Resources

Credit

Wells Fargo’s Decision Might Hurt Your Credit Score

Are you a Well’s Fargo customer? If you have a personal line of credit with Wells Fargo, it’s highly likely that your credit score will be affected.

Recent letters have been distributed by the bank notifying customers that they are “shutting down all existing personal lines of credit in coming weeks,” according to CNBC. And this comes after Well’s Fargo suspended all new home equity lines of credit last year.

Will Wells Fargo closing personal credit lines affect my credit score?

If you have a personal credit line with Well’s Fargo, then most likely. Your credit score is calculated with multiple credit scoring models: the most common are FICO® or VantageScore models.

In these models, there are multiple factors that can affect your credit score, like:

  • Making payments to lenders on time
  • Number of accounts you have open
  • Total credit available to you
  • How long an account has been open (history)
  • Total debt balances
  • Number of credit inquiries (hard inquiries)

If you have a personal credit line with Wells Fargo and they close it, that means at the very least it will affect:

  • The number of accounts you have open
  • The total credit available to you
  • How long an account has been open (history)

How much will it hurt my credit score?

If you have a lot of accounts, or the personal line of credit makes up a marginal percentage of total credit available, or if the line of credit hasn’t been open/active for very long, you may not see a noticeable effect on your credit score.

But if you’re on the opposite end of the spectrum, let’s say:

  • The Wells Fargo personal credit line makes up a majority of your total available credit, and
  • You’ve been a customer for multiple years, and
  • Have made all your payments on time

You’re going to see a much harder hit to your credit score.

What can I do to minimize the negative credit impact?

You can improve your credit score to offset a negative impact by:

  • Correcting inaccurate information in your credit report
  • Reducing your total debt balance
  • Making more than one payment per month
  • Increasing your total credit limit
  • Opening a new account (only if you are not regularly applying for new credit)
  • Negotiating your outstanding balance
  • Ensuring payments aren’t late

With all the variables and unique financial situations that people face, we’d recommended contacting one of our Financial Coaches. They’ll analyze your history, current situation, and present realistic options to improve your credit or reduce your impact from a lost account.

If you have an open balance with Wells Fargo…

If you owe money to the bank, you’ll have 60 days to pay off your balance to $0 before the credit line is closed. If you’re able to do this in time, that will minimize the negative impact of your credit score.

The takeaway: learn about what affects your credit and use it to your advantage

With so many variables – different lenders, standards, credit models, financial history, etc. – there’s no “right” answer that’s equally beneficial for everyone. But you do have options when dealing with Wells Fargo closing your service line.

Just make sure you stay on top of it and consult with a professional.

If you’d like to learn more, here are some resources that might be beneficial to you:

The Credit & Debt Library

Our team has put together resources to educate people about finances, credit, debt, and more. There’s a lot to unpack, but you’ll find information that helps you navigate your finances and reach your financial goals.

Take Free Classes & Courses

Our non-profit partner has helped families and individuals manage their finances for decades. They offer free finance education and all you have to do is register for a course.

Money Sensei™: Make Sense of Your Money

If you need additional insights, Money Sensei™ can make intelligent recommendations based on your total debt, purchase behavior, and more. It’s a free automated tool that helps you track your spending, review your credit improvement, and empowers you to make your own financial decisions.

Financial Coaching & Advice

At the end of the day, a financial expert will give you a complete picture of your available options and recommend the best approach. It’s worth it to consider free financial coaching to help you get back on your feet.

Resources

Credit

Credit Cards: Everything You Need to Know

A credit card allows you to borrow money to buy almost anything you want. However, they come with added costs such as interest and fees – and sometimes they give you benefits, like rewards and credit-building. 

Keep reading to learn exactly how credit cards work.

What is a credit card?

A credit card enables you to borrow money from a financial institution to buy goods or services (where applicable) — whether it’s groceries, bills, or a full-fledged vacation. 

  • Note: It’s unlikely you’ll be able to use your credit card to pay for some bills, like car finance payments or student loans payments, since those lines of credit are already borrowed money.

The card itself is merely a thin piece of plastic, but it can hold a lot of spending power. It can be tempting to spend money you can’t pay back immediately.

With a credit card, there’s an agreement between you and the financial institution lending you the money, that you will pay back the money you spent with any applicable interest, as well as any other established charges.

You can either pay your bill back all at once, or just a portion, or even carry over the balance to the next month. If you choose the latter, you’ll have to pay interest (a percentage of the money you owe) in addition to what you’ve borrowed.

Secured vs. Unsecured credit cards

Most major credit card companies offer both secured and unsecured credit card options. Here’s what you need to know to understand the difference – and make the right choice for you:

  • Secured Credit Cards: These are available to people with poor credit or short credit histories. The credit card is backed by a cash deposit that determines your limit. For example, if you make a $500 deposit, you’ll have a $500 spending limit. 
  • Unsecured Credit Cards: These don’t require a deposit and are available to people with average to excellent credit scores. 

What They Both Have in Common:

Both types of credit cards will often have an annual fee (but there are many that do not). You can use either type of credit card wherever they’re accepted.

How responsible you are with the card (i.e. paying it back on time) will help you build or rebuild your credit over time, or go into debt.

Understanding Annual Percentage Rates (APR)

An annual percentage rate (APR) is the amount of interest you pay on a loan, credit card, or any other line of credit in a year. 

