Being “credit invisible” means that you don’t have any active credit accounts listed on your credit report, so your credit score doesn’t exist. A lot of people become credit invisible after a financial hardship, such as a bankruptcy or foreclosure. They decide to wipe their hands of credit and become cash-only. Eventually, all the lines of credit drop off their credit report, and they become “credit invisible.”
Is Being Credit Invisible a Good Thing?
For most people, the answer is no, and here’s why: Unless you have millions of disposable dollars, chances are that you will need your credit score at some point in the future: to buy a house or a car, to rent an apartment, or to apply for a job.
And if you go credit invisible, you’ll have no credit score, which can be just as limiting as having a bad credit score.
Do I Need to Be in Debt to Build Good Credit Score?
No. You can build excellent credit without carrying debt or paying a penny in interest. Scoring models reward on-time payments, responsible use of limits, and consistent activity. They do not require you to revolve a balance.
Here’s a great way to build credit without going into debt:
Open three credit cards. Keep them active by charging one small purchase every month, and then immediately paying the balance in full. For instance, you can pay for your cell phone on your credit card, and then pay the balance in full as soon as the charge hits your account.
Watch and Learn: Dave Ramsey Is Rich Enough to Ignore Credit—You’re Not!
Financial “guru” Dave Ramsey says you should go credit invisible: He’s wrong … and out of touch!
In this article, we’ll answer some of the common questions about being credit invisible so that you can build your credit score to 720 and take advantage of the perks of a great credit score.
FAQ: What does “credit invisible” mean in plain English?
Being credit invisible means that you have no active accounts on your credit report that update month after month. Because the credit-score bureaus have no information on which to judge your credit worthiness, they assign you with no score. Think of it like applying for a job with a blank resume. You might be reliable, and you might pay everything on time, but if nothing is reported to the credit bureaus, they have no evidence that you can handle the job of paying your bills on time.
When you have no credit score, a landlord may ask for a larger deposit, a car lender may quote a painfully high interest rate, and insurers in many states will price your policy higher.
Takeaway: Being credit invisible means that no active accounts are reporting to the credit-scoring bureaus, so you do not have a credit score. That blank file makes everyday approvals harder and more expensive.
FAQ: How is being credit invisible different from having bad credit?
Being credit invisible means that there is not enough fresh data for the credit-scoring bureaus to calculate a score. Bad credit, on the other hand, means that the data shows a history of missed payments, charge-offs, or collections. In either case, you will be denied loans and credit cards, or given high interest rates. When you are invisible, the credit-scoring bureaus do not know how you will manage credit, so lenders see you as a risk. When you have bad credit, they see you as a risk.
If you are credit invisible, you can create a visible, clean history in a couple of months by opening three secured credit cards and paying on time. If you have bad credit, rebuilding your score might take longer because you are pushing newer, positive data past older, negative data. Either way, you can learn more by:
Takeaway: When you are credit invisible, the bureaus do not have current data to grade, so you get no score. With bad credit, they do have data and it shows problems like late payments or collections.
FAQ: What is the difference between being credit invisible and having thin credit?
Being credit invisible means there are no active accounts on your reports, so the bureaus cannot calculate a score. Thin credit means that while you do have a file, not much information is on your credit report. Think of thin credit like a short resume with one recent job and no references. For instance, you might have opened a single secured card last month and that is it.
When you have a thin credit file, you do have a credit score, but it jumps around because there is not enough history to build deep roots. Credit bureaus worry because they have limited proof that you can manage credit over time.
If you have a thin credit file, add depth on purpose:
Turn on autopay, keep your utilization under 10 to 30 percent, and let those accounts report every month. After three to six months, your score will usually be steady.
Takeaway: When you are credit thin, the credit-scoring bureaus have little information to judge your credit worthiness. Yes, you have a credit file, but there’s too little history for you to have a steady credit score.
FAQ: What are the downsides to having no credit score?
Category
What it looks like with no score
Housing
Slower approvals, larger deposits, co-signer requests, or flat-out denials.
Car loans & leases
Approvals are unlikely. When you are approved, you’ll pay a higher interest rate and a much bigger down payment.
Mortgages
Approvals are unlikely. Manual underwriting can apply in some programs, though there will be tougher requirements and less opportunity.
Insurance
Higher car or home premiums in many states.
Utilities & cell phones
Deposits for power, water, internet, and mobile plans, the latter of which will often be denied.
Travel
Hotels and rental cars require a card for holds or large deposits
Employment
Denial of jobs. Extra questions for roles that review credit reports.
Takeaway: No score means higher costs, bigger deposits, and slower approvals on everything from apartments and car loans to insurance and utilities. Hotels and car rentals will be difficult.
FAQ: Can I rent an apartment with no credit score?
Yes, you can rent an apartment with no credit score, but it will be more difficult. Many landlords use a credit score as a quick filter, so they might refuse to look at your application. If a landlord will accept an application for a lease without a credit score, they will likely expect additional information, including:
Two to three recent pay stubs and last year’s W-2s
Two to three recent bank statements that match your income story
A letter from your current or prior landlord confirming on-time rent
A photo ID and proof of employment, such as an offer letter or HR contact
You might also need a larger security deposit ready, first and last months’ rent, and proof of renter’s insurance.
Takeaway: You can rent an apartment without a credit score, but you will have fewer options and you may need to pay a larger deposit up front.
FAQ: Will my car insurance cost more if I am credit invisible?
Yes, in many states, insurers use a credit-based insurance score to help predict claims, and they assign your insurance premium accordingly. When you are credit invisible, the insurance companies cannot size you up, so they drop you into a pricier tier, even if you have a spotless driving record. You can still shop around, and you should, but the bigger win is to make your file visible so the pricing model can see on-time behavior.
