All Articles Tagged "credit score"
Cosigning on a loan for a family member or friend can take just a few moments to do, but can take years to be undone. Under federal law you have to be given a notice that explains the details of cosigning a loan at the time of the agreement, but most people probably never read it. It states:
“You are being asked to guarantee this debt. Think carefully before you do. If the borrower does not pay the debt, you will have to. Be sure you can afford to pay if you have to, and that you want to accept this responsibility.
You may have to pay up to the full amount of the debt if the borrower does not pay. You may also have to pay late fees or collection costs, which increase this amount.
The creditor can collect this debt from you without first trying to collect from the borrower.* The creditor can use the same collection methods against you that can be used against the borrower, such as suing you, garnishing your wages, etc. If this debt is ever in default, that fact may become a part of your credit record.”
Why Cosigning is a NO NO
This notice pretty much explains how bad things can get, and I believe deep down most people are reluctant to cosign. However many grudgingly choose to do so, feeling guilty after their family member begs and explains that they must have that shiny new lemon parked at the dealership.
The only reason a person would need a cosigner is because they have bad or no credit. So if the person is not creditworthy or has no credit history, why would you want to put your credit on the line to back them?
The Federal Trade Commission states that 75 percent of cosigners are put on the hook to repay loans that have gone into default. In most states lenders can start attempting to collect from the cosigner immediately after the primary borrower misses their first payment. And any negative impacts from the loan will directly affect cosigner’s credit.
Until the loan you have cosigned is paid off, it will linger on your credit report. Even if the person is paying on time, cosigning a loan can prevent you from attaining your own financial goals. For example, if you already have one mortgage in your name, lenders may think that a second mortgage will make your debt to income too high and deny you for your loan.
The Only Time to Cosign
With many African Americans getting hit the hardest by the subprime mortgage crisis, having a family member in need of your signature may occur more frequently than in the past. So if your kid needs you to cosign for a student loan or your mother wants you to cosign on a car, you may feel obligated to do so. But you should only act if you can afford the payments. This way if the primary borrower defaults it won’t ruin your credit.
Also, make sure you keep tabs on the loan by getting copies of all the important documents and having statements sent to your address as well. In addition, before you sign, be sure to check with your state to learn about your rights as a cosigner.
And if you can’t afford to cosign, just say NO. The only way you can really help your family and friends is by being in a position of power. If you are in the same boat they are in, strained and stressed by bills and bad credit, then you won’t be able to lead by example. Keep away now and extend the resources you do have if they really need you in the future.
From the New York Times:
“The credit score, once a little-known metric derived from a complex formula that incorporates outstanding debt and payment histories, has become an increasingly important number used to bestow credit, determine housing and even distinguish between job candidates.
It’s so widely used that it has also become a bigger factor in dating decisions, sometimes eclipsing more traditional priorities like a good job, shared interests and physical chemistry. That’s according to interviews with more than 50 daters across the country, all under the age of 40.”
According to the article, a number of enterprising websites have sprouted out, catering to this growing interest in credit background checking of potential partners. A couple such sites, Creditscoredating.com and Datemycreditscore.com, allow its members to exchange and view credit scores of potential dates. The article also included an interesting anecdotal story about a flight attendant named Jessica Lashawn, whose dream guy fizzled before her eyes after Mr. Rico Sauve broached the credit question on their first date.
“It was as if the music stopped,” Ms. LaShawn, 31, said, recalling how the date this year went so wrong so quickly after she tried to answer his question honestly. “It was really awkward because he kept telling me that I was the perfect girl for him, but that a low credit score was his deal-breaker.”
I don’t know how the rest of you feel but that just seems like an abitrary reason to dismiss your “perfect girl” on the first date. I mean, at the very least, advise her on some credit counseling and see how that pans out before writing her off. But everyone has their own standards. And quite honestly adding, “what’s your credit score” to the list of questions we already use to gauge the worthiness of a potential partner is not a bad idea.
The credit rating of a potential partner could have determining impacts on what kind of dates you have, who pays and even transportation to and from your date. And if the relationship gets more serious, his or her bad credit could impact more important financial decisions such as the ability to buy a house. Likewise, credit can also be a indictator of how sound a decision maker a person is outside of the financial realm. For instance, a guy with pretty decent credit might be a sign that he is responsible and honest person in love. However, a guy with a couple of liens and delinquent marks on his credit report, could suggest that he might not be a little flippant with not only his wallet but with your heart too. It might sound like pseudo-science but more and more employers are turning to the credit scores of job candidates to help determine good hirees.
