Monthly Archives: July 2017

Simple Tips to Fix Bad Credit

Maybe you’ve got a longer credit history, but it’s not exactly spotless. The good news is that you can raise a bad credit score if you’re willing to put in the work. The bad news is that it’s not a quick process. But given the myriad effects your credit score has on your life, it will be worth the time and effort.

Know what’s in your credit report

FICO recommends making sure you know exactly what’s in your credit report before you embark on a plan to improve it. That way, you’ll be able to spot any errors or instances of fraud that are artificially dragging down your score and dispute them.

Don’t close old accounts

Remember that 15% of your credit score hinges on the length of your credit history. Once you see your credit report, it might be tempting to close those old, unused accounts, but that can actually hurt your score.

On the other hand, having the credit there — but not using it — can help you. Cut up the cards if you have to, so you don’t use them. One exception may be a credit card with a hefty annual fee — you may want to get rid of it if you no longer use it in order to avoid the fee.

Set up a bulletproof payment plan

Set up automatic payments to make sure you pay your bills on time. If you can, pay more than the minimum due so you won’t pay as much in interest.

If you’re having trouble making the minimum payments on all your credit accounts each month, it may be time to contact your creditor and set up an alternative payment plan that you know you can keep up with. Of course, creditors are under no obligation to work with you, but most are willing to negotiate on minimum payments, interest rates, and late-payment charges.

Consolidating your existing debt into one loan can help you manage payments as well. Consider a balance transfer credit card to lower your interest payments on credit card debt and make only one payment.

Chip away at high balances

Remember, 30% of your credit score is based on how much of your credit you use — charge too much and you look like you’re at risk of overextending yourself. Experts recommend aiming for a balance of no more than 10% of your available credit. Focus on taming your credit card balances first — that will help your score more than attacking an installment loan.

Shop for new credit relatively quickly

When you shop around for a loan, your credit score can dip when potential creditors check your credit history as part of your application. You can help combat this by confining your shopping to a relatively short period of time — most likely 30 days (though it could be as short as 14 or as long as 45, depending on whether your lender is using an older or newer FICO scoring formula). Then, even if multiple potential creditors pull your report in a two-week span, FICO will count this as just one inquiry rather than several.

How Do I Check My Credit Score?

Now that you’ve learned all the essentials about your credit score, let’s talk about how to check it. There are several places you can do this, but some are better than others.

Note that by law, you are entitled to a free copy of your credit report from each of the three major credit bureaus every year fromAnnualCreditReport.com. Unfortunately, this report does not actually include your credit score, but it does include all the information your score is based on — what credit accounts you have, how much you owe, whether you’re paying on time, and so on.

FICO and the credit bureaus

You’ll get the most useful, detailed information either straight from FICO or one of the credit bureaus, but you will have to pay for these services. Here are your options:

  • myFICO offers two main services: one-time FICO scores and reports as well as ongoing credit monitoring. You can opt for a one-time credit score and report from one credit bureau of your choice for $19.95, or you can get your scores and reports from all three bureaus for $59.85. Ongoing credit monitoring ranges from $14.95 a month to $29.95 a month. The higher price gets you triple-bureau monitoring and identity-theft protection.
  • You can get your Experian credit report and FICO score for $19.95, or a three-bureau report and FICO scores from all three bureaus for $39.95. Ongoing credit monitoring of your Experian credit report and FICO score is $4.95 for a month, then $19.95 every month thereafter.
  • Ongoing credit monitoring with Transunion will give you access to your Transunion credit report and FICO score for $17.95 a month after a $1, one-week trial. The service includes several identity-theft monitoring features. Unfortunately, there is no readily available online option to order a one-time credit score and report without signing up for this service.
  • Equifax offers your FICO score and Equifax credit report for $19.95. Be careful, because it also offers its credit report with the less-useful Equifax score for $15.95, or $39.95 for reports from all three bureaus. There is also an ongoing credit-monitoring option that includes your FICO score for $14.95 a month.

Credit monitoring services

There are a number of credit-monitoring services such as Identity Guard and Lifelockthat offer more comprehensive identity-theft protection than most of the services offered by the credit bureaus. Prices typically range from about $8.99 to $26.99 a month. Most also include options for either single- or triple-bureau monitoring. However, note that the credit scores that these services access are typically not FICO scores.

For more details on credit monitoring services, check out our guide to the best credit monitoring services for recommendations.

Free credit report sites

It’s hard to beat free, so what’s the catch? Well, some less-than-reputable sites aren’t really free at all — they come with strings attached. Often you’re signing up for an initial free service that sticks you with another monthly bill when your trial period ends.

Fortunately, there are reputable sites that do let you see your credit score for free. For more details, see our guide to the best free credit report sites. Also note that you will notbe seeing your actual FICO score, which is what most lenders see and use, and typically will only see a score based on information from one credit bureau, not all three.

  • Credit Karma is partnered with TransUnion. It has a good variety of credit tools and educational information as well as fewer ads than its competitors. You will see your VantageScore based on TransUnion data.
  • Credit Sesame is now also partnered with TransUnion. Their free service actually provides identity theft insurance, but paid products are pushed more, too.
  • Quizzle is partnered with Equifax. It provides a full credit report every six months. You will see your VantageScore based on Equifax data.

