Getting your credit in order is an important part of managing your personal finances. If you’re facing a less-than-perfect credit history, it might be tempting to call credit repair companies — but that’s not the best next step. Here’s everything you need to know about credit repair companies, whether they’re worth it, and how to repair your own credit.
What is a credit repair company?
Credit repair companies are organizations that claim to help consumers improve their credit in exchange for a fee. These work with credit bureaus and creditors on your behalf to remove mistakes from your credit report. While many of these companies are scams, there are legitimate credit repair companies.
That said, you can do everything credit repair companies do on your own and avoid paying costly monthly fees.
How do credit repair companies work?
Credit repair companies work on your behalf to remove negative marks from your credit report. There are a couple strategies they use to accomplish this:
- Challenging the negative marks on your credit report, with the goal of getting credit bureaus to remove them.
- Asking creditors to verify negative marks. If a creditor fails to provide verification, it has to stop reporting those marks.
You can do both of these things on your own. You don’t need to pay credit repair companies for these services.
Most credit repair companies charge a monthly fee and offer several packages that range from basic to advanced. More expensive tiers offer things like credit monitoring and credit score analysis. They may also send cease and desist letters to debt collectors on your behalf. Again, these are all things you can do yourself.
What to watch out for with credit repair services
The world is rife with credit card scams and credit repair scams. Scammers tend to target people in financially vulnerable positions. Proceed with caution, and avoid credit repair services that:
- Tell you to avoid contacting credit bureaus directly
- Ask you to pay a fee upfront before they’ve done any work
- Insist on disputing information on your credit report that you know is accurate
- Promise quick credit repair or instant results
- Claim they can give you a clean slate, new identity, or alternative Social Security number
- Tell you to lie or knowingly provide false information
- Don’t explain what your legal rights are
Be sure to ask questions before signing up for any credit repair services. If you don’t get clear answers, that’s a red flag. Even if a service is legitimate, consider whether it’s worth paying for something you could do on your own.
How can I repair my credit myself?
It’s completely possible to repair your credit without paying credit repair companies. In many cases, it’s preferable to rebuild credit on your own. Here’s how.
Pull your credit report with all three credit bureaus
You’re legally entitled to one free credit report each year from all three of the major credit bureaus (TransUnion, Equifax, and Experian). You can access these at AnnualCreditReport.com.
Your credit report will help you understand why your credit is low. Also, you might spot errors that are dragging your score down.
Dispute any incorrect information
If you find errors on your credit report, you’ll want to get them removed.
You can file a dispute online with each credit bureau, or you can send them a letter of dispute. They might ask you for additional supporting information or documents as they investigate your claim.
If the credit bureau approves your dispute and removes the false information, you should see a credit score boost.
Pay off credit card debt, especially high balances
Average household debt hit $14.35 trillion in 2020, so if you’re carrying a credit card balance, you’re not alone. However, paying down those balances is one of the best ways to increase your credit score.
Not only will this help you improve your payment history, but it will also improve your credit utilization rate, which is one of the most important factors in determining your credit score. Here’s how you find your credit utilization rate: Add up all of the credit card debt you owe, and then add up your credit limits across all of the credit cards you have open. Divide your overall debt by your overall credit limit, and you’ll get your credit utilization rate.
In other words, this number is the percentage of your overall available credit you’re actually using, and it should stay below 30%. This is why paying off high balances that are bumping up against your credit limit can significantly and quickly improve your credit.
Build a history of on-time payments
If you’re not currently paying off debt, finding another way to build up a positive payment history can help build your credit back up.
Using a low-limit credit card a few times each month and paying off your balance in full before the due date is an effective way to do this. Just make sure to avoid carrying a balance. If the temptation to overspend and fall back into debt is too strong, it might be best to hold off on this step.
If you can’t qualify for a regular credit card, try this method with a credit card for bad credit.
Keep old accounts open
Your average age of accounts is an important factor in determining your credit score, so having older credit accounts on your credit history is beneficial.
If you’ve paid off old credit cards and don’t plan to use them anymore, and they don’t charge annual fees, keep those credit cards open. This is especially important if you’ve had them for a while.
Wait for negative marks to fall off your credit history
If you have some accurate negative marks dragging down your score, such as late payments or collections, the best you can do is wait for them to fall off of your credit report.
