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The Ultimate Guide to Increasing Your Credit Score 

Have you ever wondered how credit scores function and how to boost yours? This article will discuss the fastest and most effective way to improve your credit score. In April 2018, Tatiana Homonoff, an Economics and Public Policy professor at New York University, published a paper on credit scores summarizing her two-year study on the subject. To help anyone improve their credit score, she recommended pointing them toward two relatively easy components: paying bills and using credit cards judiciously.

According to Homonoff, paying bills on time and keeping track of credit usage are two things that people can do with ease, despite being in a difficult financial situation. However, she recognizes there are some areas of the credit score algorithm that are virtually impossible to impact.

Let’s dive into how credit scores work and provide some pointers on how to improve yours.

What Is a Credit Score?

A credit score is your credit history quantified into a number to estimate how likely you are to repay any loans. A credit score of 300 to 850 indicates a good credit history, including timely payments, low credit usage, and long credit history. Those with lower scores are considered poor investments due to late payments or overextended credit use.

There are no set cutoffs for either excellent or poor scores, but there are guidelines for each. Lenders generally consider scores above 720 as ideal and scores below 630 as problematic.

People are becoming more aware of how raising their credit score improves their financial outlook, and Homonoff’s study provides evidence of this. Consumer behavior improved dramatically when people were aware of their credit score, according to Homonoff.

“People who thought they had excellent scores discovered that they had overvalued them. They stopped paying late, paid down their balances, and as a result, their scores improved.” Homonoff said. 90% of businesses in the United States use the FICO credit score to determine how much credit to provide consumers and what interest rate to charge them.

The formula used to generate your credit score involves five major components:

  • 35% of the score is based on payment history. 
  • 30% is based on the amount owed. 
  • 15% is based on the length of credit history. 
  • 10% is based on your credit mix, i.e., mortgages, auto loans, credit cards, etc. 
  • 10% is based on new credit.

Credit scores are subject to change as you move through life. Your credit score will rise if you are timely in paying your debts, particularly credit cards and installment loans. When you use credit more often, whether you have more credit cards, get a mortgage, take out a student loan, or take out an auto loan, your credit score reflects how responsible you are with more debt.

13 Tricks to Increase Your Credit Score

Are you one of the many people who don’t know their credit rating? Good news—, you can get a free credit report from the top 3 bureaus annually. Discover Card gives you your FICO score, which is utilized by 90% of businesses that offer credit. Capital One, Chase, and other credit cards offer you Vantage Scores, which are similar but not identical. Sites like Credit Karma, Credit Sesame, and Quizzle work the same way.

Vantage Scores are generated using the same data as FICO, but the weighting of elements may be different, resulting in slightly different scores. It’s possible that your score might not be as high as you hoped. Homonoff suggests some ways to improve it:

1. Regularly Review Your Credit Report

You can request one free credit report from each of the three credit bureaus every year, and doing so will not negatively impact your credit score. Examine each report carefully for mistakes. Dispute those that you discover. This is the closest you can get to a fast credit fix.

A government survey discovered that 26% of people have at least one critical mistake in their report. Some mistakes are simple, such as misspelt names, addresses, or accounts registered to the wrong individual. Other issues are more serious, such as accounts that are incorrectly recorded as late or delinquent, debts that are listed twice, accounts that are listed as open when they are actually closed or accounts with inaccurate balances or credit limits.

Talking to the credit reporting agency to work on fixing incorrect or out-of-date information is a simple way to boost your score. A significant percentage of consumers whose information was incorrect saw their credit score increase as soon as the error was eradicated.

2. Set Up Payment Reminders

Create a timetable and set up online reminders to keep track of when you must pay your bills. In a few months, consistent bill payments will raise your score if you pay on time.

3. Make Multiple Payments During a Billing Cycle

Paying down your bills every two weeks rather than once a month lowers your credit utilization and improves your score. If you can afford it, do so.

4. Contact Your Creditors

If you miss payment deadlines and cannot pay your bills, set up a payment plan with your creditors immediately. A quick response can help ease the adverse consequences of late payments and high outstanding balances.

5. Apply for New Credit Sporadically

When you apply for or open several new accounts in a short time, it hurts your score, even though it increases your total credit limit.

6. Keep Unused Credit Card Accounts Open

Older credit histories are better, and the length of your credit history matters. If you must close credit accounts, close the newer ones.

7. Pay Attention When Paying Off Old Debts

A debt that has been “charged off” by a creditor is one that they do not expect further payments on. If you make a payment on a charged off account, it will be reactivated and your credit score will drop. This process is often employed by collection agencies.

8. Prioritize Paying Down “Maxed Out” Credit Cards

Pay off the credit card with the highest balance first if you have multiple credit cards and the amount owed is close to the credit limit.

9. Have Multiple Accounts for Diversification

Your credit score is determined by the proportion of different credit items—mortgages, auto loans, student loans, and credit cards—you have. Having more elements in your current credit mix is beneficial as long as you make on-time payments.

10. Go Loan Shopping

If you have bad credit and can’t find any other method to boost your score, you may opt for a “fast loan.” These are usually loans for small amounts—$250 to $1,000—that are reported to credit bureaus and can become a favorable item on your credit report. This should be a last-ditch effort.

11. Check Your Qualification for a 0% Interest Card

There are several companies that provide cards with 0% interest on balances, but there are restrictions to this. Typically, there is a transfer fee and the 0% offer lasts for up to 18 months. You typically need a very good credit score to qualify for one of these.

12. Have a Debt Consolidation Plan

It is true that enrolling in a debt consolidation program can temporarily lower your credit score, but as long as you make on-time payments, your score will improve quickly and you will be eliminating the debt that got you in trouble in the first place.

13. Pay Attention to Credit Utilization

The credit utilization ratio is the proportion of revolving credit you use out of the total credit you have available. It accounts for 30% of your credit rating and is frequently the most neglected way to improve your score. Credit cards are just one type of revolving credit, and personal and home equity lines of credit are also included. You should never use more than 30% of your credit limit.

How Long Does It Take To Rebuild Your Credit?

It typically takes at least 3-6 months of good credit behavior to see a noticeable change in your credit score. Unless the adverse information on your credit report was a minor blip, like being late on bill payments one month, it is hard to make a change any faster than that. It’s safe to say that the less damaging information is on your credit report—bankruptcy, constant credit applications, maxed-out credit cards, and other negatives—the easier it will be to improve your credit rating.

Repairing a poor credit history is more time-consuming than developing a good one. Errors can hurt your credit history and prevent you from acquiring a loan. You may be denied an apartment, utilities, or lose out on a job if you have a poor credit score. While  some lenders do offer “bad credit loans,” the borrower frequently ends up incurring hundreds or thousands of dollars in higher interest rates.

Your credit score will be negatively impacted much more if you are habitually late with payments and have your account turned over to a collections firm. 

Damaging information will remain on your credit report for different amounts of time, depending on the issue: 

  • The repossession of your car will be a mark on your credit report for seven years. 
  • Chapter 13 bankruptcy is a mark for seven years while Chapter 7 bankruptcy stays for 10 years. 
  • Delinquent accounts stay in your report for seven years. 
  • Credit application inquiries last on your report for two years. 
  • Any public record items, e.g., property liens remain on your report for seven years. 

The effect on your credit score diminishes over time, so a Chapter 13 bankruptcy in year six has little impact when compared to its impact in year one.

How to Increase Your Credit Score Fast

Check Your Credit Report Carefully

Look for negative information on your credit report and have it removed. 

  • Ask for a free credit report from Experian, TransUnion, Equifax as they owe you one annually. One in every five reports contain errors and omissions that can make your score drop. Dispute any wrong information by providing documents that support your case. 
  • Write goodwill letters to creditors requesting them to get rid of negative entries if you’re having difficulties with them. They aren’t obliged to grant your request but they can give you a good deal especially if you’ve had a good history with them before. 
  • If you have any collections accounts on your report, look into “pay-to-delete” and have the scope of work in writing before you send them cash. The agency can remove your negative information after the settlement. 

Enroll in Experian Boost

If your low score is due to being new to credit-seeking and making timely payments for utilities and cell phones, ask your lender to pull a report from Experian using its “Experian Boost” program. This is a hybrid model referred to as “alternative credit data”—non-traditional payments that provide lenders with valuable information about an individual’s creditworthiness.

