Tips for boosting your credit score

Tips for boosting your credit score

If you're thinking about buying a house or a car, your credit score is a very important number.

The interest rate you'll pay for the money you borrow will be determined, in large part, by this three-digit number that's generated from the information in your credit report.

Most lenders have carved-in-stone rules about handing out the best terms, and those rules almost always place a major emphasis on your credit score. If their best rates are offered to borrowers with a score of 700 or higher and yours is a 698, those two points could cost you thousands of dollars.

According to MyFICO.com, the consumer website of popular scoring model FICO, the interest rate difference between those two scores is about one-third of a percentage point.

On a $165,000 30-year fixed-rate mortgage, that difference could cost you more than $13,378 in interest charges, assuming a 4.5 percent interest rate with a 700 credit score and a 4.875 percent rate on a 698 score. Fall below a 660 and the rate goes up even more, if you can even get approved for a mortgage at all.

Keep in mind that these are averages. Most lenders today practice tiered pricing, with interest rates rising as scores go down. Each lender chooses its own "break points" between tiers. Lender A may bump up the interest rate if a score falls below 700, while Lender B doesn't charge higher rates until the score is 690 or below. So if you stick with one lender, and that lender's break point is 700, raising your score from 698 to 701 can be vital.

This underscores the importance of not only doing all you can to improve your score, but shopping thoroughly when looking for a mortgage. From the perspective of a mortgage broker, who can choose among a sea of many lenders, there are no sharp break points. Consumers should do what a good broker does -- look for a lender that offers the best rate for a specific score.

But that's jumping ahead of ourselves. First things first: You can take steps to improve your credit score. The number of variables that play into an individual score make it impossible to say that one particular action will increase a given score by a certain number of points. But there are some good guidelines.

"The key to having the best FICO score possible is following three rules," says Jeffrey Scott, spokesman for FICO. "Pay all your bills on time, every time, keep your credit card balances low and only open new credit when you need it."

Speedy upgrade

That's good advice, to be sure, but these actions take a long time. What if you're house hunting and you just need a few extra points to bump you over the line to the great rates?

Start by pulling your credit report and your FICO score to see where you are. To get an estimate of your credit score, check out our Credit Score Estimator. If your score is above a 760, you're golden. Improving your score from 760 to 800 won't get you better terms

Here is How to Repair Your Bad Credit Report

Here is How to Repair Your Bad Credit Report

 

Bad credit reports comes with nightmares that nobody admires. If you choose to stick your head in sand and ignore your wake up call, it is totally fine and if you choose to overcome your fears and reclaim your credit standing, congratulations and here are a few tips for you.

I would say start with checking your credit standing but since you are reading this article, I am sure you´ve done your homework and assessed it and the results are not that amusing. So, let’s get to business

Step One: Request reports from several credit bureaus & companies

If you are in the United States, the Fair and Accurate Credit Transactions Act (FACTA) entitles you to a free credit report from leading credit bureaus in the country. It is also worthwhile to pick copies from the credit reporting companies. This is important because you do not know what has been submitted out there.

The basis of collecting reports from several companies is to have the different versions of the story.

Step Two: Carefully analyze your reports

Keep in mind that credit reports are not auto generated but are written and submitted by humans. This should give you the benefit of doubt that whatever is in that report is true or completely accurate.

Carefully go through your credit reports to make sure that the information in it is accurate and up to date. You should check out for address, types of accounts whether revolving, installment or join, collections, financial obligations records, consumer statements and credit inquiries.

These are the areas you should pay close attention too when examining your credit reports. It is often advisable that you audit your own credit report but I understand this can be boring to some people so if you feel you will not be able to read your credit reports to the end, I suggest you find somebody who can demystify the info into notable points you can easily suggest. Either way, ensure you are familiar with the content of your report.

Review your payments

Payments cover a larger percentage of your credit report since credit is all about borrowing and paying and since you only borrow for limited number of times, only repaying your debt remains to be everybody´s interest.

If there are missing payments, make sure to lodge a complaint with your credit company since a single missing payment can cause serious setback on your credit score.

