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7 ways to improve credit score while having burden of debt on your back

how-can-you-grow-your-credit-score-while-being-in-debt
Your credit score can be hard to grow by 100 points while you’re in debt. A good or excellent credit score can be maintained through good financial habits.

You may apply for a low-interest loan to pay off your other high-interest loans or transfer credit card balances to a card having a zero-interest balance transfer fee. These options might provide you a safe passage to get away from debts; but, to take advantage of those options poor credit could be a hurdle for you.

If you’re searching for ways to get out of debt and also increase your credit score, consider the below-given options.

1. Check out credit card balances

The most important factor in your credit score is your credit utilization. Credit utilization denotes the percent of credit you are using from your available revolving credit limit. The lower that percentage, the better for your credit rating. The optimum percentage of a credit utilization ratio is 30 or lower.

So, if you want to boost your score, try to pay off your balances every month and use your available credit as low as possible.

You can also check if your credit card company will accept multiple payments in a month.

2. Avoid applying for several new credit cards

Don’t apply for several new credit cards. Try to avoid it as this approach could backfire and hurt your score very badly. If you really need to open a new credit account, maintain it wisely and make payments on time.

On the other hand, don’t close unused, old cards to raise your score. Keeping old credit card accounts are good due to their long credit history.

3. Set automated payment reminders

Making on-time payments is helpful for building a good payment history and to boost your score.

Few banks offer payment reminders through their online banking system, this facility provides you advance notifications through Emails or text messages about your coming payment dates. You could also enroll in an auto-debit payments facility provided by your credit card provider.

No matter what option you choose, the thing is you have to pay on time every month.

4. Pay off debt in collections

In some special cases, once you get a negative mark on your credit report, there’s no other way you can remove it easily.

A negative mark’s effect will be removed over time, but it may take 7 to 10 long years to be fully dissolved from your credit report.

However, the latest FICO Score and Vantage Score don’t retain some negative items like already paid collections accounts. So, if you can pay off balances on those accounts that are currently into collections, it would have a prompt positive effect on your score.

5. Use cash instead of credit cards

It is the best way to reduce your credit utilization ratio. You can start making any type of payments by cash instead of your credit cards. It’ll keep you from winding up in more debts in the coming days. Try to stick to your decision firmly until your debts get under control.

6. Try to maintain different credit types

Try to maintain different types of credit lines successfully. Regular payments on student loan, auto loan, mortgage payments and credit card bills will portray your credibility through a good credit score.

7. You need to budget your finances

Budgeting is especially good for repairing credit while having debt burden. Through budgeting, you can separate your funds for daily expenses, debt payments, and emergency expenses. By this way, managing your finances as well as credit repairing will be a lot easier.

The toughest part of improving your credit score while being in debts is keeping the patience. You will definitely achieve an appreciable effect, but it will take time to reflect in your score. There is no quick fix to grow your credit score sky high; it’ll take few years to grow.

Read more:
What are the grave mistakes you need to avoid while building credit?
What are those credit score killers that you must avoid?

By carol on December 7th, 2016

Do you want hassle-free travel? Follow these 8 credit safeguard tips

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Travelling is all about hanging loose, free from worries and spending some quality time with dear ones. To make it more hassle-free and smooth, people are taking help of technology for booking flights, hotels, etc.

GPS makes road journey more hassle free, new aged apps make booking more convenient, and most importantly credit and debit cards make traveling safer.

But, as every bright sight has a disadvantage, technology is not an exception. Sometimes, people forget this fact and commit blunders and scammers take full advantage of them.

Thus, many people experience a total mess in their travel and learn a lesson.

Read my article so that you can learn the lesson beforehand and enjoy a hassle free, flawless vacation alone or with family.

1. Carry fewer cards

Carrying a wallet full of credit cards is a big boo-boo. Carry only 2 or 3 that you need the most. Make sure you have a backup card in case the first one is lost, canceled or stolen.

But, keep the backup card in a safe place or in the hotel room to avoid hassles.

2. No debit card, please

You heard right! Using debit card is not safe during traveling; especially for purchasing items. Debit only at ATMs to get cash. It has been seen that the card details or the magnetic stripe information get stolen while swiping the debit card at the stores.

