Month: September 2017

This means understanding how credit reporting agencies work. There are several credit bureaus in the U.S., but most consumers concentrate on the main three: Experian, TransUnion and Equifax. Credit reporting agencies are public, for profit companies, and none are federally owned.

However, the Fair Credit Reporting Act enacted by congress does detail how all these bureaus should operate, which in turn helps to ensure that your credit score is fairly compiled and reported to various lenders.

How Credit Reporting Agencies Work

Credit bureaus are companies that collect information on consumers, and then sell the report to businesses. This can include,

• financial institutions
• credit card companies

Along with any other business where you might have an account or apply for financing, including Buy Here Pay Here Lots

The type of information gathered can vary slightly depending on the credit reporting agency but most will look for,

• Own or rent
• Type of job
• Payment history
• Amount of current debt
• Repossession or bankruptcy

The agencies then use this information to create your credit report and score. Since your credit score will affect everything from your chances for approval to interest rates, you want to keep an eye on it.

You are entitled to three free credit reports every 12 months. One from each of the 3 major credit reporting bureaus. Financial experts recommend spacing these reports out, instead of requesting all 3 simultaneously. This will allow you to watch your credit score without having to pay for it. You can request your free credit report at AnnualCreditReport.

They do not make any decisions, this is entirely up to the company that requested your credit report.

Credit Reporting Bureau Differences

All credit bureaus, including Experian, Equifax and TransUnion operate separately, and do not share information with each other. It is also up to your creditors which agency they report to. Some may only report your information to one, while others may send it to all three. This means that your financial history can vary from one credit bureau to another.

Often potential lenders only request one report so it is important that you pay attention to all three.

If you find an error on your credit report you can dispute it. Simply contact the credit bureau that issued the report. It will take some time, but it will be worth it when you see the black mark removed and your credit score rise.

While you do have to contact each credit reporting agency separately regarding errors and security freezes, you only have to alert one if you are placing a fraud alert. Legally, the various agencies must communicate this to each other.

You can contact the credit bureaus at the following,

Experian – www.experian.com
P.O. Box 2104
Allen, TX 75013-0949
1-888-EXPERIAN (397-3742)

Equifax – www.equifax.com
P.O. Box 740241
Atlanta, GA 30374-0241
1-800-685-1111

TransUnion – www.transunion.com
P.O. Box 1000
Chester, PA 19022
1-800-916-8800

What About FICO?

Consumers often mistakenly believe that FICO is both a credit score and reporting agency. This is not true.

FICO scores do range from exceptional to poor, just like credit scores, and are used by lenders to determine their risk in approving your loan.

3 Facts You Need to Know

There are three facts every consumer should know about credit reporting agencies. Knowing what they can and can’t do will make it less frustrating when you are trying to navigate through the system.

1. Each credit bureau creates its own report and score.

You have three different credit reports and scores. If you want a complete picture of your financial history, you need to know what is contained in each one.

2. Credit agencies are not legally required to give your score for free.

While it is true that you are entitled to one free credit report annually from each of the three major reporting agencies, they do not have to provide you with your credit score. Most will provide you with it once a year if requested, but they are not legally required to do so. There are some online sites that you can sign-up with that will give your credit score for free, but it is important to ensure that the company is reputable. One often recommended and advertised is Credit Karma.

3. Know which credit bureau to contact when there’s an issue.

• If you are disputing an error on your credit report, you need to contact the agency that created it.
• When you suspect fraud, contact any reporting agency. Legally, they must notify the others as soon as a fraud alert is placed.
• Credit freezes requires you to contact each of the three credit reporting agencies separately. It will take a little time, but it will be worth it to prevent any drops in your credit score.

This is important whether you are trying to rebuild it, have a good FICO score or just starting to create a credit history.

You might not be planning on applying for any loans, but your credit score still matters. At the very least, your existing creditors will still periodically check your FICO score after you’ve retired.

Thankfully, the steps for maintaining healthy credit are basically the same whether you are working or retired. If you’ve managed to keep your credit scores above the subpar mark while you were working, chances are you will be able to keep them healthy through retirement.