Banks or credit-card issuers

A number of banks and credit-card companies are starting to provide credit scores for customers on monthly statements or online. Some lucky cardholders, including Chase Slate, Barclaycard, and Discover it customers, will have access to their FICO scores. Some others will be stuck with less useful non-FICO credit scores. Keep in mind that in most cases, you won’t have access to your actual credit report, too.

Raise Your Credit Score

Boosting your credit score might seem like an impossible feat, but it’s not that hard to accomplish if you understand how credit works. Some easy moves you can make might even help your score gain a few points right away – that is, if you know what you’re doing.

Increasing your Credit Score Takes Time

Despite rumors to the contrary, your credit score doesn’t actually start at zero. As our resident credit expert John Ulzheimer recently noted, “FICO scoring models and the current VantageScore model are scaled on a range from 300 to 850. There is no such thing as a credit score of zero, despite what some financial celebrities love to suggest.”

Unfortunately, we can’t take your current score, put it in an enchanted pot, water it and watch it magically grow into a top-tier rating. It’s going to take time. Depending on why your score is low to begin with, it could take a couple of years, or more, to recover.

To get you back into the game, we need to cover the basics and make sure you’re not unintentionally letting your score get beat up. Follow this list of tips to make the biggest impact to your credit score:

  • Make on-time payments – Of course, with time, this heals all. If you had a tendency to miss a payment here and there, or miss the due date by a few days, consider setting up a recurring reminder or an automatic payment draft – for more than the minimum due.
  • Consider frequent payments – Making mini-payments throughout the month can help boost your score. By frequently reducing your balance, you are also trimming your “credit utilization” and that’s a good thing. Your overall available credit makes up about 30% of your credit score according to FICO, the company that issues the most-recognized credit score.
  • Keep a variety of credit accounts – It’s usually a good idea to pay off your credit cards first, rather than installment loans. Having a mix of credit accounts may help your score. However, opening a new installment loan account just to add to the variety of creditors you owe is not likely to boost your score, according to FICO.
  • Don’t close accounts – After a bout of bad credit, the first inclination is to just get rid of as many credit accounts as you can. This can actually lower your credit score. By paying off accounts, but keeping them open with available credit, you’ll help your score over time. In this case, the old saying “use it or lose it” doesn’t apply. In the world of credit ratings, what you don’t use – your available credit – is almost like gold.
  • Pay down debt – As credit expert John Ulzheimer notes, the best way to improve your credit score quickly is to pay down existing debts. “If you’re able to pay down your credit cards while eliminating some balances entirely, then your credit scores will begin to improve almost immediately,” he says. Ulzheimer suggests choosing accounts that have the lowest balances and targeting them first for the biggest impact.

Other Ways to Raise Your Credit Score

Although raising your credit score isn’t rocket science, there are more ways to make a huge impact without much work on your part. Here are a few unusual tips that can help improve your credit score over the long haul:

  • Spend less than 10% of your credit line – FICO says the 50 million individuals who have the highest credit scores in the nation, which account for 25% of all individuals with scores, use only an average of 7% of their available credit. That’s a pretty specific number, so at least shoot for spending less than 10% of what you’re approved for. Paying down your balances is the fastest way to see an improvement in your credit score.
  • Use that old credit card stuck in the back of the drawer – Of those FICO “over-achievers” with credit scores of 785 or more (on a scale topping off at 850), their average credit card account is 11 years old. If you have an old card that has been paid off, pull it out and use it from time to time, immediately paying off the balance. That will keep the creditor from closing the account for inactivity, and maintain and lengthen your long credit history, which can enhance your score.
  • Confirm your existing credit limits – If a creditor is under-reporting your available credit limit on your credit report it can negatively impact your score. Confirm your limit online or from your most recent statement. If it’s greater than what is shown on your credit report, call the card issuer to have it corrected.
  • Ask for a re-aging – If you’ve had some delinquencies on a credit card but have been paying on it regularly for at least three months, you can ask the issuer to “re-age” your account. If they agree to it, they will erase the past-due notations on your credit report for that credit card. Keep in mind that debts have a statute of limitations, meaning that there’s only a set amount of time collectors can sue to collect on debts. Don’t be tricked into re-aging, or “bringing back to life,” debts that are not collectable.

Protecting Your Increasing Score: What Not to Do

First, do no harm. That’s an excellent medical dictum but also a good policy for protecting your healing credit score. When it comes to improving your credit score, here are potentially harmful tactics to avoid:

  • Don’t ask your bank to lower your limits – In an effort to enforce some discipline in reducing credit card debt you may think it would be a good idea to call your credit card issuer and request they lower your credit limit. The thinking might be: if it’s not available, you can’t spend it. It’s a noble concept but unfortunately lowering your available credit will probably lower your credit score, too. Remember, you want to have the spending power without tapping all of it.
  • Don’t transfer balances – Moving money from one credit card to another to gain more favorable interest rates can be a good idea, but the real key to having a higher score is to maintain smaller amounts due on your cards, not a big balance. That said, if you are unable to pay the balances off in full every month, and the interest is hitting your bank account too, if could be in your best interest to consolidate your debt. Look for cards with a lengthy 0% APR offer and a minimal balance transfer fee.
  • Don’t skip regular checkups – Getting your free credit reports and reviewing them for errors is always a good idea, but especially when you’re working to raise your score. Incorrect information or misstated balances can be fixed, but only if you are aware of them.
  • Don’t take advantage of credit repair offers – Most are scams, promising clean credit reports and an increased score. Although credit repair companies can deliver temporary solution, the problems you’re experiencing won’t necessarily go away. What’s more, steps a repair company would take are the same as the ones you can take without paying hefty fees. Take the time to learn about your credit score and repair it yourself.

