5 Big Credit Score Killers & How You Can Avoid Them

It's not just bankruptcy, foreclosure or short sale you and your credit score have to worry about.

Bankruptcy. Foreclosure. Short sale. These are the items that probably jump to mind when you hear the words “credit score killers,” but there are plenty of other line items that can really tank your credit — particularly if your score was stellar at the time they hit your credit report. But knowledge is power — and many credit score crushers can be easily circumvented or ultimately addressed. (You can see where your credit currently stands by viewing two of your free credit scores, updated every 14 days, on Credit.com.)

Here are five big credit score killers — and how to avoid them.

1. A First Missed Payment

Blame it on the fact that payment history is the most important factor of credit scores, but, yeah, the first time you go past due, expect your numbers to take a dive. Per a FICO study, a single 30-day late payment can cause a good credit score of 780 to fall 90 to 110 points. An average score of 680, meanwhile, can fall by 60 to 80 points. And that blemish will stay with you for awhile —seven years from when the delinquency occurred, in fact. (Here’s the full list of how long stuff stays on your credit report.)

The good news? If you course-correct, your score should steadily rebound the further you get away from that date. Plus, no guarantees, but there are things you can do to avoid winding up with a missed payment on your credit file in the first place.

How to Avoid a Missed Payment: Set up auto-pay from a linked checking account each month. If that move makes you wary, sign up for alerts that’ll let you know when your bill is about to come due — or whether you’ve just missed one. And, if you do mistakenly skip a due date, call your issuer to make it right. They may be willing to waive the late fee and not report the missed payment to the credit bureaus “just this one time,” especially if you’ve never missed one before.

2. An Error

Because they happen. And more often than you think. Per a 2012 report from the Federal Trade Commission, one in five Americans had an error on their credit reports. Some of these mistakes are innocuous enough — a misspelled name, for instance, won’t drop your score. But a bunch of missed payments that don’t belong to you certainly will, as would new credit accounts used (and abused) by an identity thief.

How to Avoid an Error: You can’t, unfortunately. But you can certainly stay on the lookout for them by regularly checking your credit. If you find an error, be sure to dispute it right away with the credit bureau(s). And, if you’ve got more than one mistake weighing you down, check out our guide to DIY credit repair.

3. A Collection Account

It seems like such a small thing — a $132 utility bill forgotten just after you graduated college. Or a $200 medical bill you thought your insurance had paid. Unfortunately, when it comes to credit scores, a single collection account can be no joke. You could see your score drop 50 to 100 points once one winds up on your credit report — and that account can legally stay there for seven years, plus 180 days from the date of your first missed bill, whether you go on to pay the collector or not. (We say legally because some collections agencies have recently announced changes that could help you get collection accounts off of your credit reports sooner than you think.)  

How to Avoid a Collection Account: This can be a bit tricky, we admit (medical bills, in particular), but you’ll want to keep an eye on your mail and resist the urge to ignore any calls from a debt collector. While there are plenty of scammers out there and mix-ups do occur, the debt could prove to be legit. Quick tip: Request written verification to confirm before agreeing or handing out any payments.

Beyond that, keep an eye on your credit reports so you can readily catch any collection accounts that may pop up. And, if you do owe the debt, consider squaring it away. Yes, they can both hang around your credit reports, but scoring models generally weigh paid collections as less than unpaid ones — and some newer models even ignore paid collections entirely.

4. A Maxed-Out Credit Card

Credit utilization is the second most important factor of credit scores, so bumping right up against your credit card’s limit can be problematic, particularly if that’s the only card you’ve got or, worse, you’re maxing out multiple credit cards. Remember, for best credit scoring results, it’s recommended you keep the amount of debt you owe collectively and on individual cards below at least 30% and ideally 10% of your credit limit(s).

How to Avoid a Maxed Out Credit Card: Monitor your credit card statements regularly, so you know exactly how much you’re charging. Consider paying your credit card bill more than once a month in an effort to preclude a big balance winding up on your credit report. Or aim to pay as much off as you can by your statement billing date, not due date, since that’s generally the balance issuers report to the credit bureaus each month.

And, depending on your situation, you could also consider asking for a higher credit limit (say you’re paying off all your bills in full and on time on a starter or secured credit card with a seriously low credit limit). Just note: The request could result in a credit pull, which could lead to a hard inquiry on your credit report, which could ding your credit score. But that small dip could ultimately be offset by the increased credit limit — so long as you don’t use it, of course.

