credit score http://www.wisebread.com/taxonomy/term/8451/all en-US All the Ways Minimum Payments Are Evil http://www.wisebread.com/all-the-ways-minimum-payments-are-evil <div class="field field-type-filefield field-field-blog-image"> <div class="field-items"> <div class="field-item odd"> <a href="/all-the-ways-minimum-payments-are-evil" class="imagecache imagecache-250w imagecache-linked imagecache-250w_linked"><img src="http://wisebread.killeracesmedia.netdna-cdn.com/files/fruganomics/imagecache/250w/blog-images/man_laptop_credit_card_88164697.jpg" alt="Man learning ways minimum payments are evil" title="" class="imagecache imagecache-250w" width="250" height="140" /></a> </div> </div> </div> <p>Anyone who has a credit card is familiar with minimum payments. Most credit cards don't require cardholders to pay off their balances in full every month, but they <em>do</em> require cardholders to pay some minimum amount. This can be as low as 2% to 3% of the outstanding balance, or a minimum of $25 or $35 &mdash; whichever is higher.</p> <p>While paying the minimum technically keeps your account in good standing, there are negative consequences to this decision. Here are five reasons why minimum payments are evil and should be avoided.</p> <h2>They Keep You in Debt</h2> <p>Minimum payments may keep your credit card bills affordable, but you have to consider the big picture. In the end, minimum payments don't benefit your bottom line &mdash; they benefit your credit card company.</p> <p>The truth is, minimum payments are a sneaky trick designed to keep you a slave to credit card debt. The longer you keep a balance on your cards, the more money your creditors earns off you. If you only pay your minimums every month, you'll carry your balances for years to come. For example, if you have a credit card with a $2,000 balance and 17% interest rate, and you only make minimum payments each month (2% of your balance), it will take you <em>over 21 years</em> to pay it off. You'd have paid over $3500 in interest alone &mdash; and that's if you don't put additional purchases on the card.</p> <p>That may seem like a shock, but that's exactly why the minimum payment schedule was designed. Because they're taking a <em>percentage</em> of your balance, every month, the minimum payment required goes down. That does two things &mdash; encourages you to pay <em>less</em> so that you keep the balance longer, and it also tricks you into thinking that you're actually making progress paying off your debt. If you see that your payments are getting lower, you feel like your debt is getting smaller too. But you're actually hardly chipping away at the debt at all.</p> <p>If on the other hand, you pay $50 per month, it will take you five years to pay it off, with about $970 in interest. That's a huge difference compared to 21 years and $3500 in interest. Every little bit of extra you can put into your credit card debt will significantly cut down on your repayment time.</p> <p>If you can make reasonable plan and keep to your budget, a <a href="http://www.wisebread.com/when-to-do-a-balance-transfer-to-pay-off-credit-card-debt?utm_source=wisebread&amp;utm_medium=internal&amp;utm_campaign=cc_article">balance transfer will put a pause on interest payments</a> and help you <a href="http://www.wisebread.com/fastest-way-to-pay-off-10000-in-credit-card-debt?utm_source=wisebread&amp;utm_medium=internal&amp;utm_campaign=cc_article">pay off debt faster</a>.</p> <h2>Purchases Become More Expensive</h2> <p>Credit cards might be convenient, but they're also costly &mdash; and unfortunately, if you carry a balance from month-to-month and only make the minimum payment, you end up spending much more for every purchase made with the card. And once you leave a balance on your card, the grace period disappears and you immediately start accruing interest the moment you make your purchase. Grace periods are only active if there is no outstanding balance. (See also: <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=seealso&amp;utm_campaign=cc_article">Everything You Didn't Know About Credit Card Interest and Grace Periods</a>)</p> <p>If you have to make a large purchase, you can get a card with a <a href="http://www.wisebread.com/5-best-credit-cards-with-0-apr-for-purchases?utm_source=wisebread&amp;utm_medium=internal&amp;utm_campaign=cc_article">0% introductory APR on purchases</a>. For a certain period, no interest is charged on your outstanding balance. This gives you time to pay off the purchase without interest. However, once the intro period is over, the regular APR will kick in. It's important to only use that opportunity if you know you can pay off the balance during the introductory APR time period.</p> <h2>Your Credit Score Can Suffer</h2> <p>In my younger days, I thought as long as I paid my minimum payments on time, my credit score was protected. I was young and dumb and didn't realize how other factors impact credit scoring.</p> <p>Paying only the minimum may not have a direct negative impact on your score, but it doesn't exactly help it, either. A high credit card balance can result in a higher <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">credit utilization ratio</a>, which is the percentage of outstanding debt in comparison to your available credit line. Credit utilization is the second biggest factor making up your credit score, and if your credit card balances exceed 30% of your available credit, your score will take a hit.</p> <p>You can lower your credit utilization ratio &mdash; and subsequently improve your credit score &mdash; by paying more than your minimums every month. Minimum payments are just that &mdash; minimums. Even if you only double or triple your minimum, this will chip away at what you owe and reduce how much you pay in interest significantly.</p> <h2>It Affects Other Areas of Your Financial Life</h2> <p>Paying only the minimum might not seem like a big deal, until you realize how this decision can impact other areas of your financial life. If you're only making your minimum and carrying a high balance on a credit card &mdash; resulting in a lower credit score &mdash; this affects the ability to get other types of financing. If you apply for a mortgage or an auto loan, lenders will take one look at your high balances and low score and consider you a risky applicant. There's a chance you won't qualify for some loans, or the bank might not offer favorable terms.</p> <h2>Minimum Payments Can Increase</h2> <p>Another problem with minimum payments is that they aren't carved in stone. Credit cards are a revolving type of credit account. As your balance goes up, so does the amount you owe. Your minimum payments might be manageable today. But if you continue to charge to your account and don't make any efforts to significantly decrease the balance, your minimum payments can increase. If you're already struggling with your budget just to meet the minimum payments, the most important thing is to sit down and make a <a href="http://www.wisebread.com/5-day-debt-reduction-plan-stop-waiting-for-tomorrow?utm_source=wisebread&amp;utm_medium=internal&amp;utm_campaign=cc_article">debt repayment plan</a>. Otherwise, you'll be stuck in this cycle of debt for generations.</p> <p><em>Do you pay the minimums on your credit cards?</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/all-the-ways-minimum-payments-are-evil">Wise Bread</a>, an award-winning personal finance and <a href="http://www.wisebread.com/credit-cards">credit card comparison</a> website. Read more great articles from Wise Bread:</div><div class="view view-similarterms view-id-similarterms view-display-id-block_2 view-dom-id-1"> <div class="view-content"> <div class="item-list"> <ul> <li class="views-row views-row-1 views-row-odd views-row-first"> <div class="views-field-title"> <span class="field-content"><a href="http://www.wisebread.com/avoid-these-5-common-mistakes-while-rebuilding-your-credit">Avoid These 5 Common Mistakes While Rebuilding Your Credit</a></span> </div> </li> <li class="views-row views-row-2 views-row-even"> <div class="views-field-title"> <span class="field-content"><a href="http://www.wisebread.com/the-dirty-secrets-of-credit-cards">The Dirty Secrets of 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/7-ways-being-debt-free-can-cost-you">7 Ways Being Debt Free Can Cost You</a></span> </div> </li> <li class="views-row views-row-4 views-row-even"> <div class="views-field-title"> <span class="field-content"><a href="http://www.wisebread.com/is-a-balance-transfer-offer-a-good-deal">Is a Balance Transfer Offer a Good 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/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> Debt Management APR credit score credit utilization ratio interest rates minimum payments Fri, 22 Jul 2016 09:00:05 +0000 Mikey Rox 1756968 at http://www.wisebread.com 7 Money Moves to Make as Soon as You Conquer Debt http://www.wisebread.com/7-money-moves-to-make-as-soon-as-you-conquer-debt <div class="field field-type-filefield field-field-blog-image"> <div class="field-items"> <div class="field-item odd"> <a href="/7-money-moves-to-make-as-soon-as-you-conquer-debt" 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_sunset_79384959.jpg" alt="Woman making moves after conquering debt" title="" class="imagecache imagecache-250w" width="250" height="140" /></a> </div> </div> </div> <p>Congratulations &mdash; you're debt free! Now what?</p> <p>The road to debt elimination was long and treacherous, but just because the black cloud of lingering bills is no longer hanging over your head, that doesn't mean your financial house is in order. It's in better shape, sure, but you've still got a ways to go. To continue working toward that goal, here are a few smart moves you should make as soon as you get out of the red:</p> <h2>1. Rearrange and Trim Your Budget</h2> <p>Your top priority when getting out of debt is to not get back into debt. To accomplish that, you'll need to make changes to your spending and savings habits. You'll also need to revisit your budget and rearrange your priorities. Now that you don't have credit card or loan payments bleeding you dry every month, you'll have more disposable income &mdash; and you need to decide what you'll do with it to improve your quality of life and set yourself up for the future. Cut out anything that's unnecessary: Maybe it's the cable that you don't watch much of, the gym membership you don't use, or subscriptions to services you can live without. Whatever is it, cut the fat and don't look back.</p> <h2>2. Get Back to Building Your Emergency Fund</h2> <p>If you've been digging yourself out of a negative-money pit, chances are you don't have much of an emergency fund &mdash; and that needs to change ASAP. Building an emergency fund is the best way to avoid a potential debt scenario in the future. You'll be able to draw from that account to pay off life's little surprises in full, so you're not constantly treading water every time something unexpected happens.</p> <p>&quot;I recommend having an emergency fund saved up equal to six months' worth of expenses,&quot; says financial planner Russell Robertson of Alidade Wealth Partners in Atlanta, GA. &quot;This will give you time to get back on your feet if something unforeseen happens without completely disrupting everything in your life.&quot;</p> <h2>3. Check in on Your Credit Situation</h2> <p>Brace yourself. If you've been battling debt for an extended period of time &mdash; especially if you've only being sending in minimum payments &mdash; your credit situation is likely less than ideal. The good news, however, is that you're in the clear now (debt-wise, anyway), and this is the best time to <a href="http://www.wisebread.com/what-does-your-credit-score-mean-good-bad-or-excellent?ref=internal">start rebuilding your credit</a>.</p> <p>Having a solid credit score puts you in a strong position when you need to finance a purchase, like a house or car, or apply for a new line of credit. It's always a good idea to know where you stand with credit and take steps to improve it.</p> <h2>4. Max Out Your Matching-Dollar Opportunities for Retirement</h2> <p>Like your emergency fund, contributions to your 401K and IRA were probably low (or perhaps even nonexistent) while you concentrated on paying down your debt. With more funds freed up now, it's important to start concentrating on your future &mdash; especially your retirement goals &mdash; and that includes maxing out dollar-matching opportunities to take full advantage of free money.</p> <p>&quot;401K plans in 2016 have a contribution limit of $18,000 a year, plus an extra $6,000 for people over 50, so with no debt to pay, you might have the opportunity to reach that limit now,&quot; says financial planner and investment adviser Jaycob Arbogast of Arbogast Advisers. &quot;Similarly, an IRA has a $5,500 limit for people under 50 and a $6,500 limit for people 50-plus, so maxing out those plans might be a good idea too. For example, with a 6% return, adding an extra $5,000 each year to your retirement savings from age 50 to 60 could add an additional $65,000 to your retirement savings. That's a great boost that someone in debt might not be able to maintain.&quot;</p> <h2>5. Start Investing With Long-Term Returns in Mind</h2> <p>Personally, I recommend investing in real estate, but what you invest in is up to you, so long as you're investing. Outside of your emergency fund, your money should never sit in a savings account earning fractions of pennies. Instead, you'll be better off putting that money in places that promise bigger returns over the long term, so you can meet your savings goals sooner and continue making more investments for (hopefully) a more prosperous life.</p> <p>Alternatively, Robertson recommends the stock market.</p> <p>&quot;If your budget still has room for more saving, put that money to work by investing in the markets,&quot; he advises. &quot;Exchange-traded funds (ETFs) are a great way to get diversified, low-cost exposure, and many online brokerages will offer commission-free ETF options as well.&quot;</p> <h2>6. Put Money Back Into the Investments You Already Have &mdash; Like Your Home</h2> <p>For many people, their homes are their biggest investments. To ensure that investment pays off the way you want and need it to, you have to maintain it. Thus, when you've paid off your debt, start thinking about home improvement projects that will increase value. Just be careful that you're not taking on projects that cost more than the house is worth. The last thing you need is to dump your savings into your home if the project doesn't enhance the house enough to make it worthwhile in the long run.</p> <h2>7. Open a Money Market Account for Higher Interest on Savings</h2> <p>If you have a substantial amount of savings in your emergency fund &mdash; and you should &mdash; that money shouldn't be in a traditional savings account. Contact your bank, or research others, to find savings accounts that offer the best interest rates, like money market accounts or high yield savings. Bottom line, there's absolutely no reason you shouldn't be getting the most bank for your buck, especially where savings are concerned.