How to Build Your Credit with Kikoff: A Comprehensive Guide

Building a strong credit score is crucial for financial stability, and Kikoff offers a straightforward service designed to help individuals establish or improve their credit. If you’re looking for a programmatic way to boost your credit score with Kikoff, here’s everything you need to know to make the most out of their service.

What is Kikoff?

Kikoff credit is a credit-building platform aimed at helping users with no credit or poor credit scores improve their financial health. Kikoff reports monthly payments to two major credit bureaus: Equifax and Experian, which means your on-time payments will help you build credit over time. Kikoff’s key feature is its $750 revolving line of credit, which users can access for $5 per month with 0% interest.

In otherwards, you agree to a contract that is for a year. Each month you pay $5. You have a balance of $60 at the start and every month, your $5 payment deducts from the balance. The credit account comes with a credit limit of $750 with the basic plan. You can use the $750 at the Kikoff store to purchase a variety of digital products. Whatever is spent is added to the $5 monthly payment.  Whether or not you use any of the $750 in credit, you still make a $5 payment.

How Does Kikoff Work?

Kikoff operates by giving you a revolving line of credit that you can use to make small purchases in their online store. Here’s a step-by-step breakdown of how you can successfully use Kikoff’s services:

1. Sign Up for Kikoff: Signing up is easy and requires basic personal information. Kikoff does not conduct a hard credit inquiry, so signing up will not affect your credit score.
2. Access the $750 Line of Credit: Once approved, Kikoff grants you access to a $750 line of credit that you can use for purchases in their store. You are required to make small payments on your purchases. Each payment is reported to credit bureaus, which helps build your credit profile.
3. Make a Small Purchase: To keep your credit utilization low (a major factor in credit score calculation), make a small purchase from Kikoff’s online store, which offers items like e-books and courses. A low credit utilization rate is generally under 30%, but to maximize impact, you might want to aim for 10% or lower.
4. Set Up Automatic Payments: To avoid missing payments, which can hurt your credit, set up automatic payments through the Kikoff app. Since you are only required to pay $5 per month, keeping up with payments should be manageable for most users.
5. Monitor Your Progress: Kikoff provides users with a credit score dashboard so you can see how your score changes over time. Keep an eye on your score to monitor improvements as your positive payment history is reported to the credit bureaus.

How Kikoff Impacts Your Credit Score

Credit scores are primarily based on five key factors:

• Payment History (35%): Making on-time payments is the most important factor in your credit score. By paying your Kikoff bill on time each month, you can boost this part of your score.
• Credit Utilization (30%): This is the amount of credit you’re using compared to your total credit limit. By only using a small portion of the $750 line of credit, you can improve your credit utilization ratio, which positively affects your score.
• Length of Credit History (15%): If you keep your Kikoff account active for a long period, it will increase the length of your credit history, which can positively influence your score.
• New Credit (10%): Kikoff doesn’t perform a hard credit inquiry when you sign up, so opening an account won’t negatively impact this factor.
• Credit Mix (10%): Having different types of credit accounts (credit cards, loans, etc.) is good for your credit score. Kikoff adds a revolving credit account to your profile, helping diversify your credit mix.

Best Practices for Success with Kikoff

To get the most out of Kikoff’s credit-building service, follow these best practices:

1. Keep Your Credit Utilization Low: Ideally, keep your usage below 10% of the $750 line of credit. This shows that you are responsible with credit and can help boost your score more effectively.
2. Never Miss a Payment: Late payments can severely damage your credit score. Even though the payments are small, always make them on time to ensure you build a positive payment history.
3. Use Kikoff for at Least Six Months: While you might see small improvements to your score within a few months, credit-building is a long-term process. Keep your account active for at least six months or longer to maximize the positive effects on your credit profile.
4. Monitor Your Credit Reports: Regularly check your credit reports from Equifax and Experian to ensure that Kikoff is reporting your payments accurately. You can get a free credit report from each bureau once per year at annualcreditreport.com.

Who Should Use Kikoff?

Kikoff is a good fit for anyone looking to:

• Build or rebuild their credit without taking on major debt.
• Improve their credit profile without undergoing a hard credit inquiry.
• Establish a positive payment history with little financial risk.

Because of its low-cost and 0% interest model, Kikoff is especially ideal for people just starting their credit-building journey or for those who have damaged credit and want a safe, easy way to rebuild.

Conclusion

Kikoff is a practical and low-risk way to build your credit score, especially if you follow a disciplined approach to credit management. By making small purchases, keeping your credit utilization low, and paying on time, you can steadily improve your credit profile and open doors to better financial opportunities.

Use Kikoff strategically and combine it with good financial habits to achieve the best results, and soon you’ll see positive changes in your credit score.

By following these steps and using Kikoff wisely, you can build or improve your credit score effectively.

Here’s a detailed table for Kikoff’s credit account plans based on available information:

Here’s a table detailing the features of the Kikoff Basic, Premium, and Ultimate plans:

Introduction:

Building a solid credit history is essential for financial success. Before you can begin to build a solid credit history, you need to establish credit first. Establishing credit is the hardest part. If you’re rebuilding your credit file, you will have an easier time than someone with no credit history. Creditors and lenders just won’t take the risk. Many people think a credit card is the only way to get there. Luckily, that’s not the case! There are other methods you can use to establish and build or rebuild your credit rating. These tools are temporary, only for establishing credit. They get your foot in the door. From there it’s up to you to build a strong credit file. The only way to do that is to pay your balance off every month without fail.  Everything else will only boost your credit score. Credit scores change so frequently, that by the time your score gets a boost, your score could drop the next day.

Whenever you use credit, you are borrowing the money from the creditor. It does not matter if you use your credit card 30 or 1 time in a month.  The only thing that matters is if the balance is paid on due date. Because you need to establish credit and other than these new ways to help establish credit, an unsecured credit card is the only way. And as mentioned earlier it is a challenge. You need to read the terms and conditions for these products. There are fees, stipulations, and some have junk fees that are usually applied with irresponsible usage. Your goal is to obtain an unsecured credit card. You are going to need a mix of credit types, like installment loans in order to be eligible for the best loans, credit cards and home loans. But worry about that when the time comes. Without establishing credit first, there is no point in talking about building credit. First thing to do is establish credit.

Method 1: Credit Building Account

• Subheading: 1. Revolving line of credit
• Description:
  The Credit Account offers a revolving line of credit ranging from $750 to $3,500, which is reported to the major credit bureaus. Monthly payments are made against this credit line, helping to build important credit factors.
• How it works:
  I pay $5 for a plan that has a duration of 12 months. So, I owe $60 that I pay back over 12 months. A credit line is reported to the credit bureaus. The limit is $750, and the current balance is also reported. The credit line is not meant to be used with retailers. Over the next 12 months the credit account will show consistent on time payments, with low credit utilization.  It is straightforward and a way to establish credit.
• Action Steps:
  1. Research: Begin by understanding what the service offers.
  2. Visit the Website or App: Go to the official website or download their app if they have one. You’ll usually find detailed information about plans, features, and benefits.
  3. Create an Account: Sign up by creating an account with your email address or phone number. You’ll need to provide some personal information, such as your name, address, and Social Security number, to verify your identity.
  4. Choose a Credit Builder Plan: Browse the available credit builder plans offered. Choose a plan that best suits your needs, considering your budget and goals for building credit.
  5. Link Your Bank Account: To make payments toward your credit builder account, link your bank account. This step is necessary for automatic payments, which ensure your on-time payment history is reported to the credit bureaus. But you don ‘t have to do autopay.
  6. Start Making Payments: Once your account is set up and linked, begin making the required payments according to the plan you selected. Reports of these payments to the credit bureaus, is going to build a positive payment history from the gate.
  7. Monitor Your Credit Score: Keep track of the progress of your credit score. They won’t be FICO scores, so it’s not the number but the direction it is going.
  8. Stay Consistent: Consistency is key. Ensure all payments are made on time to maximize the benefits of the credit builder plan and improve your credit score effectively.

Method 2: Report Rent Payments

• Subheading: 2. Report Your Rent Payments
• Description:
  Paying rent is often your biggest monthly expense, but most people don’t realize that these payments can also be used to build credit. Rent reporting services send your payment history to credit bureaus, which can positively affect your score, especially if you have a consistent record of on-time payments. In addition, if you are late with your rent, that is also reported and impacts your account negatively.
• How it works:
  These services partner with credit bureaus to report your rent payments, adding them to your credit report as a tradeline. This allows potential lenders to see your ability to manage and pay large sums consistently, similar to how they view other installment loans. There are fees associated with reporting rent services. Maybe a monthly fee +an enrollment fee, or an annual fee. If your landlord or property management participates in these programs you can sign up through them. If they do not, you can sign up individually.
• Action Steps:
  1. Research Rent Reporting Services: Look into various rent reporting companies such as Esusu, RentTrack, , Rock the Score, or others. Compare their services, fees, reporting coverage (which credit bureaus they report to), and user reviews to determine the best fit for your needs.
  2. Check If Your Property Manager or Landlord Offers a Service: Ask your landlord or property management company if they already offer a rent reporting service. Many landlords partner with these services and may offer them at a reduced cost or for free, making it easier and often cheaper to get started.
  3. Sign Up for a Rent Reporting Service: If your landlord does not offer a service, choose a rent reporting company and sign up directly on their website or app. You will need to provide basic information such as your name, address, rental details, and Social Security number for identity verification.
  4. Provide Rent Payment Details: Link your bank account, payment portal, or other method of verifying rent payments to the rent reporting service. This allows the service to track your rent payments automatically. Some services may also allow manual verification of payments through submission of bank statements or payment receipts.
  5. Understand the Fees and Terms: Review the service’s fees, which may include a monthly subscription or an annual fee, and any one-time setup costs. Make sure you understand when payments are reported and how frequently.
  6. Ensure Your Payments Are Reported to All Relevant Bureaus: Confirm which credit bureaus the service reports to. Ideally, you want a service that reports to all three major bureaus (Equifax, Experian, and TransUnion) to maximize the impact on your credit score.
  7. Monitor Your Credit Report: Use a credit monitoring tools provided by the service. And again, use the monitoring service as a gauge of progress. Check that your rent payments are being reported accurately on your credit report. It may take one to two billing cycles for the payments to appear.
  8. Keep Making On-Time Payments: Consistently paying your rent on time is crucial, as this positive payment history will be reflected in your credit report. Missed or late payments can harm your score if reported.
  9. Maintain Communication: Keep the lines of communication open with the rent reporting service, especially if there are changes in your payment method, lease terms, or any discrepancies that need addressing.

