Current Lender Health

I haven’t contributed to my blog for a while, since the financing industry has been turned on it’s ear over the past several months.  Everything that has been written so far still applies and has a positive effect on your credit rating, unfortunately most banks have raised there criteria for loan approvals.

I will try to give you some insight into what is currently happening by giving you a basic breakdown of lenders.  To start with you have prime and sub-prime lenders, a prime lender will generally have a cutoff around a 600 to 620 Beacon score.    When it comes to sub-prime there are two tiers, the upper level sub-prime that cater to the 500 to 600 Beacon score and the lower level sub-prime that picks up those below a 500 Beacon score.  Since I haven’t mentioned this before, a Beacon score is how a lot of banks determine the rate a consumer will qualify and is based on past credit, the higher the score the lower the rate, the lower the score the higher the rate goes.

The major change we have seen lately is in the upper level sub-prime market, a majority of these lenders have either gone under or have stopped lending to this clientele completely, leaving a major void in the sub-prime lending market.  The other change we have seen is in the lower end sub-prime market, with the higher than normal default rates on loans, these lenders have raised their interest rates and cut back on the loans they are approving.

Now while this may all sound like doom and gloom, it really isn’t, it just means that a dealership has to work that much harder to get a loan approval.  Yes, the rates may be a little higher and yes, the interest rates have come up a little, but we are seeing that happen in the prime market too.  As a store we have lost six lenders over the last eight months, while that may sound like a lot you have to put it in context, six out of 80+ lenders still leaves us with a pool of well over 70 lenders.

Now is as good as time as any to buy a vehicle, just keep in mind that money down is now a major sticking point with the banks and in may take a couple days of negotiation on the dealers end to get that final approval.  So if you have less than perfect credit, be patient with the dealer, chances are they are doing their best to get you approved, they just have to kiss a lot more you know what to get there.

The Importance of Accrurate Information

I know I have mentioned this before, but honesty on the credit application is one of the most important things you can do to help yourself.  All of the lenders we deal with have different qualifications for approving a loan, some may look at job time, some may look at residence time, and others are just concerned with your monthly income. 

When we submit your application to a lender it is usually sent to one that lines up best with the information you submitted on your application and as long as the loan structure meets their guidelines we will usually get an approval.  The lenders verify all the information submitted on the credit application, if the application has been filled out accurately the customer will be driving home in their new car, if any of the information provided is false, they may lose their chance of getting a vehicle.  You are much better off in the long run if you fill out your application accurately, that way the finance manager knows how to approach the lender when he is working to get you an approval.  

We have a lot of experience getting customers with severally damaged credit approved on vehicles and can get almost anybody financed on a vehicle, but getting an approval based on false information will damage your credibility with the lenders and probably cost you the opportunity to get into a vehicle. 

Lender Constraints(or why you can’t always have the car you want)

In the previous post we talked about things you can do to improve you chances of getting financed, this time we will talk about what the dealer can do to improve your odds.  Here is how this scenario lays out, you found a vehicle you like, the dealer submits the paperwork to the lender for an approval and the lender calls back and says we are not interested in approving this customer on this car, but if you find a vehicle that fits these guidelines(which we will discuss a little later), we would consider extending them a loan.  Now the last thing a dealer wants to do is switch cars around on you, especially after you have found one you like, but given the two options, the first one is telling you we cannot finance you and you leave without a vehicle or the other option, we can probably secure financing for you if we change vehicles, the dealer is going to make every effort to find a vehicle that fits the lenders qualifications, since the bank has hinted there is a chance for an approval.

There are several reasons the banks make these demands, but most of these demands are made with one thing in mind, they don’t want you in a car that may break down and you have to make a choice between making you car payment or a repair.  Most of the time this conditional approval is pretty standard, they would like to see you in a vehicle that is a 2002 or newer, generally no more than 75,000 miles, and something with an $8,000 max price.  Keep in mind this is a positive, if we find a vehicle within these parameters, most likely you will be approved for a loan.

Now here is the part that most people have difficulty understanding, the cars that fit these parameters are  not usually trucks, vans, or SUV’s, they are generally small to midsize sedans.  When looking at these cars, understand it is not your dream vehicle, but if you make your first 12 payments on time, chances are you will be able to trade that car for the vehicle you want next year, it all comes back to re-establishing your damaged credit.