The percentage amount is determined by the total balance you owe. For example, if you’re borrowing $1,000 for 1 year and your credit card has an APR of 10%, you’ll pay around $100 in interest by the time that loan is paid off.

What is a good APR for a credit card?

Your APR is assigned when you open a new credit card and it’s determined by your credit score as well as what’s called the U.S. prime rate – an index used by major banks that sets the rate on consumer loans (i.e. credit cards). 

Lenders consider the prime rate and factor in their own additional margins to make sure they turn a profit with interest rates and decrease the chances of someone “defaulting” on the loan — or not being able to pay it back. 

But let’s define “good” APR.

APRs are entirely variable because they depend on so many factors, so there really isn’t a short definition of “good.” That said, typically the lower your APR, the better it is. And the higher your credit score, the more likely you are to have a lower interest rate.

Understanding how credit cards affect your credit score

There are a few ways a credit card can affect your credit score. Let’s review everything you need to know:

  • It adds hard inquiries to your credit file. This is one of the two types of inquiries that exists in your credit file. When you apply for a credit card, the lender will use a hard inquiry to determine whether or not you are a good candidate. 

Hard inquiries could lower your score by a few points — more if you have too many, too often. Soft inquiries on the other hand, do not affect your credit score.

  • It varies your credit mix. A credit mix is all the different types of credit a person can have – car loans, personal loans, etc. 

So adding in a credit card shows potential lenders you’re able to manage different types of credit, and if you’re responsible with paying them all on time, it will increase your credit score.

  • It helps your credit utilization rate. This is the percentage of total credit you’re using in relation to your credit limit. 

When you first open a new credit card, this will bring down your average of all your credit accounts. But the longer you have the credit card, the more it will help your score (again, if you’re responsible).

How to apply for a credit card

Applying for a credit card is as easy as filling out most online applications.

But there are some key things to know to make sure you’re actually approved for one: 

  • Your credit score. This is the most important factor an issuer will use in deciding the fate of your application. You can find this information at MyFICO.com.
  • Decide what kind of credit card you need. If it’s your first credit card, you might want to aim for a credit card company that has no annual fee and a lower interest rate.

Retail credit cards are often a good place to start, so check to see if your favorite store offers one.

  • Understand the key terminology on the application. We’ve already covered APR, but here are some other terms you’ll see (and need to understand):
    • Annual Fee – The yearly fee that lets you use the card charged by the card issuer.
    • Balance Transfer Fee – The amount charged to transfer a balance onto your credit card. This usually ranges from 3-5%.
    • Minimum Interest Charge – This is the least amount of interest you can be charged if you carry a balance over from one billing period to the next. 
    • Transaction Fee – This is the amount charged on different types of transactions you could make. For example, if you use your card outside of the U.S., you’ll most likely be charged a foreign transaction fee.
    • Penalty Fee – This the amount an issuer will charge if you make a late payment or go over your credit limit.
  • Choose where to apply. If you already have a checking or savings account with a bank or credit union, they may offer a credit card option as well.

How to get a credit card with no credit

If you don’t have any established credit, you might consider a secured credit card.

Like we’ve mentioned, this option requires you to put down a deposit that will determine your credit limit. If you don’t want to do that, there are also student credit cards that are available to those who qualify.

Alternative credit cards also exist and are issued by smaller companies that evaluate an applicant’s creditworthiness based on considerations other than just a FICO credit score.

How to pay off credit card debt

Once you have a credit card, it can sometimes be trickier than you originally planned to keep up with the monthly payments. Here are four suggestions for tackling debt quickly and efficiently.

  1. Pay at least the minimum. Especially if you have multiple credit cards. Then, shift your focus to paying off the total balance on each card one at a time. Start with the card that has the smallest balance first and also check to see which credit card has the highest interest rate.  
  2. Even better, pay more than the minimum. If you can afford it, pay a little extra each month so that your overall balance will be smaller, and therefore so will your interest rate. 
  3. Consolidate your debt. This will allow you to combine several of your debts into one that has a lower interest rate. Then, you’ll be able to pay your debt off faster without increasing the payment amounts. 
  4. Make a budget. And stick to it! Most credit card companies offer a “spend analyzer” that can show you exactly what you’re buying each month. See if there’s any spending category you can cut back on and lower your monthly bill so it’s easier to pay.

FAQs

What credit card should I get?

Finding the right credit card for you is a very personal decision! Afterall, you’ll most likely use it on a daily basis. 

First things first, check your credit score. Once you know this you’ll be able to choose from the three types of credit cards available: cards that earn rewards, cards that save you money on interest, and cards that help you improve your credit score. 

Think about your needs realistically from there. For example, travel credit cards may sound fun, but if you don’t actually travel, they probably won’t do you much good.

How many credit cards should I have?

There isn’t an exact science to the exact number of credit cards someone should have, but it is a fact that having too many credit cards can hurt your credit score.

How do I cancel a credit card?

Because cancelling a credit card account can actually hurt your credit score, it’s best to just leave them open even if you aren’t actively using them. 

However, if that isn’t an option for you, there are ways to safely close an account. 

Be sure to pay off your credit card balance in full every month so you can save money on interest and protect your credit score. If your credit card balance shows $0, it’s possible to close the card without damaging your credit score, but be sure to contact your lender before closing to make sure you have paid off your debt.

