How Your Credit Report Can Help You Manage Student Loans

Handling your student loan payments may not be easy, but here's where you can start to take control.

More than 1.8 million students graduate from college in 2017. While it’s a momentous achievement, many graduates will walk away with significant student loan debt. Though keeping up with monthly payments can be difficult, knowing how to budget for them can be an even bigger obstacle.

If you’re feeling overwhelmed and don’t know how to begin managing your loans, your credit report can be an essential tool. Here’s how your credit report can help you take control of your debt.

What’s in Your Credit Report?

Your credit report is a complete picture of your financial history. It contains information about your bills, loans and what credit cards you have open.

Lenders use your credit report to make decisions on your reliability and financial stability. They look at your report to evaluate whether to offer you a car loan, mortgage or a new credit card. However, your credit report is an invaluable source of information for you too, especially if you have student loans.

2 Ways Your Credit Report Can Help You Manage Your Loans

When you’re in school and take out federal or private student loans, it’s easy to lose track of who your lenders are or how much you borrowed — especially if you don’t have to start repaying them yet.

To make things more difficult, your debt can sometimes transfer to a new loan servicer. If that happens, you’ll have to make payments on a different website and you’ll have a new account. That’s where your credit report comes in handy. You can use it to locate your loans and their current status in the following ways:

  1. Identify your loan servicer: If you aren’t sure who your loan servicer is, use your credit report to identify who manages your loans. Your credit report will list all the institutions behind your debt. Once you have the name of your servicer, you can use that information to sign into your account and begin making payments.
  2. Find out your current balance: Thanks to interest, your loan balance could grow while you’re in school. If you’re unsure what amount you owe, your credit report will list the current balance on your loans.

Where to Get Your Free Credit Report

There are many services that will send your credit report for a fee. However, paying for your credit report is unnecessary. You can get a free credit report from each of the three credit bureaus — Equifax, Experian, and TransUnion — once a year from AnnualCreditReport.com.

It’s a good idea to stagger your credit reports throughout the year. For example, you could review one credit report from each agency every four months. That way, you can continually review your credit report for issues, rather than waiting a full 12 months. Catching problems early can save you money and protect your credit.

You can also check your credit scores for free on Credit.com. They’re updated regularly and can help you spot changes in your credit reports if they go up or down unexpectedly.

What to Do If There’s an Error

An essential part of checking your credit report is reviewing it for errors. Sometimes loans are reported incorrectly or, in cases of identity theft, fraudulent accounts can be put under your name.

If you find an issue, whether it’s a simple mistake or a more serious issue of theft or fraud, it’s important to take action right away. If the accounts in error become delinquent, those late payments can cause your credit report and score to plummet. That will make it more difficult for you to get a loan, a new credit card or get approved for a new apartment. The longer you wait to act, the longer it could take to correct.

To report a problem, write a letter disputing the errors and send it in the mail to the following:

  • Equifax: Equifax Information Services, LLC., P.O. Box 740256, Atlanta, GA, 30348
  • Experian: Experian, P.O. Box 4500, Allen, TX 75013
  • TransUnion: TransUnion LLC, P.O. Box 2000, Chester, PA, 19016

You should also notify the bank or financial institution that reported the error. Include copies of any supporting evidence you may have to prove your case.

To ensure you have a record of contacting the organizations, it’s a good idea to send the letter as certified mail as proof.

If you report the error and the credit bureaus and financial institutions do not fix the issue, you can escalate the problem to the Consumer Financial Protection Bureau.

Managing Your Credit

Graduating from college is a huge milestone, but it’s easy to get overwhelmed managing your student loans. From figuring out who your loan servicer is to learning how much your loans grew, the process can be complex.

Getting your credit report and credit scores and reviewing them thoroughly can help you keep track of your loans and stay current on your payments.

Image: g-stockstudio

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The One Thing Job Seekers Forget Employers Look At

Brush up your resume. Update your references. Clean up social media accounts and ...

There are some steps even first-time job seekers know to take ahead of formally seeking out new employment opportunities: Brush up your resume. Update your references. Flesh out your LinkedIn profile. Clean up your other social media accounts. Network.

It’s all fairly straightforward, but there’s something else very important new graduates and beyond will want to add to do their pre-employment search to-do list: Check your credit reports.

Why Should I Check My Credit Before a Job Search?

Some employers will pull a version of your credit report as part of their application process. And patterns of money mismanagement — like a bunch of missed payments or multiple collection accounts — could wind up hurting your odds of scoring a position, particularly if that gig involves handling cash, access to sensitive financial information, company accounting or government work. That’s why it’s a good idea to review your credit reports ahead of your job search.

