credit history http://www.wisebread.com/taxonomy/term/12012/all en-US 8 Credit Repair Mistakes That Will Cost You http://www.wisebread.com/8-credit-repair-mistakes-that-will-cost-you <div class="field field-type-filefield field-field-blog-image"> <div class="field-items"> <div class="field-item odd"> <a href="/8-credit-repair-mistakes-that-will-cost-you" class="imagecache imagecache-250w imagecache-linked imagecache-250w_linked"><img src="http://wisebread.killeracesmedia.netdna-cdn.com/files/fruganomics/imagecache/250w/blog-images/woman_shocked_credit_card_183185522.jpg" alt="Woman making credit repair mistakes that will cost her" title="" class="imagecache imagecache-250w" width="250" height="140" /></a> </div> </div> </div> <p>Rebuilding a poor credit score can seem like an overwhelming task, especially as bad credit puts you in a rotten financial situation. With bad credit you get much higher interest rates, and can often get completely denied when you apply for a new account. But if you don't go about repairing your credit in the right way, you may actually be doing more harm than good. Here are the top eight credit repair mistakes too many people make every day.</p> <h2>1. Closing Accounts With a Zero Balance</h2> <p>We all hear horror stories of accounts being used by identity thieves long after we stopped using them. But with today's identity theft protections, and credit card companies footing the bill for fraud, that's no longer a concern. However, these cards on your file, although not being used, do count toward your credit score.</p> <p>Let's say you have three credit cards, each with a $12,000 limit. One card is at a zero balance, one has $1,500 on it, and the other has $5,500. You decide to transfer the balance of $1,500 to the card with $5,500 and close the two empty accounts. Huge mistake. Before, you had $36,000 in available credit, and were using on $7,000 of it. That's just over 19% of your <a href="http://www.wisebread.com/this-one-ratio-is-the-key-to-a-good-credit-score?ref=internal">credit utilization</a>. Now, you have only $12,000 in available credit, and are utilizing 58% off your available credit. You have the same amount of debt, but your credit score just took a hit because of your huge debt to credit availability ratio.</p> <p>Instead of closing old accounts, use them for smaller purchases each month, and pay off the balances in full. It will keep your credit score in check.</p> <h2>2. Hiring a Credit Repair Company</h2> <p>You've seen the ads. You've heard the testimonials. They offer to clean up your credit (for a monthly fee, of course), and say they will raise your score by hundreds of points. Well, if you believe that, someone has a bridge to sell you, too.</p> <p>Most of these credit repair businesses are in the business of making as much money from you as possible, and will stretch out the process for months, or even years. One such technique they use to do this is called &quot;jamming,&quot; and it can seriously damage your reputation. The problem is, &quot;jamming&quot; actually does work&hellip;for a short while.</p> <p>Here's how it works: When you (or your credit repair agency) sends a dispute to a credit bureau, it will be forwarded to a vendor for verification. And under the rules of the Fair Credit Reporting Act, the agency has to review and respond to every dispute within 30 days. The &quot;jamming&quot; scam perverts this system by inundating the bureaus with challenges of every item on your credit report. It's an overflow of paperwork, and the items don't get addressed in time, so they disappear from your credit report. But, they come back. The vendor who reported it will keep doing so, and until it is properly addressed, it will never disappear. But the credit repair agency looks like it is doing the job, and you keep on paying them to scrub items that keep coming back.</p> <h2>3. Lying About Your Credit Issues</h2> <p>This is not the time to start getting creative with your explanations, or just plain lying about what is in your credit report. If you have a legitimate issue with something that is in your report, such as a late payment you know you made on time, then by all means fight tooth-and-nail to dispute it. But if you did make the payment late &mdash; sorry, you did that. It's on you, regardless of the situation. You can ask, or even plead, for the vendor who reported it to scrub it from their records, but lying won't get you very far. You could even get into some legal trouble, which is not going to do you any favors at all.</p> <h2>4. Paying Collection Fees</h2> <p>Collection agencies are built on a model of intimidation, scare tactics, bullying, and fear. If you do get a call from a collection agency, it will not be pleasant. You may be told you owe $50, the remaining balance on a &quot;charged-off&quot; (also known as delinquent) account. Hey, it's only $50, you have it available now, so you pay it off. Wrong. Dead wrong.</p> <p>Although it will get the collection agency off your back, it won't do anything to fix your credit score. In fact, it's an admission of guilt, and can impact your account by more negative points than simply not paying it off at all. As far as a credit report is concerned, paying a $50 fee on a charged-off account has the same impact as paying off a $50,000 fee. Your credit will suffer, because you have a permanent record that you are unreliable. Do whatever you can to work this debt out without paying the collection fee.</p> <h2>5. Consolidating Too Much Debt</h2> <p>When it comes to financial issues and credit scores, variety is definitely the spice of life. Lenders in general like to see a selection of different credit cards, loans, and other accounts, with small, manageable balances that are paid each month. You may very well have a hard time keeping track of all these smaller payments, and decide to put them all onto one card to save time and money. That is a mistake.</p> <p>If you close those accounts, your credit score is affected, as outlined earlier. If you leave them all open, but have eight cards at zero and one that is almost maxed out, that is also going to hurt your credit score. Lenders love revolving balances, but other lenders may look at you as a risk if you have eaten up 90% of your available credit on just one card. You need to spread it around. Plus, without strict discipline, you could find yourself using the other cards again, and bury yourself under more monthly debts.</p> <h2>6. Eliminating Every Single Debt</h2> <p>Wait, what? Isn't that everyone's goal? Well, yes, if you want to live debt-free and can find the means to do so, then by all means go ahead and do it. But, this is not an article about getting rid of debt. This is about credit repair mistakes, and the sad fact is, in the United States you can't have good credit if you don't have any active credit. Worse still, if you pay off and close every single account, you're basically dropping off the map.</p> <p>A credit score is affected by many things, but one major contributing factor is how you pay your debts each month. If you have small debts and pay on time, you are low risk, and highly attractive. Your have a credit history. If you have nothing in your credit report, lenders will give you a very wide berth. They don't have a resume of your spending habits to go from, and that is like letting someone rent your house without doing a background check.</p> <h2>7. Not Keeping Accurate Documentation</h2> <p>In this day and age, there is no excuse for not maintaining records of your correspondence with collection agencies, credit card companies, and other lenders. If you don't already have one, buy yourself a basic scanner and keep a copy of every letter you send (in this case, physical letters are much better than emails), or even take photographs. Send any letters, such as credit disputes, via certified mail, and indicate that you want a return receipt. Keep a file on your computer as a back up, and a physical folder that you can access at any time. You want to be completely buttoned up, and ready to bring out evidence of your payments and conversations at a moment's notice.</p> <h2>8. Finally&hellip; Doing Nothing</h2> <p>Yes, having bad credit sucks. But choosing to ignore it, hoping it will sort itself out over time, is even worse. You do not have to accept a bad credit score. You do not have to spend a lifetime paying for small mistakes you made. You can fix it, and you can do it by yourself, or find a legitimate professional to help you out.</p> <p>First and foremost, you should be checking your credit report often. <a href="http://www.anrdoezrs.net/click-2822544-10809829-1462225929000">Credit Karma</a> is a great place to start, and it's totally free. Also check out <a href="https://www.annualcreditreport.com/index.action">AnnualCreditRepot.com</a>, which is also free, and covers the three big reporting bureaus &mdash; TransUnion, Equifax, and Experian. When you see a mistake, no matter how small, get in contact with the lender and fix it. You have the power, but you have to act upon it.</p> <br /><div id="custom_wisebread_footer"><div id="rss_tagline">This article is from <a href="http://www.wisebread.com/paul-michael">Paul Michael</a> of <a href="http://www.wisebread.com/8-credit-repair-mistakes-that-will-cost-you">Wise Bread</a>, an award-winning personal finance and <a href="http://www.wisebread.com/credit-cards">credit card comparison</a> website. Read more great articles from Wise Bread:</div><div class="view view-similarterms view-id-similarterms view-display-id-block_2 view-dom-id-1"> <div class="view-content"> <div class="item-list"> <ul> <li class="views-row views-row-1 views-row-odd views-row-first"> <div class="views-field-title"> <span class="field-content"><a href="http://www.wisebread.com/heres-why-you-shouldnt-freak-out-if-you-miss-a-payment-due-date">Here&#039;s Why You Shouldn&#039;t Freak Out If You Miss a Payment Due Date</a></span> </div> </li> <li class="views-row views-row-2 views-row-even"> <div class="views-field-title"> <span class="field-content"><a href="http://www.wisebread.com/5-surprising-ways-revolving-debt-helps-you">5 Surprising Ways Revolving Debt Helps You</a></span> </div> </li> <li class="views-row views-row-3 views-row-odd"> <div class="views-field-title"> <span class="field-content"><a href="http://www.wisebread.com/what-happens-when-your-credit-card-debt-is-charged-off">What Happens When Your Credit Card Debt Is Charged Off?</a></span> </div> </li> <li class="views-row views-row-4 views-row-even"> <div class="views-field-title"> <span class="field-content"><a href="http://www.wisebread.com/youve-defaulted-on-your-loan-now-what">You&#039;ve Defaulted on Your Loan. Now What?</a></span> </div> </li> <li class="views-row views-row-5 views-row-odd views-row-last"> <div class="views-field-title"> <span class="field-content"><a href="http://www.wisebread.com/heres-why-credit-scores-and-reports-are-not-the-same">Here&#039;s Why Credit Scores and Reports Are Not the Same</a></span> </div> </li> </ul> </div> </div> </div> </div><br/></br> Personal Finance collections consolidating credit history credit repair credit repair companies credit score fees late payments Mistakes zero balances Tue, 22 Nov 2016 11:30:08 +0000 Paul Michael 1837740 at http://www.wisebread.com How to Clear Old Debt From Your Credit Report http://www.wisebread.com/how-to-clear-old-debt-from-your-credit-report <div class="field field-type-filefield field-field-blog-image"> <div class="field-items"> <div class="field-item odd"> <a href="/how-to-clear-old-debt-from-your-credit-report" class="imagecache imagecache-250w imagecache-linked imagecache-250w_linked"><img src="http://wisebread.killeracesmedia.netdna-cdn.com/files/fruganomics/imagecache/250w/blog-images/woman_happy_bills_100668055.jpg" alt="Woman clearing old debt from her credit report" title="" class="imagecache imagecache-250w" width="250" height="140" /></a> </div> </div> </div> <p>Trying to get your credit score back on track? There are lots of things you'll need to do &mdash; like start using credit wisely instead of as a crutch. But before you can rebuild from the bottom up, it's important to clear the old debt you've accumulated from your record. Here's how.</p> <h2>1. Compare All Three of Your Free Credit Reports</h2> <p>Credit reports are not always created equal, which is why the process of clearing old debt from your credit card should start with comparing your credit reports from the three major bureaus &mdash; Experian, TransUnion, and Equifax. Download them for free annually at AnnualCreditReport.com</p> <p>What you're looking for when you receive the reports are inconsistencies. Debts may be listed by one bureau, but not the others. If this is the case, you may need to contact the bureau to check into the problem and dispute any irregularities, information for which will be included on the report.</p> <h2>2. Make Sure Your Delinquency Dates Are Correct</h2> <p>A delinquency on your credit report means that you've defaulted on the payment of your bill &mdash; this could be a credit card, car note, or a number of other loans that you've been provided. The real problem is that this lack of funds (and judgment) will stay on your credit report for about seven years. If that amount of time has passed since your delinquency date, however, and it's still on your report, you should contact the bureau that's misreporting it and rectify the situation.</p> <h2>3. Dispute Discrepancies With the Credit Bureaus</h2> <p>To dispute any delinquency discrepancies, it's best to write letters to the credit bureaus to request an investigation of a collection on your report. Send them by certified mail so you have a paper trail of evidence that you're being proactive about the situation. Credit Infocenter also has <a href="http://www.creditinfocenter.com/repair/">some important tips</a> that may be helpful in this regard.</p> <h2>4. Find Out Who Owns the Debt If It Was Sold to Collections</h2> <p>If collection agencies are calling your phone nonstop, that means your debt has been sold by the original agency to the proverbial muscle men of the financial world; their sole job is to get the money you owe. If you've been avoiding these phone calls all along &mdash; a very common practice among those who have the misfortune of having collection agencies on their backs &mdash; you may not know who to contact once you're ready to talk to collections to finally settle the debt.</p> <p>Personal finance blogger Jeff Campbell offers some tips on how to proceed.</p> <p>&quot;If the old debt has been sold to collections, it would be important to verify who currently owns the debt,&quot; he says. &quot;Then it would be important to find out how much has been added to the original debt in terms of fees or penalties &mdash; these are all highly negotiable. The larger problem of ignoring old bad debts is that while in theory they drop off your credit report after seven years, when the bad debt gets sold (very common), that can sometimes start the seven-year cycle over again, so it's always better to deal with the issue and take care of it.&quot;</p> <h2>5. Validate the Debt</h2> <p>Before you pay anything to collection agencies, you need to validate the debt first to make sure it's accurate. By leveraging the Fair Debt Collection Practices Act, the collection agency will be forced to provide documentation that everything is on the up and up. Credit Infocenter suggests <a href="http://www.creditinfocenter.com/rebuild/debt-validation.shtml">writing a letter</a> to the collection agency (sent by certified mail) in hopes of settling the matter amicably, but if they're unresponsive you may have to threaten a lawsuit.