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The 5 biggest financial factors that affect your credit

factors-that-affect-credit-score

A credit score is essential whenever you go for a big funding for a house, car, personal or any kind of financial emergency. Lenders will always consider your credit score to determine the risk of lending money to you for any purpose. Credit card companies, car dealers, and mortgage lenders are the three main types of creditors who will check your credit score before considering how much you are worthy to get the funding from them and at what rate of interest. Insurance providers, your landlords, and employers might also check your credit score to evaluate your financial status. So, let us know the biggest financial factors that’ll sure affect your credit score.

1. Your payment history – affect 35%

The most important thing about your credit score that lenders and other creditors check is whether you are capable of repaying the fund that is lent to you or not. This aspect of your credit score verifies the following factors:

  • Are you paying your bills on time every time or not? You need to pay for each and every account on your credit report. Paying your bills late will affect negatively on your credit score.
  • If you used to pay late every time, how much late were you? Is it 30 days, 60 days, 90 days, or more? The more you become late, the lower will be your credit score.
  • Has any of your credit accounts gone to collections? This is a significant alert for the potential creditors that you may not be able to pay the money at all.
  • Did you go for debt settlements, any charge-offs, foreclosures, bankruptcies, lawsuits, wage attachments, liens or judgments against you? These items can really be very painful for your credit report and from a lender’s perspective, you’ll not be considered as a trustworthy borrower.

2. Amounts you owe – affect 30%

Now we’ll check the second-most important thing of your credit score. Have you regularly check how much you owe to the creditors? Let us clarify a bit:

Did you calculate how much you’ve utilized of your total available credit? It is better if it gets low. But you need to have some credit balance in your account also, owing something is good for showing a credit account, it is better than owing nothing at all. Lenders like to see that you are using a credit account and borrowed money, and you have that responsibility to pay it back.

How many accounts you are maintaining and how much you owe to the lenders? Your credit accounts may be a mortgage, auto loans, credit cards and may be installment accounts. Having a mix of several types of credit accounts is good for building a good credit score. You need to manage them perfectly.

3. Length of your credit history – affects 15%

Another deciding factor of your credit score is how long since you are using credit. Do you know how old is your oldest credit account? And do you know the average age of your total credit accounts?

If you are maintaining a long and dispute free credit history, it is very helpful for your credit score. But a short history may also be working too if you continue your payments on time every month.

4. Your new credit lines – affects 10%

Your total new accounts can be considered by the FICO score. It’ll consider the number of new accounts you have applied for, and last time when you have opened an account.

According to the credit score assumptions, if you have recently opened several new accounts, your credit score might be in bigger problems. Normally, people used to open new credit accounts if they face cash flow issues or want to take lots of new line of credit.

If you have frequently opened many new credit accounts, this may give a signal to the lender that you are thinking off gathering credit in the coming days. That means you may not be able to carry out the entire monthly mortgage installments, or the loan payments you applied to the lender. So, the lender would use your credit score to set a parameter of a credit risk they might want to take on you.

5. Types of credit you use – affects 10%

As per the FICO formula, the types of credit you use can determine your credit score. You may have a mix of different types of credit, such as credit cards, store accounts, installment loans, and mortgages. It also looks at how many total accounts you have. It is a minor aspect of your score, so you don’t have to worry about it if you don’t have accounts in each of these categories.

Your credit score is the most important factor for being approved for several loans and new lines of credit. It also helpful to have the best interest rates available in the market. But for that reason, you don’t need to be obsessive to maintain your credit guidelines. Practically, managing the credit with due responsibility and wisdom, your score will rise.

By carol on June 23rd, 2016

Mistakes you shouldn’t do with airline credit card

avoid-mistakes-with-airline-credit-card

Today, most of the airline authority provided services, like access to the lounge, meals given in mid-air and, or may be an extra personal space require the passenger to pay a fee or to go for higher airfare. Fortunately, now the airlines are happily offering these benefits back to their most frequent passenger as well as consumers having their co-branded credit cards.

So, if you are getting bored of waiting for a long cue, paying up fees and/or being crammed into the back of a plane, avoid these six mistakes to get the cream out of an airline credit card:

1. Picking up wrong cards

Many airlines will offer the passengers multiple airlines credit cards. As a passenger or consumer, you might know that American Express provides three separate versions of credit cards that are called “Delta SkyMiles cards”. Apart from that they also offer three different business class credit card versions. The basic credit card comes with a $95 fee per annum, but it also offers comparatively low reward points and additional benefits rather than the high-cost credit cards. The key to choosing the right card is to weigh all of the benefits you are able to use against the cost of the annual fee.

