credit score

When Life Goals May Mean a Lower Credit Score

November 18, 2015 by penn

Your credit score is going to be the number that can either help or hurt you in life. This is the number that lenders are going to use and decide whether to let you have that mortgage you so desperately want. It is also the number that is going to get you lower insurance rates, a better deal on entertainment and the like. You are warned from a young age that your credit score is going to be the basis for which your entire life will be played out. You never want to let this score drop, and you never want to do anything that is going to make this score change in the slightest. However, is this really practical? There are always going to be things that are going to be times in which your score is going to take a hit. But, the good news is that even with this hit, it is okay.

[Read: Ways to Fix Your Credit Score]

There are times in which you have to let your score take a hit. We will discuss three of the main reasons why, along with why these situations are okay for your credit rating.

Seeking Multiple Loan Terms

There are times in which you may feel that you need to get information on multiple loans. This is often the case when you want to ensure that you are getting the best rate out there and the lowest payment that you can possibly get. When you are looking in this manner, you are going to find that having multiple loan inquiries on your report can and will affect your credit score. However, keep this facts in mind:

The score is only going to lower by a few points
This request will be a hard inquiry on your credit report, which signals to lenders you have been shopping around for the best rate, rather than raking up credit
The points that are lost can usually come back after a short period of time as long as you are paying on time

Starting a Business Lowers Credit

When a person is starting a business, they are going to find that there are several hits that their credit score is going to take. Starting a business is a huge endeavor. Not only are nerves tested and stress is accumulated with this decision, but there are affects against the credit rating that a person has. Why is this? There are several reasons why opening a business is going to affect the score of your credit, leading to your overall number lowering. These reasons include:

Many business owners open up business lines of credit as a way to start out, they may utilize several different banks and lenders to find the best rates and terms, thus they are going to have several hard inquirers onto their credit
Credit cards are often used to help start up a business, which is going to lower the overall credit score as the person uses more credit
The debt to income ratio is going to increase when starting a business as the person is doing many things with credit, this ratio can greatly affect the overall score that a person has

Learning to Manage Debt with Debt Management Programs

There are times in which a person’s credit score is low due to the amount of debt that they have. We all understand that there are times in which having too much debt is going to adversely affect your score. Lenders view you as a risk for lending to and overall your score begins to drop. When this is the case, the person may be looking for help with dealing with their debt, which is a noble thing to do. However, through getting help through debt management programs, the person’s overall score is going to take a hit. Why is this?

Enrollment with a debt management program automatically signals that you have debt issues
Many times these companies negotiate your terms and repayment balance to get something that works better for you, resulting in you benefitting but your score losing

Why it’s Okay to Let Your Score Lower

These three scenarios mentioned beforehand are the times in which it is okay to let your score drop slightly. Consider these aspects:

If you are seeking multiple loans to find the best one for you, you are saving money in the long run with taking this hit to your credit
A new business is a great venture that could mean you succeed even more in the future. And as many people have pointed out, if you are successful it will take no time to get your credit back to where it was
If you have too much debt, it is best to take the hit to your credit score than to let this debt get the best of you and result in bankruptcy or other situations.

[Read: 12 Surprising Ways You’re Sabotaging Your Credit Score]

Though it is great to have a high score on your credit, it is not always something that you can control. Though these three scenarios would lower the score, they are great things to happen in your life if they are needed.

Ways to Fix Your Credit Score

April 11, 2014 by penn

Your credit score determines how different banks and other financial institutions view your credit worthiness. For example, it can determine whether you are able to get a mortgage or a car loan. If you have a low credit score you won’t be able to get the best rates on your mortgage if you are approved. It can also affect insurance rates. In other words, it can save or cost you hundreds or even thousands of dollars. If your credit score is not where you would like, the good news is that you can take steps to fix your credit score.It just takes some time and effort on your part and some research. The payoff in more and better credit offers is certainly worth it though.

