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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.

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.

new years resolutions

How To Improve Your Credit Score In 2017

How To Improve Your Credit Score In 2017

The New Year is a great time to set new goals, and it gives people the fresh start they need to make the changes they desire. At the beginning of each year, around two-thirds of Americans vow to make their lives better by having a New Year’s resolution. Out of those two-thirds, only 8% achieve their goals. Improving credit scores and getting out of debt is among the most popular resolutions each year. With so many people desiring to improve their credit scores, why do most fail? The answer is that most goals fail without having a concrete plan in place. If improving your credit and getting out of debt is one of your resolutions this year, having a roadmap ensures you will improve your credit score in 2017.

A credit report is simply a compilation of information obtained from lenders that an individual has used. The information in a credit report determines your credit worthiness as a borrower. In a nutshell, a credit report is a measuring tool to analyze how a person manages debt and their likelihood of repaying a loan. A credit report also depicts a person’s spending behaviors. Debt to income ratios could indicate if a person is spending more than their ability to pay.

Credit affects many important areas in life. Everything costs more with poor credit scores, which often makes it even harder to improve your credit score. While resolving to improve your credit score may not be the most glamorous New Year’s resolution, it may be one of the most important. The financial freedom and self-discipline that comes from seriously improving your credit score will be an investment you cannot afford not to make. Here are the steps to keep your resolution and improve your credit score this year.

1. Take an honest assessment of your credit

The first step in improving a credit score is to know exactly what needs improvement. In order to make an effective get out of debt plan, take some time to understand your current credit situation. Set aside a day and time that you can truly delve into your finances to create a plan.

A crucial part of improving your credit score is being honest with yourself. One of the most overlooked steps in improving credit is understanding your own behavior with money and debt. Use credit card statements and bank statements to track spending habits. Did an emergency arise that caused you to max out a credit card? Maybe an unexpected car repair, loss of income, medical situation, or natural disaster forced you to use credit cards more than you would have liked. Perhaps impulsive spending led you to high credit card balances. However you ended up with credit card debt, it is wise to learn from it, so you could plan for the future. Having a savings account to handle life’s emergencies can protect your credit score and your wallet.

Credit card debt does not always signify a money issue. It’s often a behavioral issue. Changing behaviors and relationship with money will not just propel you to improve your credit score, it ensure that bad habits will not surface again once your credit goals have been met.

2. Clean up your credit report

According to the FTC, millions of people have errors on their credit reports that can result in a lower score. Carefully check your credit report to ensure all information is being reported accurately. Once a year, you can obtain a free copy of your credit report from all three credit bureaus. If you suspect fraud, inaccurate information, or need to update your personal information, you can contact the credit bureaus individually to find out their dispute process.

To find out where to obtain a free copy of your credit report, check out our blog post on how to get your credit report and credit score for free.

Professional credit repair companies can help you clean up your credit report. However, it’s important to choose the right one, since many credit repair companies are ineffective scams.

3. Understand how credit scores are calculated

Many people have lower credit scores because they do not understand how it is calculated. Depending on your situation, aiming to eliminate all credit card debt may not be possible in one year. Around 30% of your credit score stems from credit card balances. Aim to reduce the debt to income ratio by paying off 20% or more of credit card balances.

Another credit score buster is applying for too much credit in a short period. Apply for credit only if it is absolutely necessary. 10% of a credit score is calculated by the number of hard inquiries. Another 15% of a credit score is determined by the age of the accounts. Having too many new accounts or inquiries could put a significant dent in your score, so avoid opening new lines of credit if possible.

4. Change spending habits

Knowing how to allocate your income will be a beneficial asset during this process. Is there something you can sacrifice to get to your credit goals faster? Maybe skipping your daily latte for a short period or avoiding take out lunches will speed up the process of paying off a credit card or increasing your emergency fund. It is wise to be mindful of how money is spent. Small purchases here or there may seem fine, but they eventually add up quickly. Look for ways to be smarter about money and use the savings to improve your financial health.

5. Be responsible with the credit you already have

To successfully improve your credit score this year, you will have to take care of the credit you already have. Establishing a history of paying bills on time will be viewed favorably and will have positive impacts on your credit score. If paying bills on time has been a struggle in the previous year, commit to paying bills on time this year. It is vital that all payments are made on time, every time. A late or missed payment can stay on your credit report for up to seven years. A person with an excellent score could potentially lose around 90 points because of a missed or late payment.