</p> <h2>6. Settle Debts Higher Than $1,000</h2> <p>For any remaining debt under $1,000, you'll likely be required to pay it in full. If the debt is higher than a grand, however, there may be some wiggle room. Collection agencies don't want to keep your debt forever, and in many cases they're willing to negotiate a reduced amount that requires a lump-sum payment. For instance, I once had a $1,100 delinquent credit card that I was able to get down to $800. As part of this deal, you need to have the collection agency agree to remove the listing from your credit report.</p> <p>When it comes time for the actual payment, be smart and trust no one.</p> <p>&quot;Don't pay anything electronically as it's highly possible they will charge more than agreed to,&quot; Campbell warns. &quot;Pay by cashier's check or money order only once they agree in writing to settle the account as paid in full for the agreed upon amount and agree to remove any entries pertaining to this debt with all credit bureaus within 30 days of receiving payment.&quot;</p> <h2>7. Appeal to a Higher Authority</h2> <p>If your collector is a bank and you've reached out about removing old debt to no avail, you still have recourse. According to Bankrate, these institutions have federal regulators who field your complaints to keep everybody on the up and up. Again, rather than spending countless hours on the phone getting the runaround, send in a certified complaint with your evidence, which should include copies of your correspondence and return receipts along with the agency's complaint form that you can print online. At this point, the regulators' job is to contact the company on your behalf and get to the bottom of the ordeal. And start in your own state opposed to the creditor's state.</p> <br /><div id="custom_wisebread_footer"><div id="rss_tagline">This article is from <a href="http://www.wisebread.com/mikey-rox">Mikey Rox</a> of <a href="http://www.wisebread.com/how-to-clear-old-debt-from-your-credit-report">Wise Bread</a>, an award-winning personal finance and <a href="http://www.wisebread.com/credit-cards">credit card comparison</a> website. Read more great articles from Wise Bread:</div><div class="view view-similarterms view-id-similarterms view-display-id-block_2 view-dom-id-1"> <div class="view-content"> <div class="item-list"> <ul> <li class="views-row views-row-1 views-row-odd views-row-first"> <div class="views-field-title"> <span class="field-content"><a href="http://www.wisebread.com/your-bad-credit-isnt-the-end-of-the-world">Your Bad Credit Isn&#039;t the End of the World</a></span> </div> </li> <li class="views-row views-row-2 views-row-even"> <div class="views-field-title"> <span class="field-content"><a href="http://www.wisebread.com/13-money-goals-you-can-still-reach-by-2017">13 Money Goals You Can Still Reach by 2017</a></span> </div> </li> <li class="views-row views-row-3 views-row-odd"> <div class="views-field-title"> <span class="field-content"><a href="http://www.wisebread.com/avoid-these-5-common-mistakes-while-rebuilding-your-credit">Avoid These 5 Common Mistakes While Rebuilding Your Credit</a></span> </div> </li> <li class="views-row views-row-4 views-row-even"> <div class="views-field-title"> <span class="field-content"><a href="http://www.wisebread.com/8-credit-repair-mistakes-that-will-cost-you">8 Credit Repair Mistakes That Will Cost You</a></span> </div> </li> <li class="views-row views-row-5 views-row-odd views-row-last"> <div class="views-field-title"> <span class="field-content"><a href="http://www.wisebread.com/7-best-money-management-tips-from-john-oliver">7 Best Money Management Tips From John Oliver</a></span> </div> </li> </ul> </div> </div> </div> </div><br/></br> Personal Finance credit history credit reports delinquencies discrepancies old debts organizing settling debts Mon, 24 Oct 2016 09:00:07 +0000 Mikey Rox 1817657 at http://www.wisebread.com How Your Unused Credit Cards May Be Costing You http://www.wisebread.com/how-your-unused-credit-cards-may-be-costing-you <div class="field field-type-filefield field-field-blog-image"> <div class="field-items"> <div class="field-item odd"> <a href="/how-your-unused-credit-cards-may-be-costing-you" class="imagecache imagecache-250w imagecache-linked imagecache-250w_linked"><img src="http://wisebread.killeracesmedia.netdna-cdn.com/files/fruganomics/imagecache/250w/blog-images/holding_credit_cards_79349747_0.jpg" alt="Woman learning how unused credit cards may be costing her" title="" class="imagecache imagecache-250w" width="250" height="140" /></a> </div> </div> </div> <p>We've all been there. After shopping and picking out a few items, you head to the counter, and the cashier tells you there is a special offer: You'll get 20% off if you sign up for a credit card today. It sounds like a great deal, so you sign up to get the discount. Afraid of racking up interest charges, you pay it off right away, then never use the card again. It just sits in a drawer somewhere, gathering dust.</p> <p>While you may think that minimizing your credit card balance is a smart financial decision, having unused credit cards can be a problem &mdash; and can impact your credit score.</p> <h2>Unused Cards and Your Credit Score</h2> <p>Having a range of cards and credit lines open indicates to lenders that you are a reliable borrower and helps improve your credit score. That unused card adds to your overall available credit, which is a good thing &mdash; but if it goes inactive for too long, it can negatively affect your credit history.</p> <p>Your credit score is dependent on <a href="http://www.wisebread.com/this-one-ratio-is-the-key-to-a-good-credit-score">credit utilization</a>, meaning the percentage of your available credit line you use each month. If your card goes unused, eventually the credit card company will assume you no longer want the account and will close it for you. Exactly how long this is varies from issuer to issuer and can depend on other factors in your credit history. Even worse, issuers are not required by law to inform you that the credit account has been closed due to inactivity. When the account is closed, the sudden decrease in your available credit raises your credit utilization and can cause your credit score to drop.</p> <p>Beyond credit utilization, your credit score is also dependent on the length of your credit history. If the unused card is your oldest account, and it gets closed, you lose out on the benefits of your history and your score goes down because of that, as well.</p> <p>Generally, you don't want to close your oldest account, because once it's eliminated, your credit history is abridged and your score will decrease.</p> <h2>When Does It Make Sense to Close a Card?</h2> <p>In some cases, it may make sense to close a dormant card rather than have it go unused. For example, a card with a high annual fee or a very high interest rate with a balance can cost you in the long run; it makes more sense to <a href="http://www.wisebread.com/when-to-do-a-balance-transfer-to-pay-off-credit-card-debt">transfer the balance to a lower interest card</a> and close the card with an annual fee. (See also: <a href="http://www.wisebread.com/the-5-best-credit-cards-with-no-annual-fees">Best Credit Cards with No Annual Fee</a>)</p> <p>If you know you're not going to use the cards anymore, you may want to close it on your terms rather than have it unexpectedly closed by the issuer. Do it during a time when you won't need your credit checked. Definitely don't go on a closing spree right before you're applying for a loan or trying to rent a new apartment. In fact, the best time might be right after, since your credit will have already taken some hits with the new loan or credit checks anyway.</p> <h2>Preventing an Account Closure</h2> <p>To prevent an account closure and maintain your credit score, use the cards you want to keep for necessary expenditures. Rather than using only one credit card, spread out your purchases over all of your cards to ensure they all are used and stay active.</p> <p>To prevent racking up credit card debt in the process, use your cards strategically. Use each card for a routine purchase, such as using one card for groceries and another for gas. After you make a purchase, make a payment right away. This process will keep your cards active but will ensure you do not build up credit card debt.</p> <p>While it's a good idea to keep your debt down, not using your cards can lead to a lower credit score and smaller credit line. Instead, manage your spending wisely to keep the cards active and maintain your credit history.</p> <br /><div id="custom_wisebread_footer"><div id="rss_tagline">This article is from <a href="http://www.wisebread.com/kat-tretina">Kat Tretina</a> of <a href="http://www.wisebread.com/how-your-unused-credit-cards-may-be-costing-you">Wise Bread</a>, an award-winning personal finance and <a href="http://www.wisebread.com/credit-cards">credit card comparison</a> website. Read more great articles from Wise Bread:</div><div class="view view-similarterms view-id-similarterms view-display-id-block_2 view-dom-id-1"> <div class="view-content"> <div class="item-list"> <ul> <li class="views-row views-row-1 views-row-odd views-row-first"> <div class="views-field-title"> <span class="field-content"><a href="http://www.wisebread.com/stop-making-these-5-costly-credit-card-mistakes">Stop Making These 5 Costly Credit Card Mistakes</a></span> </div> </li> <li class="views-row views-row-2 views-row-even"> <div class="views-field-title"> <span class="field-content"><a href="http://www.wisebread.com/avoid-these-5-common-mistakes-while-rebuilding-your-credit">Avoid These 5 Common Mistakes While Rebuilding Your Credit</a></span> </div> </li> <li class="views-row views-row-3 views-row-odd"> <div class="views-field-title"> <span class="field-content"><a href="http://www.wisebread.com/5-surprising-ways-revolving-debt-helps-you">5 Surprising Ways Revolving Debt Helps You</a></span> </div> </li> <li class="views-row views-row-4 views-row-even"> <div class="views-field-title"> <span class="field-content"><a href="http://www.wisebread.com/4-surprising-things-lenders-check-besides-your-credit-score">4 Surprising Things Lenders Check Besides Your Credit Score</a></span> </div> </li> <li class="views-row views-row-5 views-row-odd views-row-last"> <div class="views-field-title"> <span class="field-content"><a href="http://www.wisebread.com/this-one-ratio-is-the-key-to-a-good-credit-score">This One Ratio Is the Key to a Good Credit Score</a></span> </div> </li> </ul> </div> </div> </div> </div><br/></br> Credit Cards closing accounts credit history credit score dormant credit cards interest rates shopping store cards Fri, 30 Sep 2016 09:00:06 +0000 Kat Tretina 1802286 at http://www.wisebread.com 5 Surprising Ways Revolving Debt Helps You http://www.wisebread.com/5-surprising-ways-revolving-debt-helps-you <div class="field field-type-filefield field-field-blog-image"> <div class="field-items"> <div class="field-item odd"> <a href="/5-surprising-ways-revolving-debt-helps-you" class="imagecache imagecache-250w imagecache-linked imagecache-250w_linked"><img src="http://wisebread.killeracesmedia.netdna-cdn.com/files/fruganomics/imagecache/250w/blog-images/woman_happy_credit_card_49216544.jpg" alt="Woman learning surprising ways revolving debt helps you" title="" class="imagecache imagecache-250w" width="250" height="140" /></a> </div> </div> </div> <p>Debt can be good or bad, depending on how you use it. Different types of debt serve different purposes. We use installment loans like mortgages, car loans, and student loans to purchase homes, cars, and to get an education &mdash; but these aren't the only types of debt.</p> <p>There's also revolving debt, such as a credit card or a home equity line of credit. This type of debt can be more dangerous because it lacks a fixed payment amount, and minimum payments are based on how much you utilize the line of credit. Despite the unpredictable nature of revolving debt, however, it can be surprisingly helpful. Here's how:</p> <h2>1. It's Available When You Need It</h2> <p>Life is unpredictable. Even when you're financially responsible with money, an emergency can pull the rug out from under you. Sometimes, there isn't enough cash in your account to handle the unexpected. Or maybe you have cash, but don't want to drain your savings. Revolving debt lets you pay off purchases over time, so that you can keep more cash in your wallet.</p> <p>Revolving debt is also convenient because you have immediate access to funds when you need it. This is different from an installment loan. You can apply for a loan when you need money for an unexpected expense, but it's not immediate. You have to submit an application and wait for an approval, which can take days. Plus, there's no guarantee the bank will approve the amount you need.</p> <h2>2. It Helps Build Creditworthiness</h2> <p>Whether you're looking to establish your credit history or rebuild your credit after a blunder, you have to use credit to improve your FICO score. Revolving debt can help in this regard.</p> <p>Several factors make up your credit score, including the types of credit accounts in your name. Some people only have one type of credit account, perhaps an installment loan like a mortgage or car loan. Making timely payments on these accounts help their credit scores, but they need other types of account to increase credibility and creditworthiness.</p> <p>Credit mix makes up approximately 10% of your credit score, so it's worth adding a revolving account if you don't already have one. What's surprising is that revolving debt can be a good thing on your credit report. If you have a revolving account and you manage this account well, other creditors and lenders will take notice. This builds their trust in you, which makes it easier for you to qualify for other types of accounts in the future.</p> <p>For revolving debt to be helpful, however, you have to pay your bills on time, and you shouldn't utilize too much of your available credit. Payment history makes up 35% of your credit score, and the amount you owe makes up 30% of your credit score.</p> <h2>3. It Protects Your Credit Score</h2> <p>If you're self-employed or an employee who gets paid once a month, a revolving account can keep your head above water until you receive a paycheck. Ideally, you should have a savings account for situations like this, but if you're in the process of growing your emergency cushion, using a credit card to tide you over and acquiring short-term revolving debt is the lesser of two evils. In this case, revolving debt can protect your credit &mdash; and you'll avoid late fees.</p> <p>If your creditors don't receive a payment after 30 days, they'll report the lateness to the credit bureaus. A single late payment can reduce your credit score by 50 to 100 points, depending on the type of account. Using a credit card and increasing your revolving debt can cause a slight decrease in your credit score, but your credit score will rebound as soon as you pay down the balance. On the other hand, a late payment can stay on your credit report for up to seven years, and it takes years to regain lost points.</p> <h2>4. You Have Flexibility of Use</h2> <p>Revolving debt is also helpful because there's flexibility of use. When you apply for an installment loan, you have to use funds for a specific purpose. For example, a mortgage loan can only be used to buy a house, and a student loan can only be used for educational purposes. Revolving debt can be used for any purpose, such as renovating your home, paying tuition, taking a vacation, etc.</p> <h2>5. You May Experience a Lower Interest Rate</h2> <p>The interest rate on your revolving debt could be lower than the interest rate on personal loans offered by banks, but only if you have good credit. If so, you'll pay less in interest charges over the life of the debt, and you can enjoy lower minimum payments.