Get Your Credit Score

Because it can affect your finances in so many different areas, it’s really important to keep up with your credit score. If you haven’t done so recently, it’s a good idea to go online and get your credit report and your credit score. Getting your score is the first thing you should do if you think you might need to fix your credit score.If it turns out that your credit score could use a boost, try some of the tips below to fix your credit score.

Check Credit Report for Any Inaccuracies. Believe it or not, it is pretty common for your credit report to have some inaccuracies in it. This could be an old debt is still showing up even though you actually paid it off years ago. It could also be a debt that isn’t even yours. These errors need to be removed to fix your credit score.In order to remove the errors; you just need to file challenges on them. Many companies offer to remove these errors from your report. Do your research and you will find that anything these companies offer to do, you are able to do yourself. It probably will take a little more time if you do the work yourself but it is cheaper than hiring someone else to do it.
Check On A Credit Limit Increase. This is one of the best ways to fix your credit score because the amount of credit available to you is one of the biggest factors affecting your credit score. If you are already using most or all of your credit, see if your credit card company will increase the limit. If you have a good credit record with them, you have a good chance of getting an increase. With more credit available to you, your score should go up.
Try To Pay Off Debt Faster. Again, one of the main factors in determining your credit score is the amount of credit you have available to you. The amount of credit you are using each month is referred to as credit utilization. If you pay more than just the minimum each month, this will free up more of your credit, keep your utilization low and help fix your credit score.
Transfer Your Credit Card Balances. There are a couple of benefits to doing this. For one, you free up the credit on the existing cards. This is great for your credit utilization. Also, a lot of credit cards offer great introductory rates for balance transfers. This gives you a better rate to pay the balances off, at least during the introductory period. Just remember that it is an introductory rate and will increase after a specified number of months. To maximize the benefit of transferring your balances, you really need to pay them off during the introductory period, or at least pay them down quite a bit. If you follow this advice, it will definitely help you fix your credit score.
Ask For Forgiveness. If you have been late on a credit card payment, this will definitely affect your credit score negatively. In fact, payment history is one of the main factors in determining your score. More specifically, they look at whether or not your payments are on time as agreed. So, if you have had a late payment, you should try to have it excused. This is not always successful but it is worth a try. If you were only late on your payment one time and you otherwise have a good track record with them, you have a much better chance of having the late payment forgiven. If successful, this is a great way to fix your credit score.

In conclusion, your credit score is one of the biggest factors in determining the types of credit you are offered. Over the long run, having a low score could really cost you a lot of money. Take some time, do your research and try the tips listed above. They can really help you fix your credit score.

Things to Know about Credit

January 12, 2014 by penn

Four things you have to do if you’re just starting out with credit

Being new when it comes to credit isn’t anything to feel ashamed about. Graduating from college or thinking of buying a new home? It’s vital to get on track with a good credit score. Knowing the basics will get you started; For example, not having enough data available about you to produce a credit score will leave you with a ‘thin file.’ Ultimately meaning you don’t have a credit score.

Nevertheless, when you have enough information to create a credit score – as small as it may be – your primary score will be around about the middle. Here four tips to aid you in taking advantage of this benefit.

1. Have a look at your report

Just because you haven’t done a lot to gain you credit, does not mean your credit file is bare. Credit reports are often lengthy and tend to include personal information such as your current employer. Making sure you credit report includes correct data is the first step in working towards a great credit score. Experian, TransUnion and Equifax are the three credit-reporting agencies. Each offer free credit reports, which can be obtained directly through them or by visiting www.annualcreditreport.com. Lenders are not obligated to provide credit information to one of these credit agencies let alone all three. Therefore attaining all three of your reports is essential as the credit agencies do make the odd mistake meaning data on your reports may vary from one to the other.

