December 2021

Credit Score Ranges in the US - (Good, Average, or Bad Rating)

Credit Score Ranges in the US – (Good, Average, or Bad Rating)

Are you uncertain about your credit rating? Here is an ultimate guide on the credit score ranges in the US. Learn more.

What exactly is a credit score, and what does a good credit score entail? Suppose you’ve ever tried to buy a big-ticket item, like a home or a vehicle. In that case, the finance company will almost certainly have inquired about your credit score.

This is one of the most critical aspects that lenders assess when deciding whether or not to provide you with a loan.

Credit scores are used by credit card issuers, insurance companies, and lenders to calculate loan amounts and interest rates. Your credit score is determined by your credit history and may significantly impact the amount you pay.

Ranges of Credit Scores in the US

The range of credit scores is 300 to 850. FICO® and VantageScore score range both utilize 300 to 850. However, VantageScore used to use a 501 to 990 range.

850 is the most significant credit score.

The average credit score ranges in the US

The average FICO Score in the United States is 711, while the average VantageScore is 688.

A credit score of 680 or above is regarded as suitable, while a score of 740 or more is considered exceptional. What, on the other hand, is an average credit score?

This question may be tough to answer. Every expert, credit bureau, and a loan officer has a different take on where the line between good and bad credit should be drawn. Your credit score may be low by one lender but acceptable by another.

Furthermore, the adjective “good” is a subjective one. Is “good” synonymous with “great” or “good enough”? Comparing your score to national averages is an excellent place to start. The following percentage of customers have scored in the following credit score ranges in the US, according to the Fair Isaac Corporation (FICO), which was initially launched in 1989:

In the credit market, FICO isn’t the only scoring model employed. Credit ratings come in a variety of shapes and sizes. The other critical scoring model is VantageScore®, which is currently in its third iteration known as VantageScore 3.0.

What is the limit of a bad credit score?

Having a bad credit score ranges from 300 to 549 points. It is widely understood that credit ratings of less than 550 will always result in credit denial. If your score is in this area, you’ll need to put in some effort to raise it.

A bankruptcy filing might lower a credit score to this level. Borrowers with poor credit ratings are overdue around 75% of the time, according to statistics. However, if you continue to make on-time payments, your credit score should increase. Specific forms of loans, such as house loans, are challenging to get with a score in this area, but there are still mortgage possibilities for those with low credit.

What is the reach of a poor credit score?

A poor credit score in the US ranges from 550 to 619. Due to their high credit risk, credit agencies classify customers with credit delinquencies, account denials, and minimal credit history as subprime borrowers. Although credit may be obtained, it is sometimes on highly unfavorable terms, with substantially higher interest rates and penalty costs.

Suppose your credit score is in this area. In that case, you should start addressing any particular credit issues you may have before asking for credit. Subprime borrowers fall behind on their payments 50% of the time.

Fair Credit Score Ranges

620-679 is a fair credit score. Individuals with credit ratings of 620 or above are seen as less risky. They are more likely to be accepted for credit.

Consumers become prime borrowers in the mid-600s. This implies individuals may be eligible for more significant loan amounts, greater credit limits, smaller down payments, and outstanding loan and credit card conditions negotiation power. In this range, only 15-30% of borrowers go overdue.

What is the range of a good credit score?

In the US, anything that ranges from 680–739 is a good credit score. A credit score of 700 is considered the “good” credit level. This FICO score range is familiar to lenders, making a choice to offer credit much simpler. Borrowers in this bracket are usually always accepted for loans and have lower interest rates. If you have a credit score of 680 and it’s improving, you’re on the right road.

The median credit score in the United States, according to FICO, is in this area, at 723. Only 5% of borrowers with this “excellent” credit score fall behind on their payments.

What is the range of An Excellent credit score?

Excellent credit score ranges in the US starts from 740 to 850. Anything in the mid-700s and above is considered outstanding credit. It will result in quick credit approvals and the lowest possible interest rates. The incidence of delinquency among consumers with excellent credit ratings is about 2%.

Extra points don’t make a significant difference in your loan conditions at this level of credit rating. A credit score of 760 is considered equivalent to an 800 by most lenders. On the other hand, a higher score might act as a buffer if there are any unfavorable events in your report. For example, if you max out a credit card (resulting in a 30-50 point loss), the ensuing damage will not knock you down a tier.

