Credit, Credit Score, Financial Advice

Why Your Debt-to-Income Ratio Is So Important

A person’s credit score is not the only figure lenders look to when determining whether to approve an application for financing. Many times, lenders will also look to the applicant’s debt-to-income ratio (DTI) when making a determination to approve financing.  

A consumer’s debt-to-income ratio looks at whether the individual is bringing in enough income to meet his or her monthly bills. The actual DTI figure is computed by taking the consumer’s gross monthly income and dividing it by his or her monthly debt payments. The result is the person’s DTI.  

Bankruptcy Law, Credit Score

When Can I Apply for a Credit Card after Bankruptcy?

The type of bankruptcy can affect how soon someone can apply for a credit card after bankruptcy. A Chapter 7 bankruptcy case allows the consumer’s debts to be discharged fairly quickly, within a few months, after non-exempt assets are liquidated and used to pay off the filer’s debts.

A Chapter 13 bankruptcy case takes longer than a Chapter 7 case since it involves a three-to-five-year long repayment plan where the consumer works with the bankruptcy trustee on paying down qualifying debts while discharging what is left at the end of the repayment period.

Bankruptcy Law, Credit Score

Tips for Rebuilding Credit After Bankruptcy

Sometimes people hold off filing for bankruptcy for fear of what it will do to their credit and financial future. While filing for bankruptcy will impact a person’s credit score, this damage is not irreparable. In fact, with good financial habits a consumer can rebuild his or her credit to better than it was before filing for bankruptcy. 

After the consumer’s debts are discharged at the end of a bankruptcy case, it is recommended that the consumer monitor his or her credit report to ensure that any outstanding or past-due balances are reported as zero if they have been successfully discharged. If any discrepancies are found, these errors should be reported right away to the credit bureaus via a formal dispute.  

Credit Score

Common Errors to Look for in Your Credit Report

Consumers should monitor their credit reports on a regular basis, or at the very least once a year. The three major credit reporting agencies allow free annual credit reports, which will pull information on the person’s credit history, including closed and open accounts, as well as several other pieces of important information. However, if the person reviewing the report does not know what to look for in the report, significant errors could be easily overlooked.

A credit report is an excellent way for lenders to get a good idea of how the potential borrower handles his or her credit and debts. This information usually is used to determine whether the borrower is a lending risk or a safe option. If something is on the person’s credit report that is not correct, it should be fixed as soon as possible to ensure that the individual’s credit score stays in the good range.

Credit Score

What the New FICO Score Will Mean for Consumers

Fair Isaac Corporation, the company behind the credit score used widely by lenders across the country, otherwise known as the FICO score, announced that two new scoring models will be released this summer. These changes will impact consumers in the future, which is why it is important that consumers understand these changes and plan for what they can to keep their credit scores in a good range.

The FICO score is a three-digit credit score that is based on a person’s credit report. The score is a quick way for lenders to be able to assess the borrower’s credit history and to determine whether the borrower is a lending risk. FICO scores range between 300 to 850, with the higher the score the better. The better the person’s FICO score is, the more likely he or she will be approved for financing.

COVID-19, Credit Score

Tips to Protect Your Credit Score During the Coronavirus Pandemic

The coronavirus (COVID-19) pandemic has put many Americans in a difficult financial situation. While many are out of work either temporarily or permanently, others have found their salaries cut indefinitely as companies ride out the pandemic. The financial struggles that countless consumers are facing has put their own personal financial situations at risk, including their credit scores. Here are some tips to help protect your credit score during the pandemic.

File for Unemployment.

One of the first things a person should do after being laid off due to the pandemic is to file for unemployment. Due to the unprecedented conditions brought on by the COVID-19, the Coronavirus Aid, Relief and Economic Security Act (CARES Act) expanded the eligibility terms for unemployment benefits.  These benefits now extend to freelancers and contract workers. Additionally, the CARES Act has provided an additional $600 per week for those who qualify.

Bankruptcy Law, Credit Score

Tips for Rebuilding Credit After Bankruptcy

Filing for bankruptcy allows people to get a fresh start financially and erase past debts, but a legitimate concern many consumers have is the effect it will have on their credit score and their ability to take out credit, again.

One of the biggest misconceptions about filing for bankruptcy is that it will ruin your credit score and your financial future.  To the contrary, after filing for bankruptcy you can begin restoring your credit right away.

Bankruptcy Law, Credit Score

Tips to Help Seniors Bounce Back from a Bankruptcy Filing

With the rising costs of health care and inflation, it is not uncommon for seniors to seek bankruptcy relief. Although bankruptcy can remain on a filer’s credit report for seven to 10 years, depending on the type of bankruptcy, there are certain steps seniors can take to boost their credit score during this period.

Prepare a Budget

One of the most important steps a senior can take after filing for bankruptcy is to prepare a budget. Many agencies, including the AARP Foundation, will work with the senior to prepare one. Most seniors live on fixed incomes, which leave very little room for unexpected expenses, such as large medical bills or expensive home repairs. However, if senior consumers can put together a plan that gives them leeway to pay for the unexpected, this budget will help them prevent falling into the same financial situation, again.

Credit Card Debt, Credit Score

Reasons to Check Your Credit Score Twice this Holiday Season

When it comes to monitoring a credit score, it is important to pay all bills on time and not max out a credit card when relying on one for holiday spending. However, another factor, known as the credit utilization ratio, plays a major role in a consumer’s FICO score. In fact, this number accounts for 30 percent of the average consumer’s FICO score, and it is the second most important part of a person’s credit score next to paying bills on time.

To figure out what this score is, the consumer needs to add up credit limits across all his or her credit cards and then add up the outstanding balance on each card. Divide the total balance owed by the total limits and multiply that by 100 to determine the percentage or credit utilization ratio.