Category: CREDIT BLOG

Does the Method for Calculating Credit Scores Seem Fair to You? Why or Why Not?

Posted on July 1, 2025 by - CREDIT BLOG, Credit Score

Does the Method for Calculating Credit Scores Seem Fair to You? Why or Why Not?

What Is the Method for Calculating Credit Scores?

Before we can answer the big question—Does the method for calculating credit scores seem fair to you? Why or why not?—let’s define how credit scores are calculated.

Admittedly, that can be difficult. Indeed, the formulas for calculating credit scores are not public. Plus, there are all sorts of myths out there about what does (and doesn’t) hurt your credit score. In many ways, the credit-scoring system feels like a secret test, one you’re expected to pass without ever seeing the study guide. Still, there is a method behind the madness, even if it isn’t always transparent.

Let’s start with the basics …

The most widely used formula for determining a credit score is called the FICO score, which ranges from 300 to 850. This score is designed to predict how likely you are to fall 90 days behind on a payment in the next two years.

What Are the Factors that Determine Your Credit Score?

The formulas for determining a credit score are proprietary, but most experts agree that there are about 20 different factors that go into your score, and these factors can be boiled down to five primary categories that do most of the heavy lifting:

What Are the Factors that Determine Your Credit Score?

Your credit score influences everything from interest rates to job opportunities. But does the method for calculating credit scores seem fair to you? Why or why not?

1. Payment History (35%)

This is the most important factor in your credit score. It considers whether you’ve paid past credit accounts on time, how often you’ve been late, how recently it happened, and how severe the late payments were. The impact of a single missed payment depends on your overall credit history. If your report is otherwise spotless, one late payment may not do much damage, especially if you return to making on-time payments. But a sudden pattern of missed payments after years of reliability can signal financial trouble and trigger a significant drop. On the other hand, if late payments are already common on your report, another one won’t move the needle much. After all, your score is likely already low.

2. Amounts Owed (30%)

This category measures how much debt you’re carrying compared to how much credit you have available. Your score will be stronger if your credit card balances stay below 30% of your limit. (For example, with a $1,000 limit, keeping your balance under $300 will work in your favor.) Going above that threshold can signal financial strain, even if you make payments on time.

Installment loans, like mortgages or auto loans, are also factored in. Newer loans are seen as riskier than older ones because borrowers are more likely to default early on. The logic is simple: if you’ve already paid off most of your mortgage, you’re far less likely to walk away from it. The longer you’ve been making payments, the more invested you are, which means the less risky you appear to lenders.

This takes us to our next category …

Learn how your credit score is calculated and decide for yourself: Does the method for calculating credit scores seem fair to you? Why or why not? 

3. Length of Credit History (15%)

The longer you’ve had credit, the better. Accounts with longevity and a stable history will help your credit score. Every time you open a new account, it lowers the average age of your accounts. But as those accounts age, they start to help your score, assuming you pay them on time and keep the balance below that 30 percent threshold.

Length of Credit History

4. Credit Mix (10%)

Lenders want to see that you can manage different types of credit responsibly. Ideally, this includes a mix of revolving credit (like credit cards) and installment loans (like a car loan or a credit rebuilder account). Ideally, a mortgage can be added to the mix, but let’s be real: Not everyone can buy a home (and not everyone wants to buy a home, for that matter).

Fortunately, there are other ways to build strong credit.

If you don’t currently have credit cards, or if you have recently declared bankruptcy, open three credit cards here.

And if you’re missing an installment account, which is a key part of your credit mix, the Credit Rebuilder Program offers a simple, credit-building solution that reports directly to the bureaus.

Learn More

The bottom line: having too much credit can raise concerns, but having too little can hurt your score just as much. The credit-scoring models favor borrowers who show they can handle a well-balanced mix of accounts over time.

5. New Credit and Inquiries (10%)

Opening several accounts in a short period of time can raise concerns. Likewise, when lenders check your credit, it leaves a “hard inquiry,” which can temporarily lower your score. That said, don’t worry too much about inquiries into your credit score. For one thing, if you’re shopping for a mortgage or auto loan, multiple inquiries within a short timeframe (usually 14 to 45 days) are often counted as one to avoid penalizing rate shopping. Beyond that, inquiries usually only affect your credit score for about six months.

And this is important: Soft inquiries (checking your own score) don’t affect your credit score away. You can and should monitor your own credit score. But even with transparency tools available, it still begs the question: Does the method for calculating credit scores seem fair to you? Why or why not?

Credit Scores: You Have More Than One!

Now, here’s where things get murky.

The formulas used to calculate your score are proprietary, and they change. You might receive one score from Experian, another from Equifax, and a third from TransUnion. If you request your score directly, you’ll see a “consumer version,” which is often 20 to 40 points off from what a lender sees. If a landlord or auto dealer pulls your score, they’ll see a version tailored to their industry.

In other words, there is no single credit score—just a shifting set of numbers depending on who’s asking and why.

So … Does the Method for Calculating Credit Scores Seem Fair to You? Why or Why Not?

That’s a personal question, and one with plenty of debate. Some believe the system rewards consistency and responsibility. Others argue it punishes people for things beyond their control. One thing is clear: knowing how the system works puts you in a stronger position.

 

 

 

How to File for Bankruptcy and Keep Your Car

Posted on June 24, 2025 by - CREDIT BLOG, Credit Score

How to File for Bankruptcy and Keep Your Car

Yes, You Can Usually Keep Your Car

Before we dig into why you might want to replace your car, let’s quickly address the question at the heart of this article: how to file for bankruptcy and keep your car. Whether you file Chapter 7 or Chapter 13, the law includes exemptions that allow you to protect certain property, including your vehicle. If your car’s equity is under the exemption limit in your state, you get to keep it. Even if it’s not, Chapter 13 can allow you to keep the car and pay back the excess value through a court-approved payment plan.

Watch and Learn: What Can I Keep When Filing Chapter 7

So yes, you can usually keep your car when you file bankruptcy. But the more important question might be: should you?

