credit score

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:

How Cosigning On a Student Loan Could Impact Your Finances

Holly Johnson — Sat, 07 Nov 2020 22:44:52 +0000

While college students can get their own federal student loans without a cosigner in most cases, there are some situations where a cosigner is required. Federal Direct Parent PLUS loans, for example, can actually be taken out on behalf of dependents to help pay for higher education. Students can also apply for private student loans to pay for college. These loans tend to have high credit requirements that make it difficult for young people to qualify on their own.

But should you really cosign on student loans for your child? And should you cosign on any loans they can't qualify for on their own? You can certainly consider it, but it helps to enter the situation with eyes wide open and understand all the pros and cons.

The main advantage of cosigning is the fact that you're helping your child (or dependent) pay for higher education when they may not be able to otherwise. However, it can also be a huge risk. Here's everything you need to know before you sign on the dotted line.

You're obligated to repay the debt no matter what

Whether you take on a Parent PLUS loan or you cosign with your child for a private student loan, the first thing you have to understand is that, no matter what, you're obligated to pay that debt back. If your child stops making payments, you'll be required to make them. If your child flat-out refuses to get a job and completely defaults on their responsibilities, you will need to repay that loan.

Cosigning on a student loan is similar to buying a house with someone or cosigning on a car loan. You're both jointly responsible for repayment regardless of what the other person does. That can be a huge problem if your child doesn't take their bills very seriously, but it may not be an issue if they treat their credit with care and stay on top of their bills.

Student loans are almost never discharged in bankruptcy

Another detail to understand is the fact that student loans are rarely ever discharged in bankruptcy. For the most part, they'll stick around forever unless the borrower dies or you can prove you have some inescapable hardship.

As a parent, you're probably trying to save for retirement and reach other financial goals, so it's important to understand that the student loans you cosign for will never go away until you pay them off — once and for all.

There's no going back

When you cosign on a student loan, you can't just change your mind and back out of the deal. Your child may be able to refinance their student loans in their name, but only if their credit score is good enough to qualify for student loan refinancing on their own. And if that was the case, they wouldn't have needed a cosigner in the first place.

Your finances may be perfectly fine right now, but you should think through how they may be in five or 10 years. If you're nearing retirement, you may not want to put yourself in a situation where you'll be stuck paying off a child's student loans. Plus, you never know how your health will be or the status of your career several years from now. Cosigning for student loans leaves you on the hook no matter what, and it's hard to change that after the fact.

Cosigning on a loan could affect your credit score

When you cosign on a student loan, you have to remember that you're jointly accepting responsibility for the debt and any consequences that arise out of late payments or delinquency. So you should only cosign if you know your child or dependent is dedicated to paying their bills on time and avoiding default at all costs.

If you're not paying attention, you could easily take a huge hit to your credit score without even knowing. Since payment history makes up 35 percent of your FICO score, it's easy to see how even one late payment could cause major damage. Just think of what could happen if the student loans you cosigned for were paid late month after month. If you're not also receiving a bill in the mail, you may not find out until the damage is already done.

The bottom line

There are situations where it can make sense to cosign on a student loan, but this decision should never be taken lightly. You may be helping your child earn their degree, but you're taking a significant risk. (See also: Should You Co-Sign a Loan?)

You may want to assess the career field they plan to enter into and figure out how much they might earn upon graduation before you cosign. Some fields have plenty of promise right now, while others offer almost none, and you should know either way before you make any type of financial commitment. Maybe your college student could even spend time improving their credit score so they can qualify for student loans on their own.

Cosigning on student loans should be a last resort for parents, not an easy fix for students who don't take time to consider all their options.

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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:

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:

This Is How Free Money Management Apps Make Money

Tim Lemke — Tue, 09 Oct 2018 08:00:13 +0000

There are many smartphone apps designed to help make our financial lives easier. It’s now possible to manage nearly all aspects of our money — from budgeting, to investing, to sending money and making payments — through an app. And since many of these apps are free to use, it prompts the question as to how the operators make any money.

