3 Ways to Boost Your Credit Score in 2018

PostHolidayCreditImprovement

All the holiday excitement is over and it’s time to face your post-holiday credit card bills. If you stayed within your budget, you shouldn’t have difficulty paying off your bills. However, if you went a little crazy with December cheer, now is the time to take corrective action, prioritize your finances, and boost your credit score.

As you get your finances back in shape, you’re ultimately helping out your credit—and for a multitude of reasons, it’s important to have a good credit score. Good credit grants you better loan approval, lower interest rates, higher spending limits, negotiating power, and more rewards. Your credit score also impacts the ability to obtain necessities like a home, a car, and other lifestyle needs.

So here’s how to start boosting your credit score in 2018.

  1. Pay All Your Bills on Time

If you’re expecting hefty post-holiday bills, the best way to improve your credit score is to simply make timely payments. Making all of your payments on time is crucial to a great credit score and positive credit history. Your payment history has a huge effect on your credit score.

Set calendar reminders or alerts on your phone to make sure you pay your bills and pay them on time. Unpaid bills are a red flag and may indicate to the lender that you’re an unreliable borrower. It’s also important to tackle balances with the highest utilization and interest rates.

  1. Consider a Lifestyle Change

If you find yourself strapped for cash, there are a few things you can do.

  • Pay at least double the minimum on each payment. If you can, and if there’s no prepayment penalty, doubling down on payments each month will help you tackle the balance quicker.
  • Rework your budget. Evaluate your budget and cut out unnecessary expenses that are eating up your income. Then you can start allocating that money toward getting out of debt. For example, forgo your daily specialty drink at your local coffee shop and bring a lunch from home instead of buying lunch at work. Setting a strict budget will allow you to free up cash and focus on paying down your debt.
  • Pick up a side hustle. If you can, apply for a part-time job or do some extra freelance work to build up your funds.
  • Don’t apply for new cards or loans. For now, stay away from new credit card and loan applications, even if you’re planning to use the extra credit to pay off your debts. Also, avoid using any credit cards you’re currently paying off. 
  1. Check Your Credit Report

About once or twice a year, you should check your credit report for mistakes. Maybe you forgot to pay a bill, or maybe you’re a victim of identity theft. If you don’t check your report for these and other problems, chances are you may miss them and they can harm your score tremendously—which in turn would bring you great financial hardship.

According to the Federal Trade Commission, about 5% of consumers have credit errors large enough to increase costs of insurance or some financial products. When you have bad credit with a low credit score, it may take some time to build it back up. Check your history so you can address these problems right away.

When you do check your credit report, make sure you get reports from all three bureaus (Experian, Equifax, and Transunion) to get the clearest picture of your credit, since some creditors only report to one or two. You can check two of your credit scores for free at Credit.com

 

Image: iStock

The post 3 Ways to Boost Your Credit Score in 2018 appeared first on Credit.com.

Debt Relief: How Will It Affect Your Credit?

These 15 companies are topping the charts with the most opportunities to have the flexibility freelancing offers.

Many people ask, What’s the best way to get out of debt? Then they may often think, But I have good credit and I really don’t want to hurt it. There are many ways to lighten your debt load, and not all of them will have a major negative effect on your credit. But it’s also important to consider your situation and needs when weighing your options.

To help you decide which debt relief plan is best for you, we’ve provided a brief overview of each option and how they may affect your credit in the short term and long term.

A Few Things to Remember

Before we dive into the different debt relief options, understand that the debt you carry makes up just under one-third of your credit score. So when you pay off debt, especially credit cards that are close to their credit limits, you should see improvement in that part of your score.

However, understand that our analysis of credit relief plans is based on generalities. It doesn’t necessarily represent exactly what will happen in your case. How far your score drops—and how quickly it bounces back—depends on a lot of different factors. If your payment history always shows on-time payments, for example, and you suddenly file for bankruptcy, your score will probably drop more than someone who was already severely delinquent.

But it’s impossible to predict how a particular approach will impact your individual credit if you’re not familiar with your credit history—so get a free credit report from Credit.com to review that history.

With this information in mind, here are the main approaches to debt relief you may consider, along with a review of the impact they could have on your credit reports and scores.

Debt Relief Option Immediate Credit Impact Long-term Credit Impact
Debt Snowballs and Avalanches None Reliably positive
Debt Consolidation Small impact (positive or negative) Minimal
Credit Counseling None None
Debt Management Plan (DMP) Moderate impact (positive or negative) Minimal
Debt Negotiation or Settlement Severe damage Slow recovery
Bankruptcy Severe damage Slow recovery

Debt Snowballs and Avalanches

If you prefer to pay off your debt on your own, you might consider a snowball or avalanche payment method. The debt snowball is when you pay off your debts one at a time, starting with the lowest balance. The debt avalanche works similarly, except you start with your highest balance and work your way down.

It doesn’t make much of a difference whether you choose the avalanche method or the snowball method, but many find the snowball method is easier to stick to. Neither approach will hurt your credit, as long as you make the minimum payments on all of your cards on time.

Immediate Credit Impact: None

Long-Term Credit Impact: Reliably Positive

Debt Consolidation

Combining multiple card debts into a fixed-rate consolidation loan can be helpful, but it isn’t a strategy for getting out of debt in and of itself. After all, you still have to pay back the loan. A consolidation loan is more like a tool to get out of debt faster.

Because consolidation loans often offer lower interest rates than the credit cards themselves, you can pay off your debt faster. And if you have a lower monthly payment than before, you can better avoid late payments. This will help your credit score recover more quickly if you’ve fallen behind in the past.

But consolidating credit cards with a loan may have a positive or negative effect on your scores. It’s one of those “it depends” situations.

On the plus side, if you pay off a card balance that’s close to the credit limit, you may improve your “utilization ratio”—the ratio that compares your credit limits with the balances you currently have—provided you leave the card open after paying it off. But simply moving balances from one card to another is unlikely to do a whole lot for your scores.

On the other hand, you’ll have a new loan on your credit reports, and most credit scoring models will count that as a risk factor, which could mean a dip or drop in your scores.

The exception? If you take out a loan from your retirement account to consolidate credit card debt, you’re more likely to see your credit improve. Retirement account loans aren’t reported to credit reporting agencies, so your credit reports will show less debt with no new loan. However, retirement loans carry their own risks, so proceed with caution.

Immediate Credit Impact: None

Long-Term Credit Impact: Minimal

Credit Counseling

A credit counselor is a professional who can advise you on how to handle and successfully pay off your debt. A simple call to a credit counseling agency for a consultation won’t impact your credit in the slightest. But if the credit counselor or agency enrolls you in any kind of consolidation, repayment, or management plan, that could affect your credit.

