That said, college students should also focus on their financial future, including steps they can take to build credit before they enter the workforce.

After all, having a credit history and a good credit score can mean being able to rent an apartment, finance a car or take out a loan, whereas having no credit at all can mean sitting on the sidelines until the situation changes.

Fortunately, there are all kinds of ways for young adults to build credit while they’re still in school. Some strategies require a little work on their part, but many are hands-off tasks that you only have to do once.

Teach Them Credit-Building Basics

Make sure your student knows the basic cornerstones of credit building, including the factors that are used to determine credit scores. While factors like new credit, length of credit history and credit mix will play a role in their credit later on, the two most important issues for credit newcomers to focus on include payment history and credit utilization.

Generally speaking, college students and everyone else can score well in these categories by making all bill payments on time and keeping debt levels low. How low?

Most experts recommend keeping credit utilization below 30% at a maximum and below 10% for the best possible results. This means trying to owe less than $300 for every $1,000 in available credit limits at a maximum, but preferably less than $100 for every $1,000 in credit limits.

Add Your Child as an Authorized User

One step you can personally take to help a child build credit is adding them to your credit card account as an authorized user. This means they will get a credit card in their name and access to your spending limit, but you are legally responsible for any charges they make. Obviously, this move works best when you have excellent credit and a strong history of on-time payments and you plan to continue using credit responsibly .

While this step can be risky if you’re worried your college student will use their card to overspend, you don’t actually have to give them their physical authorized user credit card.

In fact, they can get credit for your on-time payments whether they have access to a card or not. If you do decide to give them their credit card, you can do so with the agreement they can only use it for emergency expenses.

Encourage Them to Get a Secured Credit Card

Your child can build credit faster if they apply for a credit card and get approved for one on their own, yet this can be difficult for students who have no credit history. That said, secured credit cards require a refundable cash deposit as collateral are very easy to get approved for.

Some secured credit cards like the Ambition Card by College Ave even offer cash back¹ on every purchase and don’t charge interest². If your child opts to start building credit with a secured credit card, make sure they understand the best ways to build credit quickly — keeping credit utilization low and paying bills early or on time each month.

Opt for a Student Credit Card Instead

While secured credit cards are a good option for students with little to no credit get started on their journey to good credit, there are also credit cards specifically designed for college students. Student credit cards are unsecured cards, meaning they don’t require an upfront cash deposit as collateral, but charge interest on any purchases not paid in full each month.

Many student credit cards offer rewards for spending with no annual fee required as well, although these cards do tend to come with a high APR. The key to getting the most out of a student credit card is having your dependent use it only for purchases they can afford and paying off the balance in its entirety each billing cycle. After all, sky high interest rates don’t really matter when you never carry a balance from one month to the next.

Help Your Child Get Credit for Other Bill Payments

While secured cards and student credit cards help young adults build credit with each bill payment they make, other payments they’re making can also help.

In fact, using an app like Experian Boost can help them get credit for utility bills they’re paying, subscriptions they pay for and even rent payments they’re making. This app is also free to use, and you only have to set up most bill payments in the app once to have them reported to the credit bureaus.

There are also rent-specific apps and tools students can use to get credit for rent payments, although they come with fees. Examples include websites like Rental Kharma and RentReporters.

Make Interest-Only Payments On Student Loans

The Fair Isaac Corporation (FICO) also notes that students can start building credit with their student loans during school, even if they’re not officially required to make payments until six months after graduation with federal student loans.

Their advice is to make interest-only payments on federal student loans along with payments on any private student loans they have during college in order to start having those payments reported to the credit bureaus as soon as possible.

“Making interest-only payments as a student will not only positively affect your credit history but will also keep the interest from capitalizing and adding to your student loan balance,” the agency writes.

Of course, interest capitalization on loans would only be an issue with private student loans and  Federal Direct Unsubsidized Loans since the U.S. Department of Education pays the interest on Direct Subsidized Loans while you’re in school at least half-time, for six months after you graduate and during periods of deferment.

The Bottom Line

College students don’t have to wait until they’re done with school to start building credit for the future, and it makes sense to start building positive credit habits early on regardless. Tools like a credit card can help students on their way, whether they opt for a secured credit card or a student card. Other steps like using credit-building apps can also help, and with little effort on the student’s part or on yours.

Either way, the best time to start building credit was a few years ago, and the second best time is now. You can give your student a leg up on the future by helping them build credit so it’s there when they need it.

¹Cash back rewards are subject to the Ambition Rewards Terms & Conditions.

²0% APR. Account is subject to a monthly account fee of $2, account fee is waived for the initial six-monthly billing cycles.

College Ave is not a bank. Banking services provided by, and the College Ave Mastercard Charge Card is issued by Evolve Bank & Trust, Member FDIC pursuant to a license from Mastercard International Incorporated. Mastercard and the Mastercard Brand Mark are registered trademarks of Mastercard International Incorporated.

The post 6 Ways to Help Your Child Build Credit During College appeared first on Good Financial Cents®.

Fortunately, there are standard steps to take if you want to keep your credit score in good shape. For example, paying all your bills on time and keeping your credit utilization in check can go a long way toward helping you build the credit you’ll need later in life. In the meantime, you’ll also want to check your credit reports for incorrect reporting and false information, all of which can negatively impact your score without you even knowing.

Just remember that having negative items removed from your credit reports only works if they are actually untrue. The CFPB points this out very specifically on their website:

How Credit Scores Are Calculated

In addition to checking your credit reports for errors, you should have a general idea of how credit scores are calculated. You probably have additional questions you want answered as well.

For example, what is a good credit score? And what is a bad credit score?

First off, you should know that the most important credit scoring model is the FICO scoring. Meanwhile, VantageScore is the second most commonly used credit scoring model.

Since FICO credit scores are used by 90% of top lenders, we’ll focus on this type of credit score for the purpose of this guide. Like VantageScore, FICO credit scores fall between 300 and 850, with higher scores being superior to lower credit scores.

According to myFICO.com, FICO credit scores are also separated into the following ranges:

• Exceptional: 800+

• Very Good: 740 to 799

• Good: 670 to 739

• Fair: 580 to 559

• Poor: 580 or less

If you’re wondering where you stand, you should know that Experian reported that the average FICO score came in at 714 in 2022. This means that, for the time being, most American consumers have what is considered a “good” credit score.

What to Do If You Find Something Wrong in Your Reports

To keep your credit score in the best possible shape, you should make sure you read over your credit reports from all three credit bureaus — Experian, Equifax, and TransUnion — at least a few times each year. Doing so can help you spot inconsistencies in your credit reports and even false reporting or mistakes. 

To get a look at your credit reports from all three bureaus, you should use the website AnnualCreditReport.com. This portal lets you check all of your credit reports for free up to once per week, and you can complete the entire process online.

How to Dispute Negative Items on Your Credit Reports

If you find any errors on your credit reports, especially errors that may be hurting your score, you should take steps to have them removed. Just remember that you will only have success having negative reporting removed from your reports if the information is actually incorrect.

The FTC notes that you’ll need to dispute any incorrect reporting with both the credit bureaus that report the information and the company that supplied the data. If your Experian credit report shows a late payment on your Wells Fargo car payment, for example, you would need to dispute the information with both Experian and Wells Fargo. 

If the false information was on all three of your credit reports, on the other hand, you would need to send the same information to Experian, Equifax, TransUnion, and Wells Fargo.

Steps you’ll need to take to dispute information on your credit reports include:

• Step 1: Explain in writing what you think is wrong on your credit reports, along with the reason the information is incorrect.

• Step 2: Send printed copies of your credit reports with your letter, and make sure to highlight or circle the incorrect information.

• Step 3: Include any proof you have that the information is wrong, such as a bill that shows your balances have been paid or an account closure statement.

• Step 4: Request in writing that the incorrect information you’re writing about is removed or updated.

• Step 5: Make sure to include up-to-date contact information for yourself when you contact each company, such as your name, address, and phone number.

Note that you can put together a single packet of this information and send it to the credit bureaus and the company that reported the information. In some cases, however, credit bureaus also have their own dispute form you can send along.

If you’re not disputing information on your credit reports online, make sure to send the information for your dispute via certified mail.

Either way, you’ll want to send the information to the appropriate credit bureau using the information below, and you can send the information to the reporting company using the address listed on your credit report.

Credit Bureau Dispute Information

If all of this sounds overwhelming, it’s also worth mentioning that the best credit repair companies can take on this work for you. Not only can these companies pore over your credit reports to check for errors, but they can dispute errors and misreporting on your behalf.

For example, Lexington Law charges reasonable fees in exchange for handling all aspects of credit repair ranging from disputing incorrect information on your credit reports to bankruptcies, collections, foreclosures, and more. The company also lets you complete the entire process online and over the phone, so you won’t have to drive to a credit repair office or spend time meeting with someone in person.

Common Credit Report Errors and Entries That Hurt the Most

While it’s possible almost anything on your credit report could be a mistake, the Consumer Financial Protection Bureau (CFPB) says the following credit report errors are some of the most common:

• Wrong name or contact information

• Incorrect accounts that exist due to identity theft

• Closed accounts that are reported as open

• Accounts that are falsely reported as late or delinquent

• Incorrect dates for last payments

• Debts listed more than once

• Incorrect balances

• Incorrect credit reports

• Accounts with an incorrect credit limit

Any of these errors could be hurting your credit score in some way, which is totally avoidable if you take steps to dispute incorrect data. If you’ve been wondering how to build your credit score, this is one move you’ll want to make at least a few times per year.

Related: How to Raise Your Credit in 5 Months

Final Thoughts on Removing Negative Items From Your Credit

If you want to improve your credit score so you can qualify for a mortgage, a car loan, or the best personal loans and credit cards, you should make sure you check your credit reports every few months. Doing so can help you discover errors before they cause too much damage, and you can also spot the early signs of identity theft.

Simply put, there are no downsides that come with checking your credit reports for free and disputing false items. If you fail to do so, however, you could live to regret it.

FAQs on Removing Negative Items on Credit Reports

The post How to Remove Negative Items From Your Credit Reports appeared first on Good Financial Cents®.

