What you should do if you get a collection account on your credit.

Here’s the first thing you should know about debt collection: The people calling you are not the people you borrowed from. In actuality you are talking to someone who purchased that debt for pennies on the dollar and is trying to make a profit on it.

If you have a collections account on your credit report it is important to know how this will affect your credit score and what you can do about it. 

Let’s start with the basics… What does it mean for your credit?

If you have a collection account, your credit score may drop by a substantial amount. It typically is correlated with how high your credit score is.  Therefore, the higher your score the more points you can lose.

As you know, having your credit score drop from having an account in collections can impact your financial future.  You could be denied for credit cards and loans.

Realities of overdue debts…

The truth is a creditor could sue you and win a judgment, allowing them to garnish your wages or hire a sheriff to come get your property. However, the chances of this are slim.

Many consumers feel overwhelmed by their debts and file for bankruptcy because they think it is their only option. DON’T DO THIS!  This should only be considered once all other options are exhausted.

What should you do?

Call or email me, asap! Through a careful analysis of your situation, I can determine the necessary steps to settle your debt and move toward rebuilding your credit.

-Erik Kaplan

Coming Soon!

How a business credit card could impact your personal credit score

If used the right way, a business credit card can help improve both your business and your personal financial health – which ultimately can lead to more attractive opportunities to grow your business. 

Does a business credit card impact my personal credit score?  

As with personal credit cards, if you’re paying your bills on time you can expect to see nothing on your credit reports. However, if you or your employer are not paying credit cards (in your name) on time or missing payments expect to see negative marks posted on your credit report and watch as your personal credit score drops.  This is also true for your employees. Make sure you trust your employer/employees before signing for that credit card. 

How does personal credit affect business credit? 

Let me start off by saying there are significant differences between a business line of credit and getting a business loan. When talking about business loans, personal credit scores work the same way as with any other type of lending. Typically, anything less than a 660 and you will have a hard time finding an “A” bank lender with favorable terms.  A score of 720 or higher gives you a much better chance at approval with more favorable rates and terms. Using personal credit for a business loan or credit line is common if you run a small business or a start up. You can boost your personal credit score and your business credit score by making payments on time and keeping a low balance in relation to your available credit. Experian recommends keeping your balance at 20% to 30% of your credit limit. 

Do you need help with building up your business credit? 

One of the first things new businesses should do is start a business credit in the company’s name.  Like your personal credit, your business has its own business credit scores and reports.

We can help get your Dun and Bradstreet (D&B) business profile and a paydex score of 80! We also can help get you business credit cards and get negative items removed from your business credit. 
Give us a call or email me today!

THD Credit Consulting  ・ (800) 822-7120 ・kaperik@gmail.com

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What You Should Know About Paying Off Old Debt

I’m always telling clients that even if they’ve made a total mess of their finances, with the right strategy in place and time passed- those financial mistakes can get rectified.

There are several situations however, where you need to clean up your credit report *NOW* and paying off old debt can work to your advantage. For instance, if you’re planning to buy a car, apply for a mortgage loan or refinance your home, your lender is going to take a close look at your credit history. Knocking out those old debts once and for all may not do your score any good but it will show the bank that you’re serious about taking care of your financial obligations.

If old debt is haunting your credit report, here are a few things you should know before paying it off.

Paying off a Delinquent Account

If a credit account is simply overdue and shows as outstanding debt, paying it off will improve your credit score, as will making any payments against it. You will not be able to eradicate the late payments that are showing, but returning the debt to current status and reducing the overall amount owed will both boost up the number.

Paying off a Charge-off

These payments can actually reduce your credit score rather than improve it. If you have an old debt on your credit report that has been charged off by the lender – meaning that they do not expect further payments – setting up a new payment plan can re-activate the debt and make it appear to be more current than it actually is.   Remember, newer debt weighs more heavily on your credit report than older debt.

Settlements

If you choose to settle with a lender for less than the total owed, the arrangement will show on your credit report and depending on how it is reported, may drop your score.  The best possible outcome is to negotiate with lenders to mark the debt as paid, which has a positive affect on your score.

A good credit repair strategy should involve analyzing each debt and predicting how changes to it will affect your overall score.  If you need help with credit repair, debt settlement or payment strategies, give me a call and let’s discuss what your options are.

