Category: Credit Score

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:

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.

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.

More than 30 years ago, I started my career as a mortgage broker helping people make the biggest purchase of their lives: buying a home. I seemed like I had it all together… but I walked into the bank one day, and reality hit me hard.

“You’re overdrawn!” the teller said, not exactly in a whisper.

I looked around, hoping no one recognized me. Here I was, supposed to be the expert, and I had negative $12 in my account.

Then she asked if I wanted to apply for overdraft protection. Of course I said yes.

And then came the real gut punch…

“You’ve been denied.”

I was broke. I had bad credit, and I felt like a fraud.

That moment stuck with me. I kept thinking, How can I fix this? How can I improve my credit score quickly?

So I started digging. I studied credit reports, talked to experts, and read everything I could get my hands on. Slowly, my score climbed. And eventually, I put everything I learned into a system, something simple and step-by-step.

That became 7 Steps to a 720 Credit Score, first a book, then a course. It’s now helped more than 200,000 people rebuild after setbacks like bankruptcy, divorce, job loss, or just plain life.

If you’re wondering—How can I improve my credit score quickly? —then this is a great place to start. I’ll share with you some of the best tips out there for moving the needle.

While you are at it, take advantage of our limited offer to enroll in our credit-education course for free!

FAQ: What’s the fastest way for someone to raise their credit score?

Answer: It really depends on your credit history, so let me give you a few examples that might be relevant to your specific credit profile.

Joshua was one of our students, and when he started the course, his score was low, not because he had any financial upsets, but because he didn’t have much credit to begin with. That’s common. When the credit bureaus don’t see much history, they get nervous. Their job is to guess how likely you are to miss a payment in the next 24 months, and if they don’t have much data to go on, they tend to play it safe and assume the worst.

Joshua’s score was 589, which is way too low to qualify for the best interest rates, much less get approved for some apartments.

So here’s what we told Joshua:

If you don’t have much credit yet, one of the fastest ways to boost your score is to become an authorized user on someone else’s credit card. That means you piggyback on their account and get the benefit of their payment history, without taking on their debt.

But here’s the catch: the account needs to be in great shape. That means the person pays on time, keeps their balance low (ideally under 30 percent of the credit limit), and has had the card open for a while.

Joshua added himself as an authorized user on three of his parents’ cards, cards they had managed well for years. And the result? His score jumped 107 points.

It’s one of the quickest wins we’ve seen for people who are just getting started.

Now let’s look at another example…

Alana came to us after filing for bankruptcy. Her credit score was low (607), but when we looked closer, we found something that made a big difference: Several of her old accounts were still being reported as active, even though they should have been cleared in the bankruptcy. Since no payments had been made on those accounts, they were showing up as severely past due.

That kind of reporting error can drag down a score fast.

We helped Alana file disputes to clean up the mistakes, and once those errors were removed, her score jumped from 607 to 672. That wasn’t quite high enough to unlock the best interest rates, but it moved her out of the “poor” category and into the “fair-to-good” range. And with a few more smart moves that she learned from our free credit-rebuilding program, she hit 720 just nine months later.

Watch & Learn: How Can I Improve My Credit Score Fast?

Here’s one more example, this time from someone with a different kind of credit challenge.

Leo wasn’t behind on any of his bills. He had a few dings over the years, but he paid on time most of the time. But his credit score was still stuck, and when we looked closer, we saw why: nearly all his credit cards were maxed out or close to it.

That’s a big red flag in the credit world. Even if you’re making payments, high balances can drag down your score. It tells lenders you might be overextended or struggling to manage your finances.

So here’s what we told Leo:

Do whatever you can to bring those balances down. The general rule is to keep your credit card usage under 30 percent of your limit. So if you have a $1,000 limit, aim to stay below $300. If 30 percent feels out of reach, shoot for 50 percent to start. And if you can get it down to 30 percent, don’t stop there: Getting it under 10 percent is even better.

Leo got serious about it. He trimmed his spending, made extra payments, and chipped away at those balances week by week. And the results were worth it: once his utilization dropped below 10 percent, his credit score jumped 118 points.

FAQ: Is it true that paying off collections helps your credit score?

