In the last year or more, many consumers have made conscientious efforts to reduce their reliance on credit cards and increase the timeliness of their payments, leading instances of delinquency and default to slip to at or near all-time historic lows.
But lenders will likely see their net charge-off rates slip for one more quarter before expanding again by the end of the year, finishing 2012 with higher rates of defaulted accounts than they began with, according to the latest report from analysis firm Fitch Ratings, entitled “Credit Cards: Asset Quality Review.” At the end of the first quarter, the net charge-off rate observed by the nation’s seven largest credit card lenders stood at 4.02 percent, down from 4.2 percent at the end of 2011, and 6.39 percent in the first quarter of that year.
Further, charge-offs are well below the five-year average of 6.51 percent observed between 2007 and 2011, the report said. And because of trends in 30-day credit card delinquencies, which itself is well below the five-year average, it’s likely that the current charge-off rate will decline once again in the second quarter of this year.
However, the trend may soon reverse because consumers are once again feeling better about their finances in general, the report said. Portfolio contraction among major lenders more or less held steady in the first quarter of the year, and smaller card issuers actually saw more consumers opening new accounts.
As a consequence of this trend, which may also be the result of expanding credit standards that are allowing subprime borrowers to once again access lines of credit they were unable to tap just a year ago, it’s likely that defaults will begin expanding once again, trending back toward historical averages from the current levels. Many had long projected that there must be a logical point at which charge-offs bottomed out, and we could soon see that point.
Millions of accounts were written off by lenders as uncollectable during and immediately following the recent recession as card issuers tried to shield themselves from significant loan losses as a result of consumers who could no longer afford to pay their bills. However, the improving economy has emboldened most major lenders to once again extend credit to those who previously defaulted on their accounts.
Children are not supposed to have a credit report in their name, but new studies have found that the number of those who do is growing considerably, which can pose major problems for affected kids.
People under the age of 18 who have a credit report in their name are almost certainly the victims of identity theft, and this is a large and growing problem nationwide, according to a report from the Columbus Dispatch. Some studies have found that large amounts of kids have been a0ffected by identity theft, in which the crooks open large amounts of credit in their name and steal tens of thousands of dollars or more, and leave their young victims to carry the blame.
Often, this type of crime is carried out when a thief gains access to a kid’s Social Security number, the report said. Sometimes this can happen as a result of data breaches at hospitals or schools, and other times, their relatives may steal their identity. These youngsters are usually targeted because they will have no credit history and, since parents wouldn’t normally even think to make sure their son or daughter has a credit report in their name, the crime is unlikely to be discovered for a long time.
“These kids’ Social Security numbers are particularly valuable to thieves because they can go years without detection,” Bo Holland, chief executive of AllClearID, told the newspaper. “Because of privacy restrictions, the credit bureaus can’t share with parents what they find in their (child’s) files. So they don’t know who is using the Social number or what accounts were opened.”
The most common way a child who has been victimized by this type of crime discovers the problem is when they turn 18—sometimes even older—and apply for a line of credit, the report said. To their dismay, they may learn that they’re saddled with significant debts, such as those for auto loans, credit cards and sometimes even mortgages, that have gone long periods of time without payment.
One thing parents who are concerned about this type of crime can do is contact the credit reporting agencies and ask them to put a freeze on their kids’ credit until they turn 18 and are capable of obtaining some types of loans on their own.
By: Gerri Detweiler
If it seems like everyone’s talking about credit scores these days, it’s probably not your imagination. Consumers appear to be getting smarter about credit scores. At least that’s what the results of a survey of 1000 consumers by the Consumer Federation of America (CFA) and VantageScore Solutions show. Compared to a year ago, a larger percentage of consumers correctly answered a variety of questions about credit scores. But there were a few key concepts that tripped up many respondents.
Most of those surveyed did well on the basics. They knew that:
- Mortgage lenders and credit card issuers use credit scores (94 percent and 90 percent correct respectively). And many other service providers also use these scores — landlords, home insurers, and cell phone companies (73 percent, 71 percent, and 66 percent correct respectively).
- The three main credit bureaus — Experian, Equifax, and TransUnion — collect the information on which credit scores are frequently based (75 percent correct) and that it is very important for consumers to review their credit reports with those agencies to learn if they are accurate. (82 percent correct).
- Consumers have more than one generic credit score (78 percent).
- The following types of information influence scores: missed payments, personal bankruptcy, and high credit card balances (94 percent, 90 percent, and 89 percent correct respectively). And that making all loan payments on time, keeping credit card balances under 25 percent of credit limits, and not opening several credit card accounts at the same time help raise a low score or maintain a high one (97 percent, 85 percent, and 83 percent correct respectively).
So What’s The Problem?
CFA’s Executive Director Stephen Brobeck said he has “have never seen such improvement from one year to the next,” in the organization’s consumer knowledge surveys. But there was still some basic information about credit scores that many didn’t understand. In particular, consumers didn’t seem to grasp how expensive poor credit scores can be. For example, fewer than one in three were aware that, on a $20,000, 60-month auto loan, a borrower with a low credit score is likely to pay at least $5,000 more than a borrower with a high credit score.
While credit scores don’t take factors like age, marital status or race into account, just over half thought a person’s age (56 percent) and marital status (54 percent) are factors used to calculate credit scores, and 21 percent incorrectly believe that ethnic origin is a factor.
