The Ultimate Guide On How to Build Credit When You Have None (Updated 2020)
This article deals specifically with how to build credit when you have a very limited credit history. This article does not deal with credit repair or rebuilding your credit history/score after having a bad time. If you have not had any credit before, then you may have a very limited credit history. If you are young, then you may also have a very limited banking history. These facts may make lenders fearful of lending to you because they do not know how you will handle debt. In order to build credit, you need to show that you can handle debt. If you manage your money very well, then your credit history will reflect that fact and your credit rating will start to rise.
In this article, the words “Credit Rating”, “FICO Score” and “Credit Score” are interchangeable because they both mean the same thing.
Most People With No Credit Can Get A Free Bank Account
Banks know that when students leave High School and college that they need a bank account so that their bosses may pay them their wages. Most High Street banks/ big brand named banks are going to give you a free bank account even if you have very little credit history. Your first step should be to approach them and take them up on their free bank accounts.
There is no need for a bank account with a monthly fee or unfair terms. If you were lucky, then your parent or guardian set up a bank account in your name when you were young. Alternatively, you set up a free student account when you were in High School or college. Your prospects are even better if you had a part-time job during those periods in your life and you put the money into your bank account.
Before you start working on your credit score and before you sign up for an account that charges you maintenance fees, approach bigger banks and find out what they have to offer.
Do Not Sign Up For Credit-Building Credit Cards
They have terrible fees and have horrible terms and conditions. Plus, a great deal of them are predatory and will decimate your credit rating so that you have to stick with them for years. Credit-building credit cards are for people who have messed up their credit rating. They are not for people who have limited or very little credit history.
Again, if you have little-to-no credit history or little-to-no banking history, then stay far away from credit-building credit cards. They are only for people who have a bad credit rating because they have a rough/bad/poor credit history.
You May Have To Start With A Fee-Free Secured Credit Card
Maybe you have a bank account and a bit of banking history, but you still do not have much of a credit history and you want to start building your credit history. You can use the advice you find on this article and build your credit slowly and organically. If you wish to hurry things along a little, then maybe a fee-free secured credit card will help.
A secured credit card sounds like a bit of a scam, but they exist to help people push up their credit ratings a little more quickly. You have to pay the credit card company in advance, and then they lend your own money back to you and charge you interest.
For example, you may find a secured credit card company and pay them $200. Your credit card now has a limit of $200 on it. You may spend up to $200 that you will have to pay back. While you are using your card, you will be charged interest depending upon how much of your balance you use on a monthly basis.
The hardest part is finding a legitimate secured credit card that has no fees. You may have to live with a fee or two for the privilege of having your secured credit card. Ideally, you should find a fee-free secured credit card that makes its money from the interest it charges you, and not one that makes its money from charging you fees and interest.
Once your credit rating has risen high enough for you to get a regular credit card that doesn’t have ugly terms and/or an ugly APR, then cancel your secured credit card and get a regular one.
Keep Your Credit Utilization Low
You may have enough of a credit rating to get you started with a credit card and a regular bank account. You may even have enough of a credit score to enable you to have a fair-priced credit card and/or an overdraft. However, you have probably noticed that your credit score is not really rising as you hoped it may. This is because even though you are using a lending facility, and even though you are keeping up your payments, your credit score is hindered by your credit utilization.
If you have credit cards that you never use, then your credit rating grows very slowly. If you have credit cards and you max them out, while keeping up your payments, then your credit rating rises slowly.
Your credit rating will rise more quickly if you only use part of your credit over the course of six months. There is fierce debate as to what your credit utilization should be, but most agree that it should average out at about 30% to 50%. This means that if you had a credit card with a credit limit of $1000, then on average you should use around $300 to $500 per month. Again, these are averages, and they are not set in stone. What creditors want to see is that you are using lending facilities while also paying them off fully upon occasion.
Do Not Apply For Store Cards
We have tested a LOT of store cards in our time to the point where we barely write about them anymore because they appear and change so quickly. You should not apply for store cards if you have no credit history and if you are looking to get a bank account when you have no credit history.
On average, store cards have a terrible credit-reporting track record. The fact is that they have no incentive to keep the credit bureaus up to date with your progress. Some store cards will not even report to the credit bureaus that you have a card with them until you screw up and they apply to add a negative mark to your report.
Plus, there are always administrative mistakes on their part where they do not credit your payment on time and then post a negative mark on your credit history because of a screw up that they perpetrated. Save yourself the hassle and do not apply for store cards (ever), or only apply for them when you have a sound credit rating and credit history and where owning the card offers substantial rewards that you cannot get via other means.