Why Keeping Your Car Might Not Be the Best Option

Before you move forward with how to file for bankruptcy and keep your car, it’s worth asking whether that’s actually the best move for your financial recovery.

Most people filing for bankruptcy are already under intense financial pressure. They’ve fallen behind on payments, drained their savings, and made impossible trade-offs just to get by. And when money is tight, routine car maintenance is one of the first things to go.

That means by the time you file bankruptcy, your vehicle might have:

    • Missed oil changes
    • Bald tires
    • Delayed repairs
    • A loan with sky-high interest
    • Negative equity (you owe more than the car is worth)

But even if you love your car and have taken great care of it, it may not be worth keeping. In many cases, people end up reaffirming their car loan without fully understanding the long-term consequences, so let’s take a look at reaffirmation.

Watch and Learn: What Can I Keep When Filing Chapter 13

What Is Reaffirming Debt?

Reaffirming debt during bankruptcy means you agree to remain legally responsible for a debt even after your bankruptcy is complete. In other words, you’re choosing not to include an otherwise dischargeable debt in your bankruptcy. If you reaffirm your car loan, you get to keep the car, but it also means you’re stuck with the original loan terms, even if they’re terrible.

Reaffirming a bad loan or trying to keep a car that’s falling apart can cost you more in the long run. You’ll be locked into paying for a vehicle that may already have high mileage, mechanical issues, or negative equity. And to make matters worse, reaffirmed debts often don’t report to the credit bureaus, so making those payments won’t even help you rebuild your credit score.

Are you considering bankruptcy? Book a call for a free consultation, and get your questions answered!
Meet with a Debt Professional

Why Chapter 7 Bankruptcy Is the Perfect Time to Replace Your Car

When you file Chapter 7, your debt-to-income ratio improves almost instantly. That makes you more appealing to lenders, especially those that understand bankruptcy. And because you can’t file Chapter 7 again for another eight years, lenders know you’re a lower risk.

Now, will it be the car of your dreams? Maybe not. But it will likely be reliable, affordable, and a much better deal than continuing to throw money at a car that’s falling apart. And more importantly, it sets you up to qualify for something better down the road, once your credit is fully rebuilt. 

Bankruptcy resets your financial profile. And that creates a short window where replacing your car is easier than you might expect.

What If You’re in Chapter 13?

If you’re filing Chapter 13, you’re not out of luck. Many people researching how to file for bankruptcy and keep your car are surprised to learn that Chapter 13 actually gives you more flexibility in some cases. Not only can you keep your car in a Chapter 13, but you can also buy a new car. The process looks like this:

  1. You find a vehicle that fits your budget.
  2. Your attorney submits the proposed financing to your trustee.
  3. The trustee approves a monthly payment and interest rate.
  4. Financing is finalized, and your car is delivered.

The Smart Way to Replace a Car During Bankruptcy

For many people, replacing a car during bankruptcy feels overwhelming, so it helps to work with a dealership that specializes in providing cars to people who have been through bankruptcy. Some, like Ash Auto Group (which has an online dealership), focus exclusively on helping people in bankruptcy find reliable vehicles, secure financing, and navigate the legal process alongside their attorney and trustee. These dealerships understand the court approval process for Chapter 13 cases, offer warranties and gap insurance, and report on-time payments to help rebuild your credit.

Buying a Car with Ash Auto Group

Real Talk: Why You Shouldn’t Keep a Car That’s Holding You Back

Let’s be honest: if you’re filing bankruptcy, your car might be part of the problem. Maybe it has repairs you can’t afford. Maybe you’re paying 20%-plus interest. Maybe you owe thousands more than the car is worth.

Even if your initial goal was to figure out how to file for bankruptcy and keep your car, bankruptcy can open the door to smarter options. You’re already doing the hard work of resetting your finances. Don’t drag an old problem into your new chapter.

Replacing your car during bankruptcy might not be what you expected, but for many people, it’s the key to getting back on track. You get transportation that works, payments that fit, and a chance to start rebuilding credit immediately.

Are you considering bankruptcy? Book a call for a free consultation, and get your questions answered!
Meet with a Debt Professional

Is It Possible to Get Credit Cards After Bankruptcy?

Posted on June 24, 2025 by - CREDIT BLOG, Credit Score

Why Getting Credit Cards After Bankruptcy Is So Important

To understand why it’s so important to get credit after bankruptcy, let’s start by clearing up a common myth.

Myth: Bankruptcy ruins your credit forever.

The truth is, bankruptcy actually gives you a chance to rebuild. It clears the slate so you can start paying your bills on time, and that’s the key. The credit-scoring formula puts far more weight on what you’re doing now than on what happened in the past. So if you’re making on-time payments today, your score can start climbing quickly.

A lot of people walk away from credit entirely after a financial crisis like bankruptcy. This is understandable, but it’s also a mistake. If you don’t open any new accounts, the credit bureaus have nothing current to measure. That means your report will only reflect the negative history, and your score won’t improve.

But when you open new credit accounts and use them wisely, the credit bureaus finally have something positive to report. And that’s when your score starts to rise.

So yes, you can get credit cards after bankruptcy. And yes, you should!

Open Credit Cards

We know it might feel counterintuitive. After all, why would anyone who just went through a financial meltdown want to open a credit card?

Here’s the thing, though … this isn’t about debt. It’s about rebuilding trust with lenders and credit bureaus.

How to Rebuild Your Credit Score

Think of it like this: Imagine you’re in high school and failed a few tests early in the semester. Your GPA takes a hit. But then you buckle down, study hard, and start earning A’s. What happens? Your GPA climbs, and you might even end the semester with a 4.0.

Your credit score works the same way. You can’t erase the past, but you can add better data. The best way to do that is by opening new lines of credit and using them responsibly. That’s why we recommend opening three credit cards and one installment account after bankruptcy.

