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Is it worth to avoid your life purchases to pay off a student loan early?


Sometimes the young generation has to make few hard financial decisions for a better future. Today some of us are entering the early stage of adulthood, the most awaited part of our life. After becoming a self-sufficient adult, every youth has some dreams to fulfill – like owning a car, buying a home or achieving their financial independence.

On the other hand, we’re very hopeful and enthusiastic about our long-term financial prospects. The last recession also complicated our financial life very badly. So, now the thing is, what should a young student borrower do?

So, we must make a list of pros and cons to choose what is right for us. We must decide whether or not it is right to postpone our life purchases and provide the extra dollars towards paying off student loans. Let’s find out the truth.

1) The PROS

a. We’ll be free of a major debt – We’ll feel very good when you see the $0 due balance in your student loan account. Practically, it’ll give us relief from our tension caused by the major student debt. Getting rid of our stress can help us to concentrate on our studies, and it could even help us to improve our family relationships.

b. We’ll save money – If we pay off the student loan early, it can save our wallet heavily by saving the extra amount we need to pay if the loan goes full term. We can use that money to fulfill other financial needs. Practically, we’re paying less interest, and saving more dollars.

c. Saved money from interest can be used in future – It’ll save a lot of money that we may utilize for future life purchases. This depends on a person’s own mindset and true patience. If you can remove all of your student loan payments, then the saved money can be used for something new, may be for a new car or downpayment for a new home…isn’t it?

2) The CONS

a. We might make delay for some good things – The best example would be a home. Think if you borrow a 30-year mortgage for buying a house at your 30’s. At the time of collecting the house documents from your lender you’ll be at your 60’s. If you somehow become late for more 5 years, you’ll be 65. So, think, how much you’re willing to step back to grab your major life purchases?

b. We can’t claim tax deduction from student loan interest – Presently, the IRS permits their borrowers to deduct the interest on student loan up to a certain amount at the time of your tax filing. If you want to know the details on you can get tax deductions on student loans, you must ask about it to your tax filing expert.

Things to remember

Student loans are one type of installment loans that we usually pay off through certain monthly installments. If you go for a student loan (installment loan) and a credit card debt (revolving credit) both, it’ll be a wise decision. It is very good if you can maintain combined credit accounts, it’ll help you to grow a decent credit rating. If you pay off small amount of debts, that doesn’t have any major affect on your total loan amount. But if you take required steps to reduce high debt balances from your account, you surely have to pay off your student loan as soon as possible.

At the end, it is certain that if we sacrifice a bit now and avoid spending money on big life purchases, we can definitely use that fund to clean the student loan debt once and for all. It’s a good options for every individual students , who want to seriously become debt free and live a peaceful financial life.

By carol on February 10th, 2016

What it takes to transfer your credit card balances successfully


If you have an offer to transfer your credit balances into a lower APR credit card, it may look like a good solution to your credit card oriented issues. But, before you start consolidating your debts onto a new credit card, it’s important to be cautious regarding the fine prints and probable pitfalls. Your ignorance may let you down towards a grave and expensive danger.

Here are the steps you must choose to be on the safer side of a balance transfer:

1) Identify and reduce your debts

If you’ve decided to start balance transfer from your credit card to your other low-interest account, it means the balance transfer process itself is a proof that you have huge debts on your head. It may also indicate that you’re going to encounter few problems ahead. So, prepare your documents and contact a credit counselor to create a budget for you and reduce your spending before the balance transfer.

2) Check out for uncapped balance transfer fees

There is a fee which you have to pay while transferring credit balances from one account to another. Earlier, the percentage of the fee amount was fixed. But recently, some credit card companies are removing the cap on the fee amount. For example – before 2008, the 3% fee on a transferred balance would never cross the cap of $50 to $75. But from 2008, several card issuers removed the caps. Now, a 3% balance transfer fee on a $15,000 debt is $450. So, before transferring the credit balance, read the initial credit documents and fine prints.

3) Avoid buying through cards or cash advances

Many credit card companies allow a grace period for buying if your previous balances are paid off completely. But, you can’t do that with this card as you are using it as a loan. If you buy on credit or may use it for cash advances, your payments will be applied towards the low-interest balance transfer. If it takes few busy years to pay the balance transfer, your cash advances and the purchase may get stuck there accruing interest at 5, 10 or 19 %.

