Category: Credit Repair

This can have a negative impact on their credit score making it difficult for them to secure any type of financing.

One way people are looking to repair their bad credit rating and raise their score is to consolidate their debt. It is one viable option to consider if you are looking for a way to start paying off your accumulated debt.

What is Debt Consolidation?

Debt consolidation is when you combine several unsecured loans into a single monthly bill. Some examples of unsecured debt include,

• Medical bills
• Credit cards
• Personal loans (i.e. school)
• Payday advances/loans

One of the main advantages in combining your debt is that it can reduce your chances of forgetting a payment. Instead of keeping track of several monthly bill due dates, now there is only one. Missed and late payments on loans is one of the leading causes for poor credit scores.

There are three types of debt consolidation consumers generally consider.

1. Debt Management Plans
2. Debt Consolidation Loans
3. Debt Settlement Agreements

You will not see an immediate improvement in your credit score. However, after you’ve made several payments on time it can be an effective first step in repairing your bad credit score.

Some of the other benefits that often come with consolidating unsecured debt can include,

• Lower interest rates
• Repair poor credit scores
• Lower monthly loan payments
• Reduce the amount of time you’re in debt

Debt Management Plans vs Debt Consolidation Loans

When you are trying to decide what is the best way to consolidate debt, you’ll want to figure out how much you owe. If you owe less than $3000 in credit card debt, your best credit repair option might be to apply for a new charge account with a lower or no interest rate.

You can also borrow against your retirement savings or life insurance plan if your overall debt is less than $3000. If you owe more than $3000 in credit card debt, your best course of action might be a debt management plan.

Debt Management Plan

Debt management plans (DMP) are often recommended by financial experts. The most effective ones are usually managed by a non-profit organization, and start with a credit counseling session.

Once your monthly payment amount has been decided the credit counseling will work with your creditors to,

• Lower interest rates
• Remove or reduce late/missed payment fees

Each month you send one payment to the credit counseling agency monitoring your debt management plan. They will divide the amount among your creditors, eliminating all the harassing phone calls and collection letters.

The downside to a debt management plan is that it can temporarily lower your credit score. Once the debt has been repaid, typically in 3 to 5 years, you should see an almost immediate improvement in your credit score.

Debt Consolidation Loans

If you don’t want your credit score to drop any lower, you might want to consider a debt consolidation loan (DCL).

Instead of sending several smaller payments to different creditors, you will simply make a single larger one. A debt consolidation loan will also come with a lower interest rate. Some of the types of DCLs you might want to consider can include,

• Personal loans
• Home equity loans
• Balance transferred to zero or low interest credit cards
• Student loan consolidation

Understanding Bill Consolidation

Bill consolidation is simply combining your bills and using a loan to pay them off. This way your credit report will reflect the positive settlement of several debts, along with your ability to effectively manage the new loan payments.

If your credit score is already below subpar, this might not be the best option for consolidating your debt.

Tips on Getting a Consolidation Loan

The first step is to add the total of the bills you are trying to consolidate. This includes the amount of the monthly payments, along with the interest rates. You will also want to know your current credit score before you start looking for a consolidation loan.

Some of the best places to apply for a debt consolidation loan will include,

• Banks
• Credit Unions
• Online lending companies

Many financial experts recommend starting with an online lender. Your chances of being approved for a loan are increased, and many offer lower interest rates. Before you accept any consolidation loan offer you will want to compare the following among the various lenders.

• Interest rates
• Any fees or penalties for early loan repayment
• Length of the loan

When you are taking out a consolidation loan it should not only shorten the amount of time you are in debt, but also lower your monthly payments and interest rates. If it doesn’t accomplish all three, you will want to keep looking at the various lenders.

Consolidating Credit Card Debt

If your credit score is above 700, financial experts typically recommend applying for a zero-interest account.

While this can be an effective way to eliminate your credit card debt yourself, there are a few drawbacks you’ll want to consider.

• The introductory no interest rate typically only lasts 6 to 18 months. During this period 100 percent of your monthly payments will be applied towards your balance.
• Interest rates on the remaining balance can jump as high as 27 percent, though they typically remain around 13 percent.
• A “balance” transfer fee can be applied.
• Some credit cards come with annual “maintenance” fees.

You can avoid many of these downfalls simply by “shopping around” for the best credit card offer.

How to Consolidate Bills

You will need to be patient and organized when you are consolidating your bills. In some cases, you might also have to be persistent when you are trying to figure out the total amount of your debt.

Once you have settled on these numbers, it will be easier to decide whether a debt management plan, debt settlement or personal loan is the right financial choice for you.

Regardless of the type of debt consolidation method you choose, it is always important to remember that it will not be an instant fix for your poor credit score.

When NOT to Consolidate Debt

Even though consolidating your debt does come with several advantages, it is not always the right choice for everyone. There are times when it could increase your debt, and have a detrimental effect on your credit score.

• If the debt is transferred to a zero-balance credit card, but you don’t change your spending habits you can easily find the total amount you owe steadily increasing.
• Debt consolidation can cause your credit score to drop making it difficult for you to secure a home or even high interest auto loan. If you are planning on applying for one of these loans, you might want to wait to consolidate your debt.
• If you use your home or vehicle as collateral for a debt consolidation, you could be at risk for repossession or foreclosure if the monthly loan payments aren’t made in full.

