How to Build Credit the Smart Way

A great way to build credit is by making on-time credit payments every month.

How to Build Credit with a Credit Card

Any credit card, including a secured card, works well for this. Just choose a routine monthly expense, charge it on your credit card and pay the account in full each month.

Payment history makes up 35 percent of your credit score, so making a series of on-time payments can really help your score.

A secured card is a good option for consumers with no or very little credit. After a year or so of on-time payments, you’ll build enough credit to qualify for an unsecured credit card.

How to Build Credit without a Credit Card

Another option for building credit the smart way is through a credit builder loan from a credit union.

A credit builder loan is an installment loan with terms ranging from six months to 18 months. Because credit builder loans are reported to one or more of the three national credit reporting agencies, on-time payments of the loan will build up your credit.

It’s a good idea to choose a credit builder loan that reports to all three credit reporting agencies— Equifax, Experian and TransUnion. That way you’ll get the credit for your on-time payments in credit reports from each of these companies.

With a credit builder loan, a lender places the money being borrowed into a savings account on your behalf and you pay off the loan through a series of monthly payments. You get access to the money in the savings account when the loan is paid in full.

So with a credit builder loan, you build credit and you build up some savings, too. Loan amounts for credit builder loans may be small, just $500, so you won’t need to struggle to make monthly loan payments.

Just be sure to make those payments on time each month. If you don’t, late or defaulted payments will be reported on your credit report. And you’ll wind up hurting the credit you’ve been working so hard to build.

Building good credit takes time. Call BANCO FINANCIAL today at 248-286-5100 to get started on rebuilding your credit today! 

43 Million Americans Have Unpaid Medical Debt on Their Credit Reports

Americans' credit reports contain unpaid medical debts far more than any other kind of unpaid bills, the Consumer Financial Protection Bureau has found in a study. A "staggering" 52% of all unpaid debt entries listed on credit reports is from medical expenses, the bureau says. And some 43 million Americans — or about one in five adults — have an unpaid medical debt on their records, dragging down their credit scores.

Many of those derogatory entries on credit reports are the result of America's confusing medical billing and insurance payment system, the CFPB says. Some 15 million Americans have only unpaid medical debt on the derogatory side of their credit reports, suggesting those consumers don't have trouble paying other bills. Also, most unpaid medical bills are small — the median amount is $200, far lower than the median unpaid bill for credit cards or auto loans.

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"Today's study found that many consumers are affected by medical debt, that medical debt dominates collections trade lines in the credit reporting system, and that the appearance of medical debt information on credit reports can reflect the complexity, confusion, and delays that characterize medical billing and insurance reimbursement rather than the consumer's ability or willingness to pay their debts," said CFPB director Richard Cordray in a statement about the research. "If a credit score is supposed to be a predictor of a consumer's likelihood of paying back a debt, these findings raise serious questions about how medical debt collections items affect a consumer's credit score."

The report highlights efforts already under way in the credit reporting system intended to reduce the impact that unpaid medical bills can have on a consumer's credit score. Earlier this year, the CFPB released a report showing that consumers with unpaid-medical-debt-only credit reports paid their bills at the rate of other consumers with higher credit scores, suggesting current scoring formulas inaccurately reflected those consumers' credit-worthiness.

In August, Fair Isaac, keepers of the FICO credit scoring formula, said it was changing its formula, and the penalty for unpaid medical debt would be reduced. It will take time for lenders to adopt the new formula, however.

This study further found that unpaid-medical-debt-only consumers owe less, have more available credit which they could use to repay their debt, and are more reliable payers than consumers with non-medical collections tradelines. The problem, the report suggests, is that many consumers don't know who to pay, or what they owe, after medical procedures.

"Lack of price transparency and the complex system of insurance coverage and cost sharing means many consumers, including those who have health coverage, receive medical bills that are a source of confusion," it says.

The report also highlights the hundreds of firms that might ultimately report a patient as late on a medical bill. Their "indirect affiliation with the debt introduces potential sources of error in collections reporting," the CFPB said.

Medical debts also draw a larger percentage of disputes than other kinds of debt, the CFPB said.

As part of a larger initiative, the CFPB announced Thursday that it was now requiring large credit reporting agencies to provide regular reports about the accuracy of their data, including new details on creditors who attract the most disputes.