Method 3: Get a Credit-Builder Loan

• Subheading: 3. Save Money and Build Credit at The Same Time
• Description:
  Credit builder loans are financial products designed to help individuals build or improve their credit rating, particularly those who have thin or no credit history. They are structured specifically to aid in establishing consistent payments. This type of loan is not to access immediate funds but to build credit. Instead of receiving a lump sum of money upfront, the loan amount is held in a secured account or savings account by the lender until the loan is fully paid off. All your payments are reported to the credit bureaus that will strengthen your rating, and you receive the money at end of the terms of agreement.
• How it Works
• You enroll in the Credit Builder Loan and pay $10 every month for one year. Your payments are reported to the credit bureaus to help build credit. Your Credit Builder Loan payments are saved for you to withdraw later. After twelve months, you can withdraw the full $120 that you paid.
• Action Steps:
  1. Evaluate Your Credit Needs: Determine if a credit builder loan is right for you. These loans are most beneficial for those with no credit history, limited credit history, or those looking to rebuild poor credit.
  2. Research Credit Builder Loan Providers: Look for reputable lenders that offer credit builder loans. Common providers include local credit unions, community banks, online lenders, and fintech companies like Self, Kikoff, and SeedFi. Compare terms, interest rates, fees, and which credit bureaus the provider reports to. It’s ideal to choose a lender that reports to all three major credit bureaus (Experian, Equifax, and TransUnion).
  3. Check Eligibility Requirements: Review the lender’s eligibility criteria. Credit builder loans generally have minimal requirements, often focusing on income verification rather than credit scores. Ensure you have the necessary documentation ready, such as proof of income, identification, and bank account details.
  4. Apply for the Loan: Complete the application process, which can usually be done online or at a local branch. Provide the required information, including personal details, income verification, and agreement to the loan terms. The lender will perform a soft credit check (which doesn’t affect your credit score) to verify your information.
  5. Review Loan Terms Carefully: Before accepting the loan, carefully review the terms, including the loan amount, interest rate, fees, payment schedule, and total cost. Understand how much you’ll pay in total and the impact of any penalties for missed payments.
  6. Set Up Payment Method: Choose your preferred payment method, such as linking your bank account for automatic payments. Setting up automatic payments can help ensure you never miss a due date, which is crucial for building credit.
  7. Start Making Payments: Begin making your monthly payments on time. These payments are reported to the credit bureaus, helping to establish a positive credit history.
  8. Monitor Your Credit Score: Use credit monitoring tools or check your credit report to track your progress. Payments usually start appearing on your credit report within one to two billing cycles.
  9. Complete the Loan Term: Continue making payments until the loan is fully paid off. Once completed, you’ll receive the loan amount (minus interest and any fees) from the secured account where it was held.
  10. Assess Your Credit Progress: After the loan is paid off, assess the impact on your credit score. You should see positive changes, especially if all payments were made on time.

Method 4: Use Experian Boost

• Subheading: 4. Use Experian Boost to Add Utility and Phone Payments
• Description:
  It is a free service to help people with limited or poor credit history improve their credit score quickly and easily. A tool offered by Experian that allows you to add positive utility, phone, and even streaming service payments (like Netflix) to your Experian credit report.
• How it Works
  It leverages information from your bank account to identify on-time payments that wouldn’t usually be considered by credit scoring models. You need to connect your bank account(s) that you use to pay your bills. Experian Boost then scans your transactions to identify eligible payments. The service looks for payments such as utilities (electricity, water, gas), phone bills, internet bills, and even streaming services like Netflix, Hulu, and Disney+. These payments are typically not reported to credit bureaus but can positively impact your credit if added. After identifying eligible payments, you can choose which ones you want to add to your credit report. Experian Boost only includes the payments you approve. Once the payments are added, Experian Boost updates your credit report instantly, and you can see the impact on your Experian credit score immediately. It only affects your Experian score,
• Action Steps:
  1. Visit the Experian Website: Go to the Experian Boost page or simply search for “Experian Boost” on your preferred browser.
  2. Create an Account or Log In: If you don’t already have an Experian account, you’ll need to create one. This will involve providing some personal information, including your name, address, Social Security number, and date of birth. If you already have an Experian account, log in using your credentials.
  3. Access Experian Boost: Once logged in, look for the Experian Boost section. You will see an option to “Get Started” or “Boost My Score Now.” Click on this to start the process.
  4. Connect Your Bank Account: Experian Boost will prompt you to connect the bank account(s) you use to pay your utility, telecom, and streaming service bills. You’ll need your online banking username and password for the account you want to link. Experian uses a secure, encrypted connection to access your transactions, ensuring your information is protected.
  5. Allow Experian Boost to Scan Your Transactions: After connecting your bank account, Experian Boost will scan your transactions to identify eligible payments. This includes payments to utility companies, phone providers, internet services, and selected streaming services.
  6. Review and Select Payments: You’ll be presented with a list of qualifying payments that Experian Boost has identified. Review these payments and select which ones you want to add to your Experian credit report. You have complete control over which payments are included, so you can choose only those with a positive payment history.
  7. Confirm and Boost Your Score: After selecting your payments, confirm your choices. Experian Boost will then update your Experian credit report immediately, and you will see the impact on your credit score right away. You can monitor the changes in your credit score through the Experian dashboard.
  8. Monitor Your Credit Report: Use a credit monitoring tools provided by the service. And again, use the monitoring service as a gauge of progress. Check that your rent payments are being reported accurately on your credit report. It may take one to two billing cycles for the payments to appear.
  9. Update and Manage Your Linked Accounts: You can add new accounts or update existing ones anytime. If you switch banks or have new eligible payments, reconnect or add new accounts to ensure Experian Boost captures all relevant transactions.
  10. Regularly Use and Manage Your Boost: Experian Boost updates your score continuously based on your selected payments. Regularly check your account to ensure your payments are accurately reflected.

Conclusion:

Building credit without a credit card is entirely achievable and doesn’t have to be complicated. By leveraging rent payments, credit-builder loans, becoming an authorized user, and using tools like Experian Boost, you can establish and improve your credit profile. Start exploring these options today to take control of your credit journey!

Additional Tips:

• Maintain Consistent Payment History: No matter which method you choose, consistency is key. Always pay on time to reflect positively on your credit report.
• Monitor Your Credit Regularly: Utilize free credit monitoring tools to stay informed about changes to your credit score and address any issues promptly.

Dispute Credit Collection Letter aka Debt Validation Letter

Download

The Impact of Collection Dates on Your Credit Score

When dealing with collections, the impact of a collection doesn’t depend on the amount owed but rather on the date of the first missed payment. The credit system places greater emphasis on recent activity, meaning older collections have less effect on your credit score.

Legally, debts can remain on your credit report for seven years from the first missed payment, and debt collectors cannot force repayment after this period. However, they can legally keep pursuing the debt.

It is illegal for them to keep reporting it to the credit bureaus. It is essentially up to you if you want to pay the debt back after the statute of limitations. Keep in mind that if you acknowledge the debt as yours by paying any -amount to the debt, the statute of limitation starts over. And the debt becomes recent activity and will be considered a late payment until it is paid off.

What is a Charge-Off?

A charge-off happens when an account goes unpaid for six months, prompting the creditor to close it and write it off as a loss. This does not eliminate your obligation to repay the debt. The creditor cannot accept money towards the debt once they charge it off.  The balance should show $0. A charge-off can stay on your credit report for seven years from the first missed payment and negatively impacts your credit score until it’s resolved. Charge-offs have a more significant negative impact than a late payment.

What is a Collection?

A collection happens when an account is severely past due and defaults, leading it to be sold to a collection agency. When this happens, you may see two negative entries on your credit report: one from the original creditor and one from the collection agency, both representing the same debt.

Statute of Limitations on Debt

The statute of limitations determines how long a creditor can legally sue you for repayment, typically lasting seven years from the first missed payment. If the statute of limitations is nearing expiration (two years or less), it’s often best to leave the debt alone and let it fall off your credit report naturally. However, if the account is more recent (2-4 years old), paying it off in full can be beneficial, Remember, that the law does not allow for the negative item to post more than seven years. It does not mention that it must remain for 7 years.

Handling Collections: Key Considerations

1. Balance Owed: Smaller balances, such as $500, may be worth paying off in full to avoid the ongoing negative impact.
2. Ownership of the Debt: Has the account been sold to a collection company or does the original creditor still own the debt, but their collection department is pursuing the debt. If the account has been sold, then the original creditor does not own the account anymore and cannot collect on it.  Therefore, the balance under the creditor should show $0. This mistake is very common, in this instance, the report is reporting false information and has to be deleted.  You can send a letter to the credit bureaus that show the incorrect balance demanding the account be deleted. But you must be careful in your letter to not acknowledge the debt. If you state that you already paid off that debt, the credit bureau(s) will correct the balance to show$0. You do not need to give them any explanation. You just say that the account is showing false information and has to be deleted.
3. Factual Errors and Inaccuracies: If there is anything out of place, wrong date, a typo, anything wrong. You can demand the account to be deleted because the information is false. The furnisher’s reporting must be consistent with the bureaus. If it is inconsistent then it is misleading.  And you have the right to demand deletion. If you compare your three reports side by side.  Finding inconsistencies is much easier. If there is, all you need to do is to send a short, simple letter to the credit bureau(s) that states, “This account is reporting factual errors. DELETE.”

Deleting Charge Offs and Collections

Misconceptions About Charge-Offs and Collections

Charge-offs and Payment Responsibility

Q: “Does a charge-off mean I’m no longer responsible for the debt?

“A: No, this is a common misunderstanding. Think of it this way: if a store writes off stolen merchandise as a loss, it doesn’t mean the thief can keep it without consequences. Similarly, when a creditor charges off your account, you’re still obligated to pay. The charge-off will continue to negatively impact your credit score until you resolve the debt.

Third-party Collections and Debt Validity

Q: “If my unpaid debt is sold to a collection agency I never agreed to work with, am I still responsible for payment?”

A: No, this isn’t entirely accurate. It’s standard practice for creditors to sell unpaid debts to collection agencies, and it’s perfectly legal. Your responsibility for the debt remains, even though it’s now with a different company. However, the collection agency must comply with the Fair Debt Collection Practices Act (FDCPA) in their collection efforts. You have the right to ensure their compliance before making any payments.

Debt Settlement and Credit Score Impact

Q: “Will negotiating a settlement for less than the full amount owed on a collection or charge-off harm my credit score?”

A: No, settling a debt for less than the original amount won’t lower your credit score. In fact, resolving the debt through a settlement can actually improve your credit situation.

A Preliminary Step That May Work for You

If you do not live at the same address that is listed on the collection account, before you do anything else, remove the old address from your credit report. This prevents the credit bureau from linking the collection to you via the old address, which can help dispute the collection.

