credit history http://www.wisebread.com/taxonomy/term/12012/all en-US 5 Myths About Credit Cards That Won't Go Away http://www.wisebread.com/5-myths-about-credit-cards-that-wont-go-away <div class="field field-type-filefield field-field-blog-image"> <div class="field-items"> <div class="field-item odd"> <a href="/5-myths-about-credit-cards-that-wont-go-away" class="imagecache imagecache-250w imagecache-linked imagecache-250w_linked"><img src="http://wisebread.killeracesmedia.netdna-cdn.com/files/fruganomics/imagecache/250w/blog-images/iStock-637754848.jpg" alt="Woman learning myths about credit cards that won&#039;t go away" title="" class="imagecache imagecache-250w" width="250" height="142" /></a> </div> </div> </div> <p>The idea of evaluating a person's creditworthiness goes back as early as 1899, when Equifax (originally called Retail Credit Company) would keep a list of consumers and a series of factors to determine their likelihood to pay back debts. However, credit cards didn't make an appearance until the 1950s, and the FICO score as we know it today wasn't introduced until 1989.</p> <p>Due to these timing differences, many U.S. consumers hold on to damaging myths about credit cards. Let's dispel five of these widely held but false beliefs and find out what to do to continue improving your credit score.</p> <h2>Myth #1: Closing unused cards is good for credit</h2> <p>Remember when United Colors of Benetton used to be all the rage and you shopped there all the time? Fast forward a decade; you don't shop there anymore, and you're thinking about shutting down that store credit card. Not so fast! Closing that old credit card may do more harm than good to your credit score.</p> <p>Your length of credit history contributes 15 percent of your FICO score. If that credit card is your oldest card, then closing it would bring down the average age of your accounts and hurt your score. This is particularly true when there is a gap of several years between your oldest and second-to-oldest card. Another point to consider is that when you close a credit card, you're reducing your amount of available credit. This drops your <a href="http://www.wisebread.com/this-one-ratio-is-the-key-to-a-good-credit-score?ref=internal" target="_blank">credit utilization ratio</a>, which makes up 30 percent of your FICO score.</p> <p><strong>What to do:</strong> Keep those old credit cards open, especially when they are the oldest ones that you have. Just make sure that you're keeping on top of any applicable annual fees and they're not tempting you to spend beyond your means.</p> <h2>Myth #2: Holding a credit card balance is good for credit</h2> <p>The amount you owe lenders accounts for 30 percent of your FICO score. The smaller your credit utilization ratio (the amount of debt you hold compared to your total available credit), the better your score. This means if you can avoid carrying a balance, you should do so. However, responsible use of a credit card allows you to buy big ticket items, such as a kitchen appliance or laptop, that you can't pay off all at once. So, sometimes you will have to carry a credit card balance. When you do, credit lenders recommend that you keep your credit utilization ratio below 30 percent -- the lower, the better. Keeping a low credit utilization ratio demonstrates that you're more likely to be able repay your debts, positively affecting your credit score.</p> <p><strong>What to do:</strong> Pay back your credit card balance in full every month as much as possible. When you're not able to do so, then seek to maintain a debt-to-credit ratio below 30 percent across all your credit card debts. (See also: <a href="http://www.wisebread.com/how-to-use-credit-cards-to-improve-your-credit-score?ref=seealso" target="_blank">How to Use Credit Cards to Improve Your Credit Score</a>)</p> <h2>Myth #3: Paying the cellphone bill builds your score</h2> <p>Since some cellphone carriers may run a credit check to decide whether or not to approve you for financing, you may think that those cellphone carriers report your on-time payment history back to the credit bureaus. Payments to service companies, such as cellphone carriers, electricity providers, and natural gas providers, aren't reported back to the credit bureaus. (However, Experian does provide eligible renters the option to make their rent payments count toward their credit history.)</p> <p><strong>What to do:</strong> Don't sign up for a cellphone plan thinking you'll get a boost in your credit score. Do continue paying your cellphone bill (and all other bills!) regularly on-time. If your cellphone account were to be sent to collections, then the cellphone company would surely report that info to all credit bureaus.</p> <h2>Myth #4: Choosing a popular card will benefit you</h2> <p>A 2016 study of 20,206 credit card users by J.D. Power found that at least one in five credit card holders have a card which has fees or rewards not aligned with their actual purchase habits.</p> <p>In the hunt for bigger and better rewards, 20 percent of credit card holders end up with a card that doesn't match their needs and would be better served by a different rewards card, or even one without any without rewards at all and a lower interest rate. Here's an example from the study: One of the reasons that 44 percent of airline co-branded card holders appear to have the wrong card is that those individuals aren't spending at least the necessary $500 per month to gain enough rewards to cover the average annual fee of $75. (See also: <a href="http://www.wisebread.com/cash-back-vs-travel-rewards-pick-the-right-credit-card-for-you?ref=seealso" target="_blank">Cash Back vs Travel Rewards: Pick the Right Credit Card for You</a>)</p> <p><strong>What to do:</strong> You don't just want to follow the crowd when choosing a credit card. Stack up your current credit card against others and figure whether or not it's time to find a new card more suitable to your lifestyle. Check out our guides on <a href="http://www.wisebread.com/how-rewards-credit-cards-really-work?ref=internal" target="_blank">how cash back cards really work</a> and choosing the <a href="http://www.wisebread.com/choose-the-best-travel-rewards-credit-card-with-this-guide?ref=internal" target="_blank">best travel rewards credit card</a> to find the card that fits your lifestyle.</p> <h2>Myth #5: Believing there's only one credit score</h2> <p>That <a href="http://www.wisebread.com/the-5-best-credit-cards-that-offer-free-credit-scores?ref=internal" target="_blank">free credit score</a> on your credit card statement may not be the same one used by a lending officer reviewing your application for a mortgage or car loan. Did you know that there more than 50 different types of FICO scores? Lenders have several options to choose from depending on their industry and preferred credit reporting agency.</p> <p><strong>What to do:</strong> If you get a free credit score through your card, check with the card issuer whether or not that score is a FICO score and what type of FICO score it is. This will help you know whether or not you can do an apples-to-apples comparison with the one used by your lender. Also, inquire with your lender if they can give you a target range for your loan to be approved. (See also: <a href="http://www.wisebread.com/fico-or-fako-are-free-credit-scores-from-credit-cards-the-real-thing?ref=seealso" target="_blank">FICO or FAKO: Are Free Credit Scores From Credit Cards the Real Thing?