Bad credit is detrimental to your financial standing in many ways. A low credit rating can mean getting credit cards and other credit lines at exorbitant interest rates and low limits.
If your rating is really low, your credit applications may not be approved at all. Further, landlords may decline your rental application or ask for higher security deposits.
Simply put, the negative effects of bad credit are so far-reaching that many people are willing to do anything to get a better score. To this end, you’ll find services offering to delete negative items from your reports.
So, do such fixes work? If not, how do you go about fixing poor credit?
Let’s find out:
Can Poor Credit History Be Erased?
Yes and No. If the right steps are taken to remove mistakes in your report, then bad history can be erased, allowing your rating to get a boost.
On the other hand, a service that promises to erase correct, but negative, information on your report is a scam. Companies running such frauds can even go further in promising you a completely new and blemish-free identity.
Are Credit Repair Companies Legal?
Credit repair is a legal service that is guided by the Credit Repair Organizations Act (CROA). Under the act, companies work within a framework that protects consumers from unscrupulous practices.
This consumer protection act has been in effect since 1996 and bans:
Changing a client’s identity to hide them from lenders and credit reporting bureaus.
Assuring consumers that they can erase items from a credit report.
Getting paid for incomplete repair services.
Advising you to make deceitful claims to furnishers of credit information or agencies.
Credit repair companies are also obligated to notify consumers that they can directly raise issues with credit reporting agencies.
Furthermore, the bureaus are required to make certain that their reports are without error and investigate any issues about the reports they generate.
It’s also worth noting that it’s within your right to sue any company that contravenes the CROA.
How Do Credit Repair Firms Remove Bad History?
Companies in this field act on your behalf to access your financial reports and dispute errors. A successful service ensures that the damaging information is excised from your credit report. The service involves:
Checking Credit Reports
The company requests your reports from Experian, Equifax, and TransUnion. With the three reports, credit repairers can have a complete picture of your finances, since creditors are not required to subscribe to all credit agencies.
Reviewing and Disputing Errors
Credit repair professionals go through the different entries in your reports, confirming details as contained in supporting documents from the primary sources.
For example, to find out if a credit limit is accurate, the entry is checked against a statement from the specific credit line issuer. Such errors are marked and the right documents are prepared to initiate a dispute.
Disputes are raised with both credit bureaus and the originators of the misleading information. Errors can be anything from a misspelled name to duplication of debt.
If the disputes have merit, the bureaus are required to erase the affected entries. This is usually effected within a month or so after the process is initiated via mail or online.
What Can’t Be Erased from a Credit Report?
No matter how expensive a credit repair service is, some entries can’t be removed from a credit report. In a nutshell, all correct information stays on your report, irrespective of how damaging it is to your credit rating.
At the same time, bureaus are required to retain some vital entries in your reports, long after you have cleared the debt. Such entries include:
Payments for the last 24 months, whether they were timely or not.
Bankruptcies on your report can remain for up to 10 years, even after your status changes before the duration lapses
Applications for loans, credit cards, business loans, and other forms of credit. The entries are known as hard inquiries and stay on your credit report for 2 years.
The Takeaway
One approach to improving your credit standing is finding and disputing wrong information in your credit report. Common errors include incorrect accounts, inaccurate personal details, and data management errors.
With your authorization, credit repair services can help rectify mistakes and erase errors that are lowering your credit rating. However, such businesses are governed by laws that prescribe limits to what can or can’t be erased from a credit report.
Ultimately though, you need to build your credit through timely payment of balances and not maxing out your credit limits.
Many or all of the products featured here are from our partners who compensate us. This may influence which products we write about and where and how the product appears on a page. However, this does not influence our evaluations.
If you successfully dispute a charge, the bank will notify the merchant and return funds to the issuing consumer via a chargeback. From here, merchants can decide if they want to dispute the chargeback or not.
If you file a dispute for a credit card charge with a bank, that bank will quickly notify the corresponding merchant that you’ve initiated this process. From here, the merchant can review your claim and decide whether or not to accept or deny your dispute.
Disputing a credit card charge can be a lengthy process with sweeping ramifications. That’s why it’s important to understand what a credit chargeback is and whether this tool is the best option at your disposal.
Key Takeaways:
Merchants may want to cancel a chargeback even if your bank sides with you.
Your bank will initially cover the cost of a chargeback until the matter is settled.
It’s often best to contact a merchant before initiating a chargeback.
What Is a Chargeback?
A chargeback occurs when you successfully dispute a charge on your credit card. The charge is taken off your credit card account and the money paid to the merchant is reversed (or “charged back” to the merchant). Many people dispute credit card charges for services not rendered. For example, there was a strong link between COVID-19 and chargebacks throughout 2020 as many companies struggled to keep up with demand.
A chargeback can be a powerful tool for consumers who do not receive products or services they paid for, but it comes with several caveats. Even if the credit card company sides with you, the merchant may not—and they may try to collect the chargeback funds.
What Happens When You Dispute a Charge?
The Truth in Lending Act is the federal law that gives consumers the legal right to dispute credit card charges if there is a billing error, as outlined in the Federal Reserve’s Consumer Compliance Outlook. This law defines a card issuer’s responsibilities when cardholders file disputes.
When you dispute a charge with your credit card company, it must conduct what the law calls a “reasonable investigation” to determine whether the charge was correct. It must also present you with the result of the investigation within 90 days.
During that process, the credit card company typically reaches out to the merchant involved in the charge. It requests documentation from the merchant regarding the transaction in question, and the merchant may be able to state why the charge was correct.
If the credit card company sides with you, it removes the charge from your credit card statement, and you do not need to pay the charge on your credit card.
Can a Merchant Try to Collect the Money From You After a Chargeback?
The Truth in Lending Act covers your right to dispute a credit card charge, but it doesn’t define what merchants are obligated to do—nor does it bar a merchant from trying to collect the money from you later. Instead, merchant agreements outline what actions a merchant can and can’t take concerning a dispute.
A chargeback means that the credit card company decides in your favor regarding the dispute. It doesn’t mean the merchant agrees or that they’ll return your funds.
Merchants can engage in “chargeback representment” to challenge your chargeback request and prove the original payment was valid. This process can be challenging, and merchants must decide if the potential loss of revenue is worth it—or if they might lose consumer trust with an aggressive approach without evidence.
The merchant might also seek to recover its loss by invoicing you for the charges. If you don’t pay, it might threaten collections activity or even sue you. Understanding your debt collection rights is pivotal if legal action seems imminent.
What’s the Difference Between a Refund and a Chargeback?
Chargebacks are granted by card issuers, while refunds come directly from merchants. While chargebacks can become lengthy and complicated processes, refunds are often straightforward.
So long as your claim aligns with a merchant’s terms and conditions, you’ll likely receive a refund shortly after the merchant receives the product you wish to return.
How Do You Manage Chargebacks?
No one wants to deal with an issue only to have it pop up unexpectedly in the future—especially financial issues that could affect credit scores. Here are some tips to avoid future issues when you request a chargeback.
