Category: Credit Repair

Leasing a car has its advantages, and a few downsides. However, if your credit is subpar qualifying can be a problem.

You might be able to take over someone’s existing lease payments and have the vehicle in your name. This way, you can have reliable transportation anytime you need it and get credit for making the lease payments on time.

Benefits and Disadvantages of Taking Over an Auto Lease

Before you decide that this is the right financial move for you, there are a few factors to consider. While a “take-over auto lease” can help rebuild poor credit, there can also be pitfalls. Knowing all the facts will ensure that you don’t end up hurting your credit, instead of helping it.

Upside to auto leasing

• You can trade in your vehicle every few years for a newer model. This can apply to the person that took over the loan, but a credit check will be required. If you make all the payments on time, and keep the vehicle for a few years, there is a chance your credit will have improved enough to be approved.
• Auto leases can be handled by the dealership or Buy Here Pay Here lot where credit requirements are often less strict than at a bank or credit union. This is not always the case, but the same benefit often still applies.
• Most car leases come with “bumper to bumper” warranties from the dealership at a lower price than if you would have purchased the vehicle outright.
• If the vehicle you leased turns into a “lemon”, you can have it replaced at the dealership with little to no hassle.
• Sales tax is often lower on an auto lease compared to buying the vehicle.

Downside to auto leasing

• A set mileage can included in the lease contract. If you go over it, fees often apply. These can add up depending on how often and the distance you drive.
• The dealership often gets to retain the vehicle’s blue book value when you are ready to trade it in. When you purchase an auto, you still retain its value and this can be used towards your next vehicle.
• When you assume a lease you might not have all the benefits that were included with the original leaser. This can include charges for mileage if they are over what the initial auto lease contract specified.

Taking over a lease can help you get behind the wheel. If you’ve decided that this is the right decision for you, there are a few steps you need to follow.

How to Assume a Vehicle Lease

If you want to take over someone’s car lease, there is a little more involved than just making the payments. You could just continue to pay on the original title holder’s lease but this is problematic. Not only is it illegal, you won’t be acknowledged for making the monthly payments on time. This means that your credit won’t benefit, only the original vehicle owner’s will. Everything from the vehicle title to the insurance will stay in someone else’s name.

What is a vehicle lease?

If you’ve ever rented a car, then you already have a good idea of what a lease is. A contract is signed with the lender; bank, credit union or dealership to drive the vehicle for a preset amount of time. Most leases are for 12, 24 or even 36 months. One can also be requested that it is shorter or longer depending on needs and finances. Yearly mileage will be restricted to prevent the vehicle’s value from depreciating, usually between 12,000 to 15,000. It is possible to raise the mileage restrictions but this usually results in higher monthly payments.

What is lease-swapping?

When you take over someone’s car lease it basically involves transferring the paperwork from their name to yours. Now, you are responsible legally for the remaining payments and vehicle maintenance. You will still have to abide by the mileage restrictions but you can drive the automobile for the remainder of the lease. If you want to renew the lease or get a new vehicle, you will have to meet the lender’s credit score requirements. For most lenders it is a FICO score of 620 or higher. Making the monthly payments on time can help raise your credit score, though it can take several months before it is reflected on any of your reports.

If you are ready to take over a car lease and repair your credit, here’s what you need to do.

Find out your credit score

You can find out what your credit score is for free, and without incurring any loss of points, with your bank or CreditKarma.com. If it is below 620, don’t give up, you might still be able to take over a car lease. The vehicle might be an older model but it still gets you on the road and a start to “upping” your credit rating.

Print out your credit report

There are three credit reporting agencies, Experian, TransUnion and Equifax. Each will issue one free credit report per year. You will need this when you sit down with the potential lender. Even if your report is dismal or almost non-existent there is still a chance that you can assume the lease, especially at a Buy Here Pay Here dealership.

You will also want to have documents that show proof of address and income.

Before You Take Over the Car Lease

If you have been approved by the lender, don’t sign the contract immediately. There are a few things that you are responsible for doing when you are assuming a car lease.

1. You will want to be sure that you understand all the requirements and are able to be meet them. This especially applies to the mileage and monthly payments.
2. Look to see if the lease and vehicle warranty end on the same date. In some cases the warranty ends before the “new” lease. If this is the case, you need to negotiate new terms before signing. It will save you money in the long run.
3. Once you’ve selected a vehicle, have it inspected by a licensed mechanic. The one you select, if not supplied by the lending company, should be ASE certified.
4. Double check to ensure you are getting the “best deal”. Sometimes Buy Here Pay Here lots are less expensive than traditional dealerships.
5. Find out the vehicle’s history, even if you are taking over the lease from a friend or family member. You don’t want any unpleasant surprises after you have taken responsibility for the payments. A good source to check is CarFax.com.
6. Know if there are any fees when the lease ends if you decide not to renew or select another vehicle. For some lenders, this is a common clause and the fee can be high.

