With the current financial situation in the U.S. having a good credit score is worth more than gold. The reason is that it can allow someone access to much needed money when circumstances turn bad.
Obviously, most people say when I need credit I can't get it, but when I don't need it is when I can get it. Kind like the "Old Catch 22."
The best advice I can give someone right now is to check your credit reports and buy your credit score at myfico.com. At this time you want to make sure everything is correct on your report.
You definitely don't want to apply to refinance your home & find out some old medical bill you thought was covered by your insurance is now in collections. This one little blemish on your report could mean being approved or declined.
Before any purchase review your credit reports. I have had clients declined due to misinformation on their credit reports. The main item had to be medical collections damaging their credit scores.
In my book How to Beat Banks & Credit Cards at the Money Game, I go over in more detail.
Monday, February 16, 2009
Friday, February 13, 2009
Credit Card Companies Lower Limits
Just read an article where it stated that more and more credit card companies are either lowering credit limits or closing cards.
I mentioned in this is an earlier post regarding credit scores.
By closing credit cards it is hurting them in two ways. One, it the ability to have available credit when needed. The second, is that it can lower your credit score.
The reason it can lower your credit score is that part of the your score is tied to amount owed on credit cards. For instance if you had a credit limit of $10,000 with a balance of $3,000 this probably would help a score. Now if your limit was lowered to $4,000 it can hurt your score since you don't have as much available credit.
In my book I discuss this in more detail.
All major credit cards were starting to implement even without you the consumer aware they are closing or lowering your limits. They are supposed to notify you by mail within 30 days, but sometimes that doesn't happen. In addition, if you receive a letter you may not pay any attention to the letter.
Just attempting to make you aware of this change.
LESSON: Credit card companies are more in control of your card than you. At any point they can lower your limits even if you always paid on time.
I mentioned in this is an earlier post regarding credit scores.
By closing credit cards it is hurting them in two ways. One, it the ability to have available credit when needed. The second, is that it can lower your credit score.
The reason it can lower your credit score is that part of the your score is tied to amount owed on credit cards. For instance if you had a credit limit of $10,000 with a balance of $3,000 this probably would help a score. Now if your limit was lowered to $4,000 it can hurt your score since you don't have as much available credit.
In my book I discuss this in more detail.
All major credit cards were starting to implement even without you the consumer aware they are closing or lowering your limits. They are supposed to notify you by mail within 30 days, but sometimes that doesn't happen. In addition, if you receive a letter you may not pay any attention to the letter.
Just attempting to make you aware of this change.
LESSON: Credit card companies are more in control of your card than you. At any point they can lower your limits even if you always paid on time.
Thursday, February 12, 2009
Using Debt Stacking to Pay Down Bills
One of the best ways for someone to pay down bills is to use debt stacking. This will then lead to paying off your bills entirely.
I reviewed this in an earlier post, but I think it is good to continue further with this important tip.
Debt stacking will not give relief from someone barely able to make payments. In that situation someone should look at a bill consolidation loan.
Debt stacking is for someone making their payments plus paying extra each month on their bills. I have usually met with people who say they pay an extra $200 on their bills.
Most times the $200 would be spread out on several bills. Some people pay the extra $200 on the bill with largest balance since they really want to get rid of that $8,000 credit card.
However, if they reviewed all their bills and concentrated on the lower balance cards first it would actually free up money quicker.
Most people believe paying the minimum payment on a credit card with a $700 balance and a payment of $30 is the way to go. They decide to take all their extra money and pay it on the largest balance since it will have the highest interest charge.
However, in three for four months the $700 balance would be paid off and then they could pay $230 on the next balance.
What you want to do is continue to pay out the same amount each month, but only pay the minimum payment on the rest of your bills.
Most important tip is not use the credit cards if you are debt stacking. By continuing to use your bills will never get paid off.
LESSON: Concentrate on lower balance credit cards first before paying off larger balances.
I reviewed this in an earlier post, but I think it is good to continue further with this important tip.
Debt stacking will not give relief from someone barely able to make payments. In that situation someone should look at a bill consolidation loan.