Only Dispute Credit Card Charges If You Have a Legitimate Reason
Unfortunately, some people request chargebacks even if they received the goods or services in question. They might do so because they have a problem with the vendor or simply because they don’t want to pay for the products. That last instance counts as fraud, and it could lead to your credit card account being closed or other legal consequences.
Reach Out to the Vendor First
Before you file a chargeback, give the merchant a chance to make the issue right first. Many merchants are willing to work with you and might refund the money, offer an exchange, or work to resolve your specific grievance.
As part of your chargeback process, you’ll want to demonstrate that you attempted to contact the merchant about the issue. If you file a chargeback without working with the vendor first, you give the vendor more of a reason to insist that you still owe the money.
Act Quickly
You must dispute a credit card charge in writing, and your letter should reach the credit card company within 60 days of the first bill or statement with the error on it. This short timeline means knowing how to read a credit card statement is critical.
Keep an Eye on Your Account
According to the Federal Trade Commission, you can withhold payment for disputed charges while the investigation is underway. Your credit card company can’t penalize you with late fees, interest, or reports to the major credit reporting agencies regarding nonpayment of those charges.
That doesn’t, however, extend to your account in general. Implementing relevant tips for improving your credit history can keep your score from falling during the investigation. If you do pay your credit card charges and then realize something isn’t right, you can dispute that error. A decision in your favor might result in a credit to your account.
Save the Documentation
Don’t toss receipts, emails, or other evidence just because the chargeback occurred. You might need the documentation again if the merchant decides to try to collect from you. Typically, the higher the amount in question, the more important it is to maintain your documentation.
Monitor Your Credit With Credit.com
Chargebacks won’t affect your credit score alone, but there’s a margin for error while investigation is underway. In addition to reviewing your statements regularly, ensure you’re familiar with the laws that protect you and how you can assert your rights.
If any type of inaccurate negative reporting dings your credit—whether it’s related to a chargeback collection or not—tools like credit repair letters can be vital. One way to help protect yourself is to stay on top of your credit and invest in products and services that let you easily monitor your credit, such as ExtraCredit®.
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.
A goodwill letter is a written correspondence that asks creditors to remove negative remarks from your credit reports.
Key points:
A goodwill letter is more likely to work on smaller negative items, such as late or missed payments.
The creditor has no obligation to honor or even respond to a goodwill letter.
Write a goodwill letter as you would for any business-related correspondence—keep it professional, clear and concise.
Take the necessary steps to avoid incurring negative items in the future.
Negative items, such as late or missed payments, can have a considerable effect on your credit score and make it harder for you to secure loans in the future. Luckily, if your late payments are a one-time thing and you have an overall positive relationship with your lender, you may be able to send a goodwill letter to have these negative items removed.
Read on to learn more about goodwill letters and how you can use them when taking control of your credit.
What is a goodwill letter?
A goodwill letter is a request to creditors to remove negative remarks from your credit reports. As the name “goodwill” suggests, this request puts it on the creditor to make a good-faith effort to cooperate and work with a client or customer, and to establish a good business reputation with its clients. A creditor might be willing to take such action if you have good history with the individual creditor and have demonstrated effort on your part to handle credit and finances more responsibly.
Creditors are never obligated to remove accurate negative items simply because you ask. And in some cases, creditors may not be able to remove the items due to internal policies or agreements with the credit bureaus. Nevertheless, making the request only takes a bit of your time, so it might be worth a try.
When should you use a goodwill letter?
It’s best to send a goodwill letter when you have a logical reason for missing a payment. Potential reasons for sending a goodwill letter include:
You experienced an unforeseen financial hardship that temporarily prevented you from paying your bills.
You or a loved one had a medical emergency.
You recently changed banks and forgot a payment during the switch.
You moved locations, but they didn’t send the bill to your new address.
You were under the impression that you set up automatic payments, but there was a technical difficulty.
Whatever your reason for missing the payment, be sure to communicate to the creditor that you’re committed to getting your credit back on track.
What can goodwill letters remove?
Goodwill letters are more likely to work for smaller negative items, such as late or missed payments. That’s because many creditors have agreements with credit bureaus that they will not negotiate with individuals to have repossessions, collection accounts or charge-offs removed in exchange for payment.
While you’re free to send a goodwill letter any time, they are—generally—most effective when you want to get a mark related to a one-time negative issue removed.
How long will it take to get a response?
A goodwill letter is an unofficial letter sent to a creditor. As such, there’s no timeline requirement or even an obligation on the creditor to respond to the letter. How long the letter takes to generate a response—or whether any response is generated—varies.
A goodwill letter is not an official credit dispute letter. When someone finds an inaccurate item on their credit report, they can send a credit dispute or verification letter to the credit bureau. This prompts the credit bureau to launch an investigation, which comes with specific timelines that must be followed by the credit bureau and any creditor that is asked to provide documentation for the negative item.
Do goodwill letters work?
While there is never any guarantee that a goodwill letter will be successful, they have the best chance of working when the borrower and the lender have a good relationship. If you’re already in collections or have a long history of making late payments, you might not have good enough standing to successfully make the request.
How to write a goodwill letter
Write a goodwill letter as you would any business-related correspondence. Type and print it, and keep it professional, clear and concise.
While you can provide details about the reasons for a lapse in payment or another negative factor, a goodwill letter should not focus on the emotional aspects. The goal should be to show the creditor that the issue was not indicative of how you normally handle credit. You may also draft the letter in a way that shows that you have substantially improved how you handle credit.
This helps the creditor see you as a more valuable client, which can encourage them to do a goodwill favor for you. The goal of such a letter should not be to make the creditor feel sorry for you.
When writing your letter, include details that can help the creditor identify your account and the negative item in question. Then, provide a short description of why you think the creditor should remove the negative mark. You should include:
Your account number
The date and type of issue that occurred
Information that identifies the negative mark
Information about how long you have had a relationship with the creditor
Information that shows this is not habitual behavior for you
Sincere regret that this occurred
A specific call to action that explains what you are asking of the creditor
Example of a goodwill letter
If you’re unsure how to write a goodwill letter, check out this example to get started.
Re: Account No. [Account number]
Sally Joe
1199 La Playa Street
San Diego, CA 91932
To Whom It May Concern:
I’m writing this letter to express my gratitude as a longtime customer of California Bank and to discuss a concern regarding my account. Specifically, I would like to discuss an item posted to my credit report regarding this account and request that it be revised.
My account with California Bank began on 2/10/2013. Since that time, I have enjoyed excellent customer service and benefits and have been happy with California Bank. I have also been a customer in good standing, paying my account in a timely manner while qualifying for loyalty programs.
However, in January, I was in a major car accident and spent a week in the hospital. This led to a temporary decrease in my income and an influx of medical bills. While I was able to bounce back financially and now am continuing to pay all my debts as owed and in a timely manner, the first month after my injury was financially difficult, and this is when I missed that single payment.
