How to remove inquiries from a credit report – Lexington Law

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The information provided on this website does not, and is not intended to, act as legal, financial or credit advice. See Lexington Law’s editorial disclosure for more information.

Credit scores naturally fluctuate from month to month depending on your usage, payments and transactions. For the most part, your credit score is directly tied to your actions. Occasionally there will be errors on your report that were out of your control, such as with hard inquiries and lines of credit. If you notice a sudden decline in your credit score, even if only by a few points, you may be suffering from the effect of an unwarranted credit inquiry.

Credit inquiries occur when a lender requests your full credit history from one of the credit reporting agencies. These inquiries into your credit history can affect your credit score negatively and will typically stay on your report for up to two years.

Inquiries stay on your record for so long because they reflect how many times you have applied for credit. Lenders use how many times you have applied for credit to judge whether you should be approved for an extension of credit.

In certain circumstances, an unapproved inquiry can be removed from your credit report by sending a credit inquiry removal letter to the credit reporting agency or by disputing it online.

The difference between hard and soft inquiries

difference between hard and soft inquiries

Although there is no difference between the data provided in a hard and soft inquiry, they do not affect your credit the same way. A common misconception is that checking your own credit history will negatively affect your score, but this is not true. When you check your own credit history, it is considered a soft inquiry and will not show on your credit report or affect your score.

Hard inquiries, by contrast, occur when a lender pulls your credit report. A lender may pull your credit history while going through an application for a new loan, a new credit card or any line of credit. Additionally, banks and property managers may pull your credit while setting up accounts or determining approval for an apartment.

Occasionally, a hard credit report can sometimes be pulled without your knowledge, approval or without your full understanding. Hard inquiries that were pulled without your request can be removed from your credit report under the Fair Credit Reporting Act.

How do credit inquiries affect your credit score?

Hard inquiries count as minor negative entries and account for 10 percent of your credit score. Although the exact effect on your credit score will vary depending on your credit history and current standing, you can typically expect to see a one to five point drop in your overall credit score.

Although the exact hit to your credit score will vary, you can expect to see drops in your score when these inquiries start to add up. Occasionally lenders will either pull your credit by mistake, pull your credit multiple times or pull your credit without your knowledge whatsoever.

Can you remove inquiries from your credit report?

reasons to dispute a hard inquiry on your credit report

Hard inquiries can be removed from your credit history if they occurred without your approval. If you did not have knowledge of the hard inquiries pulled from your credit profile, you have the right to ask for the inquiry to be removed. 

You can remove a hard inquiry if:

  • The inquiry occurred without your knowledge.
  • The inquiry occurred without your approval.
  • The number of inquiries exceeded what you expected.

How to send a credit inquiry removal letter

To send a credit inquiry removal letter, you should contact any credit reporting agency that is reporting the inquiry. Credit inquiry removal letters can be sent to both the credit reporting agencies and the lender who issued the credit inquiry.

1. Send the credit inquiry removal letter via certified mail

Certified mail is a way in which the sending and receiving of a letter or package is recorded. This form of mail will give you proof that the credit issuer or lender received the proper first notification to remove the hard inquiry.

2. Notify the lender first

Notifying the lender before you send a removal notice is necessary if you plan to take the dispute further to court. This is the proper first step for removing hard inquiries.

3. Include a copy of your credit report

Including a copy of your credit report with the highlighted unapproved hard inquiries may help with referencing your case. Although the credit reporting agencies will have easy access to your report, a hard copy will help investigators when processing your request.

4. Send to the appropriate credit bureau

It is important to send your letter to the credit bureau with a record of the hard inquiry you want removed. Below are the addresses for each bureau:

Equifax
P.O. Box 740256
Atlanta, GA 30374-0256
Equifax Dispute Information Center

Experian
P.O. Box 4500
Allen, TX 75013
Experian Dispute Information Center

TransUnion LLC
Consumer Dispute Center
P.O. Box 2000
Chester, PA 19016
TransUnion Disputes Information Center

Credit inquiry removal letter template

Date
Your name
Your street number, street name
City, state, zip code
Your phone number
Social Security Number
Name of credit bureau

Re: Reporting Unauthorized Credit Inquiry

To whom this may concern,

I am writing to request the removal of unauthorized credit inquiry/inquiries on my (name of the credit bureau—Equifax, Experian and/or TransUnion) credit report. My latest credit report shows (number of hard inquiries you are disputing) credit inquiry/inquiries that I did not authorize.

I am writing to dispute the following inquiries and ask for their removal from my credit report.

Item No. Creditor Account

Please have these/this unapproved inquiries/inquiry removed from my credit report within 30 days, as it is harming my ability to obtain new credit. I would appreciate a copy of my credit report once this issue is resolved.

Thank you for your assistance.

Sincerely,

(Your Name)

How to stay on top of negative credit report entries

Removing questionable negative items from your credit profile can be a long and time-consuming process that can seem daunting. Although a few points’ difference may not seem like a large priority, it is important to stay on top of these entries before they add up and get out of control.

If keeping your credit score high or improving your credit score is a top priority, Lexington Law Firm may be a good option for you. Lexington’s credit repair services can help you with addressing questionable negative items on your credit report as you work on improving your credit.

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Source: lexingtonlaw.com

What Exactly is “Fair” Credit?

UPDATE: Article Updated by Brian Acton 4/9/18

There’s always a lot of buzz about the extreme ends of the credit scoring spectrum. How can you get excellent credit? What should you do if you have bad credit?

Less attention is paid to fair credit, which is ironic considering that’s where a large segment of consumers land. While credit scoring models and lender standards differ, the average American credit score is often nestled firmly in a range that could be considered fair.

This may leave many consumers wondering what defines fair credit, how they got a fair credit score, and what they can do to improve it.

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What is Fair Credit?