5. A Tax Lien

No, Uncle Sam isn’t in the habit of reporting your full payment history to the credit bureaus. But leave that government debt unpaid long enough and you could wind up with a tax lien on your credit report, which will do big damage to your credit score. Generally, the Internal Revenue Service will file a tax lien automatically if you owe them $10,000 or more.

How to Avoid a Tax Lien: Be sure to pay Uncle Sam. But, more pointedly, if you’re saddled with a tax bill you can’t afford, contact the IRS to see if you can work out a payment plan. If a tax lien is filed against you and you later pay the balance due, take steps to have the lien withdrawn from your credit reports. You can do this by filing IRS Form 12277.

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7 Signs You’re Working With a Shady Credit Repair Firm

It’s natural to want a quick fix for your credit problems, but be wary of any practice that seems deceptive — even if it could work in your favor.

In September 2016, the Consumer Financial Protection Bureau filed a lawsuit against Prime Marketing Holdings, a credit repair firm based in Van Nuys, Calif. In its complaint, the CFPB alleged the company charged customers advance fees “totaling hundreds of dollars” and misled customers about their ability to remove negative items from their credit reports.

The case is still active, but it’s just one example of the proliferation of credit repair abuse in the U.S. And it gives rise to the question: How do I know if a credit repair company is legitimate or just another scam?

We’ve put together a litmus test of seven signs you could be working with a shady credit repair company.

  1. They ask you to pay before they start working.

One of the biggest red flags in the credit repair business is requiring an upfront fee before any services are rendered. Under the Credit Repair Organizations Act (CROA), credit repair companies can’t charge advance fees before rendering services.

In some cases, advance fees can be only a couple of hundred dollars. But some companies have been found to ask for thousands of dollars upfront. In 2011, the Federal Trade Commission sued Doug and Julie Parker, owners of a Texas-based credit repair firm called RMCN Credit Services, Inc. The FTC claimed the couple charged customers a staggering $2,000 retainer fee before they completed any work. In the end, the Parkers were fined $400,000 by the federal watchdog.

  1. They try to give you a new “credit identity.”

Another dodgy credit repair practice is when a company tries to convince clients to create a “new credit identity.” To establish this identity, the firm may offer to issue the client a nine-digit “credit profile number” or even prompt them to apply for an employer identification number with the IRS. With the new number in place, the firm could them encourage the client to apply for new credit and stop using their real Social Security number.

Don’t be fooled — this practice is completely illegal. An EIN is only used to identify businesses, and it is not a substitute for a Social Security number. Additionally, that credit profile number could easily be someone else’s stolen Social Security number. “These companies may be selling stolen Social Security numbers, often those taken from children,” the FTC warns. If you fall for this trap, you are essentially committing identity theft.

  1. They ask you to lie on credit applications.

Some credit repair organizations may also ask you to lie on credit applications in order to qualify for more credit. For example, they may ask you to report more income than you earn. It’s illegal to make false statements on credit applications.

  1. They dispute correct information on your credit report.

Yet another way credit repair companies try to manipulate the system is by misinforming consumers about the rules surrounding credit reports. They may tell consumers that they can fight every single item on their credit report — even if the item is accurate.

This is not true. If there is a negative item on your credit report that you feel is an error, you absolutely can fight to have it removed. But if it’s negative because you were, indeed, late on your bill, or did, in fact, file for bankruptcy, you cannot file to have it removed by claiming it is inaccurate.

  1. They promise to get you a perfect credit score.

When a company promises they can improve your credit score or even get your score up to a specific number, don’t believe their hype.

In 2015, the FTC filed suit against a company called FTC Credit Solutions for making exactly these types of claims. The company’s representatives told customers they would get their credit score into the 700s and promised any negative credit report information could be removed. On top of that, they also charged advance fees before rendering any services. The case was settled very quickly to the tune of a $2.4 million penalty against the defendants.

  1. They claim they are affiliated with a government agency.

Some repair firms fraudulently claim they are affiliated with the FTC or another government agency. If you are filing bankruptcy, it is true that you’ll be required to get some kind of credit counseling. But that counseling must be from a government-approved organization. There’s a full list of approved credit counseling firms on the U.S. Trustee Program website. If you’re thinking of working with a firm that isn’t on that list, you might want to reconsider.

