CreditScoreKeys blog posts

Why You Need Different Types of Credit – And What They Are

Rachel — Thu, 29 Nov 2018 13:02:41 +0000

Why You Need Different Types of Credit – And What They Are Rachel Thu, 11/29/2018 - 08:02

Different types of credit
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Your credit score is a blend of five factors. These include payment history, new credit, length of credit history, credit utilization, and credit mix. The largest single factor is payment history which makes up 35% of your credit score. The next biggest aspect is utilization at 30% of your score. The length of credit history is the next biggest at 15%. Credit mix accounts for roughly 10%, and today we’ll look at what it means and how to impact this part of your credit score.

What is credit mix?

As it sounds, this credit score factor evaluates the different types of credit you have in your credit history. There are three types of credit – revolving, installment, and open.

Revolving credit has a credit limit, and the balance carries over month to month, usually accruing interest and requiring minimum monthly payments. Credit cards, store cards, and home equity lines of credit are all types of revolving credit.

Installment credit is a loan where you pay installments on a balance. There are lots of loans that fall under this header, from mortgages to auto loans, student loans to personal loans.

Open credit isn’t as common. One example is old-school American Express cards. Back in the day, you didn’t have a credit limit on your AmEx and could charge as much as you want, but you had to pay it back in full each month.

You can have a good score without a mix

Although 10% of the FICO algorithm hinges on having different types of credit, you can have a good score (even a very good score) without a mix. However, sometimes you might get turned down for a credit line increase or another opportunity if you have only one type of credit.

You can work yourself up to a really good credit score with just credit cards. You shouldn’t take on a mortgage or car loan you don’t need to try and force another type of credit onto your report. However, if it’s part of your long-term financial plan, that’s great.

How revolving credit impacts your credit score

Because the biggest aspect of your credit score is your payment history, revolving credit is crucial. It also affects your utilization, another important factor. To optimize the impact of your revolving credit on your credit score, you need to use your credit cards then pay them promptly.

You also should not let your balances exceed 20% of your credit lines. If you manage these responsibly, then credit cards can help improve and maintain your score. Having credit cards that you abuse will drop your score and having ones you don’t use at all won’t boost it.

How installment credit impacts your score

Installment credit balance doesn’t impact your credit score since it’s a balance that should constantly be dropping as you make monthly payments on the loan. The best way to use installment credit (i.e., a car loan, mortgage, or student loan) to improve your credit score is to make your payments on time.

Make them on time, make them in full, and don’t borrow more in an installment arrangement than you can afford. If you follow these simple rules with installment loans, they will also help your credit in two ways. The first is by being part of a positive payment history and the second by being part of a diverse mix of types of credit.

The best thing to remember is that the path to good credit involves consistently good choices. However, even if you get caught up in a cash crunch that dips your credit, you can bounce back. To find out more about getting and keeping a solid credit score – even after bankruptcy or other issues, check out Credit Score Keys.

How Low Can a Credit Score Go?

Rachel — Thu, 15 Nov 2018 13:54:37 +0000

How Low Can a Credit Score Go? Rachel Thu, 11/15/2018 - 08:54

Is your credit score at rock bottom?
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There are three credit bureaus, and each uses different credit score models and ranges. Experian, TransUnion, and Equifax all have different proprietary scores and the ranges of score vary by the bureau and unique algorithm. So just how low can your credit score go and when should you start to worry? Here is some information to broaden your credit score education.

The worst credit score you can have

Equifax has the lowest bottom score of the three credit bureaus. The lowest score there is 280. With TransUnion and Experian, most score algorithms bottom out at 300. So, generally speaking, 300 is about the lowest credit score you could possibly have. However, practically no one has that score. That’s just mathematically as bad it can get.

A “perfect” credit score is 850. However, that’s a relatively exclusive achievement among consumers. You’ll probably find no one with a credit score of 280-300 and it’s a rarity for anyone to hit the other end of the spectrum at the 850 max either. The average score in the US right now is 704. Shooting for 680-725 will allow you to live a comfortable credit life.

Why low credit scores matter

When your score is down in the 500s or low 600s, you’re prone to rejections for new credit, and getting told no on credit line increases. On top of that, you’re more likely to qualify only for subprime credit opportunities. Subprime loosely means that your interest rate on financing will be worse than the prime rate. For credit cards, though, subprime can mean rates of 25-30% APR or more.

You also may be required to provide a larger down payment on a home or for utilities. You may get turned down for a cell phone contract or satellite TV service. Car loan options are usually limited for subprime borrowers and you might be asked for a sizable down payment be stuck with double-digit interest rates. Car, homeowners, and renter insurance will also cost more.

In short, you will have fewer credit and finance opportunities and the ones you get will cost more when you have a lower credit score. Those are good motives to work on your credit score and get it into the range to optimize your opportunities. You don’t need to exhaust yourself shooting for a perfect credit score, but you shouldn’t wallow with a low score either.

How to rebound from a low credit score

The first thing to assess is your credit score right now. Don’t assume you know what it is. Pull reports from all three credit bureaus to see where you’re at and what are the problem areas. Do you have items in collections? Are you rebounding from bankruptcy? Are you over the limit on your credit cards? Have you run late on payments?

The components of your credit score are credit history, length of credit history, the mix of credit, new credit, and utilization. Some of these factors are easier to influence than others. For your length of credit history, that’s a matter of time. Keeping older accounts open helps, as does not opening too many new ones. Occasionally opening new ones, though, boosts one small sector of your score.

The largest factor (roughly 35%) is payment history. Paying on time consistently, especially to creditors that report monthly to the bureaus, will benefit your score and keep it high. The second-biggest segment of your credit score is utilization. It’s calculated as the amount of revolving credit you owe as a percentage of your total revolving credit lines.

The lower the number, the better. Anything over 25% is asking for trouble but this is something you can correct quickly by paying down your balances. Don't let your score get any lower!

If your credit score is lower than it should be, take steps to get it moving in a better direction. One good resource is our Credit Score Keys DVD.

UltraFICO Coming in 2019 to a Credit Report Near You

Rachel — Thu, 08 Nov 2018 13:33:13 +0000

UltraFICO Coming in 2019 to a Credit Report Near You Rachel Thu, 11/08/2018 - 08:33

A new credit score arrives next year with some fanfare
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If you have been struggling with your credit score, there’s some great news for you. You may soon have a new option that’ll help you qualify for financial products or a loan you were hoping to land. UltraFICO is a trademarked name and score algorithm offered by Experian, and it could help a certain faction of consumers.

New UltraFICO credit score might help your finances

This new FICO credit score will launch in 2019 and could give you the added boost you need to qualify for better loan terms and credit cards. The UltraFICO score rolls out in a limited capacity in early 2019. It differs from other scores because it considers your bank account balance and cash management behavior to supplement other data already in your credit report.

Information evaluated by the UltraFICO scoring model includes how much you have in savings, length of account history, and the ebb and flow of your cash transactions. The UltraFICO score was created by the Fair Isaac Corporation, creators of the popular FICO scoring model. The score, which is being distributed by Experian, will be test-piloted with only a few lenders starting in early 2019.

How will the new score work?

The UltraFICO score would supplement the traditional credit score, but only for a certain segment of consumers. The score isn’t something everyone can utilize and will be made as an offer for a specific credit profile. It is an-opt in credit score offer. Here’s why.

Consumers ideal for UltraFICO have a credit score that falls immediately below the cut-off for approval for credit cards and loans (without paying exorbitant interest on a subprime loan). Your lender must also be using an Experian credit score since they’re the only bureau to offer UltraFICO initially.

For those with borderline scores (less than but close to 700), you may be offered the score. A few non-traditional lenders and credit unions will roll it out first. You must agree and opt-in because doing so allows the bureau to access your bank account and other financial payment data such as PayPal.

Experian won’t see details, such as what you spend your money on, but will be able to see balances and fluctuations in balances. They will also know how long the account has been open, whether it’s been overdrawn and other high-level info.

Benefits of UltraFICO

The score will help those with “thin” credit files who are just starting with credit but that have good money habits. Also, those rebuilding their credit after a financial crisis such as foreclosure, repossession or bankruptcy could benefit.

People who already have strong score don’t need to consider UltraFICO and won’t see an offer. Those new to credit stand to gain most from this new credit score, especially if they always keep a positive bank balance and have both checking and savings accounts.

Those new to credit can see a rise of 20 points or more on average under UltraFICO. You don’t need a ton of money in your bank account to benefit. If you keep a balance of $400 or more in your savings account, that puts you in a good position with UltraFICO – so start saving now!

Keep up good credit habits too

If you’re hoping to buy a car in 2019 or explore other credit opportunities and your score is teetering just below 700, UltraFICO might be on offer for you in the new year. But plan ahead! Set up a savings account and stash away close to $500 while keeping your checking in good standing.

Plus, keep up your other good credit habits like paying off credit cards in full each month, never running late on a payment, and paying bills before buying non-necessities. Lenders and creditors want to see good financial habits so stick with it!

To find out more about boosting your credit score after bankruptcy or other financial crisis, check out our Credit Score Keys DVD.

3 Things You Might Have Wrong About Your Credit Score

Rachel — Thu, 01 Nov 2018 12:24:12 +0000

3 Things You Might Have Wrong About Your Credit Score Rachel Thu, 11/01/2018 - 08:24

Don't make these three credit mistakes
Image by George Becker via Pexels

Like it or not, credit scores matter. Your credit score determines whether you can get a mortgage at a reasonable interest rate or buy a car when you need (or want one). Your credit score also can open or close the door to a job you want or a rental property. Your credit report is how lenders and creditors gauge whether you’re a risk worth taking. Understanding your credit report and score is critical. However, there are a few facts some people get wrong about their scores.

#1 It’s Best to Carry a Balance

Credit cards are a tool to help you get a higher credit score and keep it up there. However, it’s a double-edged sword. If you don’t use your credit card, the creditor won’t be happy and could cancel your account or refuse credit line increases. If you overuse or abuse your card, your score can drop.

There’s a myth floating around that you should carry a balance on your credit card and that doing so will boost your score. This is NOT true. That fact is that if you end the month with balances that exceed 15-20% of your total credit lines, your score will drop until your utilization drops back to a more appropriate range.

You never need to carry a balance to boost your score. Instead, to keep creditors happy, you need to occasionally use your card, pay in full each month, and never run late on a payment. Use your card for necessities, not luxuries and, ideally, pay off the balance before the statement cuts.

That means no interest charges, no potential to have a late payment, and no over-utilization. Avoid carrying balances to optimize your credit score.

#2 Your Age and Income Matter

When a potential creditor assesses your score, they look at the number and may examine the details behind it. How old you are, your race, where you live, where you went to college (or if you went) and other personal details are not part of the consideration. It’s simply about your credit-worthiness.

Statistically speaking, the older you are, the likelier you are to have a better credit score, but creditors don’t care how old you are. What they care about is that you handle your money wisely, don’t have negative items on your report, and can afford to pay for the credit you’re seeking.

#3 Fewer Cards is Better

Some people think having too many credit cards can hurt you. They might also think closing old accounts is a good idea. Usually, it’s not. How many cards you carry, the lines of credit you have, and how long you’ve had them all affect your credit score for utilization and credit history.

The average age of credit is one component of your score that’s simple to assess. You add up how many years you’ve had your credit cards and divide by quantity of accounts. So, if you have three credit cards and they were open one, two, and five years, you add those [(3+5+1)/3= 3 years average age].

If you closed the oldest account, your average age of credit drops to two years [(3+1)/2= 2 years average age]. Just closing that one account and making no other changes will drop your credit score. Then there’s the utilization issue.

If you have credit lines totaling $5,000 across those three cards and have a balance of $1,500, that’s utilization of 30% [(1500)/5000= 30%]. If you close an account with a $2k credit limit, your utilization would soar to 50% [(1500)/3000= 50%] with no other changes. Your score would plummet!

Understanding how your credit score works and the factors that determine your credit ranking are important so that you can optimize your financial opportunities. To find out more, check out Credit Score Keys.

How High Credit Card Balances Hurt Your Credit Score

Rachel — Thu, 25 Oct 2018 12:41:51 +0000

How High Credit Card Balances Hurt Your Credit Score Rachel Thu, 10/25/2018 - 08:41

What high credit utilization can do to your credit score
Image by Sharon McCutcheon via Unsplash

Your credit score is a three-digit numerical passport to opportunities and the things you may want in life. From a home to a car and even your dream job, like it or not, your credit score matters. Knowing the importance of your credit score is just the first step. You must also understand how your credit score is calculated and what behaviors will boost your score. One critical factor is how you manage your credit cards. Here’s a look at how high credit card balances drag down your credit score.

High balances = High credit utilization = Lower credit score

Your credit utilization is how much of your available credit lines that you’re using and is expressed as a percentage. If your total credit card lines of credit equal $10,000 and you owe $4,000 on your cards, you take 4000/10000 to calculate a 40% utilization. That is extremely high. You should never go over 20-25% of your credit line if you can avoid it.

When you charge expenses to your credit card, the amount you owe on the card gets reported to the three major credit bureaus – Equifax, Experian, and Trans Union – by your card issuers. This data is reflected on your credit report and will be used in calculating your credit score.

Why High Utilization Turns Off Creditors

The purpose of a credit score is to evaluate whether you’re worth the risk. To best assess, there’s an algorithm applied to your credit report which is a log of all your credit decisions and behaviors. When you routinely max out your cards – charging up to the credit limit – your credit utilization will be very high, and it could indicate that you’re not making good choices.

If you run up your credit cards now and then – like when you have a major car repair or must replace an appliance – that’s not such a big deal. But if you routinely max your credit lines, it’s a red flag. Even worse, if you run up your credit cards over 30% and then don’t pay down the balances and your utilization creeps upwards, it’s a sign you might be in a spending or debt spiral.

The higher your utilization and the longer it stays that way, the lower your score will drop. Not only will your score drop but it can mean you might not be approved for new credit, a real estate rental, or a job that you want. Credit risk decisions, for lenders, are all about a pattern of behavior. If you behave inconsistently or seem to be overspending, it can make you look risky.

How to Control Credit Utilization

The best bet for keeping your credit utilization down, as experts suggest, is to make sure you do not overspend. Credit cards are a double-edged sword. If you don’t use your cards at all, card issuers won’t give you credit limit increases and will eventually cancel your plastic. Ideally, you should use your cards some, but not overuse.

#1 Use cards for recurring affordable payments

Setting some recurring bills to pay on your credit card is a smart way to get usage without over-utilization. Put your Netflix on one card and your cell bill on another, for example, then pay the balances off in full at the end of the month

#2 Set up an emergency reserve

One reason people max their cards is an unexpected expense. Try and save up a few thousand dollars in an emergency savings account so that if you need a big car repair, must replace an appliance, or have another large cost, you can cover it without maxing your plastic.

#3 Ask for credit line increases

Another way to keep your utilization low is to ask for credit line increases occasionally. By having larger credit lines that you don’t use you’ll have a buffer against exceeding recommended utilization. Some sites have a button you can press to ask for a higher credit line and others you must call. Wait until your balance is zero and be sure you’ve made timely payments before you ask for a rise.

To find out more about improving your credit score, check out Credit Score Keys.

How High Does Your Credit Score Need to Be?

Rachel — Thu, 18 Oct 2018 11:07:57 +0000

How High Does Your Credit Score Need to Be? Rachel Thu, 10/18/2018 - 07:07

Is your credit score high enough?
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Your credit score is one of the most important numbers in your financial life. If it is high enough, it can be your passport to better opportunities in many regards. A good credit score allows you to buy a car, home, and enjoy lower prices on auto, renters, and homeowner’s insurance and many services and utilities. But how high does your credit score need to be?

Understanding credit scores

Credit scores range from 150 to 950, but vary a bit depending on the calculation used and the bureau that calculates the score. The lower the score, the worse it is, with 300 the worst and 850 considered a “perfect” score. You don’t need a perfect credit score to enjoy the benefits of higher scores, but you need something more impressive than 300.

In recent reports, the average American credit score hit an all-time high of 704. It is excellent news, and if yours is there, you’re doing well. As for a perfect 850 credit score, only about 1% of people ever achieve it. You don’t need a score that high to feel the benefits, though.

Subprime vs. super-prime

You might have heard talk of subprime loans. These finance arrangements are for people with lower credit scores. A subprime loan is high-interest, above the “prime rate”--thus the name. People with middling to poor credit scores qualify for these loans.

If you have a score of 550-620, you will likely only qualify for subprime financing. That means you’ll pay much more in interest. Super-prime is the opposite. It’s when you have good credit and can get the best credit offers for cards and loans.

Super-prime credit is 740 and higher. These consumers can get the best deals on interest rates on credit cards, loans, and more with interest rates at lower than the prime rate. A score of 680-739 is considered a prime borrower.

If you don’t know, the prime rate is the interest rate banks charge their very best customers. Right now, it averages about 1.75-2%. That’s a pretty sweet deal and can save you lots of money on interest if you qualify.

Looking beyond credit scores

While you will usually get better interest rates with a better credit score, other factors matter for loans like a mortgage or vehicle financing arrangement. Lenders consider other factors including your income and employment history plus whether you’re likely to retain the job you now have. They may contact your employer to discuss your employability odds.

You can have a great credit score, but if your income demonstrates you can’t afford the loan payments, you shouldn’t be approved. But if you’ve got a steady income, good employment history, and a reasonably good credit score, you should still be able to get reasonable financing offers at affordable interest rates – even without perfect credit.

How low is too low?

Credit scores below 650 can be problematic. With a subprime score like that, you’ll struggle to get approvals for financing or credit. And for offers you do get, the interest rates will be higher or demand a down payment (on a vehicle or mortgage) may be steeper. For example, a super-prime borrower can get a car loan for 2.6% interest (or less).

By comparison, rates climb to an average of 10.56% for subprime borrowers on the same car loan, according to Bankrate(dot)com.

The simple takeaway is that you should do all you can to get (and keep) your credit scores as high as you can. But once you’re past 740, it is probably not worth the effort to push yourself up to 800. So long as you make your payments on time and keep your balances low, you’ll have done plenty towards ensuring you have a better financial future.

To find out more about improving your credit score, check out our Credit Score Keys DVD.

Resources:

Credit score average

5 Ways to Boost Your Credit Score

Rachel — Thu, 11 Oct 2018 12:52:57 +0000

5 Ways to Boost Your Credit Score Rachel Thu, 10/11/2018 - 08:52

Try these five ways to boost your score
Image by Burst

Everyone makes credit mistakes at some point with their finances. It could be a missed payment, an account going into collections or something big like a repossession or foreclosure. One thing is certain - no matter what it was that damaged your credit score, you can recover. Yes, it can be difficult. But it’s doable. The best way to rebuild and recover your credit score is to get informed and then get started.

By making smarter credit decisions, you can move past your mistakes and get your credit score back on track. The best thing is that you can start immediately. There are steps to take that can pay off in no time. Here are five ways you can improve your credit score.

#1 Pay on time

You’ve probably heard this before, but it’s no less true for the repetition. Nothing affects your credit score more than paying on time and paying in full. Payment history makes up 35% of your credit score calculation and should be a top focus of your improvement efforts.

If you make payments late, figure out why. Do you forget payments? If so, set up auto payments or get a big calendar and mark the dates prominently. Do you run out of money before bills are due? Pay them first or take an online class in budgeting and financial management.

#2 Get a co-signer

After suffering a big hit to your credit score, it may be difficult to find a lender that’ll give you credit. If you’re in this situation, you need the equivalent of a financial guarantor. You need a co-signer. Having a co-signer means you can benefit off their good credit.

This makes it easier for you to access credit. Once you get a new credit line with the help of your co-signer, your credit score should rapidly rebuild so long as you make your payments on time. With a co-signer, both your credit score and theirs is on the line.