So, using this card might be very dangerous. You can stick to the plan of balance transfer, but you need to purchase or make a cash advance from any other card.

4) Beware of the bait-and-switch element

If you get a balance transfer offer, which is pre-approved for a certain amount, but at the time of submitting the application, you’ll find out it’s actually a lesser amount that you are eligible for. So, if you want all your balances to get transferred to this card, you may still get stuck with huge debt. Your credit limit might have increased, which might also affect your credit score.

5) Shop around for the best rate

It’s crucial that you must shop around and make sure to get the best rate. Finding a right credit card is the best way you can start managing your finances. Check out different websites, and see, which cards offer which rates with facilities.

You might get an offer of 9.9% APR and think it’s the best for you. But, you didn’t know that actually you can qualify for 4.9% APR. So, you can consider several credit cards and maintain them properly. People normally go for several credit cards due to the cost of credit card cash advances, lending urges, and for promotional rates on purchases. To become debt free, first make payments to the card with the highest APR.

6) Remove the new card

Closing an old credit card account is not a good idea, it’ll definitely harm your credit score. So, don’t do it right away. You can close any new credit account having a high APR, you can destroy the new card physically so that you won’t be manipulated to use it for any purpose, just use it to pay off the balance.

By carol on February 4th, 2016

Bad financial habits you don’t want your kids to learn in 2016 – part 2


This is the 2nd part of my last post, I hope you’ll enjoy it also.

There’s nothing more exciting than to sit down and discuss the right things we can do with our money.Unfortunately, it’s a human nature that we mostly learn from what we can see, rather than listening to what others say. Kids are also not an exception of that habit. They used to learn more from what they do than what they say.

So your behavior with money will be the deciding factor that’ll teach your kids the right way to manage their money in future.

6. Talk little about money

This is another misconception we normally have in our families. We normally don’t have any major discussion about money just because it’s a contentious matter in our family. But, if you don’t talk about money matters to your kids, then they genuinely don’t develop a fair idea of costing, budgeting, and wisely spending money. There’s not enough of that knowledge conveying on TV, and you need to help them for building a good money management habit.

Kids must hear you talking about money matters, kids must have financial responsibilities that are suitable to their age and mentality. Teach them about saving their pocket money, that way they can buy their things without seeking help from elders. Ask them to donate a small part of their savings or allowance to a charity, that’ll be an excellent lesson for kids. Make them realize that it’s all about earning and giving, and they need to focus on them both.

7. Spend like there’s no tomorrow

People often use this term to justify their overspending behavior, and it’s very much harmful for their finances who follows this concept. What if you spend a lot to eat, drink and buy, and you don’t die tomorrow?

If you follow this misconception, and demonstrate it to your kids that we must behave like there’s no guarantee for tomorrow, then from a financial standpoint you’re doing wrong with their financial future. It’ll force them to think that there’s no need to prepare for the future, and that is the worst financial lesson you can possibly give to your kids.

8. No savings or investing plans

You must chalk out savings and investing goals for your future and inform your kids about them. They must be aware of your financial goals and their objectives. These goals will be the opportunity to teach your kids the objectives and preparation for future savings. That’s definitely a lesson your kids need to learn.

If you can convince your kids with your future financial goals and objectives, you can also encourage them to contribute towards them. They can contribute as much as possible for them. It may add some dollars and cents extra into the family savings, but the contribution will initialize the future goals for your kids.

9. Always looking for a sale

Everyone knows that the most convenient way of saving money while buying is shopping on a sale.But, too much shopping from a sale is not saving, you’re willingly or unwillingly wasting your money.

The main purpose of running a big sale is to engage people to buy things what they wouldn’t need. So, avoid such sales and always buy only things, which you need most. That’s a good lesson to teach your kids when it comes to saving money.

10. Financial habits don’t affect health

Financial stress can hamper your health. If you’re knee deep in debt, the stress itself can shorten your life. Get control of your finances at least for your kid’s sake. Good financial moves can reduce your debt problems. Your kids will also learn to make right decisions regarding their money problems.

If you have any financial problem, discuss it with your kids. Sometimes kids have solutions, which we elders can’t find properly. They’ll learn from your mistakes, they can solve your problems, and it’s possible they can be safe from such financial problems in future.