A Small Overdraft With Your Bank Is The Place To Start
If you are looking to build wealth over your lifetime, then you should stay away from credit cards at all costs. Credit card debt is the most difficult to get out of and is the most expensive type of debt.
Let’s say you have a very low credit score because you have very little credit history. There are probably various options open to you. Perhaps a small loan, or a credit card, or an overdraft. You should always choose to have an overdraft. Not only will it be less expensive than a credit card, but it is also easier to pay off every month.
Let’s say you have a job that pays you $1100 per month, and let’s say your bank offers you an overdraft of $300. Even if you max out your overdraft every month so that you get into $300 debt every month, you will still pay it off monthly when you are paid your wages. Plus, if you need the money, then you can go back into your overdraft. Just be sure not to go any further than your arranged overdraft because it will damage your credit rating and undo all of your good work.
Consider Using Co-Signers
If you are truly stuck for credit and you are going to buy something that will make you a profit beyond the cost of the debt, then you may consider using a co-signer. The co-signer’s credit is put at risk, but if you make the payments and manage your money correctly, then your credit rating will go up because of the linked debt between you and the co-signer.
Again, if you are getting into debt, and especially if you are getting into debt with another person, you need to be sure you are going to make a profit or a saving through the use of debt. Do not tell yourself that you “Need” a car to get to work because you do not. Such a purchase would be bone headed.
There are occasions where getting into debt is acceptable, but there are only a minority of occasions where getting into debt and dragging another person in with you is acceptable. For example, if you are buying something that is going to turn a profit for you, then debt is possibly acceptable.
Another example is with car insurance. If you are young, then your car insurance is probably going to be rather high. The insurance company may offer you a discount if you pay your insurance for the full year in advance. Let’s say that you make a $180 saving if you pay for your insurance in advance. In that case, you could take out a small loan to pay for a year of car insurance in advance, and you take out the loan with a cosigner so the interest rate is relatively low. The cost of the interest may come to less than $180, in which case you getting a loan would be a smart move that saves you money and helps build your credit history.
Do Not Buy A Car Or Make Large Purchases On Finance
One may wonder why we would even bring this subject up. After all, if you have a limited credit history or banking history, then the last thing you probably want to do is land yourself in thousands of dollars worth of debt. This point has been brought up for two reasons. The first is because there are predatory car finance companies out there that target young people, and the second is to warn you about car finance deals and large-purchase plan deals.
A sleazy way to make money is to offer young people a car finance deal. The young person takes the finance deal without realizing that by the time the loan is paid off then he or she will have paid three times the value of the car. The finance company may also try to get the young person to have a co-signer to help recover the money. In many cases, the young person enjoys the car for a while and then falls behind on the payments because they are too high or because the young person doesn’t earn enough. The finance company repossesses the car and sells the almost-new car for a great price. The finance company then passes the debt over to a debt collection company which strikes a deal with the young person to lower the debt, lower the payments, and officially screw up the young person’s credit for between six to ten years.
Car finance deals are often a very poor deal. The car finance company is aware that it will get your new car back if you fall behind on the payments, which they will be able to sell to recoup most of their losses. As a result, car finance companies are prepared to offer credit to just about anybody, and people who have bad credit or limited credit “may” be more willing to take on a terrible APR and terrible terms and conditions. Avoid car finance deals at all costs, no matter what your credit rating is. Similar large-purchase plans exist that do not have your best interests at heart. It may not be a car, it may be a washing machine, sofa, or whatever. In almost every case, you are better off getting a peer-to-peer or low-to-middle cost loan than you are getting a finance deal.
Account Ages Still Matter
Our research team has read a lot about how account ages do not matter as much as they used to, and where this may be true, we know from our research experience that credit ratings fall when new accounts appear.
Our research team has a large number of candidates who open various accounts on our behalf. On almost every occasion, when somebody opens a new credit account, his or her credit rating is negatively affected. New accounts “May” harm your credit rating, which is why it is probably a good idea to pay off your newer debts first. A common rumor is that you should always pay off your newer debts first if you want your credit rating to rise more quickly, and in our experience we have found this to be true.
However, one thing we have noticed is that keeping credit cards open for a long time without using them is not a good idea. Keeping unused credit cards open for a long time for the sake of credit utilization is falling out of favor with credit companies. So called, “Secrets to raising your credit score” are now so common-knowledge that credit companies know to look out for them. That is sometimes why you may have a good credit score and yet a credit company still refuses to lend to you.
