FICO Discloses Effect of Credit Mistakes on Score reports A New Horizon Credit Counseling

Fort Lauderdale, FL (PRWEB) (A New Horizon) December 10, 2009 -- For the first time, and with unusual candor, FICO revealed “damage point” data and how exactly credit mistakes affect credit scores. FICO is the company that established credit scoring assigning a three digit number ranging from 300 to 850. These “damage points”, depending on the reason for the credit mistake, can reduce your score by 10 to 240 points. The higher your credit score – The more damage the SAME credit mistake can affect your FICO score. Everyone knows that negative actions associated with your credit cards and loans will affect your credit score.

Common examples that affect your credit score are:

Making late payments can decrease your score between 60 and 110 points Maxing out your credit card or exhausting your credit limit can decrease your score between 10 and 45 points Negotiating DEBT SETTLEMENTS with creditors can decrease your score between 45 and 125 points Filing for bankruptcy can decrease your score between 130 to 240 points

Understanding what affects your credit score is important and how that impacts not only your ability to get credit in the future, but how much you now may pay monthly because it also causes your interest rate to adjust.

In order to avoid situations that negatively affect your FICO credit score you may consider talking with a reputable Credit Counseling Service company. “The circumstances identified by FICO that can damage your credit score; that is, late payments, maxing out your credit limit and choosing Bankruptcy can all be avoided by receiving credit counseling and employing a structured debt management plan. The debt management plan will ensure that you maintain on-time payments of your obligations while you systematically reduce your debt; all of which translates to an improved FICO score” says Steven Stark, Chief Operating Officer and General Counsel at A New Horizon Credit Counseling Services in Fort Lauderdale, Florida.

By enrolling in a debt management program, certified credit counselors ensure that on time monthly payments are maintained on your behalf to all of your creditors. This, in turn, typically will INCREASE your credit score. “If your FICO score improves by using a debt management plan, the money saved because of the higher score can be used to repay your debt that much quicker” added Stark. At the end of the day, it is all about protecting your credit score and not allowing monthly payment s on credit cards or mortgage loans to increase or even worse, losing your ability to get credit. If you have already fallen into financial hardship, it is never too late to start the healing process through a structured debt management program. If you would like more information on how credit counseling may help your FICO score contact Stuart Lieberman who may be reached at (800) 556-1548 Extension 1126. A New Horizon –http://www.anewhorizon.org

Editor's comments:
This disclosure by FICO again underscores the importance of regularly checking your consumer credit report. Many negative items on your report can be errors and they be costing you hundreds if not thousands of dollars every year in interest payments, fees and missed opportunities.

Apart from enrolling in a debt management program (which, though valuable and necessary, can be a very slow and tedious process) you may also seek to give your credit profile a shot in the the arm by having the experts at Positive-Credit.com add positive credit items to your report.

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Consumers fall behind on loans at record pace

More fallout from a still deteriorating housing market

Reuters
updated 2:16 p.m. ET July 7, 2009

Soaring U.S. unemployment and a shrinking economy drove delinquencies on credit card debt to an all-time high in the first quarter as a record number of cash-strapped consumers fell behind on their bills.

Fallout from a still deteriorating housing market caused the rate of consumer loan payments at least 30 days late to rise to 3.23 percent in the January-to-March period from 3.22 percent in the 2008 fourth quarter, the American Bankers Association said.

Delinquencies were the highest since the ABA began tracking the data in 1974. Late payments on home equity borrowings set records, rising to 3.52 percent from 3.03 percent on loans and to 1.89 percent from 1.46 percent on lines of credit.

The overall delinquency rate actually understates consumer pain because it excludes bank-issued credit cards, where credit deterioration was severe.

Delinquencies on the value of all card debt soared to a record 6.60 percent from 5.52 percent in the fourth quarter. The rate of delinquent accounts rose to 4.75 percent from 4.52 percent, near the record 4.81 percent in the spring of 2005.

"The biggest driver is job losses," ABA Chief Economist James Chessen said in an interview. "When people lose their jobs or work fewer hours, it makes it that much harder to meet their obligations. Unfortunately, we're going to see higher job losses in the next year, and I expect elevated delinquencies."

The ABA represents most large U.S. banks and credit card companies. Tuesday's data are a bad sign for them as they prepare to report second-quarter results starting next week.

While improved capital markets may boost the bottom lines of some, analysts expect lenders such as Bank of America Corp., JPMorgan Chase & Co., Citigroup Inc., Capital One Financial Corp. and American Express Co. to suffer higher credit losses, especially in cards.

Bridge to employment
Borrowers are struggling as the nation's jobless rate sits at a 26-year high of 9.5 percent, with 6.5 million jobs having disappeared since the recession began in December 2007. The Obama administration expects the unemployment rate to hit double digits before declining.

U.S. consumers ended March with $939.6 billion of revolving credit outstanding, a rough approximation of credit card debt, according to Federal Reserve data.

"Consumers tend to rely on credit cards as a bridge to cover their daily needs until they find new jobs," Chessen said. "It's taking longer to find those jobs."

Meanwhile, home prices are down 32.6 percent from their peak in 2006, according to the Standard & Poor's/Case-Shiller Home Price Indices of 20 large metropolitan areas.

The ABA in June said it expects the recession to end this quarter, despite rising unemployment.


Economists point to rising debt as next crisis

The overall ABA delinquency rate includes direct auto, indirect auto, closed-end home equity, home improvement, marine, mobile home, personal, and recreational vehicle loans.

Delinquencies rose to 3.01 percent from 2.03 percent on direct auto loans, to 3.70 percent from 2.96 percent on mobile home loans, to 3.47 percent from 2.88 percent on personal loans, and to 1.52 percent from 1.38 percent on recreational vehicle loans.