Game the FICO Scoring System

As we saw earlier, there are five categories that make up your credit score. Among them, only the credit utilization ratio can influence your score significantly in the short-term. It is important to make sure payments are made before the statement closing date, so that lower balances are reported to the FICO and the big three bureaus.

With other factors constant, consumers with credit scores in the upper 600s—the bottom of the “good” range—have utilization ratios of 40-50%. To get into the 700s, you must have a credit utilization percentage of less than 30%. If you wish to assist your score quickly, use less than 15% of your credit. The less you use, the better.

Having a fat savings account or a generous uncle (or both) makes this fix simple. Otherwise, you must find extra money in your budget (or extra income in your month), in addition to spending discipline, to reduce your balances.

A debt-consolidation loan may be one way to attack high balances. Banks and credit unions, as well as various peer-to-peer lenders, are willing to eliminate credit-card debt if you can afford it. You can get a lower interest rate than Visa while eliminating your debt at the same time.

The other way to reduce your credit utilization ratio is to ask for a credit limit increase from your current lenders. But the idea of asking for higher credit limits when you have problems managing the ones you have should make you sick to your stomach.

Become an Authorized User

Having an incredibly generous parent with excellent credit is an excellent way to boost your credit score. Ask if you can be added as an authorized user to their account to gain a longer credit history. It should also help your credit utilization (if the balance on the new account is low). Please avoid using the credit card that is sent to you, as it is strictly for credit enhancement.

Getting a Credit Score 

Having a positive credit history can benefit almost every aspect of your financial future, whether you want to purchase a car, rent or purchase a home, or seek a job. The easiest way to begin is to apply for a line of credit. Credit cards for gas stations or department stores are usually easy to obtain and are excellent methods to establish good credit. Using them responsibly and avoiding overcharging is crucial. Paying your bill on time each month is critical.

If you’re unable to get approved for a standard credit card, get a secured credit card instead. Secured credit cards require a deposit, which is often equal to the credit line. For instance, a $500 deposit gets you a $500 credit line. An secured card works the same as an unsecured card in that you receive a monthly statement and are expected to pay it. Make sure that spending on the secured card is reported to the credit bureaus.

Normally, as long as you pay each month, your deposit will be refunded when you are finished with the card. Your deposit cannot be used to make the monthly payments.

As we mentioned above, being an authorized user on a credit card can help build your credit history. The best position to be in when it comes to credit is to be an authorized credit card user. You can spend without worrying about paying, because someone else will pay for you, and your credit will improve as a result.

This way, you’ll have a credit card that can help you build your credit history, even as you wait to get one. You’ll get an increase in the number of years using credit, an increase in the average age of credit cards you use, and an increase in the credit utilization available on your cards. All three will be added to your credit report immediately. A 50-100 point boost to your credit score could be accomplished by these three elements alone.

Keep in mind that your credit score might be negatively affected if the cardholder misses payments, maxes out the card every month, or engages in any other negative behavior. Also, any negative activity you create can impact the cardholder’s credit score. If you max out the card and the cardholder is late with payments or cannot make them, it will be recorded as a negative on their account—and at some point, on yours as well.

You can also create a credit history by taking out a loan to buy a used car, if you have a job. Regular payments will establish your credit history positively.

Thank you for reading our article. We hope you learned new ways to battle creditors and banks while protecting yourself.

We would encourage you to become a member of HigherScoreNow.com and start to leverage all the benefits of having good credit. You deserve this. 

How to Read a Credit Report

Your credit report provides information about your overall financial status. Reading a credit report is the best way to grasp your financial picture. It may seem challenging at first, but deciphering your credit report is incredibly simple.

Your credit report is used to determine your credit score as well as other financial decisions, and it is essentially a detailed record of your credit history. Our best credit report advice is to learn how to read a credit report and to check for errors at least once a year.

Getting a Credit Report

You can get a credit report by requesting one from one of the credit bureaus. The AnnualCreditReport.com website allows you to get one free copy of your credit report from Equifax, Experian, and TransUnion each year. To get all three reports at once, you must order directly from AnnualCreditReport.com.

How to Read Your Credit Report

All three credit bureaus should provide accurate information in these five categories, though the information may be slightly different.

Your report will include information about your name (including previous names and aliases), your Social Security number, and your birth date. It will also have your current and previous addresses and contact information like phone numbers and email addresses.

1. Personal details

Look out for misspellings and incorrect personal information.

Every aspect of your credit report must refer to you, not to your dependents, not to your ex-spouse, and certainly not to a person with the same name. Make sure that your personal details are correct.

Something is awry when you see a misspelt last name, an incorrect middle initial, an incorrect Social Security Number digit, or a phone number that does not belong to you. These are all indications that your report may have been confused with someone else’s.

2. Job experience

Your credit report includes current and previous employers’ information in the personal information section.

Make sure you recognize all of the employers listed.

Your employment history doesn’t affect your credit score because it doesn’t have anything to do with your credit or debt. Incorrect information like employer names you don’t recognize or employers you never worked for is a warning sign that you should verify your identity.

3. Credit history

The FICO credit score is calculated from quite a few factors, including the amount owed (30%), the length of credit history (15%), new credit (10%), and credit mix (10%). Your payment history, however, accounts for 35% of your credit score calculation.

Paying close attention to the sections that list your credit history on your credit score is critical since it has the most important pieces of data used to determine your credit score. The following information is included in a credit report as part of your credit history:

  • Payment history: This shows the details of all your payments. More specifically, if you made the minimum payments and how timely you are at making them. All missed payments contribute to a negative report. 
  • Closed and current accounts: Your accounts for the last seven to ten years will be listed. Whether it’s a joined account, individual account, or you’re an authorized user of any account, it will show up. There will be auto loans, student loans, mortgages and other installment loans as well as any revolving credit. 
  • Current balances: the highest balance on your accounts, as well as the current balance in the account when the creditor reported to the bureaus, will be listed.
  • Creditors/lenders names: All the listed accounts will have the names of all your creditors and the date the accounts were opened. 
  • Loan amounts or credit limits: This will show the credit limits for your current revolving accounts and the loan amount for any instalment accounts. 
  • Status of your accounts:  Your accounts will either be listed as open or closed, foreclosed, transferred, or refinanced. Others may be listed as charged off and they may be considered delinquent. 
  • Account opening and closing dates

Even after you’ve closed an account or paid off a loan, accounts will continue to appear on your credit history for some time. Your credit report will continue to reflect negative credit information such as late payments, charged-off loans and accounts, as well as delinquent loans, for seven years. After 10 years, accounts that are currently in good standing will no longer appear on your credit report.

Pay attention to all account details, especially the payment history.

Make sure that the account number, account name, balance amount, payment history, payment due date, and payment status are all correct by carefully scrutinizing your credit history. It’s important to make sure the account’s current credit limits or original loan amounts are correct. If the credit limit listed is lower than the one you actually have, it may negatively affect your credit utilization, which in turn impacts your credit score.

The following are other potential errors to look out for in this section:

  • Accounts reported as delinquent, but they’re actually open accounts. 
  • Closed accounts that are listed as open. 
  • Good standing accounts were erroneously reported as delinquent. 
  • Wrong dates: Opened/closed account dates, payment dates or dates for delinquent payments. 
  • Accounts where you’re an authorized user but you’re listed as the owner. 
  • An account listed multiple times under different creditors. This mostly happens with collections or delinquent accounts. 

Every account listed must be yours. If you don’t recognize an issuer, find an account that you didn’t open, see an incorrect balance, or notice another problem, you should dispute the error. Inaccurate account information could be a sign of identity theft, as well as outdated information on a credit report.

4. Public records

These are debts included in your report. A chapter 7 bankruptcy will remain on your credit report for 10 years. Records such as bankruptcies, foreclosures, and repossessions will be on your report for seven years. These events can negatively impact your credit standing, as they demonstrate a serious pattern of delinquency. Arrests, lawsuits, divorces, and law-unrelated infractions are not included in this section.

Public records can have a detrimental effect on your future financial well-being.

If there is a negative item on your credit report, you may need to submit a credit report explanation to lenders to explain why it is there. A public record must be verified with a courthouse visit at least every 90 days in order to be included on your credit report. Be certain that the information is correct with respect to your name, date of birth, address, and personal information.

Tax liens no longer affect your credit, so you should not see property tax liens, income tax liens, federal and state tax liens, or civil judgments on your report. If an error is found on your credit report, you should dispute it with the credit bureaus.

