Valid Reasons to Dispute a Credit Card Charge

Legitimate reasons to dispute a credit card charge include being charged twice for the same transaction, being charged for something you returned or something that was never received. Sometimes the credit card issuer fails to credit a payment. Other times an unauthorized person makes a charge.

The Fair Credit Billing Act (FCBA) protects consumers against billing errors. Under qualifying circumstances, liability is limited to $50 (and most major credit card issuers waive that liability). Qualifying errors include:

• Charges with wrong date or dollar amount
• Math errors (such as an incorrect total after adding a tip)
• Failure to post payments or credits
• Failure to deliver the bill to your current address (assuming you provided it 20 days before the billing cycle closing date)
• Charges for which you ask for proof or clarification

And two of the most common reasons for a reversal request:

Unauthorized charges. This category includes, of course, fraudulent charges made by a thief who has obtained your credit card number. But it also includes charges made by a legitimate merchant but which you never authorized.

Charges for items or services you never accepted or that were not delivered as agreed. Some deceptive recurring billing practices fall into this category. Many consumers provide a credit card number for a free trial or a one-time purchase only to be charged on an ongoing basis. This is called a negative option and it’s legal – the merchant can continue to charge the consumer unless and until the consumer says to stop. Some consumers don’t realize the charges are ongoing, forget to cancel, or just find the opt-out process confusing or difficult. When the charges are discovered, the consumer asks for them to be reversed because they never wanted or intended to subscribe to the service.

While any of the above characteristics are grounds for requesting a reversal of the credit card charge, regret, dissatisfaction and changes in financial circumstances are not, unfortunately, billing errors. They might, however, be protected under other consumer laws.

How to Dispute a Credit Card Charge

Check your statement regularly. The sooner you catch an erroneous charge, the better.

Choose your battles. If you become known as a person who often “never receives” items you were charged for, you could lose the credit card account altogether. Resist any temptation to dispute a legitimate charge, even if you were dissatisfied with the purchase. Returns are a separate issue, and you cannot circumvent the returns process by simply asking that the charge be removed from your bill.

Put on your polite hat. Even when you’re in the right, bad behavior will, at the very least, delay your resolution while all parties put up defenses and dig in for a fight. It’s alright to be firm, but be courteous, speak clearly and offer up all relevant details. Do not engage in name-calling or accusations even if you feel justified. Don’t use profanity, verbally or in writing.

Contact the merchant. In many cases, especially those involving human error (bad math or double-charging, for example), the merchant is often a quick first and last stop in the process. Legitimate businesses will happily correct a mistake when evidence of the error is presented. Merchants are charged a fee when the credit card issuer has to investigate a dispute, so it’s in their best interests to resolve the dispute informally whenever possible. A high number of disputes could lead to the merchant losing credit card privileges altogether. Give them one chance to resolve the situation amicably.

Collect your thoughts and gather your evidence. Don’t be intimidated or bullied into giving up on a valid dispute. The New York Times reported that some merchants present customers with “chargeback abuse policies” to the tune of, “you agree not to file a … chargeback with regard to any purchase.” Brazen! And illegal! If you come across such a statement, or one that threatens to “report you” to a chargeback abuser database that will make it “more difficult or even impossible” for you to use your credit card in the future, stand your ground. Identify the reason you believe the charge should be reversed, and if there is any documentation to support your position, get it together.

Log on to your account online or call the phone number on the back of your credit card. For major credit card issuers the online dispute process is just as efficient as calling to speak to a live representative. In most cases, the credit card issuer will contact you for more details if necessary. The credit card issuer will give the merchant a chance to prove that the charge is valid and then notify you of the outcome of the investigation.

Document your actions. Write down the details of the dispute, the names of any people you talk to during the resolution process, the dates and times of any phone calls, and the outcome of any conversation.

Write a letter. Many disputes are resolved without the need for formal written communication. But in some cases the merchant will not agree to the chargeback. To formally pursue a credit in accordance with your rights under the FCBA, your request should be submitted to the credit card issuer in writing and within 60 days of the date the bill with the disputed charge was sent to you. The letter should include all relevant details: your name, address and phone number, the account number, the details of the charge (merchant, date, amount), the statement closing date and the reason you are disputing the charge. You should also list all of the steps you have taken so far to resolve the dispute , and include copies of any letters, receipts or other documents. Send everything (keep a copy) by a method that provides proof of delivery (certified, return receipt requested or overnight mail) to the billing office (not the payment address) of your credit card issuer.

Pay your bill. Don’t stop paying your credit card bill unless the only charge outstanding is the one in dispute. Failure to pay the other portions of your bill can result in late fees and negative reporting to the credit bureaus. You do not have to pay the disputed charge (or related charges) while it is under investigation, and the credit card issuer cannot attempt to collect the debt, report you as delinquent or close your account. It can, however, report your challenge. And if the dispute is not resolved in your favor, you’ll be liable for any interest charges that accrue during the process.

Review the FCBA for all eligibility details before initiating a dispute. In any case, act fast and keep records.

Disclaimer: The article and information provided here is for informational purposes only and is not intended as a substitute for professional advice.

The post Know Your Rights: How to Dispute a Credit Card Charge appeared first on Credit Sesame.

Credit Sesame, a financial wellness company, is a consumer advocate. We provide credit scores, updated monthly, absolutely free to any U.S. consumer who has a credit file. Credit Sesame also provides services to help consumers make better financial decisions.

We offer free credit scores to empower consumers to do two things:

• Choose the credit products with the best terms
• Take specific steps to improve credit standing in order to save even more money in the future

Did Credit Sesame mislead consumers?

No. In early 2017, the Consumer Financial Protection Bureau (CFPB) ordered TransUnion and Equifax to pay big fines for deceiving customers about credit scores and credit reports. The CFPB says that TransUnion and Equifax told customers that they were purchasing the “same score lenders use to make credit decisions” when in fact they were not. Also, those companies lured consumers into free or $1 trial memberships without clearly disclosing that the memberships converted to monthly subscriptions that were automatically billed to the customers’ credit cards.

Credit Sesame was not part of that order or any other order in history. We have always offered members their “consumer” or “educational” score. In addition, no credit card number is required to sign up, so there is absolutely no risk of discovering surprise fees or charges for our service. Payment is only required when you choose to purchase a premium service.

In addition to free credit scores, Credit Sesame members get free credit monitoring (including real-time alerts to credit file changes), a free credit report card (including analysis and actionable tips for improvement), and free identity theft protection (including live identity restoration support and $50,000 in free identity theft insurance).

Premium services are available to consumers who want to purchase them. Pro and Platinum Protection plans include daily monitoring of your information on file with all three major credit bureaus (Equifax, Experian and TransUnion) and $1 million of identity theft insurance. Our Basic plan includes daily monitoring of your TransUnion credit report. For Platinum Protection members, we also monitor your Social Security number, public records and black market websites. All of our paid plans include 24/7 support for dealing with credit reporting inaccuracies.

What credit score does Credit Sesame use?

The credit score you see on Credit Sesame is based on the VantageScore® 3.0 scoring model and provided by TransUnion. It is a real credit score, and it is not the TransUnion Risk Score, which is a score that was merely an educational credit score and not used by lenders. The TransUnion Risk Score was designed by TransUnion to give a user an idea of what their credit score was.

Details About the VantageScore® 3.0 Scoring Model

So Many Different Scores Can Be Confusing, but Here’s What You Should Do

Hot tip: The credit score you see on Credit Sesame may differ from the score a lender sees when you apply for credit. This is normal. You don’t just have one credit score; you have dozens. There is no one score that lenders use. In fact, you even have more than one FICO® score.

A mortgage lender sees one version of your score but a credit card issuer sees another, even if both scores are viewed at the same moment. Auto lenders and certain other types of creditors also have access to special industry-specific scores. Furthermore, although credit scoring systems are periodically updated, lenders are not required to use the most current version, so even two lenders in the same class might receive two different scores on the same day.

You can read more about credit score differences in our Credit Score Range Guide.

If you have access to a free credit score from other sources, like your bank or credit card issuer, we encourage you to review those, in addition to the free credit score provided by Credit Sesame. Keeping tabs on your credit score and credit report card can tell you whether your credit profile is improving, what general range you fall into, and even if you’ve become the victim of fraud or credit reporting errors when your score unexpectedly falls.

Does Credit Sesame provide free annual credit reports?

The only online source authorized to provide your free credit report, to which you are entitled by Federal law, from Equifax, Experian and TransUnion each year is AnnualCreditReport.com. The law does not entitle you to a free credit score, and you will not get one at that website.

