Category Archives: Credit

What Can Affect my Credit Score?

So many times we make financial decisions without researching the implications of those decisions. One of the implications that many people overlook when trying to figure out their finances is how those decisions affect your credit score. Even if your credit score is fine, one wrong decision can result in several years of trying to correct your credit score. Don’t get caught in this! Today, we’re going to look at a few things that can affect your credit score.

The amount of your credit that is currently used: This is the one that many people overlook. At one point, I had several thousand dollars of credit and almost as much debt. This made my credit score plummet quite quickly. When I made this number smaller.

The length of your credit history:  Another thing that totally shot my credit score was that I had such a short history. When it was at its worst, I had only 4 years of credit. Now I have almost 10, and it has increased significantly. As your credit history gets longer, there are longer periods of time to compare to. 4 months of delinquent payments (like I had) looks a lot more terrible when compared to 4 years as opposed to being compared to 10. And, since I plan on it never happening again, it’ll be a mere smudge on 20-plus years of credit.

Your payment history: This is the most obvious. If you forget one, it’s really not a huge deal. But, if you keep skipping or forgetting bills, your credit score will start to drop. Just because it’s not necessarily a form  “credit” does not mean it does not affect your credit score. Remember, the credit score assesses how responsible you are with the credit you possess AND with making payments on that credit. If you can’t make payments on your $25 electric bill, how can a loan company expect you to make payments on a $140,000 loan? Things get even worse when you end up having to go through a collection agency.

The number of inquiries on your credit report: People do NOT realize how significant this is. If you are requesting information on your credit too regularly (most professionals suggest once or twice a year), it makes your credit dip. Why? Because if you are checking it too much, it means that you are obviously overly concerned about it, and that looks suspicious.  Now, there are some banks, credit card companies, and credit unions that will track your FICO score, and they do it monthly without affecting your credit. If you are someone who is concerned about that (like I was, because of killing my credit), then these services can help you significantly; contact your bank and/or credit union and ask. Also, the government requires that you have access to a free credit report every year. This also includes other agencies pulling your credit report; if you’re seeking too much credit, it can mar your credit score significantly after awhile.

Keep an eye on your credit score. There may be things affecting it that you don’t realize. Have a great week, and we’ll see you here next week!

3 Ways People Abuse Credit

Credit abuse; it’s not likely to make the papers or end up in a courtroom (even though it can), but it’s a chronic issue in the United States today. The issue is exacerbated by the fact that even our government is billions of dollars in debt and continues to dig itself further into it! Seems like a lot of people abuse what credit they have, and their credit scores are lackluster because of it. Today, we’re going to explore three of the ways that people abuse credit and what we can do about each of them.

  1. They try to live off of it. Please don’t do this, ever! Some people use their credit as a rolling source of income, and it’s not actual money. When this happens, those same people are wasting hundreds of dollars throughout their lifetimes because of extra fees and the insane amounts of interest. It also demolishes your credit score; making heavy use of your available credit and maxing out your credit cards results in a lot of red marks that lower your overall score. Instead of living off of it, why don’t you consider adjusting your budget (which often means adjusting your lifestyle a well) and cutting costs so you don’t feel like you have to live off of your credit?
  2. They try to hide stuff with it. This is one of the saddest things that people do to abuse credit. Many times, instead of using a bank account that a spouse or loved one would have access to, someone will use a credit card that only they have access to in order to hide an addiction or affair. It’s usually a sign that, whatever the situation is, it’s gotten out of control and help is needed in order to get out of it. If this is you, please talk to your loved ones and seek out help before it becomes bigger of a mess than it already is.
  3. They avoid it entirely. You’ve never owed a dime in your life. That’s great, but what if you end up in some situation where you would need to, like in the case of buying a home? Unless you’re going to be saving money and living in an apartment for 20+ years (which, some people do, and that’s okay), you’re going to have to borrow something. Then, they’ll look at your credit score and it really won’t be that great because there’s nothing there. A lot of people avoid it because they’re afraid of abusing it, but avoiding it is just going to make that problem worse in the long run. If this is you, consider getting a credit card with your bank or credit union and utilizing it on occasion, paying it off immediately when you do. This allows you to build a credit history and also helps you be more comfortable with the idea of having credit.

