Easy Credit Hacks That Will Actually Get You Results - Pinterest

Easy Credit Hacks That Will Actually Get You Results

Credit repair can be a long and difficult process, especially if you have very bad credit. Getting results from credit repair can take months, and it takes years to build or rebuild a solid credit history. Fortunately, however, there are some “credit hacks” that you can use to improve your credit on a much shorter time scale.

In this article, we’re going to tell you the best credit hacks to improve your credit score fast as well as credit card hacks to help you save you money on interest. In addition, we’ll also provide some credit-building hacks for those with thin credit files and credit repair hacks to help you fix bad credit.

Here are the credit hacks we’ll be covering in this article. You can click on the bulleted list items below to jump directly to each hack.

Easy Credit Hacks That Will Actually Get You Results - Pinterest

    • Pay down high-balance cards first to improve your credit utilization
    • Pay off low-balance accounts to reduce the number of accounts with balances
    • Time your payments so that you have a $0 balance on your statement date
    • Make multiple payments throughout the month
    • Build credit fast by piggybacking on someone else’s good credit
    • Consider applying for a credit-builder loan
    • Increase your credit limit
    • Ask your credit card issuers for lower interest rates
    • Set up automatic bill payments
    • Accidentally miss a payment? Ask your bank to waive the late fee
    • Pay down high-interest balances first to save money on interest and pay off debt faster
    • Transfer your balance to a card with a lower interest rate
    • Dispute inaccurate information on your credit report (such as inquiries or derogatory items)
    • Delete collections from your credit report
    • Time your credit inquiries carefully when shopping for credit
    • Get a rapid rescore from your mortgage lender
    • Manually update your credit report yourself

Now let’s delve deeper into each credit of these credit hacks.

Credit Score Increase Hacks

  • Pay down high-balance cards first to improve your credit utilization

If your focus is primarily on boosting your credit score fast, you may want to consider paying down your high-balance cards first. The reason for this can be explained by the importance of individual credit utilization ratios, which refers to the utilization ratios of each of your revolving accounts.

From what we have seen, individual utilization ratios may be even more important than your overall utilization ratio. Having one or more maxed-out accounts, for example, can drag down your score even if your overall utilization ratio is low.

Therefore, by paying down your high balances first, you can get those accounts out of the high-utilization danger zone and into a utilization range that is less damaging to your credit score.

  • Pay off low-balance accounts to reduce the number of accounts with balances

One of the factors that are considered within the overall “credit utilization” category is the number of accounts that have balances. Having fewer accounts with balances is better for your score.

In fact, the ideal credit utilization scenario is having a zero balance on all but one of your accounts and having one account with a utilization ratio in the 1-3% range.

Therefore, if you can pay some of your accounts down to zero, you should see a boost to your score. Accounts with small balances are low-hanging fruit because you don’t have to spend as much money to get them to a zero balance.

You can read more tips on how to improve your credit utilization in our article about utilization ratios.

  • Time your payments so that you have a $0 balance on your statement date

    To ensure that your credit report shows low credit utilization, time your payments so that you have a low balance (or no balance) when your accounts report to the credit bureaus.

    To ensure that your credit report shows low credit utilization, time your payments so that you have a low balance (or no balance) when your accounts report to the credit bureaus.

When it comes to credit utilization, you might think that as long as you pay your credit card balance in full by the due date every month, then you should show a 0% utilization for that account. However, this assumption is not necessarily correct.

The reason for this is that the date when your credit card issuer reports to the credit bureaus is often not the same as your payment due date.

That means that your account is reporting at some other time during the month when your card does have a balance on it. If you use a significant portion of your credit limit, the utilization on that account could be hurting your score.

To correct this, if you want to have your accounts show a 0% utilization ratio, try using this credit hack: Instead of waiting for your statement to arrive and then paying your balance on the due date a few weeks later, you need to pay your balance to $0 before the statement closing date. Then, your statement will close with a $0 balance and that’s what will report to the credit bureaus.

Alternatively, you can pay your bill on your normal schedule and then refrain from using your card for the next entire billing cycle. Since you have paid off the balance and not made any new charges, your account will show a $0 balance at the end of the reporting cycle.

Either way, if you can shift the timing of your payments so that your account reports a 0% utilization, that could provide a significant benefit to the credit utilization portion of your credit score.

  • Make multiple payments throughout the month

Another way to keep your credit utilization rate down is to make payments more frequently.

If you don’t want to worry about when to send your payment in order to lower the balance before the statement closing date, you could, instead, make more frequent payments throughout the month to keep the balance consistently lower.

This method can also help to smooth out your cash flow and make it easier to budget since you can divide your credit card bill over multiple paychecks (if you get paid weekly or biweekly).

