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8 Simple Steps to Improving Your Credit Score

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Fix Your Credit - CloverMortgage.ca

Fix Your Credit – CloverMortgage.ca

If you have made credit mistakes or have encountered financial hardships in the past and your credit score suffered as a result, you will likely have a difficult time to qualify for credit products and loans such as a mortgage, car lease, credit cards, and more. This can continue to negatively impact an already challenging financial situation.

Fortunately, there are steps that you can take to help rebuild your credit score and open yourself up for being able to qualify for credit and loans that can improve your overall financial situation.

Here are 8 things you can do to help increase your credit score:

  1. Monitor Your Credit Report and Score

Studies have shown that as many as 1 in 5 people have errors reported on their credit bureaus that have negatively impacted their credit scores and resulted in those individuals not being able to qualify for credit products such as credit cards, mortgages, home refinancing, and more.

When it comes to financing your home by getting a mortgage or home refinance, working with an experienced mortgage broker can be your best bet to getting approved for the lowest rate on a mortgage loan. Since mortgage brokers have access to non-conventional lending institutions such as trust companies and credit unions, along with access to private mortgage lenders if needed, you are more likely to get approved for the mortgage even if you have bad credit provided that you have enough equity available in your home. The main shortcoming with that come along with getting a mortgage or refinance through a sub-prime mortgage lender is that you are going to be paying a higher interest rate and may have stricter terms associated with your loan.

This is why it is imperative that you regularly check both your TransUnion and Equifax credit bureau reports. By doing this regularly, you are more likely to find errors such as reported missed payments that were actually made on time, wrong personal information, debts that have been fully paid yet still appear as outstanding, and other inaccuracies that should not appear on your record.

By checking your credit report yourself, you are not registering a “hard inquiry”, but instead a “soft inquiry” that bares no weight in the calculation of your credit score. If you do manage to uncover errors, you should report them immediately and allow for up to 30 days for the credit bureau to investigate and remedy the situation should they determine that the errors were in fact errors. By correcting errors on your credit report, you can expect to see an almost immediate improvement in your credit score.

  1. Pay Your Bills On Time

Your payment history has the largest impact on your credit score. It contributes for approximately 35% of your credit score. By regularly paying your bills on time, you can help improve you credit score significantly. Miss only 1 or 2 payments and your credit score can suffer tremendously. Here is some more information to help you better understand how your payment history and other factors impact your credit score.

Even if you miss a small payment of $50, this can negatively affect your credit score, and missed or late payments stay on your credit record for up to 6 years.

  1. Keep A Low Balance

How you utilize your credit and the ratio between the balances that you carry in comparison to your actual credit limits will play a big role in the calculation of your credit score. This ratio is called the utilization ratio. As a general rule of maintaining “good credit health” or to help improve your credit score, it is important to keep your ratio below 30%. This means that you should always try to have your total balances equal to less than 30% of your total credit limits.

As an example, let’s pretend that you have 2 credit cards. One of your credit cards has a $3,000 limit and the other has a $7,000 limit. In total you have $10,000 of available credit on your credit cards. Now let’s imagine that you have a balance of $1,000 on one card and a balance of $2,000 on the other card. In total you have $3,000 owing on your credit cards.

Now divide the $3,000 total balance by the $10,000 total credit limit and multiply that number by 100. This will give you a utilization ratio of 30% using this example. If you are within the 30% ratio, your credit score will likely start to improve rather quickly. If you surpass this ratio, then your credit score will likely start to decrease.

Here are a couple of things that you can do to help lower your current utilization ratio in the event that your ratio is a bit high:

  • If you are disciplined enough to maintain your balance as is and not increase your expenditures, then you can apply to raise the credit limits on your credit cards, line of credit, and other loans.
  • The second option, if you are able to access extra cash or save up some extra cash is to pay down your current balances so they fall below the 30% utilization ratio. One way to do this is through a debt consolidation loan, which is easiest to obtain in the form of a mortgage refinance or home equity loan if you are a property owner. Here is some information about how you can get a debt consolidation loan in the form of a home equity loan or second mortgage using the available equity that you have in your home or property.
  1. Keep Old Credit Accounts Open

The amount of time that you have been building your credit history for also plays a large part in the calculation of your credit score. This is why it is not usually suggested to close credit accounts as long as you are able to use them wisely and maintain low balances that you are able to pay regularly. Even if you don’t use a credit card much at all, it is generally advisable to keep the card open and active, even if you only use it for a small amount every few months. This will help keep your utilization ratios lower and also add to the length of time that your credit history is developing.