You can pull a copy of your credit reports from each major credit bureau — Equifax, Experian and TransUnion — for free every 12 months via AnnualCreditReport.com. You can also view your free credit report summary, along with two free credit scores, updated every month, on Credit.com.

Financial Fact: Some states, including California, Hawaii and Washington, have banned employers from screening an applicant’s credit in certain circumstances. And, in all states, employers can only look at your credit report, not your actual credit score. Plus, they can’t pull your credit reports without your permission, so if a credit check is part of their application process, you’ll at least have a heads up. (There will be a form you’ll be asked to sign.)

What Am I Checking For?

First, you’ll want to make sure there aren’t any errors on your file that could needlessly cost you a prime position. These errors are more common than you think: a Federal Trade Commission study from 2012 found that one in five Americans had an error on their credit reports. If you find one, be sure to dispute it with the creditor and the credit bureau in question. You can learn more about disputing errors on your credit reports here. Keep in mind, credit bureaus have 30 to 45 days to investigate a credit report dispute, so won’t necessarily see that error disappear right away. Hence the reason you’ll want to do check your reports before your job hunt kicks into full gear.

Second, if you discover legitimate blemishes, you’ll want to determine if anything can be done to fix them. For instance, you might want to shore up unpaid collection accounts or pay off high credit card balances. Keep in mind, many missteps will stick around for awhile as most negative information stays on your credit file for up to 7 years. (Certain bankruptcies can even take up to 13 years to age off your reports.) Still, even if you can’t undo a troublesome line item, you’ll at least know that one is there — and will be able to address any issues upfront with prospective employers.

Finally, work on improving your credit overall so you won’t have to worry so much about a dreaded credit pull the next time you’re looking for new employment opportunities. You can rebuild bad credit by using a starter credit card to establish a new and improved payment history, keeping credit card balances below at least 30% and ideally 10% of your total available credit limit(s) and adding a mix of credit accounts organically as your score and/or finances rebound.

Not sure how to fully prepare for a job hunt? No worries. Recent or soon-to-be college graduates in need of some help can find a full 50 things to do to score their first job right here

Image: Mikolette

The post The One Thing Job Seekers Forget Employers Look At appeared first on Credit.com.

50 Things Recent Grads Can Do to Score Their First Job

Consider this a crash course on getting a job after graduation.

If you’re a college senior and are nearing the time when you’re going to walk across the stage, you’re probably filled with a lot of excitement. And maybe even some panic, especially if you don’t have your next step lined up.

According to the Accenture Strategy 2016 U.S. College Graduate Employment study, four out of five graduates thought about how many jobs were available in the industry they were considering before choosing their major. But even with that foresight, only 21% of the class of 2016 had accepted a job before graduating.

So if you’re about ready to throw your cap in the air and don’t have your first job lined up yet, here are 50 things you can do to help make that happen.

1. Remember, It’s Your First Job

Yes, you have the education, but now you need real-world experience. The first job you get right out of school probably won’t be your dream job, so adjust your view and think of it as another step in getting you there.

2. Start With an Internship

It may seem like something you stop doing after graduation, but having an internship means you’ll “have something on [your] resume, learn some real-world work skills and possibly have another reference for [your] ongoing job hunt,” Dr. Crystal I. Lee, a licensed psychologist and owner of LA Concierge Psychologist, said. And this role could ultimately land you a full-time, permanent position.

3. Fill in the Gaps

Take a look at your industry and see what skills you may need that you didn’t gain in your formal education. “There are lots of relatively short programs, many of them at universities themselves, to teach these kind of ‘last-mile’ skills,” Andrew Overby of Yonderwork, an international community experience for remote workers, said. “It can only help.”

4. Expand Your Network

“Go out there and get coffee meetings with people you respect and look up to,” said Phi Pham, co-founder of Building Beats, an education startup in New York City. “Find a way to provide value to them and the dividends will pay off in job connections.”

5. Volunteer

“Reach out to a local nonprofit and see how you can put your skills to work [during] your job search,” Pham said. Plus, the people you meet when doing this can build up your network.

6. Start a Side Project

Having something you’re doing while you’re looking for full-time work “shows that you spend your time learning and figuring out how to make something meaningful for the world,” Pham said.

7. Adjust Your View

Try not to limit your applications based on pre-conceived notions about the working world. “You may think you want to work for a large corporation, bu find yourself interning or working for a small business and you feel satisfaction in knowing you are part of a team and making a valuable contribution,” Candace Dennig, director of student services at the Art Institute of Washington, said.

8. Ask for Advice

“Talk to instructors, friends and fellow students and ask for advice — are there any companies that they suggest reaching out to in hopes of securing employment?” Dennig said.

