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What is credit inquiries and its impact on your credit score?

What is credit inquiries and its impact on your credit score?

Credit scores are difficult to understand. If you don’t know how they work, you will never be able to improve your score. Remember, there can be errors in your credit report that are pulling down your score. Sometimes, even not using the credit cards can affect negatively. Most importantly, if some retailers and financial institutions access your credit report, your credit score can be affected.

There are many factors that can affect your credit score. Thus, you should be aware of the factors related to your credit score.

Today’s topic is about credit inquiries and their impact on your credit score.

What does a credit inquiry mean?

A credit inquiry is made when a creditor, an employer, or a financial institution pulls up your credit report to check for a purpose like giving you a loan, employment, or a credit card. This is reported on your credit report with the date and the name of the company, which requested it and the type of the inquiry.

Credit inquiry is of two types:

  1. Hard inquiry
  2. Soft inquiry

Hard inquiry – When does it happen?

A hard inquiry implies that you have applied to take out a loan, a credit, a mortgage, or a student loan. These types of credit checks count as a hard inquiry because a lender or a creditor has checked your credit report as you have applied to take out a loan.

You should give permission to the lender or the credit card issuer to look at your credit report to grant your loan request or a new line of credit. This process is called hard inquiry or hard pull.

A new single hard inquiry can drop your score by 5 points or less.

Soft inquiry – When does it take place?

A soft inquiry occurs when a company or a person pulls your credit report to check your background. Checking your own credit report is also counted as a soft inquiry.

For example, if an employer accesses your credit report to check how creditworthy you are or you check your own credit report from websites (Credit Karma, Credit Sesame or MyFICO), it is considered to be a soft inquiry.

In addition to this, a creditor or a lender can also review your account time to time, which will not affect your credit score; it can occur without your permission.

Do the inquiries (hard and soft inquiries) affect your credit score?

As already mentioned, soft inquiries will not affect your credit score negatively.

Hard inquiries can lower your score by some points. However, it will not affect your score majorly.

How long do the hard and soft inquiries stay on your reports?

You’ll find the inquiries at the end of your credit report labeled as “Credit Inquiries” or “Regular Inquiries.”

What does that mean?

Whenever a creditor pulls your credit report, it gets reported and stays in your reports for 2 years.

Both hard and soft inquiries stay on credit report for 2 years and it will be visible to anyone who will pull your report.

Remember, hard inquiries only have a negative effect on your credit score for the first 12 months.

Can you dispute hard inquiries?

As mentioned earlier, a hard inquiry takes place, then your credit score can drop by 5 points. If a wrong inquiry takes place, you have to dispute the error.

However, you can only dispute the error if it is done without your permission.

Therefore, it is advisable to review the credit report to get full information.

How can you manage your credit inquiries?

You can avoid hard inquiries on your credit reports. How?

  • You should apply for a credit when you truly need it.
  • Review your credit report to check that any hard inquiry on your report is not a fraud.
  • If you want to apply for a loan (mortgage or auto loan), then make sure you do it in a short time frame. Hard inquiries made within a time frame of 30-90 days are considered to be 1 hard inquiry.

Lastly, you have to understand that delinquent debts and missed payments affect your credit score more negatively than credit inquiries.

These negative items will stay on your credit report for 7 to 10 years that can create severe damage to your credit score.

So, it is important to take care of those negative listings that are causing negative effects to your credit score.

Don’t worry if you get some inquiries, because, they will automatically drop off from your credit report after 24 months.

By carol on September 22nd, 2017

Understand the different types of reward cards and their pros and cons

Understand the different types of reward cards and their pros and cons

Reward credit cards give benefit to encourage their customers for using the card more. They offer incentives for the amount of money you spend on the card. People earn more benefits based on the purchases they make using the card.

However, finding out the best reward credit cards can be overwhelming.

You will find many types of reward credit cards like cash rewards, miles, airline travel, points, and gift cards.

Don’t know where to start? Here you go :

At first, you need to analyze your spending behavior to look at where you are spending most.
By doing so, you will understand where you can earn cash back rewards, rebates, discounts, miles or points.

For example, if you often travel and stay in certain hotel brands or fly with certain airlines, then taking out a travel reward credit card can be beneficial.

Similarly, a person, who often plans long road trip, should take out a gas credit card to get rewards.

Once you decide your spending behavior, you can apply for the best reward credit card to get the most benefit.

Know the different types of credit card rewards

Credit card rewards come in 3 forms like cash, points, or travel miles.

1. Cash rewards:

A cash reward is easy to use, but it doesn’t always pay you in cash.

You can get cash back on your spending, and then you have to redeem the cash back as a statement credit, direct deposit to a bank account, and gift card.

Remember, some cash reward cards only allow you to redeem the cash reward as a credit to the bank account.