#3 Try a credit-builder loan

This category of loans is created specifically to help you build credit when your credit score is less than optimal, or you’re just starting with credit. Starter loans can come from your bank, credit union, or independent lender.

These are unsecured loans – also called a “signature loan” and are usually small. The main thing is to ensure that the lender reports the debt and payments to the credit bureaus. If they do not, it’s not a loan you need. Also, watch for high-interest rates on these and be cautious.

#4 Get a secured credit card

For those with no credit cards in their wallet, you should know that they’re one of the tools to a fast credit score rebound. But if your score is too low to get one or you just completed a bankruptcy, you might need to begin with a secured card.

To get a secured credit card, you put down a deposit with the card issuer. This protects them against a potential loss and enables them to offer cards to those with lower credit scores. These are a stepping stone, and when your credit improves, you can move on to an unsecured credit card.

#5 Get added as an authorized user

Being added as an authorized user on an someone else’s credit card helps your credit so long as they keep up with their payments and don’t max out their credit lines. But, you must find someone willing to let you piggyback on their account and put themselves at risk.

Try these strategies to boost your credit score and improve your financial opportunities. For other help with your credit score, check out our Credit Score Keys DVD.

6 Bad Habits That Hurt Your Credit Score

Rachel — Thu, 04 Oct 2018 12:29:16 +0000

6 Bad Habits That Hurt Your Credit Score Rachel Thu, 10/04/2018 - 08:29

Watch out for bad credit habits
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The better your credit score, the less you’ll pay for some expenses like auto and homeowners insurance. You’ll also save money with lower interest rates on loans and credit cards. Knowing how the bureaus calculate scores is critical so that you make smart money choices. Here’s a look at six habits you might not realize are hurting your credit score.

#1 Paying only minimums

If you can only afford to make minimum payments on your credit cards, you’re probably carrying a too-high balance. Ideally, you should pay off your credit cards in full each month. If you can’t afford to pay off balances, you’re overcharging.

Credit card activity keeps you in good standing with your card issuer. Charging items like Netflix, your cell phone bill or auto insurance is a good way to use your plastic without getting in over your head. Ideally, keep your balances below 20% of your credit line.

#2 Opening new accounts

One of the factors in your credit score is new credit. Periodically opening new accounts can boost your score. However, it’s a double-edged sword. When you seek a new account, the creditor runs a hard inquiry on your credit report that lowers your score.

This is short-term only, though. Once the new account is open, it can boost your score by lowering utilization. However, if you pursue too many new accounts, the credit inquiries drag down your score, and it also lowers your average age of credit.

#3 Closing old accounts

Closing old credit accounts can also lower your credit score because it reduces your average age of credit. The longer is your credit history, the higher your credit score. When you close old accounts, it hurts your score in two ways.

First, it drops your average age of credit. Second, if it’s a revolving account, closing it drops your total credit lines. If you’re carrying a balance, without increasing the dollar amount, your utilization goes up, and that will drop your score.

#4 Not using credit

Some people decide the best way to protect their score is to avoid debt and credit altogether. Millennials, in particular, tend to avoid credit and try to get by on a cash basis. It might seem financially healthy to avoid debt, but it hurts your credit score.

Without a credit history, you won’t have a good credit score. You must show that you can use credit and do so responsibly to have a healthy score. In some cases, if you entirely avoid credit, you’ll have no score at all. If you want a car loan or mortgage, you’ll be out of luck.

#5 Making late payments

Your payment history is one of the most important aspects of your credit score calculation. Making even one late payment can tank your credit score – dropping it by 100 points (or more). You might think one missed payment is no big deal, but that’s just not true.

Late payments are a sign of poor financial management skills and make you too risky for creditors to finance or if they do, to only offer it at high rates of interest. History is the single largest component of your credit score at 35%.

#6 Not checking your credit

Ignorance is not bliss when it relates to your credit score. You should be checking your credit report a few times a year to check for errors, fraud, and other items that can drag down your score. Monitoring your credit score can help you catch identity theft early.

Mis-posted payments, fraudulent accounts, and errors can all reduce your credit score unfairly. The longer these linger, the harder it can be to correct them, and the more your score could drop. Don’t let it happen!

To find out more about building better habits, check out Credit Score Keys.

Average Credit Scores are Higher Than Ever – How’s Yours?

Rachel — Thu, 27 Sep 2018 12:22:12 +0000

Average Credit Scores are Higher Than Ever – How’s Yours? Rachel Thu, 09/27/2018 - 08:22

Consumer credit scores are on the rise again!
Image via Unsplash

There’s good news from FICO (Fair Isaac and Corporation), the leading credit score algorithm creator. The average American credit score is again rising. Since the financial crisis abated, median scores have been constantly climbing and have reached a new milestone. FICO reported that the average score is now 704, up four points from their announcement last Summer of 700 as the average.

Credit scores hit record lows in 2009

In late 2009, at the height of the Great Recession, the average credit score hit bottom at 686. It had been in that range since 2005, but that was the worst moment for Americans' credit scores. Home foreclosures were at record highs, lots of people were jobless, and bankruptcies were common. It was a rough time for our economy and consumers.

Credit scores started climbing in 2013

Since October 2013, the US credit score average began rising and has been on a steady upward trend since then. In October 2013, it was at 690. Two years later, it was 695. Another two years and it hit 700. As of April 2018, the average American consumer credit score hit 704. Across the board all age groups are seeing higher credit scores, so that means it’s good for everyone.

Highest average credit scores by age group

Although the overall average is now 704, it’s differentiated broadly by age. The older the person, the higher the credit score, according to research by FICO. People age 60 and up average 747. In the 50-59 demographic, the average credit score is 713. For 40-49, it’s 690. Millennials aged 30-39 average about 677 and the youngest group, age 18-29 average a 659 FICO score.

Fewer people now have “bad” credit

The healthy job market and thriving US economy are pushing scores up and that means fewer Americans are now in the poor credit category. Those in the subprime credit range have been falling for years as the overall trend was on the rise. Around 19% of Americans have a credit score of less than 600. This is an excellent trend that continues today.

How to take advantage of this trend

Some recent changes are helping credit scores including the bureaus wiping out many public record complaints and de-ranking certain medical bills from the FICO calculation. These fixes helped, but it’s also about more than that. Americans are making smarter credit and financial choices. Some of the steps you can take to leverage this trend include:

Monitor your credit report – Errors are a big factor in credit scores. Check often to make sure there are no mistakes, payments are properly posted, and that your report is factually accurate.
Consider freezing your credit – Freezing your credit is now free and is something to consider. Freezing can prevent identity theft where people open accounts in your name and wreck your credit.
Pay your bills on time – Your payment history is the largest factor in your credit score. Make sure you always pay on time to prevent damage to your credit score. This is the foundation of good credit.
Don’t delete old accounts – Average age of open credit is another important factor. Needlessly closing old accounts can drop this average and your credit score.
Never max a credit card – Maxing out credit cards drops your score. Try not to over-utilize your credit lines and if you run up a card, pay it down ASAP and your score will bounce back.
Don’t open too many new accounts – Opening new accounts now and then can boost your credit and aids utilization by adding credit lines. Do it too much, though, and it can ding your score.

There’s never been a better time to boost your credit score. Take advantage of this trend and get to work on your credit report. To see more tips and strategies for improving your credit score, check out our Credit Score Keys DVD.

Source: FICO report

Credit Freeze Now Free – Do You Need to Lock Down Your Report?

Rachel — Thu, 20 Sep 2018 12:28:32 +0000

Credit Freeze Now Free – Do You Need to Lock Down Your Report? Rachel Thu, 09/20/2018 - 08:28

Why you should freeze your credit now that it's free
Image by Olivier Lemieux via Unsplash

A new law just came into effect that allows you to freeze your credit bureau files for free. This is a significant change that can protect you from identity theft and fraud. Before the new law came online, it cost $3-12 to freeze your credit report and then unfreeze it. Now it’s 100% free in all states, and it might be something for you to consider to avoid unauthorized access to your credit file.

Freeze blocks access to your account

Without your account frozen, fraudsters can use your credit to open new accounts in your name if they have enough personal information to spoof you. With basic information including your name, social security number, etc., a fraudster can apply for a credit card in your name, run it up, then leave you with the debt.

When your credit account is frozen, the creditor they apply to tries to run a credit check to approve the new account and they cannot see your credit info or score, so they reject it. That shuts down the attempted fraud because the potential creditor will refuse them based on lack of credit history access. That avoids identity theft headaches.

Freeze blocks you also – here’s how

It’s important to know that a credit report freeze also tampers with your ability to apply for new credit. If you apply for new credit with your report frozen, you’ll get the same type of rejection that a scammer does. However, you can prevent the issue.

When you apply for new credit, ask the creditor which bureau they use to run credit checks. Some use one bureau, and some will vary among the three (Equifax, TransUnion, or Experian). If they use just one, you can unfreeze that report, then refreeze after the credit check.

If they vary among bureaus, you’d have to unfreeze all three of your reports then after the check you can refreeze. When you had to pay for this service, you can see how it could get expensive to keep your credit locked down, but now it’s free!

Why you should freeze your credit

The new law goes into effect September 22, so if you want to freeze your credit, it’s free. It’s also important to note that the term for freezing has extended. Before the new law, the longest your credit could be frozen was for 90 days.

That meant if you wanted to keep it frozen, you’d pay four times a year to keep renewing the protection. Now the freeze can last for up to a year. You can also tack a fraud alert onto your account if you’ve had identity theft issues.

Consider freezing your child’s credit too

Those will stay on your credit report now for a year also and alert potential creditors that they need to do a more extensive verification of the applicant’s identity. It’s not just your credit that can be at risk – your children’s identity can also be stolen.

Freezing your children’s credit is something you should do as well. Scammers often target children because no one habitually checks those credit reports. Have you ever checked your child’s credit? Since locking it down is now free, it’s smart to do so for your children.

Most people don’t apply for credit that often, so it’s not a constant hassle to unfreeze and refreeze your credit. It will not affect any existing credit accounts you have, only when you apply for new credit. Then you can unfreeze and refreeze.

It’s a much better approach to protect your credit score by preventing fraud rather than trying to clean it up after the fact! To find out more about improving your credit score today, check out the Credit Score Keys DVD.

Resource:

NPR interview on new freeze law

Americans Smarter About Credit Scores – Survey Says

Rachel — Thu, 13 Sep 2018 12:29:56 +0000

Americans Smarter About Credit Scores – Survey Says Rachel Thu, 09/13/2018 - 08:29

There’s a prevailing narrative that American consumers don’t understand credit scores and how they work. However, a recent survey shows that we’re getting savvier about credit scores, are more concerned about them, and working harder to improve them. Let’s look at the data.

New survey by Consumer Federation of America

In the eighth installation of its annual credit score survey, the Consumer Federation of America reported that Americans are smarter about their credit scores and more concerned about the credit score process compared to three years ago.

It’s important to note that the survey polled those who recently accessed their credit scores, so that indicates a baseline interest. But other recent surveys across the board show a growing interest by consumers in understanding and improving credit scores as well.

What the survey says

More than 1,000 individuals participated in the survey that quizzed them on topics such as how credit scores are calculated and methods to improve credit scores. The survey found those most likely to investigate their credit scores are mulling over a major purchase funded by borrowed funds such as a mortgage or car loan.

Of those surveyed, 70% planning to borrow funds accessed their credit scores but close to 60% not planning to borrow also checked their credit score. The rift between these two groups was significant when it came to understanding the nature of credit scores with a 10-15 point gap demonstrating deeper knowledge by planned borrowers.

Understanding credit score calculations

Most survey participants could identify some factors that drive credit scores but didn’t understand all the factors. These include payment history, mix of credit, new credit, utilization, and average age of credit. Most knew that skipping payments and high card balances hurt their scores but didn’t understand the bigger picture of their credit score.

Also, most of the respondents knew some of the ways to raise their credit score, but had an incomplete picture. For most people, how to raise their credit score is a grey area and many take actions that harm their credit scores while trying to boost it because of a lack of understanding. For example, paying off debt early can actually drop your score.

More consumers are checking their credit

The CFA study also found that the percentage grew of those checking their credit reports over the past few years. It jumped from 29% up to 36% in 2018. However, the percentage of those who know it’s critical to check their credit report declined from 72% down to 67% in 2018. That’s a discouraging bit of data because checking your credit is always important.

The overall outcome from the study shows that Americans are increasingly interested in their financial health. More are committed to doing what is necessary to learn about their credit and how to improve their score. If you’re interested in understanding and improving your credit score, the information is out there!

Credit score factors

● Payment history: This critical element, accounts for about 35% of your credit score.

● Credit utilization: How much of your credit you use determines 30% of your credit score.

● Age of credit: The longer you’ve had credit, the better as it accounts for 15% of your score.

● Mix of accounts: One of the least understood factors, this 10% looks at types of credit.

● New credit: This 10% of your score boosts slightly for opening new accounts now and then.

To find out more about improving your credit score, check out our Credit Score Keys DVD today.

Resource:

Survey by CFA

Your Credit Score May Be Higher Soon – Here’s Why

Rachel — Thu, 06 Sep 2018 12:39:06 +0000

Your Credit Score May Be Higher Soon – Here’s Why Rachel Thu, 09/06/2018 - 08:39

Credit score boosts are ahead for many consumers
Image by Kelly Sikkema via Unsplash

Life’s about to get better for a lot of people with their credit score. That all-important three-digit number may be rising soon without any effort on your part. That’s great news! All three credit bureaus - Equifax, Experian,, and TransUnion - announced that they'd review how they deal with negative credit information and make some changes.

Why Credit Scores May Rise

Equifax, Experience, and TransUnion’s recent announcement included that they intend to drop certain debt types and items of questionable accuracy from credit reports. The makeover will likely result in higher credit scores for many consumers. Changes to your credit report trigger change to your credit score since it’s the data used to power the algorithm.

The more negative information the bureaus delete from your report, the greater the impact of this change on your credit score. This is a huge change, particularly if you’re planning a big financial move soon. If you’re purchasing or refinancing a home, considering buying a car, or other major credit-based purchase, this could be a boon for you.

Changes Coming – What Will Be Deleted?

Some of the items the credit bureaus will likely cull from consumer credit reports include:

Traffic tickets – Citations are more than annoying, they can lower your credit score. A ticket for even a relatively minor infraction can be costly and if you forget to pay it, can cause problems. What’s worse is that you might pay it, but the governmental bureau still reports you in error or fails to delete it after the fact.

Tax liens – When income tax debt goes unpaid for a time, the IRS or state revenue agency can levy your property over the debt. The tax lien attaches the debt to your property, so the IRS or state can sell to recover what you owe or, if you sell, snatch part of the proceeds. This is a significant change to credit reports and scores.

Civil judgments – If a court judgment goes against you, and the court orders you to pay to the other party, then as soon as the judgment issues, the court reports it to the credit bureaus. It’s a negative item that can drop your score. With this change, these incidents won't be on report or part of your score calculation.

Medical debts – This change is significant for a huge swath of consumers. Bureaus already lessened the impact of medical debt on score calculations in the latest score algorithms. Paid medical debts will drop from the credit report and so will those owed by your insurance company.

Library fines – This sounds like no big deal, but people have been dogged (and even arrested) over long-forgotten library books. Don’t forget – it’s still a government agency that owns the debt and they have mighty powers. Incidences of library fines will also drop off reports according to these credit bureau changes.

Will Your Score Change?

The changes don’t mean every consumer will get an increase in their credit score. However, if you’ve got one of the above items on your report, you might land a score increase. The significance of the impact will depend on how much the negative item was dragging down your score. You might see a shift of more than 40 points according to Federal Reserve data.

Check for change and then leverage it. If you’re preparing for a major purchase like a home or auto, you may want to delay until you see the impact and then check if you’re close to a new threshold and work to further improve your score before applying. If your score rises, it might be a good time to renegotiate credit card rates for a sweeter deal.

When you’re looking to improve your credit score, check out Credit Score Keys.

Resource:

Impact of credit changes

When Doing Good Things Drops Your Credit Score

Rachel — Thu, 30 Aug 2018 12:52:27 +0000

When Doing Good Things Drops Your Credit Score Rachel Thu, 08/30/2018 - 08:52

How can good deeds cause bad credit?
Image via Pixabay

Everyone wants a good credit score - and no one likes it when it drops. But it’s an even harder hit when you’ve been working to improve your credit score and are doing the right things, but it drops out of the blue. A credit score can dip from good behavior. Sounds strange? Read on!

You’re doing everything right then bam!

When building your credit, particularly after a setback like bankruptcy or a debt spiral, you are working hard. You make payments on time, you don’t let high balances accumulate on your credit cards, and you don’t have any items in collections. So why the drop?

The most common culprit is you clearing off old accounts from your credit, old accounts dropping off, or paying off installment loans. First, let’s look at what factors affect your credit score to narrow down what dropped your score despite your healthy financial habits.

Credit score determiners

There are five components to your credit score. Changes to any of these can impact your score:

Payment history – Making on-time payments is critical. Even one missed payment can drop your score significantly – by 100 points (or more).
Credit utilization – How much revolving credit you carry compared to your credit lines matters – go over 20%, and your score will drop.
Age of credit – Calculate the average age of your credit accounts by adding how many years each was open and dividing by the number of accounts. Older is better.
Credit mix – Having several types of credit boosts your score (but not a lot). There’s installment (mortgage, car loan, student loan) and revolving credit (credit and store cards).
New credit – Occasionally opening new accounts can boost your credit score, but you don’t need to do it often (and shouldn’t).

Knowing what factors affect your credit can inform your choices and explain why your credit score rises or falls.

Paying off debt is good, but your credit score might drop

When you pay off debt such as making your last installment on a vehicle or student loan, it’s certainly an accomplishment. Unfortunately, it can drop your credit score. If that was your one installment loan, your mix of credit would drop. It also represents an account that was active and is now inactive which can make your score drop. But don’t worry, it will rebound!

Housecleaning older accounts can decrease your score

You might have an older secured card you want to close to recover your deposit. Or perhaps you have an older unsecured account with a high interest rate you don’t like. Closing an old account can drop your average age of credit and your credit score. Losing that credit line can also drop your credit by increasing your utilization if you are carrying any balances.

Your credit score bracket changes

Part of how the credit bureaus rank you is by comparing you to other people in similar brackets. When you move from one credit category up to the next better one, your score might initially drop because you’re judged by harsher criteria. The same goes if you had a bankruptcy that drops off your report because you jumped out of the less-favorable bankruptcy-filer category.

You shouldn’t avoid good behavior like paying off a loan just because it will drop your credit score in the short-run. But some choices like closing old accounts should be carefully weighed before you act to protect your score from drops, particularly if you’re trying for a mortgage or car loan and need the best possible credit score.

When you’re rebuilding your credit score after a financial crisis or bankruptcy and aren’t sure what to do next, check out Credit Score Keys.

5 Ways to Add 100 Points to Your Credit Score

Rachel — Thu, 23 Aug 2018 12:49:52 +0000

5 Ways to Add 100 Points to Your Credit Score Rachel Thu, 08/23/2018 - 08:49

Bump your score 100 points - Image by Michael Gaida via Pixabay

If you’re at the threshold of a credit category (fair, good, excellent), tacking on an extra 100 points can get you there, but how can you do it? While it’s true that re-establishing your credit after a financial fiasco is a marathon, not a sprint, there are some things you can try to fast-track your way to a better credit score. Here are five ways you may be able to add 100 points to your credit score – depending on your report, finances, and what’s holding you back.