</a>)</p> <br /><div id="custom_wisebread_footer"><div id="rss_tagline">This article is from <a href="http://www.wisebread.com/damian-davila">Damian Davila</a> of <a href="http://www.wisebread.com/5-myths-about-credit-cards-that-wont-go-away">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/comparing-miles-which-airline-loyalty-program-is-better">Which Airline Loyalty Program Has the Best Value for Their Miles?</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/the-5-best-credit-cards-that-offer-free-credit-scores">The 5 Best Credit Cards That Offer Free Credit Scores</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/are-airline-or-travel-rewards-credit-cards-the-better-deal">Are Airline or Travel Rewards Credit Cards the Better Deal?</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-things-you-should-never-do-with-your-travel-rewards-credit-cards">7 Things You Should Never Do With Your Travel Rewards Credit Cards</a></span> </div> </li> </ul> </div> </div> </div> </div><br/></br> Credit Cards bills credit history credit scores credit utilization ratio debts fico miles myths rewards Tue, 21 Mar 2017 10:31:11 +0000 Damian Davila 1907103 at http://www.wisebread.com Make These 5 Money Moves Before Applying for a Mortgage http://www.wisebread.com/make-these-5-money-moves-before-applying-for-a-mortgage <div class="field field-type-filefield field-field-blog-image"> <div class="field-items"> <div class="field-item odd"> <a href="/make-these-5-money-moves-before-applying-for-a-mortgage" class="imagecache imagecache-250w imagecache-linked imagecache-250w_linked"><img src="http://wisebread.killeracesmedia.netdna-cdn.com/files/fruganomics/imagecache/250w/blog-images/iStock-506317138 (1).jpg" alt="Making money moves before applying for a mortgage" title="" class="imagecache imagecache-250w" width="250" height="141" /></a> </div> </div> </div> <p>Each year, millions of people apply for a mortgage and purchase a home. This, however, shouldn't convince you that getting a home loan is a piece of cake. In reality, a mortgage is one of the hardest loans to qualify for. But if you make these money moves before meeting with a lender, you can swing the odds in your favor.</p> <h2>1. Pay off debt</h2> <p>Getting approved for a mortgage doesn't require zero debt, but the more you currently owe, the harder it can be to qualify for a desired amount.</p> <p>To avoid any roadblocks along the way, come up with a clearsighted plan to pay off as much of your debt as possible, especially <a href="http://www.wisebread.com/the-fastest-method-to-eliminate-credit-card-debt?ref=internal" target="_blank">credit card debt</a>. A high <a href="http://www.wisebread.com/this-one-ratio-is-the-key-to-a-good-credit-score?ref=internal" target="_blank">credit utilization ratio</a> &mdash; which is your credit card balance compared to your credit limit &mdash; can lower your credit score and make it difficult to qualify for a mortgage or trigger a higher mortgage interest rate.</p> <p>As a personal goal, keep credit card balances below 30 percent of your credit limit. To attain this, stop using cards and pay more than your minimums every month. Also, ask creditors to lower your interest rate. If you can pay less interest, you'll reduce the principal faster.</p> <p>Take it a step further and make higher monthly payments on other types of debts as well, such as a car loan, student loan, etc. This is to your advantage because the less expenses you have, the easier it'll be to adjust to a mortgage payment.</p> <h2>2. Determine what you're comfortable spending</h2> <p>Your mortgage lender decides an affordable amount based on your income and existing debt. Still, it helps to have an idea of what <em>you </em>are comfortable spending on a house before meeting with a bank. Typically, banks allow borrowers to spend between 28 percent and 31 percent of their gross monthly income on a mortgage payment.</p> <p>Do the math and calculate 31 percent of your gross monthly income, and then review your budget to see if you can realistically afford this amount on a monthly basis. After determining a comfortable monthly payment, use a mortgage calculator to estimate the maximum you can borrow based on the desired payment range.</p> <h2>3. Devise a savings plan</h2> <p>Qualifying for a mortgage entails money &mdash; lots of it. Not just money for the monthly payment, but also <a href="http://www.wisebread.com/4-easy-ways-to-start-saving-for-a-down-payment-on-a-home?ref=internal" target="_blank">cash for a down payment</a> (between 3.5 percent and 20 percent of the home's value), plus there's the cost of closing. These fees can run up to 5 percent of the purchase price.</p> <p>Even if you can afford a house payment at a certain price point, you'll only qualify for a particular amount if you have enough in reserves for mortgage-related fees. Let's say you want to purchase a $300,000 house. Your income may show an ability to afford the monthly payment. But if you only have $7,500 in savings for a down payment, instead of the required $10,500 (assuming you get an FHA home loan), you can't purchase the home. You then have two options &mdash; purchase a cheaper home, or postpone buying until you save additional cash.</p> <p>Once you have an idea of how much you'll spend on a property, devise a plan to save for your down payment and closing costs. Based on your amount of disposable income each month and your desired time frame for purchasing a property, decide how much to save. Keep this money in a designated high-yield savings account.</p> <h2>4. Pay your bills on time</h2> <p>There are no hard rules regarding how many late payments a lender allows within 12 or 24 months before applying for a home loan. If there are late payments on your recent credit history, it's up to your lender to calculate the risk level and determine whether you're creditworthy. To do this, some lenders request an explanation to assess whether lateness was due to irresponsibility or circumstances beyond a borrower's control. (See also: <a href="http://www.wisebread.com/5-simple-ways-to-never-make-a-late-credit-card-payment?ref=seealso" target="_blank">5 Simple Ways to Never Make a Late Credit Card Payment</a>)</p> <p>Either way, late payments in your recent history can result in a higher interest rate, which means you'll pay more for your home loan in the long run. Therefore, aim to pay all your bills on time. If you often forget due dates, set up recurring or automatic monthly payments.</p> <h2>5. Shop around for lenders</h2> <p>According to the Consumer Finance Protection Bureau, 47 percent of homebuyers don't compare mortgage lenders when applying for a home loan. What's even more surprising, 77 percent apply to only one lender at all. It might seem convenient to get this step out of the way ASAP, but it just doesn't make smart financial sense.