Make sure you fully understand the potential impact of any debt relief program before you sign up. Don’t be afraid to ask the credit counselor how a new plan could alter your credit.

Immediate Credit Impact: None

Long-Term Credit Impact: None

Debt Management Plan (DMP)

With a Debt Management Plan (DMP), you make one monthly payment to a counseling agency, which then disburses payments to your creditors. This kind of plan can affect your credit in several ways.

Some creditors may report that a credit counseling agency is repaying the account. Don’t worry if they do. FICO, the data analytics corporation that calculates consumer credit risk, ignore such reports. An individual lender may care, but FICO doesn’t. Of course, any late payments or high balances on accounts will continue to impact your credit score.

With the help of the counseling agency, you can stay current on your payments, and that can improve your credit score. “Most major creditors will re-age your accounts after you’ve made three on-time payments in the required amount,” says Thomas J. Fox, community outreach director for Cambridge Credit Counseling.

Re-aging an account means bringing it back to “current” status, so your credit report will no longer list you as behind. Since recent late payments can really hurt your scores, getting up to date on your payments now is a smart move, especially as the sting of past late payments fades over time.

However, you’ll have to close your credit cards when you agree to a DMP, and that will likely lower your scores. How much it will hurt depends on everything else in your credit reports, including whether you have other credit accounts, such as car loans or mortgages, that you pay on time.

The impact may take time, says Barry Paperno, community director for Credit.com. He states it’s because “balances and limits won’t necessarily change right away, and utilization will be the same as before closing accounts.

He goes on to explain, “Closing an account in and of itself isn’t considered negative by the score. Over time, however, having closed the cards can hurt the score, as closed cards with zero balances are excluded from utilization and ultimately fall off the credit report much sooner than open cards that have been paid off.”

“Plan on getting a secured card when you complete the DMP so that as long as you keep a low utilization percentage on that one card, you can achieve a good score—with any [late payments] fading well into the past,” Paperno continues. “Also, your old closed cards will continue to contribute positively to your overall length of credit history for as long as they remain on your credit report (typically 7 or 10 years).”

Immediate Credit Impact: Moderate impact (positive or negative)

Long-Term Credit Impact: Minimal

Debt Negotiation or Settlement

Some creditors may allow you to settle your debt, which permits you to pay less than the full balance you owe. But creditors typically won’t settle debts with consumers who make their payments on time, so it’s a better option for those that already have several late payments on their credit report.

On top of that, “most creditors will report the settlement as something like ‘paid less than full balance’ if you settle the debt before it has been charged off,” warns Michael Bovee, community manager for DebtConsolidationCare.com. Creditors generally charge off debts when borrowers fall 180 days behind. And charged off debts often get turned over to collection agencies.

Bovee further explains, “When you settle a charged-off debt, getting it reported [with a] zero balance due will not in and of itself help your credit because the damage has already been done.” But it could help you ward off further damage from, say, a potential lawsuit.

In other words, settling an account before it gets charged off can prevent it from going to collections and adding another negative item to your credit reports—or causing other harm.

Brad Stroh, co-CEO of Freedom Debt Relief, adds, “Debt settlement hurts people’s credit scores but helps their credit profiles. [It’s] worth considering for anyone struggling to pay a lot of credit card debt, despite its negative effects on credit scores. It is far easier to rebuild one’s credit than to get out of debt, and people carrying a lot of debt likely have credit problems already.”

Immediate Credit Impact: Severe damage

Long-Term Credit Impact: Slow recovery

Bankruptcy

It’s well known that filing for bankruptcy will hurt your credit score—bankruptcies can stay on your report for up to 10 years from the filing date. However, with updates in the credit scoring algorithms, a bankruptcy isn’t the credit death knell it used to be.

Credit scoring algorithms typically segment consumers into subgroups called “scorecards.” If you experience a significant negative credit event, such as a bankruptcy, you’ll likely be compared with other consumers who’ve experienced something similar for credit scoring purposes.

That may bring a little bit of comfort, but it also means you might have a good shot at improving your credit scores if you make a real effort to rebuild your credit after your bankruptcy is discharged.

As far as your credit is concerned, you can recover from Chapter 13 bankruptcies more easily than other types of bankruptcies. In Chapter 13 bankruptcies, you typically pay back some or all of your debts over a period of three to five years, and they come off your credit reports seven years after the filing date.

So if it takes you four years to complete your Chapter 13 plan, you have to wait only three more years before the bankruptcy disappears from your reports.

However, you’ll probably end up paying more in a Chapter 13 bankruptcy than a Chapter 7 bankruptcy, where you wipe out all or most of your debts by selling some of your assets. Make sure you discuss both options with a qualified consumer bankruptcy attorney.

Immediate Credit Impact: Severe damage

Long-Term Credit Impact: Slow recovery

Getting Back on Track

Whichever method you choose, keep in mind that the ultimate goal is to pay off your debt so you can save and invest for future goals. A hit to your credit may be worth it if it means you can finally get your balances to zero. Monitor your credit, consider getting a secured card if necessary, and keep your financial situation in perspective.

“People just worry about their credit too much,” says Fox. “If your couch is on fire, would you not throw water on the fire because you don’t want to damage the upholstery?”

As you work to pay off your debts, it’s a good idea to keep an eye on your credit score to see how you’re improving. Get your credit score for free from Credit.com.

Image: Alija 

The post Debt Relief: How Will It Affect Your Credit? appeared first on Credit.com.

Find Out Which Bills Affect Your Credit Score

A high credit score helps you in many ways, including by potentially lowering your monthly bills.

Here’s the truth about your credit score: what you don’t know can hurt it, and there’s some confusion about exactly what can cause the pain.

A 2015 TransUnion survey asked consumers whether they believed a few common bills are regularly reported to the major credit reporting agencies. The data came from a survey of 1,001 US renters ages 18 to 64. The results of the study revealed that people often don’t understand which monthly bills can affect your credit score.

So out of these common bills, what happens if you don’t pay them?

  • Rent payments
  • Utility bills
  • Cable and internet bills
  • Cellphone bills
  • Insurance payments
  • Car payments
  • Mortgage payments
  • Student loan payments

Do Rent Payments Affect Your Credit Score?

If you thought paying your rent bill on time helped your credit standing, you’re not alone—48% of those who responded to TransUnion Interactive’s online survey said they thought rent payments got reported to credit bureaus.

