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How to help your kids build their own credit?

How to help your kids build their own credit?

To be true, there’s no specific age to help your kids build their own credit.

I can understand how worried you are about your kid’s ‘credit future’, given the current debt crisis our country is going through. Good credit seems to be a precious jewel to preserve nowadays.

But worry not. Building a good credit portfolio from an early age is actually very easy. Only you just have to have patience and play a few tricks to set the good credit scores rolling.

So how to build credit for kids?

  • First teach them healthy money habits:

Proper training crafts the brightest of soldiers.

First teach your kids how to use money wisely.
Soon they will be playing fireball with loans and cards. Hence build the platform for them.

Show them the differences between spending and saving.

Tell them that the more they save, the more can they spend, and the less will they have top borrow from people.

You see I can’t tell you how to teach your child financial ethics, because that will be beyond the scope of this article.

But all I can say, is that, your son should at least know 3 basic things.

  • Nothing comes for free in this world. (Never give them pocket money for free, make them do some work)
  • Credit is what he borrows from others.
  • And credit once taken, must be repaid
  • Have them open their first savings account:

This is the second thing you should do. When they will have their first savings account and a debit card, they will know the basics of banking.

If they are responsible in using a debit card, then they will grow the habit of using plastics cards wisely.

Also having a savings account open, will bring in them the tendency to save money. You need to teach them that savings is way more important than spending.

  • You can make them the authorized user of your credit card:

The first step toward helping your child build credit history, is to make them the authorized user of your own credit card, if they can’t qualify to get their own.

Now few things are completely up to you, like how you will teach your kid, not to overuse the card or that this card is not for your kid to use, but to only establish credit history.

Making your kid the authorized user, will open his credit history. So your transactions will be reflected in your kid’s credit report too. Your payment report will impact directly your kid’s report.

Only you need to be aware of the dark side, that if your kid abuses the card and do haphazard transaction and spending, then you will have to do the hefty payments.

Hence, get these few things clear with your kid, and then go for this authorization option.

  • If they want their own credit card:

First they will have to be at least 18 years old. Next they must have a stable source of income.

So if your kids have just entered the college premises, then you can motivate them to get their own job.

After they can show the bank, that they are capable to use credit cards, then they can have their first credit account opened, on their own.

Else you can cosign a credit card with them, if they want a credit card, without meeting all the required financial obligations.

But remember, co-signing your child’s credit card, can turn out to be hectic. If your child abuses the card, and becomes helpless, in paying back the outstanding balance, then the bank will charge you, and you will be responsible to pay back the balance, because your name is on the card too!

  • If nothing works, then get them a secured credit line opened:

A secured credit card will demand you to make a security deposit, before the bank hands over to you the credit card.

The security deposit you make will be a lump sum amount, and this money will both be the collateral and the limit for the credit card.

So if you make a $1000 deposit, then the card limit will also be $1000, or a bit less, but not more.

Now if your kid can’t handle the debt payments, then the bank will confiscate the security deposit, and the account might be dissolved.

People take out secured credit cards to build credit history from scratch.

Actually it’s not at all difficult to build credit from young age. To be precise, I in fact inspire parents to consider credit as a part of their children’s education.

If we can teach the children from an early age, the use and misuse of credit accounts, only then can we expect to see a future generation in our country, who knows how to use credit wisely, and ward off the devil debts, under which our country’s economy is crushed right now!

By carol on February 9th, 2018

The mistakes with reward credit cards – How to avoid the pitfalls

The mistakes with reward credit cards - How to avoid the pitfalls

People love credit cards that earns good points and miles. They always look for cards with big sign-up bonuses and attractive annual benefits. But most of the time, people feel that these rewards cards are unworthy, when at the end of the year they tally up their finances.

If you often travel with your credit cards, you should use a rewards card every time.

But if you’re planning for a tour just because you can’t resist the mentality of collecting points, then you might be addicted to using one or more reward cards which will actually cost you more money.

To be on the safer side and protect your finances, make sure you avoid these mistakes with reward credit cards:

1. Missing the “minimum spend” criteria for sign-up-bonuses

Most of the rewards credit cards come up with a catchy sign-up bonus that requires a minimum amount to be spent by you.

The maximum time limit for the transactions varies between the first 90 to 180 days of card membership.

Few cards have different criteria such as a certain amount for a single purchase. But in both cases, the minimum amount spend remains as high as $5,000 (for example – the American Express Platinum card) or more than that.

People who are too much ambitious about getting these initial bonuses, points or offers, are often drawn by the lucrative promises. But actually, most of them fail to meet the minimum criteria to become eligible for the offers. So, they never get the bonuses.