This just a way to get to the vehicle you want, this may not be your ideal vehicle, but in my experience these vehicles are always much newer and nicer than the current one you are driving and have thousands less miles.  So the downside is you get to drive a better vehicle for a year while you rebuild your credit to get the one you really want.  As your credit improves your loan options will open up and you won’t have to deal with banks that tell you what you can and cannot buy.

South Pacific Auto has a very successful stair-step program in place, we have seen many customers go from our in-house financing program to getting financed with preferred lenders with low interest rates.  If you are ready to turn your credit history around and start rebuilding your credit, give me a call at (541) 974-0780, email me at jon@southpacificautosales.com, or fill out our online application by clicking here.

How to improve your odds of securing a loan

When dealing with damaged credit there are a lot more hoops for the dealer and customer to jump through to secure financing with a bank, but at the end of the day there are a things that can be done to increase your odds of securing a loan.  As mentioned before it’s not just the customer the banks make demands on, it is also the dealer, so we will start on the consumer end then move on to the dealer in my next post.

 As a consumer with damaged credit, the banks require a lot more verification, to put it bluntly, they don’t trust you and want you to back up everything that you have put down on your application.  This is also why most dealers require this information upfront before they even submit an application, I don’t know how many times I have seen a loan get approved only to have it put into decline status because income or job time didn’t match up with the application.   As mentioned before, your goal is to build trust with the lender, so don’t overstate your income, the bank is going to require your most recent pays-tub at a minimum, so they will know the facts soon enough.

Banks that deal with special finance customer generally have a list of requirements that need met before finalizing a loan: your most recent pay-stub, a bill showing proof of residence: a phone bill, a power bill, or something showing your name with you address(this again comes back to proving what you listed on your application), landlord name and number, and six complete references with name, address, and phone numbers.  By bringing these items in with you on your first visit to the dealer you have greatly increased your odds of getting an approval. 

Special finance is all about building trust with the lender, submitting the initial application with all the required information makes a very good impression with the lender, it shows them that you are serious about getting a loan, organized, and that you are taking the needed steps to secure a loan.  You’re much better off giving the lender the required information up front, they are going to require it anyways, so why make them ask for it.

Another way to improve your odds is to be realistic on the loan amount, if you have damaged credit, your chances of getting an approval on a $20,000 to $30,000 loan are very slim and most likely unattainable.  If you are more realistic and look for something with around an $8,000 max price, your odds have increased again.  It’s all about risk management with the lenders, they are willing to take a chance on you, but they are only willing to go so far, if they have to reposes a car their loss is likely to be much less on an inexpensive car.

Now here is the one of the biggest things that increase your odds of securing a loan, and that is down-payment.  As I have mentioned before it is all about trust and risk management with the lenders and money down helps with that criteria.  The first thing the bank sees with cash participation on your part is that you now have your own money invested in this car and more than likely you will not want to lose that money in a repossession.  The other part is the risk factor, let’s say you find a $6,000 vehicle and you just put $1,500 down, so you are only financing $4,500 with them, if they have to reposes it after 8 or 9 payment they have reduced their chance of loss significantly.

Obviously there are other factors that go into getting a loan, but if you do the things I listed in this post, you can overcome a lot of the problems associated with damaged credit and greatly increase your odds of securing a loan.

New Years Resolutions: Fix Your Credit

2008 is here and it’s a new year, this can be the year you turn that bad credit history around once and for all.  It won’t be easy, it will take on lot of discipline on your part, but like any other New Years resolution, if you stick with it you will be successful.

I already know what you’re thinking, it’s too hard, my credit is so bad there is no way I can turn it around.  You have to look at it this way, even though your credit may be trashed, if you don’t start working on it today, you will still have the same bad credit years down the road.  So now is the time to get serious and start repairing your credit.

Let’s start off with something easy and free, like getting your free credit report.  In an earlier post on this blog I included information on how to get a free credit report, the credit reporting agencies are required to provide you with a free one every year.  All you have to do to get this free report is go to annualcreditreport.com this is the best place to start, not only is it free, but will give you a roadmap to work from.