9. Take a Look at Your Credit Reports

It may seem strange, but knowing what’s showing up on your credit reports may be insightful. After all, many employers review a version of these reports as part of the vetting process. You can see a free snapshot of your credit reports on Credit.com.

10. Think About Relocating

“You sometimes do need to be living in the city in which you want to work before getting a job because it makes it easier for you to get in for interviews on short notice and network in the community,” Erin Lowry, millennial finance expert and author, said. Not sure which city may be the place to go? Check out this list of the best (and worst) cities for new graduates seeking work.

11. Visit Your Childhood Bedroom … 

Going home to stay with your parents may not be feasible for everyone, but if it’s an option, it could save you some rent money until you land a job. See if your parents will offer you a discount on rent in exchange for doing work around the house. This will offer you some flexibility in terms of not having to worry about breaking a lease if you get a job out of town, plus you won’t be racking up as many bills while you look for work.

12. … But Don’t Get Too Comfortable

Yes, there are many perks that can come with staying with your parents, but don’t let that put you in a rut. Use this time to your advantage — put money in savings for all the things you’ll need when a job comes your way. This includes things like paying rent, student loans and all your other bills.

13. Set Aside Time to Apply

From finals to social events, your schedule is probably pretty packed. But it’s important to set aside blocks of time to research jobs and apply for the ones that fit your skillset. This will help make sure you aren’t rushing and making mistakes on the applications.

14. Polish Your Resume …

You may not have a robust resume, but padding it won’t help get your foot in the door. Marc Cenedella, the founder and CEO of Ladders, a career site, offers these tips: “Keep to a one-page resume, remove references to high school and focus on highlighting your education, leadership skills and accolades achieved while in college.”

15. … & Then Have a Professional Review It

Once you feel you have your resume in a good place, it’s time to get a second opinion. “Having all your documents updated and formatted professionally is key when you go to networking events or start applying to positions,” said Valerie Streif, senior adviser with The Mentat, a San Francisco-based career service.

16. Customize Your Resume to the Role

Once you have a basic template for your resume, consider fine tuning it to each application. Sure, it may take a little more time but this way you can highlight to each employer what makes you right for that particular role. (And make sure you’re avoiding these big resume mistakes.)

17. Show You Can Do More Than One Thing

If you’re looking to join a startup, they’re likely looking for people who can take on more than one role. Show them they’ll be getting a jack of all trades (or at least someone with multiple skills) when hiring you.

18. Don’t Forget About the Cover Letter

Yes, that resume is important but so is your cover letter. This is the chance you have to say things about yourself your resume doesn’t. Make sure what you write is clear, targeted to the job and proofread for spelling errors and grammar mistakes.

19. Visit Your Career Center

Most colleges and universities offer career services. They may not have all the answers, but they have insights and may even have a listing of jobs, internships, freelance work and other opportunities.

20. Attend Career Fairs

“It can be easy to delete emails with notifications of upcoming job fairs on campus and instead go to the bars or spend time with their college friends — but making the effort to actually go to these events can bring incredible opportunities,” Streif said.

21. Attend Conferences

This is a great way to network with professionals in your given industry. Many of these are free or may offer a discounted rate for students.

22. Join a Professional Association

Do some research and find a professional organization in your industry that you find interesting. Participate in their meetings and other events and build that network.

23. Get Business Cards

You likely won’t always have a resume on hand and you never know who you may meet. Include contact information and a link to your website or portfolio on your cards.

24. Find a Mentor

Find someone you admire and who has a similar career to one you’d like and pick their brain. They can give you insights into what you may need to do and think about as you search for your first post-grad job.

25. Meet With Alumni

Your alumni network may be a good place to start when searching for a mentor. But beyond that, there’s partial truth when people say, “it’s not what you know, it’s who you know” and you already have a tie with this group of people. They may even be able to open some doors for you. Check with your school to see if they have alumni events or a database of alumni you can talk with.

26. Ask Younger Students

It may seem like it’s backwards to ask students younger than you about jobs, but they may know about companies you haven’t even heard of yet. Ask around and see where they’re interning or working for the summer for more ideas of where to apply. And maybe see if they can pass along your resume if you find an opportunity you’re interested in.

27. Refresh Your Online Presence

Recruiters and human resources departments often check your online profiles as part of your application. So, freshen up your social profiles (especially LinkedIn) and do a quick search of your name to see what comes up. You may consider setting up professional accounts in addition to your personal ones.

28. Get a Professional Email

If you don’t already have one, it’s time to get an email address you can use specifically for professional reasons.

29. Create Your Website

A website with your resume and examples of your work can act like a digital portfolio. Plus, if you start it now, you can build on it as you advance in your career. If you already have one, make sure it’s up to date with your graduation date.