**How to avoid such a mistake:

Make a proper plan as soon as you apply for a new rewards card. It’s better if you apply for a new card when you have a big expense nearby. The expenses may include home repairs, summer vacation trip, or back-to-school shopping. Make a note of your deadline to reach that minimum spend, ask the card issuer, and verify the date properly.

2. Overspending to earn bonuses or miles

Earning credit card points is very interesting. We don’t just use our credit cards to purchase things we need; we also make payments for services with the plastic cards so that we can grow miles and points balances.

We swipe our cards more because we get 5x or more rewards during a quarter (for example – Chase Freedom and Discover it Cash Rewards), or we make payments online with surcharges rather than using cash payment option because we really want a good amount of points in our account.

But we are doing wrong. Yes, we tend to overspend and throw our budget plans out of the list when we focus on the rewards and not on the price tags.

**How to avoid such a mistake:

Always watch how your credit card usage and earning points are changing your spending behavior. If you think your purchases are justified because you’re earning points, it might be the best to think why you’re using that rewards card. If you’re avoiding taking out money from the ATM to pay for something, you probably shouldn’t use your reward card for buying things unnecessarily.

So, if you want to avoid such mistakes with reward credit cards, think before you swipe or make online payments.

3. Not comparing card benefits with the annual fee

Usually, most of the good points-earning reward credit cards have an annual fee.

But, do you ever think how to compare the benefits that you are getting from the reward card with the money you actually pay to be a card-carrying member?

For example: Suppose you’re paying $500 a year for an airline credit card which comes with free access to a club lounge. But, every year  year, you travel by air only two or three times. In this case, you’re the loser.

The benefit of free lounge access is worth if you travel at least 10 times a year by air. You’d be better off financially if you avoid that credit card and pay $50 for a lounge day pass every you travel; it’s cheaper.

On the other hand, if you’re using a hotel credit card that gives you one free night every year by just paying $49 annual fee, you can use the benefit every year by spending at a hotel that costs $400 per night; that’d be a great choice.

**How to avoid such a mistake:

You can perform a personal annual fee checking of your cards. Don’t be overwhelmed by the benefits that sound too good to pass up without considering the card’s annual fee. Calculate and compare the value of the card’s benefits with the amount you are paying towards annual fee; trust me…it works.

 4. Earning but not using your points

One of the major mistakes the  reward credit cards users make is never using their reward points and miles. Billions and billions of points and miles are getting wasted every year just because the credit card holders don’t use them.

Isn’t it weird that people work hard to earn card benefits, sometimes even overspend, but end up with such a waste of resources?

There are many reasons for which  people waste their points and miles. You might be saving your miles for a yearly perfect trip, and avoid using those miles on some less valuable trip, or you might just want to show off to your friends that you’ve got a million points in your balance.

Most of the time the problem arises when airlines and hotels suddenly change the valuation of your points and miles. You might be thinking about buying a first-class ticket worth 70,000 points, but next month it might cost you 100,000 points.

Apart from that, some airline miles may get expired if you don’t make any activity in your account for a certain period. So, keep those things in your mind.

**How to avoid such a mistake:

You can practice the “earn and burn” method used by the frequent flyers. Make sure you are using the points and miles you have in your account and prepare plans to earn more.

By using your point and miles time to time, you can surely redeem your reward card benefits for  the best experiences  you can get.

 

By carol on January 26th, 2018

5 unavoidable reasons to boost your credit score

5 unavoidable reasons to boost your credit score

Your credit score is  your financial responsibility. It is a sign that you are capable of paying down the loans and other acquired debts.

So, if you’re having a lower credit score, then you should try to boost your credit score to a healthier level. There are other several reasons why you should try hard to increase your score.

Let’s check out 5  important reasons for working on increasing your credit score:

  1. Buying a car or a bike

Many people opt for an auto loan when they decide to buy a new vehicle. If you have a bad credit history, you may find it difficult to achieve that goal.

On the other hand, you might be asked to deposit a larger down payment than normal as you don’t have a good credit score.

After buying the car or bike, your insurance premiums can also become very high. A good credit score will help you to save the highest amount of money not only from the price of the car but also from the added associated costs with a new car.

  1. Buying a new home or renting an apartment

One of the most important reasons of all – you should showcase yourself in a positive way while buying a home. If you like to invest in real estate, you should secure your position so that lenders approve your home loan application. Not only approval, but you need to qualify for the lowest possible rate.

The lower your credit score, the higher will be your interest rate.

Even if you think about applying for an apartment, it also requires a credit check. The landlord will definitely check your credit score to verify your dependability in the past. So, you should make sure to keep your credit score as high as possible.