Download Sample Letter for removing old Addresses

Strategy for Removing a Collection with a Balance

Download Sample Debt Validation Letter

Debt Validation:

You have the right to request debt validation. Debt validation requirements apply exclusively to debt collectors, which include collection agencies that buy debts from original creditors and the internal collection departments of companies. The initial creditor isn’t required to provide comprehensive debt validation. However, they must furnish a copy of the original contract between the parties, such as the credit card agreement or loan document with your signature. Once you request validation of the debt, the collector is required to provide you proof in the form of 5 specific documents:

1. A detailed explanation of what the alleged debt is for, ensuring that the debt genuinely belongs to you.
2. A complete payment history of the account, including calculations that show how the balance was determined, providing proof that the claimed amount is accurate.
3. A copy of the agreement or signed credit application demonstrating that you agreed to pay this debt, confirming it belongs to you rather than someone else with a similar name or in cases of potential forgery.
4. A copy of the agreement that authorizes the collection agency to collect on the old debt, applicable if the debt has been sold to a third-party agency, which they are legally allowed to do.
5. A copy of the creditor’s state license, including their license number, to verify that they are a legitimate company and not an overseas scammer attempting to collect money unlawfully.

Incomplete Debt Validation

The debt collector must provide the validation within a reasonable period, usually considered 30 to 45 days. If the collector can’t validate the debt by providing you with every document requested stated in the letter, you will be able to remove the collection without paying.

Download Sample Incomplete Debt Validation Letter

The Art of Negotiation:

If you plan on negotiating a settlement, make sure that you include a deletion clause. The agreement should state that: When the receives your payment, the debt is considered “paid as agreed.” In addition, they will report to the credit bureaus to have the collection deleted.  If you “paid as agreed” on the account, then it is impossible to have a collection under the account.

Approach negotiations in a professional, rational and calm. Don’t go into a story about your situation. Preferably negotiate over the phone, which allows for more direct communication. Here’s an adaptable script:

• • Introduce yourself and mention the collection account on your credit report. State the balance and offer a specific amount you can pay immediately, like $1,075 instead of a round number: My name is [your name]. I noticed a collection on my credit report from your company with a balance of $4,500. I want to resolve this, but I’m unable to pay the full amount. I can offer $1,275 as a settlement. If you agree to this amount, I can send a cashier’s check immediately.

At this stage, do not mention what your intentions are. The collector could say, “If you pay less than the full balance, it will show on your credit report,’ which doesn’t look good.” It actually doesn’t matter. They can add a statement if they want. You plan to have the account deleted anyway. Do not tell them yet, though. Let them know, “I’m aware of that, and it’s not a concern for me. Will you accept my offer, or would you rather I pay nothing at all?” Stay focused on the main point: negotiating the settlement amount.

You want to offer low to try and pull out their best offer. Listen to their counteroffer. If it is 50% of the balance is great, most companies will start at 20%. Negotiating a lower settlement usually requires more time. You need to make it clear that you don’t have the cash on hand and won’t be able to obtain it anytime soon.

The collector may say that “Your offer is too low; I cannot accept that.”

You then say, “I’m really sorry to hear that. Because that is all I have. What is the lowest that you can offer me?”

The collector may say, “I can take $2775 as long as you pay that by the end of the month.”

You say, “I have to say, $2,775 is a real reach. Unfortunately, it is not do-able for me. I have very limited resources. What if I can manage to get $2,559. Will you take that?”

The creditor may say, “I’ll take $2100 now and you can pay the rest of the balance next month.”

No payments, because once you put any amount towards the debt other than the full amount, the statute of limitation starts over, and the account is considered late until the balance is paid off.

You say, “No thank you. I want to pay an agreed-upon amount in one payment. That is the only way I’m doing it.  I’ll just have to wait until I can save up for the amount we agree on. If that means I have to wait a year or more, than that’s the way it will be.” Then pause, let the time frame soak in. Then continue, ‘However, if we can agree on agreeable amount, I can pay you this month. I’d like to take care of this, but I am not desperate or in a rush. Unless we came up with a do-able sum, there would be no payment at all.”

At this time, they may say, “$2,100 is the lowest I am authorized to go.”

You say, “Please send me a letter saying $2,100 by such-a-date will be paid as agreed. I’ll see about gathering the funds.”

Verbal agreements mean nothing. Once you have a verbal agreement for settlement, always asked for it in writing before going any further.

An emailed letter is acceptable. Save the email in a document that includes the header, showing the sender’s information and the date. It’s crucial to have this letter—no letter, no payment. No exceptions. Do not explain to the creditor why you need the letter; just request a letter stating that the agreed amount will be marked as “paid as agreed.”

Important Strategies:

• Never mention that you’re trying to clean up your credit to buy a car, a house, or to refinance. This signals desperation, and they may demand more money than they otherwise would.
• Avoid rushing to pay the creditor. Instead, let them feel the urgency to propose an acceptable settlement so they can collect their money.
• Don’t fall for threats that the settlement offer will be withdrawn if you don’t pay by a certain date. They always want money, and almost always, they will negotiate if necessary.
• Always propose a specific odd number instead of a round one. For example, offering $1,275 sounds more thoughtful and precise than offering $1,000 or $2,000, indicating you’ve carefully calculated what you can afford.

The Right Way to Pay Off a Collection or Charge-Off

Now that you have the agreement in confirmed in writing you can proceed with payment.

1. Use a cashier’s check or money order, do not pay in cash and do not give your bank details. Plus, you want to have a paper trail in case you need it down the road. They will accept a cashier’s check over nothing at all.
2. Wherever there is space, write: Paid in Full as Agreed. 
3. Make photocopies of your check. One is for you to keep and one for the credit bureaus that show a collection on your report.
4. Same as above, make photocopies of your check. One is for you to keep and one for the credit bureaus that show a collection on your report.
5. Send in the check to the collector, once it’s cashed, send the copies of the agreement letter, cashier’s check to each bureau that shows the collection. Include a cover letter that states: “This collection must be deleted because it was ‘paid in full as agreed.’ By law, you are required to remove this account.”

Introduction

Beginner credit cards are specifically designed for individuals new to credit, those looking to establish or rebuild their credit. These cards are ideal for young adults, students, or anyone with a limited credit history. Generally, they are meant to be steppingstones to traditional credit cards. They often have simple reward structures, low to no annual fees, and easier approval criteria compared to more advanced cards. The main benefits include credit-building opportunities, straightforward rewards, and minimal fees.

Key Features of Beginner Credit Cards

Rewards Program:

Many beginner credit cards offer basic rewards such as cashback on everyday purchases, typically ranging from 1% to 1.5% back. Some cards, like the Discover it Secured, offer specific rewards like 2% cashback at gas stations and restaurants on up to $1,000 in combined purchases each quarter. They are meant to encourage more spending. The more you spend the more cash back you receive. This is a recipe for disaster. Credit cards are not debit cards or personal loans. Whenever you make a purchase on your credit card you are essentially borrowing money from the creditor. If you have sugar at home, why would you go next door and borrow sugar?

Interest Rates:

Typical APRs for beginner cards can be higher, often ranging from 20% to 30%, due to the higher risk associated with less established credit profiles. Secured cards may have slightly lower rates but require a refundable deposit.  We all know that the interest is how creditors and lenders make their money. It doesn’t mean that you have to pay interest.  If you pay your balance off every due date, it will not matter what the interest rates are. Because there will be nothing to apply it to. Let others pay interest to the creditors.  That is how you use credit cards, paying the balance off every month. Paying anything other than the full balance amount translates to you going over your budget. Spending more than you can afford. Your credit score is docked points, and it doesn’t demonstrate responsible credit card usage.

Annual Fees:

Most beginner cards come with no annual fee or a modest fee. Capital One Platinum Secured Credit Card. No annual fee.  Security deposit is required. If you do research, you will be able to find a beginner’s card with no annual fee or monthly fees.

Credit Requirements:

These cards are accessible to those with fair credit (580-669) or even limited to no credit history. Secured cards, like the Discover it Secured, don’t require a credit score, making them accessible to those new to credit.

Additional Perks:

Benefits can include fraud protection, credit monitoring tools, and access to credit score tracking. Some cards also offer additional perks like rental car insurance or discounts on certain purchases.

Pros and Cons of Beginner Credit Cards

Pros:

• Easier Approval: Many cards are designed for those with limited or fair credit, making them easier to obtain.
• Credit Building: These cards report to major credit bureaus, helping users build their credit history with responsible use.

Cons:

• High APR: Interest rates can be higher compared to other credit card types, making it costly to carry a balance.
• Limited Rewards: Rewards programs may be less robust, with fewer categories and lower cashback rates.

Best Beginner Credit Cards in 2024

1. Capital One Platinum Secured Credit Card

• Annual Fee: $0
• Rewards: No rewards
• Introductory Offer: None.
• Ideal For: Those who are new to credit or trying to establish credit.

2. Discover it Secured Credit Card

• Annual Fee: $0
• Rewards: 2% cashback at gas stations and restaurants (up to $1,000 per quarter), 1% on all other purchases.
• Introductory Offer: Automatic reviews starting at seven months to transition to an unsecured card.
• Ideal For: Individuals looking to build or rebuild their credit with a secured card​.

3. Capital One SavorOne Cash Rewards Credit Card

• Annual Fee: $0
• Rewards: Cash back rewards structure, 8% on purchases through the Capital One Entertainment platform. 5% on hotels and rental cars booked through Capital One Travel. 3% on dining, entertainment, streaming services, and grocery store purchases. 1% on all other purchases.
• Introductory Offer: 0% Introductory APR on Purchases and Transfers for first 15 months.
• Ideal For: Those who are new to credit, Consumers Who Can Pay Off Balances Monthly.

How to Choose the Best Beginner Credit Card

1. Consider Your Needs: Identify if you need a card primarily for building credit or earning rewards.
2. Compare Rewards: Look for cards that offer rewards aligned with your spending habits.
3. Check the Fees: Be mindful of annual fees and any other associated costs.
4. Understand the APR: If you plan to carry a balance, prioritize a card with a lower interest rate. Remember this, credit cards are the riskier of credit types. The interest rates are always high in general because of the riskiness. With beginner credit cards, most issuers have shifted to variable APR rates tied to the Prime Rate.