Because there are many credit scoring models available, and because lenders may define credit differently, there’s no hard definition for a fair credit score (or any other type, for that matter). However, a typical breakdown of credit tiers looks like this:

  • Excellent Credit: 750+
  • Good Credit: 700-749
  • Fair Credit: 650-699
  • Poor Credit: 600-649
  • Bad Credit: below 600

Again, the definition of fair credit is open to interpretation, and may differ based on the credit scoring model used, the type of credit you’re applying for at the time, and the interpretations of the lender. The credit bureaus don’t even agree; Experian considers a fair score to be in the 580 – 669 range, while Transunion has stated that 668 – 719 is middle of the road. To further complicate matters, credit scoring models are frequently changing.

Here’s a good rule of thumb: if your credit lands firmly in the middle of the above ratings (and keep in mind, there is some wiggle room), chances are that your credit score might be considered fair by at least some lenders.

Why Do I Have Fair Credit?

If your credit score is hovering in the fair range, there’s good and bad news. You probably don’t have many negative items on your credit report, but your credit isn’t exactly impressive either. Luckily, fair credit isn’t a permanent state, and over time you can move the needle into the good or excellent credit range.

One cause of your fair credit could be your credit utilization rate, or the amount of available credit you have tied up in debt. This typically applies to credit cards – if you have a credit card with a $1,000 credit limit and a $500 balance, your utilization for that card is 50%. Generally, you should keep your utilization of all available credit under 30%. If your utilization is too high, it could be dragging down your score a bit.

Another reason could be a late payment on your credit report. Payment history is the largest determining factor of your credit score, and a missed or late payment can drag your score down. If the late payment on your credit report is in error, you may be able to dispute it and get it removed from your report. If it’s valid, you will just have to avoid missing payments in the future to build up a better payment history. Over time, the effect of a late payment lessens, and after seven years it will disappear from your credit report entirely.

A limited credit history can also lead to fair credit. If you just recently started building credit within the past year or so, your credit profile may simply be too thin for an impressive credit score. Over time, as you let accounts age, add new accounts, and manage your debts responsibly, your credit score will grow.

The best way to grow your score is to use common sense: make all your payments on time, don’t borrow more than you can afford to pay back, and don’t max out your credit cards.

Build Your Credit with the Avant Credit Card

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Having fair credit isn’t a bad thing—but it’s not exactly good, either. If it’s time to start building your credit score, what can you do? Give a starter credit card a try, like the Avant Credit Card.

The Avant Credit Card has no security deposit, no penalty APR and a quick application process. Avant allows you to see if you can qualify by providing you with the credit line and annual fee you qualify for—all without affecting your credit score.

Monitoring Your Credit

To track your credit progress, you should monitor your credit report and credit scores. You can check your credit reports from each of the three credit bureaus for free annually at AnnualCreditReport.com. As for your credit score, you can check two of your credit scores, updated every 14 days, for free at Credit.com
If you’re concerned about your credit, you can check your three credit reports for free once a year. To track your credit more regularly, Credit.com’s free Credit Report Card is an easy-to-understand breakdown of your credit report information that uses letter grades—plus you get two free credit scores updated every 14 days.

You can also carry on the conversation on our social media platforms. Like and follow us on Facebook and leave us a tweet on Twitter.

Source: credit.com

The 623 Dispute Method – Disputing With The Original Creditor

When the conventional method of disputing an inaccuracy on your credit report fails to yield results, the 623 dispute method may be a viable alternative to getting erroneous or unconfirmed information removed from your report. It’s named after Section 623 of the Fair Credit Reporting Act (FCRA).

623

It allows you to dispute any inaccurate information on your credit report directly with the original creditor, as long as you’ve already completed the process with the credit bureau. Learn the step-by-step process to correctly execute this strategic dispute method.

What is a 623 dispute?

A 623 dispute does not work in the same way as a traditional dispute through the consumer reporting agencies because you are not asking for verification of the debt. Instead, you’re asking for an investigation of the accuracy of the records on that debt.

If your creditor does not have accurate records pertaining to that debt, then the consumer reporting agency must remove the negative information on your credit report. The process usually follows these steps:

  1. File a dispute with the credit bureau.
  2. Await the results of the investigation. If the negative information is not automatically removed through that process, proceed to the next step.
  3. File a 623 dispute notice with the original creditor, asking for an investigation into the debt or delinquency.
  4. If they don’t have proof of the debt or delinquency, the negative information must be removed from your credit report.
  5. If they don’t comply, you will have to file suit in order to have it removed.

Remember that all 623 disputes must begin with a traditional credit bureau dispute first. As you’ll soon find out, you could bring on some unintentional negative consequences if you don’t.

What is the 623 dispute process?

In order to successfully challenge negative listings on your credit report, you must first dispute the information through the credit bureau. When you send a 623 dispute letter to them, you must wait for the 30 days for the investigation to be complete.

If the original creditor verifies that the negative listing is accurate with the credit bureaus, then you move forward with the next step which is to dispute directly with the original creditor itself.

Creditor Investigation

Under the laws governing the 623 dispute method, creditors must conduct an investigation when requested. When investigating, they must review the information that you provide relating to that dispute, and they must respond within 30 days to your original investigation request.

In 2010, revisions to the Fair Credit Reporting Act went into effect that explicitly requires original creditors to investigate when requested by a consumer.

Creditor Rights

While the Fair Credit Reporting Act is in place to protect you and your rights in the face of creditors, you must also pay careful attention to the rights of the creditor. Otherwise, you run the risk of giving up some of your rights in the process.

One key example of this occurs in the 623 dispute process. As we stated earlier, you must file a traditional dispute with the consumer reporting agency first. If you don’t, and instead dispute directly with the creditor, you waive your right to sue the company.

If they refuse to look into your request or start an investigation, you have no legal recourse because you didn’t follow the proper protocol.

You can try and get a federal or state regulator to pursue your case on your behalf, but there’s no guarantee it will happen. Make sure you follow each step of the process exactly so that you can fully benefit from the 623 dispute process.

