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Solve poor credit score of millennials: Tips from genx and boomers

increase-credit-score

A credit score is vital. It showcases a person’s creditworthiness. It’s fundamental for every generation – boomers, gen-x, and millennials. It’s quite commonly seen that the millennials have poor credit scores as compared to the gen-x and the boomers.

According to a new study from Experian, millennials have the lowest average credit scores. Millennials (18-34 year olds) have an average score of 625, whereas, the gen-x (35-49) owns an average score of 650 and the boomers and the greatest generation (with a combined age between 50-87) have an average credit score of 709.

Michele Raneri, vice president of analytics and business development at Experian, while talking about millennials, said that “It’s important to keep in mind that credit scores are built on credit experiences.” A report released by the Experian reveals a statistically relevant sample of anonymous data from its consumer credit database.

Snapshot of credit characteristics by generation (including national averages)
Generation Y/ Millennials Generation X Baby boomers and the greatest generation National average
Average Vantagescore 625 650 709 667
Average debt $52,120 $125,000 $87,438 $88,313
Average debt (excluding mortgages) $26,485 $26,670 $19,217 $23,089
Average estimated income $34,430 $50,400 $46,340 $46,790
Bankcard balances $3,403 $6,752 $5,603 $5,340
Bankcard utilization 43% 41% 25% 34%

Why do millennials have poor credit scores?

Millennials have the lowest average credit scores than the other two generations. This generation is a “go get generation.” They don’t think deeply. They are whimsical. These characteristics often earn them poor credit scores. Check out the bullets below to know why millennials have bad credit scores:

  • Frequent use of credit cards
  • Not paying bills on time
  • Keeping huge balance on credit cards
  • Not paying student loans
  • Excessive purchase
  • Piling up credit card debts
  • Not checking credit reports regularly
  • Applying for multiple credit cards
  • Closing old good credit accounts

Poor credit scores? Learn from the gen-x and the boomers

It has become a common notion that millennials are not good at handling their credit. On an average, they acquire poor credit as compared to the other two generations (gen-x and boomers). Credit can be improved at any time. However, millennials can learn the ways to improve credit score from the other generations. Here are the ways to improve credit scores:

  1. Pay bills on time – Payment history is an important factor which determines the credit score. Late payments ruin credit score. Whereas, timely payments will help the millennials build their credit.
  2. Check credit reports frequently – To improve credit scores, it’s important to check credit reports on a regular basis from the three credit bureaus – Equifax, TransUnion, and Experian. Checking credit report regularly doesn’t hurt the credit score. Rather, it’ll help millennials to find out the errors which are causing a downfall to their credit score.
  3. Use secured credit cards – Often millennials don’t get approval to open a credit card. In that case, a secured credit card is the best option to create a solid payment history, if payments are made on time.
  4. Keep low balances – Higher credit balances, if not paid on time can cause a big damage to credit score. Keep balances under 10% of credit card limits to increase credit score.
  5. Don’t sign for joint credit products – Signing for joint credit products can be fascinating and dangerous at the same time. Signing a joint account or a lease for someone else can cause a damage to the credit score if the person fails to pay on time. Millennials should be cautious of what they are signing, especially if they are signing for someone else’s payment.
  6. Build an emergency fund – It can be a savings account. This can help stop unexpected expenses from a credit card in case of any emergency. Having no emergency fund will automatically put pressure on the credit cards in case of urgent needs. This can deteriorate credit scores. Build an emergency fund to avoid damage to credit scores in case of crisis.
  7. Improve “credit utilization ratio” – Credit utilization ratio can be improved by increasing available credit or getting another credit card or raising the credit card limit. A low credit utilization ratio results in a higher credit score and vice versa.
  8. Purchase small things on credit cards – Making small purchases on credit cards will help to pay off the balance before the due date. This keeps the credit utilization ratio low and establishes good payment history, which in turn improves credit score.
  9. Avoid applying for multiple credit cards at one time – Each time an application is made for a loan or a credit card, a hard inquiry is made, which negatively affects the credit score.
  10. Pay student loans on time – Millennials should start repaying their student loans as soon as they get their first job. Due payments, late payments and defaults have an adverse effect on credit score.
  11. Use credit cards to buy affordable things – Millennials should use their credit cards to buy things which they could afford. Buying an unaffordable thing with credit cards will automatically rack up credit card debts. In turn, this will damage the credit score.
  12. Avoid carrying a credit card balance – Carrying a balance on credit card automatically lowers the credit score. This also increases the possibility of missing out credit card payments.