Some will send a check or make a deposit into the bank account when the customer wants to redeem the reward.

2. Point rewards

Point rewards are generally given based on each dollar a customer spends. For example, you can earn 1 point on spending 1 dollar.

You can redeem the points for gift cards, cash, or even branded gift cards and merchandise. You can also collect points to use them towards a rebate or cash off on purchases and hotel stay.

Make sure you check the expiration date within which you need to redeem your points.

Also, ask the credit card company to know how often you have to use the credit card to take advantage of the benefits.

3. Travel miles rewards

Airline or miles rewards credit cards offer you to redeem for free or discounted travel along with other attractive deals.

If you have a hotel credit card and you earn good points, then you can get free or discounted rewards at specific airlines.

Check out whether or not there are restrictions on travel, blackout dates or seat restrictions and an expiration date on the credit card rewards.

Advantages and disadvantages of reward Credit Cards

You can earn from your purchases by using different types of rewards credit cards.

However, it is important to understand that all these are business strategies to let you shop more and more.

Here are some advantages and disadvantages of reward credit cards that you should know.

Advantages of reward credit cards

1. You can earn from the purchases you make

Reward cards allow you to earn from your purchases.

From a cash back reward card, you can earn points for each dollar you spend using the card.

Thus, you will be able to redeem those points on your next purchase to get benefits.

2. You can get discounted price rates

You can get rebates on your purchases.

Every time you purchase a product, you will get a certain percentage amount that will be given back to your account.

You can use the rebates on your new purchases. You can also pay back your credit card balance using the rebates.

3. You can travel without paying anything

In a travel reward credit card, the points are equivalent to the mileage.

Once you collect enough mileage points, you can get free travel ticket from the credit card issuer’s sponsor airline.

Similarly, you can get a free hotel stay with the help of a hotel reward credit card.

Disadvantages of reward credit cards

1. You need to pay high annual fee

Reward credit cards usually come with a high annual fee. However, some credit card issuers offer reward credit cards with less annual fee; they might offer a low annual fee to the customers who have good credit score.

2. You will get a high-interest rate

Most rewards credit cards come with a high-interest rate or variable rate of interest.

The rate you are paying today can become expensive tomorrow.

Thus, it is advisable to avoid reward credit cards that offer a low introductory rate at the beginning, but the rate increases once the introductory period expires.

Lastly, though you can get good benefit from the reward credit cards, yet you should not purchase things extravagantly.

Remember, some credit card companies promise to offer good points until the user reach the maximum amount allowed.

So, basically, the credit card issuers want you to spend more and more by offering those attractive deals.

Some credit card issuers even have hidden terms and conditions on reward credit cards.Therefore, it is advisable to understand the policy clearly before saying “yes” to a particular reward credit card.

Remember, no matter how exciting the offers are, you have to be confident enough whether or not you can repay your credit card balances within the stated time.
Otherwise, you will fall into painful credit card debts shortly.

By carol on September 8th, 2017

This is how the wise men act for an excellent credit score

This is how the wise men act for an excellent credit score

It’s not that they don’t have money to cherish, time to relax, or healthy food to eat. It’s just that they are unable to handle credit wisely.

Are you one of them? C’mon don’t you lie. Else you would not have been here.

Maintaining an excellent credit score is more dependent on your financial habits than how much you earn.

So, what are the habits of people with excellent credit score?

You can’t just go to FICO or VantageScore and pay a few thousand dollars for a good credit report or score. It’s like a ritual you have to practice for decades to see a significant rise in your credit score.

But people are achieving it, aren’t they?

It’s pretty often we come across someone at a cafe, bar or beach, who has a stunning credit score of 800 or above.

What are the secrets? How to improve credit score?

1. They have a long trustworthy credit and payment history:

This credit history accounts for 15% of your total credit score. The payment history accounts 35%. Whoa!

Just imagine you have a 15 years long line of credit or loan with a clean payment history. You will immediately convey a good reputation when you approach any creditor or lender for credit cards or loans.

This is the big tool surfaced by geniuses in achieving an excellent credit score. This is the art.

You open a line of credit, keep on making timely payments and have the account open for a subsequently long time, say more than 10 years, and bingo!

So before you think much, my advice will be to straightaway get hold of your recent credit accounts and maintain regular monthly payments from now on.

Tips to follow in building a good credit history:

  • Don’t close your first credit card account, if it’s doing you no harm by charging annual fees or so.
  • Request to report your rental history to the 3 major credit bureaus
  • A good mortgage history is your catch
  • Never miss the dates of debt payment
  • If possible, make payments twice each month
  • As per a study, people with perfect 850 FICO score has a credit history of 50 years; prepare yourself for the marathon.

