Credit Card Quick

Your Credit Score: Broken Down

Credit Score

We all know that our credit score is of great importance, as it determines our ability get a loan or any other type of credit, but not many of us really understand the many factors that go into determining the all-mighty credit score.

Understanding the components that determine our credit score will ultimately enable us to better manage our credit, so it pays to take the time to really understand what our credit score is really trying to tell us:

• Payment History – Our payment history makes up about 35 percent of our credit report.  Our payment history is the largest component of our credit score, as it ultimately allows a lender to see if you have repaid loans in the past in a responsible manner. With this in mind, it is important to understand that any late payments made on loans, credit cards, and even utility payments, can have a negative effect on your credit score. In addition, your credit score will detail how late you were – 30, 60, 90 days or beyond.  In addition, if you have any accounts that have gone to collections for failure to repay, you can expect your credit score to take a serious hit. Other important factors that make up your payment history include: charge offs, debt settlements, bankruptcies, foreclosures, wage attachments, and liens.
• Debt Amount – Your current debt is the second most important component of your credit score, as it makes up about 30 percent of your credit score. The credit reporting agency will look at a few factors when determining this component of your credit score, including: total available credit used; amount owed on specific accounts (mortgage, car loans, installment loans, credit cards); and how much of original installment loan balances have you paid down. The general rule of thumb is to keep your credit card balances to less than 30 percent of your total available credit. Because of the importance of this component of your credit card score, many individuals will aim to pay down their debt before taking out a large loan.
• Credit History – How long have you have been using credit is the third most important component of your credit score, as it makes up about 15 percent of your total credit score. Some of the things considered include the age of the oldest account and the average age of all accounts.
• New Credit – Another 10 percent of your credit score is determined by how many new accounts you have. This includes newly opened accounts and recent applications for new accounts.
• Types of Credit – Another 10 percent of your credit score is determined by the types of credit you possess. Diversified credit is often helpful when determining this component of your credit score.

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.

Your Guide to Securing a Business Credit Card with a Low Interest Rate

Choosing Credit Card

If you own a small business then you are certainly aware of the advantages of having a small business credit card. In particular, you enjoy the low interest rates and the high credit limits that usually go along with owning a small business credit card.

However, there are certain steps you can take to ensure that you’re receiving the best, possible terms for your business credit card. How can you make sure you are getting the best interest rate with your business credit card?

• Get quotes from several different credit card companies. Don’t assume that all business credit cards carry the same APRs and fees; in fact, there are a wide range of fees that come with business credit cards, so begin your search for a business credit card by getting quotes from several different companies.
• Use the power of negotiation. If you find a business credit card that suits your business needs, but it doesn’t have the lowest APR when compared to other credit cards, you can always contact the credit card company and ask them to lower the APR; often times, credit card companies will comply with your request because they want your business. Make sure to come to the negotiation table with several other quotes from other credit card companies so you have some ammunition when negotiating.
• Consider a secured business credit card. Many times, businesses only look to unsecured credit cards; however, many secured credit cards can offer lower interest rates. If you have collateral, you may want to consider having a secured credit card. However, keep in mind that you will ultimately be responsible for your credit card bills with a secured credit card.
• Establish credit with one company and then ask for a decrease in your APR once you have a proven credit history with them. More often that not, credit card companies will want to keep your business if you have proven yourself to be a good customer, so use this to your advantage and ask for a lower APR.

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.

Avoiding Credit Repair Scams

Credit Repair

A good credit history is an important and valuable element to maintain. Bad credit can impact your life, preventing you from obtaining loans, housing and these days, even a job. You want to fix that bad credit, and though it is possible to do it yourself, some people would prefer to have a professional leading the way. Call it peace of mind or having a hand to hold, it often helps to have someone who knows the industry and knows how to explain things to you, offer advice and make things happen.

Ideally, a credit repair agent only has your best interest in mind. Unfortunately, that is not always the case. In a world where it is all to common for profits to take precedence over ethics, there are many credit repair scams appearing on the scene. These companies offer promises in pretty little packages. Unfortunately, they can’t and don’t deliver.