2. Building bridges

Using credit cards sensibly and starting with a card that suits you personally can be a simple way to build credit. Capital One’s Journey Student Rewards credit card and the Discover it for Students card are specifically intended for young people who can’t get a higher rate rewards card. You won’t miss out either if you have a poor credit score or thin credit file because secured credit cards are there just for you. All you have to do is place a cash deposit – usually between $300 and $500 – and this serves as your credit limit. They are good if you’re just beginning building credit as they are low risk.

3. Be smart with your new card and then upgrade

Another thing you have to know about credit is paying your debts on time steadily is a great way to establish a good credit score. With your first card make a minor number of purchases each month but be sure to pay off the balance in full before or on your due date. After six months you may be eligible to apply for a second credit card.

If you started out with a secured credit card, you generally have to wait 6-12 months before asking the credit card company if they would allow you to change over to a regular credit card. Don’t forget to use the second card as responsibly as you previously have.

4. Keep an eye on your credit score

Defining how credit worthy you are starts by using credit wisely. Lenders only use three-digits on your credit report to decide if they are going to prolong you credit. FICO is the only company that knows who your score is made up, however it is known to be centred on five mechanisms.

Credit utilization – 30%
Payment history – 35% – if you have paid well in the past
Types of credit used – 10% – what you have credit for
Length of credit history – 15% – how long you have had the credit for
Recent searches for credit – 10% – if you have recently applied for more credit

Credit utilization is harder to explain. It all relates to your debt-to-credit ratio; or how much you’ve used compared to how much you have left. So if you have $6000 of obtainable credit and have used $3000 of it, your debt-to-credit ration would be 50%. Credit experts say the ration should be 30% or less.

Credit utilization and payment history are the two most prominent factors here. In order for you to achieve a good credit score you must have used credit wisely and utilized the smallest amount of credit possible.

How lenders see you

Credit scores generally fall in to different groups. This is how a lender sees and checks your credit score.

700-850 – Excellent credit score
680-699 – Good credit score
620-679 – Average credit score
580-619 – Low credit score
500-579 – Poor credit score
300-499 – Bad Credit score

Obtaining you credit score

There are numerous ways to obtain your credit score. Try visiting www.myfico.com or try one of the three credit-reporting agencies. However, make sure the agencies don’t make you sign up for a trial subscription, where you would be charged later for the service if you forget to cancel it. CreditKarma.com and CreditSesame.com have a vast amount of other information about your credit other than just your score. This could be as simple as how much your mortgage is. They also offer your credit score for free from one of the three agencies, without being obliged to the trial periods.

Vital things to remember

Remember starting out with good credit is easier than try to fix bad credit. Try to avoid late payments and defaults; they could seriously damage your credit score! Good practises now mean a better financial future.

Homeowner Tips for Refinancing

December 9, 2013 by penn

In the past decade the housing market has been on a roller coaster and the interest rates are at their lowest. So as a homeowner you might want to consider some options when considering refinancing. Homeowner’s who are looking at saving money should think about refinancing their mortgage. Below there are several Tips for Refinancing to take a look at so you can make a logical decision.

Credit Score Check

Do not start refinancing until the credit score is checked and the documentation for refinancing should be in order. If there are any mistakes take time to dispute all the errors and get them fixed. This will increase the possibility of refinancing a mortgage and any loans. Tips for Refinancing should have people acknowledge that these things need to be done if they really want to refinance any type of loan.

Payments are paid on time
Do not open any new lines of credit cards
Try to save money just in case they need it for closing cost
Do not decide to take a vacation and buy luxury items to put them in more debt.

Take Advantage of Low Interest Rates

Whether you are just purchasing a new house or an older one a credit score will be checked by the lender. The lender will show you ways to help bring the monthly payment down as well as making sure refinancing is the way to go. Today to refinance a 30 year fixed mortgage it is at the lowest interest rates since the 1980’s. The list below is from comparing five financial institutions to get an average for refinancing in the Midwest.

30 year fixed rate mortgage with 0 points is still at 4.375% interest rate.
20 year fixed rate mortgage with 0 points is at 3.