The Fastest and Most Efficient Way to Build Lasting Credit
Real Credit Repair Results, W/no Monlthly ongoing fees
Your credit is important for many different reasons. If you want to buy a house, you need good credit to get the best mortgages. If you are planning to buy a car, good credit will allow you to have a lower interest rate on your auto loan. In fact, sometimes you can get a loan with 0% interest. You can also qualify for low interest credit when you need it. However, you need to know and understand how to build lasting credit.
Your Credit Report
The first step to understanding your credit is to understand your credit report. Your credit report contains all kinds of information about your finances. It helps creditors get a better understanding of how you manage your money so that they can assess their risk in giving you a loan.
Under the Fair Credit Reporting Act, you are entitled to receive a free credit report every year, and you should make sure that you do. You need to know what is in your credit report so that you can improve it and know if there is any inaccurate information.
There are three credit bureaus, Experian, Equifax, and Transunion. You need to look at all three because different creditors report to different bureaus, and you need to make sure that the information matches across all three.
When you look at your credit report, you will see that there are different sections. The first section is your personal information, including your name, any other names you may have used, your address, your phone number, and your employment. You should make sure that it is accurate, and check for any misspellings. If anything is incorrect, you can file a dispute to change it.
You will also find a section containing legal financial information, including judgments, liens, wage garnishments, and bankruptcies. This information will hurt your credit, but it should be accurate as well.
There will be a section showing credit inquiries. These are companies where you have applied for credit. These inquiries stay on your report for two years.
In addition, there is a section that has your creditors. This contains information about all of your loans and credit cards, including student loans, mortgages, and auto loans. It will have the date you opened the account, how much you owe, how much you have paid, and your payment history. It will also show any charged off accounts.
Finally, there will be a section that has your collections accounts. These accounts also hurt your score, but their impact decreases after two years. You should make sure that this information is accurate, and you might consider negotiating with these collection companies, as you may be able to negotiate a deal to pay in exchange for a goodwill removal.
Your Credit Score
The credit bureaus take all of the information in your credit report, and they come up with your credit score. It may be different with each bureau because they do not all have the same information. They have five categories that they use to determine your credit score, including the following:
- Your payment history (35% of score)
- Your credit usage (30% of score)
- The length of your credit history (15% of your score)
- The type of credit you have (10% of your score)
- Credit inquiries (10% of your score)
The first thing to notice is that your payment history and your credit usage make up 65% of your score. This is significant because it shows you how important it is to pay your bills on time. Your credit usage is how much of your available credit you carry a balance on.
For example, if you have $1,000 in credit, and you carry balances that equal $800, you are using 80% of your available credit. They want you to use less than 30% of your available credit, and your score will go down if you use more. Although the target is less than 30%, the lower that number is, the higher your score will be, so you should work hard to pay off your balances.
How to Improve Your Credit
Whether you have bad credit or you simply don’t have a lot of credit, you will need to build credit to have a good score. This is not a one-time situation; the key is to build the credit and then maintain your good score.
The first thing you need to do is make sure that your bills are paid on time. If you are 30 days late, your score will take a hit. If you are 60 days late, it will take a bigger hit. It cannot be stressed enough how important it is to pay your bills on time.
If you do have a late payment, you should immediately start rebuilding your credit. After you pay the bill on time for six months, it will not impact your score as much.
In addition, you need to make sure that you aren’t using too much of your available credit. Your score will be lower if you carry balances that are greater than 30% of your available credit. You should do what you can to pay them down.
If you are not able to pay down your balances, you can try several different strategies. You could apply for another credit card. This will increase your overall available credit, and as long as you don’t use it, it will reduce your credit usage. You should charge a small item that you need anyway, such as a tank of gas, every month and pay it off. This will help to keep your credit score high.
If you are not able to get approved for a regular credit card, you can apply for a secured credit card. When you apply for these cards, you will make a deposit, and your deposit will be equal to your credit limit. You will pay the bill every month just as you would with a regular credit card, and this will allow you to build credit.