  1. Credit inquiries

Credit inquiries show a record of who has access to your information and when they accessed it. There are two types of credit inquiries: hard and soft inquiries.

  • Soft inquiry: When you check your own credit or when creditors and other companies check your account. 
  • Hard inquiry: When lenders check your account when you’re applying for new loans, credit cards, credit card limits increase, or when a collection agency wants to contact you. 

A hard inquiry typically reduces your credit score by a few points, but soft inquiries do not. Lenders worry about increased risk when they see you requesting more credit because it may signal riskier behavior.

A hard credit inquiry can lower your credit score or signal identity theft.

An unfamiliar credit inquiry on your report may indicate identity theft, but it might also be the result of multiple potential lenders pulling your report after you apply for a loan or mortgage. Issuers, on the other hand, typically count close-timed inquiries as a single inquiry if they occur within a certain time frame (usually 45 days or less).

Make sure to delete all inquiries listed after two years, as they should be. You may file a dispute and request a hard inquiry removal if necessary.

Importance of Credit Reports

Your credit report is a critical indicator of your financial well-being. Credit can either make or break your chances of getting a mortgage, as well as influence what sort of credit cards, insurance, and interest rates you are eligible for.

Landlords are more likely to rent you an apartment if you have good credit. Banks and lenders are also more likely to say yes to your credit applications, and you can receive lower interest rates or better credit terms, such as a low-cost fixed-rate mortgage or a higher credit line on a credit card.

You may not be able to acquire the most effective credit cards if you have bad credit, and you may have higher insurance costs and interest rates. You might be denied a rental, have to make a bigger advance payment, or co-sign with a creditworthy individual if you have bad credit scores. It might even influence your love life, according to a poll by Bankrate.

Checking your credit report can help you understand where you stand so you can improve your credit score. Checking your credit report at least once a year can also help you correct any errors so that your credit report accurately reflects your financial situation.

Dispute the Errors

Incorrect or out-of-date information on one of your credit reports can be corrected by filing a dispute with the credit bureau or hiring a credit repair company to do the heavy lifting for you. It is crucial to detect any mistakes, as incorrect information can negatively impact your credit score as well as any applications that rely on your credit report.

Check your credit report

It is important to check your credit report for mistakes that could damage your credit rating or indicate identity theft. The following are examples of potential errors:

  • Wrong addresses
  • Accounts and account numbers you don’t know
  • Wrong account status

Disputes are evaluated on a case-by-case basis, so you must provide documentation to support your claim. You must provide proof of your identity, including your Social Security number, birth date, and a photocopy of your ID (such as your driver’s license or passport). You may need to send copies of documents to support your contention, which may include bank and credit card statements, loans, or death certificates, depending on the specific error.

Challenge the mistakes on credit reports

You can easily submit a complaint online or via mail or phone to Equifax, TransUnion, and Experian. Here are their addresses. 

  • Equifax: Report your complaints online or by mail to Equifax Information Services, LLC, P.O. Box 740256, Atlanta, GA 30374-0256. Dispute over the phone at (866) 349-5191.
  • Experian: Report your dispute information online or over the phone using the toll-free number included on your credit report. If you want to use mail, send it to Experian, P.O. Box 4500, Allen, TX 75013.
  • TransUnion: Call the toll-free number (800) 916-8800, online or by mail to TransUnion Consumer Solutions, P.O. Box 2000, Chester, PA, 19016-2000. Ensure you’ve filled in the request form on the website.

Review the credit bureau’s response

You have 30 days to have any errors, omissions, or unverifiable information on your credit report corrected or deleted. However, due to the COVID-19 epidemic, the Consumer Financial Protection Bureau extended the deadline to 45 days as of April 2020.

Bottom Line

It’s important to understand how to read your credit report so you can improve your credit and maintain a healthy credit score. Your credit reports should be monitored regularly to prevent identity theft and fraud. When you understand why it’s important to check your credit report and how to read one, you can make more intelligent purchasing and borrowing decisions.

Thank you for reading our article. We hope you learned new ways to battle creditors and banks while protecting yourself.

We would encourage you to become a member of HigherScoreNow.com and start to leverage all the benefits of having good credit. You deserve this. 

Credit Score 101: Definition, Calculation, & How to Improve It

What is a Credit Score?

A credit score rates a consumer’s creditworthiness using a range from 300 to 850. This number indicates the risk level of a borrower. A higher credit score indicates a better borrower to prospective lenders.

Credit scores are determined by an individual’s credit history, including the number of accounts currently open, the amount of debt currently owed, the length of time payments have been made on current accounts, and other information. Lenders use credit scores to determine whether individuals are likely to repay loans on time.

Only three credit bureaus in the U.S.—Equifax, Experian, and TransUnion—are of major national significance. This trio dominate the market for collecting, analyzing, and disseminating information about consumers.

The FICO Score is the most frequently used credit score model. FICO, now known as Fair Isaac Corp., created the credit score model. Other credit scoring systems exist, but the FICO Score is by far the most common. An individual’s score can be improved in a variety of ways, including paying off loans on time and keeping your debt low.

Importance of Credit Score

Your credit score determines whether you’ll be granted a loan and the interest rate you’ll pay. Employers also check it to see whether you’re a dependable person. Service providers and utility companies may look at it to determine whether you have to make a deposit to use their service. Even landlords use this to determine if you can get an apartment or not. It goes even further, and can even affect whether you’ll get the best cell phone plans. 

Lenders frequently examine borrowers’ scores, particularly when determining whether to raise interest rates or credit limits on credit cards. Basically, your credit score can be a hammer or a lever based on how good it is. Bad scores are a hammer, as you end up paying more and missing out on so much. On the other hand, good credit is a lever as you’ll reap the benefits of low-interest rates and great deals regardless of your age or income. 

How Credit Scores Work

Your credit score can have a significant impact on your financial life. It is vitally important to lenders when deciding whether or not to grant you credit. People with credit scores below 640 are considered subprime borrowers. Subprime mortgages are often charged higher interest rates than conventional mortgages to compensate for the higher risk they carry. Borrowers with low credit scores may also require a shorter repayment period or a co-signer.

A credit score of 700 or higher is often considered very good, and borrowers with such scores may be eligible for lower interest rates and, consequently, pay less interest over the life of the loan. Scores above 800 are regarded as excellent. Credit scores are rated on a scale defined by each creditor, but the FICO model is frequently used.

The Factors That Determine Your Credit Score

Consumers’ credit histories are recorded and maintained by three major credit reporting agencies in the United States (Equifax, Experian, and TransUnion). Although the information collected by the credit bureaus may differ, five primary variables are used to determine a credit score:

  1. Payment history: The payment history is 35% of a credit score and reveals whether a person pays their obligations on time. 
  2. The total amount owed: The proportion of credit available to a person that is utilized, known as credit utilization, contributes to 30% of the credit score.
  3. Length of credit history: The length of credit history is 15%, with longer credit histories being considered less risky because there is more data to assess payment history.
  4. Types of credit: 10% of the credit score is determined in part by the ratio of installment credit, such as car loans or mortgages, to revolving credit, such as credit cards.
  5. New credit: 10% of a person’s credit score is also affected by whether he has a mix of new credit accounts, how many new accounts he has recently applied for, whether he has recently applied for credit inquiries, and when he opened his most recent account. 

If you have several credit cards, but don’t use some of them, closing those credit cards may actually negatively impact your credit score. Rather than throwing out unused credit cards, keep them safely in separate envelopes, organized by category. Go online to access and verify each card, ensuring that there are no balances and that your address, email address, and other information are accurate. 

Make sure you don’t have autopay set up on any of these credit cards. Make certain you have your email address or mobile phone number in the notification section so you are notified if something goes awry. Check them every six months or annually to ensure that no charges are made or that there are no irregularities.

VantageScore

In 2006, Equifax, Experian, and TransUnion credit bureaus created VantageScore as an alternative to Fair Isaac Corp.’s FICO Score, a consumer credit rating product. According to Equifax, Experian, and TransUnion, VantageScore employs machine learning techniques to produce a more accurate picture of a consumer’s credit. 

According to research conducted by consulting firm Oliver Wyman, the use of VantageScore has increased by about 20% annually since June 2015, accounting for about 90% of all credit scores. The FICO score, which is used by about 90% of all lenders, remains the most popular credit score. More than 12 billion VantageScores were used by over 2,500 users between July 1, 2018, and June 30, 2019, according to the most recent research. Credit card issuers and banks were the most ardent VantageScore users.

