Credit Repair and Good Credit
Fixing the bad credit that you may have accumulated till now in your life is referred to as credit repair. When you are unable to pay back part of a debt or most of it, it hurts your credit and the debt turns bad, leaving your credit score in dire need of credit repair.
In credit repair, you can raise any form of question or challenge anything on the report itself because some of it may not be accurate or just. Fixing bad credit is what the process of credit repair is all about. In the name of credit repair, you can individually go and dispute your entire credit report and score with other credit bureaus free of charge. Formal disputes are filed with credit bureaus either in person, online, or by email, as part of this particular process of credit repair.
Many people haven’t an inkling of all the particulars that are included in their credit report and how they affect their credit score, nor anything on credit repair if needed. As a result, it is very unlikely that they will be able to challenge their standing or credit score. Credit repair services are very important and one should seek professional help for guidance for it.
You can obtain professional assistance and guidance with the process of credit repair in no time if you call Start New Financial. Although we do not entirely provide credit repair services per se, we can guide you in this regard. You can start living independently from debt as quickly as possible, though, with the debt consolidation services we offer at Start New Financial – whether or not you need credit repair.
How to Build Credit
Building credit over time is the most natural credit repair. But building credit can be frustrating, especially so when the credit industry isn’t set in your favor. Since credit-reporting agencies incentivize huge spending and lending habits for those just beginning to build credit, establishing a positive credit score can take a long time, as if you were undergoing credit repair. Fortunately, with some inside knowledge of how credit-reporting agencies work, you could get past the gap with just establishing positive lending practices.
Whether you’re establishing a credit score from scratch or improving your credit score, just follow this guide that leads you to all your credit-boosting or credit repair goals.
How you can build credit with a credit card
If you checked your credit score (or credit history) and didn’t find any results, you are part of the 1 in 10 adults who are credit-invisible or nonexistent. Being credit-invisible or nonexistent is almost akin to being in need of credit repair. It can be just as tough for the 26 million credit-invisible Americans to apply for most leases, credit cards and loans. However, not having a credit score doesn’t in any way prevent you from establishing credit.
TYou first need to establish a credit-lending history in order to start building a credit score. If you are beginning without a credit (or lending) history, there’s a market of lending alternatives for you. Although these choices don’t come with the perks or incentives that accompany top credit cards, they’re an opportunity for building credit instantly or even for credit repair.
1. FIND A SIMPLE, EASILY-APPROVED CREDIT CARD
Secured Credit Cards
A secured credit card is a way to construct a credit history or undergo credit repair without any of the risks associated with borrowing a sum of money. A secured credit card requires a deposited sum of money as collateral and works as a line of credit. Most secured credit cards require at least a $200 deposit and, depending on the lender, there might be an annual fee.
It is crucial to pay off any outstanding payments on time because secured credit cards have a high-purchase annual percentage rate on overdue amounts. A secured credit card works just like a debit card and you should only make purchases you know you have adequate funds in deposit for.
Student Credit Cards
Student Credit Cards are designed for college level students over the age of 18. You’re required a minimum credit score in order to apply for a student credit card, and all its requirements are designed with the student in mind. With low annual percentage rates and competitive rewards programs, all these cards are a great way to build credit if you are just starting out or for credit repair.
Store Credit Cards
Store Credit Cards are an alternative that few businesses offer to finance in-store purchases and also usual (general) purchases. Store credit cards usually have a low (or no) credit score requirement, making them a huge alternative for someone starting out without any credit or for credit repair. Furthermore, store credit cards are best used for groceries in a place where you shop frequently for essentials.
Federal law entitles you a free annual copy of your credit report from the 3 credit bureaus
It can lead to trouble when you are irresponsible and careless with your credit use, especially when you bite more than you can chew – such as borrowing more than you can afford to pay back when due. It never hurts to re-familiarize yourself with the very basics of what credit is and how it works, even if you’ve been using credit for years. For instance, it’s hard not to think of credit and credit cards as an extension of your wallet since they are so easy to use.