So, don’t abuse or neglect credit. In the long run, it’ll end up destroying you if you don’t change whatever bad credit habit you have now. Have a great weekend!

Some tips on negotiating a lower interest rate

Ever been in debt? If you have, and you’ve tried to get by by means of only paying the minimum payment, you may notice that it takes awhile. Why? A big part of this is how high your interest rate is. Most standard credit cards have an interest rate of at least 15%, so on a $1,000 debt, half or more of your minimum payment could be interest.

Did you know that there are ways to negotiate a lower interest rate on your credit cards? Honestly, it just takes a phone call and a conversation with the right tone in order to do so. Here are some hints.

  1. Don’t even try if your payments are erratic. A bad pay history means that your importance as a customer isn’t as high as it could be. You’re a bit of a threat, so to “reward” your mistakes with a lower interest rate is out of the question.
  2. Be polite. Threats like “I’m gonna leave if you don’t give me a lower rate!” aren’t going to help your situation any. If you are polite and mention that you’ve been offered a lower rate with another company, they’re more likely to cater to your inquiry.
  3. Talk to them about transferring other balances. If you talk to them about other cards and that you’re considering consolidating them, your creditor may be more likely to give you a lower rate so that their company is the one you consolidate to.
  4. Always double check if it’s introductory or fixed. This is incredibly important, especially when transferring balances. A lot of times, your card company will give you an introductory rate for those transfers, and then it’ll go up to a normal fixed rate after a set period of time has passed. Try to see if they will give you a lower fixed rate, even at the cost of losing the lower introductory rate. Having 7% interest throughout the duration of paying off your card is better than paying 5% interest for 6 months then having to pay 15% after that.
  5. Have a backup plan. Some creditors just won’t budge. If this is the case, make sure you do have a backup plan to transfer your balance to another company. Even though your current creditor may not have budged for you, losing your business (especially if you were a good and/or long time customer) may give them a message so that other people can negotiate lower rates.

Consolidating your debt and trying to fight for lower interest is totally worth it. If you stay polite while not allowing yourself to be walked all over, you should be able to slowly get away from a painful life of debt management more quickly.

For Those With Damaged Credit

Sometimes we all make unwise financial decisions or take on more credit than we can handle. Sometimes we acquire bad credit from unfortunate circumstances like going through a divorce, loss of a spouse,  or experience  medical issues that results in the inability to work or excessive medical bills. Regardless how you get into debt, I think we can all agree that its much easier to get into debt than to get out of it.

If you have bad credit, or have no credit history, chances are you can still get a credit card but it will cost you more and the terms will not be as good as those who have good credit. For example you may be approved for a credit card with a $500 credit limit, and you’ll probably pay an outrageous  interest rate, anywhere from 22% to 33%.  If you choose to take the card, use it wisely and make sure to make your payments on time. Keep in mind you’re using this card as a tool to better your credit and not another way to purchase.

If all else fails…get a secured card.

For those who don’t trust yourself or nothing else seems to work, you may want to consider getting a secured card. It’s very simple, you put your own money into a saving/checking account and that amount, or a portion of it, becomes the security of your credit card. If you don’t pay your bills, the card issuer will take the money from your reserved account to pay your debt. It may be hard to come up with the initial amount to deposit but it’s a good way to build a credit history. Since your main goal for using a secured card is to build your credit, make sure that the card issuer reports to a credit bureau, if not, the card is not going to help you build your credit. Many people who have used this method and have successfully made 12 to 18 months of timely payments then upgrade to a regular credit card.

As with any credit card offers, you have to beware of disreputable card issuers, especially with secured cards. Make sure to read and study the fine print before applying. Do not accept any offers from people that contact you about secured credit cards, make sure to do your own research and contact the company yourself. Ask questions whether there are application or processing fees and the interest rates and fees. Generally secured cards carry higher interest rates and higher fees.

…if all else fails , get someone to cosign a credit card.