Factors that Influence Credit Score

While each credit scoring methodology is unique, a few similar characteristics influence your credit score. These elements include:

  • Payment history
  • Using credit limits
  • Active credit card balances
  • Credit queries
  • Credit available
  • Amount of accounts

In a credit score, each aspect gets its own weight. It’s critical to remain on top of your payments, use your authorized credit, and limit queries if you want to maintain your credit score on the upper end of the spectrum.

Suppose you’re looking to buy a home or take out a loan. In that case, there’s a 45-day grace period during which all credit inquiries are treated as a single cumulative inquiry. To put it another way, if you go to two or three lenders in 45 days to discover the best rate and conditions for a loan, it only counts as one inquiry. This implies they won’t all be counted against you and won’t impact your credit score.

Why does my credit score seem to be so low?

With the current credit score ranges in the US, your rating may seem too low. Late payments, bankruptcy, and other harmful entries on a consumer’s credit history aren’t necessarily the cause of lower credit ratings. A poor credit score may also be caused by a lack of credit history.

Even if you have created credit in the past, things on your credit report may ‘slip off’ if no action has been taken for a lengthy period. Credit ratings must have had some form of action reported by a creditor within the last six months. Suppose a creditor stops updating an old account that you no longer use. In that case, it will vanish from your credit report, leaving FICO and VantageScore with insufficient data to compute a score.

Similarly, individuals who are new to credit should be informed that FICO or VantageScore will not assess their credit history, resulting in a low score. Even if you haven’t made any errors, the credit bureaus still consider you a dangerous borrower since they don’t have enough information on you.

Enhance Your Ratings

“What can I do to improve my credit score?” is another typical question when it comes to credit scores. There are several techniques to raise your credit score to the upper echelon.

  • Cleaning up your credit record is one of these techniques.
  • Paying down your amount
  • Making payments twice a month
  • Increasing your credit limit
  • Opening a new account
  • Negotiating your outstanding balance
  • Making timely payments

Consumers may use Credit.org to assist them in managing various payments. You may combine these payments into one single amount with a reduced interest rate if you use a Debt Management Plan. Contact one of our credit coaches now to learn more!

Final Thoughts

Of course, various lenders have different requirements, so your results may change. Even if you have a good credit score, a bad public record on your credit report might make it challenging to secure a loan. And, although credit score ranges in the US don’t include your income, lenders do. A lender will not accept you regardless of your credit score if they believe there are hazards, such as your incapacity to repay.

No matter where you fall on the scale, keep in mind that various things may both hurt and help you improve your credit score. If you’re having trouble paying off credit card debt, talk to one of our professional credit coaches about how they can help you pay it off quicker and improve your personal financial condition. 

Credit Bankruptcy - Tips to Recover Your Credit Rating

Credit Bankruptcy – Tips to Recover Your Credit Rating

It is a tough choice to file for bankruptcy. Still, it is sometimes essential to get your obligations forgiven and start over. While bankruptcy might help you get rid of your debts, it’s unusual that your credit score would be unaffected.

Your credit score will suffer whether you file for Chapter 13 bankruptcy or Chapter 7 bankruptcy. Even if you complete your payments on time and avoid collections accounts, maintaining your credit score throughout the bankruptcy process is challenging. Fortunately, after filing for bankruptcy, your credit score may be restored.

After you’ve finished the bankruptcy process, you’ll need to start again, and restoring your credit is a crucial first step. Although it may seem that this is an uphill struggle, there are actions you can take to repair your credit to the point where you may qualify for a credit card or a loan for a new vehicle or house.

It’s crucial to understand the various forms of bankruptcy before moving on to the actions that might help you improve your credit score.

Bankruptcy under Chapter 13 and Chapter 7

Individuals who petition for bankruptcy usually do so under Chapter 7 or Chapter 13 of the bankruptcy code. The grounds for filing, eligibility, and penalties are all significant distinctions between the two.

  • Bankruptcy under Chapter 7

The more frequent of the two, Chapter 7 bankruptcy, is filed by persons who do not have enough income or assets to repay all or part of their debt. Because the debtor must liquidate their property to fulfill their payments and escape repossession, this sort of bankruptcy is known as liquidation bankruptcy. To qualify for Chapter 7, you must have a low disposable income that meets the means test, and the process may take up to three months. In addition, Chapter 7 carries a ten-year penalty and will reflect on your credit record.

