Rebuilding your credit history & score with mindfulness

It can be a struggle for some people to get their financial reputation in order during tough life times. I’ve heard painful stories of how having poor/bad credit has adversely impacted the lives of truly good people who found themselves unable to find a good apartment, a good job, even finding love. Let alone good and affordable options to get a house, a car, and other life goals requiring short to long term financing.

We should make it our business to have an intimate relationship with our finances as we have with food. We eat to nourish ourselves in part to make us happy, healthy, and feel emotionally and physically balanced. Those who overlook importance of credit to find themselves in a rut while trying to fulfill their life goals. To be embolden to make changes for some may be hopeless and impossible, but there is hope and like everything that matters in life…those things takes time, nurturing, and personal investment. The psychological affects of poor credit overall adversely impacts one sense of worth, quality of life, and overall health. Anxiety disorders due to frequent and persistent aggressive collection calls is not at all uncommon. Filling personal bankruptcy, credit debt, and financial management issues may adversely impact self-image leading to depressive disorders and/or the need to self-medicate abuse substances; And if  key risk factors are present – substance dependency. In our western capitalistic culture success is the champion and failure is the chimp who is often shrouded with judgment and shame.  We can challenge this view by being champions from our failure through resilient efforts leading to our comeback. Not only acknowledging the problem is essential for credit recovery, but taking full accountability of it also critical. That takes true grit and courage. This mindful approach can be a significant factor in making financial comeback. One must be self-reflective in nature to take ownership of all personal bad choices, poor decisions, and life situations that has brought one life barriers in order to move forward.

An essential credit action step is to take a look at your  3 credit reports and make amends of the wrongs and make it right step by step with integrity, conviction, and grace.  It is not an easy process by no means and not a quick one.  It will take effort and along with lots of patience to make sustained change and improvement.  Our relationship with money deeply impacts our personal experience. In understanding our relationship with money and its management…we honor ourselves in great ways.

According to experian.com,  “you don’t rebuild the credit score. You rebuild your credit history, which then is reflected by your credit score. The length of time to rebuild your credit history after a negative change depends on the reasons behind the change. Most negative changes in credit scores are due to the addition of a negative element to your credit report, such as a delinquency or collection account. These new elements will continue to affect your credit scores until they reach a certain age.”
– Delinquencies remain on your credit report for seven years.
– Most public record items remain on your credit report for seven years, although some bankruptcies may remain for 10 years and unpaid tax liens remain for 10 years.
– Inquiries remain on your report for two years.

If you have errors on your credit report, fixing them is an easy way to raise your credit score. Errors can include a credit lender reporting false late payments, accounts that reportedly went to collections even though you paid, or even accounts opened in your name without your knowledge.

SO HOW DO YOU RATE?
Most credit scores – including the FICO score (the most used by creditors)  and the latest version VantageScore 3.0 – operate within the range of 301 to 850. Within that range, there are different categories, from bad to exceptional.

Exceptional Credit: 800+
Excellent Credit: 750-799
Good Credit: 700-749   (730 is the average target point of creditors)
Fair Credit: 650-699
Poor Credit: 600-649
Bad Credit: below 599
But even these aren’t set in stone. That’s because lenders all have their own definitions of what is a good credit score. One lender that is looking to approve more borrowers might approve applicants with credit scores of 680 or higher. Another might be more selective and only approve those with scores of 750 or higher. Or both lenders might offer credit to anyone with a score of at least 650, but charge consumers with scores below 700 a higher interest rate!

A good credit score will help you borrow money for a car or home, or open a credit card with a comparatively lower interest rate. That means you will pay less over time for the money.
Consider this: if you’re buying a $300,000 house with a 30 year fixed mortgage, and you have bad credit, then you could end up paying more than $90,000 more for that house over the life of the loan than if you had good credit. So, in the end, it really pays to understand your credit scores and to make them as strong as possible. SOURCE:credit.com

WHAT CAN YOU DO TO IMPROVE?

“The first thing to do is get a copy of your credit report from AnnualCreditReport.com. The three major credit reporting bureaus must give you one free copy per year, so plan to order one every four months.

