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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

Are platinum and gold credit cards worth it?

platinum-and-gold-credit-cards

Having a couple of gold or platinum credit cards is a great thing, similar to cherish a long drive in an expensive sports car or buying a luxurious mansion. You can always use the cards for a simple or major purpose. You may even get several outstanding benefits along with the cards.

Many gold or platinum cards comes with these important benefits:

1. Domestic and International travel insurance

Most gold & platinum cards offer this standard facility. Depending on the level of bank service and card’s annual fee, the insurance cover may vary. It’s a very convenient way to get travel insurance automatically rather than getting it by yourself. Make sure you carefully read the fine prints/terms of your policy as it may exclude your family from the coverage. It may also include some special clause regarding accident cases.

2. Travel inconvenience coverage

Several gold or platinum cards have “Transport Accident Cover” and medical insurance. These benefits are very important add-ons that increase the coverage of your insurance.

3. Rewards programs

Most gold and platinum card companies offer separate versions of their same card. For example, the ‘American Express‘ offers the Blue sky, Gold, and Platinum credit cards. Each consecutive card has a different level of annual fee, but a higher reward point conversion.

4. High credit limit

If you ever require an urgent credit, whether it’s for short-term investment or an emergency purpose, be prepared to get up to $100,000 of credit at your fingertips. Use your gold or platinum credit cards to get that urgent currency and use it accordingly.

5. Hotel and flight tickets

Some credit card providers offer complimentary free domestic flight tickets or free staying in a hotel (night) each year. Other providers may prioritize your tickets at the time of booking, pick up the best possible hotel suites and transportation facility.

6. International buy and return protection

If you buy anything from outside your country, some credit cards may offer up to 90 days and more buy and/or refund security.

7. 24/7 support service

At any time of the day, any place, you can connect with your card customer care executive and request for desired services. You can get any information regarding your card and change the billing cycle. You can also visit your card provider’s website and get full support online.

8. Entertainment offers

You can get great discounts on booking tickets for movies, plays or any sports event. Card providers will often offer advance tickets or free tickets for a wide range of entertainment services and shows.

How to decide whether a Gold and Platinum credit card is suitable

Gold and platinum cards have numerous benefits – however, you’ll only achieve those true benefits if you use them wisely and as much as possible.

To get the full dollar value on your gold and platinum credit cards, you need to pay off your account balance fully to avoid the high-interest charges. You can also get the complete advantage in sectors like – travel (domestic and international), luxury purchases, and entertainment purpose. Go for a card that gives you enough advantages to make the relatively high annual fee worthy.

By carol on July 21st, 2016

The 5 biggest reasons to enhance your credit score

reasons-to-enhance-credit-score

Your credit report works as your financial report card and shows your financial responsibilities. It is a symbol of your creditability to pay off loans and other debts you have acquired. You may not like your current credit score, but let me remind you…it’s surely showing that you may need to improve it and how you’re gonna do it. It is a good idea to work hard to raise it properly.

Now, here are few top reasons for improving your credit score, let’s know why it’s so important:

1. Buying a new home or taking an apartment on rent

One of the most valid reasons for which you must build your credit score is to keep yourself in a positive position when hunting for a home. If you have a deep interest in real estate market and you want to invest in them, you will want to make sure that you can be approved for a mortgage with the lowest possible rate. The lower your score, the higher will be your interest rate.

If you believe buying a home is not an option for you, still you’ll need a good credit score even for renting an apartment. Landlords always want a good dependable tenant who has a good credit history in the past, and his credit score proves that.

2. Relationships

According to U.S. News & World Report, your bad credit score can rip your personal life apart when it comes to financial issues. Bad credit issues may always become a major problem when buying a property, taking out loans, or even at the time of divorce. Your low credit score may become the reason for your spouse’s disqualification since lenders surely consider both of your credit worthiness if you are co-signing a big loan.

3. Forming own business

Once you have decided to start your business, you may want to grow your credit score if you became aware of that your score isn’t optimal. To maintain your small-business financing you may need to show off that you can manage the finances of a new business pretty good. A good credit score can impress your lenders that you are very much confident and worthy to take any financial decisions and get desired results.

4. Getting a car loan

If you want to invest in a car, you’ll surely need a perfect credit score to help you out. When buying a vehicle, it is a common option for a buyer to opt for a loan to fund his finances. The lender doesn’t accept such borrowers who are not enough credit-worthy.

In addition, you’ll need to supply a more substantial down payment than if your credit score was good or excellent.

After buying the can, your auto insurance may also get higher. Having a good credit score will give you enough support to save as much as possible when financing your car and all the additional expenses came along with it.

5. Difficult to improve and remove the bad credit score

If you fell in a problem where your poor credit score is the main issue, it is very difficult to improve your score faster at that time. Typically credit score is getting down easily but hard to bring them up, so staying on top of them and maintaining responsible spending habits is critical.

Your credit score will be reflected in your credit history till the date you expire. So, make sure it should be error free and keep it high most of the time.

MyFico suggests you must check your credit score regularly through credit report and evaluate it to find any errors. Some negative items may remain on your credit report that’ll lower your score down. But they are actually mistakes done by you. If you take an initiative to remove those errors and negative, it’ll improve your credit score and help you to get success in your future financial ventures.

If you really desire to lower the debt amount you owe, you may set up payment reminders or automatic bill payments. By eliminating debt and staying current on your payments, you can improve your current credit score.

Your financial history is reflected in your credit score, and it is your duty to make it accurate and free from negative items.

By carol on July 5th, 2016

The 5 biggest financial factors that affect your credit

factors-that-affect-credit-score

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

1. Your payment history – affect 35%

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

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

2. Amounts you owe – affect 30%

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

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

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

3. Length of your credit history – affects 15%

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

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

4. Your new credit lines – affects 10%

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

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

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

5. Types of credit you use – affects 10%

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

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

By carol on June 23rd, 2016

Mistakes you shouldn’t do with airline credit card

avoid-mistakes-with-airline-credit-card

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

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

1. Picking up wrong cards

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

2. Ignoring the huge interest charges

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

3. Not opting for the benefits

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

4. Not earning elite status

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

5. Not utilizing reward miles properly

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

6. Not looking for annual fees

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

By carol on May 31st, 2016

Strategies to rebuild credit while getting out of debt

rebuild-credit-score

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

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

Easy strategies for saving money and reducing debts

1. Increase your income

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

2. Decrease your expenses

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

3. Sell your assets

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

4. Consolidate your loans

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

5. Ask help from the creditors

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

6. Ask support from family or friends

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

7. Go for settlement of a portion

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

8. Go for a debt repayment plan

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

9. Go for bankruptcy

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

10. Make proper strategy for making payments

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

11. Go for balance transfer

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

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

1. Pay your bills timely

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

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

2. Keep credit card balances low

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

3. Keep old unused credit accounts

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

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

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

By carol on April 14th, 2016