Fingerhut FreshStart: Could This Program Jump-Start Your Credit?

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Are you trying to rebuild your credit? Fingerhut, an online mail-order retailer, says it wants to help you with its FreshStart program. It’s a new twist on the catalog card or magazine offers of yesteryear.

The program, which involves a special credit card used to shop from Fingerhut’s online product catalog, is designed for customers who don’t have the best credit. If that’s you, FreshStart could give you a second shot at proving your creditworthiness and qualifying for a regular credit card.

But does FreshStart deliver on its claims? First, here’s an overview of the program:

  • Good credit isn’t required. Do you have poor credit? With lenient application requirements, FreshStart could be a way to regain some credit traction.
  • You pay low payments and no annual fee. Unlike many credit cards, FreshStart has no annual fee and the payments tend to be low.
  • You may pay a high interest rate and other costs. If you don’t make your payments on time or don’t pay off the balance in full, you could be subject to FreshStart’s 25.90% annual percentage rate and other costs.
  • Your shopping power is limited. FreshStart lets you shop from Fingerhut’s catalog of products only; you can’t use it anywhere else. And you may be approved for only a small credit limit.
  • It’s not a traditional credit account. Although FreshStart lets you “graduate” to a traditional credit account after you pay off your balance, you don’t build credit with the major reporting agencies while you’re in the program.

How the FreshStart Program Works

How does FreshStart work, exactly? Fingerhut splits the program into three steps: order, pay off, and graduate. Once you’re approved for FreshStart, you place an order from the Fingerhut catalog for an item that costs at least $50 and at most your approved credit limit. You also have to make a $30 down payment. Once Fingerhut processes the order, your item is shipped.

For the next few months (the exact time depends on your program approval), you make payments toward the total balance on your account. Miss any payments and you risk paying late fees (up to $38 per incident) and interest—and you may not be eligible for a regular credit account.

If you adhere to FreshStart rules and pay off your balance, you’ll graduate to a traditional credit card account with WebBank/Fingerhut Advantage. This account lets you shop more often, build credit with the major monitoring agencies, and potentially qualify for credit line increases and other perks.

FreshStart resembles a more legitimate version of “catalog card” programs that are marketed as credit cards for rebuilding credit but can only be used to shop from the issuer’s catalogs. With those offers, the merchandise is often severely overpriced, and customers usually don’t benefit from these programs much because their credit scores scarcely change.

Fingerhut, on the other hand, has a popular catalog dating back to 1952. The catalog currently comprises over 700,000 items, including big brands like Sony, Dell, and KitchenAid. With its focus on issuing small credit limits to buy products, Fingerhut’s FreshStart program is often great for customers who have been turned down for the company’s Fingerhut Advantage credit card. From the company’s standpoint, it’s a brilliant move—shoppers with poor credit aren’t immediately turned away and Fingerhut gains a paying customer.

The Downsides of the FreshStart Program

Now for the costs. We’re concerned that some customers may focus on only the small down payment and monthly payments and lose track of how much they’ve spent in the long run. If you don’t pay off the balance within the set limits, you could pay high interest amounts. You’ll also pay up to $38 for late or returned payments.

Instead of saving money by purchasing an on-sale item, you could end up paying more than the item’s value by the time you pay off the balance. And with a 25.90% APR—which, honestly, is not unusual for a retail card or credit card if your credit is on the lower side—the potential costs could be higher than cards with the average rate of about 13% to 14%.

What’s more, you may not be able to get out of paying at least some interest on purchases. While Fingerhut says you can pay off your balance faster, the terms and conditions include this warning:

However, if you elect to pay your entire balance due at the same time as your down payment, then this will cancel your Loan and you may not be eligible to be considered for a WebBank/Fingerhut Advantage Credit Account. You may not be eligible to be considered for a WebBank/Fingerhut Advantage Credit Account if you die, file for bankruptcy, enter a consumer credit counseling service program, make any past due payments, or have any payments returned unpaid, or if you enter any other negative credit status.

Also, if you don’t read the offer carefully, you might miss the fact that you don’t build credit with any institution other than Fingerhut when using the FreshStart program. You must pay off purchases on time under this program before (possibly) graduating to a regular credit card. FreshStart isn’t designed as a way to build your credit with the major credit reporting agencies but as a way to build credibility with Fingerhut.

FreshStart Program Reviews

What do customers think about the Fingerhut FreshStart program? Unfortunately, when we searched for customer reviews, Fingerhut didn’t return stellar ratings. The FreshStart program has plenty of detractors online. We found several reviews that matched the tone of this one:

I opened a fresh start account. My credit increased due to opening a new account. Great! After paying off my items with every payment being 10 days early they closed and reopened a new fresh start account. Closing accounts decreased my credit by more points than the opening of a new account in the first place.

And this one:

Husband and I both have accounts, I pay at same time with one check and both payment stubs enclosed in envelope. They call me every time I use one check to make payment and say I didn’t make my payment, then charge late charge. Clearly it is marked on the check and both payment stubs are included. I do not always have the extra check that month to send, but regardless it is paid every month, I can’t wait till all accounts are paid and I will be DONE with this company!

Fingerhut also got into some trouble for its habit of using robocalls to solicit customers. A 2014 class action lawsuit against the company claimed that Fingerhut “negligently places multiple calls to consumers’ cell phones using autodialed robocalls, without prior express consent.”

So what’s our final take? If you love the idea of shopping from Fingerhut’s catalog and you can’t qualify for a traditional credit card, you may want to try the Fingerhut FreshStart program as a way to start building credit. It’s a good idea to limit yourself to a small purchase—perhaps something you’d buy anyway—and pay off the balance exactly on the program’s terms. Then Fingerhut may offer you its Advantage credit card that will help you build your credit with the major reporting companies.