This article focuses one opening new credit cards. If you’re curious about installment accounts, check out the Credit Rebuilder Program.

Learn More

Which Credit Cards to Open … And Which to Avoid

That said, not all credit cards are created equal. In fact, some might hurt your score rather than help. In general, you want to open major revolving credit cards (Visa, MasterCard, American Express, Discover) that report your correct credit limit to all three credit bureaus.

When opening new credit cards, don’t:

  • Open retail store cards (like Macy’s or Best Buy): These often trap people in debt with high interest and low limits. Plus, why open a credit card that you can use at only one location when you could open a major revolving credit card that you can use at every location?
  • Don’t count your debit cards: It’s fine to have debit cards. We all need them. But these cards will not be reported to the credit bureaus since you don’t pay bills or make payments toward them.
  • Open cards that don’t report to all three bureaus: Nearly 46% of credit cards either fail to report to all three bureaus or fail to report your limit. Both of these problems can sabotage your score.
Here is a list of credit cards that report the proper limit to all three bureaus

Choosing Between Secured and Unsecured Credit Cards After Bankruptcy

When opening credit cards after bankruptcy, you have three options:

Option 1: Open a traditional credit card

The terms you receive on a traditional credit card will depend on your credit score. If your score is high, you’ll likely qualify for lower interest rates and perks like airline miles, hotel rewards, or cash back.

But if your score is low, expect higher interest rates and annual fees. That said, here’s something that surprises a lot of people …

If you pay your credit card balance in full each month, you can avoid paying interest.

So even if the interest rate is high, it may not matter, as long as you pay your balance in full each month. And once your score starts to rise, you can renegotiate the terms or switch to a better card altogether.

Choosing Between Secured and Unsecured Credit Cards After Bankruptcy

Option 2: Open a secured credit card

Secured credit cards are a popular option for people rebuilding after bankruptcy. Here’s how they work ..

You make a deposit—let’s say $250—and that becomes your credit limit. You still need to make regular payments, and your deposit isn’t applied toward your balance. Instead, you’ll get the deposit back when you close the account, assuming you’ve paid off the card in full.

This might sound like a bad deal, but these cards are often easier to get than traditional credit cards, and they help you rebuild your score. After 12 to 24 months of on-time payments, you’ll be in a better position to upgrade, and you’ll get your deposit back.

Here is a list of credit cards that are most likely to approve applicants with poor credit. These are cards that report to all three major credit bureaus and reflect your actual credit limits, both essential for rebuilding your score.

Option 3: Become an authorized user

Another way to jumpstart your credit rebuilding process is by becoming an authorized user on someone else’s credit card. This means a trusted friend or family member adds your name to their account, and their positive payment history gets added to your credit report, even if you never use the card.

If you know someone with a strong credit history who keeps their balances low and pays on time, it’s worth asking if they’d be willing to add you as an authorized user. And if they’re worried about giving you access to their credit, you can assure them that you don’t need the physical card. They can simply add your name without handing over any spending power.

This is a great way to build your credit without taking on any new debt or paying interest and fees. But a quick heads-up: if the person misses payments or carries high balances, their activity could hurt your score. The good news? If that happens, you can simply ask to be removed from the account, and your score will typically revert, removing the negative impact.

Still, if used the right way, becoming an authorized user can give your credit the boost it needs, helping you qualify for your own credit cards down the line, with better terms and lower rates.

Become an authorized user

A Tip for Opening Credit Cards After Bankruptcy

This advice might also be counterintuitive, but here goes …

When it’s time to open credit cards after your bankruptcy, try to open them all at once. Here’s why: one factor that affects your credit score is the age of your accounts. The sooner you open new credit cards, the sooner they can start aging and working in your favor.

But if you open one card now, another in a few months, and a third sometime next year, each new account will lower the average age of your credit history. Opening them all at once gives your accounts time to mature together, which helps your score in the long run.

How to Improve Your Credit Score with the Credit Rebuilder Program

How to Use Your Credit Cards to Build Credit

Opening credit cards isn’t enough. You have to use them wisely. Follow these four rules to make sure your new credit cards actually help your score:

  1. Keep them active. Use each card for one small, consistent bill each month. Aim for something under fifty dollars, like a subscription or a utility payment.
  2. Pay them off in full. Try not to carry a balance. When you pay your statement in full each month, you avoid interest charges completely.
  3. Stay under thirty percent of your limit. Even if you pay your balance off every month, try not to let your balance go above thirty percent of your credit limit at any time. Credit-scoring bureaus pay close attention to your balance-to-limit ratio. If your balance gets too high, even for a short time, it can signal financial stress and lower your score. Keep your balance under thirty percent, and closer to ten percent if possible.
  4. Never miss a payment. One late payment can undo a lot of progress. If you’re having trouble making a payment, call your credit card company before the due date and ask for an extension. Many companies are willing to work with you if you reach out in advance.

If You’re Married, Apply Separately

If you are married, each spouse should apply for three credit cards after bankruptcy in their own name. Do not apply jointly. Why?

Because unexpected events can impact your finances. Job loss, medical bills, or other emergencies can make it hard to keep up with payments. If all credit cards are joint accounts, a single crisis can hurt both credit scores at the same time.

On the other hand, building credit separately gives couples more flexibility and protection.

Take Joe and Robin as an example. Imagine Joe loses a job, and Joe and Robin’s household can no longer afford to pay all the bills. If Joe and Robin have joint credit cards, missed payments will damage both of their credit scores. But if they each have their own accounts, they can make a strategic decision to prioritize Robin’s bills. Joe’s accounts might temporarily fall behind, but Robin’s credit will stay strong.

That strong credit score can help the couple qualify for a car loan, refinance a mortgage, or access lower interest rates if needed. It gives them options during a difficult time. When Joe is ready to rebuild, Robin can add Joe as an authorized user on one of her credit cards. This gives Joe a boost from Robin’s positive payment history and makes it easier for Joe to start improving his own score.