</p> <p>When you're ready to apply for a home loan, you need to do research and shop around. Don't just settle for the first mortgage lender who approves you. You might be eager to get the process underway, but be patient. The first person to give you the green light might not be offering the lowest interest rates (or charging the lowest fees), which could mean the difference between thousands of dollars. Maybe they're just not the right fit for you, or they don't take the time to really earn your business. You won't know unless you compare, and that step can save you a lot of stress (and money) down the line. (See also: <a href="http://www.wisebread.com/4-mortgage-secrets-only-your-broker-knows?ref=seealso" target="_blank">4 Mortgage Secrets Only Your Broker Knows</a>)</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/make-these-5-money-moves-before-applying-for-a-mortgage">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/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/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-3 views-row-odd"> <div class="views-field-title"> <span class="field-content"><a href="http://www.wisebread.com/everything-a-first-time-home-buyer-needs-to-buy-a-house">Everything a First-Time Home Buyer Needs to Buy a House</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-reasons-you-shouldnt-buy-a-house-yet">5 Reasons You Shouldn&#039;t Buy a House (Yet)</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/is-it-safe-to-re-finance-your-home-close-to-retirement">Is it Safe to Re-Finance Your Home Close to Retirement?</a></span> </div> </li> </ul> </div> </div> </div> </div><br/></br> Real Estate and Housing buying a home credit history credit score debt repayment down payments home loans mortgages saving money tax deductions Mon, 20 Mar 2017 10:30:21 +0000 Mikey Rox 1908934 at http://www.wisebread.com Why the Age of Your Credit History Matters http://www.wisebread.com/why-the-age-of-your-credit-history-matters <div class="field field-type-filefield field-field-blog-image"> <div class="field-items"> <div class="field-item odd"> <a href="/why-the-age-of-your-credit-history-matters" class="imagecache imagecache-250w imagecache-linked imagecache-250w_linked"><img src="http://wisebread.killeracesmedia.netdna-cdn.com/files/fruganomics/imagecache/250w/blog-images/iStock-472468032.jpg" alt="the age of your credit history" title="" class="imagecache imagecache-250w" width="250" height="141" /></a> </div> </div> </div> <p>A healthy credit score shouldn't be underestimated.</p> <p>This three-digit number plays a pivotal role in your financial life, including whether or not you'll qualify for auto loans, mortgages, or credit cards, and if so, what interest rates you'll pay. It can even affect your career, particularly if it's in the finance field: A brokerage firm isn't likely to hire a candidate they suspect isn't good with money. (See also: <a href="http://www.wisebread.com/15-surprising-ways-bad-credit-can-hurt-you?ref=seealso" target="_blank">15 Surprising Ways Bad Credit Can Hurt You</a>)</p> <p>Given how much weight your credit score carries, you should do everything within your power to maintain a high score. Yet, before you can maintain a good score, you have to understand the components that make up your credit score.</p> <h2>What Makes Up Your Credit Score</h2> <p>Credit scores aren't determined by a single factor, but rather multiple factors. Once you open a credit account, your creditors report account activity to the credit bureaus on a regular basis. The bureaus compile data related to your accounts, and based on reported information, the bureaus formulate a credit score.</p> <p>It probably comes as no surprise that your payment history and the amounts you owe have a tremendous impact on your personal score. Your payment history makes up 35% of your score, while the amount you owe makes up 30% of your score. If you pay your bills on time, avoid delinquencies, and keep your balances within a reasonable range, you'll eventually build up to a solid score.</p> <p>But even when you take these measures, good credit doesn't happen overnight. Because there's another factor that contributes to your overall score: When credit bureaus formulate credit scores, they also take into account the <em>age </em>of your credit history.</p> <p>The age or length of your credit history &mdash; which makes up 15% of your credit score &mdash; doesn't have as big an impact on your score as your payment history and amounts owed. Still, you shouldn't downplay the importance of credit age.</p> <h2>How Credit Age Relates to Credit Risk</h2> <p>Most of us rely on credit for an auto loan, a house, and a credit card. Even so, being a creditor is risky business, and banks don't arbitrarily approve credit applications. They consider several factors before approving financing, such as your income and your credit score. Even if you have adequate income and pay your bills on time, the bank might reject your application if you don't meet the minimum credit score requirement for a loan. This can happen if you have a young credit history. (See also: <a href="http://www.wisebread.com/why-you-need-credit-and-how-to-build-it-from-scratch?ref=seealso" target="_blank">How to Build Your Credit From Scratch</a>)</p> <p>The age of credit history affects overall scores because a longer history provides a better assessment of risk level. Credit age takes two elements into consideration: the age of your oldest account, and the average age of all your accounts. The longer accounts remain open, the more your credit matures. And as your credit matures, credit scoring models slowly add points to your score.</p> <p>To illustrate, if you've had a credit history for the past six years with no negative activity appearing on your credit report, credit bureaus evaluate your entire borrowing pattern, and based on your history and record, deem you a responsible borrower. This is a fairly accurate assessment given the length of credit history. As a responsible borrower, you're rewarded with additional credit score points.</p> <p>But let's say you've only had a credit file for six months or a year. Given your short credit history, credit bureaus can't accurately rate creditworthiness. Despite paying your bills on time, you don't have a long borrowing track record. There just isn't enough evidence to gauge how well you manage credit &mdash; this happens with time. You have a short credit history, and unfortunately, your credit score pays the price. The good news, however, is that this is a temporary problem.</p> <h2>What Can You Do?</h2> <p>Credit scores range from 300 to 850. If you're aiming for a <a href="http://www.wisebread.com/5-ways-life-is-amazing-with-an-800-credit-score?ref=internal" target="_blank">perfect credit score</a>, understand that it takes years of responsible credit habits to achieve. It doesn't matter how well you manage your credit accounts in the first one or two years, you probably won't have as high of a credit score as someone who's had A+ credit for eight or nine years &mdash; but you can get there.