Am I Alone? The Number of People with Poor Credit in America

If you feel like you’re part of a small minority of Americans who have poor credit, it might help to know that you’re not alone—not by a long shot.

Financial instability is difficult to live with, especially in the United States, where those who are struggling often have limited options.

It’s especially difficult when we live in a society that seems to run on spending money. Even just seeing your friends for a few drinks can have you spending thirty dollars in one go. Other people might not understand the hoops you have to jump through when you have poor credit and are behind on the bills. As a result, financial instability can feel really isolating, as well as difficult.

If you find yourself wondering if you’re an outlier, know that you’re not alone.


What’s considered a “poor” credit score?

Credit scores can range from 300 to 850. Here’s how to tell what scores are considered good and bad according to FICO:

FICO Score RangeRating of Score
720-850Great
680-719Good
630-679Fair
550-629Subprime
300-549Poor

A fifth of Americans have low credit scores.

According to Experian, 19.1 percent of Americans had a credit score below 600, and an additional 9.6 percent had a credit score below 650. That means about a fifth of Americans have “subprime” or “poor” credit scores, and about a third have credit scores less than “good”.

People under the age of 30 are most affected—their average score is 659 while the average score of people over 60 is 747.

Why do so many Americans have poor credit?

It makes sense that those under thirty are most affected by poor credit. The Great Recession hit in December 2007. People who are thirty now were just getting out of high school and those who went to college were graduating when the economy was still feeling the effects of the recession. Some families are still feeling the effects of the Great Recession today—resulting in credit troubles.

Another factor of poor credit could be poor financial literacy. The United States scored below average in financial literacy among 15-year-olds. Considering the financial system is so confusing that many people hire financial planners just to understand it, that’s not surprising. The credit system is counterintuitive and tricky at times and even the most responsible people can end up with poor credit due to making the wrong guess about financial decisions.

The sheer number of people with debt in America could also help explain poor credit scores. Debt isn’t a bad thing, in and of itself, but even one late payment can quickly ding your credit score. That means if you have a lot of debt, and your income is limited, all it takes is one financial emergency (say, an emergency car repair) to miss a few payments and start approaching the “poor” zone in your credit score.

Debt isn’t necessarily an indicator you’re irresponsible, either. Two of the most common types of debt are college debt and medical debt:

If you’re looking to become more financially literate, check out the free, standards-aligned personal finance classes that we offer through OppU.

Tips for building credit.

The good news is, there are options for people with poor credit. There are plenty of ways to build credit even if there are many credit lines closed to you.

  • If you need a loan, opt for loans with soft credit checks. There are many loan options which require hard credit checks, which put a ding in your credit score. Installment loan options like Opploans conduct only soft credit checks in order to reduce the impact on your credit score. And if the lender reports your payment information to the credit bureaus—as OppLoans does—then all the better, as on-time payments can help you build a better credit history.
  • Be sure to avoid predatory payday loans, title loans, or cash advances. They have higher interest rates—averaging 300 to 400 percent annually in many cases—and can easily make your credit situation even worse if something goes wrong or trap you in a cycle of debt.
  • Put together a plan for making payments on time and be patient. The truth is, time and consistency is the best cure for low credit scores. Some people will advise you to open new accounts to get it up quickly, but that could hurt you in the long run.
  • Focus on paying down debt. Pay more than you have to and make payments multiple times a month. Since credit scores are only updated once a month, making payments twice will ensure that your reduced debt is reflected in your credit report as quickly as possible. For a long-term debt repayment strategy, look into the Debt Snowball and Debt Avalanche methods.
  • Don’t max out your credit card even if you can pay it off. It looks bad on your report to have a lot of your credit lines used up. In fact, one way you can help yourself out in this area is raising credit limits because credit bureaus closely monitor your credit utilization ratio.

It can be hard to struggle with low credit and work towards specific financial goals, especially if everyone else around you seem to be spending what they want. But chances are you aren’t the only one. One in five people you know has a poor credit score too.

Being honest with your loved ones about your goals and asking them to join you can help make it a little easier, along with following tips for getting your credit score back up. To learn more about improving your credit, check out these other posts and articles from OppLoans:

Do you have a  personal finance question you’d like us to answer? Let us know! You can find us on Facebook and Twitter.

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Have Bad Credit? Here’s What That Means and How You Can You Fix It

Bad credit is usually caused by some combination of two things. And if you’re going to improve your score, those two areas are what you’ll need to tackle.

A lot of people are vaguely aware that having bad credit is—well—bad. They know that it means being denied for personal loans and credit cards from traditional lenders. They know that it means trouble finding an apartment—or even sometimes a job. They know that if they need money in a hurry, they’ll likely have to rely on short-term bad credit loans or predatory no credit check loans (like payday loans, title loans, and cash advances) to make ends meet.

But there’s a lot of things that some people don’t know about bad credit. They don’t know what kind of scores are “bad” versus “fair” or “good.” They don’t know what kind of behavior led to them having a bad credit score in the first place. Most importantly, tons of folks with bad credit don’t understand the steps they need to take in order to fix their score. If you count yourself among their ranks, don’t worry. That’s why we’re here.


What is a “bad” credit score?

When we’re talking about credit scores, we’re most often talking about FICO scores. These are the most common type of credit score, and they are expressed on a scale from 300 to 850. The higher your score, the better your credit.

While there is no hard and fast line demarking “good” credit from “fair” or “bad” credit, there are general tiers of creditworthiness that are useful to know. The quality of your FICO score roughly breaks down along the following lines:

  • Great Credit: 720-850
  • Good Credit: 680-719
  • Fair Credit: 630-679
  • Subprime Credit: 550-629
  • Poor Credit: 300-549

So if you have bad credit, that means that you have “subprime” or “poor” credit, which is a score between 330 and 629. A score in the “subprime” range will shut you out from most traditional financial products, especially loans, online loans, or credit cards that are unsecured by collateral. And the kinds of secured loans (like mortgages or auto loans) that you can qualify for will come with much higher interest rates.

If you’re wondering what the difference is between subprime credit and poor credit, it’s like the difference between having a few good financial options and having practically no good options at all. With a subprime credit score, you can still qualify for some reasonable and affordable bad credit loans—like certain bad credit installment loans—while a poor credit score under 550 means relying almost entirely on short-term no credit check loans like payday loans and cash advances.

How did your score get here?

Your FICO score is based on information in your credit reports, which are documents that track your history as a borrower and user of credit over the past seven to ten years. These reports are created and maintained by the three major credit bureaus: Experian, TransUnion, and Equifax.

There are five main categories of credit report information that are used to create your credit score. Those categories are your payment history, which makes up 35 percent of your total score, your amounts owed (30 percent), the length of your credit history (15 percent), your credit mix (10 percent) and your recent credit inquiries (10 percent).

As you can see from the previous paragraph, your payment history and your amounts owed make up almost two-thirds of your total score. So if you have bad credit, the answer almost certainly lies in some combination of those two areas: You’re not paying your bills on time, you’ve taken out too much debt, or both. 

Here’s how you can fix a bad credit score.

Luckily, the fact that these two areas have contributed so greatly to your lousy credit means that the solutions for fixing your credit score are fairly clear. Simply put, you need to start paying your bills on time and you need to pay down your outstanding debt!

In order to do both of these things, you’re going to need a household budget in place. With a budget, you can manage your cash flow to ensure that you always have the money to pay your bills on time, and you can put aside extra funds to pay down your outstanding debts.

The two best methods of debt repayment are the Debt Snowball and the Debt Avalanche. Both methods involve putting all your extra debt repayment funds towards one debt at a time while making only your monthly minimum payments on all your other debts. The difference is that the Debt Snowball has you pay your debts off from smallest to largest while the Debt Avalanche has you pay off your highest interest rate first—saving you money in the long run.

When it comes to paying your bills on time, there’s less of a tried and true method. You just have to be extremely vigilant: Even one late payment can hinder your score for years to come. And the later a late payment is made, the longer it can negatively affect your score. If you have trouble paying certain bills on time because they’re all clumped together, contact your creditors and ask to have your due date changed. Set up automatic alerts so that you know when a bill is coming due.

Above all else, what you need is patience. Fixing bad credit takes time—especially bad credit that arises from a spotty payment history. While waiting for your score to improve, you should also focus on building an emergency fund. That way, your next unexpected bill or surprise expense won’t leave you scrambling to bridge a financial gap—possibly hurting your credit even further.