Tips for Maximizing Your Beginner Credit Card

1. Pay in Full Each Month: Avoid high-interest charges by paying your balance in full each billing cycle.
2. Use the Card Regularly: To keep your card active, use your credit card at least twice every 3 months. It does not matter if you use your card 20 times in a month or if you use it once in a month in terms of your credit rating or credit score. The only thing that matters if you pay the balance each month, on time.
3. Monitor Your Credit Score: You do not need a credit monitoring service and free credit scores. You will do just fine with your free annual credit reports. Review them and make sure that everything looks correct. If not, you will have you information straight from the credit bureaus so you can begin the process of correcting the mistakes. You do not recieve credit scores with your free annual credit reports. Which is perfectly fine because credit scores are dynamic. They change so frequently, and they are not saved. If your credit provider offers tools to track your progress in establishing, improving, or rebuilding credit. Or if you do use a credit monitoring service like Credit Karma, use it as a gauge to measure your progress.

Frequently Asked Questions about Beginner Credit Cards

Question 1: Do beginner credit cards improve my credit score?
Answer: They potentially can, but because of the many factors that influence credit scores, the impact will not be the same for everyone. And beginner credit cards are designed to establish credit rather than boost credit scores. You will see and hear it all the time; paying your balance in full and on time every month is going to build a strong credit file. Your report is comprised of what is in your credit file. A credit score is the direct result of a credit report. It takes time to build a strong credit file. But one late payment is going break a credit file instantly. Any negative event will overshadow any positives in your credit file.

Question 2: Do I need a credit score to apply for a beginner card?
Answer: Many beginner or starter credit cards are specifically designed for people with no credit history or credit score. These cards can help you start building credit from scratch. Some cards, especially secured ones, don’t require an existing credit score. Instead, they require a security deposit, reducing the risk for the creditor. Making them accessible to complete beginners.

Question 3: Can I upgrade my beginner card later?
Answer: Most credit card issuers allow you to upgrade to a higher-tier card once you have established a good credit history with your current card. This often requires having the card for at least six months to a year.

Conclusion

Beginner credit cards are a great tool for establishing credit. By choosing the right card and using it responsibly, you can begin building credit and become eligible for the more desired and exclusive credit cards.  What you are really doing is paving the way for a stronger financial future. Realize that rewards and bonuses are never in the best interest of the user.  Read the stipulations for bonuses.

Here is an example, a $500 bonus requires the user to spend $1500 within the first three months.  That may work if you already had a big purchase already planned. Usually, the big purchased is planned after. Or use it as an excuse to spend the $1500 to get $500 back. Cash back rewards cards require you to spend more to get some of your money back.  Compare your options carefully and select the card that best fits your needs and credit profile.

Can I build credit with a debit card? Building credit with debit cards isn’t possible in the traditional sense because debit card usage isn’t reported to credit bureaus. Unlike credit cards, debit cards are linked directly to your checking account and using them involves spending money you already have rather than borrowing money that you will need to repay. Now they have more tools to help build and rebuild credit.

Those who are trying to establish credit or rebuilding their credit may find it challenging to get approved for traditional credit cards. Debit cards that build credit can provide a steppingstone to establish a credit history without the risk of accumulating debt. It’s important to note, however, that traditional debit cards do not affect your credit score. The products marketed as debit cards that help build credit usually involve some form of credit activity.

How They Work?

Debit cards that build credit work through innovative features that mimic or involve some credit-like activities. These cards link to your existing bank account, or the debit card links to a secured line of credit. Where the individual puts down a security deposit that becomes the spending limit. At the end of each month, the card issuer totals up your transactions. They report these payments to one or more credit bureaus (typically Experian and Equifax, sometimes TransUnion).

The Pitfalls

It’s important to approach these products with caution and to consider more traditional and established methods of building credit. Because they are generally more transparent and effective. Debit cards that help build credit might sound appealing, but they come with certain pitfalls that users should be aware of:

1. Limited Impact on Credit Scores: These cards may not have as significant an impact on your credit score as traditional credit-building tools like credit cards or loans.
2. Fees: Some of these debit cards might come with high fees, including monthly service fees, enrollment fees, or other hidden charges. These costs can add up over time and might outweigh the benefits of any credit score improvements.
3. Misleading Claims: There can be misleading marketing claims around the effectiveness of these products in building credit. It’s essential to thoroughly research and verify the claims made by these products to ensure they will actually contribute to your credit report in meaningful ways.
4. Limited Functionality: Some debit cards cannot be used at ATM’s. This limits their utility for cash withdrawals compared to traditional debit cards.
5. Dependency: Relying on a specialized product to build credit can prevent users from exploring more effective methods, such as secured credit cards, which are widely recognized and have a proven track record of building credit.
6. Consumer Education: There may be a lack of clear information on how to use these products effectively. Users might not fully understand the terms and conditions or the specific ways these cards report to credit bureaus, leading to mismanagement or unrealistic expectations.

The benefits of Credit building credit cards

Benefits:

• Build credit without taking on debt.
• Eliminate risk of overspending.
• No credit check required 

I want to point out that these tools are temporary, used as a means to attain traditional financial products to help you build a strong credit file.  Such as unsecured credit cards, installment loans, home loans and mortgages. When it comes to a strong credit file, there are things that will boost your credit score, but they are not going to make a strong credit file. Paying your bill in full and on time is going to build a strong rating. In addition, keeping balances under 10%.  Keeping low balances is not going to make a difference if your always late with payments. Paying your bill late will weaken what you’ve built. The longer the payment is late, the worst your rating will become.

When you sign a credit card agreement, you are basically giving your word that you are going to repay, what you borrow. If you do not pay the full amount, whatever the balance is you’ll pay interest on. In the eyes of the lender, when the full amount is not paid, flags begin to rise. Some lenders love it, because of the interest that gets applied to the balance. But the bottom line is, did you pay back all that you borrowed or not?  Is your word good or is it meaningless?

Ways To Establish Credit

In order to build credit, you must pay back what you borrowed. In order pay back what you borrow, you need a lender to let you borrow. If you have no credit history or a bad credit history, it’s a challenge finding a lender. Credit scoring is about risk. A bad credit history is risky. No credit history is highly risky. The credit industry has no benefit of the doubt.  As an example, if a creditor reports the current balance on a credit account, but doesn’t report the credit limit, credit scoring assumes the account is maxed out, when really the balance to credit limit ratio is 20%.

That is why having no credit history is worse than having bad credit. A bad credit history is not permanent, someone with bad credit can turn things around by paying on time and in full, if not full the full amount, at least paying the minimum. With no credit history, it is assumed that the individual will not pay the balance.

Capital One Platinum Secured Credit Card // No Annual Fee// 29.99% APR (variable)

Discover it Secured Credit Card//No Annual Fee//28.24% APR (variable)

So, there are tools that can be used to establish credit.

Credit gives an individual the ability to borrow money with the promise to repay it in the future. Individuals can make purchases or investments without having immediate funds. Credit cards are a type of credit called revolving credit. Revolving credit does not have a fixed ending date like a loan does. You use the credit as desired, pay it off, and then use more credit. The credit account goes on and on until it is closed.

Definition and Basics

A credit card is a small plastic or metal card issued by a bank or financial institution. You are able to borrow money up to a certain limit to make purchases. When you use a credit card, the issuer is essentially giving you the money for the purchase. You’re expected to pay back the money you’ve borrowed by the due date each month. If you don’t pay it all back, you’ll be charged interest on the remaining amount.

Difference from Debit and Prepaid Cards:

• Debit Cards: When you use a debit card, the money comes directly from your checking account. You’re using your own money to make purchases, not borrowing from a financial institution.
• Prepaid Cards: Prepaid cards are loaded with money in advance. Once the card is loaded, you can use it like a debit card, but only up to the amount you pre-loaded. There’s no borrowing involved.

Types of Credit Cards

Credit cards come in various forms to suit different financial needs and goals:

• Standard Credit Cards: These are the most basic type of credit cards. They don’t have many extra features, if any at all.
• Rewards Credit Cards: These cards offer rewards on your spending. The rewards can come in the form of points, miles (for airline tickets), or cash back. Rewards cards are great for people who pay off their balance each month and want to earn something back for their spending.
• Secured Credit Cards: Secured cards require you to make a deposit as collateral before you can use the card. The credit limit usually matches the deposit amount. These cards are designed for people looking to build or rebuild their credit history because they generally have easier approval criteria than standard credit cards.
• Student Credit Cards: These are designed for college students who are new to credit. They usually have lower credit limits and may offer rewards suitable for younger people’s spending patterns, like rebates on groceries, dining, and entertainment.

How Credit Cards Work?

Understanding the following aspects of how credit cards work can help you use them more wisely, ensuring you manage your finances better and avoid costly interest payments.

Charges and Billing

When you use a credit card to buy something, you’re not immediately paying for the item with your own money. Instead, your credit card company pays the merchant, and you later repay the credit card company. This transaction shows up on your credit card statement, which is a detailed list of all the transactions made during a billing cycle (usually about 30 days).

At the end of each billing cycle, the credit card company sends you a statement with the total amount you owe, known as the balance. This statement will also tell you the minimum amount you need to pay by a certain due date and the total balance if you want to avoid paying interest.

Interest Rates (APR)

APR, or Annual Percentage Rate, is the yearly interest rate charged on outstanding balances. If you don’t pay your entire balance by the due date, the credit card company will charge interest on the remaining amount. For example, if your credit card has an APR of 20%, this rate is typically divided by 12 (months in the year) to find the monthly rate. So, if you carry over a balance of $100, you’ll incur about $1.67 in interest for that month on this balance.

Minimum Payments

The minimum payment is the smallest amount you must pay on your credit card bill to keep the account in good standing. This amount is usually a small percentage of your total outstanding balance, often around 2% to 3%, or a set dollar amount, typically $25 or $30, whichever is higher.

Implications of Making Only Minimum Payments: Making only the minimum payment means you’ll accumulate interest on the remaining balance, which can add up over time. This can make the total cost of the items you purchased much higher due to the added interest. Additionally, consistently making only minimum payments can extend the time it takes to pay off your balance significantly and may impact your credit score, as it may appear you’re struggling to manage your debt effectively.

Benefits of Using a Credit Card

Building Credit

Using a credit card responsibly is one of the most effective ways to build your credit history. Here’s how it works:

• On-time Payments: Each time you make a payment on time, your credit card issuer reports this to the credit bureaus. Consistent, on-time payments show that you are reliable and can manage debt responsibly, which helps build your credit score.
• Credit Utilization: This is the ratio of your credit card balance to your credit limit. Keeping this ratio low (generally recommended below 10%) shows that you are not overly reliant on credit, which positively impacts your credit score.
• Length of Credit History: The longer your accounts are open and in good standing, the better it is for your credit score. Using a credit card over a long period and keeping the account active and in good standing can help enhance your credit profile.