  1. Starting your own business

If you are planning to start your own business with a low credit score in your pocket, you might want to think twice.  Without an optimal credit score, it’s difficult to gather finances for your small business. You may have to prove your creditworthiness to your lenders through your credit score and a good credit history. You should  convince them that you are capable of handling new finances and also ensure its optimal success. Therefore, you can successfully run a business.

  1. Keeping good relationships

A terrible credit score can hamper your relationship instantly. As per a U.S. News & World Report, a bad credit score can have a negative effect on your personal life. Just like emotional conflicts can trigger serious issues with your loved one, so can your low credit score. If someday, while opting for a loan or buying a house for your special one, your credit score impede your lover’s ability to qualify, it could be.

  1. Improving your spending habits

Once you’ve decided to boost your credit score, it’s a good initiative to practice healthy spending habits. With a good credit score, you’ll be more confident of making smart financial moves with your card.  You’ll realise the reasons for which you arrived at a lower credit score. You’ll also figure out the perks of having a higher score, so you may work hard to build a better score and avoid any fluctuations.

Your credit report will be your financial friend for the rest of your life. So, make sure it portrays your accurate financial history and credit score.

MyFico suggested that people should regularly check their credit reports and dispute the errors. Few negative items on your credit report might damage your credit score badly. You should consider these few items as mistakes and work on to rectify them. Removing these errors will surely increase your credit score and provide you a boost to move ahead with a strong financial profile.

By eliminating debts and making all the loan payments on time, you may improve your current credit score. If you want to reduce your debt amount, consider setting up payment reminders or set up ACH for bills.

So, manage your finances well, pay off your bills timely, balance your spending with your monthly paycheck to build  your credit score gradually. Don’t forget to check your credit report periodically and dispute errors if you find any.

By carol on January 12th, 2018

Unusual ways to help you keep a good credit score!

Unusual ways to help you keep a good credit score!

The worst part of being a consumer these days, is probably maintaining an excellent credit score!

We need loans, we need to swipe credit cards every now and then, and we have good amount of debt payments to make!

One skipped debt payment or a slight default on loans will start dinging credit scores to some extent!
Actually, there’s only one specific rule to maintain a good credit score. The rule is, if you are taking out credit, then make sure to pay it back on time!

But this rule doesn’t always ensure a scratch-free credit profile.
If you are supposed to pay back a few hundred dollars by the end of this month, and you are paying it back 2 months later, then your credit scores will fall!

Now you would say that you are paying it back, your intentions were never wrong, only that you need a little more time!

Well, these excuses won’t work with the credit scoring models that the credit bureaus use to evaluate your credit score!

Here are a few unusual ways to keep a good credit score:

  • Try not to max out your credit cards.

 

Of all the consumer debts in our country, the maximum number of debts are incurred through credit cards.

Now a life without credit cards is practically impossible. You need credit cards for nearly any transaction you do, as carrying liquid cash every time is not convenient!

So, always try to use credit cards within the credit limit.

There is this small but crucial thing, called the credit utilization ratio! It makes up 30% of your credit score.

You should always try to keep your credit utilization ratio below 35% !

Hence, whenever you max out your credit cards, the credit utilization ratio goes above 100%, which is the worst case scenario!
My suggestion would be, always pay off your credit card balances and keep room in your credit cards, so that you don’t have to exceed your credit limit!

  • Having only one credit account is not enough:

 

The real game is to have multiple credit accounts, with all bearing positive feedback.

The information about the types of credit accounts you have, will be used by the credit bureaus to calculate your credit score!

So, your target should be to handle multiple credit accounts at the same time, with no payment defaults on them!

Example of such a thing could be, having at least 1 secured loan and 2 credit cards!

Now you surely can ask, why should you diversify your credit profile? Well, any lender should have enough information about your credit behavior before you qualify for a loan.

The lender would like to believe that you can handle multiple credit accounts, and have enough experience in the field of debts.

Just walk in the shoes of a lender once. How can someone’s expertise in credit card debt, is enough to qualify for an auto loan?

So, to get better loan terms and good credit score, you should know how to juggle with more than one or two credit accounts!

  • Beware of hard inquiries:

 

You are always advised to apply for loans or credits only if you have the highest chance of qualifying!

Hard inquiry takes place when you approach a bank or a lender for any kind of credit.
The lender will go through your credit reports and will add the amount of the new credit to see whether or not you will be able to handle it!

This temporary addition of the new credit will increase your existing debt, and therefore hurt your credit score!

Hence your credit score may fall.

