a pressure washer or other large tools that are just taking up space out in your garage? Those rent out for big bucks! 
 
On that note, round up old belongings -- old tape recorders/players, old VCRs old Walkmans and have a garage sale or sell them on EBay. Look at the best ads and model yours after theirs. It's surprising what people will pay just to have these items to use for parts!
 
4.Cut back on expenses.
 
There are all kinds of ways to cut back on expenses, especially those for all those luxury items you could be just as happy without. 
 
Do you really need all of those cable channels? Cut back wherever you can and watch your savings grow. Learn to embrace free hobbies instead of wasting away in front of the TV. Start reading more, creating more. You'll be happier and richer too. Make your own instant cappuccinos or buy a reasonable cappuccino maker--that four dollars you're spending on fancy coffee every day could be going in your savings account. 
 
If you're renting or leasing a car, consider turning it in now and either purchasing a good, reasonable used car or even cheaper means of transport, such as carpooling, riding your bike, taking public transport, and walking places in easy distance. 
 
5. Spend a little now to save great money over time.
 
All the following ways can save you money in the long run even if they cost a little now. 
 
Buy yourself some CFE light bulbs. These new, highly energy-efficient lightbulbs never need replacing and save you some $.66 per bulb per month. Add that up for all the bulbs in your house and you're saving some $20 dollars a month, maybe more for a very large house. 
 
Get a Programmable Timer for Your Thermostat. Put your heat and air on a programmable timer--these timers can be adjusted when you are not at home to keep your heat and air from wasting while you're gone or simply turn them off or down when you'll be gone from several hours to several days. You will have to modify this slightly if you have pets. 
 
Air seal your home. This is an important task as you can waste a lot of money trying to heat rooms where cold air is seeping in or, in the summer, where your cool air is seeping out. If you get your home air sealed you can immediately see savings on your electric bill. 
 
Grow your own vegetables. All it takes are seeds and water and you could be growing those vegetables you pay dearly for at the grocery store every week. Vegetables, such as onions, lettuce, tomatoes, squash, and spices are very easy to grow while the grocery can charge you $1.00 or more for one onion. You can save as much as $40 dollars a week this way. 
 
Conclusion
 
In short, the easiest ways to get rich are by saving the money you are already earning and refusing to waste those hard-worked-for dollars on a myriad of unnecessary expenses every month. With perseverance over time, you can experience great rewards. Like gambling, saving money is addictive. The more you save, the more you will want to save, and this domino effect is one that is health as well, for you, your family, and your future. Save now so you can live well later, in your golden years. You must do it. 
 
Last updated on Dec 17th 6:38 am