By building credit separately and opening three new credit cards each, Joe and Robin protect their household from future setbacks and set themselves up for a faster recovery if challenges arise.

Open Three Credit Cards

Final Thoughts: You Can, and Should, Get Credit Cards After Bankruptcy

Getting credit cards after bankruptcy is essential. It’s the first and most important step to rebuilding your credit and regaining your financial freedom.

If you follow the right steps, avoid common traps, and use your cards responsibly, your score can rise, sometimes dramatically, in just 12 to 24 months.

So don’t wait. Visit www.720CreditCards.com, pick the cards that work for you, and start building the future you deserve.

Credit Hero Score: What It Is, How It’s Calculated, and Why It Might Look Different Than You Expect

Posted on June 16, 2025 by - CREDIT BLOG, Credit Score

Credit Hero Score: What It Is, How It’s Calculated, and Why It Might Look Different

Your Credit Score Isn’t a Fixed Number

Here’s something that might surprise you: You don’t have a single credit score. You have many. At any given moment, your credit score depends on two things:

  1. Who’s requesting it, and
  2. Which credit bureau is reporting it.

Let’s break those two factors down.

Who Is Requesting Your Credit Score, and Why Does It Matter?

Your credit score is a three-digit number that answers this question: What is the likelihood that a borrower will be more than 90 days late on a bill within the next two years?

To answer that question accurately, lenders often use specialized versions of your credit score designed for their specific industries. Most of them use a formula called FICO, but the formula is tailored a bit based on their industry.

For example:

  • Landlords tend to care more about your history with housing-related payments—like mortgages or past evictions—than your credit card habits. After all, someone might occasionally pay a credit card late but always pay rent on time. So rental screening services may highlight different aspects of your credit report than a bank or credit card issuer would.
  • Auto lenders might use a version like FICO Auto Score, which gives more weight to your history with car loans.
  • Credit card issuers might use the FICO Bankcard Score, which weighs revolving credit (like credit cards) more heavily.

When you check your own score you’ll receive a different, more generalized version of your credit score. Like most companies selling or providing credit services directly to individuals—including Credit Karma, Credit Sesame, and Capital One CreditWise—Credit Hero Score uses the Vantage 3.0 formula. This model is designed to give consumers a clear picture of their credit standing, but it’s not the exact score lenders see and it isn’t based on the FICO formula.

Which Credit Bureau Is Requesting Your Credit Score, and Why Does It Matter?

To add one more layer of complexity: each bureau—Equifax, Experian, and TransUnion—may have different information about you, because not all creditors report to all three bureaus. You might, for instance, have a credit card that reports payments to Experian and Equifax but not TransUnion, which means TransUnion would be plugging different data into its formula to calculate your score.

That’s why lenders who pull your FICO score will be given three different scores. Lenders usually look at all three scores and use the middle one to make their lending decisions. So, if your scores are …

  • 721 from Experian
  • 680 from TransUnion
  • 612 from Equifax

…your lender would go with 680.

If your Credit Hero Score doesn’t match what a lender sees, that’s not an error. It’s just how the credit system works.

What Is Credit Hero Score?

Credit Hero Score is a credit monitoring service that helps people track their credit health. It gives users access to their credit reports, credit alerts, and a score based on the VantageScore 3.0 model, a widely used formula for consumer credit tracking. This model is designed to give consumers a general picture of their credit standing.

Credit Hero Score is not the only company that offers credit services directly to consumers. Credit Karma, Credit Sesame, Capital One CreditWise, and even Experian also provide consumer-based credit scores. It bears repeating: These scores do not use the same scoring formula that lenders typically rely on. Instead of a FICO score, they use the VantageScore 3.0 model.

What Is Credit Hero Score?

This means that while the Credit Hero Score can provide a useful overview of your credit behavior, it won’t necessarily reflect the score a lender sees when they review your application for a mortgage, car loan, or credit card. It’s a general indicator of your credit health, but it is not a substitute for a lender-grade FICO score.

How Can You See the Same Thing a Lender Sees?

Your best bet for seeing the version of your FICO score that lenders actually use is to either:

  1. Pay for it yourself at MyFICO.com, or
  2. Ask a lender to pull your score as part of a credit application or pre-approval.

Let’s look at the pros and cons of both options.

Build Credit Fast

Option 1: Pay to See Your Scores at MyFICO.com

MyFICO.com is operated by the creators of the FICO scoring model. When you purchase your scores here, you’ll get access to:

  • Your FICO Score 8, commonly used by credit card companies
  • Industry-specific scores like FICO Auto Score and FICO Bankcard Score
  • The older FICO versions still used in mortgage lending (FICO 2, 4, and 5)

This is the most direct way to see exactly what lenders are likely to see—without needing to apply for credit. But there are pros and cons …

Pros:

  • You will not hurt your credit score if you request your own credit score. This is called a soft inquiry.
  • You will see a full breakdown of scores from all three bureaus
  • It includes industry-specific FICO versions used in real-world lending decisions

Cons:

  • It’s not free. You’ll pay anywhere from $20 to $40+ per month depending on what you need.
  • It can feel overwhelming because you’ll see many variations of your credit score. You might not know which one will apply to your specific situation.

Pay to See Your Scores at MyFICO.com

Option 2: Ask a Lender to Pull Your Scores

If you’re preparing to apply for a mortgage, auto loan, or major credit product, you can ask a mortgage broker or lender to pull your scores as part of a pre-approval or application process.

Lenders typically pull your FICO scores from all three credit bureaus, using the versions relevant to their industry (for mortgages, this means FICO Score 2, 4, and 5).

You can ask the lender to share:

  • The scores they pulled
  • The FICO version used
  • Which bureau reported which score

Pros:

  • You’ll see the exact scores the lender will base their decision on
  • This will be free if it’s part of a pre-approval or formal application
  • The score you see will be useful if you’re actively preparing to borrow

Cons:

  • This is a hard inquiry, which may cause a small, temporary dip in your score, though your score will recover in about six months, and the dip will be just a few points.
  • Not all lenders will pull your scores unless you’re moving forward with a real application.