Also, make sure you change the PIN time to time for its safety.

You need to be careful while using ATMs as well.

3. Give prepaid card a chance

In my opinion, a prepaid card is perfect for traveling purpose. Because it provides zero liability in case it’s lost or stolen. However read the terms and conditions carefully.

4. Recheck the terms before moving out from home

Do you know that some card charge a fee for foreign transactions?

So, verify yours from the card issuer before moving out. If you’re out for a long trip abroad, it will help you save a significant amount of money.

Keep the card details in a safe place.

Keeping the record of the card along with the card is a blunder; so no!

Don’t keep the card and the details together in a same bag or wallet.

5. Say “no” to unsecured internet connection

Free internet connection at a public place is enticing but dangerous. Try to avoid logging in using a free Wi-Fi connection. In case you don’t have any option, connect to it very carefully.

Make sure the website you’re browsing is secured.

For example, go for HTTPS://www.website.com instead of HTTP://www.website.com.

Also, don’t log in to just check how much balance is left in the account. Use the internet only when you need it.

6. Check your credit card statement time to time

Once you know the internet you’re using is safe, check your credit card statement to make sure there is no suspicious activity.

If you get any mail regarding any suspicious activity on your card, then block your card and inform the card issuer as soon as possible.

So, checking your credit card statement is necessary.

7. Inform your card issuer about your traveling

Your card issuer knows where you live, but when they see charges coming from another place that isn’t your mentioned place, they might block or freeze the card suspecting identity theft.

So, to avoid this kind of confusion, provide details about your itinerary to your credit card company.

Inform them which place and which dates you’ll be on vacation.

Ask the issuer to provide you a contact number.

Thus, you’ll be able to communicate with them easily when required.

8. Report the loss or theft immediately

If you report the loss sooner, then your liability is limited to $50 only.

So, try to report the scam or theft to the issuer as soon as possible.

However, now most of the credit card companies offer “zero liability” card as well.

Some easy tips to remember while traveling

Below are some handy tips for you if you don’t have time to read the whole article:

  1. Don’t let your card go. Keep it in your eyesight. If you let a waiter swipe it, then make sure you get it back.
  2. Keep the card in a secure wallet or a money belt inside your jacket to avoid pick-pocketing.
  3. Keep some cash to avoid hassles after losing the card.
  4. Use only ATMs of your bank.
  5. Write down all important contact numbers in a paper in case you lose the wallet and the mobile together.
  6. Use an Email for travel purpose only. Make sure you don’t use your business or professional Email for travelling purpose.
  7. Educate your family members as well regarding the credit card safety tips while travelling, to enjoy a smooth vacation.

You may also like:

Mistakes you shouldn’t do with airline credit card
What are the benefits of a gas credit card?
10 Startling facts about credit card scams and how to avoid them

By carol on November 25th, 2016

How much credit card companies snooping around their consumers

what-credit-card-companies-know-about-consumers

In our financial world, credit card companies have an eagle eye view on any financial transaction we perform. We do most of our monetary deals (like shopping, buying movie tickets, paying utility bills, medical bills, etc.) through credit cards. So, if the credit card companies want to know about the interests of American consumers, there’s no doubt that they’ll need to check the credit card transaction histories.

That’s why many reputed credit card companies, such as American Express, Capital One, JP Chase Morgan, and Citibank are always looking for big consumer data sources.

So, let’s discuss what type of data they know about consumers:

1. Your signature

If you’ve any doubt against any transaction or charges, you can ask your card company to verify your signature and proceed. Credit card companies can send you the receipt copies.

2. Your location and preferences

Credit card companies may track the places where you often visit or your favorite hotels, where you’ve checked in. They are also aware of the top ATMs you use and how frequently you log into your mobile app. Credit card companies can follow your tracks and send coupons from local stores.

You must remember that with new tracking technology, scammers may also use this information for identity theft purpose.

3. Your marital issues

Most credit card companies check their customer information to find out traces of financial issues. Credit card companies may use that information and decide to lower your credit limit.

