Credit Card Quick

How to Protect your Credit Score in Four Easy Steps

Credit Score

Do you know the ins and outs of protecting your credit score? If not, you’re not alone. Most of us don’t fully understand our credit scores because there are so many factors that go into determining our FICO score. However, in addition to paying your bills, there are a number of things that can either positively or negatively affect your credit score.

Here is our list of the top four steps you can do to protect your credit score:

1. If you don’t want nor need a credit card account any longer your first instinct may be to close that account. However, doing so could mean a lower credit score. It may seem more logical that having too much open credit on your credit score could lower your credit, but actually the opposite is true. Closing a credit card account lowers your available credit, thereby raising your debt-to-income ratio, something that the credit reporting agencies use when determining your credit score.
2. If you have any credit cards that are at or near their limit, you could be lowering your credit score. In other words, your credit limit is not an invitation to spend it all. The best rule of thumb when speaking of credit card spending is to limit your spending to no more than 30 percent of your credit limit. Any more than 30 percent could have a negative effect on your FICO score.
3. If you fail to make just one or two payments over the course of a year you may not think your credit score would suffer all that much. However, nothing could be further from the truth. In fact, one 30-day delinquent payment could mean as much as a 100 point drop in your credit score. Remember: in order to enjoy a great FICO score you must make all payments on time, without exception.
4. Falling into the retail credit card trap could cost you big. If you are inclined to take advantage of those “open an account today and save on your purchase” offers you could be setting yourself  up for trouble, as opening a number of credit card accounts at any given time can prove to be detrimental to your credit score. In addition, the high interest typically charged on retail credit cards could put you in over your head quickly in debt.

When to say When: How many Credit Cards are too Many?

Credit Score

The art of obtaining a good credit score can be quite tricky. You must have credit cards in order to build a strong credit history, but too many credit cards can lower your score. You have to apply for a credit card in order to be approved, but applying for too many credit cards can lower your credit score. You must spend on those credit cards in order to build a credit history, but too much spending can lower your credit score. Hmmm. Confused? You’re not alone!

If you are a credit card holder, you may be wondering if you have too many credit cards and if they will affect your credit score, either positively or negatively. Although it would be nice to have a definitive answer, the fact of the matter is that the right number of credit cards will be different for everyone.

However, there are a few ways you can examine your personal financial situation to determine if you have achieved a happy medium between not enough credit and too much credit:

• Review your current credit card situation – Are you currently able to handle the credit cards in your wallet? What are the finance charges and are those finance charges reasonable?
• Reexamine your ability to manage all of your cards – Are any of your current credit cards maxed out? How much credit do you have left on your cards (the credit reporting agencies will often lower your credit if your balance exceeds 30 percent of your limit)? Have you been late paying on any of your cards in the past six months? Do you often feel overwhelmed by your debt?
• Consider whether consolidating or canceling credit cards is right for you – Although most financial experts will encourage you to keep your credit cards open (even if you don’t spend on them) so that your available credit will raise your credit score instead of lowering it. However, if you feel like you will overspend on your credit cards, it is best to close the account. The small ding on your credit report will certainly be offset by the temptation you eliminate by canceling the card.
• Reexamine your spending lifestyle – If you are a good credit card holder, a credit card can easily raise your credit score and allow you to benefit from it; however, reckless, careless spending often has the opposite effect, so always take into consideration your personal financial spending situation and spending habits.

The Top Three Things you can do Today to Increase your Credit Score

Credit Score

The process of increasing your credit score may seem like a daunting task, but in reality it just takes time and a good, solid game plan.

If you want an action plan for building or rebuilding your credit, here’s what you need to do:

1. Pay all of your bills on time. OK, so this may sound quite explanatory, but in reality late bill payments are the number-one cause of poor credit scores. Many individuals only view payments such as car payments and credit card payments as important in terms of their credit score, but in reality every type of bill payment is important when it comes to your credit score. In addition to the obvious, installment type of loans, don’t neglect student loan payments and utility payments. Remember: every debt and every bill matters in the eyes of your FICO score!
2. Get the maxed out credit cards paid down first. Although debt may be the same in the eyes of creditors, your debt-to-income ratio plays a big part in your credit score. In other words, if you have a credit card with a credit limit of $10,000 and you have $10,000 charged on that card, your credit score will take a hit. As a general rule, always try to keep your credit card balances to no more than 50 percent of your credit limit. Your first order of business, therefore, should be to pay down the debt on those cards that are either maxed or near their limit.
3. Don’t cancel credit cards along the way. You may be tempted to cancel credit cards as you pay them off, but this may do more harm than good. If you are really tempted to begin spending on your credit cards again, then it may be in your best interest to cancel them. Otherwise, pay them off but keep the accounts active. This open credit available on those paid-off credit cards will boost your debt-to-income ratio, which will in turn boost your credit score.