</p> <p>Robertson agrees, and in this particular case, rescinds his recommendation to invest in stocks.</p> <p>&quot;If there is something specific you are saving up for &mdash; a celebratory trip to Europe? A wedding? &mdash; within the next two to three years, I would recommend keeping that money out of the stock market,&quot; he says. &quot;Instead, consider a money market account or CD from an online bank. In many cases you can get close to 1% interest right now on cash that is still guaranteed up to FDIC limits (currently $250,000). In fact, this is a good idea for that emergency fund as well &mdash; something that earns interest and is separate from your everyday checking account.&quot;</p> <p><em>What else should the newly debt-free do with their money?</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/7-money-moves-to-make-as-soon-as-you-conquer-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-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/the-10-biggest-myths-about-investing">The 10 Biggest Myths About Investing</a></span> </div> </li> <li class="views-row views-row-2 views-row-even"> <div class="views-field-title"> <span class="field-content"><a href="http://www.wisebread.com/should-you-pay-down-debt-first-or-invest">Should You Pay Down Debt First or Invest?</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/401k-or-ira-you-need-both">401K or IRA? You Need Both</a></span> </div> </li> <li class="views-row views-row-4 views-row-even"> <div class="views-field-title"> <span class="field-content"><a href="http://www.wisebread.com/best-online-sites-for-building-wealth">Best Online Sites for Building Wealth</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/are-you-making-the-biggest-investment-risk-of-all">Are You Making the Biggest Investment Risk of All?</a></span> </div> </li> </ul> </div> </div> </div> </div><br/></br> Budgeting Debt Management Investment 401k advice credit score emergency funds ETFs home improvements IRA money moves retirement stock market Fri, 15 Jul 2016 09:00:17 +0000 Mikey Rox 1752364 at http://www.wisebread.com 6 Money Moves to Make the Moment You Decide to Buy a Car http://www.wisebread.com/6-money-moves-to-make-the-moment-you-decide-to-buy-a-car <div class="field field-type-filefield field-field-blog-image"> <div class="field-items"> <div class="field-item odd"> <a href="/6-money-moves-to-make-the-moment-you-decide-to-buy-a-car" class="imagecache imagecache-250w imagecache-linked imagecache-250w_linked"><img src="http://wisebread.killeracesmedia.netdna-cdn.com/files/fruganomics/imagecache/250w/blog-images/couple_new_car_87292815.jpg" alt="Couple making money moves before buying a new car" title="" class="imagecache imagecache-250w" width="250" height="140" /></a> </div> </div> </div> <p>The beater you are driving now spends more time in the repair shop than on the highway. Or maybe you're sick of trying to time bus schedules or schedule Uber rides. Whatever the reason, it's time to upgrade to a new set of wheels.</p> <p>Unfortunately for most people, a new car comes with a new monthly auto loan payment. And these payments can be high. Kelley Blue Book reported that the estimated average transaction price for new cars hit $33,845 in May 2016. That's an increase of 3.5% from the same month in 2015.</p> <p>Fortunately, you can prepare for this added cost, and all it takes is a bit of research and planning on your part. Here are six money moves to make the instant you decide to buy a new car.</p> <h2>1. Check Your Credit Reports</h2> <p>You want an auto loan with the lowest possible interest rate, so that your monthly payment is as small as possible. And of course, you'll qualify for lower rates if you have strong credit.</p> <p>But before you start shopping for a new car, check your three credit reports (one each maintained by the national credit bureaus of Experian, Equifax, and TransUnion). You can order one copy of each of your reports free from AnnualCreditReport.com. Check carefully for any mistakes &mdash; fixing a mistake could immediately improve your FICO credit score.</p> <p>Knowing the information that the credit bureaus have on you and what your credit score is will give you an idea of whether you can qualify for a low interest rate now, or whether you should work to improve your score before you start hunting for a new car.</p> <h2>2. Call Your Insurance Company</h2> <p>If you are ditching an old car and upgrading to a new one, your auto insurance premium might rise. If you are buying a car for the first time, you'll need to purchase auto insurance before you can hit the road. And you'll need to know, for budgeting reasons, just how much you might expect to pay in auto insurance premiums.</p> <p>Your premium will vary depending on a host of factors, including everything from your age and driving record to the type of car you buy and where you live. So call either your current insurance agent or, if you aren't yet driving, an insurer licensed to do business in your area to get at least an estimate of how much you'll be paying each month or year in insurance costs.</p> <h2>3. Tweak Your Household Budget</h2> <p>You should have a household budget that you follow each month. Adding a new car payment means that you need to tweak that budget. Study your current budget to determine how much of a car payment you can afford. When you start shopping for cars, don't look at any that will leave you with a monthly payment that exceeds that amount. Having a new car is fun. Having a new car that you can't afford is not.</p> <h2>4. Pre-Apply for Financing</h2> <p>When you buy a new car, the dealer will offer you its own financing plan, meaning that you can take out a car loan directly from the dealership that is selling you your vehicle. But the smarter move is to go to your dealership with a preapproval letter from an outside lender.</p> <p>A preapproval letter states that a lender is willing to provide you with an auto loan. The letter will also state exactly how much money this outside lender is willing to loan you.</p> <p>It's good to have another loan option when you're at the dealership. The dealer will still want you to take out a loan from its own finance department, so the dealer might offer you a loan with slightly better terms, including a lower interest rate, as a way to compete. And if your dealer can't come up with a better offer? You can simply finalize that loan from the outside lender.</p> <h2>5. Gather Money for a Down Payment</h2> <p>You'll want to come up with the largest down payment possible when financing a new car. The more cash you provide upfront, the smaller your auto loan will be. And a smaller loan means lower monthly payments.</p> <p>So before shopping for a car, spend some time saving. It's long been recommended that consumers come up with a down payment of 20% of their car's final purchase price. For a car costing $25,000, that comes out to a down payment of $5,000. However, a smaller number of buyers today are actually providing that 20% down. Edmunds reports that consumers in 2015 provided an average down payment of just 10.5% of their car's final purchase price.</p> <p>Don't be one of those consumers who skimps on the down payment. Wait to buy until you've saved up enough cash for a bigger one.</p> <h2>6. Build an Emergency Fund</h2> <p>New cars come with a host of new expenses in addition to that monthly car payment. You'll face insurance costs, gas prices, and repair and maintenance bills. AAA estimates that the annual cost of owning and operating a vehicle in the United States is $8,558. That is actually a six-year low, but shows that owning a car is far from cheap.</p> <p>Make sure that you can afford these extra costs by building an emergency fund <em>before</em> you start car shopping. It's a sounder financial strategy than paying for such unforeseen events as car repairs or emergency home repairs with a credit card.</p> <p><em>What steps do you take when it's time for a new car?</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/6-money-moves-to-make-the-moment-you-decide-to-buy-a-car">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/5-ways-having-a-paid-off-car-is-surprisingly-great">5 Ways Having a Paid Off Car Is Surprisingly Great</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/7-money-moves-to-make-as-soon-as-you-conquer-debt">7 Money Moves to Make as Soon as You Conquer Debt</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-self-employed-persons-guide-to-getting-credit">The Self-Employed Person&#039;s Guide to Getting 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/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/should-you-hire-a-broker-to-buy-a-car">Should You Hire a Broker to Buy a Car?</a></span> </div> </li> </ul> </div> </div> </div> </div><br/></br> Cars and Transportation auto loans budgets credit reports credit score down payments emergency funds financing insurance new car Wed, 13 Jul 2016 10:30:08 +0000 Dan Rafter 1748332 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-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/this-one-ratio-is-the-key-to-a-good-credit-score">This One Ratio Is the Key to a Good Credit Score</a></span> </div> </li> <li class="views-row views-row-2 views-row-even"> <div class="views-field-title"> <span class="field-content"><a href="http://www.wisebread.com/building-a-credit-history">Building a Credit History</a></span> </div> </li> <li class="views-row views-row-3 views-row-odd"> <div class="views-field-title"> <span class="field-content"><a href="http://www.wisebread.com/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-4 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-5 views-row-odd views-row-last"> <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> </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 6 Moves to Make Before Cutting Up Your Credit Card http://www.wisebread.com/6-moves-to-make-before-cutting-up-your-credit-card <div class="field field-type-filefield field-field-blog-image"> <div class="field-items"> <div class="field-item odd"> <a href="/6-moves-to-make-before-cutting-up-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/cut_credit_card_39755818.jpg" alt="Making moves before cutting up your credit card" title="" class="imagecache imagecache-250w" width="250" height="140" /></a> </div> </div> </div> <p>Credit card debt got you down? Before you reach for the scissors to cut that plastic in half, consider taking these six steps.</p> <h2>1. Consolidate Your Debt Into a Lower Interest Rate</h2> <p>The first question to ask yourself when contemplating a breakup with your credit cards is &quot;Why?&quot; If it's because you've racked up too much debt &mdash; and that's usually the case, isn't it? &mdash; there are ways to alleviate some of that pain in the short term. You can consider balance transfer <a href="http://www.wisebread.com/the-best-0-balance-transfer-credit-cards?utm_source=wisebread&amp;utm_medium=internal&amp;utm_campaign=cc_article">credit cards with introductory 0% interest rates</a>, or <a href="http://www.wisebread.com/the-best-low-interest-rate-credit-cards?utm_source=wisebread&amp;utm_medium=internal&amp;utm_campaign=cc_article">low interest credit cards</a> (they're out there if you look hard enough). If you are a homeowner with a mortgage, when you refinance your mortgage, you may be able to get a much lower mortgage rate. (See also: <a href="http://www.wisebread.com/when-to-do-a-balance-transfer-to-pay-off-credit-card-debt?utm_source=wisebread&amp;utm_medium=internal&amp;utm_campaign=cc_article">When Should You Do A Balance Transfer to Pay Off Your Credit Cards</a>)</p> <h2>2. Continue Using the Cards &mdash; Sparingly</h2> <p>Continuing to use your cards if you're susceptible to impulse buys may not be the best option, but if you can exhibit self-control, it's in your financial interest to keep using the cards regularly. Only charge small amounts that you can pay off immediately.</p> <p>&quot;If you're looking to take the first step in rebuilding a credit profile once you've paid off a balance, then hold onto your cards and make a minor purchase each month and pay it off entirely the next month,&quot; says Mike Catania, a consumer finances expert. &quot;Once you've done this on your cards for a year, then you can safely start closing one per year.&quot;</p> <h2>3. Keep the Account Open</h2> <p>An impetuous move when frustrated with your credit situation might be to close the account. Out of sight, out of mind, right? That's true, especially if you have zero access to it; the temptation is gone if there's no active account. But if you have a lot of debt on your credit cards, you don't want to suddenly reduce the amount of available credit you have. Your credit utilization ratio will shoot up, and it will <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">negatively impact your credit score</a>.</p> <p>&quot;One factor that could result in an immediate impact on your credit score when canceling a credit card is your credit utilization,&quot; warns credit expert Nicole Laoutaris. &quot;To maintain a good credit score, it is wise to utilize a maximum 35% of your available credit at any given time. For example, if you have two credit cards, both with a $10,000 credit limit, and between the two have a $6,000 balance, then your credit utilization is 30% ($6,000/$20,000). If you decided to do a balance transfer and cancel one of your credit cards, your credit utilization would rise to 60% ($6,000/$10,000); this is the main way in which canceling a credit card can affect your credit score.&quot;</p> <h2>4. Pay Off Any Lingering Balance</h2> <p>Check to see if you still have a balance on the card. Sometimes, when people cut up their credit card, they forget about it altogether. If you have an owing balance, you'll want to pay it off before you forget about it completely. You don't want it sent to collections because you tried to discipline yourself. Or, if you can't eliminate it all in one fell swoop, setup monthly reminders for yourself to pay it off.</p> <h2>5. Work Backward to Delete Traces of the Card</h2> <p>Ensure that your old card's information isn't stored anywhere online, especially at your favorite retailers. Just because the physical card is destroyed, doesn't mean you can't use it. If you're still planning to use this card for certain online bills, take note of them and incorporate these expenses into your budget.</p> <h2>6. Commit Yourself to Positive Financial Accountability</h2> <p>Prevent cutting up your credit card by forcing yourself to be more mindful with your money. I had credit cards in my late teens and early 20s that got me into a lot of trouble. I swore off them in my mid-20s to separate myself from the temptation, but when I felt equipped to adequately handle the responsibility again, I started opening new accounts as I approached my 30s. Know your limits, and hold yourself accountable.