Can You Pay To Have Your Credit Fixed
If your credit file has information you feel is incorrect, credit repair companies may offer to dispute the information with the credit reporting agencies on your behalf. Credit repair companies typically charge a monthly fee for work performed in the previous month or a flat fee for each item they get removed from your reports. However, Experian does not charge consumers or require any special form to dispute information, so this is something you can do on your own at no cost.
If you’re on a monthly subscription, the cost is typically around $75 per month but can vary by company. The same goes for paying a fee for each deletion, but that option typically runs $50 each or more.
That said, it’s important to keep in mind that credit repair isn’t a cure-alland in many cases it crosses the line into unethical or even illegal measures by attempting to remove information that’s been accurately reported to the credit bureaus. While these companies may try to dispute every piece of negative information on your reports, it’s unlikely that information reported accurately by your lenders will be removed.
And again, credit repair companies can’t do anything that you can’t do on your own for free. As a result, it’s a good idea to consider working to fix your credit first before you pay for a credit repair service to do it for you.
What About Insurance Rates
Getting charged more for car & homeowners insurance is often a fear of people who are getting out of debt. They worry that their car and homeowners insurance rates will go up when their debts are paid off.
But that doesnt mean your rates will go up because you get out of debt, or that youll have a higher rate if you dont have a credit score.
Why? There are a few reasons.
First, paying off your debts usually makes your credit score go up, at least for a while. Its only when you no longer use credit at all going forward and enough time has passed that you will finally no longer have a credit score. That takes quite a bit of time, since your credit history still exists and items usually stay on your credit report for 7-10 years.
Second, if you have no credit because you are young and just starting out, your car insurance rates are probably going to be high. But thats probably because you are thought of as a new driver until age 25. Insurance companies usually charge more to new drivers, because their stats show drivers under 25 are more likely to have claims. So thats not because of having no credit.
How your credit score can affect insurance rates
Insurance companies are often allowed to use credit information as part of deciding on rates, whether to offer a policy, etc, but thats not always the case. Some states limit or dont let them do so. And insurance doesnt use the same credit score that would be used to apply for a mortgage, for example.
How To Get Extra Help With Your Credit And Debt
If your debt is manageable, consider consolidating it via a personal loan or balance transfer credit card.
In some cases, debt consolidation loans can provide lower interest rates and reduced monthly payments, as long as you qualify and stick to the program terms. With a balance transfer card, you can typically get an introductory 0% APR promotion, during which you can pay down the balance interest-free. Just be mindful not to continue charging on the original card once the balance is transferred.
If your debt feels overwhelming and your credit isn’t good enough to get a balance transfer card or a low-interest personal loan, it may be valuable to seek out the services of a reputable credit counseling agency. Many are nonprofit, and you can typically get a consultation with personalized advice for your situation at no cost.
You can review more information on selecting the right reputable credit counselor for you from the National Foundation for Credit Counseling.
Credit counselors can also help you develop a debt management plan with unsecured debt like credit cards. With this arrangement, you’ll make your monthly debt payments to the credit counseling agency, and it will disburse the funds to your creditors. The agency may also be able to negotiate lower monthly payments and interest rates.
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The Tale Of Two Spenders And The New Tv
Remember Sonya? She saved up for the extras. When she had enough money in her savings account, she bought a new TV for $1,500. She paid cash.
Her friend Vince is an impulsive spender. He seeks immediate gratification using his credit cards, not realizing how much extra it costs. Vince bought the same TV for $1,500 but financed it on a store credit card with an annual interest rate of 22 percent. At $50 a month, it took him almost four years to pay off the balance.
While Sonya paid only $1,500 for her new TV, Vince paid $2,200the cost of the TV plus interest. Vince not only paid an extra $700, he lost the opportunity to invest the $700 in building his wealth.
Check Your Credit Report
To get a better understanding of your credit picture and what lenders can see, check your credit report and learn more about how to read your Experian credit report. It’s also a good idea to order your free credit score from Experian. With it, you’ll receive a list of the risk factors that are most impacting your scores so you can make changes that will help your scores improve.
