Credit Card Tips for Newbies

If you’re like most people, your introduction to money most likely came about in the form of a gift from your parents, grandparents, or someone close to you.  Most likely it was a piggy bank, pouch, a small canister, or something else where you were encouraged to put a part of your allowance, or babysitting money, or any other money that you earned.  This was meant to educate you about the importance of saving money.   Hopefully, this started a lifelong habit of setting aside a certain amount of your earnings so that you would have the financial resources for any sort of emergency that may arise in your life.

The same principle applies to maintaining adequate credit availability.   It’s another means to have funds available to you in the event of an emergency.  Building your available credit is just as important as saving, but there are some important factors to consider when looking at your credit cards and the terms associated with said credit:

Annual Fees:   Many credit card companies charge an annual fee for the use of their card.  However, very few people know that they can easily get rid of such fee, especially if they have a good credit score. For this case, all you need to do is to pick up the phone, call your credit card company and request for the fee to be removed. Tell them that you are going to cancel the card otherwise.  This works most of the time.

Universal Rules:  In the event that you are late in making the repayment of one of your cards, you will almost certainly be charged a much higher rate of interest on your other cards almost immediately. This is considered to be part of the universal default rules that you’ll find in the fine print of all your credit card agreements. Therefore, one of the most important credit card tips for you is to make the payment on or before the due date.

Try Waiving The Late Fees:  If you have never been late before paying your balance and fees, you can call the credit card company and request that they waive the late fees. Some representatives may refuse this request but it doesn’t hurt to try.

Remember, having available credit when you need it is just as important as saving, so do your best to protect your credit score by making your payments on time, keeping your credit usage within limits, and review your credit report regularly!

Personal Loan Options for People With Bad Credit Scores

With the financial crisis created by the pandemic, many people are finding themselves in need of an influx of cash to get back on their feet. If your credit score is less than perfect, it may be harder to get that loan.  However, it is not impossible.  You have options.

Unsecured vs. Secured Loans

All loans fall into one of two types, regardless of what the loan is for.  The first type, a secured loan, is a loan that uses some type of physical property as collateral.  The most common types of collateral are homes, land and vehicles.  Your credit history matters, but you’re more likely to get approved for this type of loan because there is something of value securing this type of loan.  Should you default on a secured loan, the lender would simply take the collateral property and sell it to recoup their loss.

The second type, the unsecured loan, is harder (but not impossible) for those of us with less than perfect credit to secure.  Should you default on an unsecured loan, the lender will not have anything to repossess to repay the loan. So, if you have poor credit, the lender will be review your application carefully before extending credit.

Unsecured Loans with Poor Credit

Obviously, when you search online, you’ll find many options for different credit levels.  Even if your credit is poor, lenders are still competing for your business – the terms will be different and the interest higher, but there are options. Just be careful, not every loan that you find online is as good as the ad says it is.  Read the fine print.  Verify that the lender actually exists.  Do they have a phone number?  Physical address?  What are the reviews?  Check with the Better Business Bureau before you sign anything.

Carefully Review the Fine Print

Remember, the lender views you as a greater risk if the loan application if for an unsecured loan, so they may be adding other details to the loan to benefit them. The biggest thing that lenders will do to protect them when lending you money if you have bad credit is to raise the interest rate, so be sure that you compare rates before you finalize the loan.  And, most importantly, never get a loan that you’re not going to be able to pay back!  Defaulting on a loan will make your already bad credit score get worse. If you can pay it back and are responsible with your finances going forward, then consider your options and pick the type of loan that works for you.

Credit Score Changing Every Month?

Does your credit score fluctuate every month?   Up a few points one month, down a few points the next… why won’t it stabilize?  If you’re like most Americans these days, you keep a pretty close eye on your credit score, but honestly, it’s just frustrating when it goes up five points one month, only to drop ten a month later!  What causes these monthly fluctuations?  And even more importantly, is it something that you should worry about?  