What the Credit Hero Score Rewards (and What It Penalizes)

That said, whether you’re looking at your Credit Hero Score, a VantageScore from another platform, or even a lender’s FICO score, the fundamentals are the same. All scoring models reward certain credit behaviors and penalize others.

Here’s what helps your score most:

  • Paying on time, every time
  • Having a healthy mix of credit, which includes three to five credit cards and an installment account
  • Keeping your balances low (below 30 percent of your credit limit)
  • Keeping your credit card accounts active, which means you use them (without going above that 30 percent threshold)
  • Removing errors from your credit score

And here’s what tends to hurt your score:

  • Late payments, missed payments, or collections
  • Maxed-out or high-balance credit cards
  • Errors on your credit report
  • No credit, not enough credit, or no mix of credit
  • Having too many accounts
  • No credit activity at all (no reporting = no score movement)

If your goal is to rebuild your credit, these are the habits that matter most. And they’re the same habits that will help raise any score, whether it’s FICO or Credit Hero Score.

Box: Want to learn more about building your credit score FAST? Check out the Credit Rebuilder Program.

What Percentage of Young People (Age 18–24) Have Never Checked Their Credit Score? The Stats May Surprise You!

Posted on June 9, 2025 by - CREDIT BLOG, Credit Cards, Credit Report

What Percentage of Young People (Age 18–24) Have Never Checked Their Credit Score?

According to a recent study by LendingTree, a whopping 40% of Gen Z adults (ages 18–24) have never checked their credit score. That’s a staggering number, especially when you consider how much your credit score affects your everyday life. From renting an apartment to qualifying for a credit card, buying a car, or even landing a job, your credit score plays a big role in the direction of your life. Yet millions of young adults are in the dark when it comes to this crucial three-digit number.

Why Young People Avoid Checking Their Credit Score

There are a few common reasons young people (ages 18-24) avoid checking their credit:

  • Lack of education. Credit isn’t always taught in school, and many people don’t understand how it works until there’s a problem.
  • Fear. Some worry they’ll discover bad news—like a low score or a forgotten bill in collections.
  • Assumption. Many assume they’re too young to have a credit history worth checking.
  • Access. Some simply don’t know where to go to check it for free.

But here’s the truth: you can’t fix what you don’t understand. And the earlier you start building credit awareness, the more power you have to shape your financial future.

Learn the Rules of Credit

Why Your Credit Score Matters, Even in Your 20s

Even if a mortgage is years away, your credit score still affects your life right now … and the banks would rather you not figure that out. Why? Because the worse your credit, the more money they make off you through high interest rates, fees, and deposits.

Here’s how your credit score shows up in real life:

    • The chance to get ahead:With excellent credit, you can qualify for rewards cards that earn you miles, points, and perks. Use them on your everyday spending (e.g., groceries, gas, takeout), and the perks will pile up.
    • Rental applications:Landlords check credit to decide if you’re a reliable tenant.
    • Vacations:Want to book a flight, rent a car, or grab a last-minute Airbnb without draining your savings? A solid score gives you access to credit cards that can help finance travel.
    • Job opportunities:Some employers review credit reports, especially for roles in finance, security, or leadership.
    • Auto loans:A strong score can save you thousands in interest over the life of a loan.
    • Cell phone plans and utilities:Companies may require a credit check or a hefty deposit.
    • Emergencies:A healthy score gives you access to credit when life hits unexpectedly.
The bottom line?
The less you know, the more they profit.
But when you understand how credit works, you flip the power dynamic and unlock a lot more freedom.

What Happens If You’ve Never Had Credit?

Another surprising stat: around 15% of young adults are “credit invisible,” meaning they have no credit history at all. That might sound better than having a low score, but in reality, no credit is just as damaging as poor credit.

This is because lenders need evidence that you can manage debt, and if you have no credit, lenders can’t assess your risk. They will think: Better safe than sorry, and they will deny your application outright.

That’s why it’s essential to start building a healthy credit file early.

But first …

How Can You Check Your Credit Score (for Free):

Curious where you stand? Here are a few ways to check your score without spending a dime:

  • Credit card company: Many credit cards offer free access to your FICO or VantageScore as a perk. Just keep in mind that there’s no single “official” score. You actually have dozens, based on different formulas (though most lenders use FICO).
  • Bank account dashboard: Some banks and credit unions show your credit score right on their website or mobile app.
  • com: You can get a free copy of your credit report (not your score) from each of the three bureaus every week.
  • Credit monitoring tools: Free apps like Credit Karma or Experian Boost give you regular score updates, tips, and insights to help you stay on track.

What percentage of young people (Age 18–24) have never checked their credit score? A whopping 40 percent!

How to Start Building Your Credit Score

If you’ve never checked your credit score, or don’t have one yet, don’t panic. Everyone starts somewhere. These three steps will help you build credit the right way and set yourself up for long-term success:

  1. Get a Secured Card or Become an Authorized User
    A secured credit card works just like a regular credit card, but it requires a small deposit (usually a few hundred dollars) that acts as your credit limit. Because that deposit protects the lender, these cards are much easier to qualify for, even if you have no credit history.

Just remember: the deposit doesn’t pay your bill. You still have to make payments on time. If you’re late and the deposit gets used to cover what you owe, it will hurt your credit. So use it for small, regular purchases (like gas or groceries) and pay it off in full each month.

Another simple option? Become an authorized user on someone else’s credit card. This is one of the easiest and risk free ways of building your credit score. If a parent, sibling, or trusted friend adds you to an account in good standing, their history of on-time payments and low balances can give your score a boost, even if you never use the card.

Pro tip: If someone’s nervous about adding you, let them know they don’t have to give you a card at all. You’re just riding along for the credit-building benefit. And if their account ever goes delinquent, you can cancel the arrangement and your score will revert. Easy, low-risk, and super effective.
  1. Get the Credit Rebuilder Program
    If you want a shortcut to building positive credit, the Credit Rebuilder Program is designed to give you structure, guidance, and results. It’s especially helpful if you’re starting from scratch.