To learn more about improving your credit, check out these other posts and articles from OppLoans:

Do you have a  personal finance question you’d like us to answer? Let us know! You can find us on Facebook and Twitter.

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21 Little-Known Ways That Travel Pros Globetrot for Cheap

Rack up travel points—not debt.

Whether they want to admit it or not, most people are travel novices. They go on vacation once, maybe twice a year, and while they do their best to keep things budget-friendly, sometimes they succeed, and sometimes they don’t.

But what about people who travel a lot. Like, a whole lot. Do they know secrets the rest of us don’t?

Yup.

No matter the destination—the other side of the world or the next state over—travel can be expensive. But there are ways to bring down the price and still have a great time.

We asked 18 travel experts for their top tricks. Here’s what they recommend.

1. Search Incognito

Sam Williamson, WeSwap Travel Money

[U]se incognito searches when looking at hotels and flights online: People often assume that you’ll always find cheaper deals on flights and hotels online. However, what many people don’t realize is that travel sites will often use cookies to see if you’ve been on the site before, and if you have been on the site before they’ll show you more expensive prices because they know you’re interested in their offers.

By setting your browser to private or ‘incognito’ when looking at travel sites the cookies won’t be stored, so this will prevent the higher prices from being displayed and will help you to always see the cheapest deals available.

2. Travel for Longer

Chris Stevens, travel blogger at BackpackerBanter.com

Personally one of my top tips for travelling on a budget is to travel slow, but for longer. It seems like a bit of an odd tip—travelling for longer to save money—but it certainly works!

Most people piece together their dream trip and pack a lot into a short space of time, which ramps up your daily average spend. However, what they overlook is the basic costs for their day to day expenses—food and accom.

In spots like Thailand or Bali this can be extremely cheap (less than $15 USD per day even!), so by spending a little extra they spread out their big bucket lists spends (think dive courses, day trips, skydives, etc!) and reduce their daily budget whilst spending longer in paradise!

In Cambodia for instance you can grab a hostel room for as little as £2 a night, meals for £1-3 and a beer for 50p. So that’s a living cost of about £8 a day—based on a £2-a-night hostel, 2 meals at £2.50, and a couple of beers.

For a month of that you’d be spending around £250.

So basically for an extra £250 your two-week stay in Cambodia becomes six weeks.

You’ll still be doing all the cool stuff you were going to cram into 2 weeks, but now the pace of life is a bit more relaxed, you can explore each stop in more depth and of course that could well include lots of time topping up your tan on the beach.

Even if you don’t fancy staying in the cheapest dorm accommodation, a prolonged stay will also reduce the cost of your accommodation as pretty much everywhere (even accommodation in places like Australia and New Zealand) will offer a weekly reduced rate.

If you’re staying even longer barter it down even more.

Seems like a crazy idea—but it works!

3. Weigh Exchange Rates

Will Hatton, founder of Hotel Jules

If you’re in a foreign country already—i.e mid-travel—change the currency option on the flight website you are on. Sometimes it can result in a $20 to $50 difference if you get the best exchange rate.

4. Book Directly

Jill Douglas, general manager with the Commander Hotel

Booking directly with a hotel is always better than booking through third-party websites. The reason for this is because the third-party sites, which can offer great deals, many times don’t have guest-friendly cancellation policies. By booking your hotel stay via the hotel’s website or on the phone, you’ll usually have at least a 24-to-48-hour buffer before your check-in in the event that you need to cancel for whatever reason.

Also, when booking directly, you’ll have access to valuable unadvertised money-saving specials that the hotel may be running during the time period when you’re looking to visit, so be sure to ask what’s available.

Once you’re booked and checked in, ask the hotel if it has any discount partnerships with, or coupons for, area restaurants and attractions. At The Commander, for instance, we have a mobile app that entitles our guests to exclusive savings at mini golf courses, bike rental shops, and freebies at local restaurants (such as a free appetizer or drink with an entrée purchase).

Another secret perk is that guests can always request room upgrades if a hotel isn’t fully booked, which can be easily arranged based on availability. While hotels should offer this without being prompted, many don’t—so it’s definitely worth it for guests to inquire about it!

5. Track Price Drops

Doron Nadivi, chief commercial officer at Pruvo

Here is a less-known tip that can save you hundreds of dollars on your hotel reservations by just sending one email.

Travelers spend hours prior to reserving hotels in order to find the best price available. Once they book, they forget about their reservations (thinking that they got the best deal) till the date of travel. Big mistake! Hotel prices tend to drop 40 percent of the time AFTER hotels are booked and can drop up to 72 percent off the total reservation amount!

6. Travel During Shoulder Seasons

Anthony Bianco, travel writer and blogger at The Travel Tart

Unfortunately, summer in many places is the ‘peak season’ and it’s all about supply and demand—and that goes for all travel-related things, such as flights and hotels. When travelling anywhere, I try and avoid peak season like the plague. If there is a huge demand and limited supply of hotel rooms, the chance of you scoring a bargain is pretty slim, because
hotel owners know that someone else will come along with the money they want. Trying to book early can help, or trying to find a spot on either side of peak demand will reduce costs. However, going in low or off-peak shoulder seasons gives a lot more flexibility. The demand is down but supply is up and businesses are more ready to give you a substantial discount.

7. Swap Homes

Juliette Gebken-Mayí, brand publicity manager at Love Home Swap

A great option to save money and travel to amazing destination is home swapping. I work for Love Home Swap, a home exchange network with more than 10,000 homes to choose from around the globe. The founders of the site were inspired in the movie ‘The Holiday,’ and decided to create what has now become an online community of travelers looking to experience a destination in a different way—home swapping.

Members only pay the cost of membership (about $180 a year), and a $69 fee every time they do a home swap (our members save an average of $3,500 a year in travel), and are able to do traditional swaps (simultaneous), but for those that the travel dates don’t coincide, they can just obtain points to use at a later time.

8. Car Camp

Pete Ducato, CEO of Luno Life

We have a new brand that creates gear for vehicles that allows people to car camp more comfortably and save on accommodations. Not to mention when you’re traveling in the outdoors and it’s raining, snowing, or maybe around an area where dangerous wildlife is common, we have the perfect road trip set up.

We’re not trying to cancel out tents but rather offer a solution for people who enjoy traveling in their vehicle OR maybe it’s their first time in the outdoors and they’d like to approach an adventure in a more safe matter.

There’s a huge movement in wanderlust and a new community on wheels driven by this whole van life era. The Luno Life Air Mattress with our Base Extenders is something that has helped me often when car camping in California or when taking a road trip so I can lay full length in my Subaru Outback.

Car camping can save a lot of money while traveling, and you get to sleep in spots you never imagined you could! I like to think of getting our mattress as a one-time purchase with endless nights of sleeping on the road.

9. Rent an RV

Dan and Lindsay McKenzie, founders of Follow Your Detour

[C]onsider RVing as your means of travel! Gas prices are low, there are FREE spots to park all around the country, you can do many free outdoor activities, cook in your RV instead of eating out at restaurants, etc!

10. Confirm Baggage Requirements

Chad Stinton, The Luggage List

It is important to check the baggage requirements for the airline you’ll be traveling on. An overly large or heavy bag can result in extra fees which can be avoided with proper preparation.

11. Pack Light

Sharon Marchisello, author of “Live Well, Grow Wealth”

My best advice for saving money on travel is to learn to pack light (mix and match outfits, reduce pairs of shoes, wear the bulkiest items, leave unnecessary electronics at home, etc.). Because I worked for the airlines and flew space available, I learned to limit myself to carry-on luggage. Even when I’m going on a two-week cruise! Sometimes you end up having to fly to an alternate airport or reach your destination via a different city, so you don’t want your checked baggage going somewhere you aren’t.

But even if you don’t have to travel standby, you can save money by packing light: Most airlines now charge fees for checked luggage, and the weight restriction is not as generous as it once was.

When you arrive at your destination, you can take advantage of public transportation if your luggage isn’t too cumbersome. Buses and subways usually cost a fraction of what you’d pay for a cab into town.

If you do take a cab, some companies charge extra for more luggage. Also, if you travel light, you might be able to share a cab with other travelers headed for the same destination (e.g., fellow cruise passengers headed to the airport or train station). If you have too much luggage, you won’t all fit in one cab.