Here are the most common reasons why your score changes:

New Credit Inquiries:  Signed up for a new credit card lately?  Bought a car?  A house?  Anytime you take out, or in some cases, consider taking out a new line of credit, at least one credit inquiry is likely to hit your credit report.  And, while the effect is minimal, you’ll still see your score drop at least a point or two in most cases.  Fortunately, the effect is short lived, and most credit inquiries drop off after a year or so.

Closing a Line of Credit:  If you’ve just paid off a credit card bill that you’ve had for a long time, it can be really tempting to close that account, but try not to close older accounts unless you absolutely have to – closing just one long standing account will make your credit history shorter, and your credit score may drop a few points.

Missing a Payment:  Your payment history is a big factor in determining your credit score, and just one missed payment will likely hit your credit report fairly quickly, causing your score to noticeably drop.  Unfortunately, missed payments typically stay in your credit file for seven years, so the effect can be far reaching.

Credit Card Balances:  Since your credit card balances vary from month to month, it’s not uncommon for your credit score to go up (and down) a couple of points each month due to that variance.  Pay a card off and you’ll see your score go up.  Use one that you haven’t used in a while and you’ll see your score drop.  Even though this is a normal occurrence, keep in mind that your credit utilization is an important part of your score, so don’t let credit card balances get out of control.

Bankruptcy:  Even though most people know that filing bankruptcy will affect your credit score, many people are unprepared for the nosedive your score takes immediately after the filing hits your credit report.  Unfortunately, bankruptcy will stay on your report for 7-10 years, so consider all of your options carefully before you file.

Credit Mix:  Your credit mix typically accounts for about 10% of your score, so make sure you only apply for accounts that you intend to use.  Credit cards, installment loans, department store cards, auto loans, mortgages… all of these are a part of your credit mix.  Unbelievably, I know of several people whose credit score improved after buying a house simply because it changed their credit mix.

Credit History:  About 15% of your score has to do with the length of time you’ve had credit, so you may see your score tick up a few points a year simply because you’ve had credit a little longer than the month or year before.  But, you can also see that score tick down when you close an account (or open a new one), since your credit history is affected.

Identity Theft:  Although no one likes to even hear the words identity theft, in the event that your identity is stolen, you will likely see a dramatic effect on your credit score that can be difficult and costly to sort out.  Identity theft is perhaps THE most important reason to check your credit score on a regular basis, review individual accounts, and report anything unusual as soon as possible in order to minimize the damage done.

Did you know that up to 50% of us can’t tell you if there’s been a change in our credit reports?  Monitoring your credit takes only a few moments each month, and those little fluctuations can be frustrating, but just remember – minor fluctuations are normal, but keeping track of them is crucial.  A few points one month won’t make much difference, but a few points every month in the wrong direction could create significant problems for you in the future.

Putting Your Financial Life Back on Track

Now that the COVID-19 pandemic is beginning to show signs of slowing, things are beginning to open back up, and many of us are going back to work, getting our lives back on track, and starting to plan for the future.  If you’re one of the ones who was furloughed, laid off, or even terminated, your credit may have suffered… So, where do you start at putting your financial life back on track once you have a regular paycheck coming in again?

Obviously, if your credit has taken a hit, the very first thing that you need to do is study your complete credit report.  Credit Bureaus are required by law to supply one credit report per year free of charge. So, by contacting each one separately, you can get your free copy.  This will give you a file number that you can use to dispute anything on your report that you believe is incorrect.  You can also sign up for any of the free services online that help you to monitor your credit score.  (Study each one carefully, figure out which credit bureau they are reporting for, then sign up for three different companies so you can access all three credit bureaus for free!)

Once you have your credit information in hand, study your report very carefully, then consider contacting your creditors directly.  You may find they will be willing to negotiate a settlement of your debt for less than is owed. Don’t wait until your accounts have been turned over for collection by a debt collector. At that point, your creditors have given up.