Answer: Not always. It’s a common assumption that paying off a collection account will automatically boost your credit score, but that’s not how it usually works.

Here’s the deal: Once a collection is on your credit report, it can stay there for up to seven years, even if you pay it off. Just making a payment doesn’t erase it. And depending on which credit scoring model a lender uses, that paid collection might still hurt your score.

Some newer models like FICO 9 and VantageScore 4.0 ignore paid collections, but older models, including the widely used FICO 8, do not. So unless you know which model is being used, it’s hard to say whether your payment will make a difference.

There’s another layer to this. When you make a payment on an old collection, especially one that’s past the statute of limitations, you might restart the clock. That means the debt becomes “active” again and can stay on your report longer or even open the door to legal action.

But there’s a smart workaround: negotiation. In some cases, you can talk to the collection agency and ask for a pay-for-delete agreement. That’s where they agree to remove the account from your credit report entirely in exchange for payment. While credit bureaus officially discourage this practice, some collectors will still honor it, especially if you get the agreement in writing. When it works, a pay-for-delete can lead to a major score jump, sometimes 50 to 100 points or more.

We discuss this strategy in Step 6 of our free credit-education course. 

If deletion isn’t an option, paying the collection still has some benefits. It can stop collection calls, reduce stress, and show future lenders that you’ve taken care of your obligations. Just know that in terms of credit score improvement, the real wins come from either removing the collection or building new, positive credit behavior, like paying your current bills on time, lowering your credit card balances, and avoiding new hard inquiries.

FAQs

Concerns about transportation are among the biggest barriers to declaring bankruptcy. Here’s the good news: in most cases, you can keep your car whether you file Chapter 7 or Chapter 13. But here’s the better news: even though you can probably keep your car, you may not want to. In fact, for many people, replacing a bad car loan during bankruptcy is one of the smartest financial decisions they’ll ever make. In this article, then, we’ll take a look at how to file for bankruptcy and keep your car, but we’ll also take a look at your other options.

How Can I File for Bankruptcy and Keep My 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 can you file for bankruptcy and keep your car? 

Here’s the short answer: both Chapter 7 and Chapter 13 have ways for you to keep your car, but the details depend on how much equity you have in it.

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 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.

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 thinking about buying a car during bankruptcy? Meet with a lender who understands the process.

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. 

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 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.

Watch & Learn: How to Buy a Car During Chapter 13

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.

How to Buy a Car During Chapter 7 Bankruptcy

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 thinking about buying a car during bankruptcy? Meet with a lender who understands the process.

Frequently Asked Questions

1. Can I really get approved for a car loan while my bankruptcy is still active?
2. How does the court decide if I’m allowed to buy a car during bankruptcy?
3. What down payment will I need if I’m financing a car during bankruptcy?
4. Will the loan terms on a car loan be worse if I’m in bankruptcy?
5. Is there a difference between Chapter 7 and Chapter 13 when it comes to new car loans? 
6. Will financing a car during bankruptcy help my credit score?

FAQ: Can I really get approved for a car loan while my bankruptcy is still active?

Yes, you can get approved for a car loan during an active bankruptcy in both Chapter 7 and Chapter 13. If you have filed Chapter 7, you can qualify right after your case has been filed. If you have filed Chapter 13, you can qualify once your bankruptcy has been confirmed, though you will need your trustee to sign off on the car purchase. 

In any case, here is what lenders look for before approving a car loan during a bankruptcy: 

• Ability to pay. Reliable income and a payment that fits your budget.
• Reasonable vehicle choice. Two to three years old, around average mileage, warranty and gap coverage preferred.
• Clean recent banking. Fewer overdrafts and no new unpaid obligations.
• Process compliance in Chapter 13. Do not take a loan until the trustee or court signs off.

You can improve your odds by: 

• Getting prequalified with a bankruptcy-focused lender or dealership.
• Asking your attorney early so the motion or trustee letter is ready.
• Bringing a small down payment if you can, and avoiding rolling negative equity from a trade-in.
• Confirming the lender reports to all three bureaus so on-time payments help rebuild your credit. 

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FAQ: How does the court decide if I’m allowed to buy a car during bankruptcy?

