Credit Questions
- What do I need to build and keep a good credit history?
- How can I rebuild good credit after having bad credit?
- I have had some credit problems and need to know how to get help.
- What about credit repair clinics and services?
- What are unethical credit repair tactics?
- What are the 3 C's of credit?
- Can a credit bureau deny my credit application?
- I have made some credit payments late and now they have been charged off. Why are they still reported?
- I am divorced now. How does that impact the joint account we had?
- Isn't all information reported and updated electronically at the credit bureaus?
What do I need to build and keep a good credit history?
Your responsibilities as a consumer:
- Pay bills on time because late payments hurt your credit
- Borrow only what you can repay
- Read and understand the credit agreement
- Notify the creditor if you cannot meet payments
- Store credit cards in a secure place and report lost or stolen cards promptly
- Never give your credit card number over the phone unless you initiate the call
- Shred any document that contains your account information
- Sign credit cards as soon as they arrive
- Remember to get your card and receipt after every transaction
- Notify your creditor if your statement is incorrect or was not received
- Know what is on your credit report
How can I rebuild good credit after having bad credit?
It can be difficult to get credit when you have not used it or have previoulsy had difficulty paying bills on time. Look at your credit report to determine what actions may have affected your credit history negatively. Have you taken the appropriate actions to correct any errors on your credit report?
If you are wondering how you can establish a good credit record or how to re-establish credit after experiencing problems, consider the following options:
- Make a Large Down Payment: Lenders may be more supportive of your loan request if you make a substantial down payment for the item you wish to purchase.
- Be Prepared to Pay A Higher Interest Rate: If you have little credit history, or a poor credit history, you may have to pay a higher interest rate. Lenders will charge the higher rate beause you their risk is greater. As time passes, you may request a review of your account to show that you have paid on time. The lender then may consider lowering the rate or improving the terms.
- Use Collateral to Strengthen Loan Request: Applicants with little credit history or questionable history might want to consider pledging collateral, such as a paid off vehicle, a home, rental property, stock, savings or other security for the loan.
- Apply for a Secured Credit Card: Some lenders have special credit card programs that grant a consumer a credit card in the amount of the cash you have placed in a special account. Take your time and research this type of account. You need to be aware and understand all the terms and conditions of this account.
I have had some credit problems and need to know how to get help.
The ability to get credit has become easier and more accepted in today's society. Be assured that you are not alone if you are experiencing financial difficulty caused by excessive debt. If you are unable to pay your bills on time, consider credit counseling.
Credit counseling agencies can assist consumers with:
- Establishing repayment plans
- Providing hope, help and structure
- Learning money management principles
- Learning how to re-establish credit
- Avoiding bankruptcy, if possible.
SRFSI also has courses that are available for Community Members. Community Housing Resources of Arizona (CHRA) is a non-profit credit agency and is in partnership with SRFSI to provide credit counseling assistance. Please contact a staff member at 480-850-5460 for more information and to schedule an appointment.
What about Credit Repair Clinics and Services?
Credit repair services often have broad appeal to consumers who are having difficulty obtaining auto or home loans. Frequently they are lured into credit repair by promises of being able to "erase" or "fix" bad credit. Consumers should be aware of any company that, for an up-front fee, promises to improve your credit report. Most of these companies cannot deliver on their promises and will likely do little or nothing to improve your credit. Occasionally some of these companies may actually vanish along with your money. The reality is that many of the servcies can be costly, ineffective and risky. The Federal Trade Commission can provide information. Visit www.ftc.gov to get more information. The only way to clean up poor credit is to pay your bills on time and establish a pattern. You cannot erase the truth about how you have paid in the past.
What are unethical "credit repair" tactics?
- A new social security number is not the answer to your credit problems. Falsely obtaining a new social security number is a criminal offense.
- A common strategy for many of these clinics is to dispute everything on your credit report, which calls for a creditor's response within 30 days. If the creditor misses the deadline, the item must be removed from the credit report. However, consumer-reporting agencies will begin to flag suspicous disputes.
- Accurate negative information cannot be legally removed from your credit report. However, by law you are allowed to dispute any incomplete, inaccurate or outdated information at no charge to you. This simply means that anything a credit repair service can do for you, you can do for yourself for FREE. In the end, only the passage of time can erase negative information.
What are the three C's of credit?
When a consumer applies for credit, the lender wants to know whether the consumer has the ability and the willingness to repay the debt. Generally, the creditor will consider the three C's in making a loan decision: Capacity, Character and Collateral.
Capacity
The credit application will contain questions that refer to the ability of the consumer to repay a debt. Have you been working regularly in an occupation that is likely to provide enough income to support your use of credit?
- Do you have a steady job?
- What is your salary?
- How reliable is your income?
- Do you have other sources of income?
- What are your current living expenses?
- What are your current debts or loan payments?
- How many dependents do you have?
- Do you pay alimony or child support?
- Can you afford your lifestyle?
- How much are open credit limits?
Character
Questions will be asked to determine your reliability in paying debt.
- Have you used credit before?
- Do you pay your bills on time?
- Do you have a good credit report?
- Can you provide character references?
- How long have you lived at your present address?
- How long have you been at your present job?
Collateral
Collateral serves as a type of insurance for the creditor. The creditor is interested in determining whether you have any assets that could be used to pay off your loan in the even that you are unable to do so.
- Do you have a checking account?
- Do you have a savings account?
- Do you have any stocks or bonds?
- Do you have any valuable collections or jewelry?
- Do you own a boat? A car? A home?
Can a credit bureau deny my credit application?
It is important to understand that a credit reporting agency does not make lending decisions. They do not approve or reject credit. They only report credit information.
I have made some credit payments late and now they have been charged off. Why are they still reported?
Negative information such as poor payment history, lawsuits or judgements will remain on a credit report seven years from the date of last activity. Bankruptcy will remain on a credit report for up to ten years.
I am divorced now. How does that impact the joint account we had?
In the event of a divorce, all financial obligations incurred during the marriage are the responsibility of both partners regardless of how much each contributed. If, in the divorce decree, the agreement was made that one spouse is to be responsible for a certain debt, the creditor will still hold both spouses responsible regardless of the decree. During the divorce, spouses should close joint accounts, stop using credit cards and avoid applying for credit. They should also pay off as many bills as possible, and attempt to make agreements prior to the final decree.
Isn't all information reported and updated electronically at the credit bureaus?
Not every creditor belongs to the credit bureau. Local store accounts may not be reported, so always ask a creditor if they report to one of the three bureaus. While the majority of information is reported electronically to the bureaus, there are times when files are read by people who manually input the information.