</p> <p>Make sure you shop around and compare rates. Some <a href="http://www.wisebread.com/5-best-credit-cards-with-0-apr-for-purchases?ref=internal">credit cards offer 0% interest</a> on balance transfers and purchases for the first six to 18 months, and then a low permanent APR after the introductory rate period.</p> <br /><div id="custom_wisebread_footer"><div id="rss_tagline">This article is from <a href="http://www.wisebread.com/mikey-rox">Mikey Rox</a> of <a href="http://www.wisebread.com/5-surprising-ways-revolving-debt-helps-you">Wise Bread</a>, an award-winning personal finance and <a href="http://www.wisebread.com/credit-cards">credit card comparison</a> website. Read more great articles from Wise Bread:</div><div class="view view-similarterms view-id-similarterms view-display-id-block_2 view-dom-id-1"> <div class="view-content"> <div class="item-list"> <ul> <li class="views-row views-row-1 views-row-odd views-row-first"> <div class="views-field-title"> <span class="field-content"><a href="http://www.wisebread.com/4-surprising-things-lenders-check-besides-your-credit-score">4 Surprising Things Lenders Check Besides Your Credit Score</a></span> </div> </li> <li class="views-row views-row-2 views-row-even"> <div class="views-field-title"> <span class="field-content"><a href="http://www.wisebread.com/heres-why-credit-scores-and-reports-are-not-the-same">Here&#039;s Why Credit Scores and Reports Are Not the Same</a></span> </div> </li> <li class="views-row views-row-3 views-row-odd"> <div class="views-field-title"> <span class="field-content"><a href="http://www.wisebread.com/never-borrow-money-for-these-5-buys">Never Borrow Money for These 5 Buys</a></span> </div> </li> <li class="views-row views-row-4 views-row-even"> <div class="views-field-title"> <span class="field-content"><a href="http://www.wisebread.com/best-of-personal-finance-credit-where-credit-is-due-edition">Best of Personal Finance: Credit Where Credit Is Due Edition</a></span> </div> </li> <li class="views-row views-row-5 views-row-odd views-row-last"> <div class="views-field-title"> <span class="field-content"><a href="http://www.wisebread.com/8-credit-repair-mistakes-that-will-cost-you">8 Credit Repair Mistakes That Will Cost You</a></span> </div> </li> </ul> </div> </div> </div> </div><br/></br> Personal Finance Debt Management borrowing money credit history credit score home equity line of credit interest rates loans revolving debt Tue, 20 Sep 2016 09:00:05 +0000 Mikey Rox 1794234 at http://www.wisebread.com 5 Thoughts I Had After Paying Off My Credit Card Debt http://www.wisebread.com/5-thoughts-i-had-after-paying-off-my-credit-card-debt <div class="field field-type-filefield field-field-blog-image"> <div class="field-items"> <div class="field-item odd"> <a href="/5-thoughts-i-had-after-paying-off-my-credit-card-debt" class="imagecache imagecache-250w imagecache-linked imagecache-250w_linked"><img src="http://wisebread.killeracesmedia.netdna-cdn.com/files/fruganomics/imagecache/250w/blog-images/87173709.jpg" alt="" title="" class="imagecache imagecache-250w" width="250" height="140" /></a> </div> </div> </div> <p>I'm in my mid-30s now, financially stable, and I keep close tabs on my dough. But it wasn't always that way. It wasn't that long ago that I was reckless with my money, racking up credit card debt on a mountain of material possessions and teetering on zero in my bank account several times a month &mdash; and often overdrafting as a result. It was an awful way to live. I knew what I was doing was damaging my financial future, but I couldn't stop. After I while, I dug myself so much into debt that the only way I could afford necessary life items (like food and gas for my car) was to dig myself deeper into debt. The cycle was as vicious as they come.</p> <p>Eventually, however, I was able to emerge from the quicksand of debt (many years after I maxed out my cards, mind you). My credit was completely obliterated, but at least I was able to start picking up the pieces. When I made the last payments that freed me from the chains of negative balances, I reflected on my journey. Here's what went through my mind.</p> <p>See also: <a href="http://www.wisebread.com/fastest-way-to-pay-off-10000-in-credit-card-debt?utm_source=wisebread&amp;utm_medium=seealso2&amp;utm_campaign=cc_article">Fastest Way to Pay Off 10K Credit Card Debt</a></p> <h2>1. I Did It &mdash; I Finally Did It!</h2> <p>Collections duped me into picking up the phone one fateful day, and, after giving me a lecture on what a terrible person I was, the lady on the line offered me a payoff deal. The deal was about half of what I owed &mdash; which was above and beyond what my spend balance was because of years of late fees and interest &mdash; but I was promised that the entire debt would be resolved if I could make the payment in full in less than 60 days.</p> <p>I didn't have what I needed to <a href="http://www.wisebread.com/5-day-debt-reduction-plan-pay-it-off?utm_source=wisebread&amp;utm_medium=internal&amp;utm_campaign=cc_article">pay off the debt</a> then and there, but the offer was motivating, nonetheless. I had lived under that black cloud of debt long enough, and I wanted to take advantage of this opportunity to reboot my finances. So I saved: I cut out everything I didn't need for the next two months, picked up extra work, and I finally paid it off. I was proud of myself, and now I could look to the future without the guilt and stress of past debt holding me back.</p> <h2>2. I Royally Screwed My Credit Score</h2> <p>The celebration of being newly debt-free was short-lived. At the end of the day, even though the debt was gone, the effects of my irresponsibility lingered, namely in my very poor credit score. And I felt those effects for a long time afterward. Like when I wanted to purchase my first new car, for instance. My dad had to cosign for the car because I didn't qualify for the loan on my own &mdash; which wasn't a large one &mdash; despite having a decent-paying full-time job at the time. These ripples infiltrated many other parts of my life, too &mdash; like applying for apartments. These were hurdles I didn't anticipate, but I knew I had to do some swift thinking on how to reverse the damage.</p> <h2>3. How Do I Avoid Digging This Hole Again?</h2> <p>My number one rule post payoff was that everything gets paid on time; not a single payment will be processed late! That means that I need to have the money I need to cover these expenses in advance of the due date, and that check needs to be in the mail far enough ahead of time that it's deducted from my account before the due date. As such, I had to completely rearrange my budget and make cutbacks. I couldn't buy new clothes at the frequency at which I previously bought them, I skipped drinks with my friends, I ate out less and took my lunch to work more, I started carpooling with a friend to work, and I picked up a part-time job. These tactics combined helped me build enough reserve cash that I could be proactive about payments moving forward to avoid another dangerous situation, and it was a small step in the right direction toward an improved credit outlook.</p> <h2>4. No More Credit Cards for a While &mdash; Cash Only</h2> <p>I cut up my credit cards long before I paid them off. They were maxed out and essentially useless, and I stayed that course after the debt was paid, and even when new credit card offers were coming in, too. I would have been bonkers to take those new deals. Given my poor credit score, the interest rate on those offers were sky high, which only served as an additional warning that creditors see irresponsible people coming a mile away, and they prey on them &mdash; and I didn't want to play the willing victim anymore.</p> <p>So, I committed myself to a life of cash only for about five years. I decided that if I couldn't pay for it in cash, I didn't need it. Was that self-imposed plan difficult to uphold? Absolutely it was. But &mdash; it also was arguably the single best decision I've ever made for myself.</p> <p>Moving to a cash-only system helped me get a solid handle on my money, it helped me develop financial discipline, it taught me the value of being frugal, and I learned how to save for purchases that would enhance my life (and increase my income) over the long term instead of spending it on things that gave me instant gratification in the short term. Without the temptation of credit sitting idly in my wallet, I could see the bigger picture much clearer. If I couldn't afford it with the real money I had, I couldn't afford it &mdash; end of story.</p> <h2>5. How Can I Keep My Finances on the Straight and Narrow?</h2> <p>After my five-year credit card hiatus, I opened one new account to further <a href="http://www.wisebread.com/how-to-use-credit-cards-to-improve-your-credit-score?utm_source=wisebread&amp;utm_medium=internal&amp;utm_campaign=cc_article">improve my credit score</a>. But this wasn't like the last time. I was a decade older and wiser, and I used that card for emergencies only. I also paid the bill off in full (nine times out of 10, anyway) each billing cycle. In fact, it wasn't until recently (I'd say in the last three years) that I've taken on additional cards, but not for frivolous reasons. Each card I've accepted has served a purpose, like helping to furnish an income property that I own. It comes with perks and rewards, and I have a plan in place to pay for the anticipated and purposeful purchases in advance. If I don't already have the money in the bank to pay that debt &mdash; or at least earmarked income to settle it &mdash; I don't put anything on the cards.</p> <p>Credit can be beneficial if you use it the right way, but it's easy to get off track. Which is why after I've used the cards for their intended purpose, I remove them from my wallet and put them in a safe. I typically only have one card on me at any given time: The first one I accepted after my cash-only experiment, and that's enough to get me through an emergency should I need to use it.</p> <p><em>If you've paid off significant debt, how did you feel?</em></p> <br /><div id="custom_wisebread_footer"><div id="rss_tagline">This article is from <a href="http://www.wisebread.com/mikey-rox">Mikey Rox</a> of <a href="http://www.wisebread.com/5-thoughts-i-had-after-paying-off-my-credit-card-debt">Wise Bread</a>, an award-winning personal finance and <a href="http://www.wisebread.com/credit-cards">credit card comparison</a> website. Read more great articles from Wise Bread:</div><div class="view view-similarterms view-id-similarterms view-display-id-block_2 view-dom-id-1"> <div class="view-content"> <div class="item-list"> <ul> <li class="views-row views-row-1 views-row-odd views-row-first"> <div class="views-field-title"> <span class="field-content"><a href="http://www.wisebread.com/10-credit-card-truths-you-wish-you-could-tell-your-younger-self">10 Credit Card Truths You Wish You Could Tell Your Younger Self</a></span> </div> </li> <li class="views-row views-row-2 views-row-even"> <div class="views-field-title"> <span class="field-content"><a href="http://www.wisebread.com/avoid-these-5-common-mistakes-while-rebuilding-your-credit">Avoid These 5 Common Mistakes While Rebuilding Your Credit</a></span> </div> </li> <li class="views-row views-row-3 views-row-odd"> <div class="views-field-title"> <span class="field-content"><a href="http://www.wisebread.com/how-your-unused-credit-cards-may-be-costing-you">How Your Unused Credit Cards May Be Costing You</a></span> </div> </li> <li class="views-row views-row-4 views-row-even"> <div class="views-field-title"> <span class="field-content"><a href="http://www.wisebread.com/this-one-ratio-is-the-key-to-a-good-credit-score">This One Ratio Is the Key to a Good Credit Score</a></span> </div> </li> <li class="views-row views-row-5 views-row-odd views-row-last"> <div class="views-field-title"> <span class="field-content"><a href="http://www.wisebread.com/building-a-credit-history">Building a Credit History</a></span> </div> </li> </ul> </div> </div> </div> </div><br/></br> Credit Cards advice cash credit history credit score debt free overspending Fri, 02 Sep 2016 10:00:08 +0000 Mikey Rox 1782254 at http://www.wisebread.com 4 Surprising Things Lenders Check Besides Your Credit Score http://www.wisebread.com/4-surprising-things-lenders-check-besides-your-credit-score <div class="field field-type-filefield field-field-blog-image"> <div class="field-items"> <div class="field-item odd"> <a href="/4-surprising-things-lenders-check-besides-your-credit-score" class="imagecache imagecache-250w imagecache-linked imagecache-250w_linked"><img src="http://wisebread.killeracesmedia.netdna-cdn.com/files/fruganomics/imagecache/250w/blog-images/man_paperwork_house_83751927.jpg" alt="Man learning things lenders check besides credit score" title="" class="imagecache imagecache-250w" width="250" height="140" /></a> </div> </div> </div> <p>You know how important your FICO credit score is to mortgage lenders. They rely on this number to gauge how well you've handled credit and paid your bills in the past. A high credit score means that you'll qualify for a low mortgage interest rate. A low score? You might not qualify for a loan at all.</p> <p>But mortgage lenders don't look only at <a href="http://www.wisebread.com/7-reasons-you-are-more-than-your-credit-score" target="_blank">your credit score</a>&nbsp;when you apply for a home loan. They also consider several other key factors &mdash; everything from your job history to the size of your down payment.</p> <p>Here is a look at four noncredit factors that lenders will be studying when you apply for a mortgage loan.</p> <h2>Debt</h2> <p>Outside of your credit score, your debt-to-income ratio is the most important number for mortgage lenders. This ratio measures the relationship between your monthly debt obligations and your gross monthly income.</p> <p>As a general rule, lenders strongly prefer your total monthly debts &mdash; including your estimated new mortgage payment &mdash; equal no more than 43% of your gross monthly income (your income before taxes).</p> <p>If your debt-to-income rises past this level, lenders won't be as willing to lend you mortgage money. They'll worry that you're already overburdened with debt, and the addition of a monthly mortgage payment will only make your financial situation worse.</p> <h2>Job History</h2> <p>Lenders prefer borrowers who have worked for the same employer, in the same position, for at least two years. Lenders believe that such workers are less likely to lose their jobs and, therefore, less likely to lose the income stream they need to pay their mortgage loan on time each month.</p> <p>But there's a lot of flexibility with this rule. For instance, if you took on a new job with your same employer in the last two years, this probably won't hurt you. Even if you moved onto a new job with a different employer in your same industry, lenders probably won't worry.</p> <p>But what if you've taken a new job in a new industry in the last two years? That might cause some concern. Lenders might worry that you'll be more likely to lose that new position. However, you can usually still qualify for a loan.</p> <p>If you've been unemployed for a significant amount of time in the last two years, that can cause more problems. Be prepared to explain to lenders why you have a gap in your work history. As long as you have a solid income now, the odds are still good that you'll be able to qualify for a home loan.</p> <h2>Savings</h2> <p>To qualify for the lowest interest rates, make sure you have enough money in savings. You'll need money to pay for your down payment, closing costs, and a certain number of months' worth of property taxes, of course.