If you are credit invisible and need to raise your score to lower your insurance premiums:
Turn on autopay, keep your utilization under 10 to 30 percent, and let those accounts report every month. After three to six months, your score will usually be steady, at which point you can call your insurance carrier and ask them to re-rate you.
Takeaway: If you are credit invisible, your insurance premium will be higher in some states.
FAQ: I filed bankruptcy. What is my first move so I do not go credit invisible?
Enroll in 7 Steps to a 720 Credit Score, a free credit-education program, so that you learn how to rebuild your credit score after a bankruptcy. Namely, you will want to:
Open three new credit cards.
Remove all errors from your credit report. (If you have been through a bankruptcy, we offer a free review of your credit report as part of the program.)
Open an installment account.
Then, pay all your bills on time, and keep your credit card balances below 30 percent of the limit, and 10 percent for even faster results. If you follow the steps, your score should reach 720 a year or two after your bankruptcy.
Takeaway: Enroll in 7 Steps to a 720 Credit Score, a free credit-education program.
Philip Tirone started his career as a mortgage broker more than 30 years ago and quickly realized something troubling: his clients were intentionally kept in the dark about how credit scores really work. Poor credit forces people to pay thousands more in interest, straining their budgets and making it even harder to stay current on future payments. That cycle of financial stress can last for years, even decades, while banks profit from late fees and high interest rates.
This realization shaped his mission: to pull back the curtain on credit scoring, teach people how to take control, and give them the tools to build lasting financial freedom. He authored 7 Steps to a 720 Credit Score first as a book, later turning it into https://www.720creditscore.com/free-enrollment/, which has now graduated more than 200,000 students.
I have spent decades teaching consumers and attorneys how credit really works. As the creator of 7 Steps to a 720 Credit Score, a free credit education program, I have guided thousands of people through the process of rebuilding their credit after bankruptcy or financial hardship. My programs are used nationwide by attorneys, nonprofits, and individuals who want real results, not quick fixes.
But often, I meet people who want to fast-track their success. They’re asking questions like:
“How do I improve my credit score the fastest?”
“How can I qualify for a home in under a year?”
“Is there a safe way to rebuild credit without risking late payments?”
Those are smart questions. And the truth is, credit builder programs can be one of the most effective tools for moving your score up quickly, if you know how they work.
So let’s take a look at the ins and outs of credit builder programs.
What Is a Credit Builder Program?
The term “credit builder program” can mean different things to different people. After all, using a credit card responsibly is a credit builder. So too is paying your mortgage, car, or student loans on time.
But when people use the term “credit builder program,” they are usually talking about a loan or other payment plan designed to help them improve their credit scores by creating a history of on-time payments. Unlike traditional loans, the goal of a credit-building loan or program isn’t to borrow money to buy something (such as a car or a college education). Rather, the goal is to build a record of positive payments so your score climbs and you can qualify for better financing, lower interest rates, and bigger opportunities in the future.
When the program reports your payments to all three credit bureaus, each on-time mark strengthens your payment history, which is the single most important part of your credit score.
*Be sure to check out the Credit Rebuilder Program, which comes with a money-back guarantee: if you follow the program as detailed and your score doesn’t reach 720, you’ll get your money back.
Why Is Reporting to All Three Credit Bureaus Important?
In the world of credit improvement, reporting is a must-do. After all, if a program doesn’t report to the bureaus, it won’t have any impact on your score. Your credit score is based on what is in your credit report, so unless your positive payments show up there, you won’t see results.
Programs that report to all three major credit bureaus (Experian, Equifax, and TransUnion) give you the best shot at fast progress. That’s why not all “credit repair” or “credit help” services are worth your time. Not all of them report to all three bureaus.
But a good credit builder loan or program should report to all three. (It’s worth double-checking, though!)
How Does Evergreen’s Credit Rebuilder Program Work?
What Are the Different Types of Credit Builder Programs?
Generally speaking, credit builder programs can be broken into two categories:
Credit builder loans.
Credit builder programs.
Let’s take a look at the key differences.
How Credit Builder Loans Work
When you take out a credit builder loan, the lender won’t give you the loan money up front like they would with a car loan or personal loan. Instead, you make monthly payments (usually small ones, like $25–$50) for a set period of time, usually 12 to 24 months. This money gets placed in a locked savings account or certificate of deposit (CD) that you can’t touch until you’ve made all the scheduled payments.
Each payment gets reported to the credit bureaus as if you were repaying a normal loan. Once you finish the term, the lender will release the money that is being held in the savings account, sometimes with a little bit of interest.
The downside is that if you miss a payment on a credit builder loan, two things usually happen:
The late payment will be reported to the credit bureaus, which will hurt your score instead of helping it.
You may not get all the money back. The lender can keep part of what you’ve already paid to cover late fees or default, and they may not release the savings account or CD until the loan is brought current. In some cases, if you default completely, the lender will apply what is in the account toward what you still owe, so you lose both the credit benefit and some of the money.
*Be sure to check out the Credit Rebuilder Program, which comes with a money-back guarantee: if you follow the program as detailed and your score doesn’t reach 720, you’ll get your money back.
How Credit Builder Programs Work
Programs like Evergreen’s Credit Rebuilder Program are designed to eliminate that risk. Credit builder programs also report your payments to the credit bureaus, but without the risks tied to loans. If life changes and you need to stop making your payments, you can cancel anytime.
You won’t get your money back (unless the program doesn’t work, since it comes with a money-back guarantee), but you also don’t face the risk of a missed payment dragging your score down. That makes credit builder programs a better option for anyone who worries about keeping up with multiple bills or unpredictable income.
