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Why Doing "Nothing" Can Do So Much Harm to Your Credit


Why Doing "Nothing" Can Do So Much Harm to Your Credit

Ignorance is bliss...or so the saying goes. However, when it comes to your credit reports and scores being ignorant can be a truly horrible strategy which can have some seriously negative consequences as well. People generally ignore their credit for one of two reasons. First, many consumers with good credit assume that everything on their credit reports is fine and do not even bother to check their reports until their next loan application. The second most common reason why consumers ignore their credit is due to the fact that it is so bad that they feel overwhelmed and powerless to change their credit situation. Regardless of the reason, ignoring your credit is a really bad idea.

Why Consumers with Good Credit Need Still Need to Pay Attention

If you always pay your bills on time and maintain very low or even $0 balances on your credit cards then odds are high that your credit scores are probably in pretty good shape. The truth is that you have the right to expect your credit reports to contain accurate information. However, the reality of how the credit scoring system works is that mistakes on credit reports happen. In fact the Federal Trade Commission released a study in 2013 which proposes that there were around 40 million mistakes on the credit reports of US consumers. Although the Fair Credit Reporting Act does give you the right to expect accurate credit reports, errors still occur every single day. What you may not realize is that the responsibility to make sure you credit reports remain error free lands squarely on your own 2 shoulders.

Credit reporting errors can range from insignificant with little to no credit score impact to all the way on the opposite side of the spectrum where the wrong credit reporting error can wreak utter havoc upon your credit scores. Thankfully, there are several options which make it extremely easy for you to keep a close eye on your credit reports in order to ensure that they remain accurate.

Option 1: In 2003, thanks to the FACTA amendment to the Fair Credit Reporting Act, consumers were given the right to access all three of their credit reports completely free of charge once every 12 months. To access these free credit reports you simply need to visit (Not-so-fun-fact: an average of only 4% of these available free reports are actually claimed by consumers annually.)

Option 2: If you are wise enough to understand the importance of keeping a close eye on your credit reports then you will also realize that checking your credit reports once a year is not going to be often enough. The good news is that there are many free options available to access and review your credit reports throughout the year - though this option can be a bit time consuming due to the fact that truly free reports can generally only be accessed one credit bureau at a time.

Option 3: Finally, there are also several affordable fee based credit monitoring services which will allow you to check an monitor all 3 of your credit reports and scores simultaneously and easily.

Why Consumers with Bad Credit Still Need to Pay Attention

There is no question that credit problems can feel overwhelming and insurmountable. When faced with credit problems the desire to stick your head in the sand and ignore them can be very tempting. Unfortunately, ignoring credit problems does not make them go away but only keeps you stuck in the same bad situation for longer than necessary.

Whether you choose to work on resolving credit issues yourself or to seek professional assistance with your credit problems you should make the decision to do something. No matter how bad your credit reports are currently - even if you are one day out of a freshly discharged bankruptcy - there are always steps which you can take to begin moving your credit back in the right direction.

CLICK HERE to schedule a no-obligation credit analysis with a HOPE4USA credit expert to learn how to improve your credit reports and what HOPE4USA can do to help.

CLICK HERE to download our free credit repair toolkit - no strings attached. 


About the author: Ron Lambright has been a credit expert for over 14 years and is the Executive Director of HOPE4USA - a company he helped to found after struggling to overcome personal credit issues on his own twice before. He is a regular guest on radio talk shows and is featured weekly as the premier credit expert at training seminars in the Charlotte, NC region and up and down the East Coast.  Ron is an expert on teaching consumers how to achieve  "loan ready" credit reports, improving credit scores, and an expert in the fields of business financing and business credit as well. You can connect with Ron on Facebook page by clicking here.


