How to Improve Credit Score

Everything here at CreditExaminer is designed to teach you how to improve credit scores. Helping each other through this economic mess is important. You can only start with you, and your finances are ‘numeral uno’. Clean up mistakes of the past, spend more wisely, begin to save and invest in assets of substance.

First things first: Repair Your Credit
Your credit is still of major importance, so I’ve created a free guide to get you off and running. This quick guide contains only the good stuff from years of working in the mortgage industry, following the experts and guiding clients through their own successful credit repair.

Free Online Guide

How To Repair Credit 

Then, its time to learn

How to Improve Credit Scores

When your credit report is clean, learn how to improve credit scores. Raise those numbers with expert credit tips and insights. If your report is clean, there’s no reason NOT to have high credit scores. Sometimes it doesn’t happen until you give it a little push. This section is dedicated to showing you how to improve credit scores after the initial cleaning is done.

What to do Next?

What else is here?

If you’ve gotten through the resources above, You can read through all of the items I’ve published to help people understand credit better and begin to make a difference in their own.

Read More articles about How to Raise Credit Scores

January is traditionally a time when we take stock of our finances, and take steps towards improving them. After the expense of Christmas and New Year celebrations, many of us will be starting 2012 with debts to repay, and depending on your situation, there are various ways of dealing with them.

If you’re repaying unsecured debts, such as credit cards, well enough every month, you may find that simplifying your debts with a debt consolidation loan could make sense, and could make keeping on top of your repayments easier.

However, if you find that you can no longer afford your credit card repayments, you’ll need to look at a new way of making lower payments you can afford, e.g. by agreeing a debt management plan.

Let’s look at how a debt management plan could help you repay your unsecured debts at a realistic rate once again.

What is a debt management plan?

A debt management plan is a new repayment plan that borrowers may be able to agree with their unsecured lenders if they can’t afford their monthly debt repayments.

There are two ways a debt management plan can be set up: either on your own, or with the help of a debt management company. If you decide to take the latter option, a debt adviser will talk you through your finances and work out how much you can realistically afford to repay per month.

Your lenders would then be asked if they’ll accept these lower repayments. If they think it’s the best way of getting back the money you owe them, your plan can start and you’ll begin making these payments – designed to fit around all your other essential monthly costs.

On agreeing a new repayment plan, your lenders may also agree to freeze interest on your debts. However, bear in mind that if they don’t agree, making smaller monthly payments will cost you more in total, as interest will accrue to your debts over a longer period.

You’ll only be expected to make a single payment per month to the debt management company, who’ll be responsible for passing on the agreed amounts to your various lenders, as well as dealing with any letters and phone calls from them on your behalf.

Finally, note that making lower payments will damage your credit rating for six years, which could make getting more credit during this time difficult – but as a debt management plan is only suitable for people who can no longer afford their repayments, it’s likely your credit rating will have already been damaged anyway.

In some cases, if you have a substantial amount of debt you’re struggling with, an approach such as an IVA (Individual Voluntary Arrangement) could be more suitable. A debt adviser can discuss your options with you.

In the past year, the opportunity to have one’s rental payment history included on their credit report has become a reality. In June 2010, Experian, one of the three major credit reporting agencies, announced their purchase of RentBureau. This acquirement gave Experian the means to allow their customers’ rental histories to be included on credit reports and so count towards their credit score. Experian is thus far the only agency to include such data on credit reports to date.

Companies like RentReporters.com serve as the middleman between tenants and the credit report agency, verifying rental payments and submitting the information to the credit bureau to ensure that it reaches the customer’s credit profile.

So when could your rent affect your credit report, and why would or wouldn’t you want it accounted for?

On the plus side, this new opportunity could be incredibly helpful for renters who don’t have a mortgage or don’t own credit cards, resulting in them having little credit history and therefore poor or no credit.

Says Eric Hartz, President and CEO of the RentBureau’s parent company, Decision Services International: “About 90 percent of renters are good renters, yet many are not identified as such since rent does not often make it into the screening process and consumers who have thin or no credit files often find it very difficult to qualify for a lease.”
Adds Brannan Johnston, Vice President of RentBureau, “For many, rent was their biggest monthly expenditure, and they never got the credit they deserved for making those payments. Historically only negative information showed up for renters through collections or evictions.”

Now renters have the opportunity to earn credit for timely payments and good tenancy. It could also be said that with the motivating factor of upping one’s credit score with positive rental history, tenants would be further encouraged to pay their rent on time.

The addition of incorporating tenant history on credit reports poses negatives as well as positives however. For one thing, RentBureau states that it does include “comprehensive positive and negative data,” meaning that late or non-payments will be accounted for as well as timely ones.