So, don’t apply for loans without checking out if you have high possibility to qualify for it; else you can decrease your score for no good reason!

  • The 2017 credit report changes is what you should know of:

 

In the recent times, people are actually worried about medical debts, as these debts come into our lives as unexpected expenses and as a surprise!

Also, hospital bills, doctor fees, and the price of medicine are very high in our country. But as of September 2017, the credit report changes are doing us a favor!

The bureaus have decided to give us 6 months of time to figure out the best way to deal with our medical debts before they start getting reported to the credit bureaus!

Hence use this time if you are a victim of medical debt.
This is a great way to increase your credit score and also to prevent it from falling!

Here are some other short tips to help you keep a good credit score:

 

  • Always look out for credit report errors, and whenever you find one, you should dispute. There are a few common errors that many people have to deal with occasionally. These errors break your credit reputation and decrease your credit score. 
  • Learn to spend within your means. There’s no magic spell you can use to increase your credit score. Practice good spending behaviour and see how your credit score gradually increases!

 

If your credit score has fallen significantly, and no one’s ready to offer you a loan or credit card, then you seriously need to consider rebuilding your credit score. You can do this by taking out a secured credit card. You give a cash deposit to your creditor, and this amount will be your credit limit. This way, you will be able to reestablish your credit score!

By carol on December 29th, 2017

9 essential tips to follow if you rent a car using your debit card

9 essential tips to follow if you rent a car using your debit card

Thinking about using a debit card to rent a car? It is quite possible, but it’s not so easy. Normally, rental car companies prefer that their customers use credit cards instead of debit cards.

There are strong reasons behind this typical mentality of rental car companies. Most of the time, they become anxious. What if the debit card renter returns the car with empty gas tank and don’t pay for it? The renter’s insurance policy doesn’t cover that loss at all. So, they have no choice left rather than pushing their customers to use credit cards.

However, the rental car companies also want to keep their customers happy. So, on many occasions, they’ll allow you to rent a car using your debit card. But there are some strict rules.

While renting your card through a debit card, you might have to encounter few hassles and spend a longer time at the rental car counter due to those rules.

So, let’s talk about how you can ease up the process of renting a car using a debit card.

Read on and know about some situations you might have to face, and a breakdown of policies by the rental car companies.

  1. You’ll need cash available in your account

You need to have enough money in your bank account or the debit card you are using. It is quite possible that the rental car company might lock up the full rental amount in advance. They might also deduct a little more initially to cover up any sudden mishaps. The extra money will be refunded back to you when the rental deal ends. The entire process may take up to three weeks to complete.

  1. You may encounter a credit check

Many rental car companies will perform an automatic credit check for customers who wish to rent a car using their debit card. If you have a low credit score, the car company might reject your application. You might know that every time someone runs a credit check on you, it can practically harm your FICO score from 5  points to much more.

  1. You need to carry extra ID proofs

In addition to a driver’s license, you might have to provide few more IDs. So, keep all of your iDs’ up to date, especially your passport. You can also use your utility bill as an address proof if the address is similar to  the one on your driver’s license.

  1. You’ll need proof of insurance

Many car rental companies will ask you to submit your insurance policy papers. The process will take time as the rental car agent will verify the documents by contacting your insurance company. If you do not have enough  coverage, or if the agent finds anything fake or inappropriate, the agent will ask you to buy a proper policy. If you don’t respond to them positively, they’ll just  deny your application to rent a car using your debit card.

  1. You might be asked for evidence of return travel

Some car rental companies may ask you to show your return tickets too . This practice may depend on  company to company, and even from one place  to another .

For an example – Enterprise, Alamo, and National car rental companies” may want you to produce your return ticket if you want to use your debit card for non-airport locations. The ticket could be for an airline, a cruise, or a train.

  1. You can expect a cap on vehicles types

There are also some top class cars that you cannot hire. A Mercedes sedan, a Lincoln Navigator, a Volkswagen Touareg, or a Land Rover SUV – all these cars are not rentable with a debit card at several  rental locations. If somehow you manage to rent any of these luxury cars, their charges will be very high and the deposit money also is  huge.

  1. Your age might be a restriction

Some rental car companies do not allow people below a certain age limit to hire their cars. For an example – Budget and Avis company provide cars to the people over the age limit 25,  with debit card payment facility. Thrifty also provides same service for off-airport locations. Other companies may also need  more than one age proof for the car rental service.

  1. You’ll pay full amount at vehicle return

Normally, rental car companies are interested to take your money as soon as you book the car. They’ll accept the money through different monetary forms like cash or credit cards, debit cards, etc. Hertz and Thrifty will offer you to pay only a part of the rental money upfront when you book a car from them at least 30 days in advance with of their Cash ID cards. However, you’ll have to pay $15 surcharge for a new card every time you reserve a car from them.

