Category: Credit Cards
The best ways to build excellent credit are much different in your 20s than in your 50s.
Your age often affects how you balance your budget, saving for retirement and assess your investments. But it must also be a factor in managing your credit score.
The length of your credit history affects your FICO score highly, which lenders use to determine the ability of a borrower to repay a loan. While it is important to pay your bills on time and keep your balances low at all ages, there is more than most consumers can do to improve their scores so they can get better loan terms.
Here are nine steps to help you build excellent credit for your life.
1. Request a credit card
John Ulzheimer, president of consumer education for SmartCredit.com says that consumers generally get into the game of credit between the ages of 18 and 22, if the restrictions of the CARD Act makes it increasingly difficult for persons under 21 to get their first credit cards. Regulations aside, it is best to get a credit card as soon as possible because the debit cards will not increase your credit score.
Most beginners get their first credit card by getting a parent or guardian to co-sign the application or the application of a secured card, which requires customers to deposit money in advance that correspond to their lines of credit and minimize risk of failure. Either strategy can be effective as long as you understand that the real trick is to use these cards responsibly.
2. Do not apply for every credit card
“Construction Loan is not the same as building a large balance,” Ken Lin, CEO of Credit Karma.com said. Do not make the mistake many beginners make credit by opening a store card credit to all businesses visited during Christmas, for example.
Tom Quinn, expert in consumer credit for Credit.com, said that consumers should only apply for credit when they need it. A large number of credit inquiries over a short time can cause your score to go down, “he said. It can also make it much easier to run a pile of bills you can not pay.
Instead of a wallet full of credit cards, Lin proposes to add a new credit card once a year to your arsenal until you have collected three or four cards you can always pay on time.
He also suggests finding cards that are not annual fees, as any card you open at this stage should remain open for at least five years. These cards determine the length of your credit history, which represents 15% of your total credit score, so choose a card with a low to no annual fee, it is easy for beginners to keep soaring accounts opened in the long term.
3. Start watching your credit score
Beginners should be extremely diligent credit during these formative years. FICO score attempts to predict whether you’ll pay a loan on time and the first indications that you may not be particularly damaging.
“Consumers in their 20s should be aware that their credit ratings are more volatile and will react differently to payment delays and excessive credit card debt that consumers with credit files of increasing,” said Ulzheimer.
These measures may make the difference between having a score of 550 and 780.
To improve your credit score seem intimidating? It need not be. Taking a few small steps now can make the difference between a 550 and 780. Follow these tips to see your score improves.
1. Request a copy of your credit report
You are entitled to a free credit report each year in each office of consumer credit nationally – Experian, Equifax and TransUnion – through the Fair Credit Reporting Act.
“It is important to remember that consumers have more than one credit report. As there are three credit reporting agencies, different information on each of their credit reports can differ,” said Clifton M. O’Neal , senior director of corporate communications for TransUnion. Request a free credit report “can help consumers keep an eye on all their financial activities.”
O’Neal advised to check each report for fraudulent activity and to correct any errors. website of each credit bureau provides information on how to correct errors.
2. Take steps to improve your credit score
Credit bureaus and other companies follow the information contained in your credit file, and the tightening of a three digit number called a credit score. Having a low credit score will raise a red flag to lenders and could lead to the rejection of a loan application. Or even if the application is accepted, your interest rate could be much higher. In other words, if you want to buy a house or a car, improve your credit score is an essential first step.
“If you go to apply for credit at any point in the future – if a new credit card, mortgage, line of credit mortgage or a small business loan – your credit score depends very much on little or a lot you’ll have to pay for the credit… if you get it all, “says Russell Wild, certified financial advisor and co-author of” A Year of organized life financially. ”
You can improve your credit score by paying bills on time, keeping your debt to less than 35 percent of your available credit, paying down debt and to dispute errors on your credit report.