The good news: Nothing lasts forever when it comes to your credit. Both late payments and debt collections fall off your credit report after seven years. Bankruptcies are removed from your report in either seven or 10 years.
Monitor your credit
As you work to repair your credit, it’s a good idea to monitor your credit score. Both credit scoring agency FICO® and the credit bureaus offer credit monitoring services for a monthly fee. This fee is far lower than what credit repair companies charge.
There are also plenty of credit cards that offer your credit score for free. Keeping track of your credit score as you work on repairing your credit will help you monitor your progress and give you a sense of which of your actions are most effective.
How long does credit repair take?
Credit repair can take anywhere from a few months to several years. The time it takes depends on your individual situation. Credit repair companies that guarantee fast credit repair or promise they can fix your credit within a set timeline are most likely scams.
If the only negative marks on your credit report are errors that can be successfully disputed and removed, you’ll likely see an improvement in your credit score pretty quickly. On the other hand, if you have late payments, collections accounts, and other similar negative marks, it will take some time and a lot of diligence to rebuild your credit.
Are there legitimate credit repair companies?
Some credit repair companies are legitimate, but be sure to check credit repair reviews before agreeing to work with anyone. The best credit repair companies work with you to help you repair and rebuild your credit the old-fashioned way.
However, any work they do on your behalf is work you could do yourself. You’re paying for the convenience of not having to do as much of the legwork, and there’s no guarantee your credit will actually improve.
How much do credit repair companies charge?
You’re probably wondering, “How much does credit repair cost?” The fees for credit repair companies vary, but they often start at around $80 to $90 per month for basic services. Fees go up from there if you choose more advanced tiers.
You might find advertisements for free credit repair companies, but this usually just means you’ll get a brief consultation for free. They’ll start charging you once they begin to perform credit repair services.
Improving your credit score without credit repair
Considering how costly credit repair companies can be, it’s definitely worth it to improve your credit score without a credit repair service. Self credit repair involves checking your credit, disputing any errors, and working hard to pay off debt and build a history of on-time payments.
Credit repair scams to avoid
Beware of any credit repair companies that make unreasonable promises. These might include promises to:
- Erase negative marks from your credit report
- Improve your score by a certain number of points
- Accomplish quick credit repair within a certain time frame
Avoid paying credit repair companies upfront and instead opt for services that do the work to improve your credit before taking payment. Any credit repair companies that ask you to lie or furnish false information in a credit dispute or application for credit should also be avoided.
Utah credit repair companies sued over billing practices – KUTV 2News
Instant Approval Credit Cards | Bankrate.com
Instead of waiting days for an approval decision only to be turned down, you can pick the card you want, apply online and find out within seconds whether your application was approved or declined.
While many cards give you a chance to be approved instantly, the cards that list this feature front and center are typically geared toward people with a less-than-ideal credit score.
But like many so-called “guaranteed approval,” “no-credit-check” or “soft pull” credit cards, cards marketed as offering approval in seconds may not be your best option long-term.
That said, a few cards offer both instant approval and hold their own as credit-building or rewards cards. Read on to learn more about how instant approval works, which cards offer it and how it differs from prequalification or an instant use card number, as well as some of the best instant approval credit card offers.
What is an instant approval credit card and which cards are available?
Instant approval allows you to find out whether your application for a new credit card has been approved or denied within seconds (or, at most, a few minutes).
Most major card issuers give you a chance to be instantly approved for some of their credit cards. The cards that make instant approval the norm for applicants, however, are typically credit-building cards, which are designed for people with a damaged or limited credit history.
These instant approval credit card offers feature a low entry barrier, making approval more likely for most cardholders. So it’s safe to conclude that instant approval credit cards don’t always require good credit.
To start, you’ll fill out an online application form with basic information including your name, address, annual income and Social Security number.
The card issuer will then run a preliminary credit check and, if you meet the basic requirements, approve your application on the spot. This is typically only a conditional approval, however—the issuer may examine your credit history more thoroughly before making a final approval decision.
While instant approval can save you some time and take some of the guesswork out of the application process, standard approval decisions generally don’t take too long (usually a few days or a couple of weeks at most). Indeed, according to federal guidelines, an issuer is required to let you know whether your application has been approved or denied within 30 days.
