How Do You Beef Up A Credit Score When You’re Still Paying Down Debt?

Question: I have five collections on my credit report. I am paying on two. I am paying one in full next month, which will decrease my debt. I also have a closed credit card account that I am also paying on. What can I do to increase my credit score beside paying off the debts?

— Joan in Delaware

Terry Cordell answers…

The first thing you should do, Joan, is verify that your credit report is accurate.

There are a number of scenarios that could result in inaccurate data when multiple collection accounts are involved – which seems to be the case here. Sometimes, collection accounts are sold to various debt collectors, and they might report the item under their unique account number. That can result in duplicate files. You should review your report carefully and make sure each account is accurate.

Once you’re confident that your credit report is accurate, you should focus on the five factors that impact score the most.

The first factor is your credit utilization ratio. Your utilization ratio is basically the percentage of available credit that you are using. To figure out your credit utilization ratio, take your monthly balance and divide it by your credit limit.

Even while paying down debt you can still increase your credit score using Self Lender!

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Let’s say you have a credit card with a $2,000 limit. Last month, you charged or carried a balance of $200 on it. When you divide 200 by 2,000, you get 0.1. Thus, last month’s utilization ratio for that card is 10 percent.

Your credit reporting agency will typically provide a utilization ratio for each of your credit cards, as well as other types of credit like home equity loans. It will also assign you an overall credit utilization ratio. Ideally, you want to stay under 30 percent utilization for revolving accounts like credit cards. It sounds like you are already heading in the right direction here – and you should continue to pay down these debts as much as possible. Requesting limit increases is another option to help reduce utilization rates.

It’s important that you also continue to make at least minimum payments on your other accounts as well. Payment history is another critical factor, and you will want to avoid any accounts reporting late payments. If you currently have late payments reported, you may want to contact the lender to see if there is a remedy. You may be able to restructure your loan or set up a payment arrangement in exchange for the removal of the delinquency from your report.

You mentioned that you are currently paying on a closed credit card account. Length of your credit history impacts your credit score, with a longer history having a more positive impact. You are better off paying down older accounts but not closing them, if that is an option.

New credit accounts and the mix of credit account types can also impact your score. However, opening any new accounts at this point may not help. Hard inquiries can have a negative impact — although multiple related inquiries may be grouped together, each hard inquiry can impact your score from 2 to 5-plus points. Inquiries can have a greater impact if you have few accounts or a short credit history.

[For more information, check out How to Improve Your Credit Score Step-by-Step.]

If you don’t want to tackle these issues alone, you might consider a reputable credit repair firm to help you with the process. One way to verify if a credit repair company is legitimate is to check ratings with the Better Business Bureau. However, be wary of anyone offering to raise your credit score artificially. Buying access to someone else’s tradelines, falsifying your identity, and other similar deceptive tactics rarely provide any benefit and are often illegal.

Terry Cordell is a senior vice president at Ovation Credit Services, a LendingTree company, and an attorney with experience in consumer credit laws.

If you’re interested in tools to beef up your credit, check out’s Credit Repair Solutions to Maximize Your Credit Score.

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Why Did My Credit Score go Down Two Years After My Bankruptcy?

Question: We had a chapter 13 bankruptcy that was discharged in March 2016. The only debt we have is our home mortgage, which has always been paid on time. But our FICO score has dropped with Experian by 8 points — and TransUnion by one. No one can explain why. Can you?

— Lawrence in Florida

Howard Dvorkin answers…

What seems like an easy question has a long answer, Lawrence. That’s because there are many reasons for what looks like a simple problem.

Why are credit scores so confusing?

Because they want it that way. I’m talking about the credit bureaus themselves – they want to confuse the public. Of all of the questions I’m asked one of the most common is also one of the most frustrating…

How do I know what my Credit Score is really? The reason it’s so complicated is simple, no one person or company is in charge of your credit score. You’ve probably heard of FICO score but FICO is actually a private company and its initials stand for Fair Isaac and Company. They’re actually a bunch of mathematicians that compile all of this information that reports out to other people if you’re a good risk candidate or not.

But a FICO score isn’t the only score you have. Three big credit bureaus – Experian, Equifax, and TransUnion compile all your credit and debt information, and they have their own complicated scores. They have these crazy names, like these: TransUnion Credit Vision scores, Vantage scores, Experian Plus score, the Fair Isaac Risk Model V2SM. Crazy, right?

Thankfully, those credit bureaus have rules. You can order your credit reports, which is what the scores are based on, and check them for mistakes. If you find mistakes, you can get them removed. You might be surprised by how many mistakes there are.  But the best part is you can order a report from each bureau once per year for free. Just go on Annual Credit and check it out.

If you still need help, call You can get a consultation with an expert for the same price – free. And don’t forget to sign up for our daily newsletters – they will really help you out.

First, let’s explain why your score differs by a few points between Experian and TransUnion. Each of those credit bureaus — and even a third called Equifax — are private businesses. Credit card companies and other lenders don’t always give the same information to each bureau, and each bureau has its own weird rules and technical procedures. That’s why there are specific scores with names like “TransUnion FICO Risk Score, Classic 04” and “Experian/Fair Isaac Risk Model V2SM.”

Second, a bankruptcy is obviously a big hit on a credit score, but there are a slew of minor ones that can also drag down a score — like closing old accounts. That decreases your “credit age,” which is something the bureaus look at. Why? Because the longer you have, say, a credit card that you pay off, the more responsible you appear with handling credit and debt. That matters to lenders thinking about giving you a loan. Same thing goes for applying for new credit too many times.

Third, you should pull your credit reports and see if there are mistakes on one or more. Given the sheer volume of data Equifax, Experian, and TransUnion process each day, even a small percentage of errors is a huge number. The Federal Trade Commission estimates “one in five consumers had an error” on their credit reports. Thankfully, you can dispute these and get mistakes removed. Read more at Learn about the Credit Repair Laws that Protect Your Rights.