FICO and VantageScore scores differ in several respects. FICO creates a bureau-specific credit score for each of the three credit bureaus, using only that bureau’s data. Consequently, the three scores are really three distinct scores, each of which is determined by a distinct bureau. VantageScores, on the other hand, are single, tri-bureau credit scores, and each bureau uses them. 

How to Improve Your Credit Score

An individual’s credit score can rise or fall depending on new information when information is updated on their credit report. In order to improve their credit score, consumers can take the following actions:

Pay bills on time: Always ensure your bills are paid on time. If you have bad credit, you’ll have to make timely payments for six months consecutively before seeing a difference in your credit score.

Increase your credit line: Ask about getting a credit increase on your credit card accounts. This should be fairly easy if you have good standing. But once you do get an increase, make sure you are still keeping a low credit utilization rate. 

Keep your credit card accounts open: Don’t close any credit card accounts, even when you stop using the card. If you close an account, your credit score might be hurt depending on the card limit and age. For example, let’s say you have a $1,000 debt with a credit limit of $5,000 shared evenly between two cards. This puts your credit utilization rate at 20%. Closing one of the cards takes your credit utilization to 40%, negatively affecting your credit score.

Work with a credit repair company: At t times the idea of improving your credit score can feel overwhelming, and you may not even know how to improve your credit score on your own. Getting the best credit repair company to work with you will ease your stress. They’ll help negotiate with creditors and the three credit bureaus. They’ll also offer you advice to maintain a good credit score. 

Frequently Asked Questions

What is a credit score?

A person’s credit score is determined by a number from 300 to 850 which indicates their creditworthiness. Credit scores factor in repayment history, the types of loans, the length of credit history, and their debt amounts, in addition to other factors.

What is the ideal credit score to have?

Credit scoring models vary in terms of range, but scores from 580 to 669 are typically classified as fair; 670 to 739 are usually rated good; 740 to 799 are generally rated very good; and 800 and higher are usually rated excellent.

Who is responsible for calculating credit scores?

The credit reporting industry in the United States is dominated by three major players: Equifax, Experian, and TransUnion. There are, in fact, several credit bureaus, but only these three are of national significance. Collecting, analyzing, and disseminating information about consumers is what these businesses do.

Conclusion

Your credit score is one number that can either cost or save you a lot of money in your lifetime. If you have a great score, you will pay less interest on any line of credit you take out. However, it is up to you, the borrower, to maintain a strong credit score so that you can have access to more loans, if necessary.

Thank you for reading our article. We hope you learned new ways to battle creditors and banks while protecting yourself.

We would encourage you to become a member of HigherScoreNow.com and start to leverage all the benefits of having good credit. You deserve this. 

15 Interesting Bad Credit Stats You Need to Know

Your financial well-being is heavily dependent on your credit reports and credit scores. More than 200 million Americans have credit reports at the three credit reporting agencies. Curious how you compare to them? Here is your chance to see—we’ve collected 15 bad credit stats that might surprise you.

With these 15 bad credit statistics, you’ll also learn about common problems that hold down credit scores, as well as some reasons you should strive to improve your credit scores.

Only 11% of Americans have the lowest FICO scores.

It’s true that credit problems are fairly common. However, having severely low credit scores is not common. According to FICO, the corporation that developed the FICO credit scoring system, only 11.1% of U.S. consumers have credit scores lower than 550. . (Scores below 580 on the 300-850 FICO scale are very poor.)

Those with low credit scores face many obstacles when compared to those with higher scores. For example, those with very low credit scores may have a difficult time obtaining financing, depending on the lender’s approval requirements. Consumers with the lowest credit scores can still qualify for a loan, credit card, or other types of account, but they will pay significantly higher interest rates and receive less attractive borrowing terms. 

If you want to look at this from a glass-half-full perspective, the best rates are usually reserved for individuals with FICO scores of 700 or higher. 89% of the population has FICO scores of 550 or higher. Credit is definitely available for those scoring in the 500s or 600s, although it may not be offered at the best rates.

More than 20% of Americans have a subprime credit score.

A subprime credit score, according to Experian, is a FICO Score between 580 and 669. 18% of Americans have a credit score in this range. Credit scores in this range (580-669) are not as detrimental as those with a score of 580 or less. You may still be able to get financing at a better rate than those with major credit issues, but s.you may still be unable to qualify for certain types of financing, such as premium credit cards. 

More than 43% of consumers now have excellent FICO scores.

More than 22% of U.S. consumers have FICO scores over 800, and 43% of people have scores over 750. Those are elite credit scores, by any definition. You’re not alone if you have bad credit, but you should work hard to be part of the majority. 

There are several common characteristics among consumers with these excellent credit scores. If you want to join this group, these are the good habits you will have to practice:

  • Always pay your bills on time at all times. 
  • Keep your credit utilization (balance-to-limit ratio) low on your credit cards. 
  • Get a good mix of different types of accounts on your credit report, i.e. installment loans, revolving credit cards, etc. 

These financial best practices will help you achieve a credit score that ranks among the elite 43% of the population.

17% of the population has been at least three months late on a loan in the last two years.

FICO and VantageScore credit scores are designed to estimate how likely you are to default on a credit obligation in the next 24 months. Being 90 days late on credit cards, automobile loans, mortgages, or any other account on your credit report is a significant problem because you’ve already demonstrated to credit scoring models that you’re prepared to go well beyond the due date. 

90-day late payments can really hurt you, especially in the beginning. Your credit score may be severely damaged. However, the same 90-day late payment won’t affect everyone’s credit score the same way..If you have a higher score, your credit report will suffer more if you make a new 90-day late payment because you have more points to forgo. Someone with poor credit will not suffer the same consequences because they have already forfeited so many points. Thankfully, if you avoid delinquency in the future,, the late payment’s impact will dwindle over time.

Nearly 20% of consumers have been 30 days (or more) past due in the last 12 months.

It’s best to pay your creditors on time to maintain a strong credit history. Conversely, paying your creditors late is one of the fastest methods to ruin your credit rating. Your payment history accounts for 35% of your FICO score, which makes it the most important factor.

A late payment, even a single one, can have serious repercussions. For some consumers, a new 30-day late payment may result in a credit score drop of 30 points or more, depending on when the late payment occurred and whether the account was still past due.

According to the FTC, 20% of consumers have an error on at least one of their credit reports.

It is critical to take responsibility for your poor credit score if you make a mistake. Admitting that there is a problem may be difficult, but doing so puts you in control and should encourage you to improve your credit management habits.

However, your credit might be damaged due to someone else’s mistakes, or a credit bureau might accidentally mess up and report inaccurate credit information. According to the Federal Trade Commission’s credit reporting accuracy study, 20% of consumers have at least one error on one of their credit reports. That is why the Fair Credit Reporting Act’s dispute provision exists. Consumers who think their credit reports contain errors may dispute them and have them corrected for free.

Luckily, there are also credit repair companies that can help you dispute any inaccurate information on your credit report and make the process stress-free for you.  

Around 15% of U.S. consumers don’t have a FICO score.

Having no credit score can negatively affect you when you want to apply for a new credit card or loan. You may not be aware that having bad credit could keep you from progressing in many situations. After all, lenders might be hesitant to provide you with money when they have no idea how well you managed your credit obligations in the past.

Your report must meet certain minimum standards to qualify for a FICO credit score. These include;

  • An account older than 6 months that you can prove without a doubt belongs to you.
  • No deceased notation on your credit report. 
  • Have one undisputed account updated within the last 6 months. 

According to FICO, around 15% of U.S. consumer credit reports do not meet these requirements and thus cannot receive a FICO Score. VantageScore, a competing scoring model to FICO, has a more liberal scoring threshold, so more people have a VantageScore credit score than a FICO credit score.

NOTE: Some personal finance celebrities boast of having a “zero” FICO Score which is completely impossible. There is no such thing as a credit score of zero. Scores range from 300 to 850.

Every few seconds, someone’s identity is stolen.

Credit scores can be damaged not only by poor credit management and credit reporting errors, but also by fraud and identity theft. Every two seconds, someone becomes a new victim of identity theft.

It is crucial to act immediately if you think you have been victimized by identity theft. You can either place fraud alerts on your credit reports or freeze them entirely. You may even choose to utilize both credit protection tools simultaneously if you prefer.

