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How to Fix Your Credit Score | Credit Score Tips
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Dec 5, 2023
How to rebuild your credit card score? Pissed Consumer interviewed Nathan Grant, a Senior Credit Industry Analyst with @Creditcardinsider, to get tips on what consumers should do to fix their credit records and how they can improve decisions when using credit cards. 00:00 - How to rebuild your credit score 10:55 - Credit score tips 13:48 - Credit card tips #CreditScore #CreditScoreTips #ExpertTalksWithPissedConsumer More #creditcard tips on https://www.creditcardinsider.com/blog/ Support Pissed Consumer video interview project: https://www.pissedconsumer.com/donate.html Subscribe to Pissed Consumer social media accounts: Facebook: https://www.facebook.com/PissedConsumerCom/ Instagram: https://www.instagram.com/pissedconsumer/ Twitter: https://twitter.com/pissedconsumer
View Video Transcript
0:00
There are different circumstances that could damage someone's credit score
0:08
Bad decisions when they were young, taking too much debt onto themselves, divorces, business splits
0:18
There are multitude of different issues that could occur that could affect someone's credit score
0:24
Question number one. How do you restore a credit score? What is the credit card
0:30
that would be better or helping you in assisting it. Another question is kids, someone in high school
0:41
how do they go about building their credit score? So those are the two parts of the same question
0:49
How do you either build or rebuild your credit score to the good numbers
0:55
Well, I got great answers for both of those because they kind of relate a little bit because once we get past the first part of it
1:02
this is where one of the general principles of credit cards does come into play
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But I'll start with the first thing. Let's say whatever the example given is, you have bad credit scores and you want to turn things around
1:16
It can be difficult because sometimes you go to apply and because of those very bad credit scores
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you can't even get approved for building or for our credit card to help build your credit
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even if you were planning on being super responsible. So luckily, even if you're at rock bottom, there are options
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So before looking into credit cards, there's a company called self-lender that allows you to do
1:39
they're basically, I'd say it's almost like a reverse loan. You make payment, installment payment's just like you would in an installment loan
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but you're paying into an account that you can't access. And once you pay off whatever the amount that you agreed to in full, then you get the money
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But the thing about that is it's reporting that payment information every month regularly, just like as if you were paying a loan
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So that's one way to start building up some good credit scores by sending those positive signals to the bureaus by using a service like that
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But there are even credit card options for people who have bad credit
2:15
So there's a thing called secured credit cards. And basically, they work like credit cards
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You use them like a credit card. You pay them monthly like a credit card. but the credit limit, instead of being approved for a limit
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it's actually a deposit that you put in in the beginning. So let's say you get approved
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You still have to get approved for these cards because there's obviously other factors besides just your credit scores when you go to apply for a credit card
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You know, different factors that they look at when you fill out an application
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But let's just say everything else checked out and it was just your credit scores and they approved you
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Once you're approved, let's say it was $1,000. So you now have a $1,000 limit that you use for purchases
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And then just like any other credit card, you'd make payments every month. And when you pay off the card over time, those are signals being sent to the, you know
3:09
being reported directly to the credit bureau. So it's slowly improving your credit scores just like as if you were using your credit
3:16
card anyway, no matter where you came from. Once you have it all paid off, this doesn't happen
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with every issuer who puts out secured credit cards, but some of them will even let you upgrade to a traditional credit card
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once you've paid off the amount. And what's great about that is the activity that's reported
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isn't just helping your credit scores. But another factor that goes into credit scores is the overall age of your accounts
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So if it an account that you have been paying as a secured credit card and it all of a sudden becomes a new credit card and it doesn get a new number and doesn have to close that account You now have a longer history with that card on your credit reports going forward So it just such a helpful way to get kind of back on track
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But again, you have to pay on time every month. You have to do the responsible thing. So you could
4:05
get yourself in a worse situation if you, you know, aren't being responsible with it. But it is kind of like
4:10
that path to getting back there. And then I'd say, a lesser successful way, but something that still can help is look into retail store credit
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cards because even though they often have higher than average APRs, and even though you might not
4:28
get approved for a high limit, they sometimes have less strict approval standards. So
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you know, a lot of times those are people's good first credit cards. So kind of teasing into your
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next question of like younger aged people. you know, sometimes people, that's their first credit card when they turn 18 is a store card
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And if it's a card at a place that you shop at regularly, you know, and it's not, you're not just using it to use it
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You're able to make those purchases you'd make anyway, earn any rewards that might be offered, but also send those positive signals to the credit bureau
5:01
So important to look at that and as long. And if you are paying off your balance in full every month, then the high interest rates aren't even a factor
