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How to Improve Your Credit Score: A Guide

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How to Improve Your Credit Score: A Guide

Living in the era of America’s worst consumer debt crisis makes one hyper-aware of one’s own creditworthiness. If, like most of the country, are pursuing financial independence, one of the most important metrics you need to keep an eye on is your credit score. Whether you’re looking to get a loan or just a credit card, this is the one thing every financial institution is going to check before decisions are made.

In this article, we will give you five tips on how to improve your credit score and maintain it. But before we get to that, it’s important to understand what a good credit score is. The range of credit scores is 300-850. Anything below 670 is considered poor; these are the scores for which credit lines and loans are rejected. So, you only need to work on improving your credit score if it is currently below 670.

Having said that, let’s talk about the five ways in which you can improve your credit score.

Review and Understand Your Credit Reports

As mentioned above, your credit score is a numerical value in the range of 300-850. It is derived from the information in your credit files which are assessed by lenders and landlords. This is done to assess your creditworthiness. Your credit score changes over time to depict your current financial behavior, be it positive or negative.

A credit report is a summation of your finances. Pending loans and debts paid are part of your credit reports. Whenever you apply for a loan, the company or institution requests your credit report from a credit-reporting agency. Credit reports are lengthy and require a lot of time to examine accurately. Sometimes, your reports may be inaccurate due to a variety of reasons. Lenders may reject your credit applications due to this.

Credit repair companies like Lexington Law assist you in analyzing your credit and disputing inaccuracies with credit card companies and bureaus. They analyze and review your reports with expertise, and provide suggestions wherever necessary. How long credit repair takes varies from case to case. Some cases may be easily resolved, but more serious issues like identity theft will require legal intervention and inevitably take longer.

Seek Legal Help

If you find inaccuracies in your credit report, you may need to seek help from legal experts or lawyers, depending on how severe your case is.

There are four types of errors while reporting credit. Typical errors include accounts that don’t belong to you, duplicate accounts, inaccurate accounts, and incorrect inquiries. A credit repair company like Lexington Law, which is operated by a team of lawyers, can directly correspond with the credit bureaus and creditors on your behalf to have even the most complex issues resolved. For example, if you are charged for a large transaction you did not authorise, and you try to report this yourself, you are bound to make at least a few small errors. Instead, if you let Lexington Law handle this for you, they will take care of all the nuanced steps, including contacting the institutions that provided your information to the credit bureaus.

Make Full and Timely Bill Payments

The most time-tested method for improving your credit score is paying your bills on time. Every time your bill payment is delayed, you run the risk of having it show up in your credit report. Negative remarks regarding delayed payments in your credit report will reduce your credit score.

Not paying your bill for 30 days after the due date immediately reduces your credit score. Things get more and more serious the longer you take to pay your bill. In 60 days, your score drops once again, this time more significantly. At the end of 90 days of non-payment after the due date, the creditor places a permanent delayed payment remark on your credit report. This is much more harmful to your creditworthiness than a mere drop in your credit score.

Moreover, late payment attracts exorbitant interest rates in most cases. To be clear: credit attracts interest in general, but the rate of interest rises steeply for any amount that isn’t paid on or before the due date. If you have a minimum payment policy, the balance amount will be charged with a much higher interest rate. For example, suppose you have a bill of $1000 (including 15% interest) in a given month, and you make the minimum payment required, which is $140. The creditor can then charge the remaining $860 with an interest rate as high as 30%. The later you pay the full bill amount, the higher these interest rates can climb.

To avoid having your credit score drop, getting negative remarks on your credit report, or opening yourself up to massive interest rates, ensure you pay your credit card bills on time.

Understand Basic Terms

A complete, nuanced understanding of the basic terms related to your creditworthiness will go a long way in helping you improve your credit score. That’s exactly what Lexington Law helps you develop.

An example of the kind of basics you need to understand is the difference between credit repair companies and credit counseling organizations. Credit counseling organizations are non-profit and assist you in debt and finance management. Credit repair companies such as Lexington Law, on the other hand, assist you with fixing inaccuracies in your credit report and advising you on how to improve your credit score.

Another basic thing you need to know is the concept of hard and soft inquiries. If you apply for a new line of credit, whether in the form of a loan or a credit card, the lender will ask credit bureaus for your credit report. This is known as a hard inquiry, and it is recorded on your credit score. A soft inquiry is when you ask the credit bureau for your own credit report, or when a lender does so on its own to pre-approve you for an offer of credit. Soft inquiries do not show on your credit report.

Knowing these things can heavily influence your actions when it comes to handling credit.