Another option is to apply for a line of credit with your bank. If you have a relationship with them, they may approve you. You can use some of the line of credit to pay down your current balances, and leave the rest alone.
You need to remember that you are getting additional credit to reduce your overall credit usage. If you use the new credit, you will be in the same position, but you will owe more money. This will actually be worse for your credit score.
Since you are trying to build your credit and keep your score high for the long-term, you can use these tactics to improve your score quickly, but you must make sure that you are living within your means. If you continue to max out your credit cards, you will find that your credit suffers.
What to Do About Derogatory Marks on Your Credit Report
If you have derogatory marks on your credit report, you need to start rebuilding your credit right away. The good news is that over time, the impact of this negative information will lessen. Start by making sure that all of your bills are current. This is a large part of your score. Once you have gone six months without a late payment, the consequences of the late payment will lessen.
Most derogatory marks will remain on your credit report for seven years. The types of items that this includes are as follows:
- Late payments
- Short sales
- Charge offs
- Tax liens (from the date of the payment)
- Chapter 13 bankruptcy
In addition, collection accounts will stay on your credit report for seven years and 180 days, and bankruptcies other than Chapter 13 will stay on your report for 10 years. If these accounts are valid, you will not be able to remove them.
However, you do have some room to negotiate with your creditors. If you have collection accounts with unpaid balances, you can call them and negotiate a settlement. You should try to work it out that you will make a payment and they will remove the account from your credit report. If you are able to negotiate this, make sure that you have a written contract. Often they will do this as a goodwill adjustment.
With most of these derogatory marks, the impact is much lower after the first two years. They will fall off of your report in the specified time, so you may have to live with some of them. However, it doesn’t have to stop you from building your credit up again.
What to Do If You Have Inaccurate Information on Your Credit Report
Many people find inaccurate information on their credit reports. It can show up in different forms, which is why it is so important for you to check your credit report regularly. You may find any of the following types of inaccuracies:
- Duplicate accounts
- Inaccurate accounts
- Accounts that don’t belong to you
- Incorrect inquiries
- Inaccurate address or name
Duplicate accounts are accounts that appear more than once on your credit report. For instance, you may have had a credit card that was charged off. When this happens, the company often sells the debt to a debt collection company. The original account will say “charged off” and the collection account will show the debt.
Sometimes these collection companies then sell the debt to another collection company. However, this debt can only be on your credit report one time. You can dispute it if you find a duplicate account.
Inaccurate accounts are those that have inaccurate information. You should make sure that your balances are correct. Make sure that you actually made any late payments that are reflected on your account. In essence, all of the information should be accurate, right down to the spelling of your name.
It is not uncommon to find accounts that do not belong to you on your credit report. You may have a name similar to someone else in your family. In this case, you need to file a dispute to have the accounts removed from your account.
An incorrect inquiry is when someone reports that you applied for credit, even though you never did. You have the right to dispute this as well. You can also dispute any inaccuracies with your personal information, including your name, address, and phone number.
The important thing is to know that you have the right to dispute anything inaccurate that is on your credit report. Credit bureaus must verify the debt, remove the debt, or update the information if you file a dispute. You can file one yourself, or you can hire a credit repair company.
What Is a Credit Repair Company?
A credit repair company can help you file a dispute with the credit bureaus to remove inaccurate information from your report. You can file these disputes yourself, but credit repair companies have years of experience and know what the credit bureaus expect when you file your dispute.
Many people find this service to be very convenient, and the credit repair company tells you exactly what you need to do.
When you call a credit repair company, they should offer you a free initial consultation. They will meet with you to discuss the items that you want to dispute. If they agree that you have legitimate disputes, they will draw up a contract and let you know what their fees are.
They should never charge you for their services up front; in fact, the best credit repair companies may not charge you at all if they are unable to remove any inaccurate information from your credit report.