I wish I could have continued with normal payments during that time, and I regret that I wasn’t able to do so. Following that personal emergency, I’m working hard to repair any damage done to my credit and personal financial life, and I’m reaching out to you for support in that effort.
I’m asking that California Bank give me a second chance at a fully positive credit history with your organization by removing the late payment mark from my credit report with all three credit bureaus. Please let me know if there is anything else I can provide to support you as you consider my request. Thank you.
Sincerely,
Sally Joe
Goodwill letter sample + template
How to avoid incurring negative items in the future
As mentioned above, goodwill letters are most likely to work for one-off occurrences. So, if your goodwill letter is successful and a creditor agrees to remove a negative remark from your credit report, it’s important that you take the following precautions to avoid incurring negative items in the future:
Stay organized. Organizing your finances can help you remember to pay them on time.
Pay your bills automatically. If you frequently forget to make payments, set up automatic transfers to stay on top of your bills.
Update your contact information. If any personal information changes, like your address, be sure to update it on your statement.
Have an emergency fund. Building an emergency fund will hopefully allow you to keep making payments, even in the event of an unplanned expense.
If you’re looking to improve your credit, Lexington Law Firm may be able to help you. Lexington Law Firm’s credit repair services can help you address questionable negative items on your credit reports and to ensure that what is reported on your credit reports are accurate and substantiated pursuant to applicable laws.
Note: Articles have only been reviewed by the indicated attorney, not written by them. The information provided on this website does not, and is not intended to, act as legal, financial or credit advice; instead, it is for general informational purposes only. Use of, and access to, this website or any of the links or resources contained within the site do not create an attorney-client or fiduciary relationship between the reader, user, or browser and website owner, authors, reviewers, contributors, contributing firms, or their respective agents or employers.
Reviewed By
Candace Begody
Associate Attorney
Candace Begody was an Associate Attorney at Lexington Law.
Ms. Begody was born and raised in Arizona. She earned her juris doctor from Arizona State University’s Sandra Day O’Connor College of Law and her master’s in business from the W.P. Carey School of Business, also at ASU. Ms. Begody joined Lexington Law in 2022. Prior to that, she worked in transactional and business law in the Phoenix area. Ms. Begody is licensed to practice law in Arizona and was located in the Phoenix office.
Steve Rhode is the Get Out of Debt Guy and has been helping good people with bad debt problems since 1994. You can learn more about Steve, here. Latest posts by Steve Rhode (see all) .u92ccdc757eaf561319558dbbfa56aac1padding:0;margin:0;padding-top:1em!important;padding-bottom:1em!important;width:100%;display:block;font-weight:700;background-color:#fff;border:0!important;border-left:4px solid #fff!important;box-shadow:0 1px 2px rgba(0,0,0,.17);-moz-box-shadow:0 1px 2px rgba(0,0,0,.17);-o-box-shadow:0 1px 2px rgba(0,0,0,.17);-webkit-box-shadow:0 1px 2px rgba(0,0,0,.17);text-decoration:none.u92ccdc757eaf561319558dbbfa56aac1:active,.u92ccdc757eaf561319558dbbfa56aac1:hoveropacity:1;transition:opacity 250ms;webkit-transition:opacity 250ms;text-decoration:none.u92ccdc757eaf561319558dbbfa56aac1transition:background-color 250ms;webkit-transition:background-color 250ms;opacity:1;transition:opacity 250ms;webkit-transition:opacity … [Read more…]
Identity theft is a major problem. According to the Federal Trade Commission (FTC), there were more than 650,000 victims of identity theft in 2019, making ID theft the most-reported type of FTC complaint. Chances are good that you will encounter identity theft in your lifetime. That was the case for at least 1 in 10 Americans ages 16 and older in 2016, according to the most recent data from the Bureau of Justice Statistics.
Protecting your identity and privacy should be a priority for you, and knowing what identity theft is can help you prepare. There are many different types of ID theft, which can make safeguarding your personal information even more important—and more difficult. Let’s look at some of the most common examples of identity theft and what you can do to manage the risks.
Defining Identity Theft
The term “identity theft” is used a lot, often interchangeably with “fraud.” Though many instances of identity theft are committed for fraudulent reasons, the two are slightly different. If you are a victim of identity theft, you want to catch it before it becomes fraud.
According to the National Center for Victims of Crime (NCVC), identity theft is “the knowing transfer or use, without lawful authority, of another person’s identity with the intent to commit, aid, or abet unlawful activity.” In simpler terms, ID theft is the act of stealing another person’s information, like through mail theft, phishing, card skimming, unsecure Wi-Fi or a data breach. Fraud is when a criminal illegally uses that information for their own gain.
The NCVC calls the latter “identity fraud,” which encompasses crimes like credit card fraud, medical fraud, and Social Security number theft. Identity fraud can be financially driven, but is also committed out of other motivations. Someone might try to steal your passport or driver’s license information to travel unnoticed by law enforcement, for example.
I just watched a documentary on the dark web, and I will never feel safe using my credit card again!
Luckily I don’t have to worry about that. I have ExtraCredit, so I get $1,000,000 ID protection and dark web scans.
I need that peace of mind in my life. What else do you get with ExtraCredit?
It’s basically everything my credit needs. I get 28 FICO® scores, rent and utility reporting, cash rewards and even a discount to one of the leaders in credit repair.
It’s settled; I’m getting ExtraCredit tonight. Totally unrelated, but any suggestions for my new fear of sharks? I watched that documentary too.
…we live in Oklahoma.
Whether an ID thief uses your credit card or medical insurance, the cost to you can be big. Javelin Research found that the 2018 out-of-pocket costs for victims of identity theft were $1.7 billion.
Different Types of Identity Fraud
As a popular saying goes, “Know your enemy.” Let’s take a closer look at identity fraud types and preventative measures you can take to prepare yourself and protect your finances.
1. Credit Cards
Credit card fraud is by far the most prevalent type of identity theft, according to FTC numbers.
You probably store your credit card information with different vendors or subscription services. If you used your card once at a retail store, they’ll still have your information on file. If a data breach occurs at one of those businesses, someone may gain access to your credit card number and begin to make fraudulent purchases.
While it may be easier to catch a fraudulent charge on a card you have, it could be harder to spot a new account in your name. In the meantime, hard inquiries and high credit utilization due to fraud could wreck your credit score.
What you can do: Requesting a chargeback might help you avoid paying for specific fraudulent transactions, but checking your credit report will show you if the problem is deeper. Sign up for ExtraCredit to keep an eye on your credit report and scores at the same time to make sure that fraudulent accounts aren’t being opened or used. You can also request your free credit report from each of the three credit reporting agencies once a year to keep close control over your identity and credit profile. If you notice anything fishy, request a freeze immediately and file a report with the FTC.
Note: Due to the COVID-19 coronavirus pandemic, you can currently review your credit reports from each of the three credit bureaus for free each week, through April 2022.
2. Loans and Leases
Somebody with your personal information might try to apply for a loan online. Fraudsters may then be able to get financing to buy a car or real estate. The FTC has also reported fraud instances related to student loans and payday loans.