2. They go for the proper mix of credit

Is just a good long credit history enough for you to take out credit cards at suitable terms and conditions?

The masterminds go for the perfect credit mixture.

They maintain different types of credit, and manage them properly, at the same time.

But, this doesn’t mean you apply for all kinds of credit rapidly. That will be idiotic.

The credit mix accounts 10% of your credit score, which I consider is not a small section. If you look at a good credit report, you will see that having a good credit mix makes you more creditworthy to your future creditors/lenders.

Having various types of opened credit accounts with a long and positive history for each, is like green signals for a lender, when you apply for a loan.

So how will you do the credit shopping?

3. They maintain gaps between their credit shopping:

Have you heard about the hard inquiry? No? Yes? Whatever!

It is the red eye on your credit report.

Every time you ask for a credit line to be opened for you, the creditors take out the eyeglasses and scan your report to make sure whether or not you will be able to manage it properly. The same thing happens when you take out a loan. The lender wants to be sure that you’ll be able to repay it on time.

Now this scanning is really harmful and you better watch out.

This can bring down your credit score.

Again there is a trick played by credit-heroes, who have excellent credit score. They never shop for credit cards frequently. They tend to maintain a gap of 6 months between two credit cards’ shopping.

But, the thing is a bit different with mortgage, auto and student loans. You need to rush. FICO counts multiple hard inquiries within 30-45 days as one single inquiry.

So be wise and do your shopping apparently.

4. They keep the debt-to-credit ratio low :

This is also called credit utilization ratio. This makes way into your new credit section which makes 10% of your credit score.

Try to keep your credit card balances low. Those with excellent credit scores keep their debt-to-credit ratio always lower than 10%. The ratio is calculated as balance owed to the account’s credit limit.

So what are the ways to be brilliant at this?

  • Get credit cards with high credit limit
  • Decrease your credit card usage
  • Make duly payments and keep the balances on your credit card low

5. They are always attentive:

They check their credit reports time to time for any unauthorized hard pulls.

Hard pulls are hard inquiries that we discussed earlier in this post.

Whenever you get a pre-qualified credit card offer, it is evident that the financial institution has done a slight background check on your report. But that’s a soft inquiry, which you should not get worried of.

The difference between hard and soft inquiry is beyond the scope of this post. We can discuss that in some other article.

So you need to be always attentive and look out for any unauthorized hard pulls done on your report.

If you find any, send a letter to the credit bureaus and get it removed since they do spoil your credit score.

More credit score tips from the experts:

  • Go for credit cards and loans that you can afford and manage properly
  • Pay bills on time; if required set a reminder to make bill payments
  • Try to keep multiple credit accounts, with good long history, open
  • Swipe credit cards for an amount, which you can repay comfortably at every billing cycle
By carol on August 18th, 2017

Store credit card: What are the pros and cons you should consider?

An authorized user or a joint cardholder - What are you?

Whenever you go for shopping, the store executive or sales clerk might ask you “Do you want to save an extra 25% today?” It’s nothing but a sales trick to convert you into a full-time store card holder.

Store credit cards are available at any store near you where you frequently shop. The moderately-expensive stores might give you approx. 40% off with additional discounts already applied on items.

But just because a store salesperson is offering you a lucrative discount to sign up on the spot, it isn’t necessary that you must do it immediately without giving it a thought. You need to understand why you should/shouldn’t open a store credit card in the first place.

Pros and cons of getting store credit cards

Let’s have a look at the pros:

1. Create credit history

Store credit cards can be categorized into 2 different segments. a) Private-label retail cards , and b) Co-branded store credit cards.

a. Private-label retail cards

These are issued for using at the retailer’s stores and are also sponsored by them. These cards are normally easy to get with low credit scores. People looking to establish or rebuild a credit history will find these cards useful. Retail store card issuers approve the applications of low credit score applicants, more than conventional credit card companies.

Why?

If you are a regular customer at a store, retailers don’t want to hurt you by telling you that you’ve been rejected for a card. That means private retail cards may be used for building credit for people trying to establish credit.

b. Co-branded store credit cards

These are sponsored by the retailer but aided by one of the major credit networks like American Express, Visa, Mastercard, or Discover.

These cards can be used in any retail stores. Unfortunately, underwriting standards on co-branded cards are identical to traditional credit cards, so people having low credit score won’t qualify.

If you use these cards for a long time, it’ll affect your credit score positively and help you raise your score. Using these store cards often and keeping statement balances low can reduce your debt-to-credit limit ratio, which makes up 30% of your credit score.

2. Special benefits

Both private and co-branded store cards would provide you a one-time sign-up discount and great rewards at any particular store or merchant. A co-branded store card might also give you base points with good point-earnings rate, for example – 1 point/$2. But you’ll miss these points if you shop and spend outside of the sponsoring store.