Once you have this credit road map you need to devolop plan like you would with any other map.  Start your trip with area’s you would like to work on first and a good place to start is at the top of the credit report with your outstanding collections.  I’ve seen this time and time again, a list of collections that take up over half of the first page with $10 to $30 balances.  This is where you need be consitent and have a plan, work on paying these collections off over a three of four month period.  Some folks have larger balances in collections, but a majority of the time there are also several smaller ones in there too, make the effort on paying off the small ones and work out a long term plan on the bigger ones.

You have to remember the collection accounts are right at the top of your credit report, when you pay off the collection accounts they will report as paid.  Now this negative has been turned into a positive, when a lender sees “paid” instead of a balance due in that column, it shows you are making an effort to clean up your credit and now you start looking like a better risk for a loan.

The whole purpose of this blog is to help our credit challenged customers understand their situation and give them practical ways to improve their credit, so now it’s time for you to give us some feedback.  Please post your comments letting us know what you like so far and any suggestions for topics you would like covered.

In my next post, I can cover the value of an account that is paid on time and what that can lead to, or I can cover what you can do to improve your odds of getting approved for financing.  Let me know which one you would like next.

Credit Repair: Self Help May Be Best

 This is an article I found the on the FTC website, it has some good information, it tells you how to get a free credit report and what to look for and avoid in a credit repair agency.

You see the advertisements in newspapers, on TV, and on the Internet. You hear them on the radio. You get fliers in the mail. You may even get calls from telemarketers offering credit repair services. They all make the same claims:

• “Credit problems? No problem!”
• “We can erase your bad credit — 100% guaranteed.”
• “Create a new credit identity — legally.”
• “We can remove bankruptcies, judgments, liens, and bad loans from your credit file forever!”

Do yourself a favor and save some money, too. Don’t believe these statements. Only time, a conscious effort, and a personal debt repayment plan will improve your credit report.
This brochure explains how you can improve your creditworthiness and gives legitimate resources for low or no-cost help.

The Scam

Everyday, companies nationwide appeal to consumers with poor credit histories. They promise, for a fee, to clean up your credit report so you can get a car loan, a home mortgage, insurance, or even a job. The truth is, they can’t deliver. After you pay them hundreds or thousands of dollars in fees, these companies do nothing to improve your credit report; most simply vanish with your money.

The Warning Signs

If you decide to respond to a credit repair offer, look for these tell-tale signs of a scam:

• companies that want you to pay for credit repair services before they provide any services.
• companies that do not tell you your legal rights and what you can do for yourself for free.
• companies that recommend that you not contact a credit reporting company directly.
• companies that suggest that you try to invent a “new” credit identity — and then, a new credit report — by applying for an Employer Identification Number to use instead of your Social Security number.
• companies that advise you to dispute all information in your credit report or take any action that seems illegal, like creating a new credit identity. If you follow illegal advice and commit fraud, you may be subject to prosecution.

You could be charged and prosecuted for mail or wire fraud if you use the mail or telephone to apply for credit and provide false information. It’s a federal crime to lie on a loan or credit application, to misrepresent your Social Security number, and to obtain an Employer Identification Number from the Internal Revenue Service under false pretenses.
Under the Credit Repair Organizations Act, credit repair companies cannot require you to pay until they have completed the services they have promised.

The Truth

No one can legally remove accurate and timely negative information from a credit report. The law allows you to ask for an investigation of information in your file that you dispute as inaccurate or incomplete. There is no charge for this. Everything a credit repair clinic can do for you legally, you can do for yourself at little or no cost. According to the Fair Credit Reporting Act (FCRA):

