Credit Card Quick

Factors that Won’t Lower your Credit Score

Credit Score

It seems as though financial experts are telling us every day of the many things we can do to destroy our credit. In fact, we hear so much bad news that we begin to think that, well, everything we do (or don’t do) will have a negative effect on our credit score.

Make no doubt about it: We must remain responsible and vigilant when it comes to maintaining our good credit. But there are a number of things that simply have no effect on our credit (so rest easy):

• Your income – Simply put, your income has no effect on your credit score. In other words, an individual making six figures can have a lower credit score than another individual making minimum wage.
• Your utilities – Failing to pay on your utility bill will not affect your credit score, regardless of what you may have heard. If you miss a utility payment the credit reporting agencies will not know of this because utility companies do not report payments to them. However, there is one exception: if you continually fail to pay your utility bills, the utility company may send your account to a collections agency, in which case your failure to pay your utility bills will certainly put a dent on your credit score.
• Bank overdrafts – Although overdrawing your bank account is an unpleasant, and often expensive, occurrence, the fact of the matter is that is won’t have a negative impact on your credit score, provided you settle your account in a reasonable amount of time. Otherwise, your bank can send your overdrawn account to a collections agency, which will then negatively affect your credit score.
• Your age – The credit reporting agencies do not hold your age against you, just like being of a certain age does not help your credit score. The only thing you may have going for you regarding your age is the time you have to establish a strong credit score.
• Your rent – Paying your rent on time, unfortunately, does not have any effect on your credit score. The only exception to this, however, is if you fail to pay your rent and your landlord takes you to collections for the debt.

How NOT to Improve your Credit Score

Credit Score

We all want to do everything we can to improve our credit scores. Although there are a number of ways to improve your credit score (pay your bills on time, keep your debts low, and establish a strong credit history), there are a number of actions that will do nothing to boost your credit score – and some actions that may even hurt it:

• Closing inactive credit card accounts – A good chunk of your credit score involves your debt-to-income ratio, or the amount of available credit you have versus your income. Although it may seem like closing inactive accounts will boost your credit score, the opposite is actually true because closing an account lowers your debt-to-income ratio. If you want to keep your credit score strong and your debt-to-income ratio even stronger, it is best to leave accounts open and charge on them a few times a year to prevent inactivity charges from your creditor.
• Opening a number of accounts in a short period of time – Some people think that opening a slew of credit card accounts will show a good debt-to-income ratio and, while it is true that the credit reporting agencies are looking at your available credit when determining your credit score, opening a number of accounts in a short period of time may show the agencies that your aren’t properly managing your credit and are becoming a credit risk. In other words, be choosy when it comes to opening new accounts and resist going crazy and opening up more cards than you can handle.
• Not charging on your credit cards – Although it may seem like the best way to get a great credit score is to have credit cards onto which you don’t charge, the truth is that the only way to being building a credit history is by making purchases and showing timely payments. The best way to begin building your credit is to charge frequently on your card, but pay if off in full, each month, as to avoid finance charges. In short, you can’t build credit if you don’t start using credit.

Why it’s More Important than Ever to Maintain a Strong Credit Score

Credit Score

A strong credit score has always been important, but the past, few years have clearly showed us just how important it is.

Just a few years back, banks and creditors were fairly lenient when it came to lending credit to consumers. Often referred to as the housing boom and the credit boom, it was a time of free-flowing credit, and it seemed as if nearly everyone was being approved for everything from credit cards to mortgages.

Because of this easy access to credit, many consumers simply began neglecting their credit. After all, why worry about credit when getting approved for loans wasn’t just possible, but a sure thing?

The credit industry of today, however, has changed dramatically due, in part, to a variety of factors, including: the housing decline, the decline of the banking industry, high unemployment rates, and credit card legislation.

What does this mean for you?

It means banks and creditors are now decidedly more stringent when it comes to approving consumers for loans and lines of credit. In short, if you want access to credit these days, you must have a strong credit score on your side.