The business model for apps varies, but there are a variety of revenue streams ranging from advertising and referrals to subscription premium services. Let’s take a quick look at a half dozen of the most common financial app categories and their business models.

1. Money transfer apps

Do you need to pay someone, but don’t have cash and don’t want to bother with a check or money order? You can use money transfer apps to make payments and transfer cash instantly. In most cases, the app links to a bank account or credit card.

Some of the more popular money transfer apps include PayPal, Venmo, Cash App, and Dwolla, though there are many others. They are usually free to use, and they make money by charging a percentage of every transaction involving a credit card. Some apps, such as Venmo, also have a social feed component that could eventually lead to advertising revenue. (See also: The 5 Millennial Money Apps Everyone Should Use)

2. Account aggregators

These apps, which often also have desktop versions, allow users to link all of their financial accounts in order to see their full monetary situation in one view. This allows for easier tracking of spending and income, and there are some handy budgeting tools. Mint and Personal Capital are two of the more popular account aggregators.

Mint makes its money from a number of different sources, including advertising, product referrals (including credit cards), and from selling users’ aggregated financial data. Personal Capital, meanwhile, gets its revenue from the management fees tied to its separate robo-advising service. It collects 0.89 percent of the size of each portfolio under $1,000,000, and less as accounts grow larger. (See also: These 5 Apps Will Help You Finally Organize Your Money)

3. Investment apps

There are a number of new apps designed to make it easier for people to invest, including some that allow users to invest with small quantities of money. Acorns, for example, will round the cost of your purchases up to the nearest dollar and invest the difference. Acorns and its competitor Stash charge $1 per month until you have $5,000 in a portfolio (and in Stash's case, $2 a month for IRA balances under $5,000). After that, both services charge 0.25 percent of your account balance. (See also: How to Start Investing With Just $100)

4. Credit score checkers

There are a number of apps that allow users to learn their credit score and get alerts for any unusual activity on their credit report. Credit Karma, Credit Sesame, and WalletHub are popular apps that are free to use, but make money from targeted advertising, loan management, and referral partnerships with credit card providers. (See also: I Checked My Credit Score in 11 Places — Here's What I Learned)

5. Billing, invoicing, and time tracking

This group includes apps such as Harvest, which allows for time-sheet tracking, billing, online invoicing, and other services. Harvest is free for one person and two projects, but $12 per month, per person for unlimited projects. Similar apps have similar charges, but also make money if you use their payment processing features or pay for other upgrades. (See also: 5 Free Accounting Tools for Freelancers)

6. Bill paying

These apps can be similar to account aggregators, but allow users to make payments. Doxo is one app that allows for bill paying and offers a “digital filing cabinet.” Bill paying is often free, but users may be charged a fee if the provider is not part of the app’s network, or you pay using a credit card. (In the case of Doxo, this could be as much as 3.5 percent.)

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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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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:

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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6 Monthly Bills That Won't Affect Your Credit Score

Dan Rafter — Tue, 19 Jun 2018 08:00:30 +0000

What's the best way to keep your FICO credit score healthy? Simple: Pay your bills on time and don't rack up too much debt. Some bills, though, are more important to your credit score than others.

In fact, you might be surprised to learn that many of the payments you make every month have no direct impact on your traditional FICO credit score. That's because in order for a payment to boost your score, or a late payment to hurt it, it must be reported to at least one of the three national credit bureaus: Experian, Equifax, and TransUnion. And many of the companies and service providers you pay off each month don't do this.

That's a mixed blessing. Making a payment late to these creditors won't necessarily hurt your score — unless you pay so late that the bill is sent to collections. On the other hand, paying these bills on time won't help your credit score, either. (See also: 5 Money Matters That Won't Affect Your Credit Score)

Which bills are not reported to the credit bureaus?

There are six common monthly bills that have no direct impact on your credit score. They are:

Utilities.
Insurance payments.
Bills from medical providers.
Cellphone payments.
Cable service.
Membership to health clubs or gyms.

If you're a few days late in paying your car insurance bill, don't panic. Your misstep won't hurt your credit score, just as paying your bill on time won't help it.