Charge offs, liens and past due balances on your record within the past 24 months will do the most damage your credit score, so those are the ones you want to concentrate on first. If you have both charged off and collection accounts, but limited funds available, first pay past due balances.  Then, pay the collection agencies that will agree to remove all reference of the delinquency from your recordIf an agency says all they can do is report the debt delinquent, then thank them for their time, but explain you are concentrating your efforts to work with those creditors who will work with you.

If you have older debts on your credit report, the statute of limitations in your state may prevent debt collectors from being able to sue you.  After that, your unpaid debts are considered “time-barred.”  According to the law, a debt collector cannot sue you for not paying a debt that’s time-barred.  Of course, the statute of limitations varies from state to state and for different kinds of debts, so check your state’s laws first.  Also, also under certain circumstances, the debt “clock” can be reset.  This starts the statute of limitations anew, so be very careful.  If you admit to the debt, or even if you pay any amount on the old debt, the clock resets and a new statute of limitations period begins.  That means the collector may be able to sue you to collect the full amount of the debt, which may include additional interest and fees.

A critical factor in negotiating a settlement is a letter from the creditor that explicitly states their agreement to delete the account upon receipt of your payment. This letter will remove the item from your credit report completely, as if it never existed.  Normally, your credit score will quickly rise by 20-30 points once this is removed from your file. Ask that the letter be sent directly to you by fax or email, then personally send it to the Credit Bureaus to ensure that it is processed to your file quickly and accurately.

If your credit cards are behind, most will work with you to pay down your balance, set up a payment plan, maybe lowering the interest rate, or even discounting the amount owed if you agree to pay it all at once.  Remember, you will need the cards to help rebuild your new payment record, so don’t close out the account once you have paid off the old balance.

Whatever you do, keep at it. It takes effort, time, and patience to repair your credit but the results are worth it.  Do not take no for answer, if your initial contact tries to put you off insist on talking with someone who can make the decisions you require.

Rejected for a Bad Credit Loan? Here’s Why.

When the COVID-19 pandemic shut everything down a couple of months ago, so many people were laid off, furloughed, or let go from their jobs that the unemployment rate quickly rose to depression era levels.  Unfortunately, most people were unprepared for the financial emergency that came from going without a paycheck for days, weeks, and in some cases, months.  Small business owners were forced to close businesses.  Hourly and salaried workers were laid off.  Cash quickly became hard to come by for so many of us.

Monthly BudgetFast forward a few weeks and the pandemic is now showing signs of winding down, and it appears as though things are beginning to open back up.  If you’re one of the lucky ones, and you’re being called back to work, then you’ll be able to start putting your life back together sooner than many.  And one of the first areas you should address is your financial life.

If you missed payments on any of your monthly bills, you’ll soon be asked to pay up.  That mortgage or rent payment that was deferred?  Yep, it’s now due.  Utility bills?  Also due.  If fact, money may be even tighter than it was when you were self isolating at home, simply because all of those bills that you couldn’t pay before are now due and payable.  So, how will you cover it?  One option that you have, even if your credit is bad, is to get a loan to cover the extra expense, consolidate bills, or simply to just catch up.

But, if you have bad credit, what’s to keep you from being rejected?  Here are the most common reasons that people are rejected for loans, even those marketed for people with bad credit:

