Credit Repair for Couples

Credit Repair for Couples

If you’re in a serious relationship or are married, chances are you have merged almost everything together. Naturally, many new newlyweds assume their credit scores will be legally combined as well. But this is not true. Even if you’re married, you can’t combine your individual credit history with your spouse’s. Credit repair for couples can be tricky, since there are two credit scores to take into account.

How Credit Scores for Couples Actually Works

Even though your credit scores do not merge, you would be negatively impacted by your significant other’s bad credit score. For instance, if you and your spouse are considering purchasing a house together, both of your credit scores impact the loan offer you’ll receive. So even if you have perfect credit, if your spouse has poor credit, you won’t be able to get the best interest rate on your loan. In fact, if one score is really low, you might not qualify for any joint financing at all.

This is why it can be difficult to build a financial future together. It can be even more challenging when you have a very different credit history from your significant other.

Steps to Repair Credit Together

Thankfully, there are ways that you can work with your significant other or spouse to repair your credit together.

  1. Start by pulling both of your credit reports from all three reporting agencies. Go through all three credit reports thoroughly, item by item, to make note of anything that is a negative listing. If there is a negative listing, send a letter to the credit bureau requesting validation for this debt. This is a process that can take months, but if you do it, it will be well worth it. Even a single negative removal may significantly impact your credit score
  2. Pay off any debt that you and your significant other have. This can be a touchy subject to broach. In some cases, one person in the relationship might have a significantly higher debt than the other. Working to pay off any debt that either party has can be beneficial for both of you. This is especially true if you are able to collectively pay off any debt that hasn’t been sent to collections.
  3. Once you have removed any negative listings from your credit report that you can, and paid off any of your recent debt, consider cosigning a credit card with your partner. If you do this and you keep the card in good standing (e.g. by paying off each of your monthly balances on time), your credit scores may improve.
  4. Naturally, you want to make a budget together and stick with it if you haven’t already. Record every penny. Get a good sense of where your money is being spent so that you can allocate funds as necessary.

Getting Help from the Best Credit Repair Companies

There are companies out there that can help you repair your credit. They’ll go through all of the credit repair steps for a small fee. These companies can provide a great deal of benefit for couples. They provide an even bigger benefit if you sign up together because in most cases you get a great discount for signing up as a couple. There are a handful of reputable credit repair companies that offer couple programs, which you and your spouse might want to use.

  1. Ovation Credit offers couples a 20% discount for both parties signing up.
  2. Sky Blue Credit gives you a couples discount upwards of 16% off the monthly plan, charging you only $99 per month instead of the normal $118 per person.
  3. Lexington Law offers 50% off the first work fee for you and your spouse when you sign up together.
  4. The Credit People give you $20 off when you sign up with a spouse.
  5. CreditRepair.com lets you sign up for just $50 each, and with that you can sign up family or friends too.
good-credit-score-in-your-20s

How to Get a Good Credit Score in Your 20s

How to Get a Good Credit Score in Your 20s

If you’re in your 20s, now is the time to charge forward and work towards a good credit score. Far too few people in their 20s give any consideration to a credit score let alone the steps necessary to acquire credit. However, the foundation you build early on will carry on for the decades to come, from when you purchase a car to when you apply to rent an apartment.

Tips for a Good Credit Score in Your 20s

Ensure rent payments are on file

When you first start renting, encourage your landlord to sign up for electronic payments so that each of your rent payments will be on file. Do this even if you’re using someone like a parent to be your cosigner.

Turn on automatic payments

Sign up for automatic payments when you pay things like your electricity bill or your health insurance. By setting up automatic payments, you can avoid any type of late payment.

Pay bills on time

Following the second point, pay all credit card bills on time. A credit card is not meant to be used as a way to pay for things that you cannot afford. When you’re in your 20s, your interest rate on your credit card is likely to be very high. This is because you have little to no credit history. Don’t fall into the credit debt trap, which can quickly spiral out of control.

Use your credit card wisely

Use your credit card to pay for the things you would purchase anyway. One such example is to set up your regular bills like Internet, cell phone, or electricity. You can pay them with your credit card each month and then immediately pay your credit card bill that same month. This gets you double the credit, so to speak, because it shows that you paid your all your bills on time.

Beware of the fine print

Understand the fine print of your credit card. Make sure you don’t accept any additional services or fees that you don’t understand or want. If you aren’t 100% aware of what you are agreeing to, you might end up with $60 per month in service fees for services you don’t need. This is where many young adults get into trouble. They might leave the credit card in their pocket thinking that it’s something to save for a rainy day or an emergency. In such cases those regular monthly fees add up.

Create a budget

Create a budget, and stick to it. At a simple level, if you’re making more money than you’re spending, then you’ll be able to achieve a good credit score in your 20s. By having a budget, you can ensure that you’re always in the black, not the red.

Why establishing credit in your 20s is important

It’s important to realize why getting a good credit score in your 20s is a good thing. The other way to ask this question is: what happens if you don’t? This is detrimental in three ways.