Foreclosure? Bankruptcy? You Might be Able to Purchase a Home Sooner Than You Think


Foreclosure? Bankruptcy? You Might be Able to Purchase a Home Sooner Than You Think

Qualifying for a mortgage loan can be a daunting task, especially for consumers with certain types of credit problems such as bankruptcy, foreclosure, or short sales. Even if a consumer is able to rebuild his credit scores to a high enough level to satisfy a lender after one of these events (no small order), he may still be turned down for a loan until enough time has passed since the derogatory credit event before a lender will approve him for a new mortgage loan. The reason why consumers in these situations can be turned down for a mortgage even if their credit scores meet the minimum score criteria is due to the existence of mandatory waiting periods.

Not sure what your credit reports and scores look like? CLICK HERE.

Normal Waiting Periods

Fannie Mae, the government-sponsored enterprise (GSE) which is the leading source of residential mortgage credit in the United States, is slower to purchase the home loans made by lenders when certain types of credit issues appear on a borrowers' credit reports. These problematic credit issues include bankruptcies, foreclosures, and foreclosure alternatives such as short sales and deeds-in-lieu of foreclosure. When these specific credit issues occur Fannie Mae requires that a mandatory waiting period be instituted so that there is a cooling off period between the time when the major credit issue occurred and when the consumer will be eligible to qualify for a new mortgage loan in the future. Lenders have to abide by the guidelines set forth by Fannie Mae if they want the ability to sell the loans to Fannie Mae instead of being forced to hold the loans on their own personal balance sheets.

Mandatory waiting periods vary based upon both the derogatory credit event which occurred (i.e. bankruptcy, foreclosure, etc.) and the type of loan for which a consumer is applying (i.e. FHA, VA, USDA, or Conventional). If a consumer has a foreclosure on his credit reports, for example, then in many circumstances he could be required to wait up to 3 years before he is eligible to qualify for a new government-backed loan (i.e. FHA, VA, or USDA) and possibly up to 7 years prior to qualifying for a conventional mortgage.

Fannie Mae routinely adjusts mandatory waiting periods for loan programs so it is always best to check with an experienced loan officer to find out the specific wait period required for the mortgage loan program which interests you. Plus your loan officer will be able to help you determine if your situation qualifies for a reduced waiting period based upon certain "extenuating circumstances." (Don't have a loan officer? EMAIL US if you would like a referral to a loan officer we know and trust.)

FHA Back to Work Program - Extenuating Circumstances

HUD's announcement of the new FHA Back to Work Program in 2013 was very good news for consumers who experienced negative "economic events" which lead to a foreclosure, short sale, deed-in-lieu of foreclosure, or had filed for bankruptcy protection from their creditors. Thanks to the program, consumers who find themselves facing one of the situations above may be able to qualify for a new mortgage after a shortened waiting period. Qualified borrowers under the new program could be eligible to receive a new mortgage loan after as little as 1 year has passed since their derogatory credit event.

Who Qualifies?

In order to qualify for the Back to Work program consumers must be able to document the following.

1. Borrower must meet FHA loan requirements for "satisfactory credit."
2. Borrower can document the mortgage or credit problems resulted from a financial hardship.
3. Borrower has re-established a responsible credit history.
4. Borrower has completed HUD-approved housing counseling.

To qualify for the program a consumer must have credit reports and credit scores which meet the minimum requirements for approval set forth by both FHA and the lender. Next, he must be able to provide documented proof (i.e. tax returns) which demonstrates that he experienced an income reduction of 20% or more for a period of at least 6 months which lead to his derogatory credit event (i.e. bankruptcy or foreclosure). He will also need to demonstrate that he has recovered financially from the event as well. Additionally, the consumer will need to have at least a 12 month history of on-time rental payments and a 12 month credit history which is free from late payments as well.

Your Next Step

If you have taken the necessary steps to rebuild your credit after recently experiencing one of the derogatory credit events above, then you may be ready to meet with a loan officer to see if you qualify for a new FHA mortgage loan under the Back to Work Program. (Remember, if you are not already working with a loan officer you can EMAIL US if you would like a referral to a loan officer we know and trust.)

However, if you already know that you credit reports need some work before they will be clean enough to qualify for a mortgage then it is likely best for you to begin by scheduling a no obligation credit analysis with a HOPE4USA credit expert to learn what we can do together to help prepare you for your goal of homeownership.

