Category: credit

Spending money comes easily to some people, and spending money on credit cards comes even easier – as this detached way of spending can often make it seem like you’re not spending at all. That is, until the monthly statement comes in and you realize that you have gotten yourself into a bit of a mess financially!

So, before you let things get that far, you should try to take the time to learn some of the rules for using your credit card. If you start out using credit correctly, you will be able to increase your credit score and depend on the convenience that credit can provide to you.

Credit Card Rules – Avoid the Pitfalls of Uncontrolled Spending

The first and most important of all credit card rules is to pay off your balance each and every month. You don’t want to leave a balance and end up paying interest on it.

Using a credit card doesn’t have to be a costly option. If you pay it off each and every month, there is no chance for interest to be charged. This means that there is no penalty for using your credit cards. It also means that you aren’t paying more for something because you put it on the plastic.

Don’t spend more than you can pay back. This is where credit becomes a slippery slope.

You can use credit to pay for something that you don’t have the money for right now. However, the goal should be to only purchase something that you would be able to pay for in a month. This is the point where many people lose control of their spending.

Whether you want to go on vacation or purchase a new piece of furniture for your home, you need to have enough money to pay for it. That means that you can put it on credit but you need to have a steady income that ensures that you will be able to pay all of the money back that you borrow.

Keep an eye on your statements, reading them carefully and don’t just throw them in the trash.

Once you get the hang of using credit cards, you may think that you can keep track of all the spending in your head. While this may be true, it is important to read every statement that you receive. You are checking for a few key points.

Double check the amount that you owe as well as the last payment received. While it doesn’t happen very often, mistakes are sometimes made and you don’t want it to be at your expense. This can add up quickly.

Keep an eye on the interest rate. If you don’t read any of the other correspondence sent to you by the credit card company, you may not realize that your interest rates are rising or that there is a minimum finance charge after a certain amount of time.

Shred all of your statements or keep them in a secure location. In the United States, identity theft is a real concern. If you don’t want that credit card number floating around, be careful with the statement and receipts.

Some credit cards offer customers a chance to use a “one time” credit card number in place of the card’s actual number in order to protect their numbers and identity.

If you keep everything locked away, you probably won’t have any problems. When you are done with any documents that have your card number on them, shred them before placing them in the trash.

An actor, portraying a victim of identity theft, bewails the damage done and the hours spent putting back the pieces of a ruined credit history, working to get bank charges and penalties waived and getting their good name back. While many of these stories may depict actual events, advertisers are using fear to motivate consumers to buy their protection service or product.

And although there are some legitimate actions that can help prevent someone from stealing your identity, any sales pitch that suggests they can guarantee against the theft is not being honest and should be avoided. One method that slips past the best attempts to protect your identity is data breaches from a major retailer or bank. The responsibility for securing against these threats is companies, financial institutions and banks.

What is often omitted from ID protection service sales pitches is what you actually get for your money. Your identity can be stolen in a variety of ways that can be defended against – phishing, malware, stolen mail and even from sensitive documents in your trash.

Each identity protection company offers different services to guard your personal information. There are two questions you should ask yourself before signing up. Is what they’re providing beneficial and can and will you do it on your own? If you see a benefit, yet know you won’t follow through with the necessary steps on your own, it’s time to select a company. Here’s what you need to look for when choosing an identity protection service?

1. Is the company doing more than observing of your credit reports? If that’s the entire provision of the service, go elsewhere. Monitoring your own credit reports is easy, as federal law mandates a free annual copy from the three major credit reporting agencies for consumers who request them. A reputable identity protection services company will not only monitor your credit report but have sophisticated means of scanning public and court records, monitor against medical benefit fraud, and actively search known “bad neighborhoods” which feature websites that sell stolen Social Security Numbers and stolen credit card numbers, places that are less available to the average consumer.
2. Are you paying for advice or assistance? Some services merely provide advice, if you are in the unfortunate situation of becoming a victim. Look for a one that provides recovery assistance and advocates for you as you deal with financial institutions and creditors. Also, be sure the company is independently securing your credit reports and not requesting the free reports you are entitled to by law.
   
3. Is it worth the investment?Some people claim that the peace of mind is worth the price, but if you’re only paying for credit report monitoring, save your money and do it yourself. While many banks provide their customers with a variety of protection services for a monthly fee, these are typically report monitoring only.You may already have some credit card monitoring protection without being aware of it. For example, some AAA auto-club chapters or credit card providers may offer some level of credit monitoring as part of your membership. Some services require an annual payment upfront and may not provide a pro-rated refund if you cancel before the term expires. Read the fine print for the cancellation policy.

