“Sorry, your request for credit has been denied…”

The dreaded words we all wish we don’t have to encounter when we apply for a loan or credit. Sometimes, there’s not much you can do about it. Beyond your credit history and score, economic reasons may also be a factor when it comes to the decision process to grant you credit. As many of us are no doubt now painfully aware, the recent credit crunch has left people with stellar credit baffled as they receive rejection lenders to application for credit cards, student loans, auto loans, and even at times mortgages.

While sometimes there’s nothing you can do after receiving a rejection, there are times where you should take immediate action after being denied credit.

Here’s three things you should do immediately after being denied credit:

1. Contact, follow up, reach a representative to see if there’s flexibility.

Sometimes, a credit report and score can’t tell the whole story. This is especially the case if you’re applying for a credit card. Many card issuers have uses computerize models and formulas to instantly grant credit. If you’re denied instantly, you should try to call the card company in question and speak with a representative to see if there’s anything that can be done. Though you may not be able to receive the exact credit card (or rewards/benefits) that you were hoping for, you may be able to get a lower-tiered card (e.g., a gold card vs. a platinum card). Take note that at times you may be subjected to a higher annual percentage rate for interest.

2. Request for your free credit report to spot potential errors.

When you’re denied credit, federal law dictates that you’re entitled to one free credit report. Sometimes you’ll have to request this free credit report via a written letter, often times you’ll be able to immediately log on and receive your free credit report straight from the credit reporting agency’s website. If you were expecting an approval without problem, now would be a good time to go over your credit history to see if there’s any erroneous information that you may have missed. If you spot any misinformation, follow up and have the reporting agency remove them.

3. Depending on what you were applying for, stop or keep going.

Did you know that if you’re applying for a home or auto loan, you have a certain duration of grace period where you can go shop for different credit without fear of multiple inquiry dings on your credit history? If you were recently denied auto/home loan from one lender, the credit scoring model has a buffer period that ignores hard inquiries within a 30 day period of applying for an auto or home loan. This allows consumers to shop around for different rates/lenders without damaging their credit worthiness.

Remember that your credit worthiness takes time and diligence to build and repair. If you’re having issues being granted credit, you should take a hard look at your current report and standing to see if there’s any actions you can take to fix the negatives. With proper on-time payment, diversity of credit profile, keeping credit utilization ratio low, you’ll be having a solid history in no time, and rejection would be the last of your worries!

We recently received a very good question from a foreign exchange student who is moving out of the country. He asked if the credit established in the U.S follows a person, in this case to Canada. Here is what we found through our research.

SSN vs. SIN

In the United States, individuals are identified by their social security number (SSN). There is no other person in the United States with an identical SSN. In Canada, people have social insurance numbers (SIN), which serves the same purpose. Credit bureaus in Canada use the SIN to keep track of individual’s credit reports. Since the U.S and Canada are two different countries, SSN’s cannot be tracked in the Canadian systems and SIN’s cannot be tracked in the U.S systems.

Credit Bureaus

In the United States, there are three major credit bureaus: Experian, TransUnion and Equifax. These three bureaus provide credit reports and scores for all individuals with a social security number who have opened a line of credit or a loan. Canada’s credit bureaus follow the same procedures.

In Canada, the three major credit bureaus are Equifax Canada, TransUnion Canada and Northern Credit Bureaus, Inc. In several scenarios, people have found that the United States TransUnion and the Canada TransUnion share the same data in their systems. In result, there may be a possibility of a Canadian financial institution pulling your U.S credit history. This could be good for people with positive credit and bad for those with not so good credit. Equifax may do the same and share their data between countries. We have found that Experian has no effect in foreign credit because it only conducts reports on U.S residents. The same applies for Northern Credit Bureaus and its Canadian residents.

Credit Scores

As far as credit scores go, TransUnion Canada and Equifax Canada have both implemented the FICO system from the United States. The only difference being is credit scores in Canada range between a score of 300 and 900. Scores in the United States use a scale of 300-850.

Scores closer to 900 are a lower risk for the lenders, which could mean a lower interest rate to the borrower. The opposite can be said for scores closer to 300. These scores would be a much higher risk for the lender and in result would mean a higher interest rate for the borrower.