Taking the time to get all your paperwork in order and knowing exactly what you can afford to pay each month are the first steps in ensuring that a debt consolidation loan is the right choice for your financial situation.

Consolidate Debt in 3 Simple Steps

If you’ve decided that debt consolidation is the best way to repair a poor credit score, there are three simple steps you need to follow.

1. Take the first step.

The first step is to decide to start paying off your debts, and repairing your bad credit. The sooner you start working on a strategy to repay your debt, the quicker it will go away. This also means seeing a faster improvement in your credit score.

2. Know what your options are.

If you don’t know what your options are, it will be impossible for you to make the right decision for your situation. A debt management plan should be your first option, unless you have a “good” credit rating or owe less than $3000. In these cases, a personal loan or transferring the balances might work best for you.

It is also important that you know which type of debt can be consolidated. For example, you cannot consolidate federal student loans with the rest of your debt.

3. Be aware of the risks.

Financial advisors might not always fully inform you of all the risks associated with debt consolidation. The first one being, that it is not always the best choice for everyone. Using a home or automobile as collateral is risky, along with putting up retirement savings.

Simply following these 3 steps will help prevent you from making a potential mistake that could end up hurting your credit score. Before you make any final decisions, it is always best to speak with a qualified financial advisor.

If you want to start repairing your bad credit score there is an important question you need to ask yourself. Do you belong to the “credit community”? Even if you have a credit score and history, this doesn’t necessarily mean that you are a part of the community.

Credit Community: Who Doesn’t Belong?

Most adults are members of the credit community, except for two types of consumers.

• If you are one of the few adults that doesn’t have a credit history, you are probably finding it difficult to start building one. In order to build a positive history there must be credit for you to use, but it is hard to get approved when you don’t have any for potential lenders to look at. Without a previous history of making loan payments on time, most lenders won’t approve you for a credit card or loan. Since you can’t get approval there won’t be any credit for you to use, and this means that you won’t be able to start repairing your dismal FICO score. It is a frustrating Catch-22 that can be difficult to get out of.

• People that have previously experienced bad luck with their credit aren’t always a part of this community. Due to their mismanagement of their credit cards and bank accounts, they have now decided to strictly use cash. Even though this is not the norm in today’s society, it is still possible to exist without ever needing to use a credit card or take out a loan.

Basically, you will be starting from the beginning and this means it might be more difficult to raise a low credit score.

Credit Communities in the U.S.

The Federal Reserve Bank of New York conducted a study in 2015 that found an estimated 89.2 percent of American adults currently have a credit score and history. This means that they are a part of a credit community.

New Hampshire estimates that 96.4 percent of its population has a credit history, while Arizona only boasts 84.7 percent of its residents with a working credit score. The differing numbers reflect the finances of the region, with stronger economies typically resulting in a higher number of residents with useable credit histories. If the economy continues to grow, the New York Fed also expects to see participation increase in a credit community.

Rebuilding Your Credit Score

This is important to remember if you are trying to repair your credit score. Your credit score is determined by measuring a few metrics that include the age and types of accounts, along with any new credit you might have.

There are 3 other factors that comprise your FICO score, and determine how active you are in the credit community.

Credit utilization ratio

While you don’t want your credit utilization ratio to be too high, not using it at all can be just as damaging. It comprises 30 percent of your score, and most financial advisors recommend only using around 10 percent annually.

If you used more than 10 percent you are not alone.

You can still be a member of the community, and use less credit. This ensures that potential lenders have a strong current history to review, while also demonstrating your ability to manage your finances.

Revolving credit

This refers to credit cards and home equity lines of credit, and your ability to obtain it without having to apply for another loan.

Residents living in northern states typically have higher levels of revolving credit due to a stronger economy. This doesn’t mean that if you live in the southern part of the country you won’t have access to revolving credit, but it might be more difficult if you have a low FICO score. By making the monthly payments and managing your accounts, over time your participation in the credit community can help raise your score and make it easier for you to access credit without having to apply for a loan.

Paying on time

Since 35 percent of your credit score is comprised of your payment history, it is easy to see why it is so important to never miss a due date.

Not only does this indicate a strong credit community, but also consumers’ ability to keep up with their loan payments.

Just by making your loan payments on time can raise your credit score a few points, and help build a positive history that can increase your chances of being approved for an auto loan or mortgage.

Using Credit Has Its Advantages

There are not any fees, dues or other extra costs associated with being a member of a credit community. All you have to do to join is to occasionally use credit instead of cash when you make a purchase or pay a bill. Even if you hold several credit cards, if you don’t use them you still aren’t a part of the community.

While it is important for you to be responsible with your credit, if it is used correctly it does have advantages. It can help raise your score, build a strong history and significantly improve your chances of being approved for a loan with a low interest rate the next time you need to apply.

If you have any questions about your participation in a credit community and how it can help you rebuild your history and FICO score, it is always advisable to speak with a qualified financial officer.

Even though TransUnion reports that 95 percent of consumers have no problems seeing their credit reports online, there will be times when it’s not that easy for everyone. If you are having trouble viewing your credit report from any of the three reporting agencies, the following tips will guide you through the necessary steps.

