Why We Love Improving Credit
(And Why You Should, Too!)

Improving credit can give people such a great feeling. It comes as a relief because it lets you put money-related setbacks or mistakes in your past. At the same time, it offers an exciting new start for your financial life.

Love Improving Credit

In particular, improving credit can positively affect the following areas.

1. Credit Cards

With a more impressive credit, it’s easier to get credit card applications approved. Plus, your interest rates will be lower.

Also, in some cases, credit card companies will automatically raise your borrowing limits as your credit score goes up. And, if they don’t, you could always apply for higher limits. Even if you don’t spend any more money with your credit cards than you have in the past, a higher credit card limit will help you. That’s because it will lower your credit utilization ratio. That ratio measures how much you spend versus how much you could spend. A lower credit utilization number will mean an even higher credit score.

In addition, there are various credit card bonuses that people with good credit may be eligible for, including programs that provide rewards points or cash-back offers.

2. Loans

Reputable lenders are much more likely to authorize loans to people with solid credit reports. Therefore, you’ll surely be capable of securing larger loans and more favorable terms ― such as lower interest rates ― with a better credit score.

Equipped with that higher score, you could also try to renegotiate and refinance loans that you’ve already taken out, especially a mortgage if you have one. Maybe you’ll be able to eliminate certain fees or extend the length of a loan, which obviously would mean making smaller payments each time.

3. Rental Homes

Nowadays, it can be difficult to find a landlord who’ll let you rent an apartment or other type of housing if your credit is poor. Many landlords feel, rightly or wrongly, that tenants with bad credit are less likely to pay their rent on time.

This fact holds true for rented vacation homes as well. Whether you’re renting such a place for one time only or on a recurring basis, you very well might obtain lower rates and fees if the owner knows that you have good credit.

4. Security Deposits

When your credit report is healthy, you may not have to pay security deposits when you sign up with a new utilities company or buy a new smartphone. And, by not having to pay such deposits, you could save hundreds of dollars over time.

5. Getting a Job

If you’re applying for a new job, your prospective employer might ask to look at your credit report. You’d need to give your consent in writing before anyone could do so. And, if you have an excellent report to show off, it might make you look especially responsible and mature.

At this time, most employers don’t look at credit reports, but that situation could change. Moreover, if you’re applying to a company that does check out these reports, having better credit might give you an extra surge of confidence when you go in for your job interview.

6. Auto Insurance

Car insurance companies often calculate that people with higher credit scores file fewer claims. As a result, they frequently charge higher premiums to those with lower scores. Therefore, improving your credit can be a major advantage when you’re looking for an auto insurance policy.


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Repairing or Improving Credit

With all of these benefits in mind, you might be wondering how to begin repairing or improving your credit. Well, a reputable credit repair company is a good place to start. The professionals will work with you to comb through your credit report and find errors that are negatively affecting your credit. For example, perhaps your record states that you forgot or were late with a certain debt payment, but you’re sure that you paid it on time. Your credit repair company will dispute on your behalf to hopefully get that removed. Not to mention, in the process of advocating for you, your credit repair representatives could offer you a wealth of financial advice on how to live a better credit life.

It’s all too easy to spiral downwards financially. As you’ve read, when you have bad credit, it’s harder to obtain favorable conditions from lenders, landlords, credit card companies and others, which means it becomes harder to pay back the money you already owe. Then, if you fail to make some of those payments, your credit score will drop even further, which can put extra monetary strains on you. The cycle is vicious.

Fortunately, the opposite is also true. When you boost your credit, you’ll accrue an array of benefits that will make it much simpler to live within your means and save for the future. As time passes, your economic outlook should look brighter and brighter. With an outstanding credit repair service at your side, you can finally break free from harmful spending patterns and take charge of your financial life. That sense of personal empowerment may be the best reward of improving credit.







Short Sale vs. Foreclosure and Your Credit

Financial trouble can be disastrous for American homeowners. After missing four to five mortgage payments, a lender will typically foreclose on your mortgage. This puts you out a home and results in a hefty bad debt showing on your credit file. Meanwhile, a short sale is an “exit strategy” that lets you pay off as much of the debt as possible.

Short Sale vs. Foreclosure

How a Short Sale Affects Your Credit

It is common knowledge that a foreclosure is bad for your credit score. But a short sale is an alternative that can reduce the amount you have to foreclose. Accomplishing this will require selling the home before the foreclosure takes place. When this is an option, it can result in much less bad debt showing on your credit report.

The short sale will still lower your credit score for a long time. This entry can stay on your credit report for up to seven years. You can lose anywhere from 85-160 points, depending on your current FICO score and the severity of your short close. The majority of your score drop will go away within two years if you sustain good credit otherwise.

No Late Payments on a Short Sale

Are you aware that you will be unable to pay for your mortgage in the near future? For example, you might be going through divorce procedures and realize that the home is too expensive for either party to uphold. It makes sense to do a short sale at this point, but what does it mean for your credit score if you avoid late payments?

The biggest benefit is that you will not have late payments on your credit report. Your first late mortgage payment can drop your FICO score by 90-110 points. The actual damage depends on your score before the late payment; for example, if your score is 730, this number could drop below 650 after your first missed payment.

Now, there are two problems that interfere with this happy ending:

  1. Sometimes You Need Late Payments

While not always the case, many lenders will require you to run late on your mortgage payments to qualify for a short sale. That requirement exists for FHA home loans, which need to be a minimum of 31 days late by the time the sale closes. Otherwise, FHA will not approve the transaction. This means you need to withstand the FICO score drop that comes with running late on a mortgage payment. Thankfully, this not a requirement if your mortgage is through Fannie Mae or Freddie Mac.