Credit Sesame offers a free credit report based on the data in your TransUnion credit file. Credit Sesame’s free credit report card assigns a grade (A through F) to your performance in each of the major areas that affect your score (no matter which scoring model is used). They are payment history, debt utilization, file age, credit mix and inquiries or new accounts.

One person’s score might be low because of late payments while another person’s score might be low because of high debt. You need to know what your contributing factors are in order to take appropriate action to improve, and our free credit report card can help you devise a plan of action.

How does Credit Sesame make money?

Credit Sesame uses sophisticated tools to analyze consumer data provided by TransUnion in order to show you how you can save money. We make suggestions that are tailored to your unique credit profile. For example, if the data show that you are likely to qualify for a credit card with a lower APR than what you currently pay, we will show that information to you.

Then, if you choose to apply for a credit product via the Credit Sesame dashboard and the application is ultimately approved, we earn a small commission from the financial institution. There is never a fee to the consumer.

The post Credit Sesame Addresses the Confusion: What Credit Score We Use appeared first on Credit Sesame.

Credit Sesame beat them to the punch when it started providing consumers with free access to their credit scores in 2010. Knowledge is power. You can make the best financial decisions if you know where you stand. Knowing where you stand also tells you where you need to go.

Weren’t credit scores always free?

No. Until just a few years ago, credit scores were guarded secrets held by the credit scoring agencies, available only for a fee. Although we are each entitled to a free credit report every year from each bureau, those reports do not, even now, come with free credit scores. Since there was no legal obligation to provide scores, they were treated as a commodity and offered for sale. The only way to get a free credit score used to be to ask a lender to share it with you after they pulled your credit.

What’s the difference between all the credit scores out there?

We each have dozens of credit scores. Each credit score that you have represents a moment in time and reflects the data that is in your credit file. You have multiple credit files, including one each from the three largest consumer credit reporting agencies – Equifax, Experian and TransUnion. Not all creditors report to all three agencies, so the information in your files can (and usually does) differ.

Furthermore, there are many different ways to calculate your score. These are called algorithms or scoring models. They are complex formulas that examine the data in your file in order to determine how likely you are to repay future debts. These scoring models change over time. The most recent FICO® scoring model is the FICO® Score 9.

Algorithms are also fine-tuned based on the industry that’s asking for it. That means that if you apply for an auto loan, for example, the lender will probably see a credit score that applies more weight to your history with auto loans.  Most auto lenders use FICO® Auto Score 2 or FICO® Auto Score 8. The lender must purchase your score, and is not required to purchase the most current scoring algorithm. You can apply with two auto lenders who get two different scores on the same day.

Similarly, mortgage lenders and credit card issuers get scores tailored to those types of credit products.

Free credit scores are consumer scores or educational scores. They are designed to give you an idea of where your credit stands, but they may not match up exactly with the scores lenders see. Consumer credit scores can be based on FICO® or VantageScore® scoring models, and provided by any of the credit reporting agencies.

Confused? Don’t worry about the details. What matters more is the range into which your scores fall. In general, if you have good credit, the score will be in the good range no matter which score you see. A range of scores is not necessarily cause for alarm.

Who offers free credit scores and is it my ‘real’ score?

Many companies and financial institutions offer free credit scores, including Credit Sesame. The Credit Sesame free credit score is a TransUnion educational score, based on a VantageScore® scoring model. It may differ from the score a lender sees. We provide it so that you can take hold of your financial reins and gain access to better, more affordable credit products.

You may also have access to a free credit score from your bank or credit card issuer. These are also educational scores and may differ from the score a lender sees, even if your potential lender is the same institution that provides the free score.

How do companies make money giving free credit scores?

Any company that offers you a free credit score also offers profit-generating products for sale. That doesn’t mean the credit score isn’t valid. In fact, the opposite is true. The free credit score provider is in a unique position to offer the right financial products to you based on your credit profile, products that could save you money over time or provide other benefits.

Credit Sesame analyzes debt daily. Based on your credit standing, we may show you lenders that can offer you a lower interest rate than you currently pay. We only show you offers for which you’re likely to be approved. If you click the offer and are approved, Credit Sesame earns a small commission. This commission is paid by the lender, not by you.

At the end of the day everyone wins. You get a better deal, potentially saving tens of thousands of dollars over the life of a loan, the lender gets a new customer, and we earn a paycheck for helping you improve your finances.

What’s the advantage to using Credit Sesame?

Credit Sesame’s free credit score is a step above your bank’s free score because we also provide a free credit report card, $50,000 in free identity theft insurance, free credit monitoring alerts and other benefits in addition to a vast library of credit education.

Checking your own credit through Credit Sesame never hurts your score.

Credit Sesame never sells or gives away your personal information.

What you need to know about your free credit score, in a nutshell

Know your standing. If you know where you stand, you can evaluate credit offers in order to choose the best one. You can also work toward improving your credit standing in order to save even more money.

Don’t pay for a credit score. All of the big credit bureaus offer scores for sale. Those scores are also educational and no better than the free score offered by Credit Sesame. Indeed, in early 2017, two of the big three credit bureaus were fined $23 million for deceiving consumers by telling them that they were purchasing the same scores lenders used.

Check your credit reports regularly. Take advantage of your right to receive free annual credit reports (via AnnualCreditReport.com) from each of the major credit reporting agencies, and investigate any credit monitoring alert you receive from Credit Sesame. Errors and identity theft can lower your score, and that could cost you money.

Pay attention to your credit report card. We’ll tell you exactly what’s holding your credit score down so that you can plot your course to better credit.

Pay attention to Credit Sesame suggestions. The offers presented to you on your Credit Sesame dashboard are chosen because they can save you money.

The free credit score industry has grown over the past seven years. Creditors have finally figured out that credit knowledge creates a better customer base. Even though consumers with poor credit pay more, consumers with great credit are more likely to repay their debts and are therefore more desirable as customers. Knowledge is power. Take it.

Credit Sesame is your advocate. We empower you with your credit score so that you can achieve your financial goals.

The post Why Do Companies Give Away Free Credit Scores? appeared first on Credit Sesame.

Get the details of how Credit Sesame works, and sign up today.

Is Credit Sesame a scam?

Credit Sesame is a financial wellness and consumer education resource. We have appeared many times (and we don’t mean in ads) in the Wall Street Journal, the New York Times and many other respected U.S. and global publications.

Credit Sesame is a free credit monitoring service. Our site has roughly 9 million members, who take advantage of the free credit score access and other benefits we offer. We do not offer credit counseling or debt management services. We provide our members with 100% free access to their credit score, as reported by TransUnion. Your credit score is one of the most important elements of your financial life and lenders use it, along with other factors, to make credit decisions.

We also offer a vast library of educational content designed to empower consumers with the knowledge and tools they need to build an excellent, long-term credit standing.

Credit Sesame members have access to their credit and debt details through a convenient and easy-to-use online dashboard that prominently features a credit report summary. On your credit report card, we tell you how you’re doing in each credit scoring factor and where you’ve got room for improvement. When you log in to view your free credit report card, you get a comprehensive analysis of your credit score and overall debt profile. For example, at a glance you’ll see your total debt balance, total monthly minimum payment and debt-to-income ratio, based on self-reported income (your income is not part of your credit report).

In your credit profile we break down the factors that are helping your score and those that could be hurting it. Credit report card grades are assigned for five specific factors: payment history, credit usage, credit age, account mix and credit inquiries. These are the factors that influence your credit score. We also show you how your credit score has changed over time.

How can we afford to offer all of these tools for free? Our business model is very simple. We earn money when we match members to financial products that are customized to each member’s credit profile. For example, if your credit score indicates that you’re likely to be approved for a mortgage at a lower rate than your current APR, we may show offers from mortgage lenders to refinance your loan. We only show you offers that could save you money and that are appropriate for a consumer with your credit profile. If you choose to click through and apply for the product, and you are ultimately approved, we earn a small commission.

Credit Sesame also provides free credit monitoring to all members. Any time your credit score changes you’ll receive an email alert in real time notifying you of the change. You can then log in and view the details to understand why your score went up or down. Keeping close tabs on your credit is especially important for consumers planning to make a major purchase, such as a home.

Credit monitoring is also a great tool for consumers who want to take a proactive stance against identity theft. Credit Sesame members receive $50,000 in identity theft insurance, along with fraud resolution assistance, absolutely free. Premium members get $1,000,000 in insurance, full monthly credit reports from all three credit bureaus, monthly credit scores from all three bureaus, 24/7 live expert support and many other benefits.

Is Credit Sesame’s credit score the same one lenders use?

