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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

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

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

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

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

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

What does a credit inquiry mean?

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

Credit inquiry is of two types:

  1. Hard inquiry
  2. Soft inquiry

Hard inquiry – When does it happen?

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

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

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

Soft inquiry – When does it take place?

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

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

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

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

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

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

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

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

What does that mean?

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

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

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

Can you dispute hard inquiries?

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

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

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

How can you manage your credit inquiries?

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

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

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

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

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

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

By carol on September 22nd, 2017

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

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

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

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

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

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

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

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

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

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

Know the different types of credit card rewards

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

1. Cash rewards:

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

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

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

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

2. Point rewards

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

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

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

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

3. Travel miles rewards

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

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

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

Advantages and disadvantages of reward Credit Cards

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

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

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

Advantages of reward credit cards

1. You can earn from the purchases you make

Reward cards allow you to earn from your purchases.

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

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

2. You can get discounted price rates

You can get rebates on your purchases.

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

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

3. You can travel without paying anything

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

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

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

Disadvantages of reward credit cards

1. You need to pay high annual fee

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

2. You will get a high-interest rate

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

The rate you are paying today can become expensive tomorrow.

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

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

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

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

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

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

By carol on September 8th, 2017

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

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

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

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

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

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

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

But people are achieving it, aren’t they?

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

What are the secrets? How to improve credit score?

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

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

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

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

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

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

Tips to follow in building a good credit history:

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

2. They go for the proper mix of credit

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

The masterminds go for the perfect credit mixture.

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

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

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

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

So how will you do the credit shopping?

3. They maintain gaps between their credit shopping:

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

It is the red eye on your credit report.

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

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

This can bring down your credit score.

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

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

So be wise and do your shopping apparently.

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

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

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

So what are the ways to be brilliant at this?

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

5. They are always attentive:

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

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

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

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

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

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

More credit score tips from the experts:

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

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

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

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

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

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

Pros and cons of getting store credit cards

Let’s have a look at the pros:

1. Create credit history

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

a. Private-label retail cards

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

Why?

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

b. Co-branded store credit cards

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

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

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

2. Special benefits

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

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

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

The cons of having a store credit card:

1. Your debts will be expensive

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

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

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

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

2. Effect on the credit score

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

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

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

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

3. Affordability issues

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

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

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

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

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

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

Read more:

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

By carol on August 4th, 2017

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

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

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

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

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

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

There’s no way you can break the wall.

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

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

Try 1: Take out a credit builder loan

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

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

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

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

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

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

So sleep over it before taking out this loan.

Try 2: Co-sign a credit card

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

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

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

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

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

Eventually both must start to maintain a good payment history.

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

Try 3: Create a rental history

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

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

Moreover you will start to create a credit history.

How’s that??

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

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

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

Try 4: Get a secured credit card

We are all acquainted with security and back up.

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

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

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

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

Try 5:

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

Retail cards has offers and discounts.

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

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

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

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

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

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

By carol on July 21st, 2017

Can you harm your credit score by posting in Facebook?

Can you harm your credit score by posting in Facebook?

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

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

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

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

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

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

1. Maintain social media professionalism

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

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

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

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

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

2. Take caution during holiday season and vacations

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

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

Whitmore’s 5 pieces of online etiquette advice

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

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

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

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

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

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

Conclusion

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

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

By carol on July 7th, 2017