Some store credit cards have reward programs that’ll provide special benefits, such as bonus coupons, complimentary gift wrapping, waiver of shipping charges, financing offers, and so on.

In few cases, you can get your hands on a better combination of discount and rewards than you’d expect. But you must remember about the hassle and cost of opening/maintaining that card.

The cons of having a store credit card:

1. Your debts will be expensive

Signing up for a store credit card can be riskier. It is basically because of the APR on these cards tend to become high.

According to a report conducted by the creditcards.com, the average APR on America’s largest retailers’ credit cards was 23.84% in 2016, which was much higher than the current national average APR (15.07%).

So, if you shop errantly, you might easily build up a huge credit card debt burden that you can’t afford to pay off.

So, think twice before opening a store credit card and falling into a debt trap.

2. Effect on the credit score

Another important drawback of having a store card is the low credit limits available on these cards. The more you use these cards for buying things, the more your credit utilization ratio will increase. Thus, it could wind up hurting your credit score.

Finance experts would recommend that you should keep your credit utilization ratio as low as possible. It’s better to keep it below 20% – 30%.

Apart from the credit utilization ratio, you must also keep the number of hard inquiries low. Each time you want to open a store credit card, or even apply for it, it’ll also generate a hard inquiry on your credit report.

So, if you want to apply for many store credit cards from different retail stores within a short period, that would lower your credit score.

3. Affordability issues

It depends on how you’ll use the card. If you want to carry a balance on your card, you must look for a low-interest store card. If you like to buy from one particular retailer most of the time, and want to avoid any more hard inquiry on your credit report, a low-interest card will be very useful for you.

But, if you are more interested to get high discounts of your card, normally a high-interest card will fulfil your desire. High-interest store cards are generally bundled with attractive offers.

Make sure you read the terms and conditions carefully. Keep an eye on every details; for instance, if the card carries an annual fee, determine the go-to APR after the interest promotions lapse.

When people open these store cards, sometimes they might forget about it. Eventually, they’ll miss the payments too.

You could easily miss your first payment, incur late fees, interest and other important penalties. The missed payment could also hurt your credit score, about 70 to 90 points, depending on your current score.

So, considering the above pros and cons, you must decide if you should/shouldn’t open a store credit card.

Read more:

Credit card lost or stolen – What should you do in such a situation?
First Credit Card: 6 Tips to avoid high fees and interest rates

By carol on August 4th, 2017

4 Tricks you need to play to get first credit card without credit history

tricks-you-need-to-play-to-get-first-credit-card-without-credit-history

The big trap for the smart mouse. You thought you would be fine avoiding debts and credits since high school days. Now, welcome to this big game you got to play. No credit history is way more troublesome than going with a bad credit history.

It is always a question of trustworthiness when a financial institution grants you a loan or is issuing you a credit card. You show your creditworthiness through a blemish free credit report and a good score to get the new credit card or any other form of revolving credit line. It’s that simple.

But, what if you don’t have a credit history till date? How to get your first credit card then. It seems like a stage of paradox. To get ‘A’ you must have ‘A’.

Truly, the only way to get a traditional credit card with a decent credit limit is to have a good credit score.

There’s no way you can break the wall.

But there are a few cracks through which we can slide in.

Let’s have an elaborate discussion on how to get a credit card without credit history. Our first focus will be building a good credit report. Or if you have little credit history, then how to shoot it up.

Try 1: Take out a credit builder loan

You go to a credit union or a bank that offers credit builder loans.

A credit builder loan is a small amount loan, usually taken out to build a credit history or recuperate a bad credit report.

But there is a catch. You start paying for your loan but you can’t have the loaned amount. The amount you borrow goes to a savings deposit account of the lender.

You lay your hands on that amount only after you are done with the full repayment of the loan.

If you are seeking this option, remember the lender has nothing to lose. The credit union or the bank offering this loan, has a full recovery option, if you don’t repay them.

You, on the other hand, will bring a huge negative impact on your credit report as a start off, with delayed payments.

So sleep over it before taking out this loan.

Try 2: Co-sign a credit card

Become an authorised co-user of an existing credit card.

Your co-signer should be someone you trust and one who trusts you. It could be your parents, family members or trusted friends and acquaintances.

But you will have a situation down here. This is like a tie up venture.

You will obviously have your own credit report built up, but irregular payments from any side will affect both the account holder’s report.

This is technically an easy way of creating a fresh credit history for beginners. People usually co-sign with their parents or close family members.

Eventually both must start to maintain a good payment history.

After you are done with a good 6 months or 1 year credit report, you can then apply for your first credit card by showing your credit score.

Try 3: Create a rental history

Say goodbye to your home for a few months or a year.

