How to Improve Your Credit Scores and Save Money on Credit Repair Services

Repairing your credit and raising your credit scores can be a daunting task, especially when faced with the high fees charged by credit repair services that may yield limited results over an extended period. However, there are steps you can take on your own to boost your credit scores and save the $140 – $200 monthly fees these services charge. Here are some effective strategies to consider:

1. Monitor Your Credit Scores: Sign up for an account with Experian at Experian.com by paying a nominal fee of $30. This will allow you to access and track all your credit scores. Additionally, you’ll be able to simulate and enhance your Experian credit scores while easily disputing any inaccuracies on your credit report.
2. Understand Different Types of Debt: Not all credit debt affects your credit scores equally. For instance, having a car loan valued at 125% of its Kelley Blue Book value will not harm your credit scores. On the other hand, utilizing more than 20% of your credit card’s limit can negatively impact your scores. If your credit card usage reaches 64% of the limit, your scores may drop by 60 points or more. Moreover, the credit card company might decrease your credit limit to match your balance, pushing your utilization to 100% and potentially lowering your scores by as much as 160 points.
3. Dealing with a Significant Score Drop: If you find yourself in a situation where your credit score plunges from 760 to 600, and you don’t have the funds to pay down your credit cards below 10% usage, consider the following alternatives:

1. a) Cash-Out Car Loan: Contact various credit unions to explore the possibility of obtaining a cash-out car loan. Use the new car loan amount to pay off all your credit card balances. It’s crucial not to close any of your credit card accounts as doing so might have a negative impact on your credit. Since your credit score is 600, your car loan’s loan-to-value (LTV) ratio will be limited to under 80%.
2. b) Research Credit Union Criteria: Before applying for credit, call different credit unions to gather basic information. Some credit unions have a debt-to-income (DTI) ratio limit of 55%, while others restrict it to 35%. Look for a credit union with a high DTI allowance of around 50% and a favorable LTV for cash-out car loans based on your low credit score. Inquire about their credit bureau preference, the FICO score used for eligibility assessment, and if they pull reports from all three credit bureaus.
3. c) Understand Loan Parameters: Ensure you comprehend the information you need to request from the credit union. Inquire about the LTV applicable to your credit score. For example, if your car is valued at $40,000 according to Kelley Blue Book and you owe $20,000 on your car loan, an 80% LTV loan would provide you with $32,000. Subtracting your $20,000 from your current car loan debt, you would have only $12,000 available for paying down your credit cards. This reduction in credit card balances will likely boost your credit score by 60 points, as your utilization will drop from 100% to below 45%. Most Credit cards have an interest rate of 30% or higher, and with $20,000 in credit card debt that a $600 per month payment and most car loans have an interest rate below 7.99% with a 60-month term with a payment of $400. This is a $200 per month savings, saving $2,400 per year.
4. d) Apply for Multiple Loans: When applying for the cash-out car loan, consider applying for additional credit cards and personal loans from the same credit union. Use these funds to pay off the remaining credit card balances. Paying off all your credit balances could potentially increase your credit scores by as much as 140 points. Look for credit unions that offer no-cost auto loans. Car loans are generally easier to obtain and are quickly processed, often within an hour.

1. Benefits of Credit Unions: Credit unions, as member-owned organizations, prioritize serving their members rather than shareholders, making them advantageous for borrowing. Even if you’ve only opened a minimal account with a credit union, you’ll have access to loans with easier qualification requirements compared to traditional banks. Be sure to inform the loan officer that you’re consolidating your debt and paying off your credit cards, as this will help exclude those payments from your DTI calculation.

By following these strategies, you can take charge of raising your credit scores independently, potentially saving hundreds of dollars that would otherwise be spent on credit repair services. Remember to stay proactive, continually monitor your credit, and make responsible financial choices to maintain and improve your creditworthiness.

 

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How to raise your credit scores by yourself and save the $140 – $200 a month that repair credit services charge monthly that may have very limited results and take over  year to raise your credit scores.

Paying $30 for an Experian account at Experian.com should be done  so that you can see all your credit scores and so that you can boost and simulate your Experian credit scores, as well as easily dispute any mistakes on your credit.

