Understanding Negative Credit Report Information

July 9th, 2011 by admin No comments »

Negative credit information impacts your credit profile for many years to come. Old accounts can be just as damaging to your credit score today as your new accounts. It is important for you to undertake credit repair steps in order to always have a clean credit record and a high credit score. It is the only way to save money on future financing, auto and homeowner’s insurance, and ensure your financial stability. It is also important to understand how negative credit information affects your credit profile. Here is a basic overview of the length of time negatively reported credit items will remain on your credit report and lower your credit score:

General Negative Credit Information

A general rule of thumb for negative credit information is seven years. Negative credit reporting resulting from late or missed payments, loan defaults, or other failures to meet financial and credit obligations will remain on a consumer credit report up to seven years unless there is special circumstances.

There are exceptions to the seven-year rule including:

· Bankruptcy – Information about a bankruptcy will remain on your credit reports for a time period of up to 10 years.

· Judgments – If a creditor pursues a claim or lawsuit against you in court, the information concerning that judgment can be reported for up to a period of seven years, or for the time period until the statute of limitations run out depending on which time period is longer.

· Tax Liens – Information reported to the credit bureaus concerning tax liens can be reported for a period of up to seven years from the time the tax lien amount was paid.

· Defaulting On Government Loans – Information being reported to the credit bureaus concerning the default on a government-backed or insured loan, including student loans, can be reported for seven years after the government guarantor takes certain actions. » Read more: Understanding Negative Credit Report Information

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Results of Avoiding the Offshore Voluntary Disclosure Program

July 8th, 2011 by admin No comments »

If you have offshore financial activity, the Internal Revenue Service (IRS) asks that you come forward with voluntary disclosure of this information. Taxes are required to be paid on the activity and coming to the IRS voluntarily eases much of the pain on both sides to get the taxes paid and the matter closed. This is done through the Offshore Voluntary Disclosure Program that the IRS offers each year. Yet, many choose to not participate with dire consequences once the IRS begins to examine them. Detailed Examination
Whether you participate in the Offshore Voluntary Disclosure Program or not, you will have your offshore financial activity looked at. The difference is how the IRS approaches it. It can be extremely in depth when you try to avoid letting the IRS know of your financial activity. Stepping forward and filling out all the paperwork for the voluntary disclosure program gives the appearance of not hiding something or avoiding the IRS. You initiate the disclosure and the examination is much easier. The IRS does not start the process with the mindset that you are avoiding taxes. They see you as working with them. This makes working with the IRS much easier as they like voluntary disclosure.

If you avoid the IRS voluntary disclosure and don’t take advantage of this opportunity that they are giving you, then you give the appearance of hiding from the IRS. This causes you to fall under their microscope which has a very high magnification. If they think you are hiding things, they will dig deeper and question transactions more closely. Basically, you will be audited and it will not be an easy one. The IRS will expect you to have all your paperwork together and be prepared to answer all questions. It would have been much better to go through the Offshore Voluntary Disclosure Program and much less painful. Extremely High Penalties
Yes, you will have to pay the IRS even if you go through the voluntary disclosure program. Benjamin Franklin assured us that taxes can’t be avoided just as death can’t be. They have to be paid, but what you have to pay if you don’t come forward on your own will amaze you if not make you sick to your stomach. » Read more: Results of Avoiding the Offshore Voluntary Disclosure Program

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What’s a Good Credit Score?

July 8th, 2011 by admin No comments »

In today’s current economy, its much harder to qualify for a loan. Now you need a very good credit score to qualify for most types of credit. So what’s a good credit score rating?850 is perfect credit and the highest credit score rating possible, though I’ve never personally seen anyone with an 850. A good credit score starts in the 670 range. Scores lower than 670 are not considered good credit.

How to Get a Good Credit Score:

There are 5 criteria that your credit is scored upon, and they’re rather simple to follow.

1. Payment History accounts for 35% of your credit score.

Do you pay your bills on time? If you do nothing else but make timely payments, you will have a good credit score in two years. Obviously, avoiding new collections, court actions, and most easily late pays will help your credit. Past delinquency plays the largest role in hurting your credit score. One recent 30 day late payment will lower your credit score, most likely by 20 points! A couple of late payments, and your score will drop very far, very fast. 60 day lates hurt your score even more and 90 day lates are a real issue. It is important to know that the more recent the delinquency, the more negative the effect on your score. One 30 day late last month will hurt more than even a 90 day late 4-5 years ago (5-10 points). Make sure to stay on top of your debt. Take caution to make timely payments and take care of accounts before they are late or go to collection. Do not overextend yourself in such a way that it hurts your chances of making timely payments. If you have old late pays that cannot be disputed off your credit report, know that time does heal old wounds and your score will increase given that no new delinquencies are reporting.