However, be sure to talk to your lender before throwing turn trams. Sometimes the report must have just been hurried off or you may have made a payment too soon and you expect it to reflect on your report.

 Depth of credit

This is the length of time you´ve been using credit.

Older credit accounts are helpful when arguing your case out to correct your credit especially if it the older account was good or excellent.

You should carefully review your old credit account before closing it because it is your biggest bargaining chip

Recent credit accounts

New credit accounts are considered risk and they can lower your credit score in the first place. However, the consistent payment in the accounts will indicate responsibility and build your creditors confidence

Ensure that your recent credit accounts appear on your report- Although they may bear some degree of negative impact, the ultimate goal is to fix your credit and it will help a great deal.

Amount of Credit

It is hard for a credit company to post an inaccurate credit amount on your report. However, for revolving credits accounts, the amount carried forward may be inaccurate especially if you make irregular payments.

Step Three: Dispute all conflicting data

After carefully auditing your reports and noted down all conflicting data, it is time to lodge complains, the idea that complains may hurt your credit score is a misconception. Companies against any items of your credit report are never score and there is no way it will impact your score. If there is anything that will impact your credit score is failing to complain.

There are a number of ways to file complaints regarding your credit reports. One, you can call the number listed on your credit report and file your complain and two, you can file your complain online by visiting credit bureaus website.

It is not necessary to file complains with all credit bureaus as only one is enough. The credit reference bureau will forward your complain to your credit company and they will be required to reply within 30 days of the complaint. If they respond with corrections, the credit company is required to post the corrections to all bureaus they submitted the inaccurate report.

If you and your credit provider cannot resolve a dispute say have failed to reconcile a missing payment, you are allowed to attach a statement against the item on your report. For example, you may indicate ´I never missed any payment with company X´. This statement will be available for 2 years and is accessible to anybody who accessed your credit report-

Reference bureaus allow 30 days for credit companies to respond to complaints. If after 30 days not response id heard from your provider, the reference bureau will delete the inaccurate record and inform you and other bureaus. If after the correction you still feel some information is missing or inaccurate, you may have to visit your credit company in person and settle the deal personally.

For late payments, you may consider visiting your credit provider and explain yourself. These guys are humans like you and me and will consider going easy on you if you take the initiative to explain why you missed a payment or submitted your payment late.

Step Four: New report

Be sure to wait for 2 to 3 weeks before requesting for a new credit report after the corrections have been posted. In other cases, credit companies will acknowledge that the data is accurate but request more time to fix the discrepancy.

Purchasing credit score is also another option of seeing that your credit score improves. I hope these four steps to improving your credit score works with you. Remember, the best way to correct bad credit is avoiding one in the first place.

- See more at: http://www.elitepersonalfinance.com/here-is-how-to-repair-your-bad-credit-report/#sthash.KcC0bPsz.dpuf

Behind the Scenes at a Business Credit Bureau

Behind the Scenes at a Business Credit Bureau

You may have a mental image of how credit reports are created: from an orderly exchange of clean, tidy data flowing seamlessly through some kind of standard method, untouched by human hands and delivered straight to your web browser.  But that would be wrong.  As with any well-executed professional endeavor, it only looks that effortless.

I entered the world of credit data in the late 1990s as part of the team that delivered one of the first business credit reporting platforms on the internet.  Back then, I thought a lot like you.  I assumed that credit data comes from nimble-fingered accountants and therefore would be inherently orderly.  I assumed that the bigger the company sharing trade experiences with us, the more exacting and precise the data was likely to be.

At least now I no longer have a 9-track computer tape reader in my office; all of our data is transmitted digitally and we don’t have to wait for FedEx to deliver physical media.  Other than that, not much has changed.

