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How Do Closed Accounts Affect Your Credit?

Most of the time, when we talk about credit, we are talking primarily about the impact of open accounts. But are we underestimating the importance of closed accounts? Let’s shed some light on the less commonly addressed question of how closed accounts can affect your credit.

What Is a Closed Account on a Credit Report?

A closed account on your credit report is simply any credit tradeline that has been closed, whether it was terminated by the customer or the creditor. 

There are several different reasons why an account may be closed.

If you don't use your account for several months, it could get shut down for inactivity.

If you don’t use your account for several months, it could get shut down for inactivity. Photo by Hloom on Flickr.

If you don’t use a credit card for several months, for example, you could get your credit card closed for inactivity. In this case, your credit report might say “account closed by credit grantor” for that account since the lender was the party who terminated the account.

Other reasons a credit card may be closed by the creditor include:

  • The credit card issuer is no longer offering that type of credit card or is replacing it with a different card
  • The credit card issuer determined that there was fraudulent activity on the account
  • The card was stolen or lost

Consumers may also want to close their own credit accounts from time to time, in which case the account might be notated as “account closed by consumer.” As an example, if one of your credit cards increases its annual fee or if you no longer feel that the fee is worth it, you might decide to close that account.

What Do Closed Accounts Mean on Your Credit Report?

Closed Accounts and Credit Utilization

Use our tradeline calculator to calculate your credit utilization ratios.

Use our tradeline calculator to calculate your credit utilization ratios.

Now that you know what a closed account is and why an account may be closed, you may be wondering what a closed account on your credit report means for your credit. 

The main impact of closing an account on your credit is the effect on your utilization ratio. By closing an account, you are reducing your total available credit limit, which could increase your overall utilization ratio if you have balances remaining on your other accounts.

Therefore, if you have balances on any of your other cards, you probably don’t want to close an account that is helping to keep your overall utilization down, as well as improving your ratio of low-utilization to high-utilization accounts.

On the other hand, if you pay down all your other credit cards to 0% utilization, you can safely close an account without impacting your credit utilization.

Try using our tradeline calculator to calculate your individual and overall credit utilization ratios and see how closing one of your accounts could affect your utilization rate.

Closed Accounts and Credit Age

Many people believe that once an account is closed, it will no longer count toward your credit age. However, according to an article by credit expert John Ulzheimer in The Simple Dollar, this is a myth.

Credit scoring models like FICO and VantageScore do indeed consider the age of your oldest account and the average age of your accounts when calculating your credit scores. However, closing an account does not remove its history — including its age — from your credit reports.

Not only will the history of a closed account remain on your credit reports, but credit scoring models will continue to consider the age of the account as well. And, even better, a closed account continues to age. So, if you closed a five-year-old credit card today… in 12 months it’s going to be a six-year-old credit card.”

Are Closed Accounts on Your Credit Report Bad?

Closed accounts on your credit report are not inherently a bad thing. In fact, they can often be a good thing, as we will elaborate on below. 

Closed accounts on your credit report, unless they are derogatory, are not bad for your credit. In fact, they are probably giving your credit a boost.

Closed accounts on your credit report, unless they are derogatory, are not bad for your credit. In fact, they are probably giving your credit a boost.

However, derogatory closed accounts can definitely have a negative impact on one’s credit.

For example, if you had a credit card closed due to delinquency, meaning the creditor closed the account because you had stopped paying it, the account likely still has a balance owed.

Having a closed credit account with a balance on your credit report could really hurt your credit. According to some sources, closing a credit account removes its credit limit, so a credit card account closed with a balance would be considered maxed out or over-limit.

Credit utilization is a major influence on your credit score, so maxing out your utilization by having a credit card account closed with a balance could result in a big dip in your score.

However, other sources say that a closed account with a balance will be treated as an open account until the balance is paid off, at which point you can expect some damage to your score, especially if you have balances on your other credit cards.

The specific way that closed accounts are treated may depend on which credit score algorithm is used to calculate your score as well as other variables in your credit profile.

Should I Pay Off Closed Accounts on My Credit Report?

If your account was closed with a balance but remains in good standing, maintain its good standing by continuing to make payments until the account is paid off.

If your account was closed due to delinquency, the first thing to do is call your credit card issuer to check the status of the account. If the debt hasn’t been sold to a collections agency yet, you’ll want to start paying off the account immediately to prevent it from going to collections. You could end up with bad credit if you have a collection account on your file.

If the account is already in collections, however, whether or not you should pay it off is an entirely different question that depends on your individual situation.

See our article on collection accounts on your credit report for more information on how to handle collections.