What happens to credit card debt when you die?

While a scary thought, everyone is going to die, meaning if you have debt – someone is going to be responsible for it when you’re gone. 
Typically this responsibility falls on your estate. They’ll be in charge of paying everything you owe to bank accounts and other assets. Your personal representative or executor should notify your creditors in a timely fashion of your passing so your debts can be settled.

Resources

Credit

Credit Monitoring: Everything You Need to Know

Our worlds are more digital than ever before, which means our private information is more vulnerable to potential threats like fraud and scams. Keep reading to learn how credit monitoring can help you safeguard against these risks.

What is credit monitoring?

Credit report monitoring is when someone — either yourself or a company — monitors your credit history in order to detect any changes or suspicious activity. This is an effective way to stay diligent to potential identity theft and fraud. 

Without monitoring your credit, whether you do it yourself or hire a professional company, your personal information could be compromised along with your access to credit. 

What credit monitoring does

Credit monitoring does exactly what it sounds like — it monitors your credit. And whenever changes are made to your credit report, the credit monitoring service will alert you to verify the change(s).

It’s possible to do this on your own without the help of a professional service, however, these services typically have an automated and efficient method for monitoring your credit faster and more accurately. 

Credit monitoring alerts may include:

  • When a new account is opened in your name
  • When someone applies for credit in your name
  • Balances and payments on your credit
  • Address or name changes
  • Access to public records, such as bankruptcies
  • Personal information available on the dark web, including your social security, email address, and passwords

What credit monitoring doesn’t do

Credit monitoring is a great resource for spotting and preventing potential fraud, however, it’s not a 100% guarantee of protection against identity theft or unauthorized purchases. 

The service will alert you of any changes made to your credit and provide resources to help you identify possible theft, but they can’t actually promise foolproof fraud prevention. They can, however, keep you completely informed in real time so you can take action if need be. 

Here are some services credit monitoring doesn’t offer:

  • Keeping your personal information safe from data breaches
  • Preventing someone else from applying for and opening new accounts in your name
  • Stopping phishing emails
  • Reporting fraud
  • Fixing credit report errors
  • Contacting you if someone withdraws money from your bank account
  • Alerting you if someone else files a tax return in your name

How to monitor credit

Monitoring your credit requires a strong attention to detail. You’ll first want to verify that your personal information is correct. Double check your name, address, marital status, and employment information.

If you see any discrepancies, such as an address you’ve never lived at or an employer you’ve never worked for, consider these suspicious activities that should be reported as soon as possible. 

You should also close any accounts you no longer use, as these are prime targets for criminal activity since they aren’t frequently monitored. Typical criminal activities may include illegal purchases made with a stolen credit card and/or filing fake Social Security or Medicare claims. 

Most times, this information is used without the victim’s knowledge and it is very hard to detect after the fact.

Paid vs. free credit monitoring

Like we’ve mentioned, it’s completely possible to monitor your own credit. But we’re also full advocates of knowing yourself. If monitoring your own credit is something you’ll never make a habit of, it’s worth investing in someone else to get the job done. 

Credit monitoring services might also make sense if:

  • You’ve already been the victim of identity theft (or at high risk). For example, if your Social Security number has already been accessed in a data breach or you lost your Social Security card.
  • You don’t want to freeze your credit.

Credit monitoring services

A credit monitoring service provides information about your credit report in a timely manner. What you do with that information is up to you. This isn’t a full-proof guard against identity theft and fraud, just a way to stay informed about what’s happening with your credit.

Here are a few tips to make credit monitoring the most effective for you:

  • Avoid free trials. Companies that offer free trials are notoriously hard to cancel after you complete the trial period.
  • Cater your notifications to your lifestyle. If you’re always on the go, a text message may be a better way to communicate changes than an email or phone call. Your goal should be to get the most important information as quickly as possible without interrupting your day. 
  • If you see something suspicious, DO something. Don’t wait to dispute incorrect changes or anything that looks incorrect. The point of credit monitoring is to catch these right away!

Learn more about C&D’s Credit Monitoring services >

Free annual credit reports

Thanks to The Fair Credit Reporting Act (FCRA), everyone in the U.S. can get a free credit report from all three credit reporting agencies: Equifax, Experian, and TransUnion. This is available once every 12 months. Check out AnnualCreditReport.com to find yours. 

Tips to protect yourself from identity theft and fraud

There are many other preventative measures to protect yourself from fraud in addition to credit monitoring. Here are some extra steps to consider:

  • Freeze your credit report. This will make your report(s) inaccessible to anyone attempting fraud and ensure new accounts can’t be opened in your name. This is a totally free service you can do with your credit bureau.
  • Stay wary of spam emails, phone calls, and advertisements. If you don’t know who’s sending the email or calling you, it’s best to just not open it or answer. And be sure to check the legitimacy of the company from any advertisement that looks too good to be true. If they’re asking for personal information right upfront, it’s a red flag.
  • Safeguard your personal information. Don’t share your passwords with anyone and keep these stored in a secure app.

FAQs

What is the best credit monitoring service?