2. ASK FOR A CREDIT CARD COSIGNER
A cosigner can be used whenever applying for a credit card if you don’t have sufficient funds, are under the age of 21, or don’t have a credit history of your own standing. The cosigner acts as a responsible party vouching that they are accountable for paying the debt if ever the main credit card holder defaults on any payments when they are due to the lender. Ask your parents (or guardian) if they’re comfortable with being your credit card cosigner. This can be used in credit repair too.
3. BECOME AN AUTHORIZED USER ON SOMEONE ELSE’S CARD
Credit Card companies allow and enable the primary card owner to have authorized users under the same account. An authorized user isn’t accountable for paying debts (or fees) but can make charges to the card. As an authorized user, your name will start to show up on the credit history of the particular credit card account and, in turn, you will start building credit or undergo credit repair. Since an authorized user isn’t fully accountable for repaying debts, it’d help to ask a parent or guardian if you could be listed as an authorized user. Further, becoming an authorized user would give you a standing because it’d list you in the credit bureau. But that’s minor, so with that alone you might not build enough of a credit history noteworthy of aggregating a credit score.
How to build credit without a credit card
Credit cards might be the most common way for building credit, but they come with heavier responsibilities and the repercussions of high annual percentage rates. Additionally, since a credit score is calculated by using your total lines of credit and lending history, there are other steps you can take to build credit without using a credit card.
1. TAKE OUT A CREDIT BUILDER LOAN
Credit Builder loans are designed particularly for new lenders in mind and are a methodology for establishing a very positive lending history. Banks, self-lending companies, and credit unions offer small loans of around $1,000 as a way of establishing credit. These are short-term loans of 6 to 12 months. During the term of your loan, you are required to make timely payments to receive a positive credit score.
2. NEGOTIATE A LOAN
Any loan would count towards your credit score, so if you are planning on making a huge purchase (or expense) then you could negotiate a loan. If you’re starting without any credit or undergoing credit repair, then a lender might ask you for collateral or a loan cosigner. Getting a cosigner is standard for student and car loans as they are ‘typically’ a massive investment. Student loans might have a payback period of more than 10 years and would start building credit for you when you begin to pay off the loan. Car loans have a much shorter payback period and typically begin to show up quicker on your credit score. Be sure to make your payments on time and in full. This is the actual key to build up a great credit score.
How you can improve your credit score
Once you have a credit history, then improving upon it can be a bit tougher. Your credit score is carefully calculated by using metrics of your lending and payment history, types of credits, transactions, and total amounts owed. Fortunately, with careful planning and a few budgeting best practices, you could instantly put your credit score on an upward trend or undergo credit repair.
1. PAY OFF YOUR CREDIT MORE REPEATEDLY
Always paying off your credit has a positive impact on your credit score because it would keep your entire credit utilization low and assists you in staying ahead of large debts without ever needing credit repair. The more total payments you have, the better to calculate your entire credit score from. Further, paying your bills much more frequently is a longer-term investment and would have a positive impact on your credit score for months instead of weeks.
2. MAKE TIMELY CREDIT CARD PAYMENTS
Staying up to date with your card payments has the most influence on improving your credit score over time. Payment history is the top-most weighted metric in your FICO score and weighs heavily in your overall credit. If you struggle to make your payments in full, making the minimum payments would never negatively impact your credit score so you won’t ever need credit repair.
3. REPAY ANY OUTSTANDING DEBTS
Paying back any outstanding debt serves as credit repair because it will always have a positive on your credit score. Paying your debt off earlier than expected and paying off debt later than expected would both negatively impact your entire credit score. The credit companies incentivize when you stick to your financial plan and place a positive credit score on repaying your debts on time. Paying back debts before (or after) the due date is a sign of discombobulation that tells you that the borrower should have taken out credit with a different timeline.