Loan application fraud is a challenge to track, but the impact is someone racking up debt in your name. When creditors come calling, it won’t be the thief who has to answer the phone.
What you can do: As with credit card fraud, regularly check your credit reports to watch for red flags. If you spot something, immediately contact the responsible financial institution. You may also want to file a police report or contact the office of the attorney general for your state. If you are the victim of loan/lease fraud, consider using credit repair services to help you recover.
3. Phones and Utilities
Mobile takeover fraud is a complicated scheme, but it’s a growing problem. Basically, it involves a fraudster using your information to access your smartphone and then lock you out. In the meantime, they can use your apps, read saved documents, or scam others by impersonating you. They might also harvest your personal and financial information that you have saved. The same might happen for an electricity or water account: A criminal finds a way in and consumes services that are ultimately billed to you.
The common theme with identity theft here is that if someone has your info, they can do just about anything with it. This includes opening up utility accounts in your name, getting free electricity, gas, water, internet or cable.
What you can do: Maintain strong passwords for all the accounts you have. If you need to, use a password manager to help you keep track of all the complex log-in credentials. Never, ever make your passwords using personally identifiable information, like a pet, birthdate, or home street. Should something happen, immediately contact your service provider.
4. Tax Fraud
Come tax time, a refund is a happy surprise for some Americans. Others may get a nasty shock when they’ve learned someone has claimed their return before they even file their taxes. Tax fraud typically occurs when someone has stolen your Social Security number, which they can then manipulate to falsely file a return and claim your refund.
What you can do: Under no circumstances should you give your SSN to anybody but trusted entities like the government, your bank, or your credit card company. Be wary of scammers posing as the IRS who will call or email you demanding your SSN information. This is a surefire sign of fraud. You can also opt to file your taxes early, thereby eliminating the opportunity for thieves to file for you and claim your return.
The IRS recommends watching out for various scams. If you believe you’ve been a victim, file a report on IdentityTheft.gov, call the IRS at 1-800-908-4490, and complete and submit the identity theft Affidavit.
Taking the Next Steps to Protect Your Identity
Identity theft is a constant threat, so you’ll always need to be on your toes.
Guard It from ExtraCredit provides you with proactive alerts, dark web monitoring, account monitoring, and $1 million in ID theft insurance. Sign up today or read more articles about identity theft and fraud.
Today the Consumer Financial Protection Bureau and Lexington Law, the largest credit repair operation in the United States, entered into a Stipulated Final Judgement and Order the Court must approve. I would be surprised if they didn’t.
I’m going to bold what I think are the most important revelations.
The proposed order says, “Plaintiff Bureau of Consumer Financial Protection (“Bureau”) commenced this civil action on May 2, 2019, to obtain injunctive and monetary relief and civil penalties. The suit alleges, among other things, that the Defendants violated the credit repair advance fee provision of the Telemarketing Sales Rule (TSR), 16 C.F.R. § 310.4(a)(2), by billing clients for credit repair services before the timeframes required by the advance fee provision had expired. On March 10, 2023, this Court issued an order agreeing with the Bureau’s position.
Credit repair organizations that market or sell their services over the phone, irrespective of whether they promise a specific result to consumers, must follow the TSR, including the advance fee provision.
That is, credit repair organizations that market or sell services over the phone may not request or receive payment of any fee for credit repair services until (i) the time frame in which they have represented all of the goods or services will be provided to that person has expired; and (ii) they have provided the person with documentation in the form of a consumer report from a consumer reporting agency demonstrating that the promised results have been achieved, such report having been issued more than six months after the results were achieved.
And no business may substantially assist a credit repair organization that it knows or consciously avoids knowing is engaged in an act or practice that violates the TSR, including by doing such things as providing back office support, technical know-how, lead generation, or data that supports their non-complaint credit repair practices or billing.
The Defendants and the Bureau have now agreed to settle the litigation. As part of the settlement, Lexington Law, CreditRepair.com, and Progrexion—the largest credit repair organizations in the United States—have agreed that, among other things, they will not violate the advance fee provision of the TSR, nor will they knowingly assist or support any company that is violating that provision.
Consumers considering using a credit repair company should be aware that it is illegal for a company to charge them for telemarketed credit repair unless it has been six months since the company achieved the promised results. Their consumer report has to show that the promised results were achieved six months earlier than they can be billed. Credit repair organizations accepting clients via inbound or outbound telemarketing must conform their billing practices to the full requirements of the TSR, including the advance fee provision of the TSR.
.u1df350f6a14e2ae19be1787c92e07417padding:0;margin:0;padding-top:1em!important;padding-bottom:1em!important;width:100%;display:block;font-weight:700;background-color:#fff;border:0!important;border-left:4px solid #fff!important;box-shadow:0 1px 2px rgba(0,0,0,.17);-moz-box-shadow:0 1px 2px rgba(0,0,0,.17);-o-box-shadow:0 1px 2px rgba(0,0,0,.17);-webkit-box-shadow:0 1px 2px rgba(0,0,0,.17);text-decoration:none.u1df350f6a14e2ae19be1787c92e07417:active,.u1df350f6a14e2ae19be1787c92e07417:hoveropacity:1;transition:opacity 250ms;webkit-transition:opacity 250ms;text-decoration:none.u1df350f6a14e2ae19be1787c92e07417transition:background-color 250ms;webkit-transition:background-color 250ms;opacity:1;transition:opacity 250ms;webkit-transition:opacity 250ms.u1df350f6a14e2ae19be1787c92e07417 .ctaTextfont-weight:700;color:#141414;text-decoration:none;font-size:16px.u1df350f6a14e2ae19be1787c92e07417 .postTitlecolor:#c0392b;text-decoration:underline!important;font-size:16px.u1df350f6a14e2ae19be1787c92e07417:hover .postTitletext-decoration:underline!importantSee also Should I Keep Paying Lexington Law Firm to Repair My Credit?
You can read the court documents here and here.
Today, the Consumer Financial Protection Bureau (CFPB) entered into a proposed settlement with a ring of corporate entities operating some of the largest credit repair brands in the country, including Lexington Law and CreditRepair.com. The agreement follows a ruling from the court that the companies collected illegal advance fees for credit repair services through telemarketing in violation of federal law. If approved, the settlement would impose a $2.7 billion judgment against the companies. The order will also ban the companies from telemarketing credit repair services for 10 years.
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“Americans across the country looking to improve their credit scores have turned to companies like CreditRepair.com and Lexington Law. These credit repair giants used fake real estate and rent-to-own opportunities to illegally bait people and pad their pockets with billions in fees,” said CFPB Director Rohit Chopra. “This scam is another sign that we must do more to fix the credit reporting and scoring system in our country.”