If you’re really serious about getting a credit card to rebuild your credit, we recommend you get a secured credit card and pay the balance in full each month. To track your progress over time, you can get your free credit report summary every month on Credit.com.

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10 Things to Know about Credit Monitoring

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The personal information of 143 million people was compromised in the recent Equifax data breach, and since then it seems like everyone and their dog is talking about protecting themselves with credit monitoring. If only it were that simple.  

Credit monitoring services, like any service, have their pros and cons. Before you enroll in a monitoring service or decide to take it upon yourself to monitor your credit, check out the following 10 things to know about credit monitoring.

Not All Credit Monitoring Services Are Created Equal

It should go without saying, but some credit monitoring services are better—and cheaper—than others. Spend the time to research the service you’re interested in so you don’t end up with a headache over something that should be giving you peace of mind.   

You Might Be Able to Monitor Your Credit for Free

You don’t always have to pay money for basic credit monitoring. For example, you can join a free budget service with credit alerts, like Mint.com, or sign up for free, albeit somewhat basic, credit monitoring from sites like Credit.com.

Be Careful about Sharing Your Personal Information

You’ll need to provide personal information to use any credit monitoring service, but a good service won’t sell your personal information without your permission. Make sure you read through the privacy policy before signing up for any service, no matter how trustworthy it may seem.   

Free Trials Do Come to an End

Some credit monitoring services will try to entice you with a free trial, and while there’s nothing inherently wrong with free trials, they do come to an end. We’ve seen credit monitoring services charge as much as $30 a month, so make sure you understand what you’ll be paying for when the free ride is over.

You’ll Still Need to Be Diligent

No credit monitoring service is foolproof. The best way to protect yourself is to check your statements and accounts for any suspicious activity on a regular basis.

Your Credit Card May Have Free, Basic Credit Monitoring

Select credit card companies offer free, basic credit monitoring. For example, Chase includes a free monthly update of your FICO credit score for cardholders. It doesn’t hurt to check with your credit card company to see if any credit monitoring services are offered for free or at a discount.  

You’re Entitled to Free Credit Reports

Thanks to federal law, you can get a free copy of your credit report once every 12 months from each of the big three credit reporting companies (Transunion, Experian, and Equifax).

You can submit your request for a free copy by going to AnnualCreditReport.com.

Not All Credit Scores Are the Same

Just a heads-up that if you’re using a credit score from a free website, it might not be 100% accurate. It’s likely to be close, but most of the time, free websites provide credit score estimates, and not actual scores from a credit reporting bureau.  

Credit Monitoring Has Its Limits

Credit monitoring can alert you to credit fraud or identity fraud, but only after it’s occurred. Protecting yourself means you’re responsible for taking the proper actions should an issue arise.  

Watch out for Free Credit Report Impostors

There is only one website authorized by the government to provide free annual credit reports. It’s AnnualCreditReport.com. There is no other website that will provide a no-strings-attached, free credit report.

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The post 10 Things to Know about Credit Monitoring appeared first on Credit.com.

10 Things to Know about Credit Monitoring

free credit monitoring

The personal information of 143 million people was compromised in the recent Equifax data breach, and since then it seems like everyone and their dog is talking about protecting themselves with credit monitoring. If only it were that simple.  

Credit monitoring services, like any service, have their pros and cons. Before you enroll in a monitoring service or decide to take it upon yourself to monitor your credit, check out the following 10 things to know about credit monitoring.

Not All Credit Monitoring Services Are Created Equal

It should go without saying, but some credit monitoring services are better—and cheaper—than others. Spend the time to research the service you’re interested in so you don’t end up with a headache over something that should be giving you peace of mind.   

You Might Be Able to Monitor Your Credit for Free

You don’t always have to pay money for basic credit monitoring. For example, you can join a free budget service with credit alerts, like Mint.com, or sign up for free, albeit somewhat basic, credit monitoring from sites like Credit.com.

Be Careful about Sharing Your Personal Information

You’ll need to provide personal information to use any credit monitoring service, but a good service won’t sell your personal information without your permission. Make sure you read through the privacy policy before signing up for any service, no matter how trustworthy it may seem.   

Free Trials Do Come to an End

Some credit monitoring services will try to entice you with a free trial, and while there’s nothing inherently wrong with free trials, they do come to an end. We’ve seen credit monitoring services charge as much as $30 a month, so make sure you understand what you’ll be paying for when the free ride is over.

You’ll Still Need to Be Diligent

No credit monitoring service is foolproof. The best way to protect yourself is to check your statements and accounts for any suspicious activity on a regular basis.

Your Credit Card May Have Free, Basic Credit Monitoring

Select credit card companies offer free, basic credit monitoring. For example, Chase includes a free monthly update of your FICO credit score for cardholders. It doesn’t hurt to check with your credit card company to see if any credit monitoring services are offered for free or at a discount.  

You’re Entitled to Free Credit Reports

Thanks to federal law, you can get a free copy of your credit report once every 12 months from each of the big three credit reporting companies (Transunion, Experian, and Equifax).

You can submit your request for a free copy by going to AnnualCreditReport.com.

Not All Credit Scores Are the Same

Just a heads-up that if you’re using a credit score from a free website, it might not be 100% accurate. It’s likely to be close, but most of the time, free websites provide credit score estimates, and not actual scores from a credit reporting bureau.  

Credit Monitoring Has Its Limits

Credit monitoring can alert you to credit fraud or identity fraud, but only after it’s occurred. Protecting yourself means you’re responsible for taking the proper actions should an issue arise.  