FTC (Federal Trade Commission) once filed a lawsuit against CompuCredit. The case was filed for lowering the credit limit for Visa Aspire consumers who used their cards for marital counseling or other related deals.

4. You’re a regular customer

Credit card companies love regular customers. They pay on time bills, use the credit card regularly, and avail offers provided by the credit card company. They tend to make a lot of transactions and build a good payment history on their cards.

5. Your designation or job profile

Your credit card usage may reveal your designation. If you are one of the top heads of a company and use your card for company’s business, the credit card company may list you up as their top priority customer and provide you premium advantages. Sometimes they may send you attractive business card offers for your whole staff.

6. Your abusive nature

If you’ve called the credit card company and for any reason used vile language or abusive statement, credit card companies may tag your account and make a note on your profile as a “verbally abusive” customer. From next time onward, the customer care executive will be on guard before receiving your call.

7. You’re a shopping freak

Credit card companies tie up with retail stores and create special offers for you based on your previous shopping.

If you were a regular shopper at Walmart but haven’t been back in a while, an online coupon or discount card may pop up from your Email or app.

8. Whether or not you’re risky

When you contact customer care service, the representatives can see your profile status. Some companies also show your profile with “green” (normal) or “red” (risky) indicator, depending on your card usage and payment history.

Based on that indication, the card company may revoke their services and cancel the card.

9. You’re about to cancel

Credit card companies will analyze your account information, and if you haven’t been using the cards for a long time, they might consider your account as dead or assume you’re going to close the account.

So, to retain you, they might provide you heavy discounts and offers.

Credit card companies gather information about us through considering our transaction patterns, usage quantity, usage type, usage frequency, card balance, payment history and other factors. So, as much we keep these factors straight, as consumers, our profiles will become valuable to them.

By carol on November 11th, 2016

Should you cancel a credit card that is paid off?

should-you-cancel-a-credit-card-that-is-paid-off

Having credit card is good. But suppose you have a credit card that you recently paid off, and it’s lying down inside of your wallet. It’s a very high-interest card with zero reward program, and you might be feeling relaxed after having no balance on it.

But now the question is, do you need to close totally?

There are some good and bad effects of keeping that ‘paid off credit card.’ So we must decide only after reviewing those pros and cons.

a. If you want to retain the credit card – You must consider:

1. Keeping that card may enhance the risk of minor identity theft. If you’re no longer actively using the card, the risk is quite low. But, if you use that card often, the risk might get severe later on.

Solution – You need to cut off the card asap. By doing this, you’ll be free from any risk of misplacing it. It will be better if you can burn it over an open fire.

2. If you choose to keep the card, there’s a chance that you’ll use it again. If somehow you use it too frequently, you may again fall into debt. It’s right that you’ve already overcome that situation once, but can you have the guts to do it again?

Solution – Remove that credit card details from online store websites. Some retailer websites may remember your card number and PIN, so make sure to clean up your account and remove cookies/auto-fill records from the web browser. As soon as possible, remove all the traces of that credit card from the web world.

b. If you want to close the credit card – You must consider

Closing a credit card account may affect your credit score negatively.

    • When you close this card, you’ll also cut off your total available credit. So, your credit utilization ratio will increase. It is because your credit usage remains intact, but your available credit limit reduces.

The negative impact will get away slowly, probably after a year. But, during that time, your low credit score can create problems for your other financial decisions, like:

  1. Your insurance rates can go higher
  2. You may have difficulties to get any new, good job
  3. Lenders can reject your mortgage application
  • A good credit score consists of credit mix (10%) and other related factors. So, if you have only this credit card, by closing it, you’ll hamper the balance of your credit mix.
  • If that credit card bears the longest credit history amongst all your credit lines, it would be wise to keep it live. Long credit history is another factor that affects your credit score, by approx. 15%.

Solution for the above situation – Before closing that card, you must verify:

  • Are you going to shift your job? If yes, don’t close that account right now.
  • Applying for a mortgage or a car loan in the near future? If yes, put a hold on closing that card.
  • If you’re going to close your one and only card, it’s better that you go for few more cards to maintain the credit mix.
  • You also need to reduce your credit usage, unless it’ll hurt your credit utilization ratio.

