Consider A Credit Builder Loan
Another way to improve your credit score is by taking out a .;
A credit builder loan is an excellent way to build credit without taking out additional credit card debt. Once youre approved for the loan, the funds are placed in a savings account for you. Every month, youll make a fixed monthly payment which is credited toward the loan.
Once the loan is paid in full, youll receive access to the funds. But the best part is that the consistent payments you made over time helped build up your credit score.;
What Is Your Credit Score
Your credit score is not actually a single number.; Technically you have 3 credit scores which are calculated from three primary credit bureaus: Equifax, Experian, and TransUnion.
The three credit rating bureaus each calculate your credit score using proprietary models that vary slightly between the three agencies.; However, each agency follows the same general factors to evaluate your credit, but they will have some minor differences in terms of how much weight they give to different factors.
This means that your actual credit score could be three slightly different numbers depending on which agency you source your credit score.; Dont worry, your three credit scores will typically be very similar and vary by only a few digits.
Correct Credit Report Errors
You are entitled to obtain one free copy of your; annually from each of the three major credit reporting agencies: Experian, Equifax, and TransUnion. If you space your credit reports every four months, you could monitor your credit year-round for free. To keep your credit file clean, ensure that all errors get corrected.When you file a dispute over erroneous information in your credit report, the credit bureaus have 30 days to investigate and determine whether or not the information is accurate. If the credit bureaus rule in your favor and adjust your score, you could see a jump of several points just by getting the wrong information removed; no additional steps are required. Monitoring your credit reports and correcting errors is a surefire way to improve your FICO score.
Key takeaway: This is possibly the fastest way to improve your credit score. If you have multiple incorrect negative items on your report, you could increase your score by hundreds of points.
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Improving Your Payment History
You dont have as much control over your payment history as you do with your overall debt utilization.; The main thing to remember is to make sure you meet your monthly payments and you clear up any outstanding delinquencies on your credit.
If you have any older credit accounts that have been referred to a collection agency, you may be able to contact that credit agency and request that they stop reporting that delinquency to the credit reporting agencies in return for your payment.
Make sure that if a collection agency agrees to stop reporting the delinquency that you ask them to provide the request in writing.
Delinquent and late payments can remain on your credit for 7 years, but late payments are only reported to credit agencies if they are late for at least 30 days.
So if you miss a credit card payment by a day, dont stress out about the missed payment date getting reported if you make payment as quickly as possible and before 30 days from the payment date.
How To Obtain Your Free Credit Score And Report
While you can obtain a credit score for about $20 from Equifax and TransUnion, theres no need to do so. You can now obtain your free score and report from companies like:
In Canada:
Borrowell: Get a free credit score and report . It is updated weekly.
: They give you a free credit score and report .
United States:
Checking your credit score does not impact it in any way.
If you prefer, you are entitled to one free credit report every year from TransUnion and Equifax. You can obtain them as follows:
TransUnion: Online, via mail, in-person, or by phone at 1-800-663-9980
Equifax: In person, via mail, or by phone at 1-800-465-7166
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Get Late Payments Removed
Before disputing late payments you should contact your creditors and tell them you have a late payment on your credit report on your account and you believe its inaccurate. They may remove it as an act of goodwill for customers who have been with them for awhile.
I had a creditor remove a late payment from my credit report by calling and coming up with an excuse for why it was late. They removed it as an act of goodwill because I had been a customer for several years. If that doesnt work, you can start disputing it with the three major credit reporting companies.
I had four late payments with two different creditors at one point. I contacted the creditors and got one removed and disputed the other 3 with the Credit Bureaus. I was able to get another one removed, and my credit score jumped up by 84 points.
Use A Secured Credit Card
Another method that can be used either to;build credit from scratch;or improve your credit is by using a secured credit card. This type of card is backed by a cash deposit; you pay it upfront and the deposit amount is usually the same as;your credit limit. You use it like a normal credit card, and your on-time payments help your credit. Choose a secured card that reports your credit activity;to all three credit bureaus. You may also consider looking into alternative credit cards that don’t require a security deposit.
