Even Heroes Need Credit Protection
It can be hard for military families to maintain good credit scores because of the constant moving, changes in their jobs, international deployments, and inconsistent income for military spouses. While these things can all make it challenging to maintain high credit, military families are also afforded other advantages that can help solve that issue.
Steer Clear of Bad Debt
Steering clear of bad debt is the best thing you can do to begin boosting your credit for anybody. Bad debt is just any debt that costs a lot of money in interest with minimal return. So, credit card companies and payday loans that charge high interest rates and don’t offer any return other than that short-term loan are perfect examples of bad debt.
While some people may claim that all debt is bad debt, that is not always the case. Mortgages and student loans can be beneficial for you in the long-term, as long as they charge lower interest rates, because they give you something in return. Paying these debts off every month can also help improve your credit! Credit card debt, however, lowers your credit score. Keeping that balance at zero is ideal because it is expensive to have credit card debt and it hurts your credit. Avoiding bad debt like this from day one will benefit you in the long run.
Look for Military Credit and Loan Benefits
For military personnel deployed overseas, there are regulations in place that dismiss all annual credit card fees. The Department of Veteran Affairs also offers VA Mortgage loans for the families of those with a military member on tour outside of the United States. VA Mortgage Loans are loans backed by the government that offer military families mortgage loans with lower interest rates, sometimes even if they have lower credit scores. The Servicemembers Civil Relief Act also offers help for military families through restricting fees, terms, and interest rates for things like home rentals, auto loans, credit cards, and mortgages.
All of these tools don’t necessarily benefit your credit score in a direct way, but they do improve your general financial position. By doing this, you now have the ability to raise your credit score through other means, for example, reducing your bad debt. That gives you more flexibility with your finances and thus the ability to manage your credit more successfully.
Find Military Friendly Bank Accounts and Credit Unions
USAA is a perfect example of a financial institution made for military families. To even join USAA, you have to be active in the military, a veteran, or the child of a veteran. There are other institutions that offer benefits for military families as well, though. US News and World Report claims that these are the top ten banks and credit unions for military families:
- Navy Federal Credit Union
- Arkansas Federal Credit Union
- Andrews Federal Credit Union
- Randolph-Brooks Federal Credit Union
- Fort Knox Federal Credit Union
- USAA Federal Savings Bank
- Langley Federal Credit Union
- First Citizens Bank and Trust Company
- Tyndall Credit Union
- Air Force Federal Credit Union
It is a misconception that you have to live near a branch of one of these institutions to utilize their advantages. Most of the time, you can join while even living across the country to receive the benefits they offer for military families.
Locate Other Organizations Specifically for Financial Help
There are many free resources and organizations set up to help military families with their credit and finances, especially if you live next to a military base. Many of the organizations help both those in active duty service and veterans. Here are some examples of organization to contact if you want some financial assistance:
- American Military Family
- Coast Guard Mutual Assistance
- American Red Cross
- Veterans of Foreign Wars Unmet Needs Program
- Navy-Marine Corps Relief Society
- Air Force Aid Society
- Operation Homefront
- Army Emergency Relief
The best thing you can do is take steps now to protect your financial future. Building and fixing credit can take a long time to do, so taking advantage of all the opportunities offered to military families early on can help set you up for financial success in the long run.
Who Uses Your Credit Information?
As a consumer, you are probably well aware that lenders often use your credit information for various reasons. Whether you are renting an apartment or buying a car, you can pretty much always expect your credit to be checked, but did you know that there a many other companies that have access to your credit report? Collection agencies are amongst the most popular types of companies to do this without your consent.
Collection Agencies and Your Credit Report
A collection agency is an organization that specializes in collecting an individual’s or a business’s debt. They use your credit report for two reasons. The first is skip tracing. Skip tracing is how collection agencies find those difficult to locate consumers. They use credit reports to find those consumers because your credit report lists your current and all of your former addresses. This makes it easy for debt collectors to locate you.
