credit report

How to Dispute Mistakes On Your Credit Report

Holly Johnson — Wed, 01 Jun 2022 22:46:07 +0000

There are several obvious reasons to give a hoot about your credit score, and very few reasons you should ignore it. After all, you'll need a good credit score and a solid credit history if you ever plan to purchase a home or take out an auto loan. A bad credit score can even come back to bite you if you want to rent an apartment or apply for certain jobs.

But your score isn't the only detail you need to pay attention to. You also need to keep an eye on your credit report — the document that lists your formal credit history including any accounts you have open, balances due, and payments you've made.

Your report and your score are intricately intertwined. If bad information gets on your credit report due to fraud or misreporting, this can easily cause your credit score to nosedive. Likewise, a clear credit report with nothing but true (and positive) information can help your credit score reach greater heights.

That's why, every single year, you should get a free copy of your credit report from all three credit reporting agencies — Experian, Equifax, and TransUnion. Fortunately, this part is easy to accomplish via AnnualCreditReport.com.

How to dispute information on your credit report

Once you have a copy of your credit report from all three bureaus, you'll want to look over all the details to make sure they're correct. Incorrect information you might notice on your report may include:

Errors regarding your name or personal information
Accounts that aren't even yours
Accounts belonging to someone with a name that is similar to yours
Closed accounts that are reported as open
Incorrectly reported late payments
Accounts listed more than once
Incorrect balances on accounts
Incorrect credit limits on accounts

Thanks to the Fair Credit Reporting Act (FCRA), both the credit bureau and whoever is providing them with information are responsible for correcting misinformation on your credit report. This means that, if a specific retailer or bank is reporting an account that isn't yours or an incorrect balance, both the credit bureau and the retailer or bank have to work together to make things right.

If you find an error, here are the steps you should take right away:

Inform the credit bureau with the incorrect information of the mistake

The first step you should take is informing the credit reporting agency of their error, keeping in mind that it's possible not all the credit bureaus will have the same information. You should let them know about the mistake in writing, taking special care to list important details about the mistake with proper documentation. The Federal Trade Commission (FTC) even offers a sample letter you can use if you need help.

Note that credit bureaus usually have 30 days to investigate your claim and they are required to get back to you with a response. They are also required to forward the information you sent them to the provider who shared the information with them in the first place.

Inform whoever provided the information of the mistake

You'll also want to provide the company reporting the incorrect information with copies of any documentation that prove an error has occurred. Make sure to include all details required to prove your claim along with copies of documentation that backs you up. The FTC offers another sample dispute letter you can use for this instance.

Watch for your credit report to be updated

Generally speaking, credit reporting agencies are required to inform you in writing of the results of your case. They are also legally required to give you another free copy of your credit report if your dispute caused a permanent change.

You also have the option to ask the credit bureau to send notices of any corrections to anyone who has requested your credit report within the last six months. You can even have an updated copy sent to anyone who has asked for a modified version of your credit report for reasons regarding employment.

Caring about your credit

While the steps above may sound tedious, it's crucial to understand the damage incorrect information on your credit report can do. If you have inaccurate late payments on your report, for example, you could see your credit score plummet through no fault of your own. And if there are accounts on your credit report that aren't even yours, that could signify a much larger problem, such as outright identity theft.

Fortunately, the small amount of time required to dispute an item on your credit report really can pay off in a big way. After all, any negative information you manage to get wiped clean should immediately stop dragging your score down.

However, you should also note that you'll only be able to get false negative information removed from your credit reports. Any damaging information that's true will have to linger on your report until enough time has passed. Generally speaking, negative information and reporting can remain on your credit report for up to seven years and bankruptcy can stay on your report for 10 years.

The bottom line

Errors happen all the time, and they may never be uncovered if you don't find them yourself. In addition to staying on top of your credit reports, it can help to sign up for a free service that gives you updates on new accounts in your name or fluctuations in your credit score. CreditKarma.com and CreditSesame.com are two that offer a similar free service with these features, so they are both worth checking out.

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This article is from Holly Johnson of Wise Bread, an award-winning personal finance and credit card comparison website. Read more great articles from Wise Bread:

Someone Took Out a Loan in Your Name. Now What?

Kat Tretina — Wed, 14 Apr 2021 20:33:27 +0000

Identity theft wears many different faces. From credit cards to student loans, thieves can open different forms of credit in your name and just like that, destroy your credit history and financial standing.

If this happens to you, getting the situation fixed can be difficult and time-consuming. But you can set things right.

If someone took out a loan in your name, it's important to take action right away to prevent further damage to your credit. Follow these steps to protect yourself and get rid of the fraudulent accounts.

1. File a police report

The first thing you should do is file a police report with your local police department. You might be able to do this online. In many cases, you will be required to submit a police report documenting the theft in order for lenders to remove the fraudulent loans from your account. (See also: 9 Signs Your Identity Was Stolen)

2. Contact the lender

If someone took out a loan or opened a credit card in your name, contact the lender or credit card company directly to notify them of the fraudulent account and to have it removed from your credit report. For credit cards and even personal loans, the problem can usually be resolved quickly.

When it comes to student loans, identity theft can have huge consequences for the victim. Failure to pay a student loan can result in wage garnishment, a suspended license, or the government seizing your tax refund — so it's critical that you cut any fraudulent activity off at the pass and get the loans discharged quickly.

In general, you'll need to contact the lender who issued the student loan and provide them with a police report. The lender will also ask you to complete an identity theft report. While your application for discharge is under review, you aren't held responsible for payments.

If you have private student loans, the process is similar. Each lender has their own process for handling student loan identity theft. However, you typically will be asked to submit a police report as proof, and the lender will do an investigation.

3. Notify the school, if necessary

If someone took out student loans in your name, contact the school the thief used to take out the loans. Call their financial aid or registrar's office and explain that a student there took out loans under your name. They can flag the account in their system and prevent someone from taking out any more loans with your information. (See also: How to Protect Your Child From Identity Theft)

4. Dispute the errors with the credit bureaus

When you find evidence of fraudulent activity, you need to dispute the errors with each of the three credit reporting agencies: Experian, Equifax, and TransUnion. You should contact each one and submit evidence, such as your police report or a letter from the lender acknowledging the occurrence of identity theft. Once the credit reporting bureau has that information, they can remove the accounts from your credit history.

If your credit score took a hit due to thieves defaulting on your loans, getting them removed can help improve your score. It can take weeks or even months for your score to fully recover, but it will eventually be restored to its previous level. (See also: Don't Panic: Do This If Your Identity Gets Stolen)

5. Place a fraud alert or freeze on your credit report

As soon as you find out you're the victim of a fraudulent loan, place a fraud alert on your credit report with one of the three credit reporting agencies. You can do so online:

When you place a fraud alert on your account, potential creditors or lenders will receive a notification when they run your credit. The alert prompts them to take additional steps to verify your identity before issuing a loan or form of credit in your name. (See also: How to Get a Free Fraud Alert on Your Credit Report)

In some cases, it might be a good idea to freeze your credit. With a credit freeze, creditors cannot view your credit report or issue you new credit unless you remove the freeze.

6. Check your credit report regularly

Finally, check your credit report regularly to ensure no new accounts are opened in your name. You can request a free report from each of the three credit reporting agencies once a year at AnnualCreditReport.com. You can stagger the reports so you take out one every four months, helping you keep a close eye on account activity throughout the year. (See also: How to Read a Credit Report)

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This article is from Kat Tretina of Wise Bread, an award-winning personal finance and credit card comparison website. Read more great articles from Wise Bread:

4 Steps to Simplify Car Shopping in the New Year

Rod Griffin — Sat, 11 Jan 2020 03:03:53 +0000

The new year can be an opportune time to start looking for a new, or new-to-you car, as dealerships look to clear out previous model years. But shopping for a car isn't always as simple as showing up on the lot. There are a lot of decisions to be made between now and walking into the dealership: make and model, new or used, preferred features, type of financing to use, and the list goes on.

Before making that type of significant purchase, it's best to have a plan. Here are four steps to keep you focused and protect your financial health as you prepare to make your next vehicle purchase.