Build credit

The first is that you’ll miss out on the opportunity to build imperative credit. Usually when you’re in your 20s, you might have some in helping you out to get a car. Or, you live in student housing paid by your parents. In all these cases, you might fail to learn why your credit is important. However, once you no longer have a crutch to lean on like your parents’ wallets, your credit score will be used to judge your worthiness to take out loans or to rent a new place.

Avoid mistakes

The second way that it hurts you is if you make mistakes. Many credit-based mistakes, like not paying credit card bills regularly and letting your credit card go to collections, will haunt you for 10 years. These “small” things can severely hurt your credit score when you set out into the real world and try to get your first car, or even get a job. Though it’s possible to repair your credit score, it’s much easier to avoid these mistakes in the first place.

Help your job search

The third way is that it can impact getting a job. Today more than ever before, companies check the credit score of the people they might consider hiring to determine if they are responsible. This is particularly true if you want to get any job related to finance. Even an entry-level position like that of personal assistant or legal secretary might task you with the responsibility of verifying different receipts, keeping track of payments made in a ledger, something which requires you to handle financial data.

Takeaways

Ultimately, it’s important to realize the seriousness of establishing a good credit score in your 20s. Even more fundamentally, you’ll develop solid personal finance habits that will carry you for the rest of your life.

Married couple discussing credit repair companies

How Marriage Affects Your Credit Score

How Marriage Affects Your Credit Score

Marriage is a wonderful thing, and yet in one instance it can bring with it a serious problem: credit. Marriage affects your credit score, but it’s often not an issue that newlyweds think about.

How Both Scores Are Taken Into Consideration

When you get married, your credit scores do not combine. However, your spouse’s credit score impacts your ability to get a good interest rate. For instance, if you have very poor credit and your spouse has very good credit, both of these scores are considered when you apply for a joint loan. In the worst case, you might not get a loan at all. In slightly better cases you get the loan but with extremely high interest rate.

Financial Liability

Another major problem is the fact that you can become financially liable if you choose to combine assets. Consider, for example that you have worked tirelessly over the past few years to cultivate a great credit score. You have finally reached the 800 mark, but your spouse has done the exact opposite. If you fail to discuss personal assets and debts before you get married, it can land you in a tight spot. You don’t want to wait until after the honeymoon is over to learn that your spouse has three different accounts sent to collections and a myriad of bills that are not regularly paid on time.

Be Honest

The main learning is that you should have honest conversations. Then, carefully choose whether or not to put both of your names on things. You might think to put both of your names on a car will make it easier to pay the regular bills. But in so doing so, you might not realize that now your credit will be negatively impacted. Doing so without realizing this ahead of time may subsequently drop your credit score as a result.

What’s more, couples who are brand-new to marriage and might not necessarily talk about every aspect of monthly bills might set aside money for a specific mortgage or electricity bill but then one of the parties forgets and doesn’t pay on time. Even small things like paying a bill a few days late can negatively impact your scores.

How Credit Repair Can Help

There are other options if you and your spouse need help. There are organizations that help you to repair your credit as a married couple.

Incorrect negative marks on your credit history and many other things can all be rectified within a few months to help you improve your credit score. This is wonderful news for new couples, especially those who are looking to purchase their first home or maybe their first car together. By taking a few months to work with a professional service and improving both scores, you can set yourselves up for better interest rates when you go in to make a decision.

Credit Repair Companies That Work With Couples

These companies offer great programs for couples who want to work together to repair their credit. The top five companies that you might want to consider include the following:

  1. Ovation Credit offers couples a 20% discount for both parties signing up.
  2. Sky Blue Credit gives you a couples discount upwards of 16% off the monthly plan, charging you only $99 per month instead of the normal $118 per person.
  3. Lexington Law offers 50% off the first work fee for you and your spouse when you sign up together.
  4. The Credit People give you $20 off when you sign up with a spouse.
  5. CreditRepair.com lets you sign up for just $50 each, and with that you can sign up family or friends too.
women-credit-score

Achieving a Good Credit Score May be Harder for Women

Achieving a Good Credit Score May be Harder for Women

It’s hard to believe today that there was a time when women could not apply for credit on their own. Believe it or not, their husbands needed to sign the credit card application before a woman would be issued a credit card! It wasn’t until 1974 that women were able to take charge of their own financial affairs. The Equal Credit Opportunity Act of 1974 gave women the right to apply for credit independent of their spouse’s approval.

Even though women are now empowered to handle their finances, inequities still exist between men and women regarding three areas of financial parity: employment, retirement savings, and credit stability.

Employment Issues

The American Association of University Women (AAUW) issued a report in the fall of 2016, which shows American women still earn less than men. The difference is drastic: women earn 80 cents for every dollar a man earns.

Women’s lesser status as bread winners doesn’t stop at pay inequity. Their role as primary caregivers of both children and aged parents is looked at as a disqualifying factor when it comes to handing out promotions.