Credit-Building Hacks

  • Build credit fast by piggybacking on someone else’s good credit

One of the easiest and fastest ways to build credit is called credit piggybacking, which refers to the practice of becoming associated with someone else’s good credit for the purpose of helping you build your own credit history.

Piggybacking credit can help you build credit quickly, whether you open a joint account, get a cosigner, or become and authorized user.

Piggybacking credit can help you build credit quickly, whether you open a joint account, get a cosigner, or become an authorized user.

There are three main ways to piggyback credit.

  1. Get a co-signer or guarantor

Having a co-signer or guarantor with good credit can go a long way toward helping you qualify for credit because the co-signer or guarantor is essentially promising to assume responsibility for the debt if you default.

The downside of this strategy is that since the position of the co-signer or guarantor comes with a lot of risks, it can be difficult to find someone to take on this role for you.

  1. Open a joint account

Since both applicants are considered when opening a joint account, you can benefit from your partner’s good credit as well as the fact that the income of both applicants can be counted. If you maintain the joint account for a while, this can allow you to build up a credit history with a primary account.

However, many banks no longer offer joint credit cards, so your options for opening a joint account may be limited. Plus, if your relationship with the other account holder ever takes a turn for the worse, it can make managing the account difficult, and you may end up needing to close the account altogether.

  1. Become an authorized user

Becoming an authorized user on a seasoned tradeline (i.e. a credit account that already has at least two years of positive payment history associated with it) is the fastest way to build credit. Instead of opening your own primary account and waiting for it to age, you can add years of credit history to your credit profile within a few weeks or even days.

  • Consider applying for a credit-builder loan

If you have bad credit or if you have never used credit before, you might be feeling discouraged about the prospect of getting credit anytime soon. It can feel impossible to get credit if you have a thin credit file or a history of derogatory marks on your credit report.

A credit-builder loan can be a useful tool for those struggling to build credit. Here’s a summary of how they work:

    • Credit-builder loans are typically for small amounts (e.g. a few hundred to a thousand dollars).
    • A credit-builder loan functions like a backward version of a traditional loan: instead of receiving the funds upfront and paying the money back later, you first make all of the monthly payments and then receive the loan disbursement once you have already paid off the loan.
    • For this reason, these types of loans are low-risk for lenders, which is why even those with bad credit or thin credit can still qualify (provided your income is sufficient for you to make the monthly payments).
    • The lender reports your payment history to one or more of the major credit bureaus, which allows you to build a credit history.

For more information on how these loans work and whether a credit-builder loan might be a good strategy for you to consider, check out our article, “Credit-Builder Loans: Can They Help You?

Credit Card Hacks

  • Increase your credit limit

    Increasing your credit limit is one of the best credit hacks. Check out our article for more tips on how to request a credit line increase.

    Increasing your credit limit is one of the best credit hacks. Check out our article for more tips on how to request a credit line increase.

Increasing your credit limit can be one of the easiest and fastest ways to boost your credit score. However, you’ll want to strategize a little before requesting credit line increases from your lenders.

You can read more in our article on the topic, but here’s a quick rundown of how to increase your credit limit:

    • If your financial situation has improved since opening your credit cards, it might be a good time to request a credit line increase. For example, if you have received a raise at work or your credit score has increased, that could indicate to lenders that you can handle a higher credit limit responsibly.
    • Wait until you have been a responsible cardholder for at least six months and you don’t have too many inquiries on your credit report to make your request. Also, don’t request an increase if you have already requested one within the past six months.
    • Check with your credit issuer to see whether they will need to do a hard inquiry or soft inquiry. If you don’t want to get a hard inquiry on your credit report, ask if there is an amount they may be able to approve without doing a hard pull on your credit.
    • You can make your request for a credit limit increase online or over the phone. Be prepared to provide some financial information and to explain why you are asking for additional credit. Calling your bank and talking to a representative may give you more opportunities to negotiate than if you make the request online.

So, how can this hack improve your credit score?

Your credit utilization ratio, also called your debt-to-credit ratio, makes up about 35% of your FICO score and about 20% of your VantageScore. It’s defined as the ratio of how much debt you owe to the amount of credit you have available. This can be calculated for your revolving credit accounts in aggregate by adding up all of your balances and dividing by the sum of all your credit limits for those accounts.

Increasing your credit limit improves both your overall and individual utilization ratios, thus helping your credit score.

  • Ask your credit card issuers for lower interest rates

This is another credit card hack that is easier and quicker than you might think. All you need to do is call up each of your credit card issuers and ask them to lower your interest rate.

Try calling your credit card issuers and asking for lower interest rates—odds are good that they will grant your request.

Try calling your credit card issuers and asking for lower interest rates—odds are good that they will grant your request.