The last lesson

To have a better credit score, it’s important for the millennials to take the responsibility of their financial life as early as possible. Understand the do’s and don’ts of maintaining a good credit score early. In case of any confusion, follow the above footsteps of the gen-x and the boomers to build an excellent credit score.

By carol on August 27th, 2015

Credit card fraud attorney: Why you should seek their help?

credit-card-fraud-attorney

Credit card fraud has become popular with the massive usage of credit cards. There are various forms of credit card frauds that can affect the credit card holders such as: counterfeiting, using stolen credit cards and deceitfully obtaining credit cards through e-mails. Remember, it’s nothing but a term of theft, using a credit card or some other payment method for the purpose of obtaining goods fraudulently.

Credit card fraud is harmful, it may increase your financial obligation as well as create other legal repercussions. Depending on the seriousness of the allegations of the credit card fraud, you need to be represented by a criminal defense attorney who can assist you in combating such fraud.

5 Ways a credit card fraud attorney can help you

1. If you’re subject to credit card fraud or credit card abuse, then you need to contact the criminal defense attorney before a police or the prosecutors. In that case, an attorney can ensure that you don’t comment any kind of incriminating statements and protect your rights as well.

2. The attorney will understand how the credit card frauds work, how the police and the investigators carry on the investigations and what steps can be taken.

3. He will assist you in telling you what to say and what not to. In most cases, the policemen may connect you to some other crimes and if you have an attorney by your side, you can avoid falling into such situations.

4. The attorney will discover the actual facts that can strengthen your case. He will stand between you and the criminal justice system to protect your rights and to defend your action.

5. The attorney investigates into the matter and checks the authenticity of the claims of the police. He will review their reports and connects to the client.

Final words

Therefore, when you’ve been subject to a credit card fraud, you have to make sure that you take help from a criminal defense attorney so that you can achieve success and you don’t end up wasting your dollars on a fraud.

By carol on August 18th, 2015

Handy money management tips for college freshers

money-management-tips

“College is fun as long as you don’t die,” – Tsugumi Ohba, Death Note, Vol 4: Love

We experience new amazing things in our college life. We make new friends, discover our passions, gain an education, secure our financial future and so on. In a nutshell, college life is a whole new world in itself. College years are one of the most crucial years in one’s life. So, it is very important for us to make the right decision at the right time to avoid further mistakes in our lives.

College life is more than having a good education and new friends. It gives us endless opportunities for our bright careers. Now, it’s up to us how we should use those opportunities to our advantage. The mistakes, which we often make in our college days can turn our finances down. So, it’s quite important for us to recognize those mistakes and keep track of our finances, in order to secure a strong financial future.

Are you making these money mistakes?

Are you a newbie at college? Then, find out the financial mistakes you should avoid in your college days.

1. Racking up credit card debts: Credit cards have become so ingrained in our daily life that we can’t even imagine a day without this plastic. For many of us, especially for college going guys and girls, it displays the symbol of their status. This showoff often overshadows the flaws behind overspending.Credit cards with high interest rates and unfavorable terms allow students to invest more money than they really have. Making every payment with credit cards will lead you into a debt trap.

2. Damaging credit score: Flaunting your credit card isn’t the end of the game. You also need to face the consequences of mishandling it. One wrong move would automatically ruin your credit score. Thus, missing out payments and overspending would make your credit score collapse.

3. The deficit of budgeting: Budgeting! Do I need to do this in my college life? Are you of the belief that economizing in your college days would make you look not so cool? Then, my dear, you are wrong. This is the most sweetest time when you can save for your future, as there is no mortgage to pay, kids to feed and other money headaches to solve.

4. Spending student loan money for unnecessary things: Student loan money is there to help you in your academics. Using that money to fund your vacation is not the right decision for you. Application of student loan money to buy unessential goods would only lead you to debt and nothing else. You might be thinking that paying off a student loan is so very easy. But, if you pile up more debts by useless spending, then repaying the loan gets more difficult as you might not get your dream job after you graduate. So, think twice before you spend your dollars.

5. Pursuing education from an expensive college: The name of your prestigious college written in your graduation certificate doesn’t lower your debts. The majority of students dream of getting educated at an expensive and prestigious college.

Does studying in an expensive college really matter? Well, it does matter to some extent, but not always. You can save the about $100,000 on your four-year degree, if you go for an inexpensive school. Another option would be to study in an inexpensive college for the first year or two and then take a transfer to a better college. By doing this, you are able to save both time and money, which would help you to complete the rest of your degree in peace.

6. Forgetting to apply for financial aid and scholarships: Often in the excitement of getting admission to a college, we forget to look for financial aid and scholarships. It’s very crucial for every student to apply for financial aid and scholarships on time. If you are a topper, then don’t forget to apply for college scholarships. Also, there are many types of scholarships available to students of different ability levels, based on a multitude of criteria. But, be aware of the financial aid scams.

