Tag Archives: Credit as an asset

Bankruptcy Basics - Chapter 13, Bankruptcy Basics - Chapter 7, Consumer Finance

How many ways can credit scores cost me money? What can I do about it?

The Consumer Federation of America “(CFA) is an association of non-profit consumer organizations that was established in 1968 to advance the consumer interest through research, advocacy, and education. Today, nearly 300 of these groups participate in the federation and govern it through their representatives on the organization’s Board of Directors.[i]” The CFA studies consumer behavior and uses focus groups to follow economic trends and how public policy can affect consumers. The use of credit and the cost to consumers when they have low credit scores is a particular area of inquiry for the CFA. Creating pro-consumer policies and increasing communication and awareness about credit issues is a focus of this service organization.

The recent survey and release of findings on credit scores and the costs to consumers

The CFAs sixth annual survey of credit scores today, was released June 13, 2016. The survey findings indicate that over 80 percent of consumers do not understand some basic facts about their credit scores. The following are highlights of the survey as reported in the CFA press release:

  • Credit scores are used by mortgage lenders (88%) and credit card issuers (87%).
  • Key factors used to calculate credit scores are missed payments (91%), personal bankruptcy (86%), and high credit card balances (85%).
  • Ethnic origin is not used to calculate these scores (believed by only 12%).
  • 700 is a good credit score (81%).[ii]

The findings show that the Millennial generation have less an understanding of the credit scoring system when compared to Generation X.

What consumers do not know, can cost them money

A low credit score can affect many aspects of a consumer’s day to day life. Not only is your credit score used to determine the percentage rate you would pay on a car or home loan. The insurance rates you pay can be significantly higher than your neighbor with the higher credit score. When the insurance companies consider a consumer with a low credit score (something under 620) they figure that individual is more likely to file multiple insurance claims, and the statistics back it up.

Many people with low credit scores have more difficulty financing a home and renting is their only option. More bad news for renters with low credit scores – expect to pay a higher security deposit when renting a home or apartment. The assumption is that people with low credit scores have a hard time paying their bills, so the rental owner wants more money on deposit in case the renter with the low credit score cannot pay their rent.

Today is the day you can start learning more about credit and how to maximize yours

By reading this article and the CFA press release, you will know more about credit than many others out there. Here’s something else to be aware of, advocates for reform want more protection for consumers so their lives are not determined by credit scores. If you do some research on the Internet, you can learn how to write your local legislative representatives and tell them you want them to take better care of consumers with protection laws that prevent big companies from charging you more money due to your credit score.

Next steps in repairing, boosting and making your credit score bulletproof

Well, we can’t really make your credit rating bulletproof, but there are several ways you can improve your score and keep it there. If you are underwater on all your payments and your scores suffer every month with negative reports, a Chapter 7 or 13 bankruptcy can help you wipe out the debts you cannot pay and give you a fresh start. Rebuilding your credit is much easier when you are not behind the eight ball. We can connect you with credit repair companies who use advanced systems to wipe out negative debt and “zombie” debts that may be hurting your score. When you also consider secured credit cards, credit unions and more, you can really take control of your credit, save money and live the way you deserve!

 Joseph Wrobel, Ltd., works with clients on consumer issues including bankruptcy and they can offer additional information to find out if you qualify for Chapter 7 or 13 bankruptcy, and your options and rights under the law. The firm will also advise and assist clients with best credit repair options.   

Joseph Wrobel, Ltd. helps people get control of their finances and a fresh start at financial freedom. The firm’s website contains informative videos about financial issues as well as bankruptcy protection for families who want a fresh start.

Don’t forget to keep up with us on Facebook, Twitter, LinkedIn and Avvo, where you can read client and peer reviews!

 

 

 

[i] Consumer Federation of America, website, About CFA

[ii] Consumer Federation of America, 6th Annual Credit Score Survey Reveals Large Majority Know Credit Score Basics But Don’t Understand Important Details, Jun. 13, 2016 press release.