For Chapter 13, you need written permission from the trustee or court before you take the loan. For Chapter 7, no court approval is necessary.  If you are in a Chapter 13 bankruptcy and want to buy a car, ask your attorney to submit a short motion or trustee request with the car price, maximum payment, and interest cap, and approval is based on necessity and affordability. 

The trustee or judge will check two things: necessity and affordability. If the car is essential for work or family logistics and the payment fits your confirmed plan, approval is typical. Do not sign anything until that approval letter or order is in hand.

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FAQ: What down payment will I need if I’m financing a car during bankruptcy?

The downpayment on a car you buy during bankruptcy will vary by lender, income, and your budget. If you are in a Chapter 13 bankruptcy, expect your attorney and the trustee to focus on whether the proposed payment fits the plan. If you are in a Chapter 7 bankruptcy, your down payment will depend on your lender’s requirements. Be sure to work with a dealership that understands the process of buying a car during bankruptcy. 

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FAQ: Will the loan terms on a car loan be worse if I’m in bankruptcy?

Not always. Buyers working with bankruptcy-savvy lenders often land rates better than traditional subprime or buy-here-pay-here offers. The CFPB’s research shows average subprime rates at banks are around 10 percent compared with 15 to 20 percent at finance companies and buy-here-pay-here lots. Your case, income, and vehicle choice will drive the final offer.

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FAQ: Is there a difference between Chapter 7 and Chapter 13 when it comes to new car loans?

Yes, with Chapter 7, the lender can approve you for a car loan after you file, but with Chapter 13, you will need the trustee or court to sign off on a new car loan. 

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FAQ: Will financing a car during bankruptcy help my credit score?

Yes, financing a car during bankruptcy can help your credit score when three things line up: 1) The lender reports to all three bureaus, 2) you make every payment on time, and 3) the loan amount and term fit your budget so you never miss a payment.

Financing a car during bankruptcy helps build credit because your payment history is the biggest factor in determining your credit score. On-time installment payments are one of the strongest positive signals in modern scoring models.

That said, if you kept your old car in Chapter 7 without reaffirming the debt, those payments often are not reported to the credit bureaus. A new loan that reports your payments to Experian, Equifax, and TransUnion creates a clean, positive trade line.

To make sure that your payments are reporting to the credit bureaus: 

1. Ask the dealer which bureaus they report to and how quickly the new tradeline posts. 
2. Choose a term that keeps the payment comfortable. A slightly longer term that you can pay early is safer than a short term that risks a miss.
3. Enroll in autopay on day one and keep one month of payments in your checking account as a buffer.
4. Keep credit card utilization under 30 percent, pay every bill on time, and avoid new collections.

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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.

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.

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.

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.

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.

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.

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.

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.

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?

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.

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.

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.

2. 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

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.

Evaluating Bankruptcy: Is It the Right Choice for You?

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.

To boost your score quickly, be sure to check out the Credit Rebuilder Program. You’ll get free access to our credit-education program, 7 Steps to a 720 Credit Score, and you’ll start to see your credit score improve in about six months. 

What Is a Credit Report and Why Should You Get Yours?

A credit report is a detailed snapshot of your financial behavior. It includes information like:

• Loans and credit cards: Every account you’ve opened, along with balances, credit limits, and your payment history, showing how consistently you pay your bills.
• Public records: Bankruptcies, foreclosures, or tax liens (if applicable), which can significantly impact your credit standing.
• Inquiries: A list of who’s checked your credit recently, such as lenders, landlords, or credit card companies.

This report is used by banks, landlords, and even some employers to decide if you’re trustworthy. Errors or signs of fraud on your report could lead to higher interest rates, rejected applications, or missed job opportunities.

Why check it yourself?

• Spot mistakes: A 2021 FTC study found that nearly 1 in 5 people had at least one error on their credit reports, potentially affecting their financial standing. If you have had a financial meltdown like bankruptcy, it’s more like 2 in 5 people. 
• Catch identity theft: Unfamiliar accounts or inquiries could be signs that someone has stolen your information and is misusing it.
• Prepare for big financial moves: Fixing errors before applying for a mortgage, car loan, or new credit card can save you money and increase approval chances.

The good news? Thanks to federal law, you can now access your credit report for free every week from all three major bureaus—Equifax, Experian, and TransUnion. No more waiting a year between checks!