Consider the lowly data entry clerk who manually inputs much of the information into these systems.  They often aren’t paid enough to think or care deeply about what they are doing, and in many cases, they don’t have the time to notice, much less correct, misspellings like COMAPNY.  So let’s imagine three different creditors sharing their trade experiences about a customer who I will give the name of Walt’s Cigar Rentals.  We might get the name and address information in the three following ways:

WALT’S CIGAR RENTAL

123 WALT AVE

WALTVILLE, VT 01342

WALTS CIGAR RENTALS COPMANY

123 WALT

WALTVILLE VT

WALT’S CIGARRNTL CO

123 WALT STRET

MALTVILLE, VERMONT 1342

And this is a simple example.  Don’t get me started about non-US addresses, often entered into US-made software that doesn’t understand, for instance, that many countries have four or six digit postal codes, rather than five like ours – Canada’s is not even all numeric.  And while we’re on the subject of Canada:  Many addresses in Canada could be expressed in either English or French and we still have to recognize them as the same!

Now comes a user searching for this company, and they might enter the name in yet different ways.  If they search for WALT’S with an apostrophe, they won’t find the second version.  If they narrow the search to MALTVILLE, then the misspelled version, WALTVILLE, will be omitted.  When you consider that we can get trade experiences on any one company from hundreds of creditors, and that the search terms entered by thousands of users may vary in their own right, you’ve encountered the fundamental challenge of processing all this data:  How does a computer, which is famously simple-minded and literal about matching, recognize hundreds of variants as the very same company?

Even if the computer recognizes all the different variations, who wants their business credit report cluttered with all of them?  The debtor should appear once, with the name and address correctly rendered, so that users can make quick credit decisions with confidence.  Nothing inspires doubt like obvious mistakes in the representation of company names and addresses.

This is where data hygiene enters the picture.  If that evokes images of data elves scrubbing data with (industrial-strength) soap and water, that is not, metaphorically speaking, far from the truth!  But to digest data in real time and avoid falling behind, this process must be automated.  We must patiently teach computers to correct random errors introduced by humans.  It is this requirement that keeps people like me awake nights.

Thankfully, we’ve had nearly two decades to fine-tune the process, and it’s getting better all the time.  Using a combination of postal standardization software, tools for us to capture intelligence over time about common misspellings and odd abbreviations, and an extensive layer of proprietary software, the three sample addresses above would be recognized and reported by our system in a standardized way:

WALTS CIGAR RENTALS CO

123 WALT ST

WALTVILLE VT 01342

Of course there’s far more to it.  I haven’t discussed other interesting issues such as how accounts receivable can be aged differently by different companies, how the methods of expressing data points like high credit and days-to-pay can vary or just be plain incorrect, and the fact that the export and transmission of trade experience data is not always 100-percent automated by the creditor, resulting in constant small changes in the data layout and even the file format.  Our system handles roughly 80 percent of the data sent to us automatically in spite of this, and human intervention for the rest is often a matter of minutes.  It takes a long time and a lot of experience to achieve such levels of automation with such unruly data.

Nor have I mentioned the need to remove non-objective comments stashed into data fields not meant for such things.  It would not do for our business credit reports to include some clerk’s notation appended to a company name that THIS CUSTOMER IS A PAIN!  In addition, we deal with cryptic notations or acronyms that have meaning only within the collection department of a company – or within an industry.  So we have to recognize when MACYS EAST COAST ACCOUNTS should really just be MACYS INC, or that MACYS INC EDI just means that the bills are paid by “electronic data interchange” and so the EDI can be removed as superfluous for credit reporting purposes.

We have a large stable of internal “sanity checks,” too.  They help to ensure that, for instance, a creditor didn’t accidentally send us the same file they sent last month, or the same month last year.  Or that the total portfolio balance doesn’t vary by a suspicious amount month-to-month, indicating a possible malfunction in the creditor’s data export.  We have staff to contact creditors and verify suspicious changes or request corrected replacement files.

Finally, we have mechanisms to guard against credit fraud.  It’s rare, but not unheard of, for someone to set up one or more fake companies that share contrived trade experiences just to inflate the credit scores of certain slow-paying or non-paying debtors.  Surprisingly, there are telltale signs in such data that we look for regularly.