</p> <p>Remember, your payment history and the amount you owe make up 35% and 30% of your credit score, respectively. So while your credit score might be low due to a short credit history today, keeping your credit card balances low and making timely monthly payments will gradually increase your score. (See also: <a href="http://www.wisebread.com/how-to-use-credit-cards-to-improve-your-credit-score?ref=seealso" target="_blank">How to Use Credit Cards to Improve Your Credit Score</a>)</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/why-the-age-of-your-credit-history-matters">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/how-to-protect-yourself-from-predatory-lending">How to Protect Yourself From Predatory Lending</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/why-you-shouldnt-panic-if-your-credit-score-drops">Why You Shouldn&#039;t Panic If Your Credit Score Drops</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/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/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> </ul> </div> </div> </div> </div><br/></br> Personal Finance age credit bureaus credit history credit score interest rates loans on time payments risk Tue, 07 Mar 2017 10:01:04 +0000 Mikey Rox 1901331 at http://www.wisebread.com 4 Reasons to Add Your Teen as an Authorized User on Your Credit Card http://www.wisebread.com/4-reasons-to-add-your-teen-as-an-authorized-user-on-your-credit-card <div class="field field-type-filefield field-field-blog-image"> <div class="field-items"> <div class="field-item odd"> <a href="/4-reasons-to-add-your-teen-as-an-authorized-user-on-your-credit-card" class="imagecache imagecache-250w imagecache-linked imagecache-250w_linked"><img src="http://wisebread.killeracesmedia.netdna-cdn.com/files/fruganomics/imagecache/250w/blog-images/iStock-501708788.jpg" alt="A teen getting added as authorized user on a credit card" title="" class="imagecache imagecache-250w" width="250" height="140" /></a> </div> </div> </div> <p>Giving your kid access to your credit card account might make you squirm, but there are some good reasons to do it. Teens need to be educated about credit before they leave the nest and get their own credit cards. While you could just hand them your credit card whenever they want to make a purchase, there are extra benefits to making them an authorized user on your account.</p> <p>An authorized user gets a card in their own name and can make purchases just like the primary user on the account. However, only the primary user is responsible for paying the charges. That sounds scary but there are ways to handle the situation so that your child gets the most from it without landing you in debt. (See also: <a href="http://www.wisebread.com/what-you-need-to-know-about-adding-another-user-to-your-credit-card?ref=seealso" target="_blank">What You Need to Know About Adding Another User to Your Credit Card</a>)</p> <p>Let's look at the notable benefits that come with making your child an authorized user on your account.</p> <h2>1. Lessons on Credit and Debt</h2> <p>Teenagers may not really understand what credit is until they experience it firsthand. By introducing teenagers to credit early on, they can gain an understanding of what it means to owe someone money &mdash; and that every dollar spent must be paid back. They'll also learn about credit card interest this way, and how not paying your balance in full means owing more money over time.</p> <p>To make this lesson effective, you'll need to establish with your teen that they are responsible for paying the charges they make and any interest they incur. If you simply pay for all their purchases, they'll learn very little about responsible credit card use.</p> <p>For example, your teen might use their authorized user card for new clothes at the mall without a care in the world. When the bill arrives, however, if you have made it clear that they will have to pay for the charges, they'll be forced to face the consequences of their spending.</p> <p>If they've kept the cash on hand to pay their bill, they can be proud of that accomplishment. If not, they'll learn what it means to carry a balance and pay interest. And when those $49 jeans end up costing $61, they might feel the pain of their decisions in a way no other method of learning can convey. (See also: <a href="http://www.wisebread.com/13-things-to-teach-your-kids-about-credit-cards?ref=seealso" target="_blank">13 Things to Teach Your Kids About Credit Cards</a>)</p> <h2>2. Lessons in Budgeting</h2> <p>The example above presents a great way to introduce kids to another adult concept &mdash; <a href="http://www.wisebread.com/11-budgeting-skills-everyone-should-master?ref=internal" target="_blank">budgeting</a>. Whether they're buying clothes at the mall or hitting the movies with friends, they should learn how to budget their money so they can pay their bill when it comes due.</p> <p>If a teenager charges on their card often enough &mdash; and sees that bill roll in time after time &mdash; they'll get used to the fact they need to keep enough money handy to cover their purchases.</p> <p>This lesson can carry through to nearly every aspect of their lives as they become adults. They'll need the money in the bank to cover the mortgage or rent payments one day, for example. They can start developing good habits early by learning to anticipate bills and creating a budget that works with the amount of money they earn, whether it's through an allowance or a part-time job. (See also: <a href="http://www.wisebread.com/7-important-lessons-frugal-parents-teach-their-children?ref=seealso" target="_blank">7 Important Lessons Frugal Parents Teach Their Children</a>)</p> <h2>3. Emergency Spending</h2> <p>If you're not too keen on handing your kids cash every day, making them an authorized user on your credit card is a smart alternative. With a credit card for emergencies, your teen may be less likely to waste your &quot;emergency money&quot; on a frivolous purchase. After all, a credit card will create a paper trail that shows parents where that money was spent.</p> <p>And since emergencies can happen at any time, it's nice to know your kids will have money in the form of a credit card if they end up in a pickle.</p> <h2>4. Credit Building</h2> <p>Perhaps the most important reason to add your child as an authorized user is to help them <a href="http://www.wisebread.com/building-a-credit-history?ref=internal" target="_blank">build a credit history</a>. As an authorized user, the action on your credit card account will likely be reported to <em>your teen's credit report</em>. Assuming you use the card responsibly and keep the balance low, your teen will benefit from <em>your </em>good habits and, over time, earn a good credit score. That foundation can give them a leg up in the financial world for years to come.</p> <p>Of course, adding your child as an authorized user is just the first step. Once they get old enough, they can apply for their own <a href="http://www.wisebread.com/the-5-best-credit-cards-for-college-students?ref=internal" target="_blank">student credit card</a> that can help them approach credit use with baby steps.</p> <h2>Adding Your Teen: What to Watch Out For</h2> <p>While adding a teen as an authorized user to your credit card account is certainly beneficial for them, that doesn't mean it's risk-free for the primary cardholder &mdash; you. As the account owner, you'll be responsible for any charges your teenager racks up &mdash; and that's true whether they make a good-faith effort to repay or not.</p> <p>One way to prevent a catastrophe is to set a spending limit on your teen's authorized user card. With a spending cap in place, their card will be denied if they try to charge more than their limit allows. Unfortunately, only a few cards &mdash; most of them American Express cards &mdash; allow you to have a separate spending limit for an authorized user.