Credit freezes are much better than fraud alerts because they are proactive and prevent creditors from seeing your credit reports and scores. Using this approach, you can prevent a new account from being opened rather than being informed after it has been opened.

43% of consumers haven’t checked their credit scores in the last year.

Credit reporting errors and identity theft are prevalent issues. Checking your three credit reports from Experian, TransUnion, and Equifax can help you detect them. It’s a smart move. A significant drop in your credit score, after all, might indicate that something is wrong with your credit reports. Your credit information is so important that reviewing your reports and scores once a month is ideal.

Unfortunately, the number of people who neglect to monitor their credit is significant. According to an annual survey by the Consumer Federation of America and VantageScore Solutions, 43% of consumers have not checked their credit scores in the last year.

You can check your three credit reports for free once every 12 months at AnnualCreditReport.com. 

Children can also have poor credit.

You work hard as a parent to keep your child safe and healthy. You instruct your child how to brush their teeth, eat their vegetables, and avoid sticking their fingers in electrical sockets. You may not realize that your child’s credit reports also need protecting.

Normally, children under 18 shouldn’t even have credit reports or scores. For example, your son or daughter may not have a credit report until after they turn 18 and apply for a student credit card or a loan. Conversely, you may add them to your existing credit card account as an authorized user to establish credit sooner.

Sadly, there is another reason a credit bureau may create a credit file for your child. Children can be victims of identity theft. According to Javelin Strategy & Research, over one million children were victims of identity theft in 2018. Fraudsters can create an inquiry-only credit report when they use a child’s name to apply for credit. This is because it contains no negative information, so it can be used to apply for fraudulent credit.

It is important to be on the lookout for warning signs of child identity theft, such as unexpected bills or collection calls on behalf of your child. It is also possible to freeze your child’s credit reports with the three credit bureaus for additional security if you wish.

The average credit card balance is more than $5,000.

Using your credit cards and paying them off monthly is the best way to protect your credit scores and bank accounts. Many Americans, however, do not follow this important rule of thumb. According to Experian, the average credit card balance among U.S. consumers was $5,221 as of Q3 2021.

You may allow your credit card balances to creep upward for several reasons. You may have used credit cards to help you through a financial emergency or to help you make ends meet if you lost your job or didn’t follow a monthly budget. Or you may simply have a bad habit of overspending.

It doesn’t matter what caused your credit card debt; you should begin chipping away at those balances as soon as possible. For example, you may want to consider consolidating your credit card debt with a personal loan or balance transfer offer.

62% of adults have accrued credit card debt in the last year, according to the NFCC.

Despite the fact that credit card accounts can help you build your credit report and credit score, credit scoring models such as FICO and VantageScore place a great deal of emphasis on how you manage your credit cards. 

Using your credit cards irresponsibly by not paying off your balances every month can be a costly choice. Your credit scores will likely decline if the balance-to-limit ratios on your cards increase.

According to the National Foundation for Credit Counseling, 62% of Americans say they have had credit card debt in the last year. If you are one of these people, you should try to change your ways as soon as possible.

Paying down your credit card debt and lowering your credit card utilization rate may improve your credit score. You will also save money by avoiding costly interest charges on your credit card debt.

At least 25% of consumers with low incomes do not understand how to improve bad credit.

Having bad credit is tough to break out of. A rudimentary knowledge of credit scores is required, which is not provided at any level of education. A recent survey from the Consumer Federation of America and VantageScore Solutions Inc. indicates that at least one-quarter of low-income consumers (those who earn less than $25,000 per year) do not possess the knowledge they need to raise their credit scores.

According to the 10th annual credit score survey by the Consumer Federation of America and VantageScore Solutions, certain consumers may be hindered by credit score misconceptions. The survey reveals that low-income borrowers are unfamiliar with the following aspects of credit scores:

  • 25% don’t know that mortgage lenders use credit scores. 
  • 30% are not aware that low credit balances boost their credit scores.
  • More than 50% don’t comprehend that consumers have more than one credit score. 

Maybe it’s time to bring credit education into the classroom, so that everyone can be armed with the knowledge needed to responsibly manage a credit score.

Having a low credit score can cost you over $100,000 more for a mortgage.

Having good credit scores can help you obtain attractive rates and offers when you apply for financing. The same is true for mortgage loans. It is surprising to learn just how much lower credit scores can cost you. The extra interest charges can add up to well over $100,000 on a single mortgage loan.

For example, over the life of a $350,000, 30-year fixed rate mortgage with a 2.523% APR, you would end up paying $149360 in interest. That APR rate requires a FICO score of 760 or higher. If your FICO Score is below 640, your interest rate will be 4.112%. At that rate, the total amount of money you’d pay in interest would be $259,707.

That’s $110,347 more you would pay to finance the same house over the same length of time.

Of course, this assumes that you will pay off a 30-year fixed-rate mortgage over 360 months rather than paying it off early or selling your home. It also assumes that you will not refinance your loan to take advantage of a lower rate.

On average, credit scores are rising.

The good news is that credit scores in the United States have been rising over the last nine years. The average FICO score is currently 706. A good credit score for the average U.S. consumer is one that is considered to be in the range of 700 to 799. However, it is up to your lenders to determine what constitutes a good credit score.

Only 8% of consumers with great credit scores are predicted to default on their credit obligations in the future. If you work hard to repair bad credit and boost your credit scores into the good range, you will probably be granted much better offers when you seek new loans.

What do these stats tell you?

One, you may be denied certain types of financing if you have bad credit. Renting an apartment, getting a new cell phone plan, or even getting a new job can be difficult if you have a poor credit history. You may be forced to pay higher interest rates, higher insurance premiums, higher deposits for utilities, and more if you have low credit scores.

Having bad credit is not uncommon, but you should not view it as an irreversible situation. Many people have had credit problems and worked hard to alter their situations. Even minor advancements along the path of improving your credit score can significantly impact your financial well-being. However, it can be a long, difficult journey. But even the little steps like  raising your credit score from 550 to 600 is something to celebrate. 

Reach out to us today if bad credit is holding you back. We can help by removing and challenging the negative items that affect your credit score. 

Thank you for reading our article. We hope you learned new ways to battle creditors and banks while protecting yourself.

We would encourage you to become a member of HigherScoreNow.com and start to leverage all the benefits of having good credit. You deserve this. 

Scheduling your free consultation today! 

How to Choose the Best Credit Repair Company in 2023

Having a great credit score is one of the most significant financial goals that everyone should hope to attain. It’s the key to having a healthy financial future and qualifying for affordable rates on various types of loans. Today, we’ll not only look at how a credit repair company can help you get back to a great FICO score again, but also how to pick the best credit repair company for you.

People can enlist the help of credit repair companies to fix their credit scores. They evaluate credit reports to identify inaccurate, unfair, or groundless data, and they make requests on your behalf for such information to be changed or removed.

While you can do these things for yourself, many people prefer to let a professional handle it, as it can be a tedious and stressful process. Credit repair firms aren’t all the same. They utilize different methods and have different pricing schemes, so it is wise to do ample research before selecting one.

What to Know Before Paying a Credit Repair Company.

Credit repair companies locate and correct any issues that may be damaging your credit scores. You may also repair your credit for free if you want to. This in-depth guide will explain how credit repair works and the advantages and disadvantages of using the best credit repair company.

Credit repair companies try to eliminate incorrect or unverifiable information from a consumer’s credit report. Keep in mind that credit repair companies that attempt to remove accurate information are unethical. Legitimate credit repair companies will only attempt to eliminate inaccurate or unverifiable information from a client’s credit report.

How to Select a Credit Repair Company

It is important to look for several telltale signs that help you distinguish between reputable credit repair companies and the many fly-by-night firms. You should look for an organization with a legal team that is licensed and has been in business for a long time.

In addition, reputable organizations offer more than just credit repair. They should also provide you with free credit reports, credit counseling, and strategies for maintaining good credit. Working hard to reestablish good credit is useless if you don’t know how to maintain it. There are too many dishonest companies out there today that collect monthly fees but are slow to address your concerns. You should therefore make sure that you are being updated on the progress of your credit repair on a regular basis once you have chosen a firm.

The best credit repair companies provide users with an online dashboard that shows their credit scores and tracks their progress. Additionally, it is wise to keep tabs on all three credit bureaus whether or not you employ a credit repair company. Doing so protects you from deception and is an invaluable aid in restoring your credit.