AAUW’s report revealed employers are not as prone to giving women leadership roles. The employer’s assumption is women aren’t capable of handling senior positions of authority due to childrearing and elderly dependent care responsibilities. According to Career Services Manager, Lisa Andrews, PhD, “Women are definitely called upon to be more flexible…it can create all kinds of difficulties in the workplace.”

So working women find it tough to find harmony between home and work responsibilities. Women run the risk of being denied a job promotion. On the other hand, men with families go on to get fatter paychecks and climb the corporate ladder faster.

Retirement Planning

The difference for women generally gets worse with age. In general, the pay difference increases as women climb the ranks to mid- and upper-level management. This leads to a bigger difference in financial security for older women versus men.

Consumer advocate, Eleanor Blayney of Certified Financial Planning Board of Standards relates to this. “The probability is extremely high for women [that] they will be single in their retirement years.” Because financial planning is an area is which women have been undereducated, this cripples their resolve to put away funds for retirement.

Society didn’t trust baby boomer women and their mothers to be able to comprehend investment strategies. Women may have handled the bill paying, but beyond that, it wasn’t expected of them to have knowledge of financial instruments. Understanding CDs, mutual funds, IRAs, money market accounts, or other various tools of investment were above their understanding, supposedly. This necessary skill would have helped them to save for the long years of retirement.

For the modern woman, their outlook is better, but with the pay gap and investment strategies geared towards men, retirement planning may still be difficult. Women on general do have a different salary peak and longevity. Ellevest is an robo investment advisor geared towards women, taking these differences into account.

What Steps Can You Take to Gain Financial Stability?

  1. Apply for jobs at companies with an equal opportunity employment policy. The Financial Services Gender Equality Index is a list of financial firms that have committed to advancing the careers of women employees. The National Association for Female Executives also has a list of companies that seek to hire women for upper-level management jobs. They also list companies that offer flex-time work schedules and the opportunity for advancement.
  2. Make educating yourself about investing a top priority. Learning how to invest is challenging but necessary if women want to control their financial lives. Certified financial planners (CFP) are in the business of educating you, having your best interests front and center. They are obligated to do so under their CFP certification.
  3. Build a credit history apart from your partner’s, establishing accounts in your name only.
  4. Build and maintain an a-one payment history. Never pay late or skip a payment. It will damage your credit score significantly; 35% of it is based on your payment history alone.
  5. Limit the amount of debt you carry. Financial professionals suggest you maintain recurring credit balances at 30% of your credit limit. And if you can swing it lower than 10%. To give an example of how this works, let’s say your credit limit is $8,000. At 30% that would come out to $2,400; at 10% $800. The best way to control your spending is to pay off your credit card balances each month, saving on the interest charges as well.

Parting thoughts

Unfortunately, women still suffer from gender bias when it comes to pay equity, child and family leave. These lead to obstacles for career advancement. However, they can begin the journey toward financial security. For instance, peruse the lists provided by The Financial Services Gender Equality Index and The National Association for Female Executives. Begin catching up with men in earning equal pay, invest intelligently, and learn the credit game.

credit-card-companies

Increase Your Credit Score: 5 Things to Ask Your Credit Card Company

Increase Your Credit Score: 5 Things to Ask Your Credit Card Company

The average household has just over $16,000 in debt. However, this doesn’t mean that you are out of luck. There are things you can do to improve your credit score and help reduce some of your debt. How? Simply ask your credit card company to help you with one or two of these five things.

1. Waive late fees

Everyone panics when they realize that the deadline for payment has passed. The issue that credit cards charge you an average late fee between $10-$49. What most people don’t know is that many banks will erase the first late fee if you simply ask them.

In fact, 89% of people who ask will get get the fee waived. This is something very important for you if it is your first time being late. It’s always best to have a pristine record, but sometimes there are legitimate reasons. There might have been a family emergency or an illness. Obviously, don’t make a habit of calling to ask for forgiveness, but every once in a while if something goes wrong, simply talk to the credit card company or the bank. Ask them if they can get rid of that fee. They are people too, and you may be surprised by how often they are willing to make exceptions.

2. Lower minimum payments

Ask for a lower minimum payment. If you have currently fallen on hard times, do not hesitate to call your credit card company and ask them about this If, for example, you have recently become unemployed, calling to ask about a forbearance agreement or long-term repayment plan something like this to help you press pause essentially on the deck below until you find another job. This will help me to stay in good standing without breaking your bank.

3. Reduce your APR

Ask your company to reduce your APR. But, be prepared to make a case. There are a negotiation tactics you can use.

If you receive mail from other credit card companies asking you to sign up now, don’t necessarily throw it away. While you might not plan on using it, keep it to negotiate with your current credit card company. This proves to your existing credit card company that you have other options and that other companies want your services. For instance, show them that the competing credit card is offering you a 15% interest rate and that yours is currently at 20%. Be polite, but ask them clearly if they can match that 15%.

If you have been a longtime client, reminds the company that you have been a loyal customer.