2. Ignoring the huge interest charges

Like any other reward credit cards, airline cards will also bear high-interest charges than no-frills cards. It’s also unfortunate that if you earn any flyer miles from your airline card, that reward will not be as worthy as your interest charges on that card. So, by availing any those airline cards, you must pay a huge amount of money as interest if you carry a certain balance. That’s why it’s always the best idea to pay off your balance in full at the end of each month.

3. Not opting for the benefits

Most of the airline credit cards will provide a huge number of benefits to their users (travelers and passengers). But for getting these benefits, you must know how to use them. As an example, the “United MileagePlus Explorer Card” gives a free checked bag benefit to their card users along with one other person, if the user uses only that card to buy his tickets. Also, the “Delta SkyMiles Reserve card” from American Express provide complimentary access to the SkyClub lounges in any airport, but this facility is only reserved for the primary cardholders. The cardholder can include two more, by paying for $29 each additional member. The “American Airlines AAdvantage Executive World Elite MasterCard” provides free lounge entry to their primary and secondary card users along with two more members as well.

4. Not earning elite status

It is obvious that airline credit cards offer good benefits directly to their cardholders. But many of us don’t know that those credit card companies also provide indirect perks when you get elite status. As for example, the “Southwest Airlines Rapid Rewards Premier cards” from Chase deliver their card users 1,500 Tier-qualifying points for each $10,000 and above purchases, capped at 15,000 Tier-qualifying points per annum. These reward points can enable the card users to get the A-List or A-List Preferred status. By getting this elite status, a consumer can get V.I.P check-in, boarding, extra bonus points, and free wifi service in flight.

5. Not utilizing reward miles properly

Earning your reward miles is very hard, but spending those miles properly is often harder than you can imagine. Most of the airlines currently charge double miles for most flights, and travelers or passengers need to put extra effort for finding preferable seats at the lowest mileage levels, they are called “saver awards”. The best option to find the lowest priced awards for international flights is to check out for partner awards. Don’t give up on redeeming your reward miles, for getting an award flight at the lowest levels.

6. Not looking for annual fees

It is wise to apply for an airline credit card that’ll save on your baggage fees, in a single flight. But if you haven’t used that benefit recently, it is not worthy to pay the annual fee any longer. If you are getting a bill for an annual fee for an airline credit card that you aren’t utilizing as much, contact the card company. IN some special cases, you can get a similar credit card with a less expensive annual fee. The card company may offer you to waive off the annual fee or provide you bonus reward miles that can compensate the fee totally.

By carol on May 31st, 2016

Strategies to rebuild credit while getting out of debt

rebuild-credit-score

Sometimes the necessity of credit can break your best plans regarding finances. It can be totally annoying to stop making your prime purchases like – a new home, your own vintage car, etc just because of bad credit prevents the path of loans.

In these situations, you might be thinking there is any possible way to quickly raise your credit score while getting out of pre-existent debt. Unfortunately, there are no shortcut ways to repair credit score. If you have huge debt problems, paying the only minimum will make your credit suffer. So, you need to make some strategies which may streamline your efforts, raise your credits along with getting out of the debt.

Easy strategies for saving money and reducing debts

1. Increase your income

Increasing your working hours, take a part–time or a second job to earn more, rent out your house or room or garage. you may also ask your grown-up teenagers to find part–time jobs to start a new source of income, if possible.

2. Decrease your expenses

You need to spend less on luxuries like entertainment or recreation. Skip frequently eating out outdoors at the time of lunch or dinner. Try to stretch your money while buying at the grocery store. Don’t forget to file for taxes to receive assistance with premiums or government funds. Normally these benefits are based upon income levels.

3. Sell your assets

The financial crisis doesn’t come by knocking at your door. Do you have any extra vehicle that you often use for recreation? It may be a second-hand car, your bike or other possessions that you can sell out and make money for debt repayment. To overcome a financial crisis there’s nothing wrong to use your stuff to get over from it.

4. Consolidate your loans

If possible try refinancing your mortgage. Refinancing will definitely reduce the monthly mortgage installments. A consolidation loan might become handy to lower total monthly debt payments if you don’t gather any more debts until the consolidation loan is paid back in full.