1 – Clean up errors

The first thing to do is scour your credit report. Look for any items that are incorrect that could be dragging down your score. Simple clerical errors won’t matter, but some things are significant. A payment posted as late that you paid on time is a crucial mistake that can harm your score. Even if you legitimately paid something late, if you only did it the one time, call the creditor and ask for a one-time pass. If you can get them to remove that item, that can boost your score instantly and make a difference.

2 – Pay down balances

One of the major components of your credit score is credit utilization. If you’re carrying 25-30% on your cards (or more), your score isn’t as good as it could be. To check utilization, add up your total credit card debt and divide by the total credit lines you have across all cards. If it’s more than desirable, pay it down ASAP and then next month, you should see a credit score increase. Ideally, you should use your cards only for items you can afford to pay off in full that month.

3 – Get credit line increases

If you can’t afford to pay down your credit line balances right now, another approach to reducing your utilization percent and bump up your credit score is to request credit line increases. Since total balances divided by total credit lines equal utilization, reducing the numerator or increasing the denominator both work to improve the statistic. Reach out to your creditors and ask for credit line increases. The worst they will say is no, but if they do bump you, your score should improve.

4 – Deal with delinquency

For any lingering unpaid items, clearing this up will improve your score. Contact the creditor and work out payment arrangements. If you can pay on the spot, you might be able to talk them into cleaning the item off your credit. Be sure to record the conversation (if it’s legal in your area), so you have them on the record agreeing to these terms so you can enforce them later if they don’t follow through and clear the negative item off your credit.

5 – Clean up a collections item

Debt collections are frustrating because they represent a double hit to your credit score. The first item that was reported by the creditor when you didn’t pay reduced your credit score. Then, when they turned it over to a debt collector, they likely also recorded an item on your record which lowered your score some more. If you can pay off the item, do so, but first get them to agree to remove the collection from your credit. Record the proceedings so you can enforce the conditions after you pay.

A note of caution!

If you’re looking to pay off a debt collection item or delinquency, first look at the statute of limitations on the item and balance your concerns. In North Carolina, most consumer debt has a statute of three years. That means from the date the debt went delinquent (date of your last payment or charge), after three years, the creditor/collector can no longer pursue legal remedies.

If you make a payment, you restart the statute clock ticking. Legal statutes differ from the credit report clock. Items generally fall off your credit report seven years from the date of last activity. So, it’s wise to look at the datelines for both to determine what’s best for your financial future before you take an irreversible action.

To find out more about improving your credit score, check out our Credit Score Keys DVD.

How Often Does Your Credit Score Change?

Rachel — Thu, 16 Aug 2018 12:42:49 +0000

How Often Does Your Credit Score Change? Rachel Thu, 08/16/2018 - 08:42

What's your credit score?
Image by Gemma Evans via Unsplash

You know the commercial that shows a guy with a credit score tattooed on his arm? That’s one of the worst ideas ever since your credit score isn’t a fixed number. Info on your credit report determines your credit score. The data constantly changes on your credit report, every time you have credit activity.

Not only does your credit score change, but you’ve got hundreds of different versions of your credit score. A credit score is an algorithm developed by a company. Some are general while some are specially designed to assess risk for a mortgage, car insurance, or a vehicle loan, for instance.

Plus, there are thee credit bureaus – Experian, TransUnion, and Equifax. Each has slightly different data on your credit file so each of their standard credit scores will differ. With this in mind, one question consumers often have is how often their credit score changes. Let’s dig into that.

Why Does Your Credit Score Change?

The basis of your credit score is your credit report. That report is data-driven by updates from creditors, debt collectors, and the court system. If the court issues a judgment or lien against you, it will be reflected there.

When you file bankruptcy, the court enters it, and it reports to the credit bureaus as well. If you pay a debt collector, they should report the payment and alter the record. If a debt collector buys a debt you owe, they’ll enter a collection item on your credit report.

Each month when you pay on your credit card, mortgage, or vehicle loan, the activity should report to the credit bureau. If you miss a payment, that shows up too. The balances also change each month. Your data changes based on changes to vehicle, mortgage, and credit card balances.

How Often Does Your Credit Score Change?

You can see above what factors influence your credit score. These items update to your credit score often. Some creditors report monthly, some more often. The courts might report the judgment the day it goes through or at the end of the month.

A debt collector might report at any time. There is no set schedule to determine when a creditor or other source of data will report to the bureaus about your activity with them. But it’s safe to say, at a minimum, that your credit score will change at least once a month.

Your credit score isn’t sitting in a vault. It’s also not a big ticking display like on the show “24”. Your credit score generates when you authorize a creditor to access it. The information available at the time determines the score.

Some credit card companies provide you a monthly score update. They do this by running a soft pull and crunching the data. Your credit score will change every month unless you have no accounts, no activity, and no movement in credit and finance data. This is a rare situation.

Sudden Changes to Your Credit Score Can Occur

Ordinarily, changes to your credit score are minor. You might move down a few points month to month if you had some credit inquiries or the balances on your credit cards increased by a few hundred dollars.

For your score to make a bigger movement, something bigger must occur. For instance, if you miss a mortgage or credit card payment, your score could plummet 50-100 points. If your student loans move from delinquent to default, you could see a significant dip.

How Often Should You Monitor Your Credit Score?

You need not obsess and watch your credit report daily to make progress. However, you want to keep a recurring eye on it throughout the year. This lets you know if there are signs of identity theft or fraud, errors on your record, or if you’ve moved up or down a bracket.

When you’re working to improve your credit score, regular monitoring is essential. One of the easiest ways to keep an eye on your score without a hassle is to sign up for a low-cost monitoring service that alerts you when there are changes and activities.

When you’re ready to re-establish your credit score after bankruptcy or a financial fiasco, check out the useful information in the Credit Score Keys DVD.

Most Americans Are Working on Their Credit Score – Are You?

Rachel — Thu, 09 Aug 2018 10:18:02 +0000

Most Americans Are Working on Their Credit Score – Are You? Rachel Thu, 08/09/2018 - 06:18

Are you working on your credit score?
Image by Annie Spratt via Unsplash

Your credit score is important to optimize your financial opportunities. That three-digit number can determine whether you can buy a home, get a reasonable rate on a vehicle loan, or land your dream job. Given how important your credit score is, it should be something you’re constantly working to improve and maintain, but are you?

A new survey from credit card issuer Discover offered insights into how Americans are managing their credit scores.

Breakdowns from the Discover data

How many are working on their credit score

61% of consumers are grooming their credit score
83% of Millennials are working on their credit score
66% of Gen Xers are trying to improve their score
34% of Boomers are busy improving their credit score
87% of the youngest group surveyed (18-21) are most devoted to the task

Awareness of credit scores

85% of Americans know their credit score (up from 73% last year)
91% of Baby Boomers know their credit score
86% of GenX know theirs
77% of Millennials are aware of their credit score

Frequency of credit score checks

82% of US consumers check their credit score once a year
70% of Millennials check their score once or more each year
67% of Generation X check it at least every 12 months
61% of Baby Boomers do credit checks annually or more often

Conclusions from the survey

The takeaways from the Discover card survey are that Americans overall are more aware of their credit scores than in past years. Millennials, in particular, are intent on improving their credit scores and monitor it frequently. Their scores are lower than GenX or Baby Boomers, but the younger demographic seems most committed to improving their credit score.

Why check your credit score?

Knowing your credit score and what’s on your credit report is the foundation for any effort to improve your score. You must know where you are to plan where to go next. In addition to working on improving your credit, checking your report regularly allows you to recognize if you’ve been hit by identity fraud or there are errors on your report lowering your score.

How to boost your credit score

To improve your credit score, you first need to know where the weaknesses lie. There are five factors influencing credit score algorithms: payment history, credit utilization, credit history length, mix of credit, and new credit all factor into the calculation. Here are some areas of concern for each of these.

Payment history – Have you missed any payments? If so, but you only missed one, you might be able to get the creditor to give you a fresh start and remove it from your report. That can be an instant lift.
Utilization – The total of your balances divided by your total credit lines is how this is calculated. Paying down balances or requesting credit line increases can improve this factor and your score overall.
Average age of credit – Keeping old accounts open and not opening too many new ones will keep this portion of your credit score higher.
Mix of credit – Having a blend of types of credit can boost this factor. Credit cards and store cards represent revolving credit while car loans, student loans, and mortgages are installment loans.
New credit – Occasionally opening new credit accounts will boost your score but opening too many can drop it so this is a point that can be difficult to master.

One best practice to get and keep a good credit score is to always make your payments on time. All things being equal, if you must run late on a bill, paying late on one that does NOT report to the credit bureaus monthly will better protect your score.

Also, paying off your balances in full and never carrying any money on your credit card month-to-month can prevent you from getting in over your head and dropping your credit score.

To find out more about boosting your credit score, check out Credit Score Keys now.

Resource:

Discover survey data

A Mediocre Credit Score Could Cost You $45k – Here’s How

Rachel — Thu, 02 Aug 2018 12:41:58 +0000

A Mediocre Credit Score Could Cost You $45k – Here’s How Rachel Thu, 08/02/2018 - 08:41

Bad credit can cost you big bucks
Image by Artem Bali via Unsplash

Bad credit causes problems you expect – you can be turned down for financing, jobs, and even rental property. Everyone knows poor credit holds you back but did you know that mediocre credit can be almost as problematic and can cost you tens of thousands of dollars? Look at the high cost of low credit and what you can do about it.

Declined Isn’t the Worst Outcome

You might think that being turned down for credit (like when you need a car loan) is the worst thing that can happen. That’s not true. Being approved for a finance agreement that’s got terrible terms is a worse fate. If a lender rejects you for a loan, you can make alternate plans, save up money, build up your credit score, and try again later.

But if you get into a bad deal, you might wind up with excessive interest, missed payments, and wind up losing the vehicle or home to repossession or foreclosure. Even if you can stick to the finance agreement, if the terms are tough, you’ll pay thousands of dollars more in interest, fees, and finance charges than you otherwise would with a better credit score.

The High Cost of a Low Credit Score

Most people are surprised at the financial impact of a mediocre credit score. A recent study by financier Lending Tree revealed that an average credit score could cost you up to $45k over the long haul depending on your credit activity. If you ever wondered exactly how much a too-low credit scores costs, this survey provided meaningful insight.

Lending Tree looked at credit scores rated “fair” (580-669) versus “very good” credit scores (740-799). They then examined the impact of the credit score differences on credit cards, personal loans, auto loans, mortgages, and student loans. Here is what they observed:

Credit cards – Over the life of your credit activity, with fair credit, you’d pay nearly $6k more in interest than someone with very good credit.
Personal Loans – With personal loans (most often used to consolidate credit card debt), the observed difference of interest was close to $4k.
Auto Loans – For vehicle loans, the difference between fair and very good credit could cost you almost $4k more.
Student Loans – Over the 10+ year period you pay off student loans, less than stellar credit can cost you almost $2k, but that’s usually on private loans, not federal.
Mortgage – The biggest dollar hit for fair credit versus good is on a home loan where you’d pay $29k more in interest for your house.

If you add all those numbers up, it’s more than $45k you’d lose by not having better credit. You might think you’re stuck with mediocre credit, but you’re not. Nothing is holding you back from improving your score. Even with a lower income, you can have a higher score if you strategize.

How to Improve Your Credit Score

To get to a “very good” credit rating Is not an overnight process. Some steps to take to drive up your credit score include:

Pay your bills on time.

Good payment history will improve your credit report and boost your credit score. Payment history makes up a large chunk of your credit score calculation, and even one late payment can tank it.

Keep older accounts open.

When you have an older account in good standing, why shut it down? If you think fewer cards in your wallet is better, it’s not necessarily true. Older accounts boost your average age of credit.

Maintain a low credit utilization.

Forget the 30% myth. The fact is, you should not carry balances on your cards from month to month. You’ll pay more in interest, and it’s a slippery slope. Pay off in full each month if you can.

Apply for new credit cautiously.

New credit can boost your score but go after too much at once, and you can drag down your average age, and excessive credit inquiries (i.e., hard pulls) can also drag down your credit score.

This research shows you the hard dollar difference that is having a better score can make to your finances. You need good credit – but how can you get there? Get started by checking out Credit Score Keys.

Looking for a Job, Apartment, or Phone? You Need Good Credit

Rachel — Thu, 26 Jul 2018 13:43:06 +0000

Looking for a Job, Apartment, or Phone? You Need Good Credit Rachel Thu, 07/26/2018 - 09:43

Your credit score matters
Image by Helena Lopes via Unsplash

You might think your credit score matters only when you’re ready to buy a house or car and the rest of the time, it’s not so important. Nothing could be further from the truth. Your credit score affects your life and finances every day. You might not notice it, but it happens. What usually brings your credit score to the forefront is when you get refused for something.

Do you need a new smartphone?

Smartphones are expensive. The latest iPhone costs around $1,000 if you want something with curb appeal. Even bargain phones can cost hundreds of dollars if you pay out of pocket, up-front, and in a lump sum. With the major phone carriers, you can walk out of the store with a shiny new phone in hand for low monthly payments attached to your cell bill, but only if you have good credit.

Are you job-hunting?

You might not think your credit score has anything to do with the search for your next gig, but it very well might. At one time, only those who worked in finance, like bank tellers and cash handlers, needed a good credit score to get a job. Increasingly, employers are checking credit on a wide array of potential employees to screen out candidates. It might not seem fair, but it’s a growing practice.

Looking for a new place to live?

You might think about your credit score and housing needs when you’re looking to buy a place, but it also matters when renting. Larger property management companies routinely check credit scores and will often refuse those with lower credit scores for an apartment. You might have better luck with a private landlord if your score is less than optimal, but you'll see limited options with a low score.

Are you trying to start a business?

If you own a small business or are trying to get one off the ground, you might not think your personal credit score matters, but it does. You may find you're short of cash or want to expand and need a business credit card or line of credit to stay afloat or make your next big move. Without a decent credit score, your entrepreneurship aspirations could die on the vine.

What does poor credit cost you?

In addition to being turned down for opportunities, a middling credit score can saddle you with higher expenses every month. Credit scores drive some utility rates--most natural gas providers check your credit and offer rate plans based on your credit risk even though that seems unfair. The same goes for some satellite and cable television providers.

Your car insurance and homeowners or renters insurance rates are also set based on credit score even though safe driving and credit risk don’t seem to go hand in hand. Some car rental companies run credit checks before they will let you use one of their cars, particularly if you want to pay with a debit card. Plus, you’ll find yourself cut off from opportunities if you don’t have a credit card.

When you use a debit card, rather than credit, to book a rental car, they block off a large security deposit which effectively (although temporarily) drains your bank account. Often, purchases aren’t insured or covered with debit cards as they are with credit cards. The same goes for buying gas at the pump when the store blocks off a large chunk when you swipe at the pump.

Improve your credit score today

There are countless reasons that you want (and need) a solid credit score. There’s no upside to having a low score. You might have the attitude that your credit score is just a number or that you don’t want to be part of the "system." But if you want a cell phone, a place to live, car to drive, and a job, you’re part of the system that rewards good credit.

To find out more about ramping up your credit, check out Credit Score Keys today.

Millennials Need Credit Score Help

Rachel — Thu, 19 Jul 2018 12:29:12 +0000

Millennials Need Credit Score Help Rachel Thu, 07/19/2018 - 08:29

Millennials have a disconnect with their credit scores
Image via Unsplash

Everyone needs a good credit score to achieve their goals and dreams. Your credit score is crucial to your financial health and touches more aspects of your life than you might realize from employment to housing to insurance and utilities. Recent data shows that Millennials are struggling with credit score woes that are affecting their lives in significant ways.

Fact: Millennials have lower credit scores than other demographics

Data from TransUnion shows that 43% of Millennials have subprime credit scores compared to 20% of Boomers with low credit scores. The credit bureau attributed the comparatively lower credit scores to three factors:

Less lengthy credit history
Opening too many new lines of credit
Higher credit card utilization

A recent survey by lender OppLoans found that 46% of Millennials feel their credit score is “holding them back.” Some of the negative outcomes from their less than desirable credit scores, according to OppLoan’s data include:

27% reported they couldn’t buy a new car
26% got turned down for new lines of credit
14% still live with roommates rather than on their own

What’s the cause?

If you’re a Millennial struggling with low credit and limited financial opportunities, you need to pinpoint the cause. You might assume your earnings are the problem, but even those with a lower income can have good credit if you’re making appropriate financial choices. According to LendEdu, there’s pervasive lack of understanding of what drives credit scores.

Shockingly, the lender found that 10% of Millennials believe that their credit score is a “number assigned to them at birth” while another 5% think it’s a “number to track their position” on waiting lists to get credit cards. One-fourth of those surveyed admitted they never learned how to build good credit. There’s a disconnect in financial education.

Some of the misinformation Millennials hold as fact about credit utilization include:

Almost 50% think increasing credit utilization boosts credit score
Almost 40% believe maxing cards and paying them off on time helps
Less than 18% knew that decreasing utilization boosted credit rating

Tips for Millennials looking for a higher credit score

Some Millennials need help learning to get and maintain good credit. If you’re a Millennial struggling with a middling (or low) credit score or know a Millennial who needs help improving their FICO, check out these tips.

Educate yourself

There are tons of free online financial education classes and apps designed to teach you the basics of credit. Once you have baseline knowledge, you can move on to more sophisticated credit improvement techniques.

Automate your payments

Late payments are a primary crippler of credit scores. By setting up auto-pays, you’ll never run late. On-time payments represent a positive credit history that represents 35% of your credit score. Even one late payment can wreck your credit score.

Don’t max out credit lines

Never exceed 20-25% of credit utilization to shield your credit score from a hit. If you must max a card, pay it down ASAP. Total balances owed divided by total credit lines across all accounts equals utilization. This factor can change rapidly month to month.

Build a buffer

One of the top drivers of a financial crisis (and dropping credit scores) is lack of a safety net. Many Millennials don’t have an emergency fund and use credit cards instead. Even a small $500-1k rainy day fund can prevent a misstep that dings your FICO score.

Building good credit can be hard going. But if you start out now, you can get well on your way to securing your financial future. To find out more about boosting your credit score, check out Credit Score Keys.

Resources:

TransUnion data

OppLoans survey

LendEdu findings

Do These 5 Things to Rock Your Credit Score

Rachel — Thu, 12 Jul 2018 13:01:22 +0000

Do These 5 Things to Rock Your Credit Score Rachel Thu, 07/12/2018 - 09:01

Make a credit score to-do list
Image by Suzy Hazelwood via Pexels

When you’re coming out of bankruptcy or another financial crisis, your credit score might be lower than ever. That’s not a good thing. Your credit score affects your ability to get into a rental property you want, get a job, how much you pay for insurance, some utilities, and of course, determines whether you can get a credit card, car or home loan.

You need a good credit score to optimize your opportunities, financial and non-financial. Do these give things to rock your credit score and get it where it needs to be.

1 – Pay down card balances and lower utilization

A big part of your credit score is credit utilization. It makes up 30% of the calculation. Utilization can be easily calculated by adding up your total credit card debt and dividing by your total credit limits. If you owe $500 on a total of $2k in credit lines, your utilization is 25%.

That’s excessive. Ideally, a very low utilization is ideal, less than 10%. If you owe more than 30%, your credit score will drop, and trigger rejections for new credit opportunities. To lower utilziation, lower your credit card balances by spending less and chipping away at your existing balances.

2 – Pay bills on time for a positive payment history

An even more significant aspect of credit score is payment history. It represents 35% of your overall credit score. Nothing boosts your credit score more than consistent, on-time payments. If you must run late on a payment, try and avoid one that reports monthly to the credit bureaus.

Even a single missed payment can tank your score. Run past the grace period on a mortgage or auto loan payment or a credit card, and your score can plummet by up to 100 points. That’s devastating. If you do run late, pay ASAP, then call the creditor to ask them for leeway this once.