Generally, rent collectors don’t report payments to credit bureaus, so you don’t get “good credit” for making those payments on time. Still, neglecting to pay rent several times might end up hurting your credit because the company you owe money to may send the bill to a debt collector.

So paying rent on time may not put you on a sure path to a high credit score, but you should still make it a priority to avoid late fees and debt collector trouble. Plus, landlords often check your credit before agreeing to accept you as a renter, so you should avoid letting late rent bills go to collections.

Do Utility Bills Affect Your Credit Score?

Of the TransUnion respondents, 54% thought their utility payments are reported, which indicates another misunderstanding. Like rent payments, credit bureaus do not receive information about power, cable, and other utility bills—unless you forgo paying altogether and the bills wind up with debt collectors.

Stay current with your utility bills to keep your home in good working condition, but don’t expect it to make much of an impact on your credit score.

Do Cable and Internet Bills Affect Your Credit Score?

More than half of those surveyed thought cable and internet payments show up for the credit bureaus to see. Once again, that’s not true. Only those bills that remain unpaid and are sent to collections will ding your credit.

Of course, if you want to keep watching or streaming your favorite TV shows and movies or playing online games, pay your cable and internet bills on time.

Do Cellphone Bills Affect Your Credit Score?

Turns out, credit bureaus do not have a record of your cellphone payments, although 52% thought that was the case. You may experience phone service shutoffs if you don’t pay your bill every month, but missing payments won’t affect your credit score. That is, unless you leave them unpaid for a long time.

Do Insurance Payments Affect Your Credit Score?

Most adults have to pay auto insurance payments every month, and many also pay out of pocket for health insurance. Although many insurance payments are high, these bills aren’t regularly reported to credit bureaus either. Insurance companies may charge fees or higher rates if you neglect to pay on time, however.

Do Car Payments Affect Your Credit Score?

If monthly bills like rent, utility, and cellphone bills aren’t regularly reported to the credit bureaus, which bills do show up? One type of bill that can affect your credit score is any payment you make to auto lenders.

Once a bank extends you a loan or lease for a car, the bank will start reporting your payments to credit bureaus. If you miss even one payment by several days, you could see some damage to your credit score. What’s more, having bad credit or no credit can make it tough to get approved for a car loan in the first place.

Do Mortgage Payments Affect Your Credit score?

Even though the TransUnion respondents were renting their homes, it’s surprising that only 29% knew mortgage payments wind up with credit bureaus—and as a result, these payments have a significant impact on credit scores.

Like banks that offer auto loans, mortgage lenders track your monthly payments and send information about late bills to credit reporting agencies. Any late payments will negatively impact your credit scores. If you don’t make mortgage payments for several months, you risk foreclosure, which has lasting effects to your credit.

Do Student Loan Payments Affect Your Credit Score?

The last monthly bill on this list, student loans can affect your credit score too. Student loan lenders report each monthly payment to credit bureaus and whether it was paid on time. The upside: Staying up-to-date on your student loan payments can help you build credit and improve your scores.

The Bottom Line: Many Monthly Bills Do Affect Your Credit Score

Plenty of regular bill payments are regularly reported to the major credit bureaus. Any time a bank or lender extends you a loan or line of credit, the lender reports your account payment history. Credit card bills, student loan payments, mortgage payments, and auto loan payments all fit this description.

No one type of credit payment hurts more than another—a mortgage payment that’s more than 30 days past due is just as bad for your credit score as a credit card bill that’s 30-plus days late. (But if your mortgage goes unpaid for a long time, prepare for much bigger headaches.)

If you fail to pay any bill—including those that aren’t regularly reported to credit bureaus—your credit score may be jeopardized. Collection accounts have a negative impact on your credit standing for a long time. Even after you pay the debt, your credit will continue to suffer for months or even years.

However, the damage from collection accounts may be short-lived if the incident is an outlier on your credit report. Making on-time cellphone or utility bill payments won’t directly improve your credit standing, but you should still do the right thing and pay these bills to avoid further trouble.

If you’re looking to improve your credit, you have plenty of strategies to consider. First, it’s a good idea to track your progress by getting your free credit report card on Credit.com. You’ll get a personalized snapshot of your current credit situation so you can see if anything, including a late payment, has affected your scores.

What Else Should You Know about Credit Scores?

Image: sturti 

The post Find Out Which Bills Affect Your Credit Score appeared first on Credit.com.

How Much Will One Late Payment Hurt Your Credit Scores?

How Much Will One Late Payment Hurt Your Credit Scores?

You open your statement and discover you’re late on your credit card payment. Or you get a call from a collection agency about a medical bill you forgot to pay. Or you check your credit reports and discover a late payment is marring your otherwise perfect payment history.

What happens if you miss a credit card payment? How do late payments affect your credit scores? Of course, as with so many things related to credit scores, the answer is, “It depends.”

Hope for the Best

Late payments and good credit scores go together like toothpaste and orange juice—they don’t mix. But just how bad is it to miss a single payment?

First, it depends on how many days late your payment is. If you missed your credit card payment by one day, you probably don’t need to sweat it.

If you’re lucky, the lender won’t report the lapse. “Most lenders do not report missed payments until the account is 30-plus days past due,” says Anthony Sprauve, PR director for MyFico.com.

“Suppose a given credit card payment is due on May 15 [and you pay on] May 25. Technically, the payment is late, and fees and interest charges may apply. But in most cases, this late payment would not be reported by the creditor to the credit reporting agencies [CRAs].”

Or perhaps your lender may overlook the transgression. Steve Ely, president of eCredable.com, adds, “The larger creditors [like credit card companies] usually have sophisticated analytic models working behind the scenes that take into account your history of payments. If you’ve been paying on time for a long time, they’re likely to forgive your one late payment and let it slide.”

But Brace for the Worst

What if you don’t luck out and the creditor reports the late payment? Here are three questions that will help you understand the possible impact, according to Barry Paperno, community director for Credit.com:

  1. How long ago did the most recent late payment occur?
  2. How severe were the late payments (30 days, 60 days, charged off, etc.)?
  3. How many accounts on the credit report have had late payments?

“Of these three questions, the one typically having the most impact on your credit score is the first: recency,” says Paperno. “To illustrate, if a single late credit payment occurred a few years ago and all payments on all accounts have been made on time since, that single late payment will have little negative impact on your score.”

How Bad Can It Get?

To put the potential consequences in perspective, Paperno points to a study about credit scoring effects conducted by FICO that points to a scary possibility. “[A] recent late payment can cause as much as a 90- to 110-point drop on a FICO score of 780 or higher.”