Cool tips for freshers to manage money

College life isn’t just about having an education. It’s about having a strong financial, social and personal life. Here are some money management tips for college freshmen.

1. Financial Aid: If you want to grab financial aid, then you have to reapply for it every school year and sometimes each semester. Here are few handy tips to help you out.

* Use FinAid – It’s an incredible resource for financial aid, starting from scholarships to student loans.
* Take help of FAFSA – If you want to enroll yourself for financial aid, then you must submit your FAFSA (Free Application For Student Aid) each year you attend college. This is also very much required to get Federal Student Loans. Professional help is often needed for filling out the required forms on your FAFSA. For this work, Student Financial Aid Services is the best association.
* Apply for CSS/Financial Aid Profile – This application, from The College Board will grant you to apply for non-Federal financial aid.
* Repay financial aid – Paying back your college financial aid is very essential. Otherwise, you won’t be able to repay it within the given time. Get help from College Financial Aid Advisors.
* Use Cheap College Finder – Use “Cheap College Finder” for great inexpensive college options.

2. Student Loans: Every student has to deal with his/her student loans. Here are some vital tools for the students who are handling their student loans.

* Free Student Loan Debt eBook – This’ll help you to get student loan easily. You can also get suggestions on how to repay your loan quickly when you are out of your college.
* Student Loans.Gov – This is the Department of Education resource of the government which helps you to get student loans and keeps track of it.
* National Student Loan Data System – This website is maintained by the US Department of Education. If you are not sure about who owns your loan or where you have sent the payments, then check it here. This keeps track of all your student loan data.
* TransUnion – Check your credit score before applying for student loans. TransUnion offers a free credit check and resources to help you boost it.
* Simple Tuition – This is the easiest online student loan application and lender on the Internet.

3. Personal Finance: College life makes us independent and this is the time when we’ve to deal with our financial issues independently. Below are some easy tips to help out college freshmen manage their finances well.

* Avoid credit cards – Credit cards will make you spend more even if you don’t have hard cash.So, if your pocket is empty, then wait for sometime to buy your favorite stuff. This won’t allow you to rack up debt.
* Look for a cheaper lifestyle –Always remember, if you save today, then you’ll have a better future. To have a debt free and happy future, look for free stuff, cheap entertainment options and so on. Try to eat in the cafeteria of your college. The food may not be delicious, but it’s cheap.
* Save and invest – Save and invest some of your dollars to multiply your finances. Use the little money which you have to your advantage.
* Budget well – Only budgeting will help you to save your dollars properly and keep track of your financial whereabouts.
* Plan for the future – College life is the apt time to prepare for your future. If you plan your life ahead, then you’ll be able to save more in the long run.

A final tip

Having fun at college is fine. But, running out of your resources for having that fun is not acceptable. It’ll only ruin your dreams and drain your pocket. So, it’s advisable to plan and maintain your finances besides enjoying your college life. This will only rescue you from a debt trap. Lastly, enjoy your new life with these handy ideas.

By carol on August 13th, 2015

Credit counselors: Ready to help student debt victims

student-loan-gets-help-from-credit-counselors

Credit counseling agencies are nowadays keeping their eye on student debt. Of late, credit counselors have been seen exploring new opportunities. Credit counselors are those pillars of our society who help people budget their money and pay bills. Today, they have been witnessed digging their way to the student loan arena as well.

A post by Herb Weisbaum, NBC News contributor reveals that, “Nearly 7 million Americans have fallen behind on their student loans, and millions more are barely able to make their payments each month.” To solve this, credit counselors are heading towards student loan debts. This they explained, as a symbol to help students.

Student loan debt on the rise

Student loan debt is a common phenomena in the west. A college graduation degree followed by joblessness, help the students to mount up debts. In America, the cost of higher education is rising at a lightening speed. Student debt has incremented drastically over the past several decades. Federal Reserve Bank of New York, states that at the end of 2014, student loan delinquencies have increased which pictures that Americans are lagging behind payments as education debt climbs.

The total volume of incipient student borrowing has incremented more than fourfold over the past 20 years. More students in higher education results to the aggregate increase in student debt. Studies unveiled that all other forms of debt, such as, credit cards and mortgage loans have been exhibiting lower delinquency rates. The result of an Experian’s study brought to light that, “in total, $1.2 trillion is bleeding students dry”.

