Credit Monitoring, Why You Should Use Them

Some people believe that credit monitoring is only necessary if you have a troubled credit history. This is not the case. It’s just as important to use credit monitoring to maintain a great credit rating as it is to improve a poor one. When you sign up for credit monitoring you will get important information from your major credit reports through Equifax, Experian, and TransUnion. This allows you to track them and ensure all your reported information is accurate. Most monitoring services also allow you to dispute negative items.

Top Reasons You Need Credit Monitoring

credit monitoringCredit monitoring can be used as a credit repair tool. This is in addition to avoiding any inaccurate notes on your file. This can help you figure out what weak points you have in your credit and improve this going forward. Most credit monitoring show major factors in your credit score. As a result, this allows you to adjust your financial approach to get a better credit rating. This impacts your chances of getting a car or home loan.

Monitoring your credit can protect against identity theft. This is a fairly important feature. Identity protection is becoming increasingly important. We live in an era where so much information is stored online. Credit card fraud and identity theft are becoming significantly more common. Cyber criminals have been able to hack databases of major companies and obtained credit card information. No one’s information is completely safe.

Some monitoring services will provide you with all three scores for free. This is a great feature when you’re in the process of repairing your credit, it gives you a way to track your progress on a monthly basis. Information can be the difference between improving your finances or staying the same.

Credit Card Consolidation, What is it?

Credit cards do come in handy, however, they do carry a certain amount of risk. You have to focus on paying the bill in full each month and on time. Along with everything else in life, keeping track of credit card balances can be stressful. There are options to juggling multiple credit cards. There is credit card consolidation.

What is a Credit Card Consolidation?

credit card consolidationCredit card consolidation is the process of combining existing debts into one new debt. This is an opportunity to get yourself out of a bad situation. The goal of the consolidation is to become debt-free in a quick and cost effective way. If you have multiple credit cards a consolidation will merge these into one account. This allows you to make one payment per month to one creditor, rather than multiple payments to multiple creditor. Another benefit to this is you only have one interest rate. If you play your cards right, this make paying your debt down cheaper and faster in the long run.

Credit Consolidation with a Loan

There are two ways to consolidate your debt. You can do a balance transfer or a loan. A balance transfer card will combine all your credit card balances into one new card. Depending on the lender this could come with a fee, usually this is a percentage of the transfer. Like most other credit cards, your score will come into play. If you have a good score this will be a viable option. Balance transfer cards typically have low introductory rates, sometimes even as low as 0%. However, these rates generally last for about 12 to 18 months.

Another option is consolidating your debt using a loan. With this all your debts are collected under a single payment. There are a few types of loans you can choose from, personal loans, home equity loans, or 401(k) loans. You can get a personal loan from a bank, credit union or an online lender. The interest rate will depend on your credit score. However, personal loans generally have low interest rates.  Personal loans come in various sizes and term lengths.  Home equity loans allow you to borrow against your home’s value. You can get a home equity loan if your home is worth more than what you owe. These typically carry a low interest rate and is like a second mortgage.  Lastly there is a 401(k) loan. These should be considered a last resort option. Home equity loans borrow against your home’s value and a 401(k) loan borrows against your 401(k).

Authorized User, Does It Improve Your Credit

Good credit is important when applying for loans or even obtaining a place to live. Employers are starting to check employee’s credit history. If you have bad credit, there usually isn’t a lot you can do to fix it quickly. It takes time. Therefore, it pays to open lines of credit early and always make your payments on time. This can take years. You may be wondering if there is anything that can be done to boost your credit quickly. If you’ve ever activated a new card, you’re often asked if you’d like to add anyone as an authorized user.

Boosting Your Credit as an Authorized User

authorized userEvery time a new card is opened your score will take a hit. This affects the average age and inquiries. Since you’re introducing a new credit card, this will affect and lower the age of all your cards. Credit issuers do not like to see too many inquiries on your report. Your score will bounce back by adding a new account and increasing your overall credit limit. However, that is not enough to offset your bad credit.

Being added as an authorized user is just like applying for a new card without the hard inquiry. Some companies will even backdate your card to the original owners ‘member since date’. For example, if you were added to an account that was 10 years old, you would have received the same age. This rarely happens.  As an authorized user, you receive your own credit card that is linked to the main users account. This will allow you to make purchases and payments, but not able to make any significant changes to the account.

It is important to keep in mind there are risks to adding an authorized user. You will be responsible for all charges the user makes. If a user doesn’t pay their bills, your credit is now at risk. To avoid this, you can add a user but not actually give them the card. They will still get the benefits but you won’t take any risk.