How Retiring Affects Credit Scores

Your retirement should not affect your credit scores. You are not even required to let any existing creditors know that you are no longer part of the workforce.

Retirees will also be happy to know that while their personal age won’t affect their credit scores, the age of their credit accounts will. For most retirees, this means higher credit scores reflected by their older accounts.

It is estimated that 68 percent of consumers over the age of 60 boast a FICO score above 700, compared to only 30 percent of consumers ages 18 to 29.

This means that most retirees don’t need to worry about repairing their credit score, only on how to keep it healthy.

6 Tips to Keep Your Credit Score Healthy

Credit scores are calculated the same, whether you are retired or still working.

You should also know what is included in your credit score. Not only will this make it easier for you to see what areas need improvement, but also spot any errors. An error on any one of your three credit reports can significantly affect your FICO score.

Your credit score is comprised of the following,

• 35 percent – payment history
• 30 percent – credit utilization rate
• 15 percent – age of credit accounts
• 10 percent – addition of new lines of credit
• 10 percent – mix of credit accounts

Now that you know what is included in your FICO score, it’ll be easier for you to keep it healthy.

1. Know your current credit score.

Your credit score will fluctuate, and this means that it is important for you to check it periodically. If you don’t know what your credit score is, you won’t be able to repair it if there are any problems. You are legally entitled to one free copy of your credit score from each of the three credit reporting agencies.

• Experian
• TransUnion
• Credit Karma

Since your score can vary slightly from each of the reporting credit agencies, it is important that you request a copy from all three.

2. Check for errors.

Mistakes in any of your credit reports can occur. This can be anything from incorrect credit limits to payments that were misapplied.

Any errors can cause an unhealthy drop in your FICO score. Disputing any proven mistakes will result in the black mark being removed from your credit score, and this can cause a sudden increase.

3. Don’t stop using credit.

One of the most common mistakes retirees make, is to stop using credit. You need to use credit if you want to keep your scores healthy, but you also want to be careful. If your credit utilization rate is too high, it can have a negative impact on your FICO score. Simply continue to make all monthly payments on time, and keep credit card balances low.

4. Minimal credit card balances are key.

Most financial experts recommend keeping credit utilization rates below 20 percent. This generally indicates that you can manage your finances. If your credit usage exceeds 35 percent your FICO score will drop. Paying your balances down each month, and on time will help keep your credit healthy after retirement.

5. Keep credit accounts open.

A simple way to keep your credit score healthy is to keep old accounts opened.

Part of your overall FICO score is determined by the age of your credit accounts, and closing the oldest ones can cause it to drop. Cancelling the newer charge accounts will also help lower your credit utilization rate.

6. Avoid multiple credit checks.

You are allowed to check your credit score from the 3 reporting bureaus once every twelve months, without any negative effectives. However, hard checks by potential lenders can cause your credit score to drop a few points. If you want your credit to stay healthy, it is best to limit the number of times you apply for financing in each year.

Enjoy Retirement with Healthy Credit

If you pay attention to your credit scores after retirement, you can avoid many of the problems that can cause it to drop to unhealthy rates.

It not only affects interest rates and auto loan approval chances, but also insurance premiums. For most retirees, the cost of their insurance is reason enough for them to watch their credit scores.

It doesn’t take a lot of time and effort to keep your credit healthy, and it is worth it when it allows you to relax and enjoy your retirement.

Unfortunately, this means that more people are discovering how devastating identity theft can be to their credit scores.

If you have been the victim of identity fraud there are steps you can take to repair your credit report. It will take some time and a little work, but it will be worth it when you have restored your credit score.

Monitor Your Credit Reports

One of the most important things you can do to protect your good credit rating is to closely monitor your score.

You are entitled to one free copy of your credit report from the three credit reporting agencies every 12 months. It is crucial that you monitor these reports if you want to protect your credit, and prevent identity fraud.