  1. Rental policies may change according to your location

You should  know the debit card policies at your rental car location. You can check out the policies by logging into their website online. Select your location where you plan to rent and then check the fine print at the bottom. Review all the details of that location’s policy and choose accordingly.

Apart from that you can call the agency directly and get quotes. You can visit their local office; it is the best way to verify and negotiate rates.

By carol on December 15th, 2017

All you must know about promotional prepaid cards!

All you must know about promotional prepaid cards!

Prepaid cards and gift cards are taking the market at  their fingertips. Day by day people are getting more inclined towards buying gift cards, rebate cards or promotional prepaid cards to save money and grab offers!

But how significant and important are these prepaid cards?

Do you really need them around, or you are better off with traditional debit and credit cards?

You might hear every now and then that if you shop goodies worth $500 or more at a particular store, then the store might gift you a promotional prepaid card, worth $25 or $50.

But why is that store so eager to promote their business by offering you a prepaid card?

To make things crystal clear I will be dividing this post into two sections. One part will deal with why prepaid cards are important from a company’s perspective, and the other will be from the consumer’s viewpoint.

Part- I

Why companies prefer promotional prepaid cards than traditional marketing?

Let me come straight to the point.

It is actually an 80-20 situation, where the company, that’s giving away the prepaid cards, benefits the maximum (say 80% benefit) than you (you are on the lower side with 20% benefit).

A company chooses promotional prepaid cards for marketing because:

Promotional prepaid cards have this Call-To-Action property that compels the consumer to take immediate action! These include buying more products for limited offers, or activating the card right away, which makes you a potential customer.

  • The companies to track consumer mindset! Your purchases with that prepaid card will be accounted and the details will be used for the company’s benefits!
  • The prepaid cards have a response rate much higher than discounted products, bonus points or coupons.

The promotional prepaid cards (also known as prepaid incentive cards) are designed to reward potential and profitable consumers, and sometimes the employees of the company. These promotional prepaid cards are simple, flexible and convenient to use!

The card’s money can be redeemed and reloaded easily if the company wishes to do so for a better marketing prospect!

Incentive cards, gift cards, reward cards, promotional prepaid cards or whatever you would love to call them, also have other perks in addition to the above-mentioned benefits:

    1. The cards help to drive consumer traffic to any target store.
    2. The cards encourage consumer visits and help in repeat business for any particular product!
    3. Increase average purchase amounts.
    4. Help in building goodwill, and relationship marketing.
    5. Help to establish tasks like targeting a specific group of audience!

So, we have discussed the benefits for a company, if they market their products or business goals through promotional prepaid cards or gift cards or reward cards.

Part -II

Now we will see whether or not these promotional prepaid cards are good for us to buy!

I would like to start off with this small conversation that took place between two Wall Street Journal reporters, Tanya Rivero and Robin Sidel.

Here Tanya Rivero asks Robin Sidel to confirm that she has heard of a guy who uses prepaid cards and gift cards to pay off his mortgage.
In reply, Robin says,You can’t pay mortgage with credit card, so he uses a third party vendor, so he’s still using a credit card to buy the gift cards to pay the mortgage”!

So that’s making it clear I guess that how badly you can eventually make use of your promotional prepaid cards!

But sidekicks and jokes apart, let’s talk about the real deal.

Pros and cons of falling for promotional prepaid cards:

The Pros:

  • In general prepaid cards give you the freedom, from carrying cash with you, when you are on a trip or so!
  • There’s no access to your checking account, so your bank vaults are safe, and you have got a certain limit, within which you can spend without worrying about interest charges and debts like you do with credit cards!
  • Act as good gifts to give anyone you love. It will drop the brainstorming about what to give on your kid’s 16th birthday, or so. Moreover,  it also takes away the awkward look from people’s faces when you give them liquid cash as gifts!
  • With promotional prepaid cards, the offers and rewards are sometimes pretty cool to let go of! Like, say $50 off on a $150 purchase at one specific store!
  • They are easy to use, and some cards are also reloadable.
  • You can customize your prepaid card just as you want; you can add your pictures, your favorite quote, your name and whatever!

The cons:

  • The hassle of activating them. As you might already know, these cards need to be activated and at times the online forms are quite troublesome!
  • It takes away from you the freedom of making choices. So, if you have a Walmart card, then you can only buy from walmart and not from Amazon or anywhere else!
  • They have expiry dates.If you think you can drag on your $200 prepaid card for  2 years, then that’s just not gonna happen!
  • As promotional cards are displayed on racks at stores, scammers can easily take the code, reading it right away from the back of the card, and can later steal money once you buy and activate the card!