Again, you’ll want to do a little homework before asking for a lower interest rate. Research interest rates on cards from other issuers and see if your bank can match a lower number. Explain why you’ve been a good customer and why you feel your rate should be lowered. Also, describe how your financial situation may have improved since you opened the card.

You can find a detailed script to help you negotiate on creditcards.com

Although this tip doesn’t directly affect your credit score, it can still be hugely beneficial, especially if you are one of the 37% of American households that carry balances on their credit cards from month to month.

Lowering your interest rate decreases the debt burden that comes from interest charges each month, allowing you to pay off your debt faster. Paying off your debt faster means improving your utilization ratio, which leads to a better credit score!

Although this hack isn’t guaranteed to work, the worst that could happen is that your lenders deny your request and your interest rates stay the same. On the other hand, it could save you hundreds or even thousands of dollars in interest. Plus, you can be optimistic about your chances: polls show that over three-quarters of consumers who ask for a lower interest rate are successful in their request.

  • Set up automatic bill payments

Setting up automatic payments is one of the best things you can do for your credit, especially if you struggle to remember due dates or if you have accidentally missed payments in the past. Payment history is the number one factor that influences your credit score, so even one late payment can have a serious impact on your credit.

Setting up automatic payments for all of your accounts can help prevent you from accidentally missing a payment.

Setting up automatic payments for all of your accounts can help prevent you from accidentally missing a payment.

Take human error out of the equation by setting up automatic payments for all of your loans and credit cards. That way, you’ll never accidentally miss a payment, so you can continue to build up a positive payment history each month without even thinking about it.

  • Accidentally miss a payment? Ask your bank to waive the late fee

Let’s say you do happen to miss a payment, for whatever reason. Maybe you hadn’t set up automatic bill pay yet and one of your bills managed to slip through the cracks.

First, make the payment as soon as you can to get caught up. If you make the payment before 30 days have passed since your due date, then you can avoid getting a derogatory mark on your credit report.

Then, consider giving your credit card issuer a call, explaining that the late payment was an honest mistake, and asking them to waive your late fee. Although only about one in five credit card users has made this request, a survey by creditcards.com found that 89% of consumers who asked their credit card issuers to wave a late fee were granted their request.

If you’ve otherwise been a good customer and you don’t miss payments very often, that gives the bank a good reason to say yes. Considering your chance of success is nearly 9 out of 10, it would be silly not to ask!

If your payment was more than 30 days late, then that means your credit card issuer is likely reporting the minor derogatory item to the credit bureaus. In this case, also ask your lender if they would be willing to forgive the late payment as a one-time courtesy and stop reporting it to the credit bureaus.

  • Pay down high-interest balances first to save money on interest and pay off debt faster

When it comes to paying off debt, the way to save the most money on interest is to pay off your high-interest balances first. This method is called the “debt avalanche” because you’re starting with the highest interest rates and working your way down from there. (In contrast, the “debt snowball” method involves paying your debt in order of smallest to largest balances).

 As with the previous hack, by saving money on interest, you can chip away at your credit card debt faster, decreasing your credit utilization and increasing your credit score.

  • Transfer your balances to a card with a lower interest rate

Another popular way to get some relief from paying those astronomical interest charges every month is to transfer your credit card balances to another credit card that has a lower interest rate.

This hack works best if you have good enough credit to qualify for a balance transfer credit card. These credit cards are marketed specifically for this purpose and they typically come with special introductory offers, such as 0% APR on balance transfers for a certain number of months. 

A balance transfer can help you save money on interest charges and may improve your credit utilization ratio.

A balance transfer can help you save money on interest charges and may improve your credit utilization ratio.

Here’s how the balance transfer process works:

  • When you apply for the balance transfer credit card, you tell the credit card issuer the amount you want to transfer and which bank(s) you want to transfer a balance from.
  • Once you have been approved for the balance transfer card, the credit card issuer essentially pays off your balances at the other banks with the credit on your new card.
  • Your debts (plus a balance transfer fee, usually around 3-5%) have thus been transferred to your new card.
  • Since your balance transfer card likely has a low promotional interest rate or perhaps even zero interest for a while, you have some extra time to pay off your debt without being crushed by interest, which means you can pay off your debt faster.

As a bonus, this credit card hack can also help your credit utilization, because you are adding some available credit to your credit profile by opening a new account.

The pitfall to watch out for with this method is that it opens up the possibility of you running up your credit cards again and potentially ending up even deeper in debt than you were before. If you think having access to additional credit is going to tempt you to spend more, then it’s probably best for you to avoid this credit hack.

If you’re interested in potentially doing a balance transfer, make sure you read our comprehensive guide that contains everything you need to know about balance transfers.