If you fail to have a strong credit score, it may be difficult to:

• Get approved for a credit card – Creditors are lending credit to only those individuals with strong credit scores. If your credit is questionable, you may be able to get approved for a credit card, but don’t expect a competitive interest rate.
• Get approved for a car loan – Automotive lenders, because of a large number of repossessions over the last couple years, are now particular when it comes to approving consumers for auto loans. If you are able to get approved for an auto loan with less-than-perfect credit, don’t expect a low interest rate.
• Get approved for a mortgage – Because foreclosures are still a huge problem across much of the United States, lenders are more particular than ever when it comes to lending money for home loans. If you want a competitive interest rate and an attractive loan program, you must come to the table with a strong credit score.
• Get approved for a home equity loan or line of credit – Just like a mortgage, loans associated with a home are difficult to achieve unless you have a strong credit score.
• Get approved for an apartment lease – Getting approved for an apartment lease may be quite difficult to achieve if your credit isn’t strong. Remember: many things in your life may be affected by a poor credit score.

Important Steps to Take Following a Credit Card Rejection

Credit Score

If you receive a credit card rejection, it may come as quite a surprise, particularly if you have enjoyed easy credit in the past.

Upon receiving a credit card rejection, you will definitely want to investigate and remedy the problem so you can, once again, enjoy access to credit.

Here are the following steps you will want to take following a credit card rejection:

1. Order a copy of your credit report from all three credit reporting agencies – If you are denied credit based upon your credit score, you are entitled to receive a free copy of your credit report. Take advantage of this offer and order a copy of your credit report so you can begin to understand where the problem lies.
2. Fix the problems on your credit report – If you find information that is either inaccurate or incorrect, you will want to immediately dispute the credit report’s information. To do this you will need to provide the credit reporting agency with a written request to dispute the information, along with any supporting documentation. Once the dispute has been submitted, the credit reporting agency will investigate the situation and provide you with an answer, usually within 30 days.
3. Fix the problems in your budget – If you have made more poor financial decisions that have led to your credit card rejection, the first thing you will need to do is make a household budget so you can have a better idea of how your income is being divvied up among your financial obligations each month. You can’t fix your credit problems unless your first understand how to manage your monthly income and expenses.
4. Fix the problems with your spending – If your spending is the problem, now is the time to make decisions that will either positively or negatively reflect your credit from here on out. Order copies of your credit card statements from the last 12 months and carefully review them so you can get an idea how and why you were overspending. In order to remedy your credit problems, you must face the music by taking the time to really understand the mistakes of the past.

Common Questions about your Credit Report

Credit Score

How much do you really know about your credit report?

Most of us know that a credit report is vital for obtaining any type of credit, yet very few of us actually know our credit score or what is found in it.

If you want to learn more about your credit report, you may have quite a few questions regarding the process of building and maintaining a credit report. Here are the most common questions about credit reports and what you can do to build a strong credit score:

Q: Where can I find my credit score?

A: Each individual actually has three credit scores from the three credit reporting agencies: Equifax, Experian and TransUnion. A creditor may pull your credit report from any of these three agencies, so it is important to check your credit through all of these agencies.

Q: Does it cost money to order a copy of my credit report?

A: Each individual is entitled to a free copy of his or her credit report from all three major credit agencies each year. In addition, if you are denied credit, the creditor who denied you credit must tell you from which credit reporting agency they pulled your credit report; you can then order a free copy of your credit report from that credit reporting agency. You may also receive a free copy of your credit report if you were denied employment or insurance based on your credit report.

Q: What do I do if I find inaccurate or incorrect information on my credit report?

A: You can dispute the information found on your credit report with the credit reporting agency. To do this you must provide your dispute, in writing, to the credit reporting agency, along with any supporting documentation. The credit reporting agency will then investigate your dispute and provide you with the results, usually within 30 days. Any inaccurate or incorrect information will then be taken off your credit report.

Q: Who can get my credit report information?

A: The only way a creditor, insurance company or employer can obtain your credit report information is with your approval.

A Great Credit Score is in your Future!