The instant that you notice anything that might indicate someone else is using your identity, start keeping records. This includes,

• Copies of all your credit reports
• Printed copies of letters, faxes and emails
• Records of all phone calls

Basically, you will want to have records of everything pertaining to the potential problem.

If identity theft is suspected the next step is to contact either Equifax, TransUnion or Experian to have a “fraud alert” placed on your report. Once the alert is placed with one credit reporting agency, it will automatically be transferred to the other two. The fraud alert will stay on your credit report for 90 days, giving you time to resolve the problem.

It is important that you check each of your credit reports for any errors or other signs of suspicious activity.

Quick and Easy Credit Fixes

Getting your credit back after identity theft will take time. There are a few things you can do to make the process go more smoothly. If your credit accounts have been comprised, you will want to close them immediately. Most credit card companies and other lenders won’t hold you financially responsible for the fraudulent chargers if the suspicious account activity is reported in a timely manner.

If a fraudulent account has been opened in your name, close it. The charges will still need to be disputed, but this will stop the identity theft from continuing.

Get an Identity Theft Report

After notifying the credit reporting agencies and closing affected accounts, you will want to create an identity theft report. The information in the report will be used to verify your claims of fraudulent activity so your credit can be restored.

1. You will want to file an identity theft report with the Federal Trade Commission. This can be done over the phone or online at identitytheft.gov. It is also important that you keep several copies of the affidavit for your records. Even though, the FTC seldom investigates identity fraud cases most credit card companies do expect to receive a copy of the official report.
2. A police report should also be filed. You will need to bring proof of identity, any documents pertaining to the theft and a copy of the FTC affidavit. The police report should contain as much information as possible, and you will also want a copy for your records. If there are any problems filing out the police report, the FTC has released a memo for law enforcement agencies that can be referred to.

How to Dispute Fraudulent Charges

Now that you have an identity theft report supporting your claims, it is time to dispute the fraudulent charges.

You will want to send identical letters to the three credit reporting agencies disputing the fraudulent accounts and charges.

Once your letter has been received, the credit reporting agency has 30 days to respond to your dispute.

You will also want to include,

• Copy of your identity theft report
• Credit report with the disputed charges highlighted
• List of the erroneous charges

If you’re not sure what format to use for the letter, there is a helpful example on the FTC website.

The letter must be sent certified mail, and it is recommended that you request a return receipt for your records. You can also ask to have the disputed information blocked from your credit report, if your claims of identity theft can be clearly substantiated. This way your credit report should be accurate, even before the errors are officially removed.

Notify Existing Creditors

Any financial institution that you have an auto loan, mortgage or credit card with also needs to be notified of the identity theft. You will want to send your existing creditors the same information that was supplied to the credit reporting agencies.

Consider a Security Freeze

Sometimes a security freeze is the best way to protect your credit while your identity theft problem is being resolved. It will effectively block anyone from applying for a new line of credit or loan using your information. This also means that you won’t be able to open any new accounts either, which is why a security freeze is not always the right option for everyone.

It works the same way as an initial fraud alert, only it is extended for seven years. Before you choose either option, you will need to have a copy of your identity theft report.

Don’t Forget to “Follow Up”

It is important to check with the credit reporting agencies and every lender you hold accounts with that they,

• Have received your letters of dispute
• Removed incorrect information from your credit report

Most financial experts recommend starting your “follow ups” 30 days after mailing the letters, and continuing to check on the progress of your dispute. Not only does this show that you are dedicated to repairing your credit report, it also helps to ensure that all information is correct.

Sometimes the disputed information isn’t removed from a credit report, even after multiple attempts. If this happens you have two courses of action.

1. Contact the Consumer Financial Protection Bureau (CFPB) and ask them to open an investigation.
2. The National Association of Consumer Advocates (NACA) can also be contacted to request legal action being taken to remove the fraudulent charges from your credit history.