How to Get Your Credit Report for Free

Gone are the days of paying to see your credit history. Here’s how to get yours without spending a dime:

1. Use AnnualCreditReport.com
   This is the only government-authorized site for free credit reports. To access your report, you’ll need to verify your identity by providing your Social Security number, birthdate, and address. Once verified, you can choose which credit bureau’s report you want or download all three at once.
2. Visit the Bureaus Directly
   Each bureau also offers free weekly reports through their websites:

• Equifax: Visit www.equifax.com/personal/credit-report-services.
• Experian: Go to www.experian.com/consumer-products/credit-report.html.
• TransUnion: Check out www.transunion.com/credit-report.

Pro tip: Space out your requests. For example, check one bureau’s report every month to monitor your credit year-round without hitting weekly limits.

Watch out for scams! Avoid sites like FreeCreditReport.com (they upsell subscriptions) or third-party apps that ask for payment. Stick to the official sources above.

Understanding What’s in Your Credit Report

Credit reports can feel overwhelming, but they’re easier to navigate once you know what to look for. Here’s a breakdown:

Personal Information

Your name, address, Social Security number, and other identifying details should all be correct. Even a minor typo can cause your report to be mixed with someone else’s, leading to inaccurate data affecting your creditworthiness.

Credit Accounts

• Open/closed accounts: Ensure that all accounts listed under your name are accurate and that any closed accounts are properly marked.
• Payment history: Late payments can stay on your report for up to seven years. If you see any incorrect late payment marks, dispute them as soon as possible.
• Credit utilization: The ratio of your outstanding balances to your total available credit plays a big role in your score. Keeping this number low can improve your credit standing.

Public Records and Inquiries

• Bankruptcies or liens: These negative marks can stay on your credit report for seven to ten years, impacting your ability to obtain credit.
• Hard vs. soft inquiries: A hard inquiry occurs when you apply for a loan or credit card, and too many in a short period can lower your score. Soft inquiries, like checking your own credit, do not affect your score.

To boost your score quickly, be sure to check out the Credit Rebuilder Program. You’ll get free access to our credit-education program, 7 Steps to a 720 Credit Score, and you’ll start to see your credit score improve in about six months. 

Keeping Your Credit Report Accurate and Secure

Finding an error? Don’t panic—but act fast. Here’s how to fix mistakes and protect yourself:

Step 1: Dispute Errors

• Contact the credit bureau (Equifax, Experian, or TransUnion) online, by phone, or by mail.
• Include proof: Send copies (never originals) of supporting documents like bank statements, payment receipts, or identity theft reports.
• Follow up: Credit bureaus have 30–45 days to investigate your claim. If they cannot verify the information, they are required to remove it.

Step 2: Guard Against Identity Theft

• Freeze your credit: This prevents new accounts from being opened in your name until you choose to lift the freeze.
• Set fraud alerts: Credit bureaus will flag your report, requiring extra identity verification before any new credit is issued.

Common red flags to watch for:

Common red flags to watch for include accounts that you don’t remember opening, payments incorrectly marked as late when you actually paid on time, and unfamiliar addresses or employers listed on your report.

Bonus tip: Use the free weekly reports to your advantage. Regular checks make it easier to catch issues before they spiral.

For guidance on disputing errors, check out the 7 Steps to a 720 Credit Score, free when you join the Credit Rebuilder Program.

Final Thoughts

Getting your credit report isn’t just for loan applications—it’s a habit that keeps your financial life on track. With free weekly access now available, there’s no excuse not to stay informed. Remember: Your credit health impacts everything from your mortgage rate to your job prospects. By understanding your report, disputing errors, and monitoring for fraud, you’re not just protecting your score—you’re safeguarding your future.

So go ahead: Pull your report today. It’s easier than you think, and it might just save you thousands down the road

What Is a Credit Card Debt Lawyer?

A credit card debt lawyer is a legal expert who focuses on resolving issues tied to credit card debt, from negotiating settlements to defending clients in court. These professionals are well-versed in consumer protection laws, debt collection regulations, and bankruptcy procedures. Their primary goal? To help you navigate the legal maze of debt disputes while minimizing financial harm.