How Does a Credit Repair Company Work?

Legal credit repair companies assist you in removing inaccurate, false, and unsubstantiated negative items from your credit report. Avoid credit services that claim they can remove accurate but negative items from your credit repair. You are probably dealing with a scam that could negatively impact your credit score rather than improve it. It’s worth noting that reputable credit repair companies won’t promise to remove negative items or raise your credit score.

Credit reports are managed by credit bureaus, and they don’t give credit repair companies any special treatment when it comes to correcting errors. Repairing errors should take the same amount of time, whether you do it or a company does it. Credit repair companies that advise you to refrain from contacting credit bureaus are to be avoided.

However, credit repair companies offer speed and convenience when preparing documentation and communicating with creditors and credit bureaus. In addition, they go a step further and provide credit counseling and preparing of goodwill and cease-and-desist letters when required.

How Credit Repair Companies Assist You to Improve Your Credit Score

Would you like to pay a reasonable monthly fee to have a credit repair company help you clean up your credit history? If so, you may want to start with a free credit consultation with a credit expert to get the ball rolling.

After the consult, if you’re interested, you can sign up for a monthly subscription. The most common credit repair services are:

  • Summarizing and examining credit reports.
  • Communicating with credit bureaus and creditors by sending dispute letters on your behalf. 
  • Following up on the disputes until they’re resolved. 
  • Equipping you with financial tools and educational resources to ensure you can manage your own credit and finances. 

What Issues Can Hurt Your Credit Score?

Working with the best credit repair company will help you identify issues that could be damaging your credit history when they check your credit reports. These things include:

  • Inaccurate information: These are simple things to eliminate from your report, like spelling errors or incorrect amounts. 
  • Outdated items: the truth is that negative items can’t be recorded on your credit report forever. They have to be removed after a specific period of time. Take, for instance, hard inquiries—they can only be listed for a period of 24 months. 
  • Items with no evidence to back them up: If something on a credit report can’t be validated with adequate documentation, it should be removed. 
  • Fraudulent items: identity theft is one of the causes of negative items on credit reports. This is one of the hardest tasks to fix. If you are a victim of identity theft, inform the Federal Trade Commission and they’ll help straighten things out.

Tools Used by Credit Repair Companies to Repair Your Credit

Once a credit repair company identifies all the problems in your credit report, they may begin developing a strategy and establishing a remediation schedule. With your approval, the credit repair company may start working on eliminating negative aspects using these fundamental tools. 

  • Dispute letters: These are letters that dispute inaccuracies in your credit report or ask for evidence to prove the validity of negative items. 
  • Cease-and-desist letters: Debt collection agencies can be a real pain. Credit repair companies can ask them to stop contacting you if there are any inaccuracies in their claims or if it’s a case of mistaken identity. 
  • Goodwill letters: These are letters that ask creditors to remove a late or failed payment that happened due to problems that are beyond your control. 

Frequently Asked Credit Repair Questions

How long does credit repair take to work?

It can take anywhere from three months to several years to boost your credit score. This depends on how many legitimate disputes you can make and how many accurate adverse items are in your credit report. In most cases, consumers finish credit repair in about three to six months, but it might take less if your records are relatively error-free.

Can hard inquiries be removed by credit repair companies?

Credit repair companies can help you get rid of unauthorized hard inquiries from your credit report. You also have the capability to remove them yourself without paying a monthly fee. It’s important to check your credit report for hard inquiries you don’t recognize because it might be a sign that you are the victim of identity theft.

What’s a credit report dispute?

This happens when you find something on your credit report that you believe is incorrect, false, or unsubstantiated and you ask the credit bureaus to investigate it. For example, if you see a credit card account on your three credit reports that you did not agree to, you would ask the credit bureaus to correct the error.

After you dispute the negative items on your credit reports, the three credit bureaus will investigate and notify the creditor. Within 45 days, the creditor must provide proof supporting the claim. It’s up to the agency whether to remove the transaction or leave it there after that.

You can escalate the dispute resolution process if your initial complaint is rejected. Typically, this involves sending additional documentation, such as a receipt or canceled check, to prove that a negative item was an error.

How do the best credit repair companies remove negative items and improve your credit score?

A credit repair service may remove a negative item by disputing with the credit bureau, the collection company, or the original debtor. The first thing they do is check your three credit reports to see if there are any negative items that are lowering your credit score. These might include late payments, unpaid debts, or multiple difficult inquiries.

They’ll then request a modification or deletion whenever they discover an inaccurate or false negative item on their credit report. They request evidence from the credit bureaus to verify each negative item. The Fair Credit Reporting Act requires credit bureaus to provide you with a copy of the contract or agreement to prove the accuracy of an item if you desire it. If they are unable to provide such a document, the account will be unverified, and under federal law, any unverified accounts must be eliminated.

You may be able to repair your credit history by directly challenging the original lender or the debt collection firm if that doesn’t work.

How does the Fair Credit Reporting Act benefit consumers?

The Fair Credit Reporting Act (FCRA) is a federal law that regulates how credit bureaus function and ensures that the information they gather is an accurate representation of a consumer’s credit history. The Act aims to safeguard consumers from inaccurate data that might be used to their detriment.

Credit bureaus (Equifax, Transunion, and Experian) must provide a free credit report every year as part of the Fair Credit Reporting Act to help safeguard consumers from identity theft.

Can I repair my own credit scores?

Yes, you can definitely do this. To begin, get a copy of your complete credit reports from all three bureaus (Experian, TransUnion, and Equifax). If you see any issues on your report, dispute them with the credit bureaus. Then, pay down any credit card debt while making every bill payment on time. If you don’t possess any open credit accounts, consider getting a credit card and paying the whole balance every month. If you do not qualify to get a credit card, try getting a secured one.

What is the Credit Repair Organizations Act?

The Credit Repair Organizations Act (CROA) defines how credit repair businesses may operate when charging for credit repair services. Unlawful and deceptive credit repair practices are prohibited by the Credit Repair Organizations Act. In addition, companies providing credit repair services may not request a down payment, credit repair contracts must be in writing, and consumers have certain cancellation rights. Furthermore, the Federal Trade Commission states that the Act prohibits false or misleading statements.

Are credit repair firms legal?

Yes, they are. They are legal in all states except Georgia, where operating such a company is a misdemeanor. Before you spend money on credit repair services, make sure that the company is properly licensed with the relevant agency in your state.

Is it worth hiring a credit repair company?

This depends on your financial status, the content of your credit report, and your goals. If you want a credit repair company to magically remove accurate adverse information and raise your score by 200 points in a few weeks, you will be disappointed. You may accomplish the same things a credit repair company can by working hard and doing lots of research.

Credit repair companies, however, can save you a lot of time communicating with credit bureaus and debtors. This is particularly true if you work with credit professionals familiar with the credit repair industry, and the laws and regulations around it. 

Who Is the Best Credit Repair Company in 2023?

Well, the ball is now in your court! There are many companies in the market today, but luckily you now have all the information you need to choose the best credit repair company for you. Take your time to research the company, their services, how long they’ve been operating, and their pricing. 

Thank you for reading our article. We hope you learned new ways to battle creditors and banks while protecting yourself.

We would encourage you to become a member of HigherScoreNow.com and start to leverage all the benefits of having good credit. You deserve this. 

Credit Repair: The Ultimate Guide to Fixing Your Credit Yourself

The act of fixing your poor credit standing is referred to as credit repair. Your credit position can deteriorate due to a number of factors Repairing it can be as simple as making a call and disputing some mistaken information, or it can be labor intensive. That’s why it’s crucial to take some steps to have a good credit standing before everything falls apart. 

But if your credit score is already down the drain, don’t worry—there are ways to get it back on track. It can be labor-intensive and time-consuming to repair your credit yourself, which is why credit repair companies come in handy.  Credit repair services from these firms can assist you in disputing inaccurate information on your credit report with credit reporting agencies. 

These companies are transparent in what they do and they are professionals who understand how to raise your score again. Credit repair companies usually charge a monthly fee for work performed in the previous month or a flat fee for each item removed from your report. 

How to Repair Your Credit

Whether handling it on your own or working with a credit repair firm, to increase your credit score, you must take gradual steps to improve your credit history. There is no quick fix for your credit. Collection accounts, charge-offs, and missed payments will remain on your credit reports for seven to 10 years unless they are updated. However, you can build a more positive credit history by taking incremental steps over time.