While you might not be able to raise your score 100 points overnight, with a little dedication and effort, you can certainly see a significant improvement in a relatively short period of time. Here are some tips to get you started:

How to Improve Your Credit Score

1. Understanding Your Credit Score

Your credit score is a number that reflects the information in your credit report. Lenders use this number to assess your creditworthiness – in other words, how likely you are to repay a loan on time. The higher your score, the more attractive you are to lenders and the better your chances of being approved for loans and credit cards with favorable terms.

Check Your Credit Score

Most people don’t know their credit score until the time comes when they need it.

Don’t be one of these people!

Good credit scores are your passport to competitive interest rates for mortgages, cars, credit card offers, insurance premiums, and more. Maintaining a high credit score is worth it because it will save you the money you’d pay in higher interest rates.

Luckily, it’s simple to learn your credit score. I recommend the following companies:

Learn more about each of these companies:

• Experian Review
• Credit Sesame Review
• CreditKarma Review

What Affects Your Credit Score?

There are a number of different factors that go into your credit score, but the two most important are payment history and credit utilization. Payment history refers to your track record of paying back loans and other debts on time. Credit utilization is a measure of how much of your available credit you are using – the lower the better.

The best way to improve your credit score is to review your credit report. The score itself is not personal. Every American falls within the same range. However, the credit report is your unique financial history.

A credit report breaks down the following by weighted importance:

• Payment History (30%)
  • Paying your credit card, student loan bills, etc., on time? 

• Credit Utilization (30%)
  • The ratio between credit available to you and how much of it you use

• Credit Age (15%)
  • How long have credit lines been opened? Mortgage, credit cards, etc. 

• Account Mix (10%)
  • Variety of credit lines

• Credit Inquiries (10%)
  • Too many hard inquiries don’t look good, i.e., applying for a bunch of credit cards at once

Where you get your credit report matters, which is why I strongly recommend Experian. You’re not only getting it directly from the source (Experian is one of the three credit reporting companies in America), but it’s free when you create an account!

We’ll discuss credit reports more in-depth later on, but for now, let’s move on to some other things you can do to raise your credit score.

2. Identify Inaccurate Items on Your Reports

One of the best ways to raise your credit score is to identify and dispute any inaccuracies on your credit reports. If there are any errors, outdated information, or incorrect account balances, get in touch with the credit bureau and have them corrected. This can take some time and effort, but it’s worth it in the long run.

According to CNBC, 1/3 of Americans have errors on their credit report, so you’re certainly not alone.  And the most common error? Outdated information.

You can get a free copy of your report from each of the major credit bureaus – Experian, Equifax, and TransUnion – once per year at AnnualCreditReport.com.

I recently requested my credit report, and it took less than 10 minutes to receive it. You will need to provide some basic information such as your name, address, Social Security number, and date of birth.

It’s a simple 3 step process and well worth your time.  Once you receive your credit report, comb through it carefully and look for any inaccuracies. If you find anything that looks incorrect, raise a dispute with the credit bureau.

3. Get a Secured Credit Card

If you have bad credit, one of the best ways to raise your score is to get a secured credit card. This type of card requires you to put down a deposit that serves as collateral, but it can help you rebuild your credit by reporting your positive payment history to the credit bureaus.

Just make sure to use your card responsibly by only charging what you can afford to pay off in full each month, and try to keep your balance below 30% of your credit limit.  Otherwise, you could end up doing more harm than good.

There are a few different secured cards to choose from, so compare your options and find one that best suits your needs.

A former intern of mine, Kevin, was able to increase his credit score by 100 points using a secured credit card. Here’s his story:

Kevin’s 100-Point Credit Score Increase Story (IRL Example)

As a junior and senior in college, I was always told that applying for a credit card could be my first step in the wrong direction.

With a credit card in hand, my parents worried I would spend money I couldn’t pay off and build a lifestyle I couldn’t really afford rather than learning to save money.

While these are legitimate concerns, I had to let them know I felt as if I had some control over my spending. My response was always the same:

What I Learned From Being Denied Credit Cards

When I was finally prepared to get a credit card on my own, none of the banks I applied to would give me a chance.

It went like this:

It’s not exactly a winning pitch to convince someone to give you a line of credit! Two banks denied me, but one banker was kind and shared some info that has helped me raise my credit score by over 100 points in the past five months.

First, I should stop trying to apply for credit cards that would get denied. His reasoning was simple: when you apply, they do a hard credit check, which, in turn, can lower your credit score even more.

His second piece of advice was to get a secured credit card.

How a Secured Credit Card Works

He told me that no major bank was going to accept my credit application, but there was actually an alternative option available – one which was especially perfect for those in my exact situation: to sign up for what is called a secured credit card.

While the terms for these are horribly one-sided in favor of the lender, I assure you it is a small price to pay for the result you receive after only a few months.

This process truly confused me at first since I thought the deposit was money I could actually spend. What I learned, however, is that the deposit is there in case I default.

I couldn’t spend the deposit itself, but I would get it back if I kept my account in good standing until I closed the card.

After you make your deposit, secured cards are also treated just like traditional credit cards. Your secured card will typically look and act just like a regular credit card, so no one will know it is secured.

There is also an annual fee associated with most secured credit cards, but I felt it was a small price to pay for the opportunity to build some credit history.

How to Maximize the Benefits of Your Secured Credit Card

When I first checked my credit score with MyFICO in March of 2011, it was sitting at 621.

I set up my new secured credit card with a credit limit of $1,100. The credit limit should be a function of what cash you have and also what you plan on using the credit card for.

According to many bankers and friends I talked to, you should try to run a 75% utilization rate on your credit card to maximize your potential to raise your credit score.

So, if you only spend around $300 a month, you should give your secured credit card a $500 down payment so that you are utilizing your credit rather than having a $1,000 dollar limit and only spending $300.

My expenditures were approximately $700 dollars a month so the $1,100 dollar limit fit my needs.

Why You Should Let Your Kids Get a Secured Credit Card

To all of the parents out there who worry about letting their college kid apply for a credit card, I can tell you it worked for me in five months and will change my financial future for many years to come.

It’s a safe way to earn credit if you do not trust your kid to spend responsibly.

The worst that can happen with a secured card is that you cannot pay your bill, your company closes out the account, and they pay off your credit with the money you already have on deposit.

My secured card worked perfectly for me, and I have now been accepted for a credit card with a major bank.

How I Raised My Credit Score Over 100 Points

Raising my credit score with a secured card took some disciplined, conscientious spending.

Here are the rules I followed to maximize the benefits of my secured credit card.

• Spend What You Have: After I received my secured card and started spending, I made sure that I would only spend money I already had or would receive before the next pay period.

• Pay Often: I ended up paying off my credit card roughly four times a month to ensure I never carried a balance from one month to the next.

• Know Your Limits: I would never let my credit limit exceed $800, and I would never pay it off if the card balance was under $300 unless the pay period was coming to an end.

• Make Purchases: I would put every penny of my spending on the credit card – from the smallest expenses, such as a drink from the gas station, to major purchases, such as airline tickets or hotel rooms.

• Be Consistent: I repeated this process for 5 months to establish a credit history of regular use and always pay on time.

What My Improved Credit Score Allowed Me to Do

In August of 2011, I had to purchase a car so I could switch jobs.

When I filled out the credit application to see if I qualified for lower financing rates, my credit score came back as 731.

This is a very big deal because, at 621, I would have been denied a loan for the car or would have had an interest rate that exceeded 9% on the auto loan.

Since I chose to get a secured credit card, I was able to take the car loan on my own and qualify for the low rate of 3.99% financing.

The difference in the loan between the two interest rates would be $750 over the life of the loan, far surpassing the card’s annual fee and the opportunity cost of my secured credit card holding my $1,100 for five months.

4. Increase Credit Limit

One factor that is used to calculate your credit score is credit utilization, which is the amount of credit you’re using compared to your credit limit.  In general, it’s best to keep your credit utilization below 30%.  So, if you have a credit card with a $1,000 limit, you should try to keep your balance below $300.

If you have a good payment history and credit utilization is the only thing holding your score back, you may be able to get your credit limit increased. This will lower your credit utilization ratio and, in turn, raise your credit score.

To get started, call your credit card issuer and ask if they’re willing to raise your limit.  It’s always best to start with a soft inquiry, which won’t impact your credit score. But if they say no, you can always try again in a few months.

Here’s a credit utilization example :

5. Decrease/Limit Hard Inquiries for a Period

Every time you apply for a new credit card or loan, the lender will do a hard inquiry on your credit report.  This can temporarily lower your credit score by a few points.  And if you have several inquiries in a short period of time, it can look like you’re desperate for credit, which can further hurt your score.

To avoid this, it’s best to limit the number of hard inquiries you have in a 12-month period. 

And if you’re planning on applying for a major loan, like a mortgage, it’s best to do all of your shopping within a 30-day period.  This way, the inquiries will only count as one on your report.

We’ve been using the same credit cards for several years, so there haven’t been many hard inquiries on my credit.  I did recently sign up for a crypto credit card I haven’t used, so that did show up when I ran my credit report.

6. Work With a Credit Repair Agency

If you’re not able to raise your credit score on your own, you may want to consider working with a credit repair agency like Credit Saint or Lexington Law. These companies can help you dispute errors on your credit report, negotiate with creditors to remove negative items, and develop a plan to improve your credit.

Just be sure to do your research before choosing a credit repair agency.  There are a lot of scams out there, so you want to make sure you’re working with a reputable company.  You can check out the Better Business Bureau website to see if there have been any complaints filed against the company.

How Long Does It Take To Fix Your Credit Score?

The length of time it takes to raise your credit score depends on a few factors, including the items on your credit report, your current credit score, and your credit history.

If you have negative items on your credit report, it will take time to improve your score. The good news is that these items will eventually fall off your report. For example, bankruptcies stay on your report for seven to 10 years, while late payments remain for seven years.

If you don’t have any negative items on your credit report, you may be able to raise your score quite a bit in a shorter period of time. 

In general, it takes time to improve your credit score.  But if you’re patient and follow the steps outlined in this article, you can raise your score significantly over time.