If your bank offers to reduce your APR by a few percentage points, but don’t hesitate to ask for a little more than that. 78% of people that ask for a lower APR end up getting one. This makes a big difference. With $5000 of credit card debt and an APR of 18%, it would take eight years to pay it down with a $100 monthly payment. On the other hand if you get your interest rates dropped by just 3%, it would only take a 6.5 years.

4. Change your due date

If you have an odd due date for your bills, call the company to change it. A lot of people end up having bills at various times throughout the month because of when they signed up for service. If you forget to pay your bill regularly because your credit card payment comes in between your two paychecks, just ask the company to change it. It’s all about making your payments on time, each time. If you only get paid once a month at the first of the month, ask them to set a due date at the beginning of the month before your money has gone to other needs.

5. Ask about bonuses

While you are calling your credit card company company, also ask if they have any additional rewards that you might be able to use. A lot of people miss out on unused and untapped potential with a credit card. Today, almost every single credit card out there as an option for a perk. These perks are things that give you rewards for each dollar you spend. If you’re smart about it, you can use a credit card to help rebuild your credit score will simultaneously earning points that get you free plane tickets or free meals at your favorite restaurant.

Takeaways

After all of these changes, you may feel like you’re getting back on track. However, perhaps there are incidents before calling your credit card company that leave a stain on your credit report. What can you do in that case? You always have the option of choosing a top credit repair company in that situation. A reputable credit repair company can also increase your credit score. Often, some combination of credit repair options is needed for optimal results.

Credit Restoration: Pay for Delete

Pay For Delete: Should You Do It?

Pay For Delete: Should You Do It?

Pay for delete services are something many credit users do not understand. The following is information on what pay for delete is, whether it’s for you (spoiler: it’s probably not), and how you can implement in your own life.

What happens when a collection agency receives my debt?

The collection agency generally passes along this information to the credit bureaus to notify them of the collection. This process will typically add a negative event to your credit report, which can lower your credit score. Your credit score will suffer even more if you don’t pay off the debt.

This information can stay on your credit report for up to seven years, but as time goes on, the negative information factors in less to your credit score.

What is Pay for Delete?

Pay for delete is when you offer to pay owed debt in exchange for the creditor removing the negative account history from your credit report. However, there are risks associated with it, and trying to do so is asking the debt collector to violate their contracts.

How common is pay-for-delete?

Roughly 10% of collection agencies will agree to pay for delete because they want to collect. You’ll probably have better luck with smaller, mom-and-pop collection agencies. Legitimate debt collection agencies will probably not engage in the pay for delete process.

What are the risks of pay for delete?

The risk lies with debt collectors. Therefore, there’s a big chance they will not do the pay for delete. The collectors that remove this information are actually not supposed to, according to their contracts with the three credit bureaus. They are required by law and by contract to send accurate information, so technically, pay for delete is not advisable.

How does pay for delete affect my credit report?

Collection agencies could delete the account associated with the collection. But it can’t delete anything from the creditor originally, including late payment information.

  • Fully paid collection accounts will show as “paid collection”
  • Fully paid collection accounts will no longer show a balance due
  • It will stay on the credit report for seven years from the original delinquency date

Scenarios where you can pay for delete

You never received a notification of debt

If you never received a bill, you have a chance at using pay for delete. For example, if the bill was sent to the wrong address, you have grounds for an argument that the collection shouldn’t be on your credit report. Just make sure you pay off any other debts before doing so.

The collection is from medical debt

The new FICO scoring model called FICO 9 has lower weighting for medical collections. It also doesn’t take into account paid medical collections.

  • By law, medical debt doesn’t factor into your credit score as much as other types of debt. The idea is that medical collections don’t give as much information about a consumer’s credit risk.
  • However, the new credit score models aren’t widely used yet
  • Nonetheless, it’s now more probable that medical debts will be deleted from your credit report after they are paid off. Be sure to ask your debt collector if you’re dealing with medical debt.

You’re not dealing with a large creditor or bank

If the creditor that you originally owe money to is not a large creditor, pay for delete may work with a wide variety of bills (dental, phone, utilities, medical, rent).

  • If there’s a credit card bill you never paid for, there’s a very low chance that you’ll be able to pay for delete for it. It’s near impossible to negotiate that with a very established credit card company.
  • You may have better luck if you are dealing with a smaller creditor, and working with a different type of debt

Practical Pay for Delete Rules of Thumb

Ask the original creditor

  • Communicate with the creditor to ask if your debt has been sent to a collection on contingency. What this means is that an agency is able to get a percentage of funds that it collects, even though the original creditor still technically has the debt.
  • Ask if it’s possible to just pay off the original creditor’s debt directly, without the collection agency
  • The collection will no longer be in your credit report if the debt is no longer in collections

Contact the agency

Communicate with the collection agency:

  • State to the agency that you intend to pay off the debt
  • Afterwards, request to have your credit report cleared by having the collection removed
  • It can help to be polite in your communications and try to work with them as best as possible

Have ample proof

Having ample proof and a good trail of evidence in your communications is particularly important if there’s a special circumstance surrounding your removed collection. Ensure that you can back up your statements to the debt collector with ample proof

Get it in writing

This is related to having ample proof. You’ll have a strong case if communication is in writing via mail as opposed to hearsay memory over the phone.