If you can find a relative or a good friend who is willing to help, get them to cosign on a credit card for you. Keep in mind that if you decide to go this path and don’t make your payments, you can ruin the credit of the cosigner who would have to pay off your debt. So be extra careful, you wouldn’t want to do this to someone who was willing to go out on a limb for you.

Keep in mind that paying the bill in full every month is not necessary, but paying-off the monthly charges, and on time, will eventually prove that you’re no longer a credit risk!

Credit Report and How It All Works

Digging your way out of credit card debt can be an overwhelming and feeling hopeless.  It is embarrassing for friends and family members to know that you’re struggling to pay your bills. You also may be tossing and turning at night thinking about how to get out of your current debt situation. You are not alone. With hard work and discipline, you can work your way out of debt!

If getting out of credit card debt is something you want to accomplish, then there are some basics you need to follow. You need to know what is on your credit report and understand why it is there, develop a plan to pay down that debt, and change your way of spending so that you can avoid repeating your mistake.

The first thing you need to do is to find out what the creditors have on report for you. Why is this important? A credit report is your personal record of your credit payment history as reported to credit bureaus by bank, credit card companies, department stores, and other types of businesses you’ve borrowed from. This is where potential lenders get information that will determine the decision on whether or not they want to take a risk issuing you credit. It’s very important to understand how credit reports work because you can protect your rights and avoid being taken advantage of by credit repair clinic and the so-called credit doctors.

If you are considering on purchasing a home or applying for any other types of loans, you will need a good credit report. It is always good to know what is on your credit report before your lender looks into it, this way you will have the opportunity to clean up any mess or errors you may have on your record. You may also want to consider canceling any credit cards you are not using because lenders will include your credit limit as potential debt. If you have credit cards with no balance but with credit limit totaling $10,000, for example, the lender will consider it as an additional $10,000 of potential debt and may reduce the amount of the loan they are willing to give you.

Whats in a credit report?

Your credit report includes basic personal information such as name, current and previous addresses, telephone number,  social security, date of birth, and current and previous employers. The credit history portion includes information about each credit account, including things like when the account was opened, the credit limit, current balance, monthly payment, and your payment pattern during the past several years. In this report, they also include any bankruptcies, accounts sent to collection agencies, unpaid child support or alimony, tax liens, bounced checks, unpaid traffic/parking tickets, car repossessions, evictions from apartments, court records, and names of businesses or individuals who have obtained a copy of your personal credit report. Your credit report pretty  much reports everything that lenders may be interested in knowing. Some information that your credit report does not contain is information about your race, origin, religion, personal lifestyle, political affiliation, medical history, or other information unrelated to your credit history and ability to repay credit debt.

Review your entire credit report. Most financial advisers would recommend that you obtain a copy of the free credit report that you are entitled to once a year and review it carefully. If you have been rejected or turned down for credit, housing or employment due to your credit report, you may be entitled to a free copy of your credit report as well. There are three main credit bureaus that are available to you: Equifax, Experian, and TransUnion. All other credit companies obtain their information from one of these three. Since the information in your credit report may differ somewhat from one bureau to another, it is wise that you obtain a copy of your report from each of the three major bureaus once a year. If you cannot afford all three credit bureaus, then consider ordering your report from Equifax since it is the largest reporting bureau. Upon receiving your credit report, if you find an error in the report you can call or write to the credit bureau explaining the error in detail in 100 words or less. You want to provide any documents that may help prove your statements.  Your payment history will stick around for a long time. Chapter 7 bankruptcies will stay on your credit report for ten years from the filing date and Chapter 13 bankruptcies will remain on the report for seven years from the date fully paid or ten years if not paid as agreed. Unpaid tax liens may stay on your credit report as long as fifteen years.

So how do Lenders use the Credit Report?

Lenders typically use the information in your credit report to evaluate your personal character, your total debt capacity and your collateral or capital. Their study of your character is also based on the stability of your employment and residency history. They will check to see how often you have changed jobs, how often you moved and the length of time you stayed at each address. These kind of information gives the lenders a feel for your personal stability and an overall general assessment of your character. To evaluate your debt capacity, they will look into your living expenses, open credit account limits, current debts, and other payments to get a feel of how much debt you can afford with your current spending habits and your income. Another huge factor that goes into the lenders decision on lending credit is your credit score. Your credit score is a number or rating which indicates how likely you are to make payments on time and repay loans, based on information in your credit history. This score is computer generated and factors in your current income, education, job stability, how often you have changed addresses, whether you are a home owner, debt to income ratio, and past payment history.