</p> <p>Worried you won't be able to keep track of your purchases and theirs? One strategy that can keep things straight is to add your child as an authorized user on a credit card you rarely use. That way, their purchases won't become intermingled with yours and you can easily track what they spend and how much they owe.</p> <p>You can also keep a running tab on what's going on with your card by creating phone or email alerts for every time your account is used.</p> <p>Whatever you do, make sure to set rules in writing, so they're crystal clear. Let your kid know exactly what they're allowed to purchase, how much they can spend, and how repayment will work. If they appear to be getting in over their head, take the card away from them.</p> <p>Some children need to gain more maturity before handling credit, and there's no sense harming both of your credit records. In those cases, getting them a <a href="http://www.wisebread.com/5-best-prepaid-debit-cards?ref=internal" target="_blank">prepaid debit card</a> may be a good interim measure for teaching them about budgeting. Prepaid cards don't help them build credit, but they can't hurt anyone's credit record, either.</p> <p>Whichever way you go, it's important to start teaching your kids early about credit, debt, and bill paying. Your kids will be adults before you know it. Let them learn about money while they're still under your guidance, and they might not have to learn every lesson the hard way. (See also: <a href="http://www.wisebread.com/4-signs-you-are-teaching-your-kids-bad-financial-habits?ref=seealso" target="_blank">4 Signs You're Teaching Your Kids Bad Financial Habits</a>)</p> <br /><div id="custom_wisebread_footer"><div id="rss_tagline">This article is from <a href="http://www.wisebread.com/holly-johnson">Holly Johnson</a> of <a href="http://www.wisebread.com/4-reasons-to-add-your-teen-as-an-authorized-user-on-your-credit-card">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-top-money-lessons-to-learn-from-ruth-soukups-unstuffed">4 Top Money Lessons to Learn From Ruth Soukup&#039;s &quot;Unstuffed&quot;</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-fun-games-that-teach-your-kids-about-money">6 Fun Games That Teach Your Kids About Money</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/10-fun-books-that-will-get-your-kids-excited-about-money">10 Fun Books That Will Get Your Kids Excited About 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/6-unexpected-benefits-of-secured-credit-cards">5 Unexpected Benefits of Secured 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/building-a-credit-history">Building a Credit History</a></span> </div> </li> </ul> </div> </div> </div> </div><br/></br> Credit Cards Family authorized users budgeting building credit credit history emergency spending kids money lessons teens Thu, 02 Mar 2017 10:30:27 +0000 Holly Johnson 1900236 at http://www.wisebread.com Why Your Credit Score Matters in Retirement http://www.wisebread.com/why-your-credit-score-matters-in-retirement <div class="field field-type-filefield field-field-blog-image"> <div class="field-items"> <div class="field-item odd"> <a href="/why-your-credit-score-matters-in-retirement" class="imagecache imagecache-250w imagecache-linked imagecache-250w_linked"><img src="http://wisebread.killeracesmedia.netdna-cdn.com/files/fruganomics/imagecache/250w/blog-images/retired_couple_car_108348263.jpg" alt="Couple learning why credit score matters in retirement" title="" class="imagecache imagecache-250w" width="250" height="140" /></a> </div> </div> </div> <p>You've left the working world and are ready to enjoy your retirement years. So, you might be forgiven for thinking that your days of fretting over your FICO credit score are over.</p> <p>Guess what? They're not. Your three-digit credit score matters even in your retirement.</p> <p>Lenders of all kinds, not to mention credit card providers, rely on your FICO credit score to determine how well you've managed your credit in the past. Having a low score can hurt you financially, even after you've left the days of commuting to work behind you.</p> <h2>Why Scores Matter</h2> <p>Your FICO credit score &mdash; you have three, one each maintained by the credit bureaus of Experian, Equifax, and TransUnion &mdash; is a key number throughout your adult life. Lenders rely on these scores to determine if you can qualify for loans. And if your score is low, even if you do qualify, you'll pay higher interest rates.</p> <p>Generally, lenders consider a FICO credit score of 740 or higher to be an excellent one. Scores under 640 are generally considered weak by lenders, and will leave you with higher interest rates on the money you borrow.</p> <p>As you make your way through adulthood, lenders will check your scores as you apply for auto loans, mortgages, or credit cards.</p> <p>When you retire, the odds are high that you will no longer be applying for mortgage loans. However, this doesn't mean that credit scores will no longer play a key role in your financial life.</p> <h2>The Best Credit Cards</h2> <p>If you want to <a href="http://www.wisebread.com/5-best-credit-cards-for-people-with-excellent-credit?ref=internal" target="_blank">qualify for the best credit cards</a>, including ones with the <a href="http://www.wisebread.com/top-5-travel-reward-credit-cards?ref=internal" target="_blank">most generous rewards programs</a>, you'll need a high FICO score. Financial institutions only pass out their best credit cards to those customers who've proven that they have a history of paying their bills on time.</p> <p>Having a high credit score is how you'll prove to banks that you are financially responsible. And if you want to qualify for the best credit scores during your retirement, you'll take steps to make sure that your credit score is strong in your 60s, 70s, 80s, and beyond.</p> <h2>A New Car</h2> <p>Maybe you plan to buy that dream car after retirement. If you can't pay for it in cash, you'll need an auto loan. And if you want to qualify for an auto loan with the lowest possible interest rate, you'll need a strong FICO credit score.</p> <p>Auto lenders will check your credit score when you apply for financing. So make sure that your score doesn't take a dip after retirement.</p> <h2>Auto Insurance Rates</h2> <p>If you buy a new car, you'll need auto insurance, too. Guess what? Auto insurers rely on a variation of your credit score to help set their rates. Again, you'll want the highest possible credit score if you expect to qualify for the most affordable auto insurance.</p> <p>Auto insurers use something called a credit-based insurance score to set rates. If this score is strong &mdash; and your driving history is good &mdash; you'll usually qualify for lower insurance rates. Your credit-based insurance score doesn't factor in your job or income. But it will rise if you pay bills such as your credit card payments and mortgage on time every month. It will fall if you miss payments, make payments 30 days or more late, have too much debt, or have accounts that have been sent to collections.