Pay before the Grace Period on your Credit Cards. Creditors charge additional fees for late payments. This is a very large profit center for a bank. Now, not only is there a due date, but there is also a due time. A bank may charge a $30-$35 fee for being 2 hours late on your payments! (make sure to look at the fine print of all agreements) Also, many banks have implemented under 20 day grace periods, shortened from 30 days, to increase overdue charges. Don’t wait for the due date! Get your payments in fast or sign up for automatic debit payments online.

2. Amount Owed accounts for 30% of your credit score.

The credit scoring model calculates credit balance against your high credit limit. This is calculated in percentages. It’s important to keep your balances as low as possible. If you have a card with a $5,000 credit limit, keeping your balance below $500 puts you in the 10% range of available credit. There are thresholds in debt ratio that will make your credit score jump higher. These thresholds are 70%, 50%, 30% and 10%. If you can’t pay off your credit cards all the way, pay them down BELOW the next possible threshold. Calculate your credit limits in this way. If you have a card with a $5,000 limit, multiply 5000 x.10 (or.30,.50,.70) You will want to pay your balance below these amounts. In this case – less than $500 (or $1500, $2500 or $3500).

Remember, the first thing to do is to check your credit report for credit limits. If your high limit is not reporting, the scoring model will use your balance as your credit limit. This means you’re using 100% of your availability. Call your creditor and make sure they correct it. Distribution of debt is an easy way to make sure you maintain a strong score. Try to have a good spread of debt with lower balance to limit ratio. For example, its better to have $2,000 on five cards than it is to have $10,000 on one card with four others paid off.

If you’re bumping up towards your credit limits, apply for more credit, or ask for an increase in credit from your existing accounts. This criteria is based on total availability, not size of availability. It doesn’t matter if you borrow $500 or $50,000. It’s how you handle it that matters. Distributing debt onto additional cards or credit lines can help you raise your score quickly.

3. Length of Credit History accounts for 15% of your credit score.

Length of credit history means how long you’ve had your credit accounts. If you’ve had an account for 15 years, it is stronger than a having a new account open for only two months. An important tip here is to never close your credit cards. Keep your old accounts open if they are in good standing, even if you don’t use them and there’s a zero balance. Remember though, you do need to use your credit lines at least every 6 months. Accounts unused for 6 months become inactive and are ignored by the credit bureaus, unless there is a delinquent activity attached to that account. Keeping your credit lines open also aids in improving your credit availability, explained in the previous section. If seeking to add credit, ask your card company to increase your credit limit. The best place to increase your credit lines, aside from getting a new card, is to extend your line on an old account with a good long history. Make sure they report the credit amount increase to the bureaus accurately. One common factor of extremely good credit scores are long credit histories. Credit reports that have old accounts with a 15-20 year history are likely to have much higher scores. It is, however, possible to add an old tradelines to your credit report.

4. Amount of New Credit accounts for 10% of your credit score.

New credit means brand new accounts recently open. You do have to start somewhere, but build slowly. If you have just applied for 10 credit cards, banks tend to assume the possibility that maybe you’ve lost your job and are in need of a back up plan. Try to start with one small line of credit and build from there. Make sure that you can handle the payments consistently, are never late, and keep your balances as low as possible, or completely paid off.

5. Type of Credit used accounts for 10% of your credit score.

The credit scoring model likes to see that you have a variety of types of credit in your file. The very best placement of credit is to have a loan on a home, a car payment and a few credit cards. This credit is spread across different types of lenders and type of credit extended to you. There are a few types of credit to stay away from. Payday loans are very bad places to have credit with and your scores take a hit for having these types of high risk loans. Other very bad types of credit are the offers that allow you to have no payments for a year. These are dangerous, because the terms of the agreement may include that if you do not pay the loan off in a year, on day 366 you will owe the entire years worth of payments at typically 20% interest. This is a disaster waiting to happen. People who repeatedly go for these offers, are people who get into credit trouble. You should not have that kind of credit on your credit report. Trisha Dingillo’s experience stems from 5 years in the mortgage industry helping clients with credit problems. She is the author of a very popular website about credit recovery, and has helped thousands of people find out whats a good credit score. Visit her site right now for more information on credit recovery.

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By Trisha Dingillo

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Posted in Credit Tips