Although score drops from late payments tend to rise again over time, these credit dings can remain on your credit report for seven years, according to Paperno. You can expect the effects to last for much of that time.

Sprauve also explains that the impact of a missed credit card payment or late bill on your FICO credit score varies significantly depending upon the individual consumer’s circumstances. He details some of the factors that can help determine how much a late payment will hurt your scores:

  • Any history of account delinquencies or collection references (on any account)
  • Any adverse legal items on your credit report
  • The outstanding balance on the delinquent account
  • The number of other accounts on the file that you’ve currently paid as agreed
  • The length of your credit history

The Bigger They Are, the Harder They Fall

The irony is, the better your credit, the more you may feel the sting. One slipup and your credit score may take a dive—even if you have otherwise stellar credit.

“The old [adage] of ‘the bigger they are, the harder they fall’ applies to credit scores too,” warns Ely. “If you have a really high FICO Score, you’ll take a bigger hit for a late payment than someone with a lower FICO Score.”

The best defense is to be meticulous about paying your bills by the due date. But if you do mess up, see if you can’t convince the lender or collector to remove the ding from your reports. While they may balk at first, you may be able to persuade them to change their mind if you have a good explanation—and they believe you when say it won’t happen again.

What You Can Do

If you’re concerned about how late payments could be damaging your credit, you can check your three credit reports for free once a year. To track your credit more regularly, Credit.com’s free Credit Report Card is an easy-to-understand breakdown of your credit report information that uses letter grades—plus you get two free credit scores updated each month.

[Offer: Bad Credit? The credit professionals at Lexington Law use their legal expertise to help you aim for a better credit profile. Start by getting your credit reports, then connect with Lexington Law’s attorneys and paralegals who will review your credit reports and help you dispute any errors with the credit bureaus. Get started today or call (844) 346-3296 for a free credit consultation.]

More on Credit Reports and Credit Scores:

Image: Ingram Publishing

The post How Much Will One Late Payment Hurt Your Credit Scores? appeared first on Credit.com.

FICO vs. VantageScore: 5 Differences You Should Understand

new-fico-score

When you think credit score, you probably think FICO. Since the Fair Isaac Corporation introduced its FICO scoring system in 1989, “What is my FICO score?” has become a common question. FICO scores have burrowed their way into all kinds of lending decisions, most notably mortgages, credit cards, and rentals.

But over the last decade or so, FICO’s market dominance has been challenged by a newcomer called VantageScore. As the result of a collaboration between the three major credit reporting agencies (CRAs)—Experian, Equifax, and TransUnion—VantageScore uses similar scoring methods to FICO but with slightly different results.

So what are the differences, and more importantly, do they really matter to you, the consumer? The short answer: usually no. But you might want to look at different scores for different needs or goals.

In this article, we’ll cover the five main differences between FICO and VantageScore and tell you which one to watch.

1. Difference in Scoring Models

FICO and VantageScore aren’t the only scoring models on the market. Lenders use a multitude of scoring methods to determine your creditworthiness and make financial decisions. But despite the numerous options, FICO and VantageScore are likely the only scores you’ll ever personally see.

How do FICO and VantageScore rate you? Both use the same basic criteria:

  1. Payment history
  2. Length of credit
  3. Types of credit
  4. Credit usage
  5. Recent inquiries

Although both FICO and VantageScore consider much of the same information, they gather their data in different ways.

FICO bases its scoring model on credit reports from millions of consumers at once. They gather these reports from the three major credit bureaus and analyze the reports’ anonymous consumer data to generate an accurate scoring model.

Alternatively, VantageScore uses a combined set of consumer credit files, also obtained from those same three credit bureaus, to come up with a single formula.

Both FICO and VantageScore issue scores ranging from 300 to 850. In the past, VantageScore has used a range of 501 to 990, but the range was adjusted when VantageScore 3.0 was issued in 2013. VantageScore’s numerical rankings now match FICO’s, which makes it easier for consumers and lenders to implement the VantageScore model—plus, it’s less confusing for consumers who check both their FICO score and VantageScore.

2. Variance in Scoring Requirements

If you don’t have a long history of credit, VantageScore is the score you want to monitor. Before it’s able to establish your credit score, FICO requires at least six months of credit history and at least one account reported to a CRA within the last six months. VantageScore only requires one month of history and one account reported within the past two years.

Because VantageScore allows a shorter credit history and a long period for reported accounts, it’s able to issue credit ratings to millions of consumers who wouldn’t qualify for FICO scores. Considering how everyone from employers to landlords want to see your credit score these days, if you’re new to credit or haven’t been using it recently, VantageScore might be able to prove your trustworthiness before FICO has enough data to issue a rating.

3. Significance of Late Payments

A history of late payments will impact both your FICO score and your VantageScore. Both models consider these factors:

  1. How recently the last late payment occurred
  2. How many of your accounts have had late payments
  3. How many payments you’ve missed on an account

However, while FICO treats all late payments the same, VantageScore judges them differently—it penalizes late mortgage payments more harshly than other types of credit.

If you’ve had late payments on your credit cards, they will have about the same impact on both your FICO and your VantageScore. But if you’ve had late payments on your mortgage, you might find you have a higher FICO score than VantageScore.

4. Impact of Credit Inquiries

You’ve probably heard you shouldn’t open too many credit cards in a short period of time. One reason for this is every time you apply for a credit card, the lender does a “hard inquiry” to check your creditworthiness.

VantageScore and FICO both penalize consumers who have multiple hard inquiries in a short period of time, and they both do “deduplication.” Deduplication is important for things like auto loans, where your application may be sent to multiple lenders, thereby resulting in multiple inquiries. Both FICO and VantageScore don’t count each of these inquiries separately—they deduplicate them, or consider them one inquiry.  However, the timespan they use for deduplication differs.

FICO uses a 45-day span to deduplicate your credit inquiries. VantageScore limits its focus to only a 14-day range. VantageScore also looks at multiple hard inquiries for all types of credit, including credit cards. FICO considers only mortgages, auto loans, and student loans.

Inquiries aren’t your biggest concern when it comes to your credit score, but they do have an impact. If you want to buy a house or a car, restrict hard inquiries as much as possible to avoid lowering your credit score.

5. Influence of Low-Balance Collections

VantageScore and FICO both have penalties for accounts sent to collection agencies. However, FICO might give you a bit more of a break when it comes to low-amount collection accounts.

FICO ignores all collections where the original balance was under $100. It also doesn’t count collection accounts you’ve paid off. VantageScore, on the other hand, ignores only paid collection accounts, regardless of the original balance amount.