The second reason a collection agency might want to view your credit report is to see what you can afford. Viewing your entire credit report can help debt collectors decide if you would be able to pay off your debt or not. They can also use your credit report to go as far as to decide whether or not to sue you.
Collection Agencies and Your Credit Score
Your credit score is a good indicator of your ability to pay, and your collection score is a special type of credit score that relates specifically to being able to pay back debt. If you have a collection score that indicates you would most likely be able to pay your debt, then a collection agency will put forth more time and energy into trying to collect your debt versus someone with a worse collection score.
Anytime your credit is pulled, regardless of who does it, a record of the access, or an inquiry, is posted. There are, however, two different types of inquiries. A soft inquiry occurs when you pull your own credit report just to review it. These do no harm to your credit score. A hard inquiry, though, can negatively affect your score. Those occur when your credit is being checked by a lender. Unfortunately, inquiries from collection agencies can be either, meaning there is a chance your score could be damaged if a hard inquiry is posted.
Knowing that collection agencies can check your credit information without your consent can be frustrating. It might even prompt you to question whether or not it is legal for collection agencies to do this. Well, the short answer is yes, it is legal.
As long as the collection agency uses your credit information to help with their debt collection, then it is fair game for them to pull it. The Fair Credit Reporting Act (FCRA) states that any consumer reporting agency can access consumer reports if they have reason to believe they can use that information to collect debt, thus establishing the official legality of the collection agencies accessing your credit information.
Who is Looking at Your Credit Report?
As a consumer, you expect lenders to check your credit report when you apply for a loan. But did you know lenders are not the only companies looking at your credit report? Even when you aren’t trying to borrow money, other companies will still pull your credit for various reasons.
The Fair Credit Reporting Act makes it possible for credit companies to release your credit information to your potential employers. They would do this as a part of your background check. Employers must get your written permission before pulling your credit report, but if you decline, the Federal Trade Commission gives the employer the right to turn down your application immediately.
When you sign up for water, electricity, or gas, there is a chance you will be asked to submit a credit check. This is because you pay your utility bill after having already used those utilities, which means the utility company is essentially giving you a short-term loan. You have to pay for the water, electricity, or gas you used last month by a certain date, so if your credit score is lower, then the utility company might decide to charge you a deposit beforehand.
Oftentimes, when you are looking for an apartment, the landlord will ask for your credit information. They do this to see how likely you would be to pay your rent on time based on your past financial behavior. Depending on how low your score is, you could be asked to pay a higher amount for your security deposit or even get rejected by the landlord altogether.
Credit Card Companies
Credit card companies will probably check your credit when you apply for a card, but the Consumer Financial Protection Bureau says that they can also look at your credit at any time once you are their official customer. These creditors will do this in order to prescreen you and decide whether they should offer a new card to you or not. This is legal under the federal law: The Fair Credit Reporting Act, but you do have the option to refuse this prescreening.
According to the Consumer Financial Protection Bureau, The Fair Credit Reporting Act makes it possible for credit reporting companies to release your credit information if it is to offer insurance coverage or set a premium charge for insurance. Just like the credit card companies, insurance companies will also use your credit to offer you insurance deals through prescreening. You can decline this prescreening process for the insurance companies as well.
If you are looking for television, internet, or phone service, then your credit will most likely be pulled by those providers. This is just for those providers to check and assess the likelihood of you paying your bill for their service.
Nursing Homes and Assisted Living Facilities
Nursing homes and assisted living facilities operate like apartment building when it comes to your credit score. They will often check your credit to make sure you are financially responsible enough to live in their facility, especially considering that it can be expensive to live in a nursing home or assisted living facility.
Government Agencies and Courts
The Fair Credit Reporting Act allows credit reporting agencies to release your credit information for three reasons. The first is in response to a court order, the second is in response to a subpoena, and the third is for child support and enforcement purposes. The government also has the right to check your credit if you apply for government assistance in order to see if you actually qualify for it or not.
What is Freezing Your Credit and Should You Do It?