2. Your Home Has to Sell Pretty Fast

After 90 days or so, there will be more pressure to perform a “deed in foreclosure,” which works the same as a voluntary repossession. This entry factors into your credit report the same as a foreclosure, which means it is more harmful to your credit score than a short sale. Thus, your home needs to sell pretty fast or else the benefits of a short sale are minimal.

You can always take action to make the voluntary repo show better on your file. The main thing is to request the entry to show as “paid as agreed,” on your report. If the lender does not comply, you can then ask for it to be marked as “settled,” or “unrated.” These are all better entries than “foreclosure,” which is a reporting option for your lender.

How a Foreclosure Impacts Your Credit Score

A foreclosure is a more serious way of handling an unaffordable mortgage. You are giving up the debt and the lender must assume full liability. A short sale can let you capture on any real estate market gains to mitigate some of the losses. The remainder (“the deficiency”) is all you are left on the hook for, although some creditors will sue you in court for these funds.

But, with a foreclosure, you are effectively walking away from your mortgage in the most irresponsible way possible. There is no chance to determine the value of your home and the amount of bad debt becomes your entire mortgage balance. This means failing to short sell when running late on payments during a hot real estate market can be costly.

FICO Score Change from Foreclosing

You can expect your FICO score to drop by anywhere from 85-160 points depending on the specifics of your foreclosure. This typically happens when you run many months late, and by the time the debt closes, you will certainly have a 120-day late entry on your credit. This late payment entry holds longer than a single 30-day late payment; while a short sale will mostly age off after two years, a foreclosure will weigh your FICO score down for longer.

A foreclosure often comes with more serious financial struggles than a short sale, because short selling is pre-foreclosure and comes with foresight. Doing a short sale of your home can prevent you from going bankrupt at times. If your foreclosure pairs with a bankruptcy, your FICO score could drop by as much as 240 points.

Conclusion: Go for a Short Sale When Possible

The truth is that your score will suffer for at least two years, regardless of what you choose. The short sale will be less damaging, though, and it will not be as hard to keep building your credit as it would be after foreclosing on your home.

Remember that large FICO score drops occur from late payments, foreclosures and short sales alike. But it is the reporting terms that decide how severe the drop is and how long it takes to recover.







Debt Collection: Dealing with a Collection Agency

It is never fun when a bill gets sent to a debt collection agency. But, sometimes it puts the ball in your court and gives you a chance to achieve true credit repair. Whether you just couldn’t afford to pay your debt or you didn’t agree with it, once it is “in debt collections,” there is power in your hands.


Your Rights Against a Debt Collection Agency

There are many things you can do and say when dealing with a collection agency. First, you have the ability to make an offer to pay off the debt for less than the full amount. This could run down as low as 10 percent but it depends on how long the collection agency has tried to get you to pay it and what they paid for it.

It never hurts to make an offer. You can also negotiate a “pay for delete,” which means you clear the debt and get it taken off your credit report. With the help of a credit repair agency, this uncommon tactic becomes much more possible. It appears that the smaller agencies are more likely to agree than the larger ones.

Making Contact with a Debt Collection Agency

The debt collection agency will likely contact you before you realize you need to contact them. Or, the creditor you defaulted on will notify you first. You can send a cease and desist letter to force an end to any communication if you do not wish to deal with the agency. You also have the right to dispute the debt through the credit bureau(s) that list it on your file.

You should always start the communication off by confirming the amount you owe and requesting a written copy of these details. If the debt collection agency reports a different balance — a credit repair company can push for it to be removed from your file.

Making an Offer to Pay Off Collection Debt

In most cases, your main course of action is making a flat offer to pay off the debt. Agencies usually pay in the 25-50 percent range when purchasing your debt from the original creditor. Keep this in mind when making your offer. Make sure to only communicate in writing and start with a lower offer to see how they counter.

What you want to avoid is making a payment plan with the agency. This is actually bad for your credit report and score. It means that you will have an entry to bump the bad debt to the top of your report every month. You want the agency to report the debt as “paid as agreed,” as soon as possible as it can take two years before the damage wears off.

Differentiating the Types of Collection Agencies

There are two types of collection agencies that exist, the ones that operate in-house and the external companies that buy your debt. You have more leverage when working with an in-house agency. In some cases, it is even possible to restore your credit line once you cover your debt which looks better on your credit report.

Always confirm whether you are dealing with a first or third-party collection agency. This will tell you how much negotiation room you have when making an offer to pay off the debt. It also indicates whether you can do a “pay for delete,” or if you are better off approaching as someone unable to pay in full. Paying for a removal normally requires you to pay 100 percent of the initial debt.

How Collection’s Agencies Report Debt

You need to be very careful with how a collection agency handles your credit report. The balance, payment date, settlement terms and everything else must be accurate and timely recorded. You can dispute the debt with the respective credit report agencies if the information supplied by the collection agency doesn’t match the details of the debt on your credit report.

Your goal is to pay off any debt you truly owe and obtain a “paid as agreed,” comment on your credit file. This results in the lowest impact possible to your credit score and looks better when future lenders pull your file. You will notice a bump in your FICO score if you pay off a debt in collections that sat for a while.

You want to avoid having it show as anything else. You should also avoid paying off very old collections debt if possible. These entries only show on your file for seven years after the last delinquency date. You make the debt a new factor in your credit score calculation if it already stopped having an impact. Just send a cease and desist to stop further communication and wait for it to drop off your report.


Dealing with a collection agency is not all that bad. Even when you get the odd rude and aggressive one, it’s possible to stop the harassment. The key is to keep to written communication and log each interaction you have while watching for chances to dispute the debt.

A professional credit repair service can help you deal with collection agencies. If you need help removing a collections debt or paying it off cheaper, feel free to consult with Ovation Credit Repair to learn your options (complimentary consultation).