Michelle Black is an author and a credit expert with over a decade of experience, the credit blogger at, a recognized credit expert on talk shows and podcasts nationwide, and  a regularly featured speaker at seminars up and down the East Coast. She is an expert on improving credit scores, credit reporting, correcting credit errors, budgeting, and recovering from identity theft. You can connect with Michelle on the HOPE4USA Facebook page by clicking here.


Why Credit Avoidance Is a Bad Strategy


Why Credit Avoidance Is a Bad Strategy

The title of this piece alone is enough to ruffle the feathers of the die-hard believers in the cash-and-carry lifestyle. So, before I even begin with my explanation of the many ways that swearing off credit can come back to bite you, let me begin by stating that you can still live a debt free lifestyle while building a solid credit score. Don't believe me? Has your favorite financial guru told you otherwise? Before you shake your head and move on to the next item in your newsfeed, take 5 minutes to hear me out. Trust me, you will be glad that you kept reading.

Your Credit Score Is NOT Your Debt Score

Despite what you may have heard, credit scoring models do not reward consumers for going into debt. In fact, the truth is quite to the contrary. The idea that you have to carry a lot of debt in order to have good credit scores is completely false. It is 100% possible for you to be debt free and still have very good credit scores.

Credit scoring models like FICO pay a lot of attention to a consumer's debt load. Many consumers find it surprising that a whopping 30% of their FICO credit scores come from what is known as the "Debt Category" of their credit reports. Credit scoring models are constructed so that the more you owe, the worse it is for your scores. This fact is especially true when it comes to credit card debt. However, if you have credit cards with zero balances you will be heavily rewarded in the credit score department. Having credit card accounts which you keep paid off shows the credit scoring models that you are a good credit risk. Conversely, charge up more credit card debt than you can afford to pay off in a month and not only will you waste money on interest fees but your credit scores will also suffer.

Credit Matters In More Ways Than You Think

If you have experienced a financial disaster, bankruptcy, illness, or just plain bad financial decision making in the past then the idea of swearing off credit all together and adopting a cash-and-carry lifestyle can be tempting. Deciding to close your accounts and never again apply for another credit card or loan is a drastic decision, but plenty of people have proven that it is possible to live a life free from these traditional "trappings" of the credit world. However, what followers of this cash-and-carry lifestyle fail to consider is the fact that pretending their credit doesn't matter can cost a lot of money in the long run.

Thinking that your credit will only have an impact on your life if you intend to apply for a credit card or a loan is completely unrealistic. Like it or not, we live in a very credit driven world. Here are just 7 of the negative consequences to not having good credit.

Without good credit:

  1. It can be hard to qualify for an apartment.
  2. Getting a cell phone contract can be very problematic.
  3. Higher insurance premiums are probably in your future.
  4. Getting a job or a promotion may be difficult.
  5. Security deposits on utility accounts are higher.
  6. Receiving a security clearance for a job could be very tough.
  7. Qualifying to purchase a home might be impossible.

The Truth About Credit "Temptation"

Again, I agree with those who believe that debt is bad. Excessive debt will waste your hard-earned money, it will lower your credit scores, it can be bad for your marriage, and it can cause you a lot of worry and stress. However, the idea that swearing off credit cards in order to avoid the temptation to go into debt is an overly simplistic approach to a complicated problem.

The root of the problem which people who are afraid of credit need to address is the fact that having credit cards is not what caused their financial and credit problems. Problems of this nature are almost always caused by poor money management habits. Saying that credit cards cause people to go into debt is like saying that spoons make people fat.

Closing your credit card accounts is not going to eliminate the temptation to over spend. In fact, for the person who has truly mastered proper money management habits, the temptation to charge more than he/she can afford to pay on a credit card is no greater than the temptation to spend too much on a debit card. Cutting up your credit cards is simply not the answer to your financial problems.

If you have made credit or money mistakes in the past, you are not alone. Don't allow the mistake of your past to define you. Instead of feeling defeated and ashamed you can challenge yourself to try again.