Debt stacking is for someone making their payments plus paying extra each month on their bills. I have usually met with people who say they pay an extra $200 on their bills.
Most times the $200 would be spread out on several bills. Some people pay the extra $200 on the bill with largest balance since they really want to get rid of that $8,000 credit card.
However, if they reviewed all their bills and concentrated on the lower balance cards first it would actually free up money quicker.
Most people believe paying the minimum payment on a credit card with a $700 balance and a payment of $30 is the way to go. They decide to take all their extra money and pay it on the largest balance since it will have the highest interest charge.
However, in three for four months the $700 balance would be paid off and then they could pay $230 on the next balance.
What you want to do is continue to pay out the same amount each month, but only pay the minimum payment on the rest of your bills.
Most important tip is not use the credit cards if you are debt stacking. By continuing to use your bills will never get paid off.
LESSON: Concentrate on lower balance credit cards first before paying off larger balances.
Wednesday, February 11, 2009
Reviewing Your Credit Report
Yesterday we reviewed several reasons to review your credit report. I also noted where to obtain your free credit reports.
Another reason to review your reports is regarding closed accounts and how they were closed.
Let's say for example your were occasionally 30 days behind on a credit card bill. This has happened to many of us in today's economy. The important fact you have to remember is how your final payment is posted.
If you made your final payment to close out the account, but you were still 30 days behind on the bill it will still show 30 days late.
How is this possible? Well you did make your final payment, but the previous payment was late. So if you owe $200 on a credit card and you are 30 days behind on your minimum payment of say $50. Your best option is to pay something close to paying off credit card, say $175.
Then when you make your final payment of $25 plus interest you will at least close the account current.
This is huge when factoring your credit score since now the account is current versus be R2, which means 30 days behind.
LESSON: If your behind on credit card get current before making final payment on card or loan. This little fact can increase or decrease your credit score.
Another reason to review your reports is regarding closed accounts and how they were closed.
Let's say for example your were occasionally 30 days behind on a credit card bill. This has happened to many of us in today's economy. The important fact you have to remember is how your final payment is posted.
If you made your final payment to close out the account, but you were still 30 days behind on the bill it will still show 30 days late.
How is this possible? Well you did make your final payment, but the previous payment was late. So if you owe $200 on a credit card and you are 30 days behind on your minimum payment of say $50. Your best option is to pay something close to paying off credit card, say $175.
Then when you make your final payment of $25 plus interest you will at least close the account current.
This is huge when factoring your credit score since now the account is current versus be R2, which means 30 days behind.
LESSON: If your behind on credit card get current before making final payment on card or loan. This little fact can increase or decrease your credit score.
Tuesday, February 10, 2009
Importance of Reviewing Your Credit Report Annually
Everyone should review their credit reports annually. This means husband and wife, not just one spouse. The main reason both will not have same accounts on your credit reports.
I don't know how many times spouses are shocked about how different their reports are from each other. When taking a loan application I always would know when one spouse would ask, "do you have to pull both of our reports?"
This question was always a tip off that one of them had some credit card account that the other did not know about.
This is why both should review their credit report every year since sometimes mistakes are made.
Remember, humans are the people inputting information into your credit report. If that hit a number 3 instead of 5 you can become someone else.
If you do find an error contact the credit bureau with the wrong information. Another point to remember is that each credit bureau does its' own research independently. So one may show a credit card balance and the other two a zero balance.
Final tip is the only free place to get your credit report is annualcreditreport.com. The FTC approves of this site.
More information on credit reports in upcoming book.
LESSON: Review credit reports annually
I don't know how many times spouses are shocked about how different their reports are from each other. When taking a loan application I always would know when one spouse would ask, "do you have to pull both of our reports?"
This question was always a tip off that one of them had some credit card account that the other did not know about.
This is why both should review their credit report every year since sometimes mistakes are made.
Remember, humans are the people inputting information into your credit report. If that hit a number 3 instead of 5 you can become someone else.
If you do find an error contact the credit bureau with the wrong information. Another point to remember is that each credit bureau does its' own research independently. So one may show a credit card balance and the other two a zero balance.