3. Read (and understand) the terms and conditions of your credit card contract
Nobody wants to read the fine print, but it contains all important information on payment terms, interest rates, annual fees and penalties. Your credit card agreement – also called “terms and conditions” card or contract – it has, if often takes the eye health and reading comprehension at the college level.
“Most people do not bother to read the terms and conditions, and that’s a mistake,” said David Jones, president of the Association of Independent Consumer Credit Counseling Agencies (AICCCA). “You should not be surprised if your interest rate rises because you missed a payment. That’s all there in black and white.”
Most credit card agreements are difficult to understand, but that could change: Under the 2010 reform of Wall Street and Consumer Protection Act, a new Consumer Financial Protection Board shall have power to impose changes in contracts to make them easier to understand.
4. Read your monthly statements
According to Jones, credit card statements are easier to understand than ever. Credit Card Act of 2009, whose main provisions came into force in February 2010, required a new design and disclosure requirements to make statements more user friendly. Among the requirements, fees for late payments and what the money paid in fees and interest on different types of accounts must be provided. CreditCards.com has created an interactive look at the new credit card statements, using examples from all major card issuers.
If there is something that makes no sense to call your credit card company or a credit counseling agency approved by the AICCCA or the National Foundation for Credit Counseling to ask questions.
5. Repay – or pay – the balance of your credit card
“As soon as the bills come in January and cardholders realize how long it will take them pay for their holiday spending, pay bills credit card becomes a priority,” said Jones.
One of the changes required by the Act was that the MAP card statements should show how long it will take to pay off a balance if you pay only the minimum.
When it comes to paying credit card balances, avoid making new charges focus on the repayment of the card with the interest rate as high and always pay more than the minimum payment.
“Even if you can pay $ 5 over the minimum balance is a good idea because it goes straight to the capital and help reduce your debt, even a little,” said Jones.
6. Use credit cards that match your spending habits
Choose the “right” card at the checkout can save you a bundle, according to Wild.
Consider the terms of payment, he said, “including the interest rate you will pay if you do not pay your debt at the end of the month.”
Cardholders who do not pay their balance at the end of the month should be prepared to sacrifice to get a rewards card that has a lower interest rate.
Wild also suggests being careful with cards stores, especially those promising zero interest. If you have a history of late payments, interest rates can skyrocket which is a costly mistake.
Annual fees can also accumulate. If you pay $ 50 per year on airline miles for multiple cards, but never cashed in a single air mile, these accounts may not be the best solution for your consumption habits.
7. Think twice before canceling cards
Your credit score is determined in part by the variety of accounts you have, and if you ate a lot of your available credit by carrying balances. In other words, the balances on several cards will affect your credit score. Wisely manage these balances and do not rush to close accounts.
“Any major change in your habits, credit cards, including cancellation, will raise a red flag and an impact on your credit score,” Jones said. “If you want to reduce the number of cards you carry to cancel a card and a few months later cancel another rather than cancel them both. ”
Having multiple lines of credit balances and gives you a low rate of credit at low rates of use, which is good for your credit score. Make sure you keep your balances low – overall and on each credit card you have. And use of each card from time to time if the credit card company not to cancel the account.
If you’re struggling with debt and have too much available credit can lead to the temptation to spend, you might be better to cancel credit cards. It is best to let your credit score take a hit to close the accounts of dealing with the consequences of the debt burden too much and not being able to repay.
You never want to hear your waiter say, “Sorry, your card was declined.”
For people with bad credit, hard times are inevitable. When they occur, you can dig a deep hole and crawl in, but there are better ways to respond. Here are the most common scenarios involving embarrassing credit and answers most worthy.
1. “I’m sorry sir, but your card was declined.”
When a boy says these terrifying words, you are bound to flush crimson dining companions as speculate on the state of your finances.
Squelch panic, “said John Ulzheimer, president of consumer education. Explain calmly that the tape may have been damaged, and make another card for the purchase. If she was denied because you are maxed out, however, and you have no plastic or other cash, excuse yourself and call the creditor to request an “opt-in for overlimit fees. “” This will allow operations overlimit to fill, “says Ulzheimer. You will be assessed a fee, but your reputation will be saved.