Watch out for Free Credit Report Impostors

There is only one website authorized by the government to provide free annual credit reports. It’s AnnualCreditReport.com. There is no other website that will provide a no-strings-attached, free credit report.

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The post 10 Things to Know about Credit Monitoring appeared first on Credit.com.

What Happens When You Submit a Credit Report Dispute

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Finding a mistake on your credit report can be frustrating. Unfortunately, according to a Credit.com survey of credit report awareness, one in five consumers (21%) who have seen their credit reports say they found inaccurate information on their reports.

Not only is that a lot of frustration, but the error may also have a negative impact on your credit score. Submitting a credit dispute is the first step in the process of correcting inaccurate information and improving your score.

But what comes next? How do credit bureaus fix the error? What effect does a dispute have on your credit score? Here’s the whole story on what happens when you submit a credit report dispute.

How to Dispute an Error on Your Credit Report

There are two ways to dispute an inaccuracy on your credit report.

  1. Go directly to the furnisher to dispute the error: You can contact the furnisher (the creditor furnishing the data to the credit bureau) directly to dispute the incorrect data on your credit report. If the furnisher finds the information to be inaccurate, it will correct the error and notify all three Credit Reporting Agencies (CRAs) of the discrepancy. If there is no resolution and you still feel there is a mistake on your report, the furnisher will inform the CRAs that the account is in dispute.
  2. Dispute the error with the credit reporting agency: You can also file a dispute through the CRA that has the inaccuracy on its report. Each one—Experian, Equifax, and TransUnion—has its own submission process for disputes. Once a dispute is submitted to a CRA, an investigation process starts.

Filing Disputes with the Credit Bureaus

If you include enough documentation when you submit a dispute through a CRA, the agency will resolve the error on your report. If additional information is needed, the agency you submitted the dispute to is required to initiate an investigation (unless your dispute is considered “frivolous”).

When the CRA investigates, the agency forwards relevant information about your dispute to the creditor. Under the Fair Credit Reporting Act (FCRA), the creditor must then investigate the claim and report its results back to the credit reporting agency. If the information is found to be inaccurate, the furnisher must submit corrections to all three credit reporting agencies.

Confirm with the CRA to find out if you need to continue making payments while in the dispute process. Each CRA has its own policies and procedures for investigations.

While disputed information is being reviewed by a credit bureau, it is not typically labeled as “disputed” on your credit report.

  1. Experian Disputes
    When you file a credit dispute with Experian, the agency reaches out to the furnisher and gives it 30 days from the date you submitted your request to respond back. For Maine residents, the time frame is 21 days. When the agency receives a response, Experian will notify you of the results of the investigation. If it does not get a response in the allotted time, Experian will correct the disputed information as you requested or delete the disputed information. During the investigation process, Experian does not add a comment, note, or any other indication of a dispute on your credit report. 
  2. TransUnion Disputes
    TransUnion usually finishes an investigation and provides you the results about 30 days from the receipt of your dispute—but the company recommends preparing for up to 45 days. When a customer contacts the agency directly, it does not add an “in dispute” comment to their credit report.
  3. Equifax Disputes
    Once your dispute request is submitted, Equifax notifies you of the results within 30 days. On average, disputes are resolved within 10 days. Unlike the other two CRAs, Equifax makes an indication of a consumer dispute on your credit report during the investigation. On Equifax reports, the item will be “noted as ‘Consumer Disputes—Reinvestigation in Process” says Meredith Griffanti, senior director of public relations for Equifax, noting in her email, “If the consumer applies for credit during this time, the potential creditor will see this comment.”

Credit Disputes with Creditors

It is your right to dispute information that you believe to be inaccurate on your credit report. The overall process for disputing inaccurate information with creditors is similar to that of disputing information with the CRAs, but with one important difference: if you dispute an item directly with the furnisher, it will very likely be noted as “disputed” on your credit report for potential lenders to see.

Once you submit a dispute, the creditor has a duty to investigate your claim, according to the FCRA. In most cases, the creditor is expected to respond to your claim within 30 to 45 days and to inform you of the results of its investigation within five business days.

The creditor must notify the credit reporting agencies that you have disputed information, and, if it finds that the information is indeed incorrect, it must promptly provide accurate information to the reporting agencies. If you have received notice that the creditor agrees with your dispute, send a copy of that documentation to the CRAs that reported the information to ensure it gets updated. 

Why Credit Disputes Matter

Negative information on your credit report brings down your credit score. But whether an account is listed as “disputed” or not could also have an effect on your credit score.

When an account is documented as disputed, “it is temporarily excluded from consideration by the VantageScore model,” explains Jeff Richardson, spokesperson with VantageScore. Similarly, “the FICO Score algorithm excludes account activity that is in dispute,” says FICO spokesperson Jeffrey Scott.

VantageScore excludes entire accounts in dispute from the model that calculates your score. FICO, on the other hand, excludes only the disputed information such as an account balance and late payments—not the entire account—from its calculations of your score. “The dispute doesn’t include the age, type, or other non-controversial aspects,” Scott says. “It includes things directly impacted by the dispute—e.g., account balance or late payment.”

There are times when the VantageScore model could be a plus. For example, Richardson says, “If there was a missed payment on the disputed account, the consumer’s credit score can increase because the missed payment will be ignored.”

Unfortunately, the dispute process has been abused. Consumers will sometimes dispute an item that is negative but accurate, then quickly apply for credit, hoping the application will be approved while that information is under dispute and not recognized by the credit scoring model. If you’re thinking of trying that approach, be careful: It could backfire.

The Downsides of Disputing an Error on Your Report

Disputing inaccurate credit report items sounds like it would always be a positive thing, but it is important to recognize that there can be downsides to disputing an item—especially while you are trying to get a loan.

