Financial Tools That Can Help You Elevate Your Credit Score

• Potential Credit Score Lift: Average increase of 32 points
• Fees & Interest: $5/month for a $500 reporting limit and $9.99/month for up to $25,000, and no interest charges
• Credit Check: No

Potential Credit Score Lift:

Average of 32 Points

Fees:

$5-$9.99/Month

• Link bank account for credit reporting of household bills, including rent and utilities
• Monitors and pays bills using virtual card, withdrawing from linked account
• Access credit reports, promotional credits, cash back, and more

• Potential Credit Score Lift: Average increase of 32 points
• Fees & Interest: $5/month for a $500 reporting limit and $9.99/month for up to $25,000, and no interest charges
• Credit Check: No

THE FINANCIAL IMPACTS OF A LOW CREDIT SCORE

Low credit scores can have a profound and lasting impact on your financial health throughout your lifetime. It serves as a red flag to lenders, signaling a higher risk of default, which means you will get less favorable terms on loans and credit lines. More specifically, you will likely be charged higher interest rates on mortgages, car loans, credit cards — the list goes on. The consequences? Potentially accumulating thousands or even hundreds of thousands in additional debt by way of interest. More debt means more time, maybe decades more, spent paying it back. Prolonged debt can prevent you from achieving financial stability as it ties up your income in debt payments, which can prevent you from allocating money to more crucial areas of your life. 

Here’s how different credit score ranges can impact your costs:

Poor/Fair Credit

• Mortgage Interest (30-year)
  $322,276/lifetime
• Auto Loan Interest
  $76,536/lifetime
• Credit Card Interest
  $8,373/lifetime

Excellent Credit

• Mortgage Interest (30-year)
  $93,217/lifetime
• Auto Loan Interest
  $17,741/lifetime
• Credit Card Interest
  $2,997/lifetime

Fair/Good Credit

• Mortgage Interest (30-year)
  $117,974/lifetime
• Auto Loan Interest
  $39,031/lifetime
• Credit Card Interest
  $5,332/lifetime

Interest amounts according to https://www.self.inc/info/life-of-interest-payments/

BOTTOM LINE

The importance of maintaining good credit cannot be overstated — it opens doors to better financial opportunities and substantial savings on major expenses, fostering long-term financial stability. A poor credit score today can easily be turned around in a few months with help from the programs above. Whether it’s through credit-building cards, loans, or bill reporting, these services can help you build good credit and improve your credit score, as long as you make on-time payments.

As you explore your options, consider your desired point increase, budget, and the level of commitment you’re willing to make. These strategies and services are particularly beneficial for individuals with credit scores in the 500 to 600 range.

Credit Strong: Build Revolving Credit and Savings Simultaneously

CreditStrong’s Revolv product lets you build revolving credit without a credit card, offering a $1,000 credit line reported to all 3 major credit bureaus for 12 months. Instead of relying on purchases to build credit utilization and payment history, build both through monthly commitment payments, with 100%  of those payments contributing to savings. Its results speak volumes, with an average increase of 62 points over 12 months with on-time payments. This kind of boost can be a game-changer!

FREQUENTLY ASKED QUESTIONS

Your credit report is a record of data that is either publicly available or that’s been reported to the three major reporting agencies—Experian, Equifax, and TransUnion—by your creditors. That includes personal identifying information, such as your social security number, name, address, birth date, and employer information. It also includes three categories of credit-relevant data:  

• Credit Accounts: Your credit report will include a list of all your credit accounts, such as mortgages, car loans, credit cards, personal loans, and student loans. It also includes the amount of credit available, the amount used, and your payment history, including whether you made or are making timely payments.  
• Credit Inquiries: When you apply for a credit card, a loan, or some other credit product, the creditor will check your credit history. That creates a credit inquiry, which is then added to your credit report.  
• Collections and Public Records: Bankruptcies, for example, stay on your credit history for either seven or 10 years, depending on the type of case you file. This category also includes judgments and accounts turned over to collection agencies.  

Part of the complexity in learning how to get a good credit score is the fact that there are actually several different types of credit scores that may be assessed for any one person. In addition, there are two major credit score models: FICO Score and VantageScore. For many people, the most familiar is the FICO score. It is also the one most lenders use to judge creditworthiness. 

However, you probably have several different FICO scores: one for each of the three major reporting companies (since their data might differ from each other) and different scoring models. For example, one lender could use FICO Score 8 model (introduced in 2009) to evaluate your application for a loan, while another lender might use FICO Score 9 (introduced in 2014) to evaluate your application for a credit card.

Each company that calculates credit scores does so using slightly different criteria that are weighted differently. However, in general, the following factors are considered, listed in descending order of importance:  

1. Payment History: This includes how often you’ve paid your obligations on time and for how long, as well as things like bankruptcies and debt going into collections, which can negatively impact your score. 
2. Credit Utilization: This figure represents the total amount owed compared to the total amount of credit extended. The more of your available credit that you’ve used and thus owe, the lower your rating on this factor will be.  
3. Length of Credit History: This factor includes the age of your accounts, how long you’ve been using credit overall, and how active those accounts are.  
4. Credit Mix: This measures what kinds of credit accounts you currently hold. A good mix of mortgage, car, and revolving credit accounts is generally favored. However, it’s not necessary to have all of these different types of accounts to get new credit.  
5. Recent Searches and Inquiries: If your credit report shows a lot of recent inquiries, your credit score might take a hit. Creditors generally see this kind of activity close to an application as a potential sign that you’re in financial trouble. This doesn’t apply to every inquiry, though. For example, you can safely shop for the best rates on a specific type of loan without it impacting your credit score. 

According to myFICO*, currently, FICO scores are broken down into categories based on the following ranges:  

• Under 580: Scores beneath 580 are considered “Poor” and well below the average score of U.S. consumers, designating the individual as a significant credit risk.  
• 580-669: These scores are considered “Fair” and while still below the U.S. average, a score in this range might qualify you for loans from some lenders. 
• 670-739: Scores in this range are considered “Good” since they’re either on par with or a bit higher than the U.S. average, and the majority of lenders would consider extending credit.  

• 740-799: These scores are considered “Very Good” and are above the U.S. consumer average score. Lenders tend to be favorable to applications from borrowers with scores in this category.  
• 800 and above: Scores in this range are categorized as “Exceptional” and are significantly higher than the U.S. average and demonstrate superior financial responsibility to lenders. 

*https://www.myfico.com/credit-education/what-is-a-fico-score

US residents can request a copy of their credit report from each of the three major reporting agencies once every 12 months. The easiest way to do this is to visit AnnualCreditReport.com, the official website created for this purpose, and submit your request.

Your credit reports will not include your FICO Score or VantageScore. Instead, you can find this number in one of four ways:

1. Check your credit card, student loan or car loan statement.
2. Consult a non-profit debt counselor or HUD housing counselor.
3. Sign up with credit monitoring service, like Credit Karma and Experian, both of which offer access to your credit score and report for free. Some credit monitoring services are not free, so be mindful of that.
4. Buy access directly — you can purchase your FICO score information from myFICO.com, for example.  

In addition to making use of one of the financial tools we’ve discussed above, there are many other things you can do to improve your credit score as well.  

• Make timely payments on each of your accounts every month.  
• Pay off any account that’s in collections 
• Pay down your credit cards and other revolving accounts so that you’re using 30% or less of the total available credit 
• Ask for a higher credit limit to improve your credit utilization rate 
• Carefully review your credit report and dispute any errors you find