</p> <h2>Refinancing to a Lower Monthly Payment</h2> <p>The goal is to enter retirement without having a monthly mortgage payment. That doesn't always happen, though. And if you are still paying off a mortgage loan when you enter your after-work years, you might want to someday refinance that home loan to one with a lower interest rate. Lowering your rate will give you a lower monthly payment. That extra cash each month could be important once you're living on a fixed income.</p> <p>To qualify for a refinance, and for the lowest possible interest rate to make such a move financially worthwhile, you'll again need a high credit score. If your FICO credit score is 740 or higher, the odds are good that you'll qualify for an interest rate low enough to make refinancing a smart financial decision.</p> <p>The lesson here is obvious: You can't put worrying about credit scores behind you just because you've entered retirement. The best move is to continue taking the steps that help guarantee a strong credit score &mdash; paying your bills on time and keeping your credit card debt low &mdash; even after you've left the working world.</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/why-your-credit-score-matters-in-retirement">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/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/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/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-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-5 views-row-odd views-row-last"> <div class="views-field-title"> <span class="field-content"><a href="http://www.wisebread.com/what-the-new-credit-card-formula-means-for-your-wallet">What the New Credit Card Formula Means for Your Wallet</a></span> </div> </li> </ul> </div> </div> </div> </div><br/></br> Retirement car insurance credit history credit score fico insurance rates mortgages new car refinancing Mon, 30 Jan 2017 10:00:08 +0000 Dan Rafter 1870059 at http://www.wisebread.com 5 After the Holidays Moves Your Credit Score Will Thank You For http://www.wisebread.com/5-after-the-holidays-moves-your-credit-score-will-thank-you-for <div class="field field-type-filefield field-field-blog-image"> <div class="field-items"> <div class="field-item odd"> <a href="/5-after-the-holidays-moves-your-credit-score-will-thank-you-for" class="imagecache imagecache-250w imagecache-linked imagecache-250w_linked"><img src="http://wisebread.killeracesmedia.netdna-cdn.com/files/fruganomics/imagecache/250w/blog-images/iStock-619645214.jpg" alt="make these moves after the holidays to boost your credit score" title="" class="imagecache imagecache-250w" width="250" height="140" /></a> </div> </div> </div> <p>The fun part of the holidays is over. Now it's January, and your credit card bill has arrived. It's time for the dark side of the holiday season &mdash; paying for all that December cheer. If you shattered your holiday spending budget, don't panic: Now is the time to take the steps that will not only improve your finances, but boost your all-important credit score.</p> <p>Ready to put the overspending and impulse buying of the holidays behind you? Here are five post-holiday money moves that will give you a stronger credit score in 2017.</p> <h2>1. Pay on Time</h2> <p>You might not be able to pay off your entire holiday credit card bill at once. That's unfortunate, because credit card debt comes with high interest. But if you pay off a bit of the holiday debt every month on time, you will be helping your credit score.</p> <p>The three national credit bureaus of TransUnion, Equifax, and Experian track your on-time credit card payments. If you pay your credit card on time each month, your score will improve. If you are more than 30 days late on a payment, your score will plummet, usually by 100 points or more. And this missed payment will remain on your credit report for seven years.</p> <p>No one likes holiday debt. But look at it as a way to show the credit bureaus that you are responsible enough to make these payments on time. Doing so will do wonders for your credit score.</p> <h2>2. Do a Balance Transfer</h2> <p>Make a plan that will determine how long it will take you to pay down your current debt, and find a <a href="http://www.wisebread.com/the-best-0-balance-transfer-credit-cards?ref=internal" target="_blank">0% balance transfer credit card</a> that offers an intro APR for that amount of time. Some credit cards offer as much as 21 months at 0% financing. This can <a href="http://www.wisebread.com/fastest-way-to-pay-off-10000-in-credit-card-debt?ref=internal" target="_blank">save you hundreds to thousands</a> of dollars in interest, and help you pay off the debt faster. Do this only if you have a plan to pay off your debt completely within the intro period. (See also: <a href="http://www.wisebread.com/7-important-things-you-should-know-about-balance-transfer-cards?ref=seealso" target="_blank">What You Need to Know Before Doing a Balance Transfer</a>)</p> <h2>3. Don't Close Unused Credit Cards</h2> <p>If you do pay off a credit card, congratulations! That's a great feeling. But don't close that account, even if you never plan to use your card. Closing unused credit cards will hurt your credit score. That's because of something known as your <a href="http://www.wisebread.com/this-one-ratio-is-the-key-to-a-good-credit-score?ref=internal" target="_blank">credit-utilization ratio</a>. Your score will be higher if you are using less of your available credit. If you close a credit card, you will automatically be lowering the amount of credit available to you and increasing your credit-utilization ratio.</p> <h2>4. Order Your Credit Reports</h2> <p>TransUnion, Equifax, and Experian each keep a credit report on you. These reports list your open credit accounts, including credit cards, mortgages, student loans, and auto loans. They also list how much you owe on these accounts and whether you have made any late payments. The reports also list any bankruptcies that are up to seven or 10 years old, and any foreclosures that are up to seven years old.</p> <p>You can order one report from each of the three credit bureaus at no charge from AnnualCreditReport.com. Do it. Then check over your report for any potential mistakes. If you find errors, notify the offending bureau by email. Correcting mistakes can provide an immediate boost to your credit score. And even if you don't find any errors, it's always good to know exactly what kind of information the bureaus have about you.</p> <h2>5. Make a Household Budget</h2> <p>If you want to avoid overspending again next year, and avoid running up the kind of credit card debt that can hurt your credit score, draft a household budget <em>this</em> year. A budget doesn't have to be complicated to be effective. List your monthly revenues and your monthly expenses. Be honest about what you typically spend on items that can fluctuate each month, such as groceries, dining out, and entertainment.</p> <p>Once you have these numbers, you can budget how much you want to spend throughout the year on gifts, decorations, and food for all of the big holidays, not just those that roll around each December. Armed with a budget, your odds of not overspending will increase.</p> <p>Now that the holiday season is over, it's time to change your charging habits. Only charge what you can pay off in full each month. If you want to charge a flat-screen TV, make sure you have enough money saved up to pay it off in full when your next credit card statement comes due.