"These reports will specify the number of times consumers dispute information on their credit reports during that period," the CFPB said. "It will also list furnishers with the most disputes, industries with the most disputes, and furnishers with particularly high dispute rates relative to their peers. We will also see how those disputes get resolved."

If you are worried a medical bill could be hurting your credit, you should pull your credit reports, which are available to you for free once a year under federal law. You can also check your credit scores regularly to spot a medical bill that may have gone to collections.

CALL BANCO FINANCIAL TODAY AT 248-286-5100 FOR ALL OF YOUR CREDIT RESTORATION NEEDS! 

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3 Sneaky Things Hurting Your Credit

When it comes to understanding your credit, it can feel as complicated as trying to solve a Rubik's cube. Frustrated by this confusion, many consumers neglect their credit, which can have a devastating impact on their financial futures.

 A Consumer Action study recently revealed that 27 percent of Americans have never checked their credit report. That's alarming, because it's estimated that a large numbers of consumers have errors on their credit reports that could damage their credit.

1. Wrong Information

The wrong personal information on your credit report could hurt your credit. This could be things like your name, your home address, where you've worked in the past or even your Social Security number. How does a wrong address hurt your credit? Your information may be mixed up with someone else's, especially if you have a common name, or are a "Jr." or "Sr." Or it could indicate identity theft -- and that could really wreak havoc with your credit. By reviewing your credit report, you'll be able to quickly see if there's any information that needs to be updated or changed.

2. High Balances Compared to Limits

Another sneaky thing that could hurt you is your credit card balances -- even those you pay in full. How can a credit card that you pay off hurt your credit? Issuers typically report your balances as of the statement closing date. But then those cards aren't due until about a month later. So in the meantime the balance on your reports may look high in comparison to your credit limits.

Generally you want the balance on each card to stay below 20 percent to 25 percent of your available credit. If you have a retail card with a small limit or a reward card that you use to pay for everything to earn lots of points, then this factor could come back to bite you.

So you need to either pay your charges off before the statement closing date or ask for a higher credit limit. Of course, a higher credit limit should not be an invitation to overspend. You won't improve your credit scores if you get in over your head with debt.

3. Outstanding or Delinquent Bills

The third sneaky thing that could hurt your credit score could be outstanding or delinquent bills. I canceled a gym membership when I moved, and it wasn't until I checked my credit report several years later that I found out the gym was marking me as being delinquent, which was hurting my credit. You'll want to check your credit report to make sure that you have no outstanding bills or any delinquent bills that you need to get addressed.

For my delinquent gym membership, I contacted its home office and explained that I had moved and their closest location was more than hours away. After that short and painless phone conversation, it removed the delinquency, and my credit was repaired.

Review your credit report and make sure you're not being marked for anything delinquent that could be damaging your credit. This could be old gym memberships like mine, credit cards or medical bills.

"I've seen numerous situations where consumers were shocked to learn that medical bills they thought their insurance had taken care of were on their credit reports as collection accounts, " warns Gerri Detweiler, director of consumer education with Credit.com. "It doesn't matter if the amount is small. Any collection account can drop your credit score 25, 50, even 75 points or more."

BETTER ALMOST ANT CREDIT RATING USING STRATEGIC CREDIT IMPROVEMENT

There are many ways that you could improve and fix your credit. Even for those who have relatively good credit there might be some mistakes and discrepancies showing on your report, which when deleted could improve your credit reting standing. High credit scores are critial for obtaining credit when you need it but they also determine the rate of interest you'll be charged. Generally, the higher your rating, the lower the interest rate you'll be charged.

POOR CREDIT RESTORATION-WILL YOUR REPORT REALLY NEED TO BE LIMITED

Adverse credit restoration is possible for anybody. You may believe at this time there isn't any slack or ability for contesting anything on your credit report, however this is how adverse credit restoration works: if the lender just cannot demonstrate their own adverse allegation against you,than the actual credit bureaus have zero right to continue to keep reporting that adverse claim. Bad credit repair is exactly that straightforward.

BE A BUSINESS OWNER

Being a Business owner has a many rewards but it also comes with many challenges. Always hold your head up and move forward regardless of the obstacles you face. Life isn't easy so why should being a business owner be any different. Hold on to life's challenges and changes. Today is a better day than yesterday because yesterday is gone...BANCO Capital can help you wade through the paperwork of getting started today. Call us at 1-800-442-1591