The Credit Camp

I am back from an extended break, so stay tuned for more great Credit content coming soon.

There have been numerous questions regarding the impact of credit bureau inquiries on your credit score. Let me set the record straight.

Inquiries can be broken down into two types: hard inquiries and soft inquiries. Hard inquiries are made when you apply for a loan, mortgage or any other credit. These count against yourFICO score and remain on your record for up to two years. Too many hard inquiries will negatively impact your credit score. If you have a lots of hard inquiries on your report you appear to be a credit seeker to prospective lenders. The exception is when you may be rate shopping. All the hard inquiries within a two week period are counted as a single inquiry. This grace period allows for the times when you may be shopping for the best rate for a new loan or mortgage renewal. Multiple inquiries are generally not aproblem for someone with a high credit score, but if you are borderline it could have a serious impact on your ability to borrow or the rates that you are able to get.

The other type of credit bureau inquiry is called a soft inquiry. Soft inquiries are not factored into your FICO score. They are made when a company checks your credit report as part of a review or for the purposes of offering you a pre-approval. Also, when you check your own credit report it is considered a soft inquiry. There are various legitimate reasons why a business or even your employer my request a credit check and all of these do not lower your credit score.

Be aware of the differences between a hard and soft inquiry. When a company indicates they will be doing a credit check determine which type they will be doing. It is becoming more common for some banks to do a hard inquiry when you are simply opening a bank account. Others will do a soft inquiry. If your credit is borderline you may wish to avoid these institutions in favor those that will not do a hard inquiry.

The next time you get a copy of your credit report , which I recommend you do regularly, take note of the hard inquiries and soft inquiries you find. Have any companies pulled a hard inquiry needlessly? If they have take action on it right away. It is your score that is being affected.

A new method of rapidly boosting your credit score has developed called seasoned trade lines. Seasoned trade lines are credit cards or lines of credit that have high limits, low balances and an excellent, long repayment history. Private individuals, called investors, add your name to their credit line and “piggyback” as an authorized user. Within about 30-60 days these accounts will show up on your credit report and you can see an increase in your FICO score of anywhere from 30 to 180 points. The benefit of this is being able to get much lower interest rates on loans and mortgages or even being able to get approved at all.

There are a number of companies on the web that provide this service as middle-men; connecting individuals who wish to raise there credit score with individuals who are wish to rent theirs out. The fee for this service can run anywhere from $500 to $3000. At first glance this may appear steep, but after you consider how much money can be saved now by being able to get a lower interest rate on mortgages and other loans, it is put into perspective. Also there are plenty of eBay auctions now for this service which helps to keep prices in check.

The credit bureaus are aware of this method of rapidly boosting your credit score and are working on ways to counter-balance its effect. But as this is a lucrative business for those brokering the seasoned credit lines, they too are working to ensure that their services remain effective.

If you do not have an established credit history applying for a loan with a co-signer may help you get approved. Co-signers are used to strengthen a weak application and make it more likely to get approved. Co-signers can be a parent, a spouse, a friend or any other eligible adult who has good credit and meets other qualifying criteria. If the primary borrower does not pay, co-signers are equally responsible for the loan, up until it is paid out. Applying with a qualified co-signer not only increases your chances of approval, but also may make you eligible for lower rates and fees. It is important to note that a co-signer will not make a bad deal good. (more…)

Improving your FICO score can help you get lower interest rates. In fact the FICO score is the most important factor lenders use to anticipate how you will repay a loan. FICO is an acronym for the creators of the score, Fair Isaac Credit Organization. “FICO” has became the popular name for their credit scoring system. FICO scores ranges from 300 to 850, with higher than 725 considered good and lower than 600 considered bad. However, there is no single “cutoff score” used by all lenders. Lenders obtain FICO scores from the three major credit reporting agencies. The best way to maintain a good FICO credit score is to handle your credit responsibly over time.

FICO scores can vary from day to day, but most are fairly stable. Getting your FICO score once a year would be sufficient to stay on top of how you rank. Knowing your score gives you the opportunity to take steps to improve it. It is better to work on improving yourFICO score before you suddenly need to apply for a loan. If you haven’t checked yours lately you can get a copy here.