Here’s how it works: You make a small monthly payment ($39), and that payment gets reported to all three credit bureaus as an installment account. That means you’re building credit history just by enrolling. The program is built for people recovering from financial hardship, but it is also a great tool for young people. 100 percent of people are approved, and it has the same positive impact on your credit score as an auto loan..

You’ll also get access to:

  • The 7 Steps to a 720 Credit Score (keep reading for the details!)
  • Legal tools to help fix errors or unfair marks on your credit report
  • Ongoing support, even if you’re starting from zero.

This is one of the only programs out there that doesn’t require a credit check and still helps you move forward. Whether you’re rebuilding or just starting out, it’s a smart move that delivers real results.

3. Follow the 7 Steps to a 720 Credit Score

The 7 Steps to a 720 Credit Score is a credit-education program that’s included with the Credit Rebuilder Program. It’s not about disputing everything on your credit report or looking for loopholes. Instead, it teaches you the exact patterns of behavior that banks and credit bureaus reward so you can build a credit score that opens doors.

Because here’s the deal: the banks profit when you don’t know how the system works. They make money off people with low credit scores through high interest rates, fees, and penalties. The less you know, the more they earn.

You’ll learn things like:

  •  How to manage your “credit utilization”
  • What you should do if you are married
  • Which types of credit to open (and when)
  • How to avoid common mistakes that quietly drag down your score
  • How to build a score that makes you look creditworthy—even if you’ve had financial setbacks

These are the same rules lenders use to judge your worthiness, but they’re not exactly shouting them from the rooftops. We are. And the best part? Once you know how the system works, it’s not that hard to win at it.

Final Thoughts

So, what percentage of young people (age 18–24) have never checked their credit score? Close to 40%, but that doesn’t have to include you.

Checking your score is free, safe, and one of the smartest financial decisions you can make in your 20s. It’s the first step toward building a solid foundation and avoiding costly surprises down the road.

And if you’re not sure where to start, the Credit Rebuilder Program can help you take the guesswork out of growing your credit with confidence.
Enroll in the Credit Rebuilder Program

How Do Loan Terms Affect the Cost of Credit?

Posted on June 3, 2025 by - CREDIT BLOG, Credit Cards, Credit Report, Credit Score

How Do Loan Terms Affect the Cost of Credit

The Basics: What Is a Loan Term?

A loan term is simply the agreed-upon time period you have to repay a loan. Common loan terms include:

  • Auto loans: 36 to 84 months
  • Personal loans: 12 to 60 months
  • Mortgages: 15 to 30 years
  • Student loans: 10 to 30 years

The longer the loan term, the lower your monthly payment tends to be. But that doesn’t mean it’s cheaper. In fact, that extended timeline can cause the total cost of credit to balloon.

Let’s look at why.

Interest Over Time: The Longer You Borrow, the More You Pay

When you borrow money, you pay interest—which is the cost of using someone else’s money. Even if you have a low interest rate, the longer the loan term, the more months you’re paying that interest.

For example, imagine you borrow $10,000 at a 6% interest rate:

  • On a 3-year loan, your total interest might be around $950.
  • On a 5-year loan, your total interest might jump to $1,600.

Same loan amount. Same rate. But a longer term means you pay significantly more over time.

So when asking, How do loan terms affect the cost of credit?, one of the biggest answers is this: loan term determine how much interest accrues.

The Psychological Trap of Smaller Payments

Lenders often advertise lower monthly payments to make loans feel more affordable. And yes, those smaller payments might fit better into your monthly budget. But they also keep you in debt longer.

These long loan terms are like stretching out the pain instead of dealing with it upfront.

Let’s say you’re offered two options for a $20,000 car loan:

  • A 36-month term at $608/month
  • A 72-month term at $340/month

That $268/month difference sure makes the 72-month option tempting, doesn’t it! But you’ll end up paying thousands more in interest over the life of the longer loan. Plus, you’ll spend six years paying for a car that might not even last that long.

So how do loan terms affect the cost of credit? Loan terms can tempt you into longer, more expensive obligations with seemingly “affordable” payments.

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Real-Life Example: The Mortgage Trade-Off

Mortgages are the most common example of long-term loans, and they illustrate this concept perfectly.

  • A 30-year mortgage comes with lower monthly payments, but you might pay over $100,000 more in interest compared to a 15-year mortgage.
  • A 15-year mortgage has higher payments but builds equity faster and saves a huge amount in interest.

Again, this is why understanding how loan terms affect the cost of credit is so important. You don’t just want a payment you can afford today—you want a financial future you can grow into.

Loan Terms and Your Credit Score

Now let’s talk about how loan terms affect your credit score—because that’s part of the cost of credit too, and it’s what our credit-education course and the Credit Rebuilder Program focus on.

Your credit score is based on several factors, including:

  • Payment history
  • Credit mix
  • Length of credit history
  • New credit inquiries
  • Amounts owed (aka utilization)

A longer loan term might seem like a good idea for keeping your credit score stable, especially if it helps you avoid missing payments. And that’s true to a point: on-time payments over time do help your score.

But a long-term loan can also make it harder to reduce your overall debt load. Because the repayment period is extended, you end up paying more in interest over time, which means you’re spending more money without significantly lowering the principal. That can trap you in a cycle of slow progress. And if you fall behind later, the impact on your credit will be even greater—because larger balances carry more weight.

Here’s why that matters: credit utilization (how much of your available credit you’re using) is one of the most important factors in your credit score. High balances can push your utilization rate above the recommended 30% threshold, signaling to lenders that you may be financially overextended. So if a long-term loan keeps your balances high, even with on-time payments, your score may still suffer. And if you start missing payments on top of that, the damage can compound quickly.

Prepayment: Can You Pay Off a Loan Early?