  1. They don’t want you to contact the credit bureaus on your own.

Don’t believe a company that tells you they are the only way to contact the credit bureaus. By law, any consumer can contact credit bureaus directly without a third party. You also have the right to access your credit report from each of the three credit bureaus once per year for free. If you’ve been rejected for anything for credit-related reasons, you have 60 days to request a free copy of your report. This enables you to keep potential creditors honest.

If a company ever tells you that you are not allowed to contact the credit bureaus on your own, walk away — fast.

How to Repair Your Credit All by Yourself

The MagnifyMoney team highly recommends taking simple steps to improve your credit on your own, without the risk of working with a shady credit repair firm.

Read MagnifyMoney’s full, in-depth guide to repairing your own credit.

Start by getting a copy of your free credit report from each of the credit bureaus. The simplest way to do this is by requesting copies at AnnualCreditReport.com, which is a government-sponsored website.

From there, look over your information to make sure everything is accurate. If there are late payments listed, did you actually pay late? Does it show closed accounts accurately? Do you recognize all of the accounts?

Sometimes reports do have errors. If you find one, consider the fact that you may be a victim of identity theft and take appropriate steps as necessary.

If you’re instead the victim of an honest mistake, contact the credit bureaus directly. You will have to do so online and via written letter. You will also have to contact the entity that incorrectly reported the line item. You can get a sample letter here.

Be sure to keep copies of all of your paperwork and follow up on your dispute. The credit bureaus have 30 days to investigate. If all turns out well, they will remove the item, which could result in a higher credit score.

If they do not find in your favor, you can request that a copy of the dispute be attached to your credit report moving forward, but you will have to pay a fee to do so. While this will not improve your credit score, it could potentially alert future creditors to the fact that you do not agree with the negative item.

There are also rare cases where you can attempt to get an accurate item removed from your credit report. If you were not aware of a debt, but you quickly paid it off once you were properly notified, the creditor may be willing to remove the item from your report. This kindness may also be extended if you were experiencing a temporary illness or life emergency. These removals are rare, but are most often rewarded when you are an otherwise responsible steward of your debts.

To make your case to your creditor, you will need to write them a letter of goodwill. In it, explain that you understand why the item is on your report, but also explain why you temporarily were unable to fulfill your obligation. Stress the fact that you are an otherwise responsible borrower, and point out specific instances in your business relationship where this has proven to be true.

It’s also a good idea to appeal to their human side. Explain what the removal of the debt would mean for you. Is there a major milestone coming up, such as a job interview or a mortgage application? Thank them sincerely for the time they’re taking to review your case and cross your fingers. Goodwill letters do not have a high success rate, but you will have a zero percent success rate if you don’t try.

Read MagnifyMoney’s full guide on letters of goodwill.

Finding Legitimate Solutions

Even though there are a lot of scammers out there, it’s good to remember that there are legitimate credit repair organizations, too. However, before you pay a company to help you repair your credit, read our guide on repairing your credit on your own and our guide on credit counseling. At the very least, properly vet a credit repair firm before you sign up for their services — and watch out for the warning signs we covered before.

Another potentially safer way to go about credit repair is by working with a not-for-profit credit counselor. These organizations have a lower rate of deceptive practices and can work with you in a more holistic manner to resolve not just your credit report woes but also your current debt situation.

The post 7 Signs You’re Working With a Shady Credit Repair Firm appeared first on MagnifyMoney.

Can I Fix My Credit in a Week?


If you’re getting ready to apply for a car loan, mortgage or credit card, you may have heard it’s a good idea to check your credit before doing so. But, waiting until the last minute to check your credit before applying may have you surprised — if you find you have low credit scores for any number of reasons, you may be wondering just how quickly you can fix your credit.

“Unfortunately, there are no quick fixes for credit because it took time for this problem to arise and it generally takes much more than a week to resolve it,” John Heath, a credit expert and consumer attorney for Lexington Law, a Credit.com affiliate, said in an email.

Timing Is Everything

Credit scores are based on information in your credit files, which includes new data about how you handle your accounts reported by your creditors every month, according to Jeff Richardson, a spokesperson for VantageScore Solutions.

This monthly reporting date differs from lender to lender and the monthly date your credit scores update also differs depending on the reporting bureau, which is one of many reasons the cycle for fixing your credit may take more than 30 days, Richardson said.

Another example of timing limitations arises when you attempt to fix your credit by disputing errors on your credit reports, according to Heath. These disputes may include a current account, collection, bankruptcy, public record, tax lien or late payment that can’t be substantiated, isn’t yours, is inaccurately reported or is outdated.

