Improving Your Credit Score
Improving your credit score will save you money in the future and allow you access and the freedom to make new purchases and take on new loans and lines of credit.
We are a helping hand to help you:
- Resolve your debts
- Regain financial control
- Improve your credit
- Move to a positive financial future.
Call us today at 866-261-8282 for a free consultation on your options to improve your credit. Our qualified attorneys are available daily to evaluate your circumstances, outstanding debt and long term goals. For your convenience, we have six office location throughout Michigan in: Detroit, Southfield, Dearborn, Flint, Ann Arbor and Warren. We look forward to your call.
How is Your Credit Score Determined?
According to FICO®, credit scores are calculated and weighted on the following five categories :
- 35% based on your Payment history: Number of accounts paid as agreed vs. account delinquencies. According to FICO, “paying your bills on time is the most important contributor to a good credit score.”
- 30% based on your Amount of total debt load: Amount owing on accounts, proportion of credit used and debt-to-income ratio. Use our free budgeting tool to understand your current debt-to-income ratio.
- 15% based on Length of your credit history: Time since accounts were opened and last used
- 10% based on New credit: Number of recently opened account and credit inquiries. Re-establishment of positive payment history following past credit problems.
- 10% based on Types of credit that you use:
- Installment loans: such as a car loan or mortgage
- Revolving credit: such as credit cards where you are given a maximum credit limit
- Charge cards: such as charge accounts and credit cards that must be paid off each month
- Service credit: such as cell phones, utilities and gym memberships where you pay each month
Knowing what affects your credit can be the first step towards improving it.
If an average of 65% of your score is based on your Payment History and Amount of Debt Load, improving these two things will therefore have the biggest impact in raising your credit score. While there is no quick fix for a bad credit score, developing a plan for improvement is your first step. We offer debt consolidation through a Chapter 13 or debt elimination through Chapter 7. Read below how employing one of these programs could put you on track to improving your credit.
Debt Consolidation to Improve Your Credit
If your budget has become unbalanced or unexpected bills and increases have caused you to fall into the red each month, we can help consolidate and reduce your bills to improve your credit. Through the Chapter 13 reorganization plan we can improve your budget and credit in the following ways:
- Reduce your debt and improve your debt-to-income ratio (influences 30% of your credit score)
- Consolidate and likely reduce your unsecured debts such as credit cards, medical bills, personal loans, loan deficiencies, etc.
- The plan provides 0% interest repayment on all unsecured debt. This means that every dollar you pay goes straight towards principal debt. This reduces your debt-to-income ratio each month and reduces the amount owing on your accounts as well as the proportion of your credit that you are utilizing.
- Potential to remove a second mortgage or home equity loan
- Reduce principal mortgage balance on a rental property(s) to current market value. Use your tenant’s rent payments to pay-off the full mortgage balance over the course of the 3 -5 repayment plan.
- Reduced interest rate and payment on a vehicle loan and possibly a reduction in principal debt.
- At the completion of the repayment program, whatever unsecured debts have not been paid in full will be legally eliminated. What you are asked to pay back is based on an individual budget customized around your income, monthly expenses, and debt. You are only required to pay back what you can reasonably afford based on your circumstances over a 36 -60 month time period.
- Restore consistent and timely payments to all of your creditors. (influences 35% of your credit score)
- Since all of your creditors participate in the same payment cycle and are paid at the same percentage, the Chapter 13 plan has a built-in positive payment feature. This avoids late reporting to the credit agencies and has “positive” impact on your credit.
- Other budget reduction and credit restoration features include:
- Opportunity to negotiate a loan modification on a home mortgage without the pressures of a looming foreclosure proceeding
- Protection from creditor actions that could damage your credit, such as:
By providing a means to reduce overall debt and establish a positive payment history, the Chapter 13 program can help you to achieve improved credit throughout the course of the repayment plan.
Debt Elimination for a Fresh Start
If your debt is overwhelming and you do not foresee having the resources to reduce the principal debt and work towards becoming debt-free, a Chapter 7 debt elimination program may be in your best interest. This program essentially wipes your credit slate clean and allows you to take positive steps towards re-building your credit. The program will eliminate all of your unsecured debts:
Through this debt elimination, your debt-to-income ratio will instantly improve. Your next step is to establish a good payment track record. For this, we typically suggest to our clients that they:
- Establish a sound and reasonable budget and carefully track their expenses
- Continue regular payments on an affordable vehicle or purchase a car that fits within their established budget to show a positive payment history
- Take out a secured credit card and pay off balance monthly
Often times, debt obligations can mount to the point where it becomes difficult to make all of the monthly minimums and payments. Juggling bills and missing payments can prolong bad credit versus completing a Chapter 7 debt elimination to make a clean break. By reducing unsecured debts, your budget will be back on track with positive payment history for other debts such as a mortgage or vehicle payment. Maintaining a balanced budget and restoring timely payments to your creditors will prove to be a big step toward improving your credit.
We are a Helping Hand
We recognize that fully understanding your credit components and working towards improvement can be intimidating. Credit improvement through Chapter 7 and Chapter 13 is the only area of law that we specialize in. We offer free in-office or phone consultations at which time our attorney will evaluate your individual circumstances and personal finances. We provide you with free advice on what path we recommend you take towards improving finances and increasing your credit score. Please call us toll free at 866-261-8282 or click here to schedule a consultation right now.