You should not allow let fear or misguided advice cause you to believe that a life free from the world of credit is your answer. After all, in reality there is no such thing as leading a life which is unaffected by your credit. You can embrace this knowledge or you can try to hide from it. Either way, your credit is always going to have a big impact upon your life.  


Michelle Black is an 12+ year credit expert with HOPE4USA, the credit blogger at, a recognized credit expert on talk shows and podcasts nationwide, a contributor to the Wealth Section of Fort Mill Magazine, and  a regularly featured speaker at seminars up and down the East Coast. She is an expert on improving credit scores, budgeting, and recovering from identity theft. You can connect with Michelle on the HOPE Facebook page by clicking here. 

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Credit Report vs. Credit Score - What's the Difference?


Credit Report vs. Credit Score - What's the Difference?

Credit Reports versus Credit Scores

Let’s face it, for most people the world of credit can be a very confusing place. If you can’t explain the difference between a credit report and a credit score, you are not alone. People often use the terms “credit reports” and “credit scores” as if they were interchangeable. However, credit reports and credit scores are two totally different animals. Here is a crash course in credit terminology to help you make sense of this confusing topic and turn you into the super savvy consumer you always wanted to be.

Credit Reports

There is not merely one, but rather three major credit bureaus who compile data from lenders, credit card companies, collection agencies, public records, etc.  The credit bureaus are Equifax, Trans Union, and Experian. The data is compiled into credit files which are then used to generate credit reports (basically user friendly versions of the credit files themselves). In fact, the credit bureaus compile credit data about millions of consumers and sell credit reports to lenders and directly to consumers themselves.

If you have not checked your credit reports in a while, it is a good idea to do so right away. After all, it is ultimately your responsibility to monitor your credit reports for errors and for fraud. You can access a free copy of each of your credit reports (NOT your credit scores) each year at Credit reports do not exist to judge your credit management history, but rather to simply lay out the facts regarding how well you manage your debts.

Credit Scores

Contrary to popular belief, the credit bureaus themselves do not calculate your credit scores. Where a credit report simply lists a record of your credit management history, a credit score actually exists to evaluate and rate that data into an easy to understand number for lenders. A low number indicates that the consumer has a history of poor credit management. A high number indicates the opposite.

The original and most popular credit scoring model by a huge margin is FICO. In 1989 FICO partnered with Equifax to introduce the first credit bureau FICO risk score. The purpose of a FICO credit score is to predict risk – specifically the risk of the consumer going 90 days late on any account within the next 24 months. Today, FICO builds credit scoring software and installs it on the mainframe of each of the 3 major credit bureaus. The credit bureaus will use FICO’s software to calculate their own credit data and then sells the credit reports with credit scores to lenders. FICO receives a royalty from the credit bureaus for the use of the software.

FICO credit scores range from 300 to 850. If a consumer has a low credit score then the data in the consumer’s credit report indicates that there is a high risk involved with loaning money to that consumer. If a consumer has a high credit score then there is a low risk involved with loaning money to that consumer.

As mentioned above, consumers are currently not entitled via federal law to receive free copies of their credit scores annually. (Note: if you apply for a mortgage then mortgage lenders are required by law to show you all 3 of your credit scores that were pulled for the mortgage application.) Still, there are several places online where you can receive free educational credit scores (not the same scores as the ones used by lenders) or a free score from one of the bureaus individually. You can also view your credit scores, often initially for free, as a benefit of signing up for monthly credit monitoring services. Beware, many monitoring services will only all you to see your credit score from one and not all three of the credit bureaus. CLICK HERE to access a great comparison site where you can check out the benefits of several different credit monitoring services before deciding which option is right for you.


Michelle Black is an 12+ year credit expert with HOPE4USA, the credit blogger at, a recognized credit expert on talk shows and podcasts nationwide, a contributor to the Wealth Section of Fort Mill Magazine, and  a regularly featured speaker at seminars up and down the East Coast. She is an expert on improving credit scores, budgeting, and recovering from identity theft. You can connect with Michelle on the HOPE Facebook page by clicking here. 