</p> <p>&quot;Many times, people in debt like to live in denial and not check their card balances, look at receipts, etc.,&quot; Laoutaris says. &quot;Using an app like Mint is great because it shows you exactly what your cash inflow versus cash outflow is. It's also great at tracking where you're spending your money.&quot; (See also: <a href="http://www.wisebread.com/5-day-debt-reduction-plan-stop-waiting-for-tomorrow?utm_source=wisebread&amp;utm_medium=seealso&amp;utm_campaign=cc_article">5 Day Debt Reduction Plan</a>)</p> <p><em>Have you ever cut up a credit card? Did it solve your credit woes?</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/6-moves-to-make-before-cutting-up-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-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/7-ways-to-lower-your-credit-card-interest-rate">7 Ways to Lower Your Credit Card Interest Rate</a></span> </div> </li> <li class="views-row views-row-2 views-row-even"> <div class="views-field-title"> <span class="field-content"><a href="http://www.wisebread.com/what-to-expect-when-youre-expecting-a-huge-credit-card-bill">What to Expect When You&#039;re Expecting a Huge Credit Card Bill</a></span> </div> </li> <li class="views-row views-row-3 views-row-odd"> <div class="views-field-title"> <span class="field-content"><a href="http://www.wisebread.com/the-7-debt-payoffs-that-boost-your-credit-score-the-most">The 7 Debt Payoffs That Boost Your Credit Score the Most</a></span> </div> </li> <li class="views-row views-row-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-signs-its-time-to-break-up-with-your-credit-cards">7 Signs It&#039;s Time to Break Up With Your Credit Cards</a></span> </div> </li> </ul> </div> </div> </div> </div><br/></br> Credit Cards balance transfers bills credit score credit utilization cutting up credit cards debt interest rates outstanding balances Tue, 05 Jul 2016 10:30:07 +0000 Mikey Rox 1743326 at http://www.wisebread.com 5 Reasons You Shouldn't Buy a House (Yet) http://www.wisebread.com/5-reasons-you-shouldnt-buy-a-house-yet <div class="field field-type-filefield field-field-blog-image"> <div class="field-items"> <div class="field-item odd"> <a href="/5-reasons-you-shouldnt-buy-a-house-yet" class="imagecache imagecache-250w imagecache-linked imagecache-250w_linked"><img src="http://wisebread.killeracesmedia.netdna-cdn.com/files/fruganomics/imagecache/250w/blog-images/woman_new_house_62322290.jpg" alt="Woman learning reasons she shouldn&#039;t buy a house yet" title="" class="imagecache imagecache-250w" width="250" height="140" /></a> </div> </div> </div> <p>You hate sending that rent check to your landlord every month. The neighbors living above you have a newborn baby that cries all night long. And you dream of planting your own vegetable garden.</p> <p>In short, you're tired of renting and you want to buy your first home. But wanting to buy a home and being ready to do so are two different things. Are you financially ready for the burden of a monthly mortgage payment?</p> <p>Here are five signs that you're not ready to buy a house just yet. But don't fret; even if you are struggling with these financial issues, you can still become a homeowner. You'll just need a bit of patience and improved financial skills.</p> <h2>Sign 1: You Have No Savings</h2> <p>Buying a home is expensive. You'll need money for a down payment. For most mortgage loans, you'll need at least 5% of the home's purchase price. For a home costing $200,000, that comes out to $10,000. If you are buying a home insured by the Federal Housing Administration, better known as an FHA loan, you'll need a down payment of 3.5% of your home's final purchase price, depending on your credit score. For a $200,000 home, that still comes out to a down payment of $7,000.</p> <p>Then there are closing costs, the fees that mortgage lenders, title insurers, and others charge you to originate your mortgage loan. Real estate website Zillow says that these costs can run from 2% to 5% of your total mortgage loan. If you are borrowing $180,000, then your closing costs can run from $3,600 to $9,000.</p> <p>It's true that you can get help with some of these costs. You can use gift money from relatives, for example, to pay for all or part of your down payment. You might be able to convince a home's seller to pay for all or part of the closing costs. But if you don't have any savings built up, lenders might hesitate to lend you mortgage money. They want to make sure that you have reserve funds on hand to cover your mortgage payment for at least two to three months if you should suddenly run into a financial crisis such as a job loss.</p> <h3>What to Do</h3> <p>It's best to start searching for a home only <em>after </em>you've saved enough money to cover a down payment and your estimated closing costs. Most lenders will also want to see enough money in your savings after you've paid closing costs and your down payment to cover at least two months of mortgage payments.</p> <h2>Sign 2: Your Credit Score Is Bad</h2> <p>Your credit score is a key number when you're applying for a mortgage. Lenders pass out their lowest interest rates to borrowers who have FICO credit scores of 740 or higher. But the lower your score, the higher your interest rate &mdash; and your monthly mortgage payment &mdash; will be. If your score is too low, say under 640, you'll struggle to qualify for a loan at all.</p> <h3>What to Do</h3> <p>First, order at least one of your three credit reports from AnnualCreditReport.com. You are entitled to one free copy of each of your three credit reports &mdash; maintained by the national credit bureaus of Experian, Equifax, and TransUnion &mdash; once every year. Once you get your report, read it carefully. It will list how much you owe on your credit cards and how much you owe on student loans and car loans. It will also list whether you have any late or missed payments during the last seven years. Those late or missed payments will send your credit score tumbling.</p> <p>Next, order your FICO credit score. You can do this from the credit bureaus, too, but you'll have to pay about $15 to do so. If your score is low, and there are negative marks on your credit report, it's time to start a new history of paying all your bills on time. You also need to pay down as much of your credit card debt as possible. Both of these actions will steadily increase your credit score, though it could take months or even more than a year before your score recovers enough to make you a good candidate for a mortgage loan.</p> <p>Be patient and wait to apply for that mortgage until your FICO score is over 700.</p> <h2>Sign 3: You Have a Mountain of Credit Card Debt</h2> <p>Your debt-to-income ratio is another key number when it comes to buying a home. Lenders want your total monthly debts, including your estimated new mortgage payment, to equal no more than 43% of your gross monthly income. If your debt-to-income ratio is too high, you'll struggle to earn approval for a mortgage. (See also: <a href="http://www.wisebread.com/5-day-debt-reduction-plan-stop-waiting-for-tomorrow?utm_source=wisebread&amp;utm_medium=seealso&amp;utm_campaign=article">5 Day Debt Reduction Plan</a>)</p> <p>For many potential homebuyers, large amounts of credit card debt are what shoot that debt-to-income levels past 43%.</p> <h3>What to Do</h3> <p>Pay off that credit card debt. Always make more than your minimum monthly required payment. And wait until you've substantially reduced that debt before you add a monthly mortgage payment to your financial responsibilities.</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=article">This Is The Fastest Way to Pay Off Your Credit Card Debt</a></p> <h2>Sign 4: You Routinely Miss Your Monthly Payments</h2> <p>Maybe you have more than enough money each month to pay all your bills on time &mdash; you just routinely forget to pay them. Making late payments, or missing payments completely, is a sure sign that you're not ready for the financial responsibility of owning a home.</p> <p>If you miss a mortgage payment by more than 30 days, your credit score will fall by 100 points or more. If you miss enough, you could lose your home to foreclosure.</p> <h3>What to Do</h3> <p>Learn better financial habits before you apply for a mortgage. Set up reminders on your phone or computer alerting you when bills are due. Or pay those bills as soon as they arrive to make sure you don't forget them. It might makes sense to set up automatic payments through your bank. But don't apply for a mortgage until you've broken the habit of regularly missing your monthly payment due dates.</p> <h2>Sign 5: You Don't Have a Stable Job</h2> <p>You'll need a steady, reliable stream of income if you use a mortgage to finance the purchase of a home. If you're worried that you'll lose your job, or if your income is sky-high one month thanks to overtime and then low the next, you might not be ready to buy a home.</p> <p>Your monthly mortgage payment will become the biggest financial responsibility you have. What happens if you lose your job? What happens if your company goes through a dry spell in which they reduce your income for several months? Would you still be able to afford that monthly payment?</p> <h3>What to Do</h3> <p>Find a job that is reliable and that pays you a stable income each month. Don't take the risk that everything will work out. You don't want missed mortgage payments on your credit reports. And if your job is unstable? You'll greatly increase the risk of these black marks.</p> <p><em>Are you ready to buy a home? What steps are you taking to make it happen?</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/5-reasons-you-shouldnt-buy-a-house-yet">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/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-2 views-row-even"> <div class="views-field-title"> <span class="field-content"><a href="http://www.wisebread.com/the-only-5-rules-of-home-buying-you-need-to-know">The Only 5 Rules of Home Buying You Need to Know</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/whats-faster-for-mortgage-payoff-100-month-extra-or-1-payment-year-extra">What&#039;s Faster for Mortgage Payoff: $100/Month Extra or 1 Payment/Year Extra?</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-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-5 views-row-odd views-row-last"> <div class="views-field-title"> <span class="field-content"><a href="http://www.wisebread.com/ask-yourself-these-5-questions-before-buying-a-home">Ask Yourself These 5 Questions Before Buying a Home</a></span> </div> </li> </ul> </div> </div> </div> </div><br/></br> Real Estate and Housing credit score debt debt to income ratio down payments fha loans homeowners mortgages new home Fri, 17 Jun 2016 10:00:11 +0000 Dan Rafter 1732054 at http://www.wisebread.com Your Bad Credit Isn't the End of the World http://www.wisebread.com/your-bad-credit-isnt-the-end-of-the-world <div class="field field-type-filefield field-field-blog-image"> <div class="field-items"> <div class="field-item odd"> <a href="/your-bad-credit-isnt-the-end-of-the-world" class="imagecache imagecache-250w imagecache-linked imagecache-250w_linked"><img src="http://wisebread.killeracesmedia.netdna-cdn.com/files/fruganomics/imagecache/250w/blog-images/man_stressed_finances_84649523.jpg" alt="Man learning his bad credit isn&#039;t the end of the world" title="" class="imagecache imagecache-250w" width="250" height="140" /></a> </div> </div> </div> <p>Worried about your low FICO credit score? Does your credit card debt keep you awake at night?</p> <p>You're not alone. Money worries plague millions of Americans. According to the <em>Stress in America</em> survey from the American Psychological Association, more than a quarter of U.S. adults say they feel stressed about money most or all of the time. Only 30% rated their financial security as high, while more than two-thirds said that having more money would make them happier.</p> <p>But here's some good news: Yes, bad credit and high credit card debt does add stress to your life. But neither of these financial missteps are unfixable. As long as you face your financial problems and take some simple steps to correct them, you can build a new financially secure future. (See also: <a href="http://www.wisebread.com/topic/5-day-debt-reduction-plan?ref=seealso">5-Day Debt Reduction Plan</a>)</p> <h2>Scary Numbers</h2> <p>Many Americans are struggling with their FICO credit score, that three-digit number that lenders use to determine who qualifies for loans and at what interest rate. According to a 2015 report from the Consumer Financial Protection Bureau, about 45 million U.S. adults had such a limited credit history, that they had no FICO scores.</p> <p>A 2015 report from credit bureau Experian said that nearly a third of U.S. consumers had a credit score under 601. Experian was basing its study on its own credit score, the VantageScore, but consumers who have a bad VantageScore typically have a bad FICO score, too.</p> <p>These numbers mean one thing: Plenty of us are struggling with bad credit and high credit card debt. If you are, too, it's important to realize that there are five easy steps you can take now to help improve your financial health.</p> <h2>Order Your Free Credit Reports</h2> <p>You can order one free copy of each of your credit reports &mdash; the credit bureaus of Experian, Equifax, and TransUnion each maintain a separate report on you &mdash; every year from AnnualCreditReport.com. These reports will list your credit cards and how much you owe on each. They will also list the money you owe on car loans, student loans, and mortgage loans.</p> <p>Credit reports also list any missed or late payments during the last seven years, and will also include any negative judgments, such as bankruptcies or foreclosures, that are up to seven to 10 years old.</p> <p>Be sure to order your reports and check them carefully. Make sure the information in your reports is accurate. If there are errors, such as a missed car payment that you are sure you paid on time, correct them. Doing this can quickly provide a boost to your score.</p> <h2>Pay All Your Bills on Time</h2> <p>Missed or late payments are the most common cause of a weak credit score. Resolve, then, to pay all of your bills on time. As you do this, you will gradually improve your credit score. Just don't expect immediate results. Depending on how low your score is today, it can take months or more than a year to raise it from the &quot;bad&quot; to the &quot;fair&quot; or &quot;good&quot; level.