By handling your own luggage at the airport and carrying it to your hotel room without assistance, you save tips to porters.

12. Buddy Up

Shixuan Wang, PR manager at GAFFL

In my viewpoint, the best advice for budget travelers is to figure out what they enjoy most on this trip and what they don’t and try to be economical on those things that they don’t spend too much on. For example, if you travel from Cincinnati to Chicago by van, gasoline costs and hotel expenses are unavoidable. However, although you found that there is no discount on Airbnb, you could still save money by sharing the cost with your partners if you could find one.

Currently, sharing has become a popular trend as a way to travel. At GAFFL, there is a web platform that travelers could find each other who share the same destination and travel together. During the trip, they split rental car costs, gasoline, Airbnb, and everything needed. It is a very efficient way for budget travelers to save money.

13. Anticipate a Tourist Tax

Charish Badzinski, founder of Rollerbag Goddess Global Communications

Anticipate a tourist tax wherever you go. My husband and I travel a lot and we use this term to describe the upcharge tourists often pay without knowing there is another way. Be forgiving of yourself as a first-timer. Know that to much of the world, tourists from the U.S. represent wealth. Opportunists will always be there to wrangle unsuspecting travelers. The best thing you can do is to conduct some research on the front end so you know what you should be paying, and be diligent as you travel.

14. Use a Credit Card

Christian Eilers, writer for Dauntless Jaunter

Taking out cash is handy (and often necessary) when in another country. However, the fees you pay for exchange rates and international transaction fees for cash advances can be a small fortune. Instead, use your credit card to pay for all possible purchases. Most modern credit accounts (check first, of course) have no transaction fees and a very competitive exchange rate, a far tighter spread than the dubious tellers at the airport, oftentimes. And, if you earn cash back or points for your purchases, even better! Debit cards work, as well, but often don’t have quite the many perks of a credit card.

15. Travel Like a Local

Trent Hankinson, a touring musician with Aqua Seca

As a touring musician, I am constantly on the road, [so] it becomes important not to overspend at every destination. Hence I have adopted the mindset to always travel like a local.

What do I mean by this? Well, it is often times easy to spend a lot more money than you need to while on vacation. Between the hotel, transportation, and food, those will be some of your biggest expenses. But you can be sure that the locals will not be spending nearly as much as you. So in that case, just live as they do! Don’t take the taxi from the airport, take the bus. Don’t stay in a hotel, stay in a short-term apartment rental. Don’t dine out every night, go to the grocery store and find all kinds of things for super cheap.

Not only will this save your wallet from running dry, but the experience you have will be so much more authentic than the more luxurious option.

16. Find Free Tours

Ray Commins, content director at Freetour.com

[Freetour.com is] a platform for connecting travelers with top quality free tour providers and excellent local guides around the world. The free tour concept works on the basis that travelers are free to pay what they can afford or feel the tour was worth at the end of the experience. It’s a perfect way to stay in control of your travel budget without sacrificing on quality tour experiences, risk free.

We also have budget tours available and a wide range of activities and themed experiences in addition to the thousands of free tours on the FREETOUR.com platform and FREETOUR app.

17. Eat Street Food

Christian Eilers, writer for Dauntless Jaunter

Street food in another country may have you concerned about bacteria and disease. However, not only is it often the cheapest option, but you truly get a taste of the destination when trying street cuisine. Stick with the food carts which have the longest lines, as you’ll have the locals’ stamp of approval—if they keep coming back, it should be relatively safe.

18. Buy Memorable Gifts

Christian Eilers, writer for Dauntless Jaunter

Choose non-traditional memorabilia. If you need to bring home souvenirs for yourself or friends, avoid the tourist gift shops. A shot glass or t-shirt with Berlin on it doesn’t mean anything, and it’ll cost a pretty penny. Instead, bring your family local cookies from the supermarket or a bottle of the local spirits—cheap and authentic at the same time. However, don’t wait until the last minute and acquire your gifts at the airport, even at the duty-free shops. They’ll charge you an arm and a leg, and they just might not have what you’re looking for anyway. So, be on the lookout for appropriate gifts from Day 1 of your stay, and you won’t go wrong.

19. Set a Budget

Anthony Bianco, travel writer and blogger at The Travel Tart

In terms of saving money and financing any vacation, a budget needs to be set based on how long you will be away for and where. Once this amount is determined, regularly contribute the amount of money you need per week into a separate account over X number of weeks—calculate your savings time/schedule and stick to it. Be ruthless. Cut whatever you don’t need and add more to your account if possible until you reach your required budget.

20. Plan in Advance

Pedro Bone, co-owner of The Passport Office

If traveling weren’t so pricey people would probably get out more, but alas, airlines have to make money somehow.

If you’re looking to book a flight and want to save some money, you should naturally attempt to book as far out as possible. Preplanning will save you a bundle. Additionally, try to leave on a Tuesday and return on a Saturday or Sunday, airlines tend to have cheaper tickets available on those days.

If you don’t plan on traveling out of the country for months and don’t have a passport; go get one. If you wait until your trip is a month away the fees will begin to slowly climb up, especially if you don’t live near a U.S. Department of State location! Likewise make sure your passport hasn’t expired, no one likes wasting money on a trip you can’t even take!

21. Be Flexible

Neil Brinckerhoff, tour guide

After three years of nearly constant traveling, I have found ways to keep my expenses down while on the go. The biggest was my ability to be flexible. With transportation—planes, trains, buses, etc.—sometimes the cheapest price will be on a random day. The more open you are, the more likely you’ll be able to score a good deal!

Contributors

Charish Badzinski is founder of Rollerbag Goddess Global Communications. Her twin passions are writing and world travel, and she has a goal of visiting 100 countries in her lifetime. She blogs about travel, and the deeper lessons gleaned from the travel experience, on her website.
Anthony Bianco, aka The Travel Tart, is an Australian travel blogger and writer who writes about the funny, offbeat, and weird aspects of world travel today. Travel wasn’t meant to be taken too seriously! Strangely enough, he’s appeared in reputable publications like USA Today, the Australian Broadcasting Corporation, and is a member of the Australian Society of Travel Writers.
Pedro Bone has been co-owner of The Passport Office for the past 10 years. In his time working in the field, he has gained a wealth of knowledge concerning all things travel related. When he’s not aiding travelers in attaining their passports, he’s spreading the information he’s learned to those across the world. You can learn more about Pedro Bone and his company at thepassportoffice.com.
Neil Brinckerhoff is a tourism professional currently based in the Prague, Czech Republic. Working for many years as a tour guide, he has been able to see all aspects of the travel world and now advises others on their best travel opportunities. He has visited 30+ countries and supports travel that allows visitors to invest and learn in the local culture around them. No matter the budget, if there’s a will, there’s a way!
Ray Commins is a founder of the FREETOUR.com platform, with extensive experience in the budget travel sector. Having cut his teeth in the backpacker industry as a hostel Operations Manager in Dublin, Ireland, he went on to co-found what have become multi-national tour and activity outfits, a budget accommodation booking platform, and the aforementioned free and budget tour booking platform. The ambition he and his colleagues share is to make authentic, quality local experiences and top-class tour guides available to all travelers, regardless of budget.
Jill Douglas is the general manager at the Commander Hotel & Suites in Ocean City, Maryland.
Pete Ducato is a design entrepreneur residing in Santa Barbara, California. He is passionate about building iconic brands in the outdoor, sports, and lifestyle industries. His background as an industrial designer has led him to create Luno Life, an outdoor brand built on exploration and innovation. Luno Life creates gear, equipment, and accessories that help travelers explore the open road.
Christian Eilers is a native New Yorker, frequent traveler, and writer for the cultural and educational website, Dauntless Jaunter. When not planning his next excursion, he works as a career advice writer, helping job seekers make sense of the employment process.
Juliette Gebken-Mayí is the brand publicity manager of Wyndham Destinations in Orlando, Florida. She is a well-traveled, creative and results-driven bilingual public relations professional with 10 years in the travel and tourism industry.
Trent Hankinson is the frontman of the psychedelic rock band Aqua Seca.
Will Hatton is an intrepid and determined traveller, runs a travel blog (The Broke Backpacker), teaches SEO, and has an adventure product line. He caught the travel bug at a young age and has experienced so many amazing things and made heaps of lifelong friends. In the future he plans to open a commune in the jungle.
Sharon Marchisello, author of “Live Well, Grow Wealth,” became interested in personal finance at an early age and was a long-time member and officer of the Marathon Investment Club. She earned a Masters in Professional Writing from the University of Southern California and has published travel articles, short stories, book reviews, and a murder mystery (“Going Home,” Sunbury Press 2014). She also writes a personal finance blog, Countdown to Financial Fitness, with tips about saving money in all aspects of life, including travel.
Lindsay McKenzie is a writer, adventurer, and the co-founder of Follow Your Detour, a top RV travel blog. Originally from Colorado, Lindsay travels with her husband and two dogs. They are currently exploring the U.S. while living in their Winnebago. You can follow their adventures and enjoy their travel photos and advice at FollowYourDetour.com and on their social media channels.
Doron Nadivi is the Chief Commercial Officer of Pruvo, a free service and app that saves you money on hotels you ALREADY booked.
Chris Stevens is a surfer, blogger and videographer who has been on the road since 2009. Whether it’s travelling the East Coast of Australia, surfing in Indonesia or island hopping in the Philippines he shares reviews, advice and stories to inspire other people to see the world, as well as giving them the tools to to do over on BackpackerBanter.com and StokedForTravel.com
Chad Sutton is the creator of TheLuggageList.com, a travel site that focuses on providing travel tips and product reviews. Chad and his wife Rachelle are travel enthusiasts based out of Chicago, Illinois. They also run a successful Airbnb business and website at TheIncredibleHost.com which helps educate short-term rental hosts.
Shixuan Wang is a PR manager and Marketing Data Analyst at GAFFL. He is currently a senior student at Miami University with Math & Statistics and Economics major. He loves swimming, doing meditation, and mountaineering.
Sam Williamson is part of the marketing team for WeSwap Travel Money and a keen traveler.