The trade-off with credit builder programs is that you don’t get money back at the end like you would with a loan. But the upside is that many programs bundle in extra services that make the deal far more valuable. For instance, Evergreen’s Credit Rebuilder Program offers legal counsel and protection, priority Q&A support, and identity theft cleanup.
So while you don’t walk away with a savings account, you do get reporting to all three bureaus plus tools, legal support, and education that give you a better shot at lasting success.
The most important feature of any credit builder program is that it reports to all three major credit bureaus: Experian, Equifax, and TransUnion. Without that, your score may not improve across the board.
Beyond that criterion, the best credit builder program depends on your income stability, past payment history, and financial goals. If your income is steady and you’ve never missed a payment, a credit builder loan might make sense because you’ll get your money back at the end. But remember: if you miss even one payment, it can backfire and hurt your score.
That’s why people with unpredictable income, or anyone who has struggled with late payments before, often do better with a cancel-anytime program like Evergreen’s Credit Rebuilder Program. These programs won’t return your money at the end, but they also don’t penalize you for stopping.
FAQ: What happens if I miss a payment in a credit builder program?
With a credit builder loan, missing a payment can backfire. The late payment will be reported to the credit bureaus, which will hurt your score instead of helping it. On top of that, you may lose money if you make a late payment. Lenders often keep part of what you’ve already paid to cover late fees, and they may not release the savings account or CD until the loan is brought current. In cases of default, they can apply what is in the account toward the balance you still owe. And because these loans charge interest, a missed payment can also trigger extra interest charges or penalty fees.
That means you could end up paying more than you borrowed, while also damaging your credit. A tool designed to rebuild your score can actually leave you worse off.
On the other hand, a credit builder program works differently. If you need to stop making payments, you can cancel anytime. Either way, you won’t get money back at the end, but you also won’t be penalized with negative marks, late fees, or interest charges. That makes programs safer for people with unpredictable income or those who have struggled to pay bills on time in the past.
FAQ: Do I lose money if I cancel a credit builder program early?
If you choose a credit rebuilder program (versus a credit rebuilder loan), you do not get a refund of past monthly fees. There is no end-of-term payout on credit builder loans, so canceling early means you stop future charges, but you do not get money back. (That said, some providers, like this one, advertise a money-back guarantee if the program does not work as promised, so check the written terms before you enroll and again before you cancel.)
One way or another, the positive credit you have already earned under a credit rebuilder program stays on your credit reports, even if you cancel early. Here is how cancellation of a credit rebuilder program compares to cancellation of a credit builder loan:
Question
Credit Builder Program
Credit Builder Loan
What happens if I cancel or stop?
You stop paying. No refund of past fees. No new negative mark for stopping.
Late or missed payments are reported as delinquent. Funds locked in the savings account can be reduced by fees or applied to what you still owe.
Do I get money back?
No payout at the end by design, unless a published money-back guarantee applies under its terms.
Yes if you finish on time. If you miss payments, fees and interest can shrink what you receive.
Credit impact
Prior on-time payments remain and continue to help. No late mark for canceling.
A late mark can lower your score for up to seven years, per Experian, and interest or fees may apply (https://www.experian.com/).
Who might prefer this?
Anyone who values flexibility or has irregular income.
Someone who is certain they can make every payment on time and wants a payout at the end.
Here is a quick example:
Imagine that your income changes after you have paid eight months of a credit builder program, and you can no longer afford the payments. You can cancel before your ninth payment. You will not get months 1 through 8 refunded, but those eight on-time payments remain on your credit report and keep helping your score.
On the other hand, if you have a loan, a single late payment can hurt your score and reduce your payout.
Fresh tips before you cancel
Ask about pause or hardship benefits. Many programs, including Evergreen’s Credit Rebuilder Program, offer temporary relief or unemployment protections.
Keep your proof. Save statements that show on-time payments.
Aim for enough history. Twelve to twenty-four months of reported on-time payments tends to show stronger results because payment history and how long you have managed accounts both influence scores, 35 percent and 15 percent, respectively. (That breakdown comes directly from the FICO scoring model, where payment history makes up the largest share, 35%, and length of credit history makes up another 15%. Source: https://www.myfico.com.)
FAQ: Do credit builder programs report to all three credit bureaus?
Not all credit builder programs report to all three bureaus, so it’s important to check before signing up. Some programs only report to one or two, which limits your progress because lenders may pull from any of the three. Evergreen’s Credit Rebuilder Program reports to Experian, Equifax, and TransUnion, ensuring your positive payment history shows up everywhere.
FAQ: Do credit builder programs help with FICO scores or just VantageScore?
Yes, credit builder programs help with both FICO and VantageScore, because both models pull from the same raw data in your credit report. That means your on-time payments, credit utilization, and length of credit history all show up regardless of which scoring system is being used. The difference is in how the models weigh those factors.
For example, FICO scores are used in about 90% of lending decisions and break down like this:
35% payment history
30% credit utilization
15% length of credit history
10% credit mix
10% new credit inquiries
VantageScore uses the same data, but it ranks factors by influence instead of fixed percentages. Both can look different even though they’re based on the same credit file. That’s why you might see a 720 VantageScore but a 680 FICO score on the same day.
FAQ: Can a credit builder program remove negative items from my credit report?
Yes, the right credit builder program can help remove negative items, but it depends on your situation. Most credit builder programs focus on adding positive payment history, not disputing old marks.
However, Evergreen’s Credit Rebuilder Program includes extra protection. If you’ve been through a bankruptcy or dealt with identity theft, a law firm will conduct a free review of your credit report. If they find errors and the credit bureaus or creditors don’t remove them after a proper dispute, you will receive free legal counsel to enforce your rights under the Fair Credit Reporting Act (FCRA).