Fourth, check those reports carefully for identity theft. Make sure no one is opening new credit in your name. This is the fastest-growing crime in the nation, and the numbers are staggering.

Here’s what I recommend, Lawrence: Read the report How to Fix Your Credit for Free or for a Reasonable Price. To answer your original question will require eliminating some explanations. You might want to seek a credit repair consultation if you can’t deduce the situation on your own.

Find all the tools and services you need to achieve good credit in’s Credit Solutions Center.

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I’m sorry the answer isn’t as straightforward as the question. The good news is, experts are available to help you.

Have a debt question?

Email your question to and Howard Dvorkin will review it. Dvorkin is a CPA, chairman of, and author of two personal finance books, Credit Hell: How to Dig Yourself Out of Debt and Power Up: Taking Charge of Your Financial Destiny.

If I Pay Off My Credit Card, When Will My Credit Score Go Up?

Question: I have a credit card that I can pay off in full, but how long after that will my credit score go up? I need to apply for a personal loan for school, but I need my score to go up before I do that. I know it varies by the source, but about how long after I completely pay off my card will my credit score reflect it? 

— Samantha in Tennessee

[ founder Howard Dvorkin]

A reader asks, I have the money to pay off my credit card now, but am not sure it’s worth it?

Well, Samantha it is most definitely worth it! When you pay off a credit card, your credit score improves. Why? Because five factors determine your credit score, and one of the biggest is the amount of debt owed. It is 30 percent of your overall score and the biggest chunk is payment history, which is short for – I pay my bill on time.

But more important than your credit score going up is that your debts are going down.

The AVERAGE credit card interest rate TODAY hovers around 17 percent. If you put all your money in the stock market – obviously a bad idea – you’d be hard-pressed to earn 17 percent on your investments. But if you pay off a credit card bill that has a monthly balance of $5,000, you could save up to $85 a month.

That’s $1,000 a year! And you don’t have to do anything to save that money, other than pay off a debt right now. If you don’t think you can afford to do that, call today. We know how to make it happen.

Howard Dvorkin answers…

Short answer: There’s no way to know for sure, because the three credit bureaus — Equifax, Experian, and TransUnion — that decide your credit score have never explained their process in such detail.

Shorter answer: About 30-45 days, give or take. Most credit card companies update their account information once a month.

Longer answer: Depending on your circumstances, paying off your credit card won’t make much of a difference for a personal loan — which might be an unwise decision, anyway.

Let’s break this down.

First, there are many ways to boost your credit score. Check out How to Improve Your Credit Score Step-by-Step. If you really need to raise your score in a hurry, check out all your options.

Second, your credit score is based on five factors, but all of them aren’t equal. For instance, “payment history” is the biggest at 35 percent. That’s just a fancy way of saying, “I pay my bills on time.” The next biggest is “debt owed” at 30 percent. So paying off a credit card will definitely help you, but it’s still only 65 percent of the total.

It can also cost you, because 15 percent of your score is “length of credit history.” The credit bureaus like to see that you can maintain long-term relationships with your creditors. So in this case, if you pay off the card and close the account, that’s bad. You can, of course, leave the account open. Learn more at Understanding Your FICO Credit Score.

Third, and perhaps more importantly toward your overall financial situation, I worry about you taking out a personal loan to go to school. I don’t know if you mean college for the first time, or back to school after working for a few or many years.

Either way, I’d first suggest you explore other options, including scholarships. If you apply for many of those, you’re instantly eligible for the Scholarship For Aggressive Scholarship Applicants, which is awarded every two months.

All that said, I feel very strongly about this: Anytime you can pay off a credit card and still maintain healthy finances, that’s one of the absolute best tactics for achieving financial freedom. So if you can afford to pay off a credit card, doing so is its own reward.

Have a debt question?

Email your question to and Howard Dvorkin will review it. Dvorkin is a CPA, chairman of, and author of two personal finance books, Credit Hell: How to Dig Yourself Out of Debt and Power Up: Taking Charge of Your Financial Destiny.

How to Build Credit without a Credit Card

If you’re new to credit, building credit for the first time can seem like a bit of a chicken or an egg scenario. To get approved for the best credit cards, you need to have a high credit score. But to have a high credit score, you need to have a credit card. So where’s a credit newbie supposed to get started? Half of Americans don’t know the answer to this question. So, you are not alone in your search for the cure to no credit.

The good news is that you’ve come to the right place. This page explains how to build credit without a credit card step by step. That way, you can understand how credit works and what you need to do to get the credit score you want. You can also use this advice to maintain a high credit score even if you decide never to use credit cards. So, let’s get started!

Free credit help tells you how to improve your credit score and fix your credit step by step

Step 1: Understand How Credit Scores Work

First, you need to understand what goes into a great credit score. That way, you can understand what steps you need to take to start building credit fast. FICO is the credit scoring model used by most lenders when evaluating credit applications; it’s used in about 90% of financing decisions. FICO’s scoring method is widely publicized, so you don’t need to rely on guesswork as you build credit.

Know the 5 factors that determine your score

Here’s a breakdown of what FICO takes into consideration when generating your credit score.

  • 35% is determined by your payment history. How long have your accounts been open? Are you making your payments on time? Having payments that are more than 30 days late will negatively impact your credit score. Showing a pattern of late payments or having payments that are more than 90 days late are credit killers.
  • 30% of your score is tied to the amount of debt that you owe. Generally, you want to use less than 30% of the credit available to you. That means that if you have a credit line of $1,000, you never want to have a balance of more than $300. Ideally, you should keep your credit utilization under 10%. This not only benefits your credit score; it also limits interest charges and helps you avoid debt.
  • 15% of your score relates to credit age. That’s the length of time you’ve used credit. It’s based on the number of years each of your accounts have been opened. More old accounts that are still active and in good standing shows you have a history of using credit the right way.
  • 10% is made up of the number of new accounts you recently opened. If you open too many accounts too quickly, you appear desperate for credit in FICO’s eyes. This will have a negative impact on your credit score in the short term. However, you score should rebound fairly quickly as long as you don’t continually open lines of credit in quick succession.
  • 10% consists of the type of credit you have access to. If you’re able to show that you can manage multiple types of credit, you look like a responsible borrower. The ideal credit mix is a mortgage, installment loan (think car loan, personal loan, etc.), and a revolving line of credit like a credit card.