One last step to ensure that you’ve chosen the best service is to do a web search for complaints against the company. Contact the Better Business Bureau and ask if there are deceptive practice complaints. And remember that much of your security is in your hands.

About The Author: Noreen Ruth writes for several popular finance websites. She is interested in educating consumers about using credit responsibly and about legislative action that will affect their ability to borrow the money they need. She has contributed hundreds of articles to various online sites that provide content to educate consumers on credit card offers, debt consolidation services, loans and other finance related topics.

With an increasing number of households across the US experiencing financial difficulties, bankruptcy no longer holds the social taboo that it did in the past. But is there ever any way back once you have been declared as insolvent?

Bankruptcy is undoubtedly a serious step and there are many different options to avoid bankruptcy which should be considered before deciding there is no other way to free yourself from debts. Consolidating is a possibility and loans can help to identify the right type of finance.

However, if you opt to take the plunge and file for bankruptcy, it is important to know that not all debts are wiped out by the order. Student debts, for example, are exempt from bankruptcy and must still be repaid in full.

Other types of credit will be covered by the bankruptcy, such as the kinds of loans at moneysupermarket as well as credit cards and overdrafts.

Creditors will in all probability shut any existing accounts, even if the balance is zero to prevent you running up any further debts.

It can be difficult to obtain credit with a bad credit score, and a bankruptcy can make things worse. It is likely to be very difficult to obtain credit for at least 10 years and to stand any chance of rebuilding your credit score, it is imperative to ensure any credit entries are positive. Any sign of ongoing financial problems will just exacerbate the situation even further.

Can You Get Credit After Bankruptcy?

Although it will be very difficult to get credit and it is probably not a good idea to jump right back into borrowing again anyway, it is important to get some entries on your credit record to counterbalance against the bankruptcy.

Repaying student debt installments is one way to help build up some points without borrowing more money.

It is also essential that your credit file be updated to reflect the debts that were included in your bankruptcy petition. Unfortunately, this does not always happen automatically even though it should and showing undischarged debts can impact a credit file even more.

Once the credit files have been updated, it may well be possible to qualify for a high interest credit card with a small limit. Even if no finance is needed, it can be a good idea to get one of these cards, ensuring you pay off the entire balance each month so you do not pay high interest charges.

By doing this, you are demonstrating to creditors that you can be relied upon to make repayments as and when due, despite the issues you may have had in the past.

Surprisingly for many people, it is possible to get a mortgage after being declared bankrupt, providing it was over six months ago, as a general rule.

Of course, you would not qualify for the most competitive rate and your lender will need you to have some kind of deposit, but getting a home loan is likely to be easier than finding a new credit card.

The good news is that mortgages build credit ratings back up very rapidly, which is the one essential thing after a bankruptcy.

Those individuals who have gone through the bankruptcy process and are trying to rebuild their credit rating should be wary of bogus firms that either offer to ‘repair’ a credit file or offer a guaranteed loan.

There are a number of fraudulent firms that prey on individuals who have been made bankrupt, as they know they will be more vulnerable due to their lack of options.

photo credit: Images_of_Money

While it seems likely that a bad credit rating can prevent you from the ability to obtain a loan, this is not necessarily the case.

The first thing you should do is determine exactly what your credit score is. This can be done by getting a free copy of your credit report from one of the three credit bureaus: Experian, TransUnion, or Equifax.

Legally, you are permitted to one free copy of your credit report annually. This is something that every consumer should take advantage of.

Verify all the information contained on your credit report. If any of the information is incorrect, or invalid, contact the credit bureau immediately.

The item or items on your credit report that you dispute must be submitted to the credit bureau in writing. The credit bureau is permitted to take up to 30 days to investigate your dispute.

If there are no errors on your credit report, or after the disputed items have been removed, look for your credit score. This is the same number that credit lending agencies will examine.

Lending agencies are looking for the highest possible credit score. A lower score may reflect a higher risk, in their eyes. A score of 700 or higher is considered a good credit score.

If you have a credit score lower than 700, don’t despair. It is still possible to obtain a loan.

Lenders will simply adjust the interest rate on the loan you seek to be slightly higher than it would be if your credit score were higher. Generally, the lower your credit score is, the higher your interest rate will be.

If you are attempting to obtain a credit card, rather than a loan, the same rule applies. There are credit cards available if your credit is less than stellar.

Bad credit credit cards, are simply credit cards that have some sort of built in protection for the bank that offers the card. Some of these bad credit credit cards are secured cards.

With secured credit cards, you deposit a certain amount of money and you use the credit card as you would use any card, with the charges being debited from your initial deposit.