30. Branch Out on Application Methods

“Taking many different approaches to the job hunt is the best way to ensure quick success,” Streif said.

31. Contact a Recruiting Firm

These agencies can help get you placed in an entry-level position, some of which don’t have public listings online.

32. See What Others Did

Take a look at people who are a step or two ahead of you in your industry and see what they’ve done to get ideas for where your path could start. Browse their websites or LinkedIn profiles to get started.

33. Pick Up a Book

Odds are, leaders in your industry have written a book about how they got to be where they are today. Reading these books may not land you a job, but they could give you ideas. And, if nothing else, they can give you some talking points for any interviews you go on.

34. Post Your Resume Online

While you’re out there searching for jobs, know that employers are searching for candidates. Many job boards allow you to post your resume for potential employers to review and doing this may be to your advantage.

35. Go Where Others Won’t

Maybe you’re dreaming of working in a big city but so are countless other people. Starting in a smaller market may increase your chances so don’t cut these locales off your list.

36. Take Initiative

Is there a company you really like but no job openings that you qualify for? Take some initiative and call their recruiter and HR department and pitch them on hiring you. The answer may still be no, but the opportunity won’t be there if you don’t at least try. (Also, see point two — perhaps there’s an internship available to help you get your foot in the door.)

37. Remember: Odds Are in Numbers

You probably didn’t apply to one college so why apply to just one job? According to Adecco, an online staffing agency, recent graduates apply to an average of 12 jobs before getting offered their first job.

38. Think About What’s Important to You

Yes, you want a paycheck and benefits. Yes, you want to build up your resume. But there are other things involved in a job, so think about what you want. Perhaps a place you can advance or a job with a flexible schedule is important to you? Whatever it is, make note of these things so you can include them in your search (and ask about them in interviews).

39. Find a Way to Stand Out

Whether that’s bringing a hard copy of your portfolio or showing your design skills on your resume, whatever you can do to make yourself a bit different from the rest of the applicants, do it. (Just don’t go overboard. You don’t want to end up using tactics that get your application noticed for the wrong reasons..)

40. Try Your Hand at Freelancing

“Getting a freelance job could supplement your income and allow you to take a lower wage job to get your feet in the door,” said Linda Murray Bullard, a business strategist at LSMB Business Solutions LLC. Check out these 15 best companies for freelancers this year.

41. Start as a Temp

Temporary agencies may be a good way to break into your chosen industry, offering you some income while you wait for a full-time job. Some of these jobs might have the potential to turn into a permanent role.

42. Consider Teaching Opportunities

Irnande Altema, founder of FirstGenRise, suggests graduates “look into their public school systems and check the requirements to become a substitute teacher in middle or high school. … Also, another option is working for a summer camp where you are teaching a subject like science, math or history.”

43. Research the Company …

Once you get a face-to-face interview, it’s important to know details about the company and what they do. It will help you make a good impression.

44. … & Maybe Even the Interviewer

Whether you read their bio on the company website or read over their LinkedIn profile, finding common interests or details to break the ice can be helpful. Plus, it can give you more insights into what to prepare for.

45. Think About Interview Questions

Going into an interview without preparation can make it harder to think on your feet. After all, your nerves will probably be on overdrive while you’re there. Having someone do a mock interview with you — like people from your career center — ahead of time may really help you be on your “A” game. (Feel like the interview went well? Check out these five signs you may be getting hired.)

46. Follow up After Interviews

You’ll be surprised at what a difference this can make. Write a thank you note to everyone who took part in your interview process, and reiterate your interest in the position. It not only underlines your interest, it shows you have good manners and appreciate the time the interviewer(s) gave you.

47. Have References Ready

Be prepared by asking three or four people if you can list them as references. This way, when you get an interview and they ask for references, you’ll be ahead of the curve.

48. Find Out What You’re Worth

You’re just starting out, so you probably won’t be raking in the top salaries out there, but what’s fair? Take a look at sites like Glassdoor to find out what people in your industry, at your level and in the area you’re living are making. Information is power, after all.

49. Learn How to Negotiate

Once that job offer finally comes in, taking the seemingly big salary without thinking about it may be tempting. Find out what the job will entail and make sure you’re being paid fairly and negotiate accordingly. It’s highly unlikely they’re going to rescind your offer if you ask for more money. Don’t forget to factor in benefits, too. Just a week of vacation offered? If they won’t offer you more money, they may be willing to give you more vacation.

50. Consider Starting Your Own Business

Sure, it may be costly, but if you’ve always wanted to execute an idea you had for a company, now may be the time. Just make sure you crunch the numbers to see if this is feasible — after all, those student loan payments will kick in soon.

Image: sturti

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Financial Literacy: Are you at the head of the class?