But that doesn't mean you can just ignore the bill. There are other consequences for late payments. You might face late fees, penalties, or even the cancellation of service. Your auto insurer, for instance, might charge you an extra $25 if you make your payment after a certain date. Your gym might cancel your membership. And both of those scenarios are still not as bad as if your provider sends your account into collections.

That's because, while a biller may not report payments directly to the credit bureaus, if you miss too many payments, they might send a debt collector after you. Once your account falls into the hands of a collections agency, this will be reported to the credit bureaus. Having an account in collections can cause your credit score to tumble by 100 points or more. (See also: Here's What Happens to an Account in Collections — Even When You Pay Up)

What about rent?

Apartment rent is a more complicated issue. In most cases, the rent you pay each month isn't reported to the credit bureaus. Paying your landlord on time every month usually doesn't provide a boost to your credit score.

There is a movement, though, to change this. The theory goes that renters should be rewarded for paying on time, just as homeowners are when they pay their mortgage bill each month.

Some landlords have begun reporting rents to the credit bureaus. And if you want to report your own rent payments, you can sign up for a rent-reporting service such as Rent Reporters or Rental Kharma.

These services are limited. Both Rent Reporters and Rental Kharma, for instance, only report rent payments to one of the credit bureaus, TransUnion. You'll also have to pay for these services. (See also: 7 Ways to Rent An Apartment With Bad Credit)

Some alternative credit scores do include other bills

As lenders try to expand their market reach, some are looking beyond the traditional FICO score to so-called alternative credit scores. Some of these scores include your behavior with the bills listed at the top of this story, or your management of checking and savings accounts. The FICO Score XD, for example, is for people who have such thin credit reports that they're unscorable by traditional methods. It relies on a consumer's utilities, cellphone, and other bills.

The number of lenders who look at alternative credit scores is still in the minority. But if you're applying for credit and have a limited credit record, it never hurts to ask that a lender take into consideration your good payment history on other types of bills. (See also: How Alternative Data Can Help Those With Little or No Credit)

Monthly payments that always impact your credit score

Some of the payments you make each month will always be reported to the credit bureaus. It's important to pay these on time each month if you don't want your credit score to drop. They are:

Credit card bills.
Home equity lines of credit.
Mortgage.
Auto loans.
Student loans.
Personal loans.
Home equity loans.

Note that revolving credit accounts — credit cards and lines of credit — carry more weight in your FICO score than installment loans.

Also, a payment isn't reported as late to the bureaus until you miss it by 30 days or more. Your two-week delay on your credit card payment won't show up in your credit reports.

However, you'll still be charged a late fee for being even one day late. And every day that you delay payment, interest charges mount. So, it still benefits you to make your payments on time, or as soon after the due date as you can. (See also: 5 Simple Ways to Never Make a Late Credit Card Payment)

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5 Things to Do Right Now to Boost Your 600 Credit Score

Dan Rafter — Thu, 07 Jun 2018 08:00:27 +0000

A 600 FICO score isn't awful. Since credit scores can run from 300 to 850, it's easy to see how much worse things could be. A score of 600 puts you about in the middle. You won't qualify for the best financing offers, but not the worst, either.

The truth, though, is that a 600 credit score will hurt you financially, even if things could be worse. Your credit score tells lenders how well you've managed your credit and paid your bills in the past. A score of 600 shows that you've had some financial missteps along the way — and because of this, you'll end up with higher interest rates and subpar credit card offers. Some lenders might even reject your application altogether.

Fortunately, you can improve a 600 credit score. It just takes time and commitment to developing better financial habits. (See also: 5 Ways to Improve Your Credit Score Fast)

1. Pay all your bills on time

The most common reason for a low credit score is missed payments. If you pay your credit card bill late by more than 30 days, your credit score could fall by 100 points or more. The same holds true for your car loan, mortgage, and student loan.