Keep the account going on until you fulfill all your financial plans. If you don’t have such plans right now, you can close that credit card account.

Read more:
Things you need to focus on while closing old credit accounts
What are those credit score killers that you must avoid?

By carol on October 24th, 2016

Learn credit lessons that your parents forgot to teach you

learn-credit-lessons-that-your-parents-forget-to-teach-you

Most of us learned our money habits from our parents or grandparents. Many of us became lucky and learned different credit-lessons from our parents that helped us to follow the path of financial success, but all of us aren’t so fortunate.

Along with what you have learned from them directly, you might have to adapt few other credit facts to make a strong bond with your money.

You might not agree, but our parents might haven’t taught us all about credit. There are few lessons we have to learn on our own.

Brush your knowledge and check out whether or not you know these lessons:

1. Credit reports aren’t always correct

The information on our credit report is provided by the credit bureaus. So, we usually assume that the information will always be complete and accurate. But it’s not always true.

According to FTC studies, nearly 25% of consumers find errors on their credit reports.

So, you must check your credit reports regularly. As per law, you can fetch your free credit reports once a year.

While going through your reports, you may find any credit entry that is reported twice in your report. If this happens, it will surely increase your debt-to-income ratio (DTI) and your creditworthiness will be hampered.

2. It’s great to have good credit

Having a good credit means you’ll be entitled to get the best offer when you’re going to apply for financing. Having a bad credit score is not only frustrating but also can be very expensive.

If you’re going to apply for a loan with a poor credit score, most of the lenders will offer you loans at comparatively high-interest rates. You may need to deposit a good amount at the time of opening new utility accounts. Even insurance companies also charge you with high insurance premiums.

It’s for sure that as a consumer, you can save a lump sum amount over the course of a lifetime if you have good credit.

3. Credit cards are good

If something bad happens with our finances, it’s very common that we put all the blame to the credit card companies. However, we must know that most of the time it’s our bad financial habits that make us the sufferer. Good financial habits come with positive feelings but bad financial habits always make our relationship bitter with our creditors.

Credit cards are most useful for developing a good credit score or for building a good credit history.

As long as you responsibly use your credit cards, your creditors will remain happy and your credit score will grow.

4. Paying interest can be painful

It’s normal that you need to pay off your monthly credit card bills. But things becomes worse when you also need to pay interest on your card.

In today’s world, most of the credit card companies charge variable interest on the credit card balances. If you decide to pay the minimum payment on your cards and carry your high balances forward, you’ll be in a deep trouble. It’s because the interest will be charged on the remaining balance and at the end, you might be paying more than what you actually owed to the creditors.

5. It is difficult to rise but easy to fall

So many times our parents have told us about paying our dues on time. They advised us to keep the debts low so that we could maintain good credit. But what they probably missed out that if we somehow forget a payment, it will become difficult for us.

Being delinquent will lower your credit score more than what you think. A missed payment can drop your score by as much as 100 points. To earn that 100 points back, you need to work very hard.

Read more:

The 5 biggest reasons to enhance your credit score

By carol on October 14th, 2016

What are those credit score killers that you must avoid?

Credit-score-killers-you-must-be-aware-of

Your credit score can range from 350 (poor) to 850 (excellent). It is not just a number showing on your credit report. The higher it becomes, it’ll be easier for you to become eligible for new credit lines. Not only that you’ll get the best rate and terms, but you’ll also become financially safe and sound. But beware of the negative items that can be listed on your credit report. They can damage your credit score more than anything else.

Here are some aspects that you may avoid to save your credit score:

1. Carrying huge account balances – Having a huge balance on your credit card can make your credit utilization ratio higher. The ratio is calculated by using the last month’s balance-in-hand, that is showing on your bill. Your score can be damaged even if you pay off the entire balance each month.

2. Closing your cards – Closing your credit cards can lower the available credit amount, which can hit your debt utilization ratio.

3. Paying your bills late – Your payment history is always in no. 1 priority that lenders consider. It also makes up nearly 35% of your FICO score. Paying your bills late on student loans, credit cards, home loan payments, utility bills and even medical bills may lower your credit score if it gets reported to the credit bureaus.