For example, you deposit $500 towards your secured credit card. You charge $100 at a gas station, that $100 is debited from your deposit, leaving you with $400 left on your credit card.

These secured credit cards are a very good way to rebuild your credit if you’ve had credit issues in the past. Secured credit cards do not show up on your credit report as anything other than a credit card. There is no differentiation between a secured credit card and a regular credit card on your credit report.

Don’t look at your bad credit as a deal breaker. If you have trouble obtaining a loan, consider hiring a loan broker. Loan brokers are often able to obtain loans for those with less than perfect credit.

Photo credit: TrinityCreditServices

These days having a credit card is an almost essential accessory to being able to access the best deals, with cash and checks often seen as a outdated way of paying for purchases of any value.

The reliance on plastic has seen a vast number of providers spring up; a simple check on credit cards at any comparison website will provide a long list of potential lenders.

A recent trend has also been towards holding more than one card, but how many credit cards should you have? Is it a good idea to have many credit cards, or is this an indicator of underlying money problems?

In the past, most people opted to have just one credit card, increasing their limit if they needed to up their spending power. However, nowadays it is far more common to have an array of plastic to pick from.

One of the reasons for this is not just because borrowing has become more prolific and card use more mainstream, but because there are many different kinds of cards on the market that are better suited to different uses.

As an example – what kind of cardholder are you? Do you pay off your balance in full every month? Or do you scrape by with just the minimum, paying off large purchases over several months?

If you are the former, a credit card with either a low or 0% APR will be of little value to you, as you will never pay any interest on your purchases.

A far better card to look out for would be one that either provides cashback or a good reward program, as this would actually mean you end up in profit when making purchases.

If you fall into the latter group, whilst cashback or rewards would undoubtedly be a nice aside, they should not be the primary focus.

Cardholders who opt to pay off the balance over longer periods of time are far better off looking for a card with a competitive interest rate that is held at a low level for a long time.

However, in reality, many people are a combination of the two extremes, paying off smaller purchases in full but spreading out larger costs over longer periods of time.

This means that a single card is unlikely to provide the best returns, as those with the best cashback or reward programs seldom offer a competitive interest rate too.

It is therefore necessary to have different cards for different purposes – some with a low interest rate for long term spending and another with a better package for balances which are paid off in full each month.

Another strategy that people adopt is to split their spending onto different cards; one for every day bills, another for auto expenses and so on.

Whilst this takes some organization to set up, some people find it a better way to manage their finances and keep track of how much they are spending on everything. Another advantage of this is that it can make tax returns easier to do if you haven’t kept track of your costs properly throughout the year.

Whilst it can undoubtedly be of real value to hold more than one card, just adding to the collection because there is not enough money in the checking account is not a good reason and holding several cards with them all maxed out will act as a red flag on your credit file that there may be problems ahead.

Photo credit: Andres Rueda

You need good credit to survive in today’s economy. It is so easy to fall behind on bills and watch your credit score drop. Sadly, many people don’t even realize the impact that a bad credit score has on them.

Those with poor credit have probably noticed their interest rates have increased. Did you know that someone with a credit score of 630 may end up paying over 1.5% more than someone with a score of 760? Now imagine having a credit score of 539. Poor credit costs you a lot more in the long run. Also, you will be turned down for many great discounts if you don’t keep your credit score up.

Having to pay high interest rates on your loans isn’t the worst thing you have to worry about. A poor credit score may keep you from being able to get a loan at all. Most people can’t buy a new car or house with cash.  If you can’t take out a mortgage for a new house, you will be stuck renting until your score improves or $100,000 suddenly falls on your lap.

Of course, renting will cost you much more in the long run. Over the long run, a homebuyer with average credit can save $2,500 every month. The first time you are denied a loan, you know you have a problem. It’s time to fix your credit score ASAP.

Paying higher interest rates and getting turned down for loans are problems people with bad credit may expect. However, there are additional disadvantages they may never have considered. These include:

1. You might not get an apartment. Most people expect poor credit will get in the way of their dream of owning a house. They never consider that they won’t be able to get approved for an apartment. Many landlords conduct background checks and will turn away applicants they feel won’t pay up on time.
2. You can’t get a job. Landlords aren’t the only ones who do credit checks. Many employers want to know your credit as well. One employer has actually been quoted as saying that there are two things he looks for when he considers an applicant: their character and their credit score. You can actually get yourself in a viscous cycle of financial hardship if you can’t improve your credit score because you don’t have a good job to support it.
3. You pay more for electricity and cable. These companies also get nervous with customers who have not proven themselves to be responsible. They may require larger security deposits.
4. Insurance premiums skyrocket. The insurance industry also doesn’t hesitate to run credit checks. They aren’t so concerned that you won’t pay your bills on time. They adjust their premiums to customers who are more likely to file a claim. Those with low credit scores are statistically about twice as likely to file a claim and may have to pay an additional $150 a month.