  • Bankruptcy under Chapter 13

Individuals who earn a lot of money but can’t pay off their obligations in full apply for Chapter 13 bankruptcy. In these circumstances, the debt is restructured, and the person is required to finish a court-ordered payment plan, which may take anywhere from three to five years. Debtors who file for Chapter 13 bankruptcy may retain their homes provided they pay their bills on time throughout the payback term. The seven-year penalty under Chapter 13 bankruptcy is less severe.

How Can you Repair Bad Credit Rating after Bankruptcy?

After filing for bankruptcy, it’s critical to rebuild your credit score to recover financial stability. Following these measures will assist you in rebuilding your credit once your bankruptcy obligations have been erased.

1. Keep track of how long the penalty will last.

The penalty period begins on the day you file for bankruptcy and continues until the penalty expires on your credit report. You cannot file for bankruptcy again for seven years after declaring bankruptcy. The Chapter 7 bankruptcy penalty will expire 10 years after the filing date. In contrast, the Chapter 13 bankruptcy penalty will expire 7 years after the filing date. As a result, if you filed for Chapter 13 bankruptcy and took you five years to finish the repayment plan and discharge your debts, you will still have two years before the penalty is no longer applicable.

2. Don’t get rid of your entire credit score.

Although it may seem the correct thing to do to remove items from your credit report included in a bankruptcy, this might damage your score. Your credit score considers the number of accounts, the kinds of funds, and the age of the accounts that show on your credit report. Removing old accounts from your credit report, even those “included in a bankruptcy,” can reduce the number of accounts on your report and decrease your credit history, lowering your credit score.

3. Examine your credit report for account statuses.

Following the completion of your bankruptcy, the status of your included accounts should be “included in bankruptcy” or “discharged,” with a balance of $0. Your statements must reflect this state since it’s far worse if they seem to be overdue or active with outstanding amounts. If any of the accounts listed in your bankruptcy are active, current, or due, make sure they have been rectified right away and display a $0 balance.

4. Do not apply for new credit regularly.

Make sure you space out your applications when asking for new credit lines following the bankruptcy. Too many applications in six months may hurt your credit score while making you seem desperate to lenders. You should only apply for a new line of credit every six months if you can handle the debt from your previous line of credit.

5. Make Non-Bankruptcy Account Payments to save your credit

Some of your accounts may be excluded if you file for bankruptcy. Certain debts, such as student loan debt, are not dischargeable in bankruptcy. You must continue to make payments on these accounts to boost your credit score. Even though these accounts aren’t included in your credit score, if you don’t pay them on time, you may have problems in the future.

6. Avoid changing jobs often.

While switching jobs will not affect your credit score, it may impair your ability to get a line of credit. When you apply for a new line of credit, lenders will look into your work history, and if you move employment often, they may be less inclined to accept you. Jumping between jobs might indicate a lack of discipline, but sticking with one work demonstrates responsibility and a steady income.

7. Keep an eye on your collection accounts

Collection accounts are following frequent bankruptcy, and they will show up on your credit record. These accounts will typically remain on your credit report for up to seven years after repayment. Still, you may work out a deal with the collector to get them removed after the payment is made. If you do come to an arrangement with a collector, make sure you obtain everything in writing so you can have it erased from your credit report if it still shows up after you pay.

8. Enlist the help of a co-signer

Having a co-signer may help you secure credit cards and loans that would otherwise be difficult to get. If you do utilize a co-signer, you must stay on top of your payments. Anything from a single late payment to default can harm the co-credit signer’s score as well as your own.

9. Make an application for a new credit card after bankruptcy

This is a tricky step to take after filing for bankruptcy, but it is necessary for repairing your credit. Credit card firms recognize that you cannot legitimately apply for bankruptcy for up to seven years, depending on your filing date. Thus, applicants who have just filed for bankruptcy are occasionally accepted. If you don’t qualify for a traditional credit card, you may be able to apply for a retail or gas credit card. Just keep in mind that the interest rates on these cards are higher.

If you cannot get a standard credit card or a retail card, a secured credit card may be an option. For the lender’s safety, some credit cards demand a down payment. The lender may change your secured credit card to an unsecured credit card if you pay off the debt on your secured credit card every month for at least one year.