5. Ask help from the creditors

You can make calls to your creditors and negotiate with them. If anyhow you can convince your creditors to lower the interest rates, it’ll be easier and quicker for you to pay debt off or go for a relief option during hard times.

6. Ask support from family or friends

You can ask financial help from your family or friends as a short time loan. If you borrow money from them, know well about the repayment option. If you can’t go for direct financial help, then you can opt for other resources like child care relief.

7. Go for settlement of a portion

Observe and examine the situation and contact your creditors. Convince them to accept your written proposal. The creditor may settle outstanding dues by accepting a reduced amount. But settling your debts may damage your credit score a bit rather than improving it.

8. Go for a debt repayment plan

Being a consumer if you have a surplus after doing your budget, and a strong will to pay off your debts in full through a credit counseling agency, a non-profit debt management program might support you.

9. Go for bankruptcy

According to your debts and your current financial situation, you may file for bankruptcy. This option might come useful when you have nothing to pay your debts off. This legal remedy for debt can be done through a trustee, who is licensed through the Bankruptcy and Insolvency Act.

10. Make proper strategy for making payments

Make a list of your debts from the lowest balance to the highest one. You can add up all the balances and distribute a certain amount for making each payment and distribute them. This way you can pay off the balances easily and faster. You need to pay off the lowest balances first as soon as possible.

11. Go for balance transfer

The best solution for your credit card debts is a balance transfer credit card. If you qualify for this card, you may transfer your current debts to another low-interest card, or you may also transfer the balances into a 0% interest card for a specific time period. By this way, the total big interest will be divided into multiple cards, and that’ll lower your overall monthly payments. The more money you save, the more easily and quickly you can repay your debts while building your credit score.

Now, you know how to kick out debts, now it is time for improving your credit scores :

1. Pay your bills timely

It is obvious that late payments are one of the most, prime negative reason that reflects on consumer’s credit reports and are often responsible for major drops in their scores. At the time of making monthly payments of loans and credit card dues, it’s important that consumers need to pay the minimum balance on time each month without fail.

Making continuous late payments or defaulting on loans will heavily damage your credit score that will be reflected in your credit report up to seven years.

2. Keep credit card balances low

If you have a due credit balance that is equal to 35% or more of your available credit limit, it will actually damage your score. It will happen even if you pay all your dues on time and always pay more than the minimum balance. If you have a $20,000 credit limit on a credit card, you may need to maintain your credit balances lower than $7000, and also need to make payments on time. More than the minimum balance.

3. Keep old unused credit accounts

Maintaining old credit accounts for a long time actually helps to build a good score. It will also establish a goodwill with each creditor. You may be rewarded for maintaining a good, long-term credit history with each creditor. The longer you maintain your old accounts in a good, positive manner, your credit history will also show a positive statement of your credits.

4. Apply for new credit when it’s really needed

Applying a too much new line of credit can hurt your credit score. Don’t get lured by the discounts offered by the retail stores. If you’re going to make a large purchase and want to get a retailer’s credit card, make sure you must read the fine print. Determine what your interest rate will be and what fees are associated with the card.

By carol on April 14th, 2016

How do medical bills affect your credit?

how-medical-bills-affect-credit-score

Medical bills can be stressful, and they can damage your credit. The damage can be drastic. Hospitals don’t normally report a medical bill dues to credit reporting agencies. Practically they hire a debt collector and send those unpaid debts to them. Ultimately the collection agency reports them about the status of their debts.

In fact, as per the Consumer Financial Protection Bureau, half of all collection accounts on credit reports are practically medical bills. Those credit accounts surely hurt the consumer’s credit. A single collection account can drop 50 to 100 points straight.

Many people don’t know how painfully a medical bill can be to their credit. They don’t realize some facts:

a. Even you pay your medical bill, it may be sent to collections. Many people have this misconception that after paying a part of the bill, their creditors won’t send the debt to a collection agency. That’s a false statement.

b. Medical bills can be sent to a collection agency way before the patient even gets his bill. By the time he gets it, the damage has been done.

c. Collection accounts are normally hurt your credit score even those are medical bill debt accounts or not.

d. The collection agency will not fix your credit even after you pay off the debt. In several cases, those collection accounts are reported for 7.5 years. For this long time, they will surely damage your creditworthiness a lot.

e. The size of your medical debt is not that important. The most important thing is the status of your debt. A small amount of medical debt can help a collection agency to harm your credit score.