  • Bad Credit:  Keep in mind that, even though a loan is marketed as being for people with bad credit, not everyone with bad credit will be approved.  Your credit score may be too low to qualify, especially if your reason for requesting the loan is not what the lender is expecting.  Is your low credit score due to a financial emergency, such as loss of employment or illness?  Perhaps you got carried away with your spending habits when you were younger?  Have you been making an honest, continual effort to repay those bills for a period of time?  If so, lenders are more likely to work with you.  But, if you have a history of defaults, late payments, etc., that demonstrates a lack of financial responsibility, chances are you will continue to be rejected until you can prove that you have changed and have begun working on repairing your credit damage.
  • No Credit:  Unfortunately, a lack of credit history demonstrates nearly as much risk as does a poor credit history.  Without a credit history, lenders have no track record to use to determine if you will pay them back.  So, if you have no credit history, you should take some steps to build one.  Start with a bank account, then get a couple of credit cards that you use sparingly and pay off each month.
  • Lack of Collateral:  Some loans require the use of collateral to secure the loan.  Collateral, such as a home or a vehicle, is pledged against the amount of the loan. Essentially, you are showing the lender that you have property that could be sold to get you the money you need, but you are simply requesting a loan instead.  Of course, if you do not repay the loan, the lender will simply take your car or home as repayment.
  • No Income:  Unemployment will not always prevent you from getting an unemployment loan, but those are special loans.  Fast loans for people with bad credit are not unemployment loans. For a fast money loan you need to show to the lender that you have a means to pay back the loan and that requires a steady source of income.

There Are Options

Remember, it’s not the end of the world if you’re rejected.  There are still options.  You can borrow from a family member if you’re desperate, or find a cosigner with better income and better credit to help you qualify.  Keep looking.  The internet is full of lenders.  If you look long enough, you may find someone who will work with your specific circumstances.  And if not, keep working on your credit!  You will eventually get there.

 

Should You Skip Your Mortgage Payments Now?

Right now, an unprecedented number of Americans have lost their jobs, lost a large portion of their income, or worse, and simply aren’t able to pay their bills.  But what about you?  What bills should you pay?  And what bills should you skip?

Truthfully, if you have the money, you should pay ALL of your bills as usual for as long as you can.  Don’t be one of those people who are still working, yet use the pandemic to skip a mortgage or car payment.  Believe me, you will be sorry in the long run if you choose to go that route.  We still don’t know what the fallout with respect to our credit reports (and credit scores) will be as none of the legislation that has been enacted either directly or indirectly addresses payments that are skipped during this unprecedented time.  Already, we’re seeing lendors of all types, from home mortgage lenders to credit card providers, put stricter requirements in place to even qualify for a new loan, and/or cut back on credit limits, the types of loans available, and more.  So, if you can pay your bills, do so.

However, if you cannot pay your bills, the most important thing that you should do is to sit down and see what your options are with each and every bill that you have.  Does your mortgage provider have a forbearance option?  If so, will that affect your credit report, and if so, how?  What about your car loan?  If there is no effect on your credit score, these may be your best options.  If not, then look at your credit card bills.  Many are offering some type of special payment arrangements, but again, ask what effect this will have on your credit score.  Next, look at your local utility companies.  Many states have passed legislation regarding utility services, so chances are, your local providers will not shut off service if those bills are late, so that may be a viable option if you are strapped for cash.  The main thing is that you look at all of your options.

Whatever you do, don’t just stick your head in the sand.  Communicate with each and every one of your creditors for any bills that will be late, even if it’s only a few days.  Let them know when to expect payment.  Request that late fees, if any, be waived.  Request that they not report it to the credit bureaus.  And, if they do, make sure that you add a statement to your credit file explaining why the payment was late.  As hard as it may be to address these issues now, it will save you years and years of grief in the long run.

Financial Solutions for the New Normal

Coffee MugWe are facing financial challenges today as never before and we’re just not sure how we’ll ever be able to dig our way out of it or if we will ever be able to retire.  What does the future hold in the “new normal” that we’re all facing?

Honestly, if this worldwide pandemic has taught us nothing else, it’s this: regardless of your earnings, whether you make $40,000 or $400,000 a year, you’ve got to have a plan for the future!  And I’m not talking about a comfortable retirement, either!  Especially when most of us weren’t even prepared for the financial emergency that this economic shutdown created.  For many of us, it’s going to take a very long time to recover from these weeks or months of staying at home.

 

Exactly what caused us to get in the mess that we’re in?  Why weren’t we saving?  Why do we have so little in retirement?  Where is our emergency fund?