  1. Diversify Your Credit

Diversification is not only something that investment advisors suggest to their clients, but something that credit advisors suggest to consumers. By having a variety of credit products, and by demonstrating that you can manage the different credit products responsibly, this will positively affect your overall score.

  1. Strategically Plan Your Credit Applications

Did you know that every time a creditor checks your credit report for the purpose of reviewing an application for credit it is considered a “hard inquiry” on your credit bureau? If you apply for credit several times in a short time period, this will negatively impact your credit score. In the case of applying for a mortgage and shopping around several banks to get the best rate, this can have an extremely negative impact on your score.

When shopping for the most competitive mortgage rates, you are often times better off using the services of a mortgage broker who will be able to perform only one single credit check and use that same report among the various lenders and banks they work with to shop for the best mortgage rate for you. This will save you time and save your credit score also.

  1. Consolidate Your Debt

Ensuring that your utilization ratios are low and that you make your monthly payments on time will help you improve and maintain a higher credit score. A debt consolidation loan can help you achieve these two things if you are feeling overwhelmed with monthly debt payments. By paying down and consolidating your higher interest debt into one single smaller monthly payment carrying a lower interest rate, you will be improving your overall debt and credit utilization ratio while making it easier for yourself to keep up to date with your monthly debt payments and bills.

Debt Consolidation Loan - CloverMortgage.ca

Debt Consolidation Loan – CloverMortgage.ca

Consolidating debt can come in a variety of forms. Here are a few examples of common types of debt consolidation loans:

  • Promotional low rate credit cards that offer lower interest rates when you transfer balances from other credit cards
  • Credit lines, also know as lines of credit, typically come with much lower interest rates than you are likely paying with most of the common credit cards
  • A second mortgage, a mortgage refinance, or a home equity loan can all be great options to consolidate debt
  1. Get A Secured Credit Card

If your credit score is too low to enable you to qualify for credit, then consider opting for a secured credit card. Many banks offer this option as a way to help people develop or rebuild their credit ratings. For most secured credit cards, you will be required to put down a deposit equivalent to the credit limit of the card, however you will still be required to make your monthly payments on time towards the balance of the card, and it is still recommended that you maintain a balance of less than 30% of the total credit limit of the card.

No matter how poor your credit score and history might be, these eight steps along with a realistic and manageable plan to manage your credit and finances will help you improve your score and rebuild your positive credit history so that you can qualify for valuable loans and credit products such as mortgages, car loans, and more in the future. Even if you can not carry out all of the eight steps, that’s alright. Even starting with 1, 2, or 3 of these steps can help you get started on the road to credit recovery.

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Bad Credit

Early Termination of a Car Lease

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If you’re leasing a vehicle in order to save money, but are thinking of terminating your lease contract early, you may want to think twice. Leases aren’t always as easy or as affordable to get out of as auto loans.

Can You Terminate Your Car Lease Early?

In most cases, you can get out of an auto lease early, but you may not be able to do it cheaply.

Leasing typically comes with fees both at the beginning and end of your term. However, if you need to get out of your lease early, there may be early termination fees (ETF), making the cost more than you bargained for.

Additionally, lessors often require you to pay all your remaining lease payments in one lump sum before releasing the contract early. Costs involved with getting out of your car lease early may also include:Early Termination of an Auto Lease

  • Excess mileage charges
  • Wear and tear fees
  • Any taxes not yet collected
  • Any negative equity
  • Storage and transport fees
  • Pay the cost of sale preparation

Check your lease contract to see if your lessor has any charges for terminating your lease early, or if there are stipulations that prevent you from getting out of the contract before a certain time. Even if there are extra fees imposed on you for returning your leased vehicle early, it might be easier to terminate a lease nowadays than it’s been in the past.