Keep Your Credit High

Regardless of the differences between FICO and VantageScore, the essential advice for keeping your credit score high remains the same:

  • Avoid late payments. Pay your bills, and pay them on time.
  • Keep your credit balances low. Don’t max out your credit cards, and try to keep your cumulative balance to less than 30%—the lower the better.
  • Apply for new credit only when you have to. Don’t open a bunch of new cards in a short period of time, and don’t close old accounts without good reason.

Check Your VantageScore Monthly

You can get a free VantageScore 3.0 credit score, updated monthly, from Credit.com. You can also see how your score compares to others and get a custom action plan for your credit. Remember, every point counts when it comes to getting the best interest rates and lending terms.

Image: istock

The post FICO vs. VantageScore: 5 Differences You Should Understand appeared first on Credit.com.

7 Steps to Help You Get Out of Your Rental Lease

security deposit

Whether you’re renting an apartment, house, or duplex, your home ought to feel like a safe place—one that’s comfortable and secure. But what happens if something alters that safe space? Can you break your lease? And what happens if you do—is your credit doomed?

To help you navigate these troubling waters, we’ll cover common reasons tenants want to break their lease and what you should do if you’re ready to break yours.

Common Reasons Tenants Break a Lease

There are a variety of reasons people want to terminate their lease early—but here are just a few that could apply to you.

  1. The rental unit is uninhabitable. A landlord is obligated to perform general property maintenance and ensure the property adheres to health and safety codes. Circumstances that could make a property uninhabitable include the presence of black mold, a lack of running water, or a lack of proper waste disposal.
  2. The landlord illegally entered your rental space. Landlords must provide legitimate reasoning as to why they are entering your home.
  3. You are on active military duty.
  4. You are a victim of domestic violence.
  5. The rental space falls into foreclosure or is illegally rented to you.

What to Do If You Need to Break Your Lease

If you need to get out of your lease, here are seven essential steps.

1. Read Your Lease and Document Everything

Before you take action, be sure to look over your lease. “Read it three times!” says Joel S. Winston, a litigation lawyer at Winston Law Firm, LLC. Your lease should spell out the procedures and penalties for canceling early.

“The lease that you signed and that no one reads—that’s going to control how difficult and expensive it will be to break a lease,” Winston says.

Just don’t make up problems with the property that don’t exist to get out of your current lease. “Try to be open and honest and approach your landlord in a nice and friendly manner,” Winston recommends.

However, if there are problems and you feel the landlord isn’t adequately fixing them, put the complaints and problems in writing. Just make sure you keep a copy of the document for your records. And if push comes to shove, carefully look over your lease for details that cover what happens if you terminate the lease early, including whether you will be held responsible for the entire remaining term of the lease or a lesser amount.

In many states, landlords can’t use the fact that you left early as a windfall. However, if they can only rent the unit at a lower rate than you were paying for the remainder of your lease, you may be required to make up the cost difference. You may also have to pay for the advertising costs to find a replacement tenant.

2. Communicate Thoroughly

Let your landlord know what you want to do and why you want to terminate the lease. Some may be more flexible than others. A large property management company might be unsympathetic to your financial woes, but an individual owner might be more compassionate.

Also, as difficult as it may be, try to think of the circumstances from a landlord’s perspective.

Terminating a lease early may put an owner-landlord into a financial bind, especially if they have to spend time and money securing a new tenant. It’s not out of the question to assist your landlord in finding an adequate replacement, but it’s ultimately their decision.

3. Get Confirmations in Writing

Make sure you get written confirmation of any changes to the lease. If your landlord says you can move out early with a small penalty or no penalty, get that in writing. Never rely on a verbal agreement—otherwise it will be your word against theirs. You may be tempted to keep things cordial and light, but a handshake isn’t going to help you pay off a creditor or debt collector.

Store these written confirmations in a safe place you’ll remember. It won’t do you any good if you can’t find that information when a collection agency contacts you.  And should you end up in collections or in court, the written terms in the lease will likely prevail.

If the landlord won’t budge, won’t put anything in writing, or won’t compromise, you can still create your own paper trail by communicating in writing and keeping a record of the letters you sent.

4. Don’t Forget the Walk-Through

No matter how anxious or excited you are to move out, protect yourself from unexpected charges by doing a walk-through with your landlord and getting a written record of the results. We wouldn’t recommend leaving your rental until you’re able to do this. Should your landlord refuse to do a walk-through, take detailed pictures—or better yet, video—of the property’s status the day you leave.

5. Don’t Make Assumptions

When it comes to breaking your lease, avoid assumptions. Specifically, don’t assume your security deposit will take care of any remaining balance or fees you owe.

“When you are breaching the contract, it doesn’t always entitle the landlord to scoop up your security deposit. For example, in New York, the landlord has to go to the housing court to file a complaint in order to take that.” Winston says.

Similarly, if you live with a roommate and you pay your portion of the rent but your roommate does not, this missing payment has financial repercussions. If you both signed the lease, you are both fully responsible for the entire rent check, regardless of what the two of you have worked out between yourselves. But if your name is the only one on the lease, you may be the one stuck holding the bag.

6. Know That There Are Exceptions to the Rules

You may have legitimate reasons for breaking a lease that aren’t spelled out in the actual lease, like a safety or health reason directly connected to the property.

“Essentially, the ‘warranty of habitability’ is a landlord-tenant legal doctrine requiring landlords to maintain rental real estate in reasonable conditions that are fit for tenants to live safely,” explains Winston.

Winston goes on to say, “The warranty of habitability is accepted law in most every jurisdiction in America. In some states, the warranty has been established by decades of case law (i.e., Implied Warranty). But in other states, the warranty has been expressly established by legislation.”

There may be state-specific laws that allow you to break a lease early. For example, in Washington, one legitimate reason for terminating a lease is the landlord failing to make certain types of repairs within a specific period of time—as long as mold isn’t part of the problem.

7. Get Help

Landlord-tenant laws are state-specific. So it’s a good idea to research your rights as a tenant before signing your name on the dotted line. If you believe a landlord’s actions are illegal, you may be able to get help from legal aid programs, a local housing agency, or a consumer protection attorney in your state.

Understand that even if you do everything right, problems can come up. For example, an unknown balance can wind up in collections and you may not hear about it until the damage to your credit score is done. Or if you terminated your lease early, the leftover balance may be reported to specialty credit reporting agencies used by landlords—and these reports could catch you by surprise the next time you try to rent.

