Discover What to do When Your Credit Worth is Damaged Due to Circumstances out of Your Control
First of all, lets examine exactly what
credit worth means and how it affects your financial
life.
Your credit worth, as defined by the
financial industry, is the overall picture of your
financial health that is used by lenders to determine
your ability to repay debt. By looking at a combination
of factors, lenders, such as banks, credit card companies,
and utility companies, estimate how worthy you are
of receiving a line of credit or regular services
based on a payment schedule.
The most common factor used by lenders
to determine credit worthiness is your credit score.
Your credit score is a number generated by a mathematical
formula that estimates how likely you are to pay your
bills. Based on the information in your credit reports
from the three credit bureaus, Equifax, Experian,
and TransUnion, your credit score is a factor affecting
your ability to get loans and good interest rates.
Lenders compare your credit report with millions of
others to determine your score.
But your credit score is not the only
thing that lenders look at to decide whether or not
to give you a loan or a good interest rate. They also
evaluate the individual entries on your credit report
and the information you provide on your loan application.
Some creditors consider your occupation, length of
employment, and whether or not you own a home.
Each creditor creates a credit scoring
system based on factors important to that institution,
so you may receive different results with different
lenders. For this reason, it is also important to
talk to the credit manager about why you received
the credit limit and interest rates that you did.
You may have mitigating circumstances that affect
how your credit history is viewed, or you may be on
the margin between two score categories. Negotiation
may be possible if you are open with the creditor
about your ability to pay.
If you are turned down for credit, law
states that you are entitled to a free credit report
if you request it within 60 days. A few steps you
can take to improve your credit worthiness include
paying your bills on time, paying down your existing
debt, and refrain from taking on new debt. But the
points awarded by creditors for each factor varies,
and an increase in your credit score depends on how
one factor relates to another factor in their particular
scoring model.
Collections, bankruptcies, and late
payments have the greatest negative effect on your
credit score, and, therefore, on your credit worthiness.
Paying your bills on time may seem like a small thing
when youre writing that monthly check, but an accumulation
of timely payments says a lot to a potential lender
looking for a reliable client. Prompt payments in
recent months can actually make a big difference in
your credit score.
Your debt is a factor as well. Keeping
your account balances between 25% and 50% of your
available credit signals a responsible borrower. For
example, if you have a credit card with a $2000 limit,
keep your debt below $1000. For this reason, consolidating
your credit card debt can actually lower your credit
score, as it raises your debt to available credit
ratio. The best solution is to simply pay off your
existing cards as quickly as possible.
The length of your credit history is
another determining factor in a good score. Lenders
want to know that you are able to maintain prompt
payments and good standing for a reasonable period
of time. Most credit scoring models consider the length
of your credit history, but low points in this area
can be outweighed by good payment history and low
debt balances.
Some creditors consider the type of
accounts you have as a determining factor in your
credit worthiness. While its a good idea to have established
credit accounts, some companies consider loans from
finance companies or too many accounts to be negative
factors.
Checking your credit report regularly
(at least once each quarter) helps you in numerous
ways:
1. You need to know who is checking
on your credit at any given time. Inquiries factor
into your overall credit score and it is illegal to
run your report unless you have given written permission.
2. Makes you aware of accounts reported
incorrectly, which is extremely important in situations
such as a company reporting a late payment incorrectly.
3. You may discover big surprises like
a collection account filed against you that you werent
even aware of. It happens!
4. And the really big one someone has
stolen your identity and is using your credit!
With the number of identity theft cases
increasing steadily, you cant afford to ignore your
credit especially if you are considering borrowing.
In a recent court case number 02CC13327,
a 4th District Court of Appeals upheld the first $1
million judgment against a large retail company by
a victim of identity theft. One of the interesting
facts of this case is that the court recognized a
recently developed procedure for measuring credit
damage. The owner CM Financial of Fullerton, CA, Georg
Finder, is an expert witness in credit cases, and
is responsible for developing this process that he
calls Credit Damage Measurement, or CDM.
Up until recently, lawyers for victims
of credit damage had little chance of collecting damages
beyond medical treatment, lost wages and property
loss. With the development of CDM, that has all changed.
So what do you do if your credit worthiness is damaged
due to situations out of your control? Call CM Financial
at 714 441-0900 for starters to find out how its possible
to calculate exact financial consequences and therefore
enable you to seek out appropriate compensation.
You can learn more about CM Financial
and the CDM process, including being able to view
sample reports, at http://www.creditdamage.com
Cathy Taylor is a marketing consultant
with over 25 years experience. She specializes in
internet marketing, strategy and plan development,
as well as management of communications and public
relations programs for small business sectors. She
can be reached at Creative Communications: creative-c
om@cox.net or by visiting http://www
.menopauseinfo.org or http://www
.internet-marketing-small-business.com