Since the pandemic, many dealerships and lenders have pushed into the digital realm to get business done. This includes video conferences to meet with dealers that typically needed to be done in person in the past. Of course, your vehicle still needs to be turned into a franchised dealership to be inspected and processed before a leasing company allows you to terminate your lease contract early.

Is it Worth it to Terminate Your Lease?

The first step is to look at your leasing contract and see if you even can get out of your lease early, and how much it’s going to cost you in ETFs. Then, you need to gather the following information:

  • Your monthly lease payment amount
  • How many payments you have left on your contract
  • The residual value of the vehicle

To figure out a good ballpark figure for getting out of your leased vehicle early, add together the cost of your remaining lease payments and any ETFs. To see if it’s worth it, compare this figure with the buyout price at the end of your lease, and find out what the current market value of the car is by checking sites like Kelley Blue Book and NADAguides.

Depending on how close you are to the end of your lease term, if the buyout price on the vehicle is significantly lower than the early termination price, it may be a good idea to wait it out. Then, once you buy out your lease, you can trade in the car for something else.

If you decide not to wait, how you handle getting out of your leased vehicle early could depend on the difference between the current market value of the car and the residual value of the vehicle as predetermined in your leasing contract. If the car has more value than the lessor predicted, you may be able to sell it for enough to pay your way out of your lease early.

Three Options for Terminating Your Lease Early

If you’re looking to get out of your lease early, for whatever reason, you typically have three options:

  1. Sell your leased car to a dealer – Selling your leased car to a dealer is similar to doing a trade-in, except they pay off your lease contract, including the early termination fees. It’s typically a pretty easy process, especially since used vehicles are in high demand since the pandemic. You may be able to get a little more for a car that’s coming off a lease since the turnaround time on a sale is likely to be shorter, depending on demand. If this is the case, you may even be able to walk away with some cash in hand depending on if the dealer’s willing to pay more than the lessors estimated residual value on the vehicle.
  2. Have someone else take over your lease – Lease assumption isn’t always something you can do, but in many cases, you can transfer your lease to someone else, as long as they meet all the lessor qualifications and there’s equity in the vehicle.
  3. Lease buyout – With the demand for used vehicles at affordable prices up right now, you may be able to buy out your lease then sell the car privately as long as you get enough money to make it worth your while. If you can’t come close to selling it yourself for the amount you need to pay off your lease, including ETFs, it may not be worth it to try and get out of the vehicle early. Most leasing companies allow for some form of early lease buyout, but again, it may cost you those extra fees.

If Leasing Isn’t for You

Now that you’ve figured out whether it’s worth it or not to get out of your lease early, it’s time to decide what to do next when it comes to getting a vehicle.

If you didn’t mind leasing but the car just wasn’t for you, you likely have the option to swap into another lease on a different vehicle with the same company. Many lessors contact lessees toward the end of their contracts to see if they’d be willing to get into another car lease early.

However, leasing isn’t for everyone. If you found that the restrictions that come with it such as the mileage limitations, or cost of maintenance and repairs are too much for you to handle, it may be time to consider an auto loan for your next go-round. If this is the case, Auto Credit Express wants to get you started on the path toward your next vehicle.

We’ve gathered a nationwide network of special finance dealerships that are signed up with lenders to help people with credit challenges. Whether you’re just not sure where to start or you need a little help due to bad credit, start here. By filling out our fast, free, no-obligation auto loan request form, you’re taking the first step toward finding your next car loan without all the hassle of searching. Get started right now!

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GSB focuses on social responsibility

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State-owned Government Savings Bank (GSB) has focused on providing loans to people without a record in the National Credit Bureau system or with bad credit over the last year to help those impacted by the pandemic deal with unprecedented economic hardship.

GSB president and chief executive Vitai Ratanakorn said the bank has extended loans to people with no credit history who have never borrowed from commercial banks or non-bank institutions.

He said the bank had already provided 1.5 million loans to members of this group of people.

The bank has also provided loans to 200,000 people with bad credit records.

Mr Vitai said the lending was aimed at drawing those outside the credit bureau system into the system and enabled them to get access to the loans, which was one of the main roles of state-run banks. This lending has been supported by the government.