For example, if a creditor sues you for unpaid debt, a credit card debt lawyer can scrutinize the lawsuit for errors, challenge improper collection tactics, or even negotiate a settlement that reduces what you owe. They’re also skilled at identifying inaccuracies in credit reports—like incorrect balances or fraudulent accounts—that might be inflating your debt. If you qualify for bankruptcy, they can guide you through bankruptcy filings, ensuring you understand the differences between Chapter 7 (liquidation) and Chapter 13 (repayment plans).

Given the steep rise in credit card debt, their role has become increasingly vital. High interest rates mean even small balances can snowball quickly, turning manageable payments into unmanageable burdens. A lawyer’s intervention can halt this cycle, offering strategies tailored to your unique situation.

When Should You Hire a Credit Card Debt Lawyer?

Not every missed payment requires legal help, but certain scenarios demand professional expertise. Here are four key situations where hiring a credit card debt lawyer makes sense:

1. You’re Being Sued by a Creditor
   If you’ve received a court summons for unpaid debt, don’t ignore it. Creditors often win lawsuits by default when borrowers fail to respond. A lawyer can help you draft a defense, challenge the creditor’s evidence (like proving they own the debt), or negotiate a settlement. Studies show that borrowers with legal representation are far more likely to secure favorable outcomes, such as reduced payoffs or dismissed cases.
2. Negotiations with Creditors Have Stalled
   Maybe you’ve tried negotiating lower payments or settlements on your own, but creditors aren’t budging. Lawyers have leverage here: They know debt collectors often prefer some payment over none, and they can use legal pressure to broker better terms, like interest-free repayment plans or lump-sum settlements for pennies on the dollar.
3. You’re Considering Bankruptcy
   Bankruptcy isn’t a one-size-fits-all solution, but it can offer a fresh start for those drowning in unmanageable debt. And to be sure, bankruptcy isn’t as scary as you think it is. Instead, bankruptcy is a safe, legal option for moving past debt quickly so that you can build wealth.

We think of it like this: If you are deeply in debt, every penny you earn has already been claimed by someone else (in this case, your credit card companies). You can’t build wealth when you can’t keep any of the money you are making. This is when bankruptcy can be a great option for reclaiming your life.

A lawyer will evaluate whether you qualify for Chapter 7 (which erases most debts) or Chapter 13 (which restructures them), file the necessary paperwork, and shield you from creditor harassment during the process. 

Want to talk with a debt professional about your situation and explore your options? There’s no cost to get started. Call (602) 691-7570, or schedule your free consultation here.

1. Debt Collectors Are Crossing the Line
   If collectors are harassing you with relentless calls, threats, or false claims, they might be violating the Fair Debt Collection Practices Act (FDCPA). A lawyer can demand they stop, sue for damages, and even recover compensation for illegal tactics.

When you join the Credit Rebuilder Program, you will have free legal representation if your rights have been violated under the FDCPA or the Fair Credit Reporting Act (FCRA).

How to Choose the Right Credit Card Debt Lawyer

Finding the right lawyer requires research, but these steps can simplify the process:

Look for Specialization
Seek out attorneys who focus on consumer debt or bankruptcy law. General practitioners might lack the nuanced knowledge needed to tackle aggressive creditors or complex cases. Check their websites for keywords like “debt defense” or “credit card litigation,” and verify their state bar credentials.

Read Reviews and Ask for Referrals
If you need an introduction to a bankruptcy attorney, call (602) 691-7570, or schedule a free consultation with a debt professional. 

Personal referrals from friends or financial advisors can also highlight trustworthy professionals. Pay attention to testimonials mentioning communication skills—regular updates are crucial in debt cases.

Schedule a Consultation
Most lawyers offer free initial consultations. Use this time to ask about their experience with cases like yours, fee structures (flat fees vs. hourly rates), and success stories. For instance, you might ask, “How many credit card debt lawsuits have you resolved in the past year?”

Explore Affordable Options
If private attorneys are too costly, legal aid organizations or pro bono programs might help. Nonprofits like the Legal Services Corporation assist low-income individuals, while some law firms offer sliding-scale fees based on income.