The lesson? Build a history of paying your bills on time. Just as missed or late payments hurt your credit score, on-time payments will boost it. Resolve to never pay a bill late again. (See also: 5 Simple Ways to Never Make a Late Credit Card Payment)

2. Don't skip payments on "less important" bills

Some bills are more important than others when it comes to your credit score. The creditors behind your mortgage, auto loan, credit cards, student loans, and personal loans all report your payments to the national credit bureaus (Experian, Equifax, and TransUnion). Missed or late payments on these bills will quickly damage your score, while regular, on-time payments will continue to boost it.

Other payments aren't reported to the bureaus. This includes medical bills, cellphone payments, utility bills, rent, insurance payments, and cable bills. But this shouldn't be an excuse to pay these things late without fear of consequence. If you miss enough of these other payments, the provider may send your account into collections. That will show up in your credit reports and send your score tumbling. (See also: Here's What Happens to an Account in Collections — Even When You Pay Up)

3. Pay off your credit card debt

Paying down your credit card debt will also have a positive impact on your credit score.

Having large amounts of credit card debt brings high interest rates, which can overwhelm you and leave you at risk of making late payments. Your credit utilization ratio — the amount of available credit you're currently using — makes up about 30 percent of your credit score. If that ratio tips too high, your score will also tick downward. Lenders like to see you using less than 30 percent of your available credit, but the lower your credit utilization ratio, the better.

Make sure to always pay more than the minimum required monthly payment on your credit cards. Your goal should be to pay down that debt as quickly as possible. If you do, you'll see your FICO score gradually rise. (See also: The Fastest Method to Eliminate Credit Card Debt)

4. Keep paid-off credit card accounts open

If you do pay off a credit card, don't close the account. This could immediately send your credit score falling. This is once again due to your credit utilization ratio. Closing a credit card automatically increases that ratio, even without you making a single new charge.

Say you have $2,000 worth of credit card debt spread out over four cards with a total available credit limit of $10,000. If you close one card with a credit limit of $3,000, you are now using $2,000 of $7,000 of available credit. That's a higher credit utilization ratio than you'd have if you were still using $2,000 out of $10,000 of available credit. (See also: Stop! Don't Cut Up Your Credit Cards)

5. Order free copies of your credit reports

You can order a free copy of your three credit reports — one each from Experian, Equifax, and TransUnion — once a year through AnnualCreditReport.com. Once you do this, study your reports carefully for any errors.

Your credit reports list your personal information and how much you owe on credit cards and loans such as mortgages, auto loans, and student loans.

Errors on these reports could leave you with an artificially low credit score. Maybe your report states that you missed an auto payment three years ago. If you know this isn't true — and you have the documentation to back up your claim — contact the credit bureau listing the mistake. Fixing this error could provide an immediate jolt to your credit score. (See also: How to Read a Credit Report)

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5 Money Moves to Make Before Applying For a Credit Card

Dan Rafter — Mon, 04 Jun 2018 09:00:16 +0000

You're ready to apply for your first credit card. Or, maybe you simply want to add another card to the rotating deck of plastic in your wallet. Whatever the case, there are certain money moves you must make before filling out an application.

Adding a credit card to your name might seem like a small thing, but a credit card carries tremendous weight. It can be either a useful tool for building credit — or, if misused, it can lead you straight toward high-interest debt. It all depends on how you use that card and if you're financially prepared for it.

To get yourself off on the right foot, here are some important money moves smart consumers must make before applying for a credit card — whether it's their first or their fifth.

1. Do some budgeting

Don't have a household budget? It's time to make one. Have one? It's time to review it to make sure that it accurately reflects the money you are earning each month and the dollars you are spending.

Getting a new credit card could tempt you to make purchases that you can't afford to pay off in full each month. This will lead to you carrying a balance on your cards from month to month. With interest rates on credit cards being so high, this balance can grow out of control quickly.

Make a household budget listing the income you earn each month and the expenses you face. Expenses should include fixed costs that never change, such as your car bill, mortgage payment, and student loan costs. It should also include estimates for expenses that aren't the same each month, such as your utility bill or grocery bills. And don't forget to budget for discretionary expenses such as restaurant meals and entertainment.