Can a 623 dispute really work?

This method will only work to remove entries from your credit history that are inaccurate, or entries in which the creditor no longer has to verifiable information.

While you might think that the credit bureaus will have up-to-the-minute information about your past debts, this is often not the case. In fact, most credit card companies will only keep your records for 13 to 18 months.

If you have any late payments, charge-offs, or other relevant information prior to this time, they probably won’t be able to verify any of it through their records. The 623 dispute method works because anything that is inaccurate, or not in the creditor’s records will have to be corrected on your credit report.

This means that if the creditor does not have any records on your account at all they must contact the credit bureaus to have the negative information removed.

If you have disputed the information through the credit bureau before initiating the 623 dispute process, and the creditor refuses to remove erroneous information, you will have grounds to sue.

Otherwise, your only legal recourse will be to have the state or federal authorities pursue the case, and it is solely at their discretion to do so.

When won’t a 623 dispute work?

There are a few different scenarios in which a 623 dispute likely won’t be successful. For example, it probably will not work for a debt that is fairly recent. It is also unlikely to work for those companies who do keep detailed records spanning several years.

In addition, you will need to be somewhat specific about the information you wish to be investigated and any records that you have that can prove that there is an error will be helpful. So if you don’t keep your own consistent records, you may have trouble getting the information removed.

How to Initiate a 623 Dispute

At the very minimum, you must identify the account by the actual account number and provide a reason to the original creditor explaining why you are disputing the accuracy of their records.

If you do not provide this information as a part of your investigation request, the original creditor may determine that your request is frivolous and deny the investigation. If they do decide this, then they have five days in which to notify you in writing.

Overall, the 623 dispute method works best for past delinquencies and charge-offs that may no longer be listed appropriately in the records.

Still, you’ll need at least the basic information to get started. If you can’t find anything in your own records, check your credit report to see if there is any account information listed there.

If the original creditor fails to comply with your 623 dispute letter, you’ll have to take legal action. You may also file a complaint with the Consumer Financial Protection Bureau (CFPB) and your state attorney general.

Hiring Professional Help

When you still don’t have success with a 623 dispute, even after following these steps and supplying detailed account information, consider talking to a professional.

Credit repair companies have the legal knowledge and extensive field experience with getting all types of negative items removed from credit reports.

See also: Best Credit Repair Companies (Updated Reviews for 2021)

You can start with a simply phone consultation to see what they think about the steps you’ve already taken and how they might be able to bolster your case. Whether you have one negative item on your report or several, it’s never too late to ask for help.

How to Deal with Medical Debt

Without or without health insurance, medical debt can be a huge burden. Hospital and doctor’s bills can be extremely high and sometimes impossible to pay without a plan.

medical professional

Even if you have an insurance plan, you can quickly get overloaded with co-pays, deductibles, and prescriptions.

Unpaid Medical Bills

Unpaid medical expenses are easily one of the largest debts that people can face in their lives, and knowing where to turn for help can be a challenge. That’s added on top of your other bills and expenses you have to pay each month.

What’s more, sometimes health care bills are hard to decipher and can even be inaccurate, so it’s important to be cautious whenever dealing with them. It’s also useful to know what options are available to you to make it easier to manage your medical debt. We’ve got all the information you need below.

Make Sure the Charges are Accurate

When you’re dealing with medical debt, it can be hard to determine what you are being charged for. Depending on your health insurance (assuming you have insurance) it isn’t always clear in the first place just how much you might owe.

Services might sometimes overlap or be described in technical language, and there can be billing for any variety of tests, medicine, use of equipment, or time spent with doctors or specialists.

Hospital bills can be particularly hard to break down. Sometimes insurance companies won’t pay what they said they would. Doctors or hospitals will also sometimes bill you for unexpected items you thought were supposed to be covered by your healthcare plan.

Duplicate Billing

There can also be issues of duplicate billing and other mistakes that are hard to track down. Plus, your bills might be staggered so that you don’t actually know the total cost of what you owe.

For all these reasons, it’s crucial to be very careful and thorough when dealing with your medical bills to ensure that you aren’t paying more than you should be. Unfortunately, this can mean a lot of time on the phone clarifying every potential issue as it arises.

Otherwise, these issues can be buried in paperwork. It’s also essential to keep thorough and accurate records so you have a reference point whenever a new question arises.

Understanding Your Health Care Benefits

One of the best things to do is familiarize yourself with your health insurance plan’s explanation of benefits (EOB). This isn’t always clear, but you can get a better understanding of the types of procedures you’re covered for.

You can also find out what percentage you’re responsible for, and what medical providers are considered in-network versus out-of-network, or Tier 1 versus Tier 2. If you’re confused, call your healthcare company for clarity.

Do medical bills affect your credit?

In the past, it was treated just like any other type of debt on your credit report. Any relevant late payments, charge offs, or collections surrounding medical bills were weighed the same as credit card or any other type of debt.

Now, however, both laws and credit scoring models have changed to better benefit consumers who are dealing with medical bills. One of the best recent changes happened in 2015.

The three major credit bureaus decided not to report any medical debt until 180 days, compared to just 30 days for other types of debt. This gives you more time to receive your bills, make sure they’re accurate, and work out a payment plan.

FICO Score 9

Credit scoring models are also putting less emphasis on medical debt when it comes time to calculate your credit score. FICO 9, the newest model, gives medical collections less weight than other collections or debts owed.

This provides some relief when you’ve had medical and consequently, financial, situations that are out of your control. The downside is that many lenders still use older FICO models where medical bills are treated equally with other debt.

But as lenders start to upgrade and the popularity of FICO 9 continues to grow, you can expect to see some improvement in your credit score.

How to Handle Your Medical Debt

Even with the proper planning and familiarizing yourself with your benefits, it’s easy to find yourself saddled with overwhelming debt. Whether you’ve had a major operation or your child broke his leg, receiving medical care is expensive.