How to Access Your Online Credit Report

Each one will also allow you to request access to your credit report online.

Before you are allowed access to your credit report you will need to be able to supply the following information,

• Name
• Social Security Number
• Date of Birth
• Addresses within the last 2 years

Along with this information you will also need to answer several security questions.

These questions are based on “out of pocket” information, and are used to authenticate your identity. This means that the answers to the questions won’t be readily available to potential identity thieves.

Some of the other reasons you might not be able to access your credit report can include,

• If you provide an address not listed with the credit bureaus.
• Using a middle name that is not listed on your credit accounts.
• If your financial history is limited.
• If your credit accounts have been inactive for 6 months or longer.

If you can’t access your credit report online, you can still request a copy of it by mail.

How to Request a Credit Report by Mail

Requesting your credit report by mail will require you to provide the following information,

1. Copy of driver’s license or government issued i.d. with current address and photo.
2. Copy of a current utility bill, insurance or bank statement with matching address.
3. Social Security number
4. Date of birth
5. List of current and previous residences within the last 2 years.

Once the credit reporting bureaus have received and verified your information, a copy of your file will be mailed to you. The time it takes to receive your credit report will vary, usually four to six weeks.

Experian deletes inactive accounts with bad credit scores after 7 years. Accounts with good credit scores will be deleted after 10 years of inactivity. Once your credit history is deleted by the 3 reporting agencies it will be necessary for you to start building it again.

Requesting a Credit Report During Incarceration

If you or a family member are incarcerated, it is still possible to request a free credit report. The request must be done by mail, and the following information will need to be supplied.

• Full name, including middle and any suffix.
• Date of birth.
• Social Security number.
• List of residences within the last 2 years.

A notarized letter from a prison official verifying the current address will also need to be submitted. The letter must include the prisoner’s identification number, and be printed on the institution’s official letterhead.

Once the request has been received and approved, a copy of the credit report will be mailed to the correctional facility.

Locating the Necessary Information

Most of the documents and information needed to access your credit report will be relatively easy for you to provide. However, some might be a little more difficult.

If you need a copy of your social security number, you have two options.

1. You can request a new social security card by mail. You will need to provide your birth date, along with a copy of your state or government issued i.d. In most cases, it will take 4 to 6 weeks for your new card to arrive.
2. A request can be made in person at a local Social Security Administration office. You will need to show proof of identity, along with your birth date. A temporary card will typically be provided, and this can be used to access your credit report. Your permanent card usually arrives by mail within 4 to 6 weeks.

You are not alone if you do not save copies of all your financial records. If some of the necessary information is missing, you can contact your bank or lender. In some cases, you might be able to pick the documents up in person so you can have almost immediate access your credit report. Otherwise you will have to wait until they arrive in the mail.

When Should You Pay for Your Credit Report?

You are legally entitled to one free copy of your credit report from each of the 3 bureaus, once a year.

Most experts recommend requesting the reports separately. This allows you to keep an eye on your credit history for free throughout the year. If a second report is requested a fee of $12 will be charged from the credit reporting bureau.

There are circumstances when you are entitled to additional copies of your credit report for free.

• Information in your credit history might be inaccurate due to suspected fraud.
• If you are the victim of extended fraud, you can request 2 free copies of your credit report annually.
• You are planning on applying for employment 60 days or less from the date of the initial request.
• Credit or loan application denied due to your poor or thin history. You have the legal right to request a free copy of your credit report from the agency listed in the denial notice within 60 days of receiving it.

Some states also have laws in place that allow residents to request multiple free copies of their credit reports.

Often you will find that you were billed at a later date for services that you could have done yourself.

Once you have your information is in order you can send your request to

Annual Credit Report Request Service
P.O. Box 105281
Atlanta, GA 30348-5281

Requests can also be submitted to AnnualCreditReport.com.

If you have any additional questions or are concerned about identity fraud a financial expert should be contacted immediately.

Getting and keeping a good credit rating does take time and patience. You can’t avoid this. However, there are a few things you can do to help it improve a little faster.

One tip to remember is that accurate negative information can never be legally removed, no matter how damaging it is to your credit score.

7 Tips to Help You Quickly Boost Your Credit Score

Before you can start working on improving your credit score, you have to know what it is. You are entitled to one free report every twelve months from the three credit reporting agencies, Experian, TransUnion and Equifax. Along with your score the report will include your complete current credit history.

Now that you know what your credit score is you can start taking steps to help it improve.

1. Consider the “buddy system”.

This only works with the cooperation of a close family member or spouse, and it is an effective way to quickly build up your credit history.

It entails your name being added as an authorized user on their credit account. While you won’t receive full credit for payments made on time, the little that is applied will help you create a positive credit history.

There are some downsides to using this approach that you should be aware of since they can also hurt your credit score.

• You are also accountable for any bills on the account.
• Late and missed payments will hurt your credit score.
• Can cause tension between you and the primary account holder.

For these reasons alone, most financial experts recommend only using this as a last option when you are trying to build or repair your credit.

2. Report all lost, stolen and missing credit cards.

It is surprising how many consumers don’t consider this simple hack to improve their credit scores. It usually only takes a few minutes to report a credit card as missing or stolen, and in most cases it can have enormous benefits.