Step 1: Set a budget

Before you even begin to browse cars, it's vital to set a budget. One of the best ways to do this is to create a list that differentiates between your wants and needs in a car. If you're a commuter, you likely need fuel-efficiency, and while you may want the latest technology, like Bluetooth, it's not a necessity. Outlining your "must haves" can give you more control as you begin looking at costs, as you already know which items you're willing to forgo if it saves money.

As you look at different models, stick to cars your budget can handle, even if there was a sudden change in your financial situation, such as a job loss. The average new vehicle loan amount was $32,480 in the third quarter of 2019, according to Experian, while the average new car payment was $550. These amounts can give you a baseline as you look at your own budget to identify the total amount you feel comfortable borrowing, as well as how much of a monthly payment you can handle. (See also: 7 Easy Ways to Calculate Your New Car Budget)

Step 2: Ensure your credit is in good shape

About three to six months before you start seriously shopping for cars, make sure your credit is in good shape. Continue to pay your bills on time, and request a free credit report through Experian or by visiting annualcreditreport.com to check for fraudulent activity and to ensure all information is accurate.

Additionally, use the tools available to improve your credit, like Experian Boost before you hit the car lots. Experian Boost can increase your credit score instantly, and it gives lenders a more complete picture of your financial history, and your ability to pay off debt by looking at your on-time utility and telecom payments. (See also: 6 Money Moves to Make the Moment You Decide to Buy a Car)

Step 3: Shop around for the best loan options

More than 85 percent of new vehicles and 55 percent of used vehicles are financed. But financing isn't limited to a single type of lender. In addition to loan options offered at a dealership, it's a good idea to shop around for loans to see who has the best terms and rates available. Just because you put in an inquiry at one bank doesn't mean you can't look at another, but also consider looking at credit unions and traditional finance companies to find the best deal for your situation.

This is one area where your credit score can make a significant difference in what rates you're offered — the average interest rate for new vehicles for consumers who are in the "prime" credit tier is 4.21 percent, whereas for consumers in the "subprime" credit tier, it is 14.06 percent.

You can shop for a car loan without worrying about your credit score. Inquiries for auto loans are either counted as only one inquiry when they occur within a 30-day period, or may be excluded entirely from the calculation.

Step 4: If shopping for a used vehicle, get a vehicle history report

It's not surprising that buying a used car can be a significant cost savings. In fact, at $20,446, the average used vehicle loan last quarter was about $12,000 less than financing a new vehicle. When financing, that can mean significant savings in the amount of interest you'll pay over the term of your loan.

However, it's important to go into a used car purchase fully informed, so be sure to request a vehicle history report, like an AutoCheck report, before committing to the purchase. These reports include how many previous owners the vehicle had, or if there were any reported accidents. This can help you avoid surprises and give you a better idea of the value of the car. (See also: 8 Questions to Ask When Buying a Used Car)

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This article is from Rod Griffin of Wise Bread, an award-winning personal finance and credit card comparison website. Read more great articles from Wise Bread:

How Paying Attention to Detail Saves Your Finances

Tim Lemke — Wed, 17 Oct 2018 08:00:12 +0000

They say the devil is in the details. When it comes to your finances, this can certainly be true.

Each day, we have the potential to lose money simply because we aren't paying attention. We pay too much for items because we don't notice how much they cost. We lose money in fees or other charges because we don't read the fine print on documents.

We may think this lack of attention to detail costs us just a dollar here or there. But this carelessness can ultimately represent a great deal of money lost over time. Let's examine these ways that being detail-oriented can improve your financial situation.

You'll know a good deal when you see it

If you pay close attention to what items cost, you'll know when you see a good deal. Even if you are not shopping for a specific item, take time to look at its price. That way, when the time comes to make a purchase, you'll have a sense of whether you may be overpaying. If you are keenly aware of pricing, you may learn which retailers consistently have the best deals and which stores to avoid. Depending on who you buy from, you may be able to automate this process by setting up price alerts via email or text. (See also: 10 Shopping Mistakes Even Smart People Make)

You'll notice when a cashier makes a mistake

I used to work as a cashier at an office supply store, and I was not particularly great at it. At the end of the day, I often learned that I had made mistakes when giving change to customers. Few customers ever noticed the errors, so it was their loss. When you pay cash at a store, be sure to count your change before you leave. Take care to remember which bills you used to pay. If the math doesn't make sense to you, don't be afraid to let the cashier know. In addition, be sure to review your receipt to ensure you weren't accidentally charged more than once for an item.

You'll know whether you're paying too much to invest

When we invest, we often pay attention to prices and the basic return on investment. But do we know how much money fund managers takes out as expenses? Are we cognizant of what commissions we pay each time we trade? These costs can take away several percentage points from our overall returns, potentially costing us thousands of dollars over time. To get the maximum return on your investments, it's wise to examine their overall rate of return with fees and expenses included. (See also: 4 Sneaky Investment Fees to Watch For)

You'll see the "catch" when there is one

Congratulations! Your cable company just gave you free HBO. But did you notice that it's only for three months, and then you'll be charged the full monthly fee? Is that "free" cellphone really free, or did they roll the cost into your monthly bill? Whenever a deal appears to be too good to be true, it usually is. Read the fine print on anything you sign and be aware that rarely is anything truly free. (See also: Watch Out for These 4 Sneaky Charges on Your Monthly Bills)

You'll know what's covered by insurance

Several years ago, the basement of my home flooded after our sump pump failed during a heavy rainstorm. I assumed that the damage would not be covered by insurance because I had not purchased extra flood insurance. But, in reading the fine print of my policy, I learned that there was a special provision that covered me in the event of a failed sump pump. If I had not taken the time to read the policy carefully, I may have been on the hook for thousands of dollars in renovations.

Insurance policies are complicated. You may think you're covered for certain things when you aren't. You may be covered for things you aren't aware of. Always be sure to read your policy so that when bad things happen, you feel confident that you're properly insured. And be sure to update your insurance plans if your life circumstances change. (See also: 11 Unexpected Things Covered by Homeowners Insurance)

You'll notice errors in your credit report

By law, you are permitted to get one free copy of each of your three credit reports — from TransUnion, Equifax, and Experian — every year. Even if you have no intention of borrowing something, it's good to review your credit reports when you can, because they may have incorrect information about your finances. Your credit reports may also show you've been the victim of identity theft. By conducting a detailed review of your credit reports, you can ensure that lenders have the most accurate picture of your financial situation. (See also: How to Read a Credit Report)

You'll be billed correctly

Have you ever been to the car mechanic and received a multi-page, itemized list of the work performed? Have you ever been billed by a doctor's office and seen a list of unfamiliar charges? Sometimes, bills can show a lot of charges that you weren't expecting. It's best to review these bills and identify each charge. If you don't understand something or an item seems unfamiliar, don't pay the bill until you get an explanation. You should never pay a bill without reviewing the charges first.

You know you'll be paid correctly

If you have your paycheck direct deposited in your bank account, you may not look at your pay stub regularly. But your paycheck is worth reviewing each time, just to be sure that you're being paid the correct amount. It's also important to check if taxes, 401(k) contributions, or health savings account funds are being deducted correctly. Checking paychecks is especially important for hourly or freelance workers who may have inconsistent income. (See also: Are You Withholding the Right Amount of Taxes From Your Paycheck?)

You will pay the right amount of tax

Taxes are annoying, but they are a necessary part of living in a society. And it's crucial to be organized and detail oriented when filing them. Mistakes on your taxes could end up in you paying too little tax, resulting in penalties. Or, you could end up paying too much tax if you're careless. When claiming deductions, be sure to have proper documentation to justify them so you avoid getting in trouble with the IRS.

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This article is from Tim Lemke of Wise Bread, an award-winning personal finance and credit card comparison website. Read more great articles from Wise Bread:

How to Boost Your Credit Score in Just 30 Days

Holly Johnson — Wed, 26 Sep 2018 08:00:12 +0000

Most financial experts suggest reviewing a copy of your credit report at least once a year. Luckily, doing so is fairly easy thanks to an agreement the federal government has with AnnualCreditReport.com. By signing up through this website, you can get a free copy of your credit report from all three credit reporting agencies — Experian, Equifax, and TransUnion — once a year.