Follow the 30 Percent Rule

Suppose you have three lines of credit. Each has a different revolving credit limit. In short, revolving credit is a system of credit without a specific end date. The most common example of this is a credit card.

To understand the concept of the 30% Rule, let’s say you have three credit cards. Card 1 has a line of $5,000 with a balance of $1,500. Card 2 has a line of $10,000 with a balance of $2,500. Card 3 has a line of $8,000 with a balance of $2,000. The total credit available to you is $23,000, with the total credit you’ve used is $6,000. The percentage of credit being utilized here is $6,000 divided by $23,000, multiplied by 100. This comes to 26.08% of the total credit being utilized.

Experts recommend that you should use a total of 30% or less of the credit available to you. People who spend above 30% of their total credit limits are generally seen as credit-hungry by financial institutions. Hence, they are given a higher rate of interest. You can use your card’s high balance feature to avoid adding new charges if the credit utilization ratio is exceeding 30%.

To help improve your credit score, you can get another credit card and use it minimally, i.e. for grocery shopping or mobile phone recharges. Why another card? Because when you get an additional credit card and use very little of the credit available on it, creditors see that you are not hungry for more credit.

Conclusion

Your credit score will not improve over a week or a month, but it can rise if you do regular checks. Ensure your monthly credit card bills are paid on time to avoid high interests and late fees. A good credit score stands anywhere between 670-739, out of 850. Seek advice from credit repair companies like Lexington Law, whose quick and hassle-free services ensure your credit problems are resolved quickly and reliably.

Finance

One third of money management tools face closure by the end of the year if they do not embrace open banking

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One third of money management tools face closure by the end of the year if they do not embrace open banking 1
  • New research from Yolt Technology Services shows 35% of Personal Finance Managers aren’t using any open banking technology
  • Imminent screen scraping ban set to cause major disruption for consumers and businesses with just two months to go
  • 1 in 5 PFMs have never even considered using open banking
  • 28% cited data privacy as a reason for not adopting open banking technology

An international study of over 1,000 senior professionals in the banking, lending, PFM, investment, and retail sectors by leading open banking provider Yolt Technology Services has revealed that over a third (35%) of Personal Finance Management (PFM) platforms aren’t using open banking technology. These businesses will face an urgent transition when screen scraping is phased out in Europe at the end of 2020 if they are to avoid major service disruptions.

The final leg of PSD2, Stronger Customer Authentication (SCA), comes into effect in Europe on 31st December 2020 and will add an extra layer of security to log-in processes. This will force many banks to withdraw screen scraping facilities, which are currently used by PFMs to automatically extract on-screen data from the bank’s online banking page or app. This data is then used as raw text in the PFM to generate spending insights for users, but is less secure, less efficient, and creates a more cumbersome log in process.

As a result, many PFMs will have to look for alternative methods to gather customer data efficiently and securely, but despite being early pioneers of open banking, the survey showed that 35% of PFMs are not using open banking products and services such as AIS systems. In fact, nearly 1 in 5 respondents (19%) stated that they have never even considered using open banking.

More surprising still is that among those who were using open banking, only half (55%) were using Account Information Services, while over three quarters (77%) were using Payment Initiation Services (PIS). While PIS can deliver significant value for users, enabling settling between accounts or payment into regular savings accounts, its functionality is not a core part of the PFM offering in the same way as AIS.

Among those who haven’t yet adopted open banking technology, 35% of PFMs said it was too early to invest, and 28% named data privacy as the chief reason for not adopting. Despite this, PFMs do still show an above average adoption rate (68%) after being one of the first sectors to take advantage of the technology, compared with the banking and retail sectors, the next highest, on 63% and 62% respectively.

And the adoption of open banking technology is proving to be lucrative for those PFMs that do make the switch. Over 90% of PFMs who keep track of the monetary gains of open banking said that it is worth between £1m – £5m to their business each year, compared with 70% of respondents across all sectors, so there are financial gains to be had. This may be because open banking is central to service delivery for the majority of PFMs, but in other sectors it is a differentiator and its use is optional.

For all of this promise to be realised, there are clear issues to be addressed, but PFMs stand to benefit if they lead the charge.

Leon Muis, Chief Business Officer at Yolt Technology Services, comments:

“As pioneers of open banking, Personal Finance Managers have incredible potential to propel the technology even further – but only if steps are taken now to address the issues our survey reveals. That starts with more adoption – platforms which rely on manual methods of information gathering like screen scraping are not only less efficient, they deliver a worse service for users. To see a third of all PFM platforms using no open banking technology at all is a concern, and one that they will have to deal with sooner rather than later, with the upcoming ban on screen scraping.