Freezing your credit prevents lenders from seeing your credit reports. It can be a beneficial thing to do for many reasons and, thankfully, it is now free due to congressional action following the Equifax breach. Freezing your credit is important to prevent a data breach and protect your credit. Is it an extra step to prevent your credit information from being used wrongfully. So, if somebody were to apply for credit in your name, then the lender would not be able to access your credit because it is frozen, and thus would not be able to approve the loan.
You may be asking if this process is complicated or worth it. Well, it is as easy as picking up the phone. You can easily freeze your credit online or over the phone, as well as unfreeze it when you need to apply for credit yourself. You can even set up a short period of time to lift the freeze temporarily if you know when you’re going to be applying or looking for a credit loan.
Another good thing about freezing your credit is that it will not affect your credit score. So, you can do it whenever you need. Parents can even do it for their children to help protect their credit for them.
Freezing your credit cannot protect against all forms of identity theft
If somebody has access to your existing credit card information, or if they have your social security number, then you are still at risk for identity theft. So, even if you freeze your credit, you still need to monitor all of your finances and make sure there is no fraudulent activity.
Debt collectors and lenders you have been borrowing from previously can also still see your credit information even if it is frozen. So, freezing your credit does not block everybody from viewing your credit, but it can still be very beneficial in protecting your credit.
Fico Score: The Score Lenders Use
FICO scores were created in order to help lenders make faster, more efficient decisions when it comes to determining a consumer’s risk. Understanding how FICO scores work may seem difficult at first, but there are a couple of factors that end up determining the score you are given. If your number is higher on the 300-850 scale, then you are considered a less risky consumer. Typically, a score above the mid 700s is ideal for a lender.
If your credit score did not exist, then lenders would have to pull your credit report and spend hours looking it over to decide your lending risk. With a credit score, lenders can essentially see an accurate depiction of what is in your report by just analyzing a single number. To create that number, companies like FICO take the financial information from your credit score and use a mathematical model to forecast your lending risk. There are many factors that go into this model.
Your payment history makes up 35 percent of your credit score because it is so important. This is because the lender would expect you to continue the same payment habits you have exemplified in the past, preferably over many years. If you do not have a long payment history, then you are more likely to be judged by a single mistake.
If multiple years ago you accidentally paid a bill late, but your payment history has been of high quality since, then a lender most likely would not penalize you for that mistake. But, if you made a mistake more recently, then a lender would have to question what might have changed in your life to cause that mistake, and if it is possible that this mistake could turn into a trend. So, even one missed payment can drop your score for that reason, and if you pay late habitually, then your credit score would drop even lower and you would be considered extremely risky.
Your credit utilization ratio is the amount you owe in comparison to the total line of credit you have borrowed. This ratio accounts for 30 percent of your FICO score. This means that if you were to charge a lot of money every month, but also pay your balance completely, then your ratio would indicate that you are not a risky borrower as that information would show up on your credit report. But if you were to max out all of your credit cards, then your credit utilization rate would be much worse. Even if you made each payment on time, it would not be too difficult for a lender to worry about your ability to take on another line of credit and make those payments on top of your current payments. So, high debts can cause your FICO score to be lower.
The Length of Your Credit History
Making up 15 percent of your FICO score, the length of your credit history is also important. The longer your credit history, the more a lender can predict about your future behavior. So, if you have a payment history consisting of many years of on time payments and low debt, then a lender could assume that this good behavior will continue. On the other hand, if your credit history is short, meaning you just began building it, then lenders could be skeptical about your risk as a borrower. They cannot make a reliable decision without enough history to support that decision. The good news is that it often only takes one or two years of healthy credit use for lenders to begin trusting you.
The Types of Credit You Use
If you have proven that you can make payments on not only one type of credit loan, but many, then you will be considered more trustworthy to lenders. For example, if you responsibly handle all of your credit cards, student loan debt, mortgage, and car loans, then you have proven that you can most likely handle multiple lines of credit at once. This category is not as important as some of the others when determining your FICO score, but it still does effect it by 10 percent.
