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How Credit Scores are Affected by Bankruptcy, Foreclosure & More

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Credit Score RangesThere are certainly many things that can negatively impact your credit score, some more than others. If you are worried about your credit or are trying to maintain a good score, it is helpful to know items on your credit report could cause the biggest impact on your score.

Below we’ve outlined four issues that could cause the biggest drop in your credit score. We have also listed the average point loss for each item.

How Much Does a Bankruptcy Lower Your Credit Score?

The higher your starting score, the more points you’ll lose for filing for bankruptcy. For a person with a credit score of 680, filing for bankruptcy will lower your score by 130-150 points. For a person with a score of 780, filing for bankruptcy will cost you 220-240 points.

How Much Does a Foreclosure Lower Your Credit Score?

According to FICO, if your credit score is 680, a foreclosure will drop your credit score on average by 85 to 105 points. If your credit score is excellent, at 780, a foreclosure will drop your score by 140 to 160 points. In other words, the higher your credit score, the more your score will be affected.

How Much Does a Late Payment Lower Your Credit Score?

One late payment could have a more significant impact on higher credit scores. According to FICO data, a 30-day delinquency could cause as much as a 90- to 110-point drop on a FICO Score of 780 for a consumer who has never missed a payment on any credit account.

How Much Does a Car Repossession Lower Your Credit Score?

Having your vehicle repossessed could cause a 100-point drop in your credit score. And late payments, collections, and public records generally all stay on your credit for about seven years, according to myFICO.com.

For most people, the above issues are unavoidable but in certain circumstances, it is a choice to make depending on your financial situation. If you are swimming in debt and are debating filing for bankruptcy, for instance, you may want to consider a few things first. In that scenario, if your credit score is already low due to late payments, high debt-to-income ratio, and delinquent accounts, you could potentially improve your credit quicker by filing for bankruptcy as it would not have as big an impact on your score but would give you the fresh start needed to start rebuilding your credit.

For assistance with credit repair or counseling, contact Credit Absolute.

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Why Do Credit Scores Drop After Acquiring a New Credit Card?

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Even if a credit card provider checks your credit history and approves you, your credit score will still drop a few points as a result of the transaction. Ironically, this is correct. In the course of doing a thorough credit check or inquiry, they have gained access to your whole credit history. For every test you fail, you will lose a few points from your overall score. This is called the failure penalty. Consequently, if you have recently obtained a new credit card, you may discover that your credit score has decreased.

A credit card provider will only execute a hard pull on your credit report after you have applied for the credit card (not for preapproval). In order to obtain a complete credit report from one or more credit bureaus, but often only from Experian, TransUnion, and Equifax, a request will be made to the credit bureaus (the top three).

A hard inquiry deducts points from your score.

The good news is that each hard credit check just subtracts a few points. Small changes in your total, especially if you’ve just requested credit, are irrelevant. They’re also temporary, and if you maintain using credit responsibly, your score will improve.

How much a hard inquiry lowers your credit score is a complex topic. It depends on how often you seek for credit. Applying for multiple credit cards in a short period of time can cost you tens of points. Remember that whether you accept or reject the credit offer, the forceful pull always deducts points.

How to avoid this

Ask to be preapproved by the issuer. This is a little check that will not affect your score. Of course, preapproval does not guarantee a credit offer if you complete a full application. In the event of failure, it permits you to escape a hard check.

The ability to identify which everyday financial tasks require tight checks allows you to accomplish them only when you’re 100% serious. Among them are:

Car Mortgage Loan
Student credit card loans
Personal loan
Apartment or house rental

A Credit Increase Request Can Hurt Your Credit Score

Encouraging your credit card provider to increase your credit limit will reduce your score. Why might acquiring a credit boost harm your credit score? – Again, this is a tricky question.

But not every lender will run a hard credit check to verify if you meet the requirements. “Credit card issuers aren’t always transparent about the request’s outcome,” Experian notes. “If you’re unsure and can’t find the information online, call your card issuer and ask whether a soft or hard inquiry will be used,” they advise. You can also ask how likely your request is to be approved.”

Lenders and creditors update the credit bureaus on your conduct. The credit bureaus then update your credit report on a monthly to 45-day period. Credit scoring systems like FICO and VantageScore use this data to calculate your credit score. You can check your score online as often as you want.

You can review it once a week.

Reading your credit report might help you understand changes in your credit score. Inquiring about your credit score is considered a light check, and no points are subtracted. According to USA.gov, you are entitled to a free credit report from each of the three major agencies once a year.

If you have a bad credit score due to numerous credit card applications, stop applying for credit cards. Lenders may be concerned if you have a string of bad credit inquiries, Money says. Experts advise a three-month gap between applications, and even longer if your score is low. It takes two years for a hard check to be removed from your credit record.

What is holding your credit score down?

Starting with a low score takes time to build credit. You can check your credit record to discover if any of the following things are holding you back:

  • Identity theft (spending on your credit card by someone who has stolen your details)
  • Unexpected increases in expenditure (which reduces your credit limit)
  • You just closed a card (this can shorten your credit history and reduce your total available credit)
  • You’ve moved a lot (some lenders see this as a sign of instability)
  • You paid off a debt, changing your credit mix (loans to credit accounts)
  • Finances (mortgage, shared bank account) with someone with terrible credit.
  • You forgot about a credit card bill.