Once you have a written agreement, they will tell you exactly what information they need, and they will file your dispute. They know what the credit bureaus are looking for, so it is a much easier process when they handle it for you. The important thing is to make sure that you choose a good credit repair company.
A good credit repair company will have positive reviews from their clients, and they will have years of experience challenging inaccurate information on people’s credit reports. They will tell you that you can file your own disputes, but they will be ready to do it for you if you want them to. They should always offer a free consultation.
There are some red flags that you can look out for when you are interviewing a credit repair company. Avoid a company that does any of the following:
- Asks for payment upfront
- Tells you that it is a quick process
- Refuses to give you a written contract
- Has complaints from former clients
- Guarantees a specific score increase
- Asks you to be dishonest
- Tells you they can remove a valid debt
- Promises that certain items will be removed
- Suggests that you create another identity with an EIN
- Tells you that you cannot dispute items on your own
As with any industry, there are some bad seeds out there, but as long as you know what to look for, you will find a good company and get the help you need.
The process of disputing items on your credit report can take as much as 45 days. This is not a quick process, but it is an important one. This is one of the main reasons that you need to check your credit reports regularly. If they have mistakes on your report, it can hurt your ability to get a loan that you really need.
Building Your Credit
When you want to get a lasting excellent credit score, you need to start by building credit. You will follow all of the guidelines above, pay down your balances, and make sure that your payments are made on time. If you have any negative marks, do whatever you can to show that it was in the past but that you are able to pay your bills now.
You can also add a note to your credit file if anything negative was the result of a divorce or an illness. Once you have taken care of those things, you need to start thinking about building credit. You don’t want to apply for a lot of credit cards, but you need to have a good mix of credit to show lenders that you are responsible with different types of credit.
Credit cards are the easiest, and you have different choices. You can get regular Visa, Mastercard, or American Express, as well as gas cards, store cards, or other types of cards. You don’t want to have too many credit cards, and you don’t want to use them beyond what you can afford to pay every month.
Another type of credit is the auto loan. You might already have one, in which case you just need to pay it on time. Showing a positive history on this kind of loan will benefit your credit.
Having a mortgage is also important, and it is very important that you pay it on time. If you have a mix of these different kinds of credit and you pay them on time, it will help you to have a good credit score.
Keeping Your Good Credit Score
Once you have earned a good credit score, you need to keep it there. You will need to continue doing what you did to get the good credit score: pay your bills on time and use less than 30% of your available credit. If you are living within your means, this shouldn’t be too difficult. You can set your bills to autopay and make sure that they are paid each month.
Sometimes people end up with good credit, and they have credit cars with very large limits. This can make you feel as though you have more spending money available than you actually have. It is really a psychological trick to make sure that you always remember that having credit is not the same as having money in the bank. When you use credit, you have to pay it back.
It is important to have credit so that you can have a good credit score, and it can be very useful in an emergency, but you should try to spend only what you can afford to pay each month unless it is an emergency. In other words, you should not raise your standard of living based on having credit available.
People often get into trouble for this very reason. It is easy to see something that you would like to have or to sign up for something that you want to do without thinking through your budget. It can become very tempting and turn into a bad habit, and it will cause your score to decrease.
Make a Budget
Having good credit is not an end in and of itself. Your good credit score reflects that fact that you are responsible with your finances. If you want to keep your credit score high, you need to make sure that you manage your finances well.
The first step is to make a budget that you can stick to every month. Start by making a list of your income. Ideally, you will be able to list what you have available every month.
In a separate column, make a list of your mandatory expenses. This includes your rent or mortgage, car payment, car insurance, medical insurance, utility and phone bills, and any other monthly recurring bills.
Next, you need to determine what you need for food and gas. Include other auto expenses such as oil changes and tolls. These are also mandatory monthly expenses.
Next, you should determine what you can budget for clothing, entertainment, eating out, and children’s extra expenses. Finally, make a list of what you would like to spend money on, but keep it separate.