Most credit card issuers will simply close the account in question and open a new one. Where this can also help boost your credit score is that many banks and credit unions simply transfer the original opening date of the account to the new one. When it is reported to the credit bureaus it appears that you now have two established lines of credit. This is especially helpful since the age of the accounts comprises 15 percent of your credit score.

Not all credit issuers report lost or stolen cards the same way so it is important to ask how it will affect your score.

3. When are your payments reported?

You will want to note that the payment due date and the end of the monthly billing cycle are different.

Your payments will be reported at the end of the billing cycle, even though they are typically due at the beginning or middle of the month. If your payment date is during the last week it might not be reported until the following billing cycle.

This refers to the amount of credit you’ve used versus the amount available, and applies to every card in your name.

Financial experts recommend having a ratio of 30 percent for each card. However, if you want to quickly boost your credit score try to keep your credit utilization ratio less than 10 percent.

For this to benefit your FICO score you will also have to make sure that the payments are regularly reported during each billing cycle. This means that you might have to make the monthly payments before the actual due date.

4. Make a strategic payment plan.

This is actually easier than it sounds. Now that you are aware of credit utilization ratios, you know that paying off cards with higher balances will have a faster impact on your score.

Taking a few minutes to create a payment plan that allows you to quickly pay off cards with higher debt, while staying current with your other financial obligations can give a quick boost to your FICO score.

5. Make payments twice a month.

Nowhere does it say that you can’t make two payments on a loan or line of credit twice a month. You do want to be careful if you are paying off the debt early. Sometimes it can come with penalties that can end up hurting instead of helping your credit, though this typically only applies to mortgages and auto loans.

If you can afford to pay off a “big ticket” item in a brief period of time, this might be the best way for you to give a low credit score a quick boost.

6. Increase your credit limits.

If one of the reasons your credit score is below subpar is due to overspending, you will want to skip this step. Increasing your credit limit will only cause additional problems with your finances and score.

Raising the limits on your cards can help lower your credit utilization ratio, which is used to compile your FICO score. It is important to remember that just because you have more credit, using it will have the opposite effect on your score.

If you have made your payments on time and have a good relationship with the card issuer, asking to increase your line of credit is an easy way to see your score quickly rise a few points.

7. Mix up the type of credit you use.

It’s not uncommon for consumers to get stuck using the same types of credit, typically cards and mortgages. While these regular payments will help keep your credit score above the subpar range, it won’t cause any sudden increases.

If you want to give your credit score a quick nudge consider taking out an installment loan. Whether it is a two or three year auto loan or shorter in-house financing on a new appliance, simply mixing up the type of credit reported in your history can have a positive effect.

You will want to remember that this method doesn’t apply to refinancing existing loans, only new ones.

The Final Word

These tips will help you give your failing credit score a quick boost, but they are not an instant “fix-all” for a bad score. It is always important to remember that while it only took a few months for your credit to fall below subpar ratings, it can take years to get it up to good standings.

If you want to help your credit score there are two things that you must do before using any of these tips,

1. Keep credit card balances low.
2. Pay all bills in full and on time.

If you are one of the millions of adults that are dealing with the headaches that generally come with having bad credit, you are not alone. Unfortunately, most people find out about their poor credit score when they are applying for some type of financing. This is the absolute worst time to find out that you aren’t approved due to your bad credit report.

There is some good news. It is possible to repair your bad credit. While you should have received a letter from the lender detailing why you weren’t approved for the loan, it won’t explain how you can resolve the problems. This is where we can help. In this guide you will find the information you need to legally repair your bad credit so you can get the financing you need.

You Don’t Have to Pay Credit Repair Companies

You can turn to a credit repair company for help, and there are several reputable ones. If you simply don’t have the time to devote to rebuilding your score, a credit repair company might be the best choice for you. They will have the time and resources necessary to start repairing your dismal credit score, but these companies also charge a fee for their services.

It will take a little time, effort and careful financial planning but over time you will see your credit score start to rise, and here are the few steps to follow to get started.

Check Your Credit Report and Score

The very first step is to check your credit reports and scores. There are three main credit reporting bureaus, Equifax, Experian and TransUnion.

It is important to get a copy of all 3 reports since the data can vary, and it all affects your credit score. This means that there might be an error on one report, but not on the others. One error on any report could cause your credit score to drop several points.

What to Expect on a Credit Report

Once you have a copy of your reports you’ll find that they contain a lot of information. This will include basic personal details, and you’ll want to ensure that everything is accurate. You might also find previous addresses listed, and this is fine as long as the current one is correct.

Financial issues will also be on your credit report. All payments made on time, along with loans that were repaid will be included in your credit history. While these help to raise your score, the credit report will also contain a record of any liens, missed payments, foreclosures and bankruptcies. These are the items that cause your score to fall below the subprime rate.

Your financial information is divided into five categories, and this is what the credit reporting bureaus use to calculate your score.

• Payment history (35 percent)
• Credit utilization (30 percent)
• Length of credit history (15 percent)
• Types of credit accounts (10 percent)
• Number of credit checks (10 percent)

How to Repair Your Bad Credit

Now that you know how poor your credit score is, it is time to start fixing the problems.

Trying to erase accurate information is illegal, and is a punishable offense.