  • Positive information can also be affected: “A consumer could possibly see a decline in his or her score because they would also not receive the positive impact of the account’s age, history, credit availability, or on-time payments,” Richardson points out.
  • You may not be able to get a mortgage: Challenging a mistake while you are trying to get a home loan can hold up your loan. Lenders often will not close a mortgage until the dispute notation is removed. It may be best to wait to dispute incorrect data until after you close a mortgage.

The good news is that most disputes are processed quickly—in less than two weeks, says Griffin—and once the investigation is complete, the item should no longer be listed as disputed. If it’s not, the consumer can request the “under dispute” notation be removed. “If the credit report indicates the dispute has been resolved and/or closed, the account activity will be treated just like all other account activity,” Scott says.

If you have disputed information that is found to be accurate, time is the only thing that can remove that negative information from your credit report. In most cases, negative information stays on your report for 7 to 10 years.

Review Your Credit Report for Inaccuracies

Either way, to dispute a mistake on your credit report, you have to know there is one. You can get your credit reports for free at Credit.com and find out how the information they contain affects your credit by checking your credit scores. You can get your credit scores, which are updated monthly, for free on Credit.com.

If you discover your credit report contains erroneous information, dispute it—but give yourself plenty of time to get the item(s) corrected and the dispute resolved before you apply for a mortgage, car loan, or credit card.

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How Long Does Negative Info Stay on Your Credit Report

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Your credit report offers valuable insight into your financial history and affects most of your financial future: everything from whether you get approved for a mortgage or other loan to what your credit card interest rate will be.

Negative information on your credit report can be detrimental for years, but it’s not always clear how long those inquiries and other negative information will stay on your credit report—and affect your score. The length and severity vary, but here are four common types of inquiries and how long they affect your credit score.

1. How Long Do Hard Inquiries Stay on My Credit Report?

What is a hard inquiry?

Hard inquiries are created every time your credit report is accessed by a business when you apply for a line of credit. For example, your credit would receive a hard inquiry when you apply for a car loan, mortgage, student loan, or credit card.

How long will hard inquiries stay on your report?

Inquiries remain on your credit reports for two years (24 months). However, hard inquiries impact your score for only the first 12 months. After that, they have no impact on your score.

How much do hard inquiries affect your credit?

New credit—including inquiries and any new credit accounts—make up just 10% of your FICO score, and a single inquiry will likely drop your credit score by only three to five points. As long as you apply for credit only when you need it, this is one of the lesser hits to worry about

2. How Long Do Credit Accounts Stay on My Credit Report?

What is a credit account?Credit accounts refer to all of the accounts for which you hold credit, including credit cards, mortgages, and car loans. Credit scoring models like to see a healthy balance to the types of credit accounts (or “credit mix”) you have and can manage effectively. Negative information on a credit account includes late or missing payments.

How long will negative credit account information stay on your report?

Negative account information stays on your credit report for seven years from the date it was first reported as late. If you close the account, the entire account will be removed from your report after seven years. If the account remains open, the negative information will be removed after seven years, while the rest of the account information stays on your report.

Positive information, on the other hand, remains on your credit report indefinitely. If you close the account, positive information typically stays on your report for 10 years past the closing date.

How much do credit accounts affect your credit?

Your credit mix accounts for 10% of your credit score: a healthy mix means more points. If you don’t have many credit accounts or if you close your accounts, it could negatively affect your credit score.

Payment history accounts for 35% of your credit score, and making payments on time is the most important factor in determining your credit score: a single 30-day-late payment can drop a good score by 90 to 110 points.

Most lenders don’t report missed payments until accounts are more than 30 days past due, so if you can catch the missing payment in enough time, you might not notice a hit at all. Other lenders will let one late payment slide, especially if you’ve been a loyal customer for many years and have a good excuse for why you missed it.

3. How Long Do Collection Accounts Stay on My Credit Report?

What is a collection account?When you fall behind on making payments on an account, your debt could end up in the collection’s department of that particular company. That creditor may then sell your debt to a collection agency, which also reports it as a collection account. At this point, the original creditor that sold the debt should not continue to report a balance owed, but you should watch out for duplicate collection accounts.

How long will collection accounts stay on your report?

Collection accounts remain open for seven years plus 180 days from the date the account was delinquent leading up to when it was placed for collection. After that time, it must be removed regardless of when it was paid or when it was placed for collection.

How much do collection accounts affect your credit?

Understanding how collection accounts can affect your credit score is tricky. The most important factor that will affect your credit score when it comes to collections is how recently the collections occurred—the more recent the collection, the lower the score. Multiple collection accounts or lawsuits resulting in judgments can also lower your score. Unfortunately, settling or removing a collection may not impact your score positively.

While there’s no way to tell exactly how much a collection account will affect your credit score, it is one of the higher penalties, so the best course of action is to avoid having accounts sent to collection in the first place.

4. How Long Do Public Records Stay on My Credit Report?

What are public records?

Public records include any of your personal information that becomes public knowledge, including bankruptcies, tax liens, and judgments.

How long will public records stay on your report?

The type of public record will determine how long the information stays on your credit report.

Chapter 7, 11, and 12 bankruptcies stay on your credit report for 10 years from the date filed. Completed Chapter 13 bankruptcies are usually removed after seven years from the filing date.

Tax liens remain on your credit report for seven years from the date filed if they are paid, or indefinitely if they are not. If you qualify for the IRS Fresh Start program, you can request a paid or satisfied tax lien be removed from your reports.

Paid judgments remain on your credit report for seven years from the date filed, and unpaid judgments remain for seven years or the governing statute of limitations, whichever is longer. Since unpaid judgments can usually be renewed, these may remain on credit reports for a long time.