  • Truthfully, we are drowning in debt!  Did you know that the average American citizen carries $168,000 on their home mortgage, $27,000 in car loans, and a whopping $10,000-$15,000 in credit card debt?  And those with student loans?  $48,000.  The interest alone on that much debt is substantial!
  • We’re taxed to death!  The average American citizen pays approximately 24% of their total income in some sort of tax.  That includes income and payroll taxes, sales taxes, property taxes, vehicle taxes, and so on.  And every year, that figure rises!  Just wait until the TRUE cost of this pandemic hits our tax bills!
  • The average American is unable to save at all, but if and when they do, it’s usually only about 2% of their overall gross income.  Imagine 2% of your last paycheck.  How long would it take you to save an emergency fund at that rate?

So, what can we do?  Realistically, if we’ve learned anything at all these past few months, it’s that we really don’t need all those expensive extras in our life!  Take a look at what you used to spend at the coffee shop every morning.  You’ve made your own coffee lately, haven’t you?   What about the gym?  Haven’t you been exercising at home just fine since it’s been closed?  Maybe you really don’t need to eat out as much, either?  Or shop as much?  What else have you learned to do without?  Add it all up… is it $200 a month?  More?  Less?

 

Even if your savings is only $50.00 a month, start saving it now.  Before you get back in the habit of driving through the coffee shop every morning.  Before you abandon your daily walk or run for the gym.  Before you eat out every night instead of cooking at home.

Old habits have been broken.  Embrace the new normal.  Learn from it.  Use it to build a new lifestyle.  One that enables you to build on your financial future, save money, and be better prepared the next time the world comes crashing down around us!

 

What Are You Doing With Your Stimulus Money?

Over the past couple of weeks, Americans have begun to see the economic stimulus checks show up in checking accounts, savings accounts, and now in mailboxes across the country.  Now, obviously, if you are unemployed, laid off, or otherwise furloughed, and haven’t received your first unemployment check, you’re probably going to use the money to pay bills, buy groceries, and just keep your head above water.  But, what if you’re one of the ones who is still working, have started receiving your unemployment (bolstered by the extra $600 weekly federal money), or don’t need the additional money.  What are you doing with your stimulus money?  Are you one of the many who have made the trip to the local home improvement store?  Have you purchased new electronic toys online?

If you haven’t spent your stimulus money, you may want to consider saving as much as possible, and here’s why.

Even though we’ve all been led to believe that the economy will just magically bounce back once we’re allowed to officially reopen those businesses that were closed, the simple truth is that it’s just not going to happen that way.  Already, the Governors of nearly every state are considering “phased” reopening plans, meaning that it’s going to be a slow, steady, uphill battle to dig our way out of the economic hole that this virus has created for us.  Many businesses, large and small, simply may never reopen, and those that do will open with a much lower capacity, and likely, a much smaller staff at first.  And that means that many of us will not be going back to work right away – some of us won’t go back to the same jobs at all.

There’s also the very real possibility that other businesses will ultimate close weeks or even months after the “reopening,” simply because the lower volume of business, coupled with the loss of income over the past two month, will cause those businesses to falter and die long after the pandemic is over.   That’s why, even if your job is totally secure, you may want to hold on to your stimulus money for now – at least until the wrinkles all shake out once everything is open again.

Remember, at this point, nothing is certain.

Using Credit Cards to Survive the Corona Virus Shutdowns

Over the past few days, as we’ve watched industry after industry getting hit by closures, slowdowns, and collateral damage because of worldwide efforts to stop the spread of COVID-19, we’ve also watched the economy tank in nearly every country.  We’ve heard of “temporary” shutdowns, pauses, and already, many, many layoffs.  And, while the government’s new economic relief package is supposed to help in cases where people lose their jobs, where they’re sick, or where they are taking care of someone who is, how long will it take for that “help” to actually funnel itself down to those of us who literally don’t have the money to miss work?  Days?  Weeks? Months?

credit cardsWhere does that leave you?  How do you pay the car payment?  The house payment?  Buy medicine?  Groceries?  How do you live day to day until the “relief” is made available or until the virus is contained?  And, since they’re only really talking about 2/3 of your normal salary, where do you get the extra third?  Your normal bills aren’t going to just magically drop by a third, are they?  So what do you do?