One way to offset the cost of longer loan terms is to pay the loan off early. But here’s the catch: not all lenders allow it without penalty.

Some loans come with prepayment penalties that charge you for paying ahead of schedule. Why? Because early payoff means less interest income for the lender.

Never forget this: banks and lenders aren’t in the business of helping you reach your dreams—they’re in the business of making money off of you. Every interest charge, every late fee, every penalty is designed to take money out of your pocket and put it into theirs. That’s their business model.

So before you accept a longer loan term thinking you’ll just pay it off sooner, ask the lender: is there a penalty for early payment? If so, you might end up paying more than you planned—even if you do everything right.

Flexibility vs. Friction: Choosing the Right Term for You

There isn’t one right answer when it comes to loan terms. Sometimes a longer term is necessary to make a payment fit your budget. And in those cases, it might be a helpful tool.

But the more important question is: Do you know what it’s costing you?

When you understand how loan terms affect the cost of credit, you’re in a better position to:

  • Compare total interest costs
  • Decide if a shorter term (with higher payments) is worth it
  • Consider refinancing or early payoff
  • Avoid hidden fees or prepayment penalties

How to Choose the Right Loan Term

Here are a few guidelines to help you make a smart decision:

  1. Use a loan calculator. Plug in different terms and see how much interest you’ll pay overall.
  2. Choose the shortest term you can comfortably afford. This helps minimize total interest.
  3. Look for prepayment flexibility. Even if you choose a longer term, the ability to pay more when you can gives you control.
  4. Don’t forget to factor in your financial goals. If you’re planning to buy a house or start a business soon, minimizing long-term debt matters.

What If You’re Already Stuck in a Long-Term Loan?

If you’ve already taken out a long-term loan and regret the terms, don’t panic. You have options:

  • Refinance: Look into shorter terms or lower interest rates.
  • Make extra payments: Even $50/month toward the principal can save you thousands.
  • Call your lender: Ask if there are any programs to reduce your interest rate or term.

And if the debt has become unmanageable, it might be time to speak with a debt professional. We help people understand all their options, including whether they should explore reset strategies and debt-reduction options.

The Bottom Line

So, how do loan terms affect the cost of credit?

They impact how much interest you pay, how long you stay in debt, and how much financial flexibility you have going forward. Shorter terms usually cost less in the long run—but you have to balance that with what you can afford today.

The goal isn’t just to get approved. It’s to make decisions that support your future, not sabotage it.

What You Should Know Before Closing Credit Card Accounts

Posted on March 3, 2016 by - CREDIT BLOG, Credit Cards, Credit Score, Personal Finance

After learning the difference between traditional, secured, subprime, retail and major credit cards, you may want to close one or more of your credit cards, especially if you have more than five. If that’s your only solution to increasing your credit score, learn more about the credit process before closing an account.
Most credit scoring systems award a higher credit score to those who have no more than five credit cards. Before rushing to close an account, know the impact it will have on your credit score.
Here are a few basics about owning credit cards.
Fifteen percent of your credit score comes from the age of your credit accounts. The older your credit accounts are, the better it is for your credit score. Credit scoring systems consider the average age of your accounts. If possible, never close older accounts. If you do, you will drive down the average age of your accounts which will decrease your credit score.
Closing a credit card account may also affect your utilization rate. “Utilization rate” is the ratio of your credit card balance against your credit limit, expressed as a percentage. For example, if you charge $800 on a credit card with a credit limit of $2,000, your utilization rate is 40 percent. Credit-scoring bureaus reward people who have utilization rates below 30 percent. If you want to be rewarded by the credit scoring bureaus, always keep your utilization rate under 30 percent.
How does closing credit card accounts impact your utilization rate? If you transfer the balance on the account you want to close to another account, consider this first. If you decide to cancel a credit card and transfer the remaining debt to another card, you may cause the utilization rate on the second card to rise sharply.  This may cause your credit score to drop.
Leaving a balance on your card after canceling the account is worse than transferring a balance because you won’t have a credit limit to offset the balance owed. For example:  If you leave a $700 balance on the canceled card, your utilization rate will suffer dramatically since the limit on the card will be $0.
Develop a strategy to increase your credit score when you have more than five credit cards. Your best bet is to keep all of them active but pay them off every month. This is achieved with a budget. Plan which expenses you will pay with credit cards.
A steady history of payments will demonstrate to credit-scoring bureaus your ability to manage your accounts and will eventually improve your credit score. Pay special attention to the cards with the highest limits, oldest ages, and best interest rates. Be sure to keep these cards active, maintaining a utilization rate below 30 percent.
Retail credit cards, cards which can only be used at the designated company on the card, are an exception to the “keep-them-open” rule. There is no reason to purchase monthly from these stores. Letting a retail account go inactive may not be the ideal choice, but it should not be a cause for alarm unless it causes your credit score to drop. If that happens, call the retail store and to see if you can reactivate the card.

Fannie Mae and Freddie Mac

Posted on October 31, 2014 by - CREDIT BLOG, Personal Finance

Great News – Fannie Mae and Freddie Mac now accept a 620 FICO score for Mortgage Loans!
Has less than stellar credit prevented you from getting a mortgage? If so, you may be in your new home sooner than you think!
Fannie Mae and Freddie Mac are easing tight lending standards to give worthy high-risk borrowers an opportunity to become homeowners. The minimum down payment has been reduced from 5% to 3%. Although the goal of these mortgage giants is to help first-time and lower income borrowers,  they will still require borrowers with less than a 20% down payment to purchase private mortgage insurance.
FICO is also revising their formulas for generating grades this fall. No longer will overdue medical bills and paid collection accounts have a negative effect on your credit score.
Reporters E. Scott Reckard and Tim Logan write, “Improved scores could make it easier for millions of Americans with past credit blemishes to get loans or to get them at lower rates. Experts cautioned, though, that borrowers might have to wait a year or more to see the effect of changes because lenders will not quickly overhaul their systems to evaluate consumers and price loans for them.
What’s more, the effect on the housing market, a major key to economic growth, is likely to be muted. Analysts said change would be seen more rapidly in auto loans and credit cards than in mortgages.”
Fannie Mae, Freddie Mac and FICO are fighting for consumers who have had a financial meltdown and are rebuilding their credit the correct way. If you want to take advantage of this opportunity, NOW is the time to set your financial house in order!
Apply the principles in the 720 Credit Score program. Within 12-24 months, your credit score will put you in a position to take advantage of the eased lending standards of Fannie Mae and Freddie Mac. In a year or so, you can become a proud homeowner instead of renter if that is your desire.
Fannie Mae, Freddie Mac, FICO, and 720 Credit Score are extending you a helping hand. Are you ready to accept the challenge?