How much do public records affect your credit?

There is no way to know exactly how many points your credit score might drop with a public record on file, but the effect of public records on your credit report could be severe.

The best way to keep track of your credit reports throughout the year and to stay on top of any erroneous information is to monitor your credit regularly with Credit.com’s free Credit Report Card.

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I Got My First Credit Card One Year Ago – Here’s How I Already Have a Good FICO Score

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When I moved to the U.S. from my hometown, Hangzhou, an eastern Chinese city, in 2012 to pursue my undergraduate degree, the thought of establishing a credit history wasn’t even on my radar. I was, after all, an international student from China, where day-to-day credit card use has only recently caught on.  

It wasn’t until I returned to the U.S. a few years later to pursue my master’s in Chicago that I realized I’d need to establish credit if I planned to launch my career in the States.  

It’s been only a year since I opened my first card last September, and I already have a solid FICO score – 720, the last time I checked.  That’s not a perfect score by any means, but it lands me safely in the “good” credit range, meaning I probably won’t have trouble getting approved for new credit in the future. I still have work to do if I want to get into the “very good” credit category, which starts at 740, according to MyFICO, but for a credit card newbie I’m not disappointed in my progress so far. 

Here’s how I did it:  

I selected the right card for my needs
 

I wish I could say I diligently researched credit cards to choose the best offer and best terms, but honestly, I just got lucky: 

Shortly before graduate school started, I visited friends in Iowa. When we were about to split the bill after dinner at a Japanese restaurant, I noticed that all my friends had a Discover card with a shimmering pink or blue cover. The Discover it for Students card was known for its high approval rate for student applicants, and had been popular among international students. 

I thought, “Oh, maybe I should get this one, too.”  

One of the friends sent me a referral link that very night. I applied and got approved quickly. We both received a $50 cash-back bonus after I made my first purchase — an iPhone — using the card through Discover’s special rewards program. I even received 5 percent cash back from the purchase.  

Besides imposing no annual fee, the card has other perks, like rewarding me with a $20 cash-back bonus when I reported a good GPA, letting me earn 5 percent cash back on purchases in rotating categories, and matching the cash-back bonus I earned over the first 12 months with my account. For me, it was a great starter card, but there are plenty of other options out there.

Check out our guide on the best credit cards for students. 

I also could have explored other options of establishing credit, like opening a secured card, for example, which would have been a smart option if I hadn’t been able to qualify for the Discover it student card.

I never missed a payment

Despite my very limited financial literacy at the time, I attribute my current stellar credit score to the old, deeply ingrained Chinese mentality about saving and not owing. 

I never missed payments, and I always paid off my balance in full each month, instead of just making the $35 minimum payment. I didn’t want to pay a penny of interest. 

Credit cards carry high interest rates across the board, but student credit cards generally have some of the highest APRs. This is because lenders see students like me — consumers without much credit history — to be risky borrowers, and they charge a higher interest rate to offset that  risk. 

Best Student Credit Cards October 2017 

It wasn’t until much later when I learned that payment history is critical to credit establishment. In fact, it is the biggest factor there is. It accounts for as much as 35 percent of my FICO score. Naturally, I felt like I dodged a bullet! 

A Guide to Getting Your Free Credit Score 

I was careful not to use too much of my available credit

My friends with more experience advised me to use as little of my available credit as possible. They warned me that overuse had hurt their credit scores in the past. This didn’t much sense to me, but I followed their advice, for the most part diligently.. 

I later learned this is almost as important as paying bills on time each month. Your utilization rate is another 30 percent of the FICO score. Credit experts urge cardholders to keep their credit utilization ratio below 30 percent.  

That means if you have three credit cards with a total available limit of $10,000, you should try never to carry a total balance exceeding about $3,000. 

A Guide to Build and Maintain Healthy Credit 

I beefed up my score with on-time rent payment 

Keeping in mind the importance of not maxing out my credit card, I never considered paying my rent with the card. In fact, some landlords charge credit card fees for tenants who try to pay with plastic.  

But I did find a way to establish credit by paying rent using my checking account. 

I paid rent to my Chicago landlord through RentPayment, an online service. RentPayment gave me the option of having my payments reported to TransUnion, one of the three major credit-reporting agencies. Because I knew I’d always pay bills on time, I signed up for the program.  

This likely helped me improve my credit mix, another key factor influencing one’s credit score. The more types of accounts you show on your report, the better your score can be — providing you make all your payments on time.  

Yes, I made mistakes. This was my biggest one.

My first foray into the world of credit wasn’t completely blip-free.  

The only thing that hurt my credit, besides my short credit history, was that I had tried signing up for a Chase credit card and other ways to finance my iPhone just a few days before I applied for my Discover card.  

None of the other banks approved my applications, and my score went down from the very beginning due to the number of “hard inquiries” against my report. Hard inquiries occur when lenders check your credit report before they make lending decisions, and having too many inquiries in a short period of time can result in several dings to your credit score. 

I’ve learned my lesson, though. And I haven’t applied for a new credit card since. Today, as I said, my FICO score is a healthy 720, and I am on the lookout for a second credit card now that I’ve graduated and gotten a job. 

The post I Got My First Credit Card One Year Ago – Here’s How I Already Have a Good FICO Score appeared first on MagnifyMoney.

How Your Credit Affects Your Car Insurance—and What You Can Do about It

Gas can make summer road trips expensive, but the right credit card can earn some of that spending back.

Insurance is not a one-size-fits-all product. If you’ve ever talked to an insurance agent or requested a quote online, you know you have to answer a bunch of questions before you receive your quote. This is because insurance is all about risk, and insurance companies use your answers to determine how likely you are to file a claim (and thus cost them money).