The more you ask for loans, the lower your score can drop. Even if you have a trustworthy history of paying your credit debt off, asking for loans often will still hurt you. Lenders see this as concerning because they assume something is wrong in your life and that it is what is causing you to need more money so often. While this may not be true, it is enough to deter lenders from loaning you money. Lenders can see how often you ask for credit because each time you do, the bank or lender notifies the credit reporting agencies and a hard inquiry gets put on your credit report. This category also makes up 10 percent of your FICO score, which, again is not a huge portion of your score, but it is enough to raise concern if something is wrong.
How to boost your credit score.
When your credit score is not good enough to receive a loan, you might ask yourself what you can do to raise it, and how to do it quickly. Well, depending on why your credit is too low, you might have a few options. For instance, if you just have some credit card debt and that is what is hurting your score, then you definitely have more options than someone who has default accounts. Overall, there are multiple different ways to go about fixing your credit that can help you get a loan more quickly.
Pay Down Your Credit Card Debt
Your credit utilization ratio is the amount you owe on your card in relation to the limit on your credit card. The lower this ratio is for you, the better your credit will be. FICO even states that consumers with the best scores use an average of 7 percent of their credit limits. So, paying off all or at least most of your credit card debt could significantly raise your score, and quickly too.
If you don’t have enough cash to simply pay it all off, though, you could also try transferring the debt to an installment loan or a home-equity line of credit. These types of credit do not affect your utilization ratio, and thus do not hurt your score as much. In fact, increasing the number of different types of credit you manage could even improve your score as well. It is also important to note that you should keep your credit card account open even when you are done using it. This is because, once the account is closed, that card is no longer factored into your utilization ratio, so debt on other cards would be even more harmful to your score than if the other account was still open.
Pay Your Credit Card Bill by the Statement Closing Date
Credit card issuers often report your current credit card balance on your statement due date and not the payment due date. This means that if you are paying your balance right before the payment due date, then you might not be paying it early enough to help your credit score. If you make your payment before the statement closing date, however, then your low or zero balance will show up on your credit report This date can be found directly on the statement.
Ask for a Credit Limit Raise
Most of the time, credit issuers are willing to raise your credit limit yearly. By having a higher limit without using more credit, your credit utilization ratio will improve. This will help increase your credit score. But, if a large increase is granted, your credit report may get pulled. If this happens, then you receive a hard inquiry on your report which can inevitably hurt your score.
Piggyback Off of Somebody Else’s Credit
This strategy is often used for young people with little credit history. So, a parent could add their child as a user on their credit card and then that account history would show up on the child’s credit report. This of course depends on the issuer reporting it, but they do most of the time. If the parent had great credit history, then adding their child to their credit card account could immediately impact their child’s credit in a positive way. You don’t have to be related to someone to be added to their credit card account, though. Most of the time, credit card companies will permit anybody to be added to the cardholder’s account.
Take the Negative Information Off of Your Credit Report
It is imperative that you check your credit report in order to understand what is affecting your credit score and how. You can check your credit report for free once a year from all three major agencies (Experian, TransUnion, and Equifax) at annualcreditreport.com. Removing the information that hurts your score can significantly raise your score, especially if what is hurting your score occurred within the last two years. You need to make sure none of the negative activity is fraudulent. If somebody attempted to steal your identity, then your credit could be hurt in exceptional ways. You also have to make sure no lender has reported something mistakenly. If either of these things occur, you need to take steps to remove this information immediately, either by blocking the fraudulent activity or contacting the lender who made the mistake.
You can also fight to get mistakes removed from your record. If your payment history is otherwise spotless, yet you make a mistake and accidentally make one late payment, then you can contact the biller and ask them to remove the delinquency from your account. Taking information like this off of your report could greatly help your credit score increase.
If you need a loan quickly, this option might not be the best for you, but being patient can go a long way. If you continue building a strong financial history, overtime, your credit score will go up. The further away you get from a delinquency on your credit report, the less that delinquency impacts your score. The length of your credit history actually makes up 15 percent of your credit score, so just letting time pass while acting responsibly in terms of your credit, will raise your score.