What credit score do you need to get instant approval?
No specific credit score threshold guarantees instant approval. As is true with all credit card applications, your odds of instant approval will vary considerably depending on the card you’re applying for and your credit profile; the higher your credit score, the more likely you are to be approved instantly.
For example, if you have a good—but not excellent—credit score, it’s unlikely that you’ll be instantly approved for a luxury travel credit card. But you may still be approved in the end.
If, on the other hand, you applied for a card that required only an average credit score, you’d have a much better chance of getting an instant approval. If you have a low or bad credit score, instant approval cards offers may be limited to cards like secured credit cards.
Instant approval vs. prequalified offers
While there is some overlap between instant approval and prequalified offers, it’s important to distinguish between the two.
With instant approval, your application is approved and you’re able to open a new credit card account in seconds, whereas with prequalification, an issuer performs a soft pull of your credit report and lets you know whether or not you meet the basic requirements for getting the card.
Getting prequalified gives you a good sense of your odds of approval but it doesn’t guarantee approval. You’ll still have to put in a formal application and face a hard pull of your credit report.
You can typically prequalify for a new card via an issuer’s website or a tool like CardMatch in less than 60 seconds, but even if you’re instantly prequalified and apply straight away, an actual approval decision may take longer.
Instant approval vs. instant use
Similarly, you may be instantly approved for a new credit card, but that doesn’t mean you can use it right away.
While some cards offer both instant approval and a card number you can use immediately, the inclusion of one feature does not guarantee the other.
This means that even if you complete a card application and see that you’re approved a few seconds later, you may still have to wait a couple of weeks for your physical card to arrive in the mail.
If you’re looking for a card that gives you access to your account information as soon as you’re approved, search for an “instant use” credit card instead of an instant approval credit card.
Approval decision times vary on instant use cards, but once you’re approved, you’ll be able to see your credit card number online or via an issuer’s mobile app and can start using it to make purchases immediately.
A number of major issuers—including American Express, Bank of America, Capital One, Goldman Sachs, Sutton Bank and Synchrony Bank—offer instant use on some of their cards.
Best instant approval credit cards
While instant approval is possible on a number of popular credit cards, including some of the top rewards cards on the market, the majority of cards that market themselves as “instant approval cards” are designed for cardholders with a damaged or limited credit history. These typically include secured credit cards and some store credit cards.
Because of their target market, many instant approval cards are hard to recommend due to their numerous fees, high APRs or bare-bones (or nonexistent) rewards programs.
Still, a handful of cards marketed as offering instant approval may be useful if you want to get a quick approval decision and start building credit or earning rewards.
|OpenSky® Secured Visa® Credit Card||Bad credit||$200-$3,000 (based on security deposit)||$35||Credit-builders who want to avoid a credit check|
|Self Visa Credit Card||No credit history||Varies based on how much you’ve saved in your Self Credit Builder Account (minimum $100)||None (Self account carries a one-time nonrefundable administrative fee of $9)||Credit-builders who want to build their security deposit gradually, instead of coming up with hundreds of dollars upfront|
|Amazon Prime Store Card||Fair credit||Varies||None||Users who want to earn rewards on online shopping (the card offers Amazon Prime members 5% back in rewards on Amazon.com purchases)|
|UNITY Visa® Secured Credit Card||Bad credit||$250-$10,000 (based on security deposit)||$39||Credit-builders who want a high credit limit to keep their credit utilization in check|
|Discover it® Secured Credit Card||No credit history||Up to $2,500||$0||Credit-builders who want rewards with no annual fee|
|Costco Anywhere Visa® Card by Citi||Excellent||Varies||Requires $60 annual Costco membership||Frequent Costco shoppers|
|Credit One Bank® Platinum Visa® for Rebuilding Credit||Bad to fair||Varies||$75 first year, then $99 annually||Credit-builders who want rewards|
The bottom line
Instant approval is a nice perk and may ease the frustration of applying for cards and waiting for days only to have your application denied.
Nevertheless, a quick approval decision shouldn’t be your top priority when you’re looking for the best credit card for you. Instead of focusing on how long an approval decision takes, work on finding and applying for the cards that best fit your goals and credit profile.