How do you cut costs when planning a trip? Share your tips with us on Twitter at @OppUniversity.

How To Fix Credit Report Errors

by Jessica Easto
An error on your credit report could be dragging down your credit score—and these errors are much more common than you might think!

We’ve written in the past about how important credit reports are—they are the tool that lenders, businesses, and employers use to determine how “risky” you are when it comes to paying back debts, like credit cards and personal loans, on time.

But did you know that there can be mistakes on your credit report? That’s right, and it may be more common than you think.

According to a recent report, the most common complaints received by the Consumer Financial Protection Bureau (CFPB), which has been running its Consumer Complaint Database since 2011, are related to the three major credit reporting agencies: Equifax, Experian, and TransUnion. Sixty-one percent of those complaints were related to credit reporting errors.

According to a study by the Federal Trade Commission, an estimated one in five consumers has an error on at least one of their three major credit reports.

Why is this an issue? Errors can impact your hard-earned credit score. You need a certain level of credit in order to get the best financing when it comes time to borrow money. Without good credit, your only options may be bad credit loans, no credit check loans, title loans, or payday loans (otherwise known as cash advances).

All of these leave you at risk of predatory lending, debt traps, and sinking your credit even further. Credit reporting errors can have an even bigger impact on those who are just starting to build their credit or those with poor credit who are working to improve it.

Luckily, there are ways to fix errors on your credit report. Here’s what to look for and what to do.


Step 1: Check Your Credit Report

As we’ve discussed on the blog in the past, you can check your three credit reports from the major credit reporting agencies for free once a year. All you have to do is go to AnnualCreditReport.com.

You can choose to view all three at once or spread them out over the whole year. Just remember to note when you check your report, so you know when you can look again next year! As long as you look at each one only once a year, it does not impact your credit score.

It’s also important to realize that each credit reporting agency does things slightly differently. It’s not unusual to see slightly different information, and it’s possible to have an error on one report and have everything shipshape on the other two. That’s why it pays to view all three!

Step 2: Understand What a Credit Report Error Looks Like

What exactly is a credit report error anyway? According to Patricia Russell, a CFP at FinancialMarvel, a credit report error is “anything that’s inaccurate.” This can be something as simple as misspelling or name or listing an incorrect home address to something more serious, such as an inaccurate hard check on your report—something that can negatively impact your credit score.

According to the Federal Trade Commission study, one in four people have an error on one of their reports that could impact their credit score.

When looking at your credit report, make sure to read everything very carefully. Make sure your name and all parts of your address and identifying information are correct. Verify that all of the open and closed accounts are correct and that the balances and payment histories add up.

Review all of your hard credit checks—you’ll see on the report, for example, if you’ve recently applied for an auto loan, credit card, phone plan, etc.—and verify that you recognize each one.

If something looks unfamiliar, do a little research. Sometimes accounts, retail credit cards, for example, are listed by the name of a parent company, which may seem unfamiliar if your card is for a specific store. If something doesn’t add up, make a note of it.

According to Russell, the most common mistakes include “credit card balances that are wrong, the reporting of any account in an incorrect manner, and information for other people with the same name as you.” She notes that inaccurate information can also pop up “if someone’s social security number is close to yours.”

But errors can also indicate that someone is trying to steal your identity or commit fraud—another reason it’s important to check your report regularly. “Keep in mind that many people who have had their identity stolen have incorrect information on their credit report as well,” says Russell.

Step 3: Alert the Reporting Agency of the Error

Mike Pearson, credit expert and founder of Credit Takeoff, has a five-step process for contacting credit reporting agencies with errors:

  • Dispute the item with the right credit bureau. An incorrect item may appear on only one credit report, but not the others. Dispute the negative item only with the credit bureau where the item appears. (You can find each bureau’s contact information on the CFPB website.)
  • Send a letter to the credit bureau requesting that the item be deleted. Use a free letter template from the FTC website and be sure to send it via certified mail—giving you legal proof the bureau received your letter.
  • Include lots of documentation. With your letter, attach a copy of your credit report with your disputed items highlighted, and include any supporting documentation, such as payment records or court documents.
  • Send a letter directly to the lender. If the credit bureau won’t remove the item, send another letter to the lender explaining why the item is inaccurate or incomplete.
  • Never admit fault! Do not admit fault or guilt in your letter! Stick to the FTC template and leave your personal “story” out of it—it could end up causing you more harm than good, since admitting to a late payment, for example, could give the credit bureau all the information it needs to not remove the item.

“Credit companies usually have up to complete their investigation in 30 days,” says Russell. “However, if they feel it is a frivolous dispute they won’t take the time to investigate.” If the credit reporting agency deems the dispute credible, they forward your documentation to the entity in question, which is called the “furnisher.”

According to the CFPB, if either the reporting agency or the furnisher decide that the claim is frivolous and that they won’t investigate, they have to notify you within five days.

If the dispute is investigated, one of two things will happen. If it’s deemed an error, the furnisher will correct the information and notify all the credit reporting agencies. If it’s deemed correct information, it will not change on your report, but you can ask that a statement explaining the decision is included in your credit file. This will be sent to anyone who checks your report in the future.

According to the FTC study, four in five people who filed disputes saw some change to their credit report.

A Note on Identity Theft

Suspicions of identity theft are treated a little bit differently than regular credit report mistakes. If you think you are the victim of identity theft, visit IdentityTheft.gov to report it and start the recovery process. To learn more about keeping your identity safe, check out these other posts and articles from OppLoans:

Do you have a personal finance question you’d like us to answer? Let us know! You can find us on Facebook and Twitter.

Visit OppLoans on YouTube | Facebook | Twitter | LinkedIN |Instagram


Contributors

Mike Pearson is the founder of Credit Takeoff, a research-driven personal finance site for people looking to improve their credit. A proud member of the 800 Credit Club, Mike writes about practical steps that everyday consumers can take to increase their credit scores. His advice on credit repair and credit scores has appeared in QuickBooks, Go Banking Rates, and MortgageLoan.com.
Patricia Russell is a Certified Financial Planner (CFP) and the founder of the personal finance blog, FinanceMarvel, which provides free financial advice on managing credit, debit and savings. Patricia has more than 10 years experience in helping families and individuals take control of their personal finances and achieve financial independence.

How Long Does Bad Credit Last?

Improving your bad credit isn’t something you can achieve overnight. It will likely take years before your credit score fully recovers.