By carol on January 26th, 2016

Bad financial habits you don’t want your kids to learn in 2016 – part 1


There is nothing you would cherish greater than to sit down and have a chat with your kids regarding the best habits about money. Unfortunately, just any other lesson you provide, kids learn more from our act than what we say.

If your words say opposite to your behavior, then the kids will get confused and will follow what they can see us doing. So, how you should behave with your wealth will be the best and important lesson that you can teach your kids. Similarly, there are some financial habits you don’t want to see in your kids, ever! Some of them are given below:

1. You operate without a budget

If you spend by crossing your budget and buy anything you need without thinking about the whole cost, your kids will also pick up the same attitude. They’ll automatically tend to ignore buying under budget. In that way, your behavior towards budget will become their legacy. They’ll stop thinking about having a budget, and will get the negative outcome that comes from the lack of financial discipline.

2. Debt is your friend

This is one of the biggest financial problems we’re having in almost every house in our country. It’s not the debt, but the behavior of accepting debt as a friend. If you see debt as a part of your life, your kids will too.

But, actually, debt reduces your future financial income. You are basically paying off for previous expenses now, and today’s expenses tomorrow. If you continue to gather debts and continuously paying them off, there’s a very little scope for saving in your life. And your kids will have the same fate as well. This isn’t a healthy view of debt. You can and should talk to your kids about debt, but how you handle it yourself is much more important.

3. If they have it, we must also

If you are spending by seeing your friends, you’re deliberately teaching your kids to make their spending habits uncontrollably like other people. If others can indirectly control your money spending, then it means you don’t have any control over yourself and your finances. That’s a lesson your kids don’t need to learn.

4. Credit cards are essential for us

Do your kids watch you use credit cards in every possible way? If yes, then you must control using credit cards while making any financial transactions. It’ll be good to teach them spending cash instead of using too many cards. They’ll have the an opportunity to see the difference between credit purchase and purchase with available cash in hand. It’s a visual lesson, but a powerful one that works better for kids.

5. You deserve the best

Do you sometimes purchase things because you think you deserve it? It’s OK to treat yourself every now and again, but the more important criteron is “Can I REALLY afford it?” If your kids watch you regularly purchasing things because you feel you deserve them, they may also develop the same attitude. They can’t afford all the things they think they can, but primarily you need to teach them that lesson. Stop buying things that you can’t afford or you just don’t need right now. Your kids will see you and adopt that habit.

To be continued…

By carol on January 21st, 2016

5 Effective ways to beat down your debt burden


Being in a debt trap has a harmful effect on your financial future than you might imagine. Bad debts can continue to harm you and your credit score, especially if you don’t take care of them now. The first step is to know your current financial situation. It provides you with your credit score, and proper details on various components of credit file in a clear way. When you’re prepared to take a broad look at your actual credit report, you can pull three of them each year (free once in a year).

Once you’re ready to get out of debt, you have to think how to reach that aim. But, there are many professionals and experts who already gave different solutions. So, how to pick the best ones that’ll suit your situation. Here are five options that may work for you:

1. DIY debt reduction

You can proceed with two different strategies, 1) the snowball method, and 2) the avalanche method.

In snowball method, you need to concentrate on the lowest balance account and pay it off slowly. On the other hand, in avalanche method, you have to pay off the credit account first that bears the highest rate of interest. Either way, as soon as the first one is paid off, go for the next target debt. Gradually, all of your debt problems will be gone.

DIY Debt reduction is possible if:

  • You have a specific plan and want to stick to it.
  • You can stop taking on new credit card debts during the whole program.
  • You have enough income to make payments on your balances in approximately 3 years or less.

2. Debt consolidation

If you can consolidate your debts, you can opt for a new loan for paying off other debts. After they are paid off, concentrate on paying off the new loan as soon as possible. You can consolidate with a personal loan, you can go for balance transfer method or you can opt for 0% credit cards. The new loan will help you to reduce the load a little bit, but soon you’ll be paying one loan instead of multiple.

Consolidation can be possible if:

You have the income to pay off the new debt as soon as possible, may be within three years or less. You can also combine a DIY debt reduction plan along with the debt consolidation method. Hide your credit cards in a safe place so that they won’t be easy to get to you either. By this way, you won’t run up new debts while still paying off the current loan.

