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Start Repairing Your Credit Today

Purpose of this article: to give you some tips to start repairing your credit score day by day thus improving your ability to borrow money on better terms and your overall financial well-being.

Bullet Summary

  • Repairing your credit score takes some time. The following are the seven easy steps to start fixing your score today.
  • Always start by checking your credit score
  • Next obtain your free credit report and verify that the information is accurate. This will help you know your starting point.
  • Call your creditors and contact the credit bureaus when mistakes are found on your credit report.
  • Commit to paying your bills on time, every time as this is probably the single most important strategy
  • Ask for more credit limit from time to time to reduce your credit utilization rate down to 30%
  • Take out a personal loan to consolidate your credit card debt into one if you can.

Overview

Rome wasn’t built in a day. In fact, based on a Google search, Rome was built in 1,009,491 days. And repairing your credit won’t happen overnight. It’s a bit like losing weight: It will take time and there is no quick way to fix it, but you HAVE TO START NOW!

Your credit score is based on your credit history which is the sum of all your financial activities over the past 7 to 10 years. As you repair your credit history, your credit score will naturally improve over time. But for most of us, we only think about our credit score right before we need to take out a new loan. The following article will hopefully help you take some pre-emptive steps toward repairing your credit score now.

The First Step is Knowing Where You Currently Stand

The time to start repairing your credit score is well before you really need it. But before you can actually take steps to improve your score, you need to know where you stand. There is only one true way to know where you stand and that is to pull your credit report from one of the three credit agencies: TransUnion, Experian, and Equifax.

You can obtain your free annual credit report from the following link here.

Once you obtain your credit report and review it thoroughly, you will have your starting point from which you will hopefully improve. For more information on the importance of your credit score please see our article entitled “Your Credit Score … Three Digits Can Mean A Whole Lot.”

Next Step is to Fix the Mistakes on Your Report

The unfortunate reality of financial life is mistakes happen. And while you and I both are perfectly infallible human beings (kidding of course) the credit agencies are not.

The most common mistake that shows up on your credit report and drags your credit score down is incorrectly entered late payments.

This occurs when a credit card provider or a mortgage lender fails to enter a payment correctly and/or timely.

Payment history is a significant factor in your credit score. Remember that over 65% of your credit score is based on your payment history and how much credit you have used up (credit utilization). Given this it is vital that you ensure all your payment history entries on your credit report are accurate.

When you find a payment entry that is incorrect (i.e. applied late), dispute this with either the creditor or the credit bureau directly. You can also move all of your credit payments to auto draft from your bank account to ensure that the payment is issued to the creditor/lender on time. At minimum, you should have all your minimum payments on auto draft so that you can ensure that your payments are processed on time, EVERY TIME!

Ask to Remove Negative Comments

You have probably heard the saying: “You get more with sugar than with salt.” And in dealing with the credit agencies and creditors this couldn’t ring truer. When you have a negative comment on your credit report for say a late payment, you can simply call up your creditor and ask them nicely to remove the negative comment. I kid you not, but plenty of our clients have been able to remove negative marks from their credit history by simply playing nice.

This is simply because creditors have the power to instruct the three credit agencies to remove entries from credit reports for any reason at any time. Put another way, your creditor can decide whether or not to grant you mercy simply by how you ask for “forgiveness.” So, if you do anything at all, please start by calling up all of your creditors and playing nice with them to see if they will remove negative comments/remarks for late payments and other derogatory actions from your credit report.

And While You’re Asking for Things … Ask for More Credit Limit

As we mentioned above, over 65% of your credit score is based on your payment history and how much credit you have used up (credit utilization). Asking for more credit limit will decrease your credit utilization and increase your credit score. Credit Karma has a great step by step on how to ask for more credit limit.

The bottom line is if you have bad credit already, asking for more credit limit will be tough but it is still worth doing because every extra dollar of new credit limit will improve the ratio of credit utilization which will positively impact your credit score. You just have to ensure that you don’t use up the additional available credit should you be approved.

Use a Personal Loan to Consolidate Multiple Credit Card Debt into One

At first glance, the idea of taking on more debt to pay off credit card debt might seem counter intuitive. But the reality is a personal loan can help you consolidate all of your current credit card debt into one single payment, usually at a lower interest rate.

A personal loan works as follows:

  • You borrow funds from a creditor at an interest rate that is usually lower than the interest rates charged by your credit card provider.
  • You then use the funds to pay off your credit card balances.
  • Over time, you pay back the personal loan and thus reach a state of debt freedom

Personal loans are typically unsecured which means they don’t require the borrower to put down any collateral to obtain the loan, and the interest rate you pay depends on your credit score. Consider this … as of January 2018 the average credit card interest rate was higher than 16 percent[1].

So even if a personal loan has a higher interest rate than a secured loan, it will oftentimes be lower than the interest rate on your credit cards. Additionally, after consolidating your credit card debt into one, you will only have to make payments to one entity rather than all of the different credit card providers you had before.