Credit Sesame members receive their free credit score based on the information in their TransUnion credit profile. TransUnion generates FICO® scores, used by many lenders, and VantageScores®, which are used by at least 20 of the top 25 financial institutions in the U.S. Each lender decides which credit score to use, and which version.

The score that we offer to members is the VantageScore® 3.0. This score was developed by the three major credit bureaus—Equifax, Experian and TransUnion—as an alternative to FICO® and other credit scoring models used by commercial lenders. Like FICO®, VantageScore® uses the scoring range 300 to 850. Higher is better. Your VantageScore® is influenced by six distinct factors:

• Payment history
• Age and type of credit
• Percentage of credit limit used
• Total balance owed
• Recent credit behavior and inquiries
• Available credit

Neither VantageScore® nor FICO® shares the algorithm by which scores are calculated, but both agree that certain factors carry more weight than others. Payment history, for example, is viewed as extremely influential, but available credit is less influential.

The VantageScore® credit score factors are similar to those that FICO® relies upon. FICO® scores reflect these elements:

• Payment history
• Credit utilization
• Age of credit history
• Types of credit used
• Inquiries for new credit

In the FICO® model, payment history and credit utilization are the most important factors that influence your credit score. Late payments, delinquencies, collections and maxed out credit cards generally have the greatest negative impact on your score.

With regard to what scores lenders use, the answer depends on several variables. First, your credit score is a snapshot in time. It reflects your credit standing at exactly the moment it is calculated. It can change every time new data is reported, including the passage of time. The credit score you see today may not be the same as the credit score your lender sees next week.

Second, lenders use different scores. FICO® offers industry specific credit scores to auto lenders, mortgage lenders and credit card issuers, among others. If you have a great history with auto loans, your auto credit score might be higher than your consumer credit score. Furthermore, over time FICO® has developed multiple versions of each score. The same is true for VantageScore®. Each lender chooses whether to purchase updated credit scoring capability when new versions are released.

Credit Sesame’s Director of Operations Tony Wahl says, “Consumers should consider taking a broader view of their credit rating, rather than focusing on which credit score a particular lender may use. Because there are so many different credit scores and because consumers have no way of knowing what scoring model that a lender is going to use, consumers should use the VantageScore 3.0 that Credit Sesame provides as a benchmark to measure whether your score is improving.”

The advantage to checking your score on Credit Sesame is that it will give you a good idea of what credit score range you fall into and where you have room for improvement.

Is it completely free to sign up for Credit Sesame?

Credit Sesame is completely free to use. We don’t require a credit card number, and there is no trial period or expiration date for free memberships.

We do need your name, address, date of birth and the last four digits of your Social Security number to verify your identity and access your credit profile with TransUnion.

Credit scores are based on the data that is found in your credit report, such as your account balances, your payment history and the types of credit you use. In addition to TransUnion, Equifax and Experian also maintain credit data on American consumers. All three companies tie your credit report to your Social Security number.

Checking your credit score through Credit Sesame will not have any effect on your score. That’s because when you check your own credit, it triggers what’s known as a “soft” pull and has no effect on your score. On the other hand, when you apply for credit and the lender makes an inquiry it is a “hard” pull and generally knocks a few points from your score (temporarily). Note that for certain types of credit (mortgage, auto and student loans), you can apply with multiple lenders within a 14- to 45-day time frame but only one inquiry will count against your score.

Why is credit important?

Living on cash alone is great for the budget but not realistic for the average American lifestyle. If you want to buy a home, for example, saving enough cash to purchase it outright could take decades and many people lack the discipline to reach such a lofty long-term goal. You can buy a home sooner with a mortgage. The same goes for buying a car.

Credit is an important buffer to an emergency fund (or the lack of one). If something major happens—the car breaks down or you lose your job—do you have enough money tucked away to cover the additional expenses? With credit, you can borrow to bridge the gap. Indeed, with great credit, borrowing is often extremely inexpensive (think zero percent car loan).

To take advantage of credit, you need to have a good credit rating. Your credit score and history are essential considerations to just about every creditor. In general, a higher credit score signals that you’re responsible with credit, while a lower score indicates that you struggle to manage your finances. Lenders want to be confident that you will pay back what you borrow. They use your credit score as a gauge for how much of a risk they’re taking.

Obtaining credit is possible with a poor credit rating, but you’ll pay the price. Interest rates and fees are generally more expensive to those with bad credit, and terms are less advantageous to the consumer. (Goodbye, zero percent car loan.)

Credit Sesame’s free credit monitoring service can help you keep an eye on your credit so that you can take steps to improve your score if it’s not as high as you’d like. Using the credit report card, you can see which areas of your credit health need work. For example, if you have a grade of A for payment history but a D for credit utilization, you’ll know that you need to pay down your credit card balances, but you’re doing a great job with monthly bill payments.

Even if you don’t anticipate needing credit in the immediate future, it’s important to know your score. Stay in good credit health by practicing great credit habits over the long term. Use Credit Sesame’s free credit monitoring service to protect and improve your credit. Then, when the time comes to apply for a loan, you’ll be prepared for success.

Still got questions about Credit Sesame or credit in general? Head to CreditSesame.desk.com for more answers. 

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Myth #1: Checking your credit hurts your credit score.

Checking your own credit NEVER hurts your score. A self-check is a “soft inquiry” and does not impact your credit. Other types of credit checks are also harmless. When you receive a pre-screened credit card offer in the mail, that’s the result of a soft inquiry. When an employer checks your credit, also a soft inquiry.

Myth #2: Credit reports and scores are the same thing.

Your credit report is a record of your credit accounts. The  major consumer credit reporting agencies are Experian, Transunion, and Equifax, but they are not the only companies that maintain a file on you. The reports differ slightly in appearance, but all of them include your identifying information, a list of your credit accounts, any collection accounts you have, public records like bankruptcies and liens, and any inquiries that have been made into your credit. 

Your credit score is a 3-digit number that represents how likely you are to repay your debts, based on a complex algorithm that evaluates your relationship with credit over time.

Your credit score is not included on your credit report. 

Myth #3: No credit cards = the best credit score possible.

Unless you use credit, the scoring agencies have no basis for calculating a credit score. 

Some alternative credit scores are calculated for people with limited history with credit products. Those scores examine the consumer’s history with utility bills, cell phone bills, rent payments and so on.

But a top score is only available for consumers who have had and used credit products. A cash-only lifestyle is great for the budget, but not for your credit score.

Myth #4: Only some unpaid bills show up on a credit report.

Unfortunately, some bills don’t help you build credit even when you pay on time every month. Cell phones, utilities, rent and medical bills usually fall into that category. Let that account go delinquent, however, and it’s a different story.

Even if a creditor doesn’t report your delinquent account directly, if your account is turned over to a collection agency you can bet it’ll show up on your credit report. The threat of bad credit is one way they try to motivate you to pay up.

Myth #5: Paying off debt cleans up a credit report automatically.

While it’s a great strategy to pay debt off and take care of those unpaid bills, don’t assume that settling up those unpaid bills will automatically clean up your credit history. Your credit report shows positive and negative accounts, including collection accounts, discharges, late payments and bankruptcies some of which can be on your report for up to ten years.

That said, some collection agencies openly advertise that they will stop reporting a collection account once it’s paid off. If the account holder doesn’t report an account, it will not show up on your credit report.

Watch your credit report if you’re cleaning it up, and for that matter, even if it’s already in great shape. It’s up to you to make sure your credit report accurately reflects your details and remains error free.

The post Top 5 Credit Myths Busted, Once and For All appeared first on Credit Sesame.

Journey to fixing your credit score

Believe it or not, rebuilding or fixing your credit can be even harder than starting from scratch. You want to show lenders and financial institutions that you’re responsible with your credit and that you’ll make your payments as agreed upon, but there are some dings and slip-ups (or maybe even some outright disasters) on your credit report that suggest otherwise.

Thinks of it this way, you’re running a race. Instead of starting on flat ground, you’re starting downhill, and you need to run up the hill as quickly as you can. Fortunately, even though fixing your credit usually takes a bit longer than building your credit, the steps are pretty similar and easy to implement.

Fixing your credit score is important

As you can see from the data below, there is a substantial part of the population that is working to improve their credit score, at any given time — especially among those with fair or good credit.

Bad credit can happen at any time for a number of reasons. Perhaps there are unpaid debts in collections that you had simply forgotten about. Maybe you had to file bankruptcy, or you’re in the process of going through a divorce. There could be inaccuracies listed on your credit report, such as late payments that weren’t late. Or, even worse, perhaps you have been the victim of identity theft and there are all sorts of accounts on your report that are definitely not yours. No matter the reason for the bad score, it’s important that you know how to take action quickly to fix your credit score.