3. Credit Counseling

You can consult a reputable credit counseling company for reviewing your budget absolutely free of cost. They’ll provide help to figure out a Debt Management Plan for you so that you can get out of debt faster.

If you sign up for a DMP, your credit card company will lower your interest rates. You need to make single monthly payments to the credit counseling agency and they’ll pay each of your creditors every month. Educate yourself by communicating with the agency and get benefitted by their support programs.

A DMP may be possible if:

  • Your creditors reduce the interest rates to give a breathing space in your budget.
  • You have sufficient income and cash flow to pay off your outstanding debts in five years or less.

4. Debt Settlement

If you have high credit balances to pay back within a limited time, or if you have a particular kind of debt that can later trigger the collection process, you can consider trying a debt settlement program. Through this program, you may have to negotiate settlements with your creditors and they might agree to accept less than the full balances to settle the debts once and for all. You may have some stressful months to encounter while negotiating with the creditors. But, you may ease up the process by getting some suggestions from a debt settlement attorney. Also, make sure you investigate upfront whether you will owe taxes on canceled debt.

Debt settlement may be possible if:

  • You have 30% to 50% of the total debt amount in your hand.
  • You can settle your debts in a relatively short period of time.
  • You can generate the fund from your savings account or by taking a gift from a family member.

5. Bankruptcy

If you file for Chapter 7 bankruptcy, you can eliminate most of your debts soon enough. But in Chapter 13 bankruptcy, it may take 5 years or less. If you are in a financial crunch and being threatened with debt collection lawsuits, it’s a good idea to talk with a bankruptcy attorney. Ask several financial professionals for referrals, meet your attorney with all the documentation he or she recommends. Don’t hide any financial secrets from him/her, be totally honest about your situation.

Bankruptcy may be possible if:

You have a significant amount of debts that can be eliminated and your total earning allow you for doing that.

By carol on January 12th, 2016

Financial Aid – Important things parents need to understand

College costs are considered as a big investment for families. Whether you’ve one kid or several kids, finance oriented conversations are likely considered as the important part of your kid’s higher-studies. To make these conversations decisive but not divisive, you can apply some steps to get proper assistance with financial aid for your kids. It’ll be beneficial for you to devote time to think about financial aid and to seek advice about it.

1. Complete the FAFSA – Fill out the “Free Application for Federal Student Aid” (FAFSA) form. It’s an essential financial aid oriented document for your family. Your kids will be eligible for student grants, student loans, and Federal Work-Study after completing the free form. This facility is administered by Federal Student Aid; it’s the largest student financial aid provider in any of our states.

The FAFSA is available on January 1 each year, and you must advise your kids to complete it as soon as possible for them. If they submit the form early, they have chances to qualify for first-come, first-served awards. As a parent, you must also assist your kids by keeping your financial data ready during for application time, such as W-2 statements and SSN (social security numbers).

2. Determine the real cost of college – Students tuition fees vary depending on the school. The U.S. Department of Education’s College Affordability and Transparency Center shows that students will get a similar education but with higher fees in private or four-year institutions by more than $47,000. There are additional costs also apart from the fees. These costs may include food supplies, textbooks, room and board, transportation costs, personal costs (plane tickets for visiting home in the holidays).

Most office websites for “college financial aid” provide an estimated cost of attendance. But, you must also remember that your students’ personal expenses will increase and multiply for every year they remain in school.

3. Find the pros and cons of financial aid packages – Several financial aid packages include a combination of “bonus” plans. For instance, a grant and a scholarship that don’t need to be repaid, or loans, which you must pay back at the time of graduation. Now, it’s very important to have a talk with your kids about how they’ll cover remaining costs.

4. Take advantage of tax credits – There are currently 2 tax credits closely related to higher education costs. You can get information about both the options, but let me tell you that you may only claim one of these credits on your annual tax return.

The American Opportunity Tax Credit allows for a maximum credit of $2,500 for each eligible student to individuals, but they must have a modified gross earning of $80,000 or less per year. Married couples are also getting this benefit if their earning is $160,000 or less per year. It’s also available to those kids who have four years or less of college credits. So, fortunately, undergraduate students will get highly benefited from this credit.