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If You Have A Credit Card But No Installment Loans
Like the scenario above, adding an installment loan to a credit report that only features credit cards might be a wise move. By opening a new type of account, you may add diversity to your credit report mixture.
Yet opening a traditional installment loan for the sole purpose of improving your credit mixture presents a problem. Unlike credit cards, a traditional installment loan automatically causes you to go into debt.
However, there is a way to add an installment loan to your credit report without taking on debt in the process at least not in the conventional sense. Consider opening a .
With most credit builder loans, the lender will hold your loan proceeds in a Certificate of Deposit or savings account. After you make all of your monthly installments to pay off the loan, youll receive the funds to use as you please. You can then use those funds as you wish, perhaps even to establish an emergency fund to protect your finances and credit in the future.
Open A Credit Account
If you have low credit scores and dont have a credit card, getting a secured credit card can be a good place to start.
Using the card for a small purchase each month and making on-time payments can help your payment history and utilization rate. The new card will also add to your mix of credit accounts.
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Maximizing Length Of Credit History
Your length of credit history is calculated based on your average age of all open credit accounts.; The way to maximize this ratio is by keeping your oldest credit cards active.
If you have to close a credit card, always choose a credit card that has been opened for the least amount of time.
If you close a credit card that has been opened for a very long time, this can have very negative results on your personal credit score.
Setup Payment Reminders On Your Calendar
The number one killer of credit scores is delinquent and late payments.;
Anything that you can do to help remind you to make your payments on time is recommended.;
Setting up a reminder on your calendar to pop up a few days before your bill is due can help you make your payments;on time.;
There are also;a number of;great apps you can download that are specifically designed to be;bill reminder apps.;;
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If You Have No Active Credit Accounts
With no active credit accounts, theres a chance you might not have a FICO Score at all. The minimum requirements to qualify for a FICO Score are as follows:
- You need at least one account that has been open for six months or longer, plus
- At least one of your accounts has been reported to the credit bureau in the last six months, plus
- Your credit report cannot indicate that youre deceased.
In this situation, your credit might benefit from adding an installment account, revolving account, or both to your credit report. So, a and a credit builder loan could be worth considering here.
Check Your Credit Reportson A Regular Basis To Track Your Progress
No matter where you turn for your credit check-in your bank, or one of the major consumer credit bureaus its important to keep an eye on your credit. And if you find any mistakes or inaccuracies, we can help you file a dispute. If your dispute is approved by the credit bureaus, you may see the error corrected as soon as within 30 days, which can help raise your credit scores.
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How To Increase Credit Score To 800
Generally speaking, lenders typically like to see a credit score of at least 650 before they qualify a borrower for a loan. However, a score of 650 might not afford borrowers with the best interest rates, making their loans more expensive to pay down.
When it comes to getting approved for loans and securing the lowest interest rate possible, a higher credit score is best. If you can get your credit score to 800, youll likely be able to take advantage of the best rates and should have no problem getting approved for a loan, as long as all of your finances are in order and there are no other red flags that might worry your lender.
In addition to the above-mentioned tactics, consider the following measures to get your credit score to 800:
- Pay down the balance of your credit cards that are currently at or near their limit.
- Pay down higher-interest debt first .
- Consolidate your debt to pay it off more quickly and transfer the balance of a higher interest-rate card to a lower interest rate card.
- Have a mix of debt which can increase your credit score.
For more ways of improving your credit, .
Final Thoughts
Depending on your particular situation, it may take just a matter of a couple of months to inch your credit score back up. Regardless of where you fall on this spectrum, its important to take steps right now to improve your credit score so you can enjoy better rates and an easier time getting approved for a loan.
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Monitor Your Credit Records
There are two good reasons to monitor your credit records.;;
The first is because merchants regularly report inaccurate information and if you are not paying attention, these mistakes can hurt your credit score.;;
But it gets worse;
Identity theft also known as ID Fraud is a very real problem that most people dont think much about until it has been stolen.;
To combat these problems, we recommend you purchase the top-ranked and most comprehensive we have been able to find online through MyFico.