This doesn’t mean that there aren’t some steps you can take to legally improve your bad credit score for free.

Pinpoint the Problems

Once you have a copy of your credit reports, you can start pinpointing the problem areas. You don’t even have to completely understand the complicated terminology used by the financial industry, if you know what is responsible for your poor credit score.

Your payment history accounts for 35 percent of your score, and is responsible for most of the significant drops. Even one missed payment will have a noticeable effect on your credit.

Thirty percent of your score is determined by your amount of revolving credit, which is compared to the limits on the accounts.

These two categories combined account for 65 percent of your credit score, and are where most problems occur.

The remainder of your credit score is comprised by how long the accounts have been open, along with the type. There are two types of credit accounts, revolving and installment. Revolving refers to charge cards and open lines of credit, while examples of installment accounts include student, auto and home loans. When you are applying for any type of financing, creditors will want to see that you are capable of responsibly managing both types of credit.

Your credit report will also list your history of applying for financing, and it makes up 10 percent of your score. If you have been actively applying for credit recently this can cause a temporary dip in your score, but most lenders also take this into account when they are checking your history. Potential lenders know that this usually only indicates that the applicant is simply looking for the best interest rate. These minor dings to your score generally disappear from your credit report in 12 months or less, making it a minor problem that you don’t need to fix.

Clean up your Credit Report

As you are going over your three credit reports, you might find errors. Even if it is only a minor mistake it is important to start disputing it as soon as possible. Once the dispute is filed with the three credit reporting agencies, they have thirty days to respond. There are a few exceptions which can extend the response deadline to 45 days, but in most cases it will take less than a month for the bureaus to dispute or agree with your claim.

Here are a few tips on disputing an error on your credit report.

• A separate letter must be filed with each of the three credit reporting agencies, Experian, Equifax and TransUnion.
• If there are multiple errors, a separate letter must be filed for each mistake found.
• Disputes regarding errors on credit reports can be filed online or sent in via traditional mail.

Work on Building Positive Credit History

There are a few steps you can take to start building a positive credit history, instead of waiting for the negative items to disappear on their own.

Even if you were turned down for an auto loan or other type of financing, you might still be able to secure a credit card. The interest rates will probably be higher, but if you pay the balance off each month you can rebuild your credit without spending a lot on accumulated fees.

Here are a few other steps you can take to build positive credit history.

• Pay down balances on credit cards, especially ones with a high interest rate. Try to only use them when it is necessary, at least until your see your credit rating improve.
• You might want to consider applying for a “credit builder loan” from a traditional bank or other lending institution. This is always a good option for anyone worried that they might abuse a credit card.
• Don’t close credit card accounts once the balance has been paid off. This will make it harder for it to have a positive effect on your credit score.
• When you are shopping for an auto loan or mortgage financial experts recommend doing so within a 30 to 45 day time frame. This will give you plenty of time to find the best interest rate, without it having a detrimental effect on how potential lenders view your credit.
• If you have any outstanding accounts with collection agencies, you might want to think about finally paying them off. While some newer formulas used to calculate credit scores do not factor in accounts in collections, there are still a few that do.

How Long Does It Take to Repair Bad Credit?

If the negative information on your credit report is accurate it will take time for it to come off. How long will vary depending on the type.

• Past due payments: 7 years from the due date of the late payment.
• Foreclosures: 7 years
• Collection accounts: 7 years and 6 months from the date the debt enter into delinquency.
• Short sales: 7 years
• Bankruptcies: 10 years from the filing date or 7 years for Chapter 13.
• Repossessions: 7 years
• Judgements: 7 years if the payment was made in full, otherwise it could be significantly longer.
• Tax liens: 7 years from the date they were paid.
• Charge-offs: 7 years from the date the account was “charged off”.

With a lot of patience and self-control it is possible to repair your bad credit, and best of all you now know how to rebuild it for free.

They are actually growing in importance, and are used by everyone from insurers and lenders to employers and landlords. Your credit score is used to judge the risk associated with dealing with you financially, and this can affect almost every aspect of your life.

The Fair Isaac Corporation (FICO) claims that their scores are currently used to assess financial responsibility by an estimated 90 percent of the top lending institutions in the U.S. While this number is supplied by the company that created credit scoring, there is no denying that it will have an effect on your life.

What You Need to Know About Your FICO Score

Monitoring your credit score is important, especially if you ever plan on purchasing a car, home or any other “big ticket” item. While keeping an eye on your FICO score has never been easier, it won’t matter if you don’t know what you are looking for.

Some of the basic information everyone should know about their FICO scores include,

• Credit scores typically range from 300 to 850, though these numbers can vary depending on the reporting agency. When you are looking at your credit score, you want it to be in the higher range. Lower credit scores usually mean higher interest rates on home and auto loans.

• All credit scores, including FICO are generated with data provided by your creditors. These records are compiled by the three major credit reporting agencies, and turned into your financial report and FICO score.

• An important step that everyone should follow is to keep a close watch on their credit reports. Everyone is entitled to one free credit report from each of the three agencies. Most financial experts recommend requesting one every few months from a different reporting company, instead of collecting all three at once.

• Consumer Reports stated that 28 out of the 60 versions of your credit score produced by FICO are regularly used by top lenders. This only emphasizes how important it is to check it every few months.