The Bottom Line – Raising Credit Scores Fast

While Kevin’s story is amazing, it isn’t all that unique. In the real world, secured credit cards are a valuable tool that can be used to build your credit when you otherwise couldn’t. And for someone like Kevin, who doesn’t have any credit history, raising your credit score 100 points isn’t far-fetched.

Whether you like it or not, your credit score is important.

If you ever hope to take out a mortgage, borrow money for a car as Kevin did, or borrow funds to start a new business, you’ll need a good or decent credit score to qualify for the best rates.

While imperfect, secured credit cards offer the opportunity to improve your credit and your life.

If you are ready to improve your credit and think a secured card could help, don’t delay. Research your options and sign up today.

Raise Your Credit Score 100 Points FAQs

The post How to Raise Your Credit Score 100 Points or More in Less Than 5 Months appeared first on Good Financial Cents®.

Better yet, many of the top companies that offer identity theft protection extend up to $1 million dollars in identity theft insurance that can cover financial losses if you’re ever a victim of fraud.

With that in mind, it’s smart to compare the best identity theft protection service providers so you can sign up for this protection before you need it. Read on to learn which of the best identity theft protection services we recommend, how their plans work, and where each one shines.

Our Picks for Best Identity Theft Protection

• Identity Guard: Best Budget Protection

• LifeLock: Best Mobile App

• ReliaShield: Best Family Coverage

• ID Shield: Best Free Trial

• ID Watchdog: Best for 401(k) and HSA Fraud

Best Identity Theft Protection – Company Reviews

Without this type of protection, your sensitive personal details and financial information may be susceptible to theft and fraud, making you an easy target for hackers and thieves. The company reviews below can help you find the best identity theft protection services for your needs.

Identity Guard was chosen as our best budget pick based on the broad range of coverages offered in their basic plan. For just $7.99 per month, individuals can get protective benefits such as $1 million in insurance for stolen funds and fraud, dark web monitoring, a U.S.-based dedicated case manager, and more.

The company’s scanning is backed by IBM Watson, a supercomputer that uses artificial intelligence to find and analyze fraud patterns and warn customers faster.

Individuals who want the most robust coverage possible will also get a good deal with their Premier plan, which is only $25 per month. This plan includes every kind of fraud protection you can think of, plus the benefit of three-bureau credit monitoring, credit and debit card monitoring, 401(k) plan and investment account monitoring, sex offender registry monitoring, monthly credit score reports, and more.

LifeLock offers comprehensive identity theft coverage in three different tiers, all of which include up to $1 million in identity theft insurance for lawyers and experts and cybersecurity via Norton 360. That said, each tier of coverage also offers $25,000, $100,000, or $1 million in coverage for stolen funds reimbursement as well. Another stand-out feature of LifeLock is its 60-day money-back guarantee, which applies when you select the annual payment option for your coverage.

This company’s mobile app is also the highest-rated out there, with 4.6 out of 5 stars in the App Store and 4.5 out of 5 stars on Google Play. This can be important for consumers who want to receive notifications and keep an eye on their identity theft protection on the go.

ReliaShield offers identity theft protection plans for individuals and families, and their plans for individuals start at just $7.99 per month or $87.99 per year. Also, note that all of ReliaShield’s plans come with $1 million in stolen funds and expense reimbursement coverage.

All family plans also include free coverage for all children in the home who are under 18 — including monitoring social media accounts and public records — making ReliaShield a good option if you want to set up identity theft prevention for your dependents.

We also like the fact that ReliaShield offers three plans to choose from, including a top-tier ReliaShield Elite plan with Social Security number monitoring, three credit bureau monitoring, bank account takeover monitoring, credit card application monitoring, and more.

IDShield is another credit monitoring company to consider, and doing so is made easy thanks to their free trial. This company lets you enjoy identity protection and credit protection for 30 days before you commit to your plan. If you’re unhappy with their services or you want to switch to a different company, you can simply cancel before 30 days are up.

This company offers individual and family plans that include only your TransUnion credit report, but you can also select plans that include monitoring of all three bureaus. Each of their plans also comes with $1 million in identity theft insurance coverage as well as credit bureau monitoring, social security number and court records monitoring, dark web monitoring, and credit score tracking and reporting.

ID Watchdog is worth considering if you want the most amount of identity theft insurance possible, particularly if you have a lot of money in your 401(k) or a Health Savings Account (HSA). Both of this company’s plan options come with $1 million in identity theft insurance, but the ID Watchdog Premium plan adds an additional $1 million in coverage for stolen funds from a 401(k) or HSA.

Other perks offered by the top-tier plan include financial accounts monitoring, integrated fraud alerts, social account takeover alerts, a private VPN, and a password manager. Family plans also let you set up a credit freeze on your dependent’s Equifax credit report.

Identity Theft Guide 

Whether your goal is avoiding identity theft scams online or securing some identity theft protection insurance, the best identity theft monitoring services can help you along the way. Keep reading to learn how identity theft works, how identity theft companies can help you prevent fraud, and what to do when your identity is stolen.

What Is ID Theft?

According to government resources, identity theft takes place when someone steals your personal information to commit any type of fraud. They may use that information to apply for a credit card or payday loan in your name, or they could file your tax return and try to get your refund. Not only can ID theft damage your credit file, but it can cause victims of identity theft considerable stress as they work to restore their identity.

Unfortunately, identity theft is becoming more costly each year, and fraudsters are still finding new ways to get their hands on personal details, such as your driver’s license or SSN, which they can use to commit fraud. The 2022 Identity Fraud Study from Javelin* revealed that fraudulent activity and data breaches cost consumers $43 billion in losses in 2021 alone.

The report also shows that total identity fraud losses climbed to $56 billion (USD) in 2021 and that hackers and identity thieves have increasingly moved toward contacting their victims directly to ensnare them.

As the report from Javelin says, “A noteworthy characteristic of identity fraud scams is that consumers often recall the moment they interacted with a criminal through a text, call, or email.”

How Does ID Theft Protection Work?

ID theft protection companies offer plans that include various levels of protection from fraud. Common inclusions in ID theft prevention plans include credit bureau monitoring, dark web monitoring, Social Security number monitoring, social media monitoring, identity theft insurance, real-time bank account monitoring, fraud alerts, and even malware protection or antivirus software.

Generally speaking, consumers pick a plan that applies to themselves and their family members, and they begin enjoying ID theft protection right away. While consumers can still lean on old-fashioned identity theft protection strategies like checking their credit reports for errors (or more modern cybersecurity strategies such as enabling two-factor authentication), an ID theft company will work on their behalf around the clock and notify them of suspicious activity.

Most identity theft protection companies offer an online dashboard, and many also have their own mobile app. Consumers can use both of these platforms to keep an eye on any changes to their credit reports or to find out if anyone is trying to withdraw money or open a new account in their name.

Many ID theft services contact their clients through email alerts, but some will send fraud alerts via text or their mobile app.

How to Protect Yourself From Identity Theft

If you have been wondering how identity theft destroys your credit score and are looking for a way to prevent it, your best bet is to sign up for ID theft protection with one of the providers we highlighted in this guide. By paying for identity protection services, you get 24/7 monitoring of your accounts, which can lead to the discovery of signs of fraud right away.

In the meantime, make sure the plan you select comes with a considerable amount of identity theft insurance and recovery services. This type of protection can cover your financial losses if you wind up being a victim of fraud, as it can pay for expenses like lawyer fees and reimbursement of stolen funds.

If you’re looking for ways to repair your credit history, however, you may need to look in a different direction. For example, you may be wondering how to fix errors on your credit report or how to remove collections from your credit report.

Maybe you want to know how to dispute your credit report or want to look into a credit score simulator to see how decisions could affect your score.

These are questions you should ask of the best credit repair companies instead of an ID theft protection service.

Types of ID Theft Scams

When it comes to the types of identity theft scams, there are endless possibilities to be aware of. The Federal Trade Commission (FTC) frequently lists the latest ID fraud scams on its website, and here are some of the latest:

• Crypto donation scams

• Credit repair companies stealing personal data

• Hackers pretending to be the FTC

• COVID-19 identity fraud scams

• Phishing scams via phone, text, or email (this can be reported to the Anti-Phishing Working Group at reportphishing@apwg.org)

The Federal Bureau of Investigation (FBI) also offers information on common identity theft scams to be aware of. Some of the scams listed with the FBI include:

• Adoption scams

• Advance fee scams

• Charity and disaster fraud scams

• Elder fraud scams

• Internet auction fraud

• Ponzi schemes

From here, the list goes on and on. If you have been wondering why you should check your credit report regularly, the endless number of scams out there is a good indication that you need to protect yourself. Ultimately, this is why you should sign up for identity theft protection services that work on your behalf 24 hours a day.

How We Found the Best Identity Theft Protection Services

To find the best identity theft protection services, we looked for companies that offer diverse plans to choose from. We only selected companies that offer at least $1 million in identity theft insurance, and we went with providers that offer plans for both individuals and families.

While the quality of ID theft plans was considered for this ranking, we also looked at the total cost for monthly or annual plans. Ultimately, we selected the ID theft companies that offer the most services and best value for the money spent.

Summary of the Best Identity Theft Protection Services March 2024

• Identity Guard: Best Budget Protection

• LifeLock: Best Mobile App

• ReliaShield: Best Family Coverage

• ID Shield: Best Free Trial

• ID Watchdog: Best for 401(k) and HSA Fraud

Bottom Line: Top 5 Identity Theft Protection Services 2024

In today’s digital age, safeguarding your personal information is crucial. The top identity theft protection services of 2024 offer a shield against evolving fraud threats. 

Identity Guard stands out with comprehensive coverage starting at $7.99/month, powered by AI-driven scanning. LifeLock excels in mobile app ratings, with plans featuring up to $1 million insurance and Norton 360 cybersecurity. ReliaShield caters to families, providing $1 million in coverage and child protection at affordable rates. 

ID Shield offers a risk-free trial period and various plans, including credit monitoring. ID Watchdog specializes in 401(k) and HSA fraud protection with additional coverage. Stay vigilant with these services to thwart cybercriminals and their constantly evolving tactics.

The post 5 Best Identity Theft Protection Services of 2024 appeared first on Good Financial Cents®.

Bad credit or poor credit, on the other hand, can make it difficult to qualify for a loan you truly need, especially not one with the best rates and terms.