If you find information that is incorrect, you can file a dispute with the credit reporting agency on whose report you found it. You should also contact the lender that is reporting the incorrect information directly and ask them to correct their records.
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Can Savings Accounts Affect Your Credit Score
Savings accounts don’t directly impact your credit history because they’re not listed on your credit report.
That doesn’t mean it’s not important to save or that they can’t impact you when you’re trying to get a loan. Besides your credit score, a lender will most likely prefer to see you have something in savings since it increases the chance you can pay them back.
Having savings puts you in a stronger position to manage any debt or credit products you have . A savings account makes it less likely that you have to turn to a credit card or payday loan for an emergency expense.
Are You Ready To Take On A Credit Obligation
If you dont have a budget, or spending plan, youre not ready to take on debt. Before you take on credit obligations, its very important to have a good foundation, including your emergency savings, a budget, your financial records and goals, and insurance to protect your assets. See the Investment Pyramid. Do you have a strong financial foundation?
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Ask For A Credit Limit Increase
If youve been regularly making required payments on your credit card, you may want to try asking the credit card company for a credit limit increase. You wouldnt necessarily want to do this to finance a purchase you otherwise wouldnt have been able to make. But if your monthly balance is relatively steady, you could decrease your utilization rate by increasing your credit limit.
For those who may not know, the is the amount of credit available to you that youre actually using. Its basically your balance divided by your credit limit. So, if you increase your credit limit and keep the balance the same, the utilization rate will be lower. And that can translate into how to improve your credit score.
Having Money Instead Of Debt Truly Is Key
Debt is often viewed as a solution, but the problem is that when you ARE just starting out or are in a bad situation and you use it, the debt just piles on.
And then your situation is worse, not better. Because how can you pay more when you were living close to the edge to begin with?
So dont feel like you have to build credit as part of being an adult. You dont, and it should not be the main focus when it comes to managing your money.
Focus instead on things that will help improve your situation going forward. For example, you might:
- Build an emergency fund
- Pay your bills on time and in full to avoid late fees
- Create a budget
- Spend less than you earn
- Keep your skills up to date and learn new ones
- Make more money
- Find friends and family you can count on
- etc.
Those things will benefit you a whole lot more than worrying about a credit score.
But since many people do worry about what to do if you have no credit, lets go over some common concerns.
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Other Options To Build Credit
Credit-builder loans aren’t for everyone. Luckily, there are other ways to build your credit if you have little or no credit history:
- Apply for a secured credit card: A secured credit card is like a credit card with training wheels. You provide a deposit, and that becomes your credit limit. This allows you to establish good credit habits, while providing lenders with a low-risk way to help you do it.
- Become an authorized user: If you have a financially responsible friend or relative with good credit, ask them to add you as an to their credit card account. You’ll get access to that account’s payment history, which could boost your score if the primary cardholder keeps the balance low and pays their bill on time every month.
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Why You Should Pay Interest To Improve Your Credit Score
Any time youre talking about taking on a debt that youll pay off slowly, youll have to pay interest. Whether its a low-rate, $1,500 loan or a credit card with a high balance, youll pay more than you took out in the first place.
Thats why its normally best to avoid taking on interest-bearing debt whenever possible. With that said, though, there may be a case to be made for taking on a little bit of interest-bearing debt in order to increase your credit score.
One part of the basic credit scoring model looks at how well you manage different types of debt. While its not generally recommended to take out new types of debt just to boost your score, sometimes it could be a good idea. For instance, if youve never managed an installment loan, like a student loan or a car loan, taking on a small auto or personal loan could help your credit score over time.
This is a technique to use if you need to increase your score relatively quickly, like if youre in the market for a house in the next year or two. However, you shouldnt take on debt you dont really need to use on a regular basis.
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No matter where your credit stands today, there are a few basic ways to ensure that it inevitably improves. Make payments on time, dont hold balances from month-to-month, keep your credit utilization low, and dont rack up too many inquiries in a short period of time.