Credit Repair Hacks and Bad Credit Hacks

  • Dispute inaccurate information on your credit report (such as inquiries or derogatory items)

Check your credit report for errors that could be damaging your score and dispute them with the credit bureaus.

Check your credit report for errors that could be damaging your score and dispute them with the credit bureaus.

If you have any errors on your credit report that are bringing your score down, such as credit inquiries you did not authorize or derogatory items that don’t belong to you, then this hack could definitely give your credit a boost.

First, you need to obtain a copy of your credit report to check for errors. You can order one from each of the three credit bureaus for free once a year at annualcreditreport.com and you can order your Innovis credit report for free directly from their website.

Then, thoroughly check your credit report for any inaccuracies, such as late payments that you actually made on time, duplicate accounts, or derogatory information that is more than seven years old (which means it should have been deleted by the credit bureaus already).

To fix the errors on your credit report, you can dispute the items with the credit bureaus by following the instructions found on each of your credit reports. However, there are a couple of other things you should keep in mind in order to ensure your dispute process goes smoothly.

    • Look up a sample credit dispute letter, such as the sample letter offered by the Federal Trade Commission, that you can use as a model for writing your own letters. 
    • Write one dispute letter for each credit report error and send in your letters one at a time. If you try to dispute several items at once, you run the risk of the claim being dismissed as “frivolous.”
    • Be sure to include as much evidence as possible that supports your claim when submitting your dispute. Without documentation proving that the item is being reported incorrectly, the credit bureaus could dismiss your dispute.
    • Send your letters along with the necessary documentation via certified mail so that you can get proof that the bureaus received them.
    • In addition, you should also talk to the creditor that is reporting the inaccurate date to the credit bureaus in order to fix the problem at the source and prevent the error from showing up on your credit report again in the future.

Once the credit bureaus receive your dispute letters, they have 30 days to investigate the issue. If they cannot verify the information to be accurate, then they have to either update the item with the correct information or remove the item from your credit report. 

For more information on the types of credit report errors to watch out for and how to fix them, see “How to Fix the Most Common Credit Report Errors.”

  • Delete collections from your credit report

    For this credit hack, dispute collection accounts on your credit report that are inaccurate or outdated to have the credit bureaus update them or delete the collections altogether.

    For this credit hack, dispute collection accounts on your credit report that are inaccurate or outdated to have the credit bureaus update them or delete the collections altogether.

If you have collection accounts on your credit report, it may be possible to get them deleted, depending on the circumstances.

As we discussed above, if a collection account on your credit report is being reported incorrectly or doesn’t belong to you, then you can certainly dispute the inaccurate information and have the credit bureaus update or remove the item.

If, on the other hand, the collection accounts on your credit report are legitimate, then your options for removing them are limited.

Some consumers try to negotiate a “pay for delete” arrangement with the debt collector, in which the debt collector agrees to stop reporting the collection to the credit bureaus in exchange for you paying some or all of the debt.

However, this strategy is risky and it does not always work in the consumers’ favor. If you do try this approach, be sure to get the agreement in writing from the collection agency.

In addition, deleting a paid account might not even increase your credit score depending on which credit scoring algorithm is being used. Simply paying the collection may be enough to boost your credit score, since some scoring models (FICO 9, VantageScore 3.0, and VantageScore 4.0) don’t penalize you for having paid collections on your credit report.

If you want to delete a collection account without paying it, unfortunately, your only legitimate option is to wait for the collection account to be removed from your credit report automatically, which happens seven years after the date that you were first delinquent on the account.

If you’re concerned about collections on your credit report, definitely make sure to check out our ultimate guide to collection accounts.

Credit Report Hacks

  • Time your credit inquiries carefully when shopping for credit

If you’re planning to shop for credit in the future, you’ll probably be getting some hard inquiries from lenders on your credit report.

Lenders typically need to check your credit history before they can decide whether or not to extend you credit, so when you apply for a loan or credit card, the lender will often request a “hard pull” of your credit report from one or more of the credit bureaus.

While it’s unlikely that inquiries alone will ruin your credit score, since each inquiry can potentially subtract a few points from your credit score, it is still important to be mindful of the frequency and the timing of your credit applications in order to minimize the impact of inquiries on your credit report.

Thankfully, though, you can still shop around for the best loan without being punished by the credit scoring algorithms. FICO and VantageScore know that it’s financially smart to shop for the best rates, not risky. Therefore, they each have ways of accounting for this behavior so that your loan applications don’t have an outsize impact on your credit score.

When applying for credit, try to minimize the impact of credit inquiries by grouping your applications within a specific time frame.

When applying for credit, try to minimize the impact of credit inquiries by grouping your applications within a specific time frame.

FICO scores group together inquiries that occur within a certain time frame for student loans, auto loans, and mortgages. Older FICO scores allow a 14-day window for consumers to apply for multiple loans of the same type (such as mortgages), while newer FICO scores allow a 45-day window.