Percentage of Members and Non-members actively trying to improve credit by credit score

Actively trying to repair	Members	Non-Members
Poor Credit Score	9.45%	3.56%
Fair Credit Score	35.96%	17.44%
Good Credit Score	40.23%	25.9%
Very Good Credit Score	22.43%	10.63%
Excellent Credit Score	9.61%	4.75%

Source: Survey of 1000 members and non-members who have a credit score.

Let’s take a closer look at some steps you can take to fix your credit score.

Steps to fix your credit score

If you are trying to improve your credit score, first, rest assured that you are not alone. Fortunately, fixing your credit is relatively easy if you follow a few key steps and stick with a routine.

Pay on time, every time —and keep your balances low

Your payment history is the single biggest factor that impacts your credit score, contributing to 35% of your score. As such, the best thing that you can do for your credit score is to make your payments on time, each and every month. Late or missed payments will remain on your credit report for 7 years, dragging your score down. Making your payments on time will go a long way toward improving your credit score.

We looked at a number of individuals who made all of their payments on time over the course of a year, to see how their scores improved.

Average Credit Score Improvement by Making On Time Payments

Credit Starting Point	3 Months	6 Months	12 Months
(Poor) 400	424	448	483
(Fair) 586	595	614	629
(Good) 671	671	683	719
(Very Good) 742	744	751	767
Excellent (801)	802	806	809

Source: Review of individuals who for the course of a year made all payments on time.

As you can see from the data, making on-time payments can have a significant impact on your score, especially if your current score is less than stellar. For instance, those with poor credit saw their score rise by more than 80 points in 12 months — just by making their payments on time.

Sign up for a secured credit card

We understand the dilemma — you need to use credit to improve your credit score, but it’s hard to get approved for credit with a low credit score. If this sounds familiar, you’re not alone. A good suggestion to help build up your credit score is to sign up for a secured credit card.

A secured credit card is easy to qualify for. These accounts require a deposit, which then becomes your credit limit. If you miss a payment, the lender simply withdraws the funds from your deposit. As we mentioned earlier, your payment history plays a huge role in your credit score — these on-time payments will be reported to the credit bureaus, improving your score.

We surveyed more than 400 consumers over the course of 24 months, to see how their scores improved by using a secured credit card.

Average Credit Score Improvement with a Secured Credit Card

Credit Starting Point	0-6 Months	6-12 Months	12-18 Months	18+ Months
400	425	446	462	475
581	581	614	625	640
671	671	672	719	738
742	742	744	751	760

Source: We surveyed 455 consumers over the course of 24 months to understand on average how long it takes to move between credit ranges starting 2/15/2016 to 2/15/2018.

Regardless of where their credit started, everyone saw an improvement in their score by using a secured credit card — and their scores continued to improve the longer they used the secured credit cards.

Get a credit builder loan

Another option for fixing your credit score is to get a credit builder loan. When you apply for a credit builder loan, the bank will set aside a specified amount into an account. You make payments on this loan, and at the end of the term, the money is yours. Your payments get reported to the credit bureaus, improving your score.

Here’s the average impact from using a credit builder loan. This is a great strategy to use, especially for those with poor credit — who saw an improvement to their credit score of 141 points in just 18 months.

Average Credit Score Improvement with a Credit Building Loan

Credit Starting Point	0-6 Months	6-12 Months	12-18 Months	18+ Months
413	423	440	510	554
580	580	586	591	614
682	682	684	696	712
740	740	742	753	783

Source: We surveyed 455 consumers over the course of 24 months to understand on average how long it takes to move between credit ranges starting 2/15/2016 to 2/15/2018.

Become an authorized user

Becoming an authorized user on the account of someone with established, good credit is another way to help improve your score. There is less risk assumed on the part of the lender, since at the end of the day, the person who’s ultimately responsible for the debt is the person whose account you’re on. When someone adds you as an authorized user to his or her account, it is a huge expression of trust — so be sure to use this strategy wisely.

Let’s look at some data to see how becoming an authorized user can affect your score.

Average Credit Score Improvement as an Authorized User

Credit Starting Point	0-6 Months	6-12 Months	12-18 Months	18+ Months
530	548	556	567	579
583	593	607	632	662
674	682	702	718	732
740	761	772	779	787

Source: We surveyed 455 consumers over the course of 24 months to understand on average how long it takes to move between credit ranges starting 2/15/2016 to 2/15/2018.

Everyone, regardless of where their credit started, saw an improvement to their score within the first 6 months by becoming an authorized user. The biggest difference was seen by consumers who started out with a 583 credit score — their scores rose, on average, to 662 in less than 2 years.

Get a co-signer

A somewhat similar strategy, getting a co-signer for a loan or for a credit card is another way to repair your credit. By co-signing, your co-signer is essentially agreeing to be ultimately responsible for your debt, in the case that you default on your payments. Like becoming an authorized user on someone’s account, this is a responsibility that you should take seriously, since if you default on your debt, your score isn’t the only one that could be hurt.

Below are the average score improvements by adding a co-signer. As you can see, especially for those consumers who started out with poor credit, it can make a tremendous difference. For instance, the consumers who started out with a 370 credit score saw an improvement of more than 200 points to their credit score in less than 2 years.

Average Credit Score Improvement with a Co-signer
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Source: We surveyed 455 consumers over the course of 24 months to understand on average how long it takes to move between credit ranges starting 2/15/2016 to 2/15/2018.

We spoke to Credit Sesame member, Roselee, to find out what steps she took to fix her credit. Here’s what she had to say.

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Roselee fixed her credit using these steps

Member Since: 3/4/2017

We interviewed Roselee on August 28, 2018; She is 48 years old, a single mother of one teenage son, and works as a secretary for a rental company. She lives in Daytona Beach, Florida.
Were	you	able	to	fix	your	credit	score?
I didn’t think I could be able to at first, but I started slowly and I was able to fix it. Looking back, it was no one’s fault but my own, so I am glad that I learned more about credit scores and how important they are to one’s financial life.
What	was	your	original	score	and	what	is	your	score	now?
My original score was just fair. I never knew I was supposed to keep track of that type of stuff. The first time I checked it, it was 660. My score as we speak is 772, so I went up from fair to very good.
What steps did you take to improve your score, and how long did it take?
The first thing I did was look for any inaccuracies on my credit report, which I found that there were 6 of them. I sent letters regarding these to all three credit reporting bureaus and it took about 6 months for them to be cleared off. At the same time I started to make sure that all my payments were made on time, and worked to get my credit cards under 30%. It took 16 months but I am finally closer to my personal goal of having excellent credit.

Roselee’s story is important because it stresses the importance of focusing on the basics. She carefully reviewed her credit report, disputed and resolved the errors she found, and then focused on smart financial habits to improve her credit score.

Things to know about your credit score

In order to better understand how to fix your credit score, it can be helpful to know exactly what factors contribute to your credit score, or what is included in your credit report. Read on to learn more.

What is included in your credit score?

Credit scores are reflective of a scale that represents poor to excellent. The FICO scoring system is the most commonly used and scores range from 300 to 850, with higher scores reflecting better credit. There are a number of factors that contribute to your credit score, and these are reflective of the information that can be found in your credit report, a detailed history of your relationship with credit that is reported to the three major credit bureaus (TransUnion, Equifax, and Experian).

For the purpose of this article, we’re going to look at FICO’s scoring model calculation factors and their weights (FICO is the most well known and most commonly used scoring model).

FICO Scoring Model Calculation (Weight) Factors

Credit Factors	Credit Score Weight
Payment History	35%
Credit Utilization	30%
Credit Age	15%
Different Types of Credit	10%
Number of Inquiries	10%

Source: Data found September 26, 2018. Boeing Employees Credit Union website. Understanding Your FICO Score. Retrieved from https://www.becu.org/articles/understanding-your-fico-score

Is your credit report always accurate?

As stated above, your credit report is a comprehensive way for potential lenders and other financial institutions to have a better understanding of your financial history and your relationship with credit. And, as thorough as your credit report may be, keep in mind that it may not always be completely accurate or updated. While some consumers have bad credit from irresponsible decisions with their credit, others have poor credit through no fault of their own — and they often don’t even know it.

Take a look at the numbers below. While inaccuracies are steadily on the decline for both members and non-members alike, there are still a significant number of consumers who found inaccuracies in their credit reports in 2017 (an average of 27% — or more than 1 in 4 consumers).