Lexington Law and CreditRepair.com are the largest credit repair brands in the country. The credit repair services are marketed and offered through a web of related entities in the Salt Lake City area, including PGX Holdings, Progrexion Marketing, and the John C. Heath, Attorney-at-Law PC law firm. During the time period relevant to the lawsuit, the companies operated nationwide and had more than 4 million customers who were subjected to telemarketing. In 2022, the defendants had combined annual revenues of approximately $388 million.
The CFPB previously sued the companies to halt their illegal conduct and seek redress and other relief. In March 2023, the district court ruled that the defendants violated the advance fee provision of the Telemarketing Sales Rule. The Telemarketing Sale Rule provides a range of protections for consumers related to telemarketing and sets payment restrictions for certain goods and services. It requires credit repair companies to wait until six months after they provide the consumer with documentation reflecting that the promised results were achieved, before they request or receive payment from the consumer.
Following the district court’s ruling, the companies filed for Chapter 11 bankruptcy protection. The companies represented that they had shut down about 80 percent of their business, including their call centers, and laid off about 900 employees in response to the court’s ruling.
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Enforcement Action
Under the Consumer Financial Protection Act (CFPA), the CFPB has the authority to take action against institutions violating consumer financial laws, including engaging in unfair, deceptive, or abusive acts or practices, and against institutions violating the Telemarketing Sales Rule.
If entered by the court, the settlement will, among other things:
Ban the perpetrators from telemarketing for 10 years: The companies will be banned from telemarketing credit repair services or selling credit repair services that others marketed through telemarketing for 10 years. The companies will also be banned from doing business with certain marketing affiliates. These bans will attach to the companies even after the bankruptcy proceedings are complete.
Require notices to consumers: The companies will be required to send a notice of the CFPB settlement to any remaining enrolled customers who were previously signed up through telemarketing. The notice will inform consumers of the CFPB’s lawsuit, the court’s summary judgment holding, the settlement, the consumer’s right to cancel their credit repair services, and the process for canceling the service.
Impose a $2.7 billion judgment for redress: The order would impose a $2.7 billion judgment against the companies for redress. Due to the companies’ financial insolvency, the CFPB will determine whether the CFPB’s victims relief fund can be used to make payments to those harmed by the perpetrators.
Impose more than $64 million in civil penalties: The order would impose a $45.8 million civil money penalty against Progrexion Marketing and a $18.4 million civil money penalty against the Heath law firm.
Steve Rhode is the Get Out of Debt Guy and has been helping good people with bad debt problems since 1994. You can learn more about Steve, here.
Many or all of the products featured here are from our partners who compensate us. This may influence which products we write about and where and how the product appears on a page. However, this does not influence our evaluations.
Can you pay a loan with a credit card? Yes, paying a loan with a credit card is sometimes possible. Yet, whether or not you can do so depends on factors such as the lender’s policies or the type of loan you want to pay off.
Good credit can open doors, but bad credit can keep them shut. In fact, research shows one in 10 Americans were denied work because of poor credit history! Good credit is important because it tells lenders you’re not a risk and that you pay loans on time. A good score can help you get approved for mortgages, financing, loans, and credit cards. Bad credit leads to more fees, higher interest rates, and rejected applications.
Aside from securing loans, your credit can impact your ability to secure housing and even employment. Understanding your credit score can help you make more informed decisions. We’ll explore how credit works, why it’s important, and how to maintain a good credit score.
What Is Credit?
We often hear people saythat it’s important to build credit. But what is credit? When you pay for something “on credit,”you’re actually borrowing money to make the purchase, which you pay back later. But when people say “your credit,” they’re usually talking about a credit score.
Your credit score is a three-digit number calculated by FICO®, VantageScore, or other scoring models. Your score indicates how well you manage credit. Institutions and agencies use this score to determine risk, such as how likely you are to repay loans on time. A credit score of 670 or higher is considered good by most standards.
Why Is Credit Important?
Good credit is important because it helps you secure loans, mortgages, rentals, and other important financial goals. Financial institutions perform a credit check before approving applications, and use your credit history to determine available options, associated fees, and interest rates.
Credit can impact our daily lives in many ways. Potential lenders, landlords, and employers might reject your application if you have bad credit. But good credit can help you get approved for loans and save money.
There are many benefits to a good credit score. You’ll need a strong credit score for things like:
Loan applications: Lenders assess your credit to determine how likely you are to repay a loan. People with poor credit may face higher interest rates, smaller loans, or rejection.
Credit card applications: Banks and credit card companies need to look at your credit report before you can get a credit card. With good credit, you can get lower interest rates and higher limits.
Mortgage applications: Your credit score will determine monthly payments and interest rates. Good credit is essential if you can’t afford a large down payment.
Rental applications: Landlords can run a credit check or ask you to provide one. Credit score won’t impact the rental costs, but a landlord can reject an application due to poor credit.
Job applications: Prospective employers can ask for credit checks, especially if you are dealing with sensitive information. You may need a credit check for jobs in accounting, sales, the military, and other industries.
Insurance applications: Depending on where you live, you might need a credit check for insurance. Not all states allow insurance companies to access your credit information.
Vehicle rentals: You might need a credit check for vehicle rentals if you don’t pay with a credit card. And depending on your state and the company, your credit may impact your rental options.
Credit card benefits: Good credit can help you secure credit cards with benefits, including airline miles, travel credits, cashback rewards, and other perks.
Lower interest rates: Poor credit leads to higher interest rates, making borrowing money expensive. The better your credit, the more money you will save.
Better loan terms: Good credit gives you more options and freedom for repayment. Bad credit can limit your options to short-term loans with higher monthly payments.
Credit is always important, no matter how high or low your score. At the end of the day, everybody needs good credit to achieve their financial goals. That’s why it’s important to understand what can impact your credit score.
What Can Impact a Credit Score?
It might be surprising, but personal savings and stocks don’t impact your credit score. Credit score calculations look at your detailed credit history, and anything that impacts these calculations will impact your score.
The five main factors that impact your credit score are:
Payment history: when you make payments
Credit utilization: the amount of credit you use compared to your limit
Credit age: how long you’ve had credit and how old your accounts are
Credit mix: the types of credit you hold
Credit inquiries: how often your credit is reviewed
While this might look simple, many surprising scenarios can affect your credit. Unpaid parking tickets in collections can impact your payment history, for example. And closing a credit card can lower your credit utilization. You can review your free annual credit reports to watch for drops in your credit and work toward preventing a bad score.
What Happens with a Bad Credit Score?
Keep in mind that you can improve a bad credit score over time. But until you do, there can be negative consequences. Most credit scores range from 300-850, depending on the scoring model. A bad credit score generally ranges from 300-600.
Bad credit scores can lead to:
Rejected applications
Higher fees and interest rates
Lost work opportunities
Difficulty renting a vehicle
Required deposits for utilities
Difficulty securing a student loan
Expensive insurance rates
Difficulty opening bank accounts
Bad credit doesn’t shut every door, but it can make life more difficult and expensive. It’s important to check your credit score before buying a home, applying for student loans, and other important life events. This will give you time to understand your situation and make a plan to build and improve your credit.
How Do You Build and Improve Credit?