  • In case the collection agency agrees with you to delete the collection in exchange for a payment on your end, make sure you ask them for a letter that states this agreement before giving them any money. Don’t pay for anything until you both have agreed to the terms, and it’s in writing.
  • In case the debt collector doesn’t want to mail a letter, email generally also works as evidence

Some Final Things to Remember and Know

  • Paid and closed positive accounts will be on your account for 10 years
  • Open accounts that are in good standing will stay on your account indefinitely
  • Collections can legally stay on your credit report for up to seven years from when the account became delinquent
  • Paid collection accounts will not be removed from your credit report
  • If there is a negative account that’s on your credit reports from all three bureaus, removing it from just one bureau may not actually lead to much effect. And it won’t necessarily change the report from the other two, either
  • Because of this, you should verify if the information will get sent to all three bureaus or just a subset

Pay anyway

Even if you’re not able to get an agreement for pay for delete, it’s good to just pay off the debt anyway. It’s going to be better for your credit report and credit score to have the collection as paid as opposed to not. More recent credit score models for the FICO and VantageScore don’t count any types of paid collections. After paying, you should soon see an updated credit report that shows that you’ve paid.

buying a car with bad credit

Tips For Buying a Car With Bad Credit

Tips For Buying a Car With Bad Credit

Having bad credit can put you in a bind. Without a good credit score, you can’t obtain support financially for the most common adult purchases like that of a house or a car. Here are a couple of tips to consider when buying a car with bad credit.

1. To improve your credit score, don’t pay for everything with cash

Paying for a car in cash is not going to help you prepare your credit. The only way for you to improve your credit is to take out a loan and make small payments on a regular basis. You can subsequently improve the interest rate that you receive on any loans. Understand that by taking out a car loan for a new or used vehicle, there’s a chance for you to repair your credit or build up some credit out of nothing. Every step you take toward improving your credit score will help you later on down the line.

2. Lower your interest rate with a cosigner

The second is doing something to combat the interest rate you receive. Obviously people’s biggest concern here is the fact that if you have a bad for you were going to get slapped with a higher interest rate. You want to consider getting a cosigner in this situation.

If your a parent or spouse has a very good credit score, ask the auto dealer to give you an estimate for your interest rate if both of you were owners of the car. Having cosigners generally means that they take the average of your two scores which can help you. Even viewpoints can help you reach the next level.

3. Have a high interest rate? Consider a higher down payment

If you need to take out a loan with a high interest rate, you’ll be better off in the long run if you can afford a higher down payment. The more cash you can pay upfront, the better the interest rate and deal you will get on the car itself.

Understand that a lot of people do not buy their cars in full. Most people go to a dealer and pay their minimum and then get charged a ridiculously high interest rate for the next 10 or 15 years. You can avoid this by offering a $5000 down payment instead of the asking price of $2000. Something like that shows that you’re good for the money and that clearly you are getting the loan to help your credit.

4. Don’t splurge on your purchase

If you can, consider saving up the cash you need for a lower rate car, perhaps one that is used and only cost a few thousand dollars. If you can do this, you can show the dealer that you have the full price in cash but that you still want to take out a loan. By paying a higher down payment and already having the money set aside, you can give yourself financial peace of mind while potentially lowering the interest rate your will be charged.

5. If all else fails…

Remember to take into account whether or not you are able to afford the interest rates offered to you. Try different dealers. If nothing pans out, postpone leasing your car for six months and use that time to really work at improving your credit score and saving money to make a bigger down payment.

Why debt is important for a good credit score

It may seem counterintuitive, but in order to prove that you are worthy of receiving credit, you have to take out of debt. Most people, especially those who went to college after 2009, have been taught that debt is bad. And yet, the one secret that the credit-savvy know is that debt is necessary to build credit.

The trick is how you look at it. More financially savvy individuals will see that minimal debt that you can pay back is helpful. The word “debt” is not necessarily a bad word. The more financially savvy individuals will tell you a completely different story. In order to prove you are worthy of receiving credit, you have to prove that someone can give you money and you can pay it back in a timely fashion.

The more you borrow money and pay about a timely fashion, the better your credit score looks because you have built a reputation for paying that. So remember, controllable debt is good.

Takeaways

Review these 5 tips when buying a car with bad credit:

  1. Don’t pay for the entire car in cash. Rather, take out a low-interest loan to show that you are credit-worthy.
  2. If you are given a high interest rate, consider getting a cosigner.
  3. If you put down a higher down payment, your loan will be smaller. Therefore, the total interest you’ll pay will be lower as well.
  4. Get an economical car. This is not the time to be buying a new high-end luxury car.
  5. If all else fails, try different dealers or even hold off on getting a car. Instead, work on getting your credit score back up and try again. You can use one of our recommended best credit repair companies to help improve your credit score and get you back on track.
How credit scores are used: for example, to take out a home mortgage.