Step 2: Review your Credit Report

Now that you understand what goes into a credit score, you’ll want to see what is on your credit report. The information your report contains is what gets used to calculate your credit score. So, you want to know what your report says so you can make sure it makes you look as good as possible.

There are several ways to get your credit report. If you just want your reports with no score attached, you can download them for free. However, if you’re trying to build credit, then you may want to get your reports and see where your score currently stands. In this case, you need a credit monitoring service.

Credit monitoring can move you forwards towards your goalJust keep in mind that most free credit monitoring tools use the VantageScore 3.0 scoring model. That’s the scoring model created by the three big credit bureaus in the U.S. (Experian, Equifax, TransUnion). This is an important call out, as all credit scores are not created equally. Most major lending institutions use FICO rather than VantageScore when reviewing your application. It’s not uncommon for the two scores to vary by 50 points.

Still, both scores use the same scoring factors and have same scoring range (300-850). So, if you take action to get a good VantageScore, then you should have a good FICO credit score, too. If you want to get your exact FICO score, then you would need to go directly to FICO and pay for it.

Need credit monitoring to track your score as you build credit? Try this tool free for 30 days!

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Make sure to fix any inaccurate information you find in your report!

This may come as a surprise, but maintaining credit score accuracy is not the responsibility of the credit bureaus, it’s up to you to make sure that the information on your report is correct. One in five consumers have had items on their credit reports corrected. Making sure you’re starting with an accurate credit score is going to give you the best shot at credit success.

If you’re new to credit and just starting out, you probably don’t have any information to correct. But if you’re figuring out how to build credit without a credit card following a period of financial distress, then you could have mistakes that you need to correct. To learn more about how to fix mistakes in your credit report, visit’s Guide on How to Repair Your Credit.

Step 3: Find ways to build positive credit history

With 35% of your score being tied to payment history, you need to figure out how to start adding some history to your report. The most traditional way to build credit history is to use unsecured credit cards. However, qualifying for an unsecured card on your own can be tricky. Luckily for you, there are a few of options available for people that don’t qualify for unsecured credit.

Building credit history with no credit cards required

The easiest way to build credit without credit cards is by using installment loans. Installment accounts are typically things like auto loans, student loans, mortgages, and personal loans. If you’re building credit, you generally start with small personal loans to build your way up to the bigger types of financing.

You can use the funds from the loan to:

  • renovate a home
  • invest it in either your retirement or a college fund
  • fund a major purchase
  • take a credit card free vacation

There are also credit builder loans available through companies like Self Lender that automatically invest the money for you. Credit builder loans allow users with no credit history to open a small loan. But rather than get the loan funds, they are placed into a Certificate of Deposit (CD). So, it saves you the trouble of investing the money you receive from the loan.

Another good option for a personal loan may be a peer-to-peer loan through a company like LendingClub. You can often take out small dollar loans as low as $1,000. Make sure that your payment is affordable, and that your interest rate isn’t too high. Rates on personal loans can range between 5% – 36%. Shop around and try to get something under 10% if you can.

Whether you use tools like Self Lender, LendingClub or just a basic personal loan, the process works the same once you take the loan out. Make payments each month to pay off the loan and you’ll build positive credit history. This is a safe way to build credit history, save a little bit of money, and learn how to effectively manage monthly bills.

Trying to boost your credit score can be tricky. We’ve found a solution that will help you boost your score and begin to save at the same time!

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Credit card alternatives

It’s worth noting here that just because you can’t qualify for a traditional unsecured credit card on your own, it doesn’t mean the credit door is completely closed to you. There are other ways you can get access to credit cards if you so choose.

  • Secured credit cards are cards that you can get approved for with bad credit or no credit. You must put down a small cash deposit to open the credit line. The credit limit is usually equal to the amount you put down. Then, that money is used to cover the creditor in case you don’t pay.
  • Cosigning is another way you can get access to credit cards when you can’t qualify on your own. For instance, if you have a family member who has good credit and they’re willing to open an account with you, you should be able to qualify for a traditional unsecured credit card. Just keep up with the payments! Otherwise, you can ruin your family member’s credit instead of building yours

But again, deciding to use credit cards is a choice, not a necessity for achieving good credit. There are many people who for one reason or another decide to steer clear of credit cards. And those people can still achieve good credit using the installment technique we’re describing.

Step 4: Monitor your progress, manage your debt, and build gradually

Set credit repair expectations and learn how to build credit effectivelyOnce you start building credit history, see what other levers you can pull to build more credit.  If you took out a personal loan for a home renovation project, after about 3-6 months, you might consider getting a CD through Self Lender. Once you’re comfortable managing that debt, then you can add a peer-to-peer loan or even consider something bigger like an auto loan.

Make sure to take on new loans gradually or you can damage your credit score. Spreading new debt out also gives your budget time to adjust so you’re not struggling to make payments or trying to juggle bills. Monitoring your score over time and understanding how your actions impact changes in your score is going to be the most beneficial way to continue to build a good credit score.

Deciding if you want to include credit cards

After about 6-12 months of consistently building positive credit history with installment loans, you’ll be to a point where you can qualify traditional unsecured credit cards on your own. Then, it’s up to you to decide if you want to start using credit cards or not. Credit cards can make it easy to achieve an excellent credit score faster. However, they are not required to do so.