Start living on rent. You will learn to take up responsibilities!

Moreover you will start to create a credit history.

How’s that??

Well you are paying your rent, that’s one kind of a credit line after all.

Ask your owner to file your rental history to a credit union.

Regularly pay your bills to mark a good credit score so that you may go for your first credit card without any constriction.

Try 4: Get a secured credit card

We are all acquainted with security and back up.

This is a strategy that financial institutions play when people go for their first credit card with no existing credit report or score.

The banks will ask you to deposit a certain fund against your credit card. This is a collateral deposit, which will become your credit limit. Say if you deposit $1000, then your credit limit will be $1000 or a few percentage more, like $1100 or $1200.

With this card you start to activate your credit score from scratch.

After 1 or 2 years, when you have a striking score you return this card, take back your security deposit, and inquire for a traditional credit card.

Try 5:

You may also try out retail cards or store cards. These cards will help you to build a credit report, but you can only use them at selected stores.

Retail cards has offers and discounts.

They also give you cash back after using for a certain time.

There are series of retail cards in the market, choose wisely. You don’t want to fall a victim in the rigmarole of debts.

All the above methods are equally beneficial to building a new credit history or improving one’s bad or little credit history.

Now that you have learnt how to get a credit card without credit report or credit score no matter whatever state you are in, you must be clever at all the above methods. They are actually tricks you play to build your line of credit.

Don’t play foul, play safe, have a good income , and never miss any payment.

Check out: Credit Score (FICO) basics – How to improve credit scores

By carol on July 21st, 2017

Can you harm your credit score by posting in Facebook?

Can you harm your credit score by posting in Facebook?

We are aware of the fact that oversharing anything is a very common event in Facebook. Whether it is a picture, video, or even some text status message, we all share these things over and over again. This habit often lure us into a lot of trouble and makes our profile prone to harmful effects such as phishing, identity theft, cyber-bullying and much more. It may even harm our job life or create problems while obtaining a new one.

Soon the problem may go one step forward. Our sharing habit can be a probable factor that may influence our credit. It may also prevent us from applying for loans to certain lenders. Yes…that means your Facebook posts can harm your credit score.

Credit scoring companies are always keeping their eyes on our every move. Starting from the age of 18, they report every financial step in our credit report. By following that report, our banks decide if they want to provide money for our home, car, or any personal expenses.

Earlier 2017, rumors began to spread that FICO would start analyzing information that people share with their friends online. Even “The Financial Times” wrote in October 2016 that “Being ‘wasted’ on social platforms” like Facebook may damage our credit scores.

So, it’s crucial to check your online comments before you ruin your financial reputation. It is very easy to forget proper etiquette in the Internet, and also very easy to spend holidays in a luxury yacht. But don’t forget that it can be particularly dangerous.

So, what should we do? Let’s have a look what professionals said about this:

1. Maintain social media professionalism

Jacqueline Whitmore, etiquette expert and founder of the Protocol School of Palm Beach, discussed about the importance of maintaining professionalism in social media platforms.

She said whether it is right or wrong, our presence in every online social platform is considered as an replica of yourself. Most people just do not know how to behave naturally in social media platforms. It’s very easy to wear the “Professional” mask while at work. But once you are outside your office environment, that mask struggles to remain constant, especially in social media platforms like Facebook, Twitter, Instagram, etc.

Hopefully you handle your Facebook page with professionalism,” Whitmore described, “but that’s not always the way it is.”

People practically use social media platforms as their personal, open journal entries. Whitmore also said that our social media presence actually denotes our entity to the faceless masses. So, whatever we share through our posts, the common people will consider them as a reflection of our character. So, if we act recklessly on the Facebook posts, it also portray us as an reckless individual.

If the credit reporting agencies also consider us as reckless, that’ll also reflect in our credit report. So, it is clear that Facebook posts can harm your credit score.

2. Take caution during holiday season and vacations

Whitmore also said, people must maintain that professionalism throughout the year. When we go to a holiday, we usually forget what we are doing, and what actually we are posting in the Facebook. Others will post different responses on our posts and those feedbacks may affect our credit score, too.

You can recheck yourself and your posting habit through the holidays. People from other profiles will surely start reacting to your posts. So, do not post or share anything that can harm your profile, your personality, and your finances.

Whitmore’s 5 pieces of online etiquette advice

Whitmore have illustrated some unique tips on how we must behave in the social media platforms:

1. While making online interactions, behave with respect and dignity like you would in a direct interaction.

2. “Think before you post”. Consider the fact that whatever you are posting is noticeable by your current and future boss, your lenders, your religious leader, your elders and your kids. Avoid posting anything suspicious about your finances, or any other thing that you don’t want them to see and discuss about.