2. “Er, Jane, we need to discuss this issue before you pay.”
It’s awful to be sued for a debt, but it is horrible when your employer receives an order for garnishment of wages, a part of your salary should be given to your creditor.
Do not wait until the sheriff to serve hits the paper, said the trust expert Delores Pressley. Be proactive and request a meeting with your boss, saying: “I am terribly sorry that a personal question has extended to the workplace. I’ll find a solution as quickly as possible. “This straightforward approach may compensate for a negative opinion of your supervisor. Also, you can not be fired for garnishment (unless there was more than one in a period of 12 months), which may inspire some confidence.
3. “Rent to you with your bad credit? Ha!”
Ready to sign a lease? If your credit is terrible, you could be in the same humiliation that Matthew and Fiona Peters, Madison, Wisconsin, experienced.
As newlyweds, Peters thought they had found the perfect apartment. Yet in the rental office crowded, the agent announced loudly: “There is no way that we can rent with your credit. It is bad… very bad. “Every parent called and asked for help in vain.” After the second call, we sat there red-faced, wondering what we were supposed to do or say next, “said Matthew Peters.” It was emasculating!”
Today, Peters offers advice to others in similar situations, “Keep your cool and do not take it personally seen a high level for all residents not only protects the property owner’s investment, but people living there as well.. “Focus on your finer points.” You could say: “My credit is bad, but I’m busy and make it a point to always pay for my first home,” said Peters. You may need to sweeten the deal by offering a co-signer, doubling the deposit or to pay rent in advance.
4. “Great, once we see your credit file, we can complete your job application.”
credit checks pre-employment are the norm today – and you’ll want to hide if yours is full of big balances, late payments and accounts written off.
Sure, you can deny access to your reports, but it could encourage the hiring manager to build your resume. So stand tall and to disclose past problems at the front. Honesty can not increase your chances. And relax on shamefully low credit rating. “The credit bureaus and their professional organization (the consumption data Industry Association) have publicly stated countless times stating that they do not provide credit ratings and audit reports of the working credit” says Ulzheimer.
5. “Darling, I can not wait to start a life with you – buy a house, have children …”
Have terrible credit, but in the beginning of a long term relationship? Assuming it can be scary.
Like it or not, you must reveal the horrible truth. Then, commit to open communication and make amends, “said Joe Rubino, author of” Self-esteem book.” “Contact all debtors, make arrangements to clean the debts, start a savings plan, cut credit cards and take full responsibility for the management of future purchases responsibly.” Strengthen your skills and your faith life partner through financial counseling, therapy or life coaching.
6. “I need to talk with Mary about a bill pending.”
Whether calls or messages collection go to your workplace, roommate or relative, your private situation will become public.
First, the end of the phone calls. The Fair Debt Collection Practices Act prohibits collectors third discuss your debt with anyone but you. And while they may contact you at work if you ask them to stop, they should. Tell them you know the law and that you will file a complaint with the Federal Trade Commission, if they persist. Then, “said Rubino, act with integrity and clean up your mess of money. “This done, he is afraid of anyone except your own. If you feel the need to explain calls to anyone, just say you made financial arrangements to settle debts and the case is supported “.
7. “OK, Phil, go ahead and charge those costs and we will reimburse you.”
A business trip is imminent and you are supposed to book a hotel room, flight or rental car. Uh oh, you have no credit.
Do not worry, you’re not the only one not charging fees. About 29 percent of Americans live without credit. Suffice it to say that you only use cash, and ask to be paid with corporate funds or corporate card. Few employers balk at such a reasonable request.
Is it easy to deal with these credit problems mortifying gracefully? Of course not. But keep in mind that even a show of assurance from the air – and feel – better than avoidance.
Paying off certain types of debt can lift your score much more than others.