What to Expect When Working with a Credit Card Debt Lawyer

Once you’ve hired a lawyer, the process typically unfolds in stages:

1. Case Review
   Your lawyer will examine your debts, credit reports, and any pending lawsuits. They’ll identify errors, assess creditor claims, and determine the strongest legal strategies—whether that’s disputing a debt’s validity or negotiating a settlement.
2. Strategy Discussion
   You’ll explore options together. For example, if you’re being sued, your lawyer might recommend settling out of court to avoid a judgment on your record. If bankruptcy is on the table, they’ll explain how it impacts your credit score and assets.
3. Action Phase
   Depending on your situation, your lawyer might draft settlement offers, represent you in court, or file bankruptcy paperwork. They’ll handle all communications with creditors, relieving you of stressful interactions.
4. Ongoing Communication
   A good lawyer keeps you informed at every step. Expect regular updates on negotiations, court dates, or deadlines. If new issues arise—like a creditor violating a settlement—they’ll adjust the strategy accordingly.

Final Thoughts

Facing credit card debt can feel isolating, but you don’t have to navigate it alone. A credit card debt lawyer offers not just legal expertise, but peace of mind. Whether you’re battling a lawsuit, exploring bankruptcy, or pushing back against predatory collectors, their guidance can help you regain control of your finances. By understanding your options and choosing the right professional, you’re taking a proactive step toward a debt-free future—one where financial stability is within reach.

Frequently Asked Questions

1. Do I need a lawyer if I’m sued for credit card debt?
2. Can a lawyer stop debt collectors from harassing me?
3. How much does a credit card debt lawyer cost?
4. Will hiring a debt lawyer fix my credit score?
5. What happens if I ignore a credit card debt lawsuit?

FAQ: Do I need a lawyer if I’m sued for credit card debt?

Technically, you do not need to hire an attorney if you are sued for credit card debt, but you might want to nonetheless. Some people respond to a lawsuit by filing an answer with the court directly and trying to negotiate with the creditor. The downside is that creditors and their attorneys know the system well. Without legal knowledge, you might miss deadlines, overlook defenses, or agree to a repayment plan that doesn’t solve the problem.

A lawyer can file a timely response, challenge whether the creditor has proper documentation, and negotiate settlements. A lawyer can also let you know whether you should consider bankruptcy. Bankruptcy not only ends the immediate lawsuit but also wipes out the debt completely. The moment you file, all lawsuits, garnishments, and collection efforts stop through a court order called an automatic stay. And once your bankruptcy is discharged, your credit card debt can be eliminated for good.

One way or another, do not ignore the lawsuit. Ignoring it almost guarantees a default judgment, which means the creditor can garnish your wages, freeze your bank account, or place liens on your property.

Here’s what can happen depending on your response:

 Key takeaway: You don’t always need a lawyer to respond to a credit card lawsuit, but going it alone carries big risks. Bankruptcy may be the smarter long-term move because it not only defends against the lawsuit but also eliminates the debt behind it. Talking to a debt professional can help you decide which path makes sense for you.

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FAQ: Can a lawyer stop debt collectors from harassing me?

Yes, a lawyer can stop debt collectors from harassing you. The Fair Debt Collection Practices Act (FDCPA) sets clear rules for what collectors can and cannot do. If they’re calling you nonstop, threatening you, misrepresenting the amount you owe, or contacting you at work after being told not to, that crosses the line into illegal harassment. A lawyer can demand they stop, sue for damages, and in some cases recover money for you.

Here’s what the law protects you from

 The other way a lawyer can stop collectors is through bankruptcy. The moment you file, a court order called an “automatic stay” goes into effect. This immediately stops all collection activity, including calls, letters, lawsuits, and garnishments. When your bankruptcy is discharged, the credit card debt behind those calls can be erased for good.

 Key takeaway: A lawyer can stop harassment in two ways: by enforcing your rights under the FDCPA or by using bankruptcy to eliminate the debt and halt all collection activity through the automatic stay. Talking to a debt professional is the best way to find out which path is right for you, and it costs nothing to get started.

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FAQ: How much does a credit card debt lawyer cost?

Costs vary depending on your case and the state in which you live. Some lawyers charge hourly, while others offer flat fees for debt defense or bankruptcy filings. Many (if not all) provide free consultations so you can understand the cost before committing. If private fees are too high, nonprofit legal aid and pro bono programs may be available.