They fell to 3.42 percent from 3.53 percent on auto loans made through dealers, to 2.04 percent from 2.35 percent on marine loans, and to 1.46 percent from 1.75 percent on property improvement loans.

New Credit Card Bill of Rights Has Some Side Effects

At 3pm Eastern today President Obama is expected to sign the credit card "bill of rights," which is intended to protect cardholders from excessive fees and last-minute contract changes.

But what does this legislation mean for the average credit customer?

Most experts are saying that this new "bill of rights" will prompt banks to severely restrict available credit to avoid risk - some say as much as 90 billion!

Bloomberg.com quoted Andrew Caplin, an Economics professor at New York University, as saying, "The bill may stop various forms of abuse, but it will also stop some various forms of credit. If the economic recovery is going to rely on consumer spending, it will be a long wait.”

Scott Valentin, an analyst at Arlington, Virginia-based FBR Capital Markets Corp. states “You’ll see a reduction in credit available to subprime customers, and even those in the near-prime range where the card companies have a hard time gauging what the risk is."

Experts say that this new legislation may also encourage banks to raise interest rate levels to the point where new account holders will not be able to afford them; this means that those with less than desirable credit scores may still receive cards, albeit at a heightened disadvantage. The

This new legislation may also open up new markets for predatory lenders - low to moderate income households, first-time borrowers and consumers with poor payment histories may be forced into predatory lending scenarios as traditional credit becomes unavailable.

Solutions:

first-time borrowers and those with poor credit history alike will fall victim to the adverse affects of this legislation. Anything less than a stellar credit score will lead to even higher premiums on credit spending. To be forewarned is to be forearmed - you can take real steps avoid these pitfalls. Quick, effective (and legal) solutions include:

1. Get yourself a stellar credit profile - more info on new credit profiles here.
   
2. A variety of credit enhancement options exist for those who want to beef up their score. These techniques consistently raise FICO scores as much as 200 points in as little as 30 days.

The Cost of Bad Credit

It’s surprising how many people have the following attitude towards credit: “what’s the big deal about having a great credit score? As long as I qualify for loans and mortgages, my score is good enough.”

They couldn’t be more wrong. Your credit score can affect everything from whether you qualify for a mortgage to whether an employer hires you – even the military conducts credit checks on aspirant enlisters.

For most people, a mortgage loan is where they will most reap the benefit of an improved score. This is because mortgage payments typically span over much longer periods of time.

Below is a chart that outlines typical APRs given at various levels credit-worthiness for a 30 year fixed APR mortgage loan for $400,000. The average monthly payment and total amount paid are also listed. Note that the cost difference between excellent credit and poor credit is about $200,000!

The cost of bad credit is also felt on a monthly basis. The graph below displays the monthly difference in mortgage payments:

On a monthly basis, the mortgage holder with a poor credit score actually pays over 500 dollars more than the mortgage holder with excellent credit! Can you afford to have poor credit?

For More information on credit enhancement: www.positive-credit.com

Acquiring and Maintaining Good Credit - Part 2

NEW LEASE ON LIFE

A financial life jacket has just been thrown in the water. As foreshadowed in the first installment of this series (see part 1), there is a proven, reliable, l e g a l quick way to financial freedom. A n e w b e g i n n i n g. This involves the creation of a new credit file employing the use of a Credit Privacy Number (CPN).

The principles governing this technique are not new, nor complicated. They involve the proper use of a particular set of laws put in place to protect you, the consumer, from the abusive tactics of creditors and credit bureaus. These laws help ensure the consumer gets a fair shake, so to speak.

LITTLE-KNOWN TECHNIQUE USED BY THE RICH AND FAMOUS

It is used by celebrities, clandestine agents and VIPs. Some use it because the media can use their SS# to track what they are buying and where they are simply by tracking their credit cards. Some other examples of CPN use include, but are not limited to, persons in the witnesses protection program who would otherwise risk being located if they use their true social security number for credit transactions. These are just some of the reasons the Credit Privacy Number program exists. The reasons are not limited to the previous, so why shouldn’t you have a new credit file created with a CPN?

HOW TO GET ONE

Though the principles and concepts for the creation and use of the CPN are easy to understand. I recommend one employ professionals to assist you in the creation and maintenance of your new CPN and credit file. One such group, HeadStart Financial (www.headstartfinance.com), can guide you through the new file creation process and even point you to the right service providors so that you may continue on to e n h a n c e your credit profile through b y a d d i n g s e a s o n e d c r e d i t to a new or existing credit profile.

In the next installment, we'll discuss strategies for leveraging your newly-created and/or newly-enhanced credit profile, maximize your credit potential and how to keep your files separate.

-TheCreditMaster

Credit Chronicle: Tips Towards Financial Freedom

This series of posts within the Credit Chronicle will be focused on providing you with all the latest info on personal finance!

Financial planning is not an easy or pleasant task; the process can be an expensive and time consuming one. However, we all have goals that require some measure of financial planning. Whether your goals are small or large, the best way to begin gaining control of your finances is to take the first step - get active!

Simplifi is an online personal finance planning tool that can help you take that first step. With Simplifi you can see what you own and what you owe, plus your goals and spending plan, all together in an easy-to-use format. All your information works together so you can see how changes to what you spend or save can impact your ability to reach your goals. Simplifi is a SEC Registered Investment Advisor (RIA), so they know what they're doing. Best of all, Simplifi is FREE!

Check out their website: http://www.simplifi.net/

For more information on credit enhancement: http://positive-credit.com/