19 Jan How to Lower Your Credit Card Debt
CREDIT SCORES & HOW TO COMPARE THEM
When I first learned of credit all I had ever heard about was FICO credit score. Little did I know there are all sorts of scores and different versions of scores. How does one know which scores are the most important and when are they used? I will try to help explain the differences and how to use them to your best advantage. Click here to learn more about credit card debt relief.
Not only do you have one score you have many and boy! Do they change all of the time! FICO is short of Fair Isaac Corp, which was founded more than 25 years ago. Up until 2006, FICO didn’t have any major competitors in credit reporting until VantageScore was created by the 3 leading bureaus. VantageScore is now the leading competitor for FICO. Both of these companies use formulas to see how likely a person may be to pay back their balance to their agreed upon the loan. 3 bureaus with two types of scores and you’re already up to 6 different numbers.
FICO is used by many lenders across the board but VantageScore is gaining traction. Currently FICO 8 & VantageScore 3.0 are being used. How are they different, you ask?
• HOW RECENT IS CREDIT HISTORY
FICO reports on at least one account that has been used in 6 months. VantageScore looks back 24 months
• HOW LONG A PERSON NEEDS TO HAVE CREDIT TO HAVE A SCORE
With FICO a person needs to have a credit account for 6 months, but VantageScore can create a score in 30 days.
• USE OF ALT DATA
VantageScore can include things such as rent and utility payments and calculate them into their score. FICO has yet to introduce this concept but it is in the works for the new FICO XD that hasn’t rolled out yet.
• HOW PAID OFF COLLECTIONS ARE TREATED
All paid off collections stay on your credit report for seven years, but VantageScore does not take into account once collections are paid in their scoring algorithms. Although FICO 9 has been created, but not widely adopted yet, paid off collections are also not weighted as heavy but unfortunately, FICO 8 does still consider these collections paid in full.
When applying for new credit the consumer does not get to choose which score the lender chooses to review and base a decision on. Where this seems unfair it just is what it is. Because the potential creditor has to pay for the report they usually will only pull one score. If the purchase is a large purchase, like an auto loan or a mortgage, the lender will most likely pull the scores for all three lenders.
There are also specialty scores, such as auto loan scores, where the weight is based on whether you have made your car payments on time every month. Just like these scores, there are specialty scores for credit cards, mortgages, and auto insurance.
WOULD YOU LIKE TO CHECK YOUR CREDIT SCORE FOR FREE?
There are many online resources where you can receive your credit report for free. If you would like to go directly to each bureau you can request one free credit report each year. You have a right to see your credit score and challenge any mistakes that are reported.
ARE YOUR DEBT ISSUES KEEPING YOU UP AT NIGHT? HERE ARE A FEW WAYS OUT.
Debt has ridden many of us, whether it happened fresh out of the gate at 18 years old or was acquired later in life, no matter what the circumstance it is easy to feel as though you may never get out from under it. I was the typical case of acquiring debt at a young age. With the naivety of how credit card companies actually work it just seems like free money that I could just pay off later when I was able. Man! Was I wrong! Before I knew it I was drowning in debt. I would like to share with you what changes I have made that have helped me move closer to financial freedom.
I recommend trying these finance management tips:
- Live below your means & splurge as little as possible
- Can’t repay your creditor in full in 30 days? DON’T SPEND IT!
- Improve your FICO before approaching any bank for a credit line
- Search for best APR for new lines of credit
- Put a cap on your spending and pay obligations first
Most of us confront an obligation issue. Unfortunately, this issue appears to deteriorate with each passing month as more costs are added to the current weight. This is where debt consolidation loans were a huge help for me. On my desk, at bill pay time, I was covered up in high-interest charges by most of my creditors. I was able to consolidate my debt and pay a lower interest rate on my credit lines and payday loans.
With lower APR on my debt consolidation loans, I was able to start paying towards my principal amount quicker. I was starting to see a light at the end of the tunnel. Yes, I could have spent countless hours pleading and arguing with my creditors to settle payments but the long-term effects of any settlements were going to hurt me later on down the road. It could have made it impossible for future creditors to lend to me if they saw settlement claims from old accounts. The debt consolidation loan I borrowed helped me pay off all of my creditors right away. Before I knew I was onto greener pastures and living a life free of debt. Sleeping at night has never been easier.
IMPROVING YOUR FICO SCORE IN 30 DAYS
It is easy to find yourself swallowed up in credit card debt. Sometimes it seems to happen overnight. Is it possible to get out of debt as quickly as you found yourself in it? The answer is not quite. Repairing one’s credit after it has been damaged takes a bit of time but there are things you can do today that will get you on the road to reparation.
Just like bad credit is acquired over time it takes consistent behavior modification to re-establishing yourself as someone worth lending too. Most consumers request copies from three major credit reporting agencies. These agencies are Transunion, Experian, and Equifax. Once a copy has been acquired the consumer should identify any discrepancies in their report and act quickly to have these issues resolved.
STEPS TO IMPROVING YOUR FICO SCORE IN 30 DAYS
• CORRECT ERRORS ON YOUR REPORT
It is very common to find mistakes in your report. Contact your creditors directly to rectify these mistakes by phone. Once an agreement has been made follow up with your creditor in writing and notify them that the bureau has been notified. This helps in expediting the process to a quicker resolution.
• RAISE YOUR CREDIT LINE
Asking for a higher credit line with a creditor you already use can help your credit score tremendously. Boosting your line of credit boosts your FICO score, as well.
To default on a credit card payment can do quite a bit of damage quickly. Life happens. Sometimes it is just a simple mistake. It is okay to call your creditor and ask for them to remove it if it doesn’t happen frequently. A creditor can also accept partial payment for an account in collections. Settling these outstanding balances will be a quick way to remove the accounts from unpaid to paid. Just be sure to have everything in writing before you send any money to the creditor.
• BECOME AN AUTHORIZED USER
Family with great credit lines can help the less fortunate by allowing them to be an authorized user on an existing revolving account. Similar to the concept of cosigning for an auto loan or a mortgage this option to repairing your credit score works in the same manner. If your available credit rises it can lower your debt-to-income ratio. Click here to learn more about credit card debt relief