The best credit monitoring service depends all on your needs. There are three types of services available:

  • Do-It-Yourself. This requires the most of your time and energy. You’ll only need copies of your credit reports to check them for errors and inaccurate information.
  • Free Services. There are many free credit monitoring services that can keep track of everything you could do yourself. This option saves you time and energy.
  • Paid Services. This could potentially be the safest and most effective way of monitoring your credit. Companies will monitor your credit on a schedule and report any changes or potential problems immediately. It will save you energy, but cost you money.

Do credit cards have credit monitoring?

Many credit card companies are making credit report information readily available for free. In most cases, they provide a credit score from one of the three creditable bureaus, but not a full report. 

Do banks offer credit monitoring?

Some banks and credit unions do offer credit monitoring, and it could be cheaper to go through them. Be sure to confirm that their service covers all three reports and how long it will take for them to notify you of any suspicious activity.

Resources

Credit

Repairing Bad Credit: Everything You Need to Know

Good credit is the en tryway to those big-ticket financial decisions that make a difference in your life. Renting an apartment, getting a loan, buying a car, and getting a good travel rewards credit card, are all determined by the good-ole credit score. 

If your credit score could use a pick-me-up but you’re not quite sure how to do it, it might be time to initiate the credit repair process. 

Keep reading to learn more about how it works and exactly how to get it done! 

What is credit repair?

Credit repair is the process of fixing, restoring, or improving your credit score by communicating with your lenders and the credit bureaus about inaccurate information in your credit report.  

You can take care of credit repair on your own or hire a third-party company. Some third parties are often called credit repair companies and they dispute information with the credit agencies, undoing damage from inaccurate information, identity theft, and harmful spending habits.

Does credit repair work?

Yes, credit repair can work. There are just a few things to keep in mind, including:

  • There are a lot of scams out there. Lots of illegitimate credit repair companies charge illegal fees and use shady business practices to promise positive results they might not deliver. Continue reading to learn about how to choose a legitimate company.
  • It takes time. And when it comes to dealing with credit bureaus and reports, it can feel overwhelming. But with the right resources, either with support from an outside organization or composure on your end, you can see results.
  • You can do this yourself! If you’re someone who believes a job is done better if you do it yourself, it’s totally possible to comb through your own reports to look for inaccurate information. And this option is also free. We like free stuff.

Can you fix bad credit quickly?

First off, let’s define bad credit: Bad credit is a credit history that includes negative remarks that are damaging to your credit score, like late payments or charge-off accounts. myFICO, the official consumer division of FICO — the company that invented the FICO credit score — states that a poor or bad credit score falls between 300 and 579 out of a possible 850. Believe it or not, a one-point difference in your score, like 579 vs a 580, can make the difference in whether you qualify for the loan you want.

While the timeline for credit improvement can vary based on your credit profile, there are often opportunities to make improvements within 30-60 days. There are actions you or a credit repair company can take to repair your credit more quickly.

How to repair credit scores

Repairing a poor credit score takes time and patience, so be sure to keep this in mind if (and when) things get frustrating! 

Start by reviewing your credit report and looking for any inaccurate information. You can then use a credit repair company to dispute these claims or do so yourself. You’ll also want to catch-up on any bills you haven’t paid and create a budget for all your expenses. We know budgeting isn’t the most fun thing to do, so rather than spending time to DIY, consider using a smart budgeting app or calling the pros.

You can often use a secured credit card and other types of credit cards (responsibly!) to start building or rebuilding a positive credit history. Once you begin, be sure to check your credit score regularly.

What do credit repair companies do?

Credit repair companies take the DIY out of credit repair. They offer to improve or fix your poor credit score for a fee. The process starts when you share a copy of your credit report, typically from each of the major consumer credit bureaus: Equifax, Experian, and TransUnion. 

The credit repair company will review your report for inaccurate information and negative marks like bankruptcies, tax liens, and charge-offs… bleh. Then, they will create a plan to dispute any identified errors and advocate on your behalf with the company that reports your credit information to the bureaus. 

The credit repair process may include validating information with creditors, disputing the negative marks altogether, and/or sending cease-and-desist letters to the debt collectors. Debt validation letters are important because if your creditors can’t prove you owe the debt, you aren’t responsible for it.

Learn more about C&D’s Credit Repair services >

Do it yourself credit repair – is it worth it?

To determine whether or not it’s worth working with a credit repair company, ask yourself: “How much time and effort do I have available to put into fixing my credit score?”. If you’re a major DIYer, credit repair might be right up your alley. If you’d rather stop thinking about your credit score until it looks a little better – trust us, we get it – then hire the pros.

If you’re willing to put the energy into going through your report for inaccurate information and remove it, it’s definitely possible. But a credit repair company could save you a lot of time by doing most of the heavy lifting. Plus, the best pros have access and direct connections to the credit bureaus that the average DIYer just doesn’t.

FAQs

How long does it take to fix bad credit?

It could take a just few weeks or several months to fix a bad credit score and it all depends on the severity of the negative history and quantity of errors bringing down your score. 

Here are other things to consider when figuring out your timeline:

  • The type of negative information on your credit report and how much of it there is
  • The age of your negative information
  • Your credit profile and history has a major impact on the way a credit issue affects your score

For example, a foreclosure or bankruptcy will most likely be more difficult to recover from than a one-time late payment.

How long does a repo stay on your credit?