Open vs. Closed Accounts on Credit Report

In the tradeline industry, we often get questions about whether closed accounts have an impact on one’s credit and, if so, what value they hold relative to open accounts.

It is possible to have a good credit score while having only closed accounts. Photo by CafeCredit.com, CC 2.0.

It is possible to have a good credit score without having any open accounts. Photo by CafeCredit.com, CC 2.0.

This is an important question, because generally when you buy tradelines you are an active authorized user for two reporting cycles, and after you are removed from the account, it will begin to show as a closed account on your credit report.

Therefore, it is useful to know what impact the tradeline might have after it converts to a closed tradeline.

From what we have seen, closed accounts often can still be a very powerful influence on one’s credit score. 

Remember, the age of a closed account still factors into your credit, and accounts continue to age even after they have been closed. Age and payment history go hand-in-hand and together make up 50% of a FICO score, and since closed accounts can still contribute to these factors, this implies that closed accounts can still have a strong effect on your credit. 

However, closed accounts may have a diminishing impact over time, since credit scores tend to prioritize recent events.  

Can You Have Good Credit With Only Closed Accounts?

It is possible to have a good credit score while only having closed accounts in one’s credit report. We have seen examples of people with credit scores in the 700’s who only had closed accounts in their credit file.

Can I Have Closed Accounts Removed From My Credit Report?

If you have closed accounts on your credit report that are not delinquent or hurting your credit, then there is no need to remove them. They may actually be helping your credit, even though they are closed.

Accounts that were closed in good standing should automatically fall off your credit report after 10 years, while delinquent closed accounts will fall off your credit report after 7 years. 

How to Get Rid of Closed Accounts on Your Credit Report

If your credit card has been closed, you can try calling your credit card issuer to ask if the account can be reopened, but don't wait too long.

If your credit card has been closed, you can try calling your credit card issuer to ask if the account can be reopened, but don’t wait too long.

If a closed account on your credit report is reporting inaccurately, then you can dispute it and have the credit bureaus update the account with the correct information or remove it.

Contact each credit bureau or check their websites for instructions on how to dispute accounts on your credit report.

If a Credit Card Is Closed, Can It Be Reopened?

In some cases, consumers may be able to reopen closed credit cards.

If your account was closed due to fraud or delinquency, banks typically do not allow these accounts to be reopened.

If it was closed voluntarily on your part or closed due to inactivity, however, you might have a chance to reopen the account if you don’t wait too long. 

Only some banks will allow this, and those that do have varying time limits as to when you can reopen an account, so check with your credit card issuer.

If you’re within the time window and your account is eligible to reopen, here’s how to reopen a closed credit card account:

  • Call the phone number provided on the back of your credit card (or if you don’t have the physical card anymore, look up the phone number for the customer service department for that card).
  • Be ready to provide your personal information and answer security questions.
  • Explain why you closed the account and why you are requesting to reopen it.

Some issuers may require a hard inquiry before they can approve your request, which could cause a small, temporary drop in your credit score.

How Do Closed Accounts Affect Your Credit? - Pinterest graphic

If your bank doesn’t allow you to reopen the card, the next best solution might be to re-apply for the same card or apply for a new credit card altogether.

Take-Home Points About Closed Accounts

  • Accounts may be closed voluntarily by the consumer or closed by the creditor due to inactivity, fraudulent activity, or delinquency.
  • Closed accounts are not necessarily bad and can even help your credit.
  • Closing an account could affect your credit utilization.
  • Closed accounts still contribute to your credit age and they continue to age even after they are closed.
  • Closed accounts can still have a powerful impact on credit scores.
  • Continue paying off accounts that were closed with balances to prevent them from going to collections.
  • You can dispute closed accounts that are not reporting correctly.
  • You may be able to reopen a closed credit card account depending on the circumstances.
Make sure your payments are made on time

Simple Credit Tips for Recent Graduates

If you’ve recently graduated from school and are getting started in the full time workforce, you may have come in with some goals for yourself, then these simple credit tips for recent graduates are really helpful.

Top most common goals are:

  • To pay off student loans (How To Save Thousands of Dollars On Student Loans)
  • To start an investment account for retirement
  • To purchase or pay off a vehicle
  • To save up for a down payment on a house

The good news is that you can achieve all of those goals! However, they will take some time and a little bit of financial discipline.

Here are a few simple credit tips for recent graduates on how to improve their credit so they can achieve their goals faster!

Tip #1: Make sure your payments are made on time

This sounds obvious, but paying your bills on time is so important to your credit that missing a single payment could hurt your credit.

