Get everything you want...as soon as you have good credit.
In today's world you need a credit score to rent an apartment, buy a car, rent a vehicle, and in some cases open a bank account. A common problem people face is that they never get started on building their credit, so when the time comes....they have none.
Keep on reading if you want to find out how to keep and maintain your credit score.
Check Your Credit Score!
We have all heard the saying, "It's bad to check your credit", but that statement does not hold the full truth. When people warn others about checking their credit, they seem mean, "It is bad to let other people check your credit with your approval". A well intentioned phrase has turned many people ignorant to their buying power in the United States.
This article is going to outline the steps to check and maintain your credit score.
Heading #3: Why should I maintain a credit score?
Heading #1: How do I check my credit score?
There are 3 main credit bureaus to reach out to if you would like to check your credit for free, but the most user friendly way is to download the app "Experian" or visit their website.
The 3 major credit bureau's: Experian, Equifax, and TransUnion compile and sell credit reports to users who wish to inquire prospective clients.
Other companies such as FICO and Credit Karma can present subtle differences in your credit score because they collect information from other sources. These companies use formula based scoring models and equations to provide their credit scores.
If you have a bank account open with a major institution they might provide a free credit check on your mobile app or online banking system.
Experian is user friendly and allows you to check your credit for free at any time. On the app you will be able to see all reported activity along with past employment history and rental history. The app will also provide credit cards that are currently available to you. This is a great way to start building your credit.
Heading #2: How do I increase my credit?
The first step to increase your credit is to make sure you have a credit score. Many people make the mistake of believing that if they apply for a credit card they will get approved. You might have a good history of paying your bills, but there is no official record proving it to these credit bureaus.
If you have no credit score, do not start by applying for a new line of credit, try these steps instead:
Apply for a debit backed line of credit (secured credit) through the offers given to you on Experian. This means the amount of open credit you have is the amount you have put down as a "security deposit".
Reach out to a trusted individual with a good credit score and ask them if you can become an authorized user on their line of credit that has been open for the longest time period. This card will need to be active and paid off each month regularly in order to start appearing on your credit history. This method can take up to 45 days.
Set up a joint account or get a loan with a co-signer with good credit - once the loan is paid off your credit will drop so do not pay off the loan right away. Use the time frame given to pay off the loan to find other sources of credit.
Make sure to only utilize 30% of your available credit. This shows credit bureaus that you are responsible and it will prevent you from getting a decrease on your score each month.
If you are looking at increasing your credit score after already being approved for a credit card, ask for an increase in your credit limit.
Do not apply for multiple cards after receiving a rejection notice, when companies check your credit these hard inquiries stay on your account for 2 - 4 years. Applying for too many credit cards makes people look risky and loan companies are less likely to loan you money.
Do not close out any open lines of credit. If you do not want to have a credit card anymore just lock the card or stop using it. If you close a credit card you will receive a decrease in your score and they might charge you a fee. Having a high available credit limit is a good sign to potential loan companies. It reflects on your account that others find you trustworthy.
The other methods of increasing your credit score involve compiling a list of accounts that you are financially responsible for. These accounts should entail your utilities, internet, streaming subscriptions, etc. After you have this list of accounts view your payment history and identify the accounts that have no lapses in payment for the longest period of time. If you pay your rent online then you might also be eligible for "Experian Boost". This program is free to use and can boost your credit an average of +13 points. The program will evaluate 2 years of payment history for bills with at least 3 payments in the last 6 months. Make sure that the name on your account matches your Experian account.
Types of Accounts you might be Financially Responsible for:
Mobile / Landline Phone
Internet
Cable & Satellite
Gas & Electricity
Residential Rent through Online Payments (excluding Paypal, Venmo, Zelle)
Video Streaming Services (Netflix, Disney +, HBO, Hulu)
Water
Power and Solar
Trash
Another method to utilize in order to increase your credit score is to diversify your credit report. There are different forms of credit to apply for such as: Retail Credit, Installment Credit and Real Estate. Retail credit is offered to you when making purchases at places such as Macy's, JCPenny, Sam's Club, Costco, or Best Buy. These are great companies to get a credit card from due to the perks and benefits. Be aware that these credit cards often come with annual fees and restrictions, but the everyday discounts might outweigh those costs. Installment credit is reported on your credit when you apply for a loan for a new or used vehicle and you pay a monthly fee instead of the entire cost of the vehicle. This type of installment credit can also come from purchasing a bedroom set if the company offers it, they will ask to check your credit to see if you qualify.