Now it’s completely up to you, if you are in for a promotional prepaid card or not.

But for your knowledge, these thin cards have become an acclaimed promotional strategy for companies and businesses!

By carol on December 1st, 2017

Beware: 8 Things that can kill your credit

Beware: 8 Things that can kill your credit

Most of us know that our credit score plays a significant role in our financial life. We also know how to build a good credit score.

But are you aware of those things that can kill your credit score?

Here are some ways you are hurting your valuable credit score.

1. If you make late payments or not pay at all

Remember, 35% of your credit score is based on your payment history.

If you always make late payments, then it will be on your credit history which can hurt your credit score. Also not paying the credit card bills can affect your score negatively.

If you don’t make payments for 6 months or more, your accounts may get charged off and your score will suffer significant damage.

Thus, it is imperative to pay the entire credit card bill on time every month.

2. Using the debit cards to rent a car

Some car rental services accept debit card payment method. Once you use your debit card to make the payment, a hard inquiry will be added in your credit report, which can ding your credit score by a few points or remain on your credit report for 2 years.

According to the credit reporting agencies’ clause, they will pull the consumer’s credit report if they use a debit card to pay.

3. If your account goes to the collection agency

If you don’t pay off your credit card bills, the creditors may appoint debt collectors to collect the payment from you. The creditors can send your accounts to them before or after charging them off. This will get updated on your credit report accordingly and will drop your score significantly.

4. Freezing credit cards for a long time or closing old accounts

If you don’t use your credit cards for a long time, the credit card issuer can close your account due to zero activity. This will be bad for your credit utilization ratio. Also, closing old credit card account is not a wise idea as it will certainly decrease the length of your credit history which can hurt your score.

5. Considering credit card debt settlement

Choosing debt settlement method to pay off the credit card debts can hurt your credit score.

Because in this process, creditors will get less amount; they accept that the debtor is unable to pay them the total amount. So, you need to pay less money than you owe. Thus, it is considered to be creditor’s loss and your gain. Therefore, it can hurt your credit score.

6. Filing bankruptcy

If you file bankruptcy to get rid of your debts, your credit score will drop significantly. Most of the credits will not consider you as a responsible credit card user and can deny to give you further lines of credit. Once you file bankruptcy to pay off your debts, it will stay on your credit report for 7-10 years which can drop your score by about 120-130 points depending on your present score.

7. Applying for too many credit lines or loans

Credit inquiries can affect your credit score. Making too many credit or loan applications within a short time can drop your credit score. However, if too many credit or loan applications take place within 45 days, it will be considered as 1 credit inquiry. Following this condition will not hurt your credit score much.

8. Having no debt at all

Living debt free is good; but not accumulating debt altogether will not let you build credit fast. Having no credit is as bad as having a bad score. It is important to have a line of credit and use it responsibly.

Lee Gimpel, co-creator of The Good Credit Game has said, ” Building a good credit score comes from a responsible pattern of using credit — and a long history of years is better than a short history of a few weeks or months“.

Lastly, understanding exactly what is hurting your credit score is important but difficult. Remember, even small things can have a bad effect on your score. Thus, it is important to review your credit report from time to time. By doing so, you can check whether or not there is any mistake. Sometimes wrong listing or error can affect your credit score badly. So, dispute the error with the three major credit bureaus as soon as you find any mistake in your credit report. Doing so, you will have an accurate credit report which will help you raise your score.

By carol on November 17th, 2017

Credit report changes in 2017 are helping people with medical debts!

Medical bills have always been a burden in the economic market of our country. It is highly expensive to fall ill these days.

A normal knee-cap replacement can cost us somewhere around $50,000. So, incurring medical debt is not a big deal.

And that’s not all. The credit reports start to burn red with all the unpaid debt accounts in it!

But things are about to be a little different!

From 15th September 2017, medical bills are bothering us a bit less.

The consumers are now given 180 days time to decide how they are going to pay their medical debt.

You have a decent number of months in hand to dispute your debt with the hospitals, medical institutions, and your insurance company.

The scenario till date / What is the problem with huge medical bills?

In our country, making a visit to a good hospital means compromising your financial standing to a huge extent. Prices of medicines, doctor’s fees, hospital charges, even those paper cups in which your pills come, all adds up to a mountain size amount.

Elizabeth Rosenthal, a medical practitioner and a journalist, who is also the author of “An American Sickness” says “We pay 2 or 3 times what other countries pay for healthcare, without getting better results, which is the key here”.