It is difficult for you to review your credit reports annually or to check it on a regular basis. You can get a free credit report and score, regularly updated from Credit.com. As per the survey conducted by Credit.com revealed – 10% of the people who reviewed their credit reports found several collection account they didn’t pay off.

How to maintain a healthy credit score

1. Before those medical bills go for collections, if possible, be very careful and active about your medical bills. Even if you have a health insurance, don’t think every aspect will be taken care of. Review what type of benefits you are getting and carefully check them. You may contact the insurance company asap if it’s not being taken care of.

2. If a collection agency contacts you about a medical bill, ask them not to report it if you are paying it off. Think if you have all the details on the bill. Many collection agencies will listen to you and won’t report if you pay the bill quickly.

3. Updating your collection account “paid” will not boost your score, unless your lender will use the newer credit score versions. So, look for any errors and disputed items, try to remove them if possible. Some agencies will help you, others may ignore them.

4. If you feel that the agency is playing an unfair game with you – as you’re not getting a copy of the bill, you can try to solve the issue in two separate ways. First – you may file a complaint with the Consumer Financial Protection Bureau. Second – you may contact the original provider and ask him to pull it back from the collection agency. After that, you can pay it off directly. If the lender agrees, the account will not be reported normally.

5. If a collection agency contacted you and you truly believe you don’t have a medical bill that can be collected, you have the right under the Fair Debt Collection Practices Act to report against that collection agency. You may also ask the agency to validate the debt. You also have the right under the Fair Credit Reporting Act to send a report to the credit reporting agencies for disputing the account.

By carol on April 5th, 2016

The way Americans ruin their credit status immensely

ways-people-destroy-credit-score

People don’t want to damage their credit score willingly. A good credit score is always proven worthy at the time of getting new lines of credit. Particularly, most of the mortgage lenders consider credit scores to evaluate a borrower’s credibility. After verifying the financial status, the lender decides interest rates that he’ll offer to the borrower. So, the more your credit score become low, the more you’ll lose your chances of getting any kind of monetary help from others.

Whatever you do, try your best not to:

1. Skip payments – Your credit score will remain unharmed if you pay your credit card bills on the due date and in full. But, if you suddenly start skipping your payments, it’ll probably start creating a mess. After skipping the bills for 30 days, which is one complete payment cycle, you’ll be treated, delinquent. This information will get listed on your credit report for a certain period of time, and will remain there if you don’t pay off the amount entirely.

But it’s not all. After paying off the installments it’ll be still listed as “historical delinquency”. If anyhow you became delinquent for long 90 days, you’ll be in a grave trouble. Your case will be taken as major delinquency and it’ll be stabbed on your credit report for long seven years, even if you pay it off.

2. Utilizing your total available credit – Do you know how much credit is available to you? If yes, then use as minimum as possible from it. It’s not mandatory that you must use all the available credit you have in your wallet. Suppose you have $35,000 credit available to you cards. Then you must remember, in any circumstances don’t use $34,999. You must keep your credit utilization ratio as low as possible for you. Credit utilization ratio is very much influential when credit bureaus calculate your credit score.

It is also advised by the financial experts that an individual mustn’t use his/her available credit more than 30-50% of the limit. It would be great if you can keep the ratio below 10%. The persons having the highest credit scores in the country used their credit within 7% to 10%.

3. Closing credit card accounts – If somehow your credit score is getting low due to misuse of credit cards, you might want to close several cards irrespective of their credit limit. But, you should think about this twice. If you close your several credit cards and stop using remaining cards at all, you’ll eventually refrain yourself from scoring credit. As a result, you can’t avail any kind of loan or any other line of credit any further.

If your credit card company realizes that you’re no longer swiping your card, they might gradually lower your credit limit or even close your account. So, what you’re gonna do then? You may use your cards to pay for utilities which you anyhow need to pay. Do not gather more debts which you can’t afford to pay. Do not open several new credit cards or close several old cards at a time.

4. Using only one card – We all must prepare backup for every financial resource, even for credit cards. Using only a single credit card can be very harmful to your credit score. It’ll become worse if you have high or unstable credit utilization ratio.

5. Closing old accounts with high credit limits – Suppose you have one card with $20,000 credit limit and another one with $4000 credit limit. You also have $1,000 balance on the card with a 4,000 limit. So, if you need to close any one credit card account, which one would you prefer? If you close the $20,000 credit card, your available credit will be transferred to $4000 limit credit card. It is bad. As soon as you close and transfer the balance, your credit utilization ratio will go higher (25%). But if you close the $4000 credit limit bearing card, your credit utilization ratio will be 4% only.