Credit Score

If you haven’t had a chance yet to establish a strong credit score, you may be wondering how to go about doing so. Luckily, there are a number of ways you can begin building your credit score so you enjoy the many benefits of a strong FICO score.

Here’s what you need to do to begin your journey to a strong credit score:

• Order a copy of your credit report from all three major credit reporting agencies. Although you may think your credit report will be virtually blank, mistakes do happen and it’s possible that there are errors on your credit report. You are entitled to a free copy of your credit report from the credit reporting agencies once a year so take advantage of this opportunity and order them today!
• Once you have checked your credit report, you must open a checking or savings account. Lenders of any kind like to see an active bank account, as it shows financial stability. Plus, it provides you with a means to pay on monthly bills and debts.
• Understand the factors that credit reporting agencies take into consideration when determining your credit score. Understanding that your credit score is made up of a number of factors, including payment history, payments and the ratio of debt to income, will better help you build your credit score.
• Start with a secured credit card to begin building your credit history. Secured credit cards are essentially credit cards that are secured with a cash deposit. Once you have established a history of regular payments with a secured credit card you can likely apply for – and be approved for – an unsecured credit card.
• Don’t think just in terms of credit cards when considering your credit score. In fact, lenders and credit reporting agencies look at your payment history on other types of monthly bills, including student loans and utilities, just to name a few. In other words, be responsible when paying any type of monthly bill or debt, as it could reflect poorly on your credit score if you don’t.

Diversifying your Credit to Build your Credit Score

Credit Score

Many consumers wonder what they need to do to build a solid FICO score. We all know that paying our bills on time and keeping our debts to a minimum is always a good idea if we want a strong credit score, but there are other things we can do bump up our credit score so we can qualify for the lowest interest rates on everything from home loans to credit cards.

Here’s how:

The three credit reporting agencies (TransUnion, Equifax and Experian) assess your credit worthiness by looking at a number of factors, including credit history, payment history and your debt-to-income ratio. However, they also look at how you manage different types of credit. If you are missing certain types of credit, your credit score will likely be lower.

Examining Different Types of Credit

In short, there are a number of different types of credit accounts that the credit reporting agencies take into consideration when examining your credit: credit cards, retail accounts, installment loans, home loans and consumer finance accounts. If you lack a home loan or installment loan, for example, the credit reporting agency does not have information to draw from and will therefore reduce your credit score slightly to account for this lack of information.

In other words, simply paying your credit card bill on time each month will not make a huge difference to your credit score over the long run. Installment loans are a great tool for raising your credit score, as they are steady, monthly bills that must be paid. In other words, if you pay on a car loan for an extended period of time, the credit reporting agency then has adequate information that details you are a good credit risk for installment loans and will therefore raise your credit score to reflect this.

Consider Adding a Small Installment Loan

Now this certainly doesn’t mean that you should seek other types of credit simply to raise your credit score. All it means is that it may take time to build your credit score enough to obtain the best interest rates on a variety of loans. However, now may be a good time to take a small installment loan on a kitchen appliance, for example, and make the steady payments instead of paying cash for it. The history of your payments will most certainly have a positive effect on your credit score.

How to Take Care of your Credit Score

Credit Score

You take care of your home, your kids and your health, but where does your credit score play into this equation?

For many of us, our credit scores are often neglected, which may lead to big problems when it comes time to obtain a mortgage, a car loan or any other type of credit. Instead of neglecting your credit score, give it the attention that it deserves so that you can obtain the credit that you deserve in the future.