Some folks may have fallen on hard times due to lost of job or even a personal or family sickness. Some folks may have not been so fiscally wise in their younger years but might be working to clean up their credit. And some folks just have more student loan debt than actual income. While I don’t see anything wrong with asking a potential partner about their overall financial solvency, I think it might be a dangerously short-sighted to rely solely on someone’s score, especially based on a metric you had no hand in creating.
But what do you guys think? Should our FICO score be the new “What’s your digits?”
Too often at the beginning of a New Year, we don’t address one of the biggest problem areas in our lives: our finances. Instead of striving to be financially fit, our physical fitness is more important. While health and wellness should be a main priority in our lives, our finances should also take some type of priority as well. And as 2013 approaches, striving to be more wealthy should be another resolution to put on our list.
If you are looking to make a few changes in your financial part of life this New Years, here are a few suggestions of resolutions for your finances. Get in better financial shape in 2013!
This year has been a great year to learn more about your own finances, how to start your own business, manage your finances and be savvy while doing so, according to Madame Noire Business. From small business tips on how to create your own mobile app as a small business to tips on preparing for the next tax season, MN Biz has informed, introduced and changed the way we see the business and financial part of our lives. Yesterday, we took a look at the big issues we covered over the past six months. Today, we look back on some of the best business advice from Madame Noire in 2012.
If you’ve ever tried to make any kind of major purchase — a house or car, for instance — then you know that your credit score will quickly come into play. Some companies are even using a credit score as an indication of a candidate’s fitness for a job.
“An employer might rightly consider a low credit score to be a sign of poor decision-making, irresponsibility, or inability to meet deadlines. Plus, it [likely] won’t make you a sterling candidate for any job that requires handling money,” Forbes reports.
It’s a sentiment seconded by Rod Griffin , the director of public education at credit score reporting company Experian.
“I talk about credit information , so I should have good credit,” Griffin says, as a for instance. He’s been with Experian for 15 years.
With so many things dependent upon a good credit score and so many people trying to either maintain or rebuild good credit, it’s a good time to go over some of the basics of that all-important document — the credit report.
In terms of its use as a tool for assessing a job candidate, Griffin estimates that that’s done in “only five to 15 percent of hiring decisions,” he told us. Besides its use to determine a person’s competency for a job, it’s also a way for employers to confirm your identity and other information provided during the vetting process. No matter how it’s used, “in order for a potential employer to get a copy of a credit report, you have to give written permission,” Griffin reminds us.
Overall, he adds, your credit report isn’t pulled as often as you would think. Credit scores can be impacted by the number of times that a report is requested. A “hard” inquiry, for example, would be an application for a credit card. “You’ve initiated a transaction. This will be shown to other lenders. It can represent new debt that isn’t shown as an account,” says Griffin. In other words, be careful with the number of credit cards you apply for.
However, if a number of requests are made because you’re seeking a car loan or mortgage, the inquiries are lumped together into a single inquiry, in which financial institutions and others looking at the report will understand that the consumer is looking for the best deal. “Inquiries will never be the reason for someone being denied credit,” Griffin says.
And, of course, your credit report speaks to how you manage your debt. “The most important piece of information is whether you’re paying on time,” says Griffin. “If you’re late, that will have a big impact on credit score.”
Don’t forget the basics either. According to Michelle Thornhill, SVP of diverse segments at Wells Fargo bank, just looking over the basic data — name, address, and account numbers — is a big deal. Making sure it’s correct is critical, and if you’ve gotten married or moved, there could be confusion that needs to be cleared up. (She also says you should pay special attention to that aforementioned section on inquiries. “People might be applying under your name,” she warns.) If you find errors, contact the companies that have made them immediately.
In recent months, it seems there’s no shortage of concern over personal credit scores and credit reports. In part, that has to do with raised awareness about the importance of having a good bill of financial health.
“Certainly, the financial crisis we’ve been in in the past few years has led customers to want more access to their information,” Thornhill tells us. “Consumers are more diligent.”
You should take a look at your credit report yearly to make sure it’s accurate. Understanding what’s on your credit report is also important for rebuilding your credit.
