Credit, can't live with it can't live without it. You would think if you get a few credit cards, maybe a car loan or two make all of your payments on time, and wala, perfect credit right? not necessarily.†You would be surprised at the things which can affect your credit,†how it affects your credit score, and, in turn, may affect your ability to buy things with credit.
1) Timely Payments - Creditors will not report you as "delinquent" to the credit bureau unless you are 30 days or more past due. You may incur late fees, but 30 days, by credit bureau standards is delinquent. Most companies report to the credit bureau monthly, however, some only report quarterly (saves them money), so if you are 30 or more days delinquent on an account, it will show up typically within 30 days and affect your credit score. Now, if you have had a bankruptcy in the past, and it is still reporting on your credit (as they will for 10 years), delinquent payments count double against your credit score.
2) Collection Accounts - Did you know almost ANYONE can place a collection on your credit? From your family doctor to your dry-cleaner. As long as they have something signed by you saying you agree to pay†an amount, and if it's not paid, presto, instant collection. This is why it is very important for you to check your credit often. You may have forgotten to pay a co-payment to a doctors office, or an old cell phone bill. Maybe your kids forgot to drop the movies back off at Blockbuster and never told you, mom or dad. Never the less, no matter how big or how small, a collection account is a collection, and will effect your credit score EXACTLY the same as a $2000 credit card collection. So if you had 10 small collections, this could drastically change your credit score.
3) High Balances on Credit Card (revolving) debt - Here is one not many people know. You have two or three credit cards with a limit of let's say, $2,000 each. If you have charged more than $1000 on each card, yes, you have decreased your credit score. Credit Bureau Scoring systems look at the "percentage of revolving available", not just how well you have made your payments. So if you keep all of your credit cards at more than 50% of the limit, the credit bureau says "you are at a higher risk for bankruptcy". I have seen borrowers with 3 credit cards with a $300 limit charged up to $250, (clearly not at risk for bankruptcy) but their credit score was low. So, in short, watch your revolving limits and balances.
4) Bankruptcy- There are 3 main types of bankruptcy. Chapter 7 is defined as a discharge of your debts, once you have filed it can take up to 1 year for your debts to be discharged, however, once your bankruptcy is discharged, you are no longer responsible for these debts. Chapter 13 is a "re-organization of debts". Under this plan, your trustee (most often an attorney) will negotiate with your creditors, and collect a monthly payment from you until all debts are paid. Chapter 13 Bankruptcy can remain open for 3 to 5 years, and upon discharge, your creditors will be paid in full. Chapter 11 is commonly filed by a corporation, LLC or other entity, however, if you are a primary owner of the company, this too can effect your personal credit history.
The Bankruptcy laws have changed significantly over the past few years, making it more and more difficult to file. However, once you file, and your bankruptcy is discharged, it can take up to 10 years before it is removed from your credit. Bankruptcy is not the "end of the world", there are mortgages available as early as the day of discharge. Credit Cards (both secured and unsecured) shortly there-after as well. Your MortgageMax Funding Group financial consultant can help point you in the right direction toward re-establishing your credit in ALL areas.
5) Tax Liens- If you have unpaid income tax, this may appear on your credit as a Tax Lien. Tax liens, once filed, can be placed as a lien on your property as well.
6) Child Support- Once a child support order has been filed with the court, they list "child support" as a creditor on your credit report, whether or not it is delinquent. Delinquent child support will report as a "collection".
7) Consumer Credit Counseling- I see the ads on television everyday myself. "They consolidated all of my credit cards into one low monthly payment". Well it sounds good, however, did you know you CAN NOT establish any new lines of credit until the "plan" is paid in full. For example, if they put you on a 4 year plan, for the next 4 years, you can not buy a car, or get a new credit card without permission from the credit counseling agency or you will void your plan. This also will report on your credit as "this account is being managed by consumer credit counseling". This will have a major effect on your credit score as well. Creditors still have the right to report you as delinquent even if you are making timely payments on the plan.
If you are in a financial situation which requires you to consolidate debt, consider a refinance, or a second mortgage. Once the refinance is complete. You will have one low payment, all of your creditors are listed as paid in full, and your buying power is immediately restored. In addition, the interest on your mortgage is, in some cases "tax deductible" where as your credit card and auto loan interest is not, by consolidating your†other debts on your mortgage, you could increase†the amount†of your tax deduction each year (as your tax advisor for more details). We also can, on occasion, remove collection accounts from your credit history, ask your Nationwide-Credit-Lawyers government mortgage relief consultant.
Your Government Mortgage Consultant can review your credit history with you and make suggestions on how to improve your credit history and your credit score.