That’s not to say that all credit repair offers are not legit. In fact, there are many out there who are reputable and don’t make empty promises. However, the scammers are the ones who want a fortune up front and leave you hanging in the end. Face it, if you had the kind of money that they want up front, wouldn’t you just start paying the debts on your own?

An informed consumer is a smart consumer. Here are a few tips to help you avoid the pitfalls of credit repair scams.

Promise #1: Erasing Information From Your Credit Report.

No wonder so many people fall for this one. The image of some guy standing over your credit report with a big pink eraser, just scrubbing away the mistakes, does have its appeal. Unfortunately, this is one of those promises that they not only can’t keep. Information on your credit report can not simply be erased. Inaccurate information can be disputed and removed if and when found to be inaccurate, however, accurate information will remain on your credit report for 7 years and as long as 10 years, if you file bankruptcy. Accurate information can not be removed just to make your credit report look better.

Promise #2: Pay Us Large Sums of Money Up Front & We’ll Work Our Credit Magic

Nope. Not even close. Not only will this not happen, should you fall for it, it’s illegal. These companies can not ask you to pay before they deliver on their promises. They must provide you with a contract, inform you of your rights in writing and offer you a minimum of three days to change your mind and back out.

Promise #3: We Can Create a Second Credit File for You.

The idea behind this is that you can have another file to use for credit purposes, obscuring the information in the original file, allowing you to obtain credit more easily. First of all, this is what they call fraud. You can not legally obtain credit by obscuring or omitting the truth. Companies promising to create another file or “file segregation” are offering you an empty promise. It’s not only wrong;it really does not work.

Remember, you can dispute and correct mistakes on your credit report yourself by contacting the three reporting bureaus. You may also add an explanation and can easily work to improve your score on your own. However, the help of a professional is often a good idea, so look for a credit repair company that does not sound to good to be true and follows the guidelines as set above. A consumer credit counselor might also be a great choice to help you get your credit back on track.

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.

How to Avoid the Pitfalls of Credit Card Debt

Credit Card Debt

Think of your credit card as an opportunity to prove your credit worthiness. Your credit card is your chance to build a strong credit history so that you can enjoy all of the benefits that come with a strong credit score.

Here are some tips for preventing the pitfalls of credit cards that so many consumers have found themselves in:

• Find the credit card that is right for you – Instead of choosing a card because of rewards or introductory rates, concentrate on the basics of the credit card, including the APR and the annual fee. Your ability to build a strong credit history relies on your ability to pay your card on time and pay it off in a reasonable amount of time. It is therefore imperative that you find a card with only the most competitive rate and terms.
• Understand your card’s terms and conditions – Your card’s terms and conditions are likely to change because of the new credit card legislation, so it is more important than ever to pay close attention to any and all changes relating to your credit card’s terms and conditions. It is ultimately up to you to understand your credit card and all of the rules and regulations that go along with it.
• Know your credit card’s APR and pay close attention to any changes –Always pay close attention to your credit card’s APR. In fact, it is a good idea to take note of the APR every time you receive your credit card statement. Although credit card companies must provide you with at least a 45 day notice of any changes to your card’s APR, you may miss this disclosure. It is therefore always a good idea to take note of your card’s APR.
• If your card isn’t working for you, don’t be reluctant to find another card that will work for you. You must remain in charge of your financial well being, and that includes taking charge of your credit card. If you don’t feel as if your credit card is giving you the most competitive rate and terms, then by all means find another card that will.

Smart Steps to Build a Positive Credit History

Credit Score

The last year or so has done a lot of damage to many Americans’ credit scores. With lending standards tighter than ever, it is now of extreme importance that we all work towards a strong credit score because our ability to obtain any type of credit depends on it.