“Take an honest look at where you’re spending your money, what can be changed and what can’t,” says Thornhill. “First and foremost, it’s about understanding your household budget.”
Once you get a grip on what’s coming in and going out, you can make arrangements to pay off debt, decide whether you need to make more money either through a new job or something on the side, and determine whether you need help — maybe from an advisor or personal finance app — to keep your money in order.
And, more than anything, don’t get discouraged. When you have blemishes on your report, it’s easy to get down on yourself, or feel you’ve dug a hole you can’t get out of. For instance, a foreclosure or bankruptcy will stay on your record for seven years, generally speaking. Other public record information, like a tax lien, is also going to show up. But you can note special circumstances, Thornhill says, such as the death of a spouse, which may have impacted your financial status. Start saving, even if it’s just a little something for an emergency. To give your credit a little boost, there are times when positive rent payment information can be included. Or get a secure credit card and, as we mentioned, stay current.
“It’s keeping up and abreast and managing your finances so you’re not in that situation again,” says Thornhill.
When it’s time to make a major life change that involves money — buy a house, a car, or start a business — your credit score comes into play. While you can’t dictate the number that gets attached to your financial name, there are things that you can do to ensure that your credit score is as high as possible.
Today, Black Enterprise columnist Jennifer Streaks laid out five ways that you can bring your credit score up and keep it there.
“When paying your credit card bills try to pay as much of the balance as possible,” the article says. “Your credit balances hovering near the limit increases your debt to income ratio and is a red flag to potential creditors that you may be in over your head.”
For more about how you can keep your credit score in check, click to BlackEnterprise.com.
Mama told me I would need my credit score one day, and that day arrived last week. There I was, sitting at a red light in rush hour traffic jamming to my Babyface and Karyn White mix CD (don’t judge me) when all of a sudden all of the lights lit up on my dashboard and a familiar panic flooded through me as I realized my car had just stalled out.
I actually wasn’t all that surprised. Over the past few years my car had experienced its share of fuel distribution problems that left me broke, frustrated and embarrassed. But I must say one thing my 2001 Korean car had never done is leave me stranded; it always got me home. But after excusing three windows that slowly stopped working one by one, a headlight plagued by a bad case of condensation, a clock that always flashed 3:37 and a sensor that I would now be replacing for the sixth time, I knew it was time to put ole’ girl to rest.
I had been contemplating the move for quite a while, but I was hoping my car would hang in there for a little longer while I cleaned my credit up and put some money away. I also knew that as much as I looked forward to car shopping I would also have to work up the courage to do something I had avoided since graduating college: Check my credit score. It’s not that I thought my credit score was bad, but I knew it wasn’t stellar. A part of me prayed that if I took some years to open a few lines of credit and not max any of them out, and pay my bills in full and on time, by the time my credit score would be of some use I would check it only to be pleasantly surprised, but credit doesn’t quite work like that.
The good news is that my credit was good enough to allow me to get a new car fairly easily, but by all means it wasn’t perfect. The biggest lesson I’ve learned in the past two weeks is that credit is like a GPA: Easy to break down but difficult to build back up. Looking over my credit report definitely did not make me a financial expert, but it did teach me a few lessons about being more careful with my credit and making better financial decisions:
1. Ignoring it doesn’t make it go away.
A big part about maintaining good credit is communication. The next time you’re dodging the bill collector’s call or crumpling up a bill you have no intentions of paying, remember that it’s a recession and many debt collectors realize that. While some are cold-hearted, others are willing to work with you because they understand on their end a little bit of something is better than all of nothing. Responsible people don’t necessarily pinch every penny to get the bills paid, but they do make an effort with debt collectors to explain their situation and make arrangements.
Everyone won’t be willing to work with you, but that’s not to say explaining that you’re on hard times isn’t worth it. Collectors who want to be paid eventually may bring to your attention payment plans that you weren’t even aware of. When my paycheck wasn’t matching my student loan debt, by calling and explaining my situation and what I was able to pay, I eventually was placed in a plan that was sensitive to my income. Ignoring your debt doesn’t make it go away, it just sends a message that you’re irresponsible, don’t care and just makes things worse in the long run.
As college students head to class, it’s important that they’re armed with information about how to manage their personal finances. Nothing is more dangerous than a college student with a credit card and absolutely no knowledge about how to use it.