Consumers with the highest scores, typically above 800, have an average account age of at least 11 years, with their oldest account being opened 25 years prior. This means that the longer you exemplify good credit behavior, the better your score will be. Closing your cards will not hurt you score in this area because the behavior from that card will still show up on your credit report and factor into the age of your credit history for at least ten more years. Opening a new card does lower the average act of your accounts, though. So, letting time pass can greatly boost your credit score if you exemplify continuous financial responsibility
What’s the Difference and What do they do?
Historically, your credit scores were solely dependent on the information reported directly from your previous and current lenders. Fortunately, two new credit services, UltraFICO, and Experian Boost, are changing the former standard of reporting by providing consumers options that were not previously available.
How UltraFICO Works
Towards the end of 2018, FICO, Finicity, and Experian announced UltraFICO to be their new credit scoring system in a joint press release. UltraFICO was created so you now have the ability to choose whether or not your bank deposit account information is reflected in your credit score. FICO says they did this to help those consumers who manage their deposit accounts in a responsible way.
Essentially, if you are a consumer who does not bounce checks or receive multiple overdraft fees, then your credit score would be higher. On the other hand, if you bank irresponsibly, then your score will be lower.
One thing that is not commonly known is that this only impacts the newest scoring model and not all lenders use the same model. For example, most mortgage lenders use an older version, and this will not impact those models in the same way. So if you are needing to boost or improve your score to help qualify for a mortgage, proceed with caution!
This kind of system has never been seen before. Your credit score can now be directly affected by information not included in your actual credit report. This is much different from how the system has been operating. The choice to include this outside information is still optional, though. You would have to give Experian or FICO permission to access your deposit data if you wanted to take advantage of this new service, otherwise, your data will be left private. It is important to keep in mind that, while this gives you as the consumer more control over what is impacting your credit score, it also gives the credit reporting agency more of your information.
How Experian Boost Works
Boost followed in UltraFICO’s footsteps and created its own new credit service. Now, if you were to grant Experian the right to look through your online banking, like utility and phone payment data, then they would add it to your Experian credit report. This would then make it possible for FICO and VantageScore to consider this information when creating your actual credit score.
For the first time, you will now be able to add your own data and information to your credit report, whereas in previous years, all the data was added by other sources. So, if you did not have a credit card and were not building credit traditionally, you would now be able to add some scorable information to your credit report and therefore impact your score in a favorable way.
Side by Side Comparison
These two new credit scores are similar in many ways, but they do differ in some specific areas. This chart should help clear those differences up and make it easier to understand how UltraFICO and Experian Boost work in respect to each other.
HOW A CREDIT BUREAU CAN IMPACT UltraFICO Experian Boost Only Influences Experian-Based Scores YES YES Requires Consumer Permission YES YES Uses Funicity to Access Bank Account Information YES YES Considers Historical Balances and Bank Account History Itself YES NO Specifically Considers Utility and Phone Bill Payment Information NO YES Adds Information to Experian Credit REport Directly NO YES Works With FICO 8 and 9 at Experian YES YES
While you do have to be willing to give out your banking information, including usernames and passwords, these two new systems are here to change the way credit is reported. UltraFICO and Experian Boost aim to give consumers more power over how their credit is scored, which is an innovation never seen before. This seems to be what the industry is moving towards, so if you like the sound of that, then great! But if not, you still need to prepare yourself because it is coming!
The 3 Credit Reporting Companies: Equifax, Transunion, and Experian
There are three entities that your FICO scores are provided by: Experian, Transunion and Equifax. Each credit bureau reports your scores, which can sometimes vary based on the information they have. Do you wonder why your scores are so different? To ensure that the most accurate information is being given to the credit agencies, there are a few things you will want to double check when you receive a copy of your credit report. You are not alone! It is very common for consumers to have three different credit scores, however, understanding your report will help you piece together why each is so different.