We get it: You’re sick of staring at a credit score that’s stuck below 600. Whenever you need money in a pinch, you’re stuck taking out short-term bad credit loans and no credit check loans like payday loans, cash advances, and title loans. Many of those products can trap you in a dangerous cycle of debt!

And yet, while you’ve gotten better about managing your money, your score won’t seem to budge. How long do you have to wait before you’ll see your score improve? How long can bad credit last, anyway? Keep reading for the answer to that question and more …


Here’s how credit scores work.

Your credit score is a three-digit number that summarizes your perceived trustworthiness as a borrower. The most common type of credit score (and also the oldest) is the FICO score, which is scored on a scale from 300 to 850. The higher your FICO score, the better your credit.

Credit scores are based on the information contained in your credit report, which tracks your history as a user of credit. Actually, you have three different credit reports, one each from the three major credit bureaus: Experian, TransUnion, and Equifax. Your credit score can vary depending on which credit report is used to create it.

There are five main categories of information on your credit report that are used to create your score. They are your payment history (35 percent of your total score), your amounts owed/credit utilization (30 percent), the length of your credit history (15 percent), your credit mix (10 percent), and your new credit inquiries (10 percent).

Last but not least: Most information only remains on your credit report for seven years, after which point it drops off. And while some information—namely, filing for Chapter 7 bankruptcy—  stays on your report for up to 10 years, a lot of information will stop affecting your score even before it drops off your report.

Ask yourself: Why do I have bad credit?

If you look back at those five categories of information that are used to create your credit score, you’ll notice that two categories account for almost two-thirds of your score. That’s right, your payment history and your amounts owed/credit utilization are by far the most important parts of your credit score–and so they’re also two biggest reasons why people have bad credit.

In order to improve your credit score, you will need to be responsible with your money. First and foremost, that means paying your bills on time. Second, it means paying down your debts—and that goes double for high-interest consumer debt from credit cards and personal loans. But how long your bad credit score remains will depend on which category needs the most improvement.

When it comes to paying down your debts and improving your credit utilization, the path is pretty clear: The faster you pay down your open balances, the faster your score will improve. And you should see some marked improvement once you get your open credit card balances below 30 percent of your available credit limits.

When it comes to late payments, you’ll have to be extremely diligent, and more than a little bit patient. Even one late payment can cause your score to dramatically dip, which means that you’ll need years of on-time payments across the board in order for your score to fully improve.

The later your bill, the worse for your score.

If you have already missed a bill payment, you shouldn’t use that as an excuse to drag your feet. According to Mike Pearson, founder of the personal finance site Credit Takeoff, the longer a bill goes unpaid, the more damage it will do to your score.

“First, late payments can stay on your credit report for up to seven years,” he began. “But how long does it actually impact your credit score? It all comes down to how many days late you are.”

“If you are 30-60 days late, then one late payment can impact your score for up to two years. But after that, the damage should fall off significantly.”

“On the other hand, if you’re 90+ days late, then your credit score could be impacted for the full seven years” Pearson continued. “When you’re late for this long, the lenders consider you a long-term credit risk and much less likely to pay back future loans on time.

“Not only that, but if your late payment falls into collection and results in a charge off, those are two additional negative items that will appear on your credit reports and damage your score even further,” he concluded.

So don’t wait—get that late bill paid pronto!

Start fixing your score now.

Unfortunately, there is no one-size-fits-all answer to the question that we posed up top. Credit scores are complex, and there are too many factors specific to each individual score for us to say with certainty how long it will take your credit score to flip from bad to fair to good.

But there are a few general rules that we’ve outlined: Almost all information will drop off your report entirely after seven years, and most information will affect your score less as time goes on. The longer that you spend paying your bills on time and digging out of debt, the more positive information there will be on your score, and the more improvement you’ll see.

Even if takes years for you to go from bad credit to good credit, there is one piece of advice we can offer: Start now. The sooner you start working to fix your score, the sooner your score will improve. To learn more about improving your credit score and paying down debt, check out these related posts and articles from OppLoans:

Do you have a  personal finance question you’d like us to answer? Let us know! You can find us on Facebook and Twitter.

Visit OppLoans on YouTube | Facebook | Twitter | LinkedIN | Instagram


Contributors

Mike Pearson is the founder of Credit Takeoff, a research-driven personal finance site for people looking to improve their credit. A proud member of the 800 Credit Club, Mike writes about practical steps that everyday consumers can take to increase their credit scores. His advice on credit repair and credit scores has appeared in QuickBooks, Go Banking Rates, and MortgageLoan.com.

What Is a Credit Report and How Does It Work?

Credit reports track your history as a user of credit over the past seven to 10 years—and they’re the documents used to create your credit score.

People with bad credit often find themselves in a pickle when they need to borrow money—and doubly so when they need to borrow money fast. Their lousy FICO score leaves them stuck with bad credit loans that come with much higher interest rates. And some of these loans—like short-term no credit check loans, payday loans, and cash advances—could even trap them in a dangerous cycle of debt.

While relying on safer and more affordable bad credit installment loans can be a viable short-term solution to this problem, the long-term solution to this dilemma is clear: They need to fix their credit. But in order to do that, it doesn’t really help to look at your score. Instead, you need to examine your credit report; that’s where all the real information is kept.

If you’re unfamiliar with credit reports and how they work, no worries. This article will provide you a brief primer on credit reports so that you can go out there and start improving your credit score today!

Credit reports track your credit history.

The relationship between credit reports and credit scores is often expressed through the following comparison: A credit report is like a quiz you take in school, while your credit score is like the grade you receive on that quiz. And indeed, your credit score only summarizes the information that’s contained in your report.

Credit reports are documents that record your history as a credit user and borrower over the past seven to 10 years. They are compiled by the three major credit bureaus—Experian, TransUnion, and Equifax—from data sent to them by banks, credit card companies, debt collection agencies, and other businesses nationwide. They also contain certain information that is available on the public record.

Information included on credit reports includes identifying info like your name, address, and social security number; credit info like open and closed accounts, loan amounts or balances, payment history, and new credit inquiries; info from debt collection agencies as to what unpaid debts you have open; and info from the public record like bankruptcies and civil lawsuits. While most information stays on your report for seven years, some info, like bankruptcies, stays on your report for 10 years.

All this information is then used to create your credit score. When it comes to your FICO score, the most important categories of information are as follows: payment history (35 percent of your overall score), amounts owed (30 percent), length of credit history (15 percent), credit mix (10 percent), and new credit inquiries (10 percent).

You have multiple reports and multiple scores.

We tend to talk about your credit report, singular, but we really should say your credit reports, plural. Since these reports are compiled by three different credit bureaus, you actually have three different credit reports out there.

If you’ve ever used a free credit score reporting service like Credit Karma or have a “check your credit score” feature in your online banking portal, then you’ll notice that the service always tells you which credit report was used to create your credit score.

This matters because there can be actual differences between the three different reports. Not all lenders and businesses report to all three credit reporting agencies, meaning that certain information—good or bad—could be on one report and not the other two.

This matters for your credit score—or credit scores—as those differences can mean a higher or lower score depending on which bureau’s report is being used to create your score. While the differences between your credit reports are often minimal, an error on one report could end up causing you some major headaches.

Yes, your credit reports might contain errors.

Yeah, about that … not only might your credit report contain incorrect information, but the odds that it does are much higher than you’d think. According to a 2017 report from CNBC, more than one in five credit reports have “potentially material errors” that make those consumers look like a riskier best than they actually are.

If there is an error on your credit report, you will need to contact the credit bureau directly in order to have it resolved. Once they receive your dispute letter, they have 30 days to conduct an investigation, and they must inform you of the results in writing. For more information, check out our blog post on how to contest errors on your credit report.

Good news: Your credit report is free.

There might not be such a thing as a free lunch, but there truly is such a thing as a free credit report. In fact, the three major credit bureaus are required by federal law to provide you with one free credit report annually upon request. If you want to know what’s on your report, just visit AnnualCreditReport.com to order a free copy.

It’s a good thing to get in the habit of checking your credit reports regularly. If someone has stolen your identity and is taking out new personal loans or credit cards under your name, checking your report is going to help you catch them and keep your credit history clear of their wrongdoing. Order a different report every four months, and you can set up your own DIY credit monitoring service without paying a penny!