As mentioned earlier, Experian is currently the only credit agency to have incorporated the addition of rental payment history on their credit reports. As a result, this boost in your credit score will not reflect on the FICO scores or credit reports from either of the other two major companies, Equifax and Transunion.

And lastly, according to nolo.com, most landlords currently don’t report rent payments to Experian. The ones who do are usually large-volume landlords and property management companies, simply based on their having the systems in place that are required for mediating between their tenants and the credit agency. This leaves those who rent from family-owned or small-scale landlords in the dust in terms of taking advantage of this new prospect.

In closing, just be aware that the opportunity exists and has the potential to pick up speed if one of both of the other credit agencies jump on the idea. I advise you to use your knowledge of your own credit scores, credit history, finances, and tenancy to make the best decision for your personal situation.

When it comes to credit cards, those in the business category are perhaps the most misunderstood. Do you need a business to get one? Will they help (or hurt) your personal credit score? Questions such as those are posted regularly on my forum.

Let’s dispel the myths and learn how they really work.

Myth #1: You need to own a LLC or corporation to apply
According to the IRS, a sole proprietor is “someone who owns an unincorporated business by himself or herself.” So for example, if you ever sell something on eBay or Craigslist and you don’t have a LLC or corporation setup to do so, then you are a sole proprietorship.

Sole proprietors can apply for business credit cards. When you consider how many Americans make a few bucks on the side, that means the pool of people who can apply for these cards is huge. Joe Shmoe could wake up tomorrow morning, decide he now has a side business doing whatever, and could then apply by using “Joe Shmoe” as his business’ name and use his Social Security as the business tax ID number.

Myth #2: They will show up on your credit report
Now some business cards DO affect your personal credit report (we’ll talk about those later). But most will not – they are not reported to the credit bureaus and hence, they’re useless for helping your credit history.

I learned this first-hand years ago with my American Express Business Gold card. About a year after getting it, I was looking at my credit report and noticed it was nowhere to be seen. I contacted American Express and as it turns out, they don’t report business cards whatsoever. The only exception is if you were to default on your account, in which case it would be reported to your personal credit file (and would hurt you in the same way as if you did that with a personal account).

This bummed me out, because I put some heavy spending on my AmEx Business Gold card and wanted that on my credit report. The lesson? Before you bank on a business card to help your credit, first check with the issuer to find out if it will even be reported.

Myth #3. They can’t hurt your personal credit
Continuing off what was said in #2, it’s important to realize that you are 100% personally liable for your business credit if anything goes wrong. Even if you have a LLC or corporation with a separate tax ID number, during the application process you were required to also provide your SSN. This is because it’s impossible to obtain a business card without using your personal credit.

There are “corporate” credit cards, which can be obtained solely under a company’s business credit, but in order to get those you typically need to have $5,000,000+ in annual revenue and 2+ years of strong cash flow. So in a nutshell, the vast majority of so called “business” credit cards are really just like personal cards. The biggest difference being that they might not be reported to the bureaus as long as your account is in good standing.

How the most common business cards are reported
American Express – The Business Gold card was discussed above, but that’s not the only one that doesn’t report. In fact, none of the small business cards from American Express are reported to your personal or business credit.

Obviously this is a huge drawback for credit building purposes but there is a silver lining – if you have a high balance (and therefore, high credit utilization) it might be beneficial for the account to not to show up on your credit report. Why? Because having credit utilization that’s too high can actually hurt your credit score.

Capital One – They used to not show on your personal credit but that was recently changed. Today, all of them will show up on your personal file, including the new Capital One Spark card (sidenote: It appears the other Capital One business cards are being phased out and replaced with the Spark cards).

Discover – Around the time of the recession, Discover also began reporting business cards to personal credit.

Bank of America – To the best of my knowledge, Bank of America still doesn’t report to personal credit.

Chase – Not only have I read many reviews of the Ink Visa  from customers on my forum, but I also have been using the card myself for about 8 months. So far I haven’t heard from anyone who has seen it on their personal credit (and I haven’t seen it on mine). If you have a LLC/corporation they will report it to the business credit bureaus (which means the Chase Ink Visa is useful for building business credit).

Citi – I have heard from those who claim they do report, as well as those who claim they don’t. It appears the reporting policy varies by card.

As a reminder, with ANY issuer if you screw up and stop paying the bill, it will show up on your personal credit report… you can bank on that!

Your first step to getting back on track is learning how to repair credit, which includes things like disputing errors on your credit report and paying charge-offs and collections. But after you do that (or while you’re doing that) what else can be done to rebuild a new, positive credit history?

Well when it comes to credit cards, unfortunately your options will be few and far between. If you have recent charge-offs on your report and/or a FICO score in the mid-600’s or less, it’s highly unlikely you will be able to qualify for an unsecured card (especially in this economy). However secured credit cards are another story… virtually anyone can qualify for them!