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So I feel like sometimes retail store cards can get a bad rap because, you know, they're, they have the higher interest rates
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But those really only affect you if you're carrying a balance month to month. So if you're just using it and paying it off by the duty to every month, you're earning all those rewards without having to worry about that
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So for somebody with bad credit, I think those are the best options for them to start turning things around
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And the more that you pay beyond the minimums do and the, you know, less of a balance you're carrying month
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the month, the better it's going to be for your accounts overall. Now, that's all well and good
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but you mentioned how children are supposed to build their credit scores when, like I mentioned
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you turn 18, you can officially get a credit card, but how are you supposed to even get approved
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for a credit card once you're entering into adulthood if you don't have a credit score? So
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one of the more popular ways to start building credit for, you know, teenagers and stuff is a
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lot of credit cards allow you to add an authorized user to the card. So the parents, let's say
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might be the actual card holder, but they can add an authorized user. So if your child is added to
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the, as an authorized user to the card, whoever is using either the main card or the authorized
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user sometimes gets their own card as well, the same thing applies. You use that responsibly
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and start making payments and everything every month, that's sending signals to not just the card holder
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but the child as well. So that's really a good way for kids to kind of get a leg up on it
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But I will say it works both ways. If you aren't making the payments in time
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or even if mom's not making the payments on time, the negative signals are going to impact both of you
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So it's something that has to be trusted. Because, you know, there's sometimes spouses and stuff
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will add as an authorizes or two. So you just got to make sure it's a trust. scenario. You're not just giving the kid the card to spend willy-nilly that if it's being paid off
7:13
month-to-month responsibly, then it's going to positively impact them. And then I'd say for whether
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it's, this is where I said now, like a general piece of credit knowledge, whether you are coming
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from bad credit, whether you're coming from no credit at all, or whether you've had credit cards
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for years The best way to improve your credit scores is through positive payment activity So not carrying a large balance That doesn just mean making your payments on time But if you just making the minimums every month now that good
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You're not going to send any late reports because even a single late payment can stay on
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your credit reports for up to seven years. So you really want to avoid paying late
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So if things are tight and you can only pay the minimum, you will definitely be making the
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right decision by paying that minimum every month and avoiding the late. payment. But you want to pay as much over because not only will you get it paid down faster
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because if you add the interest rates, you know, make those finance charges every month
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sometimes so much that you're almost feel like you're paying more and more and it's just
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never catching up. So you want to pay it as much as you can over the minimum to help with that
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but also another factor that goes into the actual scoring and the credit scores is what's called
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credit utilization. And credit utilization is basically the amount of, your overall available credit that's being used. So if you have $1,000 and you only have a $100
8:38
balance on it, that's a much lower utilization than if you had it maxed out to like $950. So
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paying above the minimum is going to get that. The more you pay, it's basically just going to get
8:51
lower and lower and that's going to help you more over time. So it really does, you know
8:56
all kind of work together. But for however you go to rebuild your credit scores, it's
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going to take time. The good news is it's kind of weird. It takes time over time is what does
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the best for you, is showing this positive activity over time. But it's one of those things that
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you can start doing that today. So you're coming from the rock bottom, you can go, all right
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well, from today on, I'm going to never make a late payment again. I'm going to make as much as I can
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each time. So you can turn it around, even if it does take time to really start showing that
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it can start any time. So it's very like, it's one of those like, hopeful things, I'll say, even when things seem like really hard to manage
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There's so many options out there to really start turning things around. But the things I mentioned, I wanted to mention those things particularly because those are
9:45
the ones that really, the factors that really go into it the most
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Obviously, there's other smaller things like when you start paying off debt, your instinct
9:54
might be to close the account. I never want to use it again. But remember, I told you the age of your accounts helps
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So unless you're paying an annual fee to keep a card. open, it's worth keeping that card open and just not using it. And it's going to make your
10:06
