How to Improve Your Credit Scores in 2015

by Shelton on February 8th, 2015

filed under Credit Scores

By Jonathan Roisman, NextAdvisor.com

2015 is here! With a new year upon us, its the perfect time to make a few resolutions to help improve your financial life. One of the best ways to do that is to boost your credit scores because this will give you access to a number of useful benefits. From lower interest rates to more credit card offers with generous rewards, your credit scores play a major factor in determining where you stand financially. But how can you improve your credit scores? With a little work and patience, you can see your credit scores rise dramatically in 2015. Heres how to do it:

1. Pay your bills on time (and in full)

A common New Years resolution is to save and be more responsible with money. A perfect way to do that is to pay your bills on time. Paying bills late will hurt your credit scores, which in turn can raise your interest rates, forcing you to pay more money. Try to pay off your debt in full because incurring interest charges is not a good thing. If you cant pay it all off at once, at least pay the monthly minimum on time.

If you need more time to pay off your credit card bills without incurring interest charges, consider applying for a credit card that offers a 0% intro APR, then transfer the balance from the old card to the new. You will save money by completing a transfer with this card because youll be able to pay no interest on the balance you owe for an extended period of time. One of the best options for balance transfers is Chase Slate because it comes with a 0% intro APR on balance transfers and purchases for 15 months, as well as a $0 balance transfer fee if you complete the transfer within the first 60 days of account opening. You dont even need perfect credit to get approved. People with not-so-perfect credit are more likely to be approved for Chase Slate because it requires good credit, unlike many other 0% APR cards, which require excellent credit. It also comes with the useful and more secure EMV technology, better known as chip and PIN. Most balance transfer cards do charge a small fee, however, usually 3 to 5 percent of the total balance transferred with a $5 minimum, depending on the card. Read up on how a balance transfer works here.

2. Monitor your credit reports

You cant improve your credit scores if you dont know what they are. Fortunately, its easy to find out. By law, youre allowed a free copy of your credit reports annually. Make sure to check your credit report doesnt contain any errors, as many commonly do. Your credit reports and scores usually vary between the three major credit bureaus (Equifax, Experian and TransUnion) because different types of credit are often reported to different bureaus. For example, a personal loan you recently opened may be reported to one bureau but not the other two. Thats why its important to know whats on all three of your reports, because one score might be considerably worse than the other two.

The only downside to your annual free copy of your credit report is that you wont receive your credit scores from the three major credit bureaus. You have the option to pay a fee for them, however checking them one time may not be enough to catch potential fraud. Thats why you should consider signing up for a credit monitoring service. Most of them will give you your scores instantly upon signup and regularly monitor the activity on all three reports and scores on an ongoing basis as well as alert you of any changes or additions. This will help you catch any anomalies that can be caused by fraud or error.

Top-rated credit report monitoring services such as Identity Guard and LifeLock provide you with all three of your credit reports and scores immediately upon signup. To top it off, both Identity Guard and LifeLock offer 30-day free trials so you can test out the service before you make a commitment.

3. Decrease your credit utilization ratio

Your credit utilization ratio determines 30 percent of your FICO credit scores, second behind your payment history (35 percent), so maintaining a healthy ratio is extremely important. Luckily, calculating your credit utilization ratio is easy. You simply divide the total amount of credit that youve used (or owe) by your total amount of available credit to get the percentage (or your credit utilization). For example, if youve used $1,500 in credit and have $5,000 worth of total available credit, then youll have a credit utilization of 30 percent. Its ideal to have credit utilization 30 percent or below otherwise it may have a negative impact on your credit scores.

Dont panic if your credit utilization ratio is high, because you can fix it. It can take time, however. One way to is to pay off as much of the balance on your credit card as possible. By doing this, you will increase the amount of credit you have available, which lowers your utilization ratio. Try and pay more than the minimum balance when at all possible because the faster you pay off the balance, the faster your credit utilization ratio will lower.

Another way to decrease your credit utilization is to apply for new credit because revolving credit, such as a credit card, has a direct impact on your credit utilization ratio. On the other hand, installment loans, such as an auto loan, dont impact your credit utilization. When you apply for new credit, your credit score can take a small hit because a hard inquiry is placed on your credit history, so its important to only apply for a card that requires the type of credit you have. For example, dont apply for a card that requires excellent credit when you have good credit because youre going to get denied. Instead, apply for a card that requires good credit so youll get approved and wont have to apply for multiple cards within a short time frame. Checking your credit scores will help you determine what your credit ranking is.

Getting a new credit card may not be the answer for you if youre paying down a lot of debt (more than can be transferred) or if you have trouble paying back your credit card. In either case, a personal loan may be the best option. Let this blog post help you determine which is the top option for you.

Make 2015 a banner year

Its not always easy to follow through on New Years resolutions, but its certainly possible. Knowing what your credit report says and what your scores are can give you power to change for the better. Remember to check your credit reports from all three credit bureaus (Equifax, Experian and TransUnion) often. Visit our credit report monitoring reviews to see which service is best for helping you keep track of your reports and scores in 2015.

This blog post originally appeared on NextAdvisor.com.

Most Americans Have Subprime Credit Scores, Study Says

by Shelton on February 8th, 2015

filed under Credit Scores

Although, the job market in the United States is gradually improving and actually doing so at the fastest rate since the turn of the century, there is no shortage of consumers who continue to struggle with poor FICO scores, or credit scores.

A study by nonprofit group Corporation for Enterprise Development (CFED) revealed, that 56 percent of consumers surveyed have subprime credit scores. The survey described how these individuals are unable to borrow, may it be for a mortgage or qualify for a credit card, due to black marks on their credit reports and subsequently lower FICO scores. And should these consumers be able to borrow, there is a good chance they are having to pay interest at high rates, as opposed to those with good to pristine credit, who get good rates instead.

According to study author and CFED director of state and local policy Jennifer Brooks, a lot of these troubled consumers have no choice but to use dubious solutions in order to borrow like they would want to. “There are millions of Americans who are being excluded from the financial mainstream,” she observed. “They’re relegated to using fringe, often high cost financial products that trap them in a cycle of debt.”

In her statement, Brooks did not specify what type of products she was referring to, but these products include, but are definitely not limited to payday loans, which have been notorious for their deceptively onerous terms, even if they can provide instant relief.

The CFED’s report had culled credit data from credit reporting agency, TransUnion. Data on credit scores was taken from the agency’s TransRisk Score, which ranges from a low of 100 to a high of 934. All credit scores 700 or lower are considered by TransUnion to be either near prime or subprime.

In the light of the CFED’s new report, credit specialists believe that the data contained therein is proof that there are many Americans who are still in the process of repairing their damaged credit, even with the economy improving, same with employment. Repairing credit, after all, is a process that does not happen overnight. Infractions, such as late payments, delinquencies, accounts going to collections, or foreclosures, can stay on one’s credit report for up to seven years, while bankruptcy filings can stay for a good decade on a credit report.

Be that as it may, the Great Recession that affected the United States and the majority of global markets, is still affecting consumers as we know it. During those tough years in the late 2000s, otherwise-timely consumers had fallen behind on their debts, and ended up with their accounts in collections, their homes foreclosed, or been forced to file for bankruptcy.

According to CreditSesame.com president of consumer education John Ulzheimer, most people may have been able to “fight the fight” and remain gainfully employed. “If they did eventually lose their home, they probably didn’t do so for a few years,” he added, hinting that it may also be another few years before these black marks are expunged from consumers’ credit reports.

Are you interested in homebuying or refinancing? Compare current mortgage rates of top lenders.