That means if a creditor or bureau is breaking the law by leaving mistakes on your report, you’ll have legal backing at no additional cost, and in some cases, you may even be entitled to financial compensation.
FAQ: Are credit builder programs legitimate or a scam?
Yes, many credit builder programs are legitimate, but it’s easy to mix them up with credit repair scams if you don’t know the difference. A credit builder program works by reporting your on-time payments to the credit bureaus, which helps you build positive history over time. Legitimate programs are upfront about their fees, explain exactly how reporting works, and never promise overnight results.
The confusion comes from credit repair companies, where scams are more common. These are the ones that claim they can remove accurate negative items from your report. According to the Federal Trade Commission, no company can legally erase accurate information, so those promises are a red flag.
FAQ: After bankruptcy, is it better to use credit repair or a credit builder program?
After bankruptcy, a credit builder program is usually the better choice. Credit repair companies focus on disputing items on your credit report, which can help if there are legitimate mistakes. But most of the negative marks after bankruptcy, like discharged accounts or past-due payments, are accurate. By law, those items can’t be erased, so paying for “repair” services often leads to frustration and wasted money.
A credit builder program, on the other hand, reports new positive payment history to all three bureaus. Since payment history makes up 35% of your FICO score, this is the fastest and most reliable way to rebuild your credit after bankruptcy. Evergreen’s Credit Rebuilder Program, for example, not only adds positive history to your credit report, but the program also enrolls you into a credit-education program, includes a free credit report review, and provides legal support if errors remain from your bankruptcy or from identity theft.
FAQ: What’s the difference between credit builder programs and credit repair companies?
The key differences are in method and outcome: credit repair companies often try to remove negative items from your credit report, while credit builder programs add new positive history that lenders can see.
Credit repair companies dispute negative items on your credit report. When they target real mistakes, this can help. But many companies dispute everything, even accurate information, which can backfire. As the FTC warns (https://www.ftc.gov/), no company can legally remove accurate negative information. That is why so many credit repair services get labeled as scams. And if you are a victim of this scam, the credit bureaus might flag your report for frivolous disputes, which means fixing real errors later can be harder.
Credit builder programs, on the other hand, create a new positive history by reporting your on-time payments to Experian, Equifax, and TransUnion. They do not try to erase the past. They help you build a stronger future. Some, like Evergreen’s Credit Rebuilder Program, also help you correct your mistakes by reviewing your credit report and offering free legal support if errors remain from your bankruptcy or from identity theft.
FAQ: Do credit builder programs really work, or is it better to get a secured card?
Yes, both credit builder programs and secured credit cards really work, but they work in different ways, and the best choice depends on your situation. A secured credit card builds credit by reporting your purchases and payments each month, and it’s essential if you’re aiming to follow the “three-card rule” that credit experts recommend.
A credit builder program, on the other hand, is designed as an installment account. Your monthly payments are reported to all three credit bureaus, adding positive history without requiring a deposit or risking high utilization.
Credit-scoring bureaus like to see a “healthy mix” of different types of credit scores. The strongest credit scores usually come from having both: three credit cards (secured or traditional) to show revolving credit management, and at least one installment account (like a credit builder program) to show you can handle fixed payments.
FAQ: How do credit builder programs compare to DIY credit rebuilding strategies?
Credit builder programs give you a structured, guaranteed way to add positive history to your credit report because your payments are automatically reported to all three credit bureaus. DIY strategies can work too, but they require discipline, patience, and a clear plan. For example, you might open new credit cards, lower your balances, or dispute errors on your own, but without guidance, it’s easy to miss steps or make mistakes that slow your progress.
That’s why many people combine both. A program like Evergreen’s Credit Rebuilder adds the installment history you may be missing, and provides enrollment into 7 Steps to a 720 Credit Score, which is a credit-education program that shows you exactly how to use credit cards, manage utilization, and correct errors the right way.
FAQ: How long does it take to see results from a credit builder program?
Most people start to see credit score improvements from a credit builder program within three to six months. That’s because the bureaus need a few reporting cycles to establish your new payment history. The real gains, though, usually show up after 12 to 24 months of consistent on-time payments. That’s when you benefit from two factors that drive your score: payment history (35%) and length of credit history (15%).
For example, someone starting at 550 might move into the mid-600s within six months, and into the 700s after a year or two if they combine the program with smart credit card use and low balances.
FAQ: How much can my score go up with a credit builder program?
A credit builder program can raise your score anywhere from 50 to 100 points or more in 12 to 24 months, depending on where you’re starting. If your credit is very low because you have little or no history, the gains can be dramatic once positive payments begin reporting. If your score is already fair (in the mid-600s), the jump may be smaller but still enough to move you into the “good” or “excellent” range that qualifies you for the best loan rates.
You have had a major financial crisis such as bankruptcy, repossession, or foreclosure.
When you use Evergreen’s Credit Rebuilder Program as your installment account, you will also gain free access to 7 Steps to a 720 Credit Score, a credit-education course. It breaks down exactly how to combine these strategies so you can move from the 500s or 600s into the 700s in 12 to 24 months, and often much faster. The course also offers a full module on quick credit-improvement strategies.
FAQ: What are the best credit builder programs after bankruptcy?
The best credit builder programs after bankruptcy are the ones that report to all three credit bureaus and provide you with the education you need to use bankruptcy as a springboard to a better credit score. Evergreen’s Credit Rebuilder Program is a strong option because it adds positive installment history to your credit report while also offering a free credit report review, legal help if errors from your bankruptcy aren’t removed, and built-in education through the 7 Steps to a 720 Credit Score course.
That education is crucial. Without it, many people wait 10 years for the bankruptcy to fall off their credit report. But with the right knowledge, you can often rebuild your credit score to a 720 12–24 months after discharge (Chapter 7) or confirmation (Chapter 13).