“Repo” stands for repossessions, which are negative items listed on your credit report that can hurt your credit score. When someone comes to take your car because you aren’t making your loan payments, that damage goes a lot farther than you might think.

It takes seven years for a repossession to come off your credit report. That countdown begins from the date of your first missed payment that led to the repossession in the first place. 

Is credit repair legit?

There are legit credit repair companies out there that can help you improve a poor credit score, however, be aware of scams.

Any company that demands money up front is typically making promises they won’t be able to keep. Plus, charging fees for credit repair upfront is ILLEGAL.

Other warning signs for scams include:

  • They promise to remove all negative information from your credit report. Unfortunately, no company will be able to remove accurate information, good or bad. So anyone who claims they can is probably a fraud.
  • They suggest you dispute all information, even when it’s accurate. YIKES! This would just be fraudulent in the eyes of law. Don’t do it.
  • They want you to pay upfront. No legitimate credit repair company will ask for money before any work has been done. It’s actually illegal to do so under the federal Credit Repair Organizations Act.

Is credit repair legal?

Credit repair is legal at the federal level. The Credit Repair Organizations Act was enacted in 1996 and regulates how a credit repair company must operate under federal law. It protects consumers from receiving untrue or misleading information from credit repair companies and requires certain disclosures in regards to the sale of “credit repair” services. 

According to the Federal Trade Commission, the following practices are not allowed under the CROA:

  • Suggesting customers make false statements to credit reporting agencies
  • Advising credit repair customers to change their identify to dissociate with their credit information
  • Charging fees for any services that have not been fully rendered
  • Promising the removal of information from their customer’s credit reports

The CROA also protects credit repair customers by requiring companies to disclose the following information:

  • Customers have the right to dispute their own credit report information
  • Customers can sue the credit repair company if they violate the CROA
  • Credit repair companies cannot force you to sign anything that would waive any of the mentioned rights in this list
  • Credit repair companies cannot hide any of the following information listed above

Many states have their own laws about credit repair. A legitimate credit repair service should be diligent about the various laws at the federal level and those specific to your state but it doesn’t hurt to ask upfront.

What’s the best way to repair credit?

The best way to rebuild your credit score is to use your credit card responsibly (and by that, we mean only purchasing things you know you can afford and pay off in full every month). This ensures positive information is sent to your credit bureau every month.

If you’re not at this point quite yet, start by reviewing your credit reports for errors. You might even notice suspicious activity such as identity theft. Then, make an effort to make payments on time and pay all that is due. You’ll also want to avoid getting too close to your credit limit and applying for new credit cards if you don’t need them.

Pro Tip: Never use more than 30% of your credit card limit. For example, don’t allow your balance to go over $300 if your credit limit is $1,000.

How much does it cost for credit repair?

There are a couple ways a credit repair company could charge you for their services. And again, remember that a company:

  • Can’t charge up-front fees
  • Can’t charge for services until they’re delivered

A company could have you pay a one-time setup fee, which could range anywhere from $20-$90. Typically, that’s combined with a monthly service fee, which can run from $30-$130 a month depending on the services provided. Other companies may use “pay per delete,” which is when they only charge you after an item on your credit report is deleted.

Resources

Ask Abby

What should you do if you have debt on multiple credit cards

Resources

Ask Abby

5 Ways to Improve Your Credit Score

Hello everyone and welcome to Ask Abby, we have a particularly awesome show for you today with some cool new features that break down some of these nitty gritty topics into really unique, easy to consume animations. We have shared a couple of Basic finance’s videos in this credit score series, so you may have seen them before. If you haven’t, check out our Basic Finance Youtube channel: https://www.youtube.com/channel/UCaxQtBPzOWudXSZkxBjecsA and like our Facebook page to get notifications for our Ask Abby show because we will continue to have great content like that in the weeks ahead!

Today, we are talking more about credit scores but BEFORE YOU TUNE OUT because you’re thinking, “jokes on you, I don’t care about my credit score”I’m going to convince you why you should care…. Hopefully, at least. That’s what last week’s episode was about, why you should actually care about your credit score, even – or especially – if it’s in the 3-4-500 range and even if you’re not planning to make a big purchase like a home or car soon. 

Why you should care about your credit score: https://www.youtube.com/watch?v=go7IIvJQUF4. Also, if you’re sitting there going, I have no idea what a credit score is or how it works, watch this video: https://www.facebook.com/creditanddebt.org/videos/297509481376175/

Now that we’ve got all that out of the way, we are going to dive into today’s show, which is about 5 Ways to Improve Your Credit Score.  

The good news is, if you have a 3-4-500 credit score and you’re now in agreement that you should care about it, there are steps you can take to start working in the right direction of an improved credit score. Your credit score is not static, and as things change for you financially, your credit score will fluctuate as well. As your score fluctuates, the range in which you sit, fluctuates as well. So, with each step forward, you make progress towards a new credit score range.

FICO score ranges

There are several models for credit scores ,for example FICO and Vantage score, and each vary slighty, but for today’s video you’re using FICO just to keep things consistent as we talk through them. So, FICO credit score ranges vary from 300-579 for poor, 580-669 for fair, 670-739 for Good, 740-799 for very good and 800-850 for exceptional. 