I saved these methods for last because of how obvious they are. Have you ever heard of decreasing your debt? There are 2 ways to decrease the amount of debt reported on your account. The most useful way is to dispute any charges that might be appearing on your report that has already been paid.
How to verify information on your account:
1.) Download Experian
2.) Click on Reports
3.) Click on Summary
4.) Verify Personal Information (addresses and employers)
5.) If you have a settled account appearing on your report you will need to click on "Dispute". The contact information for the companies will be listed on the summary page and you will be able to reach out directly after submitting the dispute. In order to complete this task you will need to obtain your proof of payment from your bank statements.
There are laws that prevent debt collectors from being able to collect money from people after a certain amount of years have passed. Check to see if the laws in your state have a statute of limitations for credit card debt. If the date for collecting payment has passed then dispute the charge and tell them to remove it from your report. Make sure to quote the statute of limitations in your dispute. A statute is the another term for a state law and a limitation is usually identified as a time frame. If you have an account that has been sent to collections, look up in your "County Clerk of Court" records to see if a lawsuit from the collection agency has been filed against you. If such a suit exists make sure to write a response asking the agency if they have all the signatures identifying the individual who made the purchases. Collection agencies purchase debt from your original loan holders after a certain amount of time has passed due to non-payment or delinquency. Don't forget to ask the collection agency to prove that they bought your debt from the original loan holders. Wait to see if the collection agency response with the requested information. If they do not provide the information ask the court to dismiss the case with Prejudice. This means they may be able to file another lawsuit against you in states which you have lived prior.
Finally, the last way to increase your credit score is to make payments towards your debt. Call the companies that are seeking payment and ask for an installment plan. Set up automatic payments and slowly pay off your debt.
Paying down debt can be tricky, but there are ways to complete this effectively. Try contacting the company and set up a payment plan with the lowest possible payment. Companies are happy when they are able to finally get the money they are owed so they will be more than happy to accommodate a payment plan. Even hospital bills can be negotiated into payment plans!
Heading #3: Why should I maintain a credit score?
Many people think that having a credit card is risky and therefore they do not see the usefulness of having an open line of credit. This section is to outline the benefits of having a credit score.
Most property management companies are moving towards an online system which utilizes Experian, TransUnion or Equifax as part of their application process. In order to rent from these companies you need to prove that you are financially responsible enough to make payments. If you haven't rented for a long time or haven't had the need to due to living with family, you will find out that most companies require a 550 or above minimum. A good credit score takes 2 years to build. With the rising cost of rent most people are finding out that the price of a mortgage on a home is less than rent. In order to be pre-approved for a loan to buy a home you need a 650 credit score or more. Having no credit will make it impossible for you to borrow money from the bank. In order to buy a home you also need two years of consistent income in the same industry. Most people would say that they don't want a home they'd rather rent than have that type of debt attached to them. A home loan should not be viewed as a debt, but rather it is an asset. At any point you can refinance your home loan and take cash out to finance other expenditures. You can put the house up for collateral which means you are backing another loan with your home. Lenders identify this as a secured loan, because if you cannot pay them pack they can then have what you offered up as collateral. If you get approved for a home loan worth $250,000 if you ever want to sell it for $300,000 you can make $50,000. For some people that is a whole year worth of pay. If you rent you are helping someone else pay their mortgage when you could be investing in yourself. Maintaining good credit can also help you each month if you are paid on a bi-weekly basis. Being approved for a credit card allows you to spend money you do not have at the time. It is important to make sure you don't spend over the amount you make, but if you do there are credit cards that charge you no interest for 12 months (best buy). Other cards have different term limits and require you to pay a minimum balance each month in order for you to catch up on your payments. You do not need a credit card to have a credit score. If you are worried about the financial responsibility and discipline aspects of maintaining a line of credit then you might want to opt for an installment credit line in order to maintain your credit score. For both revolving credit and installment credit you are able to set spending limits and receive notifications to track/limit spending. If those reasons aren't enough I have one last reason for you. If you want to open up a bank account you need a credit score. Right now there are only a few banks that are requiring this so there are still more options available, but in 2 years anything can change and if you haven't started you might not be eligible when you need it. Having a bank account is important for making purchases and securing your money because most establishments are no longer accepting cash. The world is changing and it's important to get ahead of the curve while you can.
I hope you enjoyed this article, check back weekly for more lifestyle articles.
Jacquelin Rothwell
Rothwell USA
Rothwell.USA@gmail.com
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