</p> <h2>Pay More Than the Minimum Each Month on Your Credit Cards</h2> <p>High amounts of credit card debt can also result in a bad credit score. Each month, pay off more than the required minimum payment on your cards. As you cut down on your credit card debt, you'll again slowly improve your credit score. You'll also get the bonus of cutting down on all that interest you pay each month. (See also: <a href="http://www.wisebread.com/fastest-way-to-pay-off-10000-in-credit-card-debt?utm_source=wisebread&amp;utm_medium=seealso&amp;utm_campaign=article">Fastest Way to Pay Off $10,000 in Credit Card Debt</a>)</p> <h2>Keep Your Credit Cards Open</h2> <p>If you do pay off a credit card in full, don't close the account. Your credit score is higher when you are using less of your available credit. In general, you never want to be using more than 30% of your available credit. If you close a credit card, you're immediately reducing the amount of credit available to you. If you do have credit card debt, you will then also be immediately using more of it, which could hurt your score. (See also: <a href="http://www.wisebread.com/this-one-ratio-is-the-key-to-a-good-credit-score?utm_source=wisebread&amp;utm_medium=seealso&amp;utm_campaign=article">This One Ratio Is the Key to A Good Credit Score</a>)</p> <h2>Don't Be Afraid to Use Credit Cards</h2> <p>Using credit cards wisely can actually help <a href="http://www.wisebread.com/how-to-use-credit-cards-to-improve-your-credit-score?utm_source=wisebread&amp;utm_medium=internal&amp;utm_campaign=article">boost your credit score</a>. If you regularly charge items through the month and then pay them off in full when your credit card bill is due, you are showing that you can maturely handle credit. So don't be afraid to charge that flat-screen TV. Just make sure that you have the cash to pay off the entire purchase when your credit card's due date rolls around.</p> <p><em>Are you struggling with poor credit and high credit card debt? What steps have you taken to correct it?</em></p> <br /><div id="custom_wisebread_footer"><div id="rss_tagline">This article is from <a href="http://www.wisebread.com/dan-rafter">Dan Rafter</a> of <a href="http://www.wisebread.com/your-bad-credit-isnt-the-end-of-the-world">Wise Bread</a>, an award-winning personal finance and <a href="http://www.wisebread.com/credit-cards">credit card comparison</a> website. Read more great articles from Wise Bread:</div><div class="view view-similarterms view-id-similarterms view-display-id-block_2 view-dom-id-1"> <div class="view-content"> <div class="item-list"> <ul> <li class="views-row views-row-1 views-row-odd views-row-first"> <div class="views-field-title"> <span class="field-content"><a href="http://www.wisebread.com/avoid-these-5-common-mistakes-while-rebuilding-your-credit">Avoid These 5 Common Mistakes While Rebuilding Your Credit</a></span> </div> </li> <li class="views-row views-row-2 views-row-even"> <div class="views-field-title"> <span class="field-content"><a href="http://www.wisebread.com/the-7-debt-payoffs-that-boost-your-credit-score-the-most">The 7 Debt Payoffs That Boost Your Credit Score the Most</a></span> </div> </li> <li class="views-row views-row-3 views-row-odd"> <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-4 views-row-even"> <div class="views-field-title"> <span class="field-content"><a href="http://www.wisebread.com/what-to-expect-when-youre-expecting-a-huge-credit-card-bill">What to Expect When You&#039;re Expecting a Huge Credit Card Bill</a></span> </div> </li> <li class="views-row views-row-5 views-row-odd views-row-last"> <div class="views-field-title"> <span class="field-content"><a href="http://www.wisebread.com/heres-why-credit-scores-and-reports-are-not-the-same">Here&#039;s Why Credit Scores and Reports Are Not the Same</a></span> </div> </li> </ul> </div> </div> </div> </div><br/></br> Personal Finance available credit bills credit history credit reports credit score debt FICO score minimum payments Wed, 15 Jun 2016 10:00:12 +0000 Dan Rafter 1731281 at http://www.wisebread.com You Missed a Student Loan Payment. Now What? http://www.wisebread.com/you-missed-a-student-loan-payment-now-what <div class="field field-type-filefield field-field-blog-image"> <div class="field-items"> <div class="field-item odd"> <a href="/you-missed-a-student-loan-payment-now-what" class="imagecache imagecache-250w imagecache-linked imagecache-250w_linked"><img src="http://wisebread.killeracesmedia.netdna-cdn.com/files/fruganomics/imagecache/250w/blog-images/woman_stressed_bills_000084978003.jpg" alt="Woman missed a student loan payment, so now what?" title="" class="imagecache imagecache-250w" width="250" height="140" /></a> </div> </div> </div> <p>Imagine the scenario. You wake up one morning without a worry on your mind. Then you look at your calendar and realize you did not pay your student loan payment, and it was due three days ago. Or perhaps you didn't catch your mistake quickly enough, and you are getting notices in the mail.</p> <p><em>Don't panic!</em></p> <p>While your first reaction might be to overreact and hyperventilate, know that it is not the end of the world. As long as you can restore your student loan account from delinquency to repayment status quickly, you will be fine.</p> <p>Here's what you need to know and what you should do when you miss a student loan payment.</p> <h2>Call Your Lender Right Away</h2> <p>First things first, call your lender. You do not need to come up with an elaborate story or excuse. Just explain what happened. Many lenders have generous grace periods, and some private lenders might not have a grace period at all.</p> <p>Once you have your lender on the phone, you can ask them if your late payment has subjected you to any late fees or has been reported to your credit union. Arrange to make payments over the phone, even if you have to pay a small fee to do so. You want to make sure that the lender gets their payment immediately.</p> <p>If your late payment has been reported to the credit bureaus, it can put a ding on your credit score for several years. You can attempt to have the report taken off by writing a request to your lender. In your request, you can mention that you are trying to improve your credit for an upcoming home or vehicle purchase and that the late payment was a rare case due to certain circumstances. There is no guarantee that this will work, but it is worth attempting. (See also: <a href="http://www.wisebread.com/8-tax-tricks-to-try-if-youre-stuck-with-student-loans?ref=seealso">8 Tax Tricks to Try if You're Stuck With Student Loans</a>)</p> <h2>How to Avoid Missing Another Student Loan Payment</h2> <p>If you missed your student loan payment because you just forgot or because you have too many student loans to keep track of, here are two solutions that will help.</p> <h3>1. Consolidate or Refinance Your Loans</h3> <p>If you have several different student loans, and you are not going to apply for loan forgiveness, consider consolidating your loans to have all of your debt in one loan. Consolidating your loans might even lower your interest rate and monthly payments.</p> <h3>2. Schedule Automatic Payments</h3> <p>Another sure way to never miss your student loan payment again is to schedule monthly automatic payments. Some lenders will even offer you a discount APR if you sign up for automatic payments through their site.</p> <h2>What If You Can't Afford Your Student Loan?</h2> <p>If you are having difficulties adhering to the monthly payment deadline because you are short on cash, then you need to get help immediately. The last thing you want is for your loan to default. Attorney Daniel Gamez says, &quot;Once a federal student loan goes into default, borrowers face potential wage garnishments of up to 15% of their wages. That can be crippling if you are already on a tight budget.&quot;</p> <p>Review your payment options with your lender. You might qualify for deferment or forbearance, depending on your current situation. If you have federal loans, look into options for repayment, such as:</p> <ul> <li><strong>Extended Payment Plan</strong>, which lowers your monthly costs by extending your loan up to 25 years.<br /> &nbsp;</li> <li><strong>Revised Pay as You Earn Plan (REPAYE)</strong>, which makes your monthly payments 10% of your discretionary income.<br /> &nbsp;</li> <li><strong>Income-Based Repayment</strong>, which calculates your monthly payments each year based on your income and family size, not to exceed 15% of your discretionary income.<br /> &nbsp;</li> <li><strong>Income-Sensitive Plan</strong>, which bases your monthly payment on your annual income and can extend your loan up to 15 years.</li> </ul> <p><em> Have you run into problems with your student loans? What did you do?</em></p> <br /><div id="custom_wisebread_footer"><div id="rss_tagline">This article is from <a href="http://www.wisebread.com/ashley-eneriz">Ashley Eneriz</a> of <a href="http://www.wisebread.com/you-missed-a-student-loan-payment-now-what">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/youve-defaulted-on-your-loan-now-what">You&#039;ve Defaulted on Your Loan. Now What?</a></span> </div> </li> <li class="views-row views-row-2 views-row-even"> <div class="views-field-title"> <span class="field-content"><a href="http://www.wisebread.com/what-to-do-if-you-didnt-save-for-your-childs-college">What to Do If You Didn&#039;t Save for Your Child&#039;s College</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-10-most-common-financial-aid-mistakes-and-how-to-avoid-them">The 10 Most Common Financial Aid Mistakes — And How To Avoid Them</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-money-moves-to-make-the-moment-you-graduate">5 Money Moves to Make the Moment You Graduate</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-times-student-loan-refinancing-can-save-you-big">4 Times Student Loan Refinancing Can Save You Big</a></span> </div> </li> </ul> </div> </div> </div> </div><br/></br> Personal Finance Education & Training autopay credit score late payments lenders loan consolidation student loans Wed, 01 Jun 2016 09:30:21 +0000 Ashley Eneriz 1721634 at http://www.wisebread.com What Is a Good Credit Score and Why Is It Important? http://www.wisebread.com/what-is-a-good-credit-score-range <div class="field field-type-filefield field-field-blog-image"> <div class="field-items"> <div class="field-item odd"> <a href="/what-is-a-good-credit-score-range" class="imagecache imagecache-250w imagecache-linked imagecache-250w_linked"><img src="http://wisebread.killeracesmedia.netdna-cdn.com/files/fruganomics/imagecache/250w/blog-images/iStock_000024983142_Large.jpg" alt="" title="" class="imagecache imagecache-250w" width="250" height="141" /></a> </div> </div> </div> <p>Credit scores can be confusing, especially with so many different models and algorithms available. Plus, it&rsquo;s easy to mess up your credit rating and end up with bad credit without even realizing you&rsquo;ve done anything. Here&rsquo;s what you need to know about credit scores and increasing your credit rating. (See also: <a href="http://www.wisebread.com/how-to-rebuild-your-credit-in-8-simple-steps?utm_source=wisebread&amp;utm_medium=seealso&amp;utm_campaign=cc_article">How to Rebuild Your Credit in 8 Simple Steps</a>)</p> <h2>How Important is a Good Credit Score?</h2> <p>Credit scores don&rsquo;t usually get the attention they deserve and we don&rsquo;t realize how important they are until we go to get a loan and realize we&rsquo;ve somehow ruined it. Because credit scores are one of the only ways for lenders to assess a borrower&rsquo;s risk and can mean the difference between not just qualifying for the loan, but also paying hundreds to thousands more in interest, it&rsquo;s important that you diligently work on keeping a clean credit file.</p> <p>The most crucial role that credit ratings play in finances is in the interest rate. If you have a poor or bad credit rating, you are going to pay a much higher interest rate than someone with an excellent rating, if you are approved at all. When it comes to settling down and buying a house, your credit score can become one of the most important numbers in the process. A good credit rating can help in other situations including:</p> <p><strong>Employment</strong>. Not all employers require credit checks, but if you are in finance or a position requiring that you handle the company&rsquo;s money, bad credit can end up hurting your chances of landing a new job. The idea behind checking credit for certain positions is that if you can&rsquo;t manage your own finances, you may have difficulty managing other people&rsquo;s money as well.</p> <p><strong>Lower Insurance Rates</strong>. Bad credit can cost you in other areas besides higher interest rates on loans and credit cards. It can also affect your insurance rates and cost you hundreds more than if you had a better credit score.</p> <p><strong>Qualifying for Rentals</strong>. If you have poor credit, it isn&rsquo;t just difficult to qualify for home mortgages. You may also be denied rental opportunities simply because your credit file shows that you may be at risk of not paying your rent.</p> <p><strong>Utilities</strong>. Unfortunately, you may not be able to get your utilities hooked up in your name with bad credit. Although this doesn&rsquo;t happen all the time, credit problems can prevent you from getting necessary utilities turned on in your new home.</p> <p>See also: <a href="http://www.wisebread.com/15-surprising-ways-bad-credit-can-hurt-you?utm_source=wisebread&amp;utm_medium=seealso2&amp;utm_campaign=cc_article">15 Surprising Ways Bad Credit Can Hurt You</a></p> <h2>What Is a Good Credit Score Range?</h2> <p>Although generally &ldquo;good&rdquo; is sufficient for most things like kicking ability in kickball or rating the flavor of an apple pie, in the world of credit scores, it&rsquo;s not exactly ideal. A good credit score is often considered within the range of 700 to 749, but the goal if you want the best credit cards and lowest interest rates, is to strive for an &ldquo;excellent&rdquo; credit rating, which is 750 and higher, according to FICO and VantageScore.</p> <h2>What Is a Bad Credit Score?</h2> <p>On the other end of the credit scoring model are bad credit scores, which can make it difficult to qualify for credit cards or loans. Bad credit ratings are typically 600 or below. This, however, doesn&rsquo;t mean you are doomed never to have a credit card. There are lenders and credit card issuers that provide financial products for those in the &ldquo;bad credit&rdquo; range. However, in addition to high APRs, you can expect to pay extra fees that you won&rsquo;t find on higher-credit products. (See also: <a href="http://www.wisebread.com/what-does-your-credit-score-mean-good-bad-or-excellent?utm_source=wisebread&amp;utm_medium=seealso&amp;utm_campaign=cc_article">Good, Bad, or Excellent: What Does Your Credit Score Mean?</a>)</p> <p>In short, the credit score range from bad credit to excellent credit is usually:</p> <p>Bad Credit &ndash; 600 and lower</p> <p>Poor Credit &ndash; 600 to 649</p> <p>Fair or Average Credit &ndash; 650 to 699</p> <p>Good Credit &ndash; 700 to 749</p> <p>Excellent Credit &ndash; 750 and higher</p> <h2>Where to Get Free Credit Scores</h2> <p>Many financial companies provide services which allow you to check and monitor your score for a monthly or annual fee of approximately $29.95 per month, depending on the scoring model. There are also a number of agencies and credit card issuers which offer this service free to its customers and cardmembers. You can get your credit score free with some of the following companies:</p> <p><a href="http://www.anrdoezrs.net/click-2822544-12336148-1455123184000"><strong>Credit Sesame</strong></a>. Score pulled from the TransUnion database.