3. Don’t say anything controversial, vulgar, or mean spirited that could be used against you and harm your status.

4. Be aware of those people also who don’t know how to maintain professionalism. You need to understand that not everybody will maintain a clear and seamless image just as you are doing now. Not everybody will diversify their online presence between work and social media. So, if you somehow engage in social communication with those people, it might be devastating for your profile too.

5. We all know the fact that driving under influence a.k.a drunk driving is a very bad thing. This also applicable to social media, too. Most of the time, alcohol fuels loose lips. Whether in person or behind a monitor, be aware that alcohol can inhibit your ability to maintain a level of professionalism.

Conclusion

It is a fact that people know very little about how to present themselves in social media platforms. You never know who will tag your posts, share them, or comment on them. It is possible to moderate your post likes and comments, but you can’t do it immediately all the time.

So, your post or your posted comments may hamper your professional life and you may lose your job in a few years and be looking for a new one. Hence, it is proved that Facebook posts can harm your credit score.

By carol on July 7th, 2017

An authorized user or a joint cardholder – What are you?

An authorized user or a joint cardholder - What are you?

You have several options to share your credit card with another person. In most cases, you may add him or her as an authorized user in your existing accounts, or you can open a new joint credit card account.

On the other hand, do you recall signing an application with a friend or family member? Did you give your income or credit information? If any of these situations seem to be familiar, you probably co-signed on the account and are a joint account cardholder. On the other hand, if someone just handed you the card you’re more likely an authorized user.

To know the matter clearly, you can contact the credit card company and get the information. Another way is to pull your credit report and go through it properly.

  • If the letter “A” appears next to the account information, you’re an authorized user.
  • If it shows a “J”, it’s a jointly held account, and multiple people may have co-signed for the card.
  • An “I” denotes an individually held account, as you are the only owner.

Now let us know the benefits and drawbacks of each option.

a) Authorized credit card user

You might add any person as an authorized user on your account. The person may be your friend or family or just a roommate. It is likely that you’ll split expenses with that person and give permission to buy things using your credit card.

This person will be called an authorized user; you can add such an user in an existing credit card account.

Here are a few things you need to focus when adding an authorized user to your account:

1. You’re responsible for paying the bill

Remember, as the principal cardholder, legally you’re responsible solely for any debt accrued on the account.

Due to any circumstances, if an authorized user denies to be listed on your account, the person can practically remove himself from the account by informing the creditor through an application.

But you don’t have that chance at all. You’ll have to bear the debt burden and potentially, a ruined credit score, if that authorized user misuses your card.

Keep this in mind before adding any person as an authorized user to your account. Add those people whom you really trust.

2. You can boost partner’s credit without any harm

If your credit score is higher than your authorized user, his/her score will also get a boost at the time you add him/her with you. Your credit card issuer must also report the authorized user activity to the credit bureaus.

Due to this benefit, initially parents add their children as authorized users so that they get help to build good credit.

There is another benefit worth to mention.

Some credit card issuers only report positive authorized user activities to the credit bureaus.

So, if you forget to pay a bill, you won’t necessarily harm someone else’s credit. It’s crucial to read your card issuer’s rules and regulations regarding authorized user activity.

Generally, your kids need to be at least 16 to be considered as an authorized user. But, there are some exceptions to this rule.

For example, American Express and Discover both require authorized users to be 15, Barclays require 13, and few others like Bank of America/Capital One/Chase/Citi don’t have such criteria.

If you decide to add any authorized user, first discuss credit card basics with them and set up few guidelines for using the credit card.

3. You can add up extra income while applying individually

Because of the revision to the Credit CARD Act in 2010, you can list all your income including your partner’s at the time of applying a credit card, whether or not you decide to share that credit account.

b) Joint cardholders

Practically, opening a joint credit card account with your family member or friend is not a wise decision.

A joint account holder is a person who also owns and can manage your bank account. There is no restriction between the joint account holders for making any financial decision on that account.

A joint account is used to refer to bank accounts than credit cards. Joint account holders are equally responsible for paying the bills. Both original account holder and the joint account holder will be liable for mishandling the account and drop of their credit score.

It is because in the long term , you won’t be managing your expenses together.

Apart from that, if your family member or friend is under 21, it would be a bit risky for you. But if you and your partner decide to handle your finances together, this could be a great way to go.

In most cases, both you and your partner may have to apply for a new credit card together to get a joint account.

Here are few things you need to think about before opening an account with someone:

1. You both need to pay bills

With a joint credit card, you and your partner both are responsible for paying the debts on that account. If you both spend carefully, you can build good credit scores.

On the other hand, if you both miss any payment or overspend, your credit score will get a blow.

Don’t forget to communicate about your account balance and payment history so that both of you can avoid making costly mistakes.