</p> <p>But lenders often require that you also have enough in savings to pay at least two months of your new mortgage payment, including whatever you're paying each month for property taxes and insurance. If your total monthly mortgage payment will be $2,000, you'll need at least $4,000 in savings in addition to whatever you'll be paying for closing costs and down payment.</p> <p>Lenders want to see that you have savings in case you suffer a temporary reduction in your monthly income. This way, you'll be able to use your savings to pay for at least a couple months of mortgage payments.</p> <h2>Down Payment</h2> <p>The size of your down payment plays a big role in the size of your mortgage interest rate. In general, the bigger your down payment, the smaller your interest rate.</p> <p>That's because lenders consider you less of a risk to default on your loan if you come up with a larger down payment. You've already invested more in your home, the theory goes, so you'll be less likely to walk away from it.</p> <p>You can qualify for mortgage loans today with a down payment of as little as 3% of your home's final purchase price, in many cases. But if you want to qualify for the lowest interest rates? Putting down 20% of your home's final purchase price &mdash; admittedly not an easy task &mdash; will increase your chances of nabbing that ultralow rate.</p> <p><em>If you're getting ready to buy a house, have you taken steps to improve these parts of your finances?</em></p> <br /><div id="custom_wisebread_footer"><div id="rss_tagline">This article is from <a href="http://www.wisebread.com/dan-rafter">Dan Rafter</a> of <a href="http://www.wisebread.com/4-surprising-things-lenders-check-besides-your-credit-score">Wise Bread</a>, an award-winning personal finance and <a href="http://www.wisebread.com/credit-cards">credit card comparison</a> website. Read more great articles from Wise Bread:</div><div class="view view-similarterms view-id-similarterms view-display-id-block_2 view-dom-id-3"> <div class="view-content"> <div class="item-list"> <ul> <li class="views-row views-row-1 views-row-odd views-row-first"> <div class="views-field-title"> <span class="field-content"><a href="http://www.wisebread.com/4-reasons-why-youre-too-old-or-too-young-for-a-mortgage-loan">4 Reasons Why You&#039;re Too Old — Or Too Young — For a Mortgage Loan</a></span> </div> </li> <li class="views-row views-row-2 views-row-even"> <div class="views-field-title"> <span class="field-content"><a href="http://www.wisebread.com/15-personal-finance-calculators-everyone-should-use">15 Personal Finance Calculators Everyone Should Use</a></span> </div> </li> <li class="views-row views-row-3 views-row-odd"> <div class="views-field-title"> <span class="field-content"><a href="http://www.wisebread.com/5-things-lenders-look-for-in-a-loan-application">5 Things Lenders Look For in a Loan Application</a></span> </div> </li> <li class="views-row views-row-4 views-row-even"> <div class="views-field-title"> <span class="field-content"><a href="http://www.wisebread.com/should-you-pay-your-mortgage-off-early">Should You Pay Your Mortgage Off Early?</a></span> </div> </li> <li class="views-row views-row-5 views-row-odd views-row-last"> <div class="views-field-title"> <span class="field-content"><a href="http://www.wisebread.com/5-surprising-ways-revolving-debt-helps-you">5 Surprising Ways Revolving Debt Helps You</a></span> </div> </li> </ul> </div> </div> </div> </div><br/></br> Banking Real Estate and Housing closing costs credit history credit score debt down payment FICO score interest rates job history lenders loans mortgages savings Mon, 29 Aug 2016 10:00:09 +0000 Dan Rafter 1779806 at http://www.wisebread.com How to Build Credit Without Using Credit Cards http://www.wisebread.com/how-to-build-credit-without-using-credit-cards <div class="field field-type-filefield field-field-blog-image"> <div class="field-items"> <div class="field-item odd"> <a href="/how-to-build-credit-without-using-credit-cards" class="imagecache imagecache-250w imagecache-linked imagecache-250w_linked"><img src="http://wisebread.killeracesmedia.netdna-cdn.com/files/fruganomics/imagecache/250w/blog-images/woman_reading_letter_73633147.jpg" alt="Woman learning how to build credit without credit cards" title="" class="imagecache imagecache-250w" width="250" height="140" /></a> </div> </div> </div> <p>There are lots of reasons people avoid using credit cards. The <a href="http://www.wisebread.com/everything-you-didn-t-understand-about-credit-card-interest-grace-periods-and-penalty-aprs?utm_source=wisebread&amp;utm_medium=internal&amp;utm_campaign=cc_article">interest rates on credit cards</a> can be horrible &mdash; in some cases, 20% or higher. And walking around with a large amount of spending power in your pocket can lead to unintended purchases and being saddled with big credit card payments. So, you might be forgiven for thinking that your credit rating would be higher if you just didn't use credit cards. (See also: <a href="http://www.wisebread.com/how-to-rebuild-your-credit-in-8-simple-steps%20?utm_source=wisebread&amp;utm_medium=seealso&amp;utm_campaign=cc_article">How to Rebuild Your Credit in 8 Simple Steps</a>)</p> <p>Important <a href="http://www.wisebread.com/this-one-ratio-is-the-key-to-a-good-credit-score?utm_source=wisebread&amp;utm_medium=internal&amp;utm_campaign=cc_article">factors in calculating your credit score</a> include on-time payment history and available credit. If you don't use credit cards or make any loan payments, you may not have sufficient <a href="http://www.wisebread.com/how-to-use-credit-cards-to-improve-your-credit-score%20?utm_source=wisebread&amp;utm_medium=internal&amp;utm_campaign=cc_article">credit history to obtain a high credit score</a>. It seems illogical, but if you don't have any debt, you can end up with a poor credit rating due to lack of recent credit history!</p> <p>But let's say you're still not interested in using credit cards. How do you build your credit without them?</p> <h2>Be Added as an Authorized User</h2> <p>An easy and free way to boost your credit rating is to have a family member add you as an authorized user on one of their cards so you can get the available credit and payment history added to your credit report. Make sure that person has a good credit history and can be counted on to make on-time payments and to keep their balance low. Agree that you will not use the card (even better, let them hold onto your card). For a bigger boost, ask to be added to the card with the highest available credit and lowest debt.</p> <h2>Get a Secured Credit Card</h2> <p>Most consumer credit cards are unsecured. If you don't trust yourself with access to credit, a <a href="http://www.wisebread.com/a-secured-credit-card-can-repair-your-credit-score-heres-how-to-pick-the-best%20?utm_source=wisebread&amp;utm_medium=internal&amp;utm_campaign=cc_article">secured credit card can improve your credit score</a>. To get a secured credit card, you have to put down a deposit, which would then be your available credit. You can't use more money than you've already put in. If you have some cash to make a security deposit, this can be a good way to establish a good credit history by making on-time payments to build your credit score, without the temptation to spend more than you have. The <a href="http://www.wisebread.com/the-5-best-secured-credit-cards%20?utm_source=wisebread&amp;utm_medium=internal&amp;utm_campaign=cc_article">best secured cards</a> even come with valuable cardholder benefits such as extended warranty coverage and automobile rental insurance.</p> <h2>Take Out a Loan</h2> <p>Even if you don't need to borrow money, you can take out a loan, have the funds deposited in your account, and make payments on time to boost your credit rating. You can find lenders at <a href="https://www.prosper.com">Prosper</a>, <a href="http://track.flexlinks.com/a.ashx?foid=1029882.227343&amp;fot=1074&amp;foc=1">Lending Club</a>, or <a href="https://www.selflender.com">Self Lender</a>. You will pay a small amount of interest fees, but building your credit rating can save you lots of money in the long run.</p> <h2>Make Car Payments on Time</h2> <p>Car loans typically have much lower interest rates, and you can build your credit history with on-time car loan payments. A big problem with car loans is that people tend to buy much more expensive cars than they would if they had to pay cash. One strategy is to buy the same car you were going to buy with cash, but put down a large deposit, and get a car loan for the rest. Use your cash to make the loan payments on time for the life of the loan. You will pay a little more for the car due to interest and fees, but this is a relatively low-cost way to build your credit history.</p> <h2>Make Student Loan Payments on Time</h2> <p>If you have student loans, making your payments on time counts to build your credit history. Set up automatic payments to make sure you never have any late or missed payments reported.</p> <p><em>How do you maintain a good credit rating without using credit cards?</em></p> <br /><div id="custom_wisebread_footer"><div id="rss_tagline">This article is from <a href="http://www.wisebread.com/dr-penny-pincher">Dr Penny Pincher</a> of <a href="http://www.wisebread.com/how-to-build-credit-without-using-credit-cards">Wise Bread</a>, an award-winning personal finance and <a href="http://www.wisebread.com/credit-cards">credit card comparison</a> website. Read more great articles from Wise Bread:</div><div class="view view-similarterms view-id-similarterms view-display-id-block_2 view-dom-id-1"> <div class="view-content"> <div class="item-list"> <ul> <li class="views-row views-row-1 views-row-odd views-row-first"> <div class="views-field-title"> <span class="field-content"><a href="http://www.wisebread.com/building-a-credit-history">Building a Credit History</a></span> </div> </li> <li class="views-row views-row-2 views-row-even"> <div class="views-field-title"> <span class="field-content"><a href="http://www.wisebread.com/what-to-expect-when-youre-expecting-a-huge-credit-card-bill">What to Expect When You&#039;re Expecting a Huge Credit Card Bill</a></span> </div> </li> <li class="views-row views-row-3 views-row-odd"> <div class="views-field-title"> <span class="field-content"><a href="http://www.wisebread.com/6-secured-credit-card-facts-to-remember">6 Secured Credit Card Facts to Remember</a></span> </div> </li> <li class="views-row views-row-4 views-row-even"> <div class="views-field-title"> <span class="field-content"><a href="http://www.wisebread.com/is-your-credit-score-suffering-without-your-knowledge">Is your credit score suffering without your knowledge?</a></span> </div> </li> <li class="views-row views-row-5 views-row-odd views-row-last"> <div class="views-field-title"> <span class="field-content"><a href="http://www.wisebread.com/how-to-rebuild-your-credit-in-8-simple-steps">How to Rebuild Your Credit in 8 Simple Steps</a></span> </div> </li> </ul> </div> </div> </div> </div><br/></br> Credit Cards authorized user bills building credit credit history credit score loans payments Mon, 08 Aug 2016 09:30:29 +0000 Dr Penny Pincher 1767115 at http://www.wisebread.com Avoid These 5 Common Mistakes While Rebuilding Your Credit http://www.wisebread.com/avoid-these-5-common-mistakes-while-rebuilding-your-credit <div class="field field-type-filefield field-field-blog-image"> <div class="field-items"> <div class="field-item odd"> <a href="/avoid-these-5-common-mistakes-while-rebuilding-your-credit" class="imagecache imagecache-250w imagecache-linked imagecache-250w_linked"><img src="http://wisebread.killeracesmedia.netdna-cdn.com/files/fruganomics/imagecache/250w/blog-images/holding_credit_cards_79349747.jpg" alt="Learning to avoid common mistakes while rebuilding credit" title="" class="imagecache imagecache-250w" width="250" height="140" /></a> </div> </div> </div> <p>You know your three-digit credit score is terrible. And this makes it difficult to qualify for auto loans, a mortgage, or credit cards. Even if you do qualify, you're hit with sky-high interest rates.</p> <p>Still, you <em>can&nbsp;</em><a href="http://www.wisebread.com/how-to-use-credit-cards-to-improve-your-credit-score?utm_source=wisebread&amp;utm_medium=internal&amp;utm_campaign=article">rebuild your credit score</a>. It just takes time. Pay your bills on time every month. Pay off as much credit card debt as you can. Eventually, your score will rise.</p> <p>Just avoid these five common mistakes that consumers often make when rebuilding their credit.</p> <h2>1. Closing Paid-Off Credit Cards</h2> <p>Paying off a credit card is cause for celebration. Just don't cancel that card once you hit a zero balance. If you do, your credit score will take a hit. This is because of something called your <a href="http://www.wisebread.com/this-one-ratio-is-the-key-to-a-good-credit-score?utm_source=wisebread&amp;utm_medium=internal&amp;utm_campaign=article">credit-utilization ratio</a>. Basically, your credit score will fall if you use too much of your available credit.</p> <p>Here's an example. Say you have $10,000 worth of credit card debt and three open credit card accounts with a total available credit limit of $15,000. This gives you a credit utilization ratio of 67%. If you pay off one of the cards and bring your debt down to $7,000, your credit utilization ratio falls to 47%. This will boost your credit score. However, if you close that credit card account and lose that available credit (say it was $5,000), your total available credit will drop to $10,000, and your credit utilization ratio jumps to 70%, even higher than when you had $10k of debt but three open accounts.</p> <p>The better move? Keep that paid-off card open, just make sure to avoid running up its balance again.</p> <h2>2. Missing a Payment, Even Once</h2> <p>When rebuilding your credit score, your most important job is to make your monthly payments on time <em>every</em> month. Late or missed payments can send your credit score falling by 100 points. These financial missteps will stay on your credit report for seven years, too.</p> <p>So don't forget to send in that car or credit card payment on time. And if you do miss your due date? Send your payment as quickly as possible. Lenders won't report a payment as missed to the three national credit bureaus until it is 30 days or more past the due date. So even if you missed the official due date, you can still spare your credit score.</p> <h2>3. Swearing Off Credit Cards Forever</h2> <p>It's tempting when you're trying to rebuild your credit to swear off credit cards completely. After all, it's often credit card debt that has gotten consumers into credit score problems. But using a credit card responsibly is actually one way to help improve a credit score. Your score will rise if you pay your credit card bill on time each month. Not using credit cards at all can actually hurt your score.</p> <p>The key, though, is to never charge more than you can afford to pay off in full each month. If you charge too much, you'll simply increase the amount of credit card debt you carry from month to month. This will increase your credit-utilization ratio, thus hurting your score. So do use your card. Just don't use it so much that you have to carry a balance.</p> <p>If you find that you're having trouble getting approved for a credit card because of your bad credit, look for <a href="http://www.wisebread.com/the-5-best-secured-credit-cards?utm_source=wisebread&amp;utm_medium=internal&amp;utm_campaign=article">secured credit cards</a> which often do not require a credit check.</p> <h2>4. Looking for a Quick Solution</h2> <p>Rebuilding a weak credit score takes time &mdash; lots of it. It might take a year or more of making on-time payments and whittling down your credit card debt to improve your score enough to make you a good risk in the eyes of lenders. Don't make the mistake of trying to rush this process. Many companies claim that they can instantly boost your credit score. Unless there are errors on your credit reports, they can't. There is no quick way to raise an ailing credit score. Any company that tells you otherwise is lying.