This is part of the reason it’s smart to care about your credit early on — well before you need it. If you’re hoping to build credit now so you can live the life you want when you’re ready, read on to learn how credit scores work and the best ways to build credit that lasts.

Key Takeaways

• Your credit score can impact your ability to buy a house, finance a car, or take out a personal loan.

• The most common credit score is the FICO score. This type of score is used by 90% of top lenders.

• There are five main factors that make up your FICO score — your payment history, the amounts you owe, the length of your credit history, new credit, and your credit mix.

• Building credit from scratch can be a challenge, yet there are several credit-building financial products that can help.

How Credit Scores Work

Before you learn how to build your credit score, you should have a basic understanding of how credit scores are determined in the first place. When it comes to FICO scores, you should first note the fact that your score can fall between 300 and 850, with higher scores showing better credit health.

Within that broad range, there are different tiers of scores to strive for. With the FICO scoring method, credit score ranges are as follows:

According to USA Today, the average VantageScore (another type of credit score that works similarly to the FICO score) is currently at 702, which is up from the average score of 697 reported in 2022.

Regardless, it’s best to shoot for a score of 670 or higher, mostly because this is the threshold where lenders believe you have a good credit score.

Knowing credit score ranges can help you find a goal to shoot for, but you also need to know the factors that come into play. The FICO scoring method considers five different factors when determining your score: 

• Payment history (35%): This factor looks at how often you pay your bills early or on time, as well as whether you have any late payments.

• Amounts owed (30%): This factor looks at how much debt you owe in relation to your credit limits.

• Length of your credit history (15%): This factor looks at the average length of all your credit accounts combined.

• New credit (10%): This factor considers how many newer hard inquiries and credit accounts you have.

• Credit mix (10%): Your credit mix considers the types of credit you have, including revolving credit, installment credit, and more.

6 Ways to Build Credit Fast

If you want to know how to build your credit score, taking a look at the factors we outlined above can help. However, there are some specific steps you can take to build your credit score fast, including the following:

Get a Secured Credit Card

Building credit can be a challenge when you have none, mostly because it’s difficult to get approved for any type of credit card or loan. However, secured credit cards help you sidestep that issue altogether — that is if you’re willing to put down collateral.

With a secured credit card, consumers typically put down a cash deposit of $49 to $200 or more. This collateral secures their line of credit, which gives them a small amount of purchasing power.

Many secured credit cards don’t require an annual fee, and some even let you earn rewards. Also, note that the cash deposit you put down is fully refundable when you close your account or upgrade your card in good standing.

The most important benefit of secured credit cards is the fact they report to the three credit bureaus — Experian, Equifax, and TransUnion.

This means that, as you use a secured credit card for small purchases and pay your bill on time, your secured credit card can add depth to your credit history and boost your credit score.

Apply for a Credit Builder Loan

Another option for building credit involves applying for a credit builder loan. With this type of loan from Self, for example, consumers take out a “loan” of sorts that allows them to make payments to a savings account.

While a small amount in fees and interest is charged along the way, the loan user gets the money they pay toward the loan back in the end. More importantly, the payments they make are reported to the credit bureaus, giving them the chance to build their credit score quickly.

While credit builder loans aren’t free by any means, they don’t have to be costly, either. As you can see from the screenshot below, a credit builder loan from Self can cost as little as $48 over 12 months.

Try Credit-Building Apps

Also consider a handful of free apps that can help you build credit without much work on your part, and without taking out any type of loan. With Experian Boost, for example, consumers can download the app and start getting credit for streaming services they pay for, utility bills, and more.

Experian Boost is entirely free, and you can even get a free look at your FICO® Score 8 just by downloading the app. However, it’s worth noting that you need six months of credit history to get a FICO credit score and to better assess your creditworthiness over time.

Look Over Your Credit Reports

Another step you can take to build credit involves making sure you don’t have any glaring mistakes on your credit reports. After all, incorrect reporting on your credit reports can adversely affect your score, yet you won’t know you have any problems unless you take the time to look your reports over.

Fortunately, the website AnnualCreditReport.com lets users look at the credit reports from the three credit bureaus — Experian, Equifax, and TransUnion — for free.

While you could only see each of your reports once every 12 months in the past through this site, you can now check your credit reports up to once per week for free due to the COVID-19 pandemic.

Once you download all three of your credit reports, make sure to look them over for incorrect reporting, such as false late payments or incorrect balances owed. If you find any problems or incorrect information, you should dispute credit report errors and have them removed.

Become an Authorized User

Becoming an authorized user of another person’s credit card can also help build credit fast. When you’re an authorized user, payments made to the primary cardholder’s account can help add depth to your credit reports, thus boosting your score. 

However, it’s worth noting that the opposite is also true and that a primary cardholder who pays their bills late has the potential to damage your credit score. This is why, at the end of the day, you should only become an authorized user alongside someone you trust and vice versa.

Use Credit Responsibly

Whether you apply for a secured credit card, take out a credit builder loan, or use the available credit you already have as a means to build your credit score, there are plenty of steps that can help you prove your creditworthiness to potential lenders.

The most important credit-building moves include the following:

• Pay all your bills early or on time. Since the most important factor that makes up your FICO score is your payment history, paying bills early or on time is the best move you can make.
  
  If you’re worried you’ll accidentally miss a bill, take steps to make sure you don’t forget, such as setting calendar reminders or setting your bills up on autopsy.

• Keep your credit utilization on the low side. Maxing out your credit cards is a surefire way to make sure you look risky to potential lenders. Generally speaking, you should strive to keep the amounts you owe — also called your credit utilization — below 30% of your available limits.
  
  If possible, keeping your utilization below 10% is even better.

• Don’t open too many new accounts. Since new credit also plays a role in determining your FICO score, you should strive to avoid opening new accounts you don’t actually need.
  
  At the very least, try to space out new account applications by several months if you can.

• Keep old accounts open. Also, avoid closing older accounts you have if they’re in good standing. Keeping old accounts open can help increase the average length of your credit history — even if you’re not using them.

• Monitor your credit score. Finally, it can help to keep an eye on your credit score as you build it over time. By monitoring your progress, you can see how you’re doing and find out quickly if something has gone wrong.

Difference Between Building Credit and Fixing Credit

The steps we outline above are good ones regardless of where you are in your credit-building journey, but it’s still important to understand the difference between building credit and fixing credit mistakes you have made in the past.

In the former scenario when you have no credit to speak of, your main focus should be qualifying for some basic lines of credit (credit builder loans, secured credit cards, etc.) in order to start building a credit history.

In the latter scenario, however, additional steps may need to be taken to get your credit where it needs to be.

For example, let’s say you have credit accounts in default. In this case, the steps above won’t necessarily help your situation until you get your defaulted accounts in good standing.

If you’re trying to fix credit, your next best move typically involves making payments on old accounts in default and working to pay them off. 

Of course, you can also turn to a credit repair agency like Credit Saint for help. Not only can a credit repair agency serve as your advocate, but they can help negotiate with creditors to lower your interest rates or secure better repayment terms.

Credit Saint and other similar companies also work to identify problematic items on your credit reports so they can get those items resolved.

The Bottom Line

Building credit takes time and patience, but it also requires a certain amount of credit-building skills and knowledge. Fortunately, the process isn’t that complicated, and there are credit-building products geared specifically toward people who need to build credit or repair credit mistakes from the past.

If you need to start building credit, you know now exactly which steps to take next. The sooner you get started, the sooner you’ll have a credit score you can be proud of.

The post How to Build Your Credit Score appeared first on Good Financial Cents®.

To help in your search for the right provider, we took the time to compare more than 20 credit repair companies that offer services nationwide.

Lexington Law came out ahead of the pack due to its transparent pricing schedule and highly rated mobile app, but other credit repair agencies made our ranking stand out in their own way.

Our Picks for Best Credit Repair Companies of 2024

• Lexington Law: Best Credit Repair Company Overall
• Credit Saint: Best Money-Back Guarantee
• Sky Blue Credit Repair: Best for Transparent Pricing
• The Credit People: Best for Fast Results
• Pyramid Credit Repair: Best Phone Support
• Ovation: Best for Personalized Service
• CreditRepair.com: Best for Credit Report Disputes

Best Credit Repair Company Reviews

The best credit repair agencies can help you find inaccuracies on your credit report and get the clean slate you’ve always wanted. Each company we chose boasts plenty of positive reviews, as well as transparent pricing and a comprehensive list of services, without making outrageous claims. 

Keep reading to learn what makes these credit repair services stand out and which credit repair plans they offer.

Lexington Law has been in the credit repair business since 2004, and the company has sent out 221 million challenges & disputes on behalf of its clients since those early days.

This company offers assistance from credit repair attorneys, and they can help you get started with a free online credit report consultation. Lexington Law also offers its own helpful mobile app, which has an average rating of 4.7 out of 5 stars among users.

You can sign up for credit repair help from Lexington Law in every state except for Oregon, and they handle all aspects of credit repair, ranging from disputing information on your credit reports to bankruptcies, collections, foreclosures, and more.

Lexington Law offers three credit repair plans that range from $99.95 for a basic plan to $139.95 per month for a plan with more services included. For example, their top-tier Premier Plus credit repair plan includes credit repair basics like bureau challenges, free credit report alerts, identity protection, cease and desist letters, and personal finance tools.

List of Services:

• Disputes with credit reporting agencies
• Identity theft insurance
• Free credit scores
• Lost wallet protection
• Junk mail reducer
• Creditor interventions
• Assistance with creditor inquiries

Credit Saint was originally founded in 2004, and the company boasts a rating of A with the Better Business Bureau (BBB) and excellent rankings from third parties, including Consumers Advocate and Consumer Affairs.

This credit repair firm is one of the best when it comes to challenging incorrect data, and they offer a 90-day money-back guarantee as a result.

This means that if you don’t get the credit repair results outlined in your contract, you can get your money back within the first three months.

This provider also offers a free consultation over the phone, and plans range from $79.99 per month to $119.99 per month. Also, note that this company charges an “initial work fee” of $99 to $195, depending on the plan you choose.