According to the Federal Trade Commission (FTC), checking your credit report is the best way to find actual errors and mistakes. They even note that you could spread your free credit reports from the three agencies throughout the year so you can check for errors every few months — for example, getting your Experian report in May, your Equifax report in August, and your TransUnion report in December.

Get errors fixed immediately

By checking the details on your credit report frequently, you could discover mistakes early and before they do much damage. If you do find a mistake and get it corrected, you could also see your credit score rise at a rapid pace.

But how fast can the needle move? It really depends. Recently, I chatted with someone whose credit score surged 42 points within a month after they discovered incorrect late payments on their credit report. They took the steps outlined by the Consumer Financial Protection Bureau (CFPB) to dispute the incorrect data, then watched their score bounce back once it was removed. As the FTC notes, credit reporting agencies have 30 days to investigate disputes, which is likely why this person's score bounced back so fast.

Barry Paperno, a former consumer affairs manager for FICO and founder of the blog SpeakingofCredit.com, says that this scenario — where someone's score goes up within a matter of weeks — isn't that surprising.

Your credit score doesn't have a memory, meaning that each time it's requested, current information is used to present your score for that day. "So if you remove negative information, it's as it if never happened," Paperno said.

Whatever negative information or marks against you don't exist anymore, so they don't drag your score down. Paperno also says that, in this particular case, it's no wonder her score was 42 points lower than it should have been. Since your payment history makes up the biggest chunk of your FICO score at 35 percent, this kind of false reporting can make a bigger impact than other types.

"A late payment can cause your score to plummet," he said, adding that it depends on how recently it occurred and other information on the credit report.

While disputing information on your credit report is a smart move if something is off, this isn't a strategy that will work for everyone. You aren't going to get negative information removed from your report just for asking, says Paperno. If you dispute information that's actually right, you're just wasting everyone's time.

But if information is incorrect, such as a falsely reported late payment or an account that isn't even yours, take the steps to dispute the information with the credit reporting agency and the creditor. Disputing false information can help your credit score in a huge way.

"Accuracy is important," he says. Since your credit score is a predictor of future risk, you want to make sure everything included in your credit report is correct. The good, the bad, and the ugly — it should all be in there. Once you start watching your credit report with an eagle eye, however, you will hopefully learn how to get your credit score in the "very good" or "excellent" range and keep it there. (See also: How to Rebuild Your Credit in 8 Simple Steps)

Other ways to improve your credit score in a hurry

What else can you do to increase your credit score in a short amount of time? Paperno says looking at how your FICO score is determined can clue you in to your next steps.

Pay your bills on time

First, pay your bills on time. Paperno says you should be doing this anyway, but that this step can have the greatest impact on your score. Remember that your payment history makes up 35 percent of your FICO score, and you'll understand just how important this is if you make even one late payment.

"If you can't do that, then you're not in a position to raise your score," said Paperno. "Your goal is to get solvent."

Pay down balances

Next up, Paperno says you should pay down any credit card balances and debts you have right away. This is especially true if your credit utilization (the amounts you owe in relation to your credit limits) is over 10 percent.

"The ideal credit utilization is between one and 10 percent," said Paperno. "That's going to give you the most bang for your buck." Why? Because your credit utilization ratio makes up another 30 percent of your FICO score.

Don't open too many new credit cards

Other steps you can take to improve your credit score include refraining from opening too many new accounts, but also maintaining a good mix of different types of credit. Keeping old credit lines open — even if you're not using them — is also a good move since it can keep your utilization down and increase the average length of your credit history. (See also: 7 Easy Ways to Raise Your Credit Score This Year)

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This article is from Holly Johnson of Wise Bread, an award-winning personal finance and credit card comparison website. Read more great articles from Wise Bread:

5 Reasons You Can Be Denied for a Credit Card Even With Good Credit

Holly Johnson — Mon, 27 Aug 2018 08:00:11 +0000

When you pay your bills on time, don't max out your credit cards, and focus on building different types of credit, you're normally rewarded with a good credit score. It may take a while to get there, sure, but the recipe for good credit is mostly the same for everyone.

Your credit score may also matter more than you think, mostly due to the array of benefits that await those with good credit. Not only can very good or excellent credit (scores typically 740 or higher) help you get the best rates on a car loan or home loan, but this status may even help you score lower insurance rates.

Now, here's the bad news. Great credit doesn't guarantee you'll qualify for any loan or credit card you want. This is true even if your credit score is 850, which is the highest score anyone can achieve within the FICO base scoring method.

According to FCRA certified credit expert John Ulzheimer, this can catch people by surprise because they assume perfect credit is the ticket to all the credit they want. Not so fast. There are actually several reasons you can be denied a credit card or another type of loan even if your credit score is sky high.

1. You don't have an income

As Ulzheimer notes, the Card Act of 2009 requires card issuers to verify an applicant's income and ability to repay. For that reason, someone without money coming in may struggle to qualify for a credit card or any other type of loan.

This reason for denial is understandable since card issuers want to know they'll be paid back for any money you charge, but it may be a tough pill to swallow for people with great credit and other positive factors.

However, there's one way to sidestep this requirement if you don't earn an income but someone in your household does, says Ulzheimer. Most credit card applications ask for your "household income," even though many people may be inclined to enter their personal income. If you're a stay-at-home dad but your wife works, for example, this little detail allows you to list your household income and potentially qualify — even if you're not earning anything on your own. (See also: 6 Ways to Boost Your Partner's Bad Credit Without Risking Your Own)

2. You've had trouble with credit in the past

Let's say you have excellent credit now, but it wasn't always this way. If you had financial issues with a card issuer or lender in the past, but have repaired your credit since then, you may be denied no matter what you do.

"Credit card issuers have a really good memory," says Ulzheimer. "If you have ever discharged debt in a bankruptcy with them, they will remember — even if you have rebuilt your credit score." (See also: How to Rebuild Your Credit in 8 Simple Steps)

3. Your credit utilization is too high

Credit utilization is the second most important determinant of your credit health, making up 30% of your FICO score. The more you owe in relation to your credit limits, the more likely your score will take a hit.

Still, Ulzheimer says there is an in-between area where you can be denied a credit card with good credit simply because your utilization is high. While he wouldn't expect "someone who is highly utilized to have a super high credit score," people with respectable credit scores are denied credit all the time for this reason.

"When you owe too much, then the issuers don't want to stack more debt on top of you," says Ulzheimer. If you want access to more credit, you'll probably need to pay your balances down. (See also: The Fastest Way to Pay Off $10,000 in Credit Card Debt)

4. Your credit is just "too good"

Ultimately, there are times when people with really high credit scores can be denied credit because they are seen as unprofitable. Maybe a person hasn't carried a balance on a credit card in years and they also prepay their mortgage religiously. Or, perhaps they have a long history of only carrying a balance on extremely low rate loans, such as a car loan that comes with 0% APR due to a promotion.

"At the end of the day, card issuers are looking for consumers who are going to provide them with revenue or income — not just a good credit score," says Ulzheimer.

5. You have too many hard inquiries

There's another reason you may be denied a credit card with really good credit: too many hard inquiries. Ulzheimer says applying for too many cards within a short amount of time is seen as a bad thing since it typically means the consumer is trying to get more credit they can use or applying for rewards cards just to get the bonuses.

If you are trying to access huge amounts of credit all at once, this could look as if you want to rack up balances you never plan to repay. If you're signing up just for bonuses, on the other hand, it means you're likely to be an unprofitable customer.

That second part of the equation has become a bigger problem than it used to be over the last few years. Consumers actively pursuing new credit cards for sign-up bonuses have faced a lot more denials from different card issuers who are catching on and trying to deter this strategy.

Signing up for new rewards cards typically means "you're taking advantage of loopholes and credit card rewards with no plans to use the cards on a long-term basis," says Ulzheimer. This isn't illegal, but it does mean card issuers may not want to extend credit to you.

