Credit Inquiries

    Make sure you know who is looking at your credit report and why.  Many inquiries look bad on your credit report, but more than that you likely want to know who can see your personal financial information, now that you know that your personal information is stored in a credit report. If you sign a document with a lender or apply for credit online, you can be sure that someone is looking at your credit report.  However, you may want to look over other documents in order to see who is taking a peek. Insurance agents will often look at your credit report, for example. Some landlords and potential employers will, too. You need to be careful about online sources, too. In general, when you provide someone with your social insurance number, you may be giving permission to look at your credit report. You shouldn’t bar people from looking, but knowing who is looking is good financial practice.  

    Know the difference between soft and hard inquiries.  When you pull your credit report to look at it, it is counted as a “soft inquiry.” Only “hard inquiries” from lenders will affect your credit score dramatically. Although checking your credit score too often is an expensive habit, you should not avoid checking your credit report because you fear it will make your credit rating worse.

Understanding Your Credit Score

    If you are going to improve your credit score, then logic has it that you must understand what your credit score is and how it works. Without this information, you won’t be able to very effectively improve your score because you won’t understand how the things you do in daily life affect your score.  If you don’t understand how your credit score works, you will also be at the mercy of any company that tries to tell you how you can improve your score - on their terms and at their price.  In general, your credit score is a number that lets lenders know how much of a credit risk you are. The credit score is a number, usually between 300 and 850, that lets lenders know how well you are paying off your debts and how much of a credit risk you are.  In general, the higher your credit score, the better credit risk you make and the more likely you are to be given credit at great rates. Scores in the low 600s and below will often give you trouble in finding credit, while scores of 720 and above will generally give you the best interest rates out there. However, credit scores are a lot like GPAs or SAT scores from college days - while they give others a quick snapshot of how you are doing, they are interpreted by people in different ways. Some lenders put more emphasis on credit scores than others.  Some lenders will work with you if you have credit scores in the 600s, while others offer their best rates only to those creditors with very high scores indeed. Some lenders will look at your entire credit report while others will accept or reject your loan application based solely on your credit score.  

    The credit score is based on your credit report, which contains a history of your past debts and repayments. Credit bureaus use computers and mathematical calculations to arrive at a credit score from the information contained in your credit report.  Each credit bureau uses different methods to do this (which is why you will have different scores with different companies) but most credit bureaus use the FICO system. FICO is an acronym for the credit score calculating software offered by Fair Isaac Corporation company. This is by far the most used software since the Fair Isaac Corporation developed the credit score model used by many in the financial industry and is still considered one of the leaders in the field.  In fact, credit scores are sometimes called FICO scores or FICO ratings, although it is important to understand that your score may be tabulated using different software.  One other thing you may want to understand about the software and mathematics that goes into your credit score is the fact that the math used by the software is based on research and comparative mathematics. This is an important and simple concept that can help you understand how to boost your credit score. In simple terms, what this means is that your credit score is in a way calculated on the same principles as your insurance premiums. 

     Your insurance company likely asks you questions about your health, your lifestyle choices (such as whether you are a smoker) because these bits of information can tell the insurance company how much of a risk you are and how likely you are to make large claims later on. This is based on research.  Studies have shown, for example, that smokers tend to be more prone to serious illnesses and so require more medical attention. If you are a smoker, you may face higher insurance premiums because of this.  Similarly, credit bureaus and lenders often look at general patterns. Since people with too many debts tend not to have great rates of repayment, your credit score may suffer if you have too many debts, for example. Understanding this can help you in two ways:  

1) It will let you see that your credit score is not a personal reflection of how “good” or “bad” you are with money. Rather, it is a reflection of how well lenders and companies think you will repay your bills - based on information gathered from studying other people.  

2) It will let you see that if you want to improve your credit score, you need to work on becoming the sort of debtor that studies have shown tends to repay their bills. You do not have to work hard to reinvent yourself financially and you do not have to start making much more money. You just need to be a reliable lender. This realization alone should help make credit repair far less stressful!
     