Each inquiry for the same type of loan within the given time period gets grouped together and only counted as a single inquiry. However, note that this rule does not apply to credit cards, for which each inquiry will be counted separately.

With VantageScore, all inquiries that are made with a 14-day period are grouped together, regardless of the types of accountseven credit cards.

To simplify this information into a general rule, if you can complete all of your hard credit inquiries for a given type of loan within 14 days of each other, then the inquiries will be grouped together and you can avoid ending up with way too many inquiries on your credit report. 

  • Get a rapid rescore from your mortgage lender

Once you’ve tried some of these credit hacks and optimized your credit report, the fastest way to see your results reflected in your credit score is to get a rapid rescore. For those who are about to apply for a mortgage but need to quickly update their credit report first, a rapid rescore can be an extremely valuable tool.

Find out more about rapid rescores in “This Is How a Rapid Rescore Can Boost Your Credit Score Fast.”

  • Manually update your credit report yourself

    To trigger a manual update of your credit report, obtain verification of your tradeline's new status from your creditor and then forward the letter to the credit bureaus.

    To trigger a manual update of your credit report, obtain verification of your tradeline’s new status from your creditor and then forward the letter to the credit bureaus.

Since rapid rescores can only be provided by mortgage lenders, if you’re not in the market for a mortgage but you need to update your credit report in a hurry, you’ll need to update your tradelines manually.

To do so, once you have made the desired changes to your tradelines (e.g. paying down your balances or correcting errors), contact your creditors and ask them to send you a letter verifying the new account information. Then, forward this letter to the credit bureaus so they can update the information in your credit report.

By initiating the update manually, you can bypass the period of time that you would otherwise have to wait until your next reporting period.

Conclusions on Hacks to Improve Your Credit

While there is no substitute for the time and effort required to establish and maintain a respectable credit history, that doesn’t mean that you can’t try some of these credit-boosting hacks to help you improve your credit right away and perhaps even save some money on credit card interest and fees.

Just make sure not to lose sight of the most important goal, which is to build good credit over time and keep your credit report in good condition long-term.

Let us know what you think of these credit hacks! Which are the best credit hacks in your opinion? Do you have any creative credit hacks that you would add to this list?

Credit Report

Three Ways To Prevent Credit Problems During a Divorce

Divorce is often a messy affair, and while nobody wants to deal with it, sometimes it’s a necessary step. Here’s how to prevent credit during divorce.

One of the reasons why divorce is so messy is because of the financial aspect. You and your spouse are entwined financially, and separating all of the finances is a very difficult and tedious process that can take months, if not years, to do properly.

Many credit problems arise during divorce and they’re often not thought about until they happen. However, these problems are, for the most part, completely preventable. There are things which helps in rebuilding credit after divorce. Here’s how you prevent them.

Get a Copy Of Your Credit Report & Review It Carefully

This is the most important step. See which accounts are on your credit report and thus will affect your credit if they go late. Know what can be disputed on a credit report?

Without reviewing your credit report, you won’t know how problematic the credit problems can become for you. You might not remember what debt you cosigned for your spouse, or which items were shared.

Credit Report

Your credit report won’t show your spouse, so you’ll have to figure out which items are joint items. One of the thing remember to prevent credit during divorce.

Close All Joint Accounts

Because creditors don’t care whether or not a divorce occurred, joint accounts may become a serious issue.

If you and your ex have a joint account, and your ex had been responsible for making the payments, you’re held liable if your ex stops making payments. For this reason, it’s better to just close all the joint accounts before they become a problem.

Close All Joint Accounts

Closing the joint accounts will result in a short term hit to your credit score (or, if you’re paying off a debt in full, may increase it).

Your ex might not agree to closing the accounts. In this case, it may be necessary to get the courts involved. Closing out all joint accounts help in prevent credit during divorce.

If A House Isn’t Being Sold… Refinance The Mortgage.

The court, or your prenup, may decide that one party gets a specific piece of property. If this is the case, and the property had a mortgage with both people on it, it needs to be refinanced. There is a guide to mortgage refinancing.

Generally, it’s better to liquidate the home and get rid of the mortgage. But sometimes this doesn’t happen.

Mortgage

Simply transferring ownership may not work, as the credit bureaus may never learn about it & the item might stay on both people’s credit reports.

Refinance the mortgage and put it only in one person’s name. This may result in an increased interest rate if the other party has worse credit; however this is a necessary step to protect yourself if you have to give up the house. One of the thing to keep in mind helps in prevent credit during divorce. There are credit problems which can ruin your mortgage application.