Should You Assume the Lease of Someone You Know?

This is a common question, and the answer often depends on the vehicle and the individual. It might seem easier to take over the lease of someone you know but you still have to follow the same steps with the original lending company, and this includes a credit check.

What you should be paying attention to is the vehicle and if it fits your lifestyle and most importantly budget. If not, your best choice is to visit a car dealership and see what they have to offer. Since your credit isn’t the best, you probably won’t be able to assume the lease of a newer, fully loaded vehicle but an older model might be available without all the “bells and whistles”.

Once you’ve established a history of timely payments, then you can start discussing upgrading when the lease has ended.

Lease Swapping Could Be Right for You

There is no denying, it can be difficult to get a vehicle with little or bad credit. Being turned down repeatedly due to low credit scores can be embarrassing and disheartening.

While the chances of you driving off the lot in a new car are slim, assuming the lease of an older vehicle might be the chance you need to start rebuilding credit and get you a dependable ride so you can easily get to where you need to be.

Chances are, if you have your paperwork in order, someone will be willing to take a slight risk on you. It might be at a Buy Here Pay Here lot and there is nothing wrong with that. You might find that you’re glad you did.

Opening a merchant charge account is usually quick and easy. You often receive discounts on your first purchase, just for applying. While paying the monthly balances can help rebuild your credit, these cards can also hurt it.

Advantages of Store Charge Cards

There are several advantages that often come with merchant credit cards, and make them an attractive option for many consumers.

1. Exclusive offers and discounts

The initial discount offered, when you sign-up, is one of the main reasons consumers open store credit accounts. These can average from 15 up to 30 percent, depending on the item. On some large purchases, this can result in significant savings.

Some retailers also offer ongoing discounts to their cardholders throughout the year.

2. Easy access to credit

When you are trying to rebuild your credit, getting approved for a traditional line of credit is difficult. Retailers often do not have the same criteria for approval, especially since their cards come with a spending limit.

If you need to purchase an item that you can’t afford at the time, a card offered by the retailer might be the best option.

3. Help rebuild credit

Retail charge accounts can help you raise a low score, but only if the activity is reported to the main three credit bureaus. (Experian, Equifax and TransUnion)

To rebuild your credit with an in-store line of credit, you Must make every monthly payment on time. Failing to do so, will cause your score to drop. The missed or past due payment can also stay on your credit report for up to seven years.

Disadvantages of Retail Charge Cards

These cards might seem like an ideal way to start repairing your credit, but they can come with a few disadvantages. Knowing what they are, before applying, can prevent you from potentially lowering your score even further.

1. High interest rates

This is a significant difference, especially if the balance due isn’t paid in full.

If you only make the minimum payment each month the accrued interest could cause the final cost of your purchase to double, even with the initial “signup” discount.

2. Limited places of use

You can find some retail cards that are part of the Visa or Mastercard network. These can be used anywhere the logoed cards are accepted. Usually, you will only be able to use it in the store that issued it. This limits what you can use the card for.

Referred to as “close-loop cards”, applying for one might only be beneficial if you make frequent purchases at that store.

3. Few rewards

Typically, there are a few rewards and incentives offered after the first discount. The only drawback is that they usually must be used at that store. If you are a frequent shopper, it might be financially worth it.

If not, you might want to consider applying for a secured credit card.

4. Credit limits are lower

Credit utilization is an important part of your score, especially if you are trying to rebuild it.

This can be difficult when it has a low limit. If the card has a $1,000 limit and your balance due is $500, the utilization rate is 50 percent. This can cause your score to drop, instead of raising it.

Cards with higher limits can have a lower rate of utilization, but they can also be harder to get if your score is subpar.

Repairing Your Score with a Retail Credit Card

Retail charge cards can help you rebuild your credit, if you know how to use it. These simple tips will ensure that you don’t overspend, and they can even show you how to add a few points to your FICO score.

1. Don’t overspend

Just because you now have a line of credit at your favorite store, doesn’t mean you can buy everything you want.

Stick with your normal spending patterns.

Only use the card for items you need or were already planning to buy. This way, you can take advantage of the discounts and still be able to pay the monthly balance.