How Credit Scores Are Used

How Credit Scores Are Used

Understanding how credit scores are used is important for financial and life planning. From applying to credit cards to home mortgages to paying for school, credit scores are used in a wide variety of functions.

Why Are Credit Scores Used

Simply put, lenders want to do business with people who have a history of being responsible with their debt obligations. The three-digit number can affect how lenders do business with you in three main ways:

  • Whether you’re someone they’d like to business with
  • How much it will cost to do so
  • Which options lenders will offer you

Why are credit scores used as opposed to a different way of analyzing responsibility with debt obligations? Here’s a before and after of credit scores:

Before Credit Scores

Lenders used the applicant’s credit report to choose whether to grant credit before credit scores. A lender might have denied credit based on a subjective judgment. This method may have also been time consuming and subject to mistakes.  Lenders may have made decisions based on personal opinion rather than whether the applicant was able to pay back the debt.

The Emergence of Credit Scores

Credit scores started being widely used in the 1980’s. Credit scores help lenders calculate risk more fairly because they’re more consistent and objective. Your credit score simply reflects how likely you would repay debt responsibly, no matter who you are as a person. Credit scores are now dependent upon past credit history in addition to your current credit status.

Credit scoring 101

How is my credit score calculated?

The information that impacts a credit score differs based on which score is used. Overall, your credit score is affected by factors in your credit report including the following:

  • The total number of late payments
  • The severity of the late payments
  • Account age, number, and type
  • Total amount of debt
  • Types and number of recent inquiries

How Your Credit Scores Are Used

If you’re looking into getting credit, the following are some things you should keep in mind:

Applying for Credit Cards

Companies usually look at your credit score as one of many factors in figuring out whether to approve your credit card application. The formula each company uses is a heavily guarded secret.

  • The precise impact of your credit score will depend on which company is reviewing
    your decision
  • Your credit score may allow you to receive additional perks from a credit card company
  • Credit card companies can also use your credit scores to determine credit limits, interest rates, and other credit terms they offer you

Getting loans for school, a car, or a home

Many federal loans don’t look at your credit score. There are still some things to consider.

  • If you apply for a private student loan, however, banks typically are curious about your credit score and credit report history.
  • Your credit report and credit score also affect the loan approval and interest rate of the loan you’ll receive.
  • Auto lenders also look at your credit score to figure out if they will approve a car loan or lease.
  • Credit scores affect the interest rate in addition to the loan length.
  • The requirements for approval are usually stricter for mortgages.
  • Each lender will have their guidelines they’ll follow. However, it’s universal that your credit score is a significant data point that lenders will use.

Because of the latest housing crisis, some lenders may use the credit score as a higher factor in their analysis.

Other Situations

There are other situations where your credit score surprisingly plays a role.

  • Insurance companies are using credit scores to determine whether they want to provide coverage, how much they’ll cover, and how much they’ll charge.
  • This applies to home and auto insurance. When it comes to renting apartments, landlords often use credit scores to determine how much of a security deposit they may want from you.
  • If you need a payment plan to a buy a cellphone, companies may look at your credit score to figure out the type of payment plan options they’ll offer you and whether they’ll want a deposit.
  • Utility companies may take a look at your credit score to determine whether they want a security deposit from you and how much

How Credit Scores Benefit You

Finally, a way to understand how credit scores are used is to see how they benefit you and society as a whole.

Get loans approved more quickly

These days, the majority of credit decisions can be made in a matter of minutes. Credit scores allow department stores, websites, and additional lenders to make credit decisions almost instantly. Mortgage applications can be approved in a short-time frame hours as opposed to weeks.

Get fairer credit decisions

Things like gender, nationality, marital status, race and religion are not used in credit scoring. This allows lenders to be less biased and only focus on the relevant facts related to credit risk.

Credit mistakes are less important

Credit scoring doesn’t negatively impact you forever if you’ve had bad credit previously. More recent on-time payments will be in your credit report, while past credit problems fade away as time passes. Credit scoring takes into account a holistic view of credit-related information. Thus, your overall credit report is a much better view of your risk from the creditor’s perspective. This is in contrast to borrowers turning people down solely on a past problem in their files.

Obtain more credit

Credit scores gives lenders the confidence to offer credit to more people. This is because lenders have a better understanding of the risk they are taking on. Most lenders have their own individual guidelines. So, if you get rejected by one company, you can still get accepted by another. Instead of a simple yes versus no, lenders can offer a choice of credit products for different levels of risk. Credit scores allows lenders to identify more individuals to perform well in the future. This is true despite the fact that their credit report shows past problems.

Get lower overall credit rates

Automatic credit processes, such as credit scoring, allow for credit granting to be more streamlined and cheaper for lenders. The lenders, in turn, charge less for their service downstream to their customers. Lenders also control credit losses using credit scoring. This allows lenders to make rates lower overall. A great example is the fact that interest rates for mortgages are lower in the US compared to Europe. This is at least partially due to the fact that lenders have credit scores available to them.

how to dispute credit report

How to Dispute Your Credit Report

How to Dispute Your Credit Report

Learning how to dispute your credit report can be a confusing and complicated thing to do. The following are some practical steps for you to take to navigate your way through a financial check-up.