The Link between your Credit Score and Closing a Credit Card Account

Credit Score

Have you heard the rumor about your credit card score being lowered if you close your credit card account? Are you now nervous about closing any type of account?

If so, then you must take into account several factors.

Annual Fees

First of all, many credit card companies are now imposing very steep annual fees on their credit cards. For example, Citi is now starting to impose a $60 annual fee on some of their credit cards. The fact of the matter is that most credit cards will not impose an annual fee, so in my opinion it only makes sense to close an account that is going to charge you an unnecessary fee. Will it lower your credit score a few points? Sure. Will saving the $60 every year be worth it? You bet.

Inactive Account Fees

In addition, many credit card companies are now charging fees for inactive accounts. In other words, if you have an open credit card account that you no longer use, you could very well be charged an “inactivity” fee by your credit card company. Again, in this instance, I would say that it is best to save yourself the aggravation and the unnecessary fee and close the account.

If you are unsure about closing your credit card accounts, but you want to avoid the fees, there are steps you can take. For example, simply charging one or two purchases a year on a credit card will stop the inactivity fee. You can also call your credit card company and dispute the annual fee; many credit card companies will comply if you are a good customer.

In the end, closing your credit card account will probably not lower your credit score substantially. Many times, a closed credit account lowers your FICO score because it shortens your length of credit history. Although this is usually true, the fact of the matter is that if you have a good credit score closing one account won’t affect your FICO score for very long.

You may, however, want to avoid closing an account before making any large purchases, such as a home or a car, as you will want your credit score to be as high as possible as to secure the best interest rate.

A (Relatively) Painless Guide for Improving your Credit Score

Credit Score

If your credit score is lower than desired, take heart. There are many ways in which you can begin rebuilding your credit and redeeming your credit score.

Your credit score is incredibly important, as it will determine your eligibility for certain types of loans and credit, and will be a big determining factor when it comes to competitive rates.

• Pay all of your bills on time – OK, so this may sound like simple advice, but it is still worth mentioning. Many people think that paying a few bills late here and there will not affect their credit score but, in reality, it can lower your credit score quite a bit. If you have trouble managing your monthly bills, consider signing up for online bill payments, either through your bank or through your creditor. This will allow you to set up payment dates and amounts, thereby ensuring that your bills will be paid on time, each and every month.
• Order a copy of your credit report – It may be a bit painful to look at your credit report, but it is necessary for rebuilding your credit. Take the time to thoroughly review your credit report from all three credit reporting agencies and check for errors. Errors and discrepancies can be quite detrimental when it comes to your credit score, so immediately report any problems to the appropriate agency.
• Check your debt-to-income ratio – How much of your available credit are you currently using? Much of your credit score is determined by your available credit, also called your debt-to-income ratio. For example, if you have a credit card with a $9,000 balance and your limit for that card is $10,000, you will likely have a very high ratio. The best way to combat this ratio is to pay off your credit cards and keep your credit lines open. In addition, it is best to avoid canceling any credit cards, as this lower your available credit and subsequently lower your credit score.

Credit Card Mistakes – What to Avoid to Save Your Credit Score

Credit Score

Credit cards have become a way of life for many people all over the world; especially here in the United States. A credit card can be a very beneficial financial asset in many ways, so long as the card holder is careful and responsible. However, many people find themselves missing things or making mistakes they did not intend to make. When it comes to credit cards, these seemingly small mistakes can cost you your card, your rate, your credit limit and even your credit score. If you want to avoid such hassles, watch out for some of the following common mistakes.

Due Dates

Make sure you know when that bill is due; not only the date, but check for time of day, as some companies charge penalties if the payment comes in after a certain time. This will help you to get that bill paid on time. This should not be very hard for most, especially now that the new credit card laws will soon be in effect and your bill will be required to be due on the same day every month.

For holders of multiple cards, this can get tricky. Use a calendar to track due dates, set up automatic pay and e-mail reminders, or consider calling your numerous companies and trying to get your due dates in sync based on what you can afford.

Watch Paying Minimum Balances

Admittedly, it is nice to have the option to pay the minimum balance on your card when money is tight. However, doing this often does not help you out. You are incurring more and more interest on carried balances. You wind up paying a lot more in the long run. To protect yourself and your credit, it is best if you can keep your balance down and pay the balance due  in full each and every month. If you are having a hard time, try to at least pay more than the minimum balance and work as fast as you can to pay off the rest. Remember, if you don’t carry a balance, you don’t carry any interest, saving you lots of money and headaches.

Keep Your Debt Under Control

Watch your credit card spending. Do not pull your card out for every purchase. If financial troubles hit, curb or eliminate your spending until things are back on track. If the debt is mounting, do not ignore it. Take control, stop spending, pay down your balances and cancel the card or cards if you have to. Save yourself from debt. You don’t have to sign your soul over to the credit card companies!