Now that you have everything on paper, plug it into a spreadsheet or a chart. You can look at your income and your expenses, and ideally, your income will be greater. If not, you need to cut out some of your expenses or determine how you can earn enough extra money to cover them.
It may take some time to come up with your budget, but you can do it. You should try to save a certain amount of money every month so that it can serve as an emergency fund. You won’t have to rely on credit this way.
How to Use Your Credit Cards
Even though you need to keep your balances low to avoid having your credit score go down, you should use your credit cards each month for purchases that are part of your mandatory expenses. For example, if you have two credit cards, you can use one to buy gas, and pay it off each month. You might use the other to pay a phone bill or another monthly bill, and pay it off when the statement comes.
It is important to use your credit cards because if they are inactive, the creditor may close the account, which will lower your available credit. It can also hurt you because part of your score is determined by the length of your credit, and you want to keep older accounts open.
It is good to use your credit cards each month, but make sure that you can pay them when the bill comes. Some people actually go online and pay the credit card twice a month. The credit card will report to the credit bureaus once a month, so paying the card twice a month or after you use it can help to ensure that your balance is lower when they report to the bureau.
Other Ways to Improve Your Score
There are other things you can do to boost your score, especially if you plan to apply for an auto loan or a mortgage in the near future and you need a boost. You can enroll in a program called Experian Boost to immediately boost your score.
In this program, you sign up to report your utility payments and your cell phone. If you make those payments on time, it will boost your score. You will give Experian permission to check your bank account to verify that these payments were made on time. The great thing is that late payments to the utilities will not hurt your credit score.
Another way to improve your credit score quickly is to become an authorized user on someone else’s account. If you have a family member or a close friend who has excellent credit, they can add you as an authorized user. You will immediately get the benefit of having this account reported on your credit report.
You need to be very careful because if you spend on this card and are unable to pay the bill, your family member or friend will have to pay it or risk having his or her credit jeopardized. This is something that can cause problems in your relationship, so make sure that you are responsible if you do it. It is also important that this person pays his or her bills on time. If this person is late, it will show on your credit report too.
Another way to give your score a boost is to open a line of credit at your bank. This will give you access to emergency funds, and you will be able to build a positive credit history. In addition, it will increase your overall available credit, which will cause your score to go up.
How Long Does It Take to Establish Credit?
If you have a thin credit file, you will need to take some time to establish a credit history. It takes roughly six months of history to see a reflection on your credit report. You will want to start out by getting a credit card, a secured credit card, or a credit builder loan.
A credit builder loan is a very useful tool for anyone looking to establish credit history. There is very little risk to a company because of the way it works. You apply for the loan, and they will approve you for a certain amount. The money will get put into a savings account or somewhere else, where it will sit untouched until you pay the loan.
You will start making payments, and the company will report to the credit bureaus for you. Once the loan is paid, they will release the funds for you. The important thing to remember is that you will have to make the payments on time, or it will actually hurt your credit score. However, if you pay on time, it will help to boost your credit.
Another thing you can do is possibly report your rent to your credit report. There are actually rent credit reporting services, including RentTrack and PayYourRent. These companies will report your on time rent payments to the credit bureaus.
Over time, your score will increase as long as you pay your bills on time and keep your credit utilization low. These are all great ways to establish a positive credit history, and it will help you get the credit score you need to have credit with good interest rates available when you need it.
What Is a Good Credit Score?
Credit scores range from 300 to 850 with all three bureaus. A good score is anything above 700, and if your score is above 800, it is excellent. Most credit scores fall between 600 and 750. Your score will determine whether lenders are willing to lend to you and what the terms will be.
Scores between 300 and 579 are considered very poor. In fact, 16% of people fall in this range, and they are unlikely to be approved for credit. If your score is in this range, you need to build credit to increase your score.
You will want to start using some of the tips above to get your score moving up and out of this range quickly.
Scores between 580 and 669 are considered fair credit. Seventeen percent of people fall within this range. If you fall within this range, you are considered to be a subprime borrower. You may have credit extended to you, but at a price. Your interest rates will be high.