Here’s how:

• Pull a copy of your credit report from all three credit reporting agencies at least once a year and go over them carefully, as to catch any errors, discrepancies or fraudulent activity. If you visit annualcreditreport.com you can retrieve a copy of your credit reports, each year, for free.
• Stay diligent and pay all your bills on time, each and every month, regardless of how small or insignificant you may think they are. Sure, you pay your mortgage, car payment and credit card on time each month, but what about your gas card, your electric bill and your water bill? Most companies, including utility companies, report to the credit reporting agencies, so you could be sabotaging your credit simply by neglecting these often-forgotten bills.
• Don’t go a credit card-closing spree, even if you don’t use the cards anymore. Although many individuals think they are doing themselves a favor if they close unused credit card accounts, they may actually be doing more harm than good. This is because every time you close an account, you lower your “available credit,” which therefore raises your debt to income ratio, which – you guessed it – drops your credit score.
• Make sure you really want a particular credit card and will use it before applying for it. Too many inquiries for credit cards will also lower your credit score, and may set you up for too much debt. One of the credit card types you will definitely want to keep in check is the retail credit card. This is because many retail credit cards come with very high APRs and related fees.

Does your Credit Card Help or Hinder your Credit Score?

Credit Score

We all assume that our credit cards, when used correctly, will help our credit score ranking. After all, establishing a history of charging and paying will prove our credit worthiness and bump up our credit score, right?

Well, that’s right most of the time. However, like most financial cases, this does not always hold true.

In particular, take note if you have a Visa Signature, World MasterCard or American Express credit card. These credit cards are generally reserved for those with high incomes and excellent credit and therefore come with the NPSL feature, which stands for No Preset Spending Limit.

You may think that if your credit card comes with the NPSL that you are free to charge as pleased, with no implications. However, your spending may very well be limited – unbeknownst to you.

What are NPSL Credit Cards?

NPSL credit cards generally come in two varieties: NPSL credit cards, which allow you to spend a certain, undisclosed amount, but require you to pay off your balance each month; and NPSL credit-hybrid cards that feature a revolving line of credit that allow you to exceed your limit, provided you pay any amount over your credit limit in full each month.

What many individuals fail to realize that many of these NPSL cards do come with a spending cap and, if your reach that amount (which may be unknown to you), your card will be declined. So, instead of enjoying the benefits of having no preset spending limit, you may be fooled into thinking your card will never be declined – only, of course, to have it declined, which can be incredibly inconvenient and embarrassing.

Detrimental to your Credit Score?

In addition, the way NPSL cards are reported to the three credit reporting agencies may be downright detrimental to your credit score. This is because one of the factors considered when determining your debt-to-income ratio is your credit utilization. If the credit limit is unknown by everyone except for the credit card company, including the credit reporting agencies, your credit utilization cannot be accurately calculated, thereby possibly lowering your credit score.

In short, it may be best to stick to a competitive, low-interest-rate credit card and avoid NPSL credit cards if you are concerned about your credit score.

Are you Putting your Credit at Risk without even Knowing It?

Credit Score

Most of us are pretty good at keeping a budget, paying our bills and spending wisely on our credit cards. However, there is more to managing our finances and protecting our credit than you may think.

The good thing, however, is that, with the proper knowledge, it is actually quite simple to protect your credit and manage your finances just by following a few, simple steps:

• Switch your monthly budget into an annual budget. Most of us think in terms weeks instead of looking at the year as a whole. There have been a few studies that have shown that college students underestimate their spending by as much as 40 percent when looking at it from a monthly perspective, yet overestimate their annual spending by just three percent.
• Start now and begin saving. There is only one way to protect your finances and credit and prevent a financial catastrophe from occurring: by saving! Many experts recommend saving at least $1 out of every $3 you earn. It is always best to pay yourself and then work your budget around your remaining income. If you can’t swing 30 percent, don’t give up spending altogether. Instead, save what you can and work toward paying off your debt so you can bump up your saving for the future.
• Beware of rewards credit cards, as they could cause you to accelerate your spending. Called “purchase acceleration,” this happens when you spend more freely, or purchase things you otherwise wouldn’t have with cash, because you think you’re being rewarded. However, in reality, the interest you are paying on your unpaid balances will exceed any rewards you may have earned.
• Reevaluate your gift giving. Many individuals overdo it when it comes to spending on gifts. Often times, a less-expensive gift will be just as much appreciated, and will put you in a much better financial situation. Purchasing a gift within your budget will still allow you to make your recipient happy, but will not put you in credit card debt that you can’t afford to pay off.