Now, the biggest thing when looking at this chart is to not get discouraged. Not only is your credit score dynamic and always changing, but 33% percent of people sit in that poor to fair range, so you’re not the first person there and you certainly won’t be the last. That doesn’t mean, though, that you shouldn’t work toward improving your situation, right? 

Now that you know where you sit, let’s talk about how to get that number moving in the right direction with some ways to improve. We are going to talk about simple ways to improve your credit. There are things you can definitely do long-term, but we are really focusing more on the “right now” changes to make and hopefully see some immediate improvement. So check your credit report for inaccuracies.

The number one way to improve your credit is to check your credit report for inaccuracies. I think we talk about this every week but seriously, if you’ve never looked at your credit report, now is the time. It’s FREE on www.annualcreditreport.com.

Voice over: Usually you can only get your credit report for free once a year, but right now, you can get a free credit report on annualcreditreport.com every week through April of next year. Types of inaccuracies on credit reports include: 

  • Incorrect Personal Info
  • Accounts that aren’t yours
  • Closed accounts reported as still open
  • Duplicate accounts
  • Inaccurate payment history 
  • Outdated balance or credit limit info 

There are a few types of errors you should be on the lookout for when you get your credit report. The number one is Incorrect personal information. If your personal info is wrong, the credit bureau might have confused you with another person, which means your credit score could be all wrong! You’ll definitely want to check that out. 

Some other things to be on the lookout for are accounts that aren’t yours, because if your information was found, someone could have opened an account in your name and you wouldn’t have known it. Scams are super active right now and personal information is more vulnerable than over, so look closely! Also check to make sure that there aren’t any accounts on your report than you closed in the past but still show as open. While you do that, you can also check for duplicate accounts. Duplicate accounts can raise your credit utilization ratio, which is a major factor that affects your credit score. So let’s say you have one credit card maxed out, meaning your credit utilization for that account is 100%, a duplicate account like that will show that you have TWO accounts at 100% which could drop your score a ton. Last couple of things to check for are Inaccurate payment history and outdated balance or credit limit info. So just make sure that all that looks good. You can cross check those last few with your credit card and loan statements just to be sure.

1. Check your credit report for inaccuracies

So, CHECK! Number one to improve your credit score is not only simple but it’s also free and fast, so why not? If there’s nothing you can do to improve your financial situation because you’re just overall in a tight spot, one thing you can certainly do is check your report. If you need help navigating your credit report, our coaches can absolutely help you do that! So if you’ve never looks at in before or if you’re not really sure what you’re looking for, give our coaches a call and we can help point you in the right direction.

Alright so number 2 way to improve your credit score. We are going to talk about payments. There are alot of factors that go into payments and your credit score. Paying your stuff on time, communicating with your lenders about payments, getting a payments deferred, all these steps can ultimate have some sort of affect on your credit score, so rather than breaking each of those out, we are going to say:

2. Plan your payments

The second way to improve your credit score is to plan your payments. There are a few ways to that that: 

  • Schedule automatic payments
  • Set calendar reminders 
  • If something changes, communicate with your lender

Number one is to schedule your payments to automatically withdraw from your bank account or payment method. Most banks offer a bill pay option, in which you can sync up your account and let the system know when you’d like to make a payment. A lot of other online sites for things like car payments, cell phone bills, etc. allow you to input a payment method – like a credit or debit card – and schedule your payment to withdraw automatically. 

One of the easiest ways to ensure your credit score is heading in the right direction is to make sure you never accidentally miss a payment. So, for those account NOT on automatic withdrawal, set up a calendar reminder in your phone or email to remind you to pay your bills monthly. It’s also not a bad idea to set a reminder in your phone for the payment that DO come out automatically. That way, you know  exactly what to expect when looking at your accounts.  Lastly, it’s important that if something with your payment schedule changes, communicate with your lender.

Unexpected things happen, especially in today’s atmosphere. Whether you’re facing a reduced income, a layoff, or unexpected expense that will prevent you from paying a bill, CALL your lender before you do anything else. A missed pyament can affect your credit score, but sometimes, if you communicate proactively, your lender will work with you to set up a payment plan, waive late fees or even defer your payments, which can prevent a negative  ding to your credit score. 

So #2 has three things in it guys, but the overall message is just make your payments and if you can’t, communicate with your lender because a late payment doesn’t HAVE to negatively impact your credit score if you’re proactive. 

3. Pay down your debt 

So, the third way to improve your credit score is to pay down your debts. There are a few different methods to successfully pay down your debt. Some of them, you should be cautious, because they may initially hurt your credit score, but in the long run, they could make things move more quickly in the right direction. 

Debt Snowball and Debt Avalanche. A couple of things you can do on your own are the debt snowball vs. debt avalanche methods. Shout out to Dave Ramsey for these great methods! A debt snowball method basically says that you should make minimum payments on all accounts, and really focus on starting to paying off your smallest debt first. Meaning the account with the lowest balance. This will improve your credit because you’ll be reducing your credit utilization ratio! That’s good news. After you pay off one account, you allocate those funds to the next account, and so on and so forth, until all your accounts are paid off. A debt avalanche is similar, except that you start with the focus on your highest interest accounts. Whichever method you choose, we have one big heads up. 

PROCEED WITH CAUTION! 

Have red lights maybe and a siren? Let’s chat about it. Don’t close any of your accounts until your debt has been reduced significantly. Closing accounts when you still have high balances on other accounts can increase your credit utilization ratio and end up hurting your score! 