2. Pay the balances off

It is crucial to make the monthly payments on time, late and missed ones will hurt your score. Whenever possible, pay off the total balance. This way you’ll avoid the high interest rates.

While making the minimum monthly payments can will help build a credit history, interest will be added until the total amount due is paid off. Over time, it can quickly add up.

3. Regularly use the card

You don’t want to run-up the card’s balance, but you still want to use it often. Frequent use combined with on-time payments can boost your score, and build a strong history. If the card isn’t used, eventually it will be marked as “inactive”. This won’t hurt your score, but it also doesn’t help it.

4. Pay attention to your credit utilization

This rate is an important part of your overall score. It is used to determine “creditworthiness”, and will be affected by the use of your retail card.

Credit utilization rates are calculated by how much available credit you’ve used, divided by the limits. Optimally, you want a usage rate below 30 percent. This can be difficult if the retail credit card has a low limit and you’re carrying a high balance.

You’ll want to keep this is mind, every time you use an in-store credit card.

In-Store Credit Cards Can Be Worth It

There are drawbacks to retail charge cards, but they also have several advantages. They can help you make necessary purchases not affordable with your available funds, save money and even repair poor credit scores.

Before you succumb to the pressure at the register and apply for a retail credit card, consider how it will affect you financially. If you decide that it is something that will help you, then these lines of credit will be worth it for you. When used responsibly, they can even help you rebuild your credit.

Unfortunately, this is a mistake since this white-collar crime is on the rise.

Whether you are trying to rebuild your credit or keep your “good” score, closely monitoring your finances is something that should be done automatically.

5 Common Types of Credit Card Fraud

Watching for discrepancies in account balances and on statements will alert you if any fraudulent charges have been made. However, you can take steps to prevent the theft from ever happening.

Knowing what to look for will help keep your credit safe.

1. Be wary when you are shopping online. Since you need to enter in your payment information to place your order, it can be easy for thieves to steal your card number. If you Do Not see a lock icon or other indication that it is a secure and valid site, take your business to another online retailer.
2. Your card information, including PIN # is vulnerable at any gas station. Criminals can place a small device on the gas pump, which will collect the data from every transaction. Taking the time to “pay inside” and Not at the pump can save you the hassle of trying to straighten out your finances.
3. A study conducted by NASDAQ found that even though mobile users account for only 14 percent of the sales made online, they are responsible for 21 percent of the reported fraudulent activity. Make sure that all security updates for your mobile device have been installed, and double check that you are dealing with a reputable distributer.
4. If you love to do your online shopping between 2 am and 6 am, your risk of credit card fraud increases. This is because merchants and banking officials are less likely to notice any abnormal transactions, which makes it the ideal time for criminals to try and steal your information. NASDAQ also found that the risk for fraud increases 200 percent Christmas Eve and Christmas Day.
5. Never give your information out over the phone, even to a recognized charity. Almost every charitable outfit has a webpage, email, phone number or physical address where you can safely send your donation to. This is considered the “season of giving”, and thieves like to take advantage of this.

Tips on Preventing Credit Fraud

Along with avoiding scams and keeping an eye on your balances, there are a few other things you can do to protect your cards and credit score.

Practice Basic Security

It can seem like everyone is offering you a charge account, and if you find one with a great interest rate you want to keep your new line of credit safe.

• Immediately sign the back of the new card.
• Never keep your PIN # with the card.
• Take advantage of paperless statements.
• Make monthly payments online.

Current Personal Information

If your address, phone number or email changes it is important that you update your information, especially if your statements are mailed. It also ensures that the bank can easily reach you, if they notice any suspicious activity with your accounts. The sooner you stop any fraudulent activity, the easier it will be to resolve the discrepancies.

Receipts

Watch what you do with your receipts. Don’t leave them laying on check-out counters or in shopping carts and baskets. Shred any that you don’t need, and safely file the ones that should be kept. Double checking your receipts against your statements will help ensure that you won’t be paying for any additional charges.

Use Secure Networks and Devices

One of the best ways to protect your credit cards is to always use a secure network and device when shopping online. Here are a few tips to help keep your charge cards safe.

• Equip your laptop, computer or mobile device with a firewall. Always keep it turned on, and change the password frequently.
• Install all updates whenever prompted.
• Upload security software.

Use Safe Websites

Online shopping is extremely convenient, and it can also put your information at risk. Only shop at sites that are established, and can be easily contacted if there is an issue. A good tip to remember, is to look for sites that have “https” at the start of their web address. The “s” indicates that the site is secured.