What’s A Good FICO Score?

Even though the range for a good or bad FICO score can vary slightly, most lenders agree that 740 or higher will probably get you the lowest interest rates on home and auto loans. You should also remember that your credit score is not the only factor that will determine loan approval or even guarantee low interest rates.

Individual lenders have their own criteria that will not only include your credit score, but a list of other items that will all be factored in together. If you are one of the millions of Americans dealing with bad credit scores, it’s nice to know that it’s not the only factor that will be used to determine loan approval.

If you need some guidelines to follow when you are trying to determine where your credit score falls here is the unofficial range used by the Fair Isaac Corporation.

• Bad Credit: 300-629
• Fair Credit: 630-689
• Good Credit: 690-719
• Excellent Credit: 720 and higher

How to Get Your FICO Score for Free

With the growing importance of knowing your current FICO score, it only makes sense that there are several ways that you can monitor it for free.

You no longer have to sign up for credit cards you don’t need or subscribe to a service to receive regular reports and updates. You can take charge of monitoring your FICO score, and here are 8 easy ways how you check it for free.

1. Discover

One of the fastest and easiest ways to check your FICO score is via the Discover website. You do not have to be a member, card holder or even sign up for one, it is a free service that they offer to everyone. In less than 5 minutes, in most cases, you can have a copy of your credit score.

2. Banks and Credit Card Companies

While you do have to be a card holder or have a loan account with the following lenders, they do provide you with free access to your credit scores. Simply log into the website and you’ll find your current score listed on your statement. Not only can you check for any errors in your account, you can also monitor your FICO score on a monthly basis.

• Bank of America
• Citi Bank
• American Express
• Chase Slate card
• Barclaycard US
• USAA (via CreditCheck1)
• Merrick Bank (GoScore)
• Wells Fargo (mobile banking app)

3. Credit Unions

Unlike traditional banks Credit Unions have only recently begun offering members free access to their FICO scores. Currently there are only a few officially listed which include,

• Pentagon Federal Credit Union
• Digital Federal Credit Union

If you are a member of a Credit Union the best advice is to ask if your branch offers this convenient free service. You might also find it listed on your monthly or quarterly statements, but this can vary.

4. Checking Accounts

Many financial institutions are now providing customers with free access to their FICO score even if they only have a traditional checking account. While most will post current scores on loan or credit card statements, only a few are including it on checking accounts.

Before you use another method to retrieve your FICO score, it is best see if your bank offers this service with your checking account.

5. Loan Applications

It is important to note that this is only a “one time” way to check your FICO score for free. You don’t want to continuously fill out loan applications every time you want to check your credit score. Not only is this time consuming, it will actually hurt your overall score.

According to the Dodd-Frank Act you have the legal right to see your credit score if your loan application is denied or if you believe that you weren’t offered the best interest rate. This approach to viewing your FICO score only works when you are filing out the application in person, not if you are using an online lender.

6. Auto Dealers

Some auto dealerships, including a few Buy Here Pay Here Lots lots will share your FICO score with you, but only if you are applying for financing with one of their lenders. While this method will only allow you to check your credit score every few years, unless you frequently purchase new vehicles, it is one more way that allows you to monitor it for free.

7. College Loans

Not all student loan lenders provide their customers with free copies of their credit scores, but the Sallie Mae Smart Option undergraduate program does. They not only provide borrowers with free access to their credit scores, but their co-signers as well. This method does only apply to a select group of people, but if your student loan is through a different lender you might want to check with them to see if they offer the same services.

8. Credit Counseling Services

You will want to remember that most credit counseling services do charge a fee. The good news is that FICO has started a free program. 30 credit counseling agencies are participating and will help you learn how to manage your money for free.

A complete list of the participating services is not available, but you can easily find the help you need by contacting the National Foundation for Credit Counseling.

Avoid These Scams

It seems that as there are more ways to check your FICO scores for free, the number of scams also increases. Not only does falling for one of these cons usually end up costing you fees, it could also comprise your identity.

While the number and type of scams promising to get your FICO scores are constantly changing, there are a few red flags that you will want to watch out for. These typically include,

• Being offered a “free” trial period.
• Told that your credit card or other personal information is required.
• A “subscription” is needed.
• Unsolicited links and attachments are sent to your email.

Downloading the attachments or clicking on the links can leave you open to malware, viruses and even put your personal information at risk. With so many safe and legal ways to get a copy of your FICO score, there is no need to ever have to use someone else’s services.

Take Control Of Your FICO Score

Knowing you current FICO score is a part of being financially responsible, and now there isn’t any excuse for you to not know your own score.

You can expect to pay higher interest rates on auto and other loans. Your poor credit history will also make it difficult for you to secure almost any type of financing, and this can affect all aspects of your life.

Fortunately you don’t have to be stuck with a bad credit rating for the rest of your life. There are some things you can do to improve your credit score. One way is to contact a credit repair company, but there are some things you should know.

How Credit Repair Companies Started

Companies promising to fix your poor credit score are not new. They have been around since credit agencies first started reporting consumers’ scores and payment histories to potential lenders.

After the collapse of the housing market and subsequent economic crisis in 2008, many people found themselves with more debt than they could manage. Foreclosures, vehicle repossessions, late and missed payments all took a toll on consumers’ credit.