Reading a Business Credit Report

Each business credit bureau has their own way to represent the credit information they collect. While the layout might vary, or the names for different sections change, the principles outlined below are the same.

If you would like a free sample business credit report to follow along with, click here.

Step 1) Read the Company Profile

First thing first! Check the company profile to get an overview of the company you are looking at.

 

The company profile will contain information like:

• Company name


• Address


• Telephone and fax numbers


• Information on company principals

Don't spend too much time here. The most important thing is to be sure that the report you pulled is on the correct company. Match the company name and address to what you have on file. This is especially important if the company you are considering extending credit to has a generic name (like Smith Enterprises).

Step 2) Translate the Business Credit Scores & Credit Alerts

Towards the top of each business credit report, you will find an overview of how the company pays their bills.

Each business credit bureau has their own way to represent this overview but it will usually contain three important criteria: a credit rating, a business credit score, and a list of credit alerts.

Credit Rating

We're back to dreaded 74K-38. So what the heck does it mean?

74K = $74,000 - This is Company XYZ's average monthly balance over the past 6 months.

38 = 38 days to pay - Over the past 6 months, they pay on average, in 38 days.

To put this all together, a rating of 74K-38 would mean over the past 6 months, Company XYZ has had an average monthly outstanding balance of $74,000 and pays their bills in roughly 38 days.

Business Credit Score

Business credit scores give you an idea of a company's risk potential. They range from 0-100; the higher the better.

A sophisticated mathematical model calculates the scores based off multiple factors in each of these four areas:

1. Payment history


2. Current level of indebtedness


3. Current level of delinquencies


4. Length of credit history

Our business credit scores are grouped into three categories of risk:

Low Risk           > 87

Medium Risk     70 - 87

High Risk          < 70

Credit Alerts

A credit alert is an adverse piece of information. We show our credit alerts in bright red, hoping to literally alert credit professionals of their existence. Examples of credit alerts are:

• Collection accounts


• Judgment filed


• Fraud account


• Credit hold


• Returned check


• Phone disconnected

Alerts are never something you want to see when considering extending credit to a company. If you encounter a company with a credit alert on their report, proceed with caution.

Credit alerts, ratings and scores are useful in making a credit decision, but the majority of your time should be dedicated to the next two steps.

Step 3) Understand Month by Month Payment History

How is a company currently paying their bills? Are they slowing down on payments?

This is the start of the meat of a business credit report. Here you will see actual payment history that has been reported by businesses who are working with Company XYZ. This data is usually shown in the standard accounts receivable aging buckets (as seen below).

 

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Using January of 2014 as an example, 28 companies reported their credit experience with Company XYZ. Those 28 companies were paid by Company XYZ in roughly 43 days.

There are a few basic things to remember when analyzing this section:

1. The more money that is in the 1-30 day aging bucket the better.


2. The past 12 months of payment history are the most important. I am much more interested in how a company pays their bills now vs how they were paying 2-3 years ago.


3. You should be able to see how many companies have reported to your business credit bureau each month. If you do not have this transparency, there is no way to know whether the information you're viewing was reported 3 months ago or 3 years ago.

Step 4) Determine How Your Industry is Paid vs How All Industries are Paid

This is an extremely important section. Here you will see how Company XYZ pays different industries.

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When looking at industry specific payment history, there are two key considerations:

1. How is your industry being paid?  This is the best indication of how you will be paid.


2. How are all other industries being paid? An often overlooked area, but vital in determining credit worthiness.

Use the same logic as you did with numbers 1-3 in Step 3 above - majority of the bills in the 1-30 day aging bucket, information from the past 12 months, transparent data.

Step 5) Check the Number of Credit Inquiries

Similar to your personal credit report, business credit bureaus track the number of times a company's credit report has been pulled.

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A business credit report having multiple inquiries is not always cause for concern. In many instances, it can even be a postive sign. Here are a few examples:

Positive: a business is growing and is seeking new creditors.

Negative: a business has reached their credit limits and is seeking new creditors.