Whatever the reason, keep detailed and legible records of what transpired long after you think you’ll need them—seven years is usually safe. Also, frequently review your credit report and credit scores to make sure you’re aware of any significant changes. You can get two free credit scores updated monthly at Credit.com.
Image: iStock

The post 7 Steps to Help You Get Out of Your Rental Lease appeared first on Credit.com.

Will Debt Consolidation Help or Hurt Your Credit?

Debt isn't always a bad thing. In fact, it can help your small business thrive.

From student loans to a house mortgage, debt accumulation is stressful and overwhelming. As you make moves to get out of debt, you might want to consider consolidating credit cards or other loans to save you time and money. But that begs the question—does debt consolidation help or hurt your credit?

The answer depends on how you consolidat­e and what you do with your debt afterward.

1. Debt Consolidation Loans

Getting a new loan to pay off other debts is the most popular way to consolidate. It’s certainly what most people think of when they consider consolidation. But finding a loan that has decent terms and is designed specifically for the purpose of consolidation can be challenging—especially if your credit scores are a bit lower due to the balances you’re carrying.

It’s certainly not impossible, though. Look for reputable debt consolidation companies that will work for your specific situation.

Tip: Triple check lenders’ certifications to make sure you’re dealing with a legitimate site if you’re shopping for a loan online. Scams abound.

Effect on Your Credit: Consolidating credit cards with high balances using an installment loan (i.e. a loan with fixed monthly payments) may actually benefit your credit rating, especially if you use the loan to pay off credit cards that are near their limits. At the same time, any new loan can cause a short-term dip in your credit scores—so don’t be too surprised if you see your credit score change slightly when taking out a new loan.

2. Debt Management Plans

Debt management plans are often confused with debt consolidation—however, they’re very different programs. Debt management plans (DMPs) are offered through credit counseling agencies and, much to many people’s surprise, they don’t actually consolidate your debt.

Instead, you make a “consolidated” payment to the counseling agency, which then pays each of your creditors—usually at a reduced interest rate. Even though you’re making only one or two monthly payments, the counseling agency doesn’t actually pay off your creditors for you—it simply acts as a middle man to help you repay your debts and ensure that the creditors get the money they’re owed. These programs are available regardless of credit scores, so if you are having trouble consolidating, a DMP might be worth considering.

Tip: If you choose to move forward with a DMP, you should close or suspend your credit card accounts. Unfortunately, you’re not permitted to use credit cards while enrolled in a DMP.

Effect on Your Credit: If you have a good credit score and adhered to a creditor’s repayment terms in the past, a DMP could have a negative impact on your credit as it indicates that you are experiencing or have experienced difficulty with payments. Also, since a DMP directly impacts payment terms, credit reporting agencies might ping your DMP commitment because it designates a change in payment policies.

3. The Credit Card Shuffle

Transferring a high-rate credit card balance to a card with a lower rate is another way to consolidate. Carrie Rocha, author of Pocket Your Dollars: 5 Attitude Changes That Will Help You Pay Down Debt, and her husband paid off some $60,000 in debt, and taking advantage of low-rate balance transfers was one of the strategies they used to dig out. However, if you decide to go this route, you must be very disciplined in your approach. Otherwise, you may fall into traps such as getting stuck with a balance at a high interest rate after the introductory period ends.

Tip: Read the fine print. Keep your eyes peeled for any “but” or “until.”

Effect on Your Credit: It depends on how you use a transfer. You’ll often see a temporary dip in your credit score when opening any new card. If you use a substantial portion of the available credit (on the card) to consolidate balances from other cards with lower balance-to-available-credit ratios, your credit scores may drop from that as well. Finally, you may also lose points if you open a new card and use a majority of the credit line to consolidate.

However, if a 0% card allows you to save money and pay off your debt faster, you can come out ahead in the long run, both financially and credit score–wise.

The End Goal: Less Debt Equals Stronger Credit

Paying down debt can have a tremendous impact on your credit scores. According to FICO, the company behind most of the credit scores used by lenders, consumers with high credit scores (e.g. 785 and above), tend to keep their balances low. Specifically, two-thirds of consumers with good credit carry less than $8,500 in non-mortgage debt, and they use an average of 7% of their available credit on their credit cards.

That means that paying off debt—whether you use a consolidation loan or just put every penny you can toward your debt—will often improve your credit ratings in the long run. The biggest risk, though, is that it’s easy to run up new balances on the cards you paid off in the consolidation—and that’s definitely not a good move for your credit or your bottom line. As you make progress on paying off your loans, periodically check your free credit report to see where you stand.

Remember, moving debt is a means to your end. The goal is to pay off those balances and free up cash flow as well as to help build strong credit. So whether it’s a consolidation loan, credit card shuffle, or DMP, know your options so you get there just a little faster.

Image: mapodile

The post Will Debt Consolidation Help or Hurt Your Credit? appeared first on Credit.com.

How to Get a Mortgage With Bad Credit

Get a Mortgage With Bad Credit

While a 20% down payment and a great credit history are commonly recommended for buying a home, there are still ways you can be approved for a mortgage without them. The secret is finding your personal strengths as a potential homebuyer and overcoming your weaknesses.

Good and Bad Credit for a Home Loan

Getting a home loan with bad credit can be daunting. But even credit scores traditionally thought of as “bad” won’t stop you from being approved for a mortgage.

Credit Score Scale for Mortgage Approval

740–850 Outstanding
720–740 Great
700–720 Good
680–700 Mediocre
620–680 Less than perfect, but still approvable for a home loan
550–620 Needs improvement before applying
300–550 Unlikely to be approved for a home loan

If you have a score lower than 620, it’s unlikely you’ll be approved for a home loan. Take some time to improve your credit by paying debts on time before you apply for a loan. And while you may be approved for a mortgage with a credit score between 620 and 680, such a score will affect your loan program and pricing.

Effects of Bad Credit on a Home Loan

Your credit score determines two major things for a mortgage company: the loan program and pricing.

Loan Programs

There are various types of loan programs, including conventional, Federal Housing Administration (FHA), and Veterans Affairs (VA) loans. There are advantages and disadvantages to each of them. But unless you’re a US veteran or service member, or married to one, you won’t have access to VA loans.

Conventional loans are best for borrowers with good to outstanding credit, but if you have a large down payment, you might be approved for one even with bad credit. On the other hand, FHA loans are accessible to people with less-than-perfect credit scores, but these loans tend to come with higher expenses.

Pricing

When it comes to pricing, your mortgage interest rates will most likely be higher than those of someone with good credit. You may also face additional premiums and more expensive insurance.