Do Not Make Large Purchases On Credit
If you have a limited credit history or if you have no credit history, then making large purchases is the fastest way to get into high-interest debt. There are going to be companies and banks out there that will still offer you large loans despite the fact you have little-to-no credit history. You must avoid making large purchases at all costs. You will be in debt for a long while, and during that time your credit rating will only creep up very slowly. Plus, just one missed payment and your credit rating is shot for another six months.
Do note make large purchases on credit because you do not have the credit rating required to get a reasonable or profitable deal. No cars, no household items, and definitely no mortgages.
Car finance has already been mentioned, but it is worth mentioning again. It is common for car showrooms to offer car finance deals to young people. The debt the young person lands in is often overly inflated, and the repayment terms are often set up so that the young person stays in debt for as long as possible. If you are using credit such as credit cards or an overdraft, then keep your purchases small and keep them necessary. Do not spend for the sake of spending because that will officially make you a complete moron on Alec Baldwin levels.
Forget About Checking Your Credit Report To Look For Errors
Most of the other articles on the subject of how to build credit when you have none will tell you to study your credit report, look for errors, contest inaccuracies, and all that other piddly crap that you have been told to do with your credit report. Yet, the fact is that it makes almost no difference at all to your credit building efforts.
If you have terrible credit for no good reason, then maybe take a look at your credit report, otherwise there is no way it is going to help you build your credit history. In fact, if you truly have very little credit history, then there is literally nothing your credit report can tell you.
Only terrible errors make a difference with your credit score. Terrible errors and fraud may affect your credit score. Otherwise, there is nothing you can learn or do that will help you build credit more quickly.
Forget about small errors on your credit report because contesting them will harm your credit friendliness more than it will help it. For example, Sabrina sees that two marks are on her credit. It says she looked for a mortgage when she did not. She signs up with one of the credit bureaus, and she contests the marks on her credit report. She works on her credit rating for a few months and then applies for a credit card. Sabrina is denied the credit card. The reason given is that her credit score is too low, yet other people with her credit score have been known to get that very same credit card. The real reason she was refused was because of her contesting those two marks on her credit report. The credit card company bought a deep insight into her credit history and saw that she had two amendment requests open on her credit history. The credit card company now assumes the problem is Sabrina’s credit management, or that somebody has stolen her identity without her knowing it. No matter what the reason, she is now deemed an unnecessary risk, so they refused her a credit card.
In addition, small errors on your credit history do far less damage than many online articles would have you believe. Give it six months and the effect of small errors on your credit history are negligible at best.
Focus more on working, making money, saving and wealth building. Forget about messing around with your credit score and contesting errors. Focus on what matters, which is working and making money, and your credit rating and credit history will sort itself out so long as you do not abuse and misuse the credit you are given. Pay your bills on time, and your credit rating will rise. If you really need to see your credit score, then use a completely free (no trial subscription) service such as CreditSesame or Credit Karma.
Pay Special Attention To Your Online And Offline Security
If you have little-to-no banking history and little-to-no credit history, then you are in a delicate position where you want nothing to rock the boat. It is imperative that you are not scammed and that you do not have your identity stolen at this early stage, or you will be spending the next six years with high-fee credit-rebuilding bank accounts.
Use PayPal with paid apps rather than giving out your bank details, and use PayPal whenever you are using a website. If the website doesn’t accept PayPal, then use a credit card if you have one. It is very difficult for a scammer to steal your identity or your financial information if you use PayPal, and if you are defrauded through PayPal (which is very very difficult), then it shouldn’t appear on your credit history.
Pay Your Bills A Few Days In Advance
Paying your bills on time doesn’t seem to be enough these days. You need to pay them around five days in advance. There are hundreds of reasons why the bill you paid on time is not being paid on time. This is especially true when paying credit cards because in my experience they seem to take the longest time between sending the payment and having it appear on your transactions list/history.
Pay Your Bills A Few Days In Advance – What About Auto-Pay?
Some suggest you use auto-pay in order to make sure you pay your bills on time, which is a fair comment, but then you have to be “Super” careful to ensure that you have the money in your account ready to be taken out.
Auto-pay causes as many negative credit marks as it saves. The people who use auto-pay will often pay their regular bills on time, but are more likely to overdraw on their bank account, and many times it is not “strictly” their fault. I say not “strictly” because if you tightly keep track of your money, then nothing is a surprise and auto-pay always works in your favor.
I say that it is not strictly their fault because what is “coming” out of your bank account “when” it comes out are two different things. Normally, when you pay for something in a store, you go home and check your bank balance and your available balance, and you can see on your available balance that the money you spent has been earmarked for removal.
However, sometimes you spend on your card and it doesn’t show in your account for days, which lulls you into the false belief that you have more money than you do.