Rewards and Benefits

Credit cards often come packed with various rewards and perks that can make them financially rewarding, especially if you pay off your balance each month to avoid interest charges. Here are some of the rewards and benefits:

• Points: Many credit cards offer points for every dollar spent. These points can be redeemed for merchandise, gift cards, or even travel. But never use this as an excuse to make purchases. Carrying a balance every once in a while, happens, but if you are not able to pay off the entire balance every month, it’s a sign of living above your means and will be a journey to back on track.
• Cashback: Some cards offer cashback as a percentage of the amount you spend. This can be a great way to earn back a part of what you spend on your purchases.
• Travel Rewards: Travel credit cards specifically offer miles that can be redeemed for airline tickets, hotel stays, and other travel-related expenses. They may also offer additional travel benefits like airport lounge access, priority boarding, and baggage fee waivers.
• Insurance and Extended Warranties: Credit cards often come with a variety of insurance options, such as travel insurance, rental car insurance, and even product purchase protection. They can also extend the manufacturer’s warranty on products you buy, giving you extra peace of mind and potentially saving you money in the long run.
• Exclusive Discounts and Offers: Cardholders often get access to exclusive discounts and promotional offers, including special events, sales, and promotions not available to the general public.

Risks and Pitfalls

While credit cards offer numerous benefits, they also come with potential downsides if not managed carefully. Understanding these risks can help you use credit cards wisely and avoid the pitfalls that lead to financial strain. It’s important to use credit cards responsibly by budgeting properly, keeping track of your expenses, and understanding all the terms and fees associated with your card.

Debt Accumulation

One of the primary risks of using credit cards is the temptation to spend more than you can afford. Here’s how this can become problematic:

• High-Interest Debt: Credit cards typically have high interest rates, especially if you only make the minimum payment. This can lead to a cycle of debt that grows over time, making it difficult to pay off.
• Overspending: With easy access to credit, it might feel like you can buy anything at any time. This can lead to spending beyond your means, which can quickly add up to unmanageable debt levels.

Fees

Credit cards can come with various fees that can increase the cost of having a card:

• Annual Fees: Some credit cards charge a yearly fee for usage, especially cards that offer significant rewards or benefits. While sometimes these fees are justified by the benefits provided, they can be burdensome if you don’t make full use of the card’s offerings.
• Late Payment Fees: Failing to make payments on time can lead to hefty fees. Consistent late payments can also result in increased interest rates.
• Foreign Transaction Fees: Some cards charge extra fees for transactions made in a foreign currency or on purchases made from foreign merchants. These fees can add up if you travel often or purchase goods from international sellers online.

Credit Score Impact

Misusing a credit card can have a significant negative impact on your credit score:

• High Credit Utilization: Using a large portion of your available credit limit can signal to creditors that you are over-reliant on credit, which can lower your credit score.
• Late or Missed Payments: Your payment history is a significant factor in your credit score. Late or missed payments can severely damage your score.
• Applying for Multiple Cards: Each time you apply for a credit card, a hard inquiry is made on your credit report, which can temporarily lower your score. Applying for many cards in a short period can compound this effect.

Choosing the Right Credit Card

Choosing the right credit card is crucial to maximizing its benefits while minimizing costs and potential financial risks. Here’s a simple guide to help you select a credit card that best fits your needs and spending habits. Credit cards in general have high interest rates because for the creditor, this type of credit is riskier than the other types.

Assessing Needs and Habits

Before you start looking for a credit card, take a moment to assess your financial situation and spending habits:

• Spending Patterns: Consider what you spend the most money on each month. If you spend a lot on groceries and gas, look for a card that offers rewards in those categories. If you travel frequently, a travel rewards card might be more beneficial.
• Financial Goals: Think about what you want from a credit card. Are you looking to build or improve your credit score? Are you interested in earning rewards or cash back? Your goals will guide your choice.
• Payment Habits: Are you likely to pay off your balance in full each month, or do you anticipate carrying a balance? If you plan to pay in full, a card with rewards and perhaps a higher APR might be fine. If you’ll carry a balance, look for a card with a low interest rate.

Comparison Shopping

Once you have a clear understanding of your needs, start comparing different credit card offers. Here’s what to look for:

• Annual Percentage Rate (APR): The APR is critical if you plan to carry a balance. A lower APR will save you money on interest charges. Compare the APRs for purchases.
• Fees: Look for a card with no annual fees or monthly fees.  Also, check for other fees like late payment fees, balance transfer fees, and foreign transaction fees.
• Rewards and Benefits: Evaluate the rewards program. If a card offers points or cash back, check how and where you need to spend to earn these rewards. Also, consider how easy it is to redeem the rewards. For travel cards, look at the types of travel benefits offered, such as airport lounge access or travel insurance.
• Introductory Offers: Many cards offer introductory rates and bonuses, such as 0% APR for the first 12-18 months or a bonus if you spend a certain amount within the first few months. These offers can be very beneficial if used wisely.
• Credit Requirements: Ensure you meet the credit requirements for the card. Some cards require excellent credit, while others are more forgiving and aimed at building or repairing credit.

Safe Credit Card Practices

It’s important to use credit cards not only wisely but also safely. Here’s how you can protect yourself from fraud and manage your finances effectively when using a credit card.

Security Measures

Credit cards are convenient, but they can also be targets for fraud and theft. Here are some simple steps you can take to protect yourself:

• Keep Your Card Information Safe: Never share your credit card number, expiration date, or CVV (the three-digit number on the back) with anyone you don’t trust. Be cautious when entering your card details online; make sure the website is secure (look for “https://” in the URL).
• Use Strong Passwords: When managing your credit card account online, use strong, unique passwords. Avoid using easily guessed passwords like “123456” or “password.” Consider enabling two-factor authentication (2FA) for an extra layer of security.
• Monitor Your Accounts Regularly: Check your credit card statements and online account frequently to ensure all transactions are accurate. If you notice any unfamiliar charges, report them to your credit card issuer immediately.
• Report Lost or Stolen Cards Immediately: If your card is lost or stolen, report it to your credit card company right away. They can freeze the account to prevent unauthorized charges and issue you a new card.
• Be Cautious with Public Wi-Fi: Avoid accessing your credit card account or making purchases over public Wi-Fi networks, as they can be less secure. If you need to use public Wi-Fi, consider using a Virtual Private Network (VPN) to protect your data.
• Sign Up for Alerts: Many credit card companies offer free alerts that notify you of suspicious activity, large purchases, or when your balance reaches a certain level. These alerts can help you detect and respond to fraud quickly.

Financial Management

In addition to keeping your credit card secure, managing it responsibly is crucial for maintaining good financial health. Here’s how:

• Set a Budget: Just because you have a credit limit doesn’t mean you should spend up to that limit. Set a budget based on what you can afford to pay off each month. This will help you avoid overspending and accumulating debt.
• Pay Off Your Balance in Full: Whenever possible, pay off your credit card balance in full each month. This will help you avoid interest charges and keep your debt under control. If you can’t pay the full balance, try to pay more than the minimum payment to reduce your interest costs.
• Track Your Spending: Keep an eye on your spending throughout the month. Many credit card issuers offer tools that categorize your spending, so you can see where your money is going. This can help you stick to your budget and identify areas where you might cut back.
• Review Your Statements: Carefully review your credit card statement every month to ensure all the charges are correct. This is also a good time to check for any fees or interest charges you may not have been aware of.
• Avoid Impulse Purchases: Credit cards make it easy to buy things on a whim, but those impulse purchases can add up quickly. Take a moment to ask yourself if you really need an item before buying it.
• Plan for Large Purchases: If you plan to make a large purchase, consider how it fits into your budget and how long it will take to pay off. If you’ll need to carry a balance, calculate how much interest it will cost you.

How to Apply for a Credit Card

Applying for a credit card is a straightforward process, but it’s important to understand the eligibility requirements and what to expect during the application process. Here’s a simple guide to help you through it.

Eligibility and Application Process

1. Eligibility Requirements:

• Age: You must be at least 18 years old to apply for a credit card on your own.
• Income: You need to have a source of income to show that you can repay any money you borrow. The requirements can vary, but issuers will often ask for details about your employment and income.
• Credit History: Credit card issuers will look at your credit history to determine your creditworthiness. If you have no credit history, you might need to start with a secured credit card or a student credit card.
• Residency Status: Most issuers require you to be a resident of the country where you are applying for the credit card.

2. Application Process:

• Research: Start by researching different credit cards to find one that matches your needs in terms of rewards, interest rates, and other benefits.
• Pre-qualification: Some issuers offer a pre-qualification process, which allows you to see if you might be approved without affecting your credit score.
• Apply: Once you choose a card, you can apply online, by phone, or in person at a bank or credit union. You’ll need to provide personal information such as your name, address, Social Security Number (SSN), income, and employment details.
• Verification: The issuer might ask for additional documentation to verify your income or identity, such as a copy of your driver’s license or a recent payslip.

What to Expect

Credit Checks:

• Hard Inquiry: When you formally apply for a credit card, the issuer will perform a hard inquiry (or hard pull) on your credit report to review your creditworthiness. This typically causes a temporary dip in your credit score by a few points.
• Impact on Credit Score: The impact of a hard inquiry usually lasts for a few months, but the inquiry itself can remain on your credit report for up to two years. Applying for several credit cards in a short period can compound this effect, causing a more significant drop in your score.

Approval or Rejection:

• After the credit check and review of your application, the issuer will either approve or deny your application. If approved, you’ll be informed of your credit limit and other card details.
• If rejected, you are entitled to know why. Common reasons include low income, high debt-to-income ratio, or a poor credit history. You can use this information to address any issues before applying again.

Receiving Your Card:

• If approved, your credit card will be mailed to you. You’ll need to activate it following the instructions provided, usually either online or by phone.

Understanding these steps and what to expect can help you approach the credit card application process more confidently and increase your chances of approval.

Glossary of Key Credit Card Terms

This glossary should help beginners understand the most common terms found in credit card statements and contracts, making it easier for them to manage their accounts effectively.