Whether you acquire a regular credit card or a secured credit card, make sure your monthly amounts are manageable so you can pay them off in full each month. This will allow you to keep track of your debt and gradually improve your credit score. Late payments will show up on your credit record. They may stay there for up to seven years, lowering your credit score, mainly if your bankruptcy is still listed on your credit report.

Credit and Bankruptcy Lawyers Can Assist You

Bankruptcy may be a challenging and complicated process. It’s critical to file for the correct sort of bankruptcy. If you don’t understand all of your legal alternatives, you could not make the most significant selections. Berry K. Tucker & Associates, Ltd.’s bankruptcy lawyers have extensive expertise in bankruptcy processes. They can assist you in making the best choices possible while filing for bankruptcy. We can help you make sense of a complex process and develop a strategy to get you through bankruptcy and improve your credit score after that.

How To Fix My Credit Score To Buy a House

Applying for a mortgage loan can subject your credit to all kinds of scrutiny by mortgage lenders.

It makes the process of buying a home challenging. It may even halt the whole process. You’re probably searching for some tips to fix your credit score to buy a house.

Your credit score influences the amount mortgage lenders will give you and the interest rate they’ll charge.

Is It Important To Fix Your Credit Score Before Buying a House?

Your credit score highly affects the kind of loan you can qualify for. The better your credit score, the lower your monthly mortgage payment, and interest rate.

So if you want to get these favorable terms and more for your home loan, yes, it is important to improve your credit score before buying a house. 

Low credit scores aren’t particularly appreciated when applying for a mortgage. They are viewed as a sign that the applicant is less likely to service the loan.

Borrowers with high credit scores stand a chance to save thousands of dollars with lower monthly payments and interest rates. If you want to save your money too, first, improving your credit score will be crucial.

Look, if you’re eyeing a $200,000 home with a 15-year fixed mortgage, you can save more than $12,000 over the loan period by improving your credit score from 699 to 760.

What Should Your Credit Score Be Able To Buy a House?

how to fix my credit to buy a home

You can qualify for a mortgage loan with a credit score of even 620, but mortgage lenders do not favor it; they charge higher interest and monthly payments for such scores.

Experian, a credit bureau, suggests that a good credit to buy a house starts at 670. Very good credit begins at 740, and the stand-out credit at 800.

Don’t worry about not qualifying for the best rates given your current credit score; each step forward guarantees lower costs.

How Long Can It Take To Fix Your Credit Score To Buy a Home?

The time to repair credit scores depends on how many disputes you have to fix and what you can achieve upon completing the repair.

Most people fix their credit scores with a particular goal in mind. Whatever it is, knowing how long it can take to fix your credit score to buy a home will help you achieve the goal.

From the first steps of reviewing your credit reports to identify disputes to the last ones of responding to the resolutions, a credit repair for the average consumer takes three to six months.

However, Fewer errors and disputes may lessen three periods to even a month. 

How can I fix my credit score to buy a house?

There are several ways to fix and improve your credit score to buy a home.

1. Check And Improve Your Payment History

Payment history is one of the major factors affecting your credit score. It takes up the highest percentage of your credit score – 35%.

From now on, avoid late payments if you want to improve your credit score to buy a house.

Delayed payments can result in all sorts of problems that can damage a credit score: repossessions, bankruptcy, foreclosure, and collection accounts.

Delayed payments by up to 30 days will stay on your credit score for seven years, and no one is waiting for that time to end to buy a house.

So, if you are looking to boost your credit score to buy a house, start paying off all your bills on time. With time, it will positively impact your credit score.

 You can even put all your regular utility bills on an automatic monthly payment to make sure you never miss a payment.

2. Analyze Your Credit Report

Checking and fixing your credit reports may improve your credit score to buy a house. Errors are what you’ll be looking for.

Get your three credit reports from TransUnion, Experian, and Equifax annually and check for:

  • Duplicate accounts
  • Incorrect payment statuses
  • Incorrect accounts
  • Misspelled names
  • Outdated information
  • Incorrect dates

The Fair Credit Reporting Act allows consumers to access a free copy of all the credit reports every year from annualcreditreport.com. Check them out every four months for regularly updated information.