Our credit score is determined, in part, by our credit history; in particular, if we have one, and if that credit history is positive. There are many ways to build a strong credit history; here’s how:

• Pay everyday bills on time and in full each and every month – Not only do loans and credit cards affect your credit score, but everyday bills do, as well. From your electric and gas bills to your phone and water bills, your payment history on your monthly utility bills can make a big difference in your credit score.
• Open a checking and/or savings account and take care of it – An active bank account is another great way to build a strong credit history. Take care of your bank account; don’t overdraw it and keep a steady balance in it, if possible. Your ability to manage a bank account is essential for developing a strong credit history.
• Obtain a credit card and never, ever miss a payment – A credit card is a great, first step in establishing a positive credit history. If you can’t snag a standard credit card, consider a secured credit card. Although secured credit cards must be secured with a cash deposit, regular payments still positively reflect your credit history.
• Choose credit over cash – When possible, choose to pay your purchases with a credit card. The more activity on your credit card the more history you can establish. Make certain, however, to keep close track of your monthly purchases and to pay off your credit card in full each month.  Remember: we must use credit to build credit, so establish a healthy respect for your credit cards and you will soon find that your credit score is making positive gains.

Why it may Pay to Stick with your Current Credit

Credit Card Types

For many of us, the great credit card balance transfer offers over the years have tempted us to transfer our credit card balances from card to card. However, given the dramatic shift in the credit card industry, what once was commonplace now becomes a liability.

This holds true for many aspects of the credit card industry, including the length of time in which we keep our credit cards. Maintaining and developing a relationship with a trusted creditor is often worth much more than the short-terms savings you may experience from balance transfer offers or introductory offers.

Here are some of the reasons why it may pay to hold onto your current creditor:

• Best rates – It’s simply a fact that long-term customers get the best rates. Most credit card companies offer great interest rates to their valued customers because they have a credit history on which to draw from. In other words, if you have proven yourself to be a trustworthy customer, your credit card company will likely reward you with a competitive interest rate. You will likely also have more room to negotiate if you feel that you creditor could offer you a lower interest rate.
• Positive impact on credit score – Your FICO score, although determined using many factors, may be influenced by your history with the same creditor. In other words, you may have an excellent payment history, but another individual with the same history that has not switched credit cards every year or so will probably enjoy a higher FICO score in this area.
• Higher credit limit – Along with a better interest rate, you will likely enjoy a higher credit limit as a loyal customer. Many times, your creditor will gradually increase your credit limit as you prove your credit worthiness to them.
• Late payment forgiveness – Good customers who almost always pay their credit card bills on time will likely enjoy leniency from their credit card company if they slipped one month and paid their credit card bill after the due date. In fact, many credit card companies will remove late payment fees for loyal customers who failed to pay their credit card bill on time just once or twice.

When Co-Signing for a Credit Card may not be the Best Idea

Introduction

You may be approached by a loved one asking you to co-sign for a credit card, and you may have difficulty deciding if this is the best decision to make. So, what do you do?

For many individuals, the idea of co-signing is met with a great deal of trepidation, and rightly so. After all, you are just as responsible for the credit card bill as your loved one is. So, if they fail to pay the bill, guess who’s responsible? And, if they act irresponsibly with the credit card, guess whose credit score will suffer?

It is because of the above reasons that you must seriously consider whether co-signing for a loved one is the best idea. Here are a few situations where you may want to decline a request to co-sign for a credit card:

• Your loved one has a shaky employment history – The bottom line is that the only way to pay for a credit card is by working, and if your loved one is not currently employed, or has a habit of moving from job to job, co-signing for a credit card may not be in your best interest.
• Your loved one has a poor history – or no history – of handling credit – For most individuals, there’s a good reason why they can’t obtain credit, and it usually has to do with poor credit mistakes in the past. If your loved one has never handled credit, this may also be a warning sign for you to decline co-signing for the card. If there were legitimate circumstances under which your loved one’s credit was damaged (the loss of a spouse, a divorce) then you may feel better co-signing for a credit card.
• Your loved one has a history of making bad decisions – If your loved one made rash purchases in the past that they could not afford then you must ask yourself what is preventing them from doing the same thing if you co-sign for a credit card? Your loved one may make all the promises in the world, but in the end it is their actions that speak much louder than their words.