Little things that can mar a credit report

Saturday, June 29th, 2013 By

Cartoon of an angel and devil standing side-by-side. The angel is offering angel's food cake on a plate, while the devil is offering devil's food cake.

What kind of cake is your credit report? (Photo Credit: CC BY-SA/Alex Gorzen/Flickr)

If you’ve had a bankruptcy, foreclosure or lots of missed bill payments, you know that your credit score was diminished. But do you know about the smaller things that lead lenders to believe you’re a credit risk? A few FICO foibles can cause credit card issuers and lenders to view you with less favor and lead them to either deny you credit or charge higher interest rates.

Too much credit is a bad sign

While it may be a fact that people who max out their credit cards tend to apply for more credit cards, such behavior does not speak well to potential creditors. Too many credit applications in too short a time raise red flags. Norm Magnuson of Consumer Data Industry Association told Bankrate that banks have “shrunk the window” of frequency in which applications for credit audits are performed.

“It used to be months and months. Now you find companies doing account monitoring monthly or every other month,” he said. “That would raise some questions.”

A short sale isn’t magic

When you’re upside down on your mortgage, the specter of foreclosure may not be far away. Lenders will sometimes tell you that a short sale is the way to go. Even though you’re taking a loss, at least you’re avoiding foreclosure. Yet, how a lender reports a short sale to the credit bureaus can be just as damaging. Experian’s Vice President of Public Relations Maxine Sweet says even though the account is technically settled, the short sale ends up hurting your credit score as much as a foreclosure.

The best thing to do, advises SmartCredit.com President of Consumer Education John Ulzheimer, is to negotiate with your lender so that the difference between what’s left on the mortgage and the amount repaid isn’t reported as balanced owed.

Co-sign at your peril

Whether it’s an auto loan, student loan or any other large scale loan, if you’re a co-signer and the primary borrower defaults, you’re on the hook. Hopefully, you keep in touch with the person for whom you co-signed. Otherwise, you may not know the damage being done to your credit until it’s too late.

Minimum effort, maximum worry

It may seem easy to settle for the minimum payment on your credit cards each month, but there’s nothing easy about what that does to you in the eyes of prospective creditors.

“It suggests you’re under financial stress,” says Nessa Feddis of the American Bankers Association. “You may be defaulting.”

A busy report can indicate trouble

The more inquiries for credit that appear on a credit report, the more tiny nibbles that are taken out of your FICO score. If you know you’ll be applying for big loans – home, auto, education – try to do it all within a two-week window. This will minimize the inquiry impact, as they will be treated as a single unit. The same does not apply to credit card applications, however.

Disputing credit report mistakes

Sources

American Chronicle

Bankrate

MSN Money

Previous Article

« Modest Needs Foundation Helps Americans in Tough Times

If a trusted neighbor just needed a few bucks to get by, would you help him? The Modest Needs Foundation helps hard-working Americans who need one-time help ... Dont let your fellow Americans end up on the streets.
Next Article

Facebook torrent hack makes free download of personal user data »

The Facebook torrent hack mined the personal information of 171 million Facebook users and made the data available for anyone to download... a geek and poke cartoon lampooning facebook

Leave a Reply

Other recent posts by Steve Tarlow

Credit Counseling – Debt Management Plans and Consumer Psychology

Credit counseling for consumers depends greatly upon on consumer attitude and intent. Xiao and Wu's study looks at the connection. START HERE.
Credit counseling and a debt management plan can lead to greater peace of mind for consumers in a bind, but proper education is needed first. (Photo: picasaweb.google.com)

Learn how to find the unclaimed money waiting for you

If it worked for "Good Morning America," it can work for you. Here are some ideas for finding unclaimed money that rightfully belongs to you.
A man and a woman caress a pile of money.

Payday Loans: Going Where the Need is Greatest

In a recent Federal Reserve study, Robin Prager discovered that the connection between credit-challenged areas and payday loan stores is very real.
Payday Loans have the green light when it comes to going where the financial need is greatest. Access to conventional credit plays a large role. (Photo: flickr.com)