Day-by-day, more students are being pushed into the dark fissure of student loan debt. As an explanation to this, Fed researchers wrote: “Student debt is not dischargeable in bankruptcy like other types of debt. Delinquent or defaulted student loans can stagnate borrowers’ credit reports”.

Fed’s data showed that until 2009, student loans were the minimal form of household debt. The recession has allegedly shuffled the borrowing habits of the Americans and made them borrow money for education. Probably this was not the situation ahead the great recession, which had knocked down US in the year 2007. Thereafter, the residents have managed to pay off their debts, except student debts. This made them land in a pool of student debts.

Conquer student debts with the help of credit counselors

Today, student debt tops the debt chart. The recession has made inroads for the student debt to walk through the lives of the people of US. As a result of this, debts other than the student debts were paid off, but the latter remained at the same place. Thus, people got more tangled into student debts.

The college graduation degree paves the way for a high paying job and a carefree lifestyle. But unfortunately, there are millions of Americans still battling with the burden of student debt. Following this situation, a brand new enterprise has originated, which offers a good deal to cope up with debt. They can be called the credit counselors or credit counseling agencies who try to reduce or even eliminate debt from regime-backed student loans.

Why credit counselors set out for student debt?

Studies revealed that, along with student loan debtors, the credit counseling agencies are also facing a strong financial crux. “According to the annual reports filed with the IRS, annual revenue for the 10 largest counseling agencies fell 11% in the 2013 fiscal year… That came after a 15% decline the year before.” Irrespective of the scenario, it’s arduous to cut down the expenses. Side-by-side, income fell and the pay for the organization’s top executives rose to 8%. Credit card default rate showed 2.52% at the end of 2014 and default rates on debt also showed low, which has made fewer people to step in the agencies for help.

Kevin Weeks of the FCAA said that, “Bankruptcies are trending down, foreclosures, credit card delinquencies are low… agencies are looking for opportunities to assist more consumer”. Both the credit counseling organizationsNFCC and FCAA are paving their way into the orbit of student loans. According to Week, “Member agencies charge student loan counseling fees of $149 to $299 for what is usually a series of consultations with the borrower”. It is true that, people can solve their debt problems, but there are certain areas where they need help. Credit counselors are mainly trying to get hold of those weak units where folks want their help. They are doing so because, somewhere or the other the colleges, lenders and the federal government all have a stake in the student loan system.

Every citizen has a right to good education and for that, they are taking out loans. In the USA, education loans or student loans are sky-high. Masses are still at a warfare with their student debts since they are unable to repay their loans due to lack of employment and good wages. Millions are there who default on their student loans. And, the credit counselors and their organizations are using this opportunity to fill their half-filled pockets as an emblem to help out the student clan from their agony of student loan debts.

By carol on August 4th, 2015

Balance transfer compliments credit score: Unwrap the truth

balance-transfer-affects-credit-score

“Money is a good servant, but a bad master” – if you have money it will serve you and work for you well. But if you owe money to someone, that money will control you dreadfully. So if you treat your money carelessly, then you would get imprisoned in debt.

Are you messed up in a debt trap? Do you believe that ‘balance transfer’ method will help you manage your credit card debts well? Then, find out the answer to your queries here.

Balance Transfer – A brief insight

In simple words, a balance transfer method is the process of transferring of all outstanding balances from one credit card to a new credit card with low interest rates. Debts are a common phenomena in our lives. No one wants to pile up credit card debts. But, what will you do if you have racked up credit card debts? Well, in that case credit card balance transfer can prove to be an invaluable gem for managing credit card debts.

You might not be able to clear all your debts through a credit card balance transfer, but it does help to reduce some of your interests through its 0% or low interest programs. If you pick up a balance transfer card with an introductory 0% or low-rate promotion, then it would prevent your card from further financial charges. As for example – assume that you are carrying a balance of $10,000 on a card that charges 15% interest and your target is to pay it off in the next 12 months. If you transfer this balance to a card that’s offering 12 months at 0%, then you are able to save $831 in interest.

A walk by the seashore of balance transfer

Sinking into debt is like drowning in the sea. One way which saves you from drowning in the sea of debt is balance transfer. Are you struggling with credit card debts after spending too much during holidays? Then a balance transfer credit card would make you stand out of your plight. This would help you save money while you pay off your debts. The best balance transfer card is like a life saving drug when you are suffering from credit card debts.

