Repair Credit Score

Archive for March, 2011

Question: Is a FICO Score of 728 good or excellent?

I recently got instantly approved for a WAMU Platinum Mastercard (which I wanted only for the free FICO scores). I checked today and it said Experian FICO Score 728. I don't believe this one of those fako score likes the PLUS or Vantage. The scale tops out at 850+. So when I do the math 728 out of 850 is only an 85.6% (i'm not if this even means anything). I just can't determine if my score is considered good or excellent. Either way I can't complain as I have several cards with no balance and one that's got a balance that is equal to about 80% of the credit line for that card.
Yeah, I already read that this card gives me the bank version of the FICO Score, from what I've seen though, the classic FICO is generally a few points lower than the bank industry FICO. I'm highly interested in seeing how my score will be affected as I get the balance paid off on my one card..thanks guys!

Answer: Good
Credit Rank Credit Score
Excellent Credit 800+
Very Good 750-800
Good 700-750
Fair 650-700
Bad 600-650
Very Bad 300-600
No Credit XXXXXX

Question: Does a Debt Management Plan hurt your Credit Score?

I am thinking about getting credit counseling and enrolling in a debt management plan. But I want to know if it hurts your Credit Score. There seems to be so many scams out there right now.

Answer: Yes, participating in a debt management plan through a credit counseling agency will hurt your credit, though likely not as much as some other alternatives. However, a debt management plan will take longer, cost you much more money, and may not significantly reduce your monthly payments or balances (but interest rates will probably be reduced). Generally, you'll end up repaying 100% of what you owe, plus interest, but at a lower rate.

Whether it's a good idea for you will depend largely on how much debt you have, your ability to afford the monthly payments, and how important your Credit Score is to you (and how much more you're willing to pay to try to maintain it). Let me give you some examples:

Borrower #1 owes just $5,000 in unsecured debt. A debt management plan may be a good solution if he can afford the payments. He'll end up paying back the full $5,000 balance plus interest, plus fees to the credit counselor- but his credit should not sustain as much damage as had a debt settlement company withheld payments from his creditors for months or years, hoping to force a settlement. In this borrower's case, a debt settlement may have only reduced the balance by $1,000 - $3,000 dollars, which is a small consolation for having his Credit Score trashed. Plus, the fees to the debt settlement company would likely eat up a good portion of those savings. But let's look at a different example...

Borrower #2 owes $70,000 in unsecured debt. Let's say the DMP (debt management plan) is able to reduce her interest rate from 19.9% to just 5%. On a 60-month plan, her monthly payment (not including credit counseling fees) would be $1,321. That comes to a total of $79,260 (plus credit counseling fees) to pay off that debt at the reduced interest rate under the DMP. Her credit will be damaged while she's in the program, but perhaps not as significantly as under a different type of debt reduction program. But what's the cost? Let's say another type of debt reduction program is able to resolve her debt for 45% of what she owes, with no additional interest accruing. That $70,000 debt is now able to be eliminated for just $31,500. And if she can manage to pay the $1,321 per month as she would under the DMP, her debt is eliminated in just 24 months (compared with 60 months in the DMP). So her credit is hurt for 2 years, but she's now debt-free, and has 3 years to repair and rebuild it by making all her payments on time.

So let's look where Borrower #2 would be at the end of 5 years under each option... with the DMP, she has just made her last payment (totalling $79,260 plus fees), is now debt-free and emerging from her damaged credit profile. Under the alternate program, her Credit Report shows that she WAS way behind on payments 3 years ago (which significantly impacted her Credit Score), but has been debt-free and making payments on time for the last 36 months (which has helped to rebuild her credit). Oh, and by the way, she saved about $50,000 by choosing this option over the DMP.

So you can see that it really depends on your individual situation whether a DMP through credit counseling is a good idea for you. If you only owe a small amount, it may be a good option. But if you have a significant amount of unsecured debt, you may want to weigh the additional cost of the DMP versus the savings that you can achieve through a debt resolution option.

However, I DO NOT RECOMMEND CHOOSING ANY DEBT SETTLEMENT COMPANY, but not for the reasons that most people suggest. I’ll advise you not choose a debt settlement company because - even if you do (somehow) find a high-integrity, ethical debt settlement company - there is a far superior alternative: DEBT RESOLUTION. The concepts are similar, but because Debt Resolution is an attorney-managed program (as opposed to a private comany), it provides invaluable benefits that debt settlement simply can not offer, and at a lower cost. There isn't room to go over the differences here, but you can check out my answer to this question (copy & paste in a new browser window):

http://answers.yahoo.com/question/index;_ylt=AhQIdMaQHurT6MMwgtm9FM7ty6IX;_ylv=3?qid=20100301082225AAYrSCm&show=7#profile-info-s1OLajFVaa

To find out more about how you can reduce your unsecured debt by 55% (guaranteed) and reduce your monthly payments by 50% or more, and do so while avoiding harassing creditor calls, surprise tax bills, and exorbitant fees, visit www.BetterThanDebtSettlement.com

AP: BIGGEST USA SCAM YET:RENT A Credit Score& GET MORTGAGE !

