Fresh Start Product Boosts Credit Scores for 70 Percent of Borrowers (2024)

FAQs

Fresh Start Product Boosts Credit Scores for 70 Percent of Borrowers? ›

70% of borrowers increased their credit score after taking out a Fresh Start loan. The greatest and most meaningful increases came from borrowers with starting scores below 640, those who started out unscored, and younger borrowers.

With the VantageScore 3.0 model, most borrowers impacted by the launch of the Fresh Start program will experience a score increase, averaging more than 30 points. However, some borrowers are expected to experience an initial decline in their score, averaging about 15 points.

To raise your credit score by 70 points, you can dispute errors on your credit report, catch up on late payments, pay down debt, and lower your credit utilization.

To maintain a healthy credit score, it's important to keep your credit utilization rate (CUR) low. The general rule of thumb has been that you don't want your CUR to exceed 30%, but increasingly financial experts are recommending that you don't want to go above 10% if you really want an excellent credit score.

Fresh Start comes with various benefits, including renewed access to federal financial aid and the removal of the default from your credit report. After you get your student loans out of default with Fresh Start, you can sign up for a new repayment plan, such as income-driven repayment.

The Fresh Start program is open to any taxpayer who owes back taxes and is struggling to pay them. There are no income requirements. To qualify, you must owe no more than $50,000 in combined back taxes, interest, and penalties and be current on all federal tax filings.

Pay off debt rather than continually transferring it.

While a balance transfer to pay zero interest or a lower interest rate on your debt can be worthwhile, make sure you pay down the balance before increasing your debt load. FICO says paying down your overall debt is one of the most effective ways to boost your score.

For most people, increasing a credit score by 100 points in a month isn't going to happen. But if you pay your bills on time, eliminate your consumer debt, don't run large balances on your cards and maintain a mix of both consumer and secured borrowing, an increase in your credit could happen within months.

While achieving a 900 credit score is technically possible with the CIBIL model, it's highly uncommon. A score above 760 is considered very good or exceptional and offers significant benefits like lower interest rates and improved loan approval odds.

Is 70 percent credit utilization good? ›

Lower utilization rates are better for your credit scores, and 30% could be better than 50%, 70% or 90%. However, a lower utilization rate might be even better for your credit scores. People in the highest credit score range tend to have utilization rates in the single digits.

Make Your Payments on Time

Late or missed payments can cause your credit score to decline. The impact can vary depending on your credit score — the higher your score, the more likely you are to see a steep drop.

Lenders and credit scoring models consider a demonstrated ability to manage credit a positive factor. Therefore, it is advisable to use credit wisely, keeping the utilization ratio low but not at zero.

It's a good idea to pay off your credit card balance in full whenever you're able. Carrying a monthly credit card balance can cost you in interest and increase your credit utilization rate, which is one factor used to calculate your credit scores.

Always making payments on time can go the furthest to helping you improve credit. Actions you can take: If you're having trouble making payments on time, set up autopay for at least the minimum due and create calendar reminders and alerts through your online account.

Your Account Status May Be Reported to a Credit Bureau

You may be able to build your credit history and impact your credit score as your account status may be reported to TransUnion, one of the major credit bureaus². By building your credit history, you may have other lending options available to you in the future.

One of the primary benefits of the Fresh Start program is the removal of negative dings on borrowers' credit reports. This includes removal of the "default" flag in the credit database. Additionally, this will eliminate any loans from borrowers' credit reports that have been delinquent for over seven years.

The time it takes to raise your credit score from 500 to 700 can vary widely depending on your individual financial situation. On average, it may take anywhere from 12 to 24 months of responsible credit management, including timely payments and reducing debt, to see a significant improvement in your credit score.