Busy collecting huge amounts of debt? Decided to do a balance transfer? Then, here are some tips to enlighten you:

  • Promotional period: Validity of 0% interest account is less. Because, some credit card issuers run short promotional rate periods to attract new consumers. And once this period gets over, you may have to pay higher interest rate on the new balance. So, the next time you get such offers, be sure of its validity.
  • Transfer fees: Irrespective of whether you own a good credit or a bad credit, you will be charged a balance transfer fee. It is often 3% to 5% of the total amount you are transferring. With the help of a ‘no balance transfer fee credit card’, you can easily swap from a higher-interest credit card to a lower-interest account without having paid the additional percentage balance.
  • Impact on credit score: Transfer your balance to a card which has more credit limit as compared to your balance. Because, this lowers your credit utilization ratio, which increases your credit score. On the other hand, if you transfer your balance to a card which has less credit limit as compared to your balance, then it will lower your credit score. So, you should check the available credit line before transferring balances, as it will have an impact on your credit score.
  • Don’t purchase with balance transfer card: Since balance transfer credit cards offer 0% interest, many of you plan to make new purchases with that. But let me again remind you all that, these ‘0% interest’ offers last only for a certain duration. And once the introductory period is over, you will again rack up debt in your new balance transfer credit card. So, keep a watch at your card’s balance before making further purchases!
  • Change your spending habits: You are absolutely mistaken if you believe that you can spend as much as you wish after transferring the balance to a 0% interest card. Transferring your balances is not a certificate to misspend your dollars. So, you should step aside from balance transfer to prevent accumulation of debt on your new credit card.
  • Keep your original account open: Do not cancel your old card from which you transferred the balance. This might give a blow to your credit score. Just ensure that your card does not charge an annual fee.
  • Make a payoff plan: Balance transfer credit cards are not at all easy to manage. So you should plan it out strategically. That is, have a proper entry and exit plan. You can also take the help of ‘credit card payoff calculator’ to plan out your budget.

Do you think that balance transfer will improve your credit score?

First, let me tell you that a balance transfer does not harm your credit standing directly. Credit scoring companies don’t take into account it as a factor to evaluate their criteria for calculating your credit score. But you cannot deny the fact that, a balance transfer leads to a change in your financial profile. Read the points below to know how a balance transfer affects your score:

  • When balance transfer credit cards are used for overspending or avoiding payment, then your credit score will drop for sure. The time when you start spending more money and avoid the payments, you pile up debts which in turn affect your score negatively.
  • Your credit score gets a negative boost when you initially apply for several cards with low introductory rates.
  • The duration for which your credit accounts have been open covers 15% of your credit score. Therefore, the longer you keep your accounts open the better will be your score.
  • Whenever you apply for credit, a hard inquiry is made on your credit report. One hard inquiry will reduce few points from your credit score. But, multiple hard inquiries within a short span of time may cause significant damage to your credit score. So, do not apply for balance transfer credit cards frequently.
  • If you close your credit accounts, it will hurt your score. But when you keep your existing accounts open, the average age of your account remains high which boosts your score.
  • It is always suggested to transfer the balance to a card with more credit limit. If you do so, then this will keep your credit utilization ratio low which increases your credit score. Always remember that –
    Low Credit Utilization = High Credit Score
    High Credit Utilization = Low Credit Score
  • Last but not the least, whether you do a balance transfer or not, always make payments on time, which is vital for maintaining good credit score.

Final Decision

Don’t make frequent balance transfer as it would harm your score. Balance transfer to another credit card is good if you follow the tips and guidelines. Don’t let money make a hole in your pocket. If you pay off your balance on time and control your overspending nature, then you would be able to make your credit score happy.

I hope this piece of writing has helped you clear your doubts regarding balance transfer. Now, if you are thinking of doing a balance transfer, just do it with confidence. If you take help of these above guidelines, then I’m sure you will stand as a winner in case of balance transfer.

By carol on July 30th, 2015

The clock struck debt – Credit Report Clock and SOL Clock

difference-between-sol-clock-and-credit-report-clock

“A small debt makes a man your debtor, a large one your enemy”.
So, its “better to go to bed hungry than wake up in debt”. Because, “out of debt, out of danger”. No borrower wants to become a slave to the lender. That’s why, it’s wise to keep track of your debts and scrutinize your credit report at regular intervals, in order to pay them off soon.

Credit report clock vs sol clock

Are you confused with credit reporting time limit and statute of limitations (SOL)? Do you think that once your SOL period is over, debts will no longer be there in your credit report? If yes, then quickly check out this write-up.

Credit Report: Your financial report card

“Debt is beautiful only after it is repaid” – So, pay off debts on time to keep yourself away from collection calls. Always remember even if you forget, the debt still stays on your credit report for a particular time.

A credit report is a precis of your financial history. It contains a detailed note of a person’s credit history and is prepared by a credit bureau or credit reporting agencies. Your credit report acts as the risk meter which makes creditors and lenders decide where you stand financially as a borrower. It’s an important tool helping you to manage your finances well.

