Hi friends,

Here’s something interesting to share with you.

CreditMagic has now introduced a new look with easier navigation and add-on features. The basic objective behind the makeover is to highlight different sections, so as to make them easily accessible. Thus, visitors and community members will find it easier to browse through various sections such as “Forums“, “Ask Community“, “Knowledge Bank” etc.
What are the changes and add-on features?

You’ll find the following changes and add-on features when you browse through CreditMagic.

• Helpful Resources - It includes the Glossary, FAQ and Letters of Credit sections and can be easily located on the home page. Sample Letters of Credit are very handy and these are often required in dealing with credit related issues.

  You can easily look through the Glossary section, in case you cannot follow a credit-related term. In the FAQ section, you’ll come across commonly asked questions which can help you deal with credit issues in a better way. So, you can get ready answers to simple queries without having to put it in the Forums, and waiting for a reply.

• Popular Discussions - This section makes it easier for you to check out popular forum discussions on credit. You can participate and share your views in such discussions.
• Community Area - Considering that we’ve had a large number of visitors in recent times, the Community Area is highlighted such that one can easily find it out and login or join our community. Visitors joining our community interact in a friendly manner and solve each others’ credit related problems by sharing their knowledge and personal experiences.
• New Feature- We have included an add-on feature - the Blog. It will keep you updated with the recent happenings in the community. Herein, you’ll also find information related to new developments in the credit/finance industry.

The changes in CreditMagic have been made, keeping in mind its growing popularity. The community has till date provided quick and smart solutions to credit problems and helped the members to build up good credit. The new features further ensure an easy access to the resources available in the community.

If you want to build up your credit or repair your old credit, departmental store credit cards comes in handy. This is because these cards easily get approved even with a bad or with no credit. However, you should use these cards exclusively for the purpose of building up credit profile. Some of the leading departmental stores like Macy’s and Wall Mart now offer their own credit cards which may prove to be a very useful instrument for building up your credit profile. If you want to go for a store card, you need to visit the departmental store and fill up an application form.

After your credit card application gets approved and you get a new credit card, you should make limited purchases with your card so that you can manage to repay it within the interest free due date, as these cards carry high interest charges. Moreover, paying off the debt within the due date will help you to maintain a good credit history. Not only that, since the “amounts owed” factor plays a vital role in your FICO scores, you should not spend more than 30% of your credit limit on your cards. The biggest drawback of these cards is that, these cards come with a low credit limit and you can use these cards only within the chain of the departmental store. However, quite recently, these departmental stores have tied up with banks like Citibank and American Express and started offering VISA or MasterCard co-branded cards, which will allow you to use these cards even outside these departmental stores. In addition to this, you can even take cash advances on these co-branded credit cards just like normal credit cards. You can also enjoy lower interest charges with these co-branded cards as compared to the ordinary departmental store cards.

These cards provide you with host of other facilities as well. You may earn reward points on your purchases with these cards. However, you should not engage yourself only in earning reward points, because you may end up with debts you are not able to repay. If you cannot repay your debts on time, it may get reflected in your report as delinquent account and may badly affect your score. You should only use these departmental store or co-branded cards for the purpose of building credit. Once you build up a good credit score, you may go for general credit cards.

The credit score is a three-digit number, which is the measure of your credit worthiness. The credit score is calculated by using a mathematical model. Fair Isaac Corporation (FICO) scoring model is accepted as the standard method of calculation by most creditors and financial institutions.

5 factors affecting credit score

There are 5 factors on which the FICO score depends. By monitoring all the 5 factors, you can secure a good credit score. Check out the factors that affect the credit score, and know how you can keep them under your control.

1. Payment Records - This is the most important factor and amounts to almost 35% of the credit score. It determines how regular you have been with your payments. It is always best to make timely payments. Paying before the due date could sometimes help to raise the credit score by few points.

   If you have some delinquent or “charged-off” accounts that are adversely affecting your credit score, the best option would be to pay them off. The negative remarks may remain on the credit report even after you have paid them off. But, more than often creditors are more interested in the fact that you have tried to repair your credit by paying off old debts.

2. Outstanding Debt – This factor constitutes 30% of the credit score. This is a ratio of the amounts you owe to the creditor to your credit limit. It is always best to keep the credit utilization rate between 35-50%, even if you make timely payments. The lower your credit utilization rate, the better will be your credit score.
3. Length of Credit History - It amounts to 15% of the credit score. A longer credit history has a good impact on the credit score. So, if you have multiple credit cards, you can choose to close the newer ones. You can ask a relative or family member to add you as an authorized user to any of their old credit accounts. This will give a boost to your credit score.
4. Type of Credit Account – About 10% of the credit score depends on the type of the credit accounts you have. Unsecured credit card accounts are not enough to build a good credit history. You should have a good credit mix. If you have a student loan or an auto loan that you pay off in installments, along with the revolving credit card accounts, you will have a better credit score.
5. New Credit Accounts - You should apply for a new credit card only when you need it. Each time you apply for a new line of credit, there is a hard inquiry from the creditor on your credit report. One hard inquiry lowers your score by almost 2 to 50 points, and stays on your credit report for about 2 years. Thus, applying for many new credit card accounts within a short period of time lowers your score by several points.