• You’re entitled to a free report if a company takes adverse action against you, like denying your application for credit, insurance, or employment, and you ask for your report within 60 days of receiving notice of the action. The notice will give you the name, address, and phone number of the consumer reporting company. You’re also entitled to one free report a year if you’re unemployed and plan to look for a job within 60 days; if you’re on welfare; or if your report is inaccurate because of fraud, including identity theft.
• Each of the nationwide consumer reporting companies — Equifax, Experian, and TransUnion — is required to provide you with a free copy of your credit report, at your request, once every 12 months.
  The three companies have set up a central website, a toll-free telephone number, and a mailing address through which you can order your free annual report. To order, click on annualcreditreport.com, call 1-877-322-8228, or complete the Annual Credit Report Request Form and mail it to: Annual Credit Report Request Service, P.O. Box 105281, Atlanta, GA 30348-5281. You can print the form from ftc.gov/bcp/conline/edcams/credit/ . Do not contact the three nationwide consumer reporting companies individually. They are providing free annual credit reports only through annualcreditreport.com, 1-877-322-8228, and Annual Credit Report Request Service, P.O. Box 105281, Atlanta, GA 30348-5281. You may order your reports from each of the three nationwide consumer reporting companies at the same time, or you can order your report from each of the companies one at a time. For more information, see Your Access to Free Credit Reports at ftc.gov/bcp/conline/edcams/credit/ .
  Otherwise, a consumer reporting company may charge you up to $9.50 for another copy of your report within a 12-month period.
• You can dispute mistakes or outdated items for free. Under the FCRA, both the consumer reporting company and the information provider (that is, the person, company, or organization that provides information about you to a consumer reporting company) are responsible for correcting inaccurate or incomplete information in your report. To take advantage of all your rights under this law, contact the consumer reporting company and the information provider.

STEP ONE

Tell the consumer reporting company, in writing, what information you think is inaccurate. Include copies (NOT originals) of documents that support your position. In addition to providing your complete name and address, your letter should clearly identify each item in your report you dispute, state the facts and explain why you dispute the information, and request that it be removed or corrected. You may want to enclose a copy of your report with the items in question circled. Your letter may look something like the one on page 6. Send your letter by certified mail, “return receipt requested,” so you can document what the consumer reporting company received. Keep copies of your dispute letter and enclosures.

Consumer reporting companies must investigate the items in question — usually within 30 days — unless they consider your dispute frivolous. They also must forward all the relevant data you provide about the inaccuracy to the organization that provided the information. After the information provider receives notice of a dispute from the consumer reporting company, it must investigate, review the relevant information, and report the results back to the consumer reporting company. If the information provider finds the disputed information is inaccurate, it must notify all three nationwide consumer reporting companies so they can correct the information in your file.

When the investigation is complete, the consumer reporting company must give you the results in writing and a free copy of your report if the dispute results in a change. If an item is changed or deleted, the consumer reporting company cannot put the disputed information back in your file unless the information provider verifies that it is accurate and complete. The consumer reportincompany also must send you written notice that includes the name, address, and phone number of the information provider. If you request, the consumer reporting company must send notices of any correction to anyone who received your report in the past six months. You can have a corrected copy of your report sent to anyone who received a copy during the past two years for employment purposes.

If an investigation doesn’t resolve your dispute with the consumer reporting company, you can ask that a statement of the dispute be included in your file and in future reports. You also can ask the consumer reporting company to provide your statement to anyone who received a copy of your report in the recent past. You can expect to pay a fee for this service.

STEP TWO

Tell the creditor or other information provider, in writing, that you dispute an item. Be sure to include copies (NOT originals) of documents that support your position. Many providers specify an address for disputes. If the provider reports the item to a consumer reporting company, it must include a notice of your dispute. And if you are correct – that is, if the information is found to be inaccurate – the information provider may not report it again.

For more information, see How to Dispute Credit Report Errors at ftc.gov/bcp/conline/edcams/credit/ .

Reporting Accurate Negative Information

When negative information in your report is accurate, only the passage of time can assure its removal. A consumer reporting company can report most accurate negative information for seven years and bankruptcy information for 10 years. Information about an unpaid judgment against you can be reported for seven years or until the statute of limitations runs out, whichever is longer. There is no time limit on reporting: information about criminal convictions; information reported in response to your application for a job that pays more than $75,000 a year; and information reported because you’ve applied for more than $150,000 worth of credit or life insurance. There is a standard method for calculating the seven-year reporting period. Generally, the period runs from the date that the event took place.

For more information, see Building a Better Credit Report at ftc.gov/bcp/conline/edcams/credit/ .