If you decide to start using credit cards, make sure to follow these tips:

  • Try to pay off your balances in-full every month so you can use credit interest-free
  • If you don’t pay in-full always try to keep your balances low – it’s a myth that you need carry balances over to achieve good credit
  • Don’t just accept any credit card offer you receive; only open a new card if you have a clearly defined need for it

More tips on how to build credit without credit cards

Tip No. 1: Stick to a Budget

If you’re building credit from scratch, it means that up until this point, you’ve likely been living in a cash-based lifestyle. Having open lines of credit and debt to repay adds a new layer of responsibility to your budgeting. Falling behind on bills will have a negative impact on your credit score. And once your score goes south, it means more work to crawl back out of that hole.

The best way to avoid debt problems is to create a budget and stick to it. Don’t be among the 26% of people that we polled who think you can just maintain a budget in your head. Take the time to write your budget out so you can ensure that you don’t spend more than you earn. It may sound simple, but it’s the best way to avoid financial challenges that usually lead to credit damage.

You’ll also want to continuously evaluate your budget to make sure the spending patterns you’ve established are working for you. Is a $100 budget each month for entertainment reasonable, or are you constantly going to go over that? Set reasonable expectations, or you’ll find yourself creating debt that you can’t pay off.

Tip No 2: Understand What Doesn’t Work

Unfortunately, all bills aren’t created equal in FICO’s eyes. Paying your monthly utility, phone, internet, cable, and rent payments on time won’t impact your FICO score. That doesn’t mean you don’t need to pay these expenses on time, though. Those companies can still send you to collections, which will negatively impact your credit score.

There are some companies that will report some monthly expenses like rent to the credit bureaus, but those payments typically won’t impact your FICO. However, any accounts – even a utility bill – that goes to a third-party debt collector becomes a public record. Those records get listed in your credit report and thus negatively affect your score.

Investing instruments like stocks, savings plans, and 401k contributions will also not help you build your credit score. Establishing savings is an important part of any financial plan, and having savings can help you qualify for some loans, especially large loans like mortgages where a down payment is required. Even though a credit score is going to be the biggest factor in determining your eligibility for a financial product, banks may consider other factors, like the amount of savings you have, or an existing relationship you have with the bank.

Finally, not all credit card use will impact your credit score. Let’s say you’re an authorized user on someone else’s credit card. You can use the card and make charges, but you’re not responsible for the payments. As a result, you don’t build credit history even if the account you’re authorized to use gets paid on time every month. It affects the primary cardholder’s credit history, but not yours. Only cosigners get joint credit reporting from a single account.

Build Credit the Right Way!

If you follow these steps, you should be on your way to building a strong credit score without a credit card. Having a good credit score will unlock the best interest rates for mortgages, auto loans, and credit cards as you continue your financial journey. A bad credit score can cost you tens of thousands of dollars over your lifetime. Spending time getting to understand the ins and outs of credit when you are building credit for the first time will set you up for a lifetime of success.

Through smart planning you can use FICO’s scoring model to your advantage. At the end of the day a credit score is a math equation, and you already have the solution to the problem.

Can I Fix My Credit Report If There’s A Big, Fat Mistake On It?

Question: I have an erroneous hit on my credit which reduced my FICO score from 840 to 724. The company refuses to acknowledge the error. What can I do? 

— Dick in Washington

Howard Dvorkin answers…

This is a common problem, Dick. It’s so common, in fact, the federal government has estimated, “5 percent of consumers had errors on their credit reports that could result in less favorable terms for loans.”

If there’s any good news, it’s this: When a costly problem becomes so widespread, someone usually does something about it. In this case, that’s a law called the Fair Credit Reporting Act. The FCRA requires the Big Three credit bureaus — Equifax, Experian, and TransUnion — to help you make sure your credit reports are accurate. Here’s how that works for you…

Can I Fix My Credit Report If There’s A Big Mistake On It?

Can I fix my credit report if there’s a big mistake on it? A reader found a costly error but doesn’t know who to tell. It’s hard enough to get out of debt and build a healthy credit score. So it’s absolutely infuriating when you pull your credit report, and see mistakes that dragging down your score.

Over the past two decades I’ve seen it all. Someone else has a debt but your names are similar so it gets reported as yours. You’ve recently paid off a debt but someone forgot to record the pay off. Some debts might even be listed twice for a bunch of technical reasons I won’t even bore you with. So how do you get the big three credit bureaus to fix mistakes? These massive organizations with intimidating names like Equifax, Experian, TransUnion. Well, thankfully you’re not alone.

Federal law forces these credit bureaus to work with consumers and fix these mistakes. About 5% of all U.S. adults have had at least one mistake on their credit reports at one time or another. There’s a dispute process you can use and I explained it on’s website.

I also give advice on how to get the best results, but I’ll share one right now with you. Stay calm. It’s easy to get mad when you have to spend your free time fixing someone else’s mistake. But let’s face it, we’re all human and if you vent to the people trying to help you it can only hurt you. Learn how to dispute your credit reports in the least amount of time at

How to “dispute”

If the company refuses to correct the error themselves,  you can file a “dispute” with the credit bureaus that issued the report where the mistake appears. Here’s the problem: If this mistake appears on the reports from all three credit bureaus, you will need to make three separate disputes.

I recommend you go old school and send your dispute by certified mail, with a return receipt requested. It’s called a “paper trail” for a reason, and it’s your best defense.

Provide your name, address, and account number at the top of the letter. Then briefly detail what the error is and what the correct information should be. Include copies of any documentation that supports your case — but keep the originals for your records.

What happens next

Once a bureau receives your letter, the aforementioned FCRA gives them 30 days to respond to you. That law also says the bureau must verify the information with the creditor. If the information can’t be verified, it must be removed from your credit report.

The credit bureau will then send you a new copy of your credit report, so you can confirm the information was removed. If the information can be verified but you still believe it’s wrong, you have the right to include a 100-word “consumer statement” in your credit report with your explanation of the error.

How mistakes are made

I must tell you, Dick, that not all mistakes are corrected. If the creditor can verify what they reported is correct, then the error may remain — even if you know it’s wrong.