Having a poor credit score can cost much more than you would expect. It doesn’t only result in higher rates on your credit cards. A bad credit score can literally ruin your life. Get caught up on your bills and start managing your money more effectively.

Americans can learn a thing or two about what not to do when trying to get their financial house in order by listening to the wrangling of our elected officials in Washington. It’s shameful to see our legislators bandying around the idea as a political maneuver, when it should be standard practice for corporations, individuals and ruling bodies to secure responsible money management.

If you reap only one benefit from the federal debt dilemma, it should be the importance of establishing a debt ceiling…a personal debt ceiling. Yet, many debt-ridden Americans borrow like Uncle Sam and never put in place spending limits or a budget to rein in their out-of-control behavior. But if you’re hoping for a better life, here are some ways you can begin to attack your debt troubles, slash spending and put in place your own personal debt ceiling:

Educate Yourself

The process of becoming proficient at money management requires that you understand why your credit history is so important and then put into action the necessary steps to bring it under control. Having a poor history will have a significant negative impact on your credit score and make it difficult to buy a home, rent an apartment and even may keep you from some great job opportunities.

Putting Controls in Place

Like the Feds, there is a limit to the amount of money you can bring in. Even the wealthiest among us needs to balance their income and expenses to be able to effectively manage their money. It stands to reason that getting debt under control requires spending less than the income that is earned. This is the control that is referred to by a ‘debt ceiling’ and is the benchmark for your personal debt limit. To be most effective, an actual figure that you won’t exceed needs to be put in place as your personal debt ceiling.

Your personal debt ceiling should be no more than 40% of your gross income. For example, if your annual gross income is $40,000, your debt ceiling should not exceed $16,000. According to the Federal Reserve, households that spend more than 40% on debt repayment each month are considered in financial distress.

For people who have reached the maximum income in their field, the expense side of the balance sheet needs to be considered to stay under their debt ceiling. With thousands of debt management articles giving advice and tips on personal finance and debt problems, there is bound to be some ideas that you can work into your way of life. Make one change in how you spend money each week and you’ll begin to have more available income to pay down credit card debt or make a larger payment on your mortgage or auto loan.

photo credit: Kevin Krejci.

If you aren’t a financial expert, as most of us aren’t, you may be confused when it comes to all the different credit cards that are available. Different credit card companies will offer you different deals, each promising something that seems too good to be true. And when it seems too good to be true, it often is. If you’ve been offered a credit card with no preset limit, remember that there is plenty of fine print that you need to read before committing. Here are a few things to consider before jumping on the no preset-limit credit card bandwagon.

The Truth about Credit Cards with No Preset Spending Limit

1. Credit utilization affects your credit score.

Credit utilization is a fancy term that credit bureaus and financial services use to describe how much credit you have used out of the amount of credit that is available to you. Credit scoring companies determine your credit utilization by percentage for each account. For example, if you have a credit card with a limit of $5,000, and your balance is $500, then you have a credit utilization of 10%. The lower your credit utilization rate, the better your credit score.

2. NPSL credit cards can effectively ruin your credit score.

The biggest problem with no preset-limit (NPSL) credit cards is that credit bureaus and scoring companies often make the mistake of completely misreading your credit utilization rate. Because many NPSL credit cards have no revealed set limit, many creditors will report your credit utilization rate as 100%, whether or not you are using 100% of your credit. As such, NPSL credit cards can be risky, especially if your credit score is already average or low.

3. There is no such thing as a true no-limit credit card.

Even if you did want to take the risk of harming your credit score with a NPSL credit card, you should also know that “no limit” is a misnomer. Every card does have a limit; it just isn’t one that is revealed. For example, one type of NPSL credit card is a purely charge card, meaning that there is a limit, it is just undisclosed. Any remaining balance must be paid by the end of the month. Another NPSL card is a credit/charge hybrid card, in which the limit is revolving, and credit companies actively encourage their customers to pass the limit, as long as they can pay the balance at the end of the month, too. As they say, there is no such thing as a free lunch.

Of course, there may be certain circumstances under which you would be interested in getting an NPSL credit card. At the same time, however, the most important thing to do is to look at all your options, including other credit cards or not getting a new credit card at all, before making any final decision.