This is the sole reason that’s making us angry to look at our medical bills.

Our country, on the other hand, is taking no steps against this huge medical cost! The reason being that our nation doesn’t allow foreign competition in the field of pharmaceuticals and health industry.
What makes things more harassing is that the medical institutions don’t handle the debt accounts themselves; instead, they pass it to the collection agencies!

How medical debts are affecting us:

The first thing that needs to be done after coming home from a hospital is call a medical debt advocate and explain the whole situation with every minute details.

At least that’s what usually people do who have suffered from medical debts.

We become financially ill! We then have to call the insurance company, see how much they can cover and ask them to negotiate with the hospitals.

But no matter what steps we take, within one month, the account starts getting reported to the credit bureaus, and we can do nothing but see our credit scores drop dramatically.

Medical debt has become a prime reason in the US for people filing bankruptcies. To avoid such a condition, many of us are traversing borders for affordable medical treatment.

You can’t deny that the price of healthcare is increasing rapidly in our country. Even if you compare with our neighbors like Canada, Panama, or the other leading countries like Japan, the medical costs are a lot lower than what it is in the US.

But with the introduction of new credit scoring models, namely FICO 9 and VantageScore 4.0, in 2017, things have become a bit different. The credit bureaus are going to be lenient in reporting your debts and calculating your credit score!

How we can be benefitted

The credit bureaus have acted on this notion that medical bills cannot decide a person’s creditworthiness. This is an emergency.

If you start defaulting on your mortgage payments or car loans, then it’s purely your fault. But, medical debts fall under unplanned expenses.

So wrap up your medical bills and figure out a suitable solution to repay them. You can easily take time to negotiate with your insurance company.

As already mentioned, the credit bureaus have taken a real good step for people who have pounding medical bills.

They are offering you 6 months to decide how and when you are going to pay your medical bills. But, if you don’t pay back within this period, you can expect your credit scores to fall down.

So, be wise and utilize this time fruitfully. Immediately after you receive your first medical bill, call your insurer and negotiate the amount. Don’t waste much time. If you can already clear a good amount in these 6 months, you may see your credit score rise way up!

Just to summarize, you now got 180 days to deal with your medical bills, even though our government is doing nothing to decrease the medical cost.

By carol on November 3rd, 2017

Credit card balance transfer: The best and worst sides

Credit card balance transfer: The best and worst sides

If you have piled up debt on your high-interest credit cards, then it can be a good option for you to take out a new card with a low rate of interest and transfer all the outstanding balance of your existing credit card. Balance transfer method will make your monthly payments much affordable and will help you reduce your credit card debt.

However, before you make the big switch, you should know the ins and outs of balance transfer method that will help you make the right decision.

Why does transferring the balance to another credit card is beneficial?

1. Helps you save money

When you’ll transfer the balance of your higher interest credit card to your new balance transfer card with a low rate of interest, you have to pay less amount on interest payments and will be able to save in the process.

For example, if you were paying 10% interest on a $3000, you have to pay $300 per year as interest. Whereas, if your balance transfer card charges you 3% interest, then you need to pay only $90 per year as interest. So, you are saving $210 in the process.

However, you should repay the existing balance within the low introductory period to avoid paying much higher interest on the remaining balance later.

2. Simplifies your payments

Transferring of all your credit card balance to your new balance transfer card will simplify your payments. If you have multiple credit cards, it may be difficult for you to pay even the minimum on all your credit cards and will often accrue late fees. This balance transfer method will help you transfer all your credit card balances to one single card, which will enable you to keep track of your monthly payment dates and avoid late penalties.

3. Helps you repay other types of debts

It is not true that you’ll be only able to transfer your credit cards’ balance to your balance transfer card. You can move your other loans (auto loan, personal loan, etc.) to the low-interest balance transfer card and pay off your debts easily.

How will you do that?

For example, in case of an auto loan, repay the remaining amount with a credit card and then transfer the balance to the balance transfer card with a comparatively low interest rate.

Why you should think twice before saying “yes” to a balance transfer card

Balance transfer rates are not applicable for new purchases

You should always remember that you have taken out this low-interest card just to repay your existing debts successfully. Hence you should not use this card for shopping new items as it will charge you a high rate of interest. You should know the fact that you can take advantage of the low rate of interest on your balance transfer card only for the balance that you have transferred.

You will get better interest rate if your credit score is good

It is important for you to keep a good credit score so that you’re able to take out a balance transfer card with a low rate of interest. If your credit score is good, you may get attractive offers. If you qualify for this, you’ll be able to save significant money that will help you repay your credit card debt easily.