Luckily, there are a few different ways to handle it, many that are more amenable than other types of consumer debt. The best thing is to address the debt as soon as you start receiving bills. Otherwise, you can set yourself up for expensive late fees and negative items on your credit report.

Interest-Free Payment Plan

The cost of medical debt can be well outside of anyone’s reasonable budget, so one of the first things you should do is to arrange for a good payment plan. Most medical bills should be interest-free. The healthcare industry is usually willing to work with you as long as you’re willing to pay something.

If you can’t meet the payments they request, be honest about it and inquire about special hardship plans. You can only afford to pay so much and they’re going to have to accept that. Be aggressive about it and let them know that you intend to pay everything back, but you can only do it at a reasonable rate.

Avoid Missing Payments

When you’ve established what that is, avoid missing any payments if you want to remain in good standing and not have your debt sold to collections. If you discover that your bills were sent to collections, you should call the collections agency right away and tell them that a mistake was made.

Of course, if a medical bill is already in collections, you’ll have to deal with that in a different way. In either case, it always helps to talk to a free non-profit credit counseling service or debt consultant.

Debt Management

If your medical debts are just one debt among many, you’re not alone. It’s not uncommon for people to accrue other consumer debt as well, very often because of the circumstances surrounding their illness. If you or someone in your family has had an illness or hospital stay, it’s commonplace for other debts to build.

You or a loved one might be out of work, or dealing with other expenses. When debts become out of control, debt counselors can help. They can create debt management plans specifically tailored to your own unique situation.

Negotiate a Lower Payment

Depending on the circumstances, you might be able to negotiate a lower payment on your own or with help from a debt relief company. Sometimes hospitals are willing to work with you. Other times they’re more likely to negotiate with a professional who knows more about the system and has leveraging power.

You might even have luck asking your insurance company for help. Negotiations and even settlements can take place as part of a complete debt relief package, or one specifically centered on medical debt. Talk to a debt counselor to find out more.

Source: crediful.com

How Long Does It Take To Rebuild Credit?

If you’re trying to rebound from a major financial nosedive, it may seem like you’ll never get your credit back on track. Maybe you’re overwhelmed by credit card debt, or you lost your job and got behind on all kinds of bills.

calendar

No matter what has happened in your past, there is always something you can do to take control of your finances and your credit. It might take some time, but it is possible. So just how long does it take to rebuild your credit? Read on to find out.

How long does it take to rebuild your credit history?

Your credit score reflects the information on your credit report, so you have to take into account what items are listed, how much impact they have, and how long they stay on there.

The maximum amount of time for a negative item to stay on your credit report is 10 years. This is typically reserved for Chapter 7 bankruptcies and unpaid tax liens. Most other derogatory items, such as delinquencies, charge offs, and foreclosures, remain there for seven years.

If these items are accurate and all of the proper protocol was followed by creditors, it can be difficult to get them removed from your credit report ahead of schedule. However, it’s important to know that their effects on your credit score lessen over time, despite still being listed on your report.

How can you find the problem areas on your credit report?

Before even thinking about rebuilding your credit, you have to figure out exactly what’s wrong with it. Start off by ordering your credit report for free from each of the three credit bureaus.

Once you have them, carefully review each one to see what information is reported there. Lenders don’t just look at your credit score. They also look at your credit reports to see what is contributing to your credit score.

You’ll potentially see a list of credit items listing negative items. For example, you might see a late payment listed here, including how far past due it was. You’ll also see a list of your accounts in good standing, and a list of credit inquiries made over the last two years.

Assuming everything you see is accurate, you’ll have a good sense of what items you need to work on, either through actions you can take today, or simply by waiting.

How to Start Rebuilding Your Credit

Once you know what type of credit you’re working with, you can take a few different steps to start rebuilding. Some items take a while to make a difference in your credit score, while others start to have an impact right away.

Either way, all of these tips are necessary in order to maintain healthy credit even if some major items simply need time to repair themselves.

Pay Your Bills on Time

Maybe you’re living paycheck to paycheck, or maybe you just don’t pay attention to due dates. No matter what your attitude is towards paying bills, it’s time to shift your mindset and pay them on time.

Being just 30 days late on a payment can cause your credit score to drop more than 100 points. And the real kicker? The higher your credit score is, to begin with, the more points you’ll lose. So if your credit score is already in the high 700s or even the 800s, it’ll drop on the higher end of the range for any infraction.

Bottom line: take care of those bills each and every month. Sign up for automatic bill pay that comes out right on payday if you have to. Also, note that this rule doesn’t just apply to credit cards and loans.

Just about any creditor can report a late payment to the credit bureaus, even your cell phone carrier or utility company. So get out the calendar and make a plan to pay each and every bill before it comes due.

Keep Your Debt Low

Owing a large amount of debt can hurt your credit in a variety of ways. There’s an entire category devoted just to your amounts owed, accounting for nearly a third of your credit score. And there are several different ways in which your debt level is analyzed for your credit score.

First, it’s important what kind of debt you have. Revolving debt like credit cards is not looked upon favorably because the debt is unsecured. There is no physical property that a lender could seize if you stop paying your balance. Plus, there’s no potential for any type of growth in value.

Whatever you purchased with your credit card probably won’t garner more money than you paid for it, and probably not even face value at that.

Installment loans, on the other hand, are scored better because they usually have an asset tied to them (like a mortgage or car loan.) They potentially offer some type of added value, like equity in your home.

Credit Utilization Ratio

Another reason to keep your debt low is that your credit score takes into account your credit utilization ratio. This refers to the amount of credit you have access to compared to the amount you actually use.

It’s ok to have a couple of credit cards, and the higher your credit limits are, the better it is for your credit. But the more you charge (and don’t pay off), the more that credit limit shrinks.

Ideally, you don’t want to use any more than 30% of your credit. So if your credit card limits total $10,000 and you only have a $2,000 balance, then you’re only utilizing 20% of your credit limit.