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6 Tools That Can Help You Boost Your Credit Score This Year

Holly Johnson — Mon, 25 Jun 2018 08:30:20 +0000

Building credit takes time and vigilance, and that's especially true if you need to repair credit problems from the past. If you have a history of late payments, debts in collections, or a bankruptcy, for example, you can't expect your credit score to fix itself.

Once the dust has settled and you're ready to get on the right track, you need to take the appropriate steps to rebuild trust and boost your FICO score month by month. Some of the best steps to take whether you're building credit from scratch or trying to fix poor credit include getting a secured credit card, making sure you pay all your bills on time, paying down your debts, and keeping your credit utilization ratio low.

Fortunately, there are some apps and online tools that can make improving your credit score easier. Some of these tools are free and easy to use, while others require a bigger commitment. If you know your credit score needs help but you need help to move it along, consider these apps and strategies.

1. Self Lender

If you need to build credit from scratch but can't yet qualify for a credit card or loan on your own, you may want to consider a "credit builder loan." To understand how these work, you need to forget about the usual notions of why you borrow money. In this case, you're only taking out a loan in order to build credit.

With a credit builder loan from Self Lender, the amount you borrow is held in an interest-bearing CD and you don't see it until the end of the loan term, which is 12—24 months. You make regular monthly payments, which are reported to the three credit reporting agencies — Experian, Equifax, and TransUnion. Once the term is complete, you'll get the funds back you paid in. In that sense, a credit builder loan is like a forced savings account.

In addition to a small administrative fee, you'll also pay interest on your loan. As an example, if you take out $1000, you'll pay $89 per month for 12 months. After 12 months you get $1000 back. That ends up being an additional $68 in interest that was paid out over the course of 12 months, plus a $12 administrative fee. That's a total cost of $80.

2. Credit Karma

If you want to improve your credit score, you need to find out what it is — and be able to track it regularly. One of the best ways to do this is by signing up for a program that offers a free estimate of your credit score every month.

Credit Karma is a service that does just that. Once you sign up for a free account, you can check your credit score whenever you want, see all your debts in one place, and monitor hard inquiries on your credit reports. You can also get information on reasons your credit score has gone up or down, and steps you can take to fix problems or avoid having your credit score drop in the future. (See also: The 5 Things With the Biggest Impact on Your Credit Score)

Finally, you can sign up for alerts that will let you know any time a new account is opened in your name. This can be helpful for avoiding identity theft.

3. Mint

Mint is a service that offers to help you manage your money so you can "get more out of your life." The website does this by offering a free credit score along with budgeting and bill-paying tools.

Once you sign up for a free account with Mint, you can see all your finances in one place, including your debts, your spending transactions, and your bills. You can also monitor your investments and use the app's tools to set budgets and find creative ways to spend less.

While many of these features are aimed at helping you control your finances and boost your net worth, having a place to monitor your debts and keep track of bills should inevitably help you improve your credit score over time.

4. Debt Snowball Calculator

If you're deep in debt and ready to dig your way out, one popular method to consider is the debt snowball method. This debt repayment scheme recommends you to first throw as much money as you can toward your smallest debt while making minimum payments on your other debts. Once you pay off the smallest debt, you move on to the next-smallest debt until all your debts are gone.

This sounds simple enough, but it's hard to map out a debt snowball plan and know how long it will take you to become debt-free without any tools. The most helpful debt snowball calculator we've found is offered via Financial Mentor. This calculator lets you enter all your debts and respective interest rates, then offers a comprehensive month-by-month plan showing exactly how much you'll pay on each debt every month.

As your debt is paid off and you continue making on-time monthly payments, your credit score should slowly rise.

5. Debitize

Debitize is an app that links your credit card with your banking account. Every time you make a credit card purchase, the service withdraws that amount from your checking account and holds it in an FDIC-insured bank account. At the end of your billing cycle, the funds are used to pay your credit card bill in full. The result is that you can use credit as if it were debit. This lets you earn credit card rewards without risking you'll charge more than you can pay off.

One of the most important factors that dictates your credit score is your credit utilization ratio — how much you owe in relation to your credit limits. Eliminating debt from your life can have a marked impact on your credit score due to the fact it will lower your utilization to zero.

With Debitize, you can avoid debt, earn rewards, and take advantage of important consumer protections offered by credit cards. Best of all, the basic version of this app is free.

6. YNAB

YNAB (You Need a Budget) is a comprehensive budgeting app that can help you pay down debt, improve your credit, and build wealth. This tool helps users create their own "zero-sum budget," which is a type of budget that requires you to give each dollar you earn a job and live off your last month's income.

This app comes with comprehensive budgeting software and tracking tools that can help you stay on top of your expenses and manage your bills. Ideally, you will use the app to become more intentional with your spending and pay down debt. As your debt decreases and your credit utilization ratio drops, you may also see an improvement to your credit score.

While you can try YNAB free for 34 days, you'll pay $6.99 per month to use the app thereafter. In exchange for the fee, you'll get automatic bank syncing, free online money workshops, support seven days a week, and debt paydown tools that can help you reach your goals faster.

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2-Minute Read: What You Need to Know About FICO Scores

Holly Johnson — Fri, 25 May 2018 08:30:30 +0000

FICO scores are the most widely used credit scores in the U.S. According to myFICO.com, 90% of the top U.S. lenders access these scores to make important credit decisions.

FICO scores range from 300 to 850, with higher scores representing better credit.

Why your FICO score is important

A FICO score considered "very good" or "exceptional" (in the 740+ range) makes it more likely you'll qualify for credit approval with the best terms. If your score is below that, you may still qualify, but with a higher interest rate.

Besides, lenders, landlords, car insurance companies, and even some employers check your credit score because it's considered an indication of risk and responsibility.

Why FICO scores aren't always the same

There are many places to get your credit score, and those scores may differ. All three credit reporting agencies — Experian, Equifax, and TransUnion — assign you a FICO score, and they may not be the same since each reporting agency may have different information on file. On top of that, FICO itself offers different versions of your score — some are tailored for car lenders, others for mortgages, etc. Your FICO scores will also fluctuate over time as your credit use is reported.

Another thing: Since there are other types of credit scores (VantageScore being the main competitor to FICO), your lender may not even look at your FICO scores. But since FICO is the most commonly used scoring model, getting acquainted with your FICO scores is still a smart way to check your credit health.

5 factors used to determine your FICO scores

Payment history (35%): Your ability to make payments on time consistently is the biggest determinant of your FICO scores.
Amounts owed (30%): How much you owe in relation to your credit limits — your credit utilization ratio — is the second most important factor. You want to keep this as low as possible.
Length of credit history (15%): This is the average time that all your credit accounts have been open, with a longer history considered better.
New credit (10%): Too many new credit accounts can imply that you're desperate for credit, and lower your score.
Credit mix (10%): Having more than one type of loan is typically considered a good thing and will boost your score.

Where to get your credit score

There are several ways to get your credit scores, and some of them are free. Not all are FICO scores, but may still be worth checking to get an idea of how you're doing. You can pay about $20 to get your score from myFICO.com. Several credit cards offer free credit scores, as do Credit Karma and Credit Sesame. In addition, some lenders (e.g. Sallie Mae for student loans) offer a free FICO score or estimate of your credit score on your monthly statement.

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5 Money Moves to Make When It's Too Hot to Go Outside

Ashley Eneriz — Mon, 21 May 2018 09:00:30 +0000

The heat wave is coming — are you ready? For many, summer marks the start of vacation season, especially for kids or those who have several weeks off work. While it is good to take a much-needed break, don't get too lackadaisical when it comes to your bank account this season.

Here are a few money moves you should make when it is too hot to do much else. You will be thankful later that you didn't take a vacation from managing your money wisely.

1. Comparison shop insurance plans

When you've had the same auto insurance and home insurance for over a year, you might be stuck in the mindset that you are paying the best price, especially if you shopped quotes the year previously. Recently, my husband and I thought we were getting the best price for our car insurance because it had been the cheapest option for us for the past six years, and we had racked up several discounts for being on the plan so long.

However, replacing our paid-off SUV with a new van and having a minor accident the year before slowly made our rates creep up. I honestly didn't think another company could offer cheaper insurance, but a few quick searches online helped us find the same coverage for $500 less a year.