</p> <h2>5. Not Ordering Your Three Credit Reports</h2> <p>The three national credit bureaus of TransUnion, Equifax, and Experian each maintain a credit report on you. These reports list all the open credit accounts in your name and any missed or late payments in the last seven years. They also list any negative judgments such as foreclosures and bankruptcies in the last seven to 10 years.</p> <p>You are entitled to one free copy of each these reports every year from AnnualCreditReport.com. When rebuilding your credit, it's important to order these reports and to study them. Look for errors. One report might say that you missed a car payment last year that you know you paid on time. Correcting that error could provide an <a href="http://www.wisebread.com/7-ways-to-increase-your-credit-score-quickly?utm_source=wisebread&amp;utm_medium=internal&amp;utm_campaign=article">immediate boost to your credit score</a>.</p> <p><em>Have you improved your credit? What steps did you take?</em></p> <br /><div id="custom_wisebread_footer"><div id="rss_tagline">This article is from <a href="http://www.wisebread.com/dan-rafter">Dan Rafter</a> of <a href="http://www.wisebread.com/avoid-these-5-common-mistakes-while-rebuilding-your-credit">Wise Bread</a>, an award-winning personal finance and <a href="http://www.wisebread.com/credit-cards">credit card comparison</a> website. Read more great articles from Wise Bread:</div><div class="view view-similarterms view-id-similarterms view-display-id-block_2 view-dom-id-1"> <div class="view-content"> <div class="item-list"> <ul> <li class="views-row views-row-1 views-row-odd views-row-first"> <div class="views-field-title"> <span class="field-content"><a href="http://www.wisebread.com/this-one-ratio-is-the-key-to-a-good-credit-score">This One Ratio Is the Key to a Good Credit Score</a></span> </div> </li> <li class="views-row views-row-2 views-row-even"> <div class="views-field-title"> <span class="field-content"><a href="http://www.wisebread.com/building-a-credit-history">Building a Credit History</a></span> </div> </li> <li class="views-row views-row-3 views-row-odd"> <div class="views-field-title"> <span class="field-content"><a href="http://www.wisebread.com/how-a-solid-credit-score-saves-you-money">How a Solid Credit Score Saves You Money</a></span> </div> </li> <li class="views-row views-row-4 views-row-even"> <div class="views-field-title"> <span class="field-content"><a href="http://www.wisebread.com/stop-dont-cut-up-your-credit-cards">Stop! Don&#039;t Cut Up Your Credit Cards</a></span> </div> </li> <li class="views-row views-row-5 views-row-odd views-row-last"> <div class="views-field-title"> <span class="field-content"><a href="http://www.wisebread.com/your-bad-credit-isnt-the-end-of-the-world">Your Bad Credit Isn&#039;t the End of the World</a></span> </div> </li> </ul> </div> </div> </div> </div><br/></br> Credit Cards Debt Management credit history credit reports credit score credit utilization ratio debt paying bills rebuilding credit Fri, 08 Jul 2016 10:30:10 +0000 Dan Rafter 1747445 at http://www.wisebread.com Your Bad Credit Isn't the End of the World http://www.wisebread.com/your-bad-credit-isnt-the-end-of-the-world <div class="field field-type-filefield field-field-blog-image"> <div class="field-items"> <div class="field-item odd"> <a href="/your-bad-credit-isnt-the-end-of-the-world" class="imagecache imagecache-250w imagecache-linked imagecache-250w_linked"><img src="http://wisebread.killeracesmedia.netdna-cdn.com/files/fruganomics/imagecache/250w/blog-images/man_stressed_finances_84649523.jpg" alt="Man learning his bad credit isn&#039;t the end of the world" title="" class="imagecache imagecache-250w" width="250" height="140" /></a> </div> </div> </div> <p>Worried about your low FICO credit score? Does your credit card debt keep you awake at night?</p> <p>You're not alone. Money worries plague millions of Americans. According to the <em>Stress in America</em> survey from the American Psychological Association, more than a quarter of U.S. adults say they feel stressed about money most or all of the time. Only 30% rated their financial security as high, while more than two-thirds said that having more money would make them happier.</p> <p>But here's some good news: Yes, bad credit and high credit card debt does add stress to your life. But neither of these financial missteps are unfixable. As long as you face your financial problems and take some simple steps to correct them, you can build a new financially secure future. (See also: <a href="http://www.wisebread.com/topic/5-day-debt-reduction-plan?ref=seealso">5-Day Debt Reduction Plan</a>)</p> <h2>Scary Numbers</h2> <p>Many Americans are struggling with their FICO credit score, that three-digit number that lenders use to determine who qualifies for loans and at what interest rate. According to a 2015 report from the Consumer Financial Protection Bureau, about 45 million U.S. adults had such a limited credit history, that they had no FICO scores.</p> <p>A 2015 report from credit bureau Experian said that nearly a third of U.S. consumers had a credit score under 601. Experian was basing its study on its own credit score, the VantageScore, but consumers who have a bad VantageScore typically have a bad FICO score, too.</p> <p>These numbers mean one thing: Plenty of us are struggling with bad credit and high credit card debt. If you are, too, it's important to realize that there are five easy steps you can take now to help improve your financial health.</p> <h2>Order Your Free Credit Reports</h2> <p>You can order one free copy of each of your credit reports &mdash; the credit bureaus of Experian, Equifax, and TransUnion each maintain a separate report on you &mdash; every year from AnnualCreditReport.com. These reports will list your credit cards and how much you owe on each. They will also list the money you owe on car loans, student loans, and mortgage loans.</p> <p>Credit reports also list any missed or late payments during the last seven years, and will also include any negative judgments, such as bankruptcies or foreclosures, that are up to seven to 10 years old.</p> <p>Be sure to order your reports and check them carefully. Make sure the information in your reports is accurate. If there are errors, such as a missed car payment that you are sure you paid on time, correct them. Doing this can quickly provide a boost to your score.</p> <h2>Pay All Your Bills on Time</h2> <p>Missed or late payments are the most common cause of a weak credit score. Resolve, then, to pay all of your bills on time. As you do this, you will gradually improve your credit score. Just don't expect immediate results. Depending on how low your score is today, it can take months or more than a year to raise it from the &quot;bad&quot; to the &quot;fair&quot; or &quot;good&quot; level.</p> <h2>Pay More Than the Minimum Each Month on Your Credit Cards</h2> <p>High amounts of credit card debt can also result in a bad credit score. Each month, pay off more than the required minimum payment on your cards. As you cut down on your credit card debt, you'll again slowly improve your credit score. You'll also get the bonus of cutting down on all that interest you pay each month. (See also: <a href="http://www.wisebread.com/fastest-way-to-pay-off-10000-in-credit-card-debt?utm_source=wisebread&amp;utm_medium=seealso&amp;utm_campaign=article">Fastest Way to Pay Off $10,000 in Credit Card Debt</a>)</p> <h2>Keep Your Credit Cards Open</h2> <p>If you do pay off a credit card in full, don't close the account. Your credit score is higher when you are using less of your available credit. In general, you never want to be using more than 30% of your available credit. If you close a credit card, you're immediately reducing the amount of credit available to you. If you do have credit card debt, you will then also be immediately using more of it, which could hurt your score. (See also: <a href="http://www.wisebread.com/this-one-ratio-is-the-key-to-a-good-credit-score?utm_source=wisebread&amp;utm_medium=seealso&amp;utm_campaign=article">This One Ratio Is the Key to A Good Credit Score</a>)</p> <h2>Don't Be Afraid to Use Credit Cards</h2> <p>Using credit cards wisely can actually help <a href="http://www.wisebread.com/how-to-use-credit-cards-to-improve-your-credit-score?utm_source=wisebread&amp;utm_medium=internal&amp;utm_campaign=article">boost your credit score</a>. If you regularly charge items through the month and then pay them off in full when your credit card bill is due, you are showing that you can maturely handle credit. So don't be afraid to charge that flat-screen TV. Just make sure that you have the cash to pay off the entire purchase when your credit card's due date rolls around.</p> <p><em>Are you struggling with poor credit and high credit card debt? What steps have you taken to correct it?</em></p> <br /><div id="custom_wisebread_footer"><div id="rss_tagline">This article is from <a href="http://www.wisebread.com/dan-rafter">Dan Rafter</a> of <a href="http://www.wisebread.com/your-bad-credit-isnt-the-end-of-the-world">Wise Bread</a>, an award-winning personal finance and <a href="http://www.wisebread.com/credit-cards">credit card comparison</a> website. Read more great articles from Wise Bread:</div><div class="view view-similarterms view-id-similarterms view-display-id-block_2 view-dom-id-1"> <div class="view-content"> <div class="item-list"> <ul> <li class="views-row views-row-1 views-row-odd views-row-first"> <div class="views-field-title"> <span class="field-content"><a href="http://www.wisebread.com/avoid-these-5-common-mistakes-while-rebuilding-your-credit">Avoid These 5 Common Mistakes While Rebuilding Your Credit</a></span> </div> </li> <li class="views-row views-row-2 views-row-even"> <div class="views-field-title"> <span class="field-content"><a href="http://www.wisebread.com/heres-why-you-shouldnt-freak-out-if-you-miss-a-payment-due-date">Here&#039;s Why You Shouldn&#039;t Freak Out If You Miss a Payment Due Date</a></span> </div> </li> <li class="views-row views-row-3 views-row-odd"> <div class="views-field-title"> <span class="field-content"><a href="http://www.wisebread.com/heres-why-credit-scores-and-reports-are-not-the-same">Here&#039;s Why Credit Scores and Reports Are Not the Same</a></span> </div> </li> <li class="views-row views-row-4 views-row-even"> <div class="views-field-title"> <span class="field-content"><a href="http://www.wisebread.com/the-7-debt-payoffs-that-boost-your-credit-score-the-most">The 7 Debt Payoffs That Boost Your Credit Score the Most</a></span> </div> </li> <li class="views-row views-row-5 views-row-odd views-row-last"> <div class="views-field-title"> <span class="field-content"><a href="http://www.wisebread.com/what-to-expect-when-youre-expecting-a-huge-credit-card-bill">What to Expect When You&#039;re Expecting a Huge Credit Card Bill</a></span> </div> </li> </ul> </div> </div> </div> </div><br/></br> Personal Finance available credit bills credit history credit reports credit score debt FICO score minimum payments Wed, 15 Jun 2016 10:00:12 +0000 Dan Rafter 1731281 at http://www.wisebread.com Never Borrow Money for These 5 Buys http://www.wisebread.com/never-borrow-money-for-these-5-buys <div class="field field-type-filefield field-field-blog-image"> <div class="field-items"> <div class="field-item odd"> <a href="/never-borrow-money-for-these-5-buys" class="imagecache imagecache-250w imagecache-linked imagecache-250w_linked"><img src="http://wisebread.killeracesmedia.netdna-cdn.com/files/fruganomics/imagecache/250w/blog-images/friends_boat_ride_000021453043.jpg" alt="Friends talking about what they should never borrow money for" title="" class="imagecache imagecache-250w" width="250" height="140" /></a> </div> </div> </div> <p>While there is a time and a place for credit &mdash; most of us won't ever be able to pay cash for a home, a college education, or even a car &mdash; there are also times when it should be avoided, at all costs.</p> <p>It's difficult to delay gratification. It doesn't help that there's always a credit card or personal loan application in the mail. Still, there are certain times when it absolutely does not make sense to borrow money to make a purchase. For these big ticket items, think hard before you swipe your card or apply for that credit line. (See also:&nbsp;<a href="http://www.wisebread.com/7-ways-pride-is-keeping-you-poor?ref=seealso" target="_blank">7 Ways Pride Is Keeping You Poor</a>)</p> <h2>1. A Boat</h2> <p>Depending on the boat purchased, a payment could equal the cost of a new car payment or &mdash; for a more luxurious option &mdash; the cost of a mortgage. At the same time, <a href="http://www.boatus.com/boatloans/">current boat loan rates</a> range from about 4.5% for a $350,000 boat to as high as 6.25% for a $25,000 boat. That means that over a 15-year term, a modest $25,000 boat could end up costing $38,584. That's $13,584 more than the original sticker price.</p> <p>When it comes to boating, though, the cost of the vessel is often the cheapest part of ownership. Additional costs to consider are state taxes, slip fees, winter storage, registration and licensing, fuel, insurance, and maintenance. Mint recently estimated the annual cost of a $20,000 boat upkeep at $4,300 per year or $358 per month.</p> <h2>2. Your Wedding</h2> <p>Getting married is one of the most exciting times in a young person's life, and yet&hellip; many don't fully realize all the costs that come after embarking on a new life together. Not everyone makes the same life choices, of course, but houses, children, college tuition, retirement accounts, and even new cars are expensive life items that many new couples choose to buy or fund as they build their lives together.</p> <p>Starting a journey together with a pricey loan with a high interest rate is an expensive way to handicap yourself as you work to build a financially stable life together. When planning a wedding, it can be helpful to remember that it's just a big party. You'll have the memories when it's over, but it's the foundation that the marriage is built upon that's really most important. And that doesn't cost a dime.</p> <h2>3. Jewelry</h2> <p>High-end jewelry like engagement rings or tennis bracelets are expensive enough without adding in the financing costs. It may seem like good news that many jewelry stores are willing to help defray the costs by offering zero interest if the purchase is paid off within six or 12 months (depending on the store) but beware, there's usually a catch.</p> <p>Miss one payment or fail to pay off the balance before the due date and, for most of the stores, interest will become due for the <em>entire </em>original balance &mdash; and it's usually at a rate that's somewhere between 23% and 29%. That means that a $5,200 ring (the average wedding ring cost) could end up costing an additional $1,461 in interest payments alone, assuming a 25% interest rate and a two-year term.</p> <h2>4. Furniture and Consumer Electronics</h2> <p>Store issued credit cards are common upsells at the cash register and, if you're buying a big ticket item like a new sofa or flat screen TV, it's easy to be tempted by the seemingly attractive financing terms. What many credit consumers don't realize is that store cards typically work in a similar way as jewelry financing, as described above.