Just last week, Madame Noire offered lessons on how to save money while you’re in school. But taken a step further, personal money management means being prepared for the financial decisions that students have to make over the course of everyday life, some of them bigger than others. The most important financial decision students will make, possibly during the first week of school, is whether to sign up for a credit card.
Kiplinger offers a number of tips that promise to make life easier long after graduation. For instance, “stay on top of student loans.” On the topic of credit cards, the outlet suggests foregoing them all together. The magazine cites studies showing that college students typically carry a balance and often don’t know the interest rate on their card.
Fact is, many students actually do sign up for a card, in many cases because they simply need access to those funds for school expenses. Rather than swearing them off entirely, Fox Business takes a more tempered view, suggesting that students simply learn more about what they’re getting into. The site recommends looking for the best interest rates and monitoring your credit score.
But, let’s be real: There are many adults who don’t keep track of their credit score. The mere suggestion could seem overwhelming to a college student who’s juggling studies and other responsibilities, or one who’s just out on their own for the first time. The best advice is to teach the basics of responsible spending. One of Forbes’ lessons is, “If beer appears on your budget as a category in its own right, you may have bigger problems than personal finance.” Sage advice right there.
USA Today reminds us that keeping balances low and teaching kids about limits is the path to take. Be mindful of where your money is going. Know when it’s time to stop shopping, or save money for that big thing that you’ll have to buy later in the semester. It’s also a life lesson that’s useful beyond graduation.
-Washington Post columnist Michelle Singletary outlines her hopes for the new Consumer Financial Protection Bureau, which will be keeping tabs on the credit bureaus starting September 30. Among her requests: A few specifics about what it actually means when one of the three major agencies — Experian, Equifax and TransUnion — say they’re going to look into a customer inquiry.
- A California man is suing Hyundai because he claims an Elantra he bought didn’t live up to the 40 mpg promise the company makes. Louis Bird’s suit is the second filed in recent months against an automaker over mileage claims. Testing methods have been called into question. Is your car living up to its promise?
-States are in deep financial trouble according to a report from the State Budget Crisis Task Force, which analyzed six large states for their latest independent report. Calling the situation a “willingness to ‘unbuild’ state government in a way that has not been done before,” the report highlights the loss of state revenues, the need to implement new healthcare programs, and other fiscal issues.
-Residential construction projects jumped 6.9 percent in June to 760,000, the highest rate since October 2008. Gains were seen across both single-family houses and apartments. We’re also seeing more new home sales, more spending on construction, and higher interest in buying. However, even with gains the housing market is still soft and consumers are having a hard time qualifying for loans and making down payments.
-Are you on Google+? Or are you one of the (hundreds of) millions sticking with Facebook? Well, you might want to reconsider. Turns out the folks on Google+ are more satisfied according to the new American Customer Satisfaction Index, which tallied the level of user happiness across 230 social media companies. Still, there are far fewer people on Google+.
More on Madame Noire Business!
- Behind The Click: Tara Roberts, Co-Founder of GirlTank
- Entrepreneur Spotlight: Wedding Photographer Amber Knowles on Building Her Studio
- How CARA B Naturally’s Founders Launched A Natural Skin & Hair Care Company For Ethnic Children
- Entrepreneur Spotlight: Meet The Women Behind The Groupon of Black Hair, The Fly Cut
- Do Black Designers Skip Over Black Models to Gain White Customers?
- How She Made It: Alia Jones-Harvey, Producer of A Streetcar Named Desire
When it comes to assessing your financial fitness, your credit score is one of the single most important numbers you have, right up there with your bank account. Your credit score is a number between 300-850 that gives lenders a quick glimpse into how responsible you’ve been in your financial life.
Your credit score is determined by looking at:
- Your payment history;
- How much credit you have (and how much of it you use);
- What kinds of credit you have,
- How long you’ve been using credit and
- How much new credit you’re applying for.
All of this data is aggregated by three credit bureaus (Equifax, Experian and TransUnion) and is used to dictate whether you can get a car loan, mortgage, credit card or apartment to rent.
While few have a perfect 850 credit score (and you don’t really need one anyway), aiming for a credit score above 700 or so is a wise move to make sure you can borrow money (and do so without paying a fortune in interest).
So, if your credit score isn’t there yet or if you want to aim for a higher number for the best possible rates, here are six tips to get you started.