4. Getting defaulted – Declaring bankruptcy or going for foreclosure may easily cut off 100 points or even more from your credit score.

5. Having too many credit lines – If you’re continuously adding more credit lines, credit companies may consider it as a potential risk and you may also become overextended at some point.

6. Not having a credit card – Without having any credit history, any lender may typically consider you as unworthy. If you don’t have enough activity on your credit file, it will not generate any score either. So, without any credit score, the lenders won’t treat you as a worthy applicant for a loan.

7. Co-signing – A co-signer bears similar responsibility for the amount owed to the creditor, meaning any late payments or defaults will be listed on your credit report if you cosign a loan.

8. Collection activity – When the creditor gets tired of getting non-cooperative behavior from you, he might appoint a third-party collection agency. Either the real creditor or the collection agency may report your account (in collections) to a credit bureau. As a result, your account will be marked with a “collection” status. This can lower your credit score by a substantial amount.

9. Public recordings – Tax liens, judgments, and similar activities are considered like killers for your credit rating. Judgments remain for 10 years; in some states, it may remain listed for 20 years, even if you pay off the debt. Bankruptcies can remain in your credit report for long 10 years and unpaid tax liens never go away.

10. Debt settlements – If you pay off only a part of your unsecured debt (for example, credit card debt) through a settlement, it can be harmful to your credit score.

11. Foreclosures – If you don’t pay off your mortgage, the lender will eventually go for foreclosure and occupy your home. Another 7-year negative notification will lower your score. This also happens when you convey your home to the lender in a deed-in-lieu of foreclosure to avoid proceedings.

12. Repossession – When you don’t pay off your car loans, a “bounty hunter” will be coming after your vehicle without any notice. It’s a legal activity. The person can repossess your property and your credit score will definitely fall down.

Remember, your credit score is the key to your future financial success. Never ignore any single reason that can hurt your credit and make you a dead meat.

By carol on September 26th, 2016

What are the ways to build a good credit history being a new grad

How-new-grads-can-build-credit

Establishing a decent credit history is very important for us. Qualifying for auto loans, renting apartments, mortgage loans, and even employment depends on your credit history. So it’ll be a tough call for you in future if you complete the graduation without a decent credit history.

Ironically, the students have much tougher time in building their credit than their classmates who already carrying credit cards. Building credit after graduation become much tougher for newly grad students as credit card companies assume that your parents will no longer pay off your bills. Fortunately, the newly grads can consider few ways that can be helpful to build up their credit.

Here are those important ways to consider:

1. You must understand how credit works

You can open a couple of credit cards and opt out a small loan to improve your credit score, but you must make each payment on time.

It’s very surprising that how credit works for us. For example, having no credit cards will make your profile a risk to the credit scoring system. It is because without having any credit activity the scoring system can’t assess your creditworthiness. Without assessing your creditworthiness, the lenders will not approve your application.

You must remember, that a lender will also consider other aspects besides your credit score while determining your creditworthiness. These may include collections, bankruptcies, charge-offs, and even judgments against you. Even if your score is relatively less, if you have more positive items on your credit report, you may be considered ‘credit-worthy’ to your future creditors. So, try to add positive items on your credit report.
Know more: The 5 biggest financial factors that affect your credit

2. You must pay before due date each month

Making every single payment on time impacts on your credit score more than anything. Your payment history considers 35% of your credit score, more than any other factor.

To make sure you don’t forget

a. Set up automatic bill payments directly from your bank account. Put all of your major payments like power bills, mortgage or rent payments, cable and telephone bills, auto loan payments, etc. on auto-pay.

b. Communicate with your each creditor and set up auto-payments every month if possible. You can do this by logging into the company’s website, or you can call them directly.

Your credit card balance can vary each month due to the credit card bills. If your bank account balance is getting lower due to unpredictable payments each month, you can set up reminders on selective dates when you need to pay off credit card bills. This way you can backup your bank balance by filling it up with due dates.

3. Use credit cards wisely

Credit cards are seductive but also necessary.