Millions of consumers have fallen out of favor with the credit scoring gods. Some lost their jobs or were just overwhelmed by mounting debt. Others got caught up in the real estate bubble or had major medical bills. Whatever the reason, the rising number of foreclosures, short sales, late credit card payments and the ultimate credit sin — bankruptcies — have left black marks on credit reports most everywhere. So what can these people do to repair their credit?
Assess Your Situation
Before you even start to think about rehabilitating your credit, make sure that you can pay your bills on time and not do any more harm. If keeping up with your credit card bills is still an issue, then call the issuer, explain your situation and try to negotiate payments you can afford. Ask the issuer how that will be reported to the major three credit bureaus: Not paid as agreed, which can hurt your score? Or will the new terms say that you are now paying as agreed?
“You have to get in writing that this is what they agreed to do,” said Mechel Glass, director of education at CredAbility, a nonprofit consumer credit counseling agency. Ditto for other providers, like utility companies.
Then, assess all the damage by getting a free copy of your credit report from each of the three major credit reporting bureaus through annualcreditreport.com. Each of the major credit bureaus — Equifax, Experian and TransUnion — generate their own FICO scores based on the data they collect. Two versions of your FICO score are also available for $19.95 each.
How far your credit score has fallen will depend on where it started, as well as the frequency and severity of your credit mistakes. If you had almost perfect credit, but because of the loss of a job your credit card bills ended up at a collection agency, you can expect to lose anywhere from 80 to 150 points from your FICO score. A short sale or foreclosure? Both, Mr. Ulzheimer said, “would turn a FICO 790 into a FICO 590 overnight.”
Sign up for automatic subscription billing online, and you might keep getting charged after canceling.
Even if you use the utmost caution, you can still be a victim of credit card fraud. Credit card companies and banks are more and more often putting the onus of catching phony or incorrect credit card charges on the consumer.
The most important thing is to check your billing statement, of course. And there are organizations that offer tips on how to keep your cards safe as well. Here, we take a look at 10 of the riskiest places you might use your card, and what you can do to avoid the dangers.
Non-Bank Owned ATMs
Encryption at these ATMs is often not as good as at bank ATMs, meaning some locations are just not as safe. These ATMs also are more likely to be hacked. And in some cases, people have put up devices that look like ATMs but don’t give out cash. Instead, they are just card-skimming devices aimed at stealing your credit card or debit card information.
Wi-Fi Hotspots and Public Computers
If you’re going to be making online transactions over an unsecured wireless connection like in cafes, parks and other hot spots, data can be compromised or seen while in transit, even if you’re on a secure page while you’re checking out. The same goes for public computers like in libraries. It’s not advisable to ever transmit personal data when you’re in a public connection environment, especially on non-secure wireless.
Recurring Bills / Subscriptions
Instead of using automatic billing, ask to be billed on a one-time bill by bill basis instead. When you use your credit card for purchases that involve weekly, monthly or annual billings, you can encounter the headache of over-billings, continued billing once a subscription has ended, etc. Some less-than honest merchants will use automatic billing in hopes you’ll forget and won’t check your credit card statement.
The fee to switch to a no-interest card could wipe out your potential savings.
Consumers with credit scores of 720 and higher have been inundated with card applications and preapprovals touting 0% annual percentage rates on new purchases and balance transfers — for as long as 21 months. Credit card analysts say consumers can expect to see more of these offers as delinquency rates — already down 26% from a year ago, according to the most recent data from the Federal Reserve, continue to fall, and card issuers try to boost profits by targeting prime borrowers.
Seventy-one percent of credit-card mail features low introductory APRs on purchases, up from 53% in the year-ago period, according to the most recent data from Synovate Mail Monitor, which tracks credit-card mail. And balance transfer offers are on the rise, making up 65% of credit-card mail, compared to 54% earlier this year.
This is a dramatic turnaround from last year when these borrowers — who pay their bills on time and often maintain low-to-zero balances — were shunned by card companies, in part because their responsible borrowing habits meant smaller profits for the lenders. Many saw their credit limits cut and interest rates raised to rates as high as 30%. Now, card issuers are hoping these more credit-worthy borrowers will spend and carry a balance beyond the introductory period, says Odysseas Papadimitriou, chief executive of CardHub.com, which tracks credit-card offers.