</p> <p><a href="http://www.dpbolvw.net/click-2822544-10809829-1284618439000"><strong>Credit Karma</strong></a>. VantageScores from the three major credit bureaus.</p> <p><a href="http://www.wisebread.com/the-discover-it-card-attractive-cash-back-awards-for-shoppers?utm_source=wisebread&amp;utm_medium=internal&amp;utm_campaign=review"><strong>Discover it</strong></a>. Provides cardmembers with access to free FICO scores.</p> <p><a href="http://www.wisebread.com/chase-slate-visa-review?utm_source=wisebread&amp;utm_medium=internal&amp;utm_campaign=review"><strong>Chase Slate</strong></a>. Includes access to FICO score.</p> <p><a href="http://www.wisebread.com/unlimited-cash-back-the-quicksilver-cash-rewards-credit-card?utm_source=wisebread&amp;utm_medium=internal&amp;utm_campaign=review"><strong>Capital One Quicksilver Cash</strong></a>. Access to CreditWise which includes TransUnion Vantage Score 3.0. (See also:<a href="http://www.wisebread.com/the-5-best-credit-cards-that-offer-free-credit-scores?utm_source=wisebread&amp;utm_medium=seealso&amp;utm_campaign=cc_article"> Best Credit Cards Offering Free Credit Scores</a>)</p> <h2>FICO and Vantage: Types of Credit Scores and Scoring Models</h2> <p>Another point of confusion when discussing credit scores is which score you are measuring. The score used by most lending institutions is the FICO score, which means if you want to see what your card issuer is seeing, this might be the score to keep your eye on. However, there are those that use other scoring systems, and you may check and monitor those scores with any of the following agencies as well:</p> <p><strong>FICO score</strong>: Provided by FICO and also allows you to track and monitor your score with all three credit bureaus. <a href="http://myfico.7eer.net/c/27771/93942/2185">MyFico.com</a> provides services for restoring your identity in the event it is stolen and detecting threats through identity theft monitoring as well.</p> <p><strong>VantageScore</strong>: This score is more often the free version offered by different financial services and is among the most popular scores as well. The VantageScore has some differences such as how it scores paid-off collections, alternative data like rent and utility payments, and how it rates how recently a credit account was used. This score was created by the credit bureaus, TransUnion, Equifax, and Experian.</p> <p>In addition to FICO and VantageScore, each credit bureau provides its own scoring model as well, which is one of the reasons they joined forces to create the Vantage scoring model in the first place. The scores for each bureau includes the following:</p> <p><strong>PLUS score</strong>: Experian&rsquo;s scoring model usually not used by any lenders. It ranges from 330 to 830.</p> <p><strong>TransRisk score</strong>: TransUnion&rsquo;s score based on its own credit reports. This score ranges from 100 to 900 and is used to predict risk.</p> <p><strong>Equifax score</strong>: The Equifax version ranges from 280 to 850 and like the PLUS score, isn&rsquo;t used by lenders but is designed for educational purposes only.</p> <p>The range of scores will vary depending on the scoring model, but as an example, may include FICO scores from 300-850, Experian scores from 330-830, Equifax and TransUnion from 300-850, and VantageScore 300-850. Although they are all different scoring models, they are close enough that no matter which one you prefer, you can get a general idea of what the lenders see when they check your creditworthiness. And, if you&rsquo;re working on increasing your score, you can monitor any of them and assume that if one increases, all of them will typically adjust in a similar manner. It&rsquo;s important to note that whether it&rsquo;s a loan, mortgage, or credit card, the FICO scoring model is the most widely used.</p> <h2>What Affects Your Credit Rating the Most?</h2> <p>Because credit scores are intended to gauge your risk and the ability to repay your loans and credit cards, it&rsquo;s important to make sure you pay on time and manage the accounts responsibly in order to maintain a positive credit rating. However, there are other factors involved in calculating your credit score, depending on the model you use. For example, FICO scores are calculated according to the following activities: (See also:<a href="http://www.wisebread.com/the-5-things-with-the-biggest-impact-on-your-credit-score?utm_source=wisebread&amp;utm_medium=seealso&amp;utm_campaign=cc_article"> What Impacts Your Credit Score the Most?</a>)</p> <p>35% Payment History &ndash; the number of times you make late payments on your accounts.</p> <p>30% Amounts Owed &ndash; how much you owe. Could be an indication you are overextended.</p> <p>15% Length of Credit History &ndash; how old your accounts are and the last time you used certain accounts.</p> <p>10% Credit Mix in Use &ndash; whether you have a mix of different accounts like credit cards, retail, installment loans, and mortgage loans.</p> <p>10% New Credit &ndash; if you have a number of new accounts, it could indicate a higher risk.</p> <h2>How VantageScore is Calculated</h2> <p>In comparison, VantageScore 3.0 is calculated similarly with some minor differences, with more focus being placed on recent credit than payment history or credit utilization:</p> <p>30% Recent Credit &ndash; whether you have multiple new accounts.</p> <p>28% Payment History &ndash; late payments and payments made on time.</p> <p>23% Credit Utilization &ndash; how much credit you have versus what you owe.</p> <p>9% Credit Balances &ndash; how much you owe.</p> <p>9% Depth of Credit &ndash; your credit mix and length of your credit history.</p> <p>1% Amount of Available Credit &ndash; the total amount you have available among all credit accounts.</p> <p>Vantage Scores also include a letter grade which rates your likelihood of a charge off or paying your accounts on time. For example, 901 to 990 is considered an &ldquo;A&rdquo; grade, equal to 1 charge off for every 300 consumers who pay on time. The grades lower to &ldquo;F&rdquo;. which is 501 to 600 and equal to 1 charge off for every 1 consumer paying on time.</p> <h2>Increase Your Credit Score by Checking Your Credit Reports</h2> <p>One of the most shocking and frustrating things that can happen when you check your credit score is that you find it is lower than you expect. More shocking is if it happens to be due to an error on your credit report or a mistake that you didn&rsquo;t even know existed. This is just one of the many reasons it&rsquo;s important to regularly check your credit reports and address any errors or changes immediately. This is also one of the first places to start if you&rsquo;re going to begin your journey to improving your credit score. You can get your credit reports free in any of the following ways:</p> <ul> <li>One free per year from each bureau through annualcreditreport.com</li> <li>Denial of credit, insurance, or employment</li> <li>Unemployed and planning to look for a job within 60 days</li> <li>On welfare</li> <li>Inaccurate because of fraud or identity theft</li> </ul> <p>If you don&rsquo;t qualify for free credit reports, you&rsquo;re probably going to pay either a monthly or annual fee to access one, depending on the credit bureau. Because paying for credit reports from all three bureaus can become costly, it&rsquo;s best to set an alert or reminder to get your free reports online each year with annualcreditreport.com so you can check them all for any errors. You can then notify each bureau online of any errors or corrections that need to be made to your credit reports.</p> <h2>Ways to Increase Your Credit Score</h2> <p>Once you&rsquo;ve become aware of the importance of your credit score, you&rsquo;ll likely want to work on increasing it. While the most common ways to get your numbers up into the excellent credit score range involve making your payments on time, there are other ways to get the boost you&rsquo;re looking for if you want the best credit rating possible. Some of the easiest ways to increase your score include the following:</p> <ul> <li>Check credit reports for errors and submit corrections</li> <li>Catch up any late payments or missed payments</li> <li>Pay down balances so that you owe 30% or less of your total credit available</li> <li>Get a <a href="http://www.wisebread.com/what-are-secured-credit-cards?utm_source=wisebread&amp;utm_medium=internal&amp;utm_campaign=cc_article">secured credit card</a> (if you have bad or no credit) to start a new, clean line</li> </ul> <p>See also:<a href="http://www.wisebread.com/how-to-use-credit-cards-to-improve-your-credit-score?utm_source=wisebread&amp;utm_medium=seealso2&amp;utm_campaign=cc_article"> How to Increase Your Credit Score with Credit Cards</a></p> <p>If you have a number of problems on your credit reports, it&rsquo;s best to work on the ones damaging your credit the most, according to the percentages of the scoring calculations. For example, in most cases catching up late payments and missed payments can make the biggest difference in your credit rating. Once payments are caught up you can work on decreasing your credit utilization.</p> <h2>Keep Your Excellent Credit Score</h2> <p>When you have increased your credit rating, you&rsquo;ll need to make sure you practice other tips for maintaining excellent credit. These tips for keeping a good credit score include paying every bill on time (set up reminders and alerts if needed), using credit only when you need to, limiting your new accounts, keeping old accounts open, and mixing up your types of credit with a combination of credit cards, loans, retail, and mortgage accounts. Also, make sure your credit mix includes revolving, installment, and open lines of credit.</p> <p>Improving or increasing your credit rating isn&rsquo;t an easy task, and it will take some time. However, as long as you know what you&rsquo;re working with, you&rsquo;ll be able to say you have a great credit score and qualify for the best rates available, in no time.</p> <br /><div id="custom_wisebread_footer"><div id="rss_tagline">This article is from <a href="http://www.wisebread.com/christina-majaski">Christina Majaski</a> of <a href="http://www.wisebread.com/what-is-a-good-credit-score-range">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/how-to-avoid-getting-your-credit-card-canceled">How to Avoid Getting Your Credit Card Canceled</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/fico-vs-fakes-are-you-getting-the-wrong-credit-score">FICO vs. Fakes: Are You Getting the Wrong 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/building-a-credit-history">Building a Credit History</a></span> </div> </li> <li class="views-row views-row-4 views-row-even"> <div class="views-field-title"> <span class="field-content"><a href="http://www.wisebread.com/should-you-cosign-your-teenagers-credit-card-application">Should You Cosign Your Teenager&#039;s Credit Card 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/how-a-solid-credit-score-saves-you-money">How a Solid Credit Score Saves You Money</a></span> </div> </li> </ul> </div> </div> </div> </div><br/></br> Credit Cards credit rating credit score fico Fri, 20 May 2016 10:30:04 +0000 Christina Majaski 1711477 at http://www.wisebread.com 5 Unfounded Credit Card Fears http://www.wisebread.com/5-unfounded-credit-card-fears <div class="field field-type-filefield field-field-blog-image"> <div class="field-items"> <div class="field-item odd"> <a href="/5-unfounded-credit-card-fears" class="imagecache imagecache-250w imagecache-linked imagecache-250w_linked"><img src="http://wisebread.killeracesmedia.netdna-cdn.com/files/fruganomics/imagecache/250w/blog-images/000014443696.jpg" alt="" title="" class="imagecache imagecache-250w" width="250" height="141" /></a> </div> </div> </div> <p>Credit cards get plenty of bad press. Scan the web and you'll find countless stories of consumers who've run up thousands of dollars of high-interest rate debt, fallen behind on their monthly payments, and destroyed their credit scores.</p> <p>But credit cards, if used responsibly, are important financial tools. They're safer than cash. They can actually <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">help you build your credit score</a>. They often come with valuable rewards programs. And you won't have to worry about those high interest rates if you're disciplined enough to charge only what you can afford to pay back each month.</p> <p>Are unfounded fears keeping you from using credit cards? If so, it's time to stop. Here are five credit card fears that have been overblown, and the truths that debunk them.</p> <h2>1. Credit Cards Will Ruin My Credit Score</h2> <p>True, lenders rely on your FICO (and other) credit scores to determine if you qualify for loans. They also use these scores to set the interest rates attached to your loans. Credit scores are important. It's natural for consumers to worry that charging too much will send their scores plummeting. But the truth is, using credit cards responsibly will actually boost your credit score.</p> <h3>The Truth</h3> <p>Every time you pay your credit card bill on time, you are helping your credit score. According to <a href="http://myfico.7eer.net/c/27771/93942/2185">myFICO.com</a>, 35% of your credit score is made up of your payment history. Establish a history of paying your bills on time, and you'll be on your way to building a good credit score. Just be careful to not carry a large balance on your card each month. First, you'll pay too much in interest. Secondly, using too much of your available credit will <a href="http://www.wisebread.com/10-surprising-ways-to-negatively-affect-your-credit-score?utm_source=wisebread&amp;utm_medium=internal&amp;utm_campaign=cc_article">hurt your credit score</a>.</p> <h2>2. I'll Pay a Ton in Interest</h2> <p>It's true that if you misuse your credit card, you will pay plenty in interest. It's not unusual for credit cards to come with interest rates of 19% or higher. If you carry a large balance each month, your interest charges will skyrocket. But again, if you use your credit card wisely, you'll have nothing to fear from high interest rates. (See also: <a href="http://www.wisebread.com/the-best-low-interest-rate-credit-cards?utm_source=wisebread&amp;utm_medium=seealso&amp;utm_campaign=cc_article">Best Low Interest Rate Credit Cards</a>)</p> <h3>The Truth</h3> <p>Credit cards work best for people who pay off their balances in full each month. If you do this, your credit card's interest rate won't matter because you won't ever pay interest on your debt. You only pay interest when you don't pay off your balance in full with every statement. If you do find yourself carrying an ever-growing balance each month, though, it's time to stop using your card and focus on paying down that debt.