What is a Secured Credit Card?

In a nutshell, it’s operates in the exact same manner as a traditional credit card but with one major difference – you will need to put up a security deposit (and hence, where the “secured” name comes from).

This deposit you put up becomes your line of credit. For example, if you put up $500 then you would be given a $500 credit limit. Assuming you are working with a legitimate bank, this deposit will be FDIC insured and fully refundable when you are finally ready to close the account.

Since you are basically insuring the credit risk yourself via the deposit, it doesn’t matter how horrendous your credit may be – you will be approved assuming you are a legal U.S. resident, age 18 or older, and have a mailing address. Those are usually the only 3 requirements necessary.

Where do you start?

To rebuild your credit using secured credit cards the right way, you will want to follow these three steps.

Step One: Be ready to fund your deposit

The minimum deposit needed for most secured cards is $500. That being said, there are a handful that start lower at $200 or $300. On the other end of the spectrum, the maximum amount you can put up typically ranges from $2,000 to $5,000.

While a credit line in the thousands may sound nice, most people don’t have that much spare money lying around. My advice? Instead of waiting until you have enough money for that dream credit limit, start out small and you can always build it up later by adding more.

Either way, when you apply make sure you have (a) the money for your security deposit, and (b) money to pay whatever fees are charged for having the account.

Step Two: Research, research, research!

Not surprisingly there are a lot of bad deals out there which target people with bad credit. Some cards may not even report you to the credit bureaus (and hence, making them useless for credit rebuilding). However more often, you will probably encounter cards that charge exorbitant fees – in addition to the annual fee, some charge an application fee, processing fee, customer service fee, and more! So be on the lookout for these and make sure you always read the fine print before applying.

Generally, I advise people to make sure the card they choose has no more than $50 in fees per year (in total, for all fees charged). For example, the $39 for Orchard Bank’s card isn’t a bargain, but it’s at least reasonable. If you want to avoid paying a fee altogether for a secured card, it’s possible but there will be very few options – i.e. some credit unions offer their members secured cards for no added fee.

Now when it comes to rewards and benefits, don’t expect much from a secured card. In fact, I would estimate that well over 95% of the secured cards on the market offer no rewards whatsoever. There is a 2% Household Bank card, but since its launch a few years ago it has been discontinued and re-continued multiple times. In 2011 Capital One acquired the US credit card division of HSBC (Household Bank’s parent co.) so I think it’s highly unlikely they will allow a 2% rewards card to stick around long term, since it directly competes with Capital One’s own secured cards.

Conclusion? Focus on finding a low cost card, rather than chasing benefits and rewards which will be hard to come by. Remember your secured credit card will just be a stepping stone to bigger and better things, so don’t worry if it doesn’t have all the traits you desire. Once your credit has improved, then you will be able to get your perfect card.

Step Three: Manage your account properly

So you have your new secured credit card, now what?

Well, there are a lot of misconceptions out there about the right way to manage your card. To set the record straight, let’s review a few things:

• Your credit score factors in the amount of your credit limit that is used – using a high amount is actually bad. Try and never use more than 25% of your card’s limit at any given time.
• You should pay your bill off every month. Don’t worry, each month the balance reflected on your bill gets reported to the credit bureaus (i.e. if you spent $200 this cycle, that’s what will get reported). So there is no advantage to carrying a balance and paying interest – as long as you use your card, the spending activity will be reported even if you pay in full every month.
• Before you apply for an unsecured credit card, you will probably want to have at least 9 months of solid history on your secured card, as well as your limit built up to at least $1,000 (but preferably $2,000). Why? Because a higher amount like that is closer to the minimum credit limit found on many unsecured cards. So in other words, you will look like a better fit than if you applied and only had a card with a $200 or $300 credit limit on your report.

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A short story illustrating the beginnings of credit. Learn What Is Credit from Mr. Johnson as he gets store credit from Manny, the general store owner. A fun little story to help you learn. When youre done, you can read more about what is credit with a more detailed description.

First ever video/podcast about what is credit
Todays Lunch: Salad

Jennifers beater car has her at her wits end. The slideshow illustrates as she goes shopping for a new car at the used auto dealer. Will she get a loan?

The video was created as many people desired to have credit scores explained even further. The addition of a simple story to make the video a little more fun hopefully helps to have credit score explained on a basic level, I imagined even 5th graders would enjoy.

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Jennifers beater car has her at her wits end. Listen as she goes shopping for a new car at the used auto dealer. Will she get a loan?

A short story illustrating the beginnings of credit. Learn What Is Credit from Mr. Johnson as he gets store credit from Manny, the general store owner. A fun little story to help you learn. When youre done, you can read more about what is credit with a more detailed description.  

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