FAQ: Do credit builder programs work for people with no credit history?
Yes, credit builder programs are one of the fastest ways to establish a score when you have no credit history at all. Each monthly payment gets reported to your credit report as an installment account, which has the same positive impact as a paid-on-time car loan. Within three to six months, you will start to see your credit score emerge, and in 12 to 24 months, you can have a great score, as long as you follow the rules of credit-building.
This begs the question: “What are the rules of credit-building?” With Evergreen’s Credit Rebuilder Program, you will also gain access to 7 Steps to a 720 Credit Score, a credit-education course that provides step-by-step guidance in building a credit score.
FAQ: How do credit builder programs help people with bad credit?
Credit builder programs help by layering fresh, positive history on top of older negative marks like late payments or collections. Since credit-scoring bureaus put more weight on recent behavior, those on-time payments can quickly start tipping the scales in your favor
That said, a builder program alone isn’t enough. Rebuilder programs are reported as installment accounts, which are an important part of your credit score. But you’ll also want at least three revolving credit cards in good standing. This mix of credit types ( one installment account plus three cards) is what the bureaus call a “healthy mix.” It shows you can manage both fixed monthly payments and flexible revolving balances.
FAQ: Are credit builder programs worth it if I already have fair credit?
Yes, they can still be worth it. If you’re in the mid-600s, adding consistent installment history can push you into the 700s, which is where you qualify for the best loan rates. Many people with fair credit also have errors dragging their score down, and programs like Evergreen’s Credit Rebuilder Program include a free credit report review that can uncover those issues.
FAQ: What’s the safest way to rebuild credit if I’ve struggled with late payments before?
The safest path is to use tools that won’t punish you harshly if something goes wrong. Credit builder loans can be tricky because one missed payment can drag your score down. Credit builder programs, on the other hand, don’t report missed payments, and you can cancel anytime without taking a hit. Pair one with autopay on your credit cards (keeping balances under 10% of your limit), and you’ll build positive history without the stress of old habits tripping you up.
FAQ: Can a credit builder program help me qualify for a mortgage or car loan?
Yes, a credit builder program can improve your credit score and help you qualify for a mortgage or car loan. Lenders want to see a solid record of on-time payments, and that’s exactly what credit builder programs create.
That said, most lenders also want to see a mix: installment accounts (like a builder program or car loan) and revolving accounts (like credit cards). Put those together, and you’re showing the kind of financial responsibility banks look for when approving big loans.
FAQ: Can I rebuild my credit if I don’t have a credit card?
Yes, you can rebuild your credit score without a credit card, but it will usually take longer. Credit builder programs create installment history, which is valuable, but credit-scoring models also want to see revolving credit. Without a credit card, you miss out on credit utilization, the percentage of your available credit you’re actually using. (For example, if you have a $500 limit and carry a $100 balance, your utilization is 20%.)
Since utilization makes up about 30% of your FICO score, leaving it out slows your progress.
A smart middle ground is to pair a credit builder program with at least one secured card you use for small purchases and pay off in full each month. You can check out our list of credit cards currently approving clients.
FAQ: Can I use a credit builder program while I’m in a debt consolidation plan?
Yes, in most cases you can. Debt consolidation helps by rolling your existing balances into one structured loan, which simplifies repayment and lowers your utilization ratio, a key part of your credit score. At the same time, a credit builder program adds new, positive payment history every month, which strengthens your profile.
The combination can be powerful: consolidation organizes your old debts, while a builder program gives you fresh activity that scoring models reward. The main caution is affordability. If the consolidation payment already stretches your budget, adding another obligation could put you at risk of missed payments, which would hurt your progress instead of helping it.
I learned a ton of great information from Tom Kish about how to get business credit during Week Two of the Credit and Debt Summit. How to Get Business Credit
Tom Kish is the author of Shortcuts to Money, and he’s one of our experts at the Credit and Debt Summit. Basically, Tom teaches people how to get business credit, and then he teaches them how to use it to expand their businesses.
Here are three highlights: The first secret about how to get business credit is this: Don’t apply in your own name. A lot of entrepreneurs walk into a bank and fill out a business loan application using their own name. Kish says the banks will basically laugh in your face if you do this.
Banks want to do business with LLCs, S-Corps, and C-Corps. Banks know that corporations might buy insurance products through the bank, they might build investment accounts or retirement accounts, or they might process their merchant services through the bank.
And being a sole proprietor—even one with a Fictitious Business Names or “DBA”—just doesn’t cut it, says Kish.
But if you register your business as a corporation or formal partnership, the banks will practically salivate at your door. The second secret about how to get business credit is this: Keep your personal credit score high. A lot of lenders will look at the owner or principal’s credit score when considering a loan application.
This doesn’t mean that you should apply for business credit under your own name. Once again, you absolutely should not. It does, however, mean that your personal credit score might be considered as part of the overall process.
So if you have a bad credit score, be sure you know how to build credit. Namely, get your outstanding debt as low as you can, pay your bills on time, and scour your credit report for errors. (Be sure to come back later for some hot information from Brian Diez about errors on your credit report!) And the third secret I’ll share is this: Apply for more than one loan. Let’s say you have a business registered as a corporation and you want a $150,000 line of credit. Instead of applying for one big loan, try breaking it into three or four loans that add up to $150,000.
You will have much more success if you start by looking for a bank that will provide you with $30,000 or $40,000 line of credit. Once you secure this loan, apply for another one. And then another.
Heck if you are just getting started, apply for a $5,000 line of credit. Get your foot in the door and get the ball rolling.
One thing you should know about how to get business credit is that getting the first loan is always the hardest step, especially if you don’t have any assets or much history. Look for a bank that provides “stated income” loans that are unsecured. This means that you won’t have to provide tax returns, collateral, or a business plan.