Keep Looking for Signs of Identity Theft

Even after you have reported the identity theft and have begun the process of having the fraudulent information removed from your credit report, you might still be at risk. This is why it is important to continue to look for signs that someone might still be opening accounts in your name. Some of the warning signs that you want to watch for include,

• Mail missing
• Checks that bounce
• Credit/debit cards declined
• Bank statement shows unexpected withdrawals
• Loan application denied due to a bad credit score
• More than one tax return reported by the IRS filed with your social security number
• Credit report shows unfamiliar charges or accounts
• Bills arrive for unreceived medical treatments
• Creditors trying to collect on debts not incurred by you

There’s Hope After Identity Theft

Just because you’ve been the victim of identity theft, it doesn’t have to mean that your credit is ruined for years.

It will take some time to get the misinformation removed from your report, along with some work. However, when your good credit score helps you get approved for a low interest auto loan you’ll be glad that you took the time to dispute the fraudulent claims.

Millions of Americans are finding that their poor FICO score is preventing them from getting approved for new lines of credit. It’s a catch-22 that many adults find themselves trapped in.

You need a good credit history to be approved for an auto loan, mortgage or even a charge card. If your credit history is poor, your chances of approval are significantly lower. Since you can’t get new credit, you won’t be able to repair your credit score.

There is still hope if you are trying to rebuild your credit score, you can apply for a secured credit card.

Rebuild Your Credit with Secured Credit Cards

A common question asked by consumers looking to rebuild credit is if secured credit cards can help, and the answer is often “yes”. Though this doesn’t necessarily mean that it is the right approach for everyone. There are benefits and disadvantages to repairing your credit with a secured charge card that you should be aware of.

How Secured Credit Cards Can Rebuild Your Credit

Secured credit cards can be used anywhere traditional charge accounts are accepted. You still have a line of revolving credit that is paid back to the lender every month. The main difference is your credit limit is determined by the amount of your secured deposit.

If you deposited $500 in the account linked to the card, your credit limit would be the same. Secured credit cards typically offer limits that range from $500 up to $5000, depending on the type and issuer.

Every time you use a secured credit card and make a monthly payment, the information is generally sent to the three recognized credit reporting agencies. Over time, this can help boost your credit score so you can eventually get approval for an unsecured loan.

A secured credit card can also help you keep your credit usage to debt ratio in the optimal range, and this will positively affect your FICO score.

Drawbacks of Using a Secured Credit Card

While a secured credit card can help some consumers rebuild their credit, it might not be the best choice financially for everyone. There are some drawbacks to using secured credit cards.

• A cash deposit is required and the amount will determine the credit limit on the card.
• Some secured credit cards do not report monthly payments to all 3 bureaus. This can lengthen the amount of time it takes to repair your credit score.
• Interest will be applied to any monthly balances not paid in full, and this will affect the card’s credit limit.
• If you accidently go over your secured line of credit, the penalties can be expensive. This will also have a negative impact on your credit score.
• Some secured credit cards begin charging interest immediately after the purchase is made, instead of waiting the traditional grace period.
• There are not any customer rewards programs linked to secured credit cards.

How Long Will It Take Before Credit Scores Improve?

You won’t see your FICO score instantly improve, but over time a secured credit card can give it a boost. It will help you build a strong credit history, and this in turn will improve your score.

There are a few steps you can also take to ensure that you are getting all the bonuses that should come with using a secured credit card. This includes,

• Make monthly credit card payments on time. This is one of the most important steps you can take, since it also comprises a substantial portion of your credit score. You also don’t want to be stuck with the high interest rates that are typically applied when the monthly credit card payment is overdue.
• Do not purchase items on the secured credit card that you won’t be able to easily pay off. This can indicate to potential lenders that you are a high-risk applicant when you apply for an unsecured loan or new line of credit.
• Even if you can make the monthly payments, you don’t want to “max out” the credit card. This will negatively affect your credit usage rate, which makes up 30 percent of your FICO score. Your goal is to show that you can use credit responsibly, and this includes staying below the card’s limit.

If you show that you can use credit and repay it on time, you should start seeing a steady improvement in your score after a few months. Most lenders will also approve you for an upgrade to an unsecured credit card, typically after a year. This can cause your credit score to jump a few more points.