utilization percentage lower and it's going to make the age of your accounts longer. So being
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aware of things like that will help too. But those are like, I'd say secondary to just the
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positive activity that you can show. Because credit cards in general, what is it? It's an
10:21
issuer or a bank lending someone money. And it's all built on trust and risk. And that's where like
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your interest rates are often set based on your credit scores. So
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If you have low credit scores, you might pay a little higher interest on the debt. But as your scores improve, you might be able to get approved for better cards that aren't only more rewarding to shop with and stuff
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but are costing you less in interest if you do happen to carry a bail
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So it all connects. It all ties together, but it really starts from the individual making that choice and starting from square one
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We're speaking specifically to credit utilization. That is the percentage of your overall, whether it's multiple cards
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one card, it's still, like, that's applied across it all. So it could be better one way or the other in terms of just that metric
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But I already mentioned that closing an account can lower your scores a little bit
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So even if you're done with a card, like I've just put away a card that I know
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Like I have a retail card I think I got like a guitar center store card once when I was buying a keyboard And that all I used it for And it was years ago So before I heard with Credit Card Insider I you know sometimes was tempted by those 20 off you know for signing up offers
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And I probably am never going to use it again. But I've kept the account open because it's something that there's not a fee to keep it open
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They're not saying you have to use it in order to keep it open. So by keeping it open, it's a, it's possible
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positively impacted my credit scores, you know, by just having it. So it's, I can't give like a hard answer of this is better than that
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But looking at your own situation, seeing where it could benefit you
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And, you know, a lot of times somebody's situation, if they have that card, they might be tempted to use it
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And if they know, like, I can't trust myself to not spend, even if it does dip their credit
12:14
scores a little bit, it might be better overall for them to close it and just focus it on the one like they had
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been, you know, everybody's situation's different. But it is important to just realize that every
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little decision like that, whether it's closing an account, could affect it negatively. And as long
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as you're, you know, making sure you're using things responsibly, no matter how the balance is
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I will say, though, another positive factor that goes into credit scores is a good variety of credits
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So if you have like a student loan and some credit cards and a vehicle loan and even things like
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some phone plans, they report the fees or like utilities. Sometimes like utilities are reported to the credit bureaus
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So thinking about a wide variety of stuff definitely can be a beneficial thing to your credit
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scores if it's all paid on time and stuff. So I would say like the variety can help in that regard
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But, you know, it's again, everybody's situation. You'll hear one person be like, hey, I had this many cards in this situation
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and I got charged this much interest and, you know, this affected my credit scores this way
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It's like sometimes there are these weird situations where you're like, well, that, what worked for one person didn't work the best for that other person
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But you can kind of see where the like commonalities do lie, you know, with, okay, no matter how many cards I have, how am I using them, how long have I had them
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Those kinds of things you can kind of, once you know that, then you can keep, you know, make the right decisions based off of that now
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knowledge. Credit card insider can best be described in kind of like a twofold approach. On one
13:52
side, credit card insider reviews, rates, and compares different credit cards across all sorts
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of categories. So it could be general use credit cards, first time credit cards, people who are
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coming from bad credit or no credit, and then things like travel credit cards, retail store
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credit cards, gas cards, and even things like a hotel or airline co-branded credit cards
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So we categorize these different cards based off of different people's needs and rate them against each other accordingly
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And one thing that we take pride in at Credit Card Insider is that we don't let any affiliate advertising relationships affect what our picks are for the best cards
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So, you know, we have some relationships with certain card issuers, but it doesn't cross into our editorial stance, which is to provide the best picks
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So a lot of times, you know, we have some cards that aren't being talked about as much on other places
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Because even with advertising relationships, there are a lot of great cards out there that, you know
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issuers are working with lots of people like us who do review credit cards and stuff
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But what makes us unique is that editorial stance allows us to really spotlight some ones that might kind of stand out from the crowd for specific people
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