What About Auto-Pay? An Example Of An Auto-Pay Snafu
For example, if you bought gas at a pay-at-the-pump station, the money you spend may not appear on your bank transaction list for days. What’s more, it may not show on your available balance for days either, which means that when you look online or via an ATM, it is going to look like you have more money than you do because you cannot see that your gas money will be coming out in a few days. You think you have enough for your auto-pay transaction, but you don’t, which means you overdraw unexpectedly.
Always Budget For 10% More Than Expected
Manage your money correctly and you are less likely to mess up and damage your credit rating. One way to do this is to always budget your expenses at 10% more than what are expected.
You may be able to avoid this rule with things such as rent payments or insurance payments because they tend to stay the same every month. However, your gas budget, food budget, phone bill budget, etc., should be inflated to 10% more than expected. You may then be unpleasantly surprised by a slightly higher bill while still having enough money to pay for it.
A similar rule should apply when you budget for your income. It is always a good idea to assume you are going to receive 15% to 20% less than what you are supposed to receive. After all, you may be sick, or forced to take an unpaid vacation, or your workplace may be flooded for three days.
Concentrate On Wealth Building And Saving
Is there any chance I can convince to you stop looking for “Faster ways to increase your credit score”? Because it shouldn’t be your main priority. If you manage your money correctly and you do not apply-for or misuse credit, then your credit rating will rise of it own accord without any need for action on your part.
Look at the bigger picture. If you are concentrating on wealth building and saving, then you are much less likely to miss bills or mismanage your money. Plus, if you concentrate on wealth building and saving, then when the time comes where you want credit, you may have enough money so you don’t need it. For example, when you are in your late thirties and you figure it is time to buy a house, you may have enough money saved to buy one without needing a mortgage. You could save yourself from 25 years of having a mortgage hung around your neck.
You Can Get A Mortgage Even With Little Credit History
Since mortgages were mentioned, let’s examine the idea of building your credit so that you may get a mortgage. If you concentrate on saving and wealth building, then the longer you hold out from buying a house, the better off you will be.
Buy a house in your early twenties, and your credit rating will be lower because of your limited credit history, and you will have a smaller deposit to put down. Wait a few years until you are in your thirties, and you will have a better credit score through years of careful money management, and you will have saved more for your deposit.
You Can Get A Mortgage Even With Little Credit History – There Are Ways
Maybe you have little credit history because you have made it this far without needing to borrow, or maybe you are young and haven’t had time to build a great credit history. In either case, you can make a good argument to your bank to allow you to have a mortgage.
If you have been renting for years and you have not messed up your credit rating, then it suggests that you have managed your money rather well. In which case, you have been paying rent on time for years and could do the same thing with your mortgage payments if you were living in the house you had your mortgage on.
Plus, a good job and a high deposit are often very persuasive factors. A high deposit helps to dramatically lower the risk on the lender’s side. A high-paying job that you have had for months or years will also help to reassure the lender that you are eligible for a mortgage.
You Can Get A Mortgage Even With Little Credit History – Do You Need A Mortgage?
I mention this point only because it is something I did personally. I had a mortgage when I bought my first house and I hated it. Then I bought a rental property as an investment, I got a mortgage, and I hated it. I hated mortgages because I hate the terms, I hate not being able to pay as much back as I like when I like, I hate how the rates expire, I hate them, I hate them, I hate them.
I came across a brick-built terrace house on a rough street. They were selling it for $15,000 because the house next door had severe fire damage. The house they were selling was an epic fixer upper on a bad street, but I wanted it to fix up and use as rental property. I figured I could slowly fix it up at my own pace, and then I could insulate it with fire retarding foam, add security doors, a CCTV system, and retractable bars on the inside of the windows that were only visible at night.
People told me I would never sell it, but I didn’t intend to make a massive profit on it. I just wanted another rental property, and I always figured that if the neighborhood was worse than it appeared, then I could rent it out to a cop for a 50% discount.
Instead of a mortgage, I got a peer-to-peer loan for $20,000 to cover the cost and the other fees that come with buying. It was a personal loan, and I was able to set my own payment term, the interest rate stayed the same throughout, and I could repay it early and save on interest. The interest rate was higher than with a mortgage, but I didn’t care because I could repay the loan quicker and with any amounts I wished. Instead of going through the nightmare that is getting a mortgage, I took out a loan, and the process was far easier.
Do You And Your Spouse Even Need A Mortgage?
You could own your own house in five years if you did what me and my spouse did when we were younger (about the same age as I was when my profile photo was taken). Both of you need full-time jobs and need to be kid free. One of you pays the house bills and any debts, and the other person’s wages goes straight into a savings account. You may not be able to have new cars or fancy holidays during those five years, but at the end you will have enough money to buy a house without needing a mortgage.