You know those top-tier FICO score consumers we mentioned earlier? Even some of them have suffered setbacks in the past, including late payments, collections – even tax liens and bankruptcies, according to FICO. And now they’re at the head of the class with the best-of-the-best credit scores. With time and proper credit debt management, you can join that elite group of folks with scores in the upper 700’s.

Debt is Better

I’m restless today.  Irritable.  Unmotivated and uninspired. I’m impatient and I’m tired of being in debt.

I hate when I get in funks like this but it happens every so often.  Sometimes when I’m focusing on a goal, I obsess about it. The more I focus on reaching the goal, the longer it seems to take to get there. When I go through these phases, I make a conscious effort to shift my mindset back to one of gratitude instead of wanting and self-pity.

For the past ten months, I have been relentless about paying off my credit card debt. It’s almost gone…all $8,000. It’s been a rollercoaster ride. I feel the highs of making those $800 payments and then the lows of being set back by unexpected life expenses.

There is nothing pretty about paying off debt. There’s no easy way to do it, no quick way to fix it.  It tries you emotionally.  It tests your dedication and your persistence.  It’s hard and it’s gritty and some never succeed.

How I got here

Paying off my credit card debt to this point has been an especially emotional journey because of how I accumulated the debt in the first place.

Fourteen months ago, I was an alcoholic that had nothing to offer the world or anybody in it. I was jobless, penniless, and would’ve been homeless if it weren’t for a couple people looking out for me. At the end of my drinking, I couldn’t even get out of bed without a blood alcohol level of about .2%.

Not .02%.

.2%.

Yes, I was in debt…even worse than I am now.

But I was also out of hope. I couldn’t find very many things to be thankful for in my life and I was running out of places to turn. I didn’t know what the future looked like for me. Most of the time I didn’t even know what the next day looked like. I didn’t know what I wanted, who I was or what I stood for.

Yes, I was in debt.

But, even worse, I was morally bankrupt

I had surpassed being in debt in my personal life.  I was bankrupt, at the point of no return.   Hitting the reset button and starting over was my only option.

As I continued down the rabbithole of addiction, I turned into somebody that I had never thought I would be. I broke the law, putting myself and others in danger. I was a burden to society.

There wasn’t anybody in my life that I hadn’t pushed away. I treated them poorly, manipulating, using and taking advantage of them. I said things to people that I would never say sober, things I could never imagine saying and doing now.

When I was asked what my goals or ambitions were, I didn’t know what to say.  My addiction got me to a place where I had no hopes or desires other than to wake up and get wasted.

I hated myself and what I had become. There was a good person inside of me, but that person was drowning in booze. The only logical next step in my life was the one that I didn’t want to take. I had to get sober.

I finally filed moral bankruptcy in April 2016

It took an act of force to get me into treatment. I had violated my probation and the only way I could get myself out of jail was to agree to be on an alcohol monitor. The criminal justice system gave me an ultimatum: stay on the monitor or go to treatment.

I chose treatment. I didn’t want to live the way I had been living anymore. So I chose treatment.

I went to treatment for 25 days, worked hard, graduated and went home.  I got my drivers license back, did my community service, went to AA six days a week and didn’t worry about getting a job right away.

Yes, I was in debt.

But my debt wasn’t my first priority. My recovery was my first priority because I knew that if I didn’t focus on myself and getting better, I would relapse and go back to being the person I was. The morally bankrupt person. That was not what I wanted.

Why I’m grateful for my debt

In those two months between getting out of treatment and me going back to work, I all but maxed out my credit cards trying to pay my fines and fees related to my DWI, stay caught up on my bills and stay healthy. I topped out my credit card debt at $8,000.  But I also saved my own life.  I was sober.

Today I am feeling restless because I am getting close to the end of that $8,000 in credit card debt and I just want it to be gone. Once my credit card debt is gone I can focus on other financial goals.  But maybe it’s not such a bad thing to still have $1400 in credit card until the beginning of next month when I pay it off.

Because while I’m still in debt today, I’m also a good person that has something to offer to others and to the world. My dog isn’t scared of me anymore and my niece and nephews know who I am.

I have people that turn to me for advice and others that depend on me to be there when they need a friend. I’m reliable.

My family and friends don’t have to lay awake at night anymore, scared about getting a phone call hearing that I’m dead. I have a bright future and I’m going to be a millionaire someday.

Today is not that day.  Yes, I’m still in debt.