To determine whether inquiries are good or bad, review the company's days to pay. If these have been steadily increasing over the past few months, it could mean that they are having trouble paying their bills.

Step 6) Put it All Together

Consider all that you have learned about Company XYZ's credit worthiness. Does their credit report contain any red flags? How quickly can you expect to be paid? Can you wait that long?

A strong business credit report is one of the best weapons in a credit professional's arsenal. Understanding the information they contain will dramatically increase the likelihood of payment.

Argument for a Risk Monitoring Policy

Argument for a Risk Monitoring Policy

Reviewing the credit report of new customers is a basic business practice that's essential to limit your company's risk of bad debt and write-offs.

If that's the extent of your credit department's risk management, however, your business is still vulnerable to preventable losses, and you may be missing out on revenue-generating opportunities as well.

A risk monitoring policy can help you identify customers who require credit reviews on a frequent basis so you can both protect your bottom line and grow your business.

Why Every Business Needs a Credit Risk Monitoring Policy

Vetting new customers and setting terms is only part the equation when it comes to mitigating risk. Performing regular reviews of customer payment history and reevaluating the credit terms you've extended is equally important.

In the day-to-day operations of a business, changes that can impact creditworthiness take place continuously. A well-developed risk management strategy not only protects and creates value; it also addresses and relieves uncertainty and allows your business to continually improve.

The Aim of a Risk Monitoring Policy

A well-defined risk monitoring policy should outline the steps necessary to assess which customers should be reviewed more often.

To provide you with the framework to spot changes in customer behavior that warrant a change in review status, your risk monitoring policy should be integrated into all of your credit management processes, and it must be tailored to your company's unique requirements.

A systematic, timely, inclusive and transparent risk monitoring policy will accurately evaluate customer stability, as well as a customer's ability to pay for the goods or services you provide.

A well-designed policy that's both iterative and dynamic takes human and cultural factors into account. In order to allow you to identify those customers who need more frequent reviews, it must be based on fresh, reliable credit data and intelligence.

How to Develop a Risk Monitoring Policy

To be effective, risk monitoring needs to zero in on both negative and positive changes. If positive changes in a customer's financial situation aren't noticed, your business can miss out on opportunities to improve your relationship or increase sales.

If negative changes in a customer's behavior or circumstances are overlooked, your risk of not receiving payment for the goods or services you're supplying increases.

In order to determine when to perform customer credit reviews and how in depth they need to be, divide your A/R accounts into groups based on history and perceived risk. For example, your A/R portfolio could be divided up into groups of:

• Larger accounts that potentially represent the greatest financial loss and need to be monitored closely year-round


• Long-term customers who've always paid on time and have a spotless business credit report who only need an annual review


• New customers who are reviewed quarterly until they've shown they're reliable payers


• Customers with any history of late payments who are evaluated monthly or even weekly


• Customers who you've put on prepayments or C.O.D. terms who are reviewed monthly or quarterly to determine if they qualify for terms

The assessment policy you develop should allow ample flexibility so groups can evolve to meet the changing needs of your business.

Reliable Credit Information Plays a Crucial Role in Risk Monitoring

Up-to-date credit intelligence and analysis tools are critical for successfully implementing a risk monitoring strategy.

When you're looking for a resource to supply credit information, consider the following factors:

• Integrity of the data - Is it validated?


• Breadth and depth of the data - Does it come from a variety of sources?


• Technology - Does the provider use the latest technology and tools?

At safe consulting services, our goal is to provide accurate, real-time business credit data and cutting-edge tools that make it easy to assess and monitor risk. Contact us today to learn more about our innovative products.

WAYS TO AUDIT YOUR CREDIT REPORTS

WAYS TO AUDIT YOUR CREDIT REPORTS

Be careful. Not all websites that provide credit reports and scores are forthright in their offerings. While it’s factual that upon sign up you’ll get your 3 bureau credit reports for free, fine print for quite a lot of these products will consist of automatic enrollment into their trial credit monitoring programs. Most of these free trials run for either 1 week or a month, then your visa or master card will be charged for continuation of the service.



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