Now that you understand what credit is and why it’s important, you can plan for success. There are many ways to build and improve your credit without overextending yourself. No matter your score today, you can work toward a bright future with good credit.
Understand how credit works: Learn how your credit score works and what can impact it.
Set goals for yourself: Use this knowledge to set goals for minimizing debts, increasing utilization, and more.
Address your debts: Assess your debts and plan to pay them off.
Monitor your credit score: Look for suspicious activity on your credit report and be aware of the potential impact on your score.
Clean your credit report: Dispute errors on your credit report.
Get a secured credit card: Use it regularly and pay your bills on time.
Become an authorized credit card user: Build credit in association with somebody you trust.
Apply for a credit builder loan: Improve your score if you have poor or no credit.
Create a budget: Manage your finances to ensure consistent repayments.
Achieving a good credit score isn’t the end of your credit journey—once you have a good credit score, you will need to maintain it. Stay diligent and follow best practices to keep a good credit score.
How Do You Keep a Good Credit Score?
Don’t take good credit for granted. To keep a good credit score, you need to stay organized and sensible about your credit usage. This means understanding your responsibilities and following best practices for credit management.
Follow these tips for keeping a good credit score:
Stick to your budget: Committing to a budget can help you make payments on time, which is key to achieving a good credit score.
Avoid carrying debt: Credit utilization is the second most important factor that makes up your credit score. Unpaid debts accumulate interest, which means less money for you.
Pay bills and parking tickets on time: It’s important to pay all utility bills, phone bills, and parking tickets on time. Not paying bills can lead to collections and this impacts your credit score.
Don’t let debts go to collections: You should avoid collections at all costs. When unpaid debts go to collections, it can cause significant damage to your credit score.
Monitor your credit score and reports: When it comes to your credit, ignorance is not bliss. It’s important to watch your credit report for changes, errors, and suspicious activity.
Protect yourself from identity theft: A large drop in your credit score can be a sign of identity theft. Stay aware, protect your information, and consider a credit card with security features.
Use your credit card consistently: Using your credit card will help you build credit—just don’t spend more than you’re able to pay back each month.
Don’t close old credit cards: Closing a credit card lowers your credit mix, so it’s a good idea to leave old credit cards open, even if you don’t use them. Keep an eye on them for suspicious activity.
Only authorize people you trust: Authorized users on your accounts can impact your credit score. Only authorize accountable and trustworthy people.
Avoid retail credit cards: While retail credit cards can be easy to get, they can come with expensive rates and fees. And not all retail credit cards report payments, making them less ideal for building credit.
Don’t treat credit like extra cash: Building credit takes organization and discipline. You should always stick to a budget and avoid spending beyond your means.
Your credit score is like a financial reflection of you, so take pride in your credit and make an effort to keep a good score. Knowledge is power—the more you understand credit, the more confident you’ll feel when preparing for large purchases and other financial ventures.
Whether you have good or bad credit, it’s all about setting goals and staying organized. Remember, your current score is not set in stone. You can always improve credit management and make a difference in your future.
If you’re worried about bad credit or just want to see where you stand, get your free credit score today.
Inaccurate, negative items on your credit report can significantly affect your credit score and impact your ability to secure credit, obtain lower interest rates, land your dream job, or even rent an apartment. This negative impact can be devastating in many ways, but it’s even worse if the harmful information isn’t accurate. Correcting these errors is one of the first steps to repairing your credit.
Fortunately, the Fair Credit Reporting Act protects consumers. Specifically, section 609 of the FCRA gives you the authority to request detailed information about items on your credit report. If the credit reporting agencies can’t substantiate a claim on your credit report, they must remove it or correct it.
You can request this information by sending the credit reporting agency what’s called a 609 letter. This article provides more details about what a 609 dispute letter is and how to write one.
What Is a 609 Letter?
A 609 letter is a formal document consumers use to request more information about account details listed on their credit reports they believe to be erroneous and to request the removal or correction of this inaccurate information.
While section 609 of the FCRA doesn’t specifically mention 609 dispute letters, it does lay out the framework for making this request. Once the agency receives your letter, it must conduct an investigation and provide you with the requested information.
What Is Section 609?
Section 609 of the Fair Credit Reporting Act outlines consumers’ protections regarding disclosures. It requires credit reporting agencies to provide consumers, upon request, with information in their report, including:
Details, including dates and contracts, on any opened or closed account on credit reports at the date of the request
A list of all parties that made hard or soft inquiries on account over a 1–2 year period
All source information linked to each item on the credit report
Why Do 609 Letters Matter?
If you find inaccurate information on your credit report, submitting a 609 letter is the first step to resolving this issue. Once a credit reporting agency receives a 609 letter, it must conduct an investigation unless it can prove the claim is frivolous. The agency has 30 days to complete this investigation but can request a 15-day extension.
If the agency can’t provide verification for the information, it must remove it from your report or correct it. Otherwise, it must provide you with the information you requested.
What Can’t a 609 Letter Do?
Submitting a 609 letter doesn’t automatically remove items from your credit report. If the agency provides what it considers verifiable evidence that the account is yours, the information will remain on your account. If the agency doesn’t remove the information from your account and you still believe it’s inaccurate, you can file another dispute. Otherwise, the information will remain on your account for seven to 10 years.
Do 609 Letters Work?
Upon receipt of a 609 letter, the credit reporting agency must conduct a full investigation within 30-45 days. It must then provide you with written notification of its findings within 5 business days. If the agency fails to respond to your request, you can file a complaint with the Federal Trade Commission.
If the agency can’t verify the requested information, It must remove it from your credit report. In some cases, a 609 letter may be enough to prompt the removal of this information. If this doesn’t happen, you may need to file another dispute.
How Do You Write a 609 Letter?
The FCRA doesn’t provide a specific template for writing a 609 letter. However, there are several pieces of information you should include in your letter, such as:
Your full legal name
Your complete address
Your phone number
Statement pertaining to your 609 rights under the FCRA
Account name and number for any accounts in question
Statement requesting removal of inaccurate information
Attorney contact information, if applicable
List of enclosed documents
Along with your letter, you should also send copies of several documents, including:
Your credit report with the inaccurate information highlighted
Your birth certificate
Your Social Security card
Your passport or state-issued driver’s license or photo ID
Latest tax documents with Social Security number listed
Mortgage statement or rental agreement with current address listed
Current utility bill with name and address listed
Below is an example of a 609 letter.
Name Social Security number Date of birth Address Phone number
Date
609 Dispute Letter
Dear [credit bureau]:
I’m writing to exercise my rights under section 609 of the Fair Credit Reporting Act. I’m requesting information regarding the following accounts listed on my credit report:
Account Name: [as listed on credit report] Account Number: [as listed on credit report]
Account Name: [as listed on credit report] Account Number: [as listed on credit report]
According to section 609, I’m entitled to all pertinent information regarding these accounts, including the original contract with my signature. If you’re unable to find this information within the 30-day time limit, I request that you immediately remove the information from my credit report.