1. Check Your Credit Report 

To learn more about your credit score and what lenders see when they look at yours, check your report and learn how to read it. There are companies that give you free credit score reports. With it, you’ll be able to see the highest risk factors that adversely affect your scores and make improvements to them. You can report incorrect information to a credit reporting agency if you find it. You should also contact the lender that reported the incorrect information and ask them to fix it.

2. Improve Your Payment History

FICO® score models are based on your financial history. The most significant component is your payment history. Late and missed payments will lower your credit scores, and bankruptcy and debt collection can cause significant damage. Your credit reports and scores will remain impacted for seven to 10 years after this negative information is recorded.

Your credit scores take into account the size of your debt and the time of your payments. Your score will be worse if your debts are large and your payments are late. Always make sure to pay your bills on time and keep them current to improve your credit scores.

3. Get Additional Credit Assistance

Consider consolidating your debt via a personal loan or balance transfer credit card if your debt is manageable.

If you can qualify and stick to the program terms, a debt consolidation loan might provide lower interest rates and reduced monthly payments. With a balance transfer card, you may be able to get an introductory 0% APR promotion, during which you can pay down the balance interest-free. Just be mindful not to continue charging on the original card once the balance is transferred.

Seeking the help of a reputable credit repair agency may be beneficial if your debt feels overwhelming and your credit isn’t good enough to get a balance transfer card or a low-interest personal loan. You can get a consultation with personalized advice for your situation.

You can also work with credit counselors to develop a debt management plan (DMP) for unsecured debt like credit cards. You’ll make your monthly payments to the credit counseling agency, and it will distribute the funds to your creditors. You might also be able to negotiate lower monthly payments and interest rates with the agency. If you use a DMP, your credit history will not be adversely affected as long as you continue to make payments on time as agreed to under the new terms.

4. Keep Tabs on Your Credit Utilization Ratio

Credit scoring models usually take into account your credit utilization ratio, or how much you owe compared to how much credit you have available overall. To find out your utilization percentage, multiply your revolving debt (such as your credit card balances) by 100 and then divide by your total credit (all of your credit limits). For example, if you have $6,000 in debt and $60,000 in credit across all of your accounts, your utilization percentage is 10%.

Keeping your credit utilization ratio below 30% is a good idea, but you should have a rule of thumb—the lower the ratio, the better. There are several ways to lower your credit utilization rate:

  • Pay off your account balances. 
  • Increase your available credit. You can do this by asking for a credit limit increase on your current card or opening a new credit card account. 
  • Take a personal loan to consolidate your credit card debt as it’s not included in the calculation of the credit utilization rate. 

Increasing your credit limit might look like a great option, but it could end up costing you more money. Trying to open a new credit card might tempt you to spend more, which might take you deeper into debt. In addition, if you apply for a new credit card, a creditor’s hard inquiry might temporarily reduce your credit score by a few points.

Getting a personal loan to consolidate your debt can result in a zero utilization rate immediately, but obtaining an acceptable interest rate can be tough if your credit score is poor. As it is, paying down your balances might be the most effective method to boost your credit utilization rate and, consequently, your credit scores.

5. Check the Number of Credit Accounts You Have

Your score takes into account how much you owe across the many accounts you own, and what proportion of those accounts are involved in your debt. It might be advantageous to pay down some of your accounts if you can.

Closing an account that you’ve paid down to zero may adversely impact your credit score, as well as your credit utilization ratio. So keep your accounts open even after the balance is down to zero. Keeping paid-off accounts open is a plus, as those accounts are in good standing. 

6. Keep Your Credit History In Mind

Credit score modeling methods, like those used by FICO, take into account an individual’s oldest account and provide individuals with longer credit histories with a monetary advantage. Before closing a credit card account, think about your credit history. Even if you’ve paid off a credit card and don’t intend to use it, leaving it open might be a good call.

Your personal financial circumstances are unique, so you should carefully assess your situation to determine the best approach. Of course, if keeping accounts open and maintaining credit availability would lead to further spending and debt, you may choose to close them. Every individual has a different financial situation, and only you know all the details.

7. Beware of New Credit

Opening several credit accounts in a short period of time can cause lenders to perceive you as higher risk and, as a result, negatively impact your credit scores. Before signing up for a loan or opening a new credit card account, consider the consequences.

However, it’s important to understand that when looking for the best mortgage rates or buying a car, your inquiries may be aggregated and counted as one inquiry for the purposes of credit scoring. In many popular scoring procedures, recent inquiries have a greater impact than older inquiries, and they are shown on your credit report for just 24 months.

8. Once You’ve Reached Your Goal, Keep Track of Your Credit Ratings

Because you have already done the necessary work to rebuild your credit history, you might be tempted to move on and focus on something else. But it’s still a good idea to keep an eye on your credit score. Keeping tabs on your credit score can alert you to any potential problems that could make it drop again. It will also give you a heads-up if someone commits identity theft, so you can take action before it gets out of hand.

How Long Does It Take to Rebuild Credit?

It’s difficult to estimate how long it takes for someone to build back their credit score because each individual’s credit history is unique. The negative information in your credit report might influence how long it takes for you to recover, especially if it occurred a long time ago. You can speed up the process of paying down the debt, but other actions might take months to have a significant impact.

It can take up to 30 days for an investigation into your credit report to finish if you believe the information is fraudulent or inaccurate. When the credit reporting agency discovers your dispute is valid, the information will be removed from your credit report and your score will reflect the change as soon as it is calculated again.

Don’t sweat if your credit report isn’t updated right away if you’re making payments or reducing your credit card balances. It’s critical that you check your credit score regularly to keep track of your progress and make sure the right information is being reported over time. As your credit history improves, your credit scores are likely to improve, and you’ll have a better chance of qualifying for favorable credit terms when you need to borrow again.

Thank you for reading our article. We hope you learned new ways to battle creditors and banks while protecting yourself.

We would encourage you to become a member of HigherScoreNow.com and start to leverage all the benefits of having good credit. You deserve this. 

10 Steps to Repair Bad Credit

You might be experiencing bad credit if you’ve got an overdue student loan, a high credit card balance, a lot of overdue collections accounts, or even have been foreclosed on. Lack of good credit is a barrier to many of life’s most important milestones. You may be denied a credit card or even forced to seek assistance for an auto loan or mortgage, and the interest rates offered to you may be substantially higher.

Thankfully, a credit repair company can help you get your credit back on track. They will help you negotiate settlements with creditors, remove inaccurate information, contact collection agencies, prepare letters to credit bureaus, offer advice and support to repair your credit, and update your account. They work with credit reporting agencies on your behalf and ensure that positive changes are reflected on your credit reports. 

They are experts in credit law and well-versed in consumer protection laws and statutes such as the Fair Credit Reporting Act (FCRA), the Fair Debt Collections Practices Act (FDCPA), or the Fair Credit Billing Act (FCBA). 

Keep in mind that bad credit doesn’t have to be a permanent scar on your record. Instead, it can be a life lesson, allowing you to correct your mistakes. If you’re not interested in using a credit repair firm, you can also greatly improve your credit score on your own if you simply have the know-how, the patience, and the determination to stick to your budget. 

Here are 10 techniques for dealing with your bad credit.

1. Check Your Credit Score and Credit Reports Regularly.

To begin do-it-yourself credit repair, you must get copies of your full credit report from all three credit bureaus: TransUnion, Equifax, and Experian. Credit reports and scores are two separate (but interconnected) things.

Credit Score

Your credit score is used by many lenders to determine how much of a credit risk you are. The higher the number, the less risky you are as a borrower and the more favorable of a loan you can receive. Someone with a high credit score may be able to borrow more money and receive a lower interest rate. Your credit score is used to determine your ability to make payments and your eligibility for loans.

There are five factors that comprise your credit score, and they are weighed in different proportions when calculating the final number:

  • Payment history (35%): Always pay your loan on time for a pristine history. 
  • Credit utilization ratio (30%): Huge balances on your credit cards will hurt your score. 
  • New credit accounts (10%): You get a hard credit inquiry whenever you apply for a loan or new credit card. This lowers your score temporarily. 
  • Credit account mix(10%): Having various loan types (e.g. mortgages, auto loans, credit loans, etc.) helps you have optimal credit. 
  • Length of your credit history (15%): The longer your credit accounts have been open, the better your credit score. The longer you maintain a good credit history, the better your score.