You must take enough time to set up a balanced spending habit while using a credit card.

A few tips:

a. Don’t use the card just because you got it for free. You must limit the number of cards you have. Don’t opt for a card without knowing its perks and expenses.

b. Stay in the driver’s seat. Always research and shop before opting a credit card or loan. Don’t sign the agreement without comparing features, interest rates, and annual fees.

c. Good habits always give you freedom. If you pay off credit card bills fully every month, you can concentrate on other beneficial features like rewards and fees instead of focusing on rates.

4. Go for credit mix

You must use a mix of credit types for a healthy credit score.

There are two kinds of credit:

a. Open-end or revolving lines of credit: For example, credit cards, (on which you can make minimum monthly payment or pay full outstanding balance ), borrowing against a credit limit.

b. Closed-end or installment loans: Auto loans and mortgages are considered as installment loans. The main features of this kind of loans are fixed monthly payment made within a fixed date.

Your credit mix shows the lender how efficiently you’re handling different type of credit lines. Although it accounts for just 10% of your credit score, having a good credit mix along with a good payment history will build your FICO Score.

5. Understand how much credit you should use

The credit mix helps your score to grow, but the account balance amount also matters. It accounts for 30% of your credit score. To be on a safer side, opt for less than 30% of the amount you are allowed to borrow.

Use less than 30% of your credit limit on each credit card.

For example:

If your credit limit is $10000, borrow less than $3000.

Why so? It is because using only a small portion of your credit limit is a decent way to pump up your score.

6. Whittle your student loans

Don’t let your student loan stop you from building a good credit score. Your score will rise as your loan balances diminish. So, start paying off the student loan to reduce the principal amount. It’ll show that you’re using less of your available credit.

7. Begin with a small credit line

To establish your credit, here’s what you can do initially:

a. Go for a credit union card – Opt for a card from a credit union. It might get easier to have your first card from there rather than from a bank.

b. Use a secured card – Secured cards are initially best for learning how to use a credit card. You need to put a deposit, and that’ll be your credit limit. Though it’s your money, but you mustn’t use more than 30% of your limit. Your aim is to build credit, so use it wisely.

c. Check whether your payment behavior is reported – Some secured cards report your payment record to the big three credit reporting agencies (Experian, Equifax and TransUnion), but others do not. Opt for those secured cards that report it at least to these agencies.

d. Shop carefully – Secured cards can be costly, so don’t forget to research, compare and shop carefully before signing the deal.

e. Look for a card with a grace period – The grace period is a time frame during which you can pay off your dues without paying interest. So, don’t overlook the grace period while choosing a card.

Read more:

The 5 biggest reasons to enhance your credit score
What are the grave mistakes you need to avoid while building credit?

By carol on September 15th, 2016

What should you choose – A business credit card or a business loan?

business-credit-card-or-a-business-loan

The first universal credit card was introduced in 1950. Since then, Americans prefer the habit of buying items on credit and paying off afterward. Later the credit card companies added more benefits with the cards to attract new potential consumers.

In today’s world, credit cards are not only used for personal use, but people also use them for business purposes as well. It’s quite common that people use credit cards to buy business essentials such as furniture, inventory, and many other things while starting their new business.

Today we’ll discuss the pros and cons of opting a business credit card or taking out a business loan. Both the options are good, but it’s crucial for you to know which option is the best according to your situation.

A business credit card

First, let’s review the pros and cons of a business credit card:

Pros of a business credit card:
1. It is easier to take out a business credit card than a business loan.
2. It doesn’t need any collateral.
3. A business credit card is considered as a good line of credit and helpful for building high credit score if you can use it wisely.
4. Several reward programs along with a business card can be very beneficial.

A business credit card can help you to manage your business oriented costs temporarily if you experience a major downfall. Keeping such a card can be beneficial for your company as it’ll help you to build good credit, too. It’s also useful for foreign business transactions, as well.

Cons of a business credit card:
1. Interest rate on a business credit card can fluctuate at any point of time.
2. There are chances of credit card fraud or any other security issue at any point of time.
3. You may have to bear few fixed charges associated with keeping a business credit card.