In case you find errors, file a formal dispute on the website of all the credit reporting bureaus or write them a letter. Specify each error and describe them accordingly, then request correction and copies of documentation as evidence.

The bureaus have one month to investigate your claim. They will send a letter with the results.

3. Opt For A Debt Consolidation Loan

Balance transfer or debt consolidation loan combines all your outstanding debts from different accounts into one monthly payment.

If you have several credit accounts that give you trouble managing, a debt consolidation loan may be most suitable for you. It helps avoid missing any payments and improves your credit utilization. 

Applying for a consolidation loan results in a hard inquiry on your credit reports. It means your score will drop slightly after the inquiry.

So make timely payments above the minimum amount required after getting a debt consolidation loan.

4. Clear Credit Card Debt

You’ll witness an increase in your credit score once you pay off your credit card debt.

What you spend compared to your credit limits is called credit utilization. It accounts for 30% of your credit score. 

Mortgage lenders use your credit utilization to determine whether you manage your debts well or not.

Generally, Utilizing 20 – 30% of your credit card limit is considered okay. Using more might indicate the possibility of delayed repayments or hint that you are in financial challenges.

Poor credit utilization is straightforward to solve. Simply clear, or at least pay down your credit card debt.

It sounds easy, but in truth, it may not be; however, this method is not complicated. By having little or no credit card balances, your credit score improves by up to 30% in no time.

Having fewer expenses can help you manage your credit card debt. Unsubscribe from apps and services that you no longer use, or instead charge monthly.

5. Become An Authorized User

For those with very little or no credit history at all, becoming an authorized user in someone else’s credit account can help fix your credit score to buy a house.

It helps boost your score, especially if the original holder’s credit score is high. Although you can purchase items or pay for services using the card, total liability still falls under the original holder.

Becoming an authorized user to an account with good credit adds more credibility to your credit.

Final Thoughts

Fixing your credit before you buy a house is a worthwhile action. It increases your chances of qualifying for a loan and attracts favorable terms.

The results may not be instant, but consistency is key in improving your credit score.

If you’re thinking of buying a house with bad credit, apply these steps and start getting ready to go house hunting. 

What Credit Score Do You Need to Buy a House?

The credit score is crucial in obtaining a mortgage loan, that is why most prospective home buyers fear that theirs may be too low to acquire one. It has not only an impact on your qualification but also the interest rate to be charged.

So, what is a good credit score to buy a house in 2022?

Whether or not a credit score is good is often subjective and may have minimal influence on buying a house. This is because mortgage lenders follow specific rules that decide what credit score you require to purchase a house.

There are, however, minimum credit score requirements to take out a mortgage loan. These requirements differ based on the type of loan you want to obtain.

Here are the loan types and the required credit scores.

Conventional Loan: 620

Conventional loans are the most common loans and have a minimum credit score of 620. For those who may want the best interest rates, a score of 740 and above will help.

Conventional loans are suitable for borrowers with high credit scores who can provide a down payment of 3% or more. They also provide the best interest rates and flexible repayment periods of 8 to 30-year loan terms.

Conventional loans aren’t federally insured, but they follow standards set by Fannie Mae and Freddie Mac, government-sponsored mortgage loan lenders. There are conventional loans that do not follow the standards established by these organizations, termed ’’jumbo’’ loans, which we’ll discuss later in this article.

Conventional loans are obtained through credit unions, mortgage brokers, and mortgage lenders. They are popular because of their simple approvals and low-interest rates.

FHA Loan: 580

FHA loan is the earliest mortgage loan program, designed by the Federal Housing Administration in the 1930s to make homeownership achievable.

FHA mortgage loans require a credit score of at least 580 and a down payment of as low as 3.5%, making them easily accessible than other loans. They also offer low-equity refinances that let you refinance up to 97.75% of the property’s value.

FHA loans are covered by the Federal Housing Administration, making qualification easy and allowing lenders to administer low-interest rates.

FHA loans specifically tend to attract first-time homebuyers who have either a young or lousy credit history partly because of the lenient credit requirements of FHA loans.

You see, with an FHA loan, you can qualify for a mortgage with a FICO score of even 500, but with such a low score comes some significant drawbacks.