In Summary

  • Divorce is a hard part of life, and it’s important to not make it any harder on the rest of your life.
  • Review your credit report and figure out which accounts are joint.
  • Close the joint accounts, as these often cause problems.
  • Refinance the home if one person is getting it.

The post Three Ways To Prevent Credit Problems During a Divorce appeared first on The CreditPros.

When is The Best Time to Refinance Your Auto Loan?

When is The Best Time to Refinance Your Auto Loan?

When is The Best Time to Refinance Your Auto Loan?

 

If you are not happy with your auto payment monthly, you might have thought of refinancing your auto loan. If you feel that your auto loan interest rate is not perfect, it is time to give refinancing a look. Just like you can consolidate credit cards or refinance mortgage, you may change your auto loan and terms through refinancing. You can be saving lots of money every year and there are times that your savings could be close to thousands of dollars throughout your loan.

But, when is really the best time to refinance your car? Well, below are some of the instances you must consider refinancing auto loan:

  • Your Credit Score Has Improved

If your credit score improves, it is a chance to reassess the current loans you have to know how you could save money. If you’re in the process to get your auto loan, you had several issues on your credit report, concerns that prevented you from getting better interest rates but you required that vehicle. Today is a good time to go back and see the ways on how you can lower the rate. If you are paying auto loan on time, it can improve your credit score and expect that you will be rewarded with low monthly payment.

  • Auto Loan Interest Rates Have Reduced

If you’ve found that interest rates have reduced a couple of points since you have made your vehicle purchase, it could be a good idea to look into the options available as far as low payment. When looking at various kinds of loan options, it is essential to remember that if you bought a brand new vehicle and refinancing that, the car will be considered as a used car. Therefore, make sure that you’re looking at the right interest rates when you are comparing lenders.

  • You Did Not Get the Best Rate for Auto Loan

If you bought your vehicle, you might got caught up with your words, zero financing, and you thought that it’s your lucky day. You would not wait to sign papers, yet you forgot to read fine print, which says for 6 months only. Now you are hit with interest rates you did not see coming. It means that you have to refinance auto loan. It can be simple to get caught up at a dealership with the excitement of purchasing new car that sometimes you overlook fine print.

  • You Have Had Financial Setbacks

Maybe several financial setbacks came up like you have lost your work or you had a raise in rent. The last thing you like to do is default on car payment, yet it would surely be nice if you lessen your payments. Refinancing auto loan is a good way to help provide you extra cash. Frequently, you may select a 72-month car loan rather than 36-month car loan and it will let you save on payments monthly and provide you extra money for such financial setbacks.

Refinancing auto loans can be done at any point in your loan’s period. Stop stressing over your monthly payments, stop throwing away your money, and start talking to an auto loan provider regarding the options available once you refinance auto loan.

The post When is The Best Time to Refinance Your Auto Loan? appeared first on Creditmergency.

Bad Credit - Pinterest

What Is Bad Credit and How Can It Affect You?

Bad Credit - Pinterest

Bad credit is something we all fear, but what is actually considered poor credit and how could it affect you? In addition to explaining what bad credit is and why you need to avoid it, we’ll also provide some strategies in this article to help you fix bad credit.

What Is a Bad Credit Score?

The definition of “bad credit” varies depending on which credit scoring system you are talking about. Since FICO 8 is the scoring model most widely used by lenders, we will focus on FICO when discussing the question of what is considered bad credit.

The FICO 8 credit scoring system assigns consumers a number to represent their creditworthiness, with the lowest credit score possible being 300 and the high end of the scale being 850.

A high credit score shows lenders that they can be fairly confident that a consumer will repay debts because they have demonstrated responsible behavior when it comes to credit in the past.

A low credit score, on the other hand, means that someone represents a higher risk to lenders because they are thought to have a higher probability of defaulting on a loan.

According to Credit Karma, a FICO score between 300 to 579 is considered a poor credit score, while a fair credit score is between 580 and 669. In contrast, an excellent credit score is between 800 and 850.

Credit scores between 300 and 579 are considered poor credit.

Credit scores between 300 and 579 are considered poor credit.

What Gives You Bad Credit?

As we mentioned, having a bad credit score means lenders perceive you as a high-risk borrower. Therefore, what causes bad credit is poor management of credit and risky behaviors that indicate that you may have a higher probability of default.

For example, being late on payments or missing payments altogether can really hurt your credit because payment history is the most important factor of a credit score.

High credit card utilization can lead to bad credit.

High credit card utilization can lead to bad credit. Photo by Natloans

What causes bad credit specifically? Here are some more examples:

  • Late or missed payments
  • Defaulting on a loan
  • Charge-offs
  • Collection accounts
  • Judgments
  • Settlements
  • Bankruptcy
  • Foreclosures or repossessions
  • Maxed out or high-utilization credit cards
  • Too many inquiries at one time
  • Too much new credit

Sometimes people have bad credit because of things they can’t control, like having a medical emergency that leads to huge hospital bills that they can’t afford to pay. In fact, the majority of consumer debt in collections is medical debt, according to Magnify Money.