Being An Authorized User On Another Person’s Account May Help
A common, but risky move, is to have yourself authorized on another person’s credit card and other person uses the credit card that you were authorized on. The other person doesn’t give you access to the card that you are authorized on (unless that person is dumb, in which case you shouldn’t ask because you are better than that). The other person runs up debt on the authorized card in your name, and then pays it off. As the money is paid off, you will see your credit score start to rise.
There are two reasons why this method is fraught with danger. Firstly, if the person doing the authorizing is dumb enough, then they will give you the card and you will run up debts that the dumb person is lumbered with. On the other hand, if somebody authorities a card in your name, runs up debt, and doesn’t pay it off on time, then your credit rating is damaged and you will be responsible for paying off the debt.
Here is a quick example of how this method may work. Darren has a credit card with Capital One. With Sally’s permission, he authorizes a Capital One card from his account in her name. Instead of giving Sally the card, he keeps it and he only uses it to buy gas each week. He pays off the bill at the end of every month. Sally never has the card in her possession, but her credit rating rises as Darren keeps using the card. After Sally’s credit rating rises enough, she and Darren cancel the Capital One card with her name on it, and Sally may apply for her own card.
Again, there are ways in which you or your willing-friend may lose out, especially if one of you abuses the card or the other person’s trust. Even if the other person runs up debt in the card you are authorized on, you will not be able to sue that person because the card should have been in your possession. The courts will not help you if you try this method and it backfires.
A Job And A Stable Income Will Help Make Lenders Trust You
It is not all about your credit rating. When you apply for credit, lenders ask you what your regular income is and what sort of expenses you have. If you have had a job for more than three months, then there is a slim chance you will get credit. If you have had the same job for over six months, then your odds of getting credit increase.
The same is true if you have lived at the same address for more than six months. Add this to being on the electoral register, and your chances of being accepted for credit are going to increase yet again.
Another factor is how long you have been at your current address. If you have been at your current address for more than three years, then it works in your favor. Having a stable income is important. The amount of income you make does not matter as much as you think it does. There are old people who have a large income, but they have never had credit, and so they are unable to get loans despite the fact that their income could easily cover the payments.
There are some lenders who will not lend to people unless they have a certain amount of spare income. But, in most cases, the amount of your income doesn’t determine if you get credit or not, it mostly affects how much credit you get and how quickly they will allow you to repay it.
Use Your Card Each Month And Pay Off Your Balance Frequently
This tip is credit building 101. A classic way to build your credit history and improve your credit rating is to get a credit card, spend a little on it each month and pay off your balance fully on a monthly or bi-monthly basis. Max out your credit card and spend months paying it off, and you will damage your credit rating. But, if you can show that you can handle credit card debt responsibly by using it frequently and paying it off fully on a frequent basis, then this will improve your credit rating and will help build a positive credit history.
Avoid Cash Advances On Credit Cards
Lenders know that there are plenty of good reasons to have a cash advance from your credit card, such as sending money via Western Union or gambling in licensed premises. However, lenders also know that people in desperate trouble will often use cash advances. It is best to avoid cash advances from your credit card at costs, but if you cannot, you need to keep them to a minimum and you need to space them out as far as you can (preferably leaving six months between each cash withdrawal from your credit card).
Manage Your Bank Account And Your Credit Cards Very Well
This one goes without saying, but let us say it anyway. When you create your budget, you need to underestimate your income by 20% and you need to overestimate every expense by 15%. For example, if your phone bill is $35 per month and you pay via auto-pay, then you need to assume the bill will be $40, and you need to leave $40 in your account. It may seem like a silly way to manage your money, but it helps guard against the unexpected, such as if your phone company bills you incorrectly, or if your bank takes money from your account unexpectedly. Avoid overdrawing and avoid missing payments and your FICO score will rise
Avoiding Credit Card Debt All Together Is A Better Wealth Building Tactic
We all know that credit cards offer one of the easiest ways to build your credit rating because they allow you to choose how much debt you get into. However, credit card debt is the absolute worst type of debt to get out of. It is quite possible to get into so much credit card debt that you never get out of it. Every month you can only afford to pay off the minimums and you never pay off the balance. Even if you think you are good at handling credit card debt, it may not be worth the debt risk. If you are going to use credit cards, then keep your credit limit down nice and low. Do not fall into the trap of increasing your credit limits because a maxed out card is viciously difficult to get out of.