2. Your credit score may hamper if your relationship changes

If you and the joint cardholder have a complex relationship, or if you both choose to stop handling money combinedly, you’ll likely have to close the account.

This may decrease the average time frame of your accounts and lower your credit scores.

If any one of you dies, you’ll be responsible for paying off the unpaid debts.

This doesn’t mean that you avoid opening a joint credit card, but you might consider to keep your balance low so that all of a sudden you won’t be left alone to pay off a large debt.

3. Your credit card issuer may have stopped the service

You might be out of luck due to certain issues created by card providers .

For example:

  • In 2013, Chase stopped joint account offerings to simplify their services.
  • Capital One scrapped its joint cardholder services 10 years ago.
  • American Express never offered it to consumers at all.

It may be possible that if you request your credit card company to add a joint cardholder, they might assume it as a request to include an authorized user.

So you may need to verify whether the credit card company offers joint credit cards at all before applying for one.

If you can manage your money well enough with your partner, friend or relative, you’ll definitely have less problems due to sharing the credit. Both of you will come out with flying colors because of your good spending habits.

But If things go wrong , and you share credit with an authorized user, he or she may be less affected; whereas joint cardholders will get a blow on their credit scores.

That’s why it’s important to keep the conversation about credit going, no matter who you decide to share credit with. With trust and communication, you can boost your credit scores together and earn more rewards.

By carol on June 23rd, 2017

6 ways you can get your credit score for free of cost

get credit score for free

To every one of us, credit scores matter. The credit score is an important factor for qualifying the cheapest rates on mortgages. Your good credit score may help you to get low insurance premium rates from insurance companies. You may even get a 0% annual fee credit cards.

But let me remind you that getting your hands on your credit scores can be expensive and confusing too. So, you must find ways to get free credit scores.

4 Factors to consider to access credit score

First, it’s crucial to know that you are actually getting your FICO score. Not all credit scores are calculated using the FICO formula. You must know what type of credit score you are getting. FICO score is the most popular among the lenders, but a non-FICO credit score is also valuable.

Second, you must know which credit bureau data is considered for calculating the credit score. There are 3 major credit bureaus – Experian, Equifax, and TransUnion. Your credit score from these 3 credit bureaus may vary as each of them may use different data they collect about each consumer. So, their score may also be different.

Third, some agencies will offer helpful analysis of your credit score. It means they’ll provide you with in-depth data on every good and bad items listed on your credit report. These reports are very important if you want to improve your credit score.

The last one is cost. It is better if you can get your credit score totally free. There are several ways to get your credit score for free.

So, keeping the above factors in mind, here are 6 ways to get credit score for free (or with a small fee):

Option 1 to 3 – Credit Sesame, Credit karma, and Quizzle

These are all separate services, but here they are all grouped together as each of them is totally free. You’ll have instant access to your credit scores online. You just need to sign up and answer few questions to confirm your identity.

But you must know that none of these services will provide you with FICO score.

  • Credit Sesame will provide you the Experian National Risk Model score.
  • Credit Karma will give you VantageScore 3.0 credit score, based on informations from TransUnion and Equifax.
  • Quizzle will give you VantageScore 3.0 credit score based on Equifax.

Option 4 – Credit card

Credit card providers may offer you with a free FICO score on your monthly statement. The names of those credit card providers are – Barclaycard® Rewards, MasterCard®, Capital One Venture Rewards credit card, Discover it® card, First Bankcard, Citibank, and even Walmart, etc. So, get one of these cards and get your credit score for free.

Option 5 – Ally Bank

Ally Bank also provide free FICO® Score to help its auto finance customers. This started on February, 2015. However, the full operational service started in 2015 summer.

Option 6 – MyFICO.com

MyFICO.com offers credit score directly for a small fee. You’ll get the access to your FICO score after signing up with myFICO.com. It’ll cost you $24.95 a month.

You can cancel your online credit report from them at any point of time, although you’ll not get your refund if it is a partial month.

Your credit score act as a booster since potential creditors review your credit report to decide whether or not to offer you a loan or cancel your application.

To ensure you’re approved for a loan, or you’ll get the cheapest interest rates, it’s good to pull one of your free credit reports once in every 4 months. It’ll help you to maintain the highest possible credit score.

By carol on June 9th, 2017

FICO score – Why consumers might get lucky to get a boost in July

Card sign-up bonuses: 3 Important points to know before cashing in

In July 2017, the credit bureaus have announced that they’re taking the initiative to eliminate or “purge” most of the tax liens and public judgments from credit reports. Indeed, that’s a big relief for most of the consumers.

The three credit bureaus, Equifax, Experian and the TransUnion, are going to implement new rules for new and existing tax lien, public judgment records, or civil judgment data starting around from the 1st of July 2017.