The Credit Repair Organizations Act

By law, credit repair organizations must give you a copy of the “Consumer Credit File Rights Under State and Federal Law” before you sign a contract. They also must give you a written contract that spells out your rights and obligations. Read these documents before you sign anything. The law contains specific protections for you. For example, a credit repair company cannot:

• make false claims about their services
• charge you until they have completed the promised services
• perform any services until they have your signature on a written contract and have completed a three-day waiting period. During this time, you can cancel the contract without paying any fees

Your contract must specify:

• the payment terms for services, including their total cost
• a detailed description of the services to be performed
• how long it will take to achieve the results
• any guarantees they offer
• the company’s name and business address

Have You Been Victimized?

Many states have laws regulating credit repair companies. State law enforcement officials may be helpful if you’ve lost money to credit repair scams.

If you’ve had a problem with a credit repair company, don’t be embarrassed to report it. While you may fear that contacting the government will only make your problems worse, remember that laws are in place to protect you. Contact your local consumer affairs office or your state Attorney General (AGs). Many AGs have toll-free consumer hotlines. Check the Blue Pages of your telephone directory for the phone number or check www.naag.org for a list of state Attorneys General.

Need Help? Don’t Despair

Just because you have a poor credit report doesn’t mean you won’t be able to get credit. Creditors set their own credit-granting standards and not all of them look at your credit history the same way. Some may look only at more recent years to evaluate you for credit, and they may grant credit if your bill-paying history has improved. It may be worthwhile to contact creditors informally to discuss their credit standards.

If you’re not disciplined enough to create a workable budget and stick to it, work out a repayment plan with your creditors, or keep track of mounting bills, consider contacting a credit counseling organization. Many credit counseling organizations are nonprofit and work with you to solve your financial problems. But not all are reputable. For example, just because an organization says it’s “nonprofit,” there’s no guarantee that its services are free, affordable, or even legitimate. In fact, some credit counseling organizations charge high fees, or hide their fees by pressuring consumers to make “voluntary” contributions that only cause more debt.

Most credit counselors offer services through local offices, the Internet, or on the telephone. If possible, find an organization that offers in-person counseling. Many universities, military bases, credit unions, housing authorities, and branches of the U.S. Cooperative Extension Service operate nonprofit credit counseling programs. Your financial institution, local consumer protection agency, and friends and family also may be good sources of information and referrals.

If you are considering filing for bankruptcy, you should know about one major change to the bankruptcy laws: As of October 17, 2005, you must get credit counseling from a government-approved organization within six months before you file for bankruptcy relief. You can find a state-by-state list of government-approved organizations at www.usdoj.gov/ust. That is the website of the U.S. Trustee Program, the organization within the U.S. Department of Justice that supervises bankruptcy cases and trustees.

Reputable credit counseling organizations can advise you on managing your money and debts, help you develop a budget, and offer free educational materials and workshops. Their counselors are certified and trained in the areas of consumer credit, money and debt management, and budgeting. Counselors discuss your entire financial situation with you, and help you develop a personalized plan to solve your money problems. An initial counseling session typically lasts an hour, with an offer of follow-up sessions.
For more information, see Knee Deep in Debt and Fiscal Fitness: Choosing a Credit Counselor at ftc.gov/bcp/conline/edcams/credit/ .

Do-It-Yourself Check-Up

Even if you don’t have a poor credit history, some financial advisors and consumer advocates suggest you review your credit report periodically

• because the information it contains affects whether you can get a loan or insurance — and how much you will have to pay for it.
• to make sure the information is accurate, complete, and up-to-date before you apply for a loan for a major purchase like a house or car, buy insurance, or apply for a job.
• to help guard against identity theft. That’s when someone uses your personal information — like your name, your Social Security number, or your credit card number — to commit fraud. Identity thieves may use your information to open a new credit card account in your name. Then, when they don’t pay the bills, the delinquent account is reported on your credit report. Inaccurate information like that could affect your ability to get credit, insurance, or even a job.

Sample Dispute Letter

Date
Your Name
Your Address
Your City, State, Zip Code

Complaint Department
Name of Company
Address
City, State, Zip Code

Dear Sir or Madam:

I am writing to dispute the following information in my file. The items I dispute also are encircled on the attached copy of the report I received.

This item (identify item(s) disputed by name of source, such as creditors or tax court, and identify type of item, such as credit account, judgment, etc.) is (inaccurate or incomplete) because (describe what is inaccurate or incomplete and why). I am requesting that the item be deleted (or request another specific change) to correct the information.