“Data privacy concerns are a key reason behind this adoption rate, but this is built on fundamental misunderstandings not only about the technology, but the rules which govern its use. That over a quarter of PFM platforms don’t understand how open banking legislation works is a signal that we need to do better as an industry to champion the benefits of the technology, but also showcase the core safeguards and secure foundations upon which it is built.

“What is also clear is the power open banking has to differentiate platforms, and those which can most effectively implement it stand to benefit the most, both financially and in service delivery. And, with the phasing out of screen scraping coming into effect at the end of the year, PFMs need to act now to better support their customers and avoid being left behind.”

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Finance

Accountants have become critical to the survival of businesses and their reputations during Covid-19

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Accountants have become critical to the survival of businesses and their reputations during Covid-19 2

The opportunity for fraudulent activity to flourish as finance departments operate remotely with less oversight in these extraordinary Covid-19 times is inevitable. Government loans and financial support have been given out with little or no accountability to businesses that are struggling with the change in their trading environment and as a consequence businesses find themselves in financial need. 

There is already evidence of corporations handing back furlough grants as HMRC offers a 90-day amnesty, but without rapid data-driven insight and risk stratification, businesses may not know the extent of their exposure. Indeed many businesses face the daunting prospect of repaying loans at the same time as paying deferred VAT early next year in a far from certain trading environment. Stuart Cobbe, Director of Growth, Europe, MindBridge explains that the role of the accountant has now become critical to businesses and their reputations. 

Unlocking transparency

The Covid-19 landscape is fluid and ever-changing, and businesses require accurate visibility of all aspects of their business in order to plan effectively for the future and to understand their financial position. As the economy continues to recover to a new ‘normal’, companies need to focus on the next 6 months. How many ‘zombie’ businesses are only operating due to deferred VAT payments? How many companies will fail when they cannot repay loans? The role of the accountant is vital in unlocking this transparency to provide data-driven, actionable insights.

After all, there are many questions around how government financing has been used, from grants to loans, furlough payments to VAT deferments. As of the 20th September, the total cost of furlough claims has reached a staggering almost £40 billion, despite 30,000 applications being rejected, with many likely to have been attempts to defraud the taxpayer. Research by economists from Cambridge, Oxford and Zurich universities found that as many as two thirds of furloughed workers continued to work.

For businesses that do not understand the extent of their exposure, they risk facing a HMRC-imposed tax charge equivalent of up to 100% of the grant to which any recipient was not entitled and was not repaid. It is, therefore, interesting to see the number of large organisations now publicly revealing plans to repay all furlough payments. For many, this is an opportunity to boost corporate reputation and demonstrate a commitment to rediscovering business as usual. However, given the huge pressures businesses have been under in recent months, many CFOs and FDs may not have the full visibility they require to effectively manage this without the power of audit.

Financial Risks

This is about far more than reputational damage, the potential misuse of furlough is far from the only financial risk. The extraordinary shift in every business’ modus operandi over the past few months has opened the door for opportunistic fraud. New sources of income; staff working from home with limited oversight; the financial pressures – both business and personal – created by the recession. The misappropriation of assets should be a very real concern for businesses of every size.

For organisations that have relied upon grants and loans to survive, an employee exploiting the lack of oversight to syphon funds for personal use could tip the company into failure. Companies must determine how – or whether – deferred VAT payments and loan repayments can be made. Is the company truly solvent or no more than a ‘zombie’ business operating with a balance sheet propped up by short term government finance?

Actionable data 

Business resilience and reputation is a priority in this era, and CFOs or FDs may be struggling to establish trust across businesses now operating under a whole new range of pressures, from slimmer margins to a disjointed, remote workforce. There is an obvious need for complete visualisation of financial risks, and accountants play a crucial role in unlocking this data.

The rapid identification of mistakes in government support applications, potential fraud and the analysis of which deferred payments and loan repayments can be made and when – whilst ensuring other risk factors do not jeopardise business stability – is essential to futureproof the business, and accountants can assess data to provide this information in a complete and actionable format to lead smarter company decisions. This is the data insight CFOs and FDs need today.

Traditional financial risk assessment models will not be adequate. At best, problems will be revealed months after the fact. Companies need rapid identification of areas of unexpected activity today. This is where accountants and finance departments using sophisticated machine learning and artificial intelligence techniques can deliver real business value by rapidly assessing financial data and surfacing unexpected activity. Armed with this information, finance teams will know where to focus activities, the questions to ask and the remedial action to take. This information will drive departments and remedial action to ensure business success and growth as the nation gets back to its feet.