Should I Consolidate My Credit Card Debt?


Should I Consolidate My Credit Card Debt?

Credit card debt can quickly become an ugly monster. As a reader of the HOPE4USA blog, you already know that outstanding credit card debt can significantly lower your credit scores, even if every single payment is made on time. (Check out The Ideal Credit Card Balance to Optimize Credit Score for more information regarding how credit card balances impact your credit scores.) If your credit card debt has gotten out of control, then it is time to step back, assess the damage, and come up with a plan of action to fix the problem before it gets worse.

Step One: Face the Facts

Now that you are ready to begin tackling your credit card debt problem, the first step is to make a list of all of your current credit card debt. List your credit card debt from the card with the highest balance at the top of the list and the card with the lowest balance at the bottom. Here is an example:

1. Capital One - $5,000
2. Chase - $3,500
3. Citibank - $2,800
4. Discover - $1,200

Step Two: Figure out How Much You Can Afford to Pay

Of course, you must maintain at least the monthly minimum payment on each of your credit cards in order to protect your credit scores. However, if the minimum payment is all that you pay then you can count on being stuck underneath a pile of credit card debt for a long time – potentially as long as decades! If you do not already have a monthly budget set up for yourself, then CLICK HERE for a complimentary copy of the HOPE Basic Budgeting Worksheet. Once you have filled out your budget sheet (and maybe made a plan to cut back on unnecessary spending) you will be able to determine how much “extra” income you can afford to pay on your credit card debt each month.

Step Three: The Snowball

One option for paying off your credit card debt is the “snowball effect.” Here is how it works. Begin by paying the minimum payment on all of the credit cards on your list, with the exception of the card with the lowest balance (#4 – Discover in the example above). For the card with the lowest balance you will want to use all of your additional funds and pay the largest payment possible. Your goal should be to pay off the card with the lowest balance first, then move up the list to the next card with the lowest remaining balance. Rinse and repeat until all of the cards from your list have been paid in full.

Step Three: Determine If a Consolidation Loan Is Right for You

If you find yourself in a situation where it is going to take you a long time to pay off your credit card debt, even if you use the snowball effect method above, then it may be time to consider a debt consolidation loan. There are 2 great benefits to a debt consolidation loan. First, when you consolidate your revolving credit card accounts into an installment loan your credit scores will likely see an almost immediate increase. The reason you will most likely see a credit score increase is because credit scoring models, like FICO and VantageScore, do not treat installment debt the same way they treat revolving debt. A credit card with a balance has a great potential to harm your credit scores. However, an installment loan (like a personal loan or a vehicle loan) does not have the same negative effect. The second benefit that comes along with a consolidation loan is that it has the potential to save you money. Most debt consolidation loans have a much lower interest rate than your credit card accounts.

If you do decide to use a debt consolidation loan as a tool to help get yourself out of credit card debt, keep the following in mind.

1. Do not charge your credit cards back up once they have been paid off.
You have to determine ahead of time that you will not allow it to be an option to charge up new balances on your credit cards. In fact, it would probably be a good idea for you to lock your credit cards up in a safe place and only use them about once a quarter in order to maintain some activity on the accounts.

2. You should still try to pay off your consolidation loan early.
Just because you consolidate your credit card payments into an installment account does not mean that you should not try to pay the loan off early. Paying extra money onto the principle balance of your consolidation loan each month is still a wise financial strategy to follow.

CLICK HERE to compare consolidation loans and personal loans to find an option which may be right for you.


Michelle Black is an 12+ year credit expert with HOPE4USA, the credit blogger at, a recognized credit expert on talk shows and podcasts nationwide, a contributor to the Wealth Section of Fort Mill Magazine, and  a regularly featured speaker at seminars up and down the East Coast. She is an expert on improving credit scores, budgeting, and recovering from identity theft. You can connect with Michelle on the HOPE Facebook page by clicking here.