Bottom line: Don't assume you are paying the best price for insurance just because your plan was the cheapest when you shopped for rates earlier. (See also: Here's How a Claim Will Impact Your Car Insurance)

2. Put investing on autopilot

Don't want to think about investing on your summer break? Me neither. Investing is similar to exercising. Only a select few really love to partake and the rest of us know we must do it to remain (financially) healthy. Thankfully, you don't have to become an expert in the stock market to start investing your money. Instead, try these simple ways to put your investments on autopilot:

Start with setting up automatic deposits from your paycheck into your 401(k) through your employer. If you can set your account to increase your investment by 1 percent each year, you can grow your retirement fund without feeling the monetary sacrifice.
Use an app like Acorns, which rounds up your purchases to the nearest dollar and automatically invests your spare change.
Set up automatic payments to investment accounts. Both Fidelity and Ally offer different online investment accounts where you can set up automatic transfers. While they might require a minimum amount to start the account (i.e. Ally's professionally-managed portfolio account requires $2,500 to open), you can set up small amounts of money to be transferred each week. Think about it. You really won't miss $10 to $20 a week, but setting up the transfer will equate to $520 to $1,040 invested each year.

3. Declutter, sell, and donate

It may be too hot for a garage sale, but that doesn't mean you can't sell some unused items and free up space around the house. Make a game out of decluttering and tackle one small area of your air-conditioned home each day of the week. You can worry about your garage, basement, or attic in the cooler months. Make your decision quickly about what to keep, sell, and donate. Remember, anything you don't use regularly is taking up prime real estate in your home. Don't try to justify a need for it in the future.

If the item is larger, such as a baby swing or chair, list it on Craigslist, OfferUp, or local Facebook selling groups. If the item is easy to ship and can make you more than $10, like designer jeans or an old iPad, list it on eBay. For eBay sales, I schedule postal pickups so that I don't have to deal with the heat and post office lines.

If the item does not sell well locally or through eBay, schedule a donation pickup. Fill up a box of unwanted goods, schedule a pickup with a local second hand store, leave it on your porch, and save the donation slip for tax season. Finally, enjoy a large glass of lemonade in your decluttered home. (See also: 11 Easy Ways to Earn More on eBay)

4. Review your credit reports and credit score

Plan to get your credit in tiptop shape this summer, especially if you hope to purchase a car, home, or open a new credit card in the near future. An excellent credit score will save you money on lower interest rates.

First things first, order a free copy of your credit report through AnnualCreditReport.com. You are entitled to three free copies — one each from Experian, Equifax, and TransUnion — every year. Check the report for inaccuracies and make sure everything looks as expected. (See also: How to Read a Credit Report)

Next, order your credit score. You can purchase your FICO score from myFICO — it will run you about $19.95 a piece from each of the three credit bureaus. You can also get a good idea of what your score is through free sites like Credit Karma and Credit Sesame, or through credit cards that offer free credit scores.

Note that these free scores often have their own metric for credit scoring, and that number may differ slightly from your official FICO score, which is what most lenders use when determining whether or not to approve you for credit. Still, a free score will give you a good ballpark estimate of where your score stands. (See also: I Checked My Credit Score in 11 Places — Here's What I Learned)

What I like about both Credit Karma and Credit Sesame is that they will show you which areas you need to improve to boost your score. For example, if your credit usage is too high, the site may recommend that you boost your score by paying off debt and/or increasing your credit limit, either by opening up a new card or asking for a limit increase. Of course, be aware that asking for a credit increase and opening up a new card can be reported as hard inquiries on your credit report, and too many hard inquiries can negatively affect your credit score. (See also: 5 Ways to Improve Your Credit Score Fast)

5. Start your holiday savings fund

Even though Thanksgiving and Christmas are months away, they are coming, and they will be costly. Avoid the holiday debt trap or credit card hangover by saving way ahead of time. If you start in June, you have six months to build up a savings fund without the stress. Calculate how much you spent on Thanksgiving and Christmas/Hannukah/Kwanzaa the year before, and use it as a guideline for how much you should save.

For example, if the winter celebrations cost your family $1,000 between food shopping, decorations, presents, and outfits, divide that number by six and aim to save that much each month. It is much easier to save $167 each month for six months than to try and find an extra $1,000 in your budget between November and December. (See also: Avoid These 5 Common Holiday Budget Pitfalls)

Don't waste your summer months wishing you were on a beach somewhere or enviously looking at friends' and co-workers' vacation pictures. Instead, work on your finances with these easy steps so that you can be the one enjoying a debt-free vacation next year.

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6 Ways to Get Financially Fit for Homebuying Season

Dan Rafter — Mon, 02 Apr 2018 09:00:06 +0000

The housing market is a competitive one right now. The National Association of Realtors reported that there were 1.52 million existing homes for sale at the end of January 2018. That might sound like a lot, but that figure is 9.5 percent lower than it stood a year ago, when 1.68 million homes were for sale.

What does that mean for you? It means that if you're planning on buying a home this year, you need to be financially fit and ready to act fast. Here are the steps you can take to get ready for homebuying season.

1. Check your credit reports

When you apply for a mortgage to finance the purchase of a home, your lender will check your credit reports. You have three of them, one each maintained by Experian, Equifax, and TransUnion. These reports list your loans and credit card accounts. It also lists any financial missteps you might have taken, such as missed payments, late payments, bankruptcy declarations, and foreclosures.

You can get one free copy every year of each of your three reports from AnnualCreditReport.com. Once you get your reports, look them over carefully. You want to know what lenders will see. If you spot any mistakes — such as a late auto payment that you know you paid on time — correct the mistake with the offending credit bureau, either by phone or email. Finding and correcting incorrect information can provide an immediate boost to your credit score, which will set you off on the right foot for buying a home. (See also: How to Read a Credit Report)

2. Check your credit score

Your credit score is a key number when you're ready to buy a home. Your lenders will study your credit score to determine how likely you are to pay your mortgage on time each month. Most lenders consider credit scores of 740 or higher to be strong ones, while scores under 640 make them nervous. If your score is too low, you probably won't qualify for a loan. If you do, you'll be charged higher interest rates.

It's important to know your credit score before you apply for a mortgage. You can pay to receive your score from any of the three credit bureaus, which will cost you between $10 and $15. Your credit card provider or bank might provide you with a credit score for free, but be careful: This free score might not be an official FICO score, and might not be the same one that lenders see when you apply for a loan.

Once you know your credit score, you can determine if you need to take steps to improve it. If your score is too low, it might make more sense to wait until it rises before you start hunting for a new home. (See also: 7 Ways to Increase Your Credit Score Quickly)

3. Start a new history of paying all your bills on time

The best way to build a strong credit score is to pay all your bills on time every month. If you pay certain bills late — credit cards, mortgage, auto loan, student loan, and other forms of installment loans — your credit score could drop by 100 points or more. A bill is considered officially late and reported to the credit bureaus if you haven't paid it by 30 days or more past its due date.

Rebuilding your credit this way takes time. Depending on how weak your score is, it could take months or more than a year of on-time payments to increase it to a level that will qualify you for lower interest rates. The work, though, will pay off in the form of lower monthly mortgage payments. (See also: All the Ways Minimum Payments Are Evil)

4. Pay down your credit card debt

Another way to boost your credit score and gain approval for a mortgage loan is to pay off as much credit card debt as possible. You'll know you're ready to take on the homebuying process when your credit card balances take up no more than 30 percent of your available credit.

Paying down your debt is important, too, after you buy a home. Your mortgage payment is a big financial responsibility. Having as little additional debt as possible will ensure that these new payments are not an overwhelming burden. (See also: The Fastest Method to Eliminate Credit Card Debt)

5. Build up your savings

Buying a home is expensive. You'll have to come up with a down payment, of course. But you'll also have to pay for closing costs on your mortgage loan, and don't forget the added expenses of paying for movers, new furniture, and any repairs that your new home might need.

Build up your savings before you start searching for a home. This will also help you when it's time to apply for a mortgage. Lenders usually want to see that you have enough in your savings accounts to pay for two to three months' worth of mortgage payments. That way, you can still make your mortgage payments if you hit a financial crisis.

