The Truth About Improving Your Credit Score

Tips and Tricks to Effectively Improve Your Credit Score

Take more of the guesswork out of improving your credit score.  So many companies want to charge you to improve your credit score, and most are not worth the cost.  Credit Boosting and Credit Repair is most often a big waste of money.  Credit score simulators have become available to show you how your credit score will change if you make certain changes.  Some are free and some come with a cost.  Try the free ones first to experiment with changes that might improve your score.

Credit Karma Credit Score Simulator

Credit Karma offers a popular free credit score simulator that allows you to see how different actions might impact your credit score. Some key features include:

• Uses your actual TransUnion credit report data
• Simulates various scenarios like paying down balances, opening new accounts, etc.
• Shows estimated score changes based on VantageScore 3.0 model
• Updated weekly

Capital One CreditWise Simulator

The CreditWise simulator from Capital One is available to anyone, not just Capital One customers. It offers:

• Ability to test different financial scenarios
• Shows potential impact of actions like making a large purchase or taking out a loan
• Uses VantageScore 3.0 model
• Updated monthly

TransUnion Credit Score Simulator – part of the paid monitoring service

TransUnion offers a credit score simulator as part of its credit monitoring service. Key features:

• Uses your actual TransUnion credit report data
• Simulates various credit actions and events
• Based on VantageScore 3.0 model

NerdWallet Credit Score Simulator

NerdWallet provides a free credit score simulator as part of its free credit score offering. It includes:

• Uses data from your TransUnion credit report
• Estimates effects of various credit actions
• Based on VantageScore 3.0 model

While these simulators can provide helpful estimates, it’s important to remember that the results are not guaranteed to match real-world score changes exactly. Credit scores are complex and can be influenced by many factors. However, these tools can give you a good general idea of how different actions might impact your credit score and help guide your credit-building efforts.

Are commercially advertised credit score boosters worth the money?

Experian Boost

While Experian Boost is free, it has some significant limitations that make it questionable in terms of value:

• It only affects your Experian credit report and scores, not TransUnion or Equifax.
• The boost only works with newer FICO score versions (FICO Score 8), so it won’t help with mortgage applications which typically use older models.
• The average score increase is only about 13 points, which may not be significant for many users.
• Some users report their scores actually decreasing after using Boost.

There are privacy concerns, as you must give Experian access to your bank account information.

Paid Boosting Services

Many paid credit score boosting services offer little value beyond what you can do yourself for free:

• Services that charge monthly fees to report utility payments, like eCredable Lift ($9.95/month), are likely not worth the ongoing cost.
• Any service promising quick, dramatic score increases is likely to overstate its effectiveness.
• Paid credit monitoring services often include “score boosting” features, but these are typically just simulations rather than actual score improvements.

Why Most Boosters Aren’t Worth It

There are several reasons why commercially advertised credit score boosters often aren’t worth the money:

• Limited impact: Most boosters only affect one credit bureau’s score, while lenders may check all three.
• Short-term effects: Any boost from these services may disappear if you stop using them.
• Data privacy concerns: Many require access to sensitive financial information.
• Cost vs. benefit: Paid services often charge ongoing fees for minimal score improvements.
• Free alternatives: Many of the same benefits can be achieved through free methods like becoming an authorized user on someone else’s credit card or using a secured credit card responsibly.
• Instead of relying on commercial boosters, focus on fundamental credit-building practices like making on-time payments, keeping credit utilization low, and maintaining a mix of credit types over time. These methods are more likely to result in sustainable, long-term credit score improvements across all credit bureaus.

Are Fintech credit builder cards a good option to build credit and increase your credit score

Answer

Fintech credit builder cards can be a good option for building credit and increasing your credit score, but they have both advantages and potential drawbacks to consider:

Advantages

• Accessibility: Many fintech credit builder cards are designed for those with limited or no credit history, making them more accessible than traditional credit cards.
• Credit reporting: These cards typically report to major credit bureaus, which can help build your credit history and potentially improve your credit score over time.
• Innovative features: Some fintech cards offer unique features like gamification to encourage responsible credit use. For example, Greenlight’s Family Cash Mastercard includes an in-app financial literacy game to educate teens about credit.
• Flexibility: Many fintech credit builder cards offer more flexible terms than traditional secured credit cards, such as lower or no security deposits.
• Rewards: Some cards, like the Petal 2 card, offer cash back rewards, which is uncommon for traditional secured or credit-builder cards.

Potential Drawbacks

• Higher APRs: Fintech credit builder cards may have higher interest rates compared to traditional credit cards. For instance, Petal cards have variable APRs ranging from 18.24% to 35.74%.
• Limited credit limits: Initial credit limits may be low, especially for those with no credit history.
• Potential fees: While some fintech cards advertise no fees, others may charge annual fees or other charges. It’s important to read the terms carefully.
• Less established reputation: Some consumers may prefer working with more established financial institutions rather than newer fintech companies.

Conclusion

Fintech credit builder cards can be a good option for building credit, especially for those who might not qualify for traditional credit cards. They often offer more accessible approval processes, educational tools, and features designed to help users build credit responsibly. However, it’s important to compare different options, understand the terms and potential costs, and use the card responsibly to maximize its credit-building potential. As with any financial product, the best choice depends on your individual financial situation and goals. We can assist you with buying a home or refinancing. To get started, please give us a call today at (206) 352-6453.