Percentage of Individuals who found Credit Report Inaccuracies

Found Inaccuracies on Credit Report	Members	Non-Members
2014	26%	42%
2015	23%	39%
2016	20.5%	38.5%
2017	17%	37%
2018	16.5%	35%

Source: Survey of 500 members and non-members who check their credit reports yearly. Survey was done in December annually.

If you’re one of those consumers who found inaccurate information contained in your report, you’re probably wondering how to dispute the information and long it will take to get the error(s) resolved. Fortunately, the majority of consumers who found errors were able to have the issue resolved (74% of members and 62% of non-members) — and relatively quickly, at that. Members reported less than 45 days for their errors to be resolved, with non-members just slightly behind, at 45-60 days.

Credit Report Inaccuracies, Resolution, and time to resolve

Inaccuracies and resolution timeline	Members	Non-Members
Found Inaccuracies	17%	37%
Resolved Inaccuracies	Resolved Inaccuracies	62%
Average Time for Credit to be Adjusted	<45 Days	45-60 Days

Source: Survey of 500 members and non-members who found inaccuracies on their credit report. Survey completed over the course of 9 months from December 1, 2017 – August 1, 2018.

Fortunately, the majority of consumers who found errors were able to have the issue resolved (74% of members and 62% of non-members) — and relatively quickly, at that. Members reported less than 45 days for their errors to be resolved, with non-members just slightly behind, at 45-60 days.

How long does it take to rebuild your credit history?

So now that you know how to fix your credit score, you’re probably wondering how long it will take to see an improvement, right? The good news is that, by taking the right steps, you can start to see an improvement quickly — typically within the first couple of months.

Average Time to see Credit Score Improvement

Credit Score Factors	0-3 Months	3-6 Months	6-12 Months	12+ Months
Payment History	+20 Points	+36 Points	+48 Points	+60 Points
Credit Utilization	+15 Points	+29 Points	+41 Points	+55 Points
Length of Credit History	+5 Points	+7 Points	+12 Points	+20 Points
Credit Mix	+10 Points	+11 Points	+12 Points	+14 Points
New Credit	+10 Points	+9 Points	+7 Points	+6 Points

Source: Survey of 750 members who actively worked on improving their credit score. Survey completed over the course of 24 months from 2/15/2016 – 2/15/2018.

The benefits of fixing your credit score

It’s no secret that credit plays a huge role in your everyday life. Everything from the interest you pay on your credit cards to whether or not you get approved for a loan to buy a new car is directly related to your credit and your credit score. By taking the necessary steps to fix your credit score now, you are setting yourself up for financial success in the future.

Conclusion & summary

In conclusion, if your credit score needs some work, you are not alone. Fortunately, there are several tried and true steps that you can take to improve your credit score, regardless of where your credit stands now.

Check your credit report, fix any inaccuracies, and then focus on the basics — make all of your payments on time and think outside the box for various ways to qualify for credit, whether by applying for a secured credit card, taking out a credit builder loan, or becoming an authorized user on an established account. By taking these steps, you are already on your way to a better credit score — and a brighter financial future.

The post How to Fix Your Credit Score appeared first on Credit Sesame.

One of the most important parts of anyone’s financial life is their credit report. Without a good credit report (and a corresponding good credit score), it becomes a lot harder to get approved for credit when you need it. You may not be able to buy things like cars, homes, or even a good education—and, if you are approved, you’ll pay a lot more for them.

Why do we have credit bureaus?

Before we had the giant credit bureau conglomerates we have today, things worked differently. Small businesses and banks extended credit to customers directly, through their own vetting processes. This worked well in small communities where everyone knew everyone else, and consumers couldn’t hide from their creditors. Over time, cities became larger and people moved around more, so it became harder for business owners to know who was likely to pay back their bills.

Vetting people for credit became a big problem, and some folks stepped up to the challenge of solving it. Merchants, trade guilds and financial groups developed lists of trustworthy customers that they passed around to members for a price. If you didn’t pay your bills, there’s a good chance you’d be blacklisted, literally, and you’d have a hard time getting credit from anyone who paid for one of those lists.

Over time, these credit groups grew into for-profit companies that developed, expanded and merged, so that what we have left today are the three giant consumer credit reporting agencies: Experian, Equifax, and TransUnion. They are usually called the “credit bureaus.” (Other credit reporting companies do exist; later on in this post we’ll point you to a list of entities that may have a file on you.)

Credit bureau definition

There is no single federal credit bureau. Instead, each credit bureau operates as a for-profit company separate from the others. They each collect and store financial data about you that is submitted to them by creditors with whom you’ve had a relationship in the past, like banks and loan companies, and even utility companies, healthcare providers, and property managers.

The credit bureaus use this data to generate reports that they sell to creditors and others who are interested in your credit history (and who have permission to obtain a copy), like lenders, landlords, insurers and potential employers.

In days past, more credit bureaus competed for consumer credit business. Today, general consumer credit reporting is overwhelmingly dominated by the big three.

Since each credit bureau is its own business, they each operate in their own way. They collect different information, for example. TransUnion reports extensive data about your employment, including your employer’s name, your position, and the dates that you were employed. The other two agencies report the employer’s name.

To add even more complexity to the equation, none of your creditors are required to report data about you to any of the credit bureaus. They report voluntarily. As a result, many report to just one or two, but not all three credit bureaus. Credit bureaus even use multiple credit scoring algorithms, some of which are company-specific.

The result is a patchwork of data about you that is very likely to vary depending on which report you look at and which method is used to calculate your score. This is why it’s important to keep an eye on your credit report from each of the credit bureaus, to make sure the data is accurate.

Watch Credit Sesame spokesperson Lynnette Khalfani-Cox, The Money Coach, explain the key differences between Equifax, Experian, TransUnion credit reports.

How do I know if my information on the credit bureau reports is accurate?

You can get a full copy of your credit report for free from each of the credit bureaus every year. The government-authorized site where you can request a copy of your credit report is AnnualCreditReport.com. It is not a national credit bureau, but rather a portal through which you can visit the individual bureaus for the purpose of retrieving your annual copies.

Another way to get a 3-bureau credit report is to purchase it. FICO® sells it, as does Experian.

You can also check Credit Sesame at any time for a free credit report card, which contains data, updated monthly, as reported to TransUnion.

Here’s what you can expect to see from your credit report. Keep in mind, this is an example, not an actual credit report.

You can request your free copies from all three bureaus at once, or you can stagger them. By staggering your requests across the year (i.e., requesting a credit report from one credit bureau every four months), you can keep closer tabs on your data and catch any suspicious activity before it’s more than a few months old.

It’s especially helpful to check your credit report just before applying for any credit, a new job, or a new apartment as well, to ensure accuracy and avoid surprises.

In some cases, you are entitled to more than one free copy of your credit report from a bureau within a year. If you are denied credit, you have the right to request a copy of the credit report on which the decision was based (the creditor must provide you with the name and contact information of the credit bureau) within 60 days.

You can also request additional copies if you’re unemployed and looking for work, if you receive welfare benefits, or if you’re a victim of fraud or identity theft.

What do I do if the information on my credit report isn’t accurate?

If you find inaccurate information on your credit report, it could either be a simple error, or it could be a sign of fraudulent activity. Errors are generally much more common: a 2012 Federal Trade Commission study found that 20% of Americans have errors on their credit reports, and for a quarter of this group, the errors are large enough to impact their ability to get credit!

If you find a credit report error, it’s important to notify each of the three credit bureaus via a formal dispute process. Credit bureau disputes sound intimidating, but they’re not that difficult to do. Credit Sesame has a handy guide on how to dispute information on credit reports.

If you find an error while viewing your credit report online, you can dispute it by clicking the dispute button near the top of the report. Otherwise, you’ll need the credit bureau contact information. They can all be reached either online, by phone, or by mail.

Who do I contact to set up a fraud alert with the credit bureaus?

Identity theft and credit card fraud is a huge problem: in 2014 alone, 7% of people in the U.S. became victims of identity theft. If you think you are a victim of fraud or you might become one (because you’ve lost your wallet), it’s extremely important to set up a fraud alert right away. The credit bureaus are responsible for maintaining accurate data, and they can’t do that if someone is out there buying Ferraris under your name. Moreover, setting up a credit bureau fraud alert can stop criminals before they even have a chance to harm you.

A fraud alert lasts for 90 days. Identity theft victims can extend the alert for up to seven years. With a fraud alert in place, the creditor will have to take extra steps to verify your identity before opening a new account in your name. Fraud alerts are free for anyone who thinks or knows they are a victim of identity theft, and for active duty military.