How would you grade yourself when it comes to financial literacy and credit? If you haven’t given it much thought, April is the perfect time to do so, as it is National Financial Literacy Month.

 

In a recent survey conducted by Equifax, most consumers do not place themselves at the head of the class when it comes to financial literacy. According to the findings, one-third of the respondents grade themselves a “C” when looking at their financial literacy knowledge.

 

Additionally, one in five surveyed consumers said they know more about national politics than their own credit histories. Thirteen percent said they knew more about their favorite sports teams, 7 percent said they knew more about this season of their favorite TV series, and 6 percent knew more about the latest fashion trends.

 

The good news is, most consumers are taking steps to educate themselves when it comes to financial literacy. When asked to select the steps they’ve taken to improve their financial literacy within the last year, 45 percent of the consumers said they read news articles on financial websites, while 28 percent sought guidance from family and friends.

 

While parents were the most popular source of information, the second most common source was a personal finance course during high school or college. Ninety percent of survey respondents saw value in teaching personal finance, saying they thought it should be a required course to graduate high school.

 

The survey also found:

 

  • Most surveyed consumers correctly selected the factors that can impact credits scores. Specifically, 87 percent knew paying bills on time is one factor that impacts a credit score.
  • Additionally, 42 percent of surveyed consumers knew that most types of negative information can stay on a credit report for seven years. This is up slightly from the 40 percent of surveyed consumers who knew this same information in 2016.
  • A majority of surveyed consumers felt confident about their short- and long-term financial futures. Sixty-one percent indicated they were confident or extremely confident about their short-term financial futures, and 54 percent indicated they were confident or extremely confident about their long-term financial futures.
  • Respondents 60 years of age and older were most confident about their financial futures, while respondents aged 45 through 59 were least confident.

 

If you, too, would give yourself a “C,” here are some things to consider doing to turn those Cs into better grades:

 

  • Pay your bills on time every time – no matter what;
  • Create and stick to your budget;
  • Check your credit report at least once a year. You can get a free copy of your credit report from each of the three nationwide consumer credit reporting agencies every 12 months by going to www.annualcreditreport.com. You won’t be able to see a credit score, but you’ll be able to check your information and even might spot signs of identity theft; and
  • Pay attention to your credit card balances, and always understand the commitments you’re making.

Notice Something Different About Your Free Credit Report Card? Allow Us to Explain

Credit.com’s free credit report card has changed — Here's what that means for you.

Hey, credit-builder: The team here wanted to let you know that Credit.com’s free credit report card has changed. Don’t worry, you’ll still be getting two free credit scores, along with a letter grade for how you’re doing in the five key credit scoring categories: payment history, debt usage, credit age, account mix and inquiries.

But, starting April 11, the three-digit-number located in the upper left corner of your credit report card, along with your customized action plan, will reflect your VantageScore 3.0 Advantage Score. Previously, the credit report card was based off of your Experian National Equivalency Score (NES), which is your secondary score, visible once your click the “Other Scores” hyperlink.

Why are we making the switch? Well, as you may have heard, there are lots of different credit scores out there, but the most widely known models, including the VantageScore 3.0, follow a range of 300 to 850. The NES score, on the other hand, follows a less common range of 360 to 840. Plus, as you may have gathered, it’s used solely by Experian, whereas VantageScore 3.0 is used by all three of the major credit reporting agencies: Equifax, Experian and TransUnion.

The swap will help us provide you better credit card recommendations as you monitor and improve your credit score. It should also clear up some confusion, as the 300 to 850 range is the one most people are familiar with.

You can find more on VantageScore here. And, to give you an idea of where your credit stands generally, here’s how the ranges on both scores break down.

Vantage 3.0 Score: 300 to 850

Excellent Credit: 750+
Good Credit: 700-749
Fair Credit: 650-699
Poor Credit: 600-649
Bad Credit: below 600

NES Score: 360 to 840

Excellent Credit: 750+
Good Credit: 700-749
Fair Credit: 650-699
Poor Credit: 600-649
Bad Credit: below 600

In either case, if your scores have been fluctuating, your credit report card should provide some valuable insights as to why. Remember, while scores and their associated algorithms vary, they are all based on information in your credit reports, so focusing on your risk factors or negative line items should help you boost your standing across the board.

We get it: All this credit stuff can be confusing and it’s easy to stress about whether you’re acing every score. However, instead of trying to track down all your digits (which is pretty much impossible anyway, given lenders buy proprietary algorithms), it’s a good idea to compare apples to apples by choosing a common score, like VantageScore 3.0, and monitoring your standing over-time.

Our credit report card will provide some helpful hints for how you can improve along the way.