You may obtain your credit score, or FICO score for a fee. All three major credit bureaus offer this option with your credit report or as a separate option. If you find that your credit score is not so great, do your best to improve your credit score by concentrating on paying your bills on time, paying down your credit balances, and avoiding new debt. Improving your credit score is not an over night task, and may take a long time, but is well worth the effort.

General Tips on Gift Certificate Fraud

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Studies show that people tend to spend more on gift cards than on gift certificates. The average gift card in 2004 was $50, which was twice the amount people would spend on the average gift certificate. Although gift cards seems to be more popular than gift certificate, plastic still hasn’t completely killed paper yet. Gift certificate can still be purchased in various amounts, and are good at various shopping, dining, and entertainment establishments.

So whats the difference between gift cards and the gift certificates?

Well besides the paper vs. cards issue, for gift certificates, you may receive cash back if your purchase was less than your certificate amount. For example, you buy a $20 DVD with your $30 gift certificate and you can take your $10 and buy yourself lunch. If you buy a $20 dvd with your $30 gift card, then you will have $10 waiting for you the next time you stop by the store.

Now a question to those small business owners, do you offer gift certificates to your customers?

Many don’t because the potential of fraud scares them. However, with the right precautions, anyone can take advantage of this great sales tool. Here are some general tips on protection against gift certificate fraud:

  • Record all the certificate numbers, date of sale, and the exact dollar amount. Make sure to note when each certificate has been redeemed.
  • Do not buy generic gift certificates from office supply stores. These can easily be duplicated and not worth the trouble. Invest in custom designed certificates.
  • Use security features like an embossed logo or watermark to prevent photocopying.
  • Try to avoid huge cash refunds. It’s best to state on the certificate that if more than $10 worth of change is due, it will be reissued as another certificate.

The thing is, although this seems like a hassle to go through when you can simply go with cards, not all companies can afford cards. The cost of a typical gift card can easily range from $.50 – $3.00, and this is a fee you want to avoid if possible. So if you’re a small or medium sized company, chances are you can’t afford to give your customers the card option, but that doesn’t mean you should stay away from gift certificates. Gift certificates are a great way for you to expand your client base.

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Building your Personal Credit Report

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Personal credit Reports include personal information, employment information, payment history, a list of creditors, any bankruptcies you may have or lawsuits.

Since credit reports are what many employers are using now days as a way to gauge one’s personal habits and tendencies, it’s a good idea to check your credit report once a year just to make sure that your report is indeed correct. It’s very important to make sure that your credit report is not only correct but also you want to show that your credit history is consistent and promising.

Here are some general credit report tips.

Some credit report payment history tips:

  • Pay your bills on time. Delinquent payments and collections can have a major negative impact on your overall score.
  • If you have missed some payments, get current and stay current. Be consistent. The longer you pay your bills on time, the better your credit report.
  • Be aware that paying off a collection account will not remove it from your credit report. It will stay on your report for seven years.
  • If you are having trouble makings ends meet, consult your credit counselor. This will not improve your report immediately, but if you can begin to manage your credit and pay on time, your report will eventually get better as time progress.

Some positives and negatives that will affect your credit score.

Positives:

  • Steady/consistent employment
  • Active credit use of few accounts.
  • Remember, credit to debt ratio is very important.
  • Do not request for new credit cards.

Negatives:

  • Late payments
  • Missing Payments
  • inconsistent employment.
  • Multiple credit card accounts
  • Small finance loans
  • Bankruptcies and Foreclosures

Many people assume that because they have never missed a payment that they have good credit. They are a few minor things that the average person overlooks that could be costing them points. These are all minor things that can be easily and effective taken care of if you know what to look for.

Check out your credit report and see for your self.