Additionally, remember to check out other savings plans like a 529 plan. It is a state-or-school-operated account that is tailored to support families for saving money to meet future college costs. Plans are divided into two categories – prepaid tuition plans and savings plans. All states sponsor at least one type of plan, so research your state’s 529 plan(s) and their benefits and costs.

5. Additional financial aid is there – Encourage your kids to look out for additional scholarship opportunities at different organizations and schools. Help your kids to recognize their potentiality and weaknesses. If being a student, your kids can find a way to earn some money, guide them as much as possible. If they have an interest in different software applications, science projects, or online competitions, let them participate. Most importantly, don’t give up hope.

By carol on January 7th, 2016

Financial freedom – Habits that’ll help you to reach there


Getting our financial freedom is nothing less than a dream come true for most of us. But practically, only a few of us can achieve that success and modify our lives according to it.

So, if you want to be a financially strong person, the following key habits will help you pave the way.

1. Set goals in your life

You can’t get your financial freedom without setting some goals in your life. If you don’t have any aim in your life, being financially free would be worthless for you. So, what you have to do is:
1) Note down how much you intend to keep in your bank account.
2) Set up your lifestyle targets and decide at what age you must achieve those. The more specific your goals, the easier for you to achieve them.
3) Fix financial mileposts at regular intervals. Write down all of these points in a goal list and pin them near your workstation.

2. Prepare a budget

Prepare a monthly budget and make sure all of the unpaid bills are paid before due dates. It’s the best way to ensure all your monthly debts are fully paid. It’s a monthly routine that protects your financial goals and removes any chances of disturbance.

3. Pay credit cards

Pay off credit card balances fully each month, and cancel any cards you aren’t using except old cards.

4. Create automatic savings

Enroll in your employer’s retirement plan and get all the benefits they offer. Set up an automatic savings account for unexpected expenses. This would act as an emergency fund. Make sure the money must be deducted the same day you get your salary so that you don’t get your hands on it.

5. Check your credit

Your credit score will determine what interest rate will be offered to you when you apply for a new car loan or want to refinance your home loan. Credit score also affects things like car insurance or life insurance premiums. Your credit score is the proof of your past and present financial habits. This is why it’s important to check your credit report at regular intervals to ensure there are no bad patches affecting your good credit.

6. Negotiate price

People often become hesitant to negotiate the price for commodities and services; they think it’ll portray them in a negative light. If you can get out from this mental state, you can surely save thousands every year. Retail businesses tend to be open to negotiation, where buying in bulk or becoming a permanent customer can open the opportunity to good discounts.

7. Educate yourself

Review all applicable changes in the tax laws each year to ensure all adjustments and deductions are maximized. Educate yourself about current financial news and developments in the stock market. Don’t forget to adjust your investments according to the financial situation. As much you keep yourself up to date, there will be less chance for you to become a victim of sudden market fall or any catastrophe.

8. Take good care of assets

Take good care of your assets and properties, from cars to cell phones, from lawn mowers to shoes, and jewelry to utensils. Trust me they will last longer. Since the cost of maintenance is much lower than the cost of replacement, it’s an investment you don’t wanna miss.

9. Exercise and eat properly

Good exercise and good food can keep you healthy, sharp and away from any deadly diseases, and poor health may force earlier retirement with lower monthly income.

By carol on December 29th, 2015

How to find the right credit counselor for you


If you think yourself as many other common citizens, you might be just a few steps behind from a major financial hardship. After paying mortgage installments or rent payments, utility bills or credit card bills, insurance premiums each month, you must be getting very much frustrated. If you have debts that are increasing day by day, and you’re finding them hard to pay off, credit counseling service is the proper doorway for you to get some financial freedom.