*The information about the OpenSky Secured Visa Credit Card, Self Visa Credit Card, Amazon Prime Store Card,UNITY Visa Secured Credit Card and Costco Anywhere Visa Card by Citi has been collected independently by Bankrate.com. The card details have not been reviewed or approved by the card issuer.
What Are Payday Loans? | Canstar
They are called payday loans, small amount loans, cash loans, small loans, short-term loans and more, but the allure of getting cash quickly this way can conceal significant hidden fees and costs that leave a lasting sting on your hip pocket.
Sometimes a crisis comes up in life, and you need money quickly. Or sometimes, despite your best efforts, you may fall behind paying living expenses like rent, electricity and food. If you don’t have an emergency fund or regular savings, you might consider asking a friend or family for help or borrowing some money from a credit provider.
Payday lenders often offer loans of up to $2,000 – promising fast, convenient and easy access to cash. But are they a smart choice for Australians financially?
What is a payday loan?
A payday loan is a loan of up to $2,000 that you have between 16 days and one year to pay back, according to the Australian Securities and Investments Commission (ASIC)’s Moneysmart website. Payday loans are also known as small amount credit contracts, or SACCs.
Lenders cannot legally charge interest on payday loans. However, there are often very high overall fees attached that aren’t always obvious upfront for borrowers. These fees are capped but can still be very high compared to most other forms of credit. They can include an establishment fee (up to a maximum of 20% of the amount borrowed), a monthly service fee (up to 4% of the amount borrowed, every month) default fees and enforcement expenses. Moneysmart warns that if you take out one of these loans, you’ll end up needing to pay back “a lot more than you borrowed”.
What are the pros and cons of payday loans?
Although getting a payday loan might seem convenient, the Financial Rights Legal Centre explicitly says “using a payday lender is not recommended”. Here are three cons of payday loans:
1. Overall cost
Payday loans bring high fees – such as an establishment fee (up to a maximum of 20% of the amount borrowed), a monthly service fee (up to 4% of the amount borrowed, every month) default fees and enforcement expenses.
“Digital platforms make payday loans very accessible, almost too accessible – but often, borrowers do not fully understand the costs, risks and consequences of these loans,” she told Canstar.
2. Risk of unmanageable debt
If you borrow money and need to repay it with high fees, charges and penalties payable, you will be more likely to get into unmanageable debt than if you accessed the money in a cheaper way. This can become a serious financial problem in the longer term.
3. Potential damage to your credit score
If you repeatedly shop around for credit and apply to multiple credit providers in a short timeframe, or miss any loan repayments, your credit score might drop, and this could stay on your credit history for some time. Having a low or bad credit rating can affect your borrowing capacity in the future. For example, it might affect whether you are approved for a car loan or a home loan, plus the interest rate a lender charges you.
Who uses payday loans?
Research by a national coalition of consumer advocacy groups, Stop the Debt Trap, shows over 4.7 million individual payday loans were issued for around 1.77 million Australian households between April 2016 and July 2019, generating about $550 million in net profit for lenders. Many Australians who are experiencing financial stress turn to payday loans, with earlier research showing payday loans are increasingly available on digital platforms. Often, vulnerable women, commonly with sole responsibility for children, are relying on payday loans as emergency cash for household expenses. These women are unfortunately also taking out multiple loans in many cases, according to Good Shepherd Microfinance.
Why are payday loans a poor credit choice?
If you are already in a difficult financial situation, payday loans can make it worse. Stop the Debt Trap’s research suggests around 15% of payday loan borrowers fall into a “debt spiral” within five years. Over this time, Stop the Debt Trap estimates, about an extra 324,000 Australians may progress towards a debt path that might lead to an event like bankruptcy.
What regulation applies to payday loans in Australia?
Under Australia’s credit legislation, including its responsible lending regulations, banks, credit unions, brokers and other lenders are regulated and licensed in Australia, and aren’t allowed to give credit to borrowers who can’t pay it back.
Additional responsible lending laws apply to small amount credit contracts (SACCs) under the National Consumer Credit Protection Act at the time of writing, including the fee caps discussed earlier. Recently, stakeholders including consumer groups have shared their views about proposed credit reforms as part of a Senate inquiry, with concerns there may be weaker protections for consumers in future from predatory lending.
What are some alternatives to payday loans?
Australians should seek free, professional help from a financial counsellor instead of taking on debt from a payday loan or an alternative like a personal agreement.