Do Not Take Out Loans For The Sake Of Building Credit
If you look at it objectively, taking out a loan just so you can build your credit rating is the dumbest thing anybody can do. You are going to pay hundreds off as interest on a loan that you don’t need…only to raise your credit score a little. You would be better off putting all that interest money into a savings account and using it to build wealth.
The only reason you should ever take out a loan is if the potential return on what you spend is more than what you have to pay. For example, if Mark buys a lift for his mini-bus so that he may also transport disabled people, then the potential monetary return from those extra passengers may come to more than he pays in interest. For example, if you apply for car insurance, you are often given a discount if you pay off your insurance for the year in advance rather than paying it monthly. If the money you save on the discount is worth more than the interest on the loan you use to pay it in advance, then take out the loan.
Do Not Contest Information On Your Credit History (Unless It Is Ultra-Ugly Wrong)
I see so many articles online that say you should contest errors on credit reports, and they are all wrong. Contesting errors on your credit history has a lasting and damaging effect on your credibility. Your credit rating may rise, but lenders are going to see the activity on your credit history and they are not going to lend to you (no matter what your credit rating is). Unless there is something devastatingly wrong on your credit history, such as it says you want bankrupt when you haven’t been bankrupt, then you need to let it go. The error is highly likely to cease its negative effect within six to twelve months, and it will disappear completely from your credit history within one to two years.
What If I Have Limited Credit History And A Poor FICO Score?
It is imperative that you learn how to repair your credit, but it is more important that you understand how your credit works. If you have skimmed your way through this article up to this point, then you are doing yourself a disservice. You need to read through this article and take notes on how to fix your credit while also understanding why what is being explained works.
It is important that you have a general understanding of how the credit repair industry works, and it is vital that you understand why your credit score cannot be improved quickly.
The How And The Why May Not Matter
If you have a long and varied credit history, then how you smashed up your credit history will matter more. If you have a long credit history and you have ruined your FICO score, then you need to read these articles after you read this one:
If you have no credit history or limited credit history, then your recent mistakes will be forgotten in between six months and twelve months. The reason for this is that if you have a limited credit history, then lenders are less likely to give you large loans that land you in serious credit score trouble.
You know what you did wrong. You know why your credit rating has gone down so dramatically. It is going to be tricky for the first six to twelve months, but you will be able to repair and build your credit over the coming years. Learn from your mistakes, and resolve to build and repair your credit slowly. Do not repeat whatever mistakes you have already made, and do not try or attempt to rebuild your credit quickly.
Despite What You Read Elsewhere – There Are No Quick Fixes
Think about it logically, if there were quick fixes, then credit scores would be useless. A credit score and your credit history is supposed to help lenders figure out how well you handle credit and how well you handle your money. People do not wake up one morning and suddenly become better at handling credit.
Even what appear to be logical quick fixes are not. For example, if you woke up tomorrow and paid off your six credit cards and your two loans, by the end of the month your credit rating would have bounced up by only 2 to 5 points. Why so little? Because paying off all your debts in this case is out of character and is therefore suspicious (for want of a better word). If you remained debt free after that point for a few months, then your credit rating would rise, and if you started using credit again but you paid your balances off each month, then your credit rating would rise even more.
How Seriously You Damaged Your Credit Will Affect How Quickly Your Credit Rating Is Repaired
If you screwed over a bunch of credit companies and went bankrupt, then it is going to take six to ten years to get your credit rating back to poor-but-not-terrible. There are people who say, “That is nonsense, I had a friend who went insolvent and she got a mortgage two years later”. People who say this to you do not have your best interests at heart. If it is true, then you wouldn’t want to be in that person’s friend’s shoes because that mortgage deal will be atrocious and will have probably lumbered that person with a mortgage up until his or her retirement.
On the other hand, if your credit is broken because you decided you wanted to do a lot of overdrawing this month, then you clean up your ways, and within six months your credit rating will start to rise again.
Negative marks on your credit rating will expire within six years to ten years depending upon what they are. Obviously, things such as court judgments, insolvency, and things of that nature will result in nasty marks that damage your credit score for a long time. If the damage was caused by a few mistakes, a bit of idiocy, and a smattering of debt, then you should start seeing your credit rating start to rise if you clean up your act and quit being foolish with your credit.
What Is The Credit Repair Industry?
It is made up of legitimate companies that help you repair your credit, and it is also made up of scammers and predatory companies. The credit repair industry is stuffed with scammers and predatory companies because the industry is all about money, and the people who need credit repair services are often desperate.
Money problems + desperate = rash decisions
Predatory companies and scammers rely on you making rash decisions so that they may exploit you, or take your money and leave you in a bigger hole.
Who Are The Players In The Credit Repair Industry?