</p> <h2>3. Someone Will Steal My Card and Run Up Tons of Debt</h2> <p>It's true that thieves can steal your credit cards. They might also steal your card's information and use it to make online purchases. But credit cards are actually safer than cash.</p> <h3>The Truth</h3> <p>Consumers, if they report their card stolen or lost in a timely fashion, aren't responsible for unauthorized charges on their credit cards. If someone steals your card and charges thousands of dollars, you can dispute the illegal purchases and your credit card company won't charge you for them. Under federal law, you won't be responsible for any fraudulent charges if you report your card stolen or lost before any charges are made on it. If you report your card stolen or lost within two business days and charges have already been made, you are only responsible for a maximum of $50 worth of those fraudulent purchases, though most credit card providers will waive even that.</p> <p>Compare that to cash: If someone steals $100 from your wallet, that money is likely gone forever.</p> <h2>4. Applying for Credit Cards Will Hurt My Credit Score</h2> <p>Your credit score will take a small hit when you apply for new credit. That's because whenever you apply for a new credit card, what is known as a hard inquiry is added to your three credit reports. A hard inquiry hurts your score because every time you take on a new line of credit, you are exposing yourself to the possibility of running up debt that you can't afford. But the reality is, the damage from applying for credit cards prudently, is minimal.</p> <h3>The Truth</h3> <p>If you apply for a single credit card, that hard inquiry will typically drop your FICO credit score by about five points. That's not much, and it won't take long for that small dip to disappear. Keep paying your bills on time and don't run up credit card debt, and that five-point loss will evaporate. But if you apply for, say, six credit cards at the same time? That can cause a bigger drop in your credit scores. So apply prudently: Don't fill out more than one credit card application at a time.</p> <h2>5. I'm Worried That I'll End Up in Jail if I Can't Pay</h2> <p>There is no such thing as debtor's prison in the United States. Even so, consumers might fear that if they can't pay their credit card bills, they'll end up in jail. This simply isn't true.</p> <h3>The Truth</h3> <p>The only way credit card debt can send you to jail is if you willingly commit fraud. Otherwise, no matter how much you owe, you won't spend time behind bars. No matter what creditors say, you can't be jailed for credit card debt. That doesn't mean, however, that you won't face consequences if you can't pay your credit card bills. For instance, your credit card company might be able to garnish your wages as a way to force you to pay up.</p> <p><em>Do you harbor any of these &mdash; or other &mdash; credit card fears?</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/5-unfounded-credit-card-fears">Wise Bread</a>, an award-winning personal finance and <a href="http://www.wisebread.com/credit-cards">credit card comparison</a> website. Read more great articles from Wise Bread:</div><div class="view view-similarterms view-id-similarterms view-display-id-block_2 view-dom-id-3"> <div class="view-content"> <div class="item-list"> <ul> <li class="views-row views-row-1 views-row-odd views-row-first"> <div class="views-field-title"> <span class="field-content"><a href="http://www.wisebread.com/how-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-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-7-debt-payoffs-that-boost-your-credit-score-the-most">The 7 Debt Payoffs That Boost Your Credit Score the Most</a></span> </div> </li> <li class="views-row views-row-4 views-row-even"> <div class="views-field-title"> <span class="field-content"><a href="http://www.wisebread.com/6-moves-to-make-before-cutting-up-your-credit-card">6 Moves to Make Before Cutting Up Your Credit Card</a></span> </div> </li> <li class="views-row views-row-5 views-row-odd views-row-last"> <div class="views-field-title"> <span class="field-content"><a href="http://www.wisebread.com/7-signs-its-time-to-break-up-with-your-credit-cards">7 Signs It&#039;s Time to Break Up With Your Credit Cards</a></span> </div> </li> </ul> </div> </div> </div> </div><br/></br> Credit Cards credit card theft credit score debt fico high interest rates jail myths Wed, 18 May 2016 09:30:25 +0000 Dan Rafter 1712216 at http://www.wisebread.com 5 Moves to Make If Your Loan Gets Denied http://www.wisebread.com/5-moves-to-make-if-your-loan-gets-denied <div class="field field-type-filefield field-field-blog-image"> <div class="field-items"> <div class="field-item odd"> <a href="/5-moves-to-make-if-your-loan-gets-denied" class="imagecache imagecache-250w imagecache-linked imagecache-250w_linked"><img src="http://wisebread.killeracesmedia.netdna-cdn.com/files/fruganomics/imagecache/250w/blog-images/loan_application_rejected_000011809531.jpg" alt="Learning moves to make if your loan gets denied" title="" class="imagecache imagecache-250w" width="250" height="140" /></a> </div> </div> </div> <p>You needed an auto loan to finance that new convertible. Or maybe you applied for a mortgage loan to buy your dream home. Whatever type of loan you needed, the answer was the same: A big &quot;no&quot; from your lender.</p> <p>Lenders reject loan applications for a variety of reasons, but two stand out: Borrowers either have a low credit score, or they're already paying off too much debt each month.</p> <p>Fortunately, you can take simple steps to strengthen your finances and turn that loan rejection into an approval. Here are five moves to make after your loan gets rejected to qualify for that financing:</p> <h2>1. Order Your Credit Score</h2> <p>Your FICO credit scores are key when you're applying for a loan. You have three of them, one each generated by the national credit bureaus of TransUnion, Experian, and Equifax. These scores tell lenders how well you've managed your credit in the past. If you have a history of paying your bills late, running up credit card debt, and missing payments altogether, your FICO scores will be weak. Lenders consider a FICO score of 740 or higher to be a strong one. But if your score is too low &mdash; say, under 640 &mdash; you'll struggle to qualify for loans. And when you do qualify for a loan, you'll have to pay a higher interest rate.</p> <p>Before you re-apply for a loan after a rejection, order at least one of your FICO credit scores. Lenders are also required to provide you with a copy of your score if that&rsquo;s the reason you were denied the loan.</p> <h2>2. Order Your Credit Reports</h2> <p>You should also order all three of your credit reports, maintained by each of the credit bureaus. These reports list your personal information and detail your history of managing credit. They show how much you owe on credit cards and other loans, and any missed or late payments from the last seven years. They'll also list any negative judgments, such as bankruptcies or foreclosures that are up to seven or 10 years old, respectively. You can order each of your three credit reports once a year for free at AnnualCreditReport.com.</p> <p>Once you receive your reports, check them for mistakes. A single mistake on a credit report can send your credit score tumbling. If your report lists a missed car payment that you know you made on time, correct the error by contacting the offending credit bureau through email or by phone. Correcting an error can provide a quick boost to your credit score. Make sure, though, that you can provide documentation, such as a credit card statement or bank account record, proving that you actually did pay the &quot;missed&quot; payment on time.</p> <h2>3. Pay All Your Bills on Time</h2> <p>The best way to boost a weak credit score is to start a new history of paying all your bills on time. Your bill-payment history accounts for 35% of your credit score, according to <a href="http://myfico.7eer.net/c/27771/93942/2185">myFICO.com</a>. Paying your bills on time will cause your score to rise. But this takes patience. Depending on how weak your score is, it might take you several months, or even more than a year, to boost your score to a level acceptable to lenders.</p> <h2>4. Reduce Your Monthly Debt</h2> <p>Lenders often reject loans when borrowers' debt-to-income ratios are too high. In general, lenders want your total monthly debts &mdash; including the estimated amount you'll be paying each month for your new loan &mdash; to equal no more than 43% of your gross monthly income. If your debt-to-income ratio is higher than this, you'll greatly increase the odds of receiving a rejection on your loan application.</p> <p>The easiest way to improve a debt-to-income ratio that is too high is to pay off as much of your debts as possible. Usually, this means reducing credit card debt. Paying off the amount you owe on your cards will slowly but steadily cause your debt-to-income ratio to fall.</p> <h2>5. Keep Paid-Off Credit Cards Open</h2> <p>Say you pay off a credit card entirely and you no longer plan on using it. You should close that account, right? No. Never close unused credit cards. Cards with zero balances can actually help your credit score.</p> <p>That's because lenders look at 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>. This ratio looks at how much of your available credit you are using. The lower this ratio, the better. Closing an unused credit card will instantly hurt this ratio.</p> <p>Say you have four credit cards, each with a credit limit of $4,000 for an available credit of $16,000. Say, too, that you have $5,000 worth of credit card debt. That comes out to a credit-utilization ratio of about 31%, $5,000 divided into $16,000. But say you close one of your four cards. That reduces your available credit to $12,000. Your debt-utilization ratio immediately jumps to about 42%, $5,000 divided into $12,000.</p> <p>It's okay to keep a paid-off credit card in your wallet. Just make sure that you don't run up another hefty balance on it.</p> <p><em>Have you ever had a loan app denied? What did you do after?</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/5-moves-to-make-if-your-loan-gets-denied">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/the-7-debt-payoffs-that-boost-your-credit-score-the-most">The 7 Debt Payoffs That Boost Your Credit Score the Most</a></span> </div> </li> <li class="views-row views-row-2 views-row-even"> <div class="views-field-title"> <span class="field-content"><a href="http://www.wisebread.com/15-surprising-ways-bad-credit-can-hurt-you">15 Surprising Ways Bad Credit Can Hurt You</a></span> </div> </li> <li class="views-row views-row-3 views-row-odd"> <div class="views-field-title"> <span class="field-content"><a href="http://www.wisebread.com/5-things-most-likely-to-give-you-lousy-credit">5 Things Most Likely to Give You Lousy 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/how-to-botch-up-then-peddle-back-to-good-credit">How to Botch Up, Then Peddle Back to Good 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-easy-ways-to-raise-your-credit-score-this-year">7 Easy Ways to Raise Your Credit Score This Year</a></span> </div> </li> </ul> </div> </div> </div> </div><br/></br> Personal Finance applications bad credit building credit credit score debt denied fico line of credit loans rejection Tue, 17 May 2016 09:00:04 +0000 Dan Rafter 1709596 at http://www.wisebread.com 5 Ways Having a Paid Off Car Is Surprisingly Great http://www.wisebread.com/5-ways-having-a-paid-off-car-is-surprisingly-great <div class="field field-type-filefield field-field-blog-image"> <div class="field-items"> <div class="field-item odd"> <a href="/5-ways-having-a-paid-off-car-is-surprisingly-great" class="imagecache imagecache-250w imagecache-linked imagecache-250w_linked"><img src="http://wisebread.killeracesmedia.netdna-cdn.com/files/fruganomics/imagecache/250w/blog-images/girl_car_road_trip_000080274673.jpg" alt="Woman learning how a paid off car makes life better" title="" class="imagecache imagecache-250w" width="250" height="140" /></a> </div> </div> </div> <p>In 2005, I awoke one fine spring morning to the sound of metal crunching. Looking out the window, I saw a box truck mowing down my 1994 Honda Civic, which was parked on the street in front of my house. The driver was a 13-year-old boy who had come across the idling truck and had decided to steal it and go for a joy ride &mdash; which ended with the destruction of my car.</p> <p>It was not a great day.</p> <p>However, as overwhelming as it was for me to watch my car get hit by an uninsured driver, the entire situation was much better than it could have been because of one important fact: My Civic was paid off.</p> <p>As a matter of fact, I have been fortunate enough to never have a car payment in my 21 years of car ownership. While I'm delighted to not have a payment due every month, that's not the only way that having a paid-off car makes my life better. Here are five ways that having a paid-off car will benefit your life:</p> <h2>1. Insurance and Accidents Cost You Less</h2> <p>At the time of its sad demise, my Honda Civic was an 11-year-old car with 120,000 miles on it. I carried liability, uninsured motorist, and collision coverage. The first two were required by the state I lived in, and my collision coverage costs were fairly inexpensive because of the relatively low value of my car. The amount of money I was paying for insurance was a great deal lower than that of a classmate whose car was also totaled by another driver around the same time.</p> <p>The difference was that my classmate was driving a new car with a hefty car payment, so she had to have an expensive comprehensive insurance policy to match.</p> <p>What's more, I felt like I was made whole by my cheaper insurance, while my classmate was not. After my car was totaled, I got a check from my insurance company for the value of the car minus my $500 deductible, which I used to buy another used car. My friend was forced to take on another loan with a monthly payment that was $30 higher than the one she had before the accident.</p> <h2>2. Having a Paid-Off Car Means Potentially Never Paying Interest Again</h2> <p>One of the smartest things my husband and I have ever done was starting a &quot;car fund&quot; savings account. Each month, we set aside $350 into the account so that we have money available to either fix our cars if they need maintenance or repair, or to pay cash for a new one if our vehicles ends up going to the big garage in the sky. We pay ourselves the equivalent of a car payment each month so we never have to pay interest on our cars &mdash; and we earn some interest on the money we've saved, too.</p> <h2>3. Financial Ups and Downs Are Less Stressful</h2> <p>Making a monthly car payment is no biggie when your job feels secure. But if you are still making monthly payments on your car when you lose your job, receive an unexpected bill, or otherwise see your personal finances go south, then that monthly payment can feel more like an albatross around your neck.