6. Get preapproved for a mortgage

Looking for homes is fun. Getting a mortgage loan is not. But before you start searching for new homes, make sure to get preapproved for a mortgage.

To do this, you'll meet with a mortgage lender. This lender will run your credit. You'll also have to provide this lender with copies of your last two months of paycheck stubs, last two years of W2 forms, last two years of income tax returns, and last two months of bank account statements. Lenders will study these forms to determine how much of a monthly loan payment you can afford.

Once it analyzes your financials, your lender will provide you with a preapproval letter stating how much of a loan it is willing to give you. You won't have to waste your time searching for homes that are outside this limit. You'll also be a more attractive buyer. Sellers prefer working with buyers who already have qualified for mortgages. Deals with such buyers are less likely to fall apart because of mortgage issues.

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Here's What Happens to an Account in Collections — Even When You Pay Up

Dan Rafter — Fri, 09 Mar 2018 09:30:08 +0000

Life happens. Whatever the reason, you've fallen behind on your monthly payments, missing due dates on your credit cards, mortgage, car loan, or medical bills. Maybe you've missed so many payments for so long that your creditors have hired debt collection agencies to persuade you to pay up.

Having an account go into collections is devastating to your credit score. And the damage is long-lasting: Collections information remains on your credit reports for seven years.

Paying off your debt will bring some relief and get the debt collectors to stop calling or writing. But it won't erase the hit to your credit. Here's what will happen.

You might not qualify for new loans or credit

The biggest negative of having an account fall into collections is that it gets reported on your credit reports. This means that every time you apply for new credit or a loan, the bank or financial institution lending you money or extending you credit sees that you have an unpaid debt.

After you pay your debt, that collections account is not immediately removed from your credit reports. Instead, the account is updated to show "paid collection." Your account will also no longer show a balance due. But the "paid collection" notice does remain on your credit report for the full seven years from your original delinquency date.

Just as bad, all of the missed payments that you racked up before your creditor sent your account to collections remain on your credit reports for seven years, too. This combination can make you look toxic to many lenders and creditors.

If lenders do approve new loan or credit applications during this time, they'll most likely charge you high interest rates because they view you as more likely to miss payments in the future. The higher interest rates offer them financial protection. (See also: How to Rebuild Your Credit in 8 Simple Steps)

Your credit score will tumble

Having an account go to collections will also cause your credit score to plummet. How much your individual score will fall varies depending on where your score was before your account went to collections and how many missed payments you had.

Even if you pay off your debt, the damage to your credit score will remain. Your score won't immediately shoot up just because you've paid off a past-due debt.

The only way to improve a damaged credit score is by making your payments on time and paying off as much of your credit card debt as possible. This all takes time, though. There are no quick fixes — even a payoff — to credit score woes. (See also: The 7 Debt Payoffs That Boost Your Credit Score the Most)

Debt collectors will stop calling

Once your debt goes into collections, expect the calls from debt collectors to follow. These calls can be annoying, especially when they come week after week. One of the few immediate fixes that paying off your debt will do is stop these calls. Debt collectors have no reason to call if you no longer owe any money.

If you're currently being harassed by debt collectors, you can tell them that you prefer to hear from them in writing or meet with an attorney to craft a cease-and-desist letter. Be aware, though, that just because debt collectors stop calling you, it doesn't mean that you don't owe your debt. According to the Fair Debt Collection Practices Act, debt collectors can't threaten you, call you before 8 a.m., call you after 9 p.m., and can't call you multiple times per day. (See also: 5 Things Debt Collectors Don't Want You to Know)

A "pay for delete" might provide early relief

You might consider entering what is known as a "pay for delete" agreement with your creditors or a collections agency. Under such arrangements, you agree to pay your debt but only if your creditors or collections agency removes the notice of your unpaid debt from your credit report before the full seven-year time frame.

This practice doesn't always work. Lenders don't like it, claiming it presents them with false information about a borrower. And many creditors or debt collectors won't even consider such an arrangement.

Still, this doesn't mean that you can't try. Just don't expect much success when asking for "pay for delete."

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How to Get a Free Fraud Alert on Your Credit Report

Dr Penny Pincher — Wed, 28 Feb 2018 09:31:08 +0000

Placing a fraud alert on your credit report makes it harder for someone to steal your identity and open credit accounts in your name. If you have a fraud alert in place, businesses must confirm with you before issuing any new credit, typically by calling you at a provided phone number.

Unlike credit monitoring or simply watching your statements for suspicious activity, placing a fraud alert on your credit report is a preventive measure. It cuts fraudulent activity off at the pass, before it can impact your credit. Fraud alerts provide less protection than a credit freeze, which prevents anyone from seeing your credit report without your permission, but are typically more convenient; fraud alerts are free and don't have to be lifted every time you apply for new credit. (See also: How to Freeze Your Credit)

The credit reporting companies provide three types of fraud alerts, each with different requirements to qualify and that stay on your credit report for different durations. Here are the types of fraud alerts you can request:

Initial fraud alert (90 days).
Extended fraud alert (seven years).
Active duty military alert (one year).

If you get a fraud alert from one credit reporting company, this company will share the fraud alert with the other credit reporting companies. Contact one of the three credit reporting companies listed below and provide the requested information to open a fraud alert:

How to get an initial fraud alert (90 days)

If you are concerned that your personal information may have been stolen, but it has not yet been used to open a fraudulent account, you can place an initial fraud alert on your credit report. Here are some circumstances where you might want to get an initial fraud alert:

You have been notified that your personal information was involved in a data breach.
Your purse, wallet, or financial documents have been lost or stolen.

An initial fraud alert is the easiest type of fraud alert to get. You will be asked to provide proof of your identity, such as a copy of your driver’s license, and a copy of a utility bill or bank account statement.

An initial fraud alert stays on your credit report for 90 days and can be renewed for 90 days at a time. When you get an initial fraud alert, you are allowed to order one free credit report from all three credit reporting companies. (See also: Here's What to Do Immediately After a Credit Card Breach)

How to get an extended fraud alert (seven years)

If your personal information has been used to open a fraudulent account, you may want to file an extended fraud alert. This means that your personal information is in the hands of criminals who are using it for identity theft. Here are some situations where you may want to request an extended fraud alert:

Your credit report shows a new account that you didn’t open.
You get a statement in the mail for a credit account you don’t recognize.
You get a tax refund or tax statement that is not consistent with your tax filings.

You will again be asked to provide proof of identity and a copy of a utility bill or bank statement, plus a police report or other identity theft report that provides specific details about how your identity was misused. Having your personal information exposed in a data breach is not sufficient to get an extended fraud alert. You need to show that someone has used your personal information for fraudulent purposes.

An extended fraud alert stays on your credit report for seven years and you are allowed to order two free credit reports from all three credit reporting companies in the first year. In addition, your name is removed from prescreened credit card offers for five years. (See also: 9 Signs Your Identity Was Stolen)

How to get an active duty military alert (one year)

If you are serving in the military and will be deployed, you can request an active duty military alert on your credit report. This alert makes it harder for identity thieves to open fraudulent accounts during a deployment when identity theft may go unnoticed for a long time. You will be asked to provide proof of your identity when requesting an active duty military alert.

Active duty military alerts stay on your credit report for one year, and can be renewed if the period of deployment is longer. An active duty military alert also takes your name off the list for prescreened credit card offers for two years to provide further protection against identity theft.

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Here's What a Balance Transfer Does to Your Credit

Holly Johnson — Fri, 16 Feb 2018 09:30:05 +0000

If you're struggling with debt and high interest rates keep eating up most of your monthly payments, a balance transfer card may be just what the doctor ordered. A balance transfer credit card will offer 0% interest for 6-21 months.

But there are lots of things to consider before applying for a balance transfer card. While some balance transfer cards charge a 3-5% upfront fee to transfer a balance, some cards don't charge any fees. Either way, scoring 0% APR for a year or longer can help you along in your climb out of debt. Without interest to pay, your entire monthly payment will go directly to the principal of your balance and hack away at your debt that much faster. (See also: Step by Step Guide to Doing a Balance Transfer)

What do balance transfers do to your credit?