There are a number of factors that affect your FICO score. These include the length of your credit history, missed or late payments, and credit usage versus credit limits. Public records (ie. bankruptcy) or collections will also impact your score. Many people worry excessively about the impact credit inquiries have on their score. FICO distinguishes between shopping for the best rate on a loan and someone who is an habitual “credit seeker”. This is based on the length of time over which recent inquires have been made.

For your three FICO scores to be determined, each report needs to have at least one account that has been open for six months. When adjudicating credit however, lenders like to see more credit activity over a longer period of time. While most lenders useFICO scores when approving credit, how each lender incorporates that information into the adjudication process will differ.

The only way to realiably improve your FICO score is to simply pay down what you owe, as agreed and on time.

Identity theft occurs when someone uses your personal information commit fraud.

You may not find out about the identity theft until you review your credit report or a credit card statement and notice charges you didn’t make. Sometimes you are contacted by a collection department, demanding payment for items you never bought. When the thieves use the credit cards and don’t make payments, delinquent accounts appear on your credit report. This results in a bad credit report and a very low credit score. It will then be difficult or impossible for you to obtain new credit for yourself. You often do not even find out about it until it is too late.

An Ounce of Prevention

LifeLock is the industry leader in identity theft protection. Their system is different because it is designed to prevent your identity from being stolen rather than reporting it after the fact. LifeLock backs up its service with a guarantee that they will handle any resolution of ID theft, with a $1,000,000 warranty. When you enroll with LifeLock you will get a credit report from the major credit bureaus and they will make sure you get these reports once a year. LifeLock requests on your behalf that fraud alerts are placed on your accounts. Once your fraud alerts have expired, LifeLock will ensure that they are renewed and continue to do so as long as you stay a client. They remove subscribers’ names from mailing lists for pre-approved credit applications to cut the risk of identity theft. They also get you removed from many junk mail lists. Click here to learn more.

Monitor Your Credit Report

The best way to discover identity theft is to pay attention to your statements each month, and check your credit report regularly. You can get a copy of your credit report from any of the three credit bureaus: Equifax, TransUnion, and Experian. Get your Equifax credit report here. Once you receive it, check to see if it contains any items you do not know about. Equifax also offers a credit monitoring program called Credit Watch

Some of the steps you must take after discovering the fraud include filing a police report, checking your credit reports, notifying creditors, and disputing any unauthorized transactions. Immediately report the situation to the fraud department of the three credit reporting companies.

Some victims lose out on jobs or are declined for loans because of their bad credit score. You can take steps to protect yourself, and not be a victim.

The unfortunate truth of identity theft is that you, the victim, are responsible for cleaning up the mess and re-establishing your credit. If not detected early, it may take you months or years to clean up the damage done to your credit rating.

We spoke last time about using credit cards to build your credit score. However if you do not have a credit score or if you have bad credit, it may be difficult to obtain a credit card to begin with. This is where a secured credit card can help.

A secured credit card is a credit card where you have provided cash to be held as collateral against the balance owed on the card. (more…)

A high credit score is very important when you want to borrow money at the lowest interest rates possible. But how do you get there from no credit history or begin to fix bad credit. The answer is fairly simple and of course involves our friend the credit card.

The secret to raising your credit score is to get a credit card and put a small regular purchase on it, like your gas or your groceries. Then make a payment for this amount as soon as you can after the purchase. Pay it off online or at the bank, even before you get a bill.

To build your credit rating, the size of the loan or the size of the payments doesn’t matter. (more…)

Hello, my name is Kevin Langston the contributing author of The Credit Camp.

Through this blog I will be showing you how to get the most out of your credit cards. We will be exploring the best offers out there with respect to fees, rewards and interest rates. Additionally I will be providing insight and advice on how to manage credit cards responsibly, using them to their full advantage. We will explore credit card features and benefits as well as credit card security and protecting yourself from fraud and identity theft. From time to time I will touch on broader topics of credit and debt in general.

I look forward to updating this blog frequently with fresh and valuable content. If you enjoy this blog be sure to check out the other blogs in the Revenue Blogging Network