Financial Mistakes You Could Be Making Now

Finances do not come easy for everyone. For some, it can be easy to set up and maintain. For others, just the thought of balancing your checkbook can stress you out. Even those who are good with money and finances could be making financial blunders.

Financial Mistakes and How to Fix Them

  • Not taking advantage of increasing interest rates. The financial mistakesnational average for interest on saving accounts is 0.23%. However, there are options that offer a higher rate. It may seem like a lot of work to switch banks, but it is costing you money. Whether you’re opening an account or looking to change banks, it is a best to shop around.
  • Paying too much for your mortgage. You may believe that there is no way around paying your current mortgage. However, you could be eligible for a lower payment. Refinancing could yield a lower rate. If you have a 30-year loan, this could save you a lot of money in the long run.
  • Paying interest on your credit card. The trick with credit card spending is to pay it before the billing period wraps. You want to ensure you’re paying the full balance, if not the remainder is accruing interest. Paying only the minimum may help you get by, but you’ll be paying more in the long run.
  • Not using credit card reward programs. For many a credit card simply allows them to buy now and pay later. However, nowadays there are many credit cards with options to choose from. Most credit cards have their own rewards programs. These can be a great way to earn for your everyday spending.
  • Overpaying student loan debt. When you’re right out of college having to repay student loans can feel like a heavy weight. It can be difficult to understand how the loans work. Often people choose a repayment plan and stick to it. However not adjusting your payment plan can take a toll on savings. You could end up paying more than what is needed.

Collection Accounts, How they Affect Credit

Other than a bankruptcy or foreclosure, one of the worst mistakes you can have on your credit report is a delinquent debt that went into collections. These accounts are various types of debt that you fell behind on. They escalate to the point where a debt collector took over. Collection accounts will cause your credit score to take a big hit. They stay on your credit report for up to seven years from the time you fell behind on payments. If you pay the collection account does it get removed from your credit report? No. It’s a common misconception that it does. However, it is still important to settle any outstanding accounts that have gone to collections.

Why Pay off a Collection Account?

collectionsYou may be asking yourself why pay off the collection if it remains. Settling the account is important for two reasons. It will prevent you from potentially being sued. This can result in the court ordering wage garnishment, putting a lien on your property, or even freezing your bank account until the debt is settled. The second reason is settling a debt can help your credit score over time. While a collection account will stay on your report for up to seven years, the account will be marked as paid. As your credit report gets older, and you maintain good habits, your credit score will gradually improve the closer you get to the seven-year mark.

Can I get the collection account removed? You can, however, in the end the collection account, even paid, will remain on your credit report. If you really want to use every option to remove the collection account, contact a credit repair company. The best way to have collections removed from your credit report is to make sure that you never have an account go into collections. Make smart borrowing decisions, pay all your bills on time, and practice good debt and financial management techniques.

Credit Score, Why a Poor Score Costs

Your credit score is more than just a number. It is the lifeblood to your financial opportunities. You should be aware of how a good credit score can get your loans approved fast, can get you a lower interest rate, and save you money in the long run. However, there is likely a lot you don’t know, mainly how far reaching your credit score is.

Costs of a Poor Credit Score

If your credit is not in good standing, you should start using credit repair strategies today. However, here is a look at some consequences of having poor credit.credit score

  • Cell Phone: When upgrading your phone or moving to any cellular plan, the provider is most likely conducting a credit check. If your score is poor, your options could be limited. A credit score is an indication of how reliable you are as a consumer. If your credit report shows regular missed payments, what is to stop you from missing your cell payment?
  • Rent: Everyone knows that you need a good score to consider getting approved for a mortgage. However, a poor score can also impact your renting options as well. The same with cell phones, your report is a sign of how responsible you are.
  • Utilities: Most utility companies require an upfront deposit. Having poor credit may require you to have to pay more money upfront than someone with good credit.
  • Car Insurance: Most car insurance companies are now using your credit score. Driver history and experience is still a factor. However, when it comes to car insurance premiums, most companies have found that a credit core can also help gauge reliability.

As we have shown, your credit score reaches farther than just loan approval and interest rates. This is why it is important to take necessary steps to repair your credit now.

Foreclosure, How to Rebuild Your Credit

You may think your credit is doomed after having your home foreclosed on. A short sale or foreclosure is something no home owner wants to have on their credit report. Neither is an end-all when it comes to purchasing power. However, either a foreclosure or a short sale will require some credit repair.

How to Rebuild Your Credit After a Foreclosure

The first step is putting your short sale or foreclosure in the past. You need foreclosureto move on past it. It is unfortunate that it happened, and it isn’t going to look good on your credit report. It will hurt your credit score. However, it is not the end of the world. The short sale or foreclosure will stay on your credit report as a negative reminder. However, that does not mean you can’t build positive activity beyond it. The goal following a foreclosure is to build enough positive activity to make the negative mark look like a blip on the radar. So, what is the best way to achieve this.

Immediately start working on at least three positive lines of credit. A secure credit card, personal loan, or any other type of account. These lines of credit are ideal opportunities to build positive activity. Since the FICO score weighs behavior on making timely payments, credit history, and credit utilization, you can put the negative marks in the past by building positive activity. If you have a positive account open account, keep at it. As we’ve stated before the best way to build positive credit is to make on-time payments and keep balances low.

By following this process, following a short sale or foreclosure, it’s not uncommon to see a significant improvement in your credit score within as little as six months. It may even be possible for those with scores in the low 500s to see their scores increase into the high 600s or even 700s.  Just keep in mind, this is not a quick fix and will take time.

Medical Debt, The Inaccurate vs Accurate

Consumers should pull their credit report at least once a year. About 20 percent of all Americans have some error on their report. Checking your report and taking corrective action is the only way to have the issues resolved. However, credit reports aren’t the only credit-related item that is problematic for consumers. Medical debt collectors are becoming a routine annoyance. Up to two-thirds of all who have complained about them say they don’t owe the money that is being asked. With this, what can consumers do to tell the difference between accurate and inaccurate medical debt?

Medical debt, spot the difference.

medical debtMedical debt is the second largest debt-related complaint that is issued. The issues related to medical debt are largely due to the current health care system and consumer confusion. However, overaggressive collectors going after the wrong people can pose an issue on debt collections. How do you tell if the debt you’re being asked for is accurate?

  • Keep track your records and any treatments, office visits or hospital stays. If you’re in doubt, contact your health insurance provider to better understand what your plan covers as well as what your deductible and co-insurance is.
  • Once you’re contacted by debt collectors, take note of the communications and refrain from making any payments until you can contact your doctor’s office or insurance provider to confirm you owe said debt.
  • If you do owe for a treatment or procedure, don’t pay with a credit card. The interest you pay on the debt can affect you more in the long run.
  • As we’ve stated before, check your report annually. Doing so can help consumers detect any errors before they have a chance to hurt your purchasing power or when applying for a loan or credit card. In case of medical debt, it’s common for debt collectors to put small amounts owed on your credit report. However, these small amounts are usually too small to go after the owner, so they sit there.