Enclosed are copies of (use this sentence if applicable and describe any enclosed documentation, such as payment records, court documents) supporting my position. Please investigate this (these) matter(s) and (delete or correct) the disputed item(s) as soon as possible.

Sincerely,
Your name

Enclosures: (List what you are enclosing)

The FTC works for the consumer to prevent fraudulent, deceptive and unfair business practices in the marketplace and to provide information to help consumers spot, stop, and avoid them. To file a complaint or to get free information on consumer issues, visit ftc.gov or call toll-free, 1-877-FTC-HELP (1-877-382-4357); TTY: 1-866-653-4261. The FTC enters Internet, telemarketing, identity theft, and other fraud-related complaints into Consumer Sentinel, a secure online database available to hundreds of civil and criminal law enforcement agencies in the U.S. and abroad.

What your high credit card balances are telling lenders

You pay all your bills on time, but your credit score is not as high as it should be or is dropping rapidly.  So what is causing your score to drop?  It could be the high balances you are carrying on your credit cards.  When a bank sees all or most of your credit cards at or very near their limit, it sends up a big red flag to them, because it looks like you are close to begining a downhill slide.  When a consumer starts to max out their cards it is usually from taking money from the card to make their monthly payments.  Depending on how many cards a person has and the limits on those cards, they may be able to do this for a couple months or several months, but it will eventually come to a screeching halt when the money runs out. 

If this is starting to happen with you, it may be time to buckle down, create a budget, and stick to it.  A good place to start is by taking a notepad with you and writing down everything you purchase throughout the day over the course of a week, that way you can see where you money is really going.  I know this isn’t exactly convenient, but it is the best way to find out where you money is being spent and where you will be able to cut back.  You may find that you are eating out two to three times a day, if you brown bag just one of those meals you may save in excess of $100 a month.  Another way to save a fews buck is by combining multiple trips to stores down to a couple, with current gas prices this could save you a significant amout of money.  While the before mentioned ideas won’t cut your monthly out go by thousands, in could very easily save you a couple hundred dollars a month, which may be the difference in paying your bills when money is tight.

Inexpensive ways to start improving your credit

An easy way to start improving your credit is to start with outstanding collections, the collections section is usually at the top of a credit report and it is the first thing a lender sees when they consider giving a loan.  A lot of times there is a big list and it can be very intimidating, but if you break it down in to more manageable sections and commit to working at it over time, you will be rewarded with a payed off collection history that will show as a positive to a lender.

A good place to start is by getting a current list of your outstanding collections and one of the best places to start is with a current copy of your credit report.  These are very easy to get now, they can be accessed and purchased on-line by going to the reporting companies websites.  There are three major credit reporting companies, Equifax, Trans Union, and Experian, but in our area Equifax is the most widely used credit reporting agency and would be the best one to start with.  When you go to equifax.com they have a product called Score Power that you can buy for $15.95, that will get you your Equifax report or you can buy all three for $29.95.  One nice feature on their Score Power product is that it will let you run “what if” scenarios to let you see what effects the changes you are making should have on your credit score.

Many times I see a large list of 15 to 20 collections that total $300 to $500 and a majority of those range from $5 to $20 a piece, after you have your credit report you can identify the size of each collection and work out a plan to pay them off.  As you can see just setting aside $100 a month to put towards your collections will usually pay them off within a matter of a few months. 

Now if you find you have $1,000’s in outstanding collections, you will still usually find several smaller ones mixed in, so concentrate on the smaller more manageable ones to begin with.  Any paid collection is a positive in the lenders eyes, so even if you can’t payoff the larger collections quickly, paying of the smaller ones will show the banks you are making an effort to repair your credit.

One last thing to remember is to get receipts from the companies you are paying off and keep them in a file.  Credit reports take time to update and most lenders will accept the receipts as proof of the collection being payed off.

Ways to Improve your Credit Rating

What Is Your Credit Score?

Your credit score is a numeric guide that shows lenders what your future risk is if they give you a loan. It is based only on the information contained in your credit report. In evaluating your credit application, lenders may use only the credit score, a combination of the credit score and your credit application, or their own proprietary scoring system that may combine each of these ingredients.