List of Services:

• Unlimited challenges with the credit bureaus
• Credit score analysis
• Creditor interventions
• Credit inquiry targeting
• Experian credit report monitoring

Sky Blue Credit has been in operation since 1989, so it’s one of the most established credit repair services in our ranking. This company also offers a transparent and affordable pricing model with a monthly fee of $79 for individuals or $119 per month for couples.

Also, be aware that, like Credit Saint, Sky Blue Credit charges a one-time first work fee that is equal to the monthly charges on your account.

Sky Blue Credit promises to help you monitor and track your credit score while they file credit disputes that can repair damaging information in your credit history. Credit Saint also offers debt validation, goodwill letters, cease and desist letters, and more at no additional cost. They’re backed by a money-back guarantee as well, so you can get a refund if this company’s customer service doesn’t live up to expectations.

List of Services:

• Credit disputes (up to 15 items every 35 days)
• Credit score rebuilding services
• Statute of limitation research
• Debt validation
• Goodwill letters
• Cease & desist letters

The Credit People was originally founded in 2001, so they have had more than 20 years to fine-tune their credit repair services. With plenty of experience under their belts, this company promises meaningful results with your credit within the first 60 days.

This is much faster than other credit repair companies on our list claim they can perform, so this company can be a good choice if you need credit repair fast.

The Credit People offers the same basic credit repair services as other companies on this list, although their pricing model is rather different. You can get started for just $19 and pay only $79 per month, but you can also prepay $419 for six months of service. That brings the total monthly cost for six months down to less than $70 per month.

List of Services:

• Credit report disputes
• Free credit score from all three credit bureaus
• Free credit report from all three credit bureaus
• Debt validation
• Inquiry validation
• Creditor communication included

Pyramid Credit Repair has been in the business since 2011, although they were originally founded as a software company that aimed to help consumers repair their credit on their own.

However, Pyramid eventually added its own credit repair services to its plans, and it now operates as a full-service credit repair company.

Pyramid stands out due to its money-back guarantee, its 24/7 customer support phone options, and the transparent pricing that applies to its plans.

A credit repair plan for singles is only $119 per month, but you’ll pay $198 per month if you need credit repair as a couple.

On top of those plans, you can pay another $25 per month for 24/7 identity theft protection, credit monitoring, including dark web monitoring, and $25,000 in identity theft insurance.

List of Services:

• Unlimited credit report disputes
• Personal finance tools
• Debt validation
• Inquiry validation

Ovation Credit Repair is a LendingTree company that offers a free consultation and an in-depth look at your credit situation and score.

They also offer personalized credit help from a case advisor who will become intimately acquainted with your case, along with personalized dispute resolution and same-day service in some cases.

Plans from Ovation cost either $79 or $109 per month, depending on the level of service you require. However, you’ll also need to pay an upfront fee of $89 to get started with either credit monitoring plan.

List of Services:

• Credit disputes
• Debt validation
• Goodwill letters
• Personalized recommendation letters
• TransUnion credit monitoring
• Financial management tools

CreditRepair.com

CreditRepair.com has been in operation since 2012, and they claim to have filed more than 23 million credit challenges and disputes on behalf of their clients since then.

The company has helped with more than 7.5 million removals on behalf of its clients over the last decade, and they have taken part in more than 1 million interventions to help its clients improve their credit scores.

Creditrepair.com offers three different plans that range from $69.95 to $119.95 per month. With each of their plans, a “first work fee” equal to the monthly plan fee is required.

Credit Repair Companies: Services and Pricing Overview

Credit Repair Guide

When it comes to fixing errors on your credit report, working with a credit repair company can make the process easier.

This is mainly due to the fact that these companies know exactly which steps to take to repair your credit and that they take on the most time-consuming parts of the work themselves.

If you want to access the best credit repair money can buy. However, it helps to know how the credit repair industry works and what to expect.

Read on to learn how legitimate credit repair companies are supposed to operate and what to look for as you make your decision.

How Does Credit Repair Work? 

Credit repair is a term used to describe the process of disputing incorrect information on a person’s credit report. Credit repair agencies do this on their client’s behalf in exchange for payment, usually in the form of a monthly plan fee.

When an individual contacts a credit repair firm, they connect them with the best credit monitoring and credit report oversight services. Credit repair firms then look for incorrect information, false reporting, and credit report errors that can result in a lower credit score than the client deserves.

Over time, credit repair companies get incorrect information removed from credit reports, and clients see their credit scores improve as a result.

How Long Does Credit Repair Take? 

Disputing your credit report takes time, and that’s true whether you do it on your own or you hire a credit repair agency to help. Commonly disputed credit report information can include falsely reported late payments, incorrect credit balances, accounts falsely reported as in collections, and more. 

It’s worth noting that there are some credit actions that cannot be removed from your credit reports, no matter what, including past bankruptcies. Removing collections from your credit report is also impossible if the information is correct.

The Federal Trade Commission (FTC) reminds us that credit repair agencies cannot remove accurately reported negative information from your credit reports.

This means that if you really did make a late payment or let one of your accounts go to collections, that information will stay on your credit reports for up to seven years, regardless of what a credit repair agency says or does.

How Is Credit Repair Different From Credit Monitoring?

Credit monitoring is a service that provides oversight of your credit reports and regular reporting of the results. Credit monitoring companies may agree to oversee one of our credit reports or all three, and they often offer additional services like free credit scores, dark web monitoring, Social Security number monitoring, and more. While credit monitoring will let you know when movement is reported within your credit reports, these companies do not help dispute information like credit repair companies do.

It’s also worth mentioning that credit repair is different from credit counseling. Where credit repair firms take steps to help you fix inaccuracies on your credit reports, credit counseling companies meet with you to discuss moves you can make to improve your credit score on your own.

Is Credit Repair a Scam?

The Federal Trade Commission (FTC) says that credit repair and debt relief scams were around well before the pandemic. Further, most scams tend to target financially distressed consumers who have credit problems or significant credit card debt. 

“These operations lure consumers to purchase their services by falsely claiming that they will remove negative information from consumers’ credit reports even if that information is accurate,” says the FTC. However, no credit repair agency is entitled to make this claim since it is illegal for credit bureaus to remove accurately reported information on any person’s credit report.

The FTC notes that they have brought about numerous law enforcement actions and lawsuits against bogus credit-related services. In 2010, the FTC also amended its Telemarketing Sales Rule to prohibit for-profit companies that sell their services over the telephone from charging an upfront fee. 

The rule “also prohibits debt relief providers from making misrepresentations and requires that they disclose key information that consumers need in evaluating these services,” they write.

With all this being said, there are plenty of reputable credit repair companies out there, including firms that promote upfront and transparent pricing and offer a satisfaction guarantee. If you’re looking for help repairing your credit, the key is finding the best credit repair services out there and choosing the one that aligns best with your needs.

How to Fix Credit Yourself 

It’s important to be aware that credit repair agencies can’t do anything for you that you can’t do yourself. This doesn’t mean credit repair services aren’t worth it. It just means that you can fix your credit on your own if you’re willing to do the required research and complete all the work yourself.

Also, note that the Fair Credit Reporting Act (FCRA) ensures you have certain rights when it comes to your credit.

For example, you have the right to know what is in your credit report and if the information has been used against you. You also have the right to ask what is in your credit reports and to dispute any incorrect information found.

Credit bureaus like Experian, Equifax, and TransUnion are also required to correct or delete incorrect, incomplete, or unverifiable information from your reports within 30 days once they have been notified.

With these details in mind, the following tips can help you repair your credit on your own:

• Dispute true errors on your credit reports. You can get your hands on your best credit report from all three bureaus for free using the website AnnualCreditReport.com. 
  
  If you find incorrect information on a copy of your credit report, such as false late payments or incorrect balances, disputing your credit report with each applicable credit bureau can help you get it corrected.
• Pay your bills on time.Your payment history is the most important factor that makes up your FICO score, so paying your bills early or on time is one of the most important moves you can make.
• Avoid taking on new debts. Avoid racking up more debts that can increase your credit utilization rate since having too much debt can cause your credit score to plummet.
• Pay down balances on revolving debts. How much debt you owe is the second most important factor that makes up your FICO score, and paying down some of your debts is the best way to score well in this category.
• Keep a close eye on your credit score. Finding your FICO score for free can help you see where you’re at right now while giving you the chance to monitor your credit progress over time.

If you take the steps we have recommended above, raising your credit score by 100 – 110 points fast is a real possibility. However, a credit repair agency can help you with any part of the process you don’t understand or care to deal with.

Either way, checking your credit score regularly is a smart move. By keeping an eye on your score, you can know if the steps you’re currently taking with your credit are helping your score or making it worse.

How We Found the Best Credit Repair Companies

If you’re sick and tired of dealing with debt collectors but need to get back on track to a good credit score, credit repair companies can help.

However, you should make sure you’re choosing a firm that offers unlimited disputes and an array of other credit interventions that can turn your situation around.

To help in your search, we compared more than 20 of the best credit repair agencies. Ultimately, we searched for providers who have been in operation for a decade or longer, as well as those with transparent pricing, excellent customer support options, an array of services, and nationwide availability. 

Summary of the Best Credit Repair Companies of 2024

• Lexington Law: Best Credit Repair Company Overall
• Credit Saint: Best Money-Back Guarantee
• Sky Blue Credit Repair: Best for Transparent Pricing
• The Credit People: Best for Fast Results
• Pyramid Credit Repair: Best Phone Support
• Ovation: Best for Personalized Service
• CreditRepair.com: Best for Credit Report Disputes

The post 7 Best Credit Repair Companies of 2024 appeared first on Good Financial Cents®.

In the meantime, you should learn about what is considered a bad credit score in the first place and the thresholds you have to surpass to have “fair” credit or “good” credit instead.

Since lenders can use different credit scoring models and credit score ranges, however, what is a bad credit score number can vary. With that in mind, this guide will explain how a poor credit score looks from the perspective of the FICO scoring model and the VantageScore. 

Once you have an idea of how your credit score looks and which credit score range it falls into, you can take appropriate steps to improve it.

What Is a Bad FICO Score?

FICO credit scores were created by the Fair Isaac Corporation and are the most commonly used credit scores in circulation. In fact, FICO credit scores are used by over 90% of top lenders when making decisions on whether to lend money.