How can a credit counselor solve your financial difficulties? Every year, more than a million counselors are helping common people when credit problems harm their financial entity. The credit counselors can’t reduce the overall debt amount, but they are quite able to renegotiate the interest rates with the various lenders. They can often help you to lower your interest rates up to 50%. A credit counselor will:

  • Create a proper debt management plan and a customized budget
  • Remove all late penalties and other applicable charges
  • Consolidate and make timely payments to each of your creditors

These activities may put you on the right track to financial stability. For that reason, if you really need a credit counselor now, who can get you out from the debt misery and hardship, read on as I show you how to look for good credit counselors:

a. Don’t let them lure you

When you search, you must start it with a clean mind. Don’t be lured by the big, flashy ads, you need to think realistically and sensibly. Don’t get excited by the emails and phone calls from credit counseling agencies, they are just trying to offer their services. Professional and genuine credit counselors normally do their work depending on past client referrals. They don’t bother calling you for advertising their business or using television, Internet or “spam” emails. Find out an agency whose counselors aren’t looking for commission only.

b. Prioritize yourself always

Different people have their different financial obligations, and they need different solutions for different cases. So, find out if the counselor will suggest a plan to suit your personal obligations. Ask the counselor to provide a clean presentation of the charges and their reasons. As a general rule, you shouldn’t pay more than $100 in set-up fees or $50 in monthly fees. Monthly fees will depend according to the state laws. After getting the full estimation, you can decide whether hiring a counseling agency is justified for you or not.

c. Prepare a debt management plan

After selection of a qualified credit counseling agency, you may be asked to submit your personal financial data, like – monthly income, expenses, net assets and debts. Your credit counselor will analyze the data. After reviewing your information, he will discuss with you about your current situation and how you can proceed next to solve your financial problems.

The credit counselor or the counseling agency will provide you a debt management plan (DMP). This debt repayment plan will give you the opportunity to repay your unsecured debts at a lower interest rate. It may also be possible that this plan will keep you immune from any late fees or other penalties. But this isn’t a free service, in return, the agency will demand a regular monthly payment from you.

So, instead of paying multiple creditors separately every month, you may have the chance to consolidate your unsecured debts and pay them off with a single monthly payment. The counseling agency or the counselor will then schedule your payments to your creditors according to your preferences.

d. Several other aspects to consider

  • Don’t take any snap decision. Surely you want to take a solid action to resolve your debt problems. But, an experienced credit counselor will grant you some time to think about the offer. Take your time and think it over, and then decide.
  • DMPs normally pay off only your unsecured debts, secured debts like mortgage or car loan will not get settled through DMPs.
  • A proper debt management plan may take approx 30 and 60 months to finish. So, you are requested not to have any new credit cards or any other debts.
  • The credit counseling agency will provide you statements where they will show how your funds are getting utilized. The credit counseling agencies will also provide you counseling and education regarding your finances in the long-term. If you are seeing yourself in knee-deep debt and falling behind on every important bill, credit counseling can be a lifesaver for you.
By carol on December 24th, 2015

How your day-to-day life can be affected by credit


In different situations, our daily life can be severely affected by the credit. Credit may also influence our homeownership and employment. In this post, we’ll focus on when and how credit affects our lives. You can enhance your creditworthiness for getting help for different purposes like seeking apartment, job applications, searching for insurance policies, opening a new utility account and many others.

1. In case of apartments and rental home

A rental agent or a prospective landlord will definitely review your credit report. They are basically interested in seeking any common pattern in your payment history. Those patterns can be missed payments, any errors or negative items in your credit report. If there is any, it’ll indicate that you’re not doing your responsibilities properly as a tenant. If you have low or bad credit, while co-signing a loan, you’ll need to put a big amount as downpayment. If you apply for a rental housing, it can also be rejected. In addition, whenever a third party (a lender or rental agency) fetches and reviews your credit report, your credit scores can be affected badly every time. So be cautious about applying for such loans to all the resources at once.

Normally, if you are paying rent on-time, that doesn’t mean it will help you to grow your credit. It is because rent payments aren’t reported to credit reporting agencies. But things are changing now, several property management agencies and landlords put a positive note for considering positive rental history, which eventually push your credit to grow. Ask your landlord to avail such service that can enable you to pay your rent online. Your rent payments can then be reported to your Experian credit report via Experian’s RentBureau.

2. In case of an auto loan

Your credit score definitely affects auto loan rates whenever you apply for it. Most auto loan lenders consider only your credit score, they don’t check your full credit report or full financial history. If you have a high credit score (750+), the best loan deal will be available to you. However, even people with low credit scores can get the approval for an auto loan, usually though at very high interest. Perhaps it’s best for you to limit your loan numbers, as inquiries from auto loan applications can hamper your credit score.