And, so long as you pull your full credit reports from each credit bureau regularly and/or right before you apply for a loan, you shouldn’t be in for any major surprises. (Remember: Viewing your own credit doesn’t damage your scores.) You can get your credit reports for free every 12 months by visiting AnnualCreditReport.com. Checking them will help you spot any errors or line items that might be on only one of your credit files. (Some lenders just report to one credit bureau.) If you find an error, be sure to dispute it. And don’t hesitate to reach out with any credit-related questions in the comments sections below. Our Credit Experts will do their best to help!

Image: Georgijevic

The post Notice Something Different About Your Free Credit Report Card? Allow Us to Explain appeared first on Credit.com.

5 Basic Credit Lessons to Teach Your Kids

Your parents may have prepared you as best they could for the financial realities of adulthood, or they could have left you to figure it all out for yourself. But if you were taught the basics of finance and credit before you left the nest, you may have encountered less of a learning curve than your clueless counterparts. No matter your level of understanding, you likely have to do some learning yourself.

But now, if you’re the parent, one of your priorities is to prepare your kids for adulthood. Just as you would teach your children to dress themselves, ride a bike or do their laundry, you may want to impart lessons about credit to them to help them become successful and financially independent.

Here are five credit lessons you may wish to impart.

1. It’s Important to Regularly Check Your Credit Reports & Credit Scores

Credit reports and credit scores may seem like abstract concepts to teach your children. But you can use simple metaphors. School-age children can understand the concepts of grades and report cards, and these concepts apply to credit. The work you put into your credit is reflected in your credit report and credit score, which “grade” your performance. These grades can then be used to help you get “rewarded,” like by getting the best rate on a credit card or a loan, like for a car or home. (You can check out your free credit report summary on Credit.com, which includes grades on how you’re doing in the five key areas that make up your scores.) This brings us to our next lesson …

2. Credit Affects Their Life

Once your child understands the concept of a credit report and credit score, you can demonstrate how credit has affected your lifestyle. Many of your possessions — your home, car or credit card, for instance — were obtained using credit, and are examples of the power of credit. Of course, credit is not just a way to get “things.” It’s a tool that can help provide shelter, comfort and freedom.

3. There Are 5 Main Influencers of Credit

As your kids get older and have a firmer grasp on these concepts, they may be able to better understand how they can make credit work for them. You can show them credit is determined by five main factors:

  • Payment history
  • Debt usage
  • Age of accounts
  • Types of accounts
  • Credit inquires

If you own credit cards, have loans and monitor your credit report, you have teachable moments built into your financial routine. When your children are old enough, you can involve them as you pay a bill or check your credit report, explaining the process as you go.

4. Mistakes Can Cost You

Mistakes can be valuable life lessons for young people. But when it comes to credit, mistakes can be costly and their effects can be long-lasting. One late payment can cause your credit score to drop dramatically. And negative items such as accounts in collections and judgments can stay on your report for at least seven years. To a young person, seven years can be a long time to have difficulty obtaining loans or credit cards. You can also show them how errors on your credit report can be fixed by using this guide.

5. Credit Cards Are Merely Tools

Credit cards are not a magic wand for reckless spending, but they are also not inherently risky items to be avoided. They are tools. They can be invaluable to build credit and financial independence, but they can also be damaging if wielded incorrectly.

It’s no secret that young people can have trouble with impulse control. But you may want to impart that credit cards can be used responsibly or irresponsibly. The results will depend on the user.

Image: Liderina

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9 Signs You’re on Your Way to a Perfect Credit Score

Because we get it: Sometimes you just have to have that A-plus.

Hey, there, overachiever. Are you really trying to attain a perfect credit score? Here’s the thing: You don’t need to. Any score over 760 will pretty much net you a lender’s best rates and terms. Plus, even if you do score that elusive 850, you probably won’t keep it for long. Credit scores are mercurial: They change as new information hits your credit report or, most notably, as your loan balances go up and down. (Translation: Perfection is fleeting.)

But we get it. Sometimes you need that A-plus. So, in the interest of indulging your financial dreams, here are nine signs you could one day see a perfect credit score.

1. You’ve Never Missed a Loan or Credit Card Payment …

Payment history is the most important factor of credit scores, accounting for 35% of most popular scoring models. Plus, one little slip can do big damage once it hits your credit report — and it can stay on record for up to seven years. In other words: Don’t expect to see the highest score ever if you’ve missed a payment (or two) in that time frame.

2. … Or Any Other Bill’s Due Date for That Matter

Sure, utility companies, doctors, gyms and other service providers don’t routinely report missed payments to the credit bureaus, but collection agencies do. And, if you leave any old bill unattended long enough, that’s where the debt might end up, with a credit score fall to follow.