Your credit history is another determining factor in whether your loan will be approved or not. Derogatory items, or negative indications on your credit report, such as patterns of previous credit delinquencies and balances on closed-out accounts will negatively affect your mortgage loan approval.

Lenders will look at credit scores first to determine which home loan you’re eligible for. Next, your complete credit overview, including credit history, will be taken into consideration to determine what the lender will look for in the underwriting process. This is when the lender tries to figure out what happened in your credit history and why, as well as if there’s a chance credit issues will occur again in the future.

Overcoming Common Credit Red Flags

These derogatory items will be a cause of concern for lenders—but may not be total deal breakers:

  • Patterns of Delinquencies: Lenders can work around a record of late payments, but they’ll likely require you to have a larger down payment and lower debt-to-income percentage.
  • Student Loan Late Payments: A late federal student loan payment within the past 12 months will make approval less likely for an FHA because government financing doesn’t take kindly to delinquent federal debt.
  • Mortgage Late Payments: Lenders usually overlook one late payment in the past 12 months, so long as you can explain and provide necessary documentation.
  • Foreclosure: After a foreclosure, it takes 36 months to be eligible for a 3.5% down FHA loan and 48 months for a no-money-down VA loan. However, it takes seven years to qualify for a conventional loan approval, no matter the size of the down payment.
  • Short Sale: Mortgage eligibility after short sale is 36 months for a 3.5% down FHA loan and 24 months for a no-money-down VA loan or a 20% down conventional loan.
  • Bankruptcy: With normal Chapter 7 bankruptcy you have 24 months until you’re eligible for a 3.5% down FHA loan and 48 months for a VA loan or conventional loan.

To determine which red flags to overlook, lenders use investor overlays. These are the guidelines mortgage brokers and banks follow to prevent potential mortgage losses.

Investor overlays vary from lender to lender, so while one lender might not approve your loan because of poor credit and a minimal down payment, another may in some instances. The key is to find a lender with minimal overlays who can work with your situation.

Not sure where to start looking for a mortgage? At Credit.com, we offer a helpful list of mortgage rates from lenders in your area.

Homebuying Takeaways

First, know your credit score. Obtain a copy of your free annual credit report to help you select an appropriate lender, and monitor your score for free through Credit.com’s Credit Report Card.

Second, gather documentation to explain your credit challenges. If you can explain derogatory items in your credit history to a lender, you’re more likely to receive a mortgage.

Finally, be very specific when speaking to a potential lender. Don’t be afraid to share every detail of your needs and concerns. You’ll save yourself a lot of headache later by finding out up-front if they have any investor overlays that could prevent them from lending to you.

You don’t have to have perfect credit to buy a home. Just be prepared and search carefully for the lender who can make your dream home a reality.

Image: Jupiterimages

The post How to Get a Mortgage With Bad Credit appeared first on Credit.com.

10 Steps to Monitor Your Credit

truths-about-credit-reports

Why should you monitor your credit? Well, because bad credit can cost you thousands.  

Think about it—the higher your credit score, the lower interest rate you’ll have on loans (home, auto, etc.), and you’ll end up saving thousands of dollars. However, the time to monitor your credit score is now, not a month before applying for a loan to buy your dream home.

So where does one start monitoring their credit? Great question. Here are 10 steps to monitor your credit.

1. Start with a Free Credit Report

Go to AnnualCreditReport.com and request a free credit report. And don’t worry, it really is free (at least from this website). Some people don’t know it, but everyone’s entitled to a free credit report from each of the three major credit bureaus (TransUnion, EquiFax, and Experian) once every twelve months.

2. Review Your Credit Report

Once you receive your free credit report (see previous point), check for any inaccuracies or errors. You might find incorrect information about yourself (addresses, phone numbers, etc.) or an account you don’t recognize. If you do find an inaccuracy or error, you can check for instructions in the report on how to inform the credit bureau.

3. Protect Your Personal Information Online

If you haven’t started already, now is the time to take measures against would-be identity thieves who can sabotage your credit score and finances. For example, if you use the same password for everything you do online—”Password123” is not acceptable—you’ll want to up your password game by creating unique logins for every site you frequent, using anti-virus software, and being cautious about what you share online.

4. Protect Your Personal Information Offline

Be careful about what you throw away. Identity thieves can get to your credit by using sensitive information found in your trash, such as bank statements, medical bills, etc.

Also, watch out for scammy phone calls or texts asking for personal information. Protecting your identity offline is just as important as protecting it online.

5. Get Your Financial House in Order

If you currently don’t have an easy way to see your money all in one place, you might want to check out a service like Mint.com, which can provide you with a high-level overview of all your accounts and even help track your credit score. If you know what’s happening in your accounts, it’s easier to spot anything suspicious and stay on top of your credit.

6. Review Your Accounts on a Regular Basis

If you’re not the type to review your credit card accounts on a regular basis, you’ll want to change your ways in order to properly monitor your credit. You can set yourself a weekly reminder to review your charges and balances, and if you do find anything suspicious, report it immediately.

7. See If You Have Credit Monitoring Perks

Some people don’t realize they may already have some form of free, basic credit monitoring. For example, AAA includes free credit monitoring service for members, and many credit card companies, such as Chase, offer free FICO credit scores for cardholders. So why not make credit monitoring easier on yourself by checking if you have some perks you’re not using?

8. Check If Your Info Was Stolen

The Equifax hack is old news at this point, but that doesn’t mean you’re out of the woods.

The personal information of more than 145 million US consumers was compromised, which is almost one out of every two Americans. You can go to equifaxsecurity2017.com to see if you’re one of the many impacted. If you’re indeed one of the hundred of millions of victims, all the more reason to stay on top of monitoring your credit to thwart identity thieves.

9. Stay Motivated and Continue to Monitor Your Credit

Monitoring credit is definitely not fun, but that doesn’t mean it can’t be rewarding. If you’re having difficulty keeping up with all of your responsibilities and watching your credit, find a way to reward yourself for doing well (treat yo self!).

10. Stay Informed

The last step in monitoring your credit is as simple as staying informed and watching your credit score. If you’re monitoring your credit, you might also want to check out what it takes to build good credit. You can be the one friend who’s always informed and in the know when it comes to credit.

Image: istock

The post 10 Steps to Monitor Your Credit appeared first on Credit.com.

Thinking of Freezing Your Credit? Learn How and When to Talk to a Credit Bureau

credit bureau

Calling a credit bureau can be daunting. First, you have to hunt down the credit bureau’s contact information, then you have to make it through the dreaded automated customer service purgatory to reach an actual person—if it’s even possible to get a live person at all.

