Carolyn Warren Interview

On this week’s episode of OEL the ladies interview credit expert Carolyn Warren. Carolyn has more than 20 years’ experience working in the financial industry. During this interview they will discuss the importance of credit maintenance and repair. She explains the best ways to pay off debts and raise your credit score.

Carolyn worked as a mortgage broker and a wholesale mortgage account executive for some of the nation’s largest lenders. She was also a sales representative for Correct Credit Company, Inc. Carolyn is the author of Repair Your Credit like the Pros, Build and Protect Your Credit Like the Pros, Mortgage Rip-offs and Money Savers, and Home Buyers Beware. Her passion is helping people improve their credit, save money, and reach their dreams of home ownership.

As soon as we enter the adult world, we’re taught how credit affects us. Credit is any arrangement where you buy goods or services now but you agree to pay later. Your credit is one of the most important facets of your personal finances. Credit is important because it enables you to borrow money when you need it. Nearly every aspect of our financial lives: from our ability to purchase a car or house, to credit cards and loans, and even to temporary housing like apartment applications revolve around credit. Unfortunately, without proper education on how to manage credit, it can be relatively easy to damage your credit score. Once your credit is damaged, it can be difficult to repair, however, getting a 500+ credit score back into the 7-800s is far from impossible. Credit experts like Carolyn Warren teaches us how to manage and repair our credit.

What is a Credit Score?

A credit score is “a number between 350 and 850 that tells a creditor or a lender how risky it is to lend you money or give you a credit card.” This number was formulated by an engineer and mathematician, Bill Fair and Earl Isaac in 1956. They wanted a non-discriminatory way to determine a person’s creditworthiness. Banks and other lenders needed to know if a person can be trusted to pay back a loan. That decision should never be made on a basis of gender, disability, religion, race, or any other prejudicial factor. Fair and Isaac created the Fair Isaac Corporation (FICO) to provide a fair and legitimate score to each individual.

Who Are the Three Main Credit Bureaus?

Equifax, Experian, and TransUnion are the three credit bureaus. They use the scores to determine whether or not you are worth the lending risk. These bureaus are not government agencies, they are private companies that do not regularly communicate with each other. Banks and other financial institutions are not required to  report to these agencies, and doing so actually costs them money. Financial institutions may choose to report to them, each agency might have a different report for the same individual. Sometimes mistakes are made when credit agencies update your report, which is why it’s so important to monitor your credit reports. If a mistake is causing a derogatory remark on your report, contact the agencies to have it corrected.

Skip to: 21:18 What is the difference between a FICO score and a Vantage Score

What’s the Difference between your FICO Score and your Vantage Score?

The Vantage Score was created by the three major credit bureaus in an attempt to make credit scores more accurate than the FICO score. When it was originally developed, the score ranged from 300-950. This new system was causing too much confusion between individuals and lending institutions, so they’ve since changed it back to 850. Most banks and mortgage lenders continue to use the FICO score and choose not to look at your Vantage Score. It’s best to assume that your FICO score is what will be used to determine your credit worthiness.

What Are the Best Ways to Build Your Credit Score?

If you’re trying to establish credit, it’s best to start with a secured credit card. This means you deposit a set amount of money towards your credit line (for example: if you deposit $300 your credit limit would be $300), the bank has direct collateral if you were to miss a payment. If you pay off your entire balance each month instead of just the minimum payments, this shows creditors that you’re being responsible with your finances and they can trust you.

What Are Some Ways in Which Your Credit Score Can Affect You?

People with low credit scores are likely to have even higher insurance premiums than people with DUIs and serious traffic infractions. In one study, a person with no tickets was paying around $400 more per year for their car insurance because they had a low credit score than a person who was caught driving under the influence. A low credit score indicates to lenders that you are a high-risk borrower and they may not be willing to lend you. Creditors and lenders make you pay for this risk by charging you a higher interest rate. If you’re approved with a bad credit score, you’ll pay more in interest over time than you would if you had better credit and a better interest rate.

What Are the Best Ways to Obtain Your Credit Report?