Does Credit Impact Your Car Insurance?

Insurance companies use countless factors to determine your risk and set your rates. Many of these are obvious, such as where you live, your driving record, and what kind of car you drive. But there are also a few factors that are less intuitive, like your credit score.

Credit is considered a rating factor for nearly all US drivers. Insurance underwriting (that is, how insurance companies assess and price your individual risk) is all about statistics, and insurance companies have found that people with lower credit scores statistically file more claims than those with higher scores.

In fact, a Federal Trade Commission study found that drivers with low credit scores are more likely to file a claim than drivers with higher credit scores. It also found that claims filed by drivers with low credit scores cost nearly twice the dollar amount as those filed by higher-credit drivers.

How Much Your Credit Score Affects Your Rates

Insurance companies in California, Massachusetts, and Hawaii are not legally allowed to use credit scores as rating factors per state regulations. In the rest of the country, however, credit can have a very real impact on your auto insurance rates.

A report from The Zebra explored how your credit rating affects what you pay for car insurance:

  • Drivers with poor credit (scores of 524 or below) pay more than twice as much for car insurance as those with excellent credit (scores of 823 or above).
  • Drivers can increase their credit scores by one tier (e.g., from poor to fair) to save an average of 17% on their annual auto insurance premiums.
  • Improving your credit score from poor to excellent would yield 53% savings (an average of $1,281 per year).

Is your low credit score costing you on car insurance? There are behaviors you can change to improve your rates in the future. Here are a few steps to help get you back on track.

  1. Know Your Credit Health

The first step to healthier credit is understanding what your credit score currently is. Experts recommend checking your credit report once every four to six months. Regularly review what your credit score is and why. (You can check your credit report for free at Credit.com.) Once you know where you are, you can make goals to improve your overall credit health.

  1. Practice Financially Smart Behavior

Now that you understand your overall credit health, you can take specific steps to improve it. Keep in mind that no matter what your credit score is, you need to practice financially smart behavior. This means developing a savings plan, managing your debt, and monitoring your credit. Review Credit.com’s Personal Finance Learning Center for more tips on developing and maintaining financially smart behavior. 

  1. Check Your Insurance Rates

Many factors can impact your insurance rate, and these factors can change relatively often—so check your rates regularly. Coverage lapses, violations, claims on your driving record, and even your age can have a big impact on your rates. Compare auto insurance rates at least every six months to make sure you have the right coverage and you’re paying the best rate for it.

Keep an eye on your credit report, your financial habits, and your insurance rates for the best deals.

Image: monkeybusinessimages 

The post How Your Credit Affects Your Car Insurance—and What You Can Do about It appeared first on Credit.com.

43 Million Americans Could Get a Big Credit Score Boost Soon — Here’s Why

 

Some 43 million Americans might see their credit report improve soon, thanks to new policies put into effect by the “Big Three” credit reporting agencies — Equifax, Experian, and TransUnion.

As of Sept. 15, credit reports will no longer include medical debts that are less than six months past due.

This is a big deal. At least one unpaid medical collection appears on one in every five credit reports, and these medical debts negatively affect the credit scores of as many as 43 million Americans, according to a 2014 study of collection data by the Consumer Financial Protection Bureau (CFPB).

This is the second major change to credit reporting this year that could help boost millions of Americans’ credit scores. As of July 1, the major credit reporting agencies agreed to remove from consumer credit reports any tax lien and civil judgment data that doesn’t include all of a consumer’s information.

This new medical debt reporting change, however, will have a far greater impact. Research has shown that many consumers’ medical debts aren’t all that representative of their creditworthiness, which helped drive the bureaus to make the change. In fact, around 50 percent of Americans with medical collections on their credit report had no other significant blemishes on their credit report, according to the CFPB.

And even though the cost to your credit can be dire, most Americans don’t actually even owe that much for their medical expenses — the average unpaid medical collection tradeline is only $579, according to the CFPB’s 2014 study. This means many consumers are taking major credit hits for a relatively low bill.

Additionally, the agencies have promised that if your insurance company ultimately pays off a medical collection, this debt will be removed from your credit report altogether. Both of these changes will provide more time for insurance claims to process, says John Ulzheimer, a consumer credit expert based in Atlanta.

Expect to see an impact soon

The changes officially take effect on Sept. 15, and their influence will be felt fairly immediately. These new policies are both immediate and retroactive, meaning no medical debt from within the last six months should show up on your credit report after that time.

Jenifer Bosco, a Boston-based staff attorney with the National Consumer Law Center (NCLC) who specializes in medical debt, recommends using these changes as an opportunity to check your report now. That way, you can see if there are any collections that need to be altered because of the new debt practices.

Bosco suggests viewing your credit report for free by filling out an online request with Annualcreditreport.com. You can check out MagnifyMoney.com’s online guide for a bank-by-bank breakdown of how to easily receive your FICO Score.

The immediacy of this agreement is important, because medical collections can be a long and arduous process. Bosco says the new 180-day window is especially helpful because it provides a cushion for consumers who are trying to work through expenses with their insurance provider.

“It’s definitely helpful for people who might actually just have a debt and owe the money, but also people who are going through a lengthy process with their insurance company to get something covered under their policy,” Bosco says.

How much will credit scores improve?

iStock

While it’s difficult to measure exactly how much unpaid medical bills can affect your credit, Ulzheimer says these debts are typically just as detrimental as other collection types. “For example, the impact can range from severe, if you don’t have other unpaid bills on your credit report, to nominal, if medical bills are just one of many outstanding collections,” he told MagnifyMoney.