One thing that we’ve noticed in all this panic buying at the stores is that people are using credit cards to get those items that they’re buying that are out of the norm.  Is this a smart way to handle the extra expense that all of this self isolation is creating?  And what of the long term expenses?  Is it smart, if you are one of those affected by the crashing economy, to utilize credit cards to make ends meet?

The answer is not nearly as simple as you might think.  First off, how much credit do you have available?  You might want to take stock of your available credit first off.  Then, once you have that information, consider your circumstances.  Are you in an industry that will likely be affected long term?  If so, how will you pay back any of the charges that you create while we’re all in panic mode?  Will your job reappear?  Do you have savings to rely on?  Are the things that you’re using those cards for directly related to actually surviving the financial crisis created by this virus or are they something that you wouldn’t normally buy, but you’re only buying now because you’re in panic mode?

These questions and the answers are very personal to each and every one of us, but they are things that you MUST consider.  This virus will not last forever, but the financial decisions you make now will have an effect on your life long after this crisis has passed.  And those of us here at Fresh Start Card Offers want to make sure that everyone is using common sense as we navigate through a worldwide pandemic, something that has never happened in our lifetime, and will likely not happen again soon.

Remember this, if you remember nothing else. The choices you make right now will have long term financial consequences, so make them wisely.

Why Does Your Credit Score Go Up and Down?

Ever notice how your credit score goes up or down a few points every month?  Even worse, have you ever had your score just drop like a rock and you have absolutely no idea why?  Maybe you’ve been one of the lucky ones and seen a boost?   If you’re one of those people who gets their credit score emailed to them weekly or whenever there is a change, there’s no doubt that you wonder why it changed 2 points last week, or why it went up a point this week.  Every little score change makes you wonder… why doesn’t it just STAY THE SAME?

Actually, there are a lot of reasons why your credit score changes:

Your Balance Changes:  If you make a large payment (for example, with your tax refund), you might see your score suddenly shoot up like a little rocket (the larger the payment, the bigger the spike in your score).  Or, let’s say you make a large, new purchase, maxing out a credit card… you might actually see your score take a big nosedive.  That’s because your credit utilization goes up, leaving you less available credit.  This makes up about a third of your credit score, so keep your balances as low as possible.

You Apply for a New Credit Card:   Applying for a new credit card usually causes a hard inquiry on your credit file and this typically drops your score a few points for a short period of time.  This doesn’t make up a lot of your credit score, but if every point counts, don’t apply for new credit cards unless you really need them.

You Close a Credit Card Account:  Anytime that you close an old account, you shorten your credit history, which can negatively influence your credit score.  As tempting as it is, many experts now advise you not to close a credit card account unless you absolutely have to.

You Miss a Payment:  Missing a payment goes directly into your credit file and then stays there for seven years.  Since your payment history amounts to about a third of your score, missing just one payment can really drop your score and keep it down for a long time.

You File Bankruptcy:  Even though it’s usually a last resort, bankruptcy will have a very detrimental impact to your credit file. Therefore, it’s always wise to seek an experienced attorney to help you to make an informed decision before filing for a Chapter 7 or Chapter 13 bankruptcy. The statute of limitations for a bankruptcy can range from 7-10 years.

Your Identity is Stolen:  Unfortunately, by the time your credit score is affected by identity theft, it’s usually too late.  That’s why you need to regularly review your credit report and score.  You might even want to consider a paid subscription for identity theft protection.

Your Credit History is Short:  15% of your credit score is based on the length of your credit history, so if you’re just starting out, know that it’s going to take time to build up a strong credit history (and likewise, a strong credit score).

Believe it or not, over half of the population today cannot tell you if there has been a recent change in their credit score.  Don’t be one of those people – pay attention to your score, review it regularly, and investigate anything that you’re not sure about.