Credit bureaus list information which they get from public records, collection agencies, credit card companies, banks, retailers, mortgage companies and other lenders in your credit report. Your credit report is updated routinely as soon as the status of your accounts get reported to the credit bureaus. Each of your financial actions is noted down and the negative information stays on the record for a definite time period.

Statute of Limitations: Fear of getting sued

Amongst the various debt time frames, the most important one is the Statute of Limitations. Statute of limitations denotes a rule that sets a deadline within which someone can file a litigation against another flock.

Both civil and criminal causes of action has statute of limitations. It begins from the date when you get delinquent on your debt. Many statute of limitations are actual legislative statutes, while others may come from judicial common law.

It is a type of federal or state law, which determines the time period in which someone can sue you. If there is less financial evidence, then this law protects a consumer from being sued. An expired sol period does not block debt collectors from trying to collect debts, but they can’t simply sue you.

Are sol clock and credit reporting clock dissimilar?

As clocks show us time, similarly debt clocks display debt timings in the credit report. There are two debt clockssol clock and credit-report clock. Both are important. Are you getting muddled between the two types of debt clocks? No need to worry. Find out your answer just now.

* Statute of Limitations Time Limit – The Statute of Limitations clock force collections on a debt. So if you are concerned about reviving the forced collections on an old debt, then keep a close watch at the precious time of this clock.

It displays the time limit in which a creditor can sue you for non-payment of debts. The timeline varies from state to state. The clock starts ticking from the time of last payment and resets every time you make a payment, therefore re-aging your debt.

* Credit reporting Period – This clock showcases the time period a debt can stay on your credit report and in turn affect your credit score. According to Chi Chi Wu, staff attorney with the National Consumer Law Center, “The credit-report clock on delinquent debt starts six months after you stop paying”.

For most items, the credit reporting timeline is mandatory as per the Fair Credit Reporting Act and is a matter of federal law. Irrespective of where you live, the credit reporting period for a collection account is seven years.

A final guide

Finally, it can be concluded that a Statute of Limitations clock and a Credit Reporting clock differ from each other. The first only shows the time when you can get sued by the creditors for non-payment of debt. While the second one shows, how long an old debt remains in your credit report. So, the next time you are asked about the difference between SOL clock and Credit Reporting clock, hopefully you’ll answer all the questions with confidence.

By carol on July 21st, 2015

Debt settlement program hurts credit score: True? Why is DSP good?

impact-of-debt-settlement-on-credit-score

Debt settlement, as the name suggests, is the process to settle your debts with the creditors. Here, both the creditor and debtor agree on the reduced balance – which is considered as the full payment made by the debtor.

In a debt settlement program, an organization or a third party negotiates with the creditor or credit unions on your behalf and reduce the principal debt amount which you owe.

Debt Settlement Traits

It provides you with the following options to wipe off your debts:

  • Minimizes your principal debt amount,
  • Removes your late fees,
  • Provides you flexibility to pay off debts within your chosen time.

Thus, helps to lessen your original debt amount by a certain percentage.

Impact of Debt Settlement on your Credit Score

Q: Why a good credit score is so important?
A: A Good Score = Money In Your Pocket.

Explanation: A good credit score is a vital attribute for every individual. It is easy to get a loan approval with a good credit score. Thus, if you have more money in your pocket and if you use it in the best possible way, then it will help you to pay bills on time, which in turn will increase your score.

Credit Score Importance

Credit Score is one assessment scale which different companies and individuals consider before doing business with you because it showcases your creditworthiness. Just as a thermometer measures your physical health, a credit meter measures your financial health (your creditworthiness). It analyzes a person’s financial background and his/her position in the financial market.

Will debt negotiation hurt your credit score?

Are you irregular towards your bill payments? Or are you taking the help of debt settlement company to settle your debts? If yes, then be ready to face the consequences of a bad credit score. As soon as you go for debt settlement, this proves that you are not a person to be trusted with finances, which hampers your credit score to a great extent.

The National Foundation for Credit Counseling (NFCC) warns that your credit score may dribble between 65 to 125 points as a result of this type of program. This happens because, you fail to make the payments to the creditors within the given time period. When you take help of debt settlement and clear your dues, your accounts are reported as “paid by settlement”. This makes you look less dependable to future lenders.

The longer your balances are kept unpaid, the more damage is done to your score. After debt settlement program is complete, you can take certain steps to improve your score over time. But these steps does not fully repair the damage of your score which got affected when your accounts went unpaid. Thus, undoing the damages won’t bring back your original credit position.