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Use An Employer Identification Number To Start A New Profile
A variation of the scam listed above is to start a new credit profile as a business. You use an Employer Identification Number to start a new profile and apply for credit lines. Youre basically impersonating a business. This is also very, very illegal and can result in criminal prosecution for fraud.
Just to be clear, there is no legal, quick-fix solution to go from a 500 FICO score instantly to 800. It takes work and time to build credit. Dont break the law trying to get there faster!
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One Last Note About How To Build Credit When You Have Defaulted Federal Student Loans
If you have federal student loans that slipped into default, they damage your credit just like other defaulted debt. However, repairing that damage is easier with federal loans. Theres a special exception for credit damage caused federal loans in default. If you make six consecutive payments on time on a defaulted federal loan, it becomes current. Even better, the credit damage and negative items caused by the default disappear. Its basically like you never defaulted in the first place.
This special rule only applies to federal student loans. So, an easy additional way to boost your score if you have federal loans to repay is to focus on making the payments on those loans for six months. The loans become current, the negative items disappear from your report, and you can continue building credit from there.
Its important to note that bringing your federal loans current using a Federal Direct Consolidation Loan does not have the same positive impact on your credit. Another special rule of bringing defaulted federal student loans current is that you can instantly bring them current through consolidation. But while this removes the defaulted status, it doesnt remove all the missed payments from your credit report. So, the damage remains. Consider your options carefully and consult a student loan resolution specialist if you have defaulted loans.
How Do I Improve My Credit Score
Here are a few things that can improve a credit score:
- Paying your bills on time
- Paying off debt
- Carrying a balance that is less than the credit limit
- Disputing inaccuracies
But weve said it before, and well say it again: The best way to improve your score is by ditching your credit altogether. Peace out, credit scoreyouve been dumped! Your financial success depends on the numbers in your bank account, not the numbers on your credit report.
The only way to truly improve your credit score is by paying off debt and committing to a debt-free lifestyle today. As you build up your own financial security, you might see that all-important number start to dwindle. But dont freak out . . . thats actually when you know you can celebrate. And once those numbers vanish completely, that means youve made it. Welcome to your new life of debt freedom and financial security.
But listen closely: While the numbers on your report will lose all meaning, youll still want to keep an eye on your credit. Unless youve got all your cash buried in the backyard, identity theft and debit card fraud can still catch you off guard. Grab a free copy of your report every year from one of the three major credit reporting agenciesEquifax, Experian and TransUnionto check for any suspicious activity.3
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How To Raise Your Credit Score: Credit Building Tips
Its a question that many people have on their minds as they begin to seriously consider their finances: how do I raise my credit score, or how do I fix my credit? Though credit scores may seem shrouded in mystery how theyre calculated, which ones are used consumer credit scores tend to follow a few common principles. In this post, were explaining some simple tricks to raise your credit score.
Raising your credit score can take time. After all, credit scores are a measure of how trustworthy of a borrower youve been over the years. The good news? You can get started on these credit tips today.
Lets start with the basics on how to improve your credit score.
Pay Your Bills On Time
Since credit reports only track money that you’ve borrowed, they don’t include information about whether you pay your utility bills and monthly rent on time. Likewise, bill payment histories are not used to calculate the most popular credit score — the three-digit number known as your FICO score.
What most people don’t know is that the FICO score isn’t the only credit score available to potential borrowers. Some alternative credit scoring models incorporate bill payment histories as one of the main criteria for creditworthiness.
The people behind FICO — the Fair Isaac Credit Services — recently introduced the FICO Expansion Score, which culls financial data from “alternative data sources” like rent payments and utility checks to determine creditworthiness .
There’s even a company called Payment Reporting Builds Credit that allows you to self-report payments like rent, rent-to-own purchases and utilities. PRBC might not yet have the clout of the big three credit bureaus, but a solid report from PRBC might be enough to get your foot in the door with a lender.
Of course, to earn a good grade from PRBC, you’ll have to pay your bills on time religiously. Get into the habit of paying a bill as soon as it shows up in the mail, or consider setting up online accounts to pay all of your bills electronically .
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