First, you’ll require a down payment of at least 10%. Secondly, this type of loan is considered a subprime loan, meaning you might get the least favorable terms and end paying high-interest rates. Finally, you ought to have some very low qualifying ratios, that is, your overall debt-to-income ratio and your housing expense ratio.

All in all, the higher your credit score is, the more benefits you’ll accrue out of an FHA loan.

VA Loan: Not Specified

The VA loan is a type of mortgage insured by the Department of Veterans Affairs. The Department of Veterans itself doesn’t issue VA loans: they decide who is eligible for one and the lenders to issue it. It can be a clever move if you meet the requirements.

The requirements are that you must be an eligible veteran, service member, or a surviving spouse. A Certificate of Eligibility(COE) is a document issued upon proof of your claim to show your loan lender that you are, in fact, eligible for a VA loan.

VA loans don’t need any down payments and lack an industry-set minimum credit score requirement to obtain it though many lenders opt for a score of 620.

VA loans have simple credit requirements and offer more benefits than conventional loans, for example, the lack of down payment, more lenient credit requirements, lower interest rates, and no monthly mortgage insurance.

However, VA loans charge a one-time funding fee, which varies based on your down payment, the number of times you have chosen a VA loan, the type of service you logged, and the type of loan.

If you don’t provide any down payment on your first VA loan, you will receive 2.3% of your loan amount as the funding fee, whereas if you provide a 10% down payment on your house, you will receive 1.4%.

USDA Loan

The U.S Department of Agriculture develops USDA mortgage loans to make homeownership in eligible rural and suburban areas accessible.

Like the Department of Veterans Affairs backs VA loans, the Department of Agriculture backs USDA loans.

USDA provides three main loan programs:

  • USDA Loan Guarantees issued by participating mortgage lenders and offer minimal down payments and low-interest rates.
  • USDA Direct Loans issued by USDA for eligible low-income persons with interest rates of 1%.
  • USDA Home Improvement Loans issued to qualified homeowners to improve the state of their homes.

The credit score requirement to obtain a USDA loan is not official though most mortgage lenders prefer a score of 640 and higher to receive streamlined processing. Lower than that may subject you to more stringent underwriting standards.

USDA loans are specifically for low-income families, so for you to be eligible, your adjusted gross income mustn’t be above 115% of the median income in the area.

Your lender will also look into your debt-to-income ratio before approving you for a loan. The recommended DTI is typically 43% or lower.

USDA may be an excellent option if you are looking for a zero percent down payment mortgage and don’t qualify for a VA loan.

Jumbo Loan

Jumbo loans are meant to finance homes that are too costly for a conventional conforming mortgage loan.

They surpass the loan limit set by Fannie Mae and Freddie Mac; for this reason, they are referred to as conventional non-conforming mortgage loans. Lenders of this loan, therefore, take a risk in case of defaulted payments as Fannie Mae and Freddie Mac don’t insure them.

There is no fixed credit score requirement, but the non-conformance to loan limits makes mortgage lenders consider a minimum score of 700 for approval. The higher your credit score, the better the mortgage rate you will get. 

Depending on income and credit, you may require a down payment of between 5 and 25 percent. Compared to conforming loans, jumbo loans may charge higher interest rates depending on your financial status and the lender.

Jumbo loans also have higher closing costs because the loans are bigger and contain other extra qualification procedures.

Final Word

If you were wondering what is a good credit score to buy a house? This article has made it clear that the credit score requirements to buy a house vary depending on the mortgage loan you choose.

The higher the credit score requirements, the better the mortgage plan you get.

Other than the credit score, there are other considerations worth looking into, such as the debt-to-income ratio, income and assets, and the loan-to-value ratio.

This article offers insights designed to help prospective home buyers understand what loan type corresponds with their credit score to buy a house in 2022.

Do you need help with your credit score? Credit score experts at Ebony Credit can help. Book an appointment today for a free consultation.

How to Get a Repo off Your Credit Card: The Ultimate Guide

Having your car towed for defaulting on your auto loan will have you trying to figure out how to get a repo off your credit card. That’s some very important information because a repo will stay on your credit report for up to seven years after the default is reported to credit bureaus.

The dent it leaves on your credit score will also make it difficult to access new lines of credit. If you do manage to, it may be at higher interest rates.

How Repossession Happens

Many only know of repossession when a bank takes back a car. When a client defaults on payments, the bank can send someone over to collect the vehicle, usually without prior notice.