- Real time notifications of credit record changes;
- Deep Dark Web black market scanning;
- Only service that provides;ALL 16 FICO scores for Equifax, TransUnion, and Experian
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So how do we make money? Our partners compensate us. This may influence which products we review and write about , but it in no way affects our recommendations or advice, which are grounded in thousands of hours of research. Our partners cannot pay us to guarantee favorable reviews of their products or services.Here is a list of our partners.
What I Learned From Being Denied For Credit Cards
When I was finally prepared to get a credit card on my own, none of the banks I applied to would give me a chance.
It went like this: I am unemployed, have no credit history, and have a couple of thousand dollars in college debt that I will have to start paying on in the next year or two.
Not exactly a winning pitch to convince someone to give you a line of credit! Two banks denied me, but one banker was kind and shared some info that has helped me raise my credit score over 100 points in the past five months.
First, I should stop trying to apply for credit cards that would get denied. His reasoning was simple: when you apply, they do a hard credit check which, in turn, can lower your credit score even more.
His second piece of advice was to get a secured credit card.
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Inspect Your Credit Report And Score
As per the Federal Trade Commission, about 1 in 5 consumers have errors in their credit report that negatively impacts their credit score. Thats a big number and is why you should routinely request your free credit report annually and read it through for any errors.
Companies like Borrowell or Credit Sesame also provide it for free on a weekly or monthly basis along with your credit score. Checking your own credit score does not impact it as it is deemed a soft inquiry.;
Errors on your report could include wrong personal information, inaccurate status e.g. late payments that were made on time, hard inquiries you did not authorize, negative information that has expired e.g. collections, bankruptcy, open debts that have been paid in full, etc.
You can dispute any errors on your credit report and ask that they are removed. The credit bureaus will investigate your claim and respond within 30 days.;
Take Out A Secured Credit Card
Another way to build your credit score is by taking out a secured credit card with a card issuer. With a secured credit card, youll pay an upfront deposit which serves as collateral for the credit line. This will cause a credit limit increase which could potentially increase your credit score on your credit account.
If you default on the card, your lender will keep your deposit. But if you continue making payments and keep the account in good standing, your lender will eventually return the deposit to you.;
This is a good option for anyone who cant get approved for a traditional credit card due to bad credit. However, these cards often come with hidden fees, so youll want to compare offers from multiple companies first.;
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Length Of Credit History
The length of your credit history is simply the amount of time you have maintained a personal credit history.
This is one of the reasons why it is a good idea to open a single credit card when you are 18 years old and practice developing good payment financial management habits at a young age.
How is your Length of Credit History Calculated?
Your credit history includes three main factors:
- The age of your earliest credit account.
- Amount of time other credit accounts in your account have been open.
- Length of time since your credit accounts have been used.
Does Closing Credit Cards Impact your Length of Credit History?
When you close a credit card, that credit card will not longer be included in the average age of your credit history.
This means that it is very important to identify your oldest credit cards and keep those cards actively utilized.; If you dont use a particular credit card at all, the credit card company may decide to close that credit card.
If you accidentally close your oldest credit card, the length of your credit history can take a negative hit because your average credit age will decline.
This means you should try to close your most recently opened credit cards first.; By closing credit cards with a low average age, it will have a much smaller impact when you close a credit card.
How A Secured Credit Card Works
He told me that no major bank was going to accept my credit application, but there was actually an alternative option available one which was especially perfect for those in my exact situation: to sign up for what is called a secured credit card.
While the terms for these are horribly one-sided in favor of the lender, I assure you it is a small price to pay for the result you receive after only a few months.
With secured credit cards, you give the lender a cash deposit up front, and that cash deposit is typically equal to your credit limit.
This process truly confused me at first, since I thought the deposit was money I could actually spend. What I learned, however, is that the deposit is there in case I default.
I couldnt spend the deposit itself, but I would get it back if I kept my account in good standing until I closed the card.
After you make your deposit, secured cards are also treated just like traditional credit cards. Your secured card will typically look and act just like a regular credit card, so no one will know it is secured.
There is also an annual fee associated with most secured credit cards, but I felt it was;a small price to pay for the opportunity to build some credit history.
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