Bankruptcy Beyond The Basics, Bankruptcy Odds and Ends, Consumer Finance

Credit cards after bankruptcy: Don’t fear the system, use it to your benefit

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You might have heard it before, “What happened before your bankruptcy doesn’t matter, it’s all about what you do afterwards.” This is true with credit cards and your credit scores. Many people are reluctant to get a credit card after a bankruptcy because they are afraid they will fall back in the same trap that put them in a Chapter 7 or 13 in the first place. Qualifying for a credit card might be easier than you thought, and a secured card might be your best friend in rebuilding your credit rating.

Your credit score is an asset and you can and should use it to help you get ahead and build for the future.

Think of your credit rating as an asset you can use to leverage your ability to pay the credit cards back when you are carrying less debt on your shoulders. The ability to earn credit and pay it back is not the same after a bankruptcy discharge. If you owe less money to people, lenders might be more likely to extend that credit you might need to get ahead or keep up if something comes up.

Credit histories and scores are important when you apply to rent a home or apartment, when you look for a new job, and when you want to borrow money from your bank or credit union to buy a new car or something you need around the house, garage or lake. If you can reasonably afford a monthly payment, you should be able to borrow money and make the monthly payments, on time, to help rebuild and boost your credit score.

When should you apply for a credit card or a loan, to make purchases and rebuild credit?

As soon as you are able to obtain a line of credit, secured or unsecured, it makes sense to take these steps to rebuild and earn a better credit score than you thought you could achieve. The key is to spend your credit as if it is cash in your checking or savings account. Some people keep their credit card receipts and toss them in a box, paper-clipped to cash to cover the receipt. Then, when it is time to pay the bill, turn the cash into a proper payment method and pay that credit card in full every month.

If you can otherwise manage your money and not get behind in payments, go forth and charge away. There might be an emergency where you can only pay the minimum from time to time, but recall the spending and payment patterns that caused problems in the first place. If your bankruptcy was a result of a medical emergency or unforeseen event, please do not be offended by these tips, but appreciate that many people fall behind financially through their own doing or with no fault whatsoever. Again, what matters after a bankruptcy is more important than what lead to the filing in the first place.

Go get a secured credit card; you might be able to get one very soon after your bankruptcy discharge.

Many ask, “Who would ever give me credit after a bankruptcy?” The lending decision on extending credit is based on the likelihood that the debt will be repaid or secured in the event the borrower defaults. A secured credit card is one that looks and works just like any conventional credit card, with one exception, you pay a deposit, held by the issuing bank or credit union. If you don’t pay the bill on your secured card, the bank collects your deposit and they are not out the money. It makes sense for them and it makes sense for you.

Credit unions operate using a different set of rules for lending, and they can offer more options to someone in the process of rebuilding their credit. Start by setting up a checking or savings account with a credit union nearby your home or place of employment. If you get to know the people at the credit union when you stop by to make deposits and withdrawals, they can get a better sense of who you are as a person, not just a number on a credit report. Of course there are rules the credit unions follow, and it may be a while, but eventually they might be the best place to go when looking for a (secured or unsecured) credit card, home, boat or auto loan.

Joseph Wrobel, Ltd., wants to help clients get back on their feet and achieve financial success.

Encouraging clients to go forth and be financially successful after a bankruptcy should be the goal of an ethically managed bankruptcy law firm. At Joseph Wrobel, Ltd., we want you to succeed and send us referrals, and hopefully you won’t need to file another bankruptcy of your own in the future. We work to share information and encouragement to those who ended up in a financial bind and really do wish all our clients the best in future financial success.

Joseph Wrobel, Ltd. helps people get control of their finances and a fresh start at financial freedom. The firm’s website contains informative videos about financial issues as well as bankruptcy protection for families who want a fresh start. To keep in touch and read about consumer finance news and stories you can Like the firm’s Facebook page and Follow Joseph Wrobel. Ltd. on Twitter. If you need immediate legal assistance, please call Joseph Wrobel, Ltd. by calling (312) 781-0996 to talk to an attorney today.