If you have a budget, study it to make sure that it accurately reflects how much you spend and earn each month. If you rarely meet your budget, adjust it. Once you have an accurate budget in place, you'll know how much you can charge on a new card and still be able to pay it off each billing cycle. (See also: Build Your First Budget in 5 Easy Steps)

2. Check your credit reports

If you want to qualify for the best cards — with generous rewards programs and low interest rates — you'll need a solid credit score. Before you apply for a new card, do some research on your credit. (See also: Best Credit Cards for Excellent Credit)

You are entitled to one free copy of your three credit reports — one each maintained by Experian, Equifax, and TransUnion — every year. You can order these reports at AnnualCreditReport.com. Once you've done this, review them carefully. They will list how much you already owe on your credit card accounts, car loans, student loans, mortgage loans, and other forms of revolving credit.

They'll also list any late or missed payments up to seven years old. Other financial missteps, such as bankruptcy filings or foreclosures, will also be listed on your reports if they are not older than seven or 10 years.

If there are mistakes on your reports, contact the credit bureaus to let them know. And if your credit report is filled with late payments and high balances, you might want to take some time to pay down your other debts and build a history of on-time payments before applying for a new credit card. (See also: How to Read a Credit Report)

3. Order your credit score

Your credit score is another important number to know when applying for a credit card. This number gives financial institutions an instant look at how you've handled your credit in the past. A low score indicates that you have missed payments or other negatives on your record. A high score indicates that you have a history of paying your bills on time and keeping your debt under control.

You can order your credit score from any of the national credit bureaus. Expect to pay about $15 or so for your score. You might even have a credit card that shows your credit score in your monthly statement.

If your score comes in low, it again might be a good idea to pause your search for a new credit card. Build that score up by making on-time payments and paying off your existing credit card debt. This will boost your odds of qualifying for the best credit cards. (See also: I Checked My Credit Score in 11 Places — Here's What I Learned)

4. Pay off your existing credit card debt

You shouldn't be adding a credit card to your collection simply because you're running out of available credit on your other cards. This will only tempt you to make more purchases that you can't afford and lead you deeper into a cycle of debt.

Instead, work on paying off the credit card debt you already have. Don't apply for a new card until you've gotten your existing credit card debt under control. (See also: The 7 Best Credit Card Debt Elimination Strategies)

5. Build your savings

Financial experts recommend that everyone have an emergency fund of cash to help them pay for life's unexpected expenses — everything from a furnace on the fritz to a car that needs a new transmission. If you don't have an emergency fund, you might find yourself needing to turn to credit cards to pay for such emergencies. And that will only make your debt grow.

Before you apply for a new credit card, build an emergency fund. That way, you'll be less tempted to use your new card to pay for urgent big-ticket items such as a new water heater or an emergency brake repair for your car.

How much should you have in this emergency fund? It's generally recommended that you have enough to cover six months' to a year's worth of daily living expenses, though you may need more or less depending on your unique circumstances. (See also: 5-Minute Finance: Start an Emergency Fund)

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How New Grads Can Protect Their Credit

Dan Rafter — Wed, 30 May 2018 08:00:24 +0000

The years right after graduating from college can be stressful ones. It's time to find a job. You might be looking for a new place to live. You're starting the transition from college student to adult. It can be easy to get overwhelmed, and it can be just as easy to make serious financial mistakes that damage your credit.

What things can you do to protect your credit after graduating from college? Here are some of the big ones.

Never pay a bill late

It can be easy to miss a bill payment, especially when you're not used to having a lot of bills to pay. Mail can pile up while you're adjusting to a whole new way of life. Prioritize getting organized with your bills. Sign up for autopay or set up reminder alerts. Put your bills in a place where you can see them so they don't get buried under other junk or unread mail. Not only will late payments eat into your new budget with fees, but your credit will take a big hit. (See also: 5 Simple Ways to Never Make a Late Credit Card Payment)

Not all late payments are reported to the credit bureaus, and some late payments don't impact your credit score. The big ones, however — credit cards, mortgage, auto loans, personal loans, and student loans — are reported. A single late payment of one of these major bills could cause your score to tumble by 100 points or more. That late payment will also stay in your credit reports for up to seven years. (See also: How Late Payments Affect Your Credit)