Paying off credit cards may seem like a daunting task, especially if your cards are burdened with high interest rates.

Ideally, credit card balances should be paid in full each month, but most people have found this to be next to impossible.

If you are having trouble paying down your balance, there is a way to give yourself a longer amount of time to make payments, while still saving you money in interest.

A balance transfer is the simple act of transferring your debt from one credit card to one with a much lower interest rate. The best way to do this is to apply for a card that offers a 0% APR on all balance transfers.

While no credit card exists that has a 0% interest rate for life, many cards provide a 0% introductory rate. This rate generally lasts for one year.

The process itself is simple. On the credit card application, enter in your current credit card information and opt for the balance transfer. If qualified, the process will begin.

You can also wait until you receive a new credit card before starting the transfer process. Never transfer your balance to a credit card with a higher interest rate.

Several credit card companies offer a fixed APR rate on transfers and are willing to transfer balances with no fees, but read the fine print first.

Fees on balance transfers are becoming more widespread, so decide if the fee is worth the transfer.

Don’t forget to note any over-the-limit fees associated with the new card. If you’re notorious for making late payments, note the late fees. They may be higher than your current card.

If you have several credit cards, a balance transfer can help keep track of debt by consolidating it, making it easier to keep track of payments.

For those with poor credit, a balance transfer may not be an option. Most credit card companies only extend balance transfers to consumers with good credit, so you may have to dig deeper for a card for which you can qualify.

Another alternative is to apply for a card that carries a long-term, low-interest rate. Transferring balances to these types of cards will provide more stability, giving you more time to pay down the balance without having to worry about the 0% APR expiration. Since most 0% introductory rates shoot up after the first year, a long-term, low-rate card may end up being the better deal.

While waiting for a balance transfer to finalize, make the monthly payments on your old cards. It can take up to a month to transfer the balance so you wouldn’t want to incur a late charge.

Request a billing statement from your old card that shows a zero balance. The company may send this to you automatically. When the zero balance has been confirmed, cancel the old credit card or keep it locked away so you won’t be tempted to use it.

There are also non-credit card alternatives that can give you more time to pay down a balance. Taking out a personal loan can ensure a long-term, low-interest rate and allow you to pay the credit card balance in full. This way you will only be making loan payments and not be burdened by high credit card rates.

You’ve probably been warned by people more experienced than you that getting a lot of credit checks can actually lower your credit score (and by a significant margin, no less).  Unfortunately, this is true.  But it’s not totally accurate.  While a lot of activity on your credit report (in the way of creditors requesting a copy of the report) will probably set off alarm bells at the bureaus that determine your credit score, they have been in the business long enough to realize when you’re looking to make a major life purchase (such as a car, a house, or a college education) rather than racking up a lot of debt that you have no intention (and no means) of paying (as with multiple credit cards).  Here’s what you need to know before you start doing credit checks so that you can manage it in the right way.

For starters, you need to know what is on your credit report.  In fact, you should be checking it on a yearly basis.  This can be done by simply ordering a free report online (at AnnualCreditReport.com). This is considered a soft credit check and it should not adversely affect your score.  This should be done whether you plan to make a large purchase or not just so you can keep track of your credit rating and make sure that there is no misinformation, black marks, or fraud occurring. This is also helpful in building a perfect credit profile.

Once you know what is on your credit report you’ll have a better idea of how your credit score will be determined, which will give you a better idea of what type of loan you can get, which could save you a lot of time, trouble, and credit checks (at least until you are able to improve your rating).

And once you start shopping around for loans or credit cards, there are a couple of things you should know going in.  First of all, the effect on your credit score is not based solely on the fact that you are seeking multiple credit checks.  If these requests are coming from financial institutions, such as banks, the credit bureau will assume that you are seeking a loan for a major purchase, such as a car, a home, a business, or schooling.  Of course you will want to check with several lenders in order to get the best deal, and the credit bureau understands this.  For this reason, they will exempt these types of checks over the course of 30 days before allowing them to show up on your credit report.  This gives you plenty of time to shop around and secure your loan before there is any effect on your credit score.  And once you start paying off your loan, your score will quickly rebound.

If, on the other hand, you are shopping around for credit cards, you won’t receive the same consideration.  Although you may simply be looking for approval so that you have many cards to choose from when the time comes, the credit bureau will not differentiate between you and the person that is looking to get as many credit cards as they can, rack up the charges, and then default (in short, commit fraud).  So narrow down the number of cards you’re interested in before you try to get approval.  Otherwise you could be looking at losing five points off your credit score for every credit check.

photo credit: Casey Serin.