Never Share Your Passwords

Your passwords should always be kept private and securely stored. Never divulge them, especially online or over the phone. Change them regularly, and try to avoid using common family names, addresses or birthdays. The best passwords will contain a mix of letters and numbers.

Immediately Report Lost Cards

Credit cards do get lost and if it happens to you, report it immediately! This also applies if you notice any fraudulent activity. The longer it takes for you to report lost or stolen credit cards, the harder it will be for you to dispute any charges that aren’t yours.

You Don’t Have to Be a Victim

Just by following these simple tips, and being aware of your surroundings, you can protect yourself from credit card fraud. Keep track of any and all charges on your accounts, use secure networks and never give anyone your passwords.

During the hectic holiday season few consumers give it a second thought. This makes it easy for them to hurt it without realizing it.

There are steps you can take to ensure your credit doesn’t take a hit, so you can relax and enjoy this festive season.

Why Protecting Your Credit Matters?

There are several reasons why it’s important to keep your credit score in mind over the holidays. You don’t want to start the new year off learning that it has drop several points.

Lower scores will make it harder for you to get loan approval, for everything from vehicles to mortgages and credit cards. If your application is approved, you will be paying higher interest rates. Even though it only took a few weeks for it to drop, consumers often find that it can takes years to repair.

How to Keep Your Credit Score from Falling

Want to protect your FICO score and credit history? Here are a few steps that will help you keep it safe.

1. Don’t open any new lines of credit.

The holidays are a time for presents, vacations and festive gatherings. This also means you will probably be spending more money. It might be tempting to apply for a new credit card, but doing so will hurt your score. Every time you fill out a credit card application, an inquiry is made.

The loss of a few points is temporary, but it can still impact you financially. You might find it more difficult to be approved for a low interest loan. How many points you lose, and how long it takes to recover, will depend on the average age of your other accounts or financial history.

2. Try to keep balances low.

One of the main factors that determines your credit score is the total amount of your debt. This includes credit card balances. Scores often drop when card holders are close to reaching their limit.

Consumer Education Manager for Experian, Sandra Bernardo, recommends using 25 percent or less of your available credit. Budgeting for the season ahead of time, will help you avoid running up your credit card debt.

3. Don’t take out a personal loan.

Personal loans might be a smarter decision financially. They come with fixed interest rates that are lower than ones offered by credit cards. You also know the date the last repayment will be due, and exactly how much you can spend.

Even though these loans do have advantages, there is a downside. You are opening another line of credit, and this can affect your score. There will be an inquiry into your history, and this temporary dip could last for several months. If other lines of credit are already maxed out, adding a new one will add to your debt total. This is also factored into your credit score.

4. Avoid payday loans.

Rowe Price, a global investment management firm, noted that 11 percent of parents surveyed took out a payday loan during the holidays. The one advantage of these loans, is that they do not appear on your credit history.

However, there are several downsides. Interest rates are higher, and repayments are typically due weekly. Failure to keep up with your payments usually send your account to a collections bureau. This will appear on your credit report, and it can take up to seven years before it is removed.

5. Pay bills on time.

It’s easy to forget due dates for bills during the busy holidays. This is one thing that you don’t want to do.

Even one late or missing payment can cause it to drop.

Setting up automatic payments is the best way to make sure your bills are always paid on time. This does mean that you will have to pay attention to your bank account balance to ensure there are enough funds to cover the payments.

6. Avoid holiday scams.

Unfortunately, the holidays come with plenty of scams. Falling for one can have a devastating effect on your credit. The best advice to follow is “if the deal sounds too good to be true, it probably is.” Do not give out any personal information over the phone or in response to an email.

Emails advertising significant savings from retailers, if you fill out a short online form, is one of the most common holiday scams. Once they have your name, birthdate and social security number, it is easy for them to assume your identity. Phone calls from charities asking for a donation is another favorite ploy with scammers.

7. Keep an eye on your credit report.

The best way to protect your score is to monitor it. You can check it for free through the online site, Credit Karma. Most banks also offer credit monitoring tools at no cost, if you have an account with them. You are entitled to three free credit reports a year from the credit reporting bureaus; Equifax, Experian and TransUnion.

Monitoring your report allows you to catch any mistakes and petition to correct them. It also allows you to watch for any signs that your identity might have been stolen.

Protect Your Credit and Enjoy the Holidays

The holidays are a busy time of year, and can quickly become expensive. This doesn’t mean that your credit score has to suffer. Have a budget in mind that includes surprise expenses, do not open new lines or credit and monitor your score.

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.