Give yourself the gift of good creditBetter spending habits create financially happier holidays
Debt impacts our credit score. It's not just some incomprehensible code the banks use to measure if you've been naughty or nice.
Understanding how your habits affect your borrowing power is the first step to financial liberation.
First, some basics.
Your credit score is basically a report card on how you pay your bills. It takes into account things such as your payment history and open and closed credit card and loan accounts.
How important is your credit score?
Extremely important, according to Susan Choy, a mortgage loan officer in the Palmerton branch of First National Bank of Palmerton.
"Certainly whenever someone applies for a loan, you're going to pull a credit report," she said. "It's not just what's on the report. It's the credit score."
If you're making payments on time, each payment you make gradually increases your score. Conversely, late payments are reported to the credit bureaus and lower your score.
"It will be reported delinquent to the credit bureaus if the payment is 30 days past due," according to Craig Selner, director of counseling for Consumer Credit Counseling Services of Northeastern Pennsylvania in Stroudsburg.
"So someone two weeks late on their payment won't be reported," he said.
Other things affect the credit score. Every time someone checks your credit, it pulls your score down, according to Choy. So if you've applied for a loan or even shopped online to check on a line of credit, those places will check your credit. And that will pull down your score.
First National Bank of Palmerton doesn't check your credit unless it has a signed application. Unfortunately, that's not a standard industry practice.
The number of charge cards you have open also affects your score. The more the worse, Choy said.
It helps to think of your credit as a fixed, capped amount of money that lenders will make available to you. Every time you open a credit card account, you're given a credit limit. The limit on that card reduces the amount of credit other lenders would consider extending to you.
So the old adage that you can increase your credit score by opening credit accounts and not using them just isn't true.
But paying bills does. It tells lenders you have the money to repay your loans.
Of course, the credit score and report isn't the only thing a lender looks at.
"A very big factor is your ability to pay," according to Joe Kneller of Wayne Bank in Honesdale. "What is your income, and what is the outlook for that income to be consistent?" he said. "We also look at the collateral you may be willing to pledge, like a certificate of deposit."
Your credit score is a part of a credit report. It's used to determine the interest rates you receive on loans, for purchasing a home — or even getting a loan.
It's also used for employment. "A lot of employers are pulling a credit report for candidates for job openings," Selner said. "They are looking for anything of public record, such as a judgment or bankruptcy."
It's also used to evaluate your ability to rent an apartment — many landlords pull credit reports for that.
But what can you do to dig yourself out of a credit card crisis?
Debt management programs, like that offered by Consumer Credit Counseling Services of Northeastern Pennsylvania, are designed to help you get out of credit card debt. You're given a structured payment program to pay off the debt in five years, but you can't use the credit card for any new purchases. If you do, the credit card companies will see it and drop you from the program.
Bankruptcy is another option. But that will be on your credit report for between seven to 10 years, which subsequently makes it more difficult to obtain other credit.
FTC Notice Beginning December 1, 2009, the U.S. Federal Trade Commission (FTC) began enforcing new rules regarding transparency in advertising relations between product endorsers, advertisers, affiliate marketers, product reviewers, bloggers, celebrities, and other marketers, and the general public.
Opinions on this blog/website are our own or others we have designated as contributing authors. No one else is responsible for the content. We have not received any compensation for writing posts, articles, reviews, or other content, and we have no material connection to the brands or products mentioned, except as noted below. We do not accept free products from manufacturers or advertisers or free books from writers and publishers in exchange for a review or an article. All of the product reviews on this blog are influenced solely by the performance of the product itself. We do not receive any kind of monetary compensation for content or reviews including cash or free products.
Affiliate Notice We maintain an affiliate/publisher/republisher relationship with hundreds of companies. This page may contain “affiliate links” to one or more of these companies.
An affiliate link is a special URL to the affiliate merchant which lets him/her know you reached his/her site/sales page through my recommendation, text link, or banner ad.
If you follow an affiliate link from this website and purchase a product or service, or complete a lead form, we hope to be paid a commission from the affiliate or CPA merchant. Affiliate links may be textual or banner or both. This site may contain in-context textual ads or banner ads, such as from Google, or others over which we have no control over the content. We may or may not have an affiliate/business relationship with the companies advertising on those services. If you click on one of these links, we hope to be paid a small sum for sending you to that merchant’s site. Otherwise, we would have no reason to give Google and others space on this website.You should consult the respective privacy policies of these third-party ad servers for more detailed information on their practices as well as for instructions about how to opt-out of certain practices. We cannot control the activities of other advertisers or web sites. Unless otherwise stated, the website guest or visitor should assume that any link to a third-party vendor is a paid link, and that the author or website owner may receive compensation for that link.
Legal Information Is Not Legal Advice This site provides information about the law designed to help users safely cope with their own legal needs. But legal information is not the same as legal advice -- the application of law to an individual's specific circumstances. Although we go to great lengths to make sure our information is accurate and useful, we recommend you consult a lawyer if you want professional assurance that our information, and your interpretation of it, is appropriate to your particular situation.
Consumer Credit Counseling Information, Debt Management Plan Information, Debt Settlement Plan information, Credit Counseling, Credit Score, Consumer Credit Counseling Service, CCCS, Bill Consolidation, Credit Repair, and Debt Consolidation is not advice, and we recommend you consult a licensed credit counseling agency, debt settlement attorney, and/or licensed debt management plan administrator in your state if you want professional assurance that our information, and your interpretation of it, is appropriate to your particular situation.