</p> <p>This is especially true if you have any reason to fear repossession of your car during your financial turmoil. Owning your car free and clear means that you have one less worry while you are trying to get your financial house back in order. You know that you can still rely on your car to transport you to and from work and your other responsibilities.</p> <h2>4. You Don't Have to Worry About Weird Hits to Your Credit</h2> <p>One of the bizarre aspects of how credit scores are calculated is the fact that paying off a major loan &mdash; such as a car loan &mdash; can have the effect of lowering your credit score. That's because paying off an installment loan raises your utilization ratio. For example, if you have a $12,000 car loan with a $3,000 balance that you pay off all at once, your available credit will drop by $12,000 once the account is closed, even though your debt load will also drop by $3,000.</p> <p>I don't know about you, but that kind of convoluted credit logic makes my head spin. It's a lot simpler to just have a car that's paid off &mdash; and have your credit score based on things like your mortgage or rental history, and your utilities payments.</p> <h2>5. It's Better for the Environment</h2> <p>Wanting to avoid ever having a car payment means that I strive to <a href="http://www.wisebread.com/6-cars-you-can-drive-almost-forever" target="_blank">take great care of my cars</a>. My current vehicle is a 14-year-old Honda Accord that could probably last another 14 years if I am diligent about maintenance.</p> <p>While it's possible that car manufacturers will figure out a way for all new cars to get 50 miles per gallon before the year 2030, keeping my current car on the road for as long as possible will be better for the environment than trading it in for a more efficient one. That's because the environmental impact of manufacturing a new car and disposing of a used one offsets a great deal of the fuel efficiency I might gain by buying a new car.</p> <h2>The Bottom Line</h2> <p>Having a paid off car offers a great deal of freedom and peace of mind, whether your car provides you with years of faithful service, or it's totaled in an unfortunate joy-riding incident.</p> <p><em>Is your car paid off? What's great about it?</em></p> <br /><div id="custom_wisebread_footer"><div id="rss_tagline">This article is from <a href="http://www.wisebread.com/emily-guy-birken">Emily Guy Birken</a> of <a href="http://www.wisebread.com/5-ways-having-a-paid-off-car-is-surprisingly-great">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-money-moves-to-make-the-moment-you-decide-to-buy-a-car">6 Money Moves to Make the Moment You Decide to Buy a Car</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/14-things-insurance-agents-dont-want-you-to-know">14 Things Insurance Agents Don&#039;t Want You to Know</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/drive-the-old-car-or-buy-a-new-car">Drive the Old Car or Buy a New Car?</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/can-t-afford-your-car-much-longer-negotiate-to-keep-it">Can’t Afford Your Car Much Longer? Negotiate to Keep It</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/all-the-ways-minimum-payments-are-evil">All the Ways Minimum Payments Are Evil</a></span> </div> </li> </ul> </div> </div> </div> </div><br/></br> Cars and Transportation accidents car loans credit score green living insurance interest payments owning your car Fri, 13 May 2016 09:30:23 +0000 Emily Guy Birken 1707446 at http://www.wisebread.com 9 Money Moves to Make the Moment Your Credit Cards Are Paid Off http://www.wisebread.com/9-money-moves-to-make-the-moment-your-credit-cards-are-paid-off <div class="field field-type-filefield field-field-blog-image"> <div class="field-items"> <div class="field-item odd"> <a href="/9-money-moves-to-make-the-moment-your-credit-cards-are-paid-off" 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_000089299163.jpg" alt="Woman making money moves after credit cards are paid off" title="" class="imagecache imagecache-250w" width="250" height="140" /></a> </div> </div> </div> <p>It may have taken years. It may have required an unprecedented level of discipline and patience. But you finally have your credit cards paid off.</p> <p>Congratulations! Now, what do you do?</p> <p>With a good chunk of your high-interest debt no longer weighing you down, you can truly start to work your way toward financial freedom. Here are some key financial moves you can make immediately.</p> <h2>1. Tackle Any Other High-Interest Debt</h2> <p>Okay, so you crushed the credit card debt. What else do you owe? Take a look at things like auto loans, student loans, and your mortgage, and begin chipping away at that debt, as well. Go after the debt with the highest interest rate first. It's one thing to free of credit card debt, but to be totally, 100% debt free? That's an amazing feeling.</p> <h2>2. Assess Your Emergency Fund</h2> <p>When you're in debt, there's a good chance you don't have a lot of liquid savings. But now that those credit cards are paid off, you can start building up funds in case of a major unexpected expense or loss of income. By maintaining an account with at least three months of income, you can handle any financial crisis and know that you won't go back into debt.</p> <h2>3. Open a Retirement Account</h2> <p>It's impossible to think about retirement when you're huddled under a mountain of debt. But now that you've shed that high interest debt, you can start thinking about your long-term financial goals, including your retirement. If your employer offers a 401K plan, begin contributing now and seek to maximize the company match. (Usually, this is somewhere in the neighborhood of 5% of your income, though you can always contribute more.) Also consider opening an individual retirement account, or IRA. Opening a Roth IRA, which allows your money to grow tax free, is perfect for people who are self-employed, but is also a great complement to a 401K.</p> <h2>4. Find a Good Online Budgeting Tool</h2> <p>If you haven't already done so, consider using a service such as Mint or <a href="http://track.flexlinks.com/a.ashx?foid=1029882.216060&amp;fot=9999&amp;foc=1&amp;foc2=582907">Personal Capital</a>, which allows you to view all of your account information in one place and track your spending &mdash; even set up budgets and goals. Using one of these services will allow you to see exactly where your money is going, so you can adjust your spending, if needed.</p> <h2>5. Stop Using Your Cards for a While (But Don't Close Them)</h2> <p>Credit cards got you into trouble, so it might be good to just put them on ice for a while. But don't start canceling all your cards. If you close credit cards, you may actually hurt your credit score. You'll no longer have accounts with a long history, and your <a href="http://www.wisebread.com/this-one-ratio-is-the-key-to-a-good-credit-score">credit utilization ratio</a> will go up because you'll have less available credit. If you feel the need to get rid of cards, shed the one with the lowest credit limit. (See also: <a href="http://www.wisebread.com/the-best-0-balance-transfer-credit-cards?utm_source=wisebread&amp;utm_medium=seealso&amp;utm_campaign=cc_article">Best 0% Balance Transfer Credit Cards</a>)</p> <h2>6. Develop a New Charging Philosophy</h2> <p>If you successfully transitioned from carrying a credit card balance to being debt-free, you probably made an adjustment to how you use your cards. Now it's time to evaluate again how you use credit to ensure you stay out of the red. Do some research to find credit cards with favorable interest rates (and maybe even some good <a href="http://www.wisebread.com/5-best-cash-back-credit-cards?utm_source=wisebread&amp;utm_medium=internal&amp;utm_campaign=cc_article">cash back rewards</a>). Set up automatic transfers to pay off balances in full each month, and come up with rules to guide which purchases will be made with credit and which will be made with cash. It takes discipline to get out of debt, but it's just as much work to stay out. So set up a plan and do your best to stick to it.</p> <h2>7. Begin Saving for Big, Important Things</h2> <p>You may be out of debt, but you know that it could come right back if you don't save responsibly for the big ticket items. Whether it's a new house, car, or home appliance, it's best to try and pay for these things without taking on a lot of new debt. Consider taking whatever you were paying in credit card interest and setting it aside into a savings account, or even an index fund. Being able to pay cash for the pricey purchases will keep you from falling into the abyss of debt again.</p> <h2>8. Review Your Credit Reports</h2> <p>Looking at your credit report can be depressing when you're in debt. Who needs another reminder of how much they owe? But now that the debt is gone, it might be a good time to examine your credit reports to see if there are any errors, or even old debts you may have forgotten about. Your goal now is to improve your FICO credit score, and cleaning up your reports can play a big role in that. Each of the three major credit bureaus (TransUnion, Experian, Equifax) provide a copy of your credit report once a year at no charge.</p> <h2>9. If You Have a Mortgage, Think About Refinancing</h2> <p>Your credit score may not improve right away after paying off your credit card debt, but if you keep yourself debt-free, it will rise over time. And that means that you'll be in a better position to negotiate with lenders for a better interest rate on your home loan. Mortgage rates are still historically low, so you might save thousands of dollars over the long-term by reducing your rate even slightly. And you could have enormous savings by reducing your loan term, as well.</p> <p><em>Have you paid off your credit card debt? What money moves did you make?</em></p> <br /><div id="custom_wisebread_footer"><div id="rss_tagline">This article is from <a href="http://www.wisebread.com/tim-lemke">Tim Lemke</a> of <a href="http://www.wisebread.com/9-money-moves-to-make-the-moment-your-credit-cards-are-paid-off">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/8-money-moves-to-make-the-moment-you-get-a-promotion">8 Money Moves to Make the Moment You Get a Promotion</a></span> </div> </li> <li class="views-row views-row-2 views-row-even"> <div class="views-field-title"> <span class="field-content"><a href="http://www.wisebread.com/13-things-you-dont-know-about-your-credit-report-but-should">13 Things You Don&#039;t Know About Your Credit Report — But Should</a></span> </div> </li> <li class="views-row views-row-3 views-row-odd"> <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-4 views-row-even"> <div class="views-field-title"> <span class="field-content"><a href="http://www.wisebread.com/8-financial-decisions-youll-never-regret">8 Financial Decisions You&#039;ll Never Regret</a></span> </div> </li> <li class="views-row views-row-5 views-row-odd views-row-last"> <div class="views-field-title"> <span class="field-content"><a href="http://www.wisebread.com/heres-how-your-credit-score-affects-your-job-search">Here&#039;s How Your Credit Score Affects Your Job Search</a></span> </div> </li> </ul> </div> </div> </div> </div><br/></br> Personal Finance credit report credit score emergency fund high interest debt refinancing retirement saving money Wed, 11 May 2016 10:30:05 +0000 Tim Lemke 1705411 at http://www.wisebread.com 5 Debt Management Questions You're Too Embarrassed to Ask http://www.wisebread.com/5-debt-management-questions-youre-too-embarrassed-to-ask <div class="field field-type-filefield field-field-blog-image"> <div class="field-items"> <div class="field-item odd"> <a href="/5-debt-management-questions-youre-too-embarrassed-to-ask" class="imagecache imagecache-250w imagecache-linked imagecache-250w_linked"><img src="http://wisebread.killeracesmedia.netdna-cdn.com/files/fruganomics/imagecache/250w/blog-images/couple_stressed_laptop_000070731367.jpg" alt="Couple with debt management questions they&#039;re too embarrassed to ask" title="" class="imagecache imagecache-250w" width="250" height="140" /></a> </div> </div> </div> <p>There are some questions that we're too embarrassed to ask anyone, particularly friends or family. We certainly don't like the idea of letting others know that we have financial hardships. And all too often, we avoid asking the questions at all, preferring to bury our heads in the sand.</p> <p>This, of course, is never a good idea. So here are five of the most common questions about debt that people are too embarrassed to ask, with answers that shed a little light on the subject.</p> <h2>1. When Do I Declare Bankruptcy?</h2> <p>It's a word that strikes terror in our hearts: bankruptcy. It is interpreted as failure. Destitution. The end of the line. However, bankruptcy is not as bad as it sounds. Many famous and wealthy people have declared bankruptcy, and they do just fine. It provides a means to restructure your debts, working with creditors to pay what you owe whilst getting a level of protection that won't leave you penniless.</p> <p>When to declare bankruptcy? Well, that's different on a case by case basis. But, if you can only make minimum payments on credit cards, and are using them to pay minimums on other cards, that's a big warning sign. If you are living paycheck to paycheck, can't pay bills, are about to be evicted, and have absolutely no savings, you're in trouble.</p> <p>However, a simple test is to add up all of your assets, and compare them to all of your debts. If you have way more debt than assets, and creditors are hounding you day and night, it may be time to declare bankruptcy.</p> <h2>2. How Do I Declare Bankruptcy?</h2> <p>If you have decided that, yes, bankruptcy is the only option, the next logical step is to go and do it. But again, that can be a daunting prospect. You first need to know <a href="http://bankruptcy.lawyers.com/consumer-bankruptcy/choosing-the-type-of-bankruptcy-chapter-7-or-13.html">what type of bankruptcy</a> to declare. You hear talk of Chapter 11, but that's a very complex solution usually reserved for businesses. You will most likely want to file a Chapter 7 or Chapter 13 bankruptcy, instead.</p> <p>Chapter 7, also called a straight bankruptcy, is the simplest. This plan liquidates your current assets, if you have any, to pay off as much of the debt you owe as possible. The remaining debt is then haggled over. Some can be forgiven, and the remainder is put into a repayment plan that you can handle. The big drawback with Chapter 7 is that you may lose almost everything you own, including your home, car, and possessions of value. It's a fresh start, but it really does rip the Band-Aid off.</p> <p>Chapter 13 is therefore a better choice for anyone with property. This option is known as a reorganization bankruptcy, and you may well need to do this, anyway, if your annual income is too high to qualify for Chapter 7. Both options have many rules and regulations.