While the scenario above might sound ideal, it's important to understand what happens to your credit, if anything, when you apply for a balance transfer card and actually transfer a balance.

While opening a new credit card will ding your credit, fortunately, the news isn't all bad.

Here are some of the "mixed bag" consequences you might see after you sign up for a balance transfer card and transfer a balance.

The negative

You'll get a hard inquiry on your credit report

First things first. When you sign up for a new credit card, you will get a hard inquiry on your credit report. A hard inquiry is a notation on your report that says you applied for a new line of credit. While a hard inquiry doesn't spell doom for your credit, it's fairly common for your score to dip a few points with each hard inquiry.

Fortunately, any impact you see will likely last only a few months, as "new credit" only makes up 10% of your FICO score. (See also: 5 Factors That Make Up Your FICO Score)

Your average credit history will go down, potentially dinging your score

According to myFICO, the average length of your credit history makes up 15% of your FICO score. With that in mind, it shouldn't surprise you that opening a new credit card will reduce the average length of your credit history and potentially lower your score. Since this factor only plays a small role in your FICO score, however, any change in your score should be short-lived.

The positive

Adding a new credit card increases your available credit limits, perhaps lowering your utilization in the process

Your credit utilization makes up 30% of your FICO score, and is determined by comparing the amounts you owe to how much available credit you have. If you have a $10,000 credit limit on one credit card and you carry a $5,000 balance, your utilization is at 50%. If you open a new credit card and add $10,000 more available credit, your utilization would go down to 25% ($5,000 balance on $20,000 in available credit).

Because the credit reporting agencies see lower utilization as a good thing, this is one area where signing up for a balance transfer card could actually boost your credit score. The rule of thumb is to keep your utilization ratio at 30% or less. Around 10% is ideal.

Paying off debt will ultimately improve your credit score

If you transfer your balance and immediately start paying down debt, you could also make a positive impact to your credit score. Not only will your utilization continue going down, but you'll get even more good marks for making monthly payments on time. Payment history makes up 35% of your FICO score, the largest component of your score — so this is a really important factor.

What to watch out for with a balance transfer

While opening a balance transfer card can impact your credit score in both positive and negative ways, you'll want to make sure to avoid certain pitfalls as you move through the process. Ideally, you'll transfer a balance and pay off all your debt for good, but we all know that life often gets in the way. (See also: Your Comprehensive Checklist for a Successful Balance Transfer)

Before you open a new balance transfer card, here are some moves you should try to avoid.

Don't max out your old card again

Transferring old debts to a new balance transfer card may feel like a huge relief. Not only are you getting 0% APR on your balance as you pay it down, but you freed up open credit on your old credit cards in the process.

It might be tempting to use your old credit card again, but you should avoid using credit altogether. Old habits die hard, and that's especially true if you have a penchant for overspending or using credit as a crutch.

If you start using your old credit card for purchases and fail to pay off your balance each month, you could easily rack up even more debt that will accrue interest and make your debt payoff journey that much harder.

Once you transfer credit card or loan balances to a balance transfer card with the goal of paying off debt, you'll be better off if you put your cards away and stick with cash or debit for a while instead.

Avoid the "balance transfer game"

Far too many people transfer a balance but never build up the discipline to pay down their debt. Then, when their 0% APR introductory offer is over, they're still left with a sizable balance they failed to pay off.

Many times, the easiest answer is to just transfer the balance to new and different 0% APR cards over and over. The downside with this option is that you may never pay down debt with this strategy. Even worse, you'll likely be paying a balance transfer fee of 3-5% of your balance each time you transfer. While those fees might seem worth it, they will add up over time.

Keep your old account open — even if you're not using it

While you might feel inclined to cancel your old credit cards once you transfer balances to a new 0% APR card, your credit score will thank you if you keep old cards open. Remember that the average length of your credit history makes up 15% of your FICO score. By keeping old cards open, you're effectively improving your credit score without any added work.

Take your debt payoff goals seriously

Last but not least, make sure you're treating debt payoff as a priority, and it will become one. While it's easy to transfer a balance and make only the minimum payment toward your debts, it will take you longer to reach your goals if you're not proactive.

The best balance transfer strategy is one where you take your debts seriously. Scoring 0% APR for any length of time will help you pay down your balance faster, but only if you attack your debt with fervor.

Don't be complacent; instead, use your balance transfer offer to attack your debts with all you have. With some hard work, patience, and dedication, you could put all your debts in the rearview mirror, once and for all.

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How the Fair Credit Reporting Act Protects You

Susan Johnston Taylor — Fri, 02 Feb 2018 09:30:05 +0000

Your credit report plays an important role in determining whether you can get a loan, a credit card, insurance, an apartment, and even a job in some cases. It can also help determine how much interest you pay on a credit card or loan, and your insurance rate.

So, if your credit report contains errors — say, your report lists a loan you didn't initiate, an incorrect balance, or a closed account still being reported as open — that can result in a higher interest rate, or an outright rejection. Fortunately, the Fair Credit Reporting Act (FCRA) gives consumers protections, including the ability to access their credit reports and dispute errors on them.

Enacted in October 1970, just as small, local credit reporting agencies were consolidating and becoming a national presence, the FCRA imposes strict guidelines on consumer reporting agencies and the companies that feed them data. Understanding your rights under this law helps you stay on top of your credit and finances. Here's an overview of your rights under the FCRA and how to exercise them.

You have a right to see your credit reports

The act says that you're entitled to view your credit file from each of the three main credit bureaus (Equifax, Experian, and TransUnion) for free once every 12 months. You easily can do so at AnnualCreditReport.com. Just be sure you look at the web address closely if you type in the URL. Some copycat websites exist that may charge you for this service or may not be legitimate services.

If you're requesting your credit file online, you'll need to answer some ID verification questions to prevent scammers from posing as you. The online verification process can be frustrating to some consumers. "If they have thin credit files, a lot of those questions won't be pertinent," explains Linda Sherry, a spokesperson for Consumer Action, a national nonprofit that educates underrepresented consumers about their rights. If the website won't verify your identity and share your credit file, the alternative is to request information via the automated phone system or through the mail.

In addition to your three annual credit reports, you're entitled to a free annual copy of any reports from other types of consumer reporting agencies. These include agencies such as LexisNexis, CoreLogic, and Certegy Check Services, which may collect noncredit information about you such as your rent payments, insurance claims, or check-writing history. The Consumer Financial Protection Bureau has a list of more consumer reporting companies. Each one has its own procedures for requesting your free report. (See also: How Alternative Credit Data Can Help Those With Little or No Credit)

You have a right to ask for a credit score

The FCRA also gives you the right to request a credit score. Don't confuse that with a credit report. Credit scores and credit reports are not the same thing. The contents of your credit report determine your credit score, which can vary depending on which credit bureau supplies the information and which scoring model is used. In other words, you don't have just one score; you could have many different scores based on which factors are weighted more heavily.

Most credit agencies and other businesses charge you for your credit score and it's legal for them to do so. Fortunately, an increasing number of credit cards provide free credit scores so you may not need to pay for a credit score. (See also: FICO vs. Fakes: Are You Getting the Wrong Credit Score?)

Access to your credit report is limited

Credit reporting agencies may only share your credit record with people or institutions who have a legitimate reason to see it. Typically, that means someone who is considering your application for credit, insurance, housing, or a job, or who is a current creditor.

Potential employers and landlords generally need your written consent to check your credit. If a reporting agency shares your credit file with someone who doesn't have a valid need, it could be in violation of your rights under the FCRA.

You have the right to dispute errors on your credit reports

Once you receive a credit report, review it line by line for errors. "If you see something there that's labeled as negative that may be pulling down your score or your ability to access credit, look at it carefully and make sure it's accurate," says Sherry. (See also: How to Read a Credit Report).

If you don't recognize a line of credit or other loan, that could be a sign of identity theft, but don't panic. It could also be that you don't recognize the name of a creditor you actually did have an account with. Maybe you took out a store credit card and the issuing bank's name is unfamiliar to you (you'll likely see the name of the issuing bank, not the retailer where you opened the card). Or perhaps your mortgage was sold to a new loan servicer.