Having good credit often makes the cost even higher. According to the CFPB’s collection data research, an unpaid medical bill of $100 or more can drop a credit score of 680 by more than 40 points, but the same bill could drop a score of 780 by more than 100 points.

Consumers who notice incorrect medical debt after Sept. 15 should send a dispute to the credit agency that falsely reported it, the NCLC recommends in a press release. If this doesn’t work, you can reach out to the CFPB. If your state’s attorney general was one of the offices involved in the agreement, you can direct your issue to them.

The CFPB research also found that the lack of price transparency and complex insurance coverage systems make medical bills often a source of confusion for consumers. People can often incur debts simply because they aren’t sure exactly what they owe or who they need to pay. Having more time to figure out what you owe, pay your debts, and work through collections with your insurance company can be a major financial benefit, Bosco says.

Bosco also says the changes go beyond specific circumstances and that these protections will be helpful regardless of your situation.

“It benefits all consumers who have medical debt,” she says.

Better credit for all?

The changes are the result of two separate settlements — one with the Attorney General of the State of New York and one with the attorneys general in 31 other U.S. states — but Ulzheimer says the changes are universal.

This means that regardless of what state you live in, credit agencies can’t fault you for medical debts that are less than 180 days old, or for collections that are ultimately handled by your medical insurance.

Hopefully, these changes mean there will be less medical debt bogging down Americans’ credit overall.

The agreement was reached voluntarily, which means there is no sweeping federal or state law or regulation guiding these changes but shows the credit agencies are on board.

“We have never hesitated to go beyond the letter of the law to voluntarily improve the existing credit reporting environment,” Stuart Pratt, the president and CEO of the Consumer Data Industry Association (CDIA) said in a press release announcing the changes. The CDIA represents the country’s consumer data industry, which includes the three major national credit agencies.

Still, this decision is incredibly important considering how instrumental the “Big Three” are in determining credit scores.

The federal government considers Equifax, Experian and TransUnion to be the country’s major credit agencies, and you’re entitled to a free report from all three companies each year. The information that shows up on reports from the “Big Three” carry major weight, so having a chance to improve your score with these groups can go a long way.

To aid this process, the NCLC has created guidelines — called the Model Medical Debt Protection Act — to help protect consumers from unfair medical collection procedures. The guidelines can be used as a standard for improving their medical debt practices even further.

The post 43 Million Americans Could Get a Big Credit Score Boost Soon — Here’s Why appeared first on MagnifyMoney.

10 Surprising Things You Didn’t Know About Your Credit Score

So many Google Chrome extensions swear they’ll save me money, but will they really?

Many people know that having a good credit score is integral to making some of life’s biggest purchases. Without one, it’s challenging to qualify for a loan to buy a house or a car someday.

However, even though credit scores are really important, they’re also a bit of a mystery. Not a lot of people know what makes up a credit score, how to improve them, or even how to check them!

So, below I’ve compiled 10 surprising things you probably didn’t know about the elusive credit score, including the fact that credit scores really haven’t been around that long at all.

1. Credit Scores Didn’t Exist Until the 1950’s

Before credit scores existed, you’d have to go and sit down and talk with a banker before getting a loan. So, the process was a little subjective. If the banker didn’t like you or think you were trustworthy, you weren’t going to be approved. In the 1950’s two statisticians named Bill Fair and Earl Isaac founded FICO, but it took until the 1970’s for the FICO score to be seen as integral to lending as it is now.

2. Your Credit Score May Predict How Long You’ll Be Married

The Federal Reserve conducted an interesting study where it followed couples for 15 years to see how credit scores affected those in committed relationships. The study found that “the initial match quality of credit scores is strongly predictive of relationship outcomes in that couples with larger score gaps at the beginning of their relationship are more likely to subsequently separate.” To put it another way, the closer your credit score is to your other half’s credit score, the more likely you are to stay together.

3. TransUnion Started as a Railroad Leasing Company

The credit bureau, TransUnion, started as the Union Tank Car Company in 1968. In 1969, it acquired a business called the Credit Bureau of Cook County, which had millions of consumer card files located in 400 different cabinets. Eventually, it became the TransUnion we know today after spending 40 years collecting consumer data and developing technology that helps people and companies around the world.

4. Employers Cannot Get Your Credit Score

There is a pervasive myth that employers can screen you by finding out your credit score. This myth likely arose because people get the phrases “credit score” and “credit report” mixed up. Some employers do request permission to see your credit report, but it’s typically a different version than the one you see and is used specifically for employment screenings.

5. Your Degrees Do Not Impact Your Credit Score

You could have lots of different letters after your name, but that doesn’t mean you’ll have a higher credit score than someone who only graduated from high school. Your education level does not factor into your credit score. There are 5 factors that determine your credit score and all of them have to do with debt and payments, not education.

A few other surprising aspects of your life that don’t impact your credit score: the balance in your savings account, your stock portfolio, your employment status, and your salary.

6. The FICO Score Has a Competitor

The three major credit bureaus joined together to create a new type of credit score called the Vantage Score, a score that competes directly with FICO. According to a recent USA Today article, the Vantage score calculates your credit score in a different way than the FICO score. More and more companies are using Vantage Scores to help determine a consumer’s credit worthiness.

7. You Can Still Get a Mortgage with a “0” Credit Score

If you don’t have any open credit accounts or you never opened any to begin with, your credit score eventually becomes a 0. However, even if your credit score is 0, you can still get a mortgage through a process called manual underwriting, where the mortgage company takes all of your assets and monthly bills (like cable) into consideration before potentially approving you for the loan.