What to Expect
Longer balance transfer promotions…
Promotional periods for 0% balance transfer offers available in October last up to 21 months, compared to the 12-month average promotional period a year ago, according to CardHub. Before 2007, it was rare to see a 0% promotional offer for as long as 15 months.
Someone paying $300 each month on a $5,000 balance at an 18% rate — a common APR right now — will incur $797.17 in interest over 20 months, an expense that could be significantly reduced with a balance transfer. Consumers with credit scores of at least 720 can choose from 12 balance transfer offers with 0% interest that last at least a year. Look for these card applications in the mail, or contact credit-card issuers or search the web to apply. The Citi Diamond Preferred and the Citi Platinum Select cards offer 21 months, the longest period; the Discover More card offers 18 months.
…but higher balance transfer fees
The downside to balance transfers is the 3% to 5% fee you’ll have to pay, which wipes out a chunk of the potential savings. Of the 18 cards offering a 0% balance transfer to high credit-score consumers, all but one have fees in this range, according to CardHub.com. (The Visa Black card is the exception, the balance transfer fee is capped at $50, but the card has an annual fee of $495.)
Many credit-card issuers have also eliminated caps for fees on balance transfers, many of which were $100 or less only a year or two ago, says Curtis Arnold, founder of CardRatings.com, which monitors credit-card trends. So now, to transfer $5,000, you’d pay up to $250. And more fee hikes are likely on future offers in the near term, says Anuj Shahani, a director at Synovate. But if you can pay off the balance in a 21-month period, you could save upwards of $500 on the 18% interest you’d have otherwise incurred.
Higher rates after the promotional period…
On average, most 0% rates will adjust to around 15% after the promotional period, a high rate for prime borrowers who, pre-credit crunch, could often secure a rate below 10%. So pay off the entire balance before the promotional period ends or you’ll be stuck with a rate that could be higher than the one you have now.
Rate changes won’t stop there. As with any credit card, the issuer can increase the APR again, and if it does so, it will notify you by mail. That new rate won’t apply to your existing balance, which was often the case before the new credit-card rules went into effect, but will apply to purchases you make as early as 14 days after you receive the notice, says Papadimitriou.
…but more forgiveness
If you miss a payment, you’ll have a longer grace period before you lose that 0% rate. Prior to the new credit-card law, if a cardholder was late with one payment, his interest rate could default to a penalty APR, usually 24% or higher. Now, the penalty rate kicks in only when a consumer is late on a payment for more than 60 days. Although it’s a better deal for, say, an absent-minded bill-payer, that penalty would likely wipe out the savings from a 0% offer.
Credit card rate hikes reviewed, penalty fees crimped
Most penalties credit card will be limited to $ 25 and fees for customers who do not use their cards will be eliminated under rules issued Tuesday by the Federal Reserve. The Fed also has ordered a review of all walks of credit card interest rates charged since January 2009, including most of the record increases which came in the wake of a nationwide reduction in credit.
The rules, which implement a final set of changes that Congress passed in May 2009, will take effect Aug. 22. “The guidelines of the Federal Reserve released today are good news for consumers,” said Rep. Carolyn Maloney, DN.Y., one of the authors of the laws of a credit card.
The Fed’s rules could result in lower interest rates for consumers. Banks should reconsider the reasons for these increases that began in the last 18 months. They would have to cut rates if the reasons for the increase no longer exist, and regulators to review and implement such reductions.
Consumers will be more immediately notice the new limit penalty fee of $ 25. Reduce the cost penalty is a central provision of the law of credit card, but Congress has allowed the Fed to determine how.
The Fed gives way to a penalty fee to pay more if the consumer has shown a pattern of “repeat” violations, or if a card issuer can show that higher fees reasonably compensates its own costs in processing the violation prompting the penalty.