6. Not paying due taxes – If you keep getting delinquent to your payments, especially in paying taxes, I’m afraid it would have a major blow to your credit score. The IRS can place charges or liens, which will be added to your credit report.

7. Home selling through a short sale – A short sale is nothing less than a mutual agreement where the lender accepts less money than the total outstanding loan balance owed by the property owner. Selling your home by the short sale will be considered as a settled credit and will be listed in your report for 7 years as a major delinquency.

8. Being a co-signer for others – Co-signing for others may seem okay to you, but often it may become the worst scenario ever. Bank or any other financial institute will ask for a co-signer when they find the applicant not enough creditworthy. Being a co-signer means you’ll be liable for paying off the loan equally as the borrower. As soon as you sign the documents, your credit report will show the liability. Later, if you apply for a new line of credit, your lender will consider that previous loan which you co-signed while calculating your debt-to-income ratio. By any chance, if the other person stops making further payments, the total loan will be your responsibility.

By carol on March 31st, 2016

How to celebrate a budget-minded Easter with everybody

celebrate-easter-within-budget

From our childhood memory, most of us may remember the Easter Sunday when we used to dress up with our new Easter dress. The girls used to wear the new bonnet, pretty frilly dresses, bright white leather shoes, and a hat made of flowers/feathers according to our culture and family tradition.

Today, we practically avoid dressing up like those days anymore. We’ve made some modifications and replaced some of the main material from our dress. Still, we may have found difficulties to cope up with the traditions of Easter. It becomes very hard and frustrating for us to arrange the perfect wardrobe each time within our budget. So, we need to look for few special offers, prices at retail stores and online shopping websites. Let’s find out how we can enjoy this Easter with others being a frugal-minded shopper.

#1 Religion, tradition, and gifts

Every Easter we happily enjoy Easter as per our family traditions and social religion. We buy gift items and give them to our loved ones, and that often become too expensive for us. Getting proper gifts for the kids, parents, and others may be confusing as it happens in Christmas. It’s only because we think costly gifts will please our loved ones. We first need to change that thinking. We must look into handmade, attractive but inexpensive goods gifting behavior and please our friends and family without damaging our budget too badly.

#2 Clothes for Easter Sunday and spring

Easter is a special time when you can give the gift that’ll express your tradition and can be used during the Easter holiday. You can buy clothes from online stores like Amazon.com, Target.com, and Walmart.com; they always offer great discounts on this kind of special occasions. You can find nice dresses under $20 to $30. You can also add a pair of new shoes and it’ll not cost you more than $50 in total. Buy good clothes and gift them as Easter gifts as well as for springtime dresses.

#3 Look for flowers

When our elders were young, they used to send lilies, roses, and tulips to their friends and family on Easter. These flowers are stunning and their perfume is mind blowing. These flowers can decorate any occasion, any place you want, especially the Easter. So, flowers and bonsai trees are the most authentic and cheapest decoration one could ever for Easter. You can also use them as beautiful gifts as well at Easter. Trust me, they can be treated as special gifts while keeping your wallet safe.

#4 Look for post-Easter offers

You can avail attractive offers by shopping post-Easter week. The next day after Easter, stores will reduce their prices by at least 50% when the day is over. You can save a good amount by buying Easter decorations, flower baskets, plastic Easter eggs and much more things for next year celebration.

#5 Now what’s for your taste buds!!

* Easter candies: By the term “Easter”, we can surely remember the traditional baskets fully loaded with flavored chocolate bunnies, jelly beans, cream filled Easter chocolate eggs, “peeps” and lots of other sweeteners for indulging your taste buds.

But eating too much of these things can harm your or your kid’s health. Too much intake of sugar and chocolate can weaken your bones and gum. Those huge baskets filled with candy and sweets can also have attractive little toys, puzzles, and reading books. We’re supposed to select gifts and hide them for some special person. You can hide those gift baskets and Easter eggs any place you want.

*Treats made at home: You can avoid buying cookies from outside and can bake tasty treats at your own home. You can easily get easy-to-use homemade treat mixes from retail stores. Cookies, cakes, chocolate chip covered pastries, strawberries covered with white chocolate, and try them at your home. It’ll save your wallet as well as give you a traditional feeling of Easter.