</p> <p>Once you determine the type of bankruptcy you prefer, the process begins by filing a two-page petition to your district bankruptcy court, alongside supporting forms and a fee of about $300. The best thing to do is search for a bankruptcy attorney in your area, as you likely don't want to navigate these waters alone.</p> <h2>3. How Do I Deal With My Massive Credit Card Debt?</h2> <p>Credit card debt can be crippling. Sadly, many people take on more and more credit cards to help cover costs, and before they know it, they are buried in minimum monthly payments they cannot make. If you find yourself in major credit card debt, you have options.</p> <p>First, do you have any way to take that debt and <a href="http://www.wisebread.com/when-to-do-a-balance-transfer-to-pay-off-credit-card-debt?utm_source=wisebread&amp;utm_medium=internal&amp;utm_campaign=article">transfer it to loans or other cards</a> with significantly lower rates? A HELOC usually has a much lower rate than a typical credit card, and the repayment terms are much easier, too. Some credit cards offer <a href="http://www.wisebread.com/the-best-0-balance-transfer-credit-cards?utm_source=wisebread&amp;utm_medium=internal&amp;utm_campaign=article">zero percent interest on balance transfers</a>, with a small fee (2%&ndash;3% of the balance), or sometimes, <a href="http://www.wisebread.com/5-best-credit-cards-with-no-balance-transfer-fees?utm_source=wisebread&amp;utm_medium=internal&amp;utm_campaign=article">no fee at all</a>. Shop around.</p> <p>Can you cut costs elsewhere to apply more money to your credit card payments? Is your gym membership being used? Do you need all those cable channels? Can you cut down on meals out, or subscriptions to magazines? Find ways to cut everywhere, and apply all of that to your debt.</p> <p>Finally, try the <a href="http://www.wisebread.com/a-comprehensive-guide-to-the-debt-snowball-method-0">snowball method</a>: Apply as much money as you can to pay off the card with the smallest balance, while making minimum payments on the others. Once that balance is at zero, take all of the payment and apply it to the next card down the line. You get a feeling of accomplishment, and the payments get bigger and bigger on each card, snowballing to create a huge payment by the time you get to your last card.</p> <h2>4. How Can I Improve My Poor Credit Score?</h2> <p>Having a low credit score is not only a little embarrassing, it's also very costly. Your credit score directly influences the kind of financial deals you are going to get. If you want to see better percentage rates on loans and credit cards, or avoid being turned down for any kind of credit, you'll need to address the issue.</p> <p>Now, this is not something you can fix overnight. A low credit score takes years of behavior into account, and it will take more than a few weeks to reverse your past misdeeds. But, you can start taking steps to improve it immediately. (See also: <a href="http://www.wisebread.com/7-ways-to-increase-your-credit-score-quickly?utm_source=wisebread&amp;utm_medium=seealso&amp;utm_campaign=article">7 Ways to Increase Your Credit Score Quickly</a>)</p> <p>First, get a copy of your credit report from <a href="https://www.annualcreditreport.com/index.action">AnnualCreditReport.com</a>. It's free, and you can see exactly what you're dealing with. Ensure there are no mistakes. And as mistakes do happen to a lot of people, you can begin correcting those errors. Any faulty late payments or delinquencies can be addressed, and your credit score will rise when they're removed.</p> <p>Next, look at all your credit card balances. Do you have small amounts spread over lots of cards? If so, you'll want to consolidate those debts onto just a few cards, and use only those cards going forward. However, DON'T close out the other cards. That can actually hurt your score. Leave them open; they are a history of good credit and they improve your credit utilization ratio, which measures how much of your available credit you have free to use.</p> <p>In the future, you will want to make sure you pay every single bill on time. Technology is a wonderful thing, so use it. Create a calendar on your phone or computer that lets you know when bills are due. And, use auto-pay when you can to avoid any kind of late fees.</p> <h2>5. What's the Difference Between Good and Bad Debt?</h2> <p>Some people even wonder, &quot;How can debt ever be a good thing?&quot; Well, there is a significant difference, and if you know what it is, it can have a real impact on what you spend your money on, and how you spend it. (See also: <a href="http://www.wisebread.com/8-signs-youve-crossed-from-healthy-debt-to-problem-debt?ref=seealso">8 Signs You've Crossed From &quot;Healthy&quot; Debt to &quot;Problem&quot; Debt</a>)</p> <p>Let's start with good debt. This is anything that creates value over time. Most people consider buying a home good debt, because the investment will grow in value, and will ultimately lead to more money at the end of the day. Other examples include student loans, which are an investment in yourself and future income, and business loans, which should ultimately lead to greater revenue. Of course, all of those examples have been marred by things like the collapse of the housing market, or the lack of well-paying jobs after graduation, but as a general rule, they are still considered good debt.</p> <p>Bad debt, on the hand, doesn't create any value. It's money spent on disposable items, high-interest rates, and anything else that contributes to &quot;spending without eventual financial gain.&quot; For instance, putting a $1200 clothes spending spree on a credit card is bad debt. A new car loan is actually bad debt, because cars depreciate in value. Even dining out is bad debt if you keep ringing it up on the credit card, and only pay off the interest each month. So, be careful. You may think it's good debt to put a new suit for work on your credit card, but if it isn't leading to a legitimate financial payoff, it's actually bad debt.</p> <p><em>What are you too embarrassed to ask about debt reduction?</em></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/5-debt-management-questions-youre-too-embarrassed-to-ask">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/prioritize-these-5-bills-when-youre-short-on-cash">Prioritize These 5 Bills When You&#039;re Short on Cash</a></span> </div> </li> <li class="views-row views-row-2 views-row-even"> <div class="views-field-title"> <span class="field-content"><a href="http://www.wisebread.com/3-times-bankruptcy-is-the-right-move">3 Times Bankruptcy Is the Right Move</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/all-the-ways-minimum-payments-are-evil">All the Ways Minimum Payments Are Evil</a></span> </div> </li> <li class="views-row views-row-4 views-row-even"> <div class="views-field-title"> <span class="field-content"><a href="http://www.wisebread.com/how-to-rebuild-your-credit-in-8-simple-steps">How to Rebuild Your Credit in 8 Simple Steps</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-money-moves-to-make-as-soon-as-you-conquer-debt">7 Money Moves to Make as Soon as You Conquer Debt</a></span> </div> </li> </ul> </div> </div> </div> </div><br/></br> Debt Management bankruptcy bills credit score embarrassing questions snowball method Tue, 10 May 2016 10:30:04 +0000 Paul Michael 1703948 at http://www.wisebread.com How Late Payments Affect Your Credit http://www.wisebread.com/how-late-payments-affect-your-credit <div class="field field-type-filefield field-field-blog-image"> <div class="field-items"> <div class="field-item odd"> <a href="/how-late-payments-affect-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/man_stressed_paperwork_000086794617.jpg" alt="Man learning how late payments affect his credit" title="" class="imagecache imagecache-250w" width="250" height="140" /></a> </div> </div> </div> <p>Your payment history is the most important aspect of your credit score, with the greatest weight of any single factor. So, what happens when you have a late payment and ruin your otherwise good payment history?</p> <h2>What Happens to Your Credit Score</h2> <p>Your credit score will be negatively affected by a late payment. In fact, according to Experian, &quot;the single <a href="http://www.experian.com/blogs/ask-experian/2013/12/04/recent-late-payments-hurt-credit-scores-the-most/">most important indicator of credit</a> risk is a missed payment, so it will have the greatest and longest lasting impact&quot; on your credit.</p> <p>Your payment history affects 35% of your total credit score, so it isn't the only determining factor, but it's a big one. Typically, one late payment can drop your credit score 60&ndash;110 points. Other things can also affect your score, like how late the payment is and your history of late payments. According to Credit Sesame, as a worst-case scenario, your credit score could drop 35%. If this is your first late payment on an otherwise good credit report, then you will likely see less than a 10% drop in your credit score.</p> <h2>There's a 30-Day Time Limit</h2> <p>In most cases, a late payment on your credit cards will not show up on your credit report until it's at least 30 days past due. This means that if your payment is less than 30 days late, it may not be reported to the major credit bureaus (TransUnion, Equifax, and Experian).</p> <p>According to the federal Credit CARD Act of 2009, credit card companies are required to send statements 21 days before the payment is due. This means that technically, you have at least 50 days after the billing cycle closes to make the payment before it's reported to the three credit bureaus.</p> <p>While this may be a relief when it comes to your credit card payments, the 30-day rule doesn't necessarily apply to car payments, mortgage payments, or other installment loans. In those cases, a late payment can show up on your credit report at any time. However, if you have a history of late payments, your lender may take further action, such as sending your account to a collection agency. The later your payment is, the worse the effect will be on your credit. (For example, 90 days late is worse than 60 days late, which is worse than 30 days late.)</p> <h2>Late Fees Will Add Up</h2> <p>Each time you are late for a payment (even by a day), you will incur a late fee. Typically, a late payment penalty fee is $25&ndash;$35. If you have more than one late payment, these fees can quickly add up. If your account is in otherwise good standing, your lender may consider reversing the late payment penalty fee. Simply call and request that the fee be reversed or forgiven. If at first you don't succeed, consider speaking with a supervisor.</p> <h2>Your Rewards and Promotional Offers Could Be Revoked</h2> <p>Only one late payment can ruin that coveted <a href="http://www.wisebread.com/the-best-0-balance-transfer-credit-cards?utm_source=wisebread&amp;utm_medium=internal&amp;utm_campaign=article">0% balance transfer</a> or <a href="http://www.wisebread.com/5-best-credit-cards-with-0-apr-for-purchases?utm_source=wisebread&amp;utm_medium=internal&amp;utm_campaign=article">purchase promotional offer</a> you were approved for. A late payment can invalidate the offer, so you'd have to start paying interest on the balance. Even being one day late on your payment could result in losing points, miles, and other credit card rewards that you have accumulated.</p> <h2>Your APR May Increase</h2> <p>Even if you don't have a promotional offer on your card, a late payment may result in an increase in your interest rate or a decrease in your available credit. In fact, according to the National Consumer Law Center, you could be hit with a penalty APR as high as 30% if you are more than 60 days late on your payment.</p> <h2>It's a Big Red Flag</h2> <p>Applying for financing in the future will be more difficult if you have a late payment on your account. Future lenders will believe that you are a credit risk and likely won't want to approve your application for a loan or credit card.</p> <p>This late payment red flag can affect other areas of your life as well. For instance, your credit report may be pulled when you are applying for a new apartment, for a new job, or for new insurance.</p> <h2>How Long Will It Affect You?</h2> <p>The good news is that your credit will recover from a late payment. The bad news is that there is no exact timeline for how long this will take. It will all depend on any other negative issues on your credit report. According to VantageScore, it takes between one to two years on average for your credit score to <a href="http://your.vantagescore.com/images/resources/VantageScore_ScoreImpactsWhitePaper-130305.pdf">fully recover from a late payment</a>. While it may not affect your credit score for long, it will remain on your credit report for up to seven years.</p> <h2>How to Restore Your Credit</h2> <p>The first thing you'll need to do is bring the account current. Going forward, you'll need to demonstrate a good history of on-time payments. If necessary, just pay the minimum amount so that you can keep up with the monthly payments. Remember that a late payment consists of your mortgage, car payments, loans, credit cards, and any other regular debt or lien payments that you make every month.</p> <p>Consider setting up automatic payments so that you never miss a payment again. You may also be able to receive payment reminders by email or text every month, or you can set them up yourself in your calendar (like Google Calendar or iCal Calendar). You can also speak with your lender to request that they change the due date every month to something that is more convenient for you (such as after payday).</p> <p>Your credit <em>will</em> recover, as long as you do the right thing going forward. Keep an eye on your progress by <a href="http://www.wisebread.com/the-5-best-credit-cards-that-offer-free-credit-scores?utm_source=wisebread&amp;utm_medium=internal&amp;utm_campaign=article">monitoring your credit score</a> through your credit card bank or lender &mdash; many offer it as a service or perk for account holders. You can also get your free credit report once a year at <a href="https://www.annualcreditreport.com">AnnualCreditReport.com</a> to ensure there are no late payments you weren't aware of.</p> <p><em>Do you have any experiences with late payments? Please share your thoughts in the comments!</em></p> <br /><div id="custom_wisebread_footer"><div id="rss_tagline">This article is from <a href="http://www.wisebread.com/andrea-cannon">Andrea Cannon</a> of <a href="http://www.wisebread.com/how-late-payments-affect-your-credit">Wise Bread</a>, an award-winning personal finance and <a href="http://www.wisebread.com/credit-cards">credit card comparison</a> website. 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Now What?</a></span> </div> </li> </ul> </div> </div> </div> </div><br/></br> Personal Finance bills credit score late fees late payments past due penalties Mon, 09 May 2016 10:00:07 +0000 Andrea Cannon 1703945 at http://www.wisebread.com