As stated above, the interest rates on your business credit cards may increase over the time. So, if you don’t use these cards too often, it may become costly for you to hold such cards. Like other credit cards, the terms & conditions also may change on business cards.

In addition, there are some security issues with a business credit card. A business has numerous people associated with it. These may include (without making any exception) the manager, a salesperson, the customers, vendors, employees or even a maintenance person. Amongst these people, anybody can misuse the card without anyone’s concern. However, in the end, the company will be liable for the monetary loss incurred due to that credit card fraud or identity theft. So, it’s a bit risky to keep a business credit card within every person’s reach.

A business loan

Now let’s review the pros and cons of a business loan:

Pros of a business loan:
1. You can arrange a large sum of money for your business development and to meet other related costs.
2. Interest rates on a business loan may be tax deductible.
3. Interest rates on business loans are quite low and fixed.

Cons of a business loan:
1. A business loan requires collateral.
2. A business loan may take a longer time to get the approval than other loans.
3. Poor or bad credit may create issues to get the approval.

As stated above, a business loan comes with a low and fixed interest rate.

If you have a good credit score, you’ll easily get approval for a business loan.

Business loan interest rates also can be tax deductible.

The downside of a business loan is that it is usually provided for businesses that are already thriving. So, companies that are already making a profit and wish to grow further are more likely to get the approval easily. Furthermore, most of the banks may take months to review your application before making the final decision.

Deciding the perfect credit line for your business is a quite tough job. You need to consider the lifespan of your business, the purpose of getting the funds, and the type of financing you would prefer. However, if you’re already an owner of an established business and need capital, a business loan can be easily available to you. On the other hand, getting a business credit card is easy if you have good credit. So, your first step should be analyzing the pros and cons of these options and then you should decide.

By carol on August 30th, 2016

What are the grave mistakes you need to avoid while building credit?

mistakes-to-avoid-while-building-credit

As a human being, we all make mistakes. But, some mistakes we can easily rectify. For example, forgetting about an essential commodity while shopping may take your extra time and can cost you a little more. But, if you somehow wrongly handle your credit, it may cost you thousands of dollars. If your credit score is bad, not only you’ll suffer a big monetary loss, but also you can’t be approved for a mortgage or other line of credit with best rates.

We all make mistakes, but if we want to improve our credibility, we must avoid some major credit mistakes for building a better financial future.

1. Missing your debt payment

Do you want to damage your credit score? You can do it easily by making a late payment or simply by not making payment at all. Since all of your future lenders can see your payment history traces through your credit score, you must be regular on your monthly debt payments and it must be done within due date. Making on-time payment is considered as an important factor to raise your credit score. Just one missed payment can ruin all the hard work and eventually drop your score to some extent.

So, what can be a possible solution? Things you can do is to initiate an automated payment structure if possible or transfer an approx bill amount per month (gross) in your checking account. You can also set up calendar reminders for your due dates and pay your outstanding bills on time each month. As a result, you’ll be able to know about your important payments dates and also that you have enough money to pay everything off.

2. Using maximum credit limit

Using your available credit to its maximum is not only harmful to your bank account, but the lenders also become curious about your spending behavior. It is because they believe consumers who spend their available credit to the maximum limit are much more likely to default on their payments.

You need to keep an eye on your credit utilization ratio (divide your credit balances by your credit limits) and take required step to control it. It is good to maintain your credit utilization ratio less than 3:10 if possible. You can make multiple payments in a month, or ask your credit card company to increase your credit limit, or just increase your cash usage – these methods can help you a lot to lower your credit utilization ratio.

3. Opting for too much new credit lines

Applying for too many credit lines have a bad effect on your credit score in different ways. Every time you send an application for a new credit line, the lender will pull your credit report, and it’ll be included in your report as one hard inquiry. One or two hard inquiries may have very little effect, but multiple inquiries can surely raise a red flag for your future creditors and lenders. On the other hand, the more you open new credit lines, the more you’ll access to your available credit. It will lure you to spend more money than saving.