For people facing multiple debts or lawsuits, bankruptcy often ends up being the more affordable path. While there’s an upfront fee, the process wipes out most unsecured debt, stops collections, and gives you a clean slate to rebuild. If you’re wondering about the actual numbers, be sure to read this article: “How much does it cost to file bankruptcy?”

 In any case, here’s a rough idea of what to expect:

 Key takeaway: Hiring a lawyer costs money, but it often saves more in the long run. In many cases, bankruptcy is the more affordable and permanent way to wipe out debt while stopping lawsuits and collections. Talking to a debt professional can help you compare options at no cost.

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FAQ: Will hiring a debt lawyer fix my credit score?

Not directly. A lawyer’s role is to defend you in lawsuits, challenge improper collection tactics, negotiate settlements, or guide you through bankruptcy. None of those actions automatically raise your score, but they do remove the roadblocks that keep your score down.

For example, if you’re being sued, a lawyer may get the case dismissed or settled, preventing a judgment from dragging down your credit for seven years. If creditors are reporting inflated balances or fraudulent accounts, a lawyer can dispute those errors. And if bankruptcy is the right option, filing stops lawsuits and collections immediately and eliminates most unsecured debt, giving you a clean slate to rebuild.

Once those barriers are cleared, you can actively rebuild by adding new, positive credit behavior by enrolling in 7 Steps to a 720 Credit Score, a free credit-education program that shows you how to rebuild your credit score in 12 to 24 months.

Key takeaway: A lawyer doesn’t fix your credit score overnight, but they clear the barriers that hold it down. Whether through defense, settlement, or bankruptcy, their work opens the door for you to rebuild. Talking to a debt professional is the best way to find out which option will help you move forward. From there, programs like 7 Steps to a 720 Credit Score give you the tools to actively rebuild and return to the 700s faster.

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FAQ: What happens if I ignore a credit card debt lawsuit?

If you don’t respond, the court almost always rules in favor of the creditor. That default judgment gives them legal power to garnish your wages, levy your bank accounts, or place liens on property. Once a judgment is entered, it can stay on your record for up to seven years and is very difficult to undo. Interest and legal fees are usually added as well, making the debt even harder to manage.

Responding, either on your own or with a lawyer, keeps your options open. Without representation, you may buy time, but it’s hard to win against a creditor’s attorneys. With a lawyer, you stand a better chance of having the case dismissed, negotiating a lower settlement, or reducing how much you owe.

Filing for bankruptcy adds another layer of protection. The moment you file, a court order called an automatic stay goes into effect, stopping all lawsuits, garnishments, and collection efforts immediately. And if your bankruptcy is discharged, the underlying credit card debt is wiped out for good, which means there’s no lawsuit left to fight.

Here’s how the different paths compare:

 Key takeaway: Ignoring a credit card lawsuit is the worst option. Responding gives you a fighting chance, but bankruptcy can stop the lawsuit entirely and eliminate the debt behind it. Talking with a debt professional at no cost is the best way to find out which path will protect you.

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Understanding Your Credit Score: The Basics

Your credit score is a three-digit number (typically ranging between 300 and 850) that reflects your financial reliability. Think of it as a report card for your borrowing habits. Lenders, landlords, and even some employers use it to gauge how responsibly you manage debt. The higher your score, the lower the risk you pose—which translates to better interest rates, higher credit limits, and greater financial flexibility.

Credit scores are calculated using data from your credit reports, which track your history with loans, credit cards, and other debts. The two most common scoring models are FICO and VantageScore, both of which weigh factors like payment history, credit utilization, and account age. While the exact formulas are proprietary, we understand the key categories that impact your score. Let’s explore these crucial factors next.