Just a quick reminder…
Don’t get carried with your credit cards when shopping for holiday presents. Remember that one of the keys to a high credit score is to keep a balance that is no higher than 30 percent of the limit.
This means that if you have a $2,000 limit, your balance should not exceed $600.
Ever. Not even for one day. Even if you pay your bill in full each month.
You see, 30 percent of your credit score is based on your outstanding debt. And in large part, your outstanding debt includes something called the “utilization rate,” which is your balance as a percentage of your limit.
Credit bureaus give higher scores to people with low utilization rates, and they give lower scores to people with high utilization rates.
So keeping the right credit card balance is one of the most important things you can do this holiday season to protect your credit score.
For more ideas, be sure to download my free holiday booklet about saving money during the holidays, preventing the retail store scams, and protecting your credit score.
– Philip Tirone
With Christmas just a couple of weeks away, I wanted to share this tip for protecting your wallet when you hit the malls.
I call it the “envelope system.” It works like this: 1. First, create a holiday spending budget. I know a lot of parents who want to create lasting memories for their children, so they go overboard, buying tons of presents for their kids.
But think back to your own childhood. How many gifts are etched into your memory?
Probably not many. Your children will remember the time they spend with you more than the gifts they will receive.
And if you are racking up your credit card bills, you probably feel stress and anxiety, which will detract from the time you spend with your children.
So create a reasonable budget, determining how much you can afford to spend on each person on your list. 2. Leave the credit cards and debit cards at home.
I’m totally serious about this. If you don’t take credit cards or debit cards, you cannot overspend. It’s that simple.
If you do take credit cards and debit cards, you can. So just leave them at home.
The more radical this idea sounds to you, the more important it is that you implement it.
Taking credit cards with you is just too tempting, even to the most disciplined shopper. The allure of “buy now, pay later” will allow you to make impulse purchases.
If you take only cash, on the other hand, you will limit your spending to the cash in hand. Those impulse purchases will be impossible. 3. Create “wallets.”
This is where my “envelope system” comes into play …
Before jumping in your car and hitting the local mall, pull out some plain white envelopes and write the name of each person you are going to purchase a present for on individual envelopes. (If you have eight people to buy presents for, you should have eight envelopes.)
Within each envelope, place the appropriate amount of cash you have budgeted for this person—no more and no less.
Each of these envelopes represents the wallet you have for each person on your list.
You might want to bring a little extra money for lunch, but be sure to leave your credit and debit cards at home.
When you purchase a present, use the money from the appropriate “wallet.”
This method will create a psychological barrier to impulse shopping. If you are tempted to splurge on a gift, you will be dissuaded when you consider whose wallet you will withdraw money from in order to cover the impulse shopping.
What do you think? Does this help you avoid the “holiday credit card hangover”? Leave a comment below and let me know.
Cheers! Philip Tirone
P.S. You can use this tip for other events: birthdays, anniversaries, and other events that call you to the mall!
Scott, I have a question about rolling credit card debt into a home mortgage. If I have a current mortgage balance of around $66,150 at 8.25% fixed rate, monthly payments, with 21 years left on a 30 year mortgage, How much do I save if get a 15 year mortgage at 4.85% fixed rate, biweekly payments, with $10,190 of credit card debt added which is currently at 9.99%? I have been a subscriber for some time now, and our local credit union recommended we do this instead of doing just the home mortgage and then a separate loan for the credit cards. They also told us that by paying biweekly we would knock a few years off the 15 year mortgage. I read your newsletters all the time and have found it helpful in helping us to get our finances in order before I retire in 8 years. We are almost debt free of credit cards and we look forward to being able to live without being enslaved to the credit companies. If you use this in your newsletter use my first name and last initial. Thanks Scott you are an asset and inspiration to millions of people in these terrible economic times. Shawn M.
This is an involved math problem–which I love. 🙂 It’s important that we do an apples-to-apples comparison. That means we have to keep your payments constant. Here we go… STEP 1: Figure out the numbers AFTER you refinance at 4.85%.
Current Mortgage Balance: $66,150
Credit Card Balance: $10,190
—————————————
Total Principal: $76,340
Refinance APR (Annual Percentage Rate): 4.85%
Loan Period: 15 years
Using the DebtSmart Loan Calculator…
Monthly Payment: $597.75
Biweekly Payment Amount: $597.75/2 = $298.88
Using the DebtSmart Loan Calculator…
Loan Repayment Time with Biweekly Payment: 13.35 years (347.20 biweekly periods)
Total time paying $647.57 per month is 13.35 years or 160.2 months. STEP 2: Find the total time to repay original loans based on the amount you’re willing to pay for the refinance in Step 1.
Total willing to pay is $298.88 every two weeks.
Monthly: ($298.88 x 26)/12 = $647.57 (same monthly amount as the refinance in Step 1)
Using the DebtSmart Loan Calculator…
The monthly payment that will repay the $66,150 mortgage balance at 8.25% APR, in 21 years: $553.20
From the $647.57 you will use $553.20 for your mortgage and the difference, $94.37, for the $10,190 of credit card debt which is currently at 9.99%.
Using the DebtSmart Loan Calculator…
Time to repay $10,190 at 9.99% with $94.37 per month: 276.48 months which is 23 years. Therefore the mortgage will be paid off first.
Using the DebtSmart Loan Calculator…
The balance remaining on the credit card after 21 years is: $2,082.19
Since the mortgage is paid off, you can use the entire $647.57 to repay the credit card debt balance.