Your Personal Information
The report will have important information that is specific to you. If you notice that there are other names, incorrect date of birth or incorrect address information, you may have a mixed file. If you are married, your credit report is still separate from your spouse so you each will want to check your report. Pay close attention to:
- Social Security Number
- Date of birth
- Phone number
Common names in large cities post a potential risk for mixed files. It is important to check your credit report often and look for mistakes. If you find errors, you will want to dispute this with the credit bureaus to change it. Just this small correction can make an impact on your scores. If one bureau has correct information, but the other two do not, you may notice one is higher than the other two.
This section of your credit report is used in order to verify your identity. If you are missing employer information, you can have it added although it is not likely for this to have much impact on your file.
One of the most important sections of the report is where your accounts are showing status. In this section of your credit report, you will want to look closely at the dates of when the accounts were added and reporting bureaus. You will see:
- Open accounts
- Closed accounts
- Payment history
- Dates the accounts were opened or closed (by creditor or consumer)
- Loan payment history/status
Each account you have can report to the bureaus at different times. This is another reason that you may notice a variation in the credit scores. To get the best possible scores and outcomes for major things like a home loan purchase, call your creditors and see what day they report to the bureaus. There are a many moving parts to the puzzle, but knowing when each reports will allow you to know when your scores will look the best they possibly can and then you can time it right for when a lender or bank pulls your credit.
Credit Inquiries are not what is typically impacting your credit if your scores are low. Often times, this is what clients think is causing a low FICO but in reality, negative marks in the public record section or accounts with high balances/late payments are where the score is taking a hit.
Credit Repair Attorneys Are Ready
If you need credit help, there are credit repair attorneys that can work for you to dispute items on the credit reports. Mistakes on a credit report can hinder you from buying a home, car or even qualifying for a job. Whether you think you have a mistake on your report or not, a second opinion is never bad. 79% of credit reports contain errors. Check your accounts regularly or invest in credit monitoring.
Believe it or not we live in an age where much of what goes on in our daily lives is monitored, collected and sold to interested parties. Our driving records, our medical history, our internet traffic and most importantly our credit information. Which can make you vulnerable to identity theft or a mistake on your credit report, that could cost you money. These mistakes can increase the interest you pay on your loans, prevent you from getting a mortgage, buy a car, landing a job or getting a security clearance. A government study indicates as many as 40 million Americans have a mistake on their credit report. Twenty million Americans have significant mistakes and the credit reporting industry shows that those mistakes can be nearly impossible to get removed from your record.
Consumer Credit Reporting
Consumer credit reporting is a four billion dollar a year industry dominated by three large companies Experian, TransUnion, Equifax. They keep files on 200 million Americans in traffic and our financial reputations. They make their money gathering information from people we do business with and sells it to banks, merchants, insurance companies and employers. These businesses use it to make judgments about our credit worthiness and reliability.
But now the reliability of the industry is being questioned by the Federal Trade Commission. John Liebowitz served as FTC chairman says “One out of five Americans has an error on their credit report and one out of ten has an error on their credit report and because of these mistakes Americans credit scores might be lower as a result”.
Close your eyes for a minute and trying to think of another industry where a 20 percent error rate would be acceptable. Maybe weather men and woman are the only ones that you were more than likely able to come up with. Even then, you want to make sure you remind them that they were wrong because they ruined your plans. The same applies to your credit report.
Errors On Your Credit Report
These errors are clear violations of the Fair Credit Reporting Act which performance based credit repair companies can take care of for you, that monthly credit repair companies just can’t. Performance based credit repair companies like Credit Law Center uses those mistakes as leverage to get their clients results faster, without dragging out the process to simply collect as much money as they can get.
These banks, merchants and debt collectors have a legal responsibility to make sure that the information is accurate. The federal law says that if you believe that there is a mistake you can go to them and they have an obligation to do a reasonable investigation. Let’s face it, they are not doing a reasonable investigation.