If you want to fix your credit score and kiss high-interest online loans and risky title loans goodbye, you’ll first need a grasp on why your score is so low in the first place. In order to do that, you’ll need to check your credit report. So what are you waiting for?! To learn more about improving your credit, check out these other posts and articles from OppLoans:

Do you have a  personal finance question you’d like us to answer? Let us know! You can find us on Facebook and Twitter.

Visit OppLoans on YouTube | Facebook | Twitter | LinkedIN | Instagram

Why Do (Some) Credit Checks Lower Your Score?

There are two different types of credit inquiries: One type will affect your credit score, while the other won’t affect it at all. Why is that?

If you are tired of relying on bad credit loans and no credit check loans to make ends meet during an emergency, then you’ve probably looked into ways that you can improve your credit score. And in the course of that research, you’ve certainly come across a note that “recent credit inquiries” make up 10 percent of your overall score.

While that might not mean much to you right now, the explanation is fairly simple: If a hard inquiry is run on your credit report, it will affect your score and likely cause it to dip. So why is that? Why would a credit check cause your score to go down? Shouldn’t actively monitoring your credit be a sign that you’re financially responsible.

Well, it’s actually a bit more complicated than that. And besides, people checking their own credit doesn’t actually affect their scores. When it comes to hard credit inquiries and how they impact your credit score, here’s what you need to know.


Here’s how credit scores (and credit reports) work.

In order to explain credit checks, we first need to explain credit reports and credit scores. If this is a subject you’re familiar with, feel free to skip to the next section, as this will all be stuff you already know.

Credit scores are based on the information contained in your credit reports, which are documents that track and compile your history as a credit user. Credit reports are created and maintained by the three major credit bureaus—Experian, TransUnion, and Equifax—and they cover the past seven to 10 years of your credit history.

Credit reports contain information on how much you’ve borrowed and on what accounts, whether you pay your bills on time, how long all your different accounts (loans, credit cards, etc.) have been open, whether you’ve ever been sent to collections or filed for bankruptcy, and more. The only kinds of loans that won’t show up on your score are no credit check cash advances like payday loans and title loans.

The most common credit score is the FICO score, which is scored on a scale from 300 to 850. The higher your score, the better your credit. It takes all the info on your reports and expresses it as a single three-digit number that summarizes your trustworthiness as a borrower. Another credit score is the VantageScore, which was created by the credit bureaus themselves.

While the specific FICO formula is kept top-secret, we do know the basic contours. There are five main factors that go into making up your score: Most important is your payment history, which makes up 35 percent of your credit score, followed closely by the amount of debt you owe at 30 percent.

The final third of your credit score is divided up between the length of your credit history (15 percent), your credit mix (10 percent), and your recent credit inquiries (10 percent). So while credit inquiries only make up 10 percent of your overall score, they’re still important enough that a single inquiry could cause your score to drop. Why is that?

There are two types of credit inquiries.

A credit inquiry (also known as a credit check or credit pull) occurs when information from your credit history, including your credit score, is requested. But not all credit inquiries are the same. In fact, there are two types of credit inquiries: hard and soft.

A hard credit inquiry almost always represents a request for new credit, as they occur when a potential lender or landlord is processing a loan or lease application. However, they can also sometimes occur when a person is being hired or considered for a promotion. Hard inquiries return a full copy of a person’s credit report.

In order to run a hard pull on your credit, a business or individual must get your permission first. If you are applying for a personal loan and the lender asks you for permission to run a credit check, then you know it’s a hard inquiry. These require your permission because they are recorded on your credit report and factor into the “recent credit inquiries” category.

Soft credit inquiries, on the other hand, return more of an overview of your credit history and do not require your permission. Importantly, soft credit inquiries also do not affect your score. When you receive a “pre-approved” credit card offer in the mail, that means a soft pull has been run on your credit. The same goes for when you check your own credit score.

That bears repeating: Checking your own credit score will not affect your credit!

Hard inquiries mean requests for new credit.

As we mentioned up above, hard credit inquiries are mostly run in situations where a person is asking for more credit, like applying for a new credit card or an online loan or a mortgage to buy a house. And when a person is asking to borrow more money, lenders need to ask themselves why.

Lenders care about one thing above all else: Getting paid back. The purpose of credit scores and credit checks is to determine whether or not a potential customer is likely or unlikely to pay back the money they are borrowing—plus interest.

When a request is made for additional credit, this can be taken as a sign that a person isn’t able to meet their current bills and debt obligations, or that they are looking to spend beyond their means. This is why even a single hard inquiry can ding your score, usually around five points. However, the effect only lasts a year or two.

Multiple credit inquiries within a short period of time, on the other hand, can lower your score even more, because it starts to look like you are desperate for more credit. And when someone is desperate to borrow money, that’s usually a sign that something has gone awry with them financially, meaning that they’ll be less likely to pay back the money they’re trying to borrow.

There is one exception: Lenders want to encourage borrowers to shop around for the best deal, especially for larger loans. But shopping around means filling out multiple applications which means multiple credit checks which means your score dropping.

In order to prevent this from happening, all credit checks for mortgage, auto, and student loans made within the same 45-day span are bundled together into a single inquiry. However, if you are shopping around for a credit card or an unsecured installment loan, you are unfortunately out of luck!

To read more about credit scores, check out these other posts and articles from OppLoans:

Do you have a  personal finance question you’d like us to answer? Let us know! You can find us on Facebook and Twitter.

Visit OppLoans on YouTube | Facebook | Twitter | LinkedIN | Instagram

How Long Does Information Stay on Your Credit Report?

While almost all information stays on your report for seven years, most of it will stop affecting your score sometime before that.

If you have a bad credit score, you’re going to have a lot of trouble taking out personal loans from a traditional lender like a bank or online loan company. Instead, you may find yourself settling for short-term bad credit loans, like payday loans and cash advances, and risk entering a cycle of high-interest debt.

The long-term solution is to improve your credit score, but that’s easier said than done. And before you can improve your score, you first need to first you need to understand why you have bad credit and what you can do to fix it.

And in order to understand your credit score, you first need to understand your credit reports because it’s the information these reports that are leading to your lousy credit score. With good financial behavior, that information will eventually be replaced by better info—and one day it will drop off your score entirely.

But how long does information stay on your credit report? And how long will it affect your score? We reached out to the experts for answers.


Here’s how your credit report works. 

Your credit reports are documents that trace your history as a borrower, and information from these reports is used to create your credit score. A common metaphor to describe the relationship between the two is that credit reports are like a test, while credit scores are like the grade you receive on that test.

According to financial coach and author Karen Ford, credit reports provide “a summary of your credit history and certain other information reported to credit bureaus by your lenders and creditors.” These reports are created and compiled by the three major credit bureaus: Experian, TransUnion, and Equifax.

Information that’s recorded in credit reports includes bill payments, amounts owed on loans and credit cards, as well as recent hard credit inquiries. “Bills that will affect your score are credit cards, student loans, mortgage loans, car loans, personal loans,” said Ford. “Bills that won’t affect your score are utilities, rent (if the landlord doesn’t report to the FICO), and medical bills.”

“Of course, if you’re horrendously late with any of these, they may decide to utilize a collection agency. If you get turned into a collection agency, this will affect your credit score,” she added. Bankruptcies and other information available on the public record are also included in your report.

As not all companies report information to all three credit bureaus, your score can actually vary depending on which report was used to create your score. The most common type of credit score is the FICO score, but there are other types of credit scores as well, including VantageScore, which was created by the bureaus themselves.

Your credit reports can also contain incorrect information that could be artificially lowering your score. “One reason to check your credit report is to ensure there isn’t something on there that isn’t accurate,” Ford advised. “There may have been a mistake and a bill unpaid may be on the report, which can adversely affect your credit score.”

Luckily, you can access your credit reports for free! As Ford went on to explain, you’re entitled to one free copy of your report from each bureau every twelve months. You can order a copy of your report online by visiting AnnualCreditReport.com, which Ford emphasized was “the only authorized website for free credit reports.”

Information stays on your report for 7 to 10 years.

If you make a mistake like a late payment, the good news is that it won’t be on your credit report forever. The not-so-good news is that it will be on your report for quite some time—over half a decade.

“Items will stay on your credit report for different periods of time depending on the nature of the information,” said Jacob Dayan,CEO and co-founder of Community Tax, LLC (@communitytaxllc) and Finance Pal, LLC. “Many common things like late payments and charge-offs will stay on your report for seven years, while more serious incidents like bankruptcy will stay for up to 10 years.”