The player in the credit repair industry is you. If you want to improve your credit rating, then you are the target consumer. There are secured credit card companies that allow you to have a credit card so long as you pay them your money and then borrow your own money from them. There are also credit repair credit cards that cost a small fortune, but give you access to credit so that you may build a good credit history.
There are larger credit card companies such as Capital One that offer basic credit cards with no frills and a slightly higher APR. Companies like Capital One give you a second chance for building a good credit rating. There are similar companies that offer loans to people with bad credit so that they may rebuild their credit rating, but the APRs are terrible.
There are predatory credit card companies that offer credit cards to people with a poor credit rating, but the terms and conditions are terrible and the APR is disgusting. There are similar loan companies too that charge disgusting APR rates for loans as small as $50, and there are pay-day loans that do a similar thing for people who are employed and very desperate.
There are also credit repair companies that offer do to things that you could do just as easily, but they charge you for doing them. All credit repair companies are terrible, but then there are the worse ones that take your money and do nothing at all but give you a bit of shitty advice. Then there are debt consolidation companies that claim they will lower your monthly outgoing and your total debt, but you end up in more debt over a longer period every time, and the terms and conditions are almost always worse than the ones you left behind.
Have I missed any players in the credit repair industry? Probably, but hopefully that gives you an idea of the sort of turds that float in the toilet bowl that is the credit repair industry.
Keep Going This Way, And You Will Be Scammed
Ever read any of those, “Here Is How You Fix Your Credit In One Month” articles and tried a few of their tricks? They are written by scam artists and general idiots. There is no quick fix when it comes to your credit rating.
The worst articles and adverts that claim to fix your credit score will lead you onto a paid service where they promise to boost your credit rating for you. In every instance, these are scams to either get your money or get your financial information so that they may steal from you.
The most insidious scammers are the ones that offer to fix errors on your credit score. They claim that they have a team of legal experts who are able to have things removed from your credit history. They are especially slimy because the things they do are things you may just as easily do yourself. All it takes is contacting one of the credit bureaus and putting in a claim to contest one of the items on your credit history.
This Is Why You Still Get Rejected When Your Credit Rating Is Poor-But-Not-Terrible
Ever read any of those, “Here Is How You Fix Your Credit In One Month” articles and tried a few of their tricks?…and they have worked!!!
The truth is that some of the things you read on these articles are true (or true-adjacent). Some of the pieces of advice may be suitable and may work for you. However, there are many pieces of “Quick Fix” advice that do not work.
What’s more, all of the credit companies know about the many quick fix tricks. They are not stupid! They know it is possible to artificially inflate a credit score for a while. They know all the tricks better than you, the scammers, and the credit bureaus do. If you try the quick-fix tricks and they actually work, then that is why you still get rejected when your credit rating is poor-but-not-terrible. The credit companies/lenders can see right through them.
Let’s say you try a few quick-fix ideas such as increasing the limit on your credit card on the same day that you apply for an easy-to-get credit card, so that your credit utilization percentage looks better. Suddenly, your credit score jumps up to 600, so you get a loan from a company that offers loans to people with a credit score of 600…and you are turned down. Why are you turned down? Because the loan company knows what you did, they know why you did it, and they are not silly enough to give you a loan if your credit score doesn’t truly reflect your ability to handle credit.
Don’t Get A Free Credit Report From Anybody!!!
If you have been an eCheck.org reader for years, then you will know I have flip flopped on this issue a few times. Sometimes I have said you shouldn’t get a free credit report and sometimes I have said you should. Right now, it is a really dumb idea to get a free credit report, and here is why.
It is a really dumb idea to get a free credit report, and here is why.
TransUnion was fined for misinforming their customers. Plus, they force you into a free trial that is very difficult to get out of so that it rolls into a paid account.
Equifax was hacked and thousands of customers have had their financial information compromised. They were also fined for misinforming their customers. They also pull the free trial trick where it rolls into a paid account .
Experian isn’t as bad as the others, but they still pull the free trial trick where you have to sign up for a free trial and then you have to call them to get out of your account.
Credit Karma and Credit Sesame do offer genuinely free credit scores and reports, but we always receive many spam emails whenever our research team signs up with new email addresses.
Plus, there is nothing you can learn from your credit report that will help you. Unless there is a debt outstanding that you know nothing about, or unless there is a massive mistake, or your identity has been stolen, then there is nothing you can learn from your credit report. Think of it this way, if you are fat (an overweight tubster), how will it help you knowing how many calories your body now holds? It won’t alter the methods by which you lose weight (diet and exercise), and it won’t change the eventual result.