</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/5-after-the-holidays-moves-your-credit-score-will-thank-you-for">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/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-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/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/5-money-moves-to-make-before-moving-out-on-your-own">5 Money Moves to Make Before Moving Out on Your Own</a></span> </div> </li> </ul> </div> </div> </div> </div><br/></br> Personal Finance Budgeting back on track bills building credit credit history credit repair credit score debt repayment post holidays Thu, 22 Dec 2016 10:00:10 +0000 Dan Rafter 1859598 at http://www.wisebread.com Why You Shouldn't Panic If Your Credit Score Drops http://www.wisebread.com/why-you-shouldnt-panic-if-your-credit-score-drops <div class="field field-type-filefield field-field-blog-image"> <div class="field-items"> <div class="field-item odd"> <a href="/why-you-shouldnt-panic-if-your-credit-score-drops" 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_bills_183361464.jpg" alt="Woman learning not to panic after a credit score drop" title="" class="imagecache imagecache-250w" width="250" height="140" /></a> </div> </div> </div> <p>Credit scores matter &mdash; in a big way. Mortgage lenders rely on these numbers to determine who qualifies for home loans and at what interest rates. You'll struggle to <a href="http://www.wisebread.com/5-best-credit-cards-for-people-with-excellent-credit?ref=internal">qualify for the best credit cards</a> if your score is too low. And getting an auto loan? A low score will leave you again with higher interest rates, if you can find financing at all.</p> <p>So what if your credit score takes a fall? First, don't panic. Second, it's time to take the steps necessary to <a href="http://www.wisebread.com/how-to-rebuild-your-credit-in-8-simple-steps?ref=internal">boost your score</a>.</p> <h2>How Scores Work</h2> <p>Before panicking over a credit score drop, it's important to learn how scores work.</p> <p>The most important credit score is your FICO credit score. Generally, lenders consider a FICO score of 740 or more to be in the top range. But if your score is under 640, you'll struggle to qualify for mortgage or auto loans. And when you do qualify, you'll pay high interest rates because lenders view you as a risky borrower.</p> <p>Your credit score is a quick representation of how well you've handled your credit in the past. If you have a history of mailing in credit card payments late, your score will fall. If you've missed payments on your auto loan in the recent past, your score will, again, take a tumble. A large amount of credit card debt could hurt your score, too. (See also: <a href="http://www.wisebread.com/this-one-ratio-is-the-key-to-a-good-credit-score?ref=seealso">The Most Important Ratio That Determines Your Credit Score</a>)</p> <p>If you instead have a history of paying your bills on time and have a manageable amount of credit card debt, you should have a solid FICO credit score.</p> <h2>Checking Your Score</h2> <p>You can order one free copy of each of your three credit reports &mdash; maintained by the national credit bureaus of TransUnion, Experian, and Equifax &mdash; each year from AnnualCreditReport.com. This report will list your credit card, auto, mortgage, and other open accounts. It will also list any of your missed or late payments from the last seven years.</p> <p>This is important information to have: It can tell you quickly why your credit score might be lower than you thought. A single missed or late payment can drop your credit score by more than 100 points.</p> <p>But a credit report doesn't list your credit score. To get your score, you'll usually have to pay. You can spend about $15 to order your FICO credit score from Experian, Equifax, or TransUnion. Each of the scores from these credit bureaus might be slightly different, but they should all be fairly similar.</p> <p>Your credit card provider might <a href="http://www.wisebread.com/the-5-best-credit-cards-that-offer-free-credit-scores?ref=internal">provide your credit score</a> with each bill it sends you, too. A growing number of card providers are doing this. Be careful, though: This score might not be your official FICO score, but instead an alternative score. These alternative scores do generally sync up with what your actual FICO score might be, but it's best to order your FICO score if you want to see the same credit score that mortgage and auto lenders will see.</p> <h2>If Your Score Has Dropped</h2> <p>What if your score has taken a fall since the last time you reviewed it? What if it's much lower than you expected?</p> <p>Again, this is not the time to panic. It's the time to act.</p> <p>First, try to determine <a href="http://www.wisebread.com/10-surprising-ways-to-negatively-affect-your-credit-score?ref=internal">why your score might have fallen</a>. Some reasons are obvious: If you forgot to pay your auto loan earlier this year or if you sent in a credit card payment more than 30 days late, your score could dip by 100 points or more. But smaller dips &mdash; ranging from 10 to 60 points or so &mdash; can be the result of less obvious financial missteps.</p> <p>Did you close a credit card lately? You might think that's a smart financial move. After all, once you've paid off a credit card account, you don't want to run up its balance again. By closing it, that can't happen.</p> <p>But closing a credit card can ruin something called your <em>credit utilization ratio</em>. This ratio measures how much of your available credit you are using at any one time. Using too much of your available credit can cause your FICO score to fall. Closing an open credit card account can immediately weaken this ratio. (See also: <a href="http://www.wisebread.com/5-times-its-okay-to-close-a-credit-card?ref=seealso">5 Times It's Okay to Close a Credit Card</a>)</p> <p>Here's an example: Say you have three credit cards all with an available credit limit of $3,000. This gives you a total available credit of $9,000. Say you also have $3,000 worth of credit card debt. You are now using 33% of your available credit.</p> <p>If you close one of those cards, you'll immediately lower the amount of credit available to you by $3,000, from $9,000 to $6,000. If you have the same $3,000 of credit card debt, you are now using 50% of your available credit, for a significantly higher credit utilization ratio.</p> <p>Another reason for a sudden fall in your FICO credit score: Have you been applying for several new credit cards? If you are, your score can fall. Every time you apply for a new form of credit, something called an <em>inquiry </em>is filed on your credit report. Each inquiry can cause your credit score to fall by a small amount, maybe one to five points. If you make several inquiries for new credit at the same time, this can cause a bigger drop to your score.</p> <p>The good news is that inquiries don't always hurt your score by much. Say you are ready to apply for a mortgage loan and you are shopping around with different mortgage lenders. Each of these lenders will run a credit check on you. Each of the inquiries that these lenders make, though, will be counted as just one total inquiry. That's because you are applying for one mortgage loan, not several new credit cards.