As proof of my identity, I’ve included a copy of my Social Security card, birth certificate, passport, W-2, electric bill, and rental agreement. Also included is a copy of my recent credit report, with the accounts in question highlighted in yellow.
Sincerely,
[your signature]
[printed name]
Be sure to make copies of all information, including all letters and backup documents, for your records.
Where to Send a 609 Letter
You should mail your 609 letter and all backup documents directly to the corresponding credit reporting agency using the address listed below. If the error appears on multiple credit reports, you need to send each agency a separate letter. Due to the importance of this letter, you’ll want to go to the post office and send the letter through certified mail with a return receipt requested. This step provides proof of the date the agency received your 609 dispute letter.
Experian PO Box 4500 Allen TX 75013
TransUnion Consumer Solutions PO Box 2000 Chester PA 19016-2000
Equifax PO Box 740256 Atlanta GA 30374-0256
How to Dispute Items on Your Credit Report
If submitting a 609 dispute letter doesn’t prompt the credit reporting agency to remove the inaccurate information, you may need to file another dispute. To file this dispute, you must send another letter to the corresponding credit bureaus. Once the agency receives your letter, it must conduct another investigation based on the information you provide.
How to Write a Dispute Letter
When writing a dispute letter, be sure to clearly note what information you believe is inaccurate and provide a detailed explanation of the error. Include as much information as possible, and send copies of any backup documentation, such as account statements, proof of payments, or letters from the lender. Close the letter by requesting the prompt removal of this information.
If the credit reporting agency still refuses to remove the information, it may be time to hire an attorney or credit repair agency to help with the process. You can also use these services if this process becomes too cumbersome or time-consuming.
Is there inaccurate information on your credit report? Find out now. Get your free Credit Report Card today.
Many or all of the products featured here are from our partners who compensate us. This may influence which products we write about and where and how the product appears on a page. However, this does not influence our evaluations.
You can contact Equifax®, Experian®, or TransUnion® online, over the phone, or by mail to unfreeze your credit. The process is free, but it may take up to an hour to fully take effect.
Someone might freeze their credit for several reasons, including identity theft concerns. However, they’ll eventually need to unfreeze their credit by contacting the three credit bureaus—Equifax, Experian, and TransUnion.
In this guide, we’ll show you how to unfreeze credit with each bureau—and we’ll answer a few common questions about unfreezing credit. You’ll also learn how to monitor your credit more effectively long-term.
When Should You Unfreeze Your Credit Report?
Someone who’s experienced identity theft can unfreeze their credit after the authorities have helped them resolve their case. Conversely, someone who plans to apply for a new credit card or secure a loan will want to unfreeze their credit beforehand. In general, one must unfreeze their credit to let trustworthy sources verify their identity and credit history.
Ways to Unfreeze Your Credit
There are two ways to unfreeze your credit—temporarily or permanently. You might temporarily lift a freeze if you need to apply for a loan or a credit card. Conversely, you might opt to permanently unfreeze your credit after you’ve resolved an outstanding identity theft case. Knowing how each unfreezing method works can help you decide which suits your needs.
Temporary Unfreeze Credit: Temporarily unfreezing or “thawing” credit allows creditors to check your profile for a set time. The precise length of a thaw will vary from one state to the next. Kentucky, Nebraska, Pennsylvania, and South Dakota impose a seven-year time limit on credit thaws, while the limits of other states are essentially indefinite.
Permanently Unfreeze Credit: Permanently removing a credit freeze returns your credit profile back to normal. If you want to freeze your credit in the future, you’ll have to individually contact the three bureaus once again.
How to Quickly Unfreeze Credit with Equifax
Equifax lets clients freeze and unfreeze their credit online, by mail, or over the phone.
Online: Create a “my Equifax,” visit the “Equifax Consumer Services Center,” then select “Security Freeze.”
Mail: Download and fill out Equifax’s security freeze request form, then mail the document (along with proof of identity and proof of address items) to the following address:
Equifax Security Freeze, P.O. Box 105788, Atlanta, GA 30348.
Phone: Call 888-298-0045, then verify your identity through security questions or a one-time PIN number.
How to Quickly Unfreeze Credit with Experian
Experian offers three ways to freeze and unfreeze your credit—mail, online, and over the phone.
Online: Create an account on Experian.com, hover over “Protection,” then select “Security freeze” under “Identity Theft Support”.
Mail: Send your written request (and a copy of an ID and a utility bill) to the following address:
Phone: Call 888-397-3742, then wait to speak with a representative.
How to Quickly Unfreeze Credit with TransUnion
Like Equifax and Experian, TransUnion also provides three ways to freeze and unfreeze your credit.
Online: Make a TransUnion Service Center Account, then choose “Freeze Credit Report” under the “Services” tab.
Mail: Ship your written request, proof of identity, and a six-digit PIN number to the following address:
TransUnion, P.O. Box 160, Woodlyn, PA 19094.
Phone: Call 800-916-8800, then prepare to provide your six-digit PIN number.
Credit Freeze FAQ
Freezing and unfreezing credit isn’t exactly a common practice, so it’s no surprise when people have a lot of questions about the process. Thankfully, some of the most common credit freeze questions have fairly straightforward answers.
How Long Does It Take to Unfreeze Credit?
The credit bureaus can unfreeze your account as soon as they receive your request. It’s worth noting that it may take an hour or more for your credit report to be fully updated.
Will a Credit Freeze Hurt My Score?
No, a freeze won’t negatively or positively affect your credit score in and of itself. Creditors won’t be able to access your credit report, but you also won’t be able to apply for new loans or cards while your credit is frozen.
How Many Times Can You Freeze and Unfreeze Credit?
You can freeze and unfreeze your credit as often as needed. However, you will have to repeat the unfreezing process with the corresponding bureaus.
How Much Does It Cost to Unfreeze Credit?
Placing and removing a credit freeze is completely free every time. Neither Equifax, Experian, nor TransUnion will charge you for submitting a request or creating an account on their websites.
Many or all of the products featured here are from our partners who compensate us. This may influence which products we write about and where and how the product appears on a page. However, this does not influence our evaluations.
There are many ways to improve your credit score fast, like checking the accuracy of your credit reports, fixing late payments, becoming an authorized user, and much more. Each method can add points to your current credit score.
Having a bad credit score can make it difficult to navigate life, and it can also cost you quite a bit of extra money. A low credit score can increase your interest rates for credit cards and loans and may also require you to put down larger deposits when renting a home or turning on services. However, a good credit score gives you more options for where you can live and the loans you can get. Plus, it can save you money in the long run, which is a win-win for most.
Here, we provide you with 11 different ways that might help you improve your credit score faster. Not only will these methods help you improve your credit score, but they’ll also help you maintain a healthy score in the future.
