Catalog Card Shopping for Christmas

You know, one of the biggest stress factors during the holiday season is trying to figure out how you’re going to afford to buy gifts for everyone on your list!  That’s why many of us use credit cards to do that all important Christmas shopping.  But if your credit is less than stellar?  Getting the credit that you need can be nearly impossible?

Fortunately, there are catalog credit card companies that work with those of us with less than perfect credit, especially at this time of year!

Not only will many of these companies extend credit when no one else will, but typically, catalog credit cards can help you to improve your credit in the long run… you see, just like regular credit card companies, catalog credit card providers also report to the major credit bureaus, so your available credit AND your payment history will reflect that the catalog creditor has extended credit to you and that you are making regular payments (or have paid in full).  And that information just might bump your credit score a few points.

Oh, and did I mention that most of these catalog companies have specials, coupons, and such at this time of year?

Check it out:

 

Changes in Credit Scoring

Over the past few years, there have been some changes in the way your credit score is calculated.  These changes can help if you’re planning to buy a home, in fact, these new rules may even help you get the credit score that you need to get that mortgage!  Even though your payment data, debts and court records will all still count, the new scoring model reflects some different weighting – in favor of the consumer. Score 9 rolled out this fall, and you may have already noticed a change in your score based on the new formula.

Four Changes to Credit Score Calculations

Rent:  If you rent your home or apartment and you pay on time, you may just get a boost to your credit score.  The new formula promises to weigh renting more heavily than the previous version. Paying on time every month could give you a boost – and a better relationship with your landlord.

Medical Collections: If your medical debt was weighing down your score, then the new model is great news for you. Medical and healthcare related debts will matter less than they have in the past, allowing consumers with otherwise good scores to be hurt less by high medical bills or overdue medical expenses. If your medical debts were impacting your ability to secure a residential mortgage, this change is very good news for you.

Trending Data: If you have a very slim credit portfolio, your data may be interpreted based on trends – the new scoring formula will use predictive models to determine your credit worthiness. This new technique will impact youthful consumers who have not yet established much credit and those with a long history of avoiding credit and choosing cash instead. If you have an established credit record, use credit cards or have a car loan, this change will not have much of an impact on your score.

More Even Scoring: One of the goals of the Score 9 model was to encourage lenders to upgrade to this new formula. While upgrading is not mandatory, it is definitely encouraged – and some lenders and credit reporting agencies are still using old scoring models.  As businesses continue to adapt, credit scores across major credit bureaus are expected to become more consistent, thereby making it easier to for a lender to get a clearer picture of your background and creditworthiness.

While these changes are expected to help most consumers, the best way to boost your credit score is to pay your bills on time and make sure your debt ratio remains low. If you are considering applying for a residential mortgage within the next year, a good credit score is a must. The right score will not only make approving your loan easier for your lender, but it could help you secure lower rates on your homeowner’s insurance as well. If you haven’t checked your score lately, it is time to review your credit report, you could be in for a nice surprise.

Simple Mistakes That Can Hurt Your Credit

Have you ever forgotten to pay a bill? Bounced a check? Believe it or not, simple everyday mistakes with your finances can affect your credit score. Read on for a few things that you might want to think twice about.

Bouncing a Check:  This will come as a surprise to many, but a bounced check may actually affect your credit score at some point.  And that is the key phrase:  At some point.   Just because your bank doesn’t send a report to the credit bureaus every month, doesn’t mean that it can’t or won’t do so, especially if you don’t pay it back promptly!  Failing to cover a bounced check can result in collection, civil, and even criminal charges – both from your bank and/or from the company that you paid with the check.

Too Many Credit Inquiries:  Whenever you apply for any type of credit card or loan, the potential lender performs an analysis known as a ‘Hard Credit’ inquiry so that they can review your complete credit report, determine your FICO credit score, and decide whether or not to extend credit to you.  Applying too frequently for any loan or new credit card can and will affect your credit score as the financial risk to potential lenders increases as your score drops, and statistical analysis has proved that having numerous new credit cards in a short time span is a bad indicator of an individual’s financial responsibility.

Late Payments:  Late payments can indicate unreliability, lack of funds, and irresponsibility in an individual.  And, since your payment history accounts for 35% of your credit score, one late payment can cause your score to drop significantly, especially if you are more than 30 days past due on the payment.  