</p> <h2>Fixing a Drop</h2> <p>Once you determine why your credit score has fallen, it's time to fix the problem.</p> <p>Realize, though, that if your score has fallen significantly from a missed or late payment, it will take time to recover. Pay your bills on time and cut back on your credit card debt. Do this for a long enough period of time &mdash; several months, maybe a year or longer &mdash; and your FICO credit score will steadily improve. (See also: <a href="http://www.wisebread.com/7-ways-to-increase-your-credit-score-quickly?ref=seealso">How to Improve Your Credit Score Quickly</a>)</p> <p>If your score has fallen by a smaller amount, say 10 to 50 points, your recovery period will be shorter. Often, these drops will fix themselves. Pay down a good chunk of your credit card debt &mdash; without closing any credit card accounts &mdash; and your score should improve. Keep paying your bills on time every month, and, again, your score will rise.</p> <p>There are no quick fixes for drops in your credit score. But there are also no scores that can't be rebuilt. All it requires is patience, a willingness to <a href="http://www.wisebread.com/fastest-way-to-pay-off-10000-in-credit-card-debt?ref=internal">pay down large amounts of credit card debt</a> and a vow to pay all of your bills on time every month.</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/why-you-shouldnt-panic-if-your-credit-score-drops">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-4"> <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/why-the-age-of-your-credit-history-matters">Why the Age of Your Credit History Matters</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-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-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/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/how-to-protect-yourself-from-predatory-lending">How to Protect Yourself From Predatory Lending</a></span> </div> </li> </ul> </div> </div> </div> </div><br/></br> Personal Finance credit history credit score FICO score interest rates loans qualifying Thu, 15 Dec 2016 10:00:09 +0000 Dan Rafter 1852821 at http://www.wisebread.com 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>After getting burned with credit cards and loans, the first thing you want to do is swear them off completely. But wait.&nbsp;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. You'll 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. So once you've done the smart thing and paid off all your debt, pick one or two <a href="http://www.wisebread.com/top-5-travel-reward-credit-cards?ref=internal">credit cards with solid rewards</a>, use it to pay for stuff you meant to buy, and pay it off entirely when the bill is due. That will keep your credit active, healthy, and you'll get a few bucks back from your <a href="http://www.wisebread.com/5-best-cash-back-credit-cards?ref=internal">cash rewards credit cards</a>, too. (See also: <a href="http://www.wisebread.com/the-best-5-credit-cards-for-groceries?ref=seealso">Use These Credit Cards When You Grocery Shop</a>)</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-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/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-after-the-holidays-moves-your-credit-score-will-thank-you-for">5 After the Holidays Moves Your Credit Score Will Thank You For</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/why-the-age-of-your-credit-history-matters">Why the Age of Your Credit History Matters</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-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-5 views-row-odd views-row-last"> <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> </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-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/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/why-the-age-of-your-credit-history-matters">Why the Age of Your Credit History Matters</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-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-4 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-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-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/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/why-the-age-of-your-credit-history-matters">Why the Age of Your Credit History Matters</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/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/7-ways-to-lower-your-credit-card-interest-rate">7 Ways to Lower Your Credit Card Interest Rate</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-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/why-the-age-of-your-credit-history-matters">Why the Age of Your Credit History Matters</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/why-you-shouldnt-panic-if-your-credit-score-drops">Why You Shouldn&#039;t Panic If Your Credit Score Drops</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-to-protect-yourself-from-predatory-lending">How to Protect Yourself From Predatory Lending</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/best-of-personal-finance-credit-where-credit-is-due-edition">Best of Personal Finance: Credit Where Credit Is Due Edition</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/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-4 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-5 views-row-odd views-row-last"> <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> </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-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/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/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-3 views-row-odd"> <div class="views-field-title"> <span class="field-content"><a href="http://www.wisebread.com/why-you-shouldnt-panic-if-your-credit-score-drops">Why You Shouldn&#039;t Panic If Your Credit Score Drops</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/15-personal-finance-calculators-everyone-should-use">15 Personal Finance Calculators Everyone Should Use</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/why-the-age-of-your-credit-history-matters">Why the Age of Your Credit History Matters</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-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/6-secured-credit-card-facts-to-remember">6 Secured Credit Card Facts to Remember</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/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-4 views-row-even"> <div class="views-field-title"> <span class="field-content"><a href="http://www.wisebread.com/5-after-the-holidays-moves-your-credit-score-will-thank-you-for">5 After the Holidays Moves Your Credit Score Will Thank You For</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> 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-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/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/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-3 views-row-odd"> <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-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/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> </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