To quickly rebuild your credit, try to pay down any debt you have to get your ratio under 30%. You should notice an uptick in your credit score after a month or two.

Think Twice Before Opening New Accounts

You might think that getting a credit card is a great way to increase your credit utilization ratio without having to actually pay down debt. Just get a new card to increase your limit, right?

Not so fast. Your credit report is an intertwined web of information and making one seemingly simple change can have ripple effects you didn’t account for.

There are several ways that opening a new account could actually cause harm to your credit. For starters, you’re increasing the amount of revolving credit in your credit mix. That’s not going to help your credit score at all.

Credit Inquiries

Inquiries also hurt your credit score. Sure, it’s just five or ten points, but that can add up if you’re applying for several cards at once. Plus, each of those inquiries remains on your report for two years!

Finally, new accounts shorten your average length of credit because you’re essentially adding a big fat zero that brings down your more seasoned accounts.

It’s fine to get a new credit card if you need one for a specific reason, but don’t open one solely in an attempt to rebuild credit. You’ll probably end up doing more damage in the long run.

Don’t Close Old Accounts

On the same token, closing an old account could hurt your credit by inadvertently lowering your credit utilization ratio. Closed accounts do still contribute to your credit history length for another ten years, but they won’t count towards your available line of credit.

If you’re considering closing an account because you can’t control your spending, try locking up your cards or keeping them with a trustworthy family member.

You’ll also need to delete any saved credit card information on your phone and laptop so you’re not tempted to make quick-click purchases. Obviously keeping your debt on track is most important. However, if self-control isn’t an issue, then you’re probably better off keeping your current accounts open.

What factors affect your credit scores?

Although there are five separate categories, they actually overlap in a number of ways. Here’s how they break down:

  • Payment History (35%)
  • Amounts Owed (30%)
  • Length of Credit History (15%)
  • Credit Mix (10%)
  • New Credit/Inquiries (10%)

Opening a new credit account, for example, may increase your overall available credit. However, the brand new account also lowers the average length of your credit history and adds a new inquiry on your report.

That’s three different categories affected by one action, with one potentially positive change and two negative ones. Plus, each person’s credit score is weighted differently depending on the entire credit profile.

Bottom Line

Everything is relative. It’s nearly impossible to figure out exactly what effect your financial decisions will have on your credit score.

Rather than trying to manipulate potentially positive impacts, focus on the sure-fire wins like paying your bills and lowering your debts owed. They might take longer to rebuild your credit score, but you don’t run the risk of an unforeseen domino effect by muddled decision-making.

If you need more help, consider contacting a credit repair company. They help clients rebuild the credit by removing negative items from their credit reports. Check out our list of the top credit repair companies.

How to Get a Loan with Bad Credit

Everyone needs extra money from time to time, and this doesn’t change when you have bad credit. Unfortunately, your options become much more limited when you have bad credit. This makes it difficult to qualify for a loan, even when you need it to cover a financial emergency.

young couple

Whether you’re wondering how to get a car loan with bad credit, pay hospital bills, or even qualify for a mortgage with bad credit, we’ll show you how to improve your credit score and get your finances back on track.

Not only will you find out how improving your credit score can save you money on your next loan, you’ll also learn steps you can start taking today to start building your credit.

How does bad credit affect your ability to get a loan?

Before you start looking for a loan, it’s important to get an accurate understanding of your credit score. Most lenders use the FICO scores, which ranges from a low of 300 to a high of 850. A “bad” credit score is typically defined as lower than 629.

If you want to know your exact number, you’ll have to purchase that information from FICO. But if you simply want to see what kind of derogatory items are on your credit report (and potentially fix them), you can request a free copy of each of your three credit reports.

It’s a good idea to take advantage of this free service every 12 months to check your reports for accuracy even if you’re not actively looking for a loan.

Once you’ve established whether or not your credit score is low, find out the exact impact bad credit can have on your life. Bad credit affects you both financially and emotionally, but the most expensive effect is the type of loan you’re able to get.

Higher Interest Rates

When applying for a loan, the lender will charge you higher interest rates for a poor credit score. That’s because your lender sees you as a greater financial risk, so they charge higher rates in case you default on the loan.

Higher interest rates can really add up over the life of the loan. Keep reading to find out exactly how much.

Application Denied

Even worse than getting a high interest loan, you may not qualify for a loan at all if your credit score is too low. If the loan is for something non-essential, then this may not be that big of a deal.

But it can significantly affect your well-being if you have serious financial needs, like car repairs or medical bills. At this point, some people decide to turn to “no credit check” lenders who offer predatory products like payday loans.

Though short-term, these loans have extraordinarily high APRs and often lead people into a cycle of never-ending fees for what started off as just borrowing a few hundred dollars. Luckily, there are many ways to avoid ending up in this situation.

Where can you get a loans for bad credit?

If you do have a poor credit history, some reputable lenders might be willing to offer you a loan. Just remember, you’re going to be paying a lot of interest on top of the amount you borrow.

Check Out Our Top Picks:

Best Personal Loans for Bad Credit

It’s always good to check with your local bank or credit union, although they are likely to have stricter lending standards and a slower origination process. If you have an existing relationship with a bank or credit union, they may be willing to help you out.

Many online lenders offer quick approval and funding, even for borrowers with a low credit score. Just be sure to do your research to make sure the company operates a legitimate business.

Before taking out a personal loan from anyone, check to see what kind of reviews that company has received and what its Better Business Bureau rating is.

