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10-second answers to your credit questions
Spend a few minutes getting to know more about your credit and why it matters
Credit affects nearly every aspect of our lives, yet many of us don’t spend enough time thinking about it. Like death and taxes, your credit rating doesn’t go away. It follows you around like a reminder of bad decisions or as a helpful friend depending on how you take care of it. Luckily for you, there is a lot of information about credit available to help you manage your credit. We answered the most common credit questions with 10-second, easy-to-understand answers.
Answers to 21 common credit questions
1. What is a credit report? Does everyone have one?
Credit reports include your credit account information, soft and hard inquiries, bankruptcy history, and collections information. Not everyone has a credit report available. Those without a credit history and individuals without a Social Security number may not have a US credit report available.
2. What is a good credit score? FICO score?
This is one of the most common credit questions. In general, a credit score of 670-740 is considered good. Similar to credit scores, a good FICO score is about 670-740. However, keep in mind that creditors can choose what score they consider good.
3. How do I build my credit history?
Building credit is simple. Acquire accounts that report to the credit reporting agencies and keep those accounts in good standing. Types of accounts that report to credit reporting agencies include car loans, credit cards, student loans and personal loans.
4. If I don’t have credit, can I rent an apartment?
Yes, you can. Well, in many cases. You can usually rent an apartment without credit if you can prove that you have an adequate, steady income and do not have bad credit. If you are looking to live in a high-demand area, you may face additional challenges, such as being required to obtain a co-signer.
5. Can I request a copy of my credit report?
6. How long does negative information like bankruptcy stay on my credit report?
In most situations, it takes seven years for negative information to stop appearing on your credit report. Chapter 7 bankruptcies stay in your credit file for ten years.
7. How can I quickly improve my credit rating?
The easiest and fastest way to improved your credit score is to get current on any past due accounts and keep them current. You can see some improvement to your credit score within 2-3 months just by paying your bills on time. Want more? Read here.
8. Can I get a good credit score without a credit card?
You may believe you need to have credit cards or credit card debt to build credit, but you do not. Credit activities that build credit include car loans, student loans, and authorized credit card usage (such as your parent’s credit card). You can also protect your credit by not allowing any bills to go into collections.
9. How do I correct errors in my credit report?
To correct credit report errors, you’ll need to send the credit reporting agencies a dispute letter with supporting documentation ( do not send original companies). Credit reporting agencies will send you a written response within a month, along with a copy of your credit report.
10. Are credit checks bad for my credit?
“Hard” inquiries do affect your credit. But the effect is minimal unless there are many incidents. Hard inquiries drop off your credit report after two years. These types of credit questions are common, but you shouldn’t worry about it unless you have a large number of hard checks.
11. How much do late payments affect my credit?
A late payment here and there may not affect you much, but a lot of late payments, especially recent late payments, may. Generally, late payments are reported to credit report agencies if they are over 30 days late. Late credit payments remain on your credit report for seven years.
12. Are credit monitoring services worth it?
For the most part, no. You may have paid services advertised to you, and sometimes they are not cheap. You should be able to monitor their credit adequately using free services such as Credit Karma or Mint, along with a careful review of your free credit reports. Your credit card provider should also watch your card activities for fraudulent usage.
13. Do evictions affect my credit?
If you lose in court against your landlord and your eviction debt ends up in “collections,” the debt collection action may appear on your credit report. If you pay your eviction balance right away, you can likely keep it off of your report. Generally, an eviction stays on your rental history record for seven years.
14. Can I build credit as an authorized user?
Yes. If you are an authorized user of a credit card, such as your parent’s card, you can start slowly building your credit. This is not true if you are using a corporate credit card owned by your employer.
15. How does refinancing my mortgage affect my FICO score?
Usually, the impact is minimal. The changes that may appear on your credit report include a credit inquiry, changes to your mortgage loan balance, and changes to the terms of the loan. It will appear as a new loan. Make sure to make all of the required payments during the refinance process to avoid late payments.
16. What helps my credit score the most?
If you don’t have credit, building credit – like opening a retail card at your favorite store then buying something and pay it off right away. If you have bad or marginal credit, repairing your credit – like getting past due bills up-to-date. Either situation you find yourself in, be patient. It may take several months (or years) to build or repair your credit.
17. What is a credit freeze and how does it help protect me?
Credit freezes control access to your credit report, which helps block unauthorized uses of your credit. They help protect you from others opening fraudulent accounts in your name. Credit freezes do not hurt your credit, and they are free to place.
18. Should I close credit cards I’m not using?
Only if the creditor charges a monthly or yearly fee, otherwise, leave it open and use it sparingly once every few months (and pay it off immediately) to keep the card active. A card with a “history,” meaning it has been open for a long time, can help your credit rating.
19. How do divorce and marriage affect credit?
The 10-second answer is that any accounts that are mutual or in both of your names can affect your credit. If you are getting married, consider reviewing one another’s credit reports and if you have a lot of assets, consider a prenuptial agreement as well. If you are getting divorced, try to find a way to pay off all mutual debts at the time of the divorce.
20. What is the difference between debt management, consolidation and settlement?
Debt management is a repayment plan designed to help you improve your credit and reduce debt. In this case, you often make payments to a debt management company that makes payments for you.
Debt consolidation often involves a loan that pays off your debts so that you only owe one creditor. The loan may be a secured loan with your property placed as collateral.
Debt settlement involves negotiating lower balance pay-off or monthly payments with your creditor. This tactic is most often used if you are severely behind in payments.
21. How do I protect my credit during difficult times?
If you are unemployed or cannot work because of your health, you may find yourself in a difficult position. To help survive this situation, lower your monthly bills as low as possible, cut out unnecessary spending, make minimum credit payments, monitor your credit closely, and negotiate with your creditors if needed.
Managing your credit is essential. Knowing answers to common credit questions will help you improve your credit. Your credit score can influence not only what you can finance but also where you can live and work. Armed with credit knowledge and continuous access to your credit score, you can make educated choices that can help you build or improve your credit.
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