Google any unfamiliar creditors to check if the loan might be legitimate before you try to dispute it. If you still suspect identity theft, Sherry suggests filing a police report. (See also: 9 Signs Your Identity Was Stolen)

The FCRA also grants you the right to dispute any erroneous information you find with the credit reporting agency or agencies. They must investigate your dispute and respond (typically within 30 days) unless they deem your dispute frivolous.

To dispute an item with a credit bureau, mail the credit bureau a letter and copies of documents that support your position (for instance, a notice stating a loan is paid in full if your credit record is still showing an outstanding balance). The Federal Trade Commission (FTC) has this sample letter showing you how to dispute items on your credit report.

The FTC recommends sending dispute letters by certified mail, "return receipt requested." That way you have proof of what the credit reporting agency received and when. Also keep your own copies of your dispute letter and any supporting documents.

If the credit bureau corrects an error, it must send you a new, free copy of your credit report through AnnualCreditReport.com. That way you can check to see that all the mistakes have been corrected.

You can also dispute inaccurate information with the company that provided the information to the credit bureau. For instance, if a bank claims you defaulted on a loan that you know you paid in full, also contact the bank so that you don't have to deal with erroneous collections actions later on.

Starting in September of 2018, credit agencies will be required to send you a detailed report of their dispute investigation, providing you with contact information of the company or companies that supplied the data in question. The bureau will also have to explain what you can do if you're not happy with the investigation's findings.

Negative information can't stay on your credit record forever

It's helpful to understand the difference between negative and positive credit information. Late payments or accounts in default are negative factors on your credit report, while on-time payments and low balances reflect positively on your credit report. Positive items stay on the report up to 10 years after the date of the last activity on the account. But by law, credit bureaus cannot report negative information that is more than seven years old, except for some forms of bankruptcy, which may linger on your credit report for 10 years.

Sherry says negative items are typically labeled as negative on your credit report. But take heart. Negative information that's accurate won't haunt you indefinitely. What's more, the weight that lenders give to negative items they see on your credit report decreases over time. (See also: How to Rebuild Your Credit in 8 Simple Steps)

You have a right to know if you've been rejected because of information on your credit report

When a creditor, employer, insurer, or landlord denies your application based on the contents of your credit report, it's called an adverse action. They must then notify you and tell you the name, address, and phone number of the credit reporting agency that provided the information.

You're entitled to order a free copy of your credit report from the bureau that provided the information within 60 days of an adverse action. (This is in addition to the three free reports you're allowed every year.) However, it's wise to check your credit report in advance so you have time to correct errors before you get turned down for a mortgage or lose a job offer. (See also: Why Your Credit Card Application Was Denied — And What You Can Do About It)

You can take further action

If you've lost a dispute over your credit record and aren't happy with the result, you can file a complaint with the Consumer Financial Protection Bureau.

In other cases, you may be able to sue for damages in state or federal court.

You can sue a credit reporting agency (CRA) if they allow someone to view your credit report without a permissible purpose.
You can sue a CRA if you tell them about an error on your report and they fail to fix it and as a result, you receive an adverse action. While the CRA is investigating items you dispute, they must indicate on your credit report that the item is in dispute.
You can sue a credit information provider if they willfully provide incorrect information to the CRA.
You can sue an employer or other party who views your credit report without disclosing it to you or securing permission from you.
You can sue someone who pulls your credit report and doesn't dispose of your information appropriately, which results in your identity being stolen.

Lawyer Sonya Smith-Valentine says consumers sometimes get confused about their right to sue after they receive an adverse action. To be clear, you won't get awarded damages if the adverse action occurred before you notified the credit bureau. Many consumers don't realize this nuance, according to Smith-Valentine, who is president of Financially Fierce, LLC and a former managing attorney with Valentine Legal Group, which handled financial and consumer protection litigation.

"They tried to get a mortgage or a job and found out because of going through this that there was a mistake," she says. "They want to be compensated for losing out on the job or the house, but [the FCRA] does not allow for harm that occurred before you contacted the credit bureau about the mistake. That's where a lot of people get tripped up."

Your right to legal action doesn't kick in until after the creditor or credit reporting agency has been notified of an error and has had a chance to fix their mistake. All the more reason to be proactive about requesting your credit report and reviewing it for errors.

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This article is from Susan Johnston Taylor of Wise Bread, an award-winning personal finance and credit card comparison website. Read more great articles from Wise Bread:

How to Freeze Your Credit

Dan Rafter — Fri, 15 Dec 2017 09:00:07 +0000

Cybersecurity experts called it a wake-up call: In September 2017, national credit bureau Equifax suffered a massive data breach that exposed the personal information of over 145 million customers. The breach was a startling reminder that your personal information might not be as secure as you would like to believe. It also woke many consumers up to the concept of freezing their credit.

Here's a quick guide on how credit freezes work, how you can apply one yourself, and what you have to do to thaw your credit freeze. (See also: How to Protect Your Credit After the Equifax Breach)

What a credit freeze does

A credit freeze prevents lenders or financial institutions from accessing your credit report. It can also stop an identity thief from opening an account or getting credit in your name, even if they have accessed your personal information through a security breach like the one that hit Equifax in September.

Even if Equifax reports that you weren’t impacted by the breach (which you can check at EquifaxSeurity2017), you might still consider a credit freeze. Doing this stops any of your personal and financial information from being reported to lenders and creditors. This is important; if a thief tries to use this information to apply for a new credit card or loan in your name, the application would automatically be rejected. (See also: 5 Times You Must Freeze Your Credit Report)

How to apply a freeze

Even though Equifax suffered the breach, freezing your credit with Equifax alone is not enough. To completely protect your personal information, you must freeze your credit with all three national credit bureaus: Equifax, Experian, and TransUnion.

The quickest way to do this is by logging onto the security freeze pages maintained by each bureau:

You can also call each of the bureaus by phone to request a credit freeze. You can reach Equifax at 1-800-685-1111, TransUnion at 1-888-909-8872, and Experian at 1-888-397-3742.

What you need for a freeze

First, you'll usually have to pay to file a credit freeze. That fee varies depending on where you live. Fees typically range from $3 to $10, but in many states, this fee is waived if you can prove with an investigative or incident report that you already have been the victim of identity theft.

Depending on where you live, you'll have to provide a list of documents that the credit bureaus can use to verify your identity. For instance, in California, you must provide your full name, including your middle initial and any suffixes such as "junior" or "senior." You must also provide your Social Security number; complete addresses for the last two years; birth date; copy of a government-issued ID card such as a driver's license or state ID card; and one copy of a utility bill, bank statement, insurance statement, or other form of proof of identity.

The credit bureaus will send you a letter confirming that your freeze is in place. It will remain in place until you ask to remove it.

Unfreezing

You probably don’t want your credit freeze to remain in place forever. If you need to apply for a mortgage or auto loan, for instance, you’ll want lenders to be able to access your credit. Fortunately, each credit bureau will send you your own personal identification number — or PIN — that you can use to unfreeze and refreeze your credit.

If you are applying for a car loan, for instance, you can use your three PINs to temporarily unfreeze your credit. Your auto lender can then check your credit. Once your loan is granted, you can refreeze your credit with your PIN.

Unfreezing your credit can range from free to $12. You can unfreeze your credit for one specific creditor or for a set period of time.

Your credit freeze will remain in effect in most states until you request its removal. But in the states of Nebraska, Pennsylvania, Kentucky, and South Dakota, credit freezes are automatically removed after seven years. You can freeze your credit longer in these states, but you’ll have to remember to renew the freeze on your own.

The fraud alert alternative

A credit freeze is labor-intensive. It can also slow your ability to qualify for new loans or credit cards. As an alternative, you could consider signing up for fraud alerts from all three bureaus.

In a fraud alert, a credit-reporting agency will put a warning on your credit reports. This tells lenders that they need to carefully verify the identity of anyone trying to open an account in a consumer’s name. (See also: 9 Signs Your Identity Was Stolen)

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This article is from Dan Rafter of Wise Bread, an award-winning personal finance and credit card comparison website. Read more great articles from Wise Bread: