On April 30, 2012, FICO released a report that a growing number of consumers are nearing the perfect FICO score. FICO, the most widely used credit scores, range from 300-850. The top tier FICO score range is 800-850. The report showed an increase in consumers who have near perfect credit scores in the top.

The increase reflects the highest level since October 2008. According to FICO’s researchers 18.3% of consumers have credit scores in this range. According to Rachel Bell of FICO Labs, “Many consumers have moved into the top tier of the FICO® Score range by redoubling their efforts to maintain an excellent credit profile.

On the flip side consumers with FICO scores between 700-799 has not shown improvement. The percentage of consumers between 700-749 (15.5 percent) is the lowest since 2005, when FICO began tracking that information. The explanation for this was “…Other people have fallen into lower tiers, most likely due to the financial stress that many households have been feeling…”

The problem with these findings

FICO failed to mention the findings are based on the newest version of the credit scoring model, FICO 8. FICO 8 is not the most widely used version of the scoring model. Most lenders continue to use the previous version of FICO to evaluate a potential borrower’s creditworthiness.

In case you were wondering, there are several generations of the FICO credit scoring models dating back to 1989 when the 1^st generation was introduced. FICO 8 is the 5^th generation of their credit scoring model and lenders have been slow to adopt the newest version since it was first rolled out in 2009. It may take years for lenders to convert their systems to the newest version, FICO 8.

I think FICO’s report may be flawed, especially since there are differences in FICO and FICO 8. Not to mention consumers have no access to FICO 8 scores, only FICO scores.

FICO vs. FICO 8

FICO 8 was introduced in 2009. This new version is touted to be a better predictor of borrower risk. There are some major differences in FICO and FICO 8. For instance, consumers who maintain high credit card balances and continually have balances close to their credit limit will lose more points than previously lost under FICO.

This would explain the increase in consumers with near perfect scores. If a consumer normally keeps balances low or even pays in full each month, the FICO 8 scoring model rewards them even more. On the other hand consumers who may be experiencing financial difficulty and depending on credit cards to make ends meet now have lower credit scores under FICO 8.

FICO 8 can tank your credit score if you carry a balance near your credit limit or max out your credit card. FICO 8 may also help some consumers with small collection accounts $100 or less because it ignores “small-dollar nuisance collection accounts.”

According to myfico.com nearly half of consumers have FICO 8 scores within 20 points of their scores under the previous version. This means your FICO 8 scores could be 20 points higher or 20 points lower than the widely used FICO version. Confused yet?

Consumer confusion is justified

If you are like average consumers, you were probably unaware of the many generations of FICO scoring models that lenders could be using. Not only are there different generations, there are also various FICO scoring models designed for specific industries.

For instance FICO works with the credit bureaus to produce credit scores for auto lenders, banks and mortgage lenders. The industry-specific scores are designed to more accurately reflect creditworthiness in select areas. But you cannot purchase these credit scores; they are only available to businesses.

FICO’s lack of transparency in not specifying the version of the FICO score on which it based its report only adds confusion and even more mystery to credit scores.

Consumers who want to improve or rebuild credit scores should not have to operate in the dark. Not to mention, FICO 8 scores are not available to consumer; reason being according to FICO, “…myfico.com was intended to offer consumers access to the scores that are most used.”

So my question is — why conduct a study about consumers nearing perfect credit scores when FICO 8 is not widely used by lenders.

Consumers need to know as much as possible about how credit scores are calculated. More importantly, they need to have transparent information about the credit scoring formula that most lenders are using; not what FICO hopes more lenders will be using in the future.

Consumer Financial Protection Bureau

Some things just need to be regulated. FICO has way too much control in determining the financial success of consumers; and, way too little regulation. This privately owned company can determine what interest rates you pay, if you can rent an apartment or get approved for a mortgage loan, if you can get a job interview and what you will pay for insurance.

It’s just too much power not to be regulated. I hope the CFPB new target of consumer reporting agencies will help in clarifying and making credit scores not only more transparent but more accessible to the people who are actually affected everyday by them.

More articles you may like:

1. FICO 8: What to expect from the newest version of the credit scoring model
2. How Many Lenders use VantageScore vs. FICO Score
3. Authorized User Credit aka Piggyback Credit remains a part FICO 08
4. The FICO Expansion Score may do more harm than good to consumers with little credit history

FICO 8’s newest formula has been revised to enhance the credit score’s ability to predict consumer credit risk.

FICO 8 has been available since 2009 and according to their website, 7600 creditors now use the newest version, FICO 8. This is not a big number. The former version of FICO is still the most widely used credit scoring formula.

But, if your lender is using the newest version of FICO, consumers with good credit habits will probably see their scores somewhat increase, while consumers with poor credit habits might see their scores decrease.

Major Changes under FICO 8

1. Greater Penalty for High Balances

Consumers who max out credit cards will experience a lower credit score under FICO 8. I talk about keeping balances within 30%  of your available credit limit all the time on Rebuild Credit Scores in order to improve your credit score. In case you ever doubted, this is proof positive lowering your account balance to 30% or less will increase your credit scores.

FICO’s website says “if your credit report shows a high balance close to the card’s limit, your score will likely lose more points than it would have previously.” Now, more than ever, keeping balances low should become a habit if you are not already doing so.

2. Rare Late Payments

I have written about how one late payment can drop a good score by as much as 100 points and a less than perfect credit by as much as 30 points. Under FICO 8 if you routinely pay on time and your other obligations are in good standing, one late payment may be forgiven. But, if you have late payments with other creditors, FICO 8 will penalize you even more than the widely used FICO scoring model.

It is expected consumers who currently have a low credit score will see it get worse once more lenders begin to use FICO 8. If you have good credit, your score may see an increase.

3. Authorized user of credit

FICO tried very hard to get rid of authorized user credit. Authorized user credit has the potential to increase a credit score, if the account holder has good credit. The authorized user gets the benefits of the account holder’s good credit without the financial responsibility.

It is common for parents to add their children or spouses to add one another to an account. However, the authorized user benefits were abused for several years. Some companies began to sell account holder’s good credit to consumers with bad credit. Instantly and literally overnight a low credit score would increase. The practice was called trade-line renting.

The company would charge a fee for the authorized user accounts and the account holder would receive compensation. The buyer of the authorized user account would never get an actual credit card from the account holder but they would reap the benefits of the positive credit accounts.

FICO lobbied hard to end authorized user accounts but was unsuccessful; and, for good reason. Parents should be able to add their children and spouses definitely should be able to share the benefit of good credit.

FICO 8 continues the practice of authorized user credit but has revised the formula to reduce any benefit of trade-line renting. The formula somehow detects a stranger being added to a credit account for the purpose of trade-line renting.

4. Small dollar Collection Accounts

Consumers that have collection accounts with a balance of $100 or less on their credit report will no longer experience the negative effects. FICO 8 ignores small-dollar collection accounts where the original balance was less $100.

What remains constant between FICO and FICO 8 is that consumers still do not have transparency on how credit scores are calculated. FICO has said, “Nearly half of consumers have FICO 8 scores that are close to their scores from the previous version of our formula – no more than 20 points higher or lower.”

They seem to dismiss the 20 point discrepancy as no big deal. But consumers know 20 points lower can make the difference in approval or denial of credit; or, the difference in mortgage or car loan interest rates.

Although FICO 8 is not widely used by lenders as of yet, the best way to combat any changes in your credit score is to pay your bills on time and keep your balances low. These tried and true credit habits will continue to help your credit score, no matter what version of the credit scoring formula FICO introduces.

Total outstanding student loan debt in America is expected to exceed $1 trillion this year. This figure exceeds the total outstanding credit card debt in America. The often unnecessary rising cost of education is partly to blame. Public institutions have consistently increased tuition as public financing has declined.

Currently, the average borrower owes about $25,500 on their loans and that number includes public as well as private institutions. And, if current rules for federal education loans are allowed to expire in the coming months, interest rates would double to 6.8%. President Obama has been speaking out against the 3-point increase in interest rates on federally-subsidized Stafford loans but congress has yet to act.

Current programs to help borrowers like the income-based repayment programs are not working even though the president has proposed an accelerated income-based repayment program along with new incentives for states to contain costs.

Hope is on the horizon. In April Rep. Hansen Clarke proposed the Student Loan Forgiveness Act of 2012, H.R. 4170. This bill would help eliminate student loan debt and its consequences.

Here is an overview of the bill:
 

• Full loan forgiveness for borrowers who have paid the equivalent of 10% of their discretionary income for 10 years.
• Borrowers who have been making student loan payments will have a shortened repayment period. Any amount paid over the last 10 years would be created toward full forgiveness.
• Federal student loan rates would be capped at 3.4%.
• Borrowers whose student loan debt exceeds their income can get relief by converting their private loan debt into federal direct loans and then enroll in the 10/10 program.
• Borrowers choosing to work in public service professions like teaching or firefighting or medical professionals working in underserved communities will see a reduction in the required years to receive student loan forgiveness from 10 years to 5 years.
• Borrowers experiencing a financial setback will be eligible to enroll in the program and bring their payments down to 10% of discretionary income.
• Future enrollees in the program can receive forgiveness up to $45,520 after paying up to 10% of discretionary income for 10 years.

The bill also contains a component designed to increase millions of Americans’ purchasing power. By decreasing loan repayment, fees and interest rates, Americans would be free to stimulate the economy by investing, buying goods, services and homes and starting businesses. The increased demand for goods and services would create jobs.

Many believe student loan debt amounts to indentured servitude. Unlike the housing crisis where home owners can seek remedies through loan modification or bankruptcy, currently, student loan debt cannot be escaped. Bankruptcy is not an option.

Although unemployment rates for those without college degrees is higher, employment opportunities for college graduates have been bleak. In 2011, college graduates experienced an unemployment rate of 9.1% according to a report by the Project on Student Debt.

You can show your support of the Student Loan Forgiveness Act of 2012, H.R. 4170 by signing a petition at hr4170.com and asking your congressional representative to support the bill.

But there is nothing worse than having only negative credit on your reports. Adding positive credit is an integral part to rebuilding credit history.

Adding positive credit to your credit reports can be done by getting a credit card, personal loan, car loan or even a retail credit account.

Unsecured credit card to add positive credit

Credit One Bank – Visa®Platinum Card can help you add positive credit as well as rebuild credit. The reason I like this card for consumers looking to rebuild or build credit is that Credit One Bank pre-qualifies you before an actual hard inquiry is placed on your credit report. This can save points being deducted for credit inquiries. Even though consumers with low credit scores have been approved for this card it is still comforting to know they pre-qualify you first.

Secured credit card to add positive credit

Secured credit cards offer many of the same benefits as unsecured credit cards. You determine your own credit limit with a FDIC insured savings deposit used to secure your credit card. The Applied Bank® Secured Visa® Gold Credit Card has no annual fee or account set up fees, you can choose your credit limit from $200 to $5,000 and there is monthly credit bureau reporting. Even though you are securing your credit card with a deposit, payments must be made on-time and account balances should be kept low just like an unsecured credit account.

A car loan will add positive credit

The credit scoring system rewards consumers who have a good credit mix and an installment loan such as a car loan will give you a good credit mix. If your credit scores are low you may be required to make a down-payment unless you utilize a lender who provides car loans for consumers with bad credit.

Unsecured or Secured Personal Loan

By adding a personal loan to your credit reports you not only create a good credit mix but also show you manage credit well enough that a bank considered you a good credit risk. If your credit is fairly decent you may qualify for an unsecured personal loan. If your credit is a little shaky ask your bank if they offer secured personal loans. A secured personal loan works much like a secured credit card where a deposit serves as collateral for the loan. In the case of a bank secured personal loan you may be able to use a savings account or certificate of deposit account to secure a personal loan.

Retail Credit Accounts

Retail credit is typically easier to qualify for than a visa or mastercard; however the interest rates may be slightly higher than credit card interest rates. But the Gettington credit account has a low APR making it easier to pay as you go. Gettington offers thousands of name brands along with flexible payment options. This is a great retail credit account that can help you rebuild credit and there is no annual or over-limit fee.

Keep account balances low

After you add positive credit to your credit reports you must not max out or charge close to the credit limit. Consumers who routinely max out credit cards are more likely to experience problems repaying the debt should a change of circumstance occur, such as loss of income or illness. The lower the utilization rate, the better your credit score.

Keep those balances low — And by low I mean do not charge more than 30% of your available credit limit. If at all possible aim for 10% of your available credit limit and your credit scores will get better and better as long as you pay all of your credit obligations on time.

Credit scoring models calculate the utilization of available credit because it is thought to be a good indicator of risk. Using too much of your available credit may land you in the high risk category.

New Credit Should be Reported to Major Credit Bureaus

All new credit accounts should be reported to the credit bureaus. This is how you will improve your credit scores. In the event you only qualify for a secured credit card make sure it reports to the credit bureaus. The ideal scenario is to have the credit card company report the account the same way an unsecured credit card is reported. No one will ever know the credit account is secured.

e-OSCAR enables Experian, Transunion, Equifax, and other consumer reporting agencies to create and respond to consumer credit history disputes automatically, without conducting an real investigation.

The e-Oscar method of investigation converts written dispute letters into a two or three digit code, thereby eliminating the CRA’s responsibility to conduct real investigations in compliance with the Fair Credit Reporting Act (FCRA).

The e-Oscar (Online Solution for Complete and Accurate Reporting) system is utilized even when consumers send in detailed disputes, with supporting documents. The dispute is  broken down into a two or three digit code and sent to the original creditor to verify a simple code, failing the duty to investigate.

Consumer Dispute Verification Form

The CRAs use a form called Consumer Dispute Verification (CDV) to communicate disputes to data furnishers of the disputed information. Data furnishers can be original creditors, debt collectors or any other entity that reports information to your credit file. The automated version of the form is called Automated Consumer Dispute Verification (ACDV). The process by which the CRAs open an investigation with the original creditor or furnisher of the information is by transmitting the ACDV via the E-Oscar system.

How E-Oscar Works
 

• The CRA receives a dispute letter from the consumer.
• The CRA employee reads the letter and selects a dispute code from among several specific codes offered by the e-Oscar system.
• The ACDV transmitted to the data furnisher consists of consumer identifying information; the e-Oscar code(s) summarizing the consumer’s dispute and in some cases a one or two line narrative to supplement the dispute code.

Why e-Oscar is Problematic

Consumer credit disputes can be unique and complex. Many dispute letters are accompanied by supporting documents and proof which is imperative to getting an error corrected. The e-Oscar method of investigation reduces often detailed credit disputes to a two or three digit code by an overworked, time constricted credit bureau employee. It is totally in their discretion what code best describes the dispute.

The E-Oscar code is transmitted to the data furnisher and no supporting documentation that may have been submitted by the consumer is sent. That supporting documentation is crucial to correcting errors. It is often conclusive proof that an error has occurred; and, that error should be corrected or deleted. This practice is a direct violation of the Fair Credit Reporting Act. No real investigation was ever conducted.

To make matters worse, out of the possible codes the credit reporting agencies can use, they use the same 4 codes “for nearly 90% of all disputes.” The percentage breakdown of commonly used codes by the credit reporting agencies is as follows:
 

• Not his/hers 30.5%
• Disputes present/previous Account Status/History 21.2%
• Claims Inaccurate Information. Did not provide specific dispute 16.8%
• Disputes amounts. 8.8%
• Claims account closed by consumer. 7.0%

This information comes from written testimony before the House Committee on Financial Services regarding “Fair Credit Reporting Act: How it Functions for Consumers and the Economy” submitted by Leonard A. Bennett of Consumer Litigation Associates on June 19, 2007. See the full report here.

Results of E-Oscar Disputes

Often consumers get the results of an investigation stating the account was verified by the creditor without any details of the investigation, who was contacted and what information was obtained to verify the account as accurate. Because of the E-Oscar system consumers get frustrated with the dispute process and sometimes give up. Don’t give up! Exercise your rights under the FCRA, Section 611 (a)(6) and (7) and request the credit reporting agency give you the “Method of Verification.”

As you can see credit repair can be complex and may call for several strategies, knowledge of credit laws and patience. Sometimes you have to let a professional handle your credit repair needs. Get Legal, Effective, Credit Report Repair – Call (877) 587-4574

The amount of time it takes really depends on the amount of negative credit reporting in your credit history and how determined you are to stick with the process. The task may seem daunting at first but once you get into a rhythm it will flow easily. You can expect to see a difference in credit scores within several months.

Start with these tips and strategies:

Find out what is affecting your credit score the most

When determining what item or items in your credit history is affecting your credit score the most look for current derogatory information like a charge-off, collection account or late payments. Any current major derogatory will significantly lower your credit score. If there is an error in the listing such as an incorrect date or inaccurate amount, that can be disputed. The dispute process may result in a deletion or correction of the information.

You may want to consider leaving older negative information alone to drop off your credit report. Older negative information affects your credit score less than newer negative credit information. Articles on how to repair credit and disputing negative credit contain useful tips on dealing with specific bad credit items.

Make on-time payments for all obligations

On time payment is the most important piece of the credit score pie! You may already be familiar with the credit score chart but it’s worth showing you again. Take a look at the amount of weight given to payment history, it accounts for 35% of your credit score.  In fact, a late payment can reduce a credit score by as much as 100 points!

What’s really awful about late payments is that items that are not even normally listed on your credit history can end up on your credit report. A ticket, library fine or even utility bill can end up on your credit report if left unpaid. It is imperative that all bills are paid on time to avoid businesses sending even the most smallest of bills to a collection agency.

Once a bill ends up with a debt collector it can remain on your credit report for 7 years, whether it is paid or unpaid. A paid collection account is still considered a negative account and your credit score does not improve just because it is paid.

Minimize account balances

Any outstanding credit card debt should be decreased. You will get the best results in rebuilding credit if you maintain current account balances to no more than 10% of your available credit limit. for example: A credit card with an available credit limit of $2,000 should have a balance of no more than $200 which is 10% of $2,000.

The credit limit of the account does not matter; this rule should be practiced even if your account limit is $200. Try it and watch your credit score increase. Maintaining low balances translates into higher scores and shows how well you manage credit card debt. Consumers who manage credit well and have little debt are considered a good risk and banks will come looking for your business. If 10% is too difficult to maintain aim for 30% of your available credit limit.

Get New Credit

Replacing bad credit with good credit is mandatory! The previous tip to “minimize account balances” will not work too well if you have no current open credit card accounts. You may be thinking how can I get new credit if I have bad credit or no credit at all? Well, I’ve got the solution. Get a credit card specifically designed for consumers who need to rebuild credit. There are only a few credit card companies that have competitive rate credit card products for bad credit. But just in case you cannot get an unsecured credit card for bad credit, get a secured credit card.

Secured credit cards work just the same as unsecured credit with the exception of you placing a deposit, typically from $200 up to $5,000 in an FDIC insured bank account. That deposit not only serves as your credit limit but also reduces the risk to the credit card company. Secured credit cards report to the major credit bureaus just like unsecured credit cards which means even though you have a deposit backing the credit limit, you must still pay on time.

Exercise caution when seeking new credit. You want to avoid too many credit applications as each inquiry will decrease your credit score by a few points and banks will view you as a risk because credit applications indicate you may be taking on too much debt.

Avoid Prepaid Cards

The goal is to rebuild credit history and prepaid cards in no way help rebuild, build or re-establish your credit history. Prepaid cards are not credit cards and do not report to the credit bureaus as they do not provide a line of credit. You are strictly dealing with money you prepaid on the card.

Raise Credit Scores Quickly

Maybe your credit history is not in need of rebuilding and you just want to quickly raise your credit scores. The first thing you can do is keep any old credit accounts open. You may not be using that old account but it is helping your credit score and closing it may lower your credit score.

The second thing you could do is to ask your creditor to remove any recent late payments. I am not talking about disputing with the credit bureaus. Go directly to a creditor and simply ask for a removal of a recent late payment. Your creditor may want to extend goodwill to you if a late payment was a mistake and not consistent with your regular payment habits. Recent late payment notations can sink your credit score. Get more tips on how to raise credit scores quickly.

Practice makes perfect

Okay, now that you have new credit what should you do with it? The answer is simple. Practice good credit habits to rebuild credit. Your goal in rebuilding credit should be to have credit score of 720 or above. Some of you may be 50 points away from a 720 credit score and others may be 150 points away. It does not matter where you start, it’s where you end up that counts.

Some consumers cease using credit cards after having bad credit or a bad financial experience, but that will not help you rebuild credit. Creditors want to see how well you manage credit and you can only accomplish this by using credit. Charge only what you can afford to pay and make sure you pay on time each month and your credit history will recover.

For specific creditors that cater to bad credit consumers read “How to Rebuild Credit Scores.”

The dispute process may take some time and living without a bank account is not only inconvenient but also costly. Check cashing fees add up over time and not having a place to grow your money prohibits wealth building.

No Chexsystems banks do not use Chexsystems to open bank accounts; however they may run a credit report. A No Chexsystems bank may also have a second chance bank account allowing consumers with current or past Chexsystems records to open accounts.

No Chexsystems Banks

Electric Orange℠ Checking Account
The Electric Orange℠ checking account from ING DIRECT is not only an above average checking account because it is an Interest Earning Account but for other reasons such as: (1) No ChexSystems; (2) No Overdraft fees; (3) No ATM Surcharge; (4) No Monthly Fee; and (5) Earn a $50 bonus when you open an account.

ING DIRECT will pull your credit because they offer an overdraft line of credit; however your credit does not have to be good. The “overdraft line of credit” permits customers to write checks or use a debit card for more than their balance and pay back the overage with interest over a period of time. Open the Electric Orange℠ checking account and earn a $50 bonus.

Orange Savings Account℠
The High Yield Savings with the Orange Savings Account℠ from ING DIRECT has no hidden fees or service charges and no minimum deposit. ING DIRECT does not use Chexsystems. You can open the Orange Savings Account℠ instantly online.

Banks will sometimes do ChexSystems sweeps on existing customers and close accounts without warning even if your account is in good standing. Never have all your money in one bank. Because the ING High Yield Savings Account and Electric Orange℠ Checking Account do not use ChexSystems, both can be excellent back-up accounts if you have an existing checking account but are still in ChexSystems.

UPside Prepaid Visa
Get a second-chance bank account in the form of the UPside Prepaid Visa. It works like a checking account allowing you to write personal checks for any purpose. In order to write a check all you have to do is log into your account and select the “Write a Check” button and fill out the payee name, address and amount. The check will be debited from your account and sent automatically on your behalf. You even have the ability to stop payment on a check, just like a traditional account. It is the only prepaid account with a checkbook!

USAA
USAA serves the military but you do not have to be in the military to open an account. You will have to become a member prior to opening an account. Once you establish you are not in the military, a series of questions will be asked that will grant you membership.

You will be given a member number and with that number you can then open a checking account. The process can be completed online or over the telephone in about 15 minutes. The minimum opening balance is $25 for a checking account and $50 for a savings account.

Suntrust Bank
Suntrust Bank offers several types of checking accounts, all of which include online banking, mobile banking, overdraft services, direct deposit, online bill pay and a SunTrust MasterCard® Check Card. While Suntrust maintains they do not use ChexSystems, some consumers have reported otherwise. It may be best to apply over the telephone or through their online chat service; and, complete the process in full through the mail.

Fort Sill National Bank
Fort Sill National Bank (FSNB) is open to anyone; you do not have to be in the military. FSNB does not use ChexSystems. If you are interested in direct deposit, this may be a good account for you because FSNB may not be located in your state. In order to open an account from any location call their new accounts department at (800) 749-4583 and an application will be mailed to you.

Everbank
Everbank is another great bank that does not use Chexsystems. Your credit history will be pulled for identification purposes. Each credit situation is evaluated on an individual basis; therefore, if you have bad credit you can still apply online and you may get approved.

Even though the minimum opening balance is $1,500, you are not required to maintain the minimum balance once your account is open. Other features are direct deposit, ATM reimbursements, online & mobile banking, mobile check deposits, overdraft protection and optional online bill pay. Everbank has one of the highest yield interest earning checking accounts in the industry.

IncredibleBank
This bank is an internet only bank and a division of River Valley Bank. IncredibleBank offers a a high yield checking account and a high yield CD that can be opened online. They is a no Chexsystems bank but they will run a credit report and require a minimum credit score of 640.

TCFBank
This bank is not available in all states. TCFBank has 436 branches in Minnesota, Illinois, Michigan, Colorado, Wisconsin, Indiana, Arizona and South Dakota. This bank offers several checking accounts to choose from and business checking. They will open an account for consumers in Chexsystems but you must not owe any money to TCFBank.

Second Chance Checking

US Bank
Try the in-store branches and take proper identification along with a utility bill showing your address. Consumers using in-store branches have experienced success in opening checking accounts while in Chexsystems.

Woodforest Bank
This bank is not available in all states; however, they do have an account called “Second Chance Checking. It comes with unlimited check writing and a debit mastercard. You must go inside a branch in order to open this second chance checking account.

BBVA Compass
Offers a second chance checking account where you get a visa debit card, unlimited check writing and no minimum balance required. The monthly service charge is $13.95 and the minimum opening deposit is $25.

Wells Fargo – Opportunity Checking
This is a traditional checking account with a visa debit card and checks; however, it comes with some restrictions. This account will definitely help you stay within your budget. Deposits cannot be made through the ATM and you may not be able to get cash back immediately upon depositing a check. Once you remain in good standing for some time, Wells Fargo may offer you an upgrade to a regular checking account, with less restrictions.

Chase
Chase offers an account called Access Checking. It comes with several limitations but you may be able to convert to a regular checking account after 6 months in good standing. You will receive a debit card with this account. You must go into the branch to open the account and they do pull your credit report for verification.

PeoplesCashSolutions
Peoples Cash Solutions offers a Second Chance Checking Account for consumers who have been reported to ChexSystems or TeleCheck. There must be no fraud activity reported in ChexSystems. Bad credit and even bankruptcy are okay.

Fund an Account or Verify Small Deposits

If you are opening an account online but do not have a way to fund it instantly with another account, debit or credit card, most online accounts can be funded with a prepaid debit card.

Some online accounts even verify your identity by making a small deposit into a checking, savings, credit or debit card account and then have you verify the deposit amount. A prepaid debit card such as the Upside Visa Prepaid card will meet the requirements if you need to fund an online account immediately or verify your identity by allowing the online bank to make a small deposit.

Safe Check Ordering

Consumers who have been reported to ChexSystems, whether the item is paid or unpaid, should be careful when ordering checks. Ordering checks from well known companies such as Deluxe, Designer Checks, Checks Unlimited and Current Checks may not be safe. These companies share your personal information with ChexSystems. ChexSystems will then report your ChexSystems record to your current bank.

Order checks from companies that do not share your personal information with ChexSystems such as Costco Check Printing, Checkworks or Harland Clarke. Ordering checks from companies that share your information with Chexsystems may end up getting your current bank account closed, even if your checking account is in good standing.

More articles you may like:

1. Second Chance Checking Accounts
2. What is Second Chance Checking
3. How to Order a ChexSystems Report and Get a New Account
4. Business checking account as alternative to Chexsystems

Credit card companies view consumers who need to build credit as higher-risk which means you will more than likely have a higher interest rate and lower credit limit than a consumer with an established credit history. But that is not important because your goal is to build credit with a credit card, not to shop until you drop.

In order to build credit with credit cards you must get a credit card that reports to the three major credit bureaus. And, you should get a credit card with a competitive interest rate if you plan to carry a balance each month. Stay away from high interest rate cards unless you have the budget to make the minimum monthly payments. You want to avoid any possibility of getting into financial trouble while trying to build credit.

Here is a look at the types of credit cards to help build credit for consumers with a limited or bad credit history:

Retail and gas cards

This type of credit is typically easier to qualify for than traditional bank credit cards. You have to pay attention to the fine print before agreeing to the terms. Easy to get retail cards are great for consumers who need to build credit but it will cost you a little extra in interest rate. No doubt the interest rate will be higher but it may be worth the cost in order to build credit.

Bank Credit Cards

Credit cards from banks can be unsecured or secured. Unsecured cards are generally more difficult to get because they are not backed by any guarantee. Because an is not backed by any type of collateral such as a deposit the bank may offer you a credit card for limited or bad credit. The interest rate may be higher with this type of of unsecured visa or mastercard. A good strategy would be to charge a small amount and pay it off each month. It will show how well you manage credit and debt.

A secured card are often the easiest type of credit to qualify for because they require a cash deposit as collateral. But even though a deposit is required you should treat them exactly like an unsecured credit card. Having a deposit as collateral does not mean you can skip a monthly. Secured credit cards are reported to the credit bureaus just like unsecured credit cards.

This is good because your goal is to build credit; therefore, you want on-time payments to be reported to the credit bureaus. Many bank secured credit cards allow you to move up to unsecured credit cards with good payment history and management after several months. Some secured cards come with upfront fees. Secured cards that come with upfront fees usually approve anyone, bad credit or no credit because no credit history or minimum credit score is required for approval.

Do not expect the unsecured credit card to come with a a high credit limit when you have limited or bad credit. The only unsecured credit card to build credit that may come with a high credit limit is the Credit One Bank – Visa®Platinum Card. It is one of the leading issuers of credit cards specifically designed for consumers with less than perfect credit that may come with a credit line up to $1,500. Secured cards are different in that your deposit determines your credit limit so your limit can be higher.

Managing New Credit

With all credit cards, whether they be unsecured or secured, it is important to manage your credit by making on-time payments and not maxing out your credit cards. Never charge your credit cards to the limit, if at all possible, especially when you are attempting to build a positive credit history.

It is important to use your new credit but make sure you only purchase what you can pay for. The best rule of thumb is to limit your credit card balances to not more than 30% of your available credit limit. For instance, if your credit limit is $500 do not spend more than $150.

Maintaining low credit account balances will help build credit and improve your scores. You will be amazed at how quickly you can build your credit history with credit cards by making on-time payments and managing your credit usage.

Bad credit affects your good name and your name is involved in all areas of everyday life.

Fixing your credit report must involve as many strategies as necessary and a comprehensive plan of attack.

Disputing bad credit is a common strategy used by consumers but there are other ways to repair your credit. Below are seven useful strategies to fix your credit report:

1. Rehabilitate Past-Due Accounts
If you are past due on a credit card or loan some lenders will allow you to rehabilitate your account. Rehabilitation is a process by which lenders erase negative marks from your credit reports once a series of on-time payments have been made consecutively.

Usually lenders require at least 6 to 9 consecutive on-time payments in order for the negative marks to be deleted. Rehabilitation is not something lenders generally offer. You will have to request it.

A supervisor or manager may have to be involved in order to get account rehabilitation. Be persistent because many lenders will work with you, especially during this economic downturn. Remember to always negotiate a better credit rating in the rehabilitation process. You want the negative past due marks deleted once the rehabilitation process has been successfully completed.

2. Dispute Negative Information
Credit bureaus handle millions of credit files and even more pieces of information daily. Inaccurate reporting, mistakes and errors occur all too often. In order to fix your credit report dispute all negative information including duplicate account reporting, incorrect balances, negative payment history, derogatory accounts and reporting errors.

Learn how to dispute specific information in your credit report. Getting negative information removed will give your credit score a good boost and improve your credit history.