Q: What does happen to a new account when debt settlement is carried on?
A: Debt settlement of a new account = Serious damage to credit score.

Explanation: This is so because, when you sign the credit agreement, you have agreed to pay the total amount of your debt. Now when you are unable to pay the said amount, your score drops, which means you are not creditworthy. In a debt settlement program, only a part of the whole balance is paid, giving a blow to the lender’s money.

Debt settlement – Why should you apply?

From the above discussion, it is clear that debt settlement damages credit score. Now, the question which strikes you – if it is so, then why should you go for it? Well, it has some benefits attached which makes it applicable. Here it goes:

  • It helps you to escape creditor harassment.
  • Through a debt settlement program you are able to save your dollars, as you are paying a part of the outstanding balance to the collection agencies.
  • It will eliminate your debts in 2 to 4 years.
  • It gives you the freedom to choose your own settlement terms.
  • All your financial records are kept confidential.
  • Under a debt settlement program, you just have to make one affordable monthly payment instead of multiple payments.
  • Debt settlement gives you the chance to rebuild your score once you take certain steps after your dues are paid off.
  • It is the best option for those with large amount of unsecured debts.
  • Debt settlement helps to avoid asset liquidation through bankruptcy.
  • Finally, with a DSP you become a debt free person.

End Result

In spite of having the above benefits, it cannot be ignored that debt settlement injures credit score. This negative marking is reflected on your credit report for the next 7 years. Whatever the fact is, consumers still go for debt settlement. The probability of getting harassed at the hands of the creditors is less throughout the process of negotiations. A debt settlement program though not appropriate for your credit score, is seen as a great start to financial recovery.

By carol on July 16th, 2015

Pay hike vs credit score: Will the first one elevate the other?

relation-between-pay-hike-and-credit-score

Have you ever wondered that, a pay hike might increase your credit score? Want to know whether a pay hike influences credit score or not? Find out your answer right here in this piece of article.

Is it true that a pay hike will escalate your credit score?

Credit score determines your credit worthiness. Your credit score is one of the most integral elements of your life, as it depicts the position where you stand in your financial life. There are numerous myths associated with credit score. Out of those, the most prevalent myth is that a pay hike influences credit score.

Many of you think that a higher income will automatically lead to a greater or better credit score. People believe that, if you earn more money, you are likely to secure more credit and in turn your credit score will get a boost. But in reality, the scenario differs – a pay hike does not affect your credit score whatsoever.

Actually, that’s not the way how credit scores are calculated. Rather, there are five parameters upon which credit score is calculated. The factors which makes up credit score are as follows:

  1. Payment History – It accrues about 35% of your credit score. If you pay bills on time, keep low balances on credit cards and avoid late payments, charge-offs, and collections; then it will help to keep your scores high.
  2. Amount you owe – This component comprises 30% of your credit score. So, if you want to maintain a good credit score, then you have to keep your balances as low as possible in relation to your credit limits.
  3. Length of Credit History – This one measures 15% of your score. Remember, your long-lasting credit history will help you gather more credit score because lenders will certify it as your creditworthiness. Nobody wants to lose a good credit history. Right? That’s why it is suggested not to close old good accounts of yours.
  4. Types of Credit – Having a mixture of accounts (such as credit card, auto loans, mortgage loans, etc) will also help your credit score to grow slowly, as it only occupies 10% of your score. This will give an idea to your creditors that you are capable of handling different types of credit. Hence, be aware of the fact that, diversified accounts are always better than having one kind of credit accounts.
  5. New Credit – Searches for new credit holds 10% of the score. Excessive shopping for credit can hurt your score. So, open new credit accounts when you really need and try to avoid inaugurating multifarious accounts within a short span of time.

Final Report – TransUnion’s Online Survey

As stated by TransUnion, about half of the American adults consider that a pay hike uplifts their credit score. According to its online survey of about 1,000 people, the following points came to the forefront:

  • Nearly half of them think that ‘rent’ and ‘cell phone’ payments directly affect their score. But in actual, these aren’t routinely reported to the credit bureaus.
  • 50% of the respondents who have checked their credit report of the last 1 month mistakenly believed that their ‘full employment history’ and ‘income level’ are included in their reports.
  • About 48% of them assume that an increase in income enhances their score.
  • Some of them don’t know why checking credit report at regular intervals is important and how it can affect their score for better.
  • Amongst them about 70% mistakenly assumed that credit reports reveal recent changes or trends in their finances over time.
  • Lastly, 61% of the respondents believed that their score will increase if they pay off delinquent debts.