Luckily, not all bankruptcies stay on your report for a full decade. According to Jared Weitz (@jaredweitz), CEO and Founder of United Capital Source Inc, it’s only Chapter 7 bankruptcies that stay on your record for the full 10 years. Chapter 13 bankruptcies, on the other hand, only remain on your report for seven years.

(What’s the difference between Chapter 7 and Chapter 13 bankruptcies? Chapter 13 involves a restructuring of debts and a repayment plan, whereas Chapter 7 involves liquidating your assets in order to pay off what you can and then discharging the rest. For more information, check out our blog post on which debts can—and can’t—be discharged through bankruptcy.)

So if you miss a bill payment on your credit card bill, you have to wait a full seven years before your credit score can rebound? Not necessarily.

“The good news, however, is that these items will carry less weight in your credit score as they become older,” said Dayan. “You can expect your credit score to rebound from the significant hit a bankruptcy will have in around five years.”

Dayan also added that you are free to dispute any items on your credit report as long as you have grounds to do so. For information on that, you can read our post on contesting credit report errors.

How late was that late payment?

Even though a late payment stays on your credit report for seven years, the damage it does to your credit score should fade well before that seven-year mark is up. The difference lies in how late you were in making that payment. The longer that bill sits unpaid, the worse it is for your score.

“Negative actions, such as late payment, will stay on your credit record for seven years, but not all actions are equally as damaging,” explained Weitz. “If you have an isolated event where payment is 30 to 60 days late, this will be less damaging than multiple late payments or a late payment that exceeds 90 days.”

“To view impact to your credit, think of payments in 30-day increments,” Weitz continued. If you have one payment that is 30 days, or 60 days late, this won’t cause lasting damage to your credit. If you are 90 days late your score can be impacted for the entire seven years.

“Since the scoring model is based on the prediction of whether you meet the credit obligations in a 90 day period, exceeding this duration will hurt a creditors trust in you, and thus—lowering your score.”

And if you think that the damage to your score can’t get any worse past 90 days, think again.

“If your delinquency exceeds 120 days, your debt is usually sold to a third-party collection agency and will be filed on your credit score, hurting it further and longer,” said Weitz.

So if you miss a bill payment, don’t throw up your hands and assume that it’s too late to do anything. The longer that bill sits unpaid, the more your score will suffer.

How can you improve your credit?

There are five main categories of information that make up your FICO score. Your payment history makes up 35 percent of your total score, more than any other single factor—while your amounts owed/credit utilization comes in a close second at 30 percent.

So if you are looking to improve a bad credit score, these are two areas where you want to focus your efforts. In short: You need to pay your bills on time and you need to pay down your debt.

To pay down your debt, check out the Debt Snowball and Debt Avalanche strategies. Ford also recommended measuring your credit utilization ratio, as carrying credit card balances that exceed 30 percent of your overall limit can have an additional negative impact on your score.

Lastly, Ford pointed out that the length of your credit history and your credit mix also play a part in your score. (In fact, they make up 15 percent and 10 percent of your overall credit score, respectively.) While longer credit histories are preferable, Ford asserted that a short credit history can be great as long as you’ve made your payments on time.

Improving your credit score is likely going to take years—especially if the main reason you have poor credit is too many late or missed payments. But the sooner you start working to fix your credit, the sooner you’ll see results, even if it’s still years down the line.

Have bad credit? Build an emergency fund.

Oddly enough, the kinds of short-term no credit check loans (like payday and title loans) that you get stuck with when you have bad credit don’t affect your score—unless they get sent to collections. But even if these loans don’t show up on your credit report, their high rates and lump sum payments can do plenty of damage to your financial wellbeing.

Many soft credit check installment loans, on the other hand, do report your payments and can affect your score either positively or negatively, depending on whether or not you make your payments on time.

Even if you have bad credit, the best way to avoid one of these loans is not to need a loan in the first place. That means having a well-stocked emergency fund built up to cover surprise expenses. To learn more about how you can save money and manage your finances, check out these other posts and articles from OppLoans:

Do you have a  personal finance question you’d like us to answer? Let us know! You can find us on Facebook and Twitter.

Visit OppLoans on YouTube | Facebook | Twitter | LinkedIN | Instagram


Contributors

Jacob Dayan is the CEO and Co-Founder of Community Tax, LLC (@communitytaxllc) and Finance Pal, LLC. He began his career in Wall Street New York at Bear Stearns working in the Financial Analytics and Structured Transactions group. He continued to work in Wall Street until early 2009. When he then left New York and returned to Chicago to be with his family and pursue his lifelong dream of self-employment. There he co-founded Community Tax, LLC followed by Finance Pal in late 2018.
Karen Ford is a Master Financial Coach, Public Speaker, Entrepreneur, and Best- Selling Author. Her #1 Amazon Best Selling Book “Money Matters” is a discovery for many.  In “Money Matters” she provides keys to demolishing debt, shares how to budget correctly, and gives principles in wealth building.
Jared Weitz (@jaredweitz) has been in the financial services industry for over 10 years. Due to his extensive work experience and deep network of close financial relationships, he handles a multitude of different finance options for his clients and contacts. Over the years, he has held positions in some of the largest business financing companies in the U.S. Some of his roles have been: Underwriter, Director of Business Development, Managing Partner and currently, CEO of United Capital Source, LLC.

How Long Does It Take to Go from Bad Credit to Good Credit?

Improving your credit is a marathon, not a sprint. But just how long it will take you to fix your score could depend on why it was so lousy in the first place.

If you’re tired of relying on bad credit loans and no credit check loans when you need to cover an unforeseen expense, then you’re going to need to improve your credit score. But how long is that going to take?

Well, it’s going to depend on how low your score is, and why your score is lousy in the first place. Here’s what you need to know.


There is no one-size-fits-all answer.

One of the reasons that this question doesn’t have one answer to rule them all, is because “bad credit” is a pretty broad definition.

FICO credit scores are scored on a scale from 300 to 850, with 850 being the best score possible and 300 being the worst. A prime credit score—which is a more technical way of saying a “good” credit score—is generally considered to be any score above 680.

Once you’re in that range, you can start getting qualified for a wide range of unsecured personal loans from traditional lending institutions like banks and online loan companies. And when you take out secured loans like auto or mortgage loans, you’ll be able to qualify for much better terms and lower interest rates.

If you have a score under 680, on the other hand, then your score is generally considered to be “subprime”—but this isn’t necessarily the same thing as bad credit. You can still qualify for some traditional personal loans if you have a score under 680. It’s when your score dips to below the 620 to 630 range that the bad credit label starts to really stick.

But even then, a score that’s in the 400 range is much, much worse than a score of 619, even if both of them still qualify as “bad credit.” The bottom line is this: The lower your score is, the more damage that has been done, and the longer it is going to take to fix.

So, why is your credit score low in the first place?

Your credit score is based on the information contained in your credit reports, which are documents that track your history as a borrower and user of credit over the past seven-to-ten years. These reports are created and maintained by the three major credit bureaus: Experian, TransUnion, and Equifax.

Credit reports contain lots of different data, some of which is collected from lenders and other businesses, some of which is available on the public record. Types of info tracked by these reports include credit accounts, bill payments, credit card balances and credit limits, bankruptcies, collection accounts, government liens, and recent hard credit inquiries.

With your FICO score, there are five main categories of credit report data that are used to create your score: payment history (35 percent), amounts owed (30 percent), length of credit history (15 percent), credit mix (10 percent), and recent credit inquiries (10 percent).

Looking at those five categories, it’s clear that payment history is the most important factor in your score, followed closely by the amount of debt that you owe. Together, they make up almost two-thirds of your overall score.

So if you have bad credit, it’s a good bet that the answer lies somewhere within these categories. Either you have a history of late or missed bill payments, you owe too much high-interest consumer debt (probably on your credit cards), or both.

The best way to learn why your score is bad is to check a copy of your credit report. Luckily, U.S. consumers are entitled to one free copy of their credit reports every 12 months from each of the three major bureaus. To request a free copy of your credit report, just visit AnnualCreditReport.com.

Always pay your bills on time. Always.