Consumers are also confused about how inquiries affect credit scores. Just 9 percent correctly knew that “multiple inquiries during a 1-2 week window” will not lower scores. In reality, when it comes to FICO scores, recent inquiries within a short period of time for mortgage, auto or student loans don’t affect scores, and going back in time, multiple inquiries for the same type of loan in those categories are treated as a single inquiry. The exact time period varies, depending on which scoring model is used. Similarly, multiple inquiries within a 1-2 week window won’t lower VantageScore scores.
The Smartest Consumers Know Their Scores
Checking one’s credit scores apparently does help cut through the confusion; those who had seen their scores recently were more likely to correctly answer the survey questions. But fewer than half of those surveyed (42 percent) had received at least one of their credit scores during the past year. Of those who did see their scores, the top sources were a website (49 percent) and a mortgage lender (45 percent).
The number of consumers in the top credit score range has reached its highest level since fall 2008, a report by FICO Labs shows, which could indicate more Americans are working to better their personal finances, including improving their credit reports. (If you want to know more about how a credit score works, check out: What’s a Credit Score?)
More than 18 percent of consumers now have FICO scores between 800 and 850—the first time the ratio of consumers has grown to this figure since October 2008, FICO Labs reports.
However, the number of consumers with scores between 700 and 799 hasn’t improved in the same manner. The report states 15.5 percent of U.S. residents have scores in this range, which is the lowest the figure has been since FICO Labs began recording the statistic in 2005.
Additionally, the report found that nearly one-third of the country’s consumers have FICO scores between 550 and 699—the most amount of people with a score in this range since 2006.
According to FICO, this data likely denotes there are still a considerable amount of Americans in poor or average financial standing.
[Credit Check Tool: Try Credit.com’s Free Credit Report Card]
Despite many Americans in evident need of a credit tune-up, Rachel Bell of FICO Labs stated the report indicates a considerable change in consumers’ attitudes toward their personal finances.
“Many consumers have moved into the top tier of the FICO Score range by redoubling their efforts to maintain an excellent credit profile,” said Bell. “Other people have fallen into lower tiers, most likely due to the financial stress that many households have been feeling. Despite this shift, we continue to observe more than half of FICO Scores in the U.S. are between 700 – 850, which means Americans have managed their credit well despite the economic downturn.”
[Featured Products: Compare credit score, report, and monitoring plans at Credit.com]
One facet of the report that stands out, according to Bell, is the percentage of consumers with FICO scores in the 300-549 range—nearly 15 percent. This is the lowest the figure has been since 2006. The reason for the reduced figure, Bell notes, is due to many lenders writing off a substantial amount of bad debt.
“Some consumers who had multiple bad debts and delinquencies a few years ago are now able to move on, and their credit scores are starting to move into the 550-699 range,” Bell added.
by: Michael Creditfirm.
Many Americans are still grinding through life with Bad Credit. In fact, over 110 million Americans (50% of the population with credit files) have had their credit file negatively affected by the recent economic crisis according to Business Wire. So how do you know which Credit Repair company to choose when looking for help in improving your credit report?
Going through life living with bad credit, many Americans struggle repaying high interest loans and making minimum monthly payments on their credit cards, barely covering their interest charges which can be as high as 29.99%. Paying more money to rent then they would to own because they don’t qualify for a mortgage based on their credit history.
Good credit can save you thousands of dollars by allowing you to qualify for low interest rate mortgages, auto loans, credit cards, and more. Unfortunately, most people choose to live with bad credit rather than be proactive and make a change to improve their credit.
Choose to be proactive and fix your bad credit, it’s time to get serious about credit repair. CreditFirm.net has helped thousands of clients qualify for low interest rate mortgages, auto loans, credit cards, and more, by improving their credit scores. Let CreditFirm.net guide you down the journey toward fixing your bad credit. We’re not your typical credit repair service. With 15 years of credit repair experience, we have helped thousands of clients increase credit scores and improve credit reports. Results and customer satisfaction are of the utmost importance for us, that is why we are always eager to help and answer any questions which you may have.
CreditFirm.net will never ask you to pay for any credit repair services which we have yet to complete. This is why we offer a FREE Credit Consultation with a qualified credit consultant who will:
Help you obtain your FREE credit report and go over it
- Explain what is inside your credit report. (both positive and negative)
Explain what a credit score is and how it is calculated
- Explaining the different types of credit scores and the metrics used in calculating them.
Create a Custom Action Plan
- A guide for you to follow which will outline the necessary steps in order to improve your credit score.
- Different Clients have different goals and no 2 situations are exactly alike. This is why we treat every case on an individual level. We are not a credit repair factory like many of our competitors, all of our work is custom.
One service level
- Unlike our competitors, we don’t confuse you with different levels of service offering different credit repair techniques. We have one service level, we utilize every tool we have and we only have one speed, FAST. We do everything we can, as fast as we can, to help you improve your credit and reach your goals.
- We follow the Credit Repair Organization Act (CROA) to the tee. We do not offer guarantees because the CROA prohibits such practices, but we do promise first-rate service, an attention to detail, and our dedication to improving your credit report and score.
We want you to be confident in your credit repair decision and let our results speak for themselves. This is why our clients enroll in our credit repair service for distinctive monthly servicing periods and pay only for the credit repair services which have already been performed and delivered.