“One of the major rules of the Fair Credit Reporting Act grants the credit reporting agencies 30 days to review your challenges to items on the credit report,” Heath said.

According to a 2012 VantageScore report, showing the impact of different positive and negative credit behaviors, you can typically improve your credit scores by 10 to 15 points within a few months with simple credit management techniques such as paying bills on time and paying down debt. For larger score improvements, it can take even longer depending on your specific credit report and account history.

Credit Fixes Accomplished in 30 Days

In general, the negative score impact of running up the balances on your credit cards can usually be corrected by a payoff the next month, according to Richardson.

“Pay down the balance all the way to zero, or at least under 30% of your total available credit, and you may see a credit score bump back up the next month, so long as there are no other negative credit events on your report,” he said.

Again, depending on timing, there might be one way you might improve your credit score in one week, according to Richardson.

“A score increase or decrease will depend upon when the lenders update your file,” Richardson said. “If you can find out when, say, a credit card issuer is reporting to the credit bureaus and reduce your balance significantly beforehand it is possible to see a score increase in a short time period.”

He favors taking a longer view of your credit health and improving your credit before you need to apply for any new credit, if possible.

Heath said you could spend one week reviewing your credit reports thoroughly making sure you recognize all the listings on the report and creating a budget that assures timely payments. Both of these actions, easily completed in one week, go a long way toward improving your credit in the long run.

No matter what steps you take to improve your credit scores — whether it’s to repair errors you discover or simply improve your habits — it’s important to note that these are things you can do on your own. There are also professional credit repair experts who are available to help you, but opting to turn to one for help is not essential.

If you are unsure where your credit currently stands, you can view two of your credit scores for free, updated ever 14 days, on Credit.com.

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


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

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

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

1. Get a Credit-Builder Loan

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

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

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

2. Pay Your Rent 

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

3. Become an Authorized User

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

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

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

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

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The 3 Universal Truths of Getting Out of Debt


For many people, debt has, perhaps unwittingly, become just another part of life. In fact, a 2015 study from Pew Charitable Trusts found 80% of Americans are carrying debt. And not all of what they owe is tied to good debt, like a mortgage. At the time of that study, 39% of Americans were reporting unpaid credit card balances.

But just because (almost) everyone is in the red doesn’t mean you should be. There are, after all, some universal truths when it comes to getting debt-free. Here are the major ones.

1. It Will Save You Money

OK, so, chances are, you know already that your debt is costing you, given almost all financing involves some type of interest. But what you may not realize is exactly how much your outstanding balances are adding to your lifetime debt load. The average person can expect to pay $279,002 in interest on credit purchases over the course of his or her life, but you can get a better idea of how much your current balances are costing you by using Credit.com’s Lifetime Cost of Debt Calculator.

2. It Will Help Your Credit Score

Debt plays a critical role when it comes to your credit scores. In fact, among major credit scoring models, the amount of debt you’re currently carrying accounts for 30% of your score. Experts generally recommend keeping your credit utilization — essentially the amount of money you currently owe your creditors — below at least 30% and ideally 10% of total available credit limit(s). So, if your balances are much bigger than that, there’s a good chance your score is worse off for it. (You can see how your debt may be affecting your credit scores by viewing your free credit report summary, updated each month, on Credit.com.)

Paying down outstanding debts also could help fix your credit by improving your credit utilization rate — and decreasing the odds missing of a payment, winding up with an account in collections, or, even, filing for bankruptcy — all big no-nos when it comes to maintaining your credit.

3. It Can Be Done

People facing a mountain of debt may feel like their situation is hopeless, but there are some steps you can take to get burgeoning balances under control. For instance, you can prioritize debt payments either by putting the most money towards your lowest balance (which can be a good motivator) or the credit line with the highest interest rate (which will save you on interest) while making on-time minimum payments on other loans.

You could also consider a debt-consolidation loan or balance transfer credit card. The latter lets you move high interest credit card debt to another piece of plastic that charges low-to-no interest for a set period of time. (You can learn more about the best balance transfer credit cards in America here.)

Beyond that, it’s about going back to basics: Take a look at your budget to see if there are items you can cut out or scale back on so that you can put more money toward your debts. And consider keeping any credit cards on ice, figuratively or perhaps even literally, while you pay down existing balances.

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I Have Too Many Credit Cards. What Can I Do?