Using the DebtSmart Loan Calculator…
Time to repay $2,082.19 at 9.99% using $647.57 per month: 3.36 months
Total time paying $647.57 is 21 years, 3.36 months or 255.36 months. CONCLUSION:
The comparison is based on the fact that an apples-to-apples comparison dictates that you pay the same amount per month to both cases and then figure out which case is best and how much is saved.
When you refinance at 4.85% you pay $647.57 for 160.2 months.
With the 8.25% mortgage and 9.99% credit card rate you would have to pay $647.57 for 255.36 months.
Therefore, the amount saved is the difference in payoff time multiplied by the monthly payment:
$647.57 x (255.36-160.2) = $61,622.76 (TOTAL SAVINGS)
That is the amount you could save, instead of spend, by doing the refinance at 4.85%.
You may be interested in reading more on what I think about biweekly mortgages in my article, Biweekly mortgage may be rip-off.
———–
Thanks Scott so much for crunching the numbers for us! We will definately go the route of refinancing the CC debt into the Mortgage at the lower rate for 15 years fixed. We can think of alot of things we can spend almost $62,000 in savings on! Thats alot of winters spent someplace warmer! Thanks again and continue the great job you do to help others get free of the Debt.
Shawn M.
Author: This article was contributed by DebtSmart.com.
Source:
Before the holidays are over, many consumers will charge an extra $600, $800, even $1,000 to their credit cards. Most shoppers don’t plan for this—it just happens. Department stores tempt them with offers of retail store credit cards, two-for-ones, and big discounts …
But by the time January rolls around, they have giant credit-card-debt hangovers that leave them wondering how they can preserve their finances when they have migraine-headache-sized debt looming over them.
Though they are supposed to be joy-filled, the holidays represent a giant danger to your credit score and your pocketbook. Come the New Year, you will have to battle with your credit card bills as well as increasing interest rates. Remember that when your credit card debt increases, your credit score decreases, which translates to growing interest rates.
But this year can be your breakthrough year. Here are a few of my 10 Holiday Shopping Rules. 1. First and foremost, plan in advance.
This means that before you head to the department stores:
Make a budget.
Prioritize your gift list.
Assign a dollar value to each person on your list.
2. Then, play with cash, and leave your credit cards at home using the “envelope system.”
“I’ll just put it on my credit card, and I’ll pay it off when the bill comes.”
How many times have you said this? The problem is that life tends to get in the way by the time the bills come.
Even to the most disciplined shopper, credit cards are a little like Monopoly money, but if you use cash only, you will limit your spending to the cash in hand.
Before heading to the stores, review your budget and create envelopes with the names of each person you are going to purchase a present for (Son, Mom, Dad, etc.). Within each envelope, place the appropriate amount of money you have budgeted for this person— no more and no less. Each of these envelopes represents the wallet you have for each person on your list.
Though you might want to bring a small amount of cash for parking and lunch, leave all credit cards at home, including your debit cards. When you purchase a present, use the money from the appropriate “wallet.”
This method will create a psychological barrier to impulse shopping. If you are tempted to splurge on a gift, you will be dissuaded when you consider whose wallet you will withdraw money from in order to cover the impulse shopping.
3. Buy your most important presents first.
If you have budgeted appropriately, you will not run out of money, but let’s face it: Money does not go as far as it used to.
When shopping, buy the gifts at the top of the priority list first and, if you go over budget, find substitutes for those people on the bottom of your list. (Your sister would probably love a framed picture as much as a $75 sweater.)
If you buy your most important gifts first, you will be less tempted to charge things to your credit card. But if you save your most important gifts for last, you might find yourself turning to credit cards when all your cash has been spent on less-important gifts.
Finally, never get the credit-card discount. 4. Finally, never get the credit-card discount.
That 10 percent discount you get for signing up for a store credit card might seem like a great deal, but think again. It’s a giant scam because it pales in comparison to the damage this will do to your credit score.
Think about it: If you sign up for a retail store account, you are:
Inviting an inquiry into your credit score. The retail store will run your credit report, which will hurt your score. Inquiries account for 10 percent of your score.
Increasing the number of credit cards you have. Credit-scoring bureaus respond more favorably to people with three to five major credit cards (American Express, Discover, MasterCard and Visa).
Incurring interest, unless you pay the account in full. This interest will compound so that the 10 percent savings ends up costing you 20, 30, 50, even 100 percent more than you had intended to spend!
As many of you know, I have four kids, all less than four years apart. My wife Lily is a true super star.
So I went to my daughter’s preschool to read to read to her class. As all the kids gathered around, instead of my daughter sitting with her classmates, she wanted to crawl up next to my leg and sit there.
While I was reading, I didn’t even realize what was happening until I saw this picture my wife took:
Isn’t this the most precious picture you have ever seen? It melts my heart… I’m the luckiest man alive.
She didn’t want to watch “Dad” read…. she wanted to just be close to “Dad.”
Tell me what this picture says to you….
From bird-dogging to seller financing, Carter Brown kicked off the Credit and Debt Summit with six strategies for buying a home with bad credit and no money down. Even if you have a bad credit score and no down payment, Brown explains the six strategies for buying home, or investing in real estate. Buying a Home with Bad Credit and No Money Down
Carter Brown is a real estate coach for Prosper Learning who started investing in real estate while he was in college. He now coaches other people on out-of-the-box strategies for buying homes or investing in the real estate market. These strategies don’t require any money down, and they can be used by people with bad credit scores.
As part of the Credit and Debt Summit, Brown shared these strategies with registrants:
Assigning contracts
Double-escrow closing
Subject to financing
Seller financing
Lease options
Bird-dogging
Two of the highlights are “subject to financing” and “bird-dogging. “ Buying a Home with Bad Credit and No Money Down Strategy: Subject to Financing
Subject to financing is a perfect strategy for buyers with bad credit and no money down and sellers who are on the brink of foreclosure. It works like this:
The buyer takes over mortgage payments on a person’s house. In exchange, the seller transfers the title to the buyer, but—and here’s the kicker—the seller keeps the loan in his or her name. The buyer, however, starts making payments on the home.