3. In case of a cell phone connection

Cell phone companies are now verifying the credit score before giving any new connection or providing you a new service plan. People with damaged credit may have to put a good amount of money as an advance for a service contract. But there are several more cell phone services who doesn’t require a credit check. If you check carefully, you’ll notice that some cell phone companies are putting a clause in their contract, through which they can review your credit report at any point of time. You must remember that a cell phone application inquiry may lower your credit score, as it’ll appear in your credit report.

4. In case of a checking account

Banks will not review your credit report while processing the checking or savings account application. However, most banks will check and verify your ChexSystems report before approving your application and create a new account for you. ChexSystems reports are created totally based on your bounced checks or other banking negatives.

5. In case of credit cards

When you apply for a new credit card, the credit card company will surely check your credit report and review your score. Through this they will determine how much credit they can possibly allow you, or is it ok to approve your application or not. Different credit card companies have their separate terms and regulations. Secured and prepaid card companies allow such borrowers who have low credit. Credit card companies can also change your credit limit at any point of time by reviewing your credit report.

6. In case of insurance policy

Home and auto insurance companies normally consider consumer credit information with your application information while approving rates and terms. As per general statistics, more than 90% of auto insurance companies check credit reports while insurance approval. The reports and scores are normally different from what is used in case of credit cards. But your basic data and standing remain same. The insurance company will fetch your credit report for calculating “insurance risk score.” High score applications will get better insurance rates. This inquiry will appear on your credit report but not harm your score.

7. In case of mortgages

Mortgage lenders will definitely check all three of your credit reports and credit scores. Normally a mortgage is much bigger than a student loan or auto loan, so lenders perform a detailed review. You must have a credit score above 700 to get a standard mortgage interest rate. This credit inquiry will appear on your credit reports and can harm your credit score deeply.

By carol on December 15th, 2015

How to grow your credit before buying your dream home


When the housing market boost up and more people decide to buy new homes, it’s important that your credit score provides a helping hand to secure a mortgage for you. Conventional lenders will typically ask for a FICO score of at least 720, or in some critical cases 740, but people with a score of 700 or below may still have the chance to qualify for an FHA loan. So, let’s look at the steps you may take to ready your credit before buying a dream home:

1. Review your credit report

Several months before getting the home or a mortgage, check your credit report and identify issues. If you normally an on-time bill payingthen check your credit two to three months prior to applying for a mortgage. It’s just to be on the safe side and avoid any mistakes. For those who know they’ve late payments or other derogatory items on their account, it’s better to start clearing up things six to nine months in advance.

2. Dispute any inaccuracies

You must file a dispute with the credit reporting agency if your credit report contains any errors — such as, an unpaid item that you have already paid or a credit account balance, which shouldn’t be there.

3. Make sure you have several tradelines

Conventional loans will require minimum three tradelines (combination of student loans, credit cards, auto loans, etc.) These tradelines must be active within the past 12 to 24 months. FHA loan asks for two tradelines. If you have fewer tradelines, you won’t be able to get a mortgage. If you need to open additional tradelines, a new Visa or Mastercard credit card will be the best option. You need to open that account at least 6 months before you apply for a mortgage.

4. Leave older credit lines open

Old tradelines will boost your credit score, so you must let old credit accounts open even you don’t use them. You should use those old credit cards sometimes in every few months and pay them off in full so that those accounts or tradelines remain active.

5. Avoid opening new credit lines

When you’re six months away from applying for a home loan, don’t create new credit lines. If you do, it’ll lower your credit score. The credit bureau considers any new credit account as a risk factor. Lowering your credit score is not worth that 10% discount you’d get from a department store for opening a new credit card.

6. Stop buying on credit

Being excited, some people rush out to buy new appliances or furniture before closing. But even if you’re in escrow, having a debt utilization ratio above 30% right before closing could disqualify your loan. Be patient for purchasing your new furniture until your loan is closed.

7. Don’t shuffle money around

When you apply for a mortgage, you’ll need to provide several months of bank statements for your checking and savings accounts. If you suddenly shut an account or have a large transfer from one account to another, then you’re going to have to paper-trail that whole account too. Leave your money and your accounts for at least three months.

By carol on December 10th, 2015