Another option is to place a credit freeze on your file. You’ll have to contact each bureau separately, and in some cases pay a fee to freeze, and later to thaw, your file. With a freeze in place, your credit file will not be released to anyone who requests it (creditors you already do business with will still have access to your file).

Since virtually all creditors require a credit check before extending credit, a freeze stops new accounts from being opened in your name. When you do want to allow a legitimate application for credit to get through, you can temporarily thaw your file (via your online account or by phone). Some consumers find a credit freeze to be inconvenient, but it is one of the most effective ways to thwart identity theft before it happens.

What you need to know about your Experian credit report

The way to get your Experian free credit report is to visit AnnualCreditReport.com once every year. If you visit Experian.com, you will find credit reports and scores for sale, not for free. You can get an additional copy if your Experian credit report was used in a decision to deny your credit application.

When you do get a copy of your report, check it carefully for accuracy. If you come across any errors, follow Experian’s instructions to dispute them and, ultimately, have them removed from your file. The simplest way to file an Experian dispute is to click through the dispute process while viewing your report online. Experian also provides other dispute methods, including an opportunity for you to submit supporting documentation. Information about that process will be noted on your credit report.

If you find, through your credit report review or any other way, that your identity has been compromised, it’s absolutely essential that you take immediate action to lock down your credit file and prevent any further damage. Place a fraud alert on your file right away, and consider freezing your credit long term.

Experian credit score

If you purchase your Experian credit score, it is a FICO® 8 Score. The Experian credit score range is 300-850, and it is the score used in lending decisions by many, but not all lenders. Experian also provides many other versions of both FICO® Scores and VantageScores, depending on who requests it, and other scores, such as business credit scores, that are not marketed to consumers.

Experian Credit Tracker℠

Experian Credit Tracker℠ is a service sold by Experian. It includes a copy of your Experian credit report, your FICO® Score, daily credit monitoring with email alerts, fraud resolution support and a dedicated phone hotline. This service is sold as a monthly paid subscription.

What you need to know about your TransUnion credit report

The way to get your TransUnion free credit report is to visit AnnualCreditReport.com once every year. If you visit www.TransUnion.com you will find credit reports and scores for sale, not for free.

When you receive your report, check it carefully for accuracy. If you come across any errors, follow TransUnion’s instructions to dispute them and have them removed from your file. The simplest way to file a TransUnion dispute is to click through the dispute process while viewing your report online. TransUnion also allows you to file a dispute in other ways, and guidance will be noted on your credit report.

You can place a TransUnion fraud alert or credit freeze and TransUnion will notify the other two bureaus of a fraud alert, but not a freeze.

TransUnion Credit Lock is a freezing service offered as part of TransUnion’s credit monitoring service (sold as a monthly paid subscription).

TransUnion SmartMove®

TransUnion SmartMove® is a tenant screening service for smaller-scale property managers and landlords. Renters can use it to keep their personal information private while they submit rental applications (SmartMove® sends the screening report directly to the authorized landlord). SmartMove® background checks do not have any impact on your credit score. They are “soft” inquiries.

TransUnion credit score

TransUnion generates FICO® Scores, VantageScores, company-specific educational scores, and business scores that are not marketed to consumers. There are many versions of the FICO® Score and the VantageScore currently in use, and TransUnion offers them all. The credit score offered for sale on the TransUnion website is an educational score and may not be the same number a creditor sees. This TransUnion credit score range is 300-850.

This table below explains the general number ranges for excellent to bad credit scores.

Equifax credit report

To get your Equifax free credit report, visit AnnualCreditReport.com once every year. If you visit Equifax.com you will find credit reports for sale, not for free.

To file an Equifax dispute, click the dispute button while viewing your credit report online. If you received a paper copy of your credit report or you need to submit copies of documents, follow Equifax’s instructions for filing a dispute by mail. Any time you file a dispute by mail, send copies, not original documents, and keep a copy of everything you send.

Equifax credit score

Like the other two bureaus, Equifax provides FICO® and VantageScores, and can calculate your score according to many different scoring models. The Equifax credit score range depends on the score being calculated. The most current FICO® and VantageScores range from 300 to 850. Note that the credit score offered for purchase on Equifax’s website is based on the Equifax Credit Score model and is not the same score used by creditors. The range is 300 to 850.

Equifax Complete

Equifax Complete is a credit monitoring service offered as a monthly paid subscription. It includes credit scores, credit reports, a credit freeze and alerts.

Are there other credit reports out there on me?

Hundreds of credit reporting agencies still operate in niche markets, such as business credit, tenant screening, employment screening and so on. Here is a list of other consumer credit reporting companies, and information about how to get a copy of your report from each one. You should save this list. Anytime someone (an employer, a landlord, a creditor) obtains a report on you, ask what company provided the report so that you can obtain your own copy to check for accuracy.

What’s a VantageScore?

The credit scoring system most consumers are familiar with is the FICO® Score, a proprietary formula licensed by FICO®, formerly the Fair Isaac Corporation. A consumer’s FICO® Score is calculated by each credit bureau based on the information that has been reported to it. In recent years, a new credit scoring model has emerged, developed by the credit bureaus themselves based on their own research into the consumer credit information they have on file. This newer credit score is called the VantageScore.

A VantageScore takes different information into account, and places different weight on the various components of a customer’s credit profile. Originally, the VantageScore even used a different scale, between 501 and 990, compared to the FICO® Score range of 300 to 850. However, the current VantageScore 3.0 model uses the same credit score range of 300 to 850 used by the traditional FICO® Score.

What’s a free FICO® Credit Score?

The first question is simple: what is a FICO® Credit Score? While the credit bureaus are responsible for collecting accurate information from banks and consumers about their credit profile, they’ve traditionally licensed out the work of synthesizing that information into a single credit score to FICO®.

Since each credit bureau uses the FICO® formula to calculate a consumer’s FICO® Score based on the information it has available, each bureau’s FICO® Score can be slightly different from the others. For example, a credit card company may check your Equifax credit report, but not your TransUnion or Experian credit reports. If different accounts are reported to the other two bureaus, your Equifax FICO® Credit Score may not be the same as the FICO® Scores produced by the other two bureaus.

What is the highest FICO® Score?

The highest score assigned by the FICO® Credit Scoring Model is 850, although a “perfect” 850 credit score is an anomaly. A high credit score is a sign that a consumer uses a range of credit products responsibly. But one component of the FICO® Credit Scoring Model is the number of recent credit inquiries on a consumer’s credit report. In other words, as soon as someone attempts to take advantage of their “perfect” 850 FICO® Credit Score, it will go down a few points!

[Related: How to Build Credit Fast or Easy Way to Improve Your Credit Score]

Credit score chart

What’s a good FICO® Score?

Much more important than your particular FICO® Credit Score is where your score falls along the FICO® Credit Score range of 300 to 850. A good FICO® Score is one between 640 and 719. A 720 FICO® Credit Score or higher is considered an excellent credit score by most lenders. Depending on the contributing factors of your credit report, a good FICO® Score may make you eligible for the most competitive interest rates on car loans and mortgages and some exclusive credit cards.

Highest FICO® Score

While the highest possible FICO® Credit Score is 850, only a tiny number of consumers have an 850 credit score.

Among active Credit Sesame members, the highest credit score is 839, and just 0.006% of members have that score! As you can see from the table, most Credit Sesame members fall within the range of 550 to 639 range, which is considered “fair” credit, per the TransUnion scoring model.

[Related: Credit Score Chart]

To find out your own FICO® Score for free, you have a range of options. You can check with your credit card issuer and see if they offer access for you to get a FICO® Score based on the information in your Experian credit report. Your credit card issuer may also provide a breakdown of some of the information contributing to your FICO® Credit Score.

You can also check if you can receive a FICO® Score based on your TransUnion credit report, although they may only provide you with the “key factors” that go into your credit score, rather than providing a detailed breakdown.

If your consumer credit card offers a FICO® Score be aware that it may not provide a detailed credit report so you shouldn’t rely on it to check for mistakes in your credit report.

VantageScore vs. FICO® Score

VantageScore credit scores were designed to have a few advantages over traditional FICO® Credit Scores. For example, the FICO® Credit Score model has difficulty producing credit scores for consumers with “thin files,” meaning a limited history of applications for credit and usage of existing credit lines.

This can create problems for young people who don’t have yet have a history of using and repaying credit cards and car loans. Additionally, consumers who have had loans sent to a collections bureau but have paid the debt in full don’t have those paid collections factored into their VangageScore. (FICO® newest Scoring Model, FICO® 9, also ignores paid collections, but is not widely used yet.)