While there are different FICO credit scores in use, it’s important to know that this type of score falls between 300 and 850. From here, scores that fall within different ranges are considered anywhere from bad to excellent, as shown below:

• Exceptional: 800+

• Very Good: 740 to 799

• Good: 670 to 739

• Fair: 580 to 669

• Poor: 579 and below

If you’re wondering which range to shoot for, “good” credit is a good place to start. According to myFICO.com, many lenders consider scores above 670 as an indication of good creditworthiness. “Typically, the higher your score, the lower the risk and the more likely creditors are to lend to you,” they write.

What Is a Bad VantageScore?

The VantageScore is another popular type of credit score, and this score’s newest models (VantageScore 3.0 and 4.0) also assign credit scores from 300 to 850.

However, the range of scores is slightly different than the FICO scoring model. As you can see below, there are more ranges to be aware of, and “good” credit requires a slightly lower threshold. In the meantime, “fair” credit requires a slightly higher score.

• Excellent: 781 to 850

• Good: 661 to 780

• Fair: 601 to 660

• Poor: 500 to 600

• Very Poor: 300 to 499

The newer VantageScore models also break down the bad credit score range into “poor” and “very poor” categories. Either way, consumers should strive for a VantageScore that’s considered “good” or better.

Downsides of a Poor Credit Score

Perhaps you don’t think poor credit is a big deal, but you may quickly change your tune if you need to borrow money, rent an apartment, or even get car insurance. The reality is that a truly “poor” credit score can impact your life in more ways than people realize.

How does a bad credit score affect me? Consider these pitfalls of poor credit:

• Poor credit = higher interest rates. A lower credit score almost always results in higher interest rates, and that’s true whether we are talking about credit cards or other types of loans.
  
  If you are approved to borrow money with any financial product, the cost of borrowing with a high APR can be sky-high.

• You’ll miss out on the best credit card offers. A poor credit score will bar you from qualifying for the best credit cards on the market today, including ones with excellent perks. If anything, you’ll be able to get approved for a credit card for bad credit or a secured credit card.

• Renting an apartment can be more costly. A low credit score can make you seem more risky to potential landlords. As a result, you may need a cosigner to rent a house or apartment, and you may need to put down a larger security deposit.

• You could miss out on a job. Employers can request your permission to see a modified version of your credit report as part of the interview process. If your credit score is very damaged, this will likely hurt your chances of getting the job.

• You may struggle to get a mortgage. Poor credit can make it difficult to qualify for a mortgage. If you do get approved, you could have to come up with a larger down payment or pay a higher interest rate.

• Financing a car becomes expensive. Auto loan rates vary based on your credit score, and a higher score is always better.
  
  According to Experian’s State of the Automotive Finance Report for Q1 of 2023, deep subprime borrowers buying used cars with credit scores between 300 and 500 paid an average interest rate of 21.32% on car loans.
  
  In Q1 2023, the average interest rate for a used vehicle surged to 11.17%, a notable increase from 8.67% in the previous year’s corresponding period.

• Your auto insurance rates are higher. Also, be aware that a low credit score can result in higher car insurance rates. Car insurance companies consider your creditworthiness as a major factor in assessing risk, and they will price your premiums accordingly.

Steps to Improve Your Credit Score

The good news about a bad credit score is that you can always do better. In fact, there are numerous ways to increase your credit score over time and without a ton of work.

You just have to be strategic and disciplined, and you have to avoid making all the poor decisions that got you in the bad credit score range in the first place.

If you need a better credit score for an auto loan or you want to be able to buy your own home one day, the following steps can help you build good credit that lasts.

Step 1: Take a Look at Your Credit Reports

Before you can fix a bad credit score, it’s immensely helpful to look at all the information on your credit reports. Your credit reports store all the information lenders have reported to the credit bureaus about you in the past.

Information found on your credit reports includes but is not limited to balances you owe, your payment history on credit cards and other loans, any accounts you have in default, and more.

We suggest heading to AnnualCreditReport.com, a website that lets you look at your credit reports for free.

While you used to be able to see each of your credit reports once every 12 months through this portal, you can now check your reports for free weekly due to the COVID-19 pandemic.

Once you head to this website, you’ll want to look at your credit reports from all three credit bureaus — Experian, Equifax, and TransUnion. It’s crucial to look at all three reports because the information reported to each bureau can vary.

Look over the information on your credit reports, and you’ll have a general idea of the mistakes you have made with credit in the past.

If you find any errors, you can also follow a formal process to dispute credit report mistakes. In some cases, a corrected error on your credit report can quickly boost your score.

Step 2: Pay All Your Bills Early or on Time

Another important step involves paying all your bills early or on time. While an occasional late payment may not seem like a big deal, it is because your payment history is the most important factor that makes up your FICO credit score.

While on-time or early payments can help prove your creditworthiness and increase your score over time, a late payment can dramatically impact your score in a negative way.

If you’re worried about paying bills late or you’re prone to forgetting your due dates, we suggest setting up your bills on autopay or setting reminders on your phone.

Step 3: Pay Down Revolving Debts

Also, see if you can pay down any revolving debts you have, such as credit card balances.

Because how much you owe in relation to your credit limits (also called your credit utilization) is the second most important factor that makes up your FICO score, paying down debt can result in a higher credit score.

How much debt is safe? Most experts suggest paying down your revolving balances until you owe less than 10% of your available credit, or 30% at the maximum. This means keeping your balances below $500 or below $1,500 at the absolute maximum, with available credit of $5,000.

Step 4: Consider a Secured Credit Card

If you need the chance to prove your creditworthiness and you can’t get approved for other types of credit cards, a secured credit card could be your best bet.

Secured credit cards require you to put down a cash deposit as collateral, which is used to secure your line of credit.

However, these cards report your credit balances and payments to the three credit bureaus, so they can help you increase your credit score and prove creditworthiness over time.

Also, remember that a secured credit card is nothing more than a stepping stone and that you should only use this type of card until your score has increased enough to qualify for better options.

When you cancel or upgrade your secured card while your account is in good standing, you also get your security deposit back.

Step 5: Check Out Credit-Builder Loans

If you don’t like the idea of a secured credit card, you can also consider a credit-builder loan from a company like Self. With this type of “loan,” you actually make payments to a savings account that is held on your behalf.

However, your payments are reported to the credit bureaus, and you get the proceeds of your savings, minus interest and charges, once your loan term ends.

While a credit-builder loan from Self isn’t free, these loans don’t have to be costly, either. As an example, Self says one of their “Large Builder” loans requires a monthly payment of $48 for 12 months.

When the loan ends, you get $539 back and will have paid a total of $46 in interest and fees.

Step 6: Become an Authorized User on a Credit Card

Finally, see if anyone in your life is willing to add you as an authorized user on their own credit card. You’ll want the primary account holder to have a good credit score, of course, but it could be a spouse or partner or a family member.

When you become an authorized user, you can benefit from the responsible credit payments and usage of the primary account holder. 

Can a Credit Repair Agency Help?

You may also be wondering if a credit repairs agency like Lexington Law or Credit Saint can help you repair your credit. The answer to this question is definitely “yes,” but there are some facts to be aware of before you sign up.

For example, Credit Saint claims that they can help improve your credit score by challenging incorrect data on your credit reports. In the meantime, they say they can help you learn to “optimize your report using techniques for paying bills and opening or closing credit.”

However, the Federal Trade Commission (FTC) points out that credit repair companies “can’t remove negative information that’s accurate and timely from your credit report.”  Not only that, but credit report agencies can’t do anything for you that you can’t do for yourself.

With that being said, you should consider reaching out to a credit repair agency if you need help getting back on track because you can’t seem to handle it yourself.

In that case, having the expertise and support of a third party could mean the difference between improving your credit or staying where you’re at.

Bottom Line: Understanding and Enhancing Your Bad Credit Score

Understanding what constitutes a bad credit score is essential for financial well-being. FICO and VantageScore credit models assign scores between 300 and 850, categorizing ranges from “Exceptional” to “Very Poor.” 

Poor credit brings higher interest rates and limits access to favorable financial options, from credit cards to mortgages. It hampers renting, job prospects, and insurance rates. To enhance credit, start by examining credit reports, paying bills punctually, and reducing debts. 

Consider secured credit cards, credit-builder loans, and becoming an authorized user. While credit repair agencies can assist, accuracy matters most. Prioritize these steps to secure a brighter financial future.

The post What Is a Bad Credit Score? (Plus How to Improve It) appeared first on Good Financial Cents®.

• No one can legally remove correct information from your credit reports.

• If collection activity on your credit reports is incorrect, there is a formal process you can use to dispute it.

• In many cases, paying off debts in collections can help you have the information removed from your credit reports early.

• With no action taken, collection activity on your credit reports will “fall off” on its own after seven years have passed.

When you default on any type of debt obligation, such as credit card debt or a personal loan, the original creditor will try to collect on the debt for a while. Eventually, though, your creditor may come to a point where they sell your debt to a collection agency. At that point, the additional negative information is reported to the three credit bureaus, which can do considerable damage to your credit score.

Collections stay on your credit report for seven years from the point the account first went delinquent, at which point this information will automatically “fall off” your report. However, you may want to have collections removed from your credit report sooner rather than later — particularly if you’re hoping to improve your credit score in the short term. As a side note, you’ll also want to have collections activity removed from your credit reports if you believe some or all of the information is incorrect. 

But, how do you remove collections from your credit report? There are several ways this can happen, although the step you should take depends on your situation.

Steps to Remove Collections From Your Credit Report

If you’re wondering how to get collections off your credit report, you’ll likely need to take at least a few of the steps below:

• Step 1: Check Your Credit Reports

• Step 2: Dispute Incorrect Information

• Step 3: Ask for a Goodwill Deletion

• Step 4: Write a “Pay for Delete” Letter

• Step 5: Wait it Out

Step 1: Check Your Credit Reports

Whether you just think you have collections on your credit report or you know for a fact you do, you have to start the process with the full knowledge of what you’re dealing with. To find out the exact details of the collections activity you’re facing, you have to start by checking your credit reports with all three credit bureaus — Equifax, Experian, and TransUnion.