The credit score is the measure of how you have handled credit in the past. Your credit score would determine whether you would qualify for a loan or a new line of credit. A credit score of 700 and above is considered as a good score. You can expect to qualify for loans at the best possible interest rate with a score ranging from 700 to 750. Keeping in mind the economic slowdown, maintaining a good credit score has become compulsory.

Credit is important in our day to day life and we cannot move without it. The better is our credit; the better is the terms on which loans are offered. So we try our best to maintain a good credit score. Letters of credit are intended to help you to repair bad credit. Now, credit score depends on our credit report and so we try our best to remove negative items from our report as these items adversely affect our score. However, as per the Fair Credit Reporting Act and the FTC, we cannot remove accurate and timely information from our report. We can only remove the incorrect entries. Letters of credit helps us to remove these incorrect entries.

The most common types of letters include the pay for delete letter, dispute letters to the bureaus, debt validation letter, and the letter to remove hard inquiries. Each of these letters of credit helps us in different ways to repair our bad credit. Here we try to describe how these letters help us to repair our credit.

Pay for delete letter: This letter is generally sent to the creditor in order to remove a delinquent account from your report. However, it may be noted that certain negative accounts like charged off and judgments can never be removed even through pay for deletion agreement. In other cases, if a creditor agrees to the pay for deletion agreement, the negative delinquent account gets removed from your credit report once you pay off the debt in full to the creditor and your credit score improves. However, you should always get the pay for deletion agreement in writing before you start making payment towards the debt. Since the creditor is not bound to remove the negative account from your report as per the FCRA, he may not agree to PFD. In such cases you may ask the creditor to report it as “paid in full”. Although “paid in full” is also treated as a negative in your report, it is far better than the debt being delinquent, as it saves you from judgment.

Dispute letters: Dispute letters can be sent to the credit bureaus to dispute any incorrect listings in your report. As per the Fair Credit Reporting Act, both the creditors and the credit bureaus are required to correct any incorrect item in your report. Once you dispute the debt, the bureaus need to investigate it within 30 days with the creditor and send you updates along with a free copy of your report if any changes have been made.

Debt validation letter: If you receive a collection letter from a creditor or a collection agency, or if you find a creditor / CA listing in your credit report against a particular debt, Section 809 of the Fair debt Collection Practices Act gives you the right to ask for debt validation to be sure whether you actually owe the debt to the creditor or not. The creditor has to stop the process of debt collection till the time they validate the debt. If the creditor is not able to provide you with debt validation, he must remove the item from your credit report; else you may file a complaint against the creditor with the Federal Trade Commission.

Letter to remove hard inquiries: Hard inquiries are made whenever you apply for a new line of credit. Whenever you apply for a new credit, you automatically authorize the creditor to pull out a credit report and make a hard inquiry. Each hard inquiry reduces your credit score. More and more hard inquiry implies that you are credit hungry which may prove negative for your score. However, only authorized inquiries can stay in your credit report. So if you find any unauthorized inquiry in your report, you may send a letter to the creditor asking them either to remove the hard inquiry or to verify your authorization. In most cases the creditors get the hard inquiry removed from your report if they cannot verify your authorization.

Whenever a creditor considers a debt as a bad debt and deems it to be uncollectible, they charge off the debt. Mostly a debt is charged off by a creditor if you have not made any payment towards the debt for a continuous period of six months. However, some creditors also charges off an account if it is past due for a period of 90 days. “Charge off”, also known as “write off”, may prove costly to your credit score. Whenever, an account is charged off by a creditor, it gets reflected in your credit report and may lower your credit score by as much as 100 points.

“Charge off” is considered a black mark on your credit report and cannot be generally removed before seven years. This negative listing may not only lowers your score, but also affect you in various ways. You may be denied a new line of credit, or may not qualify for re-aging your account if you have a charge off in your report. Most creditors usually sell off the account to collection agencies after charging it off. If you have a charge-off listed on your credit report, it does not mean that you are no longer required to pay off the debt. In fact, if the debt is within the Statute of Limitation period, the creditor can sue you to the court and bring judgment against you to recover the debt either by garnishing your bank account or your wage.

Charge off can be removed from your credit file only by the original creditor in exchange of partial or full payment of the outstanding debt. If the creditor agrees to remove the charge off listing from your credit report, you should get the agreement in writing. Now, if the debt has been sold to a collection agency, it cannot be removed from your report before seven years even if you pay it off in full. However, even if the creditor does not agree to remove the charge off from your report, you should try to settle the debt for less and pay it off in order to avoid judgment which the creditor might bring to recover the debt.

Since it is difficult to remove charge off from your report, you should try to prevent is as far as possible. For this you should contact your creditor whenever you fall behind your payments, explain him of your financial situation and try to negotiate for a repayment plan and pay off the debt. Mostly the creditors will agree to work with you. However, if you are not successful in negotiating with your creditor, you may appoint a credit counselor who may help you out.