Still wondering whether a pay hike affects your credit score? The answer is no. A pay raise will make you manage your finances well but, it is not a part of the credit scoring system.

If you pay heed to the five parameters, your credit score is bound to increase. Try to manage your finances well and avoid unnecessary wastage of money if you want to build good credit score. Now, I hope that I’ve been able to solve your dilemma regarding whether a pay hike will increase your score or not. So, the next time if someone throws similar questions at you, I wish that you will be able to clear their doubts without any hesitation.

By carol on July 7th, 2015

4 Steps to rebuild credit score after paying debts

rebuild-credit-score

You should fix your credit score after repay all debts. Because, having too much due bills, debts can affect your credit score severely. And several negative listings can lower your score and create bad impact on your financial life as well. You may face problems in future. For instance, you may charge the higher rate of interest if you take out a loan. You could be even denied for applications made on the basis of credit. So, it is quite essential for you to improve your credit score as soon as possible after paying off debts. If you one of them who needs some guidance to rebuild credit score with new hope, then this is a must read.

1. Pay your bills on time

Make sure that you pay all the due bills at the end of the month. If you can’t pay the full amount, then try to pay the minimum on your cards. Thus, you can build a good credit record in the long run. For instance, if your score is 580 now you can raise the points by 18 points on every on time payments each month.

2. Stop using multiple credit cards

Having more credit cards inspire people to shop more. And more shopping means more unpaid bills which you should pay on time. If you miss any payment, then you should pay the late penalties which can make your credit score lower. Because such mistakes and credit record proves you as an irresponsible debtor. Moreover, opting new credit cards can lower your average account age and lower your credit score by 10 % as well. So, think before using credit cards for every purchase. Your one mistake can cost you dearly.

3. Go for a secured card

A secured card is easy to get and you can get even with bad credit. Because the company will charge a certain amount of money as security deposit when you’re buying the card. This type of card will help you to establish a good credit score in near future. Because secured credit card will regularly report to all the major credit bureaus. But, you should maintain the account carefully.

4. Take a close look on your credit report

Review your account on a regular basis. Inform the credit bureaus right way if you find any negative listing in your report.

Final words

The last thing you’ll have to follow that is avoiding further debts. You need to take proper care whether or not you’re making any mistake on your bill payments or any financial step. Carry cash to avoid excessive expenses and credit card bills. Follow a disciplined financial routine to rebuild your credit score with time. Also, you need to maintain the credit limit as well. Make sure that you utilize only 25% of your credit limit while shopping. Crossing the maximum part of your credit limit can blow your credit score into lower scale.

By carol on July 2nd, 2015

4 Must do steps to get a grip on your money

how-to-save-money

Most people are facing personal financial worries as they are dealing personally with debt problems. But, you’re certainly unaware that, applying a bit of common sense can make easy to unburden the load. If you’re a reckless spender, then no one can help you to improve your financial condition. You need to follow some good financial habits in order to make some changes in your present financial life and help you get back a firm grip on your money.

Have a look at the various personal finance tips that can ensure a controlled financial life.

1. Set a frugal budget and stick to it

One of the most basic rules that you must follow while bringing back a grip on your finances is to stick to a budget. The best way is to avoid unnecessary spending habit and debt by crafting a frugal budget. A budget enables you to keep track of your income and expenditure and monitor your savings. Without a budget, you may end up spending more on the unnecessary items and less on the things that you actually need. Make sure you assess your budget at the end of the month, so that, you can make the required changes.

2. Spend less money than you earn

Your financial health is almost similar to your physical health and therefore, you have to maintain a balance between how much money you earn and spend, just as you do with your energy. Don’t succumb to your temptations of purchasing anything that you set your eyes on. Maintain a spreadsheet and check at the end of the month whether or not your expenses are less than your income.

3. Set up an auto-savings account

Why not cover your base by saving enough money as well as pay down debt? If you’ve accrued huge amount of debt, and you’re looking for easy ways to pay them down, make sure you create an auto-savings account with a reputable bank. Set a goal to save at least 10% of what you earn in a month. You can even tie your checking account with the savings account so that as soon as you get your salary, the specific amount is deducted and transferred to your savings account.

4. Contribute to your company’s retirement account

If you’re not contributing money to your retirement account, you’re perhaps wasting your money and your employed life. Irrespective of the employer’s match, you must contribute a particular amount of money to the account so that you can help yourself in planning for your retirement. This will be an emergency fund that will help you with urgent funds when you come across any sudden financial emergency.

Final words

These are some personal financial habits that you must brag about among your friends and also make them aware of. Plan your financial future so that you may lead a financially fit life and eradicate your entire debt burden.

By carol on June 23rd, 2015