So with that warning, we can talk about one other big way to reduce your debt and that’s by talking to our coaches. I say it every week but our coaches will give you a free analysis of your debt and layout all of your options. So if you have $1,000 in debt or $100,000 of debt, our coaches will give you your options and let you know how long it’ll take for you to pay that off with some various strategies, plus, they will talk you through how your credit score might be affected in each case. IF you have questions on this one, please throw them in the comment bar! And I’ll get to them as we dive in to #4 

4. Ask for increased credit limits 

There are a few ways you can get an increased credit limit, and in turn, increase your credit score. If you have a credit card, go to the servicer’s website, login or create an account and navigate to where you have your account information or credit limit information. Sometimes, it’s as simple as the push of a few buttons! You can click “increase credit limit” or something or sometimes it says “request a credit limit increase” or something along those lines and you either just request an increase and they’ll let you know what you’re approved for or you can type in your request and they’ll approve or disapprove. Obviously, if you’re account isn’t in the best standing, they won’t likely approve you for an increased credit limit. But if you’ve been paying on time are in in decent shape, they might give you a bump which could them bump your credit score up a bit. 

Lastly, #5 way to increase your credit score quick and easy. We are going to wrap this up with an overarching tip to increase your credit score altogether and long-term is 

5. Avoid new hard inquiries

To avoid hard inquiries on your credit. Hard inquiries happen anytime a lender or services checks your credit to figure out if you’re eligible to qualify for their product or program. When they do that, it’s inevitable it will ding your credit, whether you have good credit or bad credit! 

The other major thing to consider is that new hard inquiries can stay on your credit report for TWO YEARS, so really chose carefully when you are trying to decide what’s important. You’ll have a hard credit inquiry for loans, store cards, travel cards, fuel cards, etc. One thing to note is that for secured debt, like a car or mortgage, you can have multiple inquiries over the course of – usually – 14 days or so and they only ding your credit once. That said, try to have a conversation with a lender prior to applying to see if you’re in the ball park range before they go through with the hard pull. There are so many ways to check your credit score for free, so make sure you know where you stand prior to making any major financial decisions. 

So, that’s our show today, 5 ways to improve your credit score, especially if it’s not a great score and you’re ready to make some money moves in the right direction.

Recap: 5 Ways to Improve Your Credit Score:

  1. Check your credit report for inaccuracies
  2. Plan your payments
  3. Pay down your debt
  4. Ask for increased credit limits
  5. Avoid new hard inquiries

Just to summarize the show for you, here are the 5 main ways to improve your score, check out that credit report because ITS FREE so hello. Plan out your payments, whether you can make them this month or not, plan ahead. Pay down your debt. You can do it on your own or call our coaches and we’ll map it out for you (ALSO FREE). Ask for increased credit limits. The worst they can say is no! And lastly, avoid new hard inquiries, or just make sure to know where you stand and plan your inquiries in advance. Know what’s a priority and what’s not as important.

That’s our show today guys, thank you so so much for tuning in. As always, please make sure to like and comment our page. Today’s show was a unique new way to get you all some content so please let us know if you liked it or if you didn’t, I want to know! If you have questions, you can comment on this post or even email me directly at askabby@creditanddebt.org . Tune in next week for our show – we are going to start on a brand new series and hopefully answer all your student loan questions! Thanks again and we will see you next week on Ask Abby

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Ask Abby

Tips to build your credit while in college (Interview)

Because swimming in student loan debt doesn’t count as cardio, so you’ll need some funds for that gym membership, plus your rent payment, phone bill and money for a social life, right? Well, even in college, some of these things require you to have a credit score, and a decent one at that. With so much on your plate, how are you possibly expected to focus on building your credit in college? That’s a great question and one that we are going to answer for you today with a special treat, so stay with me. 

Hello everyone and thank you for tuning in to Ask Abby, my name is Abby and like I said, we have a special treat in today’s show. I’m interviewing Peyton Mandel, a current college student, who, while in college full-time, working part time, has also, somehow, managed to build her credit while in college. So, I’m going to bring on this credit guru in just a minute, but before I do, I just want to let you know how this show is going to work. 

I have quite a few questions for her, but I’d also love to know what questions you have. So while we are chatting, please add your comments and questions in the comment bar and we will get to them toward the end of the show. 

So, I’m going to go ahead and bring Peyton on now…. 

Hi, Peyton, welcome to the show! 

We are so excited to have you on today and so excited to learn exactly how you’ve managed to juggle everything that you have going on and still been able to build up your killer credit score. So, we have a ton of questions for you, but first and foremost, would you mind giving us a quick introduction of what you have going on in your life right now? 

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Ask Abby

Why should I care about my credit score?

Hello everyone and thank you for tuning into Ask Abby, our live show where we answer all of your questions about credit, debt and your finances. Today, we are diving into our series on CREDIT SCORES. We are going to start at the basics and really talk about everything there is to know about your credit score, how to improve it, and what to do if your credit score is somewhere in the 3-4-500 range and you’d like to get out of there. 

Before we dive in, please take a moment to like and share this video so that more people can get some financial tips, especially, during these crazy times when the economy is still fluctuating and your financial circumstances aren’t super certain.