You should know the official definition of a late payment. A payment is only reported as late to the credit bureaus if you are 30 days or more past the due date. So even if your payment is two weeks late, you can avoid a hit to your credit by immediately making a payment. (See also: Pay These 6 Bills First When Money Is Tight)

Don't ignore the bills that don't get reported

There's a big caveat to the payments that don't get reported to the credit bureaus. If you're late with a doctor's bill, utility payment, rent payment, or cellphone bill, the three credit bureaus won't know about it unless those payments are sent to a collections agency in effort to get you to pay what you owe. When that happens, your credit score can again plummet by 100 points or more.

It isn't just collections you should be worried about if you fail to make rent payments, either. If your landlord evicts you, that won't show up on your credit reports. But if your landlord sues you for breaking your lease, and that ends in a civil judgment against you, your credit will take another hit. Civil judgments are reported to the credit bureaus and stay on your reports for up to seven years. (See also: 10 Surprising Ways to Negatively Affect Your Credit Score)

Those monthly payments can be overwhelming, but it's important that you pay them, and do so on time. You might have to cut down on your discretionary spending, move back home, or take other steps to make sure that you are keeping current with your bills.

Seek help for student loans if you can't afford the payment

The average 2017 graduate left college with $39,400 in student loan debt, according to Student Loan Hero. That's a staggering amount of debt for anyone, let alone a young adult who is just getting their footing in the world. When your student loan payment comes due, it's important that it gets paid. Otherwise, you risk defaulting on that loan, which will issue a blow to your credit. (See also: What Really Happens When You Don't Pay Your Student Loans)

If you are struggling to come up with your monthly student loan payment, be proactive in finding ways to alleviate the financial burden. You may have the option to consolidate multiple loans, defer the payments, or speak directly with your lender about how to make your repayment plan work better for you. You will likely have more options with federal student loans than private ones, but you should still do your research. (See also: 8 Surprising Ways to Pay Off Your Student Loans)

Don't run up your credit card debt

It can be easy to rely heavily on credit cards when money is tight. When you're young and your paychecks are small, this can be an even bigger temptation. This, though, can also wreck your credit.

Racking up too much credit card debt will lower your credit score and leave you with a financial burden that's difficult to overcome. The high interest will pile on until you're struggling to keep up with payments. Lenders view consumers with too much credit card debt as a high risk for missed payments, and often deny them other forms of financing. It's a dangerous cycle that many young adults can easily fall into.

Resist the temptation to use your credit card to purchase restaurant meals, movie tickets, electronics, or concert tickets. If you can't afford these goodies in cash, you can't afford them with credit. (See also: The Millennials Guide to Avoiding Credit Card Debt)

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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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Do You Need Credit Monitoring to Protect Your Credit?

Holly Johnson — Tue, 15 May 2018 08:30:24 +0000

While the internet has improved our lives in numerous ways, technology has also made our personal information more vulnerable than ever. If data breaches from big stores like Target and Home Depot several years ago didn't convince you of this fact, the 2017 Equifax data breach, which may have released the sensitive data of up to 145 million consumers, probably helped you realize how much peril your personal information could be in.

If you've seen ads for credit monitoring services like LifeLock or Identity Guard, you may have wondered if signing up is worth it. You may have also heard about credit freezes and fraud alerts and wondered how those work. Before you take any steps to protect your credit and your identity, here's what you should know. (See also: Don't Panic. Do This Instead If Your Identity Gets Stolen)

The difference between credit monitoring, credit freezes, and fraud alerts

During the Equifax data breach, consumers' names, Social Security numbers, addresses, and, in some cases, credit card numbers were accessed by hackers. To control damages after the breach, Equifax created a special website where you could enter your information and find out if you were affected by the Equifax breach. It also began offering a year of free credit monitoring and other identity theft services to all U.S. consumers, whether their information was accessed during the data breach or not.