You can also choose to voluntarily give the vehicle back. This gives some kind of control or order on how the repossession occurs. 

While both may be painful, one is much less embarrassing and dramatic. They, however, both carry the same weight when it comes to their impact on your credit score. 

In the event that selling the car doesn’t enable the bank to fully recover its money, you will still be left paying a car loan with no car plus a bad credit rating. It becomes more difficult to maneuver. 

The Repo Effect on Your Credit Score

A repo means you had a debt and stopped making payments for a while. The lender then repossessed the car to recoup their cash.

The whole premise of the credit rating is the ability to pay back debt and within the required length of time. A repo, therefore, causes the credit rating to take a dip. A lender may even charge an extra fee to give you credit since they would be taking a risk with your soiled repayment record.

It is not just the repo in itself that causes damage. Your credit score will suffer because of the following too:

  • Towing fees to move your car, where applicable
  • Late fees plus their interest
  • Several months of missed payments
  • Car storage fees as the car sits in the lot
  • Any balance still owed after repo

Any other additional costs incurred lower the credit score even further. Seven years is too long to let it feature on your record. There are proper ways to address this situation. 

How to Get a Repo off Your Credit Card

1. Dispute It

According to the Fair Credit Reporting Act (FCRA), negative records must be true. Check for any inconsistencies in your report. It could be a wrong date or even a misspelled address. If there was an error, you can and should dispute it immediately. 

Make sure you explain why the item is incorrect when you dispute it. Send your complaint to all three bureaus (Equifax, Experian, and TransUnion) because they usually have the same records. You can do it online or via certified mail.

They are required to address the complaint within 30 days.  

2. Check with All Credit Bureaus

Once one credit reference bureau is reporting a repo, the higher likelihood is that the other two are as well. That’s because your lender shares the same information with each of them. Reach out to them with your details and confirm. 

If they are reporting inaccurate information, they will have to correct it or remove it. 

Where there are inaccuracies and any of the credit bureaus doesn’t respond to your request, reach out to the Federal Trade Commission (FTC).

3. Speak to the Lender

There is room to negotiate with your lender. You can work out a new arrangement that works for both parties. Maybe they can allow you to refinance the car or trade it in. Some may accept delayed payments or a different payment plan altogether. 

Be sure to speak to someone who has the authority to sign off on the new arrangement. You may need to be persistent in your asking before you get a favorable response but it will be worth the trouble. 

When you do get them to bend, make sure to have it in writing.

4. Hire a Credit Repair Professional

You can also ask credit repair professionals to do the heavy lifting for you. It will come at a monthly cost but they will handle all the disputes and negotiations for you and ensure errors are cleared.

Building Your Credit Report after Repo

Regularly going through your credit report will ensure you catch any incorrect information in good time. Sometimes this happens because of credit card fraud or even double listing of a credit account.

If the information is correct, you can start by slowly building trust with your lenders. Take out small loans you know you can repay and make sure you repay them on time. You may also consider a credit card with a low monthly limit. Start slow and build back slowly.

While a repo is a negative mark, it has less impact as it ages. Going forward, it is best to keep your credit report looking healthy. As the repo ages, lenders will look less into it and more into your current abilities and creditworthiness. 

Utilize your credit wisely, keep your total debt in check, maintain a good repayment history over an extended period, and diversify your credit lines a little. If you don’t need it, don’t get it yet. It will serve you better if you take it at the right time.

Final Words

A repo does not mark the end of your borrowing days. It may take about two years of a spotless repayment history for most lending institutions to consider extending credit your way but it soon ends.

In the event, you can’t wait that long, second-chance auto financing options exist. A second-chance car loan offers you credit after you’ve been denied by top-tier lenders. They know their clients have less-than-perfect histories and still accommodate them.

Whichever option you choose to take, be responsible for your credit. Remember, the goal isn’t just to own a car or how to get a repo off your credit card but to have a good credit rating to allow for better financial opportunities in the future.

7 Benefits of Using Credit Unions

Are you considering shifting to a credit union?

First, it’s essential to understand what a credit union is and what it’s all about. They are financial institutions run by co-owners and have no stakeholders.

The outstanding advantages of joining a credit union are the high interest on savings and low interest on loans.

The present technology has made the research about these unions easier, where most of them have websites.

