One of the most important distinctions to understand in personal finances is the difference between secured debt and unsecured debt. Whether or not your debt is secured can make a big difference in how you proceed in a number of different financial situations.
Secured Debt
Secured debt is debt that uses some asset as security. You pledge an asset in return for getting the loan. If you default on the loan, the lender has the option of repossessing the asset in order to help recoup the money lent to you. A mortgage is a good example of secured debt. If you don’t make your monthly payment, then your home could be foreclosed on. A car loan is another example, since the lender can repossess your car if you stop making payments. Sometimes, you may have to offer collateral — such as a valuable piece of jewelry — to get certain loans.
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Categories: Debt
Every year, you are entitled to a free credit report from each of the free credit bureaus. By going to www.annualcreditreport.com, it is possible for you to get access to a credit report from each of the bureaus. This is important, since what is in your credit report can affect your credit score. If you want to keep a good credit score, part of it is making sure that information in your report is accurate. However, you have to realize that, although you are entitled to a free credit report, you are not entitled to a free credit score.
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Why Were You Turned Down for Credit?
Additionally, whenever an “adverse action” takes place due to your credit, the lender is required to let you know what information was used, and you can get a free credit report from the bureau that provided the information. But, that still doesn’t let you know what credit score was used to deny you credit (or give you a higher interest rate). That is about to change, though, when July 21, 2011 rolls around. That’s when a provision in the financial reform bill passed last year takes place.
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Categories: Credit Report, Credit Score
We’ve been looking a little more closely at the factors that make up a credit score recently. So far, we’ve addressed the following:
Together, these three factors account for 80% of your FICO score. The final 20% of your score consists of two different factors, weighed at 10% each: types of credit you have right now and new credit accounts. Even though these factors aren’t weighed as heavily when figuring your credit score, they are still worth paying attention to.
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Categories: Credit Report, Credit Score
No one likes being denied a loan because of their credit score. In fact, it’s downright embarrassing in some cases. The good news is that, if a creditor denies you, they will send you a letter than tells you the reasons you’ve been denied. If they have denied you because of your credit score, you are then allowed to get a copy of your credit report for free. (Of course, you’re always able to get a free credit report once per year via the Annual Credit Report website, as well.)
Here are some tips and tricks you can follow in order to try to get the bank to loosen up a bit, improve your credit score, and get access to the credit you want and need:
- Check your credit report for errors. If there are any errors, you have a right to see them corrected. Follow the procedures set out by the credit reporting agencies to correct errors, and you’ll see your credit score start to rise. The credit reporting bureau is required by law to investigate your claim within 30 days. If they do fix an error, you can request that the correction be sent to any company that’s asked for your report recently.
- Pay your bills on time. The single most important contributor to your credit score is how you pay your bills. If you pay late or not at all, your score will drop.
- Pay down your debt. One of the most important factors in your credit score is the ratio of debt to available credit. If your credit cards are all maxed out, it will negatively affect your credit score. You need to utilize less than about 30 percent of your overall credit.
- Consider a secured credit card. A secured card can create a positive mark on a credit report that’s otherwise not so good, and have an upward pull on your credit score.
- Pay attention to your credit card statements. Watch for unauthorized charges. If you become the victim of identity theft, you don’t want it to have to negatively impact your credit score.
Categories: Advice