In This Piece:
Check the Accuracy of Your Credit Reports
Target the Areas You Need to Improve
Fix Your Late Payments
Get Added as an Authorized User
Clear Any Outstanding Collection Accounts
Open a Secured Credit Card
Dispute Credit Inquiries
Be Mindful of Your Credit Utilization
Increase Your Credit Limits
Set Up Automatic Payments
Have Your Utilities Reported
1. Check the Accuracy of Your Credit Reports
The first step in improving your credit score is to be aware of what’s on your credit history. There are three major credit bureaus, Experian®, Equifax®, and TransUnion®, and each has its own credit report and score based on your credit history. That means everyone actually has multiple credit scores.
Sometimes, you may find errors on your report that you’ll need to correct through a dispute process. If you find an error, you’ll have to file a separate dispute with each credit bureau since they’re run separately. If there are multiple errors on your credit reports, you’ll need to dispute each of those individually. You might consider working with a credit repair company to make things a little easier for yourself.
Due to derogatory marks having such a big impact on your credit score, removing errors can be one of the fastest ways to build your credit score.
2. Target the Areas You Need to Improve
Checking your credit reports from each of the three main credit reporting agencies is easy. Under the Fair Credit Reporting Act, you have the right to obtain a free copy of all three credit reports once each year. The government mandates that you can receive one free credit report each year, and you can easily access it at AnnualCreditReport.com. You can also check your credit through our free credit report card, which provides a snapshot of your credit and a letter grade for each of the factors that drive your score.
Once you receive a copy of your credit report, you will know which areas need improvement and where to start.
3. Fix Your Late Payments
Late and missed payments can stay on your credit report for seven years. These derogatory marks lower your credit score and make you appear as a bigger risk to lenders.
The credit reporting agencies don’t remove these items, but you may be able to talk a creditor into doing so. Creditors can forgive one late payment if you have a history of on-time payments and you call to discuss it with them. Removing repeated delinquencies may require a little more effort on your part.
4. Get Added as an Authorized User
You can become an authorized user for a credit card account if you have a friend or family member with a good credit history. Even if you don’t use the credit card, your credit reports will reflect the person’s credit history of on-time payments.
This is also known as “piggybacking” on someone’s credit. Should you do this, it’s important to remember that the other person and yourself are now linked. This means that using the card and missing payments can harm the other person’s credit score and vice versa.
5. Clear Any Outstanding Collection Accounts
Contacting your creditors about paying off your debt is a great way to raise your credit score fast. Make sure that they agree to remove the negative hit to your credit report if you repay it in full—and get it in writing. If this agreement isn’t made, there will likely be no impact to your credit.
After making an agreement with the collections company, request a pay for delete letter to have it removed from your credit report. A pay for delete letter is an agreement in writing stating that the creditor will have the derogatory information removed from your report.
6. Open a Secured Credit Card
Having and using a credit card can help you build credit, but it’s difficult to get approved for a credit card when you have a low credit score, which is where secured credit cards become useful. Unlike a typical unsecured credit card, where you are given a credit line based on your credit alone, you can open a secured credit card by depositing money, which becomes your credit limit.
For example, if you deposit $500, you will then have a $500 line of credit. Banks are more likely to approve you for a secured credit card because it’s less of a risk. Your payments on this card are reported to the credit bureaus, and if you make those payments on time, this can help you raise your credit score.
7. Dispute Credit Inquiries
Many credit inquiries are hard inquiries, and hard inquiries impact your credit score. In fact, a hard inquiry stays on your credit report for an entire year. While each individual hit is relatively small, it can push you over the edge from one credit score tier to one below it. What’s more, several hard inquiries over a short period of time can drop your score by a lot.
Like any other negative factor on your credit report, you can dispute credit inquiries. If you didn’t approve the inquiry into your credit, you may be able to get it removed. This could potentially increase your credit score, but only slightly.
8. Be Mindful of Your Credit Utilization
If you carry a large amount of debt compared to your available credit, your score can suffer. In fact, credit utilization accounts for 30% of your credit score. So, if your total credit card available credit is $10,000, and you’re currently using $8,000 of it, paying down those balances can increase your score.
Keeping your utilization rate at around 30% is recommended. That’s $3,000 in debt on a $10,000 available limit, for example.
9. Increase Your Credit Limits
As discussed above, a low utilization rate is ideal, and one way to improve your credit utilization is by increasing your credit limits. Using the $10,000 example, $4,000 of debt would be a 40% credit utilization ratio. If you increase your credit limit to $15,000, that same $4,000 of debt would only be 26%. But be aware, this could trigger an inquiry and that will impact your score as well.
10. Set Up Automatic Payments
Having a good payment history is one of the best ways to improve your credit score because your payment history accounts for 35% of your FICO score. One of the simplest ways to do this is to set up automatic payments. Simply go to your credit card company’s website, make an account, and set up automatic payments for the minimum each month.
This way, you never have to worry about forgetting your payment. You can also make additional payments during the month if you plan on paying more than the minimum.
11. Have Your Utilities Reported
Typically, your utilities are not reported to the credit bureaus, and not many people realize this. Each month, it’d be great to get positive payment history on your credit score for making these payments on time. You can do this by taking an extra step to have your utilities reported through different services. For example, Credit.com offers this as part of our ExtraCredit® service.
How Your Credit Score Is Calculated
When working on improving your credit score, it’s helpful to know how your score is calculated so you know which factors are the most important. You can then make a plan for where you should start. Here are the major credit scoring factors and how each one can impact your credit score:
Payment history: A history of overdue and missed payments may signal that you are a bigger risk to creditors. Thus, this factor has the greatest negative effect on your credit score. This makes up about 35% of your credit score.
Amount of debt: Debt is 30% of your FICO Score and also weighs heavily on other credit scoring models. This is also known as your “credit utilization,” and ideally, you want to keep it below 30% of your max credit limit.
Age of accounts: Creditors like to see a proven record of borrowing, utilizing, and repaying credit. If you’re new to credit and borrowing, there isn’t a lot of data to go on. This makes up 15% of your score.
Account mix: Making 10% of your score, lenders want to make sure you can handle both revolving and installment credit. This means credit cards that you continue to use after repaying and loans that are closed upon full repayment.
History of credit applications: Multiple hard inquiries on your credit may look like you are overextending yourself financially and appear desperate. This will lower your score. Credit inquiries make up 10% of your score.
How Long Does It Take to Fix Your Credit Score?
Most people want to fix their credit score as quickly as possible, but the length of time often depends on your situation. If you have multiple derogatory marks on your credit report, it may take months or even years for them to drop from your report. When trying to fix your credit score, it’s most beneficial to start with methods you can control, like making your payments on time, disputing errors, and trying to settle your debts with collection agencies.
FAQs
Below, we’ve answered some of the most common questions people have about how to quickly improve their credit score.
Checking Your Credit Report Is the First Step Toward Improving Your Credit Score
Your credit report is the best place to start if you want to improve your credit score. Your credit report will show you your account balances, any derogatory marks you may have, and hard credit inquiries. This will help you see where to start, and you can also find out if there are any errors on your credit report.
To get an idea of where you stand with your credit, sign up for Credit.com’s free credit report card today.