Having a credit score above 700 lets you do pretty much anything a person with a higher score can do. Actually, if you have a higher credit score, let’s say 850,  lenders know that they are unlikely to make much money from you, so it can work against you. 

Credit Report

Your credit report shows your credit history in detail. You can check if you’ve made any loan payments late or if you’ve had any late payments in the past. It’s important to check your credit report every now and then to ensure that there isn’t an error on your account. 

You can check your credit score and credit report for free through reputable free credit score tracking apps such as Credit Karma or Credit Sesame. 

2. Dispute Any Errors You Find

The next step in credit repair is to dispute incorrect information on your credit report. While errors aren’t common, they do occur. It’s worth cleaning up any small errors you do see, but don’t try to correct accurate information.

You should also check your identity information (including your Social Security number, the spelling of your name, and address) and credit history to see if there are any problems with your credit.

Make a copy of the report and highlight the errors if you notice any on the list of credit cards, outstanding debts, or major purchases. Make copies of your bank statements next, because the credit bureaus won’t act without proof.

In the letter, notify the credit reporting agency about the error and provide a copy of the report. Share how the report is incorrect and include enough evidence to support the claim. Sending this letter by certified mail is a good idea even though some Credit Bureaus now allow you to submit disputes online.

You must send a letter to the reporting agency asking for a response within 30 days. You can always get the help of a credit repair company to straighten things out for you. 

3. Stick to a Budget and Don’t Go Beyond It

Make sure you’re not spending more than you earn, no matter how painful or scary it may be. You need a budget. This may be extra difficult (though maybe even more necessary) for people who don’t get a consistent income throughout the year. For example, if you’re a restaurant server, an Uber driver, or a freelance writer, your income may vary from month to month, so you will need to budget extra.

Review your tax returns for the past two years to get a sense of how much money you take home in a year. Subtract your regular monthly expenses from your current income to get your starting point. Next, estimate your monthly spending habits for other expenses such as gasoline, groceries, and entertainment. Create a limit, based on your income, of what you can spend in each of the different categories of expenses. Resist impulse purchases.

4. Pay Your Bills on Time

Make sure you pay all your bills on time. Missing a payment accounts for 35% of your credit score. That’s heavier than any other factor. Missing a single payment on a credit card can knock down your credit score significantly. To improve your credit score, paying your bills on time is the most important thing you can do. Even if you are only paying the minimum, your credit score will improve. 

To prevent damaging your credit score,  make as many bills as possible autopay. Even if you normally pay your bills on time, autopay is still a good safety net if you somehow forget.

Some bills might not be eligible for autopay. Make yourself a number of reminders if you fear you will forget about these. For example, you can set a mobile notification a week before the due date asking yourself to pay early—and another late notification on the due date. If you’re really concerned, put sticky notes on your bathroom mirror reminding you to pay. It is critical.

5. Pay Off/Down Credit Card Balances and Other Debts

Avoid being charged high-interest rates by paying off your credit card in full before each due date. You may not always be able to do that, but you must develop a plan to clear your debt across multiple accounts. It is not bad to focus on the debts that cost the most to pay before tackling debts that cost the least.

When you’re making no progress at all on your five credit cards draining away your bank account in the form of minimum payments and interest charges, it can feel like you’ve got nothing to show for your efforts. Prioritize paying down the smallest loan until it’s finished, then you can focus on the next smallest loan. Your debt decreasing can also help your mental state.

6. Keep Track of Your Credit Utilization Ratio.

Using more than 30% of your total credit is a bad idea. Credit utilization accounts for 30% of your credit score. In short, 30% of your credit score is based on the amount of credit you are using vis-à-vis the amount of credit that you have available to you. Consider the following example: You have a $10,000 credit line on one credit card and a $5,000 outstanding balance. In this situation, your credit utilization is 50%.

A good credit utilization ratio is 30% or less. If a lender sees you using 90% of your available credit, it may indicate financial trouble. Try to pay off as many of your large purchases as possible to prevent exceeding the 30% credit utilization threshold.

7. Don’t Close Your Old Credit Cards

Even if you don’t use a credit card, it may still be worth keeping an account. Your credit score is determined by the proportion of your debts that are currently outstanding. This is known as your credit score’s “importance factor.” The longer the average age of your debts, the better your credit rating.

For instance, if you opened your first credit card four years ago, the average length of your credit history is four years. If you open another credit card today, the average length of your credit history will be two years. And if you want to close your first card, the average length of your credit history will be one day. The accounts that you close in good standing will remain on your credit report for several years, but the impact on your credit score when the account is removed will be felt. 

Don’t just close your credit card if it no longer suits your lifestyle. Keeping it open will help preserve the average age of your loans. It’s smart to keep a credit card around if you don’t have to pay an annual fee. However, if you don’t use your card, it’s probably not a good idea. You can call your bank to switch to a no-annual-fee version of the card.

8. Ask for Help

You can get the help of a professional credit repair company to improve your credit score. Inaccurate data, blemishes, and reporting mistakes can all have a negative effect on your credit score. Also, late payments, collections accounts and charge-offs can have the same dramatic effect. A poor credit score not only affects your ability to get a loan but also get employment in some cases. A credit repair company comes in to help you get everything on track. They are skilled negotiators, who know all credit laws and can offer you ongoing support and advice.

If you must, lean on those with better credit. It still is possible for you to achieve some of the greatest milestones in life even if your credit score is holding you back. Ask family members to assist you in improving your score if you need help buying a house or car.

An authorized user card is one way to get your own good credit history on someone else’s credit report. It’s an injection of healthy credit habits into your credit score. They don’t even have to give you the authorized user card, they can just shred it and allow you to reap the benefits of their good behavior secondhand.

You may want to consider asking a relative with good credit to cosign with you if you want to get a new loan. For instance, if you want to apply for a debt-consolidation loan but are not qualified, a cosigner can help you out. In this case, if you default on the loan, the family member will be responsible for the bill.

9. Do Not Apply for New Credit Cards

Even if you were offered a sign-up bonus for a new credit card, resist the temptation to open one. Each time you ask for a new loan, the lender will scrutinize your credit to determine if you’re worthy. This is known as a “credit check.”

There are two kinds of credit checks: soft and hard credit pulls. A soft credit pull has no adverse effect on your credit score, as it’s used to pre-approve loans for any potential customers. Hard credit pulls, on the other hand, can lower your credit score temporarily. Lenders use this to decide whether they can extend the loan to you. 

Credit scores are likely to plummet dramatically if you apply for new credit too frequently, although you might see a rebound within a month or two. Frequent credit inquiries are viewed as a warning sign by lenders. They don’t want to see lots of inquiries because it can reflect that you are desperate for money.

10. Use Credit-Building Tools

To get back on track, use available credit tools to help you. There are unique ways to build your credit on the internet. You can get apps that help you build credit by offering various types of loans—each of which you pay down monthly. You’ll find some that even send you back the initial term of the loan, minus the interest rate and a small application fee, at the end of the term. 

When you make a payment each month, good behavior is reported to the Credit Bureau and your credit score and profile may improve. The initial application might lower your credit score, but if you make all payments on time (essentially to yourself), it will increase.

You can also improve your credit by obtaining a secured credit card from a bank. These cards are issued to people with poor credit because they are effectively zero risk for them. To put it simply, you hand over money to the bank and they give you a credit card with a matching credit limit. For instance, if you give the bank $2,000, you’ll receive a credit card with a $2,000 limit. Should you neglect to repay your debts, the bank will keep your money. When you graduate from a secured credit card, the bank will return your money.

Wrapping Up!

It takes tremendous willpower to climb out of debt, but you can do it. Make sure there aren’t any errors on your credit report and dispute them with the credit bureaus. Even if it’s just the minimum payment, make sure you pay all your bills on time. Starting with the smallest credit card balance, focus on eliminating credit card debt as quickly as possible. Keep your credit utilization low, and keep all your credit cards open and in a sock drawer, if you must, to remove temptation (as long as they don’t have annual fees).

There really is no quick credit fix. However, if you plan to take on a big debt or buy a new home, it’s worth the effort. You’ve also got credit repair companies like High Score Now to help you out.

Thank you for reading our article. We hope you learned new ways to battle creditors and banks while protecting yourself.

We would encourage you to become a member of HigherScoreNow.com and start to leverage all the benefits of having good credit. You deserve this.