*Easter Eggs: This Easter you can save money by not buying costly Easter egg coloring pack. You can enjoy coloring your Easter eggs in the old fashioned way. All you have to do is to use natural food color and vinegar for coloring your Easter eggs. Don’t forget to put some water in it.

*Easter decorations: Another way you can save lots of bucks on Easter decorations by making all the crafts and posters all by yourself. You can make beautiful Easter centerpieces by using colorful jellybeans and peeps. You need to get a glass jar full of water also. After putting the jelly beans and peeps in the jar, fill it with water and add flowers for decoration. You can also use a large glass cylinder vase and decorate it with candles, jellybeans, and colorful stones also.

By carol on March 22nd, 2016

Why you should know your spouse’s credit score

know-your-spouse's-credit-score

The way your spouse manages his/her finances, it may have a huge affect on your finances also. So, it’s for sure that you’d need to keep an eye on his/her credit history as often as possible. For this you must have that authority to check the credit report. If not, then you might just have to ask your partner for permission.

But are there more reasons behind checking your spouse’s credit history? Yes, there are, and practically, you can’t avoid them:

1. Home loan

Whenever you’d decide to buy a new property, check yours and your spouse’s credit scores if both of you will be the co-applicants for this loan.

You don’t require to have a high credit score for qualifying the home loan. Normally, FHA or Federal Housing Administration provides finances to such borrowers who are having scores above 580. But it is possible as long as the lender get satisfied with other financial requirements. But if your score is greater than 740 or even higher, you easily fulfill one step towards opting a home loan.

Keep in your mind that home loan providers or lenders not only verify FICO scores but several other aspects too. If you are getting defaulted in your credit cards, a single or multiple late payments may hamper your dream of getting a new property. Lenders may ignore your past records, but they might also consider any eviction history from rental homes. If you are confused about whether your spouse has such trouble on his/her report or not, it is wise to make a fa-to-face chat regarding the matter. You may form an agreement to give each other authority to check at each other’s credit reports. If you both found any error, talk about that and resolve it as soon as possible.

2. Protection

If somehow you have become the prey of an identity thief, all of your personal/financial details will be gone. The thief may have access to your financial data, along with your spouse. There are several ways they can hunt you down and steal from you. You’ll definitely try to save and retrieve your private data from him. So, first you need to check all of your family’s credit reports if any one member among you has been victimized.

You must also check his/her credit report after the demise of your spouse. You must attend the outstanding accounts and check regularly to prevent further frauds after your loved one’s death.

3. Trust factor

It is wrong to break the trust of your spouse and check his/her credit history without their prior permission. But if your spouse denies to show you his/her credit report, seriously, then it might get complicated. As per a general survey conducted in 2014, 30% to 36% of couples hide a significant amount of money from each other. 27.5% of those couples hide their spending behaviour from each other. Keeping secrets can harm the relationship between any couple. So, financial – infidelity is not a good thing to cope up with.

By reviewing bank statements, credit card bills, and also the credit history, you both can have a fair idea about each other’s financial status. So, move ahead and play the financial game as a team, but not as an opponent.

4. Good credit

You can build a strong credit history, along with your spouse’s. Use the information you and your spouse got from each other’s reports and make improvements in your FICO score.

What you may do:

  • Pay off debt – The most common way to improve your credit score is to reduce the debt burden. Most of us are getting stressed by the credit card bills. So, by doing this we can also normalize our stress levels.
  • Make on-time payments – Making on-time payments is a great helper to grow your credit score. You can select auto-deduction facility if you need to.
  • Maintain old accounts – Keeping older accounts is a great way to keep good credit score.
  • Apply for new credit – Getting a new line of credits and maintain them properly to grow your and your spouse’s credit score.

You can’t check your spouse’s credit history without their permission or without having a court order, but it can be a good exercise for both of you if can be done together.

By carol on March 17th, 2016

Credit card vs personal loan – Which one should you choose?

credit-card-and-personal-loan

Are you having huge problems to arrange money for your future needs? Or can’t you really decide which way to go, towards a credit card or a personal loan?

Here are some pros and cons of both the options, read them and decide yourself:

1. Credit Cards

To meet your future expenses, it is the fastest and easiest way. If you got a credit card with enough credit balances, you could use it to buy or pay your bills any time.

Pros

a. Good credit comes with lower rates – If you have a good credit balance on your credit card, you can use the card for buying and paying bills without bearing a huge interest rate. But for availing this benefit for several months, you may require a good credit to qualify for a new credit card.