4. KEEP UNUSED CREDIT CARDS OPEN
Closing out old and unused credit cards isn’t ideal for credit repair because it could negatively impact your credit by raising your credit utilization and shortening your lending history. Further, if your credit card has any required fees (or minimum usages), you should still close the account despite its effect on your credit score.
5. LOWER YOUR CREDIT UTILIZATION
Credit utilization is the percent of funds you generally borrow, compared to your total credit limit. Your average credit utilization is a vital factor of your credit score, as it determines if your spending habits on the card are close to your total limit. A Perfect credit utilization is 30% or under, which is low for numerous, beginning with a brand new credit card. It’s crucial to keep your credit utilization low because periodically hitting your limit would negatively impact your credit score.
6. INCREASE YOUR CREDIT LIMIT
If you find yourself nearing your credit limit between every payment, you should ask your credit card provider to raise your limit. Whenever you reach out to your credit card provider to raise your credit limit, just ensure that first you have already paid off any balances (or bills) due on that card. Credit card companies will look into your account before deciding on raising your credit limit and could deny a request if you have frequently missed any payments, outstanding balances, or frequently pay only the minimum balance.
7. REMOVE NEGATIVE CREDIT ENTRIES
Negative credit entries such as reporting mistakes, late payment charges, hard inquiries and delinquencies could all be removed from your credit in credit repair, given a few stipulations. Furthermore, removing any negative credit entry is one of the fastest credit repair ways to improve your credit score, as updates are usually handled in the 30-day period in which the credit reporting agencies are updated.
How a credit score is calculated
To best understand how to perform the credit repair of enhancing your credit score, it’s crucial to look at exactly how your credit score is calculated. Yes, your FICO score is calculated by using data reported by the major credit reporting agencies and is used by lenders for determining risk with eligibility to borrow.
The FICO Score Variables
- Payment History
- Amount Owed
- Length of Credit History
- New Credit Transactions
- Credit Mix
Payment history is the most crucial value that carries a 35% weight in your gross credit score. Payment history would have a positive impact on your credit score if you make your payments on time and in full. Further, payment history would have a negative impact on your credit score if you are late, ever carry over balances, or are default with payments.
Your total amount owed accounts for 30% of how your credit score is calculated and contains both good and bad debt. Good debt is actually allowances that you are paying off and paying down over time. Just because you have an outstanding debt does not mean you would have a negative score. Further, bad debt in the case of amounts owed would be outstanding credits you aren’t paying off the minimum payments on.
LENGTH OF CREDIT HISTORY
How long you’ve been listed as a borrower accounts for 15% of your gross credit score. The length of your credit history adds much more conviction to your gross credit score as it’s more likely that you will continue if you have established a past good relationship and behavior with lenders. Similarly, a long-lasting bad credit history will have a negative effect on your credit score and this factor could end up notably lowering your score.
NEW CREDIT TRANSACTIONS
Your latest transactions account for 10% of your overall credit score and are weighed higher than your gross transactions. Numerous credit score raising hacks, such as taking out another credit card (or loan), could cause your credit score to rise, but the benefits are short-term. Additionally, new credit transactions are constantly revolving and are updated within 30-day cycles.
Your Credit Mix is the assortment of your gross credit (or lending history) and accounts for 10% of your gross score. Your credit mix is scored by the number of various kinds of credit you have outstanding and used during the past. Car Loans, Student Loans, Mortgages, Credit Cards, and any other formal lending would add to this score.
Repair Your Credit Instantly
Negative credit report entries contain delinquencies, late payments, overdrafts, charge-offs and a diversity of other negative lending practices. Furthermore, another avenue of credit repair for raising your credit score is via credit repair services that remove negative entries from your entire credit history.
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Simply fill out the form and one of our credit counseling experts will contact you. Soon, you’ll be on your way to a debt-free life!