Bad Credit Loans

If you have bad credit, you’re likely going to have a hard time getting loans with favorable terms or possibly even getting approved for a loan in the first place. Since a bad credit score represents a high risk for the lender, loans for people with poor credit typically have higher interest rates and may require collateral or a down payment—if the lender is willing to approve the loan at all.

Those with bad credit might turn to payday loans, which can come with interest rates of up to 400%.

Payday loans can come with interest rates of up to 400%. Photo by Aliman Senai.

Personal Loans for Bad Credit

Personal loans for bad credit may be few and far between. Usually, at least a fair credit score is needed to be considered for a loan.

Bad credit loan lenders may charge very high interest rates since they are taking on a lot of risk by lending money to someone with poor credit. These higher interest rates may translate into thousands of dollars of additional interest payments over the term of a loan.

Very bad credit loans such as payday loans often have astronomical interest rates of up to 400%, which makes it nearly impossible for many consumers to get out of debt.

Bad Credit Car Loans

Bad credit auto loans, also known as subprime auto loans, are often considered “second-chance” loans because they are typically the next option for those who have been rejected for traditional auto loans. Although there is not necessarily an official dividing line between which credit scores are considered prime and subprime when it comes to auto loans, credit scores below 620 tend to be considered subprime.

Bad credit car loans can have triple or more the interest rate as prime auto loans.

Bad credit car loans can have triple or more the interest rate as prime auto loans. Photo by QuoteInspector.com.

Car loans for bad credit, similar to personal loans for bad credit, are associated with much higher costs than prime auto loans. Since lenders of second-chance auto loans are taking on additional risk, these loans often have significantly higher interest rates and more fees than auto loans for consumers with good credit. Additionally, car loans for bad credit may come with penalties for paying off the loan early.

According to Investopedia, “While there is no official subprime auto loan rate, it is generally at least triple the prime loan rate, and can even be five times higher.

Credit Cards for Bad Credit

If you have bad credit, your options for getting a credit card will be limited, and you will most likely not be able to get the perks associated with premium credit cards, such as low interest rates, high credit limits, and rewards. Credit cards for poor credit may also come with annual or even monthly fees.

Subprime credit cards often require you to make a deposit with the lender as collateral. These cards are known as secured credit cards since they are secured by your deposit, which the lender can keep if you fail to make payments on the card. Sometimes, the lender may be willing to switch you to an unsecured card after you have shown a history of consistent on-time payments.  

As we’ve seen with loans for bad credit, credit cards for bad credit, whether they are secured and unsecured, may have high interest rates, sometimes as high as 30% or more.

How to Fix Bad Credit

Having a bad credit score is expensive. It makes getting any kind of credit more difficult and more costly because bad credit lenders tack on high interest rates and fees to compensate for the higher financial risk of poor credit loans.

Having bad credit doesn’t just dramatically increase the cost of credit. It can also affect other aspects of your life, such as your insurance premiums, your ability to find housing, and even your job, since many employers now check prospective employees’ credit reports. Therefore, most people with bad credit want to fix it as soon as possible.

Here are some strategies that you can try if you need to fix bad credit.

Credit Repair

If you have bad credit as a result of identity theft or extensive errors on your credit report, you’ll likely need to undergo credit repair in order to clean up your credit file.

Some people opt to try their hand at DIY credit repair, while others may prefer to hire a trusted credit repair company to get help with the dispute process and potentially faster results.

Either way, it’s important to be aware of best practices when disputing credit report errors. It’s best to submit your dispute by sending a letter along with documentation to verify your identity and support your claim. Trying to dispute errors online or over the phone may not yield the best results.

In addition to disputing inaccurate information with the credit bureaus, it’s also important to contact the company that is furnishing the data so that the error doesn’t get reported again in the future.

Rebuilding Credit

Improving bad credit takes time and patience. While credit repair companies may claim to have tactics that can boost your credit fast, the reality is that these tactics are usually limited to removing inaccurate information from your credit report. If you remove everything from your credit report, what are you left with?

The best way to fix bad credit, beyond correcting inaccuracies, is to rebuild it with more positive credit history over time. In other words, you need to add more positive accounts to your credit profile and keep them in good standing while they age. At certain age levels, these accounts should begin to boost your credit profile with that positive payment history.

Rebuilding credit with positive credit history helps to fix bad credit.

Rebuilding credit with positive credit history helps to fix bad credit.