• Annual Fee: A yearly charge some credit cards have just for using the card. Not all cards have an annual fee.
• Annual Percentage Rate (APR): The yearly interest rate charged on outstanding balances. This rate is applied if you don’t pay your full balance by the due date.
• Balance: The amount of money you currently owe on your credit card.
• Balance Transfer: Moving the balance (debt) from one credit card to another. This is often done to take advantage of a lower interest rate on the new card.
• Billing Cycle: The period for which your credit card statement is generated. It’s usually about one month but can vary slightly by issuer.
• Cash Advance: Using your credit card to withdraw cash. This typically has a higher interest rate than regular purchases and may include additional fees.
• Credit Limit: The maximum amount of credit a credit card issuer will allow you to borrow at any one time.
• Credit Utilization Ratio: The percentage of your credit limit that you’re currently using. It is calculated by dividing your total credit card balances by your total credit limits.
• Due Date: The date by which the minimum payment must be made on your credit card. Failure to meet this deadline can result in late fees and interest charges.
• Interest: The cost of borrowing money on your credit card. It’s charged when you carry a balance beyond the grace period.
• Minimum Payment: The smallest amount you must pay on your credit card bill to avoid late fees and keep the account in good standing.
• Overlimit Fee: A fee charged when your spending exceeds your credit limit.
• Statement: A monthly document that details all transactions, fees, payments, and outstanding balances. It’s important to review this document to ensure all information is accurate.
• Variable Rate: An interest rate that can change based on an index such as the prime rate. This means your APR could increase or decrease.
• Grace Period: The time between the end of your billing cycle and the date your payment is due. During this period, you may not be charged interest on new purchases if you paid your previous balance in full.

Comparing Credit Card Offers

Review multiple offers to find the best fit. Look at several cards side by side, comparing annual fees, APRs, credit limits, and rewards.

Secured vs. unsecured cards: Secured cards require a deposit that serves as your credit limit. They are easier to get but may have fewer perks. Unsecured cards don’t require a deposit but might be harder to qualify for.

Introductory offers can provide benefits like 0% APR for an initial period or a signup bonus. These can be great for getting started, but make sure to read the fine print on when these offers end.

Customer service and support: Look into how easy it is to reach customer support and what other users say about their experiences. Good customer service can be invaluable, especially for a first-time cardholder.

The following are affiliate links, I will be compensated if you apply and are approved for the credit card

Capital One Platinum Secured Credit Card // No Annual Fee// 29.99% APR (variable)

Discover it Secured Credit Card//No Annual Fee//28.24% APR (variable)

Capitol One Platinum Mastercard// No Annual Fee//29.99% APR (variable)

Capitol One Quicksilver Secured Rewards// No Annual Fee//29.99% APR (variable)

Discover it  Cash Back//No Annual Fee// 18.24%- 28.24% APR (variable)

E OSCAR (Online Solution for Complete and Accurate Reporting)

How An Investigation is conducted

What do you think of when you hear or see the word “investigation”? Probably somewhere along the lines of document review, fact research, interviews with both parties, and handwriting comparison. Here is an example, these are some of the duties a fraud investigator would perform for Zales Jewelers:

• Securing original documents, such as the credit application, sales slips, and any written accounts from store staff.
• Obtaining copies of identification documents and police reports.
• Analyzing the signatures on the sales slip and the credit application.
• Conducting interviews with store employees, including the manager and the sales associate involved in the transaction.
• Drafting statements for store employees to endorse or recording notes during interviews.
• Questioning the fraud victim to collect more details that may aid in identifying a suspect or understanding the nature of the fraud or forgery.

That sounds about right. How much do you think this investigation would cost Zales Jewelers? How long do you think it would take to complete the investigation? Keep those two questions in mind. Now you probably do not want to know what you’re going to read. But even though it sounds like bad news, you can use this information to your advantage.

The E-OSCAR system, was created, designed and deployed by the credit bureaus. It summarizes detailed dispute letters into dispute codes. This highly automated and computer-driven process uses an electronic form called an Automated Consumer Dispute Verification (ACDV) form. This is the only form of communication between the credit bureaus and the furnishers.

Key Points of the e-OSCAR Process:

• Automated Dispute Forms: The ACDV form, streamlines the dispute into one- or two-digit codes that represents the consumer’s detailed concerns.
• Limited Interaction: Initiated through an online system, e-OSCAR diminishes the human element in processing disputes. At first there were 100 codes that were available to choose from. Today the number of available options is 26 and E-OSCAR is heavily dependent on the dispute codes to categorize and communicate issues.
• Loss of Supporting Documents: Supporting documentation, like billing statements and letters from consumers, which provide substantial proof of disputes, are not passed along when the codes are sent to furnishers.
• Codes Usage: Three of the twenty-six dispute codes are used for majority of disputes. The details of each individual dispute are not addressed. With such a complex system, three dispute codes cannot cover the spectrum of issues that consumers have.

Disadvantages Highlighted:

• Inadequate Responses: Following a quick investigation with a minimum effort, consumers receive generic responses from the credit bureaus that are meaningless.  They lack details, justification, and explanation of the findings. They are not required to provide written explanation of their investigations.  It is only when the consumer requests written details of their findings is when they are required to provide written explanation.
• Limited Categorization and Generic Notices: Examples from court cases reveal how responses from the bureaus fail to address specific consumer disputes. The results are generic notifications that do not resolve or appropriately acknowledge the issues raised by the consumers.

You need to understand the rights that consumers have. Under the Fair Credit Reporting Act (FCRA), you have certain automatic rights, but many key protections only kick in if you actively pursue them. Here’s a breakdown:

Automatic Rights:

1. Dispute Process: If you challenge an error on your credit report, the credit agency must investigate it within 30 days.
2. Notification of Adverse Actions: If a decision negatively affects you (like being denied a loan or job) based on your credit report, you’ll automatically be notified, including who provided the report.
3. Reinsertion Notice: If something that was removed from your report gets put back, the agency must inform you within five days.

Rights that Require Your Action:

1. Seeing Your Credit Report: You must request a copy to see the outcome of a dispute or the current state of your report.
2. Verification Requests: If you need more details about specific items on your report, you must ask for this in “writing”.
3. Free Credit Reports: After a fraud alert, you must ask for your free reports; they aren’t sent automatically. You’re entitled to one free report per year from each major agency, but you need to request additional ones.
4. Adding a Statement of Dispute: If you’re not happy with how a dispute was resolved, you must ask to add a statement to your file.

What You Could Lose by Not Acting:

• Not Disputing Errors: If you don’t challenge errors, they won’t be corrected, which could keep harming your credit.
• Ignoring Notifications: Not following up on adverse actions or reinserted items could mean missing chances to correct them.
• Not Requesting Detailed Information: Failing to ask for verification or details about disputes could leave you without essential info needed to challenge inaccuracies.

In short, while the law gives you some automatic protections, you need to be proactive to make the most of your rights under the FCRA. Not taking action can lead to missed opportunities to fix issues on your credit report.

Online Credit Disputing: A Cautionary Guide

E OSCAR system revolves around the standardized dispute codes. The only reason E OSCAR was created, was to eliminate disputes as fast as possible. Because the credit bureaus receive thousands of dispute letters daily. They cannot possibly address them all. However, the FCRA legally requires the credit bureaus to investigate all disputes. Some letters are lost, ignored, and mishandled. The high volume of disputes overwhelms the system and staff. Here is the catch, the credit bureaus claim that their careless investigations under the FCRA is because of frivolous disputes from credit repair organizations. Who make guarantees to consumers to be able to delete accurate negative information from credit files. Only 30% of disputes at credit bureaus are linked to such cases so that claim doesn’t hold any weight.

The Economics of Credit Reporting

A. Identifying the Customer

Do not think that the credit bureaus are looking out for consumers’ best interest. They are a business, and their main clients are the creditors. Creditors have access to their databases and use the data to market financial products to very targeted consumers. That is why a creditor decides to report their information to the credit bureau. The credit bureaus have reporting fees. They generate revenue in other ways, for instance, credit monitoring services. But the furnishers is where they generate more revenue.

Consumers unfortunately, are caught up in the mix of the relationship between the creditor and the credit bureaus. Consumers have no say so about the data about them, being in their databases. We cannot have them remove the data from their databases and for the majority of Americans, establishing a credit history is essential for significant life events.  The purchasing of a house, funding an education, or purchasing an automobile. The data in their databases about consumers will impact many other areas of life. We, consumers cannot walk away with the information if we do not like how the information on us is being handled. The creditor owns the information.

The creditor, on the other hand, can take their business elsewhere. So, if a creditor only reports to Experian and their credit dispute investigations are thorough like Zales fraud investigations and the outcome results in favor of the consumer. Experian will ruin their customers’ ability to collect. Ultimately losing profits for their customer and driving them away. If it comes down to siding with the furnisher or siding with the consumer, who do you think the credit bureau is going to side with?

Credit disputes are also costly. Whatever the cost of a Zales fraud investigation is, multiply that by 1000. The expense is going to offset any profit made.  E-OSCAR system is the credit bureaus way of reducing business expenses. Do you ever wonder what the terms and conditions are, when you use online disputing?  Before you open a dispute, you must agree to their terms and conditions.  It’s never straightforward, but at the end of the day, the consumer agrees to waive their right to request written details of the investigation.  And cannot challenge the outcome if it is not in their favor. Those are the most important rights that a consumer can exercise. There is a good chance that your online dispute will be misclassified because there isn’t any human judgement, interaction or common sense. And the credit bureaus don’t have IT techs that will dive into the systems files and correctly classify a dispute.  In fact, trying to correct a misclassified dispute is perceived as gaming the system, which leads to the dispute getting flagged as frivolous. There is no paper trail and no evidence of negligence when disputing online.  You want your letters to have human interaction. The credit experts only dispute through U.S. Postal Service, so we will follow their lead.

Key Concerns with Online Disputing:

• Limited Consumer Rights: Engaging in online disputes often involves accepting terms and conditions that waive crucial consumer protections. Online systems, including terms of service that users rarely read, can strip you of the right to a detailed explanation of the investigation process and allow the reinsertion of negative items with little to no recourse.
• Inefficiency and Rights Waiver: Online disputing formats like E-OSCAR, designed to streamline bureau processes, tend to oversimplify disputes into numerical codes that can misrepresent the specifics of a dispute case. This digitization lacks human judgment, potentially leading to unresolved or misclassified disputes.
• Lack of Supporting Evidence: The online format does not allow for the attachment of supporting documents, which can lead genuine disputes to be dismissed as “frivolous or irrelevant.”

Credit Scores vs. Credit Reports: The FCRA guarantees free access to your credit report once per year from each of the three major credit bureaus, but it does not cover free access to your credit scores. These are often available at a cost or through credit monitoring services.

Avoid Free Credit Score Websites: Obtaining your credit report from websites offering free credit scores will not be accurate. Numerous third-party sites are known to inflate scores, potentially leading to disappointment. They sign you up for costly credit monitoring services that will not justify the expense. They are only  good for monitoring the progress of improving your credit score. Because they are not FICO scores and are always off by decent number of points.

In addition, the only credit scores that are available to the public for purchasing are consumer credit scores. Creditors use FICO’s consumer credit scoring model and credit monitoring service websites use their own scoring models that aim to produce the same results as FICO but do not. The standard for credit scoring is FICO. And their scoring models are proprietary. FICO also has industry specific scoring models that lenders use.