This does not apply to credit cards alone. Want to save your credit score and your good rates? Watch all of your debts. Those credit card companies can and will monitor customer credit reports. Any slow-pays or no-pays will send up the red flag, whether or not the credit card company has any real reason to worry. You will then be tagged as a high-risk and might be penalized with lower limits and higher interest. Who wants that?

Learn to budget, pay down your debt, give up those little (and big extras) until you have control. Take care of debt first and foremost and save you credit score from falling into a hole that is near impossible to crawl out if. If this does occur, give credit cards up until you can gain control. Use other methods to rebuild your score once your debt is paid down and think about credit cards later on when you have the means and the knowledge to keep things flowing smoothly.

Should You Consider a Credit Co-Signer?

Credit Score

If you’re young, have little to no credit history, or are looking to rebuild your credit history after bad credit or a financial disaster, a credit co-signer might be in your best interest. This is a person who is going to vouch for you as creditworthy, regardless of what your credit report says. While it might be a good idea, in both theory and reality, there are some things to keep in mind. A co-signer situation is not something you want to take lightly.

What It Means

When Uncle Bill signs his name on that line, he is not only vouching for you; he is laying his own credit on the line and taking on some potential financial responsibility himself. This means Uncle Bill had better be able to trust you in the first place or he could wind up in a world of financial hurt.

Responsibility

If you’re going to use a co-signer for any kind of credit, your co-signer is going to have to have pretty good to excellent credit in the first place and reasonable income. As for you, lack of credit or bad credit is the whole reason you are using a co-signer. You need to make sure you have the income to back the credit you are receiving and to make those payments on time each and every month. If you default, Uncle Bill has to pay, and not only will he be unhappy with your lack of responsibility, he might repossess the item he co-signed for or could even take you to court over the money he is out. After all, Uncle Bill most likely paid anyway. He doesn’t want to see the good credit he has built up through the years getting flushed down the toilet.

Considerations

You and your co-signer must have mutual trust and must work together to keep things going smoothly. If you have a hard time, talk to your co-signer to work something out, even if you have to pay them back when you are on your feet again. You do not want to ruin your chances of building the credit you so desperately want and need, nor do you want to destroy another person’s credit in the process. Always use a co-signer that you know well, and always do your part. Be cautious, as a co-signer relationship with someone close to you can become a disaster if there is a default on the account. Who wants to see a friendship or family relationship strained or destroyed over financial matters?

As long as you use a credit co-signer with caution and responsibility in mind, it can be a great way to help you build your credit and gain some independence as well.

The Importance of Building Credit and How to Get Started

Credit Score

Credit is one of life’s little enigmas. If you don’t have a credit history, you’re going to need it at some point. If you already have it, it may not be as good as it could be or you might not really be using it. Either way, credit can be difficult to obtain if you don’t have it or are not keeping up with it. If you are not flat out denied, odds are you will wind up paying a lot more than the guy with the five-star credit rating. Without credit history, a lender has no idea what kind  of customer you are. With a limited or flawed credit history, you will seem like a risk to the company. If you want the best deals and offers, the ultimate rates and yeses rather than nos, you need to build up your credit and maintain a good credit score.

You will thank yourself later in life when you try to get a loan, mortgage that dream house, buy a new car or even go for some big career change. Here’s a few great ways to get started on building up your credit:

Pay Your Bills On Time

Keep all of your bills current. Not all of them will appear on your credit report, however, some will and the ones that don’t (such as renting from a private landlord) might still reward you with an impeccable credit reference later on.

Establish Bank Accounts

Get yourself a checking and savings account. Make regular deposits, maintain a balance and keep these accounts in good standing. As an added perk, grab yourself a high yield account and you can earn excellent interest on your money as well.

Secured Credit Cards

You make a deposit and have a credit limit typically equal to the amount of the deposit. You use it, pay it off and use it again. This builds your credit by showing consistency in your payments and use and your financial responsibility.

Any Reputable Credit Card

If you can obtain any type of credit card from a reputable issuer, get one, use it and keep it paid up. This will go on your credit report and will build your credit worthiness in the eyes of those who might be looking.

Store Cards, Store Financing, Rent-To-Own and Gas Cards

Sometimes, these types of credit cards are easier to obtain than a standard credit card. As long as the company reports your activity to a credit bureau and you keep the account current, you will be building good credit that will benefit you in the future.

Co-signers

As you start to build credit, you might want to use a cosigner for some transactions. You need to choose someone you trust that also trusts you and has their own good credit score and is financially responsible with all their own debts. Of course, don’t take this lightly. If you default, your cosigner is the one in hot water, since they vouched for you. Be responsible when using co-signers so as not to impact their credit rating, cost them money or ruin the relationship you have with them.