How could this be? Here’s a common example…

You made your mortgage payment on time, but your lender reports it as missed. Why? Because the company added an additional flood insurance assessment onto your monthly payment. Even if the assessment was added in error — because the lender did not receive your National Flood Insurance Program policy renewal promptly — the payment technically was missed because you didn’t make the required payment for that month.

These kinds of situations happen. If this is similar to the situation you face, I suggest you work with a state-licensed attorney who can file the dispute on your behalf. Credit repair attorneys are well-versed in getting mistakes removed. You could have more success working with a professional than you would have making the dispute on your own, although offers you advice on both.

Check out our DIY Step-By-Step Credit Repair Plan report, or contact us to be introduced to an attorney who can help you.

Have a debt question?

Email your question to and Howard Dvorkin will review it. Dvorkin is a CPA, chairman of, and author of two personal finance books, Credit Hell: How to Dig Yourself Out of Debt and Power Up: Taking Charge of Your Financial Destiny.

Will You Help Me Go INTO Debt?

Question: I have been reading your question-and-answer columns for a while now. I have not seen anyone with my problem. It is the opposite from most of the people who write to you.

These people usually ask you how to either get out of debt themselves, or they have significant others who they are trying to convince to get out of debt.

But I need to get into debt. I just need to know the best way to do it.

I am 24 and work as a plumber. I am well paid. I never went to college, so I have no student loans. But I want to buy a new car and a house one day — but I can’t even get a credit card! I keep getting denied. I think it is because I have no credit history.

Everything I read online says to take out a personal loan or get something called a secured credit card. Is that an option? I thought that’s for people in debt?

This is a weird question, isn’t it?

— Ryan in Nevada

Howard Dvorkin answers…

Not weird at all, Ryan. In fact, this is quite common.

It certainly seems weird on the face of it, seeing as how this country is mired in debt. When the average credit card debt per household tops $15,000, and when the average student loan debt is nearly $30,000 per borrower, who worries about not having enough debt?

The answer: young people without a credit history.

Three years ago, I was interviewed by The New York Times on this very topic. What I told the reporter then is still true today: “Having no credit history can be as detrimental, or worse, than having a bad credit history.”

It’s true. If you have no credit history, lenders are reluctant to hand you money — because you have no track record of paying back a loan.  If you have a poor history, at least it gives lenders a benchmark. They’ll surely charge you more interest for a loan, but they’re not completely in the dark.

Is a low credit score keeping you from purchasing a car or a new home? Self Lender may be just what you need to establish good credit!

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Around the same time I spoke with The New York Times, had a 19-year-old intern who couldn’t get a credit card.

“Even though I pay all my bills on time, I face the same problem as people who never do,” wrote Lulu Ramadan. “We can’t get a credit card, a car loan, or a mortgage.”

What did Lulu do? She asked her parents to become an “authorized user” on their credit card account, which helped her slowly build credit. Another option is what you alluded to, Ryan: a secured credit card.

Yes, these cards are for people in debt. They’re really not credit cards at all, because you must give the issuer a refundable deposit. That becomes your credit limit. In essence, you’re charging against your own money.

Why go through this process? Because lenders will look favorably upon a secured card user who pays his monthly bills on time. Coincidentally enough, they also look favorably upon secure-card users who have no previous credit history.

So which card do you choose?’s credit card expert reviewed several such cards. Check out The 6 Best Credit Cards That Help You Build Credit. Once you establish a good payment history with a secured card, you won’t have any trouble getting a “real” credit card.

If you pay the balance in full each month, soon enough you’ll have an excellent credit score. A car and a house won’t be far behind. Good luck, Ryan, with your not-so-weird problem!


Have a debt question?

Email your question to and Howard Dvorkin will review it. Dvorkin is a CPA, chairman of, and author of two personal finance books, Credit Hell: How to Dig Yourself Out of Debt and Power Up: Taking Charge of Your Financial Destiny.

How Do I Get Rid Of A Credit Card Charge I Didn’t Make?

Question: I have a debt from a credit card that I have been disputing with credit bureaus and the card issuer for years. I cannot get it removed. I have “welcoming” paperwork from the card issuer with address that was not my legal address due to identity theft. I have sent them copy of my lease with the correct address but still can’t get removed. How can I get this removed?

— Gail in Rhode Island

Gerri Detweiler answers…

Let’s review the steps for disputing credit report errors, and then we can suggest some alternatives.

When you find a mistake on your credit reports, the first step is to dispute it with the credit reporting agency that’s reporting the mistake. There are three major credit reporting agencies, or CRAs: Equifax, Experian, and TransUnion. They don’t share information with each other, so you’ll need to dispute the mistake with each CRA, assuming each of them is reporting it.

When a CRA receives your dispute, it must investigate and respond within 30 days in most cases. The item can no longer be reported if it cannot be verified with the lender or company reporting it.

(The company reporting the claim to the CRAs is referred to as the “furnisher” of information under the Fair Credit Reporting Act, or FCRA, the federal law that applies to credit reporting agencies.)

If the dispute with the credit reporting agency doesn’t resolve your problem, the next step is to dispute the mistake directly with the furnisher who reported the erroneous information. In your case, that’s the credit card issuer.

You gain an advantage when you dispute incorrect information directly with the CRA that’s reporting it. Why? If the furnisher of the information agrees there’s an error, it must report the correction with any credit reporting agency to which it has supplied that information. This requirement could save you the extra steps of having to contact each CRA separately if you haven’t already done so.

There’s one more important protection that may apply in your case. If a consumer notifies a CRA that information in her report is incorrect due to identity theft, federal law says the CRA must block that item and notify the furnisher. However, they can decline to block the information or rescind the block if it determines it was blocked in error, or if there was a misrepresentation by the consumer.

You didn’t mention what information you’ve provided to verify your claim of ID theft beyond a copy of your lease at the time. Sometimes card issuers will want to see verification of the theft in the form of a police report or identity theft affidavit. It’s not always required, but it could be necessary in order to help get your claim taken seriously.