Why Should You Check Your Credit Report

It’s quite common for errors to appear in your credit report, which is why it’s also common to dispute your credit report. These errors may not be insignificant. They may be important ones that can have a powerful impact on your future. The fact of the matter is that you could be missing out on a lot when you’re not looking at your credit report. Check out some important statistics and facts below:

  • 35% of Americans have never checked their credit report
  • A 2012 Federal Trade Commission (FTC) report found one in four Americans found at least one potentially important error in at least one of their credit reports
  • Errors on your credit report may affect if you can take out a loan
  • They may affect how much you will have to pay money to get that loan
  • Ensure the information on your credit report is correct, complete, and updated before applying for a loan for a large purchase e.g. home mortgage, car loan, buy insurance, or applying for a job
  • To prevent identity theft

Now is the time to act. Plan now for your future, especially if you’re thinking about doing any of the following things above. You never know what’s going to happen. And you may not know what you’re going to want.

How To Spot An Error

An error is information on your credit report that shouldn’t be there. This might be due to the fact that the information is not yours, is wrongly reported, or it’s against the law to be listed. Common credit report errors include errors in personal information, accounts, and/or derogatory marks.

Personal Information Errors

  • Wrong name listed
  • Addresses you’ve never lived at or used as a mailing address
  • Inaccurate employer information

Account-Related Errors

  • A late payment that’s more than seven years old
  • Having a credit card or loan account listed that’s not yours (or that you’re not a co-signer or an authorized user on)
  • An account that was closed by you, but shows as being closed by the provider

Derogatory Mark Errors

  • A paid-off collections account that still shows as being unpaid
  • A paid tax liens that is more than seven years past the date of payment
  • An account that was discharged in bankruptcy is still showing up as active with a balance (account history can still be reported)

How to Obtain Your Free Credit Report

The Fair Credit Reporting Act (FCRA) requires the three nationwide companies to provide you a free credit report. Equifax, TransUnion, and Experian must, upon request from you, give you a free report once every 12 months. They must provide a website, telephone number (toll-free), and mailing address. You can use any of these 3 methods to obtain your free credit report.

Annual Credit Report Request Service
P.O. Box 105281
Atlanta, GA 30348-5281

You don’t need to request your free credit report from the three nationwide credit reporting companies separately. In fact, you ask to get the credit report from the 3 credit reporting companies simultaneously.

Other Reasons for Getting a Free Credit Report

There are other situations where you’re entitled to a free report. You can get a free credit report if a company takes negative action against you by denying your application for insurance, employment, or for credit.

You can also get a free credit report for the following other reasons:

  • You’re unemployed and are planning to look for a job within the next 60 days
  • You’re on welfare
  • Your credit report is inaccurate due to fraud (e.g. identity theft)

Buying Your Credit Report

If you need a credit report for not any of the reasons above, it might cost you to buy another copy of your report within 12-month period. Contact the three credit reporting companies to a purchase your credit report:

Fixing Credit Report Errors

You want to get into touch with both the credit bureau and the organization that gave the information to the bureau. Under the FCRA, both of these parties are responsible for ensuring that there isn’t wrong or missing information in your credit report.

Credit Bureau

Unless the credit bureau thinks your dispute is frivolous, they must look into the item(s) in question typically within 30 days. Include copies of the documents that will help your case. The letter should include the following:

  • Your full name
  • Your up-to-date address
  • Clearly show each item you are disputing in the credit report
  • List all of the facts along with an explanation for why it supports your dispute
  • Request a deletion or correction
  • Include a copy of your report
  • Circle items you’re disputing
  • Use a sample letter such as this one

You should keep copies of your disputed letter and enclosures. Use certified mail to send your letter, along with a return receipt requested. This way you can keep a record that the credit bureau received your correspondence.

Appropriate creditor or information provider

You also want to write to the appropriate creditor or information provider. Explain that you are disputing the information provided to the bureau.

  • Include copies of documents that support your position
  • Request that the provider copy you on correspondence they send to the bureau

This process may take between 30 and 90 days. Remember that if the provider again reports the same information to a bureau, it must include a notice of your dispute.

Conclusion

Sometimes, disputing incorrect information on your credit report may be one of the fastest ways in making a positive impact on your credit score. At the end of the day, it’s really important to dispute wrong information on your credit report because it may have a huge effect on your financial future. Therefore, learning how to dispute your credit report is important to know.

bad information on credit report

How Long Bad Information Stays On Your Credit Report

How Long Bad Information Stays On Your Credit Report

Many of us have wondered this before, particularly after we make a mistake or slip in remembering to pay the bills on time. But before we go into the details of how long bad information stays on your credit report, you should be aware of where that “bad information” in your credit report comes from.