So, practically this means – Consumers having tax liens or judgments on their credit reports are getting that information erased from the reports totally.

Tax liens are different from other negative items on your credit reports. Tax liens aren’t directly reported to the credit bureaus by your state taxing authority or the IRS. The three credit bureaus actively look out for such information regarding public records.

There’s no obligation in the FCRA (Fair Credit Reporting Act) that’ll require this removal of liens and judgments. Even there’s no conflict in the settlement language between the credit bureaus and all attorney generals that can influence this decision.

This choice is totally made by the credit bureaus for the betterment of common people.

Normally a judgment stays on a credit report for 7 years from the date of filing. Also, unpaid tax liens aren’t erased from credit reports. Even when a lien has been paid and released, it will still remain on the credit report.

So, the decision made by the three credit bureaus will effectively remove some of most crucial negative items from the credit reports.

This decision taken by credit bureaus is also causing some issues for lenders. They mostly use credit reports and credit scores to judge a person’s’ credibility while reviewing his/her loan application. From July onwards, the credit report isn’t going to show the judgments or tax liens anymore; so the lenders will face problem to judge riskier people with liens and judgments. Consumers with liens or judgments are twice as likely to default on loan payments.

While this is a good news for common people, but it’s not-so-good for creditors and lenders who depend on credit scores and reports for taking their final decisions. It’s now becoming very difficult for them to figure out how they’re going to differentiate between a risky borrower and a genuine borrower after July 1, 2017.

What happens next?

The approval process will be easier and approval time will be short as well. So, the borrowers might be influenced and could apply for additional credit activity. As a result, it is possible that the economic activity will be boosted pretty well. But it could potentially increase risks for lenders. As I said earlier, lenders will not be able to assess genuine applicants.

Erasing judgment and tax lien from credit reports may cause changes in consumers’ credit scores. As per myfico.com, approximately 12 million U.S. consumers, or about 6% of the total U.S. citizens have FICO credit scores, and they’ll notice the increase in their scores because of this decision.

Check out:
My spouse has a bad credit: How will it affect me?
7 ways to improve credit score while having burden of debt on your back

By carol on May 26th, 2017

Card sign-up bonuses: 3 Important points to know before cashing in

Card sign-up bonuses: 3 Important points to know before cashing in

Credit card sign-up bonus has become very popular these days. Many credit card companies offer sign-up bonuses for opening a new card. You may get rewards like cash back, points, double cash back, miles, free hotel stay, etc. All the sign-up bonuses are enticing. Many people are applying for a credit card just to get those sign-up bonuses. But there is a big catch that they might not be aware of.

The catch is, to get the bonus, you need to spend a certain amount on the card within a stipulated time after opening the account.

Apart from this, many terms and conditions are there behind the card sign-up bonuses.

Gary Leff, the writer of the “View from the Wing” said, “The bigger the bonus, the higher the spending requirement. Minimum spending requirements can range from less than $1,000 to $5,000 or even more. It’s fairly common to see offers in which you must spend $3,000 in 3 months.”

Here are other untold credit card sign-up bonuses catch you need to know beforehand.

1. Understand the offer’s terms and conditions

As I have said in the introduction that getting the sign-up bonuses is costly. You have to spend a certain amount within a certain period to get the sign-up bonus.

So, the truth is credit card sign-up bonuses is pushing you to overspend.

So, if you want to apply for a credit card just to get rewards, then think twice. Make sure you know every term beforehand. Try to know how much you have to spend to get the point or cash back.

After knowing the exact amount, ask yourself whether or not you are comfortable spending the particular amount within the stipulated time.

If your answer is yes, then go ahead and apply for the credit card to get the rewards. If you think you are able to spend $3000 within the time, then leave the idea of applying for a new credit card.

2. Not all spending will go on your new card

Remember, not every dollar of your spending will go on the new card.

Often, mortgage servicers, insurance companies, local utility companies, and landlords charge a certain fee to pay by a credit card; and it will cancel some of the benefits of a sign-up bonus.

3. Know the exact timeline

The terms and conditions of sign-up bonuses varies from one company to another. The common rule is that the credit card holder needs to spend a certain amount in a fixed period.

The catch is, knowing the “fixed period” is very tricky.

Make sure you know the period for meeting the minimum spending criteria to get the rewards.

It is advisable to ask the credit card company about it. The company will tell you in detail and also inform you regarding the spending progress you have made for the sign-up bonus.

Lastly, the cards with good sign-up bonuses usually come with annual fees.

Don’t assume that the annual fees will count as your spending; only your purchases count. Card related charges and fees are excluded from the spending goal. However, be aware of credit card debt. Don’t purchase things that you can’t afford; otherwise, the credit card debt trap is waiting for your grand entry.

By carol on May 12th, 2017