He said this lending was not aimed at seeking profit as GSB charged a low monthly interest rate of 0.1-0.3%. For example, if the bank provided a 10,000 baht loan to a person under this scheme, it would only gain interest income of around 120 baht per year.

In addition to its objective of becoming the country’s genuine social bank, GSB’s other goal this year is to prevent loans from becoming bad debts, he said. The bank will rush to help customers in danger of accumulating bad debt to restructure before it reaches that stage.

Mr Vitai said GSB will not focus on growing its loan portfolio during the first six months of the year, but on serving the state’s policy of helping people and business operators cope with the impacts from Covid-19. Grassroots people and small and medium-sized enterprises are suffering the most from the pandemic, he said.

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How to Start Over When You’ve Lost Everything

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Upset women laying on the wood floor of her living room and petting her dog.

Image source: Getty Images

When you’re down to nothing, you have everything to gain.

People start over for many reasons, including job loss, divorce, illness, and business failure. Whatever the reason, if you’re starting anew, here are some steps to take in rebuilding.

Acknowledge the twist

Remember that you’re not starting from scratch. The fact that you’ve lost assets means that you had assets to lose. Whether that’s a retirement account, home, or business doesn’t matter. You know what it’s like to work for — and achieve — something. You did it once; you can do it again.

Establish credit in your name

If you don’t have much credit in your name, establish your own healthy credit file by taking out small amounts of credit and paying them off like clockwork each month. If your credit score has taken a hit, apply for a credit card for people with bad credit, use it to make small purchases, and pay it off each month before the bill comes due. Or you might ask someone you’re close to to add you as a user on their credit card. Your credit score gets a boost each time they make a payment, even if you never touch the card yourself.

Invest right away

The sooner you begin, the faster you can recoup losses. Maybe you can’t invest as much as you once did. That’s okay. Something is better than nothing, and you can add to your investment pot over time. The more time compound interest works its magic, the better. Every dollar helps, whether you plan to retire in 10 years or 30.

If you’re employed by a company that matches a percentage of 401(k) contributions, do whatever you can to contribute at least that much. The matching funds are basically free money.

Let’s say you earn $60,000 annually, plan to work 15 more years, and your employer matches up to 5% of your contributions. Here’s how much you’ll have put away with just your 5% on its own:

Annual Income

Percent Contributed

Amount Contributed

Average Annual Rate of Return

Time Until Retirement

Value At Retirement

$60,000

5%

$250/month, before taxes

7%

15 years

$75,387

Since your employer also matches that 5% of your income, you’ll have $150,774 instead.

If you were to raise your pre-tax contributions to 10%, here’s how it would look instead:

Annual Income

Percent Contributed

Amount Contributed

Average Annual Rate of Return

Time Until Retirement

Value At Retirement

$60,000

10%

$500/month, before taxes

7%

15 years

$150,774

Including the additional 5% contributed by your employer, you would have $226,161 at 15 years. It’s not a fortune, but could be very helpful. By the way, if you don’t touch it for 20 years, that nest egg would be worth nearly $369,000. If you don’t plan to retire for 30 years, it will be worth more than $850,000.

If you’re not with a company that matches contributions, find a brokerage firm that supplies the level of education and direction you’re looking for and get started.

Get professional help

After financial trauma of any sort, it’s tempting to invest aggressively. While in some circumstances it could be an effective way to make up for losses, it may not be the best move if you’re closing in on retirement. Consider working with a financial advisor, even if it’s on an hourly basis and you pay only for their time helping you come up with a smart investment strategy.

Postpone Social Security

One thing my husband and I (and many of our friends) have done is raise the age at which we expect to retire. We don’t see it as a sad thing. I never want to stop working, and now that my husband is in a job that tickles him, he’s not in a hurry either. The minimum age to retire is 62, but if you can wait until you’re 70, you max out your monthly Social Security payments.

Find support

Millions of people have made money, lost money, and started over. Chances are you already know a few people who’ve redesigned their lives from the bottom up. Talk to them. Ask them what they learned from the experience. If they had it to do over again, is there anything they would change?

People who experience hardship often have the best stories to tell and are often an excellent source of inspiration. It may not be easy now, but with luck, you can look back one day and say, “Hey, I did okay — despite the unexpected setbacks.”

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