Cons

a. Your credit score may get a blow through the big charge – You can save a lot of money on interest if you make a big purchase or payment on your low-interest credit card. But, be ready to hurt your credit score due to too much credit utilization.

Suppose you have $50,000 credit limit and you have purchased worth $25,000 for your kids. By doing so, you are actually devoting 50% of your available credit limit. It is said that to maintain a good credit score, every consumer mustn’t utilize more than 10% of their available credit limit.

b. Rates may change – Interest rates on your credit card may vary depending on different social and economical reasons. So, you may encounter different rates and variable charges due to changes in interest rates.

When a credit card is best for you

Practically, most of the credit cards have higher interest rates. You can use credit cards for short-term purposes. It will be the best possible way to get more out of your credit cards.

2. Personal Loans

If you go for a personal loan, you may be charged with interest every month for a certain time frame. The time period may extend 3 to 5 years from the date of loan disbursement. To obtain a personal loan is a good option to paying off a big expense.

Pros

a. You get the option of budgeting – Once you qualify for a personal loan, the first thing you may need to do is to prepare your daily and monthly budget. The budget must be perfect for you to carry out your other expenses along with the loan payments. You may choose a time frame and a monthly payment amount suitable for you.

b. Zero impact on utilizing your credits – Many credit scoring companies have different views regarding personal loans and credit card accounts. If you’ve taken a personal loan and it is added as “installment” loan rather than “revolving” credit, you can be sure that it’ll not be considered in your credit utilization ratio.

Cons

a. A credit score can be hurt by the loan inquiries – Every credit inquiry will lower your credit score. So, in the case of a personal loan, the lender will surely fetch your credit report, and that’ll be counted as a credit inquiry. You can avoid this situation by applying for multiple loans at a time. You can also ask your lender about his/her minimum credit score requirement.

When a personal loan is best for you

Personal loans will be best for your longer-term money requirements. The purpose may be several, like starting a small business, a family money crisis, sudden health issues, any legal requirement or anything else. As you can get personal loans with better interest rates than a credit card, opting for a personal loan will be a good option if you may have a chance to default.

On the other hand, for a short-term purpose, if you can pay off the monthly dues on time, a credit card will be the best choice for you. Now, it’s up to you to decide which type of money resource is suitable for you.

By carol on March 8th, 2016

Is it smart to be your own financial advisor?

be-your-own-financial-advisor

Financial advisors are nothing but financial professionals with a calm and sensible mind. They help us to make the right decision when we get panicked and can’t decide what to do during a financial crisis. But, is it really necessary to depend on an unknown person’s view while making financial choices? The reasons below will show you why it makes sense to manage your own wealth.

a. You can use DIY method – Doing it yourself can save your extra cash which you need to pay the financial advisor. Think again, managing your money by your own method can be very exciting. But, you must also remember, you can make mistakes at any point in time because it is quite tough to make right choices on a regular basis.

b. Investment returns will motivate you to save – You may calculate the returns you’ll get from your investments, which will motivate you to save as much as possible. You may also understand that through reducing your daily spending, you can practically reduce your employment timeframe. So, as much you can save, by investing that amount you get much more in return.

c. Some advisors just ignore your retirement accounts – According to regulations, many financial advisors will deny entertaining your retirement account. Practically, the advisor is not at all completing his purpose of guiding you in every aspect of finance. So, you’ll end up wasting your money and time as you’ll be only managing part of your finances.

d. You’ll easily modify your plans as per your choice and circumstances – If anytime you want to change your financial plan, you can do it comfortably if you choose DIY method. You need to carefully calculate and allocate the percentage of money to each of the investment. You may also need to research about the tax laws and their effect on your tax benefits. Unfortunately, some of the financial advisors can’t handle all of these situations.

But, if you handle all your financial aspects and take all the major decisions solely, you can minimize your cost way better than any other person.

Now, the question would be how can you manage your finances wisely?

Here are the tips:

1. Make your financial assessment properly

You can’t create a plan of action if you don’t know your actual financial status, ups and downs and secrets. You first need to track each and every income and expenditure of yours.

Apart from your monthly income and expenses, take a look at your investments in stock, your assets, insurance if you have any, and your retirement savings details. Once you’ve got a fair idea about your current financial status, you can now think in much better ways, what to do next.