I’m assuming your debt hasn’t been turned over to collections. If you’re contacted by a collection agency or a collection account appears on your credit reports you’ll need to also dispute it with the debt collection agency.

Given that you’ve already tried disputing your problematic item with the CRAs and the furnisher, you’ll have to try other approaches.

One option is to file a complaint with the Consumer Financial Protection Bureau at The CFPB will likely contact the credit reporting agency and, with the agency’s assistance, you may be able to resolve your problem.

If that doesn’t work, you can contact an attorney with experience in consumer credit reporting cases. The website of the National Association of Consumer Advocates can help you find a lawyer in your state with that expertise. If the attorney thinks you have a good case, she may be willing to take it on a contingent fee basis so you don’t have to pay her upfront.

If neither of these approaches work, keep in mind that as negative information ages, it should have less of an impact on your credit scores, especially if your credit reports show on-time payments since the date of the negative information was first reported. In other words, time is on your side. You don’t have to wait until the negative account is removed from your credit reports to start rebuilding your credit.

Have a debt question?

Email your question to and Howard Dvorkin or one of his fellow experts will review it. Dvorkin is a CPA, chairman of, and author of two personal finance books, Credit Hell: How to Dig Yourself Out of Debt and Power Up: Taking Charge of Your Financial Destiny.

How to Improve Your Credit Score Step-by-Step

Improving your credit doesn’t always require paid professional help. explains both options.

How to improve your credit score.

Credit scores affect so many aspects of a person’s life – from interest rates on loans, what kind of mortgage you’re eligible for to the job you can get. So how can you improve your credit score?

Here are’s top tips for raising your credit score.

The most important tip is to simply make your payment on-time – this alone accounts for 35 percent of your score. Credit scores are determined by what’s in your credit report. If you’re late paying your bills it damages your credit and hurts your credit score.

Another major factor in determining your credit score is how much revolving credit you have versus how much you’re actually using. The smaller that percentage is, the better it is for your credit rating. The optimum is 30 percent or less. To boost your score, pay down your balances, and keep those balances low.

If you have multiple credit card balances, consolidating them with a loan or consolidation program could help your credit score.

It is also good to keep old account on your credit reports. The longer your credit history is, the better it is for your score.

If you’re shopping for a home, car or student loan, it pays to do your rate shopping within a short time period.

Every time you apply for credit, it can cause a small dip in your credit score. However, with three kinds of loans — mortgage, auto and student loans — scoring formulas allow for the fact that you’ll make multiple applications but take out only one loan.

Sometimes, the best ways to improve your credit score is to not do something that could damage it – like missing payments or paying less than the amount due.

Be sure to go to www DOT Annual Credit Report DOT Com to pull your credit reports for free every year. And remember, if you pay your bills on time and use credit responsibly your credit score will reflect these smart spending behaviors.

If you would like more information on how to make your credit score better fill out our form or better yet, call us so we help you find the best solution for your situation. We are A- plus rated by the better business bureau and have helped thousands of people become financially stable.

When life happens, we’re here for you.

Whether you’re just starting out or you need to rebuild after period of financial distress, knowing how to improve your credit score is essential. You can always pay a professional to do the work if you have the means, but not the time. However, there is nothing that paid credit repair and restoration services provide that you can’t effectively do on your own.

This guide teaches how to improve your credit score for free on your own. We’ll also point you to paid services when they’re available, so you can decide if it’s worth the cost. If you have any questions or need help achieving the score you want, just head over to’s Credit Help Center.

Below is a quick snapshot of the process and the differences between the free and paid methods of credit improvement. You can read more about each step below and find a helpful FAQ at the end of this page.

How to improve your credit score step-by-step:
The Free WayThe Paid Way
Step 1: Download your credit reportsGo to annualcreditreport.comPay a credit repair service to obtain them or subscribe to a credit monitoring service
Step 2: Review reports for errors / negative itemsReview your reports yourselfCredit repair service completes review and confirms errors with you
Step 3: Dispute any errors to have info removedMake all disputes yourself directly with the bureausState-licensed credit repair attorney makes disputes on your behalf
Step 4: Offset negative items with positive actionsDo this without a credit monitoring or with a free serviceUse paid credit monitoring to track score improvement
Step 5: Gradually build credit to achieve the score you wantIf you’re not monitoring, expect score improvement within one to two yearsWith monitoring, you can exactly gauge when you’re done

Step 1: Download your credit reports for free

Fixing your credit fast with free yearly credit reports

There is really one place that allows you to download your credit reports for free with honestly no strings attached. It’s This is a government-mandated website that was launched as part of the Fair Credit Reporting Act. That law states allows that every consumer can request a free copy of their credit report once every twelve months. is the portal they created to make that possible.

Are you feeling stuck with a 600-something credit score? Here’s a way to get a boost without opening a new credit card. 

Learn More

This is not run buy a private company and there is not hidden way of charging you later. You don’t even enter credit card information to access it. Just answer a few security questions based on the information contained in your report. Then you can download your reports from each of the three credit bureaus.

There is no requirement to download all three at once. In theory, they should all say the same thing. However, errors and discrepancies can occur – that’s part of the reason you need to download your reports. So, you need to decide if you want to download all of them or just one at a time.

  • If you just recovered from financial distress, you may want all three. That’s because you want to make sure that all three reporting agencies show your newly debt-free and financially stable status.
  • If you’re just working to improve your credit over time, you may only need one. This allows you to download the three reports throughout the year, giving you better tracking ability.

If you download all three reports then decide that you want to check them again within that year, you’ll usually have to pay. You can either pay a specific bureau for another copy OR you can use a paid credit monitoring service. But, if you use the free downloads strategically, you may be able to avoid this cost.

Step 2: Review your credit reports

Once you get your reports it’s time to read through them. If you’ve never looked at your report, don’t be intimidated! We have a resource page that can walk you through reading your report. Basically, there are two main goals to accomplish as you review your report:

  1. You must identify any errors, mistakes or discrepancies that you need to dispute.
  2. You also need to review the negative items that are not errors to see where your credit actually stands.