If I do not have an SIN and am a American citizen, how do I apply for credit if I move to Canada?

Just like in the U.S, in Canada it is hard to obtain credit without a credit history. You can walk inside a Canadian bank and explain your situation to them. Some banks in Canada will ask for some information from your U.S credit report. This will enable them to make an easier and quicker decision to issue credit. Some may offer you a secured credit card which will help you build a credit history by depositing a certain amount on a pre-paid credit card and then make payments.

Also, as stated above, TransUnion may have the ability to display U.S credit report information to Canadian financial institutions because of shared data between TransUnion Canada and the United States TransUnion.

What if I want to move to Canada for an extended period of time and then move back to the United States?

If you are not planning on being a long term resident or are not planning on buying a home, it may be best to stick with United States based international credit cards. Credit card companies with affiliates in the U.S and Canada would work best. These cards will work in both countries but will only report to the U.S credit bureaus.

Here is an excerpt from the U.S Department of State: “If you will be abroad for an extended period, you may want to arrange for the delivery of your mail. Some banks and international credit card companies handle mail for customers at their overseas branches. In addition, post offices in many countries will hold mail for travelers under their General Delivery (Poste Restante) services. U.S. Embassies and Consulates do not handle private mail. Check with the embassy of your destination country to see if that will be possible there. A listing of foreign embassies and consulates in the U.S. is available at http://www.state.gov/s/cpr/rls/dpl/32122.htm. “

A safe bet is that if you owe on a debt in the U.S and move out of the country, you will owe on that debt upon your return, as it will be recorded on your credit report. Will creditors try to collect from you in another country? Well that is the golden question. The golden response is, they may have a right to collect. Will that new country consider your U.S credit history? It may.

Regardless of where you move, it is best to maintain a positive credit history. If your new country of residence chooses to look at your U.S credit history you want to make sure it is clear of negative information. However, one cannot assume that a positive U.S credit history will help establish new credit in another country.

Your credit score it is one of the most critical factors in your financial life. It determines if you will be approved for a loan or line of credit. A credit score is a mathematically calculated number developed by the Fair Isaac Corporation (FICO) that lenders use to rate potential customers in determining the likelihood that a customer will pay their bills on time. A credit score or credit rating is determined by using five main criteria as defined by MyFico.com: your payment history which accounts for 35% of your credit score, the amounts owed which accounts for 30% of your credit score, the length of your credit history which accounts for 15% of your credit score, new credit which accounts for 10% of your credit score, and the types of credit used which accounts for 10% of your credit score.

Payment history shows the history of how you paid your bills either on time or late but unfortunately does not show if your bills were paid before the due date. Amounts owed shows the total amount of credit you have available. If your balance is near the credit limit this may lower your credit score. The length of history indicates how long you have had credit. If your credit history is 2 years or less could lower your credit score. New credit indicates how many times you have applied for new credit. If you open two many new accounts in a short period of time this may lower your credit score. The types of credit used indicate the types of accounts you have such as revolving or installment accounts. Revolving accounts are usually credit cards and installment accounts are usually mortgages, auto loans, etc.

The FICO credit score model ranges from 300-850 with 850 being an excellent score and 300 being the worst score. The higher the credit score the lower the interest rate you will receive for a loan or line of credit. Having a good credit score can save you thousands of dollars in interest over the life of the loan or line of credit. A good credit score is generally in the range of 660-749 but may vary from lender to lender.

The three major credit bureaus Experian, Equifax and TransUnion use the FICO credit score model. Equifax uses the Beacon credit score, Experian uses the Fair Isaac or Plus score and TransUnion uses the Empirica score. Each credit bureau subscribes to the Fair Isaac’s FICO model of scoring and then integrates their own version of a consumer’s FICO score. The Equifax Beacon score ranges from 340-820. The TransUnion Empirica score ranges from 150-934. The Fair Isaac or Plus score ranges from 330-830.

When applying for credit or a loan if all three credit scores are pulled, the middle score is generally the score used with the application, but according to the Fair Isaac Corporation 75% of mortgage loan applications use the Fair Isaac or Plus score.