In addition to taking advantage of credit monitoring, Equifax and consumer advocates suggested consumers consider several other steps to protect their credit right away: freezing their credit reports and placing a fraud alert on their reports.

But what's the difference between these options? While each service has the same goal of protecting your identity and your credit, they all work differently and some may be better for some consumers than others.

Credit monitoring

Traditionally, credit monitoring is a service people pay for. With LifeLock, for example, you can pay a monthly fee to have the company continually check for fraud or threats to your financial accounts and credit reports. Other credit monitoring services work similarly, although they may offer different features.

Credit freeze

With a credit freeze, you usually pay up to $10 per credit reporting agency to make your credit report inaccessible to lenders, thereby making it impossible for hackers and scammers to open new accounts in your name. Note that you usually also pay a fee every time you want to unfreeze your credit. For now, credit freezes and unfreezes are free with Equifax.

Fraud alerts

If you don't want to freeze your credit completely, you can place three different types of fraud alerts on your credit report instead. Fraud alerts are free, and they require lenders to verify your identity before issuing new credit in your name. As the Federal Trade Commission notes, options include:

Initial fraud alert: This type of fraud alert is best for someone whose identity hasn't been stolen yet. It protects your credit from unverified access for up to 90 days.
Extended fraud alert: An extended fraud alert protects victims of identity theft for up to seven years.
Active duty military alert: This alert protects active duty service members from identity theft for up to one year while they are on deployment.

Should you pay for credit monitoring?

Whether you should pay for credit monitoring depends on your situation. Gerri Detweiler, education director for Nav, a company that makes tools for managing business credit, says that while there are more opportunities than ever to monitor your credit for free, there are times when paying for a more comprehensive service could be advantageous. "The monitoring on these platforms can be more robust," she says.

If you know that you will not take the time to monitor your credit accounts yourself, or you just want the peace of mind of knowing someone else is doing it for you, then paying for a subscription service may be worth it.

Freezing your credit report can also make sense, says Detweiler. But if you're doing it to prevent identity theft, you need to know the drawbacks. "It can be a hassle when you go to apply for credit, insurance, or even try to get a new cellphone," says Detweiler, mostly because you will have to unfreeze your credit report any time you want to apply for new credit. That can get costly.

Detweiler says she also worries that credit freezes create a false sense of security. While a freeze can prevent someone from opening new accounts in your name, it can't prevent hackers from using your existing accounts fraudulently or stealing your information.

As far as fraud alerts go, Detweiler chose this option when she was a victim of identity theft in 2017. While a credit freeze locks down your new credit, fraud alerts allow creditors to access your credit report as long as they are able to verify your identity. For this reason, fraud alerts may be a better option for someone who opens new credit regularly and still wants some protection against identity theft.

Other ways to keep your credit safe

If you are preparing for a crucial loan like a mortgage, new auto loan, or small business loan, for example, you want to make sure your credit is as solid as possible, says Detweiler. That's because lower credit scores may mean you won't get approved for the loan or you'll pay more in interest charges.

Plus, you'll want to keep your identity and personal information safe from hackers and scammers no matter what. If your identity is stolen, it can take months or even years to get the situation cleared up.

Detweiler says you should take advantage of the fact that you can get a free copy of your credit report from the three credit reporting agencies — Experian, Equifax, and TransUnion — once per year at AnnualCreditReport.com. By accessing your full credit report regularly, you can check for errors or fraudulent activity and report them immediately if you find them. (See also: How to Read a Credit Report)

There are also plenty of places where you can get a free credit score. Many credit card issuers give out free credit scores. Other free services such as Credit Karma give you an estimate of your credit score year-round and set up notifications to let you know when a new account is opened in your name.

Trevor Buxton, Certified Fraud Examiner (CFE) and assistant vice president of fraud prevention at PNC Bank also suggests the following actions to keep your credit safe:

Keep a close eye on your bank accounts. "If you notice unauthorized activity on your account, immediately call the number on the back of your debit, ATM, or credit card, or stop by your local branch," says Buxton.
Sign up for alerts on your accounts. Many banks let you set up your credit and debit accounts so you're notified any time a purchase is made.
Spread your free credit reports over the course of a year. Since you can get a free report from the three credit reporting agencies once per year, Buxton suggests spreading those out by accessing one free report every four months.