So, let’s talk about credit scores. First things first, if you have heard of a credit score and you’re not really sure what it’s all about or how it affects your finances, you have to watch this video: https://www.facebook.com/creditanddebt.org/videos/297509481376175/

It breaks down exactly what a credit score is, and what affects your score. It’s 2 minutes long and superrr informative! So if you’re like, look I have heard of this credit score thing but I really have no idea what it is,  if I have one, or how it impacts me check that video out and then also be sure to ask me questions along the way! 

If you have a credit score that’s in the 3-4-500 range, you’re probably in one of two boats: 

One: you faced a challenge something happened along the way and you feel like you may be in a hole in which you can’t climb out But you really want to work towards improving it if you only knew how…

Two: you don’t really care anymore and you aren’t actively monitoring or working towards an improved score, and your mindset for the whole thing is something like ignorance is bliss right? You know your credit isn’t great and whatever changes are happening might be negative or whatever else you don’t know about your credit score – what you don’t know can’t hurt you? 

Well for those of you who are in boat #1 and either want to know how or are actively working towards improvement, that’s great. I’ll have a show for you next week and here’s a great resourceful article with some tips and tricks for improving your score. So read that and please let me know what questions you have. 

Those of you in boat #2 don’t tune out! This show is for you and  I’m going to spend the rest of this episode doing my best to convince you that your credit score is your important  friend and you’re better off treating it that way rather than ignoring it like another stress factor in your life. As I talk through some of this stuff, feel free to comment, whether you agree or disagree, or ask questions. I especially want to hear from you if you disagree, I want to know your perspective, so please share your thoughts.

So why should you care about your credit score? Well #1 is to use credit. Your credit impacts many different areas of your life that you may not be aware. Let’s say you have no intention of buying a car or a house anytime soon, so why do you need to care about or work on your credit score? 

  1. You need credit to purchase a phone,rent an apartment or even get insurance.
    • Prepaid cells are one of the few ways to independently purchase a cell plan. The major carriers offer plans This means though, that you’ll have to pay for your phone outright.
    • You’ll need a deposit if you have no credit history. They vary, but it could be several hundreds $$
    • Renting an apartment might not seem like a big deal, but most landlords will run your credit to make sure they’re not getting themselves into a financially risky situation. The lower your credit score, the higher risk you seem to a landlord.
    • Many insurance companies now check your credit and adjust your rates based how risky they think you are
  2. You could be a victim of fraud and not even know it. 
    • The only proactive way to protect your identity and your finances is by looking at your credit report. Credit fraud affects everyone, including and sometimes ESPECIALLY people with a credit score in the 3-4-500 range. Why? Because thieves are betting on the fact that you don’t care.
    • Take a moment, go to the annual credit report . com and check out your credit report. If you have any questions or suspicions, you can file a report right there.
  3. It takes a while to improve your score
    • If you have a credit score in the 3-4-500 range, it can be discouraging to get going. I think the biggest thing if you have a low credit score is to remind yourself that over 40 million people in the US have a credit score lower than 550.
    • Because it takes a while – from 2 to 10 years, depending on the type of credit event that’s hurting your score – it’s best to be proactive to avoid additional damage.
      • Hard inquiries take 2 years to be removed from your credit report, but they might only impact you for about 6 months. 
      • Missed payments take 7 years
      • Bankruptcy can take up to 10 
    • Credit history is one of the factors that affect your credit score
  4. If you’re working on your credit score, you’re making good financial moves.
    • This is a blanket statement, obviously. There are certainly times in life where you need to make a decision that might negatively impact your score but positively impact your life.
    • That said, most moves you make to increase your credit score are moves that benefit your financial stability in general. 
      • Catching up on your payments
        • The debt collectors will stop calling you
      • Getting out of debt
      • When you are ready to make a purchase using credit (car, home, furniture, etc), you’ll be in the right place.
        • You might think a car purchase is years in the future, but a great credit score might be years off as well.
        • there are multiple strategic ways you can start improving your score now so you can begin lowering the interest rates you pay and hopefully achieve your goals sooner than you expected. 
  5. A couple of closing thoughts:
    • Avoid scams. Only a few credit repair companies are legitimate and even these use questionable tactics while charging you a LOT of money.   questionable.  Most are scams.
    • It typically takes 12-18 months to see good progress but improvements can be achieved quickly with sound advice. And after about 3-6 months of positive changes, your score will start moving in the right direction.

Now that you – hopefully – agree that you should care about your score, tune in next week because we are going to dive further into improving your score and making moves towards SUCCESS in your finances. Here’s the thing, if you still are like “why do I care? none of this applies to me” I want to know. I want to know why you’re in that boat and I want to chat about it. This is why I’m here so please reach out to me.

I hope we answered all of your questions today and if I didn’t and you still have questions, please reach out. So, you can comment on this post. There are a lot of people out there facing these circumstances so please take a moment to hit that thumbs up button and share this!  If you like and share our stuff, we benefit because more people see it and you benefit because if you really do like it, you’ll see it more often. You can also email me at askabby@creditanddebt.org, go follow my FB page, ASK ABBY, subscribe to our YouTube Channel and opt to get notifications on FB when we go live at 12:30 pacific on wednesdays! As always, thank you so much for tuning in and we will see you next week on Ask Abby.

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