</p> <p>The offer may state 12-months, zero APR (or 12-months, same as cash), but miss a payment and you'll reset the clock, finding yourself responsible for interest payments from the date of purchase, not from the date when the payment was missed. For a $4,000 furniture purchase, a missed payment could add $1,400 in interest to the bill, assuming a 24.99% interest rate and a 24-month term. In other words, that financed furniture (or computer or refrigerator or&hellip; well, you get the idea) could end up costing you a lot more than you expected.</p> <h2>5. Vacation</h2> <p>Most vacations last a week or less but, if you take out a personal loan or swipe a credit card to fund the getaway, it won't just be the memories that last a lifetime. Earlier this year, MarketWatch determined that you could <a href="http://www.marketwatch.com/story/how-long-does-it-take-to-clear-a-2000-credit-card-with-minimum-payments-2015-07-07">raise a child from infancy</a> to adulthood before you could repay a $2,000 credit card balance with a 18% annual rate, if you're making just the monthly minimum payment. That's 30 years in repayment, based on their analysis, and an extra $4,931 in interest payments.</p> <p>For many purchases, buying on credit can cause a lot of financial strain. Before you buy, it's important to understand the full cost of the purchase, including the cost of credit. Most times, you'd be much better served by saving up, instead of swiping your card. Think before you borrow. Your wallet will thank you.</p> <p><em>What purchases do you refuse to make on credit?</em></p> <br /><div id="custom_wisebread_footer"><div id="rss_tagline">This article is from <a href="http://www.wisebread.com/alaina-tweddale">Alaina Tweddale</a> of <a href="http://www.wisebread.com/never-borrow-money-for-these-5-buys">Wise Bread</a>, an award-winning personal finance and <a href="http://www.wisebread.com/credit-cards">credit card comparison</a> website. Read more great articles from Wise Bread:</div><div class="view view-similarterms view-id-similarterms view-display-id-block_2 view-dom-id-6"> <div class="view-content"> <div class="item-list"> <ul> <li class="views-row views-row-1 views-row-odd views-row-first"> <div class="views-field-title"> <span class="field-content"><a href="http://www.wisebread.com/5-surprising-ways-revolving-debt-helps-you">5 Surprising Ways Revolving Debt Helps You</a></span> </div> </li> <li class="views-row views-row-2 views-row-even"> <div class="views-field-title"> <span class="field-content"><a href="http://www.wisebread.com/how-to-manage-your-money-during-a-spousal-separation">How to Manage Your Money During a Spousal Separation</a></span> </div> </li> <li class="views-row views-row-3 views-row-odd"> <div class="views-field-title"> <span class="field-content"><a href="http://www.wisebread.com/reach-your-money-goals-faster-with-a-simple-naming-trick">Reach Your Money Goals Faster With a Simple Naming Trick</a></span> </div> </li> <li class="views-row views-row-4 views-row-even"> <div class="views-field-title"> <span class="field-content"><a href="http://www.wisebread.com/3-sources-of-fast-cash-besides-your-401k">3 Sources of Fast Cash Besides Your 401K</a></span> </div> </li> <li class="views-row views-row-5 views-row-odd views-row-last"> <div class="views-field-title"> <span class="field-content"><a href="http://www.wisebread.com/rich-people-spend-350k-to-park-their-cars-heres-how-wed-spend-it-instead">Rich People Spend $350K+ to Park Their Cars — Here&#039;s How We&#039;d Spend it Instead</a></span> </div> </li> </ul> </div> </div> </div> </div><br/></br> Personal Finance Budgeting bad money moves boats borrowing money credit history debt furniture interest jewelry loans travel weddings Tue, 24 May 2016 10:00:10 +0000 Alaina Tweddale 1711683 at http://www.wisebread.com What to Expect When You're Expecting a Huge Credit Card Bill http://www.wisebread.com/what-to-expect-when-youre-expecting-a-huge-credit-card-bill <div class="field field-type-filefield field-field-blog-image"> <div class="field-items"> <div class="field-item odd"> <a href="/what-to-expect-when-youre-expecting-a-huge-credit-card-bill" class="imagecache imagecache-250w imagecache-linked imagecache-250w_linked"><img src="http://wisebread.killeracesmedia.netdna-cdn.com/files/fruganomics/imagecache/250w/blog-images/woman_writing_bills_000083882473.jpg" alt="Woman learning what to expect with a huge credit card bill" title="" class="imagecache imagecache-250w" width="250" height="140" /></a> </div> </div> </div> <p>You've been splurging the last few months &mdash; dining out, ordering online gifts, and booking a vacation you sorely need. And you put all of these purchases on your credit card.</p> <p>You know you won't be able to pay off this debt within a few months, but you've justified it by reasoning you <em>can </em>pay it off <em>very soon</em>. But these purchases you've made &mdash; well they couldn't wait until you could actually afford them.</p> <p>Maybe that's true. Maybe an unexpected but critical expense came up. Maybe everyone was booking flights for your family vacation and you had to commit. A little debt isn't going to kill your finances, right? Okay, so you'll just pay a little in interest.</p> <p>Unfortunately, it's likely to be more than a little interest &mdash; and there's a lot more at stake than paying more interest.</p> <p>Consider these financial challenges that you might not be expecting with a big credit card bill. You'll struggle with each of them until you <a href="http://www.wisebread.com/when-to-do-a-balance-transfer-to-pay-off-credit-card-debt">eliminate your credit card debt</a>.</p> <h2>Tons of Interest</h2> <p>The biggest problem with credit cards? All that interest you'll pay if you carry a balance each month. Say you owe $5,000 on your credit card at an interest rate of 16.5%. If you make a payment of $100 every month on that debt, it will take you 86 months, or more than seven years, to pay off that $5,000.</p> <p>Why so long? Because of interest. By paying just $100 a month, you'll pay an additional $3,517 in interest alone before you erase your debt. This means you'll pay a total of more than $8,500 to pay off $5,000 worth of charges.</p> <p>The lesson here is simple: The interest you'll pay is never worth the instant gratification of getting something when you can't afford it. It'll just start a never-ending cycle of not being able to afford the <em>next</em> thing you want because you're still trying to pay off that other thing you bought. If you must carry a balance for a period of time, pay as much as you can (not just the minimum) to avoid more interest piling on (interest gets calculated based on your daily balance so get it down as much as possible, as quickly as possible).</p> <p>Even better &mdash; if you know you'll have to make a large purchase but can't pay it off right away, get a credit card with a <a href="http://www.wisebread.com/5-best-credit-cards-with-0-apr-for-purchases">0% promotional APR for purchases</a>. That will buy you some time, but you still have to pay it off before the promotional period ends. If you already have a balance you're paying interest on, try a credit card with a <a href="http://www.wisebread.com/the-best-0-balance-transfer-credit-cards">0% APR for balance transfers</a>.</p> <h2>No More Grace Period</h2> <p>Most credit cards offer a grace period to pay off your purchases before they charge interest. Pay off your balance during this grace period and you're golden &mdash; you've borrowed money for free, and perhaps even made a little if you used a <a href="http://www.wisebread.com/5-best-cash-back-credit-cards">cash back credit card</a>. But when you leave a balance, you'll not only get hit with interest for those purchases, you lose your grace period on all future purchases. Meaning, the minute a charge gets through, interest can start accruing.</p> <p>It'll take several billing cycles before your grace period is reinstated, so make sure you don't lose it in the first place.</p> <h2>A Lower Credit Score</h2> <p>If you have too much credit card debt, your credit score will suffer. That's because lenders consider you more of a risk to not pay back your debts when you are saddled with high amounts of credit card debt.</p> <p>Something called your <a href="http://www.wisebread.com/this-one-ratio-is-the-key-to-a-good-credit-score">credit-utilization ratio is a key factor</a> here. If you use too much of your available credit, your credit score will drop. For instance, if you have $20,000 worth of credit available to you and you owe a total of $17,000 on your credit card accounts, you have a credit utilization ratio that is far too high. A high ratio will drop your credit score.</p> <p>You may not think much about your credit score until you need it. If you're hoping to buy a house, a car, or even a new job, your credit score may determine whether you get it or not.</p> <p>(See also: <a href="http://www.wisebread.com/this-one-ratio-is-the-key-to-a-good-credit-score?ref=seealso">15 Surprising Ways a Bad Credit Score Can Hurt You</a>)</p> <p>No matter how much credit available you have, it's never a good idea to use it all up at any one time. Spread out your purchases and pay them down quickly.</p> <h2>A High Debt-to-Income Ratio</h2> <p>In addition to your credit score, lenders rely on your debt-to-income ratio. This ratio examines the relationship between your monthly debts and your gross monthly income. Lenders factor in your minimum required monthly credit card payments as part of your debt obligations. If these minimum payments are high, it could throw your debt-to-income ratio out of whack.</p> <p>For instance, if you're applying for a mortgage loan, lenders want your monthly debts &mdash; including your estimated new mortgage payments &mdash; to equal no more than 43% of your gross monthly income. If your credit card payments push that ratio up past 43%, you might not qualify for that home loan.</p> <h2>Sky-High Interest Rates</h2> <p>With a large credit card debt and a low credit score, you can expect to pay higher interest rates on whatever loans &mdash; including auto and mortgage &mdash; for which you do qualify. Lenders charge higher rates to borrowers whom they deem higher risks. If your score is low &mdash; in part because of your huge credit card bill &mdash; get ready to be hit with interest rates higher than the market average.</p> <p>That's too bad. Higher rates can make a significant difference in the amount you pay each month on loans. Say you take out a 30-year fixed-rate mortgage loan of $200,000 to finance a new home. If your interest rate is 3.95%, you'll pay about $949 each month, not counting whatever you'll need to pay for homeowners insurance and property taxes.</p> <p>If you have a lower score your interest rate on the same loan could be more like 5.5%, which means you'll pay about $1,135 each month, again not including insurance and taxes.</p> <p>That's a difference of $186 each month or $2,232 a year, simply because you owe too much on your credit cards.</p> <h2>More Hurdles to Renting</h2> <p>Even if you don't want to finance a home or a new car, high credit card debt can cause problems. Say you want to rent an apartment, your possible landlord will run your credit. If this search turns up high credit card debt, a landlord might hesitate before leasing you an apartment. The landlord might worry that with all the debt you're already facing, you won't be able to pay your monthly rent on time.</p> <h2>Contain the Pain</h2> <p>The first step is to curtail spending, but if the horse is out of the barn, here are a few steps to take to minimize the sting.</p> <h3>1. Stop Digging</h3> <p>Stop spending more than you can pay off every month! You can't begin to chip away at your debt balance if you keep adding to it.</p> <h3>2. Pay More Than the Minimum</h3> <p>Paying the minimum maximizes the amount you pay in interest over time. Whittle away at your debt overhang by paying more of it off, whenever you can. Changes to the law a few years ago mean that any extra you pay will go toward the highest interest debt on the account.</p> <h3>3. Make Multiple Payments Per Month</h3> <p>You can ease the burn of bill paying day by breaking up your payments as your paychecks or income arrive. Since your interest charge is based on your daily balance, cutting down your balance whenever you have funds available, rather than waiting until the bill is due, can help reduce the interest you pay, too.</p> <p><em>Have you ever dreaded the arrival of a credit card bill? Did it change your behavior?</em></p> <br /><div id="custom_wisebread_footer"><div id="rss_tagline">This article is from <a href="http://www.wisebread.com/dan-rafter">Dan Rafter</a> of <a href="http://www.wisebread.com/what-to-expect-when-youre-expecting-a-huge-credit-card-bill">Wise Bread</a>, an award-winning personal finance and <a href="http://www.wisebread.com/credit-cards">credit card comparison</a> website. Read more great articles from Wise Bread:</div><div class="view view-similarterms view-id-similarterms view-display-id-block_2 view-dom-id-1"> <div class="view-content"> <div class="item-list"> <ul> <li class="views-row views-row-1 views-row-odd views-row-first"> <div class="views-field-title"> <span class="field-content"><a href="http://www.wisebread.com/avoid-these-5-common-mistakes-while-rebuilding-your-credit">Avoid These 5 Common Mistakes While Rebuilding Your Credit</a></span> </div> </li> <li class="views-row views-row-2 views-row-even"> <div class="views-field-title"> <span class="field-content"><a href="http://www.wisebread.com/6-moves-to-make-before-cutting-up-your-credit-card">6 Moves to Make Before Cutting Up Your Credit Card</a></span> </div> </li> <li class="views-row views-row-3 views-row-odd"> <div class="views-field-title"> <span class="field-content"><a href="http://www.wisebread.com/your-bad-credit-isnt-the-end-of-the-world">Your Bad Credit Isn&#039;t the End of the World</a></span> </div> </li> <li class="views-row views-row-4 views-row-even"> <div class="views-field-title"> <span class="field-content"><a href="http://www.wisebread.com/how-to-build-credit-without-using-credit-cards">How to Build Credit Without Using Credit Cards</a></span> </div> </li> <li class="views-row views-row-5 views-row-odd views-row-last"> <div class="views-field-title"> <span class="field-content"><a href="http://www.wisebread.com/heres-why-you-shouldnt-freak-out-if-you-miss-a-payment-due-date">Here&#039;s Why You Shouldn&#039;t Freak Out If You Miss a Payment Due Date</a></span> </div> </li> </ul> </div> </div> </div> </div><br/></br> Credit Cards bills credit history credit score debt debt to income ratio interest Wed, 27 Apr 2016 09:30:22 +0000 Dan Rafter 1696224 at http://www.wisebread.com Is It Ever Okay to Cosign a Loan? http://www.wisebread.com/is-it-ever-okay-to-cosign-a-loan <div class="field field-type-filefield field-field-blog-image"> <div class="field-items"> <div class="field-item odd"> <a href="/is-it-ever-okay-to-cosign-a-loan" class="imagecache imagecache-250w imagecache-linked imagecache-250w_linked"><img src="http://wisebread.killeracesmedia.netdna-cdn.com/files/fruganomics/imagecache/250w/blog-images/man_signing_documents_000029589200.jpg" alt="Man learning if it&#039;s ever okay to cosign a loan" title="" class="imagecache imagecache-250w" width="250" height="140" /></a> </div> </div> </div> <p>Cosigning a loan is, generally speaking, a bad idea. That's because you place your own credit at risk and could be responsible for the entire amount of the loan if the other party fails to pay. There are horror stories aplenty of people who cosigned loans for friends or family members &mdash; or even just acquaintances &mdash; and found themselves in debt and with their credit ruined.</p> <p>But there may be cases where placing your name on another person's loan is acceptable, provided that you're clear on the risks. It's not uncommon for parents to cosign loans for children as they look to get established, for instance. Ultimately, cosigning a loan is a personal choice, but it's important to be aware of the downsides.