Nonetheless, the FICO® Credit Score remains the most popular among lenders themselves, so it’s important to be aware of your FICO® Score, you can do so by regularly checking one or more of the free FICO® Scores options that are available. Free FICO® Credit reports are not offered. The FICO® Credit Scores provided by some of the credit card issuers may use the FICO® 8 Credit Scoring Model.

A final resource for comparing your FICO® Credit Score to the scores of people applying for credit cards, mortgages, and car loans is the FICO® forum, an independent resource where members discuss their own experiences applying for credit. The open forum makes it easy to see whether members with similar FICO® Credit Scores were approved for the credit products you are interested in.

Take a look at the graphic that outlines how your credit scores overlap from the different bureaus.

Helpful links and resources

The credit bureau phone numbers, addresses, and online dispute resolution centers are as follows:

Equifax Information Services

P.O. Box 740256
Atlanta, GA 30348
1-866-349-5191

Experian Information Solutions, Inc.

P.O. Box 4500
Allen, TX 75013
1-866-200-6020

TransUnion Consumer Solutions

P.O. Box 2000
Chester, PA 19022
1-800-916-8800

For a fraud alert, you only need to contact one bureau and that bureau will notify the other two.

• Equifax, 1-888-766-0008
• Experian, 1-888-397-3742
• TransUnion, 1-800-680-7289

Experian fraud alert and credit freeze

• You can place an Experian fraud alert, and afterwards, Experian will notify the other two bureaus.
• You can place an Experian credit freeze, however, unlike fraud alert, a credit freeze must be placed with each bureau.
• Experian customer service is offered online.

Equifax fraud alert and credit freeze

• You can request a fraud alert on your Equifax credit file, and Equifax fraud alert will also result in a fraud alert at the other two bureaus.
• You can request an Equifax security freeze. Equifax customer service is offered almost exclusively online, except for customers who have purchased a product. Those customers may log in to the Equifax Member Center for assistance.

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The post Credit Bureau Guide: What the Differences Are Between Equifax, TransUnion, & Experian appeared first on Credit Sesame.

Cyber crime is an ever-growing problem with no real solution in sight. People on the other side of the world can take your credit card information and use it to make all kinds of purchases without your permission. Fortunately, while stopping it can be nearly impossible, reacting to it in such a way that mitigates the damage done is very realistic.

The difference between credit card and debit card fraud liability

If you’re like most people, you use a combination of credit cards and debit cards. It’s important to understand that both can be the victim of fraud, and they work quite differently.

[Related: When to Use Credit or Debit]

Reported unauthorized charges on a debit card can be reversed if you notify your bank within two days of learning of the theft, but you may still be responsible for up to $50 of the amount you lost. Fortunately, some banks will waive this liability. If you report the unauthorized charges after two days, but less than 60 calendar days after your statement is mailed to you, the limit to your liability increases to $500.

After 60 days, you’ll most likely have to shoulder the entire loss.

One more quick note about unauthorized debit card charges: just because someone used your PIN doesn’t mean you’re out of luck. Many people have had their PIN number stolen or used by someone who knew it but wasn’t given permission to use it. You’ll need to sign an affidavit explaining what happened, and you may be able to get your money back.

Your liability for unauthorized use of a credit card is much lower. Under some circumstances, you can be held liable for $50. If your number is stolen, but not the card, your liability is zero. If you report a lost or stolen card before it’s used by anyone else, your liability is zero.

Fraud red flags

Virtually all major financial institutions have precautionary measures put in place to catch unauthorized charges the moment they happen. Red flags can include:

– Geographic region (countries other than your own, and areas in and out of the U.S. known as “fraud-prone” zones)

– Uncharacteristic purchases

– Numerous, small purchases (this may mean someone is testing your card first before going on a spending spree)

If a red flag comes up, the transaction may be declined. In some cases, the account will be suspended until the card issuer can confirm that you are the person making the purchases and not the victim of a thief.

Understanding phishing

One of the most common forms of identity theft is phishing. A thief sends an email or text message pretending to be someone else – usually an institution or person you’re familiar with. The goal is to get you to respond with your personal information or to click on a link that takes you to an official looking website but that is actually a fake.

For example, the message might appear to be from the lender that holds your auto loan. It may say that there was an issue with your last payment, so they need you to update your payment information. If you provide it, you’ve unwittingly given a thief access to your credit card or bank account.

No matter who a party claims to be, always check the source of any email or text message that asks for personal information. If a message appears to be from your bank, call the bank to ask if they sent it.

Other threats

Always check your accounts regularly for signs of unauthorized use. Even though phishing may be one of the most popular options for stealing people’s information, it’s hardly the only way a criminal could start charging you for their purchases.

Skimming is another real threat. In this method, a thief uses a device to duplicate the information on your credit card. They can use the information to create a duplicate of your card. Skimmers are often employees at businesses that have access to your credit card out of your sight (like waiters at restaurants). Other times, thieves install the devices in card readers at gas pumps or ATM machines.

Skimming is much more difficult to pull off on EMV cards (“chip cards”). If your card has an embedded computer chip, that means a unique authorization code is generated for each transaction. Thieves can’t accomplish this on a skimmed card. If you haven’t received a chip card to replace your old magnetic stripe card yet, call your bank to find out when you will.

What to do if you notice unauthorized charges

Check your accounts regularly. Log in at least once a week to review your bank and credit card accounts. The sooner you notice suspicious activity, the sooner you can resolve it.

If you do notice an unauthorized charge on your credit card or funds missing from your bank account, call the card issuer to report the unauthorized charges. If you login to your account online or use the mobile app, you can report the theft those ways, too.

Some issuers offer emergency card replacement, but you may have to pay a fee if you need expedited delivery. Otherwise, your new card should arrive within 7-10 days. If you’re near a local branch, you may be able to walk in and get a replacement immediately, particularly for lost and stolen debit cards.

Debit card issuers generally investigate fraudulent charges within 10 days and take action within 3 days. Credit card issuers may take longer, but you aren’t responsible to pay charges during the investigation.

If your account has not been open for 30 days, the bank has a little longer to investigate (20 days). After the investigation is complete, the bank has three days to notify you of their findings. The bank must resolve the investigation and reversal of the charges within 45-90 days, depending on the circumstances.

If the bank or card issuer finds that the charges were not fraudulent, it must notify you in writing before taking back any money that was returned to you during the investigation.

In some instances, someone can take money from your account without your permission. If you are subject to a tax lien or wage garnishment, your account can be debited and you will not be entitled to a refund.

The post Unauthorized Credit Card Charges and What to Do if You Incur Them appeared first on Credit Sesame.

What is a marriage penalty or marriage bonus?

The “marriage penalty” is a phenomenon in which two people end up owing more in taxes together as a married couple than they would have separately as single tax filers. The marriage penalty is more likely to hit a couple with more or less equal incomes, particularly if both spouses are either high earners or low earners. The higher the incomes, the more pronounced the penalty.

	Spouse 1	Spouse 2	Total
Taxable income	$23,700.00	$63,700.00	$87,400.00
Tax (single)	$3,090.00	$11,713.00	$14,803.00
Tax (married, filing jointly)	$2,629.00	$8,629.00	$11,258.00
Marriage bonus			$3,545.00

The “marriage bonus” (also called a marriage subsidy) is when a married couple owes less in taxes together than they would have owed separately. The marriage bonus most often applies to couples with very different (one high, one low) incomes. The relevant tax codes were written at a time when most married couples consisted of a primary earner and a non-earner or low-wage earner.

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Here’s an example:

	Spouse 1	Spouse 2	Total
Taxable income	$185,000.00	$185,000.00	$370,000.00
Tax (single)	$44,871.25	$44,871.25	$89,742.50
Tax (married, filing jointly)			$97,629.00
Marriage penalty			$7,886.50

Similarly, a wage-earning spouse who marries a non-working spouse will immediately see a tax benefit. If Spouse 1 earns zero and Spouse 2 earns the entire $87,400, Spouse 2’s tax liability drops from $17,638 to $13,431 for a savings of $4,207.

Where does the marriage penalty come from?

Whether rich or poor, marriage penalties often pop up because income limits set by the IRS are not doubled for couples.

While a single person can earn up to $189,300 before falling into the 33 percent tax bracket, a married couple cannot earn twice that amount before paying 33 percent. Instead, the rate kicks in at a combined income of $230,450.

[Related: Crack the Tax Bracket Code and Save More Money This Year]

Furthermore, high wage earners are also subject to certain additional taxes, such as the Medicare Surtax, which is imposed on combined income over $250,000. As single tax filers, our high-earning couple didn’t need to worry about that surtax (the cutoff is $200,000 for singles). Getting married easily pushes a high-earning couple into new tax territory.