3. Your Debt Levels Are Virtually Non-Existent

The rule you commonly hear involves keeping the amount of debt you owe below at least 30% and ideally 10% of your total credit limit(s), particularly when we’re talking credit cards. If you’re trying to achieve credit perfection, you’ll want to focus on the ideal part.

Expert Intel: It’s a bit of a misnomer that you need to carry debt to build credit — you simply need to have credit accounts on the books that are being managed responsibly. So, for instance, someone could conceivably build a good credit score with a single credit card they pay off in full each month. People with 850s tend to have more than one loan on the books (more on this in a minute), but you’ll be best served in the long run by adding financing as you truly need (and can afford) it.

4. You’ve Had Good Credit for a While …

There’s a reason older demographics tend to have higher credit scores: Credit history, or the length of time you’ve been responsibly using credit, accounts for 15% of most scores. Technically, though, this category doesn’t have anything to do with your age. Instead, your credit history “starts” when you open your first credit account.

5. … But Haven’t Applied for Any New Loans Recently

That’ll boost your credit history, which also factors in the average age of your credit accounts. Plus, loan applications generate credit inquiries, which can ding your score for up to one year and hang out on your credit report for up to two. (More on how long stuff stays on your credit report here.)

6. You’ve Got a Mix of Credit Accounts on the Books

Credit scores give you maximum points for responsibly managing different types of credit. That’s why having, say, a mortgage, an auto loan and a credit card (or two) — all in good standing — tends to be a common characteristic of people in the 850 club. In technical terms, this means you have revolving lines of credit, like a credit card, and an installment loan, like that mortgage, on the books.

7. Your Public Record Is Clean

Judgments and liens can wind up on your credit file, though there are indications that will soon be changing. For now, though, a matter of public record could wind up hurting your credit score.

8. Your Credit Report Is Error-Free

Credit report errors can happen for a number of reasons and most misinformation will needlessly harm your credit. To achieve perfection, your file needs to be pristine — which you can help to ensure by diligently pulling your free annual credit reports from each major credit reporting agency and disputing any error you see.

9. You Keep a Compulsive Eye on Your Standing

You know the old adage “if a tree falls in a forest and no one’s around to hear it, does it make a sound?” Well, the same can be said about an 850 credit score. You’ve got to play all your credit cards right, and then you’ve got to be lucky enough to check your score at the precise moment perfection strikes. (Like we said earlier, that 850 probably isn’t going to stick around for long.) Fortunately, you can view two of your free credit scores, updated every 14 days, on Credit.com.

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Will I Lose My Credit History If I Change My Name?

Here's how to ensure your name change goes as smoothly as possible.

Thousands of people change their names each year, often as a result of marriage or divorce, and less frequently, just for fun. In fact, one man, armed with $50 and a written deed poll application, secured the moniker Bacon Double Cheeseburger in the United Kingdom last year.

Although Mr. Cheeseburger may be perfectly satisfied with his colorful designation, he and others can experience some bumps after a name change. And while you won’t “lose” your credit history if you change your name due to marriage, divorce or even just for fun, there can sometimes be confusion about your identity if your information isn’t being accurately reported.

In general, your new name is added to your credit reports after you notify your mortgage lender, credit card issuers and other businesses of the change. They report the change, be it a first or surname change, to the three main credit bureaus and your new name replaces the old, which then remains on your credit history similar to old addresses and employers.

How to Smooth Your Name Change Process

Keep in mind that changing your name isn’t an automatic process. It requires lots of paperwork and contacting the necessary businesses to ensure a successful shift. Personal participation is key.

The best way to ensure that your name change is reflected on your credit report is to contact government agencies and credit issuers who provide personal data and account information to the credit bureaus. These include:

  • The Social Security Administration: Applying for a new Social Security card is a good place to begin your name change because it can be used to help verify your identity as you move forward. While your Social Security number (SSN) won’t change, your name will be updated.
  • The Department of Motor Vehicles (DMV): If your name change is the result of marriage or divorce, you may need an original or certified decree before a change is allowed (rules vary by state). Visit the DMV to update your license.
  • Bank & Credit Accounts: Contact your lenders and credit card issuers to order new checks, debit and credit cards, and be sure any business accounts are updated as well.
  • Your Employer: In addition to updating their own records, your employer needs your new name in order to pay Social Security, unemployment and other taxes on your behalf.
  • Medical Providers: Medical bills rarely appear on your credit report unless you fail to pay it, but it’s a good idea to provide your doctors and dentists with your new name.
  • Insurance Companies: Insurance coverage is essential to protecting your home, car, business and other valuables. Make sure your providers have current information.

When you’re finished, it’s also a good idea to contact each of the three credit reporting agencies (Experian, TransUnion and Equifax) to alert them of your name change and ensure it is accurately reflected.