Always make sure that any option you choose for building credit comes from a place that will be reporting your financial dealings with them to a credit reporting agency. If they don’t do this, your actions are having no impact on your credit score, defeating your purpose. Building credit is a smart thing to do, but use it wisely. Never take having great credit for advantage. It could come back to bite you someday. One moment of irresponsibility is all it takes for your credit score to quickly decline.

What’s All This Talk About Credit Scores?

Credit Score

You have probably seen and heard tons of advertisements advising you to check your credit report and credit score. With so much talk, it’s hard to believe anyone could have missed it, but has anyone really been listening? Do you know what your credit score is? Not just the number itself, but what that number means, why it’s so important and what that score potentially means for you?

Your credit score, or FICO score, is not just some meaningless number. It is a number, based on your social security number and financial history data, that is calculated by the three major credit reporting agencies. While each agency might have slightly different information and a slightly different calculation of your credit score, the numbers should still be similar enough to give a basic idea of just how credit worthy you are.

What Does My Credit Score Mean?

These scores are based on things the length of time that accounts have been opened and tracked. These accounts include revolving accounts (such as credit cards), installments, mortgages, bank accounts, debts owed, etc. If you have any kind of account with a company, typically, your activity will be reported to and tracked by the credit bureaus, regardless of whether your payment history is good, bad or in-between.

Credit scores typically range from a low of 340 to a high of 850. Few people achieve the 850 rating, as many things affect your overall credit rating, even if you do not have bad credit. An excellent score is 700 or higher. 600-699 is considered a satisfactory rating, even with the minor blemishes on your credit report. Any score below 500 is considered a low score and can make obtaining any kind of credit very difficult. Anyone with a score this low should think about taking a close look at their credit report and working hard to raise that number.

How Does My Credit Score Affect Me?

A high credit score is a major benefit. It will bring you the best offers for financing and lower interest rates for products such as loans, especially mortgages. A satisfactory score may not get you the best options, but since about 30% of people fall within the 600-699 FICO score range, most financial institutions want to work with them despite any flaws that appear on their credit reports. Maybe this is because even with the minor speed bumps, which are just part of life, people in this range have proven their want and will to keep their debts to a minimum and their financial reputation intact. A credit score of 500 or less will often leave you paying more in interest and fees, and that’s if and when you can get the credit. While credit is sometimes extended on a limited basis to people with very low credit scores, more often than not, credit is not offered at all. It’s nothing personal. While some people with a low credit score might be guilty of failing to pay there debts, others simply have little credit history to speak of. Not being given the credit because of a low score is simply because a person either seems high-risk or there just isn’t enough credit information to make lending or extending credit a plausible option. That’s why it is important for those with scores of 500 and below to work to increase their number.

Is There a Solution to My Low Credit Score?

Of course there’s a solution! Speaking with a credit counselor could help you to understand the fine points of credit and financial management and can help you to make a plan for improving your credit. Paying off debts you owe will also help. Other options include credit cards that offer a small spending limit and allow you to build up your credit as you use it and pay on the balance. The important thing is to look into your options and raise you credit score from low to at least a satisfactory level if you want the benefit of more credit and financing options.

Free Credit Report Ads are Under Scrutiny

Credit Score

You know those catchy commercials where some guy is telling you that you should order a “free credit report” to protect your credit.  Well, so does the Federal Trade Commission, and they’re not too happy about them.

In particular, they think using the term “free” by these companies is misleading. Many people don’t realize that these free credit report companies are not merely offering a free credit report; in fact, they are trying to sell credit monitoring services.

Credit Monitoring Services for Sale

In fact, if an individual orders a “free” credit report through one of these companies they are often lured into signing up for credit monitoring services. Credit monitoring services are essentially memberships that charge monthly fees to update consumers on any credit activity taking place on their credit report.

These memberships are often automatically withdrawn from an individual’s account on a monthly basis and, because many consumers are unaware of how this membership works, they end up being charged for a service that they simply don’t want.

Consumers’ Rights regarding Annual Credit Reports

The FTC seems to have the biggest problems with these commercials because the people calling these companies are simply looking for a free copy of their credit report. What many people don’t realize is that everyone is entitled to a free copy of their credit report on an annul basis from all three of the nation’s credit reporting agencies (TransUnion, Experian and Equifax). Individuals are also entitled to a free copy of their credit report anytime they are denied credit.

Are Credit Monitoring Services Right for you?

Credit monitoring services are memberships that closely monitor an individual’s credit report for any and all signs of activity. The purpose of these sights is to catch unauthorized activity as soon as it occurs. For some individuals, these services may be quite helpful and may help provide peace of mind. However, for most individuals, a quick check of their credit on an annual basis is all they need to keep track of their credit report.