Expiry of the low introductory rates

Initially, you may feel excited about the low-interest rates on your balance transfer card. But there is a catch; the fact is that you can take advantage of the benefit within the stipulated time period that is provided to you to pay off your debt. If you’re unable to repay your debts within the time period, then the interest rates will get higher, perhaps even more than the interest rates that you were paying earlier.

It can affect your credit score negatively

Switching your outstanding balance again to another balance transfer card with low rate of interest may affect your credit rating negatively. So, be sure that you’d be able to repay the existing balance within the promotional period.

Lastly, you should make sure that you never miss your monthly repayments or exceed your credit limit. This will invalidate the entire deal and you’ll be charged standard rate of interest to repay your unpaid bills/cards. You should also know that the balance transfer fee is an inevitable factor in this process. There can be many hidden terms and conditions as well.

Hence, it is advisable that you should do a thorough research of your creditor before taking out a balance transfer card. Thus, it is advisable to compare the terms and conditions of different lenders and choose a suitable one that will help you reduce your credit card debt.

By carol on October 20th, 2017

3 credit report errors you need to look out for

3 credit report errors you need to look out for

You cannot ignore your credit report.

It is the first requirement in whatever new financial decision you want to take.

The credit report is handled by the credit bureaus.

We are usually concerned with the 3 main credit bureaus- TransUnion, Experian, and Equifax.

Any financial institution will report your credit transactions to either one, any two, or all three of these bureaus.

Maintaining a good credit report is solely your responsibility.

To be precise, if any error is found in your report, you are held responsible.

So, it is your duty to check your report from time to time for any mistake.

Your credit report is used to calculate your credit score.

You don’t want to mess things up!

These are the common errors that sometimes may pop up in your credit report:

1. Your personal information:

Whenever you pull out your credit report, your personal information is usually visible on the first page;. unlike Experian, who gives a full detail of your information on the 7th or 8th page of your report.

The listings are:

  • Name
  • Address, Contact details
  • Previous address
  • Employment status
  • Social Security Number (SSN)
  • Social Insurance Number (SIN)
  • Credit report number

Sometimes, your personal information might get a bit shabby. Say the address got changed with someone else or the S.S.N can get misprinted.

This happens because a credit bureau is not making a credit report only for you. Nearly everyone in the USA has to have a credit report.

So there are chances, that information may get switched.

Whenever you are checking your credit report, don’t forget to look out for your personal details. Make sure they are printed correctly.

2. Credit items, public records and trade information:

All your information about current credit accounts will be listed here.

It will also show your public records, or bad credit activity like late payments or defaulting.

Trade information, the status of payments, collections, chapters of bankruptcy, if any, will also be shown clearly.

Your public records will also show the name of attorneys you took help of.

Any mistake down here or any wrong information will highly affect your credit score and credit profile.

You should always check out this section minutely.

Some tips to avoid mistakes in this part:

  • Every year download your free credit report and go through it for any significant changes.
  • Try to maintain the same identity and write your name clearly while applying for any credit.
  • Always provide correct information to banks and lenders.
  • Don’t forget to report any account duplicity or account fraudulence to the credit bureaus.
  • Check out the statement listing for any closed credit account. If you ever had debt settlement or debt consolidation, check out whether or not the account status is updated as – “Account closed at consumer’s request” or “Account disputed/settled by consumer”. If the account status is bearing a creditor’s name, it gives a negative ranking to your credit profile.

Beware of fraudulent account listings or account details of your ex-partner. Get it removed as soon as possible.

If you think your identity information has been hacked, then you can opt for credit freeze. With this procedure, you will be able to temporarily disable any third party access to your credit reports, till you sort out the problem.

3. Other little mistakes that count a lot:

There are often mistakes made by the bureaus or banks themselves.

For example, they put a wrong credit limit for a certain credit account, or a settled debt account appearing even after the credit reporting time has passed.

Or let’s say account duplicity, where information about a credit account is appearing more than once.

Also, hard inquiries falling under your name which you have not initiated.

These may seem to be small issues but it can affect your credit score a lot.

So, next time you encounter these mistakes, don’t forget to note them down and report it to the respective bureaus.

To be honest, it is not always your fault or a creditor’s that a credit account or certain important information is showing errors on your credit report.

But what to do, it is our responsibility to take care of our credit profile.

So, you don’t need to freak out if you see any misprinted or wrong information.

Your credit report can be revised anytime you want. Download your one-time free report in every 12 months.

If the report seems to be clean and correct, then it’s okay.

If you find errors, don’t be late in disputing them!

By carol on October 6th, 2017