Bad Credit Lenders

Here are a few online lenders that offer bad credit loans:

  • Avant is a major online lender offering bad credit loans that only requires a minimum credit score of 580.
  • MoneyMutual is a lending aggregator that offers short-term loans to borrowers with low credit. You do need to have a consistent monthly income of at least $800 to apply.
  • CashUSA partners with lenders offering loans to people with bad credit between $500 and $10,000. The credit and income requirements are flexible, but the interest rate could be pretty high.
  • BadCreditLoans.com is a lending marketplace for borrowers with bad credit who need quick access to cash. You could receive up to $10,000 with loan terms up to 60 months.
  • PersonalLoans.com is another lending marketplace that offers personal loans to borrowers with poor credit. You will need to prove that you have a monthly income of at least $2,000 to qualify.
  • OneMain has physical locations in addition to its online presence and actually has no credit score minimum. The company says its average customer has a credit score between 600 and 650. Don’t get too excited, though – your APR could be as high as 35.99%.

Things to Know About Applying for a Bad Credit Loan

If you do decide on getting a bad credit personal loan, keep a few things in mind so you don’t damage your credit scores even further. First, limit your number of loan applications.

Every time you apply for a loan, the lender makes an inquiry on your credit report. This lowers your credit score anywhere between one and five points depending on your situation.

That might not seem like a lot, but it could affect your interest rate if you’re on the border between “bad” and “fair” credit. Plus, many lenders view a large number of inquiries as a risk factor, especially if they’re all made within a short period of time.

Thoroughly research potential lenders in advance and see if they offer to make a soft pull on your credit rather than a hard one. That way you can compare interest rates without hurting your credit even more.

Going through a lending marketplace is a good way to limit your credit inquiries as well. With just one application, you’ll receive quotes from multiple lenders that are willing to work with you.

How much extra interest should you expect to pay on a loan with bad credit?

Even after getting approved for bad credit loans, there’s no getting around the fact that it’s going to be an expensive decision. Just how expensive depends on the terms and conditions of the loan.

On top of your interest rate, your lender may also charge an origination fee. Unfortunately, this is a pretty universal concept, so there’s not much you can do to avoid paying it.

The origination fee is usually charged as a percentage of your loan amount, so – just like interest – the more you borrow, the more you pay. You don’t have to come up with the cash upfront; instead, the fee is deducted from your loan.

Make sure you account for this deduction in your loan request. For example, if you need a $20,000 loan and there is a 3% origination fee, be sure to request $20,600 because 3% of $20,000 is $600.

Annual Percentage Rate

A helpful tool in determining the best interest rate and applicable fees is the loan’s annual percentage rate or APR. This number helps you compare offers that have different rates and fees to see which is better on an annual basis.

However, APR does not account for the loan term, which is the amount of time it will take you to pay off your loan. A loan may have an extremely low interest rate, but if it takes 10 years to pay off, you might actually end up paying a lot more in interest.

There are a lot of variables to consider when figuring out how much interest you’ll be paying. Let’s look at an example to help put these facts and numbers into context.

Auto Loan Calculator

Let’s say you want to figure out how to get a new car loan with bad credit. By using an online calculator, you can determine if making the purchase now is worth paying the extra interest compared to fixing your credit first.

According to Experian, the average length of a new car loan is 67 months and the average loan amount is $28,711. For simplicity’s sake, let’s say you get a 60-month (five year) loan for $28,000. Here is how MyFICO estimates different credit scores to stack up in the same scenario.

The differences in the amount of interest paid over the life of the loan are jaw-dropping: a person in the lowest range pays nearly $9,500 more than someone in the highest range. So you wouldn’t be paying $28,000 for that new car, you’d actually end up paying almost $37,500.

Bumping your credit score up just 31 points from a 589 to a 620 could save over $4,600 in this scenario. Think of how many paychecks that adds up to before you decide on getting a loan with a bad credit score.

Fico Score APR Monthly payment Total interest paid
720 – 850 3.312% $507 $2,421
690 – 719 4.636% $524 $3,424
660 – 689 6.751% $551 $5,069
620 – 659 9.474% $588 $7,262
590 – 619 13.848% $649 $10,958
500 – 589 14.944% $665 $11,918

Should you fix your credit before applying for a loan?

If you want to potentially save thousands of dollars on your next loan, then yes, you should consider fixing your credit before you apply. While some credit components take time to improve, there are many actionable steps you can take right now to improve your credit scores.

It’s always better to get a head start on the process rather than waiting for a financial emergency. If you don’t need the money right away, take the time to fix your credit now so you can save big when you are ready to borrow.

Here are five steps you can take right away to fix bad credit:

1. Dispute any errors on your credit report

Before you attempt to repair your credit, you want to know what you’re dealing with first. So the first place to start is by reviewing and disputing any errors on your credit report. And checking your report will give you a good idea of where you can begin making improvements.

2. Start making your payments on time

One of the easiest ways to raise your credit score is by making your monthly payments on time. Your payment history counts for a significant portion of your credit report, so if you struggle to make your monthly payments on time, your credit scores will take a hit.

And you may be surprised to learn that this applies to more than just lending products. It also includes credit cards, personal loans, home loans, utilities, and even your cell phone bill. Once you have that under control, start paying down any existing credit card debt.

3. Lower your credit utilization ratio

Your credit utilization ratio accounts for 30% of your credit score, meaning you’re not just judged on the amount you owe, but also on the amount you have borrowed compared to the amount you are allowed to borrow.

If your credit cards let you borrow up to $10,000 and your balance is $4,000, your credit utilization ratio is 40%. Ideally, your credit utilization ratio should be below 30%, so try to make extra payments until you can reach that ideal range.

4. Consider using a credit repair service

If you’ve already taken the steps we outlined above with minimal success, then you may want to consider hiring a professional. A credit repair service can dispute any negative items on your account and help improve your credit score faster than if you’re doing it on your own. Here is our top choice for a credit repair service.

By law, an item must be removed from your report if the creditor can’t verify it within 30 days. By having a tireless advocate on your side, you’ll make sure your current and past creditors are following the law. They will help you make sure your credit history has been updated to accurately reflect your financial history.

5. Show a lender can you repay the loan

Once you’ve put in the work to raise your credit score, it can help to look for ways to show an online lender, bank, or credit union that you’re able to repay the loan. Providing proof of income can give a lender more peace of mind and demonstrate that you’re financially capable of repaying the loan.