Until next month,

Erik Kaplan

THD Credit Consulting ・(800) 822-7120 ・kaperik@gmail.com

Do’s and Don’ts of Credit

Having a high credit score and good credit history can set you up for many perks. It shows potential lenders that you’re likely to repay loans in full and on time, which can help you lock in better rates on car loans, mortgages and other financial products. 

Here are a few do’s and don’ts for managing your credit. 

DON’T MISS PAYMENTS:

This is the biggest no-brainer, but it’s importance cannot possibly be stressed enough. Your payment history makes up 35 percent of your credit score.  Therefore, a single missed payment on a small credit card might not seem like to big of a deal, but that missed payment can sit on your credit report for at least seven years. Make more than one or two missed payments, and it will really start hurting your credit score. 

DON’T OPEN OR CLOSE A LOT OF TRADELINES:

Tradelines is a fancy word for credit accounts. If you open multiple accounts at once, it will ding your credit. If you close a lot of accounts at once, it too will ding your credit. Your credit score is calculated by your credit history and how long you’ve kept some of your credit open.

DON’T LOOK AT YOUR CREDIT OFTEN: 

Don’t let anyone look at your credit. By allowing creditors to “pull” your credit, you are potentially reducing your credit score. The assumption is that by letting creditors pull your credit, you are applying for more credit. If you’re curious about your credit and want to know it for yourself, you are allowed one free report each year.

DON’T CLOSE YOUR OLDEST CREDIT CARDS:

Part of the credit rating formula is longevity. Fifteen percent of your FICO score is the average age of all your trade line.

DO SET UP ALERTS:

Credit card websites allow you to set up alerts and notifications.  If you have difficulty keeping track of expenditures, you can set up email or text notifications to warn you when you’ve reached a certain limit and before payment is due. 

DO CALL LENDERS:

Ask lenders for your interest rates to be decreased. Having lower interest rates will help you to pay off your debt sooner, decreasing your credit utilization. 

DO CREATE A PLAN:

Work out a payment plan to pay down your debts and stick to it. Carrying a high balance on a credit card costs you lots of money in interest, and drags down your score. Always pay off debts with the highest interest rates first.

Every monetary decision you make can influence your credit rating. Remember, there are many things you can do in the day-to-day management of your finances that can improve your credit score. 

If you have questions about these Do’s and Don’ts give me a call or email me today.  

Until next month,

Erik Kaplan
THD Credit Consulting
(800) 822-7120

4 Things That Hurt Your Credit Score

4 Things That Hurt Your Credit Score

Your credit score is one of the most important factors of your financial life. While knowing your credit score is an important part of managing and maintaining your financial health, knowing just isn’t enough. It’s really important to know what are good financial habits and understand the actions that could hurt your score.

Here are 4 of them.

Maxing out your credit cards – While paying your bills on time positively influences your credit score – it’s not the only thing that matters. Even if you are never late on payments, carrying high balances on your credit cards on a regular basis will negatively affect your credit score.

Best practice is to keep your credit utilization ratios (the ratio of your credit card debt to credit limits) down by keeping your usage to about 10 to 20%.

Late or missing payments – Making a late payment on your credit card, mortgage or loans or medical bills can lead to negative consequences that could sink your credit score and damage your credit health. Whether you are just three days late or 30 days late, not paying your bills on time could affect you for months and potentially years to come.

The bottom line? One slip up and your credit score may take a dive, even if you have otherwise stellar credit.

Multiple Credit Report Inquiries –  When you are shopping for a new car and the dealership runs your credit multiple times, your credit score could take a hit. When you are shopping for loans, a lender will do a hard inquiry on your credit, meaning they pull your credit report to check your history and credit score to determine approval for your loan application. Hard inquiries show up on your credit report for two years. A lender may perceive a consumer who has had too many credit inquiries as desperate for credit or as a potential credit risk.

Be mindful of how many different lenders you apply for an auto loan with, because it can add up to a drop on your credit score.

Too many new opened accounts – Opening several new credit accounts in a short period of time represents a risk – especially for people who don’t have a long credit history.  Why?  It is believe that people who apply for credit multiple times within a short time period tend to over-extend themselves and are more likely to default at some point. Typically credit inquiries of this type have a small impact on one’s scores and while it isn’t the biggest factor, the appearance of “new credit” does influence your score.

When looking for a new credit card, spend time determining what the best credit card is by reading about the features of each card and then only apply for the one that has the features you want from a new card.

If you have any questions about your credit score, financial health or credit reports – give me a call or email me.

– Erik

THD Credit Consulting • (800) 822-7120

 

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