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How to Pay Down that Credit Card Debt

card.jpgStatistics show that the average American has over $8,000.00 in credit card debt. If you fall under that credit card debt range, then you’ve got some major cleaning up to do. There are millions of people who have come out of some heavy credit card debt, so now it’s your turn.

Follow these 5 steps to be on your way to being credit card debt free. 

  1. First thing, you need to stop the credit card offers. You want to get away from all these tempting offers. You can actually force credit card bureaus to stop selling your information at 1-888-5-OPTOUT. Call the number to get the forms.
  2. Reduce your interest rates. The average credit card interest rate goes for about 18%, which is really high. You want to be in the 7%-12% range. You can call your credit card provider and negotiate for a lower interest rate. If you have been a customer for a while, then it should be really easy to negotiate. 
  3. Stop using your credit cards. If you’re trying to reduce your debt, the last thing you want to do is to keep adding to it. If you have a hard time not using your cards, then take them out of your wallet or purse and leave them at home. If those methods doesn’t work, you can even cut up your cards.
  4. Always pay more than the minimum due amount. Credit card companies love it when you only pay the minimum amount because the balance is calculated based on a system so that they can extend your payment plan as long as possible to make optimal profit.
  5. Consolidate your debt. Once you have reduce the interest rates of your cards, you want to combine your credit card debt into the card with the lowest interest rate.

Once you have stopped using your cards, reduced your interest rates, and have consolidated your debt, then you’re heading in the right direction for paying off your credit cards.

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5 Basic Concepts To Teach Kids About Money

piggy2.gifOne of the most important life lessons you can teach your kids is to develop successful money management habits  and  a sense of financial responsibility. When it comes to teaching your kids about money, the sooner they learn the better.

  1. Help your child understand the value of saving money.  Here is where you start showing them the importance and the  benefits of saving money. This can be done with a simple but balanced form of an allowance. While they are young, giving them small amount of money will help them prepare for the future when the amount becomes larger.
  2. Discuss the privileges and pitfalls of owning a credit card.  Show that credit cards can be a very powerful tool which could help you dramatically with your finances and also in return, how you could misuse a credit card and how much that could affect your life.
  3. Give your teen ‘real world’ experience with money and budgeting. Instead of buying their yearly school clothes yourself, give them a set amount and let them decide what they need and what they don’t need. Emphasis that that is all they are getting so chose wisely.
  4. Teach your child how to track spending. Get them in the habit of tracking their spending by either getting a notebook or a creating a simple excel spreadsheet on your computer.
  5. Cover the basics of investing. It’s never too early to start explaining the general overviews of investing. The earlier you start, the better they’re equipped when it’s actually time for them to start investing.

Credit Card Update

So I managed to bring my credit card debt down to an even $4,000.00 just this past weekend. Paid off $1,404.22 out of the $5,404.22  which brought my total to an even $4,000.00 :) I plan on paying off a little more as soon as I receive my refund from my federal return. My goal is to bring it down to $3,000.00 by next week. It would be nice if I could have it completely paid off before summer starts but I doubt that will happen, simply because I am only working part time and spent money on worthless junk. However, this will not stop me form trying to get it down as much as possible. Here is a general idea on how I plan on getting it down as much as possible. Some of the stupid/unnecessary things I spend on includes:

  1. Chinese food – This one is really stupid considering I have a meal plan on campus which is completely already paid for. I just need to throw out all my carry out menus from my room.
  2. Starbucks - Ah, how I love coffee. This one is going to be a little hard to stop but I am going to try to cut down little by little. I go about 5-7 times a week. I love their new Dulce de Leche Latte. Such temptation makes this one quite tricky.
  3. Random grocery shopping. Yes, I am truly a college student. I all I do is eat and study. Although I love the infamous Ramen Noodles, I tend to spend a little more on the hot pockets and frozen pizzas.
  4. Car gas. Gas price is no joke. Especially since my car only takes premium fuel.
  5. Pure junk. Stop carrying my cards and cash everywhere. Simple.

I think that if I am able to cut down on these 5 things I can save so much more. I’m going to set my target date for May 21st. Until then, I plan on keeping a record of how much I would of spent and instead saved.