The first part of this exercise relates to credit repair. About 1 in 20 reports contains at least one error, and 1 in 5 says something that damages your score.  So, you need to check to make sure that your credit reports are accurate. This is what you need to look out for:

  • Incorrect personal information, including aliases that aren’t you
  • Accounts that don’t belong to you
  • Duplicate accounts (i.e. the report lists your mortgage twice)
  • Missed payments that you made on time
  • Incorrect or out-of-date account statuses or balance amounts
  • Collection accounts that aren’t yours

Any of those items can lead to credit problems for you and many would decrease your score if they exist. So, you want to make sure your report is accurate and error-free. If you find a discrepancy, highlight it for the next step.

In addition to mistakes, you also want to take note of any negative information that’s legitimate. These are items that contribute to a lower credit score. Knowing what those items are helps you craft an effective strategy to offset that damage.

Step 3: Dispute any items that are incorrect

By law, you can dispute items in your credit file that you believe are inaccurate. You simply contact the credit bureau and ask them to verify the item. They have 30 days to verify that the information is correct with the creditor. If it can’t be verified, they must remove it and provide a new copy of your report showing the correction.

That is the sum total of what credit repair is, despite any rip-offs or horror stories that you heard. It’s not the credit repair process that’s shady – it’s many credit repair companies. These companies often make bold guarantees about improving your score by a certain amount. That’s not possible to guarantee, which is why these companies get into trouble.

That’s not to say that there are not legitimate third-party credit repair services either. However, if you decide to use a paid credit repair service, just check the company’s background thoroughly. In order to legally repair your credit on your behalf, they must have a state-licensed attorney on staff that is authorized to make dispute. Check independent review websites and make sure a company has a proven record before you sign up for anything.

However, just to be clear, even a legitimate credit repair company cannot do anything that you can’t do yourself. If you hire a company, they will review your reports, identify potential discrepancies and make disputes on your behalf. It’s the exact same thing as free credit repair, just without the hassle of doing it yourself.

Depending on the number of items you need to dispute and how promptly you correspond with the credit bureaus, these first three steps generally take anywhere from 1-2 months.

Take the right steps to repair your credit

Step 4: Evaluate the negative information you’re up against

Once you remove all the errors, any negative information left gives you an idea of how much work you have. This step begins the slower part of the process: rebuilding your credit. There’s no quick fix here. In order to achieve the credit score you want, it takes effort and time.

The focus here is about taking positive actions that help you build credit, while avoiding negative actions that hurt it. This works because the impact of negative information on your score decreases over time. In other words, a missed payment last month hurts you much worse than a missed payment six years ago. So, although most negative items stick around on your credit for seven years, they don’t carry the same weight over that time.

As a result, you can offset negative items incurred in the past with positive actions now. At the same time, you avoid taking any actions that could decrease your score. This means:

  • Making all payments on time
  • Keeping credit utilization low by not running up balances on your credit cards
  • Gradually opening credit to avoid opening too many accounts at once
  • Maintaining a good, health mix of good types of debt
  • Avoiding account closures that could decrease the length of your credit history

Step 5: Build credit by taking small strategic steps

The right way to build credit is incrementally and gradually; that’s true whether you’re new to credit or rebuilding after bankruptcy. You don’t want to take on too much new debt at once and you don’t want to overextend yourself. So, you take baby steps to better credit.

  1. Start by getting a secured credit card that’s designed to help people with low scores build credit.
  2. You open this credit line with a small cash deposit, then you typically have a credit line equal to the deposit you made.
  3. Make practical, reasonable charges that you can pay off in-full at the end of every month.

This 3-step system keeps your net utilization ratio a 0% – that’s the second biggest factor in credit score calculations. It also builds a monthly positive payment history, which is the most important credit factor.

After about six months with this account, consider taking on more debt. You can either open another credit card or apply for a loan. Creditors consider traditional loans to be good debt, so they help your score. If you need a car, apply for an auto loan you can afford. If not, consider a personal loan and use the funds for an investment, home renovation project, or even a vacation.

Once you secure the new loan or credit card, continue making payments. If you take on multiple credit cards, always make sure to keep your utilization ratio below 10%. That means if your  total credit limit is $1,000, then you should never carry a balance of more than $100. To be clear, you do not need to carry any balance over month to month to achieve a good score. Paying off your balances in full every month allows to use credit interest-free, avoid debt problems, and still build credit.

Improve Your Credit Score FAQ

How long does it take to improve my credit score?

If you follow the five steps above, you should achieve a better credit score within six months to a year. How much your credit improves and how fast really depends on your profile:

  1. Where your credit score was when you started
  2. The number of negative items in your report
  3. When each of those items was incurred

So, for instance, let’s say you filed Chapter 13 bankruptcy six years ago and you’ve had no negative credit activity since. In this case, you can work to build better credit over the next year. Then when that bankruptcy penalty expires seven years from the date of final discharge, your score should improve more.

However, if you filed for Chapter 13 bankruptcy last year, then there’s no way to get rid of that penalty early. You can still take steps to build credit, but you won’t see that big jump described above for another 6 years. That’s not to say you can’t build your way to at least a fair score; it’s just going to take more effort and time.

In general, if you had a low credit score to start, the method we describe here takes about six months to a year to see a notably better score. Just keep in mind, the higher your score is when you start, the more work it takes to move the needle.

How is it possible to improve my score without knowing it?

You’ll notice in the method above, we don’t mention anything about paying for your credit score. So, if you do the completely free method of improving your credit, you could be working blind. But that’s not a roadblock to achieving better credit. Just because you don’t know the exact three-digit number, it doesn’t mean the steps above won’t work. You can trust the system, you just won’t know the exact numeric improvement.