Last but Most Important … Pay Every Bill on Time

The single most important strategy to repair your credit today is to commit to paying every single bill you have on time, every time. Just one late payment of 30 days has the potential to drop your credit score by 90-110 points. So, to say this is the most important step is a bit of an understatement.

Closing

Your credit history good or bad can impact your ability to buy a home, purchase a car, get a better credit card, get cellphone coverage, and even impact the type of employment opportunities you may have.

Repairing your credit score will take some time. On average, negative comments and remarks on your credit report remain on your report for about 7 – 10 years. Remember that your credit history is really just a story that tells future lenders how you manage your financial affairs. And everyone likes a good comeback story.

If you are just starting your credit repair journey, you can use the strategies discussed above to navigate this process. My hope in writing this article is that after reading this, you will take some steps towards successfully repairing your credit score.

[1] https://www.creditkarma.com/credit-cards/i/loan-pay-off-credit-card-debt/

Follow our seven steps to help repair your credit. Always start by (1) checking your credit score and (2) obtaining your free credit report. This will help you know your starting point. (3) Call your creditors and (4) contact the credit bureaus when mistakes are found on your credit report. (5) Paying your bills on time, every time is probably the single most important strategy on the road to repairing your credit. Remember that a missed payment can drop your credit score over 90 points. (6) Ask for more credit limit from time to time to reduce your credit utilization rate down to 30% and (7) take out a personal loan to consolidate your credit card debt into one if you can. These seven strategies will help you improve your credit score over time and get you on the path to better credit management and financial well-being.
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When Big Credit Card Companies Reject You Because You Have Limited Credit History, Turn to the Petal Card

Purpose of this article: to give you a strategy to turn to when you can’t get a credit card because of limited or no credit history. Please note that we are not paid to recommend products like this, and our decision to do so is solely based on our experiences and our client’s experiences with this product.

Overview

Building credit from scratch is one of the hardest financial things you will embark on as you start your financial well-being journey. Credit card companies want you to have a solid credit history, but it’s simply hard to start building the needed history when no one will give you a card in the first place. 

In our post entitled “How to Build Credit from Scratch” we suggest that even though you are just starting out, you should apply for a credit card even with limited or no credit history. For some of you, this strategy will work in your favor and you will be able to obtain a store credit card or an unsecured credit card (traditional credit card). But for some of you, this strategy doesn’t work and you are left going back to the drawing board on how to build your credit history.

The following article will introduce you to the Petal Card which will allow you to start building your credit history even though you may not have the necessary history to obtain a traditional credit card.

What Is the Petal Card?

The Petal Card was founded by Jason Gross who was looking to solve one of finances basic paradigms: It takes credit to build credit. Consequently, he set out to design a card specifically for people who have no credit scores. Their approach is simple enough: They look at your income and analyze your spending to create a digital financial record.

By analyzing your bank account transactions (with your permission of course) Petal gets a better sense for your monthly cash flows than any credit score would ever give. As a result, this approach can open up sound credit options to many people who simply don’t qualify under the traditional means of deciding credit worthiness.

On top of this algorithmic and data driven approach to making decision on your credit worthiness, the Petal Card doesn’t believe in tacking on petty annual fees or other security deposit type fees.

Will I Get a Credit Limit?

Similar to traditional credit cards you will get a set credit limit. This credit limit will be set based on your income levels and your spending patterns. Put simply, the Petal Card looks at your digital financial record to determine what credit limit you need. Based on our work with some of our clients, we have seen credit limits as low as $500 to as high as $5,000.

One thing to note about this credit limit is it’s not static. The Petal Card consistently checks your digital financial record to see if there are any updates to your income levels or spending patterns. As both factors change, your credit limit can be bumped!

Drawbacks to the Petal Card

Currently the single largest drawback to the Petal Card is that its availability is capped by the waiting list. Eventually the plan by the Petal Card team is to make this product available to all consumers. But right now, you have to join the waitlist. To apply now click here. ***As of October 2018 the credit card is now open to the general public. Waitlist will no longer apply.

The second drawback is in regards to the lack of rewards that this card will offer you. Unlike traditional credit cards, the Petal Card won’t offer you cash back or travel points. But in our opinion, this is a minor drawback. The major reward of the Petal Card is the fact that it gives you the chance to start building credit when you otherwise wouldn’t have been able to. It also allows you to build credit within a reasonable cost structure as the interest rates associated with the Petal Card are reasonable.

The last drawback we see is in regards to the sharing of your data. In this day of age of data breaches and hacks, giving up your bank account information can be a scary hurdle to overcome. However, the company will not be able to alter your account information or change anything. 

Closing

The Petal Card is a really good option for you if you are looking for a credit card that is simple and has no fees. It will give you a chance to build the necessary credit history that you otherwise will not be able to do with traditional credit cards.

Get the Petal Card if you want to build your credit history from scratch and cannot obtain a traditional credit card or a store credit card. With the Petal Card, you will get access to a decent credit limit, you will avoid those pesky fees, and you will be well on your way to building your credit history.