In short, accountants and finance professionals can provide the answers businesses need today, whilst helping managers to plan for the future effectively, despite the changes in policies and protocols as the pandemic continues to throw curveballs. An audit can quickly identify problems including but not limited to, cash flow, fraud, misuse of grants, loan repayment issues – all whilst offering the guidance and steps to safeguard the business to promote resilience and protect the solvency and reputation.

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Finance

Taking advantage of the UK’s renovation revolution

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Taking advantage of the UK’s renovation revolution 3

By Paresh Raja, CEO, Market Financial Solutions

UK property is a popular asset class because of its historical resilience to withstand periods of political and economic volatility and quickly recover its value. Domestic and international investors are aware of this general observation, which no doubt explains why investment into bricks and mortar has been rising during the COVID-19 pandemic.

As a result of tax reliefs introduced by the government to encourage buyers and sellers to return to the property market, house prices have been rising at an impressive rate. According to the UK’s biggest building society – Nationwide – house prices rose in September at the fastest annual rate since the aftermath of the EU referendum vote in 2016. Nationwide recorded annual house price growth of 5% in September.

For homeowners, this is important – house prices are a useful way of measuring the capital growth of a property. If house prices are rising, it means there is strong demand for real estate which is positive news for homeowners. House price growth also allows us to assess the overall health of the property market.

Here at Market Financial Solutions, we are regularly arranging bridging loans to support the property investment intentions of UK and non-resident buyers. From our perspective, COVID-19 has not dampened the overall need for finance to complete on real estate transactions. And importantly, we are also seeing a rise in homeowners undertaking renovation and refurbishment projects amidst the pandemic.

In August, the Renovation Nation Report revealed that the typical UK homeowner had spent over £4,000 on renovation works since the introduction of lockdown measures in March 2020, ranging from garden to living room, bedroom and kitchen upgrades. This has no doubt increased in value since then.

The rise in home improvement projects is important for a number of reasons. First, it is an effective way of increasing the value of a property. Simply updating worn furnishing and fittings, adding an extension or implementing new technologies to make a home more energy efficient can significantly enhance the appeal of a home and increase its market value.

Second, the rise in renovations and refurbishments taking place drives productivity and creates new building opportunities for SME construction firms. For example, a survey that was recently published by the Federation of Master Builders showed a marked increased interest for home improvement projects. It revealed that 42% of SMEs are predicting higher workloads during the Autumn months.

Paresh Raja

Paresh Raja

In my opinion, the COVID-19 pandemic is directly responsible for this sudden hike. People are spending more time at home, either working remotely or as part of social distancing measures. Naturally, this has compelled homeowners to consider ways of upgrading their property so that they can better enjoy their office and/or living spaces. What’s more, with the UK on the brink of second lockdown, there is a general acceptance that working from home either fulltime or part-time is something that will remain the case long after the coronavirus outbreak has been contained.

Unlocking the renovation revolution

One of the biggest challenges when undertaking a home improvement project is having the necessary finance in place. The traditional method of engaging with a high street lender for a loan has become complicated. As a consequence of COVID-19, banks are treading carefully – based on reports we’ve been hearing, loans are taking longer to be approved and the range of products available is limited.

Given how important property market activity is in driving economic productivity and growth, there is a clear need to ensure that homebuyers can access finance with minimal delay and fuss. Having witnessed current trends, Market Financial Solutions has responded by offering specialist finance loans that are tailored specifically for renovation and refurbishment projects. These are structured to the specific demands of each application, which means that construction deadlines can be met without the risk of finance being delayed.

Interestingly, the government is also keen to promote home improvements, particularly when it comes to green housing. For instance, in September the government launched the Green Homes Grant to encourage energy efficient housing. Under this scheme, grants can be accessed to pay for green home improvements. This could range from the insulation of walls and floors to the installation of double and triple glazing and the addition of low-carbon heating.

I would not be surprised if the government also considers similar grant programmes to support either types of renovation projects, particularly if more people are facing the prospect of permanent remote working. Of course, a lot of research would need to be undertaken for such a proposal but there are plenty of advantages that could be on offer as part of such a scheme. For now, we will need to wait and see.

My advice for anyone considering a home improvement project is to consider all the finance options available and applying for a loan that best meets their individual circumstances. While this might seem challenging, the fact of the matter is that lenders like Market Financial Solutions are responding to demand and creating products to support such undertakings. Finding the right type of finance will only increase the chances of work being completed on time, which ultimately works in favour of the homeowner.

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