One option that can help people re-establish credit is opening a credit-builder loan, which works in the reverse order of a traditional loan. Instead of receiving the loan amount upfront and then making payments to the bank to pay off your debt, with a credit-builder loan, you make all the payments first and then receive the funds after you have finished paying off the loan.

Since these loans are much less risky for lenders, they can be offered to those struggling with bad credit or lack of credit history.

Generally, though, building credit by opening new accounts can take at least two years to see much of a positive effect. The best way we have seen to bypass this two-year waiting period is by piggybacking on the good credit of others.

Have you been affected by bad credit? What did you do about it? Tell us your story in the comments.

Credit Freeze

What To Do If Your Identity is Stolen

Identity theft is a crime that affects millions of Americans every single year. It’s painful to suffer through, and it’s difficult to recover from. What’s worse is that no one is truly safe. Check out Identity theft is a crime that affects millions of Americans every single year. Check out these identity theft recovery steps on what to do if your identity is stolen.

But if you find that your identity has been stolen, you will find that you CAN recover. Here are some simple identity theft recovery steps you must take to ensure that you can get yourself back in order after dealing with identity theft.

Things to Do After Your Identity Is Stolen:

Step 1: Freeze Your Credit

The first thing you should be doing is making sure that no more damage can be done to your credit.

To initiate a credit freeze, contact each of the credit bureaus and let them know that you want to put a credit freeze on your accounts. Read out what is a credit freeze?

Credit Freeze

What this will do is ensure that potential lenders cannot get access to your credit reports, and this will not allow them to complete the loan application process. Keep reading the other steps on what to do if your identity is stolen.

Step 2: Check Your Bank Accounts and Credit Cards for Unauthorized Transactions

If identity theft has occurred, it’s possible that the fraudster has gotten access to your money. This is the first thing you want to check under identity theft recovery steps.

To find these transactions, go back as far as you can & see if there are any transactions that seem odd, or are particularly large.

How Credit Cards Can Destroy Your Credit

If you catch it too late, this won’t help you as you won’t be able to view transactions that happened long ago. Same way; you need to know: how far back does your credit report go?

Step 3: Get New Credit & Debit Cards.

If fraudsters have access to your credit accounts or your debit cards, you need to make sure that they cannot use the cards or card numbers they have.

It’s super simple to get new cards: contact your bank, report the cards as lost or stolen, and they will immediately cancel those cards and send you new ones. One of the reason why credit cards are safer than debit cards.

New Credit

In this process, you will also need to cancel all your automatic debits that originate from debit or credit cards. Otherwise, the payments will not go through and you could lose your subscriptions or worse, see an effect on your credit report. Keep reading the next steps on what to do if your identity is stolen.

Step 4: Get Your Credit Reports From All 3 Credit Bureaus & Review Them

There are 3 credit bureaus: Equifax, Transunion, Experian. What you’re looking for are loans that you don’t recognize or credit accounts opened in your name that you don’t have access to.

Credit Bureaus

Finding these will assist in the following steps, and will allow you to prove that identity theft has occurred.

Simply noting an odd change in your credit score is not enough to prove that fraud happened. You need to prove that accounts were opened in your name and that you were not the one who opened them.

Step 5: Contact The Police

The local police departments have fraud divisions that can help deal with cases of identity theft.

However, there might not be anything they can do to help you. They may be able to, though, as the most common sources of identity theft are relatives, employees that take your personal information, and skimmers that take your credit card info.

Contact The Police

They can’t help you if the crime originated on the Internet, however they may be able to initiate an investigation.

It doesn’t hurt to contact the police, and it might help you get closure. There are couple of other things to do after your identity is stolen and mentioned below.

Step 6: Put a Fraud Alert on Your Credit Accounts

A fraud alert will let credit bureaus know that there is potentially suspicious activity on your account. This is not the same as a credit freeze.

Fraud alerts are sent to institutions that request your credit report, letting them know that the applicant’s identity may be compromised. This could prevent a lot of damage done, but it can also slow down your own attempts to get loans.

Things to Do After Your Identity Is Stolen

They can stay on your account for up to a year, giving you peace of mind for a good amount of time. Read how to protect your credit from fraud.

Step 7: Tighten Your Security

Security is paramount to making sure identity theft doesn’t happen again. To tighten your security, you will want to follow these steps:

  • Unique passwords on all websites you visit. We recommend using a password manager like Lastpass or Dashlane.
  • Don’t click on suspicious links sent to your email that look to be from your financial institution. If you’re unsure, give them a call or visit the branch.
  • Use a VPN when in a strange location. NordVPN is a popular VPN service provider that can help protect your Internet info while you browse in an insecure location such as a hotel or restaurant.

All above are the top things to do after your identity is stolen.

The post What To Do If Your Identity is Stolen appeared first on The CreditPros.