A Digression For Overweight Tubsters
If you are overweight and you are sick of being overweight. If it annoys you when you read comments such as “Overweight Tubster,” then here is the best advice you will ever read, and you are getting it for free
Losing weight has three elements – diet, exercise, and mindset. We all know the diet and exercise bit, but the bit you are missing is the mindset. Forget willpower, dedication, and all that other piddly-crap. Focus your mind on your new identity. Your new identity is that of a healthy, slender, strong person. Never again in your life call yourself overweight, fat, or anything similar because from this day forward you are none of those things.
If it sounds like you are deluding yourself, then delude yourself if that is what it takes. Look in the mirror and say, “Damn, I am good looking.” Look at your muscles and say, “Damn, those are bigger than yesterday.” Walk around in your body and say, “Damn, this thing is getting heather by the hour.” If your name is Simon, then rename yourself “Skinny Simon.” If your name is Danielle, then rename yourself “Danielle the Dexterous” or “Dynamic Danielle.” People may laugh and they may even think you are making fun of yourself, but let them laugh, you are too damn healthy, hot and powerful to care.
I know that to some people the paragraphs above seems ridiculous, but ask yourself two things. Firstly, have you tried permanently changing your identity as suggested in the paragraphs above? If not, then trying something new is surly better than repeating old mistakes.
Secondly, haven’t you noticed that the most single-minded (maybe even deluded) people are the ones who get what they want? You have seen horrible and/or ugly guys call themselves studs and somehow walk away with a beautiful girlfriend, and you have seen women who say they can talk their way out of anything…and then get out of speeding tickets without trying. Part of the Getting-Healthy process involves changing your whole identity, and it starts with the way you see yourself, address yourself, hold yourself, and treat yourself. See your gorgeous body as a temple of perfection that gets better looking every day.
Don’t Get A Free Credit Report From Anybody!!! – Just To Press The Point Home
Here is a quote from another article on credit repair. It is one that is sponsored by Experian. The article said, “When you order your credit score from Experian, they also include a list of the top credit factors that are affecting your credit score.”
What sort of a selling point is that? Who doesn’t know what factors affect their credit? Are people waking up in a morning and only just finding out that they have a mortgage or a loan? Are people waking up to find and only just figuring out that missing their last six credit card bill payments was a bad thing? You know what factors are affecting your credit score because those factors are what you have been worrying about for months. Those unpaid bills, swelling debts and frequent overdrawls that have kept you awake for months are what is causing your poor credit rating. Getting a “free” (Ha…Free!?!) credit score from one of the three credit bureaus and then spending six months trying to get out of their paid subscription is not going to help you raise your credit score.
Don’t I Need To Know My Credit Rating To Apply For Credit?…No You Don’t
It is true that you may need to apply for credit so that you may build your credit rating, but you do not need to know your credit score in order to do it. In order to repair your credit, you may need to apply for some sort of basic lending facility so that you may manage it correctly to prove that you can handle credit responsibly. However, you do not need to know your credit score in order to do this.
Almost every credit-repair credit card, loan, secured card, bank loan, online money loan, and peer-to-peer lending service has its own soft-search function. All of the credit cards we tested this year and last year had an online soft search. You give them your basic details, they run a soft search on your credit, no mark appears on your credit history, and you know in minutes if you may use their services. You do not need to know your credit score in order to apply for lending services because they all let you run a soft search. This means you can trawl through tens of credit companies in one night and find out which of them will lend to you and which will not.
Conclusion – Did You Learn Anything?
I will not do you the disservice of trying to sum up the many many many many things you have learned in this article other than suggest you read it again in the near future to see if what you have learned has sunk in. If you enjoyed that article, then maybe you would like to try a few of our others. Here is a short list of some of the articles that may interest you.
Why You Should Never Withdraw From Your 401k To Pay Off Creditors
Wealth Building: What You Should Be Teaching Your Kids
Why You are Not Wealthy (and here’s how to change it)
5 Ways to Stop Being a Spender and Become a Wealth Builder
How You Should Be Investing In Growth Shares If You Want To Build Wealth
How to Build Wealth When You Are Living Hand-To-Mouth
Understanding Free Credit Score Services
Credit Karma Vs Credit Sesame
Credit Sesame Review – Does This Fremium Charge A Secret Premium?
Credit Karma Review – Are The Rumors About A Scam True?
How To Build Your Credit
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Personal Loans Vs Credit Cards: Which Should You Use?
Credit Cards Vs. Personal Loans – Which Is The Better Option
Best Cards For Bad Credit
The Best Credit Cards: The Ultimate Mega Guide to Every Card for Every Person
Best Secured Credit Cards (and how to get one)