Your credit score is based on the following variables: payment history, amount owed on accounts, length of credit history, the nature of any new credit, and types of credit you’re using. I don’t know exactly in what percentage these areas have importance, but I can tell you that more than half of the credit score is based on payment history and amount owed.

 

How Do You Improve Your Credit Score?

1. Focus On Your Payment History

The more payments that you pay on time, the higher your credit score will climb. If you’ve been turned down for a bad credit auto loan because of your credit score, you probably have had several late payments. One or two tardy payments won’t kill your score. However, if you’ve been excessively late your score is probably pretty low. Get yourself back on track right away. Six months to a year of good payments can do wonders for your score.

2. Pay off Collection Accounts

You can’t remove a collection account by paying it, but paying them off can improve your score. It doesn’t hurt to ask the creditor to remove the account when you pay it off, but don’t expect them to do that.  Many mortgage companies will insist that you pay off collection accounts before giving you a home loan.

3. Focus On the Amount You Owe

If you’re carrying high balances on your accounts, your credit score may suffer. Being close to your credit limit on your credit cards may show that you’re overextended, and your credit score will suffer as a result. If you can, pay off your cards, or at least get the balances down. When your credit report updates with lower balances your score may be able to raise your credit score fast.

Having said this, carrying small balances on your cards that you have managed to pay on time is much better than carrying no balance at all. 

Also, pay off your debt instead of just moving it around. Shifting balances from one card to another does not qualify as paying off your balances.

4. Avoid Taking On New Debt

Although it matters less than your payment history, taking on new debt may affect your score. People who open several new credit accounts at the same time may seem to be a greater risk than those who are lowering their current debt.

If you’re looking to purchase a new or used car or a home, don’t drag out you shopping activity over months. Having your credit pulled by several companies over the course of a year or so looks like a much higher risk than having this done in a shorter period.  Instead, do your rate shopping in a shorter period.

Opening up a handful of credit cards, for example, may lower your credit score. Some people do this to increase the level of available credit. You are usually better off applying for credit as you need it. If you really don’t need a new credit card, just don’t apply for it. Especially if you’re trying to improve your score.

5. If You Are Trying to Repair Your Credit After a Bankruptcy or Other Credit Crisis

If you are trying to repair your credit score then opening up a new credit care account may make sense. In that case, you should open a new account so that you can begin to establish a good payment history. If, for example, you are coming out of a bankruptcy, we would recommend that you start with a credit card or small installment account and begin to make payments over time. Just remember, as you build your credit and more credit becomes available, don’t apply for it unless you really need it.

6. Limit Your Credit Inquiries

Every time a merchant or lender pulls your credit in order to evaluate a credit application submitted by you, your score will be dropped slightly. This shouldn’t present any problems for you or the lender. However, numerous inquiries that include several different attempts to get credit can lower your score drastically. Multiple inquiries, for example more than ten in a short amount of time, can signal a higher risk of bankruptcy. The credit reporting agencies can distinguish between normal “rate shopping” and someone looking to max out their credit irrationally.

7. Pull Your Own Credit Every Six Months

Pulling your own credit using any of the reporting agencies or other services does not lower your score. Each of the reporting agencies do not drop your score for checking your own history. Also, any time your credit is pulled as a part of a promotional event or item (for example an unsolicited credit card offer), you will not be penalized for that inquiry.

At least every six months you should pull your credit history to check for mistakes or any kind of identity theft or fraud.  Correcting mistakes in your credit report can take time.  Don’t wait until you’re at the car dealership to hear that someone has opened a credit card in your name and wrecked your score.  This isn’t common, but it happens more than you may think.

This wasn’t an all inclusive list of ways to improve your credit score. Your credit score is based on several factors, not all of them available to the public. However, sticking to basics like making your payments on time, applying for credit only when you need it and not having excessive inquiries should go a long way towards improving your score over time.

South Pacific Auto Credit Blog

South Pacific Auto has 18 years experience in helping customers with damaged credit, the main purpose of this blog is to help our customers understand their situation and to help them better their credit rating.  We will be posting video’s and text with explantations of what a bank looks for when considering a loan and things you can do to improve your odds of securing a loan.  We are ecouraging people to leave feedback, if you have any questions please let us know, this blog is being designed around the needs of our customers.