If you think you will be late with paying your bill, do not wait until the last minute to contact the lender. Contact the creditors right away and set up alternative payment arrangements. Most creditors and banks have automated payment options available to make paying bills on time easier.

6. Adjust expectations and work hard

While “improving credit” and “getting out of debt” are some of the most cited New Year’s resolutions, they are often the ones people break the quickest. Like many resolutions, improving credit scores takes hard work, patience, and a change in behavior. These things normally do not happen overnight. Create a realistic budget and stick to it. This will keep track of bills and spending habits. Wallethub.com suggests breaking credit goals down into smaller goals to maximize your ability to follow through with your plan. For example, setting a deadline to order credit report, increase emergency funds, and create a budget could be mini-goals that pushes you closer to your ultimate goal.

Concluding Thoughts

Everyone could benefit from analyzing their credit reports and spending habits. Surprisingly, the most effective way to improve a credit score is to change your mind set about credit and money. By understanding your previous credit pitfalls, you can work hard at eliminating them. A healthy relationship with money, hard work, and perseverance will eventually translate to excellent credit. This year, resolve to investing in yourself by improving your credit score.

erase-debt

How to Get Rid of Credit Card Debt

How to Get Rid of Credit Card Debt

Credit card debt is all to common. Most than 45% of Americans carry a balance every month. This is even after knowing that this balance will eventually come back with a vengeance. A cardholder who owes $15,956 (the average debt per household) will need to pay $11,000 in interest if only the minimum due is paid each month. This is why it’s extremely financially savvy to get rid of credit card debt.

Life can throw many unexpected events. Some people get into debt after losing a job or getting very ill. Regardless of the cause, hopefully you are now in a place where you are ready to tackle ridding yourself of this financial burden. This will ultimately save thousands of dollars in interest fees. Here are the 5 steps to create a plan to get rid of credit card debt.

1. Budget your expenses and make sure you live within your means.

This is an obvious one, but it still is amazing the number of people that try to eliminate their credit card debt without having any accounting in place to figure out where their money goes versus how much they bring in.

By ensuring that this step is done, you are confident that you won’t increase your credit card debt month over month. If after this budget exercise, that’s the case, you’ll have to figure out how to decrease your costs. Whether it’s eating out less often or something more drastic like moving into a lower rent location, you will need to make these changes in your life before you can move forward with eliminating your credit card debt.

To learn more about budgeting, check out our guide on How to Budget Your Money.

2. Pay off one card at a time, from highest to lowest interest rate.

If you are having trouble paying off multiple cards, then rather than trying to pay them off evenly, you will pay less in interest if you try to tackle paying off the card with the highest interest rate first. And then move on to the next one from there.

A bonus of doing this approach is that you will feel the momentum at having paid off one card, then the next, and then the next. There will be a satisfaction at having a reduced number of cards carrying a balance month-over-month.

3. Ask if you can get a lower interest rate from your creditors.

It never hurts to ask. One phone call to your credit card issuer often allows you to have a lower interest rate. This typically works better if you have a good credit score already (730 or higher). It’s even better if you are also a long-term customer that typically makes payments on time. Still, it may be worth it to try even if you don’t meet these requirements. Even a decrease or a percentage point or two can add up to hundreds of dollars saved in interest per year.

4. Use a peer-to-peer lender.

Using a peer-to-peer lender means that you’ll borrow money from another service, such as LendingClub.com or Prosper.com. Then, use this borrowed money to pay off your credit cards and get rid of your credit card debt. Then, you’ll just have one loan with an interest rate that is typically around 20% to 30% lower than most credit cards. This can make it easier to track how much you need to pay off per month and also save on interest payments.

5. Make two minimum payments each month.

Maybe it’s easier for you to make the minimum payment on your cards after your paycheck arrives every other week. It’s far better to make two minimum payments each month as opposed to one. For example, if you charged $2,000 on a card with a 17% interest rate and only make the minimum monthly payment, it would take 21 years to pay off the entire balance. But if instead you made an additional minimum payment every month, it would only take 3 years. Every bit counts, even if it doesn’t seem like it. So, consider making payments not just once but twice a month to your credit cards.