</p> <p>With those words of warning out of the way, here are some times when cosigning a loan may be okay:</p> <h2>1. If You Think of the Loan as a Gift</h2> <p>It's often said that if you lend a friend or relative $500, just treat the $500 as simply a gift. If you're comfortable giving the money away, then lending it is okay, because you won't worry about getting the cash back. Similarly, when cosigning a loan, operate under the assumption that you will be the one paying whatever is owed &mdash; because you might very well end up the person on the hook. If you're comfortable with this, then go ahead and cosign.</p> <h2>2. If It's for a Child's Education</h2> <p>Student loans can be hugely beneficial to a young person, and parents may feel compelled to help children obtain the necessary financing for higher education. You may feel it's worth the risk to help your child in this way, and you may not even mind helping your <a href="http://www.wisebread.com/how-to-financially-educate-your-children">child pay the loans back</a> later. (It may be better, however, to simply help them pay through a 529 plan or similar savings if you can.) If you feel strongly about a child's educational funding needs, cosigning a student loan can be wise &mdash; provided you believe the child understands the responsibility of repayment.</p> <h2>3. If You're Helping a Family Member Build Credit</h2> <p>When you're young, building credit can be a bit of a chicken or egg problem. You can't build credit until you show you're able to pay back loans, but it's hard to get a loan without a credit history. Cosigning a loan for a young person can help them gain financial independence over time.</p> <h2>4. If You're Helping a Loved One Buy a Car So They Can Work</h2> <p>It's often hard for young people to land a good job if they don't have reliable transportation. But they may not have the means or credit history to purchase a car. Cosigning a car loan for this person could make it easier to land that job and earn income of their own. Just make sure the car they buy is affordable; borrowers shouldn't assume monthly payments disproportionate to their income. And frankly, you shouldn't cosign a loan you can't afford, either.</p> <h2>5. To Help a Family Member Secure Safe Housing</h2> <p>I once had a friend who graduated from college and moved to a new city, but wasn't earning a lot of money right away. It was hard for her to secure an apartment in a safe neighborhood because she didn't have much income, credit history, or savings. Ultimately, her father was willing to cosign an apartment lease to ensure she could live in a nicer building. Her dad took a risk, but he rested easier knowing his daughter was comfortable in her new city.</p> <h2>6. If You Know You Won't Need a Loan for Yourself Anytime Soon</h2> <p>When you cosign a loan, you put your own credit score at risk. But this only matters if you plan to borrow money in the future. If you have plenty of money in the bank and own your home and car free and clear, a ding on your credit may not impact you very much. Just be sure you have an emergency fund in place to protect against job loss, disability, and other unexpected problems.</p> <h2>7. If You've Agreed With the Lender to Certain Protections</h2> <p>It is sometimes possible to negotiate certain conditions with a lender when cosigning. For instance, you can insist that you be notified immediately if there are any late payments. This gives you a chance to intervene before the tardiness shows up on your credit history. You may also be able to get the lender to agree that you will only be responsible for the principal of the loan.</p> <h2>8. If It's for a Short Term</h2> <p>There may be ways to remove yourself as a cosigner after a time. For instance, you could ask to have your name taken off when a borrower chooses to refinance a home loan. If you are a cosigner on a credit card, you could have the borrower apply for new credit cards under his or her name only, then close the old accounts. If you can, it makes sense to try and remove yourself as a cosigner after 12 months or so, when a borrower presumably has the credit to stand on their own.</p> <p><em>Have you ever cosigned a loan? How'd it go?</em></p> <br /><div id="custom_wisebread_footer"><div id="rss_tagline">This article is from <a href="http://www.wisebread.com/tim-lemke">Tim Lemke</a> of <a href="http://www.wisebread.com/is-it-ever-okay-to-cosign-a-loan">Wise Bread</a>, an award-winning personal finance and <a href="http://www.wisebread.com/credit-cards">credit card comparison</a> website. Read more great articles from Wise Bread:</div><div class="view view-similarterms view-id-similarterms view-display-id-block_2 view-dom-id-5"> <div class="view-content"> <div class="item-list"> <ul> <li class="views-row views-row-1 views-row-odd views-row-first"> <div class="views-field-title"> <span class="field-content"><a href="http://www.wisebread.com/7-ways-paying-off-student-loans-early-can-boost-your-finances">7 Ways Paying Off Student Loans Early Can Boost Your Finances</a></span> </div> </li> <li class="views-row views-row-2 views-row-even"> <div class="views-field-title"> <span class="field-content"><a href="http://www.wisebread.com/should-you-refinance-your-student-loan">Should You Refinance Your Student Loan?</a></span> </div> </li> <li class="views-row views-row-3 views-row-odd"> <div class="views-field-title"> <span class="field-content"><a href="http://www.wisebread.com/prioritize-these-5-bills-when-youre-short-on-cash">Prioritize These 5 Bills When You&#039;re Short on Cash</a></span> </div> </li> <li class="views-row views-row-4 views-row-even"> <div class="views-field-title"> <span class="field-content"><a href="http://www.wisebread.com/how-to-stop-student-loans-from-ruining-your-life">How to Stop Student Loans From Ruining Your Life</a></span> </div> </li> <li class="views-row views-row-5 views-row-odd views-row-last"> <div class="views-field-title"> <span class="field-content"><a href="http://www.wisebread.com/8-signs-youve-crossed-from-healthy-debt-to-problem-debt">8 Signs You&#039;ve Crossed From &quot;Healthy&quot; Debt to &quot;Problem&quot; Debt</a></span> </div> </li> </ul> </div> </div> </div> </div><br/></br> Debt Management borrowing cosigning credit history giving money loans student loans Mon, 23 Nov 2015 18:00:03 +0000 Tim Lemke 1615573 at http://www.wisebread.com Here's Why You Shouldn't Freak Out If You Miss a Payment Due Date http://www.wisebread.com/heres-why-you-shouldnt-freak-out-if-you-miss-a-payment-due-date <div class="field field-type-filefield field-field-blog-image"> <div class="field-items"> <div class="field-item odd"> <a href="/heres-why-you-shouldnt-freak-out-if-you-miss-a-payment-due-date" class="imagecache imagecache-250w imagecache-linked imagecache-250w_linked"><img src="http://wisebread.killeracesmedia.netdna-cdn.com/files/fruganomics/imagecache/250w/blog-images/woman_financially_stressed_000027261501.jpg" alt="Woman trying to stay calm after missing payment due date" title="" class="imagecache imagecache-250w" width="250" height="140" /></a> </div> </div> </div> <p>The due date for your mortgage loan payment slipped past without you sending a check to your lender. Or maybe you didn't have enough money in your checking account to send an on-time payment to your credit card provider.</p> <p>Don't panic. Your financial misstep might not hurt your credit score just yet.</p> <p>Missed payments are a sure way to send your three-digit credit score plummeting by as many as 100 points. This financial mistake will remain on your credit report for seven years.</p> <p>But late payments aren't immediately reported to the three national credit bureaus of Experian, Equifax, and TransUnion. Often, lenders and credit providers won't report missed payments until they are at least 30 days late. This means that even if you miss your initial due date, you can still avoid a hit to your credit score by paying before 30 days pass. But first consider these variables.</p> <h2>Late Isn't Always &quot;Officially&quot; Late</h2> <p>Whitney Fite, president of Angel Oak Home Loans in Atlanta, said that most mortgage loans today come with a 15-day grace period. Your mortgage might be due on the first of the month, but lenders won't assess a late fee unless you fail to pay by the 15th of the month. This late fee will vary by the size of your loan, but could be about $100.</p> <p>Credit card companies will also charge <a href="http://www.wisebread.com/zooey-deschanel-never-pays-late-fees-and-5-other-smart-money-lessons-from-celebrities">late fees</a> if you miss your payment. Those fees vary, but what might hurt more is when your card provider increases your interest rate to the penalty rate. Under rules spelled out in the Credit CARD Act of 2009, your card provider can impose a penalty interest rate if you become more than 60 days late on your payment. These penalty rates are a true punishment, often running as high as 29%.</p> <p>But as long as you pay your mortgage, auto loan, or credit card payment within 30 days of its due date, most lenders won't report a missed payment to the credit bureaus. This means that your credit score itself will not be harmed.</p> <p>Fite warns that you need to be careful when paying after the official due date on auto loans, mortgages, or credit card payments. If you wait too long to send in your check, you might be tempting fate, and you might find yourself facing a late fee or credit hit after all.</p> <p>&quot;It can be a dangerous game to squeeze out a few extra days with the grace period,&quot; Fite said. &quot;Any delay by the mail carrier could result in the lender receiving the payment after the 15th and late fees being assessed.&quot;</p> <h2>Actually Late Can Hurt, However</h2> <p>If you can, be sure to send in that payment before the 30-day grace period ends. A single reported missed payment can lower your score by 100 points or more, especially if you had a relatively unblemished credit history before your missed payment.</p> <p>You don't want a low credit score. Lenders today rely on these three-digit scores to determine how much interest you'll pay on loans and credit cards. If your score is too low, you won't even qualify for loans or credit.</p> <p>Lenders consider a FICO credit score of 740 or higher to be a strong one. If your FICO score is under 640, you might struggle to qualify for loans or credit cards, and when you do qualify, you can expect to pay high interest rates on the money you borrow.</p> <p>Some missed payments are more damaging to your score than others.</p> <p>&quot;Recent late payments on mortgages are more damaging than late payments on other consumer loans,&quot; Fite said.</p> <h2>Unwanted Calls</h2> <p>You might not have to be 30 days late to begin receiving unwanted collection calls, too. Fite said that some lenders will begin making collection calls shortly after the first of the month. He said that almost all mortgage lenders will begin calling about missed payments on the 10th or 12th of the month.</p> <p>So if you don't want to hear from collection agencies? Make those payments on or before your due date. And it goes without saying that paying your bills on time &mdash; every time &mdash; is always the best policy.</p> <p><em>How do you stay on top of your bills &mdash; and on time?</em></p> <br /><div id="custom_wisebread_footer"><div id="rss_tagline">This article is from <a href="http://www.wisebread.com/dan-rafter">Dan Rafter</a> of <a href="http://www.wisebread.com/heres-why-you-shouldnt-freak-out-if-you-miss-a-payment-due-date">Wise Bread</a>, an award-winning personal finance and <a href="http://www.wisebread.com/credit-cards">credit card comparison</a> website. Read more great articles from Wise Bread:</div><div class="view view-similarterms view-id-similarterms view-display-id-block_2 view-dom-id-1"> <div class="view-content"> <div class="item-list"> <ul> <li class="views-row views-row-1 views-row-odd views-row-first"> <div class="views-field-title"> <span class="field-content"><a href="http://www.wisebread.com/8-credit-repair-mistakes-that-will-cost-you">8 Credit Repair Mistakes That Will Cost You</a></span> </div> </li> <li class="views-row views-row-2 views-row-even"> <div class="views-field-title"> <span class="field-content"><a href="http://www.wisebread.com/how-late-payments-affect-your-credit">How Late Payments Affect Your Credit</a></span> </div> </li> <li class="views-row views-row-3 views-row-odd"> <div class="views-field-title"> <span class="field-content"><a href="http://www.wisebread.com/13-things-you-dont-know-about-your-credit-report-but-should">13 Things You Don&#039;t Know About Your Credit Report — But Should</a></span> </div> </li> <li class="views-row views-row-4 views-row-even"> <div class="views-field-title"> <span class="field-content"><a href="http://www.wisebread.com/4-credit-report-mistakes-that-could-be-costing-you-big">4 Credit Report Mistakes That Could Be Costing You Big</a></span> </div> </li> <li class="views-row views-row-5 views-row-odd views-row-last"> <div class="views-field-title"> <span class="field-content"><a href="http://www.wisebread.com/heres-why-credit-scores-and-reports-are-not-the-same">Here&#039;s Why Credit Scores and Reports Are Not the Same</a></span> </div> </li> </ul> </div> </div> </div> </div><br/></br> Personal Finance bills collections credit history credit report credit score grace periods late payments Mon, 05 Oct 2015 13:00:39 +0000 Dan Rafter 1576207 at http://www.wisebread.com Here's Why Credit Scores and Reports Are Not the Same http://www.wisebread.com/heres-why-credit-scores-and-reports-are-not-the-same <div class="field field-type-filefield field-field-blog-image"> <div class="field-items"> <div class="field-item odd"> <a href="/heres-why-credit-scores-and-reports-are-not-the-same" class="imagecache imagecache-250w imagecache-linked imagecache-250w_linked"><img src="http://wisebread.killeracesmedia.netdna-cdn.com/files/fruganomics/imagecache/250w/blog-images/woman_thinking_questions_000038564992.jpg" alt="Woman learning how credit reports and credit scores are not the same" title="" class="imagecache imagecache-250w" width="250" height="140" /></a> </div> </div> </div> <p>Do you know the difference between your credit score and credit report? A surprisingly high number of consumers don't. They use the terms &quot;credit score&quot; and &quot;credit report&quot; interchangeably, not knowing that there's a big difference between the two.</p> <p>&quot;You can look at a credit report as your report card in school,&quot; said Jason van den Brand, chief executive officer of San Francisco-based Lenda, an online mortgage-refinance platform. &quot;You have all this information on it, sort of like the grades you get from all your different teachers. Your credit score is more like your combined grade-point average from all that information.&quot;</p> <p>Your credit report &mdash; you actually have three important ones &mdash; lists key financial information such as your open credit card accounts, how much you owe on your auto loan, and whether you've made any late payments or suffered any foreclosures. Your credit score, meanwhile, is the three-digit number that lenders use to determine how likely you are to pay back your debts on time.</p> <p>Here's a look at the differences between credit reports and credit scores.</p> <h2>Understanding Your Credit Report</h2> <p>Three national credit bureaus each maintain their own reports on your financial activity: Equifax, Experian, and TransUnion. You can order one copy of each of your three reports every year for free. Do this at <a href="https://www.annualcreditreport.com/">AnnualCreditReport.com</a>. Do not order these reports from other sites that might try to charge you.