The 5 Factors That Shape Your Credit Score

Your credit score isn’t arbitrary—it’s built on five core components. Here’s what matters most, ordered by their impact:

1. Payment History (35%)
   This is the most significant factor in credit scoring. Paying bills on time—every time—ibuilds trust with lenders. Even one missed payment can remain on your report for up to seven years, negatively affecting your score. Set up autopay or calendar reminders to ensure you stay on track and never miss a due date.
2. Credit Utilization (30%)
   This measures how much of your available credit you’re using at any given time. For example, if your total credit limit is $10,000 and you’ve charged $3,000, your utilization rate is 30%. Experts recommend keeping this ratio below 30% (ideally under 10% for the best scores). High utilization suggests over-reliance on credit and can lower your score.
3. Length of Credit History (15%)
   Older accounts demonstrate to lenders that you have experience managing credit. That’s why closing old credit cards—even if they’re unused—can negatively affect your score by shortening your average account age. The longer your credit history, the better.
4. Credit Mix (10%)
   Having a diverse mix of credit accounts (e.g., credit cards, mortgages, personal loans) indicates that you can handle different types of debt responsibly. 
5. New Credit (10%)
   Applying for multiple loans or credit cards in a short time frame can trigger “hard inquiries,” which temporarily lower your score. Space out credit applications by at least six months to minimize the impact on your credit health.

Proven Strategies to Boost Your Credit Score

Now that you know what matters, let’s tackle actionable steps to improve your score.

1. Never Miss a Payment
   Late payments are the fastest way to tank your score. If you’re forgetful, automate payments for at least the minimum due. Struggling to keep up? Contact lenders immediately—many offer hardship programs or adjusted due dates.
2. Lower Your Credit Utilization
   Pay down existing balances first, focusing on cards closest to their limits. If you can’t pay in full, ask for a credit limit increase (without spending more!) to lower your utilization ratio.
3. Audit Your Credit Reports for Errors
   One in four people find mistakes on their reports, like outdated accounts or incorrect balances. And if you’ve been through bankruptcy, that number is more like two in five. Claim your free annual reports at AnnualCreditReport.com and dispute errors with the credit bureaus. For guidance on disputing errors, check out the 7 Steps to a 720 Credit Score, free when you join the Credit Rebuilder Program.
4. Keep Old Accounts Open
   That dusty store credit card from 2010? Don’t close it. Older accounts lengthen your credit history, which boosts your score. Just use them occasionally (e.g., a small charge every six months) to keep them active.
5. Build Credit Strategically
   If you’re new to credit or rebuilding, consider a secured credit card (backed by a cash deposit) or a credit-builder loan. These tools report payments to the bureaus, helping you establish a positive history.
6. Avoid “Quick Fix” Scams
   Ignore companies promising to “erase” bad credit overnight. This is unethical, sometimes illegal, and oftentimes will backfire when creditors catch on and start to deem your disputes as frivolous. Legitimate improvement takes time–at least six months if you join the Credit Rebuilder Program, and 12 to 24 months if you enroll in 7 Steps to a 720 Credit Score. Focus on consistent, responsible habits instead.

Tracking Your Progress and Staying Motivated

Improving your credit score isn’t a one-time task—it’s an ongoing process. Here’s how to stay on track:

• Join the Credit Rebuilder Program

This program is designed to help you improve your score quickly. Plus, it includes free access to 7 Steps to a 720 Credit Score, a program normally reserved for clients of Evergreen Financial Counseling. 

• Monitor Your Score Regularly
  Many banks and credit card issuers provide free FICO or VantageScore updates. Apps like Credit Karma and Experian offer weekly credit monitoring and send alerts for any changes.
• Review Reports Annually
  Check your reports from all three credit bureaus (Equifax, Experian, and TransUnion) at least once a year. Look for any errors or signs of identity theft, and dispute inaccuracies promptly.
• Celebrate Small Wins
  Did you pay off a credit card? Notice a 20-point increase in your score? Recognizing progress—no matter how small—helps maintain motivation and reinforces positive financial behavior.
• Be Patient
  Negative marks like late payments fade over time, and positive habits accumulate. Most people see noticeable credit score improvements within six to twelve months when following these strategies.

The Bottom Line

Your credit score is a reflection of your financial habits, and improving it requires consistency, patience, and a strategic approach. By paying bills on time, keeping balances low, and staying vigilant about your credit health, you’ll gradually build a strong credit profile that opens doors to better loan terms, approvals, and financial opportunities. There’s no shortcut to a perfect score—but with time and effort, you’ll create a financial foundation that benefits you for years to come. 

Now, go check your credit report—you’re on the right path to success!