Look closely at your credit score

That being said, if you want to know your score when you start and as you progress, then you need credit monitoring. These services vary on what they provide and how much they cost. At a basic level, they all alert you when there are changes in your score. Most only track one or two scores, but keep in mind that you have many. FICO scores are used in about 90% of all lending decisions. However, even if you use a service that monitors a different score, they all follow the same calculation structure. So, good actions that increase one score will never negatively impact another. They often just vary by how many points your score changes.

How can I improve my score faster?

Legally, there is no way to improve your credit score faster than the organic method described above. There’s no magic bullet that will take a score from 500 to 750 in the blink of an eye. The only time you may see significant numeric jumps is when a hefty negative item like bankruptcy or foreclosure naturally falls off your report. And even then, a jump of 250 points would typically be unlikely.

If a company promises that they can improve your credit score instantly or even within just one month, run. It’s a scam. They’re almost certainly going to tell you to do something illegal that can lead to criminal prosecution. This usually involves fraudulently creating a completely new credit profile for you, using a fake Social Security number; in some cases, they advise you to use an Employer Identification Number (EIN) that’s supposed to be for business credit.

Both of these practices are 100% illegal and amount to credit fraud; you can be criminally prosecuted, right alongside the company that told you to do it (if they haven’t disappeared). An instantly better score is not worth costly fines and the possibility of jailtime. Report any company that gives you this advice immediately to the FTC.

What Tricks Can I Use To Raise My Credit Score?

Question: My credit score stinks. I got a 679, which I hear is really in the toilet. I want to buy a house in the next few years. Will I be able to get a mortgage with that? Can I get a decent rate? I still have a car to pay off, and about $10,000 on several credit cards (six, I think).

What can I do to raise my credit score? Got any tricks? 

I heard a neat one: Report my credit card stolen. They close the account and create a new one. Not sure exactly how this helps, but it’s supposed to. What else can I do?

— Peter in Oklahoma

Howard Dvorkin CPA answers…

Don’t take this the wrong way, Peter, but you’ve just written one of the most depressing letters I’ve received this year. Let me explain why.

First, you want to buy a house but are focused exclusively on your credit score. 

What you don’t realize, Peter, is that your credit score isn’t just a random number. It’s based on the money you have and the money you spend. So if you’re already struggling with five-figure credit card debt on top of a car loan you don’t see paying off before you by a house, you’re heading for a debt disaster.

Second, you don’t have a grasp on your credit card debt.

You have “about $10,000.” In my experience, such estimates are usually low, because cardholders fail to appreciate just what 16 percent interest (and that’s just the average these days) can do to a monthly balance.

Even worse, you’re not exactly sure how many credit cards you have. You “think” it’s six.

Third, you’re trying to fix your credit score by lying.

Setting aside the ethics of reporting a card stolen when it isn’t, this “trick” won’t significantly help you. In fact, you’re not even sure how it works. (It doubles your “trade lines,” which I won’t bother explaining.)

Even if it does work, “credit age” comprises just 15 percent of your overall credit score. Credit score is based five factors, but “payment history” is 35 percent of it. The next biggest chunk is “level of debt” at 30 percent. So that’s 65 percent combined. Anything else you do is expending a lot of effort for minor results.

If you pay your bills on time and reduce your debt, you’ll be in a much better position to buy a house — and keep it.

By the way, Peter, you’re not too far from your goal if you apply yourself. Your credit score of 679 is only a shade under the national average of 682. That’s considered only “average,” but if you can make some minor changes, such as budgeting and taking these five steps to lowering your credit card debt, you might get that house you wanted, and at the interest rate you want, too.

Have a debt question?

Email your question to and Howard Dvorkin will review it. Dvorkin is a CPA, chairman of, and author of two personal finance books, Credit Hell: How to Dig Yourself Out of Debt and Power Up: Taking Charge of Your Financial Destiny.

Ask The Expert: I Got A Huge Raise. Why Didn’t My Credit Score Go Up?

Question: Right before Thanksgiving, I got moved to a new job with my company. It came with a big fat raise. I mean, HUGE. So I checked my credit score with TransUnion like said, and it wasn’t any higher. Does it take awhile for the raise to get listed? Or are those credit bureaus intentionally delaying this so they can get more money out me?

— Micky in Utah

Howard Dvorkin CPA answers…

Howard Dvorkin on how to get out of debt fast

Credit scores might look like simple three-digit numbers, but what goes into them is what’s complex. That’s where mistakes, myths, and conspiracy theories arise.

One myth is: “The more I earn, the better my credit score.” That’s simply not true, and for good reason.

What’s is a credit score?

A credit score isn’t based on how much money you have. It’s based on how much debt you owe. That makes sense when you really think about it. If your bank account is bulging with $1 million but your credit cards, mortgage, and auto loan total $2 million; then why would anyone lend you more money?

That’s all a credit score really is, by the way. It’s a prediction tool for lenders. It gives them a good idea — although no guarantee — that you will repay a loan made to you on time and in full.

It’s not all about how much money you earn

That’s why a middle-class person with no debt is more valuable to lenders (and let’s face it, to the success of our country) than a rich celebrity who blows all their money on parties, clothes, cars, and jewelry. It’s also why the five factors that go into your FICO credit score don’t include “income.”

Instead, they’re payment history, debt owed, length of credit history, new credit, and type of credit used. So if you haven’t used your raise to pay off your credit cards or make an extra car payment, your credit score is unaffected.

As for the credit bureaus making money, they do that mostly by charging lenders for your credit information, so they can make wiser decisions. Credit bureaus will also offer you services for credit monitoring and identity theft for a small fee, and while those services can be excellent, I suggest you shop around first for the best deal.

If I can be self-promotional for a moment, has partners who offer these services at the best prices I could find. So you may want to check them out.


Have a debt question?

Email your question to and Howard Dvorkin will review it. Dvorkin is a  CPA, chairman of, and author of two personal finance books, Credit Hell: How to Dig Yourself Out of Debt and Power Up: Taking Charge of Your Financial Destiny.