Disputing Your Credit Report
Eight million people a year file disputes about their credit report, which usually requires a visit to the Experian, TransUnion or Equifax websites. Those sites are primarily designed to sell you premium products, not resolve a dispute. There’s a toll free number you can call which is likely to connect you to someone on a faraway continent.
Besides the toll free number, they also give you a post office box address where you can send a letter and documents supporting your claim in each case. It’s extremely unlikely that anyone with the authority to resolve your dispute will ever actually see it. Usually if you challenge your credit report and mail your information to a post office box in the United States, the dispute will likely be investigated in India, Philippines or South America.
Then your dispute will be sent with a two or three line summary and no documentation back to the bank,merchant, or debt collector that furnished the original information. If there was a difference of opinion between the creditor and the person who was filing the complaint. The bureaus usually resolve it in favor of the creditor. You heard correctly, the creditor was always right.
The difference between monthly and performance based credit repair
Much of what’s known about the inner workings of the consumer credit agencies come out of lawsuits filed by performance based credit repair companies like Credit Law Center who have subpoenaed company records, deposed employees and executives and say under the current system there is no way for people to get these issues resolve.
Performance based companies like Credit Law Center can get a jury verdict for hundreds if not thousands of dollars for their clients.That’s chump change for these bureaus! They would rather pay a verdict in a hundreds to thousands of dollars, than to actually go in and change the policies and procedures that they have.
What most people don’t understand is that monthly credit repair companies are limited by what they can do. Basically you are paying $65 to $100 a month to send dispute letters that are going to India, Philippines, South America or filling out the dispute on the 3 big credit bureau sites on your behalf and keeping their fingers crossed. Very little if any fighting for consumers rights are going on.or people to get their problems solved. So clients who take the time to meticulously document their case that the bill isn’t theirs or the bill has been paid, have sometimes not only got the items deleted but also has received a check from the bank, merchant or collector for damages.
How Do Inquiries Impact My Score?
One of the common misconceptions about a credit score is that inquiries have a major role in the score. If you have looked at your credit score recently and feel that there are not many dings to the report that would cause your score to be low, take a few things into consideration first:
- Do you have two or more revolving lines of credit? If so, are these accounts at or below 30% of the limit?
- Now, are there any collections, charge-offs or other accounts that are in a negative standing? You’ll want to have these removed from the report.
- Lastly, do you have incorrect or inaccurate contact information on your credit report i.e addresses, names, etc?
All of the above scenarios should be looked at before jumping to what your inquiries look like.
One Too Many Inquiries
If you have been credit card or car shopping lately, you may notice a multitude of inquiries on your credit report. It is very common for a dealership to throw your information into their system to see if they can find you a low interest rate at a great loan term so they can sell you the car on their lot.
Understanding how this impacts your score allows you to walk into each situation prepared and knowledgeable. Whether you are applying for a new credit card or a car note a few things.
- When shopping for a car, research a Credit Union you could get a loan through, rather than the dealership financing option
- Know your credit score
- Don’t apply for credit when you don’t need it
Each time you apply or allow someone to check your credit score, you are allowing them to apply another hit to your credit profile.
The best rule of thumb for inquiries is no more than 10 “pulls” on your credit over a 12 month period.
Once you start running into more inquiries than this, your credit score will start to be impacted by them. Again, applying for unnecessary credit lines will start to impact you in a negative way.
I Have Been Denied Credit
If you have run into issues of hoping to start building credit, but have been denied credit cards over and over, there are a few options you have. Applying or inquiring for more and more credit is not helping your scores. You can try a few other options such as:
- Applying for a Secured Credit Card
- CD Builder Loans
- Second Chance Checking
You can look for other options for credit cards here
What My Credit Score Says
Your credit score tells a lender the likelihood of you to default on a loan in the next 12 months. Credit demonstrates your trustworthiness to pay your bills and loans on time. Keeping this in mind, it is easier to understand what your credit report says about you as a borrower.
If you have late payments, this impacts your score significantly.