Final tip is the only free place to get your credit report is annualcreditreport.com. The FTC approves of this site.
More information on credit reports in upcoming book.
LESSON: Review credit reports annually
Monday, February 9, 2009
Applying for Credit Cards
Let's take a look at applying for new credit cards. Since my past couple posts have received such a high hit rate. I think this must be of some interest.
A little saying I like regarding credit card applications.
"What the bold print giveth, the fine print taketh away."
Not sure who said it, but he had to be a genius.
We have have received these great credit card offers. 5.99% FOR BALANCE TRANSFERS AND NEW PURCHASES. This sounds like a pretty good offer.
What you must do is flip over the offer sheet and read the "FINE" print. There is a box on the back broken up into several different areas. The federal government requires this for every credit card application.
This sets the terms and conditions. Such as how long is this 5.99% in effect? What will the rate adjust to after introduction rate? What are the annual fees? How is interest rate calculated? (Average Daily Balance or Two Cycle Billing) Word to the wise always get Average Daily Balance NEVER Two Cycle Billing.
In my upcoming book I will have an example of credit card application.
What is the Grace Period for new purchases?
These are the type of questions that are answered on the back of the application.
LESSON: If you receive an application and the rate or terms seem too good to be true, beware of credit card. ALWAYS LOOK FOR FINE PRINT.
Hope this helps.
A little saying I like regarding credit card applications.
"What the bold print giveth, the fine print taketh away."
Not sure who said it, but he had to be a genius.
We have have received these great credit card offers. 5.99% FOR BALANCE TRANSFERS AND NEW PURCHASES. This sounds like a pretty good offer.
What you must do is flip over the offer sheet and read the "FINE" print. There is a box on the back broken up into several different areas. The federal government requires this for every credit card application.
This sets the terms and conditions. Such as how long is this 5.99% in effect? What will the rate adjust to after introduction rate? What are the annual fees? How is interest rate calculated? (Average Daily Balance or Two Cycle Billing) Word to the wise always get Average Daily Balance NEVER Two Cycle Billing.
In my upcoming book I will have an example of credit card application.
What is the Grace Period for new purchases?
These are the type of questions that are answered on the back of the application.
LESSON: If you receive an application and the rate or terms seem too good to be true, beware of credit card. ALWAYS LOOK FOR FINE PRINT.
Hope this helps.
FICO & Department Stores
Another way to hurt your credit score is through department store credit cards. You know the ones that are offered at the cash register.
You have teenager Susie at the register ask, "Would you like to save 10% today on your purchase?" You look at your purchases of $150 and decide sure why not have $15. However, Susie just hurt your score by doing two things.
One, she did an hard hit or credit inquiry on your credit report. Two, you just opened a new credit line.
Now how much did this damage your score? The only honest answer is not sure. However, it did not help your credit score if you already have credit.
As you will learn there are times it does help to apply for store department store cards. Such as you are young with no credit. It can be an easy way to build up a credit report. More on that in another posting.
Getting back to Susie and your new credit card you should say "no thank you" 9 out of 10 times.
Meaning usually it does not help only can hurt. This fact has been stated by many other leading experts in regards to credit reports and credit scores.
LESSON: Don't apply for department store cards. Won't help you, but probably will hurt you in the long run.
You have teenager Susie at the register ask, "Would you like to save 10% today on your purchase?" You look at your purchases of $150 and decide sure why not have $15. However, Susie just hurt your score by doing two things.
One, she did an hard hit or credit inquiry on your credit report. Two, you just opened a new credit line.
Now how much did this damage your score? The only honest answer is not sure. However, it did not help your credit score if you already have credit.
As you will learn there are times it does help to apply for store department store cards. Such as you are young with no credit. It can be an easy way to build up a credit report. More on that in another posting.
Getting back to Susie and your new credit card you should say "no thank you" 9 out of 10 times.
Meaning usually it does not help only can hurt. This fact has been stated by many other leading experts in regards to credit reports and credit scores.
LESSON: Don't apply for department store cards. Won't help you, but probably will hurt you in the long run.
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