Does this sound crazy? Why in the world would a seller transfer title but keep the loan in his or her name?
It isn’t crazy, and Brown explains why it works;
1. The homeowner (seller) is going to lose the home to foreclosure otherwise. Under “subject to financing,” the seller doesn’t have to go through foreclosure and preserves his or her credit score. Perhaps more importantly, the seller’s financial stresses are over. No longer do they have to worry about coming up with thousands of dollars, negotiating with banks, attempting—and failing—to get loan modifications. The buyer can take over payments immediately, leaving the seller with peace of mind.
2. The buyer and seller can always write a clause into the contract that forces the home to return to the original owner in the event that the buyer misses a payment. And because the loan is still in the original owner’s name, the seller can track the buyer’s payments.
3. Worst-case scenario, the buyer misses a payment and the home returns to the original owner. If this happens, the original owner can start making payments if his or her financial situation has improved. If the original owner’s financial situation has not improved, he or she is no worse for the wear.
Obviously, this strategy is a bit sophisticated. Want the transcripts of Brown’s Credit and Debt Summit webinar? Register for the free summit here and get more details, including information on where you can find qualified sellers. Buying a Home with Bad Credit and No Money Down Strategy: Bird-Dogging
If “subject to financing” makes you nervous, but you still want to get your foot in the door and start learning advanced techniques for real estate investing, Brown suggests starting with a technique he calls “bird dogging.”
Under this strategy, you don’t actually buy a home, but it allows you to shadow someone who is using outside-the-box strategies, which means you can quickly move up the ladder and start learning about buying a home with bad credit and no money down.
Simple put, bird-dogging is another way of saying that you act as a scout, and you get paid for bringing a seller and an investor together. You also get to shadow the investor so that you learn more about real estate investments.
Let’s say that you are chatting with your neighbor, and you learn that she and her husband are in financial distress. Their house has been on the market for months, but no one is biting. If something doesn’t happen—and soon—the bank is going to foreclosure.
This is where you come in. Simply introduce your neighbor to a real estate investor. Tell the investor that you want to provide a referral for a finder’s fee. If the investor purchases the property, you will receive a fee of about $500.
This isn’t where it ends. Ask the investor if you can shadow the transaction. Let the investor know that you are interested in learning more about real estate strategies. The investor, thrilled that a hot deal has dropped onto his or her lap, will agree.
Brown goes on to describe four other strategies for buying a home with bad credit and no money down. His strategies offer something for everyone—from the seasoned investor to the newbie hoping to get his or her feet wet.
Three defendants have been sentenced to federal prison on charges of bank fraud and aggravated identity theft; one man committing fraud from prison.
According to United States Attorney Sally Quillian Yates, the charges and other information presented in court: In late January 2011, Samantha Johnson stole the wallet of a 93-year-old woman while she was shopping at a retail establishment in Conyers, Georgia. There Johnson found the victim’s debit card for checking accounts at Georgia United Credit Union along with the personal identification number (PIN) for her debit card and account numbers and personal information that she would need to obtain information over the telephone about her accounts from the credit union.
Johnson shared the victim’s debit card number, PIN, account numbers and personal information with Danyez Hines and Carlos Garcia. At the time Garcia was incarcerated at Valdosta State Prison, having been convicted of identity theft and fraud in which he targeted elderly victims. Sounds like a real “go-to” person, eh? Nothing like looking for help in committing a crime than with a person who had previously failed at getting away with this crime before. Criminals are so smart ::rolls eyes::.
Unfortunately, incarceration did not stand in the way of Garcia participating in additional crimes. Johnson and Hines were able to communicate with Garcia through a cell phone that had been smuggled to him in the prison. Which makes me wonder, how in the world would one keep a cell phone charged in jail?!
Using the victim’s account numbers, debit card, PIN, and personal information, the defendants attempted through various means to obtain the more than $120,000 in funds that were in the victim’s accounts at the Georgia United Credit Union. Garcia, using the cell phone smuggled to him in the prison, used the debit card number and PIN to wire transfer money from the victim’s account to his prisoner account at Valdosta State Prison.
Hines and Johnson ordered new checks for the account and directed that they be sent to Hines’ grandmother’s address. Once the checks arrived, Hines forged the victim’s signature on checks and cashed them or gave them to others to cash for him. Using the personal information obtained from the victim’s wallet, the defendants called the credit union, posed as the victim and transferred funds between accounts.
When the victim and her family discovered the fraud, they reported it to the credit union. The credit union froze the victim’s accounts and deactivated the victim’s debit card before a substantial loss occurred.
I’m sure the wiring to a personal PRISON account and the mailing of checks to a personal address didn’t give the police too much of a chase in this case.
Garcia, the already once failed criminal, fails yet again and was sentenced to 6 years, 9 months in prison to be followed by 5 years of supervised release and ordered to pay restitution of $3,104.09.
Hines was sentenced to 2 years, 10 months in prison to be followed by 5 years of supervised release and $1,719.75 in restitution.
Johnson was sentenced to 5 years, 10 months in prison followed by 5 years supervised release and $3,104.09 due in restitution.
“Identity theft has the potential to decimate its victims bank accounts and credit history. These defendants targeted a 93-year-old woman and attempted to defraud her of her life savings. Thankfully, the victim and her family discovered the crime before the defendants were able to empty her bank accounts,” said United States Attorney Sally Quillian Yates. “They exhibited a remarkable callousness toward the impact that their criminal conduct would have on their elderly victim” – Source.
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