3 – Don’t close old accounts or open too many new

The average age of accounts makes up 15% of the credit score algorithm. The number is easy to crunch. Look at how long your credit accounts have been open and average that number. Count all credit items, not just credit cards. Add up the years accounts were open, then divide by the number of accounts.

If you’re considering closing an old credit card account you rarely use, or that has a high annual fee, do the math on what closing it will do to your age before you close it. Also add new accounts slowly and consider the impact on your average age before you apply for new credit.

4 – Blend of installment and revolving credit

If you have only credit cards and no other forms of credit, this aspect of your credit score suffers. The credit mix is just 10% of your score, so it’s not a crippling issue, However, if you only have one type of credit, it’s something to consider if you’re trying to boost your score and need an instant lift.

A mix of some installment loans (car loan, student loans, mortgage) and revolving credit (i.e., credit cards, store cards) is ideal, but you shouldn’t go out of your way to acquire debt simply to boost this credit score factor.

5 – Limit hard pulls

There are two type of credit inquiries – hard pulls and soft pulls. When you apply for new credit, it’s usually a hard pull where they see your credit record and the credit bureau logs the request and dings your credit slightly. A soft pull doesn’t hurt your credit.

Soft pulls can be used for pre-approvals and for existing creditors to assess you for increased credit lines, etc. To avoid excessive hard pulls, pre-screen creditors and only apply where you know you meet the criteria. Hard pulls have less effect on your score and eventually fall off the report.

A complex issue simplified

Further complicating your credit score is that these factors interplay and affect each other. If you close an old account, not only could you drop your average age, but you could increase your utilization because you have a lower overall credit line.

If you want a higher credit score but don't know how to get there, check out Credit Score Keys. We can help you rebuild your credit score after bankruptcy or another financial crisis.

What Credit Score Do You Need to Lease a Car?

Rachel — Thu, 05 Jul 2018 12:21:52 +0000

What Credit Score Do You Need to Lease a Car? Rachel Thu, 07/05/2018 - 08:21

Need a car? Leasing might be your answer
Image by Alex Radelich via Unsplash

Let’s face it – to get around in North Carolina, you need a vehicle. There’s a lack of widespread public transportation. That means you need a car or a healthy budget to catch Uber rides. Your options for buying a car are paying cash, getting a loan financed, or leasing.

Most people don’t have cash in hand to buy a new car, and buying a used car that’s in decent shape is still a costly proposition. For most people, borrowing or leasing is more feasible. Car leases are a popular alternative to loans and account for around 30% of all new car sales.

How a car lease works

Unlike a straight purchase, a vehicle lease offers lower payments and may be easier to obtain. Leases were initially exclusive to corporate or luxury car customers, but leasing is now available to anyone with a credit score and income that meets the criteria of the leasing company.

The purchase price of the car is the first factor of the lease payment. Therefore, you still must negotiate the best possible price whether you’re leasing or buying. You might also be able to negotiate terms such as the mileage limits.

Most leases offer annual mileage limits of 9k-15k miles a year with 12k being the most common. You can try and negotiate a more generous allowance. You can also try and negotiate the overage mileage charge.

The average charge is 20 cents per mile overage, so every five miles is another $1 when you turn in the vehicle at the end of the lease term. The amount of money you’ll put down with a lease varies based on your credit score and terms.

At the end of the lease, you have an option to buy the car, and you can negotiate that along with any disposition fee which is a fee you pay if you do NOT buy the vehicle. There may also be additional charges if you turn it back in with damage or excessive wear and tear.

Qualification

You must have a moderately good credit score to be approved for a lease. The minimum credit score for lease approval is usually around 620. Below that score, your credit is subprime, and if you can get approved, the terms will likely be terrible.

Credit scores above 680 are much likelier to be approved. Scores above 740 are top-notch and should have no problem with lease approval. What also matters is having a steady job and an income level that shows you can afford the lease payments.

Leasing vs. Buying

Benefits of leasing

You can keep driving the newest car and swap it out every year or so.
You can get lower payments with a lease than a traditional auto loan.
Smaller down payment can help people with good credit but no cash to put down on a car.

Benefits of purchasing

You don’t have to worry about mileage restrictions and steep overage fees.
The car is yours from the get-go without paying a balloon payment at lease-end.
You can do what you want with the car including using it for work (like Uber, pizza delivery, etc.).

Leasing versus buying isn’t necessarily a case of right or wrong. It’s about what is best for your needs, finances, and circumstances. If you need a car to keep your job and the one you have is on its last legs, leasing might be the best solution for you.

For those looking for a car and extra cash, there are options offered to help you get a vehicle you can use while driving for Uber or competitor Lyft. The most cost-effective approach is a quality used car bought with cash since you’ll save on insurance, avoid interest, and won’t face monthly payments.

To find out more about boosting your credit score, so you have better opportunities for buying or leasing a vehicle, check out our Credit Score Keys DVD.

5 Reasons to Check Your Credit Report

Rachel — Thu, 28 Jun 2018 12:41:33 +0000

5 Reasons to Check Your Credit Report Rachel Thu, 06/28/2018 - 08:41

Here's why you must check your credit report often
Image via Unsplash

When it comes to your credit score, many clichés apply no matter how tired they sound. “You snooze you lose” comes to mind as does “Use it or lose it!” When you don’t pay attention to your credit report and score, bad things can happen. “Ignorance is bliss” doesn’t apply here. Most people don’t bother checking their credit report until they need to use it for something and by then, you might be facing a mess. You shouldn’t wait – monitoring your credit should be an ongoing activity.

Aside from maintenance, let’s look at five reasons to check your credit report:

1 - To check for identity theft and fraud

Don’t assume that you would automatically know that you have been the victim of identity theft. In case of a website breach, you might get a notice, but unfortunately, there are lots of other identity theft issues you could miss unless you checked your credit report or got a notice of non-payment and collection on a debt that you didn't even know you owed.

Checking your credit is an early indicator of identity theft or fraud. Look for accounts and collection items you don't recognize. Scammers may use your identity but with a different mailing address, so when the bills and late notices come, it won't be at your house. You might have a debt collection and credit score nightmare you didn't even realize was brewing.

2 - To check for mistakes

Mistakes on credit reports are quite common. They range from minor things like a discrepancy in the date when the account opens or a small error on your mailing address, up to large errors like payments not properly credited or delinquencies you didn’t know about that are tanking your credit score.

When you check your credit report regularly you can correct a small blip before it becomes a big crisis that could drop your credit score. Digging into archived bank and credit records is a hassle. The sooner you notice a mistake, the easier it will be to correct because it's fresh and the records should be on-hand to prove your case.

3 - To prepare for a loan

Often, people don't check their credit report until right before they send off a credit application for a mortgage, vehicle, or a credit card. This is too late. If you're ready to get a mortgage and there are mistakes on your credit file, it could take you several months to rectify the errors. In the meantime, you could lose your dream home.

It's not just errors to look for when preparing a credit application. Verify the credit parameters the lender wants for the optimal interest rate. Then, you can check your credit report and score and see where you're at compared to where you need to be - and have the time to improve your credit score before you submit that all-important application.

4 – To be proactive

Your credit score affects more than just your ability to get credit and finance large purchases. Your credit score can affect:

Employment opportunities
Access to rental property
Getting or keeping a security clearance
How much you pay for utilities
Utility deposits
Rates for auto and homeowners/renter’s insurance

5 – It’s free

You can access your credit report from each of the three credit bureaus once a year for free. However, once a year is a bare minimum to monitor the accuracy of your credit report. Many low-cost monitoring solutions and apps will keep an eye on your credit report for you. They alert you to changes and items of concern.

An affordable monitoring program is money well spent because it could wind up saving you thousands of dollars in interest costs and financial opportunities. You should also check with your credit card company because many offer monitoring alerts at no cost to their customers, but you may need to opt-in to the program to take advantage.

To find out more about improving your credit quickly and easily, check out our Credit Score Keys DVD.

How Much Do You Know About Credit Scores?

Rachel — Thu, 21 Jun 2018 12:25:43 +0000

How Much Do You Know About Credit Scores? Rachel Thu, 06/21/2018 - 08:25

How much do you know about your credit score?
Image via Pixabay

On average, credit scores in America are on the rise which is excellent news. The bad news is, over the last year, consumer understanding of credit scores diminished. A recent survey by the Consumer Federation of America (CFA) in partnership with VantageScore Solutions showed less awareness of the importance of credit scores, what drives your score, and how vendors use credit scores to assess service fees. Here’s a look at study findings and what you need to know.

The Good News

The eighth annual survey revealed the encouraging results that most consumers can correctly identify the crucial factors that can have a negative impact on their credit scores. A high percentage of consumers surveyed (at least 85%), knew the following factors affect their credit score:

Carrying high credit card balances
Skipping loan payments
Filing bankruptcy

Also of interest in the study was that fewer women surveyed self-assessed their knowledge of credit scores as good or excellent yet they outperformed men on many aspects of the survey. Far more women than men grasped the necessity of checking their credit report (at all three bureaus) for accuracy.

The Troubling News

Some results from the CFA survey are concerning. Some consumers wrongly believe that age, marital status, and ethnicity affect credit scores. None of these matter and are not factors in any credit score algorithm.

Another item of concern is that lower-income consumers are less savvy about credit scores, yet income is no barrier to having a healthy score so long as you live within your means and make wise financial choices.

Other areas of decline in awareness, compared to last year’s study, include:

Fewer people knew that a low credit score could increase auto loan charges by more than $5k.
Fewer people knew that credit scores help lenders assess the risk of non-repayment of a loan.
Fewer people knew the importance of checking credit reports from all three credit bureaus.

Far-Reaching Effects of Credit Scores

When most people think about credit scores, they do so in the context of loans or credit cards, but suppliers of critical services may check credit to determine whether to offer services, the price you would pay, and deposit required for cell services, insurance, and utilities.

Credit scores can also impact whether you can obtain rental property and how large of a deposit you’d be required to pay. The survey showed increasingly fewer consumers understood the impact of their credit score on these non-credit services. Understanding how credit scores work is critical to a stable financial standing.

What Actions Affect Credit Scores?

It’s imperative to know what actions can boost or drag down your credit score. CFA’s executive director Stephen Brobeck said, “Low credit scores can cost consumers hundreds and sometimes thousands of dollars a year and higher loan and service costs.”

Things to avoid:

Maxing out credit cards
Making late payments
Skipping payments
Opening too many accounts
Closing older accounts

Things to do:

Keep credit utilization low
Occasionally open new accounts
Always pay bills on time
Review all three bureau credit reports for accuracy
Live within your means

Things to ask yourself:

Do you understand factors influencing your credit score?
Is your score lower than you’d like?
Are you planning to buy a home or auto in the next 2-3 years?
Do you know how to improve your credit score?

If you want a better credit score but aren’t sure how to get there, we can help. If you’ve tried to improve your credit score but it’s not working as well or as fast as you want, we can help. For the answers you need, explore Credit Score Keys.

Resource:

CFA Survey

Use Your Tax Refund to Boost Your Credit Score

Rachel — Thu, 14 Jun 2018 12:39:32 +0000

Use Your Tax Refund to Boost Your Credit Score Rachel Thu, 06/14/2018 - 08:39

Use your tax refund to boost your credit score
Image via Pixabay

Everyone loves a tax refund. You work all year long, and when the IRS sends you a check or direct deposit, it feels like a windfall. In reality, it’s your money that you let the government use without charging them any interest! If you ordinarily get a refund, you might want to reduce your withheld taxes to increase your take-home pay all year long instead of getting a tax refund.

No matter what you choose, just know that it’s the perfect chance to use that windfall to boost your credit score. Of course, you can’t just go out and buy a higher FICO rating. However, you can use the money-back from the IRS to improve your score and make sure you’re moving in the right direction since your credit affects so many aspects in life.

1 - Pay down credit card balances

Credit utilization is a significant factor in your score, accounting for roughly 30% of the algorithm. It’s calculated by dividing total balances owed by total credit lines. If you’re over 20%, your score could be dropping every month even if you pay your bills on time.

Using your tax refund to knock that balance back and zero it out, or at least get it under 20%, is a good use of that cash infusion. With lower balances, your score should pop up pretty quickly. Just don’t let those balances build up again, ruin your utilization and drag down your credit score.

2 - Create an emergency fund

A recent study showed that 60% of Americans have less than $1,000 in the bank in savings. That’s scary and something you can correct with your tax refund. Consider stashing all that cash in a savings account that you can’t easily access.

If you keep it in checking, it could be gone before you know it. Setting up a special account that has no debit card access could be the ticket to keeping it safe. If you ever need the emergency funds, you can get to it quickly, but it won’t be so easy you drain it when you shouldn’t.

3 - Get a secured credit card

When rebuilding your credit score after a financial mishap, credit cards are one of the best ways to rebuild. However, if you’re coming out of bankruptcy or a lengthy financial crisis, you might have lost your cards.

Starting with a secured credit card might be your best bet, but it requires a cash deposit to set up a secured card account. You can use your tax refund to set up one or two secured cards and get your credit back on track right away.

4 - Pay off delinquent accounts

Accounts in collection are often a double whammy on your credit report. The initial debt, if it was one that reported to the credit bureaus (like a credit card), starts dragging down your credit score when you start missing payments or max out your card.

If you’re reported to a debt collector, they may make a second entry on your report, so the account can doubly drag your score. Paying off a delinquency could help your score, but be sure to negotiate terms before you pay including that they remove the collections entry from your bureau report.

5 - Catch up on past due bills

Even if your bills haven’t gone delinquent and into collections, they may be a little late. If you’re always a week or two behind on your payments or if you’re always paying utilities at the last moment to avoid being cut off, that’s stressful and can cost fees and late charges.

Use your tax refund to get current on your payments then stay current, so you don’t have to do it all over again. This can improve your credit, reduce anxiety each month, and set you on a path to financial consistency and betterment.

It’s tempting to splurge with your refund, but you need a better credit score more than you need a new TV or the latest smartphone. Use your tax windfall strategically so it can make a difference in your life. To find out more about improving your credit score, check out Credit Score Keys.

Resource:

Savings Survey

Student Loans and Credit Scores

Rachel — Thu, 07 Jun 2018 11:40:45 +0000

Student Loans and Credit Scores Rachel Thu, 06/07/2018 - 07:40

Watch out for how student loans can impact your credit score
Image via Pixabay

College debt keeps rising every year. Many are overwhelmed by the amount of their student loans and worry how they’ll pay them. But they don’t stop to consider what other aspects of their lives may be affected – including their credit score.

One starting point when it comes to credit knowledge is the type of debt student loans represent. Credit cards are revolving debt, which means they are a line of credit and your balance changes and the debt revolves and carries over month to month. Mortgage and auto loans are installment loans because they are a set amount of debt that you pay back over time in installments.

It’s easy to see by this definition that student loans fall under the classification of installment loans. They differ from mortgages and car loans in that they are unsecured debt, meaning they’re not tethered to an asset as are home and vehicle loans. Credit bureaus and credit score algorithms treat installment loans differently than revolving debt, but all affect your credit score.

How student loans affect your credit score

So long as you make your payments on time, whether you have private or federal student loans, it will benefit your credit score. Installment loans paid on time are always a plus for your credit. If you’re paying your debt properly, check your credit report and be sure that the track record of good payments is reflected there.

Student loans appear on your credit report from the moment you start taking them. Although they’ll display as “deferred” until you leave school and the six-month grace period expires, they are there. If you’re unsure how much you owe while in college and still incurring debt, your credit report may be a touchstone to assess your amassing debt.

After you graduate or leave school and enter the repayment period, the debt “turns on” and your payments will begin to affect your credit score. If you miss payments your score will drop, and when you make payments on time, the impact should be positive (unless you’re already delinquent). Every month, your student loans can be a force for good or bad on your FICO score.

Default vs delinquency

When you miss a student loan payment, you go delinquent. This is the status your loans will remain in for nine months, unless you cure it by catching up or making arrangements. After 270 days without a payment, your loans drop from delinquent to default. Going delinquent can drop your score 50-100 points, and it may drop further when you go into default.

Your payment history accounts for 35% of your credit score. In essence, leaving your loans in default or in collections as a result of consistent late payments will have grave repercussions on your credit score and your credit history. Neither situation is good for your credit score but default triggers unpleasant collection consequences.

What you can do about past-due student loans

If you can’t make your monthly student loan payments, you should immediately contact your lender for a forbearance or deferment. Either option temporarily stops your loan payments and can buy you time to refinance, consolidate, or get on a more affordable repayment plan and rehabilitate your student loans. Doing nothing lets your credit score suffer.

Once your payments are temporarily stopped, you can pursue an Income Drive Repayment (IDR) plan. Depending on your income, it can drop to as low as $0 a month no matter how much your loan balances. It’s solely based on disposable income, not your debt. After 20-25 years on an IDR, your loan balances can be discharged, although there are income tax consequences.

The bottom line is that student loans affect your credit score and leaving them to wallow in default is not good for your credit score. IDR may help, or you might be a candidate for bankruptcy relief of student loans. Once you get your student loans under control, it’s time to work on improving your credit score and re-establishing your credit. Check out Credit Score Keys for tips!

Bad Credit Results in Travel Ban in China

Rachel — Thu, 31 May 2018 12:06:51 +0000

Bad Credit Results in Travel Ban in China Rachel Thu, 05/31/2018 - 08:06

New travel bans in China based on credit
Image by Pedro Szekely via Flickr

In America, good credit is the pathway to many opportunities like an affordable mortgage, car loan, and access to services like utilities at reasonable prices. Bad credit limits you, to some extent in the US, but nothing like it does in China. Changes in the social system there have made the high cost of bad credit stunningly grim.

No one wants bad credit and having excellent credit certainly makes life easier, but poor credit won’t ruin your life here in the US or in most Western nations, Europe, and other regions. However, China structures itself differently and makes rules unlike those anywhere else in the world. Here’s a look at what a bad credit score can do there.

Social credit system

Here in America, we have a credit tracking system, but the rigors in China are more extreme. They now monitor what’s called “social credit” which ranks citizens on many aspects of behavior. If you don’t live up to the expectations of the government, you can find yourself banned from flying on planes or traveling by rail for as long as 12 months.

It’s not just skipping out on bills that can land you in hot water in the largest Asian nation, but also smoking on trains, using an expired ticket on transit, or spreading misinformation about acts of terrorism. Financial misdeeds could also result in a ban including employers that fail to pay insurance premiums and citizens who don’t pay fines or tickets.

Permanent ban possible

Although the initial notices said the bans could last a year, Chinese President Xi Jinping said the new system is based on the tenet of “once untrustworthy, always restricted” which seems terribly harsh. Evidence hints that even before this news leaked out of China, the government had been banning residents from flights due to “social misdeeds.”

One means the government is reportedly using to gather data is tapping into the system of Zhima Credit. This agency tracks activity on the AliPay smartphone payments system, much like Apple Pay in the US. Disturbingly, consumption activity from the payment system may be shared with the Chinese government although Zhima denies reporting to the government.

“Bad” people pay more

Already, Zhima Credit ratings are affecting the way Chinese citizens live. Those with lower credit scores must pay higher rates to rent hotel rooms, bicycles, umbrellas, and more. The CEO of Zhima said their system make sure that “bad people in society don’t have a place to go” while “good people can move freely.”

More than 6 million Chinese citizens have been banned from air travel for poor social credit. It’s not just the poor that could wind up blacklisted. Last year, tech pioneer Jia Yueting made the blacklist of high-profile citizens with bad credit. This master list means no fast train access and even big-ticket purchases can be barred.

Named and shamed

In America, if you’re in debt, it’s a private matter. It’s against the Fair Debt Collection Practices Act for creditors and debt collectors to tell anyone about your financial delinquency. In contrast, China is encouraging local governments to set up websites to name and shame those who have defaulted on debt.

