You should look beyond your credit score to build financial stability. There are approximately 30 million Americans who are considered credit invisible, meaning they have no credit score or recent credit history. In addition, there are approximately 60 million Americans who are considered thin-file, meaning they have five or fewer credit accounts. Finally, about 30% of U.S. consumers who do have active credit files are subprime, with credit scores below 620.
When it comes to loans, housing, and even jobs, those in the following categories often start at a disadvantage. But there are still ways to achieve financial stability. Here’s where to start.
1. Make Sure Rent and Utility Payments Count Toward Your Credit Score
There are a lot of things that go into a good credit score, and paying your bills on time is one of them. But did you know that many utilities don’t report payment history to credit agencies? This means that your on-time payments could be invisible when it comes to your credit score.
There are steps you can take to ensure that your rent payments are visible on your credit report. One option is to use a service that reports your payments to the credit bureaus. Services like Experian Boost and Rental Kharma can help make sure your payments are being reported. Another thing to keep in mind is that some of these services only report to one or two of the major credit bureaus. So, it’s important to compare your options and make sure whoever checks your credit will be able to see your rent payments.
There is no one-size-fits-all answer when it comes to credit repair, but there are some services that can help you improve your FICO score.
2. Use Alternative Credit Data to Improve Your Creditworthiness
Different lenders have different standards for what they consider to be good credit. Some may use alternative credit data when evaluating credit applications from people who are credit invisible, thin-file, or new to the United States and don’t have any traditional credit history here. So it’s worth shopping around to find a lender that’s willing to work with you.
Alternative credit data can come from a variety of sources, such as pay stubs, transaction records, and cash flow information. You don’t necessarily need active credit accounts to generate this data. Some lenders work with companies that specialize in alternative credit data analysis, such as Inscribe or Fiserv. In these cases, you would need to provide the lender with the correct documents and account details. The lender would then handle the rest of the process.
3. Dispute Errors on Your Credit Report
Your credit report is one of the most important pieces of your financial puzzle. It’s a record of your credit history that lenders use to determine your creditworthiness. That’s why it’s so important to make sure it is accurate.
Unfortunately, credit reports often contain errors. Sometimes these are simple computer errors, while other times they are more malicious. Either way, an inaccurate credit report can harm your credit score and make it harder to achieve financial stability.
You can protect yourself by regularly checking your credit report. You are entitled to one free report from each of the three major credit reporting agencies every week through December 2023. Normally, you would only be able to get three free reports per year.
Look for any red flags on your report and dispute any inaccuracies with the appropriate agency. By law, they must investigate and respond to your claim.
4. Get a Cosigner for Loans and Credit Lines
When you can’t qualify for credit on your own, turning to someone with good credit who is willing and able to help can be lifesaving. This person is called your cosigner.
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It’s a big deal to cosign a loan for someone, so it’s best to ask only close relatives like parents or siblings. The cosigner’s credit score will drop too unless they make the payments. But finding someone willing to do this can open up lots of financial opportunities.
5. Find a Stable W-2 Job (That You Love)
No wise person has ever said that when you love your job, you never have to work again. Most people who love their jobs still have to work hard every day. However, it is true that when you like what you do, you’re less likely to quit. You’re more likely to keep a stable job.
In today’s economy, it is more important than ever to have a full-time job. Lenders prefer to lend money to people who have a steady income from employment, rather than self-employed people or business owners. They see income from traditional employment as more predictable than income from self-employment or business ownership.
As someone self-employed most of my life, I can attest to the fact that business owners and people who work for themselves tend to have good years and bad years. Sometimes the bad years are so tough that it becomes difficult to pay debts.
That’s why financial stability and credit opportunity are important factors to consider when choosing a job. It’s not just about finding a job you love, although that’s certainly important.
It’s More Than a Number When it Comes to Credit Score To Build Financial Stability
Credit scores are important, but they’re not everything. Your credit file is more than just a list of numbers. It’s a representation of your financial history and it can affect many aspects of your life.
There are a lot of things that can impact your credit score, but there are also some things that people don’t know about credit that can help improve your score. Here are some shocking credit card facts that most people don’t know which can help improve your score.
There are a few things you can do to help improve your credit score. One is to make sure your utility and rent payments are reported to the credit agencies. Another is to get a cosigner for any new loans or credit lines.