So, you must control yourself and limit the applications. Hard inquiries will fall off from your account within 2 years, so you may wait for that time. However, you can also ask your creditors to increase your credit limit. If you’re satisfied with your current credit limit, don’t take out any new credit card.

4. Not using your cards at all

Creditors want responsible consumers who can use credit well and pay responsibly. However, it’s not possible for you to prove yourself responsible without using credit cards or any other line of credit. In addition, if you don’t use your credit cards, the creditors may close your account, and that’ll surely damage your score.

The best way you can use your credit cards is by making small purchases. Small credit card bills are easy to pay off, and it’ll also help you to retain your credit account. Also, it’ll help you to build up a good payment history for your future creditors.

5. Chasing rates

Transferring balances to a low-interest balance transfer card is a good option for borrowers to save money and pay down debt. However, as we discussed earlier, applying for new credit cards can include hard inquiries on your credit report. Various fees and charges may also add to increase your debt burden. Instead, do some market survey and stop too much balance transfers.

It’ll take several years to recover from your credit mistakes and rebuild a good credit report. However, by choosing the right path and avoiding above mentioned mistakes, you may keep your credit in a perfect and healthy condition.

By carol on August 18th, 2016

Things you need to focus on while closing old credit accounts

do's-and-don't's-of-closing-old-credit-accounts

It is always wise to maintain more than one credit card account. However, if you already have too many cards in your wallet, you might want to cut down any existing credit card that you’ve stopped using recently.

There are few reasons behind this decision that you must be aware of:

  1. It’ll help you to keep track on all the active credit cards. It’ll also clean your credit report.
  2. You’ll be qualified to get a loan as your revolving debt amount will be lowered.
  3. It’ll help you to avoid unnecessary payments. Without using the card at all, it’s a waste of money to pay yearly charges and fees.
  4. It’ll provide protection regarding any identity theft. Con artists may target your unused cards and you’ll end up paying a lot towards things you didn’t buy or use.

To help you understand what you should and should not do when closing old credit card accounts, here are a few tips to keep in mind.

Do’s…

1. Close unused high interest cards – If your card has a high interest rate or excessive fees, and your credit card company isn’t willing to reduce the rates or waive fees, you may surely close the account, especially if you aren’t using the card.

2. Pay balances on your active accounts – You can request your creditor to close new charges in your existing accounts. In the meantime, you can pay down the balance at every billing cycle. It is a good option for heavy credit card users to stop further spending as well as lowering their account balances.

3. Try to retain some accounts – You can do this to keep your credit score high. The more you actively and responsibly use your credit, the more chances you’ll have to get approved by your future creditors.

4. Don’t forget to check your credit reports – Check for updates and errors after you close accounts. Usually, creditors and credit bureaus will take 30 to 60 days for updating your records. The details may stay on your credit report for 7 or more years.

5. Dispose of canceled credit cards – It is crucial to dispose off the closed credit cards. You must cut the cards in half so that no one can misuse your credit card and reopen the closed account.

6. Pick one card for general use and make regular payments – You can select one low-interest card and use it for day to day spending. You can reserve your other cards for any emergency or specific cause. By paying off that single card on time every month, you won’t have to think of carrying a huge balance. On the other hand, urgent expenses can be handled with your higher-interest cards. However, don’t forget to pay them off on time.

Don’t’s…

1. Closing the oldest credit account – Your credit history is one of the 5 prime factors of your credit score. So, if you close your old credit card accounts, your credit history will become shorter and it may damage your credit score. Therefore, think before closing your credit accounts.

Try to have more than 7.5 years of open accounts to have a good score.

2. Just throwing off unused old cards – Don’t just throw away your unused cards; that’ll be foolish! The right way to close one of your unused credit accounts is to send a certified letter to the creditor. Normally, within 10 days you’ll receive the closing confirmation letter in your hand.

3. Canceling several credit accounts at a time – If you want to cancel more than one credit account, then try to keep a time gap between closing two accounts. If you don’t, it may increase negative suspicion from existing creditors.

4. Over-consolidate balances onto one card – You must keep your credit balances under 30% of your available credit limits if possible. If anyhow you cross the limit, it may hamper your credit score.

By carol on August 2nd, 2016