Now that the economy is recovering and people are starting to get back on their feet many are taking a look at their credit reports and scores. While a credit repair company can’t make correct negative information go away, they can help you fix errors that are lowering your score. This will not only make it easier for you to get approval for an auto or other type of loan, but it will also help you save money by avoiding high interest rates.

How Credit Repair Works

A study recently conducted by the Federal Trade Commission discovered that one out of five consumers had an error on their credit reports. Even one small error is enough to drop your credit score several points. This will affect everything from your ability to secure a loan to the amount of the down payment and interest rates.

It is classified as an “error” if it doesn’t meet the following three standards, according to the Federal Trade Commission.

• Reporting must be fair.

• Data must be supported by facts.

If the information contained in all three of your credit reports does not meet the criteria, it is considered an error and steps should be taken to correct it immediately. While you can “do-it-yourself”, sometimes it is best to let a professional take care of repairing your credit.

Credit repair simply means correcting any errors found on your three reports. It is important to remember that only mistakes can be removed, and not negative information that is correct. When an error is identified the credit repair professional will help you find documentation that supports your claim, and work with the reporting agencies to have it removed from your report.

Some of the most common causes for errors to appear on a credit report include,

• Bills a former spouse was responsible for under the divorce decree.

• Identity theft resulting in fraudulent accounts.

• Mistakes made by one or more party responsible for gathering and reporting various credit data. (credit card companies, lenders, debt collectors, etc.)

The reason for this relatively short timeline is to help ensure you don’t have to wait to get the line of credit you need.

What To Look for in a Credit Repair Company

If you believe that there is an error on your credit report, it might be time to contact a professional. While you can dispute errors by yourself, sometimes it is worth it to get help from an expert. They have the time and resources to devote to your problem, and know the specific documentation needed to support your claim.

Unfortunately some credit repair “experts” are less than reputable and choosing the wrong one can leave you with the same problems, while still costing you money in fees.

While flashy advertisements promising instant results might get your attention, it shouldn’t be the deciding factor when you are choosing a credit repair company. Some of the things you will want to look for to ensure that you are getting the best service include,

• The credit repair company should be aware of your rights, and explain each one to you in complete detail. This should be done before any contracts or agreements are signed. The credit repair specialist should also be able to answer all of your questions to your satisfaction.

• It is important that the credit repair company takes the time to understand why you are disputing an item on your credit report. If they aren’t willing to listen to your story, chances are they won’t be able to effectively resolve your problem. You want the credit repair company to make sure that information in the reports meets the required criteria for it not to be considered an error. Otherwise hiring them will be a waste of your time and money.

• A top rated credit repair company will be able to clearly explain exactly the type of services they can perform for you. Before you sign the agreement you should know exactly what you are getting, and the type of results you can expect.

How To Avoid Credit Repair Scams

With all of the importance that is placed on a credit report, it’s not surprising that there are plenty of scams promising to fix any negative data for one low fee. This is only one of the common credit repair scams, and it is unfortunately easy to fall for any of them.

Some of the common signs that often indicate a credit repair company or expert might not be reputable typically include,

• Guaranteeing to erase bad credit information permanently.

• Promising to boost your low credit score to a “fair” or “good” rating.

• Stating that they can provide same day results.

• Promising to erase all bad credit scores from a FICO report.

Even though you have probably seen these and similar ads on billboards, television and other media outlets these are promises that credit repair companies simply cannot keep, and usually indicate that they are only trying to take your money.

It is illegal for these companies to use the strategies they are advertising, and in most cases it is also impossible.

According to the Federal Trade Commission there are a few factors that often indicate a credit repair company is dishonest, and knowing what to look for will save you time and money. Some of the things to be cautious of when you are looking for help in repairing bad credit include,

• The Credit Repair Organizations Act states that a company or individual cannot charge you until the promised services are completed. This means that you should never be charged upfront.

• You are not informed of your rights before signing a contract, along with the steps you are able to take to correct an error for free. You can petition the credit bureaus to remove any mistakes, but in some cases it does help to have the experience of an expert.

• If the credit repair company advises you not to contact the three major credit reporting services, it is probably a scam. If you do not have all three of your credit reports, it is impossible to accurately tell if there are any errors.

• Since accurate and current negative information on your credit report cannot be legally removed, and company that promises to do so is one that shouldn’t be trusted.

• If you are advised to dispute all of the information in your credit reports, regardless of accuracy, it is best if you seek help from a more trustworthy source.

• Some credit repair companies will even suggest that you apply for an Employer Identification Number. Using this, instead of your social security number will generate a “new” credit identity and report with a higher score. Not only is this dishonest, it can also be illegal.

Cost of Repairing a Credit Report

The cost of repairing your credit report will vary depending on a few factors. Where you live and the type of services you need all play a role in the cost, along with the company. Fees will vary, and it is important to get everything in writing before you sign any contract.

It is important to note that the Credit Repair Organizations Act makes it illegal for these companies or even a solo professional to charge you before they have completed the job. If a credit repair company ever demands payment before starting work, you will want to report them to the Federal Trade Commission and find someone more reputable.