3. Keep Balances within Thirty Percent of Credit Limit
Do not use over thirty percent (30%) of your available credit. Keep those balances low and your credit scores will increase. Definitely do not go over your credit limit. This hurts your credit score tremendously. If you have some extra cash on hand pay down your credit card balances, even if it’s a small one, to 30% or less of your available credit limit.

In the alternative, if you do not have the cash on hand to pay down your credit card account, request a credit line increase but don’t spend it! Many credit card issuers can increase your limit without running a credit report if your account has been in good standing. Make sure you ask if a credit report will be pulled before requesting the credit line increase if you do not want to create hard credit inquiries.

4. Attack Collection Agency Accounts
Take a look at your credit reports and analyze collection accounts. First, determine whether the collection account belongs to you, is outdated (over 7 years old), a duplicate account, or even previously paid. As the junk debt buying industry grows, collection accounts should be under close scrutiny. Collection accounts are often sold from one collection agency to another.

Every collection agency involved could be listed in your credit files. This is incorrect and must be disputed. Zombie debt is also a growing problem. It involves older debt, often past the statute of limitations, being resurrected by a collection agency. There are horror stories where consumers have been harassed by collection agencies about closed, charged-off, paid in full or settled credit card debt over 15 or 20 years old. Learn more about Zombie Debt.

5. Get a Bank Loan Secured by a Savings Account
Bank loans weigh heavily on credit reports. A bank loan will help you rebuild credit. A secured bank loan will have the same positive effect on your credit scores as an unsecured bank loan, as long as it reports to all three major credit reporting agencies and paid on time. A proven strategy that has been around for a while is piggybacking secured loans where you open more than one secured bank loan.

Opening a secured bank loan does not require excellent credit because it is secured by money on deposit. That money will be earning interest in a savings or certificate of deposit account. Secured loan limits can range from $500 to $10,000. It simply depends on how much you are able to put on deposit. You must have enough in your monthly budget to maintain timely payments as the funds you deposit will be on hold until the loan is paid in full. Learn more about Secured Loans.

6. Settle Collection Debts and Get a Deletion
Once an account is purchased by a collection agency, it can often be settled for pennies on the dollar, especially older collection accounts. If you decide to deal with a collection agency never pay what they are requesting, which often includes inflated fees and interests. But more importantly, if you choose to settle a debt with a collection agency, get that entry entirely deleted from your credit reports.

There is no incentive to pay a collection agency without getting that negative entry deleted. Paid collection entries hold the same negative weight as unpaid collection entries because it is the negative collection entry that decreases your credit score. Negotiate a pay for deletion if you choose to settle a collection agency debt. Learn how to negotiate settlement and about pay for deletion.

More articles you may like:

1. Strategies to Dispute Chase Credit Card Charge-Off
2. 5 Quick Fixes to your Credit Report
3. 5 Little known items that can appear on your credit report
4. What to do when you discover a collection account on your credit report

In June 2010, Experian, one of the largest consumer credit reporting agencies acquired RentBureau. RentBureau was established in 2005. They developed a National Rental Data Exchange (NRDE) database and system.

The system stores rental payment history, rental collection data and lease applications on approximately 8 million of the nation’s 38 million rental units according to the Los Angeles Times.

Reporting rental payments may have a positive effect on consumers with little to no credit history such as students, recent college graduates and immigrants. It may help consumers with slight credit files to build a credit history.

If you pay rent on time your credit score could experience an increase. No longer will consumers have to depend solely on credit card accounts, mortgage, personal and auto loans for credit building information.

However, there is the huge potential it will hurt consumers who do not pay rent on time. You may even find it harder to rent in the future if negative rental information becomes part of your credit file.

For now, the credit reporting will only affect Experian’s VantageScore credit score. It is likely in the future rental payments will be incorporated more widely into all credit reporting and scoring.

If you are not paying your rent on time you may be okay at this time as Experian may not even have your rent information. According to the National Multi-Housing Council, a trade group for major landlords, the 8 million renters in Experian RentBureau database represent just a slice of the nation’s 96 million renters.

One group of consumer most likely to benefit from this new credit reporting will be young people. New legislation has made it more difficult for younger people to obtain credit cards. Young people who rent and make timely payments will find it easier to get credit cards and installment loans.

Another group likely to benefit is consumers who have faithfully paid their rent on time. Previously there was no credit score benefit to paying rent on time, now there may be.

Vice present and managing director of Experian RentBureau, Brannan Johnston said “Given that one-third of the U.S. population rents, we felt it was imperative to reflect the true creditworthiness of those individuals who responsibly pay their rent.”