2. Identify your financial goals

After getting the information about your financial status, take a deep breath and think what would you do next to manage your financial future. It’s called making a financial goal. This must include your every future financial step whether it may be long-term or short-term. Long-term goals may include buying a house through a mortgage, buying a car through a loan, opting a new insurance policy and retirement saving investments. On the other hand, short-term goals may include paying off your debts, having a vacation abroad, or may be arranging a party at your place.

3. Make a solid plan

You need to make a solid plan about the method and ways you’re gonna take for a financially secured future. This is where the idea of budgeting comes to the light. You’ve already made an estimation of your monthly income and expenses. So, you may use a monthly budget allowance system that’ll support your daily needs for the whole month. Try not to cross the budget limit and also try to save as much as possible.

4. Research well before you leap

You must do good research before taking any action or decision regarding different financial aspects like retirement funds, estate planning, asset allocation etc. If you want to take the place of a professional financial advisor, you must be updated with information and trusted online media sources. You can also discuss with your lawyer, accountant, or any senior person to guide you regarding any of those matters.

By carol on March 3rd, 2016

Why your credit score is more important in 2016 and tips to raise it

tips-to-raise-credit-score-in-2016

We are already aware of the fact that our credit scores are very much important for our financial life. Whenever we seek for a loan, lenders will fetch our credit score to determine creditworthiness, that means whether we’re able to return their money with interest or not. They’ll also check, how much interest they can charge on us, depending on our credit score.

But, have you not realized that in 2016, those three-digit credit scores will get even more importance in our lives. Why so? If we check the benchmark of Federal funds rate for December, we’ll see that the Federal Reserve Board decided to increase it first time after long seven years, and they might do it again in coming days.

The benchmark for the federal funds rate decides the amount (%) of interest every financial lender pays to borrow from one another. If the rate increases, the prime rate will also go higher. Then the lenders will offer lowest rates only to their most creditworthy borrowers.

So, as per the recent federal decision, there are chances of increment in the interest rates. This might be applied to any variable-rate financing that is pre-existing in your credit report, for example – credit cards or HELOC. But, it also indicates that new loans will also get more expensive for borrowers belonging to any category. It’ll especially hurt consumers with low to bad credit. Great money saving offers like 0% down financing or long-term balance transfer credit cards will be harder to get.

So, let’s find out how you can boost your credit score in 2016 to get better opportunities while applying for any kind of financing:

1. Check out the credit report and find errors

The first move you should do to boost your credit score is to check your credit report. Fetch a free copy from – Experian, Equifax, and the TransUnion. Collect your credit report once a year from AnnualCreditReport.com. Make sure every item is correct, and if you find something wrong, report it as soon as possible. Some items to look for:

  • Accounts that are unrecognizable.
  • Late payments that you didn’t make.
  • Closed accounts still showing as open.
  • Credit limits that are extremely high or too low.

If you find any error, collect any evidence you can gather and inform the credit bureau by sending them a written letter. The bureau may take up to 45 days for investigating the matter, and if the item(s) cannot be verified at that time, they’ll remove the item.

2. Build your credit slowly but steadily

First of all, try to open a new credit card account, but not too many. A new credit card can help you to reduce your credit utilization rate, which is one of the important aspects of credit build-up.
Newer credit cards have less credit limit initially, but as you use it wisely your credit limit and your utilization rate will rise.

Don’t add too many credit cards at a time. Applying for too many credit accounts may hamper your score as the credit card companies may think you are experiencing major financial trouble, and they’ll fetch your credit report several times to verify the risk factors. Too much checking of your credit report is not good at all.

3. Make frequent payments

If possible, pay your credit card bill twice in a month. If it’s not possible for you to increase the total amount, you can divide the monthly payment into several parts and pay multiple times in a month. Trust me, it’ll help you score more. Several banks offer payment reminder service through their online banking portals. They’re sending emails or text message to their debtors about the next payment due date. To make your payment timely, you can avail automatic payments service through your lenders and credit card companies. By this way, your monthly payments will be automatically debited from your bank account.

4. Make bigger payments and reduce debts

People with the best credit scores have a tendency to pay their monthly dues at the end of every month. If you fail to do that, make sure you pay more than the usual monthly payment. Avoid paying the minimum balance. Lower payments gradually affect higher credit scores. So, if you have missed monthly payments, then be current and stay safe.

If you are falling behind on your payments, contact the collection agent and pay off the balances. Remember that paying off a collection account will remain on your credit report for seven years.

By carol on February 23rd, 2016