If you don’t have any proof of income and your credit score is still lower than you’d like, you can consider applying with a creditworthy co-signer. Ideally, this will be someone who has a good credit history and can vouch for you with your lender.

However, you should only use a co-signer if you’re certain you can repay the loan. If you default on a loan, the bank will go after your co-signer, which will put their financial future at risk.

How can you maintain your credit score once it’s fixed?

After taking the time and effort to raise your credit score, make sure you do everything in your power to keep it up — or get it even higher!

You might not be looking for another loan or line of credit at the moment, but you never know what your financial future will look like. Perhaps you rent an apartment now, but want to buy a house further down the road.

Getting a Mortgage

It’s hard to figure out how to get a mortgage with bad credit, so do your best to make sure you take care of your credit now. That means paying all your bills on time, setting aside cash for emergency savings, and not racking up unnecessary debt.

Remember, most infractions stay on your credit report for up to seven years, so the financial decisions you make now stick with you for a long time.

Renting an Apartment

Plus, think of all the ways poor credit affects your life outside of getting a loan. Many landlords run credit checks on prospective tenants, so it can be difficult to rent an apartment with bad credit.

Potential Employers

Potential employers also sometimes run credit checks on job applicants to see how they handle their money. Why? They think that if you’re not responsible in your personal life, you probably won’t be responsible in your work life.

So bad credit not only affects your spending power, it affects your earning potential as well. Keep every door open by making a conscious effort to continually improve your credit. It would be a huge waste of time and effort to give up on all the progress you just made. Do yourself a favor and consciously manage your money going forward.

Final Thoughts

It certainly is possible for people with bad credit to get a loan, but that doesn’t mean it’s the best decision for you. Analyze just how urgent your financial needs are. Then, decide if you can wait a while to improve your credit before taking out a high-interest loan.

A reputable credit repair service can help you aggressively put your credit score on the fast track to improvement. Check out our credit repair reviews page for a list of reputable credit repair companies that can get you started today.

Source: crediful.com

How To Get Your Free Credit Report

AnnualCreditReport.com's website

What is a credit report?

Most people already know what a credit report is, but let’s go over the basics real quick just in case.

Credit reports are sometimes referred to as “credit files” or “credit history”. They are compiled by the three major credit reporting agencies, aka credit bureaus: Equifax, Experian, and TransUnion.

What kind of information is on my credit report?

Credit reports include information such as your name, social security number, current and previous addresses, current and former employers, credit card and loan payments, credit inquiries, collection accounts and public records such as bankruptcies, judgments, foreclosures, and tax liens.

Each account listed on your credit reports will show the date the account was established, your payment history, credit limit, and the type of account (mortgage, installment, revolving, collection), etc.

How do I get my free annual credit report?

By law, under the Fair Credit Reporting Act, you are entitled to a free copy of your credit report every 12 months from each of the three major credit bureaus (Experian, Equifax, and TransUnion). In addition, several states offer an additional free credit report per year, including:

  • Colorado
  • Georgia
  • Maine
  • Maryland
  • Massachusetts
  • New Jersey
  • Vermont

Your free annual credit reports contain the same information that is found on a paid credit report: your open and closed financial accounts, and your payment history for each. You’ll generally find payment history for loans, credit cards, and revolving lines of credit. You may also see rental payments if you rent an apartment.

How do I order my free credit reports?

If you are getting your annual free credit reports, you can order them online through AnnualCreditReport.com.

This website will let you order all three of your free credit reports at once, with no obligations and no hidden fees. You may have to provide some personal information in order to confirm your identity before ordering, but you will not be charged if you use this site.

Please note that if you use these free credit reports to file a dispute with the credit reporting agencies, they have 45 days to investigate your dispute instead of the typical 30-day timeframe.

Other ways to get a free credit report:

The free annual credit report is available to everyone in the United States. However, in addition to that, you can also get a free credit report directly from a credit reporting agency if you’ve been denied credit.

You have 60 days from the time you are notified of the denial to request your credit report. Your request must also be with the credit reporting agency that was used to check your credit.

If you are ordering a free state report, or you are getting a free credit report due to any of the other factors we’ve talked about, you’ll need to contact the nationwide credit reporting agencies directly. Equifax and TransUnion make it easy to order these free credit reports online, but to get your free Experian credit report, you may need to call.

The contact information and links for each are here:

  • Free Experian Credit Report – call 1 866 200 6020 to confirm eligibility and get your credit report by mail or use this link.
  • Free Equifax Credit Report – order online through this link.
  • Free TransUnion Credit Report – order online through this link.

Remember: Keep track of when you order your credit reports and from which bureau(s) so that you know when you’ll be eligible to order your next credit report for free.

Can I get a free credit score too?

Unfortunately, the law does not mandate that credit reporting agencies give you a free credit score with your free credit reports. However, Lexington Law Firm offers a free FICO credit score as well as a free credit repair consultation. You can get that by visiting their site or calling 1 (800) 220-0084.

There are also several credit card companies that offer a free credit report.

You can often order your credit score alongside your free credit report for an additional fee as well from the credit reporting agencies. However, these scores are considered FAKOs as they are not real FICO credit scores (the credit scores that lenders use).

While the VantageScore (the credit score created by the credit reporting agencies to compete with Fair Isaac) is used by some businesses and institutions, the vast majority still rely on FICO scores to make credit decisions. So before you pay for any credit score, make sure that it’s one that will be useful to you.

If you want to monitor your credit reports and credit scores monthly, you might want to consider a credit monitoring service.

Can I get more than one free credit report per year?

If you’ve already ordered your legally-mandated free credit reports for the year and you don’t live in a state where you are entitled to an additional free report, there are still several situations which qualify you for an additional free credit report:

Negative actions as a result of your credit report such as:

  • Being denied for credit or a loan
  • Being denied for insurance
  • Being passed over for employment
  • Being denied a government license or benefit, or having an adverse action for either of these
  • Being denied or having an unfavorable action happening on another account (i.e. interest rates raised on your credit accounts, being denied a credit line increase, etc.)