Secured vs Unsecured, What’s the Difference?

If you’re considering applying for your first credit card, or trying to repair your credit card history, you’ve likely come across the term “secured” credit card. What is a secured credit card? How does this differ from an unsecured card? Each type of card targets different users and have their own set of risks and benefits.

Secured vs Unsecured

One way to categorize credit cards is to look at them as secured vs unsecured. A secured credit card is backed by a cash deposit you pay after you’ve been approved. The initial deposit is collateral for the account. This means that the issuer can use those funds if you’re unable to pay the bill. This is what makes secured cards a good option for those with no or damaged credit. Deposits generally determine the credit limit. Most deposits start around $200.

securedAn unsecured credit card is not backed by a deposit. Without a deposit, you have more freedom to spend on the card. If you miss a payment, the issuer can come after o you instead of using the deposit. This is makes unsecured cards more suitable for those with more credit card experience. The credit limit is determined based on factors like your credit score and payment history. Unsecured cards usually have lower interest rates than secured cards.

So, how does an unsecured credit card work? Because an unsecured card doesn’t require a deposit, qualifying for one will depend on your payment history, credit score, and credit report. Usually you need an average to excellent credit score to qualify for an unsecured credit card. If you do get an unsecured card with poor credit, you’ll have higher rates and fees.  Like secured credit cards, you can use an unsecured card to rebuild your credit. Both cards pose different benefits and risks. Deciding which is best for you will depend on your personal finances and spending habits.

Debt Collectors, How Not to Deal With Them

It is never fun to deal with a debt collectors. It can be even more stressful when you’re sitting on a pile of debt. There are times a debt collector may fail to follow the rules outline in the Fair Debt Collection Practices Act. If that is the issue you’re facing, it may be best to file a complaint. However, if you’re personally making the following mistakes, your debt issue could go bad to worse.

What Not to do With Debt Collectors

  • Ignoring the debt collectors. Screening calls and avoiding collectors won’t help control your debt. While debt generally has a debt collectorsstatute of limitations, it does vary depending on your state. Once it expires, the collector may not be able to sue you, but you could still be responsible for paying back what you owe in addition to any interest. Letting an old bill pile up can destroy your credit score. Any unpaid debt can remain on your credit report for up to seven years.
  • Watch what you say over the phone. Once you’ve decided to no longer dodge your bill collector, it is important to avoid sharing certain details over the phone. You never want to say that you’ll pay a specific amount by a deadline or give access to your bank accounts. Anything you can say can be used against you. By agreeing to make a payment can even extend the statute of limitations. A collector’s main goal is to collect missing funds. Stay calm, keep the call short and keep your comments to a minimum.
  • Verify the debt is yours. When talking to a collector, it’s important to make sure they’re legitimate. Debt collection scams are common. Before you send over any money, confirm that the debt belongs to you and not someone else.
  • Keep proper documentation. Whenever you communicate with a bill collector, it’s a good idea to take notes. Jot down the details about who you spoke to and what you discussed. If you’re forced to appear in court or report a collector this will help.

Credit Cards, Should They Be Used to Pay Off Loans

The idea of a low-balance transfer is enticing. They are also a large part of credit card companies’ offerings. This is one way to attract new business in a field that is already overwhelmed with credit card offers. Some have considered using their high-limit, low-interest credit cards to pay off a car loan to save monthly interest and pay off the lender. While this may seem like a great idea. Instead of continuing to rack up interest on a car loan, why not go with a lower rate and get the title of your car?

Should I use my credit card to pay off my loans?

credit cardsVery few have figured out how to play the system, so to speak. They endlessly transfer their balances to different low or no interest cards. Sometimes they score big and get travel points or even cash-back rewards. This is almost like giving yourself a debt consolidation loan. Allowing yourself to avoid lower interest credit card fees.  However, consumers need to be careful in how they manage their balances, their payments and when opening new accounts to pay off old accounts. It can have an impact on your overall credit utilization. Those that use balance transferring to pay off a car loan should also be wary. Car loans don’t carry the same weight as credit cards when it comes to evaluating your credit score. Transferring a balance to pay off your car could have a positive impact. However, having much larger credit card debt can also be negative.

Some balance-transfer plans also prohibit the use of paying off a car. Auto lenders may also have a penalty for early payoff. It’s important to do the research before making any moves. Be sure to read the fine print and continue to pay your bills While that zero percent interest offer seems like a great idea, the lender knows that many consumers will not be able to pay off their balance before the interest-free time limit expires. If you miss the deadline, this could be an even larger balance.

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 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.