Category Building Credit

The Smart Way to Rebuild Credit

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Even if you’re not the most organized person, you should have a plan for building a good credit score.  The good news is building credit isn’t complicated — you just need to know a few things to get started.

Know What You’re Dealing With

If you don’t know what’s broken, you’re going to struggle to fix it. If you want to improve your credit score, the first thing you need to do is look at your credit reports. You’re entitled to a free annual copy from each of the three major credit reporting agencies, and your scores will be based on the information in these reports.

Your credit report lists all sorts of information about you, from loans and credit accounts to report inquiries (when a third party requests your report) and collections accounts. It will show how much debt you have, your overall credit limit, the dates you opened accounts and if you’ve paid your bills on time — it’s a lot of information, which can be overwhelming, but everything is labeled pretty clearly.

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Identify Problems

Once you have your credit reports in hand, look for anything you don’t recognize. If you see an account listed that doesn’t belong to you, it could be a mix-up or a sign that someone is fraudulently using your personal information. Make sure your name is spelled correctly, that your address is right and all your payment history looks accurate. You should dispute anything that is incorrect by following the dispute directions on Experian, Equifax and TransUnion’s websites.

Assuming everything is accurate, look at what may be having a negative impact on your credit standing: Do you have late payments? Do you use a lot of your available credit? Did you apply for a lot of credit cards or loans within a 12-month period? These are all things that could lower your credit score. Your score may also be suffering if the average age of your credit accounts is less than seven years or if you only have one type of credit in your name, as opposed to a mix of loans and credit cards.

Set Goals and Track Progress

Once you’ve identified the issues, the path forward can be pretty simple: If you’re late on making payments, do whatever you can to set a streak of on-time ones. Automatic payments and calendar reminders are really helpful for that. If you notice you’re carrying a lot of debt in comparison to your available credit, try to pay it down and reduce your spending — keeping your credit utilization rate below 30% (or better yet, below 10%), will help raise your score.

The most effective strategy for improving your credit score is to watch it change over time. There are dozens of credit scoring models out there — some are used by lenders and others are educational — but they all give you an idea of where you stand. There are also tools available with a free Credit.com account that allow you to gauge your credit weaknesses in addition to comparing your score from month to month.

You’ll never know which score a lender will use to assess your credit risk ahead of when you apply, so the best thing you can do is pick a score or two that you can access regularly (ideally for free), and compare the same score periodically. Your Credit.com account will show you why your score improved or fell, but you can also get a pretty good idea of that by thinking back on what you’ve done since the last time you’ve checked your score.

Awareness makes a big difference in financial behavior. Watching your score drop if you’re late on a payment or seeing it spike after cutting your debt can be a great source of motivation as you go forward, and figuring it out requires minimal effort on your part, as long as you make a habit of checking your score.

More on Credit Reports and Credit Scores:

  • The Credit.com Credit Score Learning Center
  • What’s a Good Credit Score?
  • How to Get Your Free Annual Credit Report
  • How Do I Dispute an Error on My Credit Report?
  • What’s a Bad Credit Score?
  • How Credit Impacts Your Day-to-Day Life

Image: Copestello

The post The Smart Way to Rebuild Credit appeared first on Credit.com.

Source: credit.com

I Don’t Need a Credit Card But Want to Build Credit. What Can I Do?

By in Building Credit, HVAC Tips and Guides Tag , , , , , ,

Good credit is essential if you hope to borrow money one day for things like a new car or home. But good credit can also be important for smaller things like renting an apartment or even landing a new job. And one of the easiest ways to build the credit necessary for these things is by getting a credit card.

If you have no credit, or even bad credit, and you’re averse to getting a secured credit card to help improve your credit, there are other ways to go about establishing and building good credit.

Here are three other options for building credit and improving your credit scores.

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1. Get a Credit-Builder Loan

A credit builder loan is a loan with a set amount you pay back over a set period of time (referred to as an installment loan). Most have repayment terms ranging from six months to 18 months, and because these loans are reported to one or more of the three national credit reporting agencies, on-time payments will help build up your credit.

Here’s how it works: A lender places your loan into a savings account, which you can’t touch until you’ve paid it off in full, allowing you to build credit and savings at the same time. And because loan amounts for credit builder loans can be quite small (just $500) it can be much easier to make monthly loan payments.

Credit-builder loans are best for people with no credit or bad credit. But, if you have good credit but don’t have any installment accounts on your credit report, a credit-builder loan could potentially raise your score since account mix is another major credit-scoring factor.

2. Pay Your Rent 

If you’re in the process of moving or need to do so in the near future, it’s a good idea to find a landlord who reports your rent payments to the major credit bureaus. Depending on what credit report or credit score is being used, these on-time monthly rent payments can give you a quick and easy credit reference and help you qualify for a loan (or at least another apartment down the road).

3. Become an Authorized User

Asking your spouse, partner or even your parent to add you onto one of their accounts as an authorized user could give your credit a boost. If the account they put you on has a perfect payment history and low balances, you’ll likely get “credit” when that account starts appearing on your credit reports. You won’t necessarily need to use the card to benefit from this strategy. It is a good idea to have your friend or family member check with their issuer to be sure that it reports authorized users to the three major credit reporting agencies (not all do).

Remember, one of the most important things in building good credit is making timely loan and bill payments. Bills like rent or utilities may not be universally reported to the credit bureaus, but if they go unpaid long enough, they can hurt your credit, especially if they go into collection. (You can see how any collections accounts may be affecting your credit by viewing your two free credit scores, updated every 14 days, on Credit.com.)

If your credit is in rough shape, due to a collection account or other payment history troubles, you may be able to improve your scores by paying delinquent accounts, addressing high credit card balances and disputing any errors that may be weighing them down. And remember, you can build good credit in the long term by keeping debt levels low, making timely payments and adding to the mix of accounts you have as your score and wallet can handle it.

[Offer: If you need help fixing your credit, Lexington Law can help you meet your goals. Learn more about them here or call them at (844) 346-3296 for a free consultation.]

More on Credit Reports & Credit Scores:

  • The Credit.com Credit Reports Learning Center
  • How to Get Your Free Annual Credit Report
  • How Credit Impacts Your Day-to-Day Life

Image: Jacob Ammentorp Lund

The post I Don’t Need a Credit Card But Want to Build Credit. What Can I Do? appeared first on Credit.com.

Source: credit.com