The best way to obtain your credit report is to write a letter to the credit bureaus and request a copy. When obtaining your report online, and agree to the terms and conditions you waive several of your rights in return for quick results. It’s always best to put everything in writing.

How Long Does Debt and Derogatory Remarks Stay on Your Credit Report

Debts and derogatory remarks can stay on your credit report for a maximum of 7 years. Additionally, bankruptcies can stay on your credit report for a maximum of 10 years. Creditors have the option to report debts to the credit bureaus for the full 7 years, therefore you have the option to contact the credit reporting agencies and request that they remove the marks from your report. The longer a mark stays on your credit report, the less weight it has on your score.

What Debts Should Be Tackled First?

It’s best to pay down any and all revolving debts first, this primarily includes your credit cards. These can have a higher negative impact on your credit because they can continue to affect you all your life as opposed to installment loans like student loans and medical debts that have an end date. It’s best to make your payments regularly and on-time and pay down your credit card debt before tackling other larger balances.

When deciding which credit card to pay down first, it’s generally best to start with the one has the highest APR. The more you pay on interest, the more money you wind up paying in the long run. You should list your credit cards from highest APR to lowest. Once you’ve paid one off, take the money you were applying to it each month and snowball it into the payment you’re applying to the next card. This is the easiest and fastest way to pay off your revolving debts without needing to start off with giant lump sum payments.

What Are Some Ways to Maintain Good Credit?

Never shut down all of your cards. Closing your credit card accounts means that nothing is actively reporting to the credit bureaus. When there is no score to report you have no credit and banks will not approve you for a mortgage or car loan. It’s best to pay down your balances and use the credit cards a few times a year and immediately pay them off. This way creditors won’t automatically close your credit card account due to inactivity.

Should You Use Credit Repair Companies?

There are a few factors to keep in mind when considering a credit repair company. Always ask what the percentage of negative accounts and remarks they remove. If the answer is anything other than 0%, do not use that company. There’s no sense in hiring a company that will only remove negative debt and remarks temporarily.

If you don’t feel like you can trust a credit repair company you can try removing derogatory remarks on your own. This can be done by filing a dispute with the credit bureaus or contacting your creditors and ask them remove the remarks from your report. If you go through the credit bureaus, they will decide if what you’re disputing is accurate or fraudulent and then remove it. If the creditor does not verify that the negative remark or account is accurate in a timely manner, the credit bureau will permanently remove the derogatory mark from your report.

Bankruptcies have to be 100% accurate in order to be removed. Credit bureaus often do not communicate with the courts, choosing instead they go through third parties to file. Because of this, there are sometimes errors on bankruptcy reports. According to fair credit reporting laws, bankruptcies must be removed if they are found to be incorrect. Never lie about having had a bankruptcy on your report when filling out loan applications. Even if it’s not currently on your report, mortgage lenders and other financial institutions have ways of finding out if you’ve ever filed bankruptcy.

RESOURCES

Skip to: 01:18:02 What Credit Repair Companies would you recommend for those of us who do not want to repair their credit themselves

There are several companies dedicated to assisting people with credit repair. These companies assist in finding programs and resources to help consumers educate themselves on the importance of credit. Among those are:

• THD Credit Consulting– Mr. Erik Kaplan, Owner and Credit Specialist-800-822-7120\

• US. Best Credit Solutions– Danny Harbin, Credit Specialist-469-447-7631 (They will handle Bankruptcies and School Loans)

 

• Correct Credit Company, Inc.- Mr. Pat Fasano, Owner and Credit Specialist-732-657-8800

For more information on credit repair or additional resources please visit Carolyn’s website at https://askcarolynwarren.com/

5 Takeaways about Credit Health

• You can connect with Carolyn through Facebook or her website.

• Never shut down or close credit card accounts, pay them down and keep them active

• Communicate with your creditors to see what options are available for removing your derogatory remarks from your credit report

• Manage your credit cards, If you charge something to your credit card make sure it’s something you’ll be able to pay it back fairly quickly

• Keep your revolving debts low 30% utilization rate (lower that 7-10% if you want excellent credit)

• The best way to obtain your credit report is to write a letter to the credit bureaus and request a copy

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