Here we will help you understand the advantages of trade unions you will enjoy upon joining.

But first,

Types of Credit Unions

Before we get to the advantages of credit unions, let’s check the types of credit unions you are likely to come across in your community.

  • Employer Credit Unions: It serves people in a specific profession or company. They include firefighters, postal employees, and teachers. Government employees may not be part of this plan but rather have their credit unions.
  • College Credit Unions: Colleges and universities have these unions that target students, faculty, staff, and alumni. The students get affordable services here.
  • Military Credit Unions: These credit unions are accessible to military members.
  • Group Credit Unions: Mostly serve fraternal groups and churches, limiting their membership to a particular group.
  • Local Credit Unions: Provide services to a specific community. The requirement is residing in the region the union is located.
  • Federal Credit Unions: To join these national unions, you need to be 18 years and above and a U.S citizen.

Advantages of Credit Unions

1. Lower Fees

advantages of credit unions

It would be best to consider joining a credit union because of the low fee they charge on joining and monthly fees.

Unlike banks, the unions don’t charge for ATMs; their main aim is to help their customers save and not make the stakeholders richer.

The rates on loans are lower compared to that of banks. According to the National Credit Union  Administration report in 2021

Additionally, the union’s overdraft fees are lower than the banks’ amounts. The best part is that the fees collected are used in improving loan rates and upgrading services for the clients.

With credit unions, you don’t need a minimum balance in your checking account, making it easier to build up your savings habit, unlike banks that require you to have a minimum balance.

2. Voting Rights

Credit unions offer you a chance in decision-making through voting. 

The leader you choose presents all your concerns to the other board members. The board of directors oversees and supervises services offered.

Each member of the union has the right to participate in elections since they are co-owners of the union.

To run for a position on the board, you also need to be a member and in good standing.

The election is conducted during the annual general meeting with some of the unions providing an online voting system that saves both time and cost.

If your credit union has branches in various regions, the delegates vote on behalf of the members.

3. Focuses on the Community

One of the significant advantages of credit unions is the impact on the community they serve.

The union invests the resources in the communities by involving other local organizations to keep their income revolving in the community.

While banks return their profits to the stakeholders, credit union profits go back to the community by giving high dividends on savings.

When there is a business to settle on, the union doesn’t get into it without consulting the members who decide the way forward.

4. Cooperation Between Credit Unions

Maybe the credit union near you has a limited geographical footprint, and you feel it may interfere with your banking services. 

However, you don’t need to worry since most credit unions have ATMs spread out in other areas. 

And another thing, if you settle on using another financial institution, your credit union covers the reimbursement fee.

Some credit unions have formed a partnership and agree that you can make transactions in any branch of the union.

5. Personalized Service Experience

We already mentioned that once you become a member, you are a co-owner of the credit union, and since it covers a smaller area, we expect better-personalized services.

Experts in the union will guide you on how to go about saving and make the borrowing process more manageable.

Credit unions partnering with local investors will bring some of the services at hand. For example, if you need to purchase a house and your credit union has partnered with a real estate company, you will likely get the best package.

Don’t be afraid to approach your credit union when you have a unique financial need; they care for the welfare of their members.

Credit unions are focused on helping each member reach their financial goal through building their saving habits.

6. Offers a Variety of Services

Despite covering a small area, the credit unions offer various services.

Besides mortgage loans and business loans, they offer additional services: financial education, overdraft protection, car loans, and consumer loans.

You may think that unions are not advanced compared to banks; I suppose you might be wrong.

They have adopted online banking services such as mobile apps where the customers access the services at their comfort.

7. Favors Small Borrowers

Do you have a small business in mind that does not require a large loan to start or a small amount for your loan?

A loan from a credit loan will work perfectly for you, unlike the banks which offer larger loans.

The lower interest rates will make it even easier for you without mentioning that you don’t need collateral for personal loans.

When the union is evaluating you for a loan, they look at your credit score and check your job history. The approval may be favorable compared to that of banks.

Final Word

Thorough research on the credit union near you will help a lot. Remember that different unions have different governing policies. Check the requirements, too, before settling on one. 

Terms and conditions may be tiresome to read, right? But these are essential; make sure you read each and understand them before signing your agreement. In addition to that, choose a financial institution that fits your financial needs.

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