Even worse, a phone company in Beijing tagged people behind on their bills so that when they make calls, the person on the other end of the line is notified of their delinquency. So far, this new system has reportedly blocked people from more than 11 million flights and more than four million high-speed rail trips.

Credit scores matter

Thankfully, America isn’t adopting a system like China. However, there are systems in place in the US where a form of social credit determines access. Services like Uber and Lyft rely on reviews so that drivers and passengers can rate each other and decide whether they will transact with each other. Those with poor ratings are often shunned.

Credit scores do matter in the US, but a poor FICO rating won’t leave you unable to travel or access critical services. However, it can affect how much you’ll pay for them. If you’re ready to improve your credit today, check out Credit Score Keys.

Resource:

Social credit in China

5 Credit Score Concerns for Couples

Rachel — Thu, 24 May 2018 12:21:57 +0000

5 Credit Score Concerns for Couples Rachel Thu, 05/24/2018 - 08:21

Arguing over credit scores?
Image by rawpixel via Pexels

Financial stress is one of the top strains on relationships, whether you’re married or in a partnership. You can’t over-emphasize the effects of money problems on the fate of your romance. Credit scores remain a primary concern and pitfall that could split even the most committed of couples. When you’re looking for love, physical and chemical attraction are the initial criteria, but looking at the debt and credit score of a potential partner should rank as well.

Whether you get hitched or not, when you’re planning a financial future together, the credit score of both partners will ultimately impact your quality of life together in many aspects. There is no such thing as a credit score for the two of you as a couple, but each of your individual credit scores impact financial decisions when you apply together for financing.

Your partner’s credit doesn’t appear on your report

Unless you have co-signed or joint credit, your two reports should have no overlap. The debt you signed for and service will be on your credit report and vice versa for your partner. Your credit behavior only affects your score, but in some instances, you both need decent credit to accomplish your financial goals.

Your scores are separate and unique

Since your credit reports are separate, so too are your credit scores. They are unique to you so long as you have no co-signed or joint credit. For instance, if you took out a home mortgage together, that would reflect on both reports. But your individual credit cards, loans, and debt affect only your score, not your partner’s.

When a couple’s credit score matters

Home loans and rental contracts

For most people, a significant purchase like a home may not be feasible on just your income. If you need your partner’s earnings to qualify, that means their credit score also matters. When your salary is healthy, but your credit score is not, it can trigger a mortgage loan rejection or interest rates that are subprime and costly.

Even if you only want to rent, most reputable rental agencies want to run the credit of the adult occupants of their property. If one of you has a substandard credit score, it can cause you to lose out on a rental property you want.

Car loans and leases

When you’re ready to buy or lease a car, as with a home loan, how much you earn matters. Suppose one of you has a healthy income but the other is the one with the better credit score. Lenders won’t look at these aspects separately. You can be turned down for a lease or favorable auto loan if both applicants don’t have solid credit scores.

Opening joint accounts

When you’re partners in life, opening a joint bank account is a natural financial evolution but if one of you has a poor credit score, it can be a problem. Many of the top banks now run a credit check before they agree to open an account for you. If one of you has a sub-optimal credit score, the bank may tell you to go elsewhere. Plus, if one of you has unpaid debt, you might find your joint account garnished for the debt of just one of you.

Don’t let a low credit score wreck your love life

It’s a harsh reality in our time that credit scores matter for many things in life. If you have a low score and it stops your partner from realizing their financial goals, it could cause strife in your relationship. If you’re dealing with stress in your relationship due to a less than great credit, score check out Credit Score Keys today to get back on track.

10 Surprising Things That Trash Your Credit Score

Rachel — Thu, 17 May 2018 12:16:22 +0000

10 Surprising Things That Trash Your Credit Score Rachel Thu, 05/17/2018 - 08:16

Don't trash your credit with carelessness
Image by Gary Chan via Unsplash

Credit scores are an integral part of our daily lives. They effect interest rates on a mortgage, auto loan, and even basics like utilities and insurance. For optimal financial opportunities, you need to keep an eye on your credit score. Take your eye off the prize, and your credit score could take a hit. Here are 10 things that could deflate a healthy credit score.

1 - Opening multiple credit card accounts

Aspects of your credit score include quantity and type of accounts plus how you use those accounts. Opening new accounts occasionally can boost your score but opening many in a short period can tank your score. It lowers your average account age plus all the hard inquiries can hurt.

2 – Delinquent taxes

Not paying taxes when due can lower your credit score. When the IRS or tax collector eventually comes knocking and sends you a bill for unpaid taxes, it is best to work out a compromise quickly. A collection item or liens can drag down your report and your score.

3 – Car rental reservations

Do you have plans to rent a car? If you use a debit card, some rental agencies might require a credit screening. If they run your credit with a hard inquiry, which is standard, it can lower your credit score and stay on your report for two years.

4 – Defaulting on rental payments

Failure to pay your rent on time may trigger your landlord or rental company to report your delinquency to credit bureaus. Some rental companies will report you right away for missing a payment while others may wait. Either way, it can drop your score.

5 – Unpaid doctor bills

Although the latest versions of credit scores put less weight on medical bills, they can still hurt your score. Now, medical bills generally won’t show up on your credit report for six months, but eventually, if they linger unpaid, will lower your score.

6 – Defaulting on any bills

Even though your cable and gas bills won’t show up on your credit report if you pay them on time, if you skip out, you can find they will certainly damage your score. Once a bill goes to debt collectors, they report a negative item and that's a credit score killer.

7 – Unpaid traffic tickets

Ignoring parking or speeding ticket is never a good idea, but did you know it can ding your credit if it lingers unpaid? You can also face a warrant for failing to pay or appear in court, and that’s a bigger issue, but neither is a good outcome!

8 – Overdue library books

You might not think twice about leaving a novel or DVD to gather dust at home, but you should take it back to the library on time and pay your late fees. If you don’t bring back the stuff, some libraries turn the cost over to a collections agency which can report to the credit bureaus.

9 – In-store financing

Some stores may offer you a sweet deal with zero-interest financing you may want to nab. But if it’s revolving credit and the limit is set to the amount of the purchase, you’ll have 100% utilization of your credit line which can drag down your score.

10 – Closing credit cards

Closing out older credit card accounts with less favorable terms might not seem like a big deal, but it can cause your score to plummet. First, closing an account lowers your overall credit lines and increase utilization. Second, it can diminish your average age of credit.

Your credit score is critical to many aspects of your life. Safeguarding it and constantly working to improve it are a best-practice. To find out more about improving your credit score, check out Credit Score Keys.

5 Times You Must Absolutely Check Your Credit Report!

Rachel — Thu, 10 May 2018 13:20:23 +0000

5 Times You Must Absolutely Check Your Credit Report! Rachel Thu, 05/10/2018 - 09:20

You must check your credit report!
Image by PhotoMIX Lts via Pexels

Your credit report is the touchstone of your financial wellbeing. If it’s flawed or erroneous, you’ll pay more in interest for crucial services like utilities and some insurance coverage, and miss out on certain financial opportunities. Despite the importance of your credit report, many people rarely check it and just hope for the best.

Your credit report drives your credit score which is important to not just your financial opportunities, but perhaps career and housing options as well. It does you a world of good to keep an eye on that all-important report. When should you check it and how often? Here are five times you need to check your credit report.

#1 While trying to improve your score

Trying to improve your credit score without first checking your credit report is like batting blindfolded and hoping for a home run. Without baseline info, you won’t know how to strategize for success. You need to know where you stand so you can decide what to do next. Your credit report gives you information to determine where you’ve not been up to par.

From there, you can see what to avoid and what you need to do to get where you want. Look at the five aspects that make up your score (age of accounts, utilization, payment history, etc.) to see where you can make improvements. Without seeing your credit report, you won’t know how to address deficiencies and improve your score.

#2 If you think you’ve been the victim of identity theft

The first indicators that you’ve been a victim of identity theft could be on your credit report. If you see new credit activity that you didn’t initiate, that’s a sure sign that someone is using your identity to get credit. You can bet they will run up these new accounts and never pay them off, leaving you with a mess to sort and a plummeting credit score.

Of course, if you don’t check your report regularly, it could be months before you know about the fraud. The first indication you may get is a call from a debt collector wanting to know when you intend to start paying up on that debt that came thanks to the identity theft. Monitoring your report is good, but you can also lock down your credit reports if you think you’re at risk.

#3 You want to apply for a loan

Just like you make sure your house is spotless when you know you’re expecting company, you need to tidy up your credit report before you invite potential lenders in to look around. It’s advisable to examine your report well before you apply for the loan - at least six months or more. That gives you enough time to clear up any discrepancies or errors on your report.

The first thing to do is fix mistakes and get incorrectly reported items, fraud, etc., off of your report. From there, you can see how to improve your score to get better terms. Paying down balances or requesting line of credit increases so your utilization is lower (and score can be higher) are all techniques to consider when prepping to apply for a loan.

#4 You were turned down for credit

By law, you’re entitled to a free copy of your credit report after you have been turned down by a potential creditor. When a creditor turns you down, they must send you a letter informing you of their reasons for denying you and how you can obtain a free copy of the report they used to make their decision.

You need to review the report they used so you are sure they didn’t decide because of some misunderstanding that you could fix easily. It may have been a late payment reported in error, some form of fraud, or other circumstance you can clean up then reapply for credit once you rectify the error.

#5 Periodically just to make sure it’s okay

Just as you go to the doctor for a check-up every so often, so too should you look at your credit report periodically to assess its health. At a minimum, you should take a glimpse at your credit report quarterly. Even better, sign up for a free or low-cost monitoring service.

That way, you’ll be notified if new accounts appear on your report, if your score drops or raises, or if there are any negative items added. Checking can give you a heads-up on any issues s you can promptly address them. It’s also a good way to keep a casual eye on your credit if you’re likely to forget to review the report occasionally.

If you want to improve your credit, check out Credit Score Keys today.

6 Ways to Rebuild Your Credit Score Without Using Plastic

Rachel — Thu, 03 May 2018 12:18:44 +0000

6 Ways to Rebuild Your Credit Score Without Using Plastic Rachel Thu, 05/03/2018 - 08:18

Get a better credit score
Image via Pixabay

One of the fastest ways to establish or rebuild credit after it takes a dip is with credit cards. However, some people are wary of plastic, especially if they got buried in credit card debt in the past. Plastic can be very helpful when trying to bump your FICO score, but it’s a double-edged sword. If you don’t want the temptation, here are some alternatives to consider.

1 - Federal student loans

Although student loans are as frightening to contemplate as credit card debt, they can help boost your credit score in some cases. Once you get the loan, it shows up on your credit report, and if you pay it back on time, it boosts your payment history.

Not only that, but it also enhances the mix of credit aspect of your credit score since it’s an installment loan rather than revolving credit. The main consideration when taking out a loan is to pay it back. Only pursue a federal student loan if there’s a bona fide reason to do so.

2 - Personal loans

Personal loans can come from a bank, credit union, or other sources. Just be careful and don’t borrow from shady payday loan establishments. They charge exorbitant interest and don’t report to the credit bureaus, so there’s no upside to those places.

Only borrow from a legitimate source that will report the loan and payment activity to the credit agencies. Borrow a small amount, pay it back on time, and never run late on a payment. When you pay these loans over time, they build payment history and help your mix of credit.

3 - Peer-to-peer (P2P) loans

If you want another avenue of credit, consider a loan from an individual investor through an authorized network instead of a bank. Even though they are from individuals, these loans are not informal. Reputable P2P services routinely facilitate these arrangements.

Once you get the loan, you make the payments back to the individual investor through the network. These are often at lower interest rates, but you’ll need a good reason for the loan. Investing in your small business or an educational course is a good motivation.

4 - Authorized user

Another fast way to improve credit without a credit card is to become an authorized user on someone else’s account. They add you to the account, and you benefit from their positive account activity. It could be the account of a friend or family member.

If they are responsible, your credit will benefit. One way to convince them to give you a shot is to tell them to hold onto the card, so you won’t even use it. But be careful, it also goes the other way, and if the cardholder doesn’t meet their obligations, it might bite you!

5 - Auto loans

Auto loans are secured debt that are reported to the credit bureaus so long as you buy from a legitimate outlet. A buy-here pay-here establishment won’t and neither will some private financing agreements. Buy a car whose payments are well within your budget.

Don’t max out what you can borrow – be modest – that way if you have any financial hiccups you’re less likely to miss payments and foul up your credit score. A car loan boosts mix of credit and payment history aspects of your credit score.

6 - Passbook or CD loans

Sometimes, your bank may offer you a passbook or CD loan as an existing customer. This type of loan is essentially an overdraft where you withdraw more cash than you have in your account and then pay it back over time with a little interest.

Just be sure before you hop into this arrangement that it will report to the credit bureaus as a loan. If the bank doesn’t report it, there’s no reason to pursue the arrangement. Every action you contemplate should have a potentially positive effect or skip it and try something else.

When trying to improve your credit score, one of the first things to do is check out Credit Score Keys.

15 Credit Score Terms You Need to Know Now

Rachel — Thu, 26 Apr 2018 11:31:51 +0000

15 Credit Score Terms You Need to Know Now Rachel Thu, 04/26/2018 - 07:31

Know your credit terms!
Image by Romain Vignes via Unsplash

When you’re rebuilding your credit after bankruptcy or another financial hiccup, education is key. It’s hard to understand how to improve your FICO score if you don’t know the language of credit. Today we look at some terminology. School is in session!! Here are 15 credit score terms you absolutely must know.

APR

This is the quick way to refer to an annual percentage rate. It’s the interest rate that you’ll be charged on your mortgage, car loan, or credit card balances carried over from month to month, over the course of the year. Depending on the finance agreement, it can be compounded daily, weekly, or monthly basis.

Average age of credit

This is one of the five critical components of your credit score. The average age examines how long you have had all your accounts open as an average. The higher the number, the better for your score. To check, add up how long each credit card account has been in existence then divide by the number of cards to get the average!

Credit bureau

The credit reporting agencies that maintain credit reports are called bureaus. These include Equifax, TransUnion, and Experian. Many (but not all) of your creditors report your activity to the bureaus. Some report to only one or two while some report to all three. The bureaus should keep accurate information on which your credit score calculation is based.

Credit history

Your credit report is the log of your credit history. It is an account of how you have managed credit over the past several years. Once accounts go inactive, they eventually fall off the report and no longer affect your credit. Accounts that are active, in good standing or bad, or in collections, are all part of your history. Most items stay seven to 10 years on your report after they close.

Credit inquiry

A credit inquiry occurs when you apply for a new line of credit such as a credit card, store account, or loan. Every time you apply, there’s usually a “hard” inquiry on your credit report. A hard inquiry will lower your score just a bit. Too many hard inquiries in a short period can negatively impact your credit score. A “soft” inquiry which is often used for pre-screening doesn’t drop your score.

Credit report

This is a detailed document of your credit history and is used synonymously with the other phrase. It’s not your credit score, but the information on which your score is based. It’s kind of like a report card for your financial behavior. Keep it clean and in good standing, and you should have a healthy credit score.

Credit score

Your credit score is a three-digit score, calculated from any one of a thousand (or more) algorithms to display your creditworthiness. It generally ranges between 300 and 850 depending on the nature of the score calculation. A low score means lenders won’t feel confident that you’re a good credit risk. A high score inspires confidence.

Derogatory marks

Also known as a negative item, these are items you want to avoid. They tarnish your report and lower your credit score. Debt collection activity, foreclosures, and tax liens all fall within this category. If you can get derogatory items (another turn of the same phrase) off your report, it can boost your credit score.

FICO

The Fair Isaac Corporation (FICO) is one of the largest purveyors of credit score calculations. There are at least 50 different FICO calculations plus ones marketed by other companies. The term “FICO score” has now become synonymous with “credit score” even though not every credit score is a FICO score.

Installment credit

Also called an installment loan, it’s a financial arrangement where you pay the same payment at set intervals, often on a monthly basis. You are expected to keep paying at those intervals until you pay in full. An example of installment credit is a traditional mortgage or a car loan.

Late fee

If you fail to pay at least the minimum required payment on your debts on the agreed upon date, you will likely be charged a late fee for missing a payment every time it happens.

Penalty rate

This is also called a default rate. It is levied by a credit card company as a punishment for not sticking to the terms of the agreement. These rates are usually buried in the terms and conditions of your finance agreements.

Revolving credit

This is a type of credit that does not have a fixed number of payments or fixed payment amount. It contrasts with installment credit with a set schedule and dollar amount. Credit card and store cards are prime examples of revolving credit accounts.

Utilization ratio

This ratio tracks how much of your credit you’re using compared to your total credit limits. Low credit utilization does your credit score good. If you’re using more than 20% of your credit lines, you will start to see a diminishing effect on your credit score.

Now that you’re armed with this information, you’re ready to get to work. To find out more about re-establishing credit or improving your score, check out our Credit Score Keys program.

How to Help Your Partner Improve Their Credit Score

Rachel — Thu, 19 Apr 2018 12:41:28 +0000

How to Help Your Partner Improve Their Credit Score Rachel Thu, 04/19/2018 - 08:41

Yes, you can help your partner get a better credit score
Image by Mabel Amber via Pixabay

Everybody loves a good credit score. It helps you get crucial services like utilities, cell services, and insurance at a lower price while also enabling you to get favorable rates on car loans and mortgages. But what if your score is great while your partner's isn’t? If you plan to co-finance an asset like the purchase of a home, the imbalance in your scores could prove problematic.

Debt puts a strain on nearly every aspect of your life, and your relationship is no different. Money squabbles are a top source of discord among partners. If you and your loved one can’t get on the same financial page, your relationship may be doomed. A study by the Federal Reserve found that couples with drastically different credit scores aren’t likely to last in the long run.

You have a lot to gain if you and your partner both have good credit. So how do you go about helping them boost their score?

#1 Forget the blame game

It doesn’t help to point fingers. Maybe your partner was a bit irresponsible with his or her spending in the past. If it’s in the past, don’t dwell on it. By laying blame you breed resentment, and that can make things worse with your relationship.

Instead, put your heads together and review your credit reports. Assess the problem areas and figure out what you can do and what factors are pulling down your partner’s credit score. Maybe it’s a collection item or too-high credit card balances dragging it down.

Knowledge is power.

#2 Set up a budget

It is important that you work together to control your household spending. You need to adopt sound money management habits to benefit you immediately and also in the long run. Establishing a budget (and sticking to it) is one of the best first steps.

Create a household cash fund you both can access. Use this instead of credit cards if you have habits of overspending with plastic. Also, set up an emergency fund for unexpected expenses like car repairs, appliance outages, and medical costs.

Good habits are crucial.

#3 Create a plan

If your partner has excessive debt, it can drag down their score and cost you credit opportunities. You need a plan to defeat your partner’s debt together. You can’t leave them to do it alone and expect meaningful results (refer to “laying blame” above).

Figure out the best way to tackle the debt. Usually, it’s by eliminating the highest interest rate balances first to save money. This ensures that you pay less overall in the long run and once you get a debt paid off, your partner’s score should begin to improve.

Planning is important.

#4 Share an account

You can also use your good credit to boost that of your partner. Making them an authorized user on your credit card that’s in good standing can help. Your good credit history will spread to them, but you must be sure they won’t abuse your plastic.

Also, work on getting your partner their own card. Obtain an unsecured card to start building credit. If they can’t get approved, go for a secured card instead. Spending moderately and paying off in full each month helps.

Get started ASAP.

#5 Don’t be the cleaner

You and your partner should function as a team. Don’t put yourself in the role of cleaning up their mess for them. Avoid situations where your partner runs up credit card bills, and you swoop in and save the day.