Besides the obvious fact that there are only so many credit cards you can squeeze into your wallet, there are times when you might consider paring down or simplifying the credit cards you carry.

Before You Close a Card…

Before you start cutting up cards and calling issuers to close your accounts, there are some consequences you should consider. Specifically, closing a bunch of credit cards — even if you have a good reason to — can hurt your credit and potentially make it more difficult to open new cards down the road.

When you close a credit card, you directly impact your credit scores in three ways: You reduce your overall credit limit on your revolving accounts, impact the age of your credit history and potentially hurt your mix of accounts, too. You can see where your credit scores currently stand by seeing two of your credit scores for free on Credit.com.

Whether you’re facing a tight financial time and need to cut back or have just realized that you’re not managing your credit cards smartly, each problem that might make you want to close a credit card has some alternate solutions as well. Here are some of the common problems that prompt consumers to close credit cards and how to make the right choice for your money and credit.

Problem #1: I’m Spending More on Credit Cards Than I Can Pay Back

If you find yourself unable to pay off your credit cards in full every month and are quickly seeing a pattern that’s making you worry about a major credit card debt problem, you might be thinking that cutting up your cards is the best move. And it very well could be. But closing the cards doesn’t erase the debt you currently carry on those cards — it just prevents you from adding to those balances. You may want to consider some classic get-out-of-debt options like a personal loan to consolidate debt (counterintuitive, I know) or opening a balance transfer credit card to get some 0% interest breathing room while you make a plan to pay off your debt and, more importantly, avoid getting back into credit card debt.

Problem #2: I Have Too Many Credit Cards With Annual Fees

Carrying six or seven credit cards in your wallet and not using them is costing you nothing — unless some of those cards have annual fees. Then, it could be costing you hundreds of dollars a year. You could close the cards, but you also may be able to work with the issuers to get some of your annual fees waived temporarily. Or, potentially, you could ask to move to a no-annual-fee option of the same card. That option may not be available from every issuer, but it’s worth a phone call to customer service to explore your options.

Problem #3: I’m Missing Payments Because I Can’t Keep All My Credit Cards Straight

Payment history is the most important factor in your credit scores, and recovering from a negative hit like a missed payment can take years, though there are things you can do to improve your credit score in the meantime.

If you’re missing payments or paying late purely because you have too many credit cards to keep organized, you have a great reason to consider closing accounts. One thing you might consider first, though, is setting up payment alerts. Most of the major credit card issuers have account alert settings that will email or text you reminders of your payment due date. These issuer reminders, or even setting calendar reminders for yourself on your smartphone, could be a great way to tackle the problem without closing a card.

[Offer: Your credit score may be low due to credit errors. If that’s the case, you can tackle your credit reports to improve your credit score with help from Lexington Law. Learn more about them here or call them at (844) 346-3296 for a free consultation.]

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Can I Fix My Credit in 30 Days?


If you’ve got a less-than-stellar credit score and are looking to apply for a loan, chances are you’re going to want to fix those numbers fast. And you just might be able to do it — depending, of course, on what’s weighing your credit down.

Dealing With Disputes

Under the Fair Credit Reporting Act, once a dispute has been formally filed, credit bureaus generally have 30 days to investigate a claim and remove the item. So, if your score is damaged due to an inaccuracy, you could theoretically fix your credit within a month’s time.

“I have seen questionable items removed within that 30-day time frame,” John Heath, credit expert and attorney with Lexington Law, a Credit.com partner, said in an email. “However, there is no guarantee that those removals will happen.”

The credit bureaus, for instance, could decide that your dispute is frivolous, elect not to remove the information in question and effectively send you back to the drawing board. Plus, even when dealing with an inaccuracy that is ultimately deemed legit, the law provides a little bit of wiggle room for investigations.

There are certain exceptions when the bureaus can take 45 days to update information on credit reports. For instance, they have an extra 15 days whenever you dispute information after receiving your free annual credit report or when you submit additional information relevant to your dispute within the initial 30-day investigation period. (You can go here to learn more about disputing errors on your credit report.)

Recovering From Missteps

Of course, not all dinged credit is due to errors, and if your credit is lackluster because you made some mistakes, it may take longer for your score to rebound. Exact timeframes will vary depending on your full credit profile, but, in general, negative information can take a full 7 years to age completely off your credit reports (some bankruptcies take up to 10 years), though the effects each item has on your credit will lessen with time. (You can go here to find out more about how long things stay on your credit report.)