</p> <p>Once you get your reports, it's important to know how to read them. Each of your reports will start with the most basic of your personal information: your name, birthdate, address, past addresses, Social Security number, and employment information. Don't be surprised, though, if not all of your past jobs are listed. Not all employers report information on their employees to the credit bureaus.</p> <h3>Public Records</h3> <p>Ideally, the public records section of your credit report will be empty. This section lists the financial missteps such as foreclosures, bankruptcies, and court judgments that can cause your credit score to plummet.</p> <p>If a foreclosure or bankruptcy is listed here, you'll also see information on when a creditor filed the judgment against you. TransUnion will also list a date on which each of your negative judgments will disappear from your report. These dates, of course, vary. Foreclosures remain on your credit report for seven years. Chapter 7 bankruptcy filings stay on them for 10 years, while Chapter 13 bankruptcy filings also fall off your report after seven years.</p> <h3>Accounts</h3> <p>Your credit reports have two sections devoted to your credit accounts. The bad one is labeled &quot;Adverse Accounts.&quot; This section lists credit accounts &mdash; such as open credit cards &mdash; on which you have either missed a payment or been late. These financial blunders will stay on your credit report for seven years. This section will also list how much you owe on these accounts.</p> <p>There is also the &quot;Accounts in Good Standing&quot; section. This part of your report lists open credit accounts that you have paid on time for a specific period, usually the past 53 months. Again, this part of the report will also list how much you owe on these accounts.</p> <h3>Credit History</h3> <p>The last major part of your credit report is devoted to &quot;Credit History Requests.&quot; If a mortgage lender requested your credit reports &mdash; to make sure that you haven't paid your bills late &mdash; it will be listed here. You might see, too, that a potential landlord requested your credit reports. Many will do this before leasing their apartment units to renters.</p> <p>What's most interesting about this part of your report is that every creditor that requests your reports is required to list a reason why. You'll see these reasons listed here, too.</p> <h2>Understanding Your Credit Score</h2> <p>Credit scores generally get more press than do credit reports. That's because lenders use these three-digit numbers when deciding who gets loans and at what interest rates.</p> <p>The most important of your credit scores is the FICO score. Other companies offer credit scores &mdash; the VantageScore is a popular example &mdash; but none of them have the same impact on your ability to qualify for a loan.</p> <p>FICO credit scores run from a low of 300 to a high of 850. The higher your score, the better. Lenders generally consider FICO scores of 740 or higher to be excellent ones. If your score is lower than 640, though, you might struggle to qualify for a conventional mortgage loan or other loans or forms of credit.</p> <p>Your FICO credit score is only made up of the information contained in your credit reports. Not all bill payments, for instance, show up on your credit reports. You might pay your monthly utility and cell phone bills on time, but they don't show up on your credit reports and, therefore, don't have any positive impact on your FICO score.</p> <p>According to FICO, your FICO score is made up of five parts. The most important, consisting of 35% of your score, is your payment history. If you make your credit card, auto loan, mortgage loan, and other payments on time, this part of your score will be strong.</p> <p>An additional 30% of your score is made up of the amount you owe on credit card accounts and revolving loans. The length of your credit history makes up 15% of your score. In general, longer credit histories will provide a boost to your credit score. (See also: <a href="http://www.wisebread.com/how-to-use-credit-cards-to-improve-your-credit-score?ref=seealso2">How to Use Credit Cards to Raise Your Credit Score</a>)</p> <p>An additional 10% of your score is determined by the type of credit you use. FICO will look at your mix of credit cards, mortgage loans, and installment loans when determining whether your credit mix is a healthy one.</p> <p>New credit influences the final 10% of your score. FICO says that consumers who open several new credit accounts in a short period of time represent a greater risk for lenders. Because of this, opening five new credit card accounts in two months could cause your credit score to drop.</p> <p>Both your credit reports and score are key to managing and understanding your financial health. Keep tabs on both to stay in top financial health.</p> <p><em>Do you track both your credit report and your credit score?</em></p> <br /><div id="custom_wisebread_footer"><div id="rss_tagline">This article is from <a href="http://www.wisebread.com/dan-rafter">Dan Rafter</a> of <a href="http://www.wisebread.com/heres-why-credit-scores-and-reports-are-not-the-same">Wise Bread</a>, an award-winning personal finance and <a href="http://www.wisebread.com/credit-cards">credit card comparison</a> website. Read more great articles from Wise Bread:</div><div class="view view-similarterms view-id-similarterms view-display-id-block_2 view-dom-id-2"> <div class="view-content"> <div class="item-list"> <ul> <li class="views-row views-row-1 views-row-odd views-row-first"> <div class="views-field-title"> <span class="field-content"><a href="http://www.wisebread.com/heres-why-you-shouldnt-freak-out-if-you-miss-a-payment-due-date">Here&#039;s Why You Shouldn&#039;t Freak Out If You Miss a Payment Due Date</a></span> </div> </li> <li class="views-row views-row-2 views-row-even"> <div class="views-field-title"> <span class="field-content"><a href="http://www.wisebread.com/4-credit-report-mistakes-that-could-be-costing-you-big">4 Credit Report Mistakes That Could Be Costing You Big</a></span> </div> </li> <li class="views-row views-row-3 views-row-odd"> <div class="views-field-title"> <span class="field-content"><a href="http://www.wisebread.com/4-surprising-things-lenders-check-besides-your-credit-score">4 Surprising Things Lenders Check Besides Your Credit Score</a></span> </div> </li> <li class="views-row views-row-4 views-row-even"> <div class="views-field-title"> <span class="field-content"><a href="http://www.wisebread.com/5-surprising-ways-revolving-debt-helps-you">5 Surprising Ways Revolving Debt Helps You</a></span> </div> </li> <li class="views-row views-row-5 views-row-odd views-row-last"> <div class="views-field-title"> <span class="field-content"><a href="http://www.wisebread.com/your-bad-credit-isnt-the-end-of-the-world">Your Bad Credit Isn&#039;t the End of the World</a></span> </div> </li> </ul> </div> </div> </div> </div><br/></br> Personal Finance credit bureaus credit history credit report credit score FICO score loans Tue, 22 Sep 2015 13:00:30 +0000 Dan Rafter 1567348 at http://www.wisebread.com Stop Making These 5 Costly Credit Card Mistakes http://www.wisebread.com/stop-making-these-5-costly-credit-card-mistakes <div class="field field-type-filefield field-field-blog-image"> <div class="field-items"> <div class="field-item odd"> <a href="/stop-making-these-5-costly-credit-card-mistakes" class="imagecache imagecache-250w imagecache-linked imagecache-250w_linked"><img src="http://wisebread.killeracesmedia.netdna-cdn.com/files/fruganomics/imagecache/250w/blog-images/000020354979.jpg" alt="" title="" class="imagecache imagecache-250w" width="250" height="141" /></a> </div> </div> </div> <p>Credit cards are useful tools for building and maintaining a strong credit score. If you charge items and pay them off on time every month, your credit score will rise. That's important; a strong credit score can help you earn lower interest rates on mortgage and auto loans, and qualify for credit cards that come with rewards programs and other perks.</p> <p>See also: <a href="http://www.wisebread.com/top-5-travel-reward-credit-cards?ref=seealso">Best Travel Rewards Credit Cards</a></p> <p>But it's also easy to misuse your credit cards. And if you do, you might find yourself facing a mountain of debt that keeps growing each month because of high interest rates. You might also find yourself with a credit score that is falling instead of rising.</p> <p>Here are the five biggest mistakes that you don't ever want to make with your credit cards, lest your credit score and your finances suffer.</p> <h2>1. Late or Missed Payments</h2> <p>Never pay your credit card bill late. If you do, the consequences are quick and severe. First, your credit card company will charge you a late fee. These vary, but usually run from $25 to $35. But that late fee is actually the least of your worries.</p> <p>If you pay your bill late, your credit card company can boost your card's interest rate. Penalty rates can rise to as high as 29.99%. This is a big financial drain. If you carry a balance on your card each month, penalty interest rates that high can make your existing debt soar every 30 to 31 days.</p> <p>If your payment is more than 30 days late, your credit card company will report the late payment to the three national credit bureaus (TransUnion, Equifax, and Experian), which means the late payment will show up in the three credit reports that these bureaus maintain. Mortgage, auto, and other lenders will see the late payment whenever you apply for a loan. This will make it harder to get a loan, and if you do qualify, your interest rate will be higher. The late payment will remain on your credit report for seven years.</p> <p>A late payment can also cause your credit score to drop. By how much depends on how high your credit score already is and how many other dings you have on your credit report. Payment history accounts for 35% of your credit score. If you have missed credit-card payments, then, your score can tumble.</p> <h2>2. Carrying a Balance Each Month</h2> <p>You should always pay off your credit card's balance in full each month. If you don't, you'll be charged interest on what you owe. That can make your existing debt grow quickly. That's because credit cards come with such high interest rates. If your interest rate is 17%, even a balance of $1,000 that you don't pay off can grow rapidly.</p> <p>See also: <a href="http://www.wisebread.com/the-best-0-balance-transfer-credit-cards?ref=seealso">Best 0% Balance Transfer Credit Cards</a></p> <h2>3. Paying Only the Required Minimum</h2> <p>When you get your credit card bill, it will list the minimum payment you must make that month to avoid a late fee. But paying only the minimum is a big mistake; you'll pay loads in interest over the lifetime of your debt if you only make the minimum payment each month.</p> <p>Here's an example: Say you owe $3,000 on a credit card with an interest rate of 18%. If you make the minimum payment of just $75 each month, it will take you 222 months &mdash; or more than 18 years &mdash; to pay off your debt, if you never make another charge on your credit card. You will also pay more than $3,932 in interest on that $3,000 debt.</p> <h2>4. Closing Unused Cards</h2> <p>You might think that closing a credit card that you never use is a good move. But doing so can actually cause your credit score to drop. That's because a portion of your credit score is made up of how much of your available credit you are actually using. If you close a credit card that you no longer use and has no balance on it, you'll immediately be using more of your available credit, which will cause your credit score to fall.</p> <p>Here's how this works: Say you have four credit cards, each with a credit limit of $3,000. This gives you a total of $12,000 of available credit. Say you also have $3,000 worth of credit card debt spread out among your four cards. If one of your cards has no balance and you close it, you now have just $9,000 worth of available credit. If you still have that $3,000 of credit card debt, you are immediately using a higher percentage of your available credit. Put simply, $3,000 of credit card debt looks better when you have $12,000 of available credit than it does when you have just $9,000.</p> <p>See also: <a href="http://www.wisebread.com/how-to-use-credit-cards-to-improve-your-credit-score?ref=seealso">How to Use Credit Cards to Raise Your Credit Score</a></p> <h2>5. Taking Out a Cash Advance</h2> <p>Your credit card might allow you to take out a cash advance. Even if you are short of cash, don't do this. It's barely better than taking out a payday loan.</p> <p>First, you'll usually be charged a fee for taking out a cash advance, usually ranging from 2% to 4% of whatever advance you take. That's not the worst part, though. Your credit card company might charge a higher interest rate on the money you take out through a cash advance. The interest will start accruing immediately. There is no grace period as with other credit card purchases.</p> <p>Some credit card companies won't even allow you to pay off your cash advance dollars until you first pay off your more traditional credit card debt. If you carry a balance each month, it might take you a long time to pay off the higher-interest-rate debt from a cash advance.</p> <p>Credit cards can be terrific financial tools when used wisely. Avoid the five traps above and make the most of your credit.</p> <p><em>Have you ever made any of these common credit card mistakes?</em></p> <br /><div id="custom_wisebread_footer"><div id="rss_tagline">This article is from <a href="http://www.wisebread.com/dan-rafter">Dan Rafter</a> of <a href="http://www.wisebread.com/stop-making-these-5-costly-credit-card-mistakes">Wise Bread</a>, an award-winning personal finance and <a href="http://www.wisebread.com/credit-cards">credit card comparison</a> website. Read more great articles from Wise Bread:</div><div class="view view-similarterms view-id-similarterms view-display-id-block_2 view-dom-id-3"> <div class="view-content"> <div class="item-list"> <ul> <li class="views-row views-row-1 views-row-odd views-row-first"> <div class="views-field-title"> <span class="field-content"><a href="http://www.wisebread.com/how-your-unused-credit-cards-may-be-costing-you">How Your Unused Credit Cards May Be Costing You</a></span> </div> </li> <li class="views-row views-row-2 views-row-even"> <div class="views-field-title"> <span class="field-content"><a href="http://www.wisebread.com/8-credit-repair-mistakes-that-will-cost-you">8 Credit Repair Mistakes That Will Cost You</a></span> </div> </li> <li class="views-row views-row-3 views-row-odd"> <div class="views-field-title"> <span class="field-content"><a href="http://www.wisebread.com/avoid-these-5-common-mistakes-while-rebuilding-your-credit">Avoid These 5 Common Mistakes While Rebuilding Your Credit</a></span> </div> </li> <li class="views-row views-row-4 views-row-even"> <div class="views-field-title"> <span class="field-content"><a href="http://www.wisebread.com/heres-why-you-shouldnt-freak-out-if-you-miss-a-payment-due-date">Here&#039;s Why You Shouldn&#039;t Freak Out If You Miss a Payment Due Date</a></span> </div> </li> <li class="views-row views-row-5 views-row-odd views-row-last"> <div class="views-field-title"> <span class="field-content"><a href="http://www.wisebread.com/6-moves-to-make-before-cutting-up-your-credit-card">6 Moves to Make Before Cutting Up Your Credit Card</a></span> </div> </li> </ul> </div> </div> </div> </div><br/></br> Credit Cards credit bureaus credit history credit score interest rates late payments Tue, 08 Sep 2015 21:02:17 +0000 Dan Rafter 1548194 at http://www.wisebread.com