Your partner must accept responsibility for cleaning up their credit predicament. However, you are there to support and help them as they improve their financial management skills and develop better credit habits.

To help improve your credit score or your partner’s, check out Credit Score Keys today.

Resource:

Federal Reserve study results

How Does One Late Payment Affect Your Credit Score?

Rachel — Thu, 12 Apr 2018 12:39:03 +0000

How Does One Late Payment Affect Your Credit Score? Rachel Thu, 04/12/2018 - 08:39

Don't run late on payments
Image via Pixabay

Everyone intends to pay their bills promptly, but sometimes life gets in the way, and you might run short on cash or forget to pay a bill. Sometimes it’s something more serious like an unexpected expense like a major car repair or job loss that throws off your finances. In other cases, maybe you just didn't remember. Whatever the issue, you should know that missing even one payment can surely affect your credit score. Here’s what you must ask yourself.

Does the creditor report to the bureaus?

The first concern is the type of bill you pay late. If it’s your gas or electric bill, you can find yourself without a necessary utility if you don’t pay promptly. However, that won’t necessarily harm your credit, so long as you clear up the bill soon. Some creditors report to the credit bureaus every month like credit cards and auto and mortgage lenders.

Other creditors, like utilities and medical providers, don’t report monthly but will eventually report you if you leave them hanging. That means a delayed payment on a doctor bill won’t immediately affect your credit so long as you take care of it before it goes into the debt collection phase. If you must pick and choose between bills, consider this factor.

How late is the payment?

If you pay by even one day late, some creditors will report you to the bureaus automatically. However, if you have the money and missing your payment was just an error of timing, or you can pay it ASAP, you might be able to reach out to the creditor and ask them not to report you. If you’ve never missed a payment before, they may work with you.

Many creditors have a grace period where, so long as you make the payment within “x” number of days, they won’t report you. Even so, most card issuers and lenders assess a late fee that can be sizable, but they might forego this once, upon request, if it’s a one-time occurrence. If you make the payment within a week of the due date, you might escape reporting to the bureaus.

Are you more than 30 days past-due?

Once you miss a bill and it lingers unpaid for a month, you can count on being reported to the credit bureau by a credit card issuer, mortgage or auto lender, or cell phone carrier with whom you have a contract. Many auto and homeowners’ insurance providers will also report you for non-payment. Unpaid medical bills can usually go 180 days before hitting your credit report.

There are other consequences to paying late. Some card issuers will increase your interest rates. With insurance carriers, you might be rejected for future coverage or renewed at a higher rate. If you're unsure, check your finance agreements in the terms and conditions section to see what happens if you miss a payment or run late.

How much will your credit score drop?

If you run 30 days late on even one payment, you can see a 100-point drop in your FICO score. That can happen the first time you miss a payment. In fact, it’s the first missed payment that hurts the most. Subsequent missed payments will lower your score, but not as much as that first hit. So, never assume that missing just one payment doesn’t matter – it does!

Payment history makes up 35% of your credit score calculation so you can do the math and see that late payments are problematic. Not only does that late payment sting, but it lingers on your report for up to seven years, although the impact will lessen over time so long as you stay current after that delinquency.

Avoid late payments, protect your score

You know the old saying “failing to plan is planning to fail” and that’s true when it comes to your credit score. Here are some steps to take to ensure that you never miss a payment:

Set up as many bills as possible on auto-payment direct from your bank account.
Plan to pay bills twice a month, on each payday, so things don’t build up.
Never charge more on your cards than you can afford to pay off that month.
Set payment reminder notifications to pop up a few days before bills are due.
Never leave payments until the last moment in case there’s a complication.

Your credit score matters – so take protecting it seriously. If you’re rebuilding your credit after bankruptcy, check out Credit Score Keys today.

Resource:

Data on credit scores and late payments

Credit Card Commandments to Resurrect Your Credit Score

Rachel — Thu, 05 Apr 2018 11:24:54 +0000

Credit Card Commandments to Resurrect Your Credit Score Rachel Thu, 04/05/2018 - 07:24

Follow these eight rules with your credit cards
Image by Kyle Fang via Unsplash

Credit cards are the fastest way to establish or re-establish your credit history. You can use credit cards to demonstrate your financial responsibility and rapidly improve your credit score. Even when you’ve been in financial trouble and had to turn to bankruptcy for debt relief, you can use credit cards to rebuild your credit within just a few months of your discharge.

Credit cards are tools that must be wielded wisely. If you’re coming out of bankruptcy or a financial crisis, you might be hesitant to carry plastic. Credit cards aren’t the problem – abusing them is – and that’s usually caused by other issues such as unemployment, medical problems, divorce or a life event that that lowers income or increases expenses.

Everyone needs a good credit score, and that makes credit cards a necessity. When rebuilding credit, start slowly with one card and build from there, but be sure to bear in mind these eight credit card commandments to resurrect your credit score and keep it healthy.

#1 Never have more on credit cards than you do in the bank

Credit card lines of credits aren’t there for you to use, they are only there to keep your utilization rate low. You should never charge more than you can afford to pay immediately, and your total credit card balances should never exceed your bank balance.

#2 Always pay in full each month

Making only minimum payments is a fool’s game. If you pay off your credit cards in full every month, you won’t pay any interest, and you never run the risk of maxing out cards and getting in over your head. This is a critical step to getting and keeping a high credit score.

#3 Never pay late

One late payment can drop your credit score by up to 100 points, so it’s a big deal to be tardy. You can pay twice a month to ensure you never run late or carry excessive balances. Plus, if you pay late, you will be charged exorbitant fees, and your issuer may raise your interest rate.

#4 Never max out a card

Maxing out a credit card can lower your credit score because it throws off your utilization ratio. Not only that, but maxed out cards can be difficult to repay, you’ll pay high interest, and it can be a slippery slope to more financial problems. Don’t overuse your cards.

#5 Check your credit report often

Protecting your credit report is crucial not only by engaging in positive credit behavior yourself but also by making sure no one else is abusing your credit. Monitoring your credit report often can help you catch errors and stop identity theft.

#6 Review your credit card agreement

We’ve grown too accustomed to agreeing to terms and conditions that we’ve not read. So many things have T&Cs from streaming services to your phone or tablet. But it’s wise to carefully read your credit card T&Cs to know what your card issuer can do if you pay late or go over your limit.

#7 Review your purchase history

Review your credit card statements monthly and watch for fraudulent transactions. Raise an alert immediately if you spot one. Monitoring your statements is the best way to catch a mistake or know if someone has stolen your card info and is making fraudulent charges.

#8 Don’t loan out your credit card

It’s never a good idea to let someone else use your credit card, much less keep it in their wallet. You never know what someone else is going to do with your card or whether they will protect it from fraud. Your finances are your responsibility, and you must be in control always.

Follow these rules to boost your credit score and also check out Credit Score Keys for tips and strategies to rocket your credit score.

What Credit Score Do You Need to Get a Business Loan?

Rachel — Thu, 29 Mar 2018 12:13:27 +0000

What Credit Score Do You Need to Get a Business Loan? Rachel Thu, 03/29/2018 - 08:13

Your credit score affects your small business
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If you’re already an entrepreneur or a “wantrepreneur,” which is someone who is yearning to start a small business, you know that raising funds is key. You have to spend money to make money and for many start-ups, no matter your size, that can mean taking out a personal loan. When you open a sole proprietorship, banks and other lenders see you and your business as the same so your personal credit score determines whether you can borrow to finance your business.

Personal vs. business credit score

Creditors rate well-established businesses on their own merit. Dun & Bradstreet offers a business credit rating, but if you’re just out of the gate, this option isn’t open to you. Lenders will judge the ability to pay back funds it loans on your personal history of financial responsibility. That’s one of the many reasons your credit score is so important. Once your business has been around a few years and grows to medium-sized with an independent financial track record, your personal credit will come under less scrutiny.

What credit score do you need for a business loan?

As with any loan, different lenders have different criteria and expectations. With credit scores ranging from 300 (very bad) to 850 (excellent), lenders will expect you to fall into the range of good credit. You’ll need a minimum credit score of at least 550 to get a business loan. Plus, the higher your credit score, the lower your interest rate should be, so that’s an important consideration.

What determines credit scores?

Your credit score is a calculation based on your credit report which is a history of your credit activity. There are five components to a credit score:

Payment history makes up 35% of your credit score
Balances owed determines 30% of your score
Length of credit history accounts for 15% of the score
New credit determines 10% of your credit score
Mix of credit types accounts for 10% of your score

It’s easy to see that payment history and balances owed drive most of your credit score. It’s vital that you pay all your bills on time each month, particularly those that report to the credit bureaus such as credit cards, mortgage, and auto loans. The balanced owed considers how much of your total lines of credit that you’re using.

If you’re using more than 25-30% of your available credit, your score will drop. If you miss even one payment or make one late payment, your credit score will drop. If these conditions continue, your credit score will drop every month until you get your finances in order. These personal habits can make or break your ability to find your small business.

How can you quickly improve your credit?

For those that own a business and need financing or are planning to start a business, getting your personal financial house in order is step one. Always pay your bills on time, never charge more than you can pay off in a month, and don’t feel like you need to use your credit cards just because they’re in your wallet. Credit cards are a useful tool to build credit but can be a slippery slope.

The fastest way to improve your credit is to get negative items off your report, pay down balances, and pay on time. If you have negative entries or collection items, work with the creditor or debt collector to resolve the issue on the condition that they’ll remove the item. Tighten your belt, pay off card balances, and don’t run them up again. Finally, set a budget, stick to it, and always pay on time.

If your credit score is lower now because you are coming out of bankruptcy or had a financial hiccup, rebuilding it as soon as possible benefits you and your small business. Check out Credit Score Keys for more info on re-establishing your credit and getting a better credit score.

5 Habits of People With High Credit Scores

Rachel — Thu, 22 Mar 2018 12:07:35 +0000

5 Habits of People With High Credit Scores Rachel Thu, 03/22/2018 - 08:07

Achieve a better credit score
Photo by Japheth Mast on Unsplash

A good credit score is crucial to buying a home or auto at a competitive interest rate and saving on insurance and utilities. It can also be key to obtaining the job or apartment you want. Knowing that you need a good credit score is one thing but understanding how to get it is another. There’s no rocket science to getting and maintaining a high credit score.

You just need to create and stick to positive credit habits to get you from where you are now to the credit score you desire. Here are five habits of people with excellent credit scores to try out in your life.

1 - No spending beyond your limit

The first rule of building and keeping good credit is to always live within your means. A credit card or line of credit isn’t an invitation to spend. Credit cards are a great tool to help build and maintain your credit score but if you spend when you shouldn’t it can be a slippery slope to a suffering score. You must strike a balance between regularly using your credit so that creditors keep raising your credit limits but avoiding charging things you can’t afford.

2 - Always pay on time

One of the habits that has the greatest impact on your credit score is making consistent timely payments. Creditors and lenders give credit and loan money based on the understanding that you will repay at the agreed time and the full amount due. If you fail to do this, you cannot be considered worthy of excellent credit. Never pay bills at the last minute to avoid the chance of a late fee or a negative entry on your credit report.

3 - Build a positive credit history

Your credit history is the track record of how responsible you were with credit in the past and is a significant portion of your credit score calculation. To do this, you need to make payments on time, in full, occasionally open new accounts, and use the blend of new and old credit responsibly. Even one missed or late payment looks bad on this all-important historical record. To help with this, only charge things you can pay off in full each month.

4 - Pay twice a month on each payday

Credit card statements cut once a month and are due on a specific date like clockwork. Interest is charged on the statement balance on your credit card. If you pay off the balance before the statement cuts, in most cases, you can avoid interest entirely. Since all credit card issuers accept online payments, you can pay down your credit cards twice a month to align with your paydays. That way you’ll never face a large bill at month’s end.

5 - Don’t close old accounts

If you have older credit cards, you might consider closing them if you have newer cards with better benefits like cash-back or rewards, or older cards may have annual fees you don’t want to keep paying. That’s fine, but before you close an older account, check to see if it will drop your average age of credit, a component of your credit score. Add up how many years each card was open then divide by the total number of cards to see your average age of credit.

If you’re rebuilding your credit after bankruptcy, it’s important to start with a foundation of good habits. In addition to these five mentioned, it’s wise to set yourself up on a budget so that you know you can always pay your bills and you don’t wind up back in excessive debt. To find out more about rebuilding your credit, check out Credit Score Keys.

Gender Disparity in Credit Card Debt – See the Shocking Numbers

Rachel — Thu, 15 Mar 2018 13:40:48 +0000

Gender Disparity in Credit Card Debt – See the Shocking Numbers Rachel Thu, 03/15/2018 - 09:40

There's gender disparity in debt!
Photo by rawpixel.com on Unsplash

Americans are more in debt than ever. According to the Federal Reserve, at the end of 2017 non-housing consumer debt reached $3.82 trillion. Every type of debt except home equity lines of credit (HELOC) increased, and 80% of Americans have some form of debt in their lives. But did you know that debt differs for men versus women?

Research shows a significant gender disparity in the numbers for credit card debt. Regarding debt level, credit card balances, and even credit score, the data varies signficantly between the sexes. Here are some of the shocking figures.

More women have credit card debt

Research presented by Quicken Loans showed that among women and men age 18-24, 63% of the women carry credit card debt compared to just 36% of men. Among people age 55-64, 33% of men carry credit debt while twice as many women of the same age have credit card debt. Even though more women have plastic debt than men, the balances differ.

Men have higher card balances and credit scores

While more women carry credit card debt, the data shows that men have higher balances than women. Men average $25,000 in credit card debt while women owe roughly $21,000. Despite men having higher balances, it's women that have lower credit scores. Women average a FICO score of 621 while men fared better at 630.

Why are more women in debt than men?

There are many reasons women might be more likely to get into credit card debt than men.

Gender wage gap

Women often earn less than men for the same job, even with equivalent education and experience at the rate of about 70 cents on the dollar.

More debt from the start

Research from Credit Sesame shows that more women graduate with more student loans and this can snowball into even greater overall debt.

Time off from work

Women are more likely than men to take time out of their careers to raise children, and that can affect earnings potential.

Getting out of debt with bankruptcy

If you’re a woman struggling with debt, bankruptcy might be the best solution to get you on a better financial path. Credit cards, medical bills, and old income taxes and utility bills, can be discharged within a few months using Chapter 7 bankruptcy. Under Chapter 13 bankruptcy, you can catch up on secured debt and discharge unsecured debt too.

There are many options to get out of debt and bankruptcy isn’t right for everyone. If you do choose bankruptcy, it’s crucial to start rebuilding your credit immediately after you get your discharge of debt from the court. Bankruptcy can even put you on a path to a better credit score that could close the gender gap in FICO scores.

How to get started rebuilding credit

Whether you’ve got a fresh start thanks to bankruptcy or got your debt under control another way, re-establishing credit takes time and should be done methodically. It’s also important to know that your credit won’t get better on its own. If you’ve struggled with credit card debt in the past, you may have some aversion to plastic, but cards are the best way to rebuild credit.

If you don’t have any credit cards and have a lower score, you’ll likely need to start with a secured card. You put down a deposit, and the line of credit matches the deposit. The card reports to the credit bureaus so using it responsibly can boost your score and open doors to other credit products. To equip you on your journey to better credit, check out Credit Score Keys.

Resources:

Federal Reserve Data

Credit Sesame Data

National Debt Relief Data

Is Your Credit Score Making You Undateable?

Rachel — Wed, 07 Mar 2018 12:47:48 +0000

Is Your Credit Score Making You Undateable? Rachel Wed, 03/07/2018 - 07:47

Good credit can help you find love
Image by Allie Milot via Unsplash

You might be great looking, drive a nice car, and be charming and witty, but if your credit score is less than average, you might fall into the category of undateable, according to new research. There are many reasons to keep your credit score as high as possible, including being able to get an affordable home mortgage, buy a car at a decent interest rate, and pay reasonable prices for utilities. All that is good, but finding love is also important – and a good credit score can help with all these things.

It may seem strange to connect romance and credit ratings, but that’s the reality now. People are increasingly savvy about the importance of good credit and if they have a high FICO score, protecting it even if that means discounting some potential partners and moving on to candidates with healthier scores can be necessary. Here’s a look at the research, how it might affect your love life, and how to boost your score.

The new trend in partner choice

How can your credit score determine if you have good potential as a romantic partner? You’d be surprised, but just as those three numbers make you a good (or bad) risk to creditors, the same may apply to a potential mate. In a study done in conjunction with Discover Credit and dating site Match, 58% of survey respondents said a good credit score is more alluring than driving a nice car. Around 50% said credit scores matter more than a fancy job title.

What may be even more shocking is that 40% of those surveyed said they’d be more impressed by a high credit score than a fit and toned physique. So, this might be a sign that your time is better spent paying bills than pumping iron if you want to find lasting love. A rep for Match.com, Dr. Helen Fisher, said, “If you have a good credit score, flaunt it” and encouraged online daters to be open about their fit FICO to attract more potential partners.

There is a lot of data to support this point. Bankrate conducted research that found 42% of people would push someone over into the friend zone if they found out they had mediocre credit and call it a “deciding factor” when choosing someone to date. Even those with lower credit scores prefer to date someone with much better credit, which makes sense. Whether you’re looking for love online or going the traditional route, your credit score matters.

Why does your credit score matter when it comes to love?

It’s a sign of fidelity

When you sign a financial agreement, it’s a pledge to play by the rules. Paying consistently and meeting your obligations is a habit of responsible people. If you don’t keep your promise to your creditors, potential mates might think you won’t keep your word to them either.

It’s a sign of stability

While drama is great on the TV screen, it’s not something most people want in real life. No matter how much you earn, you can have a good credit score if you spend wisely, pay your bills, and don’t live beyond your means. Stability is attractive to potential partners as it represents security.

It’s a sign of compatibility

Studies show that partners with similar mindsets on spending, saving, and finance will last longer as a pair. A low credit score is a sign that you don’t have control over your finances or spending. People want someone like-minded to be partners in love and finance for a happy future together.

Get on the path to a better credit score

Even if you’re not looking for love, a strong credit score brings many benefits. After bankruptcy, your credit score is lower, but it’s the perfect time to rebuild on the clean slate you have post-discharge. No matter your situation, if you want a better credit score, it can be done. It won’t happen overnight, and it’s an ongoing process, but you’ll be happier and financially healthier as a result. Check out the Credit Score Keys DVD today to see how to get started on a better FICO score today.

Resources:

Discover data

Bankrate study

Credit Score Dos and Don’ts

Rachel — Thu, 01 Mar 2018 14:01:16 +0000

Credit Score Dos and Don’ts Rachel Thu, 03/01/2018 - 09:01

Be careful with your credit score
Image by @nina_p_v via Twenty20

Your credit score is crucial to your life in many ways. While it’s not a life or death matter, your credit score determines whether you can buy a car or a home. Even if you are approved, if your score isn’t as good as it could be, you’ll pay a lot more in interest than you otherwise could. After bankruptcy, you have the chance to make the most of your clean financial slate. Here are some credit score dos and don’ts to bear in mind while re-establishing your credit.

Credit Score Dos

Understand why you need a strong credit score

Your credit score demonstrates to potential creditors (and even employers and utility providers) whether you can be trusted and are worth the risk. While a credit score doesn’t tell the whole story about you, in this day, it is considered an important measure of a person's financial health and risk.

By using credit wisely, you improve your chances of getting that apartment or job you want, a low-interest loan, affordable auto insurance, and a whole host of other services and opportunities. The hard truth is that your credit score matters.

Read the fine print on finance agreements

To protect your credit score and finances, you must read and understand agreements before you sign them. This goes for bank documents, credit card terms and conditions, and especially loan documents. Agreeing to terms you don’t understand is a bad idea.