This part of the process is easy and free thanks to a government-backed website that provides free credit reports — AnnualCreditReport.com. Anyone can head to this website and receive a free look at their credit reports at any time. While free reports are normally only available once every 12 months from each of the credit bureaus, you can currently access all three of your reports weekly due to the COVID-19 pandemic.

Once you have accessed your collections information and the other details on your credit reports, you can compare the information to your own records to check for accuracy.

Step 2: Dispute Incorrect Information

If you find any incorrect data on your credit reports, you’ll need to dispute it with the credit bureaus and the company reporting the data. This is true whether we are talking about incorrect information regarding your accounts in collections, but it also applies to any other information you find.

According to the Consumer Financial Protection Bureau (CFPB), you can start the process by disputing the incorrect data with both parties in writing. Explain what you think is incorrect about the information, and try to include any documentation you have that confirms your dispute. In your letter to the credit bureaus and the company reporting the false information, you’ll want to include:

• Your Full Contact Information

• Copies of Your Credit Report With the Incorrect Information Highlighted

• A Comprehensive Explanation of Why the Information Is Wrong

• A Formal Request to Have the Information Updated, Corrected, or Removed From Your Credit Report

The CFPB also has several sample letters on its website, as well as contact information for each of the three credit bureaus. Note that you can get the mailing address for the company reporting any incorrect information directly from your credit reports.

After your dispute has been submitted and received, the credit bureaus each have 30 days to investigate your claim. If collections activity on your credit reports is indeed false, they will remove the incorrect information from your reports. If the data is correct, however, the collection activity will remain on your credit reports with no change at all.

Step 3: Ask for a Goodwill Deletion

If you know for a fact the collection activity on your credit reports is correct, there’s no reason to spend time disputing it. In fact, federal law dictates that no one can legally remove accurate information from your credit reports for any reason.

Instead of spending your time trying to get correct information wiped away, you can ask the collection agency to make a “Goodwill Deletion.” 

Note that this strategy only works if you’re wondering how to get paid collections off your credit report. If you still owe the money, there’s no chance the collection agency will do anything to make your situation easier.

If you have settled the debt with the collection agency, reach out with written correspondence that explains the circumstances that led to collections, why you would like the information removed from your credit reports, and how your situation has changed. 

There’s no guarantee the collection agency will do anything on your behalf, but it never hurts to ask. If the collection agency does indeed remove the collection reporting from your credit reports, you will still see the late payment activity that led up to collections, which is harmful to your credit score. However, having collection activity removed from your credit report while also showing a positive payment history going forward can help you get on the right track.

Step 4: Write a “Pay for Delete” Letter

According to Lexington Law, another strategy involves writing a “Pay for Delete” letter, which they say is “a negotiating tool to have negative information removed from your report in exchange for payment.”

With this type of letter, you’re agreeing to pay the balance you owe in exchange for having the information removed from all three of your credit reports. With that in mind, you’ll want to send this letter before you pay off the debt in collections. After all, you’re using your agreement to pay as a bargaining tool to get collections activity off your reports.

Your letter doesn’t need to be complicated. It just needs to include:

• Your Full Contact Information

• Account Numbers for Your Account in Collections

• The Amount You Currently Owe

• An Explanation That You’re Willing to Pay This Amount in Exchange for Having the Collection Removed From Your Credit Reports

If the collection agency responds positively, you should keep all the correspondence as proof of the agreement. If they reject your request or ignore your letter completely, you’ll have to try another strategy to have the collection information removed from your credit reports.

Step 5: Wait it Out

You can also choose to wait until the collection activity falls off your credit report on its own. This takes place seven years from the date your account first became delinquent, so you could be waiting quite a while if your financial problems were fairly recent.

Although waiting it out may seem like a long and drawn-out option, keep in mind that the impact of collection activity on your credit report will lessen over time. Also note that steps you take in the meantime, such as keeping your credit utilization low and making all monthly payments on time, can help improve your score as well.

Collections Removed? What Happens Next

Once collections activity is removed from your credit reports, either through actions you take or the passage of time, your credit score has the potential to improve fairly quickly. This is mainly due to the fact that your payment history makes up 35% of your FICO score. When negative information regarding your payment history (such as collections) stops having the power to damage your credit score, you may see a pretty big boost to your credit right away.

However, you shouldn’t let your guard down, nor should you become complacent about your credit. While collections activity may be gone from your report, late payments, high balances and other credit mishaps can still hurt your credit score moving forward.

To keep your credit score in the best shape, you should strive to always pay your bills early or on time. Also make sure you keep your credit utilization at a minimum, or below 10% of your available credit for the best results. At the maximum, you should keep your credit balances at 30% of your available credit or less, or $3,000 in debt at the most for every $10,000 you have in available credit. Also refrain from opening or closing too many accounts since either action can impact your credit in a negative way.

The Bottom Line

Having one of your debts in collections can be incredibly stressful, and that’s especially true once you see the impact on your credit score. However, it’s good to know that collections can’t harm your credit forever and that they’ll eventually fall off your reports on their own if you can’t have the information removed.

If collection accounts on your credit report are making your life difficult, however, your best bet is figuring out what steps to take to make it all go away. Most of the time, this is going to involve biting the bullet and actually paying back the money you owe.

The post How to Remove Collections From Your Credit Report appeared first on Good Financial Cents®.

The information revealed in our analysis isn’t intended to make you feel insecure in any way. Instead, it’s designed to help set parameters that will enable you to see how you are doing and to make improvements where you believe it’s necessary.

We hope you like numbers because we have plenty of them! They’re a necessary evil, and they go with the territory when it comes to personal finance. We’re going to present statistics concerning multiple topics relating to income, debt, savings and budgeting, and financial planning.

Income Statistics

Median Household Income

The median household income nationwide is $79,900. However, there is a wide variation between the individual states. The following median household income statistics are provided by the U.S. Department of Housing and Urban Development as of April 18, 2022:

Have you ever wondered where your income falls among wage earners nationwide? For example, you may be interested to know that if your household income is over $200,000 per year, you’re among the 11.9% wealthiest households in the country.

According to Statista, the income distribution in the U.S. is as follows (for 2022):

According to the U.S. Census Bureau, 11.5% of the population – or about 37.9 million people – were below the poverty line in 2022.

According to the U.S. Office of the Assistant Secretary for Planning and Evaluation (ASPE), the poverty line for 2023 is as follows (based on annual income by household size) for most of the country:

• One person – $14,580
• Two people – $19,720
• Three people – $24,860
• Four people – $30,000
• Five people – $35,140
• Six people – $40,280
• Seven people – $45,420
• Eight people – $50,560

Based on the table for “Median Household Income Per State” provided by the U.S. Department of Housing and Urban Development in the first section above, the top five richest states in the USA are:

• District of Columbia, $144,800
• Massachusetts, $120,400
• Maryland, $117,500
• New Jersey, $117,500
• Connecticut, $112,600

Based on the table for “Median Household Income Per State” provided by the U.S. Department of Housing and Urban Development in the first section above, the top five poorest states in the USA are:

• Mississippi, $65,000
• West Virginia, $67,700
• New Mexico, $68,700
• Arkansas, $69,400
• Louisiana, $72,400

Impact of Education on Earnings

Your level of education also significantly impacts your income. According to the Bureau of Labor Statistics (BLS), income per education level for 2022 is as follows:

Earnings by Age Bracket

According to the U.S. Bureau of Labor Statistics, median earnings by age bracket are as follows (for the third quarter of 2023):

Expenses and Debt: The American Financial Burden

Consumer Spending Patterns

Average annual consumer spending in the USA was $72,967 in 2022, according to the Bureau of Labor Statistics.

The biggest individual category expenses were:

• Housing, $24,298
• Transportation, $12,295
• Food, $9,343
• Personal insurance and pensions, $8,742
• Health, 5,850

Reality of Consumer Debt

The state of consumer debt in the United States is both substantial and multifaceted, as indicated by statistics from the Federal Reserve Bank of New York for the third quarter of 2023.

The total consumer debt has reached a staggering $17.29 trillion, encompassing home mortgages, student loans, credit cards, and auto loans. Drilling down into these figures, the nation’s credit card debt accounts for $1.079 trillion of this total.

On average, a family carries $6,120 in credit card debt, with 45.20% of American families having some level of credit card debt. The interest paid by the average American household on credit cards is a high 22.77% annually.

This figure suggests a potential lack of awareness among consumers about the total interest they pay due to the complexity of managing multiple credit cards and the fluctuating nature of balances and interest rates.

On the education front, student loan debt has surged to a record $1.77 trillion at the outset of 2023, with about 45.3 million students and graduates owing an average of nearly $30,000. Parent borrowers have taken on an average debt of $37,200 to finance their children’s education.

Bankruptcy also features prominently in the American financial landscape. Annually, 418,724 Americans file for bankruptcy, with personal bankruptcies constituting 403,000 of that number.

Chapter 7 bankruptcies, which entail the liquidation of assets, accounted for 239,125 cases, signifying complete insolvency. The remaining 173,362 were Chapter 13 bankruptcies, often involving reorganization and installment plan settlements.

These figures provide a stark illustration of the financial challenges facing many Americans.

Savings and Financial Planning: Are Americans Prepared?

Savings and Emergency Funds

Recent surveys and financial reports shed light on the state of American savings and budgeting behaviors, painting a somewhat concerning picture of the financial stability of many households.

According to Statista, as of the latest data, 12% of Americans have no savings at all, highlighting a significant portion of the population potentially vulnerable to financial emergencies.

Further emphasizing this vulnerability, a 2023 CNBC survey revealed that 62% of Americans are living paycheck-to-paycheck. Alarmingly, this hand-to-mouth existence spans across income levels, including 10% of households with annual incomes exceeding $100,000.

In terms of financial planning, Nerdwallet reports that only 74% of Americans maintain a budget, suggesting that a quarter of the population does not actively manage their spending against their income.

This lack of financial oversight may contribute to the stark reality that fewer than half of Americans — under 45% — have sufficient savings to cover an unforeseen $1,000 expense.

Instead of having a financial cushion, many would turn to credit cards, personal loans, or family and friends for financial assistance in such scenarios. The consequences of these precarious financial practices become further evident in the amount Americans pay in overdraft fees.