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Doughnut Economics

Macroeconomics Explained Using Doughnuts

Matt Groening was once said, “Donuts. Is there anything they can’t do?” And for Kate Raworth, doughnutsare rewriting everything you ever learned in Economics 101. Her book, Doughnut Economics, is a simple referendum on modern day economics. Her thesis is quite simple:
Leaders of 2050 are being taught an economic mindset that is rooted in the textbooks of 1950, which in turn are rooted in the theories of 1850.
This “archaic” economic mindset has led our current world astray, and thus a new way of thinking for the 21st Century is much needed.

Enter the Doughnut

The essence of the doughnut is a social foundation of well-being that no one should fall below, and an ecological ceiling of planetary pressure that we should never go beyond. It is in between these two layers that lies a safe and just space for us all:
In order to remain within the boundaries of the doughnut, current economic thinkers and policy makers need to change their default modus operandi. Raworth identifies seven specific ways to change economic thinking and policy making for the better: 
1.      Change the Goal from GDP to the Doughnut
2.     See the Big Picture from self-containing market to embedded economy 
3.     Nurture Human Nature from rational economic man to social adaptable humans

4.     Get Savvy with Systems from mechanical equilibrium to dynamic complexity
5.     Design to Distribute from ‘growth will even it up again’ to distributive by design
6.     Create to Regenerate from ‘growth will clean it up again’ to regenerative by design
7.      Be Agnostic about Growth from growth addicted to growth agnostic
The following picture is my visual representation of what Doughnut Economics represents to me.
 
 
 

Shifting from Conventional Economics to Doughnut Economics Will Help Planet Earth and All Humankind Thrive

The current economic pursuit of GDP first pushes every consumer in our global economy to spend money they don’t have on things they don’t really need (think consumerism 101). It’s an endless hamster wheel of more for the sake of more, and it requires continual growth in income and output to support it.

By changing the goal of our global economy from GDP to the Doughnut we ignore conventional economic theory that posits every citizen’s satisfaction or happiness is based on the consumption of more goods. And this switch in focus will allow us to better advance the richness of human life on earth.
Underlying the big shift in economic focus is another underlying shift in the characterization of humans and their nature. Conventional economic theory posits that humans are rational and make decisions that solely maximize their utility which equates to driving satisfaction through consumption.
But the reality of life for each of us is we are far from solitary figures. Instead, we are social adaptive beings that thrive best in environments where we can relate to each other. Thus, our global economic machine is best served by putting the collective “WE” at the focus instead of growth in “GDP” at the focus.

It’s Clear We Have an Economic Design Problem … The Question is Will We Fix It?

In the 21stcentury, we have transgressed at least four planetary boundaries and have created a global economy that has left billions of people still facing extreme deprivation. On top of that, the current global economy has allowed the richest 1% to own half of the world’s financial wealth.
At the heart of income and wealth inequality lies a simple design question: who owns the enterprise, and so captures the value that workers generate? Our current economic system is designed in such a way that shareholders own the enterprise and thus capture the value generated by workers as evidenced by the following:
From 2002 – 2012 worker productivity grew +30% while real wage growth remained practically non-existent. This trend was so dreadful that economists have dubbed this ten-year period the “Lost Decade for Wages.” Meanwhile, returns to shareholders grew faster than the economy as a whole.
Furthermore, it’s beyond clear now that our economic system is the actual root cause of the ecological crisis that we currently face as humankind on this Earth (see hereand here). At the heart of Earth’s ecological decline lies a simple design flaw in our current global economy:
We extract Earth’s minerals, metals, biomass, and fossil fuels and manufacture them into products. These products are eventually sold to consumers who use then but eventually throw them away. The very essence of this cradle-to-grave type industrial economic system is destructive to Earth’s ecological system. 
Given the societal and ecological challenges we face, it’s up to us to decide whether or not we want to fix the economic design problem we have.

In Closing

In 2015, world GDP was $80 trillion. An expectation of 3% indefinite growth would mean that …
(1)   By 2050 the world economy would be 3x bigger than 2015
(2)  By 2100 the world economy would be 10x bigger than 2015
(3)  By 2200 the world economy would be 240x bigger than 2015
It’s beyond clear that this expectation of indefinite growth can not be possible without destroying our Earth and society! Alarm bells should be going off in each and every one of us from citizens to politicians.
It’s time for us to accept the fact that we have reached the logical conclusion of our expansionist economic paradigm, and redesign a global economy that is focused on the promotion of human prosperity whether GDP is going up or down. This will be an extremely hard shift in paradigm, but it will be absolutely vital if we are going to make it as a planet and society for the next 100 years.

Extras

Brian Nwokedi’s Book Review on Goodreads
Brian Nwokedi’s Twitter
Direct Link to Book: Doughnut Economics
Author’s Website: Doughnut Economics
Author’s Twitter: @KateRaworth