If you have a history of late payments that are tanking your score, then fixing that score is relatively simple: Pay your bills on time. Only one late payment can send your score plummeting, so you’re pretty much going to need a 100 percent on-time payment success rate in order to improve your score and maintain it.

For folks who have trouble paying their bills on time because they don’t have the funds to cover every bill every month, here are a couple of helpful tips. First, contact your creditors to see if you can have your due dates changed. Second, create a household budget to make sure that that you have enough money in your checking account to cover all your outstanding bills.

The bad news with a score that’s suffering due to a poor payment history is that it will take years for your score to fully recover. Lenders and other creditors really value customers who pay their bills on time, so it will many, many months of on-time payments before your score will be in the prime range again.

If you need to borrow money in an emergency while your score is still in the dumps, consider taking out a soft credit check installment loan that reports your payment information to the credit bureaus. Unlike short-term cash advances like payday loans and title loans, paying one of these loans off on-time could actually help your score improve.

How quickly can you pay down your debts?

If your score is low because you owe too much high-interest consumer debt, however, there is some good news: Your score can recover much faster. The quicker you pay down those debts, the faster your score will rise.

Still, that’s easier said than done! You’ll once again need to stick to a strict household budget, on top of which you’ll need a debt repayment plan. Two of the most popular strategies out there are the Debt Snowball method—which rewards you with early payoff victories—and the Debt Avalanche method—which will save you money in interest.

The more funds you are able to free up for debt repayment, the faster you’ll be able to improve your score. Considering getting a second job or side hustle to supercharge your payoff. If you get paid biweekly, plan for those three paycheck months when you’ll have some extra money coming your way.

Luckily, you should see a bump in your score once you are able to get your outstanding credit card balances below 30 percent of your total credit limits. Moving forward, do your best to maintain a credit utilization ratio under 30 percent at all times—even if that means paying your cards off more regularly than once a month.

You’ll probably have to be patient.

Unless you’re able to pay off a lot of debt in one fell swoop, improving your score is still likely going to take you years, not months. But the good financial habits that you build during that time will help you not only improve your score now, they’ll help you manage your money for years to come.

To learn more about building better financial habits, check out these related posts and articles from OppLoans:

Do you have a personal finance question you’d like us to answer? Let us know! You can find us on Facebook and Twitter.

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Should You Use a No Credit Check Loan to Pay for Medical Bills?

by Jessica Easto
If you’re short on emergency savings and facing an expensive medical bill, there are better ways to cover it than taking out a short-term, high-interest no credit check loan.

According to a new study out of the University of Chicago, 51 percent of working Americans would need to dip into their savings accounts if they missed more than one paycheck. But about 31 percent of Americans have less than $500 in savings set aside for emergencies and an additional 19 percent have no money set aside at all.

So what happens, for example, when you or someone in your family needs an unexpected trip to the emergency room—which can cost up to $700 even with insurance—or worse? Many people who are struggling to keep the finances stable end up using no credit check loans or bad credit loans in an attempt to bridge the financial gap between unexpected medical expenses and their next paycheck.

If you can avoid them, you should, as these types of short-term loans are not the best idea. We’re going to tell you why and then explore some of the options you have available for avoiding them.


Why not pay for medical bills with no credit check loans?

No credit check loans allow you to borrow a small amount of money (usually a few hundred dollars) for a short period of time—often until your next paycheck. This is why they are sometimes called payday loans or cash advances.

As you may have guessed by their name, these loans don’t require credit checks like traditional personal loans and other financial products, which make them popular among those who don’t have very good credit.

The catch? They come with ridiculously high interest rates and fees, which means that you can end up paying way more money than you originally borrowed. Many people find themselves having to take out another loan just to pay off the first one, creating a cycle of debt that seems never-ending.

In fact, the average person who takes out a no credit check loan spends an average of $520 in fees to repeatedly borrow $375.

Taking out a short-term no credit check loan to pay for medical bills could likely cause more problems than it solves. Just consider that a full 80 percent of these loans are rolled over or followed by another loan within two weeks of the first one.

You want to get these medical expenses paid down, not pay for them forever. So what do you do?

1. Confirm your medical bill is correct.

The cost of healthcare is ballooning in this country. Even those who are lucky enough to have employer-sponsored health insurance paid a record-breaking average of $19,616 in annual premiums for family coverage and $6,896 for individual coverage in 2018.

If you find yourself with a giant medical bill on your hands, the first thing you should do is confirm that the bill is actually correct. About 80 percent of medical bills contain billing errors. This usually happens because procedures were miscoded either by a breakdown in technology or human error. One study found that errors are more common in bills totaling $10,000 or more, with an average of $1,300 worth of errors per bill!

In addition to costing you more money, miscoding can also cause the insurance company to reject the claim or pay less of their share than they should. This might happen if your doctor accidentally coded a preventative visit, like an annual physical, that is covered by insurance at 100 percent as a visit to treat an illness, which is likely not covered at 100 percent.

So what do you do? First, if the healthcare facility gives you a bill that only shows a lump sum, ask them to provide an itemized bill that lists all of the procedures and charges individually. Then carefully read through that itemized bill, making sure the items listed make sense, that they are coded correctly, and that nothing is duplicated.

Sometimes it can be difficult to parse the diagnostic codes and descriptions on a bill. For anything you don’t understand, call the billing office and ask for an explanation. This writer, for one, can speak from experience. She received a bill for a “surgical procedure” that cost $115. Surely, this is a mistake, she thought, having never had a surgery in her life. Then she realized that it was referring to the impacted wax she had removed from her ear during a routine annual physical. Unbelievable! But unfortunately true.

If you find a real mistake on your bill, demand that the billing department remove it and issue a new bill. If you can’t get ahold of someone or do not receive resolution within a week or so, set a reminder to yourself to keep calling until the issue is resolved.

2. Negotiate a payment plan.

If you cannot afford to pay the lump sum of a medical bill, many healthcare facilities will let you negotiate a payment plan, especially if you meet certain financial criteria, so you can pay it off little by little. This eliminates the need for no credit check loans—or even for soft credit check installment loans.

To do this, you may need to contact the billing department, a financial aid office, or a financial assistance office—it can be different depending on what kind of facility you are dealing with. You won’t know what can be done until you ask!

Here’s a pro tip: It’s always better to try to negotiate a bill with a healthcare facility than let it go to a collections agency. According to a 2014 study, about 20 percent of credit reports contain a medical bill in collections. Once you are in default in that way, it starts to negatively impact your credit score (between 40 and 100 points on average, according to that same study), which can cause even more headaches down the line. A payment plan will keep your debt in good standing and out of the hands of collections.

3. Open a Health Savings Account (if you can)

Health Savings Accounts (HSAs) are a great way to save for both expected and unexpected medical expenses. It allows you to deposit 100 percent tax-deductible money into a savings account. When you use it to pay for qualifying medical expenses, your payment is tax-free, too.

One catch is that you have to have a high deductible health plan (HDHP) and meet certain out-of-pocket criteria to be eligible to open an HSA. To be eligible in 2019:

  • an individual’s health insurance plan must have a minimum annual deductible of $1,350 and maximum annual out-of-pocket expenses of $6,750.
  • a family’s health insurance plan must have a minimum annual deductible of $2,700 and maximum annual out-of-pocket expenses of $13,500.

Check your insurance plan to see if you qualify. Many plans purchased on the state health exchanges are eligible for HSAs. You may even be eligible if you get health insurance through an employer, especially if you work for a small business.

The other catch is that you can only use it to pay for qualifying medical expenses. The good news is that most medical costs qualify as eligible, according to the IRS.

The great things about HSAs are that you can contribute a good amount of money each year (in 2019, $3,500 for individual coverage and $7,000 for a family), the money never expires, and you can keep rolling it over year after year. The requirements and restrictions of HSAs are updated every year, but even if your circumstances change and you no longer qualify for an HSA, you can still use your HSA to pay for medical expenses until you run out of funds.

If you do have an HSA, you can contribute a little money each month until you build a nest egg. Depending on your employer, you may be able to have them instantly take money out of your paycheck and put it in the HSA, so you never “miss” it.

Technically, once you save enough to cover your deductible and out-of-pocket savings, you’ll never have to dip into your checking account to cover medical expenses. You’ll always have the money on hand, and you’ll get to use it tax-free to boot!

To learn more about saving money and building a nest egg, check out these other posts and articles from OppLoans:

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