It is illegal under federal law to misrepresent your Social Security number, supply false information on a loan application or apply for an Employer ID number in an effort to receive a new credit report. This is true even if you were advised by a credit repair company.

Are Credit Repair Companies Really Necessary?

When it comes to deciding if a credit repair company is really necessary, this will depend on your unique situation. In some cases you can probably dispute an error on your credit report by yourself, but other times you might need some expert help.

The last thing you want is to find yourself in legal trouble, along with being out the required fees. Take your time and make sure that you ask the right questions, and you’ll find a credit repair company that can resolve your problems quickly and legally.

If you are tired of your bad credit score affecting your ability to purchase anything from a vehicle to a home, there are some steps you can take to start improving your rating. It will take time, in some cases several years, but with hard work and consistency you slowly start improving your poor or bad credit score.

3 Things You Can Do Now

There are several steps that you can take to start improving your subpar credit score, and there are three that you can do now.

1. Review your credit report.

The most important thing is to check your credit report. If you don’t know what your score is and why it is so low, you won’t know how to start repairing it. Errors can also occur in a credit report, and this is another reason why it is important to check it regularly.

Your credit report will show all of the information used to calculate your score. This includes data on any missed or late payments, which will cause your credit score to drop. If any mistakes are found on your report it is important to deal with it immediately by contacting the credit bureau.

You are entitled to one free credit report every 12 months from each of the three credit reporting agencies. Most financial experts recommend requesting a copy of your credit report from a different agency every four months to ensure you are well informed.

2. Make payments on time.

Late and missed payments are the most common reasons credit scores start falling. Setting up reminders when payments are due is one easy and convenient way to ensure it always gets sent in on time. Some financial institutions offer the option for automatic payments. The money is automatically deducted from your account on a preset date so you don’t have to worry about it. The only downside to this convenient option is that only the minimum payment is withdrawn each time so you don’t always have a chance to pay off a high interest auto or other loan in a shorter amount of time.

3. Lower amount of debt.

It might not be easy, but lowering your amount of debt is a great way to start improving your credit score. It will also help you get a handle on your spending. Financial experts recommend paying off your credit cards with the highest interest rates first, while continuing to make the minimum monthly payments on your other loans.

Since you will still be making payments on the lower interest cards, your credit report will still continue to show a positive history.

Tips On Improving Your Credit Score

There are a few other things you can also do to start improving your credit score. The following tips are easy to implement, and if you use them consistently you’ll soon be able to qualify for auto loans with a lower interest rate.

Pay attention to credit card balances

The amount of revolving credit you have will affect your score, and smaller is always better. To help boost your rating pay off your balances and try to keep them low.

You also want to make sure that your monthly payments are the ones being reported to the credit bureau and not your balance. This will cause the amount of your revolving credit to be higher than the usage, and this will have a negative effect on your score.

Get rid of “nuisance” balances

“Nuisance” balances are usually small and occur when you use several cards, instead of just sticking with one. While making monthly payments on time will help your credit rating, having too many can have the opposite effect.

This way you are still able to make the purchases you need, without cluttering up your credit report.

Another advantage to only using one or two credit cards is that there are fewer payments to remember to make each month.

Don’t get rid of all old debt

It is actually good to have old debt appear on your credit report, even though many consumers try to have it removed. While missed and late payments, bankruptcies and repossessions all have a negative impact on your credit score, old debt that is paid off has a positive effect. It shows that you successfully paid a loan off, and potential lenders view this as a sign that you might qualify as a low risk borrower.

This usually translates into an easier approval process when you are applying for an auto loan, along with lower interest rates.

How to Keep Your Credit Score from Falling

It doesn’t matter if your credit score is considered excellent or poor, you don’t want it to fall. The biggest reason a credit score drops are due to missed or late payments, but there are other factors that can contribute to a loss in points. Knowing what these are will help you keep your credit score improving, instead of having to watch it fall.

• It is important to re-establish your credit history if your score is below average. One of the best ways is to open a new account and pay it off on time. Even though it will take a while to show up on your credit history it will prevent your score from falling, and eventually help it increase.

• You do want to check your credit score at least once a year, and some financial experts recommend doing so more often. As long as you request a copy of your credit report from one of the three major credit reporting agencies, Experian, Equifax and TransUnion, it will not affect your score.

• Refrain from opening several lines of credit in an attempt to maintain or improve a bad credit rating. Not only will this appear to potential lenders that you might be a high risk, it can also lower your score. Opening several credit accounts at the same time can cause some lenders to question your ability to make all of the various payments on time. It also makes it harder for you to keep track of when all of the monthly payments are due, and missing even one can cause your credit score to plummet.

• It is important to remember that just because you closed an account it isn’t automatically removed from your credit report. In some cases it can stay in your history for up to seven years, according to Experian. If you made all of the payments on time it should have a positive effect on your score, otherwise you’ll have to wait for it to be removed by the credit reporting agencies.

It is Possible to Improve a Bad Credit Score

If you have a bad credit score and want to apply for an auto or other type of loan there are steps you can take to eventually avoid high interest rates. It starts with monitoring your credit report, and becoming financially responsible.

This way the next time you are shopping for a “big ticket” item like a vehicle you aren’t stuck with a  high interest bad credit auto loan. If your score has improved enough you might not even need a large down payment.