This “bad information” is gained from multiple sources. Examples include collection agencies, lenders who have issued your credit, or whatever is included in your public information. All of this information is then reported to the three nationwide credit reporting agencies. These credit reporting agencies put all of this information together and lists it in your credit report. So, credit reporting companies don’t make judgments about the information; they simply reveal what’s being sent to them.

Luckily for you, the Fair Credit Reporting Act (FCRA) limits how long a credit reporting agency can reveal negative items in your report. The following is a breakdown of what kind of bad information is included in your credit report and how long bad information stays on your credit report.

Public Records

There are 3 types of public records that show up on a credit report: bankruptcies, tax liens, and civil judgments. A tax lien usually results from not paying your taxes. A civil judgment is a debt you owe through the courts because of a lawsuit. Judgments generally stay on your credit file for 7 years. This is 7 years from the date filed, whether paid or not. Paid tax liens generally stay on your credit file for 7 years from the date paid. Unpaid tax liens, however, remain on your credit file indefinitely.

Bankruptcies

A bankruptcy is a legal proceeding in which an individual is given relief from paying debts they’re unable to repay. The 2 important forms of bankruptcy are called chapters because they are defined by chapters in bankruptcy law. For Chapter 13 bankruptcy, a person repays at least a partial amount of their debts. Under Chapter 7, a person doesn’t pay any of the debts.

Completed Chapter 13 bankruptcies remain on your credit report for 7 years, and 10 years for Chapter 7 and 11 bankruptcies. If your Chapter 13 bankruptcy was dismissed, it remains on your credit file for 10 years from the date filed. The 10 years starts from the date of the dismissal. Contrary to a completed case, a dismissed case means you didn’t get an order discharging your debts.

Criminal Records

Most criminal records like information on arrests and indictments can be reported until the expiration of the statute of limitations or before seven years, whichever is longer. But criminal convictions may be reported for an indefinite period. An indictment only establishes whether or not there is enough information to charge a suspect with crime. A conviction has to do with an individual who’s been tried and convicted by a judge or jury.

Credit Accounts

Also called trade lines, lenders report on each account you’ve created with them. One of the important things reported is the type of account (whether it’s a bankcard, auto loan, mortgage, etc.). Other reported information include the date you opened the account, your credit or loan amount, account balance, and your payment history.

Late payments remain on your credit report for about 7 years. Accounts with current statuses such as R1 and I1 that show previously late payment history will remain on the credit file for up to 10 years from the date of last activity. R1 means revolving debt on credit cards and home equity lines where the account holder has never missed a payment. I1 is installment debt such as auto or student loan. Only the late payment history is taken out after 7 years.

Collections

Collections refer to the transfer of late or past-due accounts to a collection agency. Amounts are then fully or partially recovered. Collection accounts stay on your credit file for 7 years. The start date begins from when the account first became past due prior to the account being placed in a collection agency.

Foreclosures

A foreclosure basically means that you lost your house due to not paying your mortgage. It’s actually seen by lenders as being something very negative, second only to bankruptcy. A foreclosure on your credit report will remain there for 7 years.

Inquiries

Inquiries occur when you apply for a loan. You’re essentially authorizing your lender to ask a copy of your credit report. These inquiries list everyone who’s accessed your credit report within the last 2 years. The reports includes voluntary inquiries which are  inquiries due to you asking for credit. And it also includes involuntary requests which happen when a lender orders your report for the purposes of pre-approved credit offers in the mail. Involuntary requests do not affect your credit score but will remain on your credit file for 12 months.

Bullet Point Summary Of How Long Bad Information Stays On Your Credit Report

  • Public records like paid tax liens and civil judgment will remain for 7 years. Unpaid tax liens may remain indefinitely.
  • 7 years for completed Chapter 13 bankruptcy. 10 years for dismissed chapter 13 bankruptcy. 10 years for Chapter 7 and 11 bankruptcies.
  • For arrests and indictments, 7 years or if the statute of limitations has expired, whichever is longer. Criminal convictions may be reported indefinitely.
  • Late payment on credit accounts remain for 7 years.
  • Collections stay on for 7 years.
  • Foreclosures stay on for 7 years.
  • Voluntary inquiries stay on for 2 years.

At the end of the day, you should know that the three nationwide credit reporting agencies receive both negative AND positive information. A credit report is obviously not all about negative things in your credit. Items that are also positive or neutral are not only included but may be there indefinitely. Another thing to realize is that the older the negative items, they less of an effect they’ll have on your FICO® score. Further, the type of information channel affects how long bad information stays on your credit report.

Many of us have made financial mistakes in one way or another. Understanding what mistakes you’ve made in the past and how much of an impact it has on your credit will give you a better perspective in rebuilding your credit. If you haven’t checked your credit report recently, why not have a look? Make sure that all your information is correct and accurately shows your personal financial history.

Check out our list of where to get your credit report and credit score for free, to see what’s on your record. If you’d like more information about the credit repair companies that are most effective, you can view our list of the best reputable companies for credit repair.