With credit card T&Cs, you should look for fine print about when and why the card issuer can raise your interest rate, charge you additional fees, or close your account. Lenders might also write in conditions where your interest rate can be raised above the initial rate.

Pay at least the minimum due

Credit card statements always have the minimum payment and the date it’s due at the bottom of your monthly statement. Always pay at least that amount and several days before the date due to give the payment time to process.

If you miss even one payment or pay less than the minimum, your credit report will take a very hard hit. You might think skipping just one payment won't matter, but it does. In fact, the first time you miss a credit card or loan payment is when your score may see the greatest damage.

Set a credit score goal

You probably wouldn’t get into your car for a road trip without knowing where you’re going and having a route picked out to get you there. The same should apply to your finances. You should have a credit score goal and a path to achieve the goal.

Shoot for a score of greater than 700 and take steps to reach that goal. 700 or higher will qualify you for better credit offers including higher balance credit cards at lower interest rates and preferable deals on a car loan and mortgage.

Stick to low utilization on credit lines

Credit utilization is the percentage of your revolving credit lines you’re using. Revolving credit includes credit cards and store cards. You should try and never have more than 20% utilization, but the truth is carrying no balances over month-to-month is the best approach.

Unless you have an emergency crop up, never use your cards for anything you can’t pay off in full that month. Also, consider paying down your card balances on each payday, twice a month, to avoid interest charges and accidentally running late on payments.

Credit Score Don’ts

Cancel credit cards

Another factor in your credit score is your average age of credit. This is a simple calculation done by adding the number of years each credit card has been open divided by the number of cards. Don’t close older accounts without a good reason or it can drag down your score.

Sometimes older card accounts might have higher interest rates, but if you don’t carry a balance, interest rates don’t matter so much. However, if an older card has a high annual fee, that’s a good reason to consider closing it. Just make sure your average age won’t take too much of a hit.

Apply to lots of new accounts in a short period

For every credit card you apply for, a hard credit inquiry appears on your report. Each hard inquiry lowers your score and stays on the report for a couple of years. Over time, the impact lessens, but if you apply for many at once, your score can drop significantly.

Also, don’t apply for a new account you won’t get. How can you know if you’ll be approved? There are many credit card forums where you can research specific card offers, see what profiles are approved, and make sure you meet the basic requirements before you apply.

Co-sign debt for someone else

If you co-sign a credit application with someone else, you’re putting your credit fate in their hands. Even if the person is someone you trust, if something shakes their finances such as divorce or job loss, they may miss payments and damage your credit.

It might be better to help your friend or family in other ways such as making them a small loan or helping them research a loan or credit card where they can be approved without a co-signer. This can be a win-win and ensures your friendship will stay intact.

If you’re just coming out of bankruptcy, now is the time to work on re-establishing your credit score. Check out Credit Score Keys to find out how to fast-track a better score.

9 Things You Must Know About Credit

Rachel — Wed, 21 Feb 2018 13:33:57 +0000

9 Things You Must Know About Credit Rachel Wed, 02/21/2018 - 08:33

What you must know about credit and scores
Image by Glenn Carstens-Peters via Unsplash

If you’re rebuilding your credit score after bankruptcy, the first step is to educate yourself about what affects your score, how you can boost it, and what happens if your score isn’t as good as it could be. When you want to buy a home or a car, your credit score is all-important but it also matters for your job hunt, and what you’ll pay for certain utilities and services. Here are nine things you must know about your credit report and credit score.

1 – The factors that determine your score

Five factors determine your credit score calculation. Knowing these means you know what’s hurting and helping your score and what you need to improve to boost your number. Payment history accounts for 35% of your score, and credit utilization accounts for 30%.

Utilization is the ratio of your credit balances versus your total credit lines. The average age of accounts contributes to 15% of your score and the mix of types of credit makes up roughly 10% of your credit score.

2 - Only a creditor can access your credit score

As a rule, only authorized people can get a look at your report or score. You can see your report and a version of your score if you request it. Potential creditors can access it, as can existing creditors, like credit card issuers, who occasionally re-check your credit to make you’re still a good risk.

Potential employers can see a limited version of your report, but only if you sign an authorization form. Some pre-screening programs seek lists of consumers that meet certain parameters to pre-qualify for offers, but you can opt out of this by going to optoutprescreen dot com.

3 - Your credit score may predict how long you’ll stay married

A study by the Federal Reserve revealed a very interesting trend. The study found that couples with closer credit score gaps have higher chances of staying together, while couples with wider credit score gaps have higher chances of separation.

4 - Credit scores are relatively new

It’s only been about 30 years since credit scores began. The FICO score came out in 1989. Before then, credit decisions came down to subjective judgments of character. Although Equifax has been around since 1899, tracking credit back then was difficult.

A credit score by Bill Fair and Earl Isaac (who later developed FICO) was first developed in the 50s, but it didn’t catch on. Later, with the advent of the Fair Credit Reporting Act, better data collection was established and the revised score took hold.

5 - FICO isn’t the only score

While FICO was once the only credit score on the block, now there are lots of credit scores by different firms. Vantage is a newer score developed by the credit bureaus. There’s also the CE Score and Credit Optics Score. There are also different versions of the scores – some specifically designed for mortgage or auto lending. In all, you could have 100 different scores calculated off of your credit report.

6 - Late payments will ruin your score

The old saying of “better late than never” is true in many aspects of life but running late on a bill that reports to the credit bureaus means your score will be hard hit. You might think missing one payment is no biggie, but it’s the first missed payment that hits your score the hardest. To keep your score as good it can be, never run late or skip payments.

7 - Closing credit cards can tank your credit score

The age of your accounts is an important factor in your credit score. When you close older accounts, your average age of credit may drop, and so might your credit score. Think carefully before you close an older account. It may be wiser to keep them open and use them sparingly. Even if it has high interest, if you pay it off in full when you use it, you won’t pay any fees.

If an older account has a high annual fee, closing it makes sense, but check your average age and delay closing until the effect is minimal. Simply add up the age of all your credit card accounts and divide by the number of cards to see the average age. It’s a quick and easy calculation.

8 – Joint accounts impact your credit

When two people jointly secure credit, the account activity is reflected on the credit reports of both parties. Credit cards are less common as joint credit these days, but auto loans often have co-signers and a mortgage might have two parties. Missing payments, paying late, or defaulting will wreak havoc on the credit report of both signers.

9 - A poor credit score costs you money

An unhealthy credit score affects you in more ways than being turned down for a car loan or mortgage. It also drives costs for everyday expenses like auto and homeowners insurance and utilities. Many utility providers run credit checks and your score determines the rate you pay for natural gas and other services. Even if you’re a safe driver, a lower score means you’ll pay more to insure your auto.

If you’re rebuilding your credit after bankruptcy, education is key. Check out Credit Score Keys for the best approach to re-establishing your credit and boosting your score to make the most of your fresh financial start after bankruptcy.

Resources:

Federal Reserve Study

How Medical Debt Affects Your Credit Score

Rachel — Thu, 15 Feb 2018 13:58:45 +0000

How Medical Debt Affects Your Credit Score Rachel Thu, 02/15/2018 - 08:58

Medical debt can impact your credit score
Image by Free-Photos via Pixabay

Medical debt is not like other debt. It’s not something you usually want to incur. It’s not a fun purchase and it’s often costly and unexpected. Medical debt is also something that can quickly spiral out of control even if you have insurance coverage. High deductibles, costly co-insurance, and out-of-pocket expenses can turn a medical crisis into a financial disaster.

In some cases, medical debt that winds up on your credit report isn’t even your responsibility. Protracted debates with your insurance carrier while they fight about whether to cover an expense can put your credit score at risk just as much as an unpaid debt for which you were responsible. The medical provider holds you accountable, even for items that should be covered by insurance.

How long does it take for medical debt to be reported?

Medical providers are more patient than other creditors when it comes to initial collections and reporting. If your medical bill runs 30 days late, you won’t see it pop up on your Equifax report. Credit bureaus will now wait at least 180 days before they display an unpaid bill on your credit report and as part of your score calculation. That gives you time to resolve any billing issues and try to find the money to pay.

The real issue arises when the provider turns your medical debt over to a collection agency. Once the collections process starts, your credit report will reflect the debt and it can harm your score. Unpaid collections items can stay on your credit for years even though medical debt is subject to the same statute of limitations as other unsecured debt.

How does medical debt affect your credit score?

Recent changes to credit scoring models downplay the impact of medical debt on your score, even though they still display on your credit report. However, different scoring models treat medical debt differently. With older scoring models like the FICO 8, lenders treat all collections accounts the same and it doesn’t matter if it’s medical versus other lingering debt.

With newer scoring models like FICO 9, collections that have been paid are disregarded and it also puts less weight on medical debt. Your score will be affected, but not as much as it would for other negative credit items. Even though the collection account may remain on your report for years, it should have an increasingly diminished impact.

If a creditor uses older scoring models, the impact of medical debt on your ability to get new credit (or increase existing lines of credit) may be problematic. The wrinkle is that you likely won’t know which credit score model is used by a potential creditor. If you have lingering medical debt, doing some research online to see which lenders and card issuers use FICO 9 may be wise.

How to minimize the impact of medical debt on your credit score

Treat medical expenses like you would any other cost. If you have time to plan ahead, shop around for the most cost-effective treatment options if you’re paying out of pocket. Sometimes one doctor will charge hundreds of dollars less than another for the same service.

If your insurance will cover a treatment, talk to them before you schedule the appointment to verify the procedure and facility are covered under your plan. If your employer offers an FSA (flexible spending account) where you can use pre-tax dollars for co-pays and prescriptions, consider enrolling.

For covered costs, if your insurance doesn’t pay up promptly, become a squeaky wheel and badger them until they pay and keep your provider in the loop, so they know you’re working on it. For costs that aren’t covered, chip away at them by offering installment payments to avoid the account going into collections.

After bankruptcy, re-establishing your credit score is critical and keeping it in good standing offers many benefits. Don’t let medical debt throw you off track. Comparison shop, work with your insurer and provider to control cost, and consider tucking away an emergency savings fund to help cover any unexpected medical costs.

To work on improving your credit, check out Credit Score Keys today.

Turned Down For Credit With a Good Score? Here’s Why

Rachel — Thu, 08 Feb 2018 13:01:29 +0000

Turned Down For Credit With a Good Score? Here’s Why Rachel Thu, 02/08/2018 - 08:01

Turned down for credit?
Image by Isaiah Rustad via Unsplash

There is more to being approved for financing and lines of credit than just your credit score, although your credit score is first and foremost. Depending on the type of credit you’re applying for, additional factors aside from your score may be considered as part of the credit decision. For a low-limit retail store card or in-house financing offer, your FICO score alone may be the determining factor, but for more complex and longer-lasting credit arrangements, other issues also matter.

If you’ve been turned down for new credit but you think your credit score is just fine, you might wonder what drove the rejection. What might have affected your application for new credit could have been other equally important credit factors such as your Verifiable Income, Debt to Income Ratio, and Credit Utilization Ratio among other considerations.

Is Your Verifiable Income Too Low?

You can have excellent credit, but if your income isn’t high enough to support the added debt, you could be turned down. For things like a mortgage or car loan, the lender wants to see verified income such as on a W2, pay stub, or income tax return. With credit card applications, they may take your word for it up to a certain threshold. If you’re turned down for insufficient income, then it might be a sign that you’re attempting to over-borrow.

Is Your Debt to Income Ratio Too High?

Your debt to income ratio is a metric lenders use to determine how much of your income is devoted to servicing your debt and other costs of living. To calculate DTI, add up your monthly debt installments and divide it by your monthly gross income. For instance, if your debt payments total $1000 and your gross income is $4000, that’s 1000/4000=25% DTI. If your debt to income ratio is 30-36%, you should be okay, but if it’s edging towards 40% (or higher), that could explain a rejection.

Is Your Credit Utilization Ratio Excessive?

Another important factor that potential creditors consider is credit utilization ratio. It is a ratio of credit card balances versus credit limits. This determines 30% of your credit score. High credit utilization ratio can signal that you might not be responsible with credit and may be overextending yourself. If your utilization is high, you might be approved but at a higher interest rate than you would prefer. Utilization no higher than 25% is preferred.

Is Your Employment History Erratic?

Depending on the type of credit arrangement for which you’re applying, length of employment history might factor into the lending decision. For a mortgage, employers want to see consistent employability. If you’re thinking of changing jobs and also considering a car or home loan, applying for financing before you swap jobs is probably wiser. Some lenders want to verify your employment and have your employer sign a statement indicating your employment is likely to continue.

Are You Applying For Too Much Credit?

When you apply for credit, a hard inquiry is recorded on your credit report. It only applies to the bureau that the creditor checked (assuming they only checked one), but every inquiry lowers your credit score slightly. Apply for a bunch of new accounts and your score will drop. Apply for a bunch of new credit and creditors will see that you’re looking to open a lot of accounts and they may be less inclined to approve you because many applications at once may be a sign of suspicious activity or bad financial moves.

Rebuilding credit after bankruptcy is a process and keeping your credit score in good shape is a matter of maintenance and ongoing attention. Good credit scores don’t happen by themselves. If you’re just coming out of bankruptcy and looking to re-establish credit, check out Credit Score Keys to make the most of your clean financial slate.

Your Credit Score Matters – Here’s Why

Rachel — Thu, 01 Feb 2018 14:25:46 +0000

Your Credit Score Matters – Here’s Why Rachel Thu, 02/01/2018 - 09:25

It's time to improve your credit score
Image by Fab Lentz via Unsplash

Like it or not, your credit score is an all-important number. During your life, the ability to use credit for key purchases can greatly impact your quality of life. Your credit score is an amalgam of your credit and debt habits based on your credit report that’s curated by the credit bureaus. Potential creditors, landlords, insurers, and utility providers pay to access this data (with your consent) to inform decisions about whether to loan you money, issue credit lines, or offer services to you. Here’s why your credit score is so important and what you can do to better it.

What Exactly Is A Credit Score?

While your credit report is a comprehensive dossier of your debt and credit behavior, your credit score is a single number used to judge your creditworthiness. This score is calculated by any number of companies that offer score calculations. The name you most likely know is FICO, but there are lots of scores and score providers.

The credit score is a calculation based on the info on your credit report. The report and the score are two different things. Because each score is calculated differently, your score will change based on the calculator, which agency the data comes from, and the type of calculation. Some scores are strictly run for mortgages and auto loans, etc.

What Is A Good Credit Score?

A good credit score starts in the high 600s or low 700s. A score above 800 is considered excellent. Depending on the type of credit or service you’re applying for, the acceptable range of credit scores will differ. For example, the higher your score, the lower the interest rate you can get on a loan like a mortgage, car loan, or lease.

The current average credit score is 695 but the averages scale by age. Typically, older American have better credit scores with those under 30 having the worst scores and those over 70 having the best scores. Not surprisingly, those with greater income have better credit scores, on average. In North Carolina, the average credit score is 600 and climbing.

What Determines Your Credit Score?

Your credit score is a measurement of factors in five broad categories:

Payment history determines roughly 35% of your credit score and reflects whether you pay your bills on time that report monthly to the credit bureaus.
How much debt you owe compared to your available credit determines about 30% of your credit score.
Age of credit drives about 15% of your credit score and is simply an average of all your revolving lines of credit by history (i.e., how long they’ve been open).
Your mix of credit mix determines roughly 10% of your credit score. This is the percentage of revolving versus installment (i.e., credit cards versus auto loans and mortgages).
Having recently approved credit affects about 10% of your score. Opening new accounts now and then can improve this facet, but can also drag down other aspects.

Why You Need A Good Credit Score

A good credit score impacts what you will pay for goods and services. Even if you don’t like the idea of debt and credit, it’s inevitable. You may plan on paying cash for everything in your life, but that’s not possible. For instance, applying for natural gas service or auto insurance necessitates a credit check and the better your score, the lower you will pay.

You can have no debt and pay all your bills on time, but if you don’t have a solid credit history and good credit score, you may still pay more for necessary services. If you want to buy a car or home one day, even if you’re not ready for that step right now, a good credit score is necessary to be approved and determines how much interest you will pay.

If you’re just coming out of bankruptcy, you got a fresh financial start from your debt, but now is the time to leverage your clean slate for a brighter tomorrow. After you get your bankruptcy discharge, rebuilding your credit to get a better score should be your next step. Check out Credit Score Keys now to see how to improve your score.

Resources:

Average Credit Score Data

6 Ways to Get A Better Credit Score

Rachel — Thu, 25 Jan 2018 13:11:48 +0000

6 Ways to Get A Better Credit Score Rachel Thu, 01/25/2018 - 08:11

Make a list of good credit habits and stick to them
Image by Thought Catalog via Unsplash

Your credit score determines whether you can have a credit card in your wallet and get an affordable car loan or mortgage with a reasonable interest rate. Your credit score may also determine how much you pay for some utilities like natural gas, whether you can get cell service through a major carrier, and if you would be approved for auto insurance through a reputable carrier, even if you have an excellent driving record. If you want a better score, here are six things to consider.

#1 Be careful about new credit accounts

New accounts can hurt or help. If you’re carrying debt, opening a new account will lower your utilization which can bump your score. On the flip side, your average age of accounts matters, so opening new accounts can drop this score factor. Adding new credit can give you an overall bump, but if you abuse it, it can hurt your score. Also, too many credit checks can drop your score. Be strategic about when you open new accounts and how you use them to get a better score.

#2 Stop charging

You should not live off your credit cards. While it’s no big deal to swipe plastic so long as you pay it off in full at the end of the month, if you charge things you can’t afford, it can send you into a spiral that hurts your credit score. However, you also need activity on your cards to keep your issuers happy so it’s a matter of finding balances. Try never to charge anything unless you can pay it off at the end of the month, except in cases of emergency.

#3 Pay past due balances

If you have any overdue items, get them caught up ASAP. If you’re just coming out of bankruptcy, you got a fresh start on your debt, so it’s critical that you not get back into a hole again. If you have anything late, be sure to take care of it and do everything you can not to fall behind on your bills and debt payments. It’s particularly important to stay current on those that report to your credit report monthly, but almost any bill left unpaid can eventually lower your score.

#4 Make your payments on time

A good credit score is the result of a long-term pattern of responsible behavior with credit. So, it’s very key that you not default on payments. Consistent monthly payment is perhaps the biggest factor in getting and maintaining a good credit score. If you are not consistent in your monthly payments, your score could take a big hit. Set up a budget, set calendar reminders, and do everything to get and stay on track with all your payments.

#5 Don’t close any accounts

If you’re doing some financial housecleaning, you might consider closing some accounts that are older, or you don’t use often. First, consider whether closing them might lower your credit score. Accounts contribute in two vital ways. Having older accounts can boost your score because it increases your average age of credit. Also, if you ever carry balances, your total credit lines are consequential because you want a low utilization (total debt/total credit lines). Closing accounts will lower your credit lines and your score.

#6 Pay down your debt

If you carry debt on your credit cards, you must watch the percentage of debt you use. If you carry more than 20-30% utilization (i.e., debt/credit lines), you could be lowering your credit score. Reducing your debt also reduces your credit utilization ratio which should boost your score. The best-case scenario is to pay off your credit cards in full each month so that you never pay interest or run the risk of going over your limits.

If you’re coming out of bankruptcy and want to improve your credit score, it’s time to take action. Check out Credit Score Keys now to find out more about how to strategically improve your credit and get the most from your fresh start after bankruptcy.credi

How Many Credit Cards Do You Need to Improve Your Credit Score?