If your score falls between 670 and 739, it is considered to be good credit. Twenty-one percent of people fall within this range, and you are considered less of a risk because only 8% of these borrowers are likely to become seriously delinquent.
If your score is between 740 and 799, it is considered to be a very good credit score. More people fall into this category than any other, at 25%. You are likely to receive better interest rates and to be approved for credit when you need it.
Finally, 21% of borrowers have a credit score between 800 and 850. This is considered to be exceptional credit, and you will get the best interest rates.
Why Does a Credit Score Matter?
If you don’t have any plans to buy a car or a home or if you don’t need a loan, you may wonder why your credit score matters. The reality is that it matters for a number of reasons. If you do find yourself wanting to buy a home or a car, you will not be able to raise your score overnight, and the best policy is to keep your credit score as high as possible.
In addition, other people check your credit and factor it into their decisions about you. Many employers will run a credit check on job applicants, and poor credit can be enough for them to decide not to hire you. In addition, cell phone companies often run credit checks, and you may not qualify for the best plans. In fact, with a bad credit score, you may have to buy a pay-as-you-go cell phone.
If you are renting your home, your landlord may run your credit and factor your score into your rental agreement. Some car insurance companies also run your credit, and you could find yourself paying more for insurance.
Your credit score tells people how you manage your finances, so these other companies will base their decisions on this three-digit number.
If you do plan to get a mortgage or an auto loan, your credit score matters for more than one reason. First of all, it will factor into whether or not the company is willing to extend credit to you. If they are, it will factor into your interest rate.
While a high interest rate on an auto loan may not look so bad factored into your payments, you could end up paying tens of thousands of dollars more on loan products. It may not seem too bad when you see a 17% loan that adds $30 to your monthly payment, but when you do the math, you realize that it increases the overall cost significantly.
This will impact your entire future. That extra money could have been saved for your retirement or something else that you really want to do.
Recap: How to Build Lasting Credit
If you make it a priority to build lasting credit, you will have more options available to you when you need them. There are simple things you need to do so that you are ready. Take a look at the following:
- Pay all of your bills on time
- Pay down your balances
- Open a secured credit card
- Get a credit builder loan
- Use your credit cards, but pay them off each month
- Pay off as much as possible on your balances
- Do not close old accounts
- Check your credit report
- Dispute any errors
- Negotiate with collections companies
- Stick to a budget
It may seem very complicated, but it is not hard at all. Use your credit cards to build credit, but make sure that you remind yourself that your credit is not extra spending money. The biggest problem that people have with credit is that they overuse it. You will want to use your credit, but you need to use what you can afford and pay off the balances each month.
Should You Use Credit Repair Services?
If you find inaccurate information on your credit report, you should challenge it right away. You can sign onto the websites of any of the three credit bureaus and file these disputes yourself. However, credit repair companies have years of experience disputing items similar to yours on a daily basis, and many people would rather have this handled by the professionals.
The important thing to remember is that a credit repair company can only dispute inaccurate information. This means that they cannot challenge a valid debt or late payment. The only way to address these types of marks is to bring the accounts current and pay down your balance. You can ask for a goodwill adjustment, but this will be up to the creditors themselves.
Whether you are in the process of establishing good credit or if you already have it, we can help you dispute inaccurate items on your credit report. We are a credit repair company, and we have years of experience in dealing with the credit bureaus. One of the most important things that you can do is to check your credit report for inaccuracies and remove anything that is invalid.
There are many different tips and tricks to help you get a good credit score, but you need to remember that living within your means is the best way to ensure that this happens.
If you find yourself using your credit all the time, and you are unable to pay down the bill, you will know that you are living outside of your means. For this reason, it is important to remember only to use your credit for expenses that you already have in your budget. You need to pay them anyway, and this will help to improve your credit and keep your score up high.
Ready to take your Credit to the
Ready to take your Credit to the