Low-income earners aren’t safe either

It’s not just affluent taxpayers who have to worry about a tax penalty for tying the knot. Low-earners get hit, too.

Many low income earners who are eligible for the Earned Income Tax Credit find that marriage pushes them above the income limit for that financial benefit. The EITC is worth between $506 and $6,269, depending on the number of children the taxpayers have.

Couple with one child - EITC limits
Taxable income limit if single	$39,296.00
Taxable income limit if married	$44,846.00
Maximum tax credit	$3,373.00

The EITC is a phased credit, not all-or-nothing, meaning the more you earn the less of a credit you qualify for. But clearly some couples will lose out on $1,000 or more.

The marriage penalty can also stem from a tax filer’s loss of head-of-household status. Overall taxable income is higher when this single-filer status is lost.

On the bonus side we see fewer examples. Although technically not a marriage bonus, some newly married couples buy their first home and qualify for several new tax deductions, including all closing costs and any interest paid on a mortgage for a primary residence. Of course those deductions are available to single and married taxpayers alike, but couples are more commonly eligible for them.

[Related: 3 Tax Filing Changes You Must Know About When Transitioning From Your 20s to 30s]

Ways to avoid (or mitigate) a marriage penalty

Not everyone who gets married will get hit with a big IRS bill. If one spouse doesn’t work, the newly married spouse’s tax burden will go down, since married taxpayers filing jointly pay lower taxes on combined income than single people with the same taxable income.

Also, marrying a non-working spouse can help a low wage earner qualify for a larger EITC.

Deductions become more important once your income and assets start to rise. If your career is on an upward trajectory, get into the habit of saving receipts now, on paper or electronically. You’ll need them later on if you find that you are eligible to deduct the expenses. You cannot take deductions, though, without proper documentation.

You can protect your assets in other ways, too. A non-working spouse can have an IRA, even though he or she would not have been eligible as a single taxpayer. Contributions reduce taxable income for the couple.

[Related: Tax Refund 4 Great Ways for Millennials to Spend a Lump Sum]

Marriage protects assets in case of death. A spouse can inherit any amount of money without being liable for estate taxes.

A qualified tax professional can help you determine the most advantageous way to file (married, filing jointly or married, filing separately). In fact, you might want to talk to the tax pro before getting married. Some high-earners facing significant additional taxes choose not to get married after all.

If you are a self-employed high earner married to someone in a similar financial situation, your tax professional can help you estimate taxes so that you can pay installments throughout the year and avoid a big tax bill in April.

If you are a high-earning employee, carefully review your withholdings. Don’t adjust your W-4 to reflect newly married status with no other consideration to the amount withheld from your paychecks. You might end up paying too little throughout the year and get hit by a big bill at tax time.

Be sure to notify the Social Security Administration of your name change right away. If you don’t, you could trigger an audit.

Wondering how your taxes will be affected by marriage or separation? Plug the numbers into this marriage penalty calculator to see.

The post Tax Time: Will You Get Hit by the Marriage Penalty? appeared first on Credit Sesame.

We’ll show you what that looks like using a real consumer’s credit scores gathered on a single day. You’ll see that the range is 705 to 752, and we’ll explain why that’s fine.

[See how you compare to the rest of America, when it comes to credit scores.]

The “scoring model” is the algorithm used to calculate the score. The scores shown below are based on the FICO 8 scoring model. Scoring models are complex and proprietary, and they are updated every few years.

“Our scoring model has been redeveloped several times to make sure it’s more reflective of consumer behavior,” says Tom Quinn, Vice President of Product Management for Direct to Consumer Offerings at FICO. FICO owns the scoring models most widely used by lenders in credit decisions.

The “who” is Equifax, Experian or TransUnion, the three major credit reporting agencies in the US. Since every lender doesn’t report to all three credit reporting agencies, the information in your file differs from one agency to the next, and therefore the scores they generate almost always vary slightly.

Even if the three agencies each calculate your FICO base score using the exact same algorithm, the scores will differ based on the data in your file at each agency. Take a look:

It’s important to note that even if many lending organizations still use FICO Score 8 when evaluating your credit, the credit bureaus do update their scoring methodologies every few years. As of 2020 Fair Isaac Corporation is rolling out FICO Score 10.

What is VantageScore?

The credit scores you see on Credit Sesame and other free credit score sites and on your bank website or credit card statement may not be exactly the same as the score a lender sees when you apply for credit. Here’s the same consumer’s Credit Sesame score on the same day:

Why is it different? Credit Sesame offers the VantageScore 3.0, provided by TransUnion. This VantageScore 3.0 score is based on whatever data is in the consumer’s TransUnion credit file on the day it’s calculated.

VantageScore was developed by the three big credit reporting agencies – TransUnion, Equifax and Experian – to compete with FICO. VantageScore is now used by more than 2,000 lenders nationwide, including 7 of the 10 largest banks.

[Related: Rent & Utilities to Be Stronger Factors for Your Credit in 2016?]

Like FICO, the VantageScore ranges from 300 to 850. (Earlier VantageScores ranged from 501 to 990.) VantageScore uses a different algorithm to calculate credit scores that it claims more accurately predicts credit risk.

Credit.com, Credit Karma, LendingTree, myBankrate, MyCreditCards.com, Quizzle and WalletHub all also offer the VantageScore 3.0 score for free, provided by TransUnion, Equifax or Experian.

Again, scores for the same consumer on the same day, on various free credit score websites:

FICO and VantageScore both offer specially tailored versions of your credit score to different types of creditors, including lenders in the auto, mortgage and real estate industries. Those industry scores may differ slightly from the base version of your score.

Mortgage credit scores

When you apply for a mortgage, the lender gets a special credit report that shows data from all three credit agencies. The report is called a “merged” report, or a residential mortgage credit report (RMCR), and it allows the lender to see the most complete picture of your credit possible. This report is more comprehensive than the credit report other types of lenders see.

The mortgage lender will also see three different FICO scores from the three credit agencies, and they’re all based on different FICO scoring models. The Equifax score is based on FICO 5, the TransUnion score is based on FICO 4, and the Experian score is based on FICO 2. All of these are tailored to predict the likelihood that you will repay your mortgage. The data is analyzed in such a way to determine whether “there is something that makes this consumer more or less risky for that industry,” says Quinn.

The mortgage lender might base its approval (and interest rate) decision on the middle score, or it might take an average of the three.

Auto credit scores

Auto lenders use a FICO or VantageScore that is specially tailored to predict the likelihood that you will repay your auto loan. This industry score gives greater weight to your history with auto loans and other, similar installment loans.

Bankcard credit scores

For credit card issuers, FICO and VantageScore offer specially tailored bankcard credit scores that are designed to predict how risky you are with credit cards and other revolving credit.

The interesting thing, though, is that the credit card account approval process varies widely. Credit card issuers are more secretive and don’t reveal their underwriting guidelines or which score they intend to pull for a given application.

Indeed, an issuer might pull one applicant’s credit report summary and score from one agency, and another applicant’s report and score from another agency. Most also perform an in-house credit analysis, particularly when the customer applies for a credit line increase.

Which credit score is most important?

The truth is that all of these credit scores are accurate reflections of the consumer’s credit risk, and vary depending on the information in the consumer’s file and the data the score aims to emphasize. Taken as a group, these scores show that the consumer has decent credit, but there’s plenty of room for improvement.

[You May Also Like: Why You’ll Feel Better About Your Low Credit Score When You Tackle This First]

Rather than focusing on the numbers, focus on ways to improve them. The very same actions will improve the scores across the board. “What’s important for the consumer is not all [of the different] FICO scores, but to think about their goal, and to try to understand their score and report,” says Quinn.

[Related: Understand Lender Credit Lingo & Jump to a Higher Credit Category]

No matter where you view your credit score, pay close attention to the factors holding it down and suggestions for bringing it up. In our consumer’s case, the highest priority is to get revolving balances paid down.

Reviewing Credit Sesame’s letter grades for the different factors affecting this consumer’s credit score, we can see that average account age is the second priority. Our guy can move from a B to an A by avoiding opening new accounts, and keeping old accounts open and in good standing.

[Related: How to Move Your Credit Grade From a ‘C’ to ‘B’ in 2 Simple Steps]

Once he achieves straight As across the board, we won’t be surprised to see this consumer’s score jump past 800 no matter what agency calculates it!

The post FICO, VantageScore, Mortgage Credit Scores & More: What Your Different Credit Scores Mean appeared first on Credit Sesame.