8. Closing Your Credit Cards Can Hurt Your Score

The age of your accounts is an important factor in determining your credit score. If you close your oldest account, it could cause your score to drop. Also, all of the available “space” on your credit cards helps to show credit-worthiness. Closing cards shrinks your credit “space” and an easy way to potentially boost your score is to request a credit limit increase.

9. Car Insurance Companies Use Your Credit Score (Sort Of)

When you apply for car insurance, having good credit matters. While car insurance companies won’t use your FICO score to help determine your insurance rates, 92% of insurers use something called a credit based auto insurance score. The data in this score helps to show insurers whether or not you’re likely to file a claim along with other data.

10. Credit Scores Aren’t the Only Predictor of Bad Financial Behavior

Many people worry about their credit scores, especially if they’ve had a late payment in the past. However, many people don’t realize that there are also other financial reporting agencies that keep track of other financial transactions, like how you treat your bank account. Banks use reporting from companies like TeleCheck, ChexSystems, and EWS to determine whether or not you should be allowed to open a checking account.

So, as evidenced, your credit score is actually pretty interesting!

Not only does it help show lenders whether or not you’re a good borrower, but it can also predict your relationship success. Also, your credit score is private, but sometimes employers and insurance companies can see versions of your score and credit report to learn more about you as a consumer.

Ultimately, having a good credit score really is important, and the best way to have a good score is to keep making your payments on time, have a variety of accounts, check your credit score regularly, and keep your credit card balances nonexistent. This can help you to qualify for larger purchases down the road and can prove that you’re trustworthy when it comes to your finances.

Image: pixelfit

The post 10 Surprising Things You Didn’t Know About Your Credit Score appeared first on Credit.com.

Minimize Rejection: Check if You’re Pre-qualified for a Credit Card

Check if You're Pre-qualified for a Credit Card

Updated August 16, 2017

Are you avoiding a credit card application  because you’re afraid of being rejected? Want to see if you can be approved for a credit card without having an inquiry hit your credit score?

We may be able to help. Some large banks give you the chance to see if you are pre-qualified for cards before you officially apply. You give a bit of personal information (name, address, typically the last 4 digits of your social security), and they will tell you if you are pre-qualified. There is no harm to your credit score when using this service. This is the best way to see if you can get a credit card without hurting your score.

What does pre-qualified mean?

Pre-qualification typically utilizes a soft credit inquiry with a credit bureau (Experian, Equifax, TransUnion). A soft inquiry does not appear on your credit report, and will not harm your credit score.

Banks also create pre-qualified lists by buying marketing lists every month from a credit bureau. They buy the names of people who would meet their credit criteria and keep that list. When you see if you are pre-qualified, the bank is just checking to see if you are on their list.

A soft inquiry provides the bank with some basic credit information, including your score. Based upon the information in the credit bureau, the bank determines whether or not you have been pre-qualified for a credit card.

If you are not pre-qualified, that does not mean you will be rejected. When they pull a full credit report or get more information, you may still be approved. But, even if you are pre-qualified, you can still be rejected. So, why would you be rejected?

  • When you complete a formal credit card application, you provide additional personal information, including your employment and salary. If you are unemployed, or if your salary is too low relative to your debt – you could be rejected. There are other policy reasons that can be applied as well.
  • When a full credit bureau report is pulled, the bank gets more data. Some of that incremental data may result in a rejection.
  • Timing: your information may have changed. The bank may have pre-qualified you a week ago, but since then you have missed a payment. Final decisions are always made using the most up-to-date information.

Even with these caveats, checking to see if you are pre-qualified is a great way to shop for a credit card without hurting your score.

Where can I see if I have been pre-qualified?

Most (but not all) banks have pre-qualification tools. In addition, some websites (like CreditCards.com) have tools that let you check across multiple banks at once. Here is a current list of tools that are functioning:

CreditCards – CardMatch is a very good tool developed by CreditCards.com that can match you to offers from multiple credit card companies without impacting your credit score. This is a good first stop.

Bank of America

Capital One

Chase

Citibank

Credit One  – This company targets people with less than perfect credit.

Discover

U.S. Bank

Below are credit card issuers that do not always have the pre-qualification tool live:

American Express – We have reports that this does not work for everyone. To find the pre-qualification page, click on “CARDS” in the menu bar. Then click on “View All Personal Charge & Credit Cards.” At the bottom of the page you will find a section called “Do More with American Express” – and you can click on “Pre-Qualified Credit Card Offers.”

Barclaycard – unfortunately Barclaycard has taken down their pre-qualification tool. We will keep looking to see if it comes back.

Consider A Personal Loan (No Hard Inquiry and Lower Rates)

If you need to borrow money, you may also want to consider a personal loan. A number of internet-only personal loan companies allow you to see if you are approved (including your interest rate and loan amount) without a hard inquiry on your credit report. Instead, they do a soft pull, which has no impact on your credit score. Personal loans also tend to have much lower interest rates than credit cards. If you need to borrow money, personal loans are usually a better option.

We recommend starting your personal loan shopping experience at LendingTree. With one quick application, dozens of lenders will compete for your business. LendingTree uses a soft credit pull, and within minutes you will be able to see how much you qualify for – and the interest rate – without any harm to your credit score. (Note: MagnifyMoney is owned by LendingTree)

Not pre-qualified but still want to apply?

We still believe that people are too afraid of the impact of credit inquiries on their score. One inquiry will only take 5-10 points off your score.

If you pay your bills on time, do not have a ton of debt (less than $20,000) and want to apply for a new credit card, an inquiry should not scare you. The only way to know for certain if you can get approved is to do a full application.

How We Can Help

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The post Minimize Rejection: Check if You’re Pre-qualified for a Credit Card appeared first on MagnifyMoney.