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What is Experian’s Credit Boost?-An Overview

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What is Experian Boost and how does it work?

Credit scores below 650 are one of the most significant financial burdens you will face in your lifetime. Poor, or even fair, credit scores may disqualify you from qualifying for certain types of credit accounts or loans, depending on your situation. This may also result in higher rates of interest being charged. This means that if your credit score improves, you will be eligible for better interest rates and loan terms in the future as well.

So, how do you plan on improving your credit score in the future? Experian’s Credit Boost, also known as Experian Boost, is a new service that will be able to assist you in accomplishing exactly that.

Experian is one of the three major credit bureaus operating in the United States. They collect information on people from a variety of sources, including mortgage lenders, credit card companies, banks, and other financial institutions, as well as from public records and collection agencies.

In addition, the company issues credit reports, which contain information about a consumer’s delinquencies, credit accounts, and other items such as bankruptcies throughout their credit history. This will also provide consumers with a credit score, which is calculated using a proprietary formula that is specific to them. Experian is currently offering a brand new program dubbed Experian Boost, which is intended to assist people in improving their credit rating.

There have already been some positive outcomes reported as a result of the program’s implementation. According to Experian’s reports, users of Experian Boost have seen an average increase of 13 points in their FICO credit score since signing up.

Since the launch of Experian Boost, approximately 60% of its users have noticed an improvement in their credit scores. You must keep in mind, however, that results may differ from person to person. Some users did not notice any changes in their scores or their chances of getting approved, and this was due to technical difficulties. Some lenders do not use Experian credit files at all, and others do not use the scores that have been affected by Experian Boost, which is another issue.

Experian Boost – How Does It Function?

For you to be able to take advantage of this free program, you must first create an Experian Boost account. You should keep in mind that this is a separate account from your Experian account. When you sign up, you will be asked to create your own profile and to provide Experian with some personal information about yourself.

You will need to link the bank accounts that you use to pay your utility bills to the program once you have completed the registration process and have obtained your own account. If you want your utility bill payments to have a positive impact on your credit score, you must link the bank accounts that you use to pay them to the program.

Your payment history will then be transmitted by Boost to Experian, which will then use it to calculate your credit score as part of the calculation. These payments will appear on your credit report alongside the rest of the open accounts and credit lines that you currently have in place.

In particular, one feature of Boost that appeals to me is that it only reports the payment history of your bank account that has been positive. If you didn’t make your phone bill payment last year, it won’t be reported. It is this that distinguishes it from the traditional methods of calculating credit scores.

Experian Boost will almost certainly be able to work in your favor when it comes to improving your credit score because it will only show positive payments on your reports.

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Why Do Employers Check Employees’ Credit? What Do They Look For?

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Employers today evaluate applicants based on their previous work experience, skills, and attitude. Depending on the information contained in the candidate’s resume and the information obtained during the interview, employers can make hiring decisions in a variety of positions. However, there are some instances in which your credit score is also important in your job search process.

While potential employers cannot check your credit score in its entirety, they can obtain a copy of your credit report and use it to assess your judgment and determine whether or not you pose a financial risk to the company. Interviews are already stressful situations, so being aware of what potential employers can and cannot find out about you through a credit check can alleviate one of your concerns significantly.

Is it possible for an employer to see your credit score?

During a job application, prospective employers will not be able to see your three-digit credit score. However, they can still view a version of their credit report that differs from the version that potential lenders can view. What they can look at is a modified report that does not contain information such as your account numbers, date of birth, information about your spouse, or other information that could be used to violate the laws governing equal employment opportunities.

In light of the fact that the purpose of your credit score is to demonstrate to a lender whether or not you are creditworthy, it is unlikely that potential employers will consider it when making hiring decisions. Therefore, it is not included in the report and is not visible to them.

What information can employers access from your credit report?

Personal information such as your name, Social Security number, and address will be included in the modified credit report that is made available to potential employers only. This will include information about your incurred debt, such as credit card debt, mortgage debt, student loan debt, and your payment history for each of these types of obligations.

If this is the case, why would potential employers be interested in obtaining access to your credit report? Employers may take this action for a variety of reasons. It is possible that a credit report will reveal a lack of financial responsibility if money management is part of the job. This could also indicate financial distress, which could increase the likelihood of theft or fraud.

Employers can reduce the risks associated with the hiring process by checking off prospective employees who have some red flags on their credit reports. For example, if the applicant’s credit report shows a pattern of late payments or something more serious, employers may interpret this as an indication that the applicant lacks adequate organizational skills.

Before running a person’s credit report, it is mandatory for employers to obtain the applicant’s permission first. If an applicant is not hired as a result of the information contained in his or her credit report, the employer isIn

In conclusion

Essentially, a credit report can assist potential employers in determining how responsible and trustworthy you are as a potential employee. It is especially useful if you are applying for a position in which you will be responsible for managing financial information or working with sensitive customer data.

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