Hardships that make it difficult to maintain positive credit such as:

  • You are currently unemployed and are planning to seek employment within the next 60 days
  • You are receiving or have recently received public welfare assistance
  • You believe that your credit file may be inaccurate due to fraud or identity theft

How can I dispute inaccurate information on my credit report?

If you find inaccurate or “questionable” information on your credit report, you can dispute the errors with the credit bureaus. We also offer free credit repair letters or if you need help getting rid of negative items on your credit reports, you can hire a credit repair service.

How to remove inquiries from a credit report

young family reviewing credit report together

The information provided on this website does not, and is not intended to, act as legal, financial or credit advice. See Lexington Law’s editorial disclosure for more information.

Credit scores naturally fluctuate from month to month depending on your usage, payments and transactions. For the most part, your credit score is directly tied to your actions. Occasionally there will be errors on your report that were out of your control, such as with hard inquiries and lines of credit. If you notice a sudden decline in your credit score, even if only by a few points, you may be suffering from the effect of an unwarranted credit inquiry.

Credit inquiries occur when a lender requests your full credit history from one of the credit reporting agencies. These inquiries into your credit history can affect your credit score negatively and will typically stay on your report for up to two years.

Inquiries stay on your record for so long because they reflect how many times you have applied for credit. Lenders use how many times you have applied for credit to judge whether you should be approved for an extension of credit.

In certain circumstances, an unapproved inquiry can be removed from your credit report by sending a credit inquiry removal letter to the credit reporting agency or by disputing it online.

The difference between hard and soft inquiries

difference between hard and soft inquiries

Although there is no difference between the data provided in a hard and soft inquiry, they do not affect your credit the same way. A common misconception is that checking your own credit history will negatively affect your score, but this is not true. When you check your own credit history, it is considered a soft inquiry and will not show on your credit report or affect your score.

Hard inquiries, by contrast, occur when a lender pulls your credit report. A lender may pull your credit history while going through an application for a new loan, a new credit card or any line of credit. Additionally, banks and property managers may pull your credit while setting up accounts or determining approval for an apartment.

Occasionally, a hard credit report can sometimes be pulled without your knowledge, approval or without your full understanding. Hard inquiries that were pulled without your request can be removed from your credit report under the Fair Credit Reporting Act.

How do credit inquiries affect your credit score?

Hard inquiries count as minor negative entries and account for 10 percent of your credit score. Although the exact effect on your credit score will vary depending on your credit history and current standing, you can typically expect to see a one to five point drop in your overall credit score.

Although the exact hit to your credit score will vary, you can expect to see drops in your score when these inquiries start to add up. Occasionally lenders will either pull your credit by mistake, pull your credit multiple times or pull your credit without your knowledge whatsoever.

Can you remove inquiries from your credit report?

reasons to dispute a hard inquiry on your credit report

Hard inquiries can be removed from your credit history if they occurred without your approval. If you did not have knowledge of the hard inquiries pulled from your credit profile, you have the right to ask for the inquiry to be removed. 

You can remove a hard inquiry if:

  • The inquiry occurred without your knowledge.
  • The inquiry occurred without your approval.
  • The number of inquiries exceeded what you expected.

How to send a credit inquiry removal letter

To send a credit inquiry removal letter, you should contact any credit reporting agency that is reporting the inquiry. Credit inquiry removal letters can be sent to both the credit reporting agencies and the lender who issued the credit inquiry.

1. Send the credit inquiry removal letter via certified mail

Certified mail is a way in which the sending and receiving of a letter or package is recorded. This form of mail will give you proof that the credit issuer or lender received the proper first notification to remove the hard inquiry.

2. Notify the lender first

Notifying the lender before you send a removal notice is necessary if you plan to take the dispute further to court. This is the proper first step for removing hard inquiries.

3. Include a copy of your credit report

Including a copy of your credit report with the highlighted unapproved hard inquiries may help with referencing your case. Although the credit reporting agencies will have easy access to your report, a hard copy will help investigators when processing your request.

4. Send to the appropriate credit bureau

It is important to send your letter to the credit bureau with a record of the hard inquiry you want removed. Below are the addresses for each bureau:

Equifax
P.O. Box 740256
Atlanta, GA 30374-0256
Equifax Dispute Information Center

Experian
P.O. Box 4500
Allen, TX 75013
Experian Dispute Information Center

TransUnion LLC
Consumer Dispute Center
P.O. Box 2000
Chester, PA 19016
TransUnion Disputes Information Center

Credit inquiry removal letter template

Date
Your name
Your street number, street name
City, state, zip code
Your phone number
Social Security Number
Name of credit bureau

Re: Reporting Unauthorized Credit Inquiry

To whom this may concern,

I am writing to request the removal of unauthorized credit inquiry/inquiries on my (name of the credit bureau—Equifax, Experian and/or TransUnion) credit report. My latest credit report shows (number of hard inquiries you are disputing) credit inquiry/inquiries that I did not authorize.

I am writing to dispute the following inquiries and ask for their removal from my credit report.

Item No. Creditor Account

Please have these/this unapproved inquiries/inquiry removed from my credit report within 30 days, as it is harming my ability to obtain new credit. I would appreciate a copy of my credit report once this issue is resolved.

Thank you for your assistance.

Sincerely,

(Your Name)

How to stay on top of negative credit report entries

Removing questionable negative items from your credit profile can be a long and time-consuming process that can seem daunting. Although a few points’ difference may not seem like a large priority, it is important to stay on top of these entries before they add up and get out of control.

If keeping your credit score high or improving your credit score is a top priority, Lexington Law Firm may be a good option for you. Lexington’s credit repair services can help you with addressing questionable negative items on your credit report as you work on improving your credit.

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Source: lexingtonlaw.com