You do not want to rely on consumer credit scores when applying for a mortgage. There are unique aspects of mortgage lending that are taken into account when credit scores are calculated that other types of credit do not. The same goes for the automobile industry.  The scoring models aren’t as lenient as the consumer credit scoring model.

This is why you want to focus on the quality of your credit report and do not focus on credit scores.

5

If you are at this point, the inaccurate information you want deleted from your file is being validated. You may have received a letter stating: “Unfortunately, we are unable to remove the disputed information reported on your credit report. To preserve the integrity of the credit reporting system, we are unable to alter or remove valid information reported to the credit reporting agencies.”

What is your next move? 

Well, you will now send a letter requesting written proof no matter who you are sending your letter to. But there are different letters that depend on who you are sending the letter to. 

The terms “debt validation” and “proof of debt” are related but apply in different contexts and have distinct requirements. 

Debt Validation

Debt validation applies specifically to debt collectors and is governed by the Fair Debt Collection Practices Act (FDCPA). When a debt collector contacts a consumer about a debt, the consumer has the right to request validation of the debt. The debt collector must provide the following:

1. Verification of the Debt: Information about the amount of the debt and the name of the creditor to whom the debt is owed.
2. Evidence of Ownership: Proof that the debt collector has the legal right to collect the debt, which typically involves a transfer of the debt from the original creditor to the debt collector.
3. Details of the Debt: A statement providing details of the original debt, including the original creditor’s name and the amount owed.

The consumer must request this validation in writing within 30 days of being contacted by the debt collector. The debt collector is required to stop all collection activities until the debt is validated.

Proof of Debt 

Proof of debt applies to creditors, the original entities that provided the credit or loan. Creditors must provide evidence that the debt is valid and that they have the right to collect it. This typically includes:

1. Original Contract or Agreement: A copy of the original agreement or contract that established the debt, showing the debtor’s signature.
2. Account Statements: Detailed statements showing the transactions, charges, payments, and balance history.
3. Proof of Ownership: Documentation proving that the creditor owns the debt.

Key Differences 

Applicability: 

• Debt Validation: Applies to debt collectors who are attempting to collect a debt on behalf of another entity. 

• Proof of Debt: Applies to creditors, the original lenders or entities that extended the credit. 

Legal Basis: 

• Debt Validation: Governed by the FDCPA. 

• Proof of Debt: It is not governed by any specific act. However, in order for a creditor to establish the legitimacy of the debt, these documents are what will prove legitimacy. 

Content of the Request: 

• Debt Validation: Focuses on the legitimacy of the debt collector’s right to collect and the basic details of the debt. 

• Proof of Debt: Focuses on the complete details and history of the debt, including the original agreement and detailed account statements. 

Summary 

• Debt Validation: Ensures that the debt collector has the right to collect the debt and that the details they provide are accurate. 

• Proof of Debt: Requires the original creditor to provide comprehensive documentation proving that the debt is valid and detailing the debt’s history. 

By understanding these differences, you will be able to navigate your rights and obligations when dealing with debt collectors and creditors. When you request debt validation or proof of debt, they are legally bound by that request and cannot ignore it. If any documents are missing, it is not proper validation. You have the right to send a letter to the credit bureau demanding they delete the information.

The Art of Debt Validation: Unveiling Credit Bureau Secrets

The creditor is not allowed to continue reporting the account to the credit bureaus, they cannot collect any money from you, and they are not allowed to contact you about the debt. With debt validation and proof of debt, you are banking on the fact that the creditor doesn’t have one specific document on hand. The original contract that you signed when you opened the account. Maybe they don’t have the time or inclination to locate your original document that has your signature on it because of the inconvenience.  

Medical offices keep excellent records. Some creditors do and some do not. If it is a new account, they probably will have no trouble locating the document. However, if the account is established, paper records may be stored offsite, and locating the document will take time.

If you are in good standing with the creditor, it would make more sense to delete the information and keep their customer, you, happy. However, if you are in bad standing with the creditor, they will ensure they provide proof because you have not upheld your end of the agreement. And they are probably not too happy with the situation.

 If it is a debt collector, the older the debt the less likely the debt collector is going to have the original credit agreement. Generally, as debts are transferred or sold, maintaining complete and accurate records can become more challenging.  

The chances of a debt collector having a copy of the original credit agreement for the debtor can vary depending on several factors including the age of the debt, the policies of the creditor, and the practices of the debt collection agency. Here are a few considerations: 

• Age of Debt: Older debts are less likely to have the original credit agreement readily available. As debts are sold and transferred between different collectors, documentation may be lost or not transferred completely. 

• Type of Debt: Certain types of debt, like credit card debt, may not involve a detailed “credit agreement” as one might expect with a mortgage or a car loan. Instead, they might be governed by the terms of service agreed upon when the account was opened, which might be updated periodically. 

• Creditor Policies: Some creditors maintain thorough records and transfer these to debt collectors when selling the debt. Others may not keep detailed records or may not transfer all documents to the agency. 

• Collection Agency Practices: Some debt collectors maintain comprehensive records and can easily access original agreements, while others may not prioritize keeping detailed files. 

• Legal Requirements: Depending on the jurisdiction, there may be legal requirements for debt collectors to retain and provide original credit agreements upon request, particularly if the debtor disputes the debt or requests verification. 

Sample Debt Validation Letter

How to Challenge Credit Bureaus and Win the Credit Repair Game

 You know that credit repair is not a one size fits all.  Your situation may have a better outcome by sending letters to creditors.  I am going to stick to the general steps. So, we are going to send the next letter to the credit bureaus that show the inaccurate information. We have sent them a letter requesting an investigation be done on the matter. Knowing that they do not investigate, and they do not look over any documentation. You have been keeping track of the letters you have sent. So, you know what date you sent a letter and the date in which they received it.  

We expected them to verify the information and send you a response letter back. They are stalling. Trying to deflate your balloon. This tactic works well for them. A lot of people would have quit by now. Who can blame them? It’s frustrating . 

They are not expecting you to send a letter back. We want to see what happens when you call B.S. on them.  

They should have provided you with the specifics of their investigation. But it was not requested and they are not obligated to.  

So let’s request to have their method of verification because you do not believe them. Send this letter certified mail, because they are now obligated to provide you with the specifics. If you do not receive the receipt that shows the letter was signed for, they can say they never received your letter. “It was lost in the mail.”  

They now know that they need to provide specific information to you. What determined the information to be valid? What documents were reviewed? You want to know the exact steps they took to verify the information. Who was the investigator? You need their name and contact information so you can communicate with them. 

The credit bureaus do not what to give written details of their investigation and hand them over to anyone. It is not like the public doesn’t know. But they cannot lie and write a false report. Stating that they spoke to the furnisher and had them pull out their records and reviewed documents. They can’t do that. That would be a lie and in writing.

And they also do not want to write what actually occurred and hand it over to a consumer. But they are required to because you requested it.  They do not want to tell you that they outsourced the dispute to the Philippines, nor do they want you calling their agent and the agent saying something they are not supposed to. In fact, the vendor’s do not have phones at their workstations  with the disputes that are outsourced.

Their other option is to delete the information altogether, and the problem goes away. 

Sample of Method of Verification 

Sample Letter for Incomplete Debt Validation

4

Understanding the Impact of Closed Accounts on Your Credit Score

On your credit report, you will find both open and closed accounts. Closed accounts can affect your credit score in several ways. Here’s how:

When an account is closed, the credit limit on that account is deducted from your total available credit. This increases your credit utilization ratio, which is the percentage of the amount of credit that you’re using from what is available to use.

For example, if you have three credit cards. Each has a limit of $4,000. The total available credit is $12,000.  If you have used $4,000 of the $12,000, your credit utilization is 33%.

If one card with a $4,000 limit is closed, your total available credit drops to $8,000. Your credit utilization jumps to 50%, which will negatively impact your credit score. Experts recommend keeping your credit utilization under 10%. Because you gain points when your score is calculated. 30% is the point when your score will start losing points and the higher the percentage goes, the more point you lose points.

In addition to your credit cards being scored altogether, they are also scored individually. The balance that will earn the most points is $0. However, if there is a $0 on a closed account, it will negatively impact your credit. Closed accounts that read “paid as agreed” is how the status on a closed account should read.

How Credit Utilization and Account Longevity Influence your Credit Score

When an account closes, in addition to credit utilization, the average length of a consumer’s credit history shortens. The length of credit history is a significant factor in determining your credit score. It contributes 15% to your overall FICO credit score. Here’s a breakdown of how this aspect is evaluated: 

• Age of Accounts: Credit scoring models consider the age of your oldest credit account, the age of your newest credit account, and the average age of all your accounts. A longer credit history with great payment history generally indicates more experience managing credit, which positively impacts your score. 
• Length of Time Accounts Have Been Open: The longer your accounts have been open and in good standing, the better. It shows a history of responsible credit use. 
• Time Since Recent Account Activity: Credit scoring models also consider how long it has been since you used each of your accounts. Regular, responsible use of credit is viewed favorably. 

The length of credit history accounts for 15% and credit utilization accounts for 30%. These two factors make up almost half of your credit score. 

Implications of a Closed Account

A lender will look at a consumer’s credit score to help determine if the applicant is a high risk. In addition, to looking at a credit score, lenders will review a consumer’s credit report. Within your credit report there is information that are red flags for lenders. As an example, if a credit report states that the consumer is working with a credit counseling service or a debt management company. It tells potential lenders that the consumer cannot manage their money. Lenders see this as bad as Chapter 13 bankruptcy.

 An account can be closed by the consumer or by the creditor. If your account is closed, you want to be the one who closes the account. A creditor closing an account does not look good to potential lenders. It is a red flag, lenders might interpret that the creditor closed the account due to the consumer’s financial instability or inability to manage credit responsibly.  I

To avoid having an account closed due to inactivity, you only need to use your credit card twice every 3 months to keep it active. And the purchase doesn’t need to be expensive. It could be as small as a pack of gum.  

A closed account stops earning longevity points, that is what you want, longevity with excellent payment history. That builds strong credit. And you get more points for maintaining a credit account for a long time. However, if a closed account is in good standing with the creditor.  It will still be beneficial because it shows a record of timely payments. Your credit payment history accounts for 35% of your credit score. It’s the most influential factor. 

It will also help with the age of accounts because remember the scoring model considers the age of the newest account, the age of the oldest account is, and the average age of all your accounts is also considered. Closed accounts will contribute to that factor.  

A closed account in good standing reflects well on your ability to manage credit responsibly. Future lenders view this positively as it indicates that you have a history of honoring your credit obligations, even if the account is no longer active. 