Becoming an Authorized User Quickly Increase Your Credit Score

Posted on October 10, 2014 by - CREDIT BLOG, Credit Score, CREDIT SCORING

The easiest and fastest way to increase your credit score is to become an authorized user on a family member’s credit card account.
This is an excellent strategy for teen children or people who have suffered a severe financial crisis. Both are interested in building or rebuilding their credit. As an authorized user, they receive the benefits of someone else’s credit but have no contractual obligation to pay the bills.
A person’s individual credit score is not considered when becoming an authorized user. Neither is his or her credit report reviewed. There is no pre-qualification for an authorized user status on a credit card. However, the credit card’s history will be reported on the authorized user’s credit report as long as the authorized user is related to the account holder.
Becoming an authorized user on a family member’s credit card will quickly raise your credit score, even after bankruptcy or other financial disaster, by allowing you to “borrow” the account holder’s clean credit history.
Family members may not be receptive to adding you to their credit card accounts if they believe you will not honor your commitment to repay the charges you make. You must assure them of your ability to re-pay. Show them how you will repay charges or tell them you do not want a credit card or access to their account. Your goal is to become an authorized user to increase your credit score.
To protect the family member adding you as an authorized user, here are two suggestions:

  1. The account holder should shred the credit card that arrives in your name.
  2. The account holder should never give you the account number, credit card expiration date, or card security code.

Both of you will then benefit. How? Your credit score will increase because you have a good credit report. The account holder benefits because he or she is able to help a family member without worrying about irresponsible behavior on your part.
Authorized users must be related to the account holder for their bad credit scores to benefit from this strategy. Try to choose someone with the same last name and address. Otherwise, the credit-scoring bureaus might not recognize your status as an authorized user and your credit score might not improve.
Call the credit card company and ask if they are reporting your status as an authorized user. You can also check your credit report to see if the account is appearing. If not, choose another account holder.
Be sure that you also choose a responsible relative with an account in good standing. If you become an authorized user on an account that becomes delinquent, guess what happens? Your score will drop. Therefore, pick an account with a clean history of payments and a utilization rate of no more than the 30 percent limit. If the balance exceeds 30 percent, or if the account holder makes a late payment, you should immediately remove your name as an authorized user so the negative information does not hurt your credit score.
Authorized users usually see a quick jump in their score. In twelve or eighteen months remove yourself from the account because you should be able to qualify for loans on your own.

Are You a Victim of Identity Theft?

Posted on September 5, 2014 by - CREDIT BLOG, Personal Finance

Do you know if someone has stolen your identity? Are they living the good life at your expense?
80 percent of people have errors on their credit reports. Most of these errors are a result of identity theft. If you’ve been a victim of identity theft, you may not be interested in using credit again. That’s the biggest mistake you can make! Use this as an opportunity to protect yourself and learn how to build your credit wisely.
Once a thief acquires your personal information, she or he can quickly steal your identity and suck your account(s) dry. This can be a devastating financial loss. Additionally, it takes a tremendous amount of time to correct these errors.
Hackers have infiltrated Target, Neiman Marcus, Johns Hopkins and many other organizations. Do you think they’re capable of stealing your information? Of course they are! Now, more than ever, you need to safeguard your personal information against scheming identify thieves. Don’t leave yourself open to identity theft. Be aware of the many ways identity theft might occur.
Dumpster diving. You may not dumpster dive but identify thieves will. This is one of the easiest ways to collect personal information. The credit card offers you discard without a thought can be used by dumpster divers to set up credit accounts in your name. Bank account statements that have your credit card number or banking information can be used to purchase items online or over the phone. To prevent this, purchase a shredder and shred all items containing your personal information.
Open-access mailboxes. If your mailbox does not lock or is an easily accessible community mailbox, beware of identity thieves snatching your mail and setting up bogus accounts in your name. Protect yourself from identity theft by putting a hold on your mail when away from home for extended periods of time.
Pickpockets and purse-snatchers. Guard your purse and bags. Never leave them unattended. If an identify thief has access to your credit card, driver’s license, and Social Security number, they will enjoy the good life at your expense. If possible, never, ever carry your Social Security card in your wallet.
Phishers and Phreakers. Be especially wary of phishers and phreakers. Phreakers are people who search for personal information by eavesdropping on telephone calls.  Phishers send cleverly disguised emails that ask you to provide personal account information. Using anti-virus software and a firewall is a good way to cut down on malignant attempts by criminals to access your information. Do not share your password with anybody and change it often to decrease the possibility someone may hack into your computer. Also watch out for spyware which can be installed on your computer without your consent. It can monitor your computer for personal information, such as credit card numbers.
Guard your Social Security number. Each person’s social security number is unique. If an identity thief gains access to your Social Security number, she or he can make financial decisions that can affect you for years. Do not give out your number unless you started the call and can confirm the identity of the person or company you are calling.
Check your credit report often. Obtain a free copy of your credit report yearly from all three credit bureaus. Your best weapon against identify theft is getting a copy of your credit report every three months. This allows you to immediately identify any suspicious information or other irregularities.
Another often overlooked important safeguard against identify theft is double-checking the purchases on your credit card as well as withdrawals from your bank account.