Notify credit reporting agencies of any false reporting. If you find any errors on your credit report, notify the credit reporting agency in question and dispute the information right away. You can find out more about how to dispute errors on your credit report on the FTC website.

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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:

8 Money Mistakes at 20 That Will Land You in Debt by 30

Kentin Waits — Mon, 14 May 2018 08:01:14 +0000

Few mistakes are more difficult to erase than money mistakes. The errors of youth have a way of haunting us long after we've changed our ways and become models of responsible personal finance. If you're in your 20s, look ahead and make life easier for your 30-something self. Here are eight money mistakes at 20 that will land you in debt by 30.

1. Amassing huge student loans

According to Student Loan Hero, today's average student loan borrower will graduate owing $37,172. What makes student loan debt particularly dangerous? First, most loans have variable interest rates. When rates increase, so do your payments (try budgeting around that). Second, student loan debt can't be discharged in bankruptcy. If you default, the government can garnish your wages, take your tax refund, and even dip into your Social Security payments in retirement. (See also: What Really Happens When You Don't Pay Your Student Loans)

2. Carrying credit card debt

With high interest rates, late payment penalties, and other fees, a modest credit card balance can quickly become a major problem. People who overspend in their 20s can easily rack up huge debt loads by their 30s — a situation that forces many to delay homeownership, toil away at jobs they dislike, and live with constant financial stress. Avoid the drama of consumer debt. Adopt a strict policy of paying off your credit balances in full each month. (See also: The Fastest Method to Eliminate Credit Card Debt)

3. Ignoring your credit score

Your FICO score is your GPA of adulthood. That magic number affects everything from loan eligibility and interest rates to employment opportunities. Since rebuilding a low credit score can take years, you can't afford to ignore it. Just imagine getting stuck with a higher mortgage rate at 35 because you were late with a few car payments at 27. Not good. (See also: How to Rebuild Your Credit in 8 Simple Steps)

4. Splurging on a new car

Countless 20-somethings are tempted to buy a new car as soon as they land their first real job. But with steep prices, rapid depreciation, and higher insurance premiums, buying new is seldom a smart financial move. This single bad investment can strain your budget for years and leave little money to establish an emergency fund or aggressively pay down student debt. (See also: 3 Reasons Why You Should Never Buy a New Car)

5. Not talking finances with your significant other

Ready for an important love lesson? Talking about money won't kill your romance, but the stress of overwhelming debt just might. Before you commit, share your full financial picture (warts and all). Talk about income, debt, bad money habits you're trying to overcome, and your personal financial goals. It'll not only bring you closer as a couple, it'll empower you to work as a team. (See also: 5 Money Conversations Every Couple Should Have)

6. Overspending for your wedding

According to a study conducted by The Knot, the average cost of a wedding in the United States hit a whopping $35,329 in 2016. And while new unions are always a cause for celebration, the price tag for these elaborate events often forces young couples to assume more debt at a time when paying off student loans, saving for a home, and funding retirement accounts should be top priorities. With interest, wedding bills can easily become money monsters that devour budgets for years. (See also: 3 Reasons Taking a Loan For Your Wedding Is a Bad Idea)

7. Not building an emergency fund

Ah, the optimism of youth! Twenty-somethings often don't realize that a layoff, uninsured medical expense, or unexpected home repair can spell financial disaster. Without an emergency fund to cover at least six months' worth of living expenses, they risk being forced into high-interest credit card debt — a decision that can launch a long-term cycle of debt. (See also: 7 Easy Ways to Build an Emergency Fund From $0)

8. Going without health insurance

We all feel invincible when we're in our 20s, but accidents and unexpected health issues can throw our lives off course at any moment. Without insurance, medical bills can quickly reach staggering amounts (in fact, medical expenses are the most common cause of personal bankruptcy in the United States). Protect your most important asset — yourself. (See also: The One Question You Need to Answer to Choose the Best Health Care Plan)

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