Your credit score varies from each bureau because each agency collects their own data from various sources and may collect different data for the same account. Your score can vary anywhere from 5-40 points between the three credit bureaus. Your credit score changes due to updates to your credit file which changes based on account activity such as balance changes or additions to your credit file (i.e. new accounts or deletion of older negative accounts more than 7 or 10 years old). As a result, you may see a difference in your score from one month to the next.

The following criteria are not included in calculating your credit score:

1. If rent or you own a home

2. Income

3. Length of time at your current job

4. Length of time at your current address

5. Whether you’ve been denied credit

However, the above may be considered in approval for a loan in addition to using your credit score.

If you have a low credit score here are 5 things you can do to boost your credit score:

1. Stop using your credit cards and pay with cash.

2. Pay more than the monthly minimum. If you can’t, it’s time to cut spending.

3. Develop a plan to reduce your total debt.

4. Reduce your interest rates, but be careful of the fine print–a credit card with 0% interest could cost you thousands in interest depending on how the credit card is structured.

5. Get a part-time job in addition to your full time job or find ways to reduce expenses and use the extra money to pay down debt.

The major disadvantage of credit scoring is that it relies on information in your credit report which may contain errors. It is estimated that 75% of credit reports contain at least one error. That’s why it is so important that you check your credit report at least once a year to ensure that all information is accurate and up to date.

If you plan on purchasing a large item such as a car, house or investment property, it is best to pull your credit yourself to see if any negative items appear so you can fix those issues before applying for a loan. The best way to understand your credit score is to do research and read the information that is provided when you order your credit report.

Back in the day, “humans” were the ones who decided someone’s credit worthiness. All you needed was a handshake. But times have changed, and now a single number (your FICO credit score) decides whether you’ll get a loan or not.

75% of all financial institutions use the FICO credit scoring system. It was created by the Fair Isaac Company. You can go to Myfico.com, and get your credit reports and scores from all 3 major credit bureaus. They are Experian, TransUnion, and Equifax.

Your FICO score will determine how much credit your approved for and at what interest rate. So monitoring your credit score can help

you save on interest when applying for loans.

Improving your credit score, or maintaining it doesn’t have to be difficult. It will just take some time to implement some of the steps.

Here are three strategies to maintain or boost your credit score.

Strategy One: Establish a Credit History

There could be various reasons you don’t have a credit history. Maybe you’re fresh out of high school. Maybe you only use cash, and never needed a loan. Most likely, if you have no credit history, your FICO score will be low.

The easiest way to obtain a credit history, is through an installment loan. Paying an installment loan on time can improve your score faster than paying off a credit card.

If you have $1000 to work with, here’s a great way to establish a credit history. First, take $1000 to a bank, and open a 6 month CD account. Then, apply for an installment loan for $1000, using the CD as collateral. Now, here’s what you do. Take the $1000 loan, and open another 6 month CD at another bank. Get another loan for $1000 from the second bank. Do all the steps again at one more bank.

You will now have 3 loans to pay off. Pay the minimum amount for 6 months. In the final month, cash out your CD’s and pay the loans off in full. You will have established a credit history in just 6 months.

Strategy Two: Maintain Your Good Credit History

You have a steady job. You don’t have high credit card debt, and you pay your bills on time. Here are some tips to keep your credit score from going down.

First off, don’t close your old accounts. Closing old accounts will remove how much total credit you have available, and can lower your credit score.

Second, if you pay your credit cards in full, you may have to watch when you pay on them monthly. For example: You have a $5000 limit credit card. Every month, you charge about $1200 to that card, and you pay it off in full. But here’s what can happen to you. Your credit card company reports your credit info monthly to the credit bureaus. If they report it before you pay off your card, it can look like you carry a balance on your credit card every month. You may find that your FICO score will improve if you pay on your credit cards at a different time of the month.

Strategy Three: Repair Your Poor Credit History

If you have poor credit, there are some things you can do to boost your credit score. It will take some time to accomplish this.

The first step to repairing your credit is to pay all of your bills on time. You’ll want to establish a good payment history. Your mortgage is the most important to pay on time. Installment loans are next, and then credit cards.