When to Consider Closing an Account

While it’s generally advisable to keep credit accounts open, there are situations where closing an account might be beneficial. As an example, if you have an excessive number of credit cards (e.g., 10), closing a few may be a good idea to maintain a manageable amount of credit.  A potential lender doesn’t know how you’ll be able to handle a new line of credit. Everyone has that point where it’s too overwhelming. Having too much credit is not a good thing for potential lenders to see. Three credit cards earns the most points; having more will negatively impact your score.  This is just one of many characteristics that determines your credit score.

How to Close a Credit Account Properly: 

1. Pay Off the Balance: Ensure that the account balance is paid as agreed. 

1. Notify the Creditor: Contact the creditor to request the account closure. 

1. Confirm Closure: Obtain a written confirmation that the account has been closed. 

1. Monitor Your Credit Report: Check your credit report to ensure the account is marked as “closed by consumer” if you initiated the closure. 

Handling Negative Items on Closed Accounts

If you have a closed account that is paid off but have negative items, such as a balance showing that you already paid off and late payments. This account is hurting your score and will look bad when a potential lender reads your credit report. This type of account needs to go. 

But you never want to write that the balance is wrong. What do you want to write? “The account is reporting false information.” Whatever the issue is, reference it as “an account that is reporting false information”. In which case you have the right to demand deletion. 

 That is a true statement that is based on the law.  Don’t write about your struggles. Don’t send a goodwill letter and risk the chance of saying too much and admitting the account to be yours. 

Your dispute letter is not disputing the account or negative item as being yours because that could be a lie. Your letter is disputing the fact that false information was reported and posted on your report. You see any information that is added to a consumer’s credit file must be verified as accurate.  

In other words, if I open up a credit line. The creditor is going to report the account to the credit bureau. When the credit bureau receives notice of a new account. They must verify that the consumer did indeed open up a new account. Before it is added to their file.

The law doesn’t say that derogatory accounts must remain on your credit report for a period of 7 years. It only limits the amount of time they can be visible on your credit report. So, removing derogatory accounts is 100% legal.

Take a look at this Target account from my reports.  There are 3 columns, each one represents a different credit bureau. The account is paid off and closed. You can see that this account has 2 late payments that occurred in 2018. They hurt my score whenever it is calculated. Also, the account was closed by the creditor. Remember that is not good for potential lenders to see.

The payment status is “as agreed”. That is what you want the payment status on closed accounts to read.  The payment history is almost perfect. That will help when my score is calculated. Because of the payment history, I want to keep this account listed.  

If I was going to have this account deleted, I would send the letter to the credit bureau first. The rule of thumb is to challenge the credit bureaus first and creditors second. 

Remember the previous step we sent the letter to the credit bureau. Assuming we received a verification letter. We would send a letter to the creditor next because they reported the information. They will need to prove it or delete it. Those are the only choices they have. 

You want your letter to depict you as an honest person who is astonished to find an error on your credit report. And because the law allows you to exercise your rights and demand an account with false information posted, be deleted. That is what the letter is instructing them to do. Because your credit is very important to you and don’t want your credit to be negatively impacted.  Versus someone who hired a service to remove a list of derogatory items. 

letter to creditor to remove negative item from report 

Identifying and Correcting Errors in Your Credit Report

Is there anything wrong with the account, maybe there’s a zero that should be the letter O. Maybe the date is wrong. A common error is a balance showing on a paid off account. When the creditor sells an account, they don’t own the account and cannot collect money on the account anymore.  The balance should show $0. 

The Target account shows $0 for the balance. The fact is I will keep the Target account because the payment history will help my credit score.  

But I will use it as an example. If I wanted to have it deleted because of the two 30-days late payments, I would look for a factual error. 

You want to look for any false information. In a previous step you had chosen a form of your legal name you were going to use going forward. Any other names listed on your credit report; you had them deleted.   

 Check to see what name is tied to the account with the negative item. If the name tied to the account is not your chosen name, the information on the account is false. You can demand deletion of the account. 

You also had addresses removed. What address is the account tied to. If it is tied to an address that was deleted, the information is is now false. 

When reviewing your three credit reports, it is important to directly compare them side by side to ensure that they are accurate and consistent. Discrepancies may occur during this examination. Let’s use the target account as an example. 

Again, each column is a different credit bureau. The creditor is Target, same account, same creditor. The credit bureaus will not know anything that isn’t reported to them. Because of this, I can understand if Experian didn’t show my Target account on their report. I can make the assumption that the creditor reports only to Equifax and TransUnion. 

However, if the creditor is reporting to all three credit bureaus, as Target does, I expect the information to be the same across the board. If Target reported to TransUnion and Equifax that; “I had made 100% of payments for this account on time”. What should I expect Target to report to Experian? I expect to see the same post, right? 

Experian shows that Target reported that; “I had made 98% of payments for this account on time”. This my friend is inconsistent reporting. This leads to discrepancies in my credit reports, which is going to affect my credit score and lending decisions. Since it is the same account only one of the two different statements can be true. If I didn’t compare the three reports side by side, I never would have caught this error. 

Credit repair is not a straight line. You may need to adjust to make sense for your situation. For example, in this step we are sending a letter to the creditor. But for this discrepancy, I would send a letter to the credit bureaus before I send a letter to the creditor. Because the creditor could make the correction needed and then tell the credit bureaus to make the change in their records.  

When I provide screenshot copies of the account from my report and point out that contradictory statements have been reported and posted to my file. I demand the account be deleted. There isn’t any proof that can be provided that will make the contradictory statements true at the same time. I am sure that there is a simple explanation why this error occurred.

But that isn’t the issue anymore, the problem is that the report is misleading for potential lenders. The quick and easy option is to delete the account. And the creditor won’t have to be bothered with this error.

It’s a closed, paid off account. It does not hurt the creditor at all if the credit bureaus delete to the account. Whereas this does hurt my credit by having it remain.

In reality, the payment history on the account outweighs the two 30-days late payments. So, I am going to leave this account as is.

You will have twists and turns that don’t follow the fundamental steps of the disputing process. A step might be sending the letter the furnisher, but a situation may have a better chance of success if the letter is sent to the credit bureau. 

Back to the step, in the letter I would include screenshots from the three reports that show the contradictory statements, printed out so I can place into the envelope before sealing it. Pointing out the inconsistent reporting in the letter and demand deletion of the account reporting false information.

By this time the letter has been sent and received by the creditor. Generally, the creditor has the proof of verification somewhere in their records. The question is, does the creditor have the time to search their records for verification? Time is money for them. They may not have the time to go searching, or it might be too much of a hassle for them. Deleting the information will be less of an inconvenience.  

Now your credit history with the creditor will come into play. If you have a great history, it would be better to keep you happy and delete the information. That could result in you applying and opening a new account, using credit, and the creditor makes money in the long run. 

If you have multiple late payments on the account, expect the creditor to dig through their records and find the proof. Your next move is to wait for a response to your letter.  

Letter for Closed Paid Off Account 

 Handling Late Payments on An Open Account

Make sure you are not behind on any credit card or loan payments before attempting to remove late payments from an active account. Prioritize catching up on any outstanding payments and maintaining a regular schedule of paying on time. This step is essential as it becomes challenging to dispute past late payments if you continue to be late in your current payments. 

 Compare all three reports against each other and check for any discrepancies within the three reports, like I did above, before you send any letters.  

If you have one late payment that is older than two years, and the rest of your credit is perfect, you could leave it alone. Because it isn’t hurting your score as it did the first two years. The longer it has been since the negative event occurred, the less and less damage it will do.  

But if you want it gone, if you have proof to show you weren’t late, get it. I know the burden of proof is on the creditor, but honestly the burden of proof is on both parties. The proof can be the bank statement showing the funds being withdrawn. 

Letter with proof

If you lack evidence and have a single late payment with an otherwise flawless report. It is out of character for you. Your report indicates that this late payment is an anomaly. You do not typically have a track record of late payments. 

 The obstacle you face is the one who reads your letter. What if the representative is the type that dictates the law to borrowers? The law says that inaccurate data cannot be added to a consumer’s file. And accurate data cannot be deleted. Therefore, the information on file must be accurate.

To ensure your letter reaches the appropriate person, consider identifying the individual responsible for handling customer complaints.  

• You can locate this information on the company’s website,  
• Conduct a Google search using the company name + “file a complaint,”  
• Or contact their customer service hotline for assistance. 

Once you find the name, address the letter to that specific individual, ensuring you spell their name correctly. Avoid using generic salutations like “Dear Sir or Madam.” If the name is unavailable, you can opt for “Dear Executive.” If your handwriting is clear, consider writing the letter by hand. 

The letter you send should be non-threatening and complimentary, expressing appreciation for their service. As a loyal customer, you anticipate continuing to support their business. As you conclude the letter, make it clear to the recipient that your business dealings with them are paused until the inaccurate information is deleted. 

Again, your credit history will come into play. If you’re a long-time customer with a good history, it makes more sense to delete the late payment to keep a loyal customer and the creditor is able to keep your credit line open for use, everyone wins. 

 Unfortunately, I cannot guarantee this outcome. If you are denied, that’s fine, move onto the next step.  If the creditor is Capitol One, challenge the late payment with the credit bureaus instead. Because Capitol one will not delete a late payment. 

Letter Without Proof

Multiple Late Payments And Covid

If you experienced late payments during the pandemic due to illness or job impact, the CARES Act might have prevented these from being reported. A legal clause could be applicable in this context. Below is a sample letter for such circumstances.

This letter will be directed to the credit bureaus responsible for listing the late payments on your report. It is advisable to send this letter via certified mail to obtain a receipt upon their acknowledgment of receiving and signing for it. The bureaus are required to furnish you with proof within 45 days. Once they acknowledge receipt by signing for it, they are legally bound to address it and cannot claim they did not receive it. Keeping the receipt of their signature handy will be beneficial if needed. 

Cares Act letter

Tips for deleting late payments 

1. When addressing multiple late payments: Dispute one account at a time per credit bureau if you have late payments on several accounts. 
2. Maintain professionalism and politeness: Ensure your letters are professional and courteous.
3.  Use friendly language: End your letter with a warm closing like “Thank you in advance” and start with a friendly greeting such as “I hope you are well. 
4. Providing documentation to credit bureaus: Update your personal information and include three to five identification documents displaying your correct name and address to improve the chances of deletion. It’s been proven by credit repair businesses that including several pieces of ID helps obtain the deletion.
5. Organize your correspondence: Create a system, like a dedicated folder on your computer, to store all your communications, relevant documents, and screenshot images in one place.