“A lot of people are afraid to call credit bureaus because they don’t want to get bogged down in bureaucracy or be on hold for hours,” says Zara Mohidin, co-founder of Fig Loans.

In addition, there’s often confusion about what answers credit bureaus can provide and when it’s important to call a bureau.

To help you wade through all of the uncertainty, we asked finance industry and credit experts to provide some insight on these topics.

Contact Information: Equifax, TransUnion, and Experian

To begin with, it’s important to understand that there are three major credit bureaus, and each is required by law to provide consumers with a toll-free number that’s staffed during regular business hours. The phone numbers for each of the credit bureaus are below:

When to Call a Credit Bureau

It’s a good idea to contact a credit bureau whenever you notice any administrative inaccuracies on your credit report, such as misspelled names, incorrect address information, or erroneous employment information.

Further, if there are credit cards, collections, missed payments, or anything else on your report that you don’t recognize, contacting the credit bureaus is critical.

“Always call the bureaus if you notice a sign of fraud on your credit report,” urges Mohidin, who says one in four consumers have an error on their report that could be pulling their credit score down. “And getting your identifying information correct is important so that you are rewarded for on-time credit payments.”

Under the Fair Credit Reporting Act, credit bureaus must investigate any items you dispute and correct the information if it cannot be verified.

“If you disagree with the results of a credit bureau’s investigation, you can ask the bureau to include a consumer statement (to that effect) in your file and your future reports,” explains Freddie Huynh, vice president of credit risk analytics at Freedom Financial Network. These statements allow you to offer extra explanation, such as why you missed a payment.

Additional Reasons to Call

Keep in mind that correcting inaccuracies with one of the bureaus does not mean it will automatically be corrected by the others. It’s important to review the individual reports of all three credit agencies.

Huynh, who was previously the lead data scientist at FICO, stresses that though information is largely similar across all the credit reporting agencies, there can be variations between the reports.

In addition, when disputing something on your report, the burden of proof is on you, says Greg Oray, president of Oray King Wealth Advisors.

“Gather any documents that may help your case and have them available,” says Oray. “If you’re having trouble working with a representative or the reporting bureau to resolve your case, consider hiring a legal service that specializes in these matters.”

If you’d like to freeze your credit, you’ll have no choice but to speak to a credit bureau.

How to Freeze Your Credit

Understanding what it means to freeze your credit is critical, particularly in light of the recent Equifax security breach that exposed the personal information of millions of consumers. 

A credit freeze, also called a credit lock, is a tool that restricts access to your credit report. Taking this step makes it far more challenging for identity thieves to open new accounts in your name.

“Placing a credit freeze is similar to putting your credit cards in a bowl of water in the freezer—no one can use the credit until you ‘thaw’ it,” explains Andrew Housser, CEO of Freedom Financial Network. “With a credit freeze, creditors cannot see your credit history. If a scammer tries to open credit in your name, the creditor is unlikely to issue credit without knowing the history attached to your name and Social Security number.”

However, it’s important to note that freezing credit requires contacting each of the three credit bureaus separately.

Freezing Credit with Equifax

Equifax provides detailed instructions about how to place, temporarily lift, or entirely remove a freeze on its site.

Consumers may also request a freeze in writing or over the phone. You can request a security freeze by calling 1-800-685-1111 (NY residents call 1-800-349-9960) or submit your request in writing to the following address:

Equifax Security Freeze
PO Box 105788
Atlanta, GA 30348

Putting a freeze on your account, or lifting one, requires some personal information, including your Social Security number, address, and more.

It’s also important to note that as part of initiating an Equifax freeze, you will be provided with a PIN during the process. This PIN will not be emailed to you, so make sure you write it down.

Freezing Credit with TransUnion

You can freeze your credit with TransUnion via its website. TransUnion offers two different services on this front—locking your credit and freezing your credit.

Locking your credit via TransUnion is a process controlled by you, and there is no fee. You have instant, independent control over who accesses your credit information. This approach also means you have online, real-time ability to lock and unlock your account as often as you want.

Freezing your credit file with TransUnion means the credit agency controls who has access to your information. There are fees associated with both freezing and unfreezing your credit with TransUnion. In addition, there is a waiting period for a freeze to be either placed or lifted via this approach.

Freezing Credit with Experian

Experian provides an online form to initiate a credit freeze on its website. You can also freeze your credit by calling Experian at 1-888-397-3742 or sending certified or overnight mail to this address:

Experian Security Freeze
PO Box 9554
Allen, TX 75013

While this bureau doesn’t charge victims of identity theft who’d like to initiate a freeze, there are fees for others seeking to take this step with their credit. The fees vary by state of residence and range from about $3 to $10.

What You Need to Know about Credit Freezes

When initiating a freeze, keep in mind that lenders need credit reports to determine if you’re eligible for credit. After your credit is frozen, no one can pull your credit report. That means it won’t be possible to get approved for a loan or credit card in your name.

Credit freezes, however, do not affect your overall credit score in any way and they will not prevent you from accessing an annual credit report.

While a credit freeze can keep identity thieves from opening new accounts in your name, it does not prevent thieves from using your existing accounts. So it’s important to keep monitoring your credit and accounts.

 The Downsides to Calling Credit Bureaus

Not all experts think calling a credit bureau is the best approach. Don Petersen, an attorney, recommends calling a bureau for only basic administrative questions—such as updating an address or asking if you’re affected by a recent data breach.

For most other issues, Petersen advises his clients to write to credit bureaus or submit disputes online.

“The consumer will not have a record of what was said when they called,” explains Petersen. “Most consumers struggle to understand the system and would be much better served by taking the time to memorialize their dispute in writing and, obviously, save a copy of their letter.”

If you do prefer to call a credit bureau to get to the bottom of a question or concern more quickly, Petersen urges consumers to follow up in writing after the telephone conversation. Include the name of the representative you spoke with in the letter as well as details of what transpired in your conversation.

And finally, send the letter via certified mail with a return receipt requested, Petersen instructs.

“Call with very simple questions,” Petersen says. “But if you’re trying to initiate a dispute, it’s best to do it in writing so that you have a record.”

Keep an Eye on Your Credit

Every now and then, pull your credit report and review it carefully—you can obtain your free credit report at Credit.com. Look for any inaccuracies or other issues in the report, and if you spot something unusual, make a few calls to the credit bureaus. Always investigate suspicious activity on your credit report, and if you’re worried about identity theft, mitigate the issue with a well-placed credit freeze.

Image: Image Source

The post Thinking of Freezing Your Credit? Learn How and When to Talk to a Credit Bureau appeared first on Credit.com.