The Final Word

If you are trying to rebuild your credit, it can be difficult. You need credit to get credit, and when you have a subpar FICO score your options are often limited.

A secured credit card might be what you need to boost your score, but it is also important to make sure that it is the right one for you. The card issuer should report to all 3 credit agencies, and allow for a grace period after a charge has been made. You also want to compare interest rates, to ensure you are getting the best credit card for your money.

Just like its name implies, a credit builder loan can help you boost a low FICO score. It is a small loan and the terms will vary depending on the financial institution. It also doesn’t require a good credit score for approval.

You might be wondering why you haven’t heard of a credit builder loan before. This is due to the fact it is rarely advertised, and typically only offered at community banks and credit unions.

Types of Credit Builder Loans

There are different types of credit builder loans and each can come with additional financial benefits. If you apply for an unsecured credit builder loan, the money is provided upfront. This is a good option if you need cash for an emergency expense.

A loan secured by funds will help you learn how to save money. The amount of the loan is held, until you have paid it off. If you only want to improve your credit portfolio, and don’t need money immediately, this can help you become more financially responsible.

You can also apply for a secured loan, and if you need to quickly raise your FICO score it might be a financially sound option. You will need to have the amount you are borrowing in your account, where it will be frozen until you have repaid the loan in its entirety.

How Credit Builder Loans Work

Credit-building loans typically range from $100 to $1500, rarely any higher since one of the terms is usually that it needs to be repaid in 12 months or less.

Most financial institutions also require that the applicant is financially stable. Common requirements include,

• Member of the institution
• Proof of employment
• In good standing with the bank

If you meet all the requirements you’re chances of approval are good, regardless of your credit score.

One of the main disadvantages is the typically high interest rate that can make it difficult for some borrowers to make their payments on time. For example, if you have a bad or no credit score your interest rate could be 18.99 percent or higher.

Fico Scores and Credit Building Loans

According to one of the directors at Credit Builders Alliance, Sarah Chenven, the majority of consumers that apply for one of these loans are working towards a larger financial goal.

A study conducted in 2013, found that credit scores could improve up to 35 points in 6 months by paying off a small credit building loan. This can make it easier for you to get approval for an auto loan, mortgage or even an unsecured credit card.

If you have missed or late payments from other accounts the boost to your credit score will be lower, usually around 20 to 25 points. This can still be enough to raise a poor FICO score to “fair”.

Get The “Most” Out of a Credit Builder Loan

If you believe that a credit-building loan is financially right for you, there are a few steps you can take to ensure that you get all the possible advantages.

1. Are you financially ready? If you’re having problems paying your existing bills on time, you will want to wait to apply for a credit-building loan. It will cause more damage to your credit score if you can’t make the payments, and any money that you have in your accounts could be forfeit.
2. Shop around. There are different types of loans with varying terms and benefits. Along with checking with your local credit union, see what other financial institutions are offering. Some credit builder loans are designed for specific borrowers, and one of these might fit your unique financial situation.
3. Understand the terms. This is important. If you don’t understand all the loan requirements, it can cause problems later on. Don’t be afraid to ask the lender any questions. This can include,

• Collateral, if applicable
• Interest rate
• Payment due date

4. Never make a late payment. Any late payments will be reported to the credit agencies, and this will hurt your FICO score. It can also be difficult to get back on track, especially if the high interest rates are piling up.
5. Don’t double up payments. It can be tempting to shorten the length of the loan by paying it off faster. While it can be less stressful, it won’t help your credit score. You need every payment to count, if you want your FICO score to increase. The purpose of this type of loan is to build your credit and that takes time.

Building Good Credit Takes Time

While you can ruin your credit in a relatively short amount of time, it takes longer to rebuild it and this type of loan can give it a little push up.

Just remember to “shop around” and understand the loan terms. It is also important to make every payment on time, even if the funds are being held in your account. If you follow every guideline, you should see your credit portfolio improve during the life of the loan.