Credit reporting isn’t a perfect system, and while changing your name shouldn’t erase or negatively impact your credit history, it’s a good idea to check your reports and scores in the months that follow. Visit AnnualCreditReport.com to order free copies of your TransUnion, Experian and Equifax reports. You can also view two of your credit scores for free, updated every 14 days, on Credit.com.

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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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You May Be Able to Get Collection Accounts Off Your Credit Report Sooner Than You Think

A collection account can drag down your credit score for several years — but not always.

While shopping for a home to buy, Ryan discovered through his credit monitoring service that a collection account had hit his credit reports. His credit score dropped, and he was worried it could jeopardize this ability to get a mortgage. “I had no idea what it was,” he says. He wanted it off his credit.

After doing some research online, Ryan (he asked his last name not be used to protect his privacy) connected with Michael Bovee of Consumer Recovery Network, who helped him negotiate with the collection agency to resolve the account.

Bovee had good news for Ryan: The collection agency that had the account, Midland Funding, had recently made changes to their credit reporting policy. Because the account had been delinquent more than two years prior, if he resolved it he could get it removed from his credit reports and continue looking for a home to buy.

Collection Accounts Can Damage Your Credit for Years

One of the most frustrating things about collection accounts is that once they are on your credit reports, the damage is done. You can resolve them — settle them or pay in full — but they still can remain on your credit reports for many years, affecting your credit scores and flagging you as a higher risk to lenders. (You can see how much collection accounts are harming your credit by reviewing two of your credit scores for free on Credit.com. The scores are updated every 14 days.)

It can be a long time before you completely put them behind you. By law, collection accounts may be reported for seven years, plus 180 days from the date you first fell behind with the original creditor. So if you stopped paying a department store card in January 2015, for example, and it later wound up in collections, that collection account could be reported until June 2022. Ouch!

While the newest credit scoring models — FICO 9 and the latest version of VantageScore — ignore collection accounts with a zero balance when calculating credit scores, most lenders are using older credit scoring models that treat all collection accounts as negative, whether they are paid or not. That means consumers trying to get a mortgage, car loan, credit card, or auto insurance may wind up paying more because of a collection account that perhaps was resolved some time ago.

Worse, most consumers seem to believe that paying a collection account will help improve their credit scores and are often shocked to learn after that fact that it doesn’t.

So when Encore Capital, which owns Midland Funding, Asset Acceptance and Atlantic Credit and Finance, quietly changed its credit reporting policy late last year, consumers who were the beneficiary of this new, more lenient policy may not have realized how fortunate they were to have these items removed from their credit reports, sometimes years before they would have been previously.

Specifically, these companies announced they would:

  • Stop reporting accounts that were more than two years old if the account was paid in full or paid for less than the full balance, and
  • Not report new accounts if payments are made within three months of the initial notice and are made on time thereafter until the account is paid in full or paid for less than the full balance.

According to one source familiar with this action, over 1 million of these derogatory accounts have already been removed from credit reports as a result of this change. There are at least 30 million Americans with accounts in collection, according to the FTC, but some estimates put that number as high as 77 million.

Changes on the Consumer’s Side

Bovee has been encouraging the industry to adopt new reporting policies for some time. “If the newer (credit scores) say paid collections don’t really matter, then keeping them on there is just punitive,” he says.

It’s not just consumers that can be hit by collection accounts. According to a National Federation of Independent Businesses survey in 2012, nearly half of small business owners use their personal credit in some way, shape or form to finance their company, so entrepreneurs with collections on their credit reports may struggle to get credit when their business needs it because of a mistake years prior. (You can check your business credit reports for collection accounts that may be hurting your business credit scores.)

Last year, Rep. Maxine Waters (D-Calif.) proposed a bill that would have reduced the time negative information stays on credit reports to four years and required that paid and settled debts be removed from credit reports within 45 days. However, that legislation stalled in Congress. (You can read more here about how to repair credit report issues and possibly improve your credit.)

Credit reporting is a voluntary system and no lender is required to report. But generally credit reporting agencies (and even some regulators) frown on removing accurate information early, as it may increase risk to lenders who are unaware of the consumer’s full credit history. So far, the change in collection account reporting by these major debt collectors hasn’t been met with public opposition from the bureaus.

Ryan appreciates this change. He knows that not all collection accounts are removed so quickly. “It’s very good to find out this will come off completely,” he says, “and makes you feel as if paying it off is well worth it.”

Bovee believes that other collection agencies are likely to follow suit in the not-too-distant future. After all, they want to get paid, and if consumers know that resolving their collection accounts will help get them removed faster, they are more likely to try to strike a deal.

“The cat’s out of the bag, and it needs to stay that way,” he says.

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