“Consumers who are experiencing difficulties making payments for utilities, telecommunications or loans can contact their service provider for hardship arrangements such as an extension of time for payment,” said Dr Chen.
“Additional help such as utilities relief grants or household relief loans may be available and people who are experiencing family violence and are facing financial difficulties can seek hardship assistance from their credit or utility provider.”
Dr Chen said that if consumers have trouble reaching suitable hardship arrangements with a credit or utilities provider, they could consider contacting a financial counsellor to assist with negotiations, as this might lead to better outcomes.
The NDH are both free and impartial. A financial counsellor can help if you need to “negotiate a settlement of debts” with existing credit providers, plus join calls with you as an advocate if you need support handling difficult money conversations with credit providers.
Separate to addressing how you manage debt, ASIC’s Moneysmart suggests the No Interest Loans Scheme (NILS) or a Centrelink advance payment may be suitable, cheaper options if you are eligible and need to get money fast.
What support is available if you are in financial stress?
Payday loans: frequently asked questions
What is a bad credit payday loan?
A payday loan, or small amount credit contract, or SACC, might be marketed to you as a ‘bad credit payday loan’. This means a lender is targeting the loan towards people who have a bad credit score, as they may be less likely to get approval for credit. Keep in mind that if you have a low credit score, you are likely already financially vulnerable – you could have fewer borrowing options than someone with a higher score. Making repeated requests for credit can negatively impact your credit score. If you are alternatively considering a bad credit personal loan, we’ve covered what to look out for.
Should you take out a payday loan?
The Australian Securities and Investments Commission (ASIC) says on its Moneysmart website that when it comes to payday loans, “there are cheaper ways to borrow money when you need it”, adding, “If you’re struggling to pay your bills, don’t get a payday loan.” To protect your credit score and finances, you might like to consider other options aside from a payday loan if you need to borrow money, such as a NILS loan or a Centrelink advance.
How much does a payday loan cost?
You can use the Moneysmart Payday loan calculator to help work out the true cost of a payday loan, modelling the costs based on the loan details such as the amount (up to $2,000) and borrowing term (from 16 days up to one year).
What is the interest on a payday loan?
No interest is allowed to be charged on a payday loan. However, there are often very high overall fees attached that aren’t always obvious upfront for borrowers. These can include an establishment fee (up to a maximum of 20% of the amount borrowed), a monthly service fee (up to a maximum of 4% of the amount borrowed, every month), default fees and enforcement expenses.
Are payday loans dangerous?
Research by Stop the Debt Trap suggests payday loans can be “devastating for the people involved” because “these products are aggressively marketed, which can drive people away from other services that may be more suitable, such as free financial counselling or no or low interest loan schemes”. The National Debt Helpline says the risks of payday loans include very high costs, needing to borrow again to repay the loan, a potential negative impact on your credit rating, high default fees, and being difficult to get out of. Plus, it adds, payday lenders usually sign customers up to pay by direct debit on payday. This can mean money is taken out of your income before essential expenses such as food and rent. If you find yourself unable to make ends meet, you could find yourself in a debt trap that brings more serious long-term consequences.
How do you take out a payday loan?
Consumers can take out a payday loan online or by contacting a credit provider that’s offering high-cost, short-term loans directly over the phone or in person. Lenders will usually require applicants to share information that relates to their income, identity and the loan purpose. If you have a severe history of default or a bad credit rating, you might get turned down for a payday loan, and making multiple requests for credit can have a negative impact on your credit rating.
Can anyone get a payday loan?
Payday lenders tend to be more flexible in their borrowing requirements than major banks. So, if you’re self-employed or have a poor credit rating, you might pass some payday lenders’ borrowing standards. However, you’ll still need to show you have capacity to repay the loan, and this will be assessed based on factors such as your income, spending, identity, employment and credit score. If you are under 18, are not an Australian citizen or resident, have unstable or insecure employment, have a history of poor spending habits, have a low income or have a bad credit score, you might be declined access to a payday loan. Speaking to a financial counsellor for advice on getting your debt under control could be helpful, ideally before you consider applying for a payday loan. Free, confidential advice is available from the National Debt Helpline on 1800 007 007.
Main image: Rawpixel.com/Shutterstock.com
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