Restructuring your debt can boost  your credit scores, and getting more credit of the right types of credit at times increases your credit scores as well.  Knowing how to raise your credit scores and how to get the right loans and credit  is very valuable. Sadly, to actually be an expert on how to rearrange your credit takes years of gathering knowledge. Here below are a few possibilities.

Not all credit debt is the same. Example, you can have a car loan at 125% of its Kelly blue  book value and it will not adversely affect your credit scores, yet a credit card used at 20& of its limit and above may adversely lower your credit scores. Credit card debt leveraged at 64% of the Credit card limit may lower your score 60 or more points and the credit card companies may lower your credit limit to the credit card balance now making your credit card usage leveraged at 100 % plummeting your credit scores by as much as 160 points.

Now what do you do when this happens, and you’ve gone from a 760 down to a 600-credit score??

A few suggestions If you have no money to pay down your credit cards to under 10% of usage and your credit score is around 600.  A low credit score makes it difficult to borrow money. Here are some possibilities below.

• Try getting a cash out car loan from a credit union, and taking that cash out and paying off all of  your credit cards. Do Not Close Down Any Of These Credit Card accounts, that most likely will hurt your credit. Get enough cash out to pay off all of your credit card balances.  With a low  credit score of 600 you will be limited to under 80% LTV on car loans.
• Call to several credit unions first before you apply for credit and get some basic information. Some credit unions use a 55% DTI while other credit unions limit the  DTI to 35% . You will want to apply at a credit union that has a high DTI around 50% and that will give you a high Cash Out car loan LTV based on your low credit score, these LTVs usually range from 75% to 125% LTV. Ask several questions such as what DTI do they use at you low credit score. (DTI debt to income)  Are they pulling all three credit bureaus? And which credit bureau are they pulling your credit from and which fico score are they using to determine your eligibility for the loan?  If you call a credit union and they are only pulling one credit bureau and they are pulling from trans union and that’s your lowest credit score of 540, and your Experian score is your highest at 620, you are better off finding a credit  union that pulls only Experian and you may need to apply for your car loan  over the phone from out of state to apply for credit using your highest score.
• Sadly you most likely will not know what to do with this information that you should ask for. Ask for the LTV for your credit score, meaning if your car is worth $40,000 on Kelly Blue Book and you owe $20K on your car loan and the credit union will only give you 80% of the Value (80% of $40,000 is $32K) $32K and you owe $20k in credit cards usually at 30% interest,  and being able to obtain this car loan under a interest rate under 10% with a 60 month term obviously shows you the benefit of a lower monthly payment . Make sure the credit union offers no cost auto loans. In this scenario only $12K would be available to pay down your credit cards. That cash out car refi only gives you $12K to pay down your credit cards because you still owe $20K on your car, so only $12k is available to pay down your $20k credit cards to $8K. This should raise your credit score 60 points because now you have gone from 100% credit use to less than 45% credit use.  When you apply for the car loan you should apply for all of the other credit cards and personal loans from that same credit union that you can in order to pay off the remainder of the credit cards. If you can accomplish this and pay off all of your credit balances, then your credit scores should go up possibly as  high as 140 points. Getting a cash out car loan that can pay down your credit cards under 20% can optimize your DTI And Credit Score. This is usually a great option to get money to pay down your credit cards and lower your monthly payments. Remember to not close out your credit  card accounts. Car loans are some of the easiest loans to get and some of the fastest loans to fund, usually done within an hour.

Credit unions make loans to their owners/members. This is what makes credit unions usually a better place to borrow from, because they serve YOU, their member/owner, even if you only opened an account for $5 that very hour, and once you are a credit union member you have access to usually easier to qualify loans. Credit unions work for you Verses Banks that work for their stockholders. With a bank you are not a member owner of that bank,  you are  just a depositor, and customer.

Debt to income DTI could kill your loan because you have too much in monthly payments and your payments need to be lowered.  Make sure to tell the loan officer that you are getting these loans to consolidate your debt and pay off your credit cards as a consolidation loan,  and that way the credit union will pay off your credit cards and they , the credit union will not count those credit card payments  to  be paid off as part of  your DTI.