Then use one or more of the following tips to boost that three-digit number that has increasing power over our everyday lives:

1. Dispute errors. Mistakes happen. You can dispute errors online through Equifax, Experian and TransUnion. If you spot a mistake like a paid-off debt appearing as unpaid, contact the lender or creditor that reported the inaccurate information and ask them to update your account. Each credit bureau also has a form on their website for submitting disputes. For a more serious issue, file a dispute with the creditors and the credit bureau, as well as the Consumer Finance Protection Bureau (CFPB). After you’ve fixed any foul-ups, you might try to…

2. Negotiate. You can’t deny that you stopped paying a credit card bill when you were unemployed last year. But you can ask creditors to ‘erase’ that debt or any account that went to collection. Write a letter offering to pay the remaining balance if the creditor will then report the account as ‘paid as agreed’ or maybe even remove it altogether – ‘paid as agreed to delete’. (Note: Get the creditor to agree in writing before you make the payment.) While it’s always in your best interest to resolve outstanding debts as soon as possible, the new FICO 9 credit model makes this even more worthwhile. Under the new FICO 9 credit-score model any record of you failing to pay a bill will not be factored into their calculations if the bill has been paid or settled with a collection agency. Before this any bill reported to collection, even if settled, would still have dinged your score.

You might also be able to ask for a ‘good-will adjustment’  Suppose you were a pretty good Visa customer until that period of unemployment, when you made a late payment or two – which now show up on your credit report. Write a letter to Visa emphasizing your previous good history and ask that the oopsies be removed from the credit report. It could happen. And as long as you’re reading the report, you need to…

3. Check your limits. Make sure your reported credit limits are current vs. lower than they actually are. You don’t want it to look as though you’re maxing out the plastic each month. If the card issuer forgot to mention your newly bumped-up credit limit, request that this be done.

4. Get a credit card. Having one or two pieces of plastic will do good things to your score – if you don’t charge too much and if you pay your bills on time. In other words, be a responsible user of credit.

Can’t get a traditional card? Try for a secured credit card, taking care to choose one that reports to all three major credit bureaus. And if you can’t get a secured card, you might ask to…

5. Become an authorized user. This means convincing a relative or friend to be added to his or her existing credit card account. If you’ve had a checkered financial history, don’t be surprised if you hear the word “no” a lot. But you might luck out, especially if you’re a young person who has no history of poor credit use.

Offer to put an agreement in writing stating how much you can spend and how you will get your share of the bill to the cardholder. Then “do your part and use the card responsibly,” says Beverly Harzog, author of Confessions of a Credit Junkie. In other words, don’t buy more than you can afford and don’t leave your co-signer hanging when the bill is due. The point is to learn to use credit responsibly.

6. Under-use your cards. Yes, we did just tell you to get credit by any means possible. But don’t whip out the plastic to pay for everything. The ‘credit utilization ratio’ should be no more than 30% and ideally even less. 10% credit utilization ratio will “maximize this part of your FICO score.”

For example, suppose your Mastercard has a $1,500 limit and you routinely charge a grand a month. It doesn’t matter if you pay it all off before it’s due. What matters is the credit bureaus think “Curtis is using two-thirds of his credit! What a spendthrift!” And if you’re a cash-free kind of guy? Then try to…

7. Raise your credit limit. Ask your creditors to increase your limit, i.e. making that Mastercard good for up to $3,000. Be careful with this one, though: It works only if you can trust yourself not to increase your spending habits accordingly. Otherwise you’ll be right back to using 66% of your credit each month and how will that look?

8. Don’t close any cards. Canceling a credit card will cause your available credit to drop, which doesn’t look good to a bureau. One way to keep a card active is to use it for a recurring charge such as a utility bill. There’s room for that in your budget, right?

9. Mix it up. Using a different kind of credit can make for a modest boost to your score. For example, you might take out a small personal loan from the credit union or buy a piece of furniture or appliance on installment (but only if you’re 100% sure you can and will meet the payment schedule). To prove to lenders that you are not risky and build up your credit score, you will need to build credit history. To create a good credit history, you’ll need to have open lines of credit that you use and pay off responsibly each month. While you may want to open a new line of credit occasionally, be careful not to open too many new accounts at once as this is seen as risky behavior. Watch out for retail credit card signups as well as these will take a bigger bite out of your score then signing up for a traditional credit card will.

10. Pay your bills on time. Seriously. Your payment history – including the ones you pay late or skip altogether – makes up a whopping 35% of your FICO score. The biggest influence on your credit score is your payment history. Whether you’ve made your loan payments and done so on time will rise or lower your score more than any other single factor

11. Pay your bills twice a month. Using too much of your credit limit at any given moment doesn’t look good. Suppose your limit is $3,000 and a month’s worth of havoc (car repair, doctor bills, plane ticket for kid to get to college) means you’ve charged up $2,9000. Sure, you plan to pay in full by the 18th of the month – but until then it looks like you’re maxing out yet another card.

Instead, make one payment just before the statement closing date and second one right before the due date. The first will likely reduce the balance that the credit bureaus see and the second makes sure you won’t pay interest or a late fee.”

SOURCES:forbes.com and time.com

As always my very best to you!