Co-Signing a Loan:  Before co-signing any loan for a member of your family or a trusted friend, you will want to consider the effect that your involvement in another person’s finances could have on your own financial picture.  Co-signing for a credit with a very high balance could affect your utilization ratio, consequently causing a drop in your credit score.  And of course, as a guarantor, you take up the responsibility of ensuring full settlement of the loan by the borrower in accordance to the stated terms. A default or inconsistent loan servicing by the borrower lowers your credit score.

Remember, the benefits of good credit far outweigh the effort that it takes to build and maintain a good credit score, so take care to ensure that you don’t let a simple, little mistake ruin all your hard work!

What is a Bad Credit Score?

What’s your credit score?  Is it Excellent, Good, Fair, or Bad?   Is your credit score holding you back from home ownership, buying that new car, or even getting your dream job?

Although you wouldn’t think that it should, the definition of bad credit has actually changed over the course of the past decade or so.  What was once considered a good credit score is possibly now only fair and those with fair credit scores might even have fallen into the bad credit range.

Here are a few things to know about your credit score:

Bad credit varies from lender to lender.  For example, mortgage companies have very strict credit requirements while catalog cards have fairly lax requirements.  Mortgage lenders may consider anything under 640 as a bad credit score, but credit card companies may offer credit cards to people with credit scores lower than 600.  The interest rates may be substantially higher and there may be additional fees, but you can usually still get a credit card.

Generally a credit score below 500 is considered very bad credit and you may struggle to get any kind of credit if your score dips that low.  The sad part is, it could only take one late payment, one medical bill sent to collection, or at the worst, bankruptcy, to knock your score down considerably.  And it can take months and years to repair your credit after such an event.

During that time, you’ll likely pay nearly double the interest rate as compared to those with scores above 640. And this isn’t just your credit cards, it will also affect the interest rate on a new (or used) car, and potentially even your insurance rates.

Understanding how your credit score impacts your interest rates for loans and credit cards is an important step to rebuilding your credit.

After Bankruptcy, Remove Incorrect Info From Your Credit Report

Recently declared bankruptcy?  Want to rebuild your credit?  If so, it is essential that you monitor your credit report on a regular basis to ensure that all of the details remain correct. Even if you never intend on buying your own home or a brand new car, having a poor credit score will impact your life in so many other ways. Not only will a bad credit score cost you more for car insurance, or your monthly cell phone plan, but it can also cost you a great job. That alone makes it worth the time and effort it may take to clean up your credit report.

Granted, it’s easy to become so busy that you forget your credit, especially since it’s generally lowest right after you file bankruptcy, but that’s when you should be watching your score the closest!  And, when you find an inaccuracy, it’s the best time to fix it!   Otherwise, this incorrect information could very likely prevent you from rebuilding your credit and cost you even more MONEY.

Generally, the two years following a bankruptcy are actually the best times to begin to re-establish your credit.

Here are the correct steps to take.

  1. Review your credit report thoroughly and regularly. To do this DO NOT use an online company like Equifax in order to view your credit report. Why? You might lose certain rights in order to comply with that company’s own rules (each company is different). Instead, write to annualcreditreport.com and use the MAIL IN form to request your credit report.

Note: you MUST ask for your report in writing. Sure, it may seem archaic, but it’s the only really good way to get all of your credit information and not be taken advantage of by the credit reporting agencies.

  1. Once you have your report, take a good look at it. Since you have declared bankruptcy, all debts that can be cleared should be cleared. Next to any cleared debts the note ‘zero balance discharged in bankruptcy’ should appear. If there is anything else written — anything at all! — make sure to correct that detail. The above statement is the only one that should appear.

  2. If there is any wrong information on your credit report, write directly to the credit agency that has reported the wrong information. One again, it is very important that you do not take the easy road on this and email or call the credit reporting agency, this dispute must be submitted in writing. You cannot submit this information online or through an email because you may not be able to prove your case if they fail or refuse to remove the negative information. Why am I telling you to take the hard way? Evidence, that’s why. When I sue the credit reporting agencies, I need evidence. Without evidence, you do not have a case.