That’s not to say there aren’t times you can easily bounce back. In fact, if your score is bogged down by high debt, you may be able to fix it by paying down your credit cards. That should adjust your credit utilization rate (how much revolving debt you are carrying versus your total available credit limits), which accounts for about 30% of major credit scores. Experts generally recommend keeping this rate below at least 30%, and ideally at 10%, of your available limits, though if you’re looking to improve your credit, the lower it is, the better.

“If you have high balances or have maxed your accounts, you can pay these down, which can positively affect your credit score,” Heath said.

This boost could happen within a 30-day window, considering most creditors report to the major credit reporting agencies each month.

Getting Back to Good

In order to really bolster your credit, you need to identify what might be plaguing it in the first place. You can pull your credit reports for free each year at AnnualCreditReport.com and view two credit scores for free each month on Credit.com.

While everyone’s credit problems may differ, you can improve scores in the long run by making all payments on time, keeping those aforementioned debt levels low and adding a mix of credit accounts over time. You can also limit new credit inquiries while you wait for your score to recover. Remember, when you apply for new credit, hard inquiries will appear in your credit report,” Heath said. “These inquiries may negatively affect your score.”

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

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How $2,500 in Payday Loans Turned Into $50K of Debt


Less than a week after Google said it was banning ads for payday loans, one man’s story is making national headlines. He’s an example of how a bit of financial bad luck can turn into a mountain of debt.

Back in 2003, Elliott Clark’s wife broke her ankle. She couldn’t work, so to keep up with the bills, Elliott took out a $500 payday loan. Then he took out four more totaling $2,500.

“I had nowhere else to go,” Clark recently told the Kansas City Star. “I had a family, a daughter in college, bills to pay … I’m an honest man.

“Those places shouldn’t be allowed to do that,” Clark added. “It’s just glorified loansharking.”

After his wife Aquila’s injury, the medical bills rose to $22,000, the Star reported, and Clark couldn’t get a bank loan with a 610 credit score. Paying back those payday loans quickly became a juggling act. Over the next five years, it would end up costing him more than $50,000 in interest, the Star reported. And the couple lost their home during that period, too.

With payments due every two weeks, he would repay one $500 note along with $95 in interest, the Star reported. At the same time, he often would then take out another $500 loan and go to the next place and do the same until all five were paid.

He would be out the $475 in interest. And he’d also face the new loans coming due. That pattern went on for five years until he received disability payments from Veterans Affairs and Social Security, the Star reported. Those amounts allowed him to finally repay the whole debt.

“And I sure haven’t been back to those places,” he said.

What to Consider Before Getting a Payday Loan

Before you apply for a payday loan, step back and consider your options. Is this really an emergency? Is it possible to wait to repair your car or pay your bills until your next paycheck?

Here are some other ways to borrow money that are often lower-interest options:

  • Negotiate a payment plan with the creditor.
  • Receive an advance from your employer.
  • Use your bank’s overdraft protections.
  • Obtain a line of credit from an FDIC-approved lender.
  • Borrow money from your savings account.
  • Ask a relative to lend you the money.
  • Apply for a traditional small loan.
  • Ask your creditor for more time to pay a bill.

If you have evaluated all of your options and decide an emergency payday loan is right for you, be sure to understand all the costs and terms before you apply.

  • Shop around for a trusted payday lender that offers lower rates and fees.
  • Borrow only as much as you know you can pay back with your next paycheck.
  • When you get paid, your first priority should be to pay back the loan immediately.

If your bad credit is keeping you from getting a credit card or qualified loan, you can start repairing your credit. Getting negative, inaccurate information off of your credit reports is one of the fastest ways to see an improvement in your scores. You can view your credit scores for free each month on Credit.com.

[Offer: Your credit score may be low due to credit errors. If that’s the case, you can tackle your credit reports to improve your credit score with help from Lexington Law. Learn more about them here or call them at (844) 346-3296 for a free consultation.]

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The post How $2,500 in Payday Loans Turned Into $50K of Debt appeared first on Credit.com.

Help! My Kid Messed Up My Credit


Whether you handed over your credit card too many times, co-signed a loan or made your child an authorized user on that travel rewards card, there is a chance that your credit took a hit. Your hope was that they’d be responsible, but giving them access to your line of credit can all too often become a free-for-all with serious consequences. If that describes your situation, here’s what you can do.