Make sure your payments are made on time

If you’re not able to make a full payment, you will need to make a minimum payment. If you can’t afford a minimum payment, it’s better to call the lender and explain the situation to see if you can work something out. There is a list of credit building tips for recent graduates to follow.

Tip #2: Increase your credit limits over time

A big part of your credit score is your credit utilization ratio. Credit utilization ratio just refers to the amount of credit that you’re using compared to the amount of credit you have available. For example, if your credit card balance is $3,000 and your credit limit is $10,000, your utilization ratio is 30%.

Increase your credit limits over time

Once you keep your credit card spending relatively consistent, increasing your credit limit will decrease your credit utilization ratio.

It works even better if you pay off your balances every month, so your credit utilization ratio ends up very low as you increase your credit limit! Know how to reduce your credit utilization rate.

Tip #3: Take advantage of low or no cost financing to increase credit mix while not incurring unnecessary costs

This works much better when your credit score is a little higher, but if you want to improve your overall credit score, you will want to have a good mixed credit files. It is known as one of the simple credit tips for recent graduates.

Credit mix just refers to the diversity of credit account types. Mortgages, credit cards, car loans, all of these are considered different types of debt.

If you’re able to take advantage of low or no cost car financing, for example, you could get a car loan that you can afford, with very little or no interest payments!

Tip #4: Refinance your student loans

This is a slightly different tip, as refinancing your student loans will DECREASE your credit score in the short run. However, getting your loans refinanced might be a huge help to you for the future. Again one of the simple credit tips for recent graduates.

If your interest costs are super high, refinancing your student loans might be able to lower the overall cost of the debt. This could save you thousands of dollars and years of paying down student debt, so you can achieve your goals faster. Not only that, but paying down your principal improves your credit score over time!

In Summary

New graduates need to take advantage of as many ways to improve their credit as possible.

It’s paramount to be responsible with your credit. Responsibility just means paying your bills on time and not taking out debt you can’t afford.

Having access to credit while using it responsibly improves your credit rating.

The post Simple Credit Tips for Recent Graduates appeared first on The CreditPros.

How to Avoid Paying Interest on Credit Cards

How to Avoid Paying Interest on Credit Cards

How to Avoid Paying Interest on Credit Cards

 

If you are struggling to pay off credit card fees and interest rates due to accumulated penalties, interest, and fees, you are not alone. Using credit cards offer convenience and numerous benefits. You can make payments without the need to withdraw cash using cash advance facilities and indulge money you don’t have yet. However, good things are not free. In return for facilities and conveniences, credit card incurs charges and fees including cash advance fees, over limit fees, credit card interest fees, and later payment fees.

With a credit card, APR or Annual Percentage Rate is known as an interest rate. APR is an effective interest rate you would pay once you borrow money on credit cards for a year.

Credit cards are a kind of loan. If you use credit cards, you are borrowing money until you are done paying the bill. Since it is a loan, you can expect to pay interest always. But, with majority of credit cards, you may avoid paying interests completely.

A lot of credit cards have various APRs. These include the following:

  • Introductory APR

There are credit cards that offer low APR. Frequently, it is zero percent for a limited time after opening credit cards. It could be for balance transfers, purchases or both. It is introductory since the special APR lasts only for a limited period of time.

  • Balance Transfer APR

If you transfer balances from a certain credit card to another, it’s the APR you will pay for the debt. There are times that it is the same as Purchase APR, yet it can be different. Majority of banks begin changing interests on balance transfers.

  • Purchase APR

It’s the APR that credit card companies charge on every normal purchase. Sometimes, it is known as regular APR. Many cards have grace period. It means they do not charge interests on purchases once you pay credit card bill on time as well as in full monthly.

  • Cash Advance APR

Once you use credit card to withdraw money at ATM, you will pay the rate. Usually, interest charges begin the day the money is withdrawn, so there is no grace period. Oftentimes, APR is higher than Purchase APR and thee are typically some fees aside from the APR.

Below are some of the ways to avoid paying interest on your credit card:

Know Your Outstanding Balance’s Due Dates

It is easy to forget when the outstanding balance has to be settled, particularly if you hold different cards. Keep your own calendar to remind you of the dates. Other banks give a grace period where you could settle your bill beyond due date without paying additional charges.

Always Pay in Full

There is no simpler way to avoid such fees through paying credit card bills in full and on a timely manner. If you can’t, try paying the minimum payment amount to avoid some unnecessary interest charges and penalties. You have to be reminded that banks require credit card users to pay extra fees for paying below the outstanding balance’s minimum fee.

 

The post How to Avoid Paying Interest on Credit Cards appeared first on Creditmergency.

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.

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