In 2022, individuals paid out $7.72 billion in such fees, with the burden primarily falling on those already identified as financially vulnerable, according to the Consumer Financial Protection Bureau.

When examining the average savings per American family, there’s a vast discrepancy at the state level. As of 2023, the national average savings stood at $65,100.

However, this average does not reflect the financial health of all states, with Arkansas averaging the lowest at $1,664 and the District of Columbia the highest at $2,806, suggesting significant regional disparities in economic well-being.

Retirement Preparedness

The landscape of retirement savings in the United States varies considerably by age, as detailed in the 2022 Federal Reserve data. The median retirement savings for American households stands at $87,000.

However, when these figures are broken down by age, it becomes evident that younger Americans, specifically those under the age of 35, are at a different stage in their retirement planning, with a median savings of $18,800.

The benchmarks for how much an individual should have saved for retirement by specific age brackets are not universally fixed and tend to be somewhat subjective. The general guidance is predicated on one’s current income, presuming it is adequate to manage living expenses comfortably.

This income is then multiplied by a certain factor intended to result in a sufficient nest egg by the time one retires at age 65. For instance, by the age of 40, it is suggested that one should have saved approximately 1.5 to 2.5 times their current annual salary.

As individuals progress through different age brackets, the recommended savings multiplier increases to ensure that retirement savings grow in proportion to the approach of retirement age.

American Financial Landscape: A Comprehensive Overview of Savings, Budgeting, and Retirement Preparedness

The Bottom Line – Personal Finance Facts and Statistics

The landscape of personal finance in the United States is as diverse as its population. Median household incomes fluctuate significantly across states, revealing a country of economic contrasts.

Education continues to be a powerful determinant of earning potential, with higher levels of education correlating with increased income. However, despite reasonable earnings, many Americans are burdened with considerable debt and lack the savings necessary to weather financial emergencies.

The state of retirement savings varies widely by age, emphasizing the need for early and consistent financial planning. The statistics presented underscore the importance of financial education and the development of robust personal financial management skills.

They highlight both the challenges and opportunities that lie within managing personal finances, pointing to a need for individual responsibility and systemic solutions to support Americans in achieving financial stability and security.

The post Personal Finance Facts and Statistics appeared first on Good Financial Cents®.

If your credit profile is thin or nonexistent, or if you have made some credit mistakes in the past, your best bet is to look for a credit card for fair credit, bad credit, or no credit at all. This guide highlights some of the best credit cards for building credit when you have none, as well as the best practices to improve your credit score over time.

Best Credit Cards for Building Credit

• Petal® 1 Visa® Credit Card: Best Overall

• Discover it^® Secured: Best Secured Credit Card for Building Credit

• Petal® 2 Visa® Credit Card: Best for Rewards

• Platinum Mastercard® from Capital One: Best for Fair Credit

• Discover it^® Student Cash Back: Best for Students

Petal® 1 Visa® Credit Card: Best Overall

Why It Made the List: The Petal® 1 Visa® Credit Card considers factors other than your credit score — like your checking account history — when you apply. From there, they use alternate information to gauge your eligibility, making it easier to get approved with no credit or limited credit history.

Who Can Qualify? Individuals with a bank account may be able to qualify for this credit card regardless of their credit history or lack thereof.

The Petal® 1 Visa® Credit Card is worth considering if you don’t have any credit history but are ready to build credit. This card uses alternative information to approve you for an account, yet it’s still unsecured, meaning you don’t have to put down a cash deposit as collateral. You won’t earn any rewards on regular purchases, but there is no annual fee, and there are no foreign transaction fees.

Discover it® Secured: Best Secured Credit Card for Building Credit

Why It Made the List: Individuals without any credit may prefer to get started with a secured credit card that requires a cash deposit as collateral. The Discover it® Secured is the best-secured credit card on the market today since it lets consumers earn rewards and doesn’t charge an annual fee.

Who Can Qualify? Discover says on its website that this card “is for people new to credit as well as people looking to rebuild their credit.”

This card doesn’t charge any fees, yet you get the chance to earn 2% back on up to $1,000 in combined spending at gas stations and restaurants each quarter (then 1% back) and 1% back on other purchases. Discover will also double all the rewards you have earned after the first year. If you use your card responsibly, Discover says you may get your deposit back and be upgraded to an unsecured version of this card in as little as eight months.

Petal® 2 Visa® Credit Card: Best for Rewards

Why It Made the List: The Petal® 2 Visa® Credit Card is another credit card that uses some alternative data to gauge your eligibility. There are no fees, and you get to earn rewards for each dollar you spend.

Who Can Qualify? Where the first version of this card is geared toward people with little or no credit, the Petal® 2 Visa® Credit Card is for people with some credit history or “fair” credit.

The Petal® 2 Visa® Credit Card doesn’t charge an annual fee or any hidden fees, yet you start off earning 1% back on all your spending right away. From there, you can graduate to 1.25% back when you make six on-time payments on your credit card, then to 1.5% back when you make 12 on-time payments. You can also earn more rewards when you use your card for purchases with select merchants.

There are no late or returned payment fees with this card, although you may start out with a relatively low credit line.

Platinum Mastercard® from Capital One: Best for Fair Credit

Why It Made the List: The Platinum Mastercard® from Capital One is for consumers with fair credit or an incredibly limited credit history. We chose this card for our ranking due to the fact there is no annual fee, and you can get pre-approved online without filling out a full credit application.

Who Can Qualify? Individuals with “fair” credit may be considered, which can include FICO credit scores as low as 580. 

The Platinum Mastercard® from Capital One doesn’t offer any rewards, but it does give users the chance to build credit with no annual fee. Capital One will even consider you for a higher credit limit after six months of on-time payments. There are no foreign transaction fees, and you get access to Capital One’s credit building and credit monitoring tools.

Discover it® Student Cash Back: Best for Students

Why It Made the List: The Discover it^® Student Cash Back lets students build credit history while earning rewards. It’s easy to qualify for, and there are no hidden fees.

Who Can Qualify? Students with no credit or limited credit history may be able to qualify.

The Discover it® Student Cash Back was created for students who need help building credit from scratch. This card is easier to qualify for when compared to many other rewards credit cards, yet it is still offered with no annual fee and no hidden fees. Cardholders also get the chance to earn 5% back on up to $1,500 spent in quarterly bonus categories (then 1% back) and 1% back on other purchases. Discover will even double all the rewards you have earned after the first year.

Students with good grades can also qualify for a $20 Good Grade Reward each year they report a GPA of 3.0 or higher. New cardholders even get 0% APR on purchases for six months, followed by a variable APR of 12.99% to 21.99%.

Best Credit Cards for Building Credit Comparison Table

What Is a Good Credit Score?

If you haven’t checked your credit score yet, you may want to get started on this step right away. Even if you believe you have no credit history, it’s possible some loans or bills you have paid have made their way onto your credit report. Plus, it can help to know where you stand before you select a credit card that suits your needs.

What makes a good credit score? And how do you know what your score means? While there are several types of credit scores out there, the most popular credit score used by 90% of top lenders is the FICO score. This type of credit score ranges from 300 to 850, and here’s how FICO breaks these scores down by category:

• Exceptional: 800+

• Very Good: 740 to 799

• Good: 670 to 739

• Fair: 580 to 669

• Poor: 579 or Below

If you have no credit history or limited credit, chances are good that your credit score will fall within the poor or fair range. However, you can build credit and boost your score regardless of your income. You just need to learn about the factors that make up your credit score, as well as how to maximize each one.

Factors that Affect Your Credit Score

According to myFICO.com, there are five main factors that make up your FICO score. Here’s how these factors break down and the percentage each one contributes to your score:

• Payment History: 35%

• Amounts Owed: 30%

• Length of Credit History: 15%

• New Credit: 10%

• Credit Mix: 10%

Payment history is determined based on whether you pay your bills early or on time each month. While timely payments will help you score well in this category, late payments can be catastrophic.

Amounts owed are often referred to as your credit utilization. This factor takes into account how much money you owe in relation to your credit limits, and low credit utilization is always better.

New credit is measured by how many new accounts you have opened in the recent past, and you can score better in this category by applying for new credit only when absolutely necessary.

Credit mix is a factor that is determined by the different types of credit you have. You’ll score better in this category if you have several types of accounts like revolving credit accounts, a mortgage, and a car loan.

How to Build Credit With a Credit Card

The factors we explain above show exactly how your credit score is determined, but what should you do next? Once you apply for one of the credit cards we highlighted on this page, here are your best next steps:

• Always Pay Your Credit Card Bill Early or on Time. Since your payment history is the most important factor that determines your credit score, you’ll want to avoid late payments at all costs. Make sure to pay your bill on time every month, even if you have to set up payment on autopsy.

• Keep Your Credit Utilization as Low as Possible. Experts suggest keeping your credit utilization below 10% for the best results. As an example, this would mean keeping your revolving balance below $50 if your credit limit is $500.

• Refrain From Opening or Closing Too Many Accounts. Opening new accounts can damage your credit score, so try to avoid it whenever possible. Also, keep older accounts open so they can add depth to your credit history.

• Stay the Course. Building credit with a credit card takes time. Continue following the steps above until you see improvements to your credit score, at which point you may be able to qualify for a new credit card with better perks or rewards.

Methodology

To choose the credit cards for our ranking, we looked for advantages like easy approvals and pre-approval options online. We also looked for cards with no fees or minimal fees, and we gave preference to credit cards that let users earn rewards on their spending. Other perks we looked for include the potential for credit line increases, free credit scores, and other credit-building tools.

The Bottom Line – Best Credit Card to Build Credit When You Have None

Navigating the world of credit can be daunting, especially for those with limited or no credit history. 

However, the right credit card can be an invaluable tool in building or repairing one’s credit profile. The key lies in choosing cards tailored to those with fair, bad, or no credit. 

From the unsecured Petal® 1 Visa® Credit Card that factors in alternative data for approval to the reward-rich Discover it® Secured and student-friendly Discover it® Student Cash Back, there are options designed to suit various needs. 

By understanding factors affecting credit scores and adopting responsible credit habits, anyone can pave the way to a stronger financial future.

The post Best Credit Card to Build Credit When You Have None appeared first on Good Financial Cents®.