After that, you need to reduce the percentage of credit that you are currently using. Paying down the revolving credit debt that you have will improve your credit score.

One last thing is to look for errors in your credit report. Get a copy of your credit report from all three major credit bureaus from Myfico.com. Look them over for any errors, and contact your creditors to remove any negative items.

Your credit score is vital to your financial health, and implementing these strategies may help boost your credit score. Please consult with a financial advisor about all concerns of your finances.

Understanding your credit score rating scale can seem like an overwhelming and almost impossible prospect. A credit rating scale can be confusing, especially if you have trouble with numeric systems. In a scale you have several numbers that all mean something different. Even though it can be a hard and overwhelming to try to understand your rating scale, doing so can be rewarding and a necessity in fixing it if need be.

One of the first things you should look at it is how exactly your credit score rating scale is composed and put together. Companies look at a couple of different aspects to put it together. One thing that determines how your credit rating is put together is your past payment history. This includes how well you pay your bills and whether or not you pay them on time or not. This aspect also includes any outstanding debt, too much can make your credit rating lean towards the lower end. Something else that is considered is your credit history in general. Beginners as well as a poor one can lower it as well. Sometimes if you are just starting out it may be even lower than someone who has a history that is poor.

Other things that are considered as part of a credit score rating scale are any credit applications or inquiries into your credit. Too many of either can lower your score and reflect poorly on you and your score. Different types of loans and credit can also have an affect as well. Balances that are too high and the number of balances that are too high can be a bad sign to a credit reporter as well. High interest rates can even be a negative mark as well.

On the rating scale a score of seven hundred or more is excellent and someone with this type of score should have no problems with credit or interest rates. While those with scores around six hundred and fifty to four hundred and fifty will have some difficulty obtaining credit, though could still have a chance. A lot of times those who fall on this part of the scale will have to secure any loan they apply for with some type of collateral. Those who fall below four hundred and fifty will most likely not get approved at all, whether secured or not. These people need to find a solution to their credit problems and a way to improve where they fall on the scale if they wish to stand any chance at all.

Speaking of help in rising where you fall on the credit score rating scale there are a lot of places to start from. Free credit counseling is available if you know where to look and will greatly help you if you are in need. These credit counselors will not only help you improve your score but can also help you get back on track and be more responsible in the future to avoid the problem again.

After sifting through all the information and getting your bearings you can learn a lot. Things may not be so overwhelming after all. When it comes to the credit score rating scale and understanding it, all it takes is a little patience, which in the end can be well worth it.

Before you can work on erasing your debt, you need a clear understanding of your financial situation. Here are the most important items to consider when assessing your finances.

Income versus Debt. Unfortunately, most people don’t realize how much they spend until they sit down and start counting everything. After only ten minutes of research, you should clearly see how much money is coming in and how much is going out. The numbers may be worse than you think, though recognizing the problem is the first step towards improving your finances. You may have reduce your spending on simple pleasures like dining out or going to the movies or, depending on the severity of your situation, remove them altogether.

Request credit histories. There are three agencies that run credit reports: Equifax (800-685-1111), Experian (888-397-3743) and TransUnion (800-888-4213). Contact all three and ask for your credit report. While the three are usually in the same ballpark, you may find one is much higher (or lower) than the others. It’s important to find out why and remedy the situation. Creidt reports are the most objective look at your finances; not only does it list what you owe, it shows who you owe to, whether you’ve exceeded your credit limits, and if you consistently pay your bills on time (which of course, you should!). Having low credit scores makes for higher interest payments on credit cards and, more importantly, mortgages.

Check out your FICO score. This is another way lenders assess your finances, and can be even more important than your credit histories. A FICO score is measured by your credit history, so its results should be similar to your three credit history reports. The score ranges from 300 to 850. If you are over 720, you are in great shape. You can find this information on their website at http://www.myfico.com.

These are the three most important steps to determining your finances. Remember, in order to beat over spending, you must be aware of your income and debts, and learn to manage them appropriately. According to a study by The National Foundation for Credit Counseling, 41% of those who filed for bankruptcy cited poor management of their money. Take action today, and don’t become one of those 41%!