Question: Are there any ways to "quick fix" your credit and raise your Credit Score?

Answer: Step One
Correct all inaccuracies on your Credit Report.

Go through your credit reports very carefully. Especially look for; Late payments, charge-offs, collections or other negative items that aren't yours, Accounts listed as "settled," "paid derogatory," "paid charge-off" or anything other than "current" or "paid as agreed" if you paid on time and in full, Accounts that are still listed as unpaid that were included in a bankruptcy, Negative items older than seven years (10 in the case of bankruptcy) that should have automatically fallen off your report (you must be careful with this last one, because sometimes scores actually go down when bad items fall off your report. It's a quirk in the FICO credit-scoring software, and the potential effect of eliminating old negative items is difficult to predict in advance). Also make sure you don’t have duplicate collection notices listed. For example; if you have an account that has gone to collections, the original creditor may list the debt, as well as the collection agency. Any duplicates must be removed!

2Step Two
Make sure that your proper credit lines are posted on your Credit Reports.

Often, in an effort to make you less desirable to their competitors, some creditors will not post your proper credit line. Showing less available credit can negatively impact your Credit Score. If you see this happening on your Credit Report, you have a right to complain and bring this to their attention. If you have bankruptcies that should be showing a zero balance…make sure they show a zero balance! Very often the creditor will not report a “bankruptcy charge-off” as a zero balance until it’s been disputed.

3Step Three
If you have any negative marks on your Credit Report, negotiate with the creditor/lender to remove it.

If you are a long time customer and it’s something simple like a one-time late payment, a creditor will often wipe it away to keep you as a loyal customer. If you have a serious negative mark (such as a long overdue bill that has gone to collections), always negotiate a payment in exchange for removal of the negative item. Always make sure you have this agreement with them in writing. Do not pay off a bill that has gone to collections unless the creditor agrees in writing that they will remove the derogatory item from your Credit Report. This is important; when speaking with the creditor or collection agency about a debt that has gone to collections, do not admit that the debt is yours. Admission of debt can restart the statute of limitations, and may enable the creditor to sue you. You are also less likely to be able to negotiate a letter of deletion if you admit that this debt is yours. Simply say “I’m calling about account number ________” instead of “I’m calling about my past due debt.”

4Step Four
Pay all credit cards and any revolving credit down to below 30% of the available credit line.

The scoring system wants to make sure you aren’t overextended, but at the same time, they want to see that you do indeed use your credit. 30% of the available credit line seems to be the magic “balance vs. credit line” ratio to have. For example; if you have a Credit Card with a $10,000 credit line, make sure that never more than $3000 (even if you pay your account off in full each month). If your balances are higher than 30% of the available credit line, pay them down. Here is another thing you can try; ask your long time creditors if they will raise your Credit Line without checking your FICO Score or your Credit Report. Tell them that you’re shopping for a house and you can’t afford to have any hits on your Credit Report. Many will not but some will.

5Step Five
Do not close your old credit card accounts.

Old established accounts show your history, and tell about your stability and paying habits. If you have old credit card accounts that you want to stop using, just cut up the cards or keep them in a drawer, but keep the accounts open.

6Step Six
Avoid applying for new credit.

Each time you apply for new credit, your Credit Report gets checked. New credit cards will not help your Credit Score and a credit account less than one year old may hurt your Credit Score. Use your cards and credit as little as possible until the next Credit Scoring.

7 Step Seven
Have at least three revolving credit lines and one active (or paid) installment loan listed on your Credit Report.

The scoring system wants to see that you maintain a variety of credit accounts. It also wants to see that you have 3 revolving credit lines. If you do not have three active credit cards, you might want to open some (but keep in mind that if you do, you will need to wait some time before rescoring). If you have poor credit and are not approved for a typical credit card, you might want to set up a “secured credit card” account. This means that you will have to make a deposit that is equal or more than your limit, which guarantees the bank that you will repay the loan. It’s an excellent way to establish credit. Examples of an installment loan would be a car loan, or it could be for furniture or a major appliance. In addition to the above, having a mortgage listed will bring your score even higher.

The Mortgage Messenger - Credit Score Quick Tips