Rachel — Thu, 18 Jan 2018 14:20:48 +0000

How Many Credit Cards Do You Need to Improve Your Credit Score? Rachel Thu, 01/18/2018 - 09:20

How many credit cards should you have?
Image by The Digital Way via PixaBay

If you are just coming out of bankruptcy, you might view credit cards in a dim light because of your recent debt experience. People that struggled with credit card debt in the past are often hesitant to have plastic in their wallet ever again. Even if you don’t like the idea of credit cards, they are a valuable tool to rebuild your credit score after your bankruptcy discharge. The key is to use cards wisely.

How Many Credit Cards Do You Need?

The number of credit cards you have in your wallet doesn’t directly impact your credit score. There’s no magic number of cards that will help you get the score you want. However, having multiple cards that you use strategically can indirectly impact your credit score. There are several ways credit cards can help re-establish your credit score after bankruptcy.

Having several credit cards can help your utilization ratio. This is important because it accounts for about 30% of your overall credit score. Utilization is the percentage of your available credit that you’re using. So, if you have six credit cards with $500 credit limits each, you have a total credit line of $3k. If you have $1000 in balances, that means you are utilizing one-third of your credit.

Using 33% of your credit lines (or more) can cause your credit score to drop. That’s when having more cards can help. If you have more cards or higher credit lines on your existing cards, your utilization will drop without you paying down your debt or making any other effort.

How Many Credit Cards Do You Have?

More than 75% of adults in America have at least one credit card, and most have between two and four cards according to Credit Cards dot com. According to Credit Karma, there’s a correlation between a high credit score and multiple credit cards but just having lots of cards won’t boost your score. Instead, you should manage the cards you have wisely and obtain new ones strategically.

Using Credit Cards to Rebuild Your Credit Score

Simply having credit cards won’t improve your FICO score – it’s all about how you use them. Here are some tips to use your cards to boost your credit score.

1 - Pay on time and in full

Your credit score is a calculation based on data about how you use debt and manage our finances. You must demonstrate that you can use credit responsibly. Part of that is paying your credit card bill on time and in full. Carrying balances over month-to-month can be a slippery slope and should be avoided at all costs.

2 - Treat it like a debit card

Sometimes credit cards don’t feel like real money when you spend using them. But since debit card transactions come right out of your checking account, you feel the pain. If you treat your credit cards as a debit card and force yourself to pay off everything you charge when the statement comes due, you will boost your score while avoiding debt.

3 - Keep accounts open

Another factor in your credit score is length of credit history. This is also called “average age of credit” and is a simple average of how long your revolving accounts (i.e., credit cards) have been open. If you close out older accounts, you can shorten your average age of credit and drop your credit score. Be sure to check this important number before you close an older account.

Rebuilding credit is a process

If you’re not sure what you need to do to rebuild your credit after bankruptcy, or you’re not having any luck, it’s time to consider Credit Score Keys. We help people improve and re-establish their credit scores after bankruptcy to make the most of their fresh financial start. Find out more today.

Credit Card Debt on the Rise - Protect Your Credit Score

Rachel — Thu, 11 Jan 2018 13:26:04 +0000

Credit Card Debt on the Rise - Protect Your Credit Score Rachel Thu, 01/11/2018 - 08:26

Credit card debt is rising
Image by CafeCredit.com via Flickr

Successfully going through with a bankruptcy filing is an accomplishment. It can be life-changing for those who recognize that they are stuck with overwhelming debt and decide to do something about it. But to make the most of your fresh financial start, you must rebuild your credit score and then protect it. That means being responsible with credit and debt.

Credit Card Debt on the Rise

The Federal Reserve has been tracking consumer debt since the 1940s and as of November 2017, revolving credit (mostly made of credit cards), reached $1.022 trillion, and of that, according to Nerd Wallet, $905 billion was credit card debt. This is the highest level of credit card debt ever, even higher than just before the Great Recession.

There are lots of reasons for higher credit card debt. It typically rises along with consumer confidence and a healthy economy. Spending boosts and benefits the economy, but on a personal level, if your credit card debt gets out of control, it can wreck your credit rating and waste the fresh start that you got with your bankruptcy filing.

Protect Your Credit Score

When you first file for bankruptcy, your credit score will drop. Generally, the lower your score, the smaller the hit will be. On the flip side, if you’re in excessive debt you can’t afford, your credit score is probably dropping every month anyway. After bankruptcy, it’s time to focus on improving your credit and making sure it stays in good shape.

Here are some tips for using credit cards wisely to improve your credit and protect your score.

1 – Use your cards regularly

You can’t just shove credit cards into the back of your wallet or desk drawer and never use them. If there is no card activity, your issuer might cancel your card. A good strategy to achieve activity to keep the accounts open is to use them regularly for things you must have.

Set up recurring charges on your cards that you must pay anyway. For instance, your Netflix could go on one card and your cell bill on another. If you charge necessities that you pay anyway, it helps get the activity you need without going into debt you don’t need.

2 – Ask for credit line increases

One of the factors in your credit score is utilization. This is the percentage of your total credit lines that you’re using. The higher your credit limits and the lower your balances, the better your score. It pays to have higher credit limits in case you must ever carry a balance.

Sometimes card issuers will give you credit line increases, but often you must ask for them. Some card issuers have automatic request buttons on their websites, but for others, you’ll have to call and ask. It’s worth the time and effort to give yourself a cushion.

3 – Pay before your statement cuts

Paying your balances in full each month will protect your score and keep you from paying interest. To avoid interest, know the policies of your card issuer. Some won’t charge interest until after your statement cuts, but before the payment is due.

With most cards, if you pay online on your card issuer’s site before the statement date, you should avoid interest so long as you pay the balances in full. If you must ever carry a balance, pay it down (or off) as soon as you can.

Rebuilding your credit score after bankruptcy is a process. You should get started as soon as you have your bankruptcy discharge. To find out how to re-establish your credit after bankruptcy, check out Credit Score Keys.

Resources:

Federal Reserve stats

Nerd Wallet data

5 New Year’s Resolutions for a Better Credit Score in 2018

Rachel — Thu, 04 Jan 2018 13:38:04 +0000

5 New Year’s Resolutions for a Better Credit Score in 2018 Rachel Thu, 01/04/2018 - 08:38

Plan now for a better credit score in the New Year!
Image by Brooke Lark via Unsplash

The year 2017 is behind us and with it went a year of triumphs and disappointments. If one of your regrets from last year is problems with your credit score, 2018 represents the opportunity for a fresh start. If you’re ready to improve your credit, consider making some New Year’s resolutions targeted at better finances and a stronger credit report. For those coming out of bankruptcy, now’s the time to get better credit. Here are a few tactics to consider for a better credit score in 2018.

Resolution #1 - Get Organized

Missing payments on bills and debts can ding your credit score unnecessarily. Trying to keep track of all your bills without a system isn’t wise. Without organization, it can be hard to stay on task and always pay on time. Missing even one payment can hurt your credit score.

Here are some tips to help you get (and stay) organized:

Set e-reminders for your bill due dates using your smartphone or email.
Sign up for text and email reminders from your card issuers, utility providers, and other creditors.
Set up automatic payment for recurring bills.
Reinforce your digital system with a paper calendar or roster in a prominent place.

Resolution #2 - Set a Budget

As the popular saying goes, failure to plan is planning to fail, and the same applies to your finances. Setting a budget offers insight into where your money goes and opportunities for saving. Before you set your budget, track your spending for a month to assess and set parameters.

If you’re not sure where to start, Consumer Credit offers free online resources. If you prefer videos, Dave Ramsey offers a series of YouTube videos on budgeting and money management. There are also tons of low-cost and free budgeting tools for your smartphone.

Resolution #3 – Make a Plan For a Significant Purchase

Most people plan to buy a home and late model car at some point in their lives. While you need good credit to get a mortgage or car loan, getting a mortgage or car loan can also improve your credit. Having an installment loan on your report improves your mix of credit.

Replacing rent payments with a mortgage means you’ll have a home to call your own and a boost to your credit. If you don’t currently own a home, but want to, 2018 is the time to make a plan. Investigate your mortgage options, start saving for a down payment, and move forward with your finances.

Resolution #4 - Minimize Interest Payments And Fees

Interest payments on credit cards are unnecessary expenses. As a rule, you should never charge something that you can’t pay off the same month. If you pay down your credit card balance before your statement issues, you should be able to avoid interest charges.

Also, letting bank balances drop below minimums or paying any bill late can result in fees charged. Avoiding interest and fees means more money in your pocket that can go into savings, your emergency fund, or towards saving for a mortgage or car loan deposit.

Resolution #5 – Monitor Your Credit Reports

Before you improve your credit, you need to know where you stand. You can easily assess this by reviewing your credit reports from all three credit bureaus – Experian, TransUnion, and Equifax. You can get one report each year for free, but that’s not enough.

Consider signing up for a low-cost monitoring service that will notify you of changes to your credit reports whether it’s good, bad, or just informative. This allows you to keep an eye on identity theft, fraud, and to track positive changes in your score so you can pat yourself on the back.

If you’re ready for a better credit score in 2017, give Credit Score Keys a try!

Better Credit in the New Year - How to Rebound Your Credit Score after Bankruptcy

Rachel — Thu, 28 Dec 2017 14:12:56 +0000

Better Credit in the New Year - How to Rebound Your Credit Score after Bankruptcy Rachel Thu, 12/28/2017 - 09:12

Make some credit score resolutions for 2018
Image by NordWood Themes via Unsplash

The New Year is an opportunity to start things fresh. It is a time when you make resolutions and goals for the coming year. Some people make overwhelming goals to revamp their lives from top to bottom and some shoot for smaller targets. Close to 70% of people in a recent survey said they are making a resolution for 2018. The top resolutions are diet, exercise, and dealing with finances. If you are just coming out of a bankruptcy, it’s a great time to resolve to improve your credit score.

When you file for bankruptcy, your credit score will take a hit, but if your finances are so dire that you need the relief offered by bankruptcy, your score is probably already on a downward trend. Rebuilding your credit score after bankruptcy is essential to getting better prices on car insurance, to buying a home or vehicle, or to being approved for rental property or a job you want. Check out the following tips to help rebuild your credit in 2018.

Know your credit score

Knowing your credit score (good or bad) is the first thing you should do after you get your bankruptcy discharge. You might feel that since your credit score has taken a hit, there’s no need to check on it or you might not want to see it because you’re worried it will be bad news. But not knowing is worse. To know where you’re going, you must know where you’re coming from so you can plan.

Order a copy of your report from all three credit bureaus and check out your score. When you get your credit report, check for any possible errors and get a handle on your current debts. It is only by examining your credit report that you will know your starting point, clean up errors, and get started rebuilding your credit for a brighter future.

Open a new bank account

It can be wise to open a new bank account post-bankruptcy and close out any older ones you had while you were in debt. This gives you a fresh start and makes sure there’s no lingering debt associated with your old bank account. Open both a checking and a savings account so you can work on building up an emergency fund if you don’t already have one.

Check with your bank to see about setting up automatic online bill pay. This way, you’ll pay your bills on autopilot, never miss an installment, and rebuild your credit score in the process. Paying all your bills on time is essential to making the most of your fresh financial start after your bankruptcy discharge.

Get a secured credit card

To improve your credit score dramatically, you must establish a track record of handling credit responsibly. You might be gun-shy about having credit cards in your wallet after your recent debt dilemma, but credit cards are the fastest way to re-establish credit. You’ll likely have to start with a secured credit card, depending on your credit score a few months after discharge.

Be sure to check options and compare interest rates and annual fees. Since you are just coming out of bankruptcy, you won’t get the best interest rates and may have to pay an annual fee. Do your homework to make sure you qualify before you apply because applying for credit can lower your credit score. Don’t apply often and be sure you’ll be approved before you apply.

Pay off your credit cards each month

On your credit improvement journey, one way to demonstrate to creditors that you are a good credit risk is to pay off all your plastic monthly. Using your credit card responsibly then paying it off in full will keep interest charges from piling up. You need activity to get credit line increases which, in turn, help your credit score.

Only carry over balances month-to-month in case of emergency. Allowing credit card interest to pile up can be a slippery slope back into the swamp of financial trouble. Use your cards modestly for recurring small-ticket items like Netflix and your cell bill so you get usage without spending wastefully or on things you cannot afford.

Monitor your credit report

While you are working towards rebuilding your credit, make sure to monitor your credit report. Not only will it boost your morale as you watch your credit score climb, but it’s the best way to stay on top of identity theft, fraud, and errors that can drop your score. Credit monitoring services can be free or low-cost and will alert you when your score rises, drops, or if there are fraud alerts.

If you’re rebuilding your credit after bankruptcy, be sure to check out Credit Score Keys to see how we can help.

Resource:

When Rebuilding Credit, What's the Difference Between an Authorized User and a Joint Cardholder?

Rachel — Thu, 21 Dec 2017 13:48:30 +0000

When Rebuilding Credit, What's the Difference Between an Authorized User and a Joint Cardholder? Rachel Thu, 12/21/2017 - 08:48

Get started rebuilding your credit now
Image by Corinne Kutz via Unsplash

When you come out of bankruptcy, as soon as you have your discharge in hand, it’s time to start rebuilding your credit. For most consumers, the starting point is a secured credit card that you use responsibly. But there are also the options of being an authorized user or a joint cardholder with someone else to help improve your credit. Each comes with different responsibilities and repercussions, so be careful before pursuing either of these options.

Two cards, two users, but one set of financing

With both authorized users and joint cardholders, both parties can make purchases with the credit card. There is one statement issued to the primary cardholder, the balance is made up of purchases from both cards, and both are subject to the same credit limit. The credit card history is reported on both credit reports, regardless of who made the payment or purchases using the card. But from there, the two diverge.

The differences between a joint cardholder and an authorized user rest mostly on the obligation and permissions.

Who’s responsible for the balance owed?

The significant difference between an authorized user and a joint cardholder is the responsibility for the credit balance. As an authorized user, you have no obligation to pay the credit balance. This means that the card issuer can’t go after an authorized user if there is outstanding credit card debt.

When someone is added as an authorized user on an account, hopefully, they’re a good credit risk who will pay the bills on time and not abuse the privilege. As an authorized user on an account in good standing, you can see a boost to your credit score. But if the person who owns the account doesn’t keep it up as they should, it could drop your credit score.

On the other hand, a joint cardholder is legally responsible for paying the credit balance as much so as the other cardholder. In cases of default, the credit card issuer can go after both. The activity on the jointly held card will be reported on your credit report and can boost your score so long as the account is managed wisely, payments are made on time, and you don’t max out the card.

How are joint and authorized user accounts created?

A primary difference lies in how the accounts are established. As an authorized user, you are added to an account that someone else already opened. As a joint cardholder, you and someone else open an account together. An authorized user can be added to a credit card account at any time or taken off an account at any time. An authorized user isn’t usually subjected to a credit check.

The primary account holder simply requests to add you and a card will be sent out in your name and the card activity should begin showing up on your credit report in a short while. With a joint credit card, the two users apply for the card together. Both credit scores will be checked to see if they qualify, and if approved, both joint cardholders will be issued cards.

If your credit score is inadequate to get approved for an unsecured card, which is the usual case after bankruptcy, applying with someone who has a solid credit history for a joint account can fast-track you to approval. Joint cardholders share the risk together unlike with an authorized user.

Removing card users

Another difference between an authorized user and a joint cardholder is how easily they can be removed from the account. With a joint cardholder, issues arise when the relationship between the two account holders end. You can’t just remove a joint cardholder because the account is owned by both. This is more complicated.

For an authorized card user, the primary account holder can take someone off the card with a simple phone call. Since the authorized user doesn’t have a legal obligation for the card, they can be easily removed. If you’re removed as an authorized user, the card activity will stop being reported on your credit report.

Rebuilding your credit with plastic

After bankruptcy, credit cards are the easiest way to start re-establishing your credit score. A few months after your bankruptcy discharge, you should be able to start exploring secured card options and maybe even unsecured depending on your credit score. If you wait for a month or two after discharge, you can start working on your credit without any assistance from a joint cardholder or someone willing to add you to their account.

It’s important that you start rebuilding your credit as soon as you get your discharge. If you’re not sure where to start, check out Credit Score Keys to get you on the right path to recovering your financial footing.

6 Ways to Rebuild Credit After Bankruptcy

Rachel — Thu, 14 Dec 2017 13:31:30 +0000

6 Ways to Rebuild Credit After Bankruptcy Rachel Thu, 12/14/2017 - 08:31

Kick start your credit score after bankruptcy
Image by ChrisGeirman via Unsplash

When you’re deep in debt you can’t dig out of by yourself, bankruptcy can come in handy. But once you have your discharge, it’s time to get busy rebuilding your credit score. It’s true that filing bankruptcy will cause your credit score to dip, but if you were maxing out your credit cards and behind on bills, it was probably dropping every month already.

Once you file, the credit score free-fall stops and the rebound can begin. Fortunately, if you know the right things to do and develop a strategy, you could be well on your way to rebuilding a strong credit score and on the path to making the most of your fresh financial start. Here are six tips to consider:

1 – Confirm your bankruptcy reflects the right debts

When rebuilding your credit score, your report is ground zero. The first step is to be sure that all the debt that was part of your bankruptcy reflects that it was part of the bankruptcy case. It should show zero balance owed and with a notation that it was part of the bankruptcy. If any accounts that were in your bankruptcy show open, submit your bankruptcy docs to the credit bureau and ask for a correction. If you accidentally left a debt off of your bankruptcy petition, contact your attorney to discuss correcting the oversight.

2 - Revamp your financial habits

To rebuild your credit takes persistence, patience, and cultivating good financial habits. At the baseline, you should do things like paying your bills on time, reviewing and analyzing your credit report, avoiding maxing out credit lines, and controlling your spending. When you unload debt in bankruptcy, you’ll feel liberated and should have more cash in your wallet, but that’s not the time to indulge yourself. Spending less, saving more, and rebuilding cautiously over time is the way to go. It’s a marathon, not a 100-yard dash.

3 - Use a budget

A budget is recommended to reestablish your credit on solid footing. Never spending more than you earn is the foundation of financial success. If you’ve never set up a budget and aren’t sure how, there are many tools online to help you. There are apps and websites that are free, will help track your spending, and alert you when bills are due, and balances are low. With a budget, you know where you need to cut back and can become more conscious of your finances. It can be surprising to see where your money goes. Once you adjust to life on a budget, you can build from there.

4 - Apply for credit

Improving your credit score depends heavily on how well you can manage debt. So, you need to apply for credit. The first step you should take is to open a savings and checking account. From there, you’ll need to start applying for credit, but not all at once, not in a hurry, and only when it makes sense for your score. After bankruptcy, you might be hesitant ever to put a credit card in your wallet again, but cards are one of the top ways to rebuild your score. The key is not to see a credit card as a tool for spending but one to rebuild credit wisely, not to spend needlessly.

5 - Get a secured credit card

The first type of credit that bankruptcy filers can often get is a secured credit card. With secured credit cards, you won’t spend more than the money deposited in your account and the card issuer is more flexible on credit score because they have protection in case you don’t pay your bill. Credit unions offer secured cards, and so do most brand-name credit card companies. There will still be some minimum requirements, so it pays to shop around to make sure you meet the minimums for a secured card program before you apply. You’ll also need cash on hand for the deposit.

6 – Use cards moderately

Once you have credit cards in your wallet, secured and then unsecured, you must use the cards to keep your score climbing. However, you also don’t want to get back into unmanageable debt. Using your cards for small regular purchases and paying off in full each month will keep your card issuer happy. Putting your Netflix subscription on one card and your cell phone bill on another, etc., ensures there is card activity without spending unwisely. With a positive history, you can periodically request credit limit increases. These can help your credit score, too.

To find out more about rebuilding your credit score after bankruptcy, check out Credit Score Keys today.