     Credit reports are put together by credit bureaus, which use information from client companies. It works like this: credit bureaus have clients - such as credit card companies and utility companies, to name just two - who provide them with information.  Once a file is begun on you (i.e. once you open a bank account or have bills to pay) then information about you is stored on the record. If you are late paying a bill, the clients call the credit bureaus and note this. Any unpaid bills, overdue bills or other problems with credit count as “dings” on your credit report and affect your score.  Information such as what type of debt you have, how much debt you have, how regularly you pay your bills on time, and your credit accounts are all information that is used to calculate your credit score.  Your age, sex, and income do not count towards your credit score. The actual formula used by credit bureaus to calculate credit scores is a well-kept secret, but it is known that recent account activity, debts, length of credit, unpaid accounts, and types of credit are among the things that

Investing

    Being an entity that provides a varied platform of services from stock broking to trading in other securities the stock market can be and usually is very volatile in its dealings.  There are several ways individual can scout and capitalize on opportunities available through the stock market. The following are some tips on how the shock market can be an opportunity providing platform:  Keep the focus on quick and small gains rather than trying to get rich overnight. Most people make the mistake of not knowing when to buy and when to sell. Though buying is generally based on the sentiments of the time and some knowledge, selling is mostly based on individual perception.  When the stock price seems to be climbing there is always the temptation to see it climb higher before deciding to sell. This is a very destructive line of thought as the stock price can fall just as easily as it went up, causing incredible negative consequences.  Therefore a limit should be set very early on in the buying stage so that when this pre set limit is met the stock can be sold without hesitation thus minimizing any possible losses. 

    Invest conservatively and ensure one is well informed of the company’s background before making the decision to invest. Avoid chasing a seemingly upward trend without the relevant backing knowledge of the company.  In every case the bigger investors will start cashing in first and as their investments are instrumental in the climbing stock price, it will also be instrumental in its decline.

    Prepare for financial emergencies
Few of us think about what would happen if we lost our jobs or suddenly became too ill to work. The thought is simply too terrible to contemplate in many cases, especially if we are living paycheck to paycheck with a job as it is.


    The fact is, though, that financial emergencies happen to almost everyone at some point and they can have devastating impact in your credit. In fact, most people who declare bankruptcy do so because of a huge financial disaster such as sudden unemployment, huge medical bills, a lawsuit, or divorce. Despite this, few people plan for these problems, even though they can happen to anyone.  If you want to keep your credit score in good trim, you should know exactly what you would do in case of an emergency. Developing an actual written plan can help you by letting you take action to save your credit as soon as an emergency occurs. Some items that could be on your financial emergency plan could include:

1) A list of all assets you could liquidate if you had to.

2) A list of all extras or luxuries you could cut out of your life right away if there was a problem (i.e. newspaper subscriptions, cable television, water delivery service, Friday nights at the movies).

3) A list of any resources you have that could help you in case of an emergency. Maybe you know a lawyer who deals in financial facets of the law. Maybe you have insurance that could help you. Maybe your employer offers a severance package. Whatever it is, write it down. Keeping a list of these resources will make them easier to access in case of an emergency.

4) Other ways you could get money if you had to - jobs you could take, things you could rent out to others.

Dealing With a Credit Score after a Big Problem

    If you have bad credit, establish better credit by taking out credit and repaying it quickly
If you have terrible credit following a bankruptcy or other major financial upheaval, you may need to get back into a good credit rating by taking out a loan you can handle. Make an appointment to see your bank or bad credit lender a few months or years after the problem in question and arrange for a small loan.
You should have enough savings to pay for the loan before you do this. Pay back the loan quickly. It will not hugely boost your credit score but it will show lenders that you are having an easier time paying your bills. Taking out a small loan you can repay is part of the slow process of reestablishing good credit following a big financial problem.

    Try secured credit if you cannot qualify for other types of credit Secured credit is credit or a loan which uses something as collateral. In some cases, this could be an asset like a house. In some cases, this collateral could be money frozen in an account by the bank for just such a purchase.

If you need credit following a big problem with your credit score, secured credit may be something you can qualify for. You can use this secured credit to reestablish a good credit rating so that you will qualify for other loans in the future. You may have to pay slightly higher interest if your credit score is quite low, but in the long term repaying this type of loan can improve your credit score after you have repaid your debts and resolved the problem.

In fact, major problems such as a bankruptcy will remain on your credit report for seven or ten years, affecting your credit score. Even if your credit problems stem from simply not paying bills on time, it will take some time for the mark to fade from your credit report and for your credit score to reflect your better repayment.

Paying off your debts and resolving problems will help your credit score (since overdue accounts will be marked as “paid” on your credit report), but only time will remove the mark of the problems from your record entirely.

Consumer Credit use Falls

According to recent Gallup suerveys the average number of credit cards owned by consumers is 2.6 opposed to 2.9 from surveys six years ago and has not been this low since 2001.  Some other interesting statistics are below.

29% of consumers do not have a credit card at all

48% claim that they pay their balances in full monthly