Co-Signers Must Pay — & Rebuild Their Credit

“If your child fails to repay according to terms, the co-signer will suffer the same consequences as the primary borrower when it comes to their credit rating,” Bruce McClary, vice president of Communications for the National Foundation for Credit Counseling, explained via email. Worse still, “if their child skips town, the lender can pursue the parents for repayment.”

A proactive step may involve refinancing the loan exclusively in the name of your child before the account falls into delinquency. If it’s a student loan in question, you can also refer your child for student loan counseling with a nonprofit agency, McClary said.

If the worst has already happened, however, there’s really not much you can do. (You could take your child to court, McClary said, but you would still be on the hook until the matter is resolved in your favor.) Take a long, hard look at your finances to determine the best way to repay the loan. Then in the meantime, focus on rebuilding your credit, one step at a time. To start, you’ll need to obtain a copy of your credit report — you can view your scores, updated monthly, for free on Credit.com — and check them for accuracy. (You go here to learn how to dispute any errors you might find.) You can also fix your credit in the long-term by keeping debt levels low, making all future loan payments on time and limiting new credit applications while your score rebounds.)

Credit Card Holders May File Charges

As with any balance charged to a credit card, the lender will identify the person responsible for repayment as the one named on the account, McClary said. The same rule applies for authorized users — the cardholder is responsible for charges on the card.

If your child went on a shopping spree without your permission, you may consider seeking legal advice regarding options for filing charges. You can also file a dispute of charges with the issuer and submit a police report to establish the claim of fraudulent activity. Finally, a parent can add a statement explaining the situation to their own credit report.

Remember, when giving your child access to your credit, you’re not just giving them permission to make purchases in your name, you’re putting your own credit on the line. Make sure you’ve gone over the value of having good credit — and how bad credit can hurt you both.

[CREDIT REPAIR HELP: If you need help fixing your credit but don’t want to go it alone, our partner, Lexington Law, can manage the credit repair process for you. Learn more about them here or call them at (844)346-3295 for a free consultation.]

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Is It a Big Deal If My Name Isn’t Correct on My Credit Report?

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It’s sometimes entertaining how much people and companies struggle to spell names correctly, and it can result in some hilarious junk mail. (I’m endlessly amused that my father-in-law gets mail addressed to Bawrence or Lawrench. His name is Larry.) But name misspellings aren’t always something to laugh off.

If you pull your credit reports and see something wrong with your name, it could cause you problems or be a sign that someone stole your identity. Even if a name error on your credit report is just that — a mistake — it’s something you should try to fix.

A strange variation in your name could seem suspicious to someone who is manually reviewing your credit reports, like a mortgage lender.

“Is this somebody who regularly uses alternate names to dishonest ends?” Randy Padawer, consumer education specialist with Lexington Law, which represents consumers who want to repair their credit, said. “In a world when creditors aren’t always repaid the money they lend, this might be a cause for concern, even if that concern isn’t too terribly strong.”

First, you want to get your free annual credit reports (like you are already doing on a regular basis, we hope) and review them for accuracy (your names, accounts and everything else). Some variations are perfectly normal, like if you go by Larry even if your full name is Lawrence, but something like an incorrect middle initial or a totally different first name (one you’ve never used) is something to address.

The name variations could be a result of identity theft, a mixed credit file with someone of a similar name or a mere typo. In the case of identity theft, you’ll want to file a police report and monitor your credit for abuse or even freeze your credit to prevent new account fraud. You can get a free credit report summary to help you watch for signs of fraud every 30 days on Credit.com.

To correct information on an account that actually belongs to you, Padawer recommends starting with your credit reports. The name on your account won’t be listed next to the trade line, so you may not be able to tell if one of your creditors is reporting it incorrectly, but you can dispute the incorrect name information. After that’s corrected, consider digging deeper by reviewing your account statements or contacting your creditor to make sure your records are accurate. If disputing the name doesn’t work, you’ll also have to put in a little extra effort to get that fixed.

“You’re going to need to go straight to the data furnisher,” Padawer said. “Ask for a signed copy of the credit application. Ask for full debt validation.” You’re entitled to have your credit report accurately represent your identity, so press the creditor for information on how to correct the name until they do it.

[Offer: If you’re worried about errors on your credit reports, and you don’t want to go it alone, you can hire companies – like our partner Lexington Law – to manage the credit repair process for you. Learn more about them here or call them at (844) 346-3296 for a free consultation.]

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