A Long Process

Again, it’s a lot simpler to ask for a credit report online and to submit things online, but this is not what we recommend. Even though it takes a while to submit information or ask for a credit report in writing, this is the absolute best way to go about this process. It’s important that you consider what you might be giving up when you gain information through any kind of private company, so keep this in mind when tempted to ask for credit rating details electronically.

A Qualified Bankruptcy Attorney Can Help

It might not seem like there’s a lot involved in declaring bankruptcy, but a good legal team can do a lot more than plead your case. When you select a bankruptcy lawyer, it’s important that the lawyer you choose helps you decide whether or not bankruptcy is actually the right course for you. In some cases bankruptcy is ideal, but in other cases it’s not the best solution.

What is Rapid Rescore?

If you read about the housing market a lot, or you’ve recently been house hunting, you might have heard of something called ‘rapid rescore.’  Essentially, this is a service that mortgage lenders provide to certain clients in order to immediately boost credit scores. The main goal of a Rapid Rescore being to make it easier to purchase a home.

In some instances, a Rapid Rescore can be a good thing, but it’s not a strategy for everyone. If you’re considering paying extra for this service (or just want to know more about it), here’s some detailed information to take into consideration prior to opting for this service.

Not A Clean Slate

If you have bad credit, buying into a Rapid Rescore service isn’t going to fix that bad credit. Here’s what it will do:

  • Update your credit immediately
  • Allow you to purchase a home with updated information

Here’s what a Rapid Rescore won’t do:

  • Fix any major credit problems
  • Help you gain credit approval if your credit is truly bad
  • Eliminate any bankruptcy notifications that might be listed on your credit report.

How It Works

  1. Corrected credit report information is updated (so, let’s say that you’ve recently paid off a credit card or two, and you opt for a Rapid Rescore. Instead of waiting months for that update to happen, the information is fixed immediately).

  2. The updated details are sent to the credit bureaus.

  3. The lender then asks for an updated score that reflects the new changes.

All of this happens within days, but it’s not a service that you can get on your own. This is a value added service that lenders provide to certain people.

Not For Everyone

A Rapid Rescore is a great tool if your credit report needs a small bump – 5-10 points max. But, it’s not a tool that will work (or even be offered) if you’ve missed payments or have bad credit. In order to fix those problems, you will have to fix your credit. Normally, it takes six months to one year to fix credit problems, so keep this in mind prior to shopping for a mortgage. If you see any problems on your credit report, we still recommend fixing those issues in writing.

Getting a higher credit score immediately can make a huge difference where interest is concerned, and for some people it might even mean getting a mortgage as compared to not getting approved at all.

Best Ways To Improve Your Credit Score

When you look at improving your credit score, you have to look at the big picture.  If you’ve had a bankruptcy, it can stay on your credit report for 10 years, even though your credit history typically only covers the past seven years.

While there are plenty of law firms and companies out there that claim to be able to repair your credit report in an instant, many of them are scams, and can actually hurt your credit.  Simply put, the best way to clean up your credit report is to work on it yourself.  There is no “magic” fix – it takes time and effort, but in the end, it’s worth it.

Here are a few simple steps to get you started, cut remember, this is not an easy, quick fix.  It’s more of a starting point to put yourself on the road to managing your credit successfully.

Step 1. Make All of Your Payments On Time & In Full

The best possible way to offset your bad credit, and the best and first step toward repairing your credit, is making all of your payments on time, every time, and to pay them in full every month. Not only will this first step keep you from falling into the vicious cycle of owing interest and penalties, it will also help you climb back out of debt.

Step 2. Reduce Your Debt

Look for ways to reduce your debt, whether it’s just paying things off slowly, enrolling in a debt counseling program, or joining a payment plan with creditors to whom you are the most in debt. Don’t allow your debt to continue climbing.  Instead, actively take steps to clear your debt, and you’ll be home free sooner than you think.

Step 3. Understand Your Limits

This is the third most important step to take throughout your financial life. If a credit card, or bill sounds too high for you, or out of your league, don’t do it!  Your two best friends here are your basic math skills and your instincts. If you foresee a problem in the future, there’s a good chance there will be. Only purchase things you can afford, –it sounds simple, but it’s harder than most people think.

Step 4. Periodically monitor your credit report

Negative information about late or missed payments can lower your overall credit score. Monitor your credit report for incorrect information and dispute it when necessary.

3 Things You May Not Know About Your Credit

How much do you know about your credit score?  If you’re like many people, you know you have a credit score, and you may even know what it is, but that’s about all you know!  Even worse, many people have no idea WHY your credit score is even important in the first place.

If you’re not sure why you need to pay attention to your credit report and your credit scores, then you definitely need to start working on it.  Because your credit score is more than just your financial history… in many instances, your credit score can actually change the course of your life!  The question is, is your credit score changing your life for the better or for the worse?

Here are three things you need to understand about your credit score:

  1. Bad credit is expensive!   Your credit score can cost you hundreds of thousands of dollars in extra fees when it’s less than excellent.  There’s an old saying, “Buy with cash, pay once; buy with credit, pay three times.”  Sadly, it’s the truth, as it refers to interest, or the cost of borrowing money.  Not to mention the many other potential costs to bad credit, most of which lead to hundreds and even thousands of dollars spent on higher premiums for your auto and home insurance!
  2. Background checks aren’t all that potential employers pull!  Your credit score can affect your ability to get a job.  That’s right: your estimated ability to repay borrowed money (i.e., debt) also can be used to assess your suitability certain kinds of careers.   Although legislation has been introduced to limit the access of prospective employers to your credit score, these are just limitations, not universal exclusions – and I promise you, many employers these days do check your credit score.
  3. Knowledge is power!  Your credit score is a big indicator of your financial health and, as much as you’d like to, ignoring a low score won’t make it go away.  Instead, it’s time to be proactive and start working to raise or restore your credit score. You just have to take the first step and then put your mind to it.

Remember, your credit score is somebody else’s business, and not just your own.  Your credit score is big business these days.  Not only is your score at the mercy of three different privately owned credit bureaus, whose entire business is rating you and your creditworthiness, but they actually make millions of dollars every year doing it!

These “big three” national credit bureaus, Experian, Equifax, and TransUnion, not only track your score, they CREATE your credit score. And this credit – or FICO – score that they assign you ranges anywhere from 300 on the low side to a perfect 850 on the high side.  Which side do you want to be on?

Time to Think About Your Christmas Shopping

It’s that time of year again!  Yep, you heard that right.  It’s time to think about Christmas shopping!  Where will you get the money this year?  Credit cards?  Personal loan?  Maybe a year end bonus?  Or will you use just plain old cash?

You know, retail stores aren’t the only ones who love holiday spending.  Credit card companies stand to make a small fortune every time customers whip out those credit cards… that’s why your mailbox is filling up with all those credit card offers, with balance transfers, low interest, and rewards galore!  And, while there are some really good deals right now, be sure to read the fine print for any new offer that you consider applying for this year.

Here are a few things you’ll want to pay attention to before you fill out that credit card application:

“Interest Free” Purchases:  Seems like every offer you see, whether it’s in the mail or in the store, promises “interest free until next year.”  And while it’s true that you won’t pay interest, you do need to make sure that you can pay off that “interest free” purchase before the expiration date.  Otherwise, retroactive interest charges may be added to your account at the end of the promotional period.  (And while you’re at it, better check what the interest rate actually is when that promotional period expires!)

Balance Transfer Fees:  Be sure to read the fine print any time that you consider a balance transfer – with fees as high as 3%, you could pay a pretty hefty fee if you transfer a large balance.  And again, make sure that you can pay the full amount off before the end of any balance transfer promotion!

Store or Catalog Credit Cards:  Right now, there are lots of promotions out there… discounts, coupons, interest free until next year, etc.  Once again, check your interest rate and have a plan to pay the account off quickly!   (Store and catalog cards are actually a good start if you’re looking to improve your credit score – many of them will work with you to get you the credit you need.)

Millions of Americans use credit cards as a way to finance their holiday spending, and then aren’t able to pay it off – make sure you’re not one of them.  Set a budget, have a plan and enjoy the upcoming holiday season!

Your First Credit Card

“It’s everywhere you want to be.”

“What’s in your wallet?”

Advertisers make sure we’re aware of the power of plastic long before we’re old enough to carry those credit cards, don’t they?   Even though choosing your credit cards based on ad campaigns is not the right way to do it, the advertisers do get one thing right:  Credit cards can be very powerful tools.  And for young adults trying to select that first credit card, making a careful, educated choice can save you a lot of money, as well as helping you to establish and build a good credit history.

When it comes time to buy a car, get a mortgage, or just rent your first apartment, the better your credit score, the better your chances are of getting that loan at an interest rate that’s far more affordable than if you had no credit history.   (Even more important, in this digital day and age, your credit score can even affect your employment opportunities.)

Potential lenders utilize your credit reports to determine how risky it is to give you a loan.  Will you pay the loan back?  Will your payments be late?  Or, will they all be on time, every time?  Essentially, the lender wants to know if you, the borrower, will be able to pay back the loan.  If your credit is bad, then you may have made some major or ongoing financial mistakes and you may be less likely to repay this loan.  On the other hand, if your credit is good or excellent, then you’ve likely established a history of paying back your debt, and the lender will most likely grant the loan.

Credit cards are effectively short-term loans that need to be paid back within a short grace period.  Getting your first credit card can be difficult, especially if you’ve not borrowed any money in the past, and don’t have much, if any, credit history.  But, how are you supposed to establish and build your credit score if no one will give you a credit card?

One of the best ways to establish credit is to apply for a secured credit card. These credit cards are secured by a deposit that you make when you sign up for the credit card. Typically, your credit limit will be the same as your initial deposit, but that’s where the similarity usually ends.  Just like an unsecured card, you’ll be able to use your secured credit card to make purchases, you’ll make monthly payments, and you’ll even have interest charges if you carry a balance on the card.  All in all, a secured credit card is a great way to build your credit if you’re just starting out.

Another effective way to build a credit history is to become an authorized user on someone else’s credit card.  Often, a parent or guardian will designate one or more of their young adult children as authorized users on a credit card.  This helps the child build credit without obligating them to pay the balance every month.  Just keep in mind that if the person whose account you are authorized to use does not handle the account properly, their mistakes could end up hurting rather than helping your credit.

Typically, establishing credit only takes a few months, then you’ll be ready to select for your first unsecured credit card.  But, before you sign up for the first ad you see, make sure that you do your research so that you choose the right card for your needs.  As yourself these questions:

How will you use the credit card?  Emergencies only?  Day to day purchases so that you can cash in on rewards?   Will you pay in full every month or will you carry a balance?

If you plan to carry a balance on the credit card, what’s the interest rate that you’ll pay on the balance each month?  The interest rate used by credit card companies is the annual percentage rate, or APR. There are cards with variable APRs, which are based on a certain index (such as the U.S. prime rate).  There are also nonvariable APRs, which are usually fixed-rate credit cards. As a beginner, you will usually want a low-rate, nonvariable APR credit card, because knowing your interest rate will give you a sense of how much money you will need each month to pay at least the minimum amount due. A low-rate, nonvariable APR card will therefore help when you create a monthly budget.

Will there be any penalties, fees, or other charges related to the credit card or it’s use?   Read the fine print – the most common fees include balance transfer fees, cash advance fees, fees for requesting a credit limit increase and online or mobile payment fees.  Most credit card companies impose penalties for not paying your bill on time or going over your credit limit.   Choosing the wrong credit card company can result in outrageous fees and penalties that could actually hurt your credit score in the long term.

What about rewards credit cards?  Many credit cards offer cash back for certain purchases, or 0 percent APR for the first six to 18 months, or other incentives.  The low interest cards are great if you’ll carry a balance, just as the cash back is excellent if you use that reward correctly, but make sure that the reward actually fits your spending pattern.  Knowing how to use these rewards can really save you a lot of money if you’re careful.  Just remember, that 1% cash back really isn’t  saving you money if you’re paying 24% interest on the balance you’re carrying every month… don’t fall into the credit card trap.  Use your cards sparingly and pay off the balance as quickly as possible.

Remember, you’re working to build good credit, and you don’t want to get off on the wrong foot!  Your payment history, the amount of credit you use, and the number of negative marks on your credit history all have a large impact on your overall credit score.   

Pay off your balance as soon as you can, limit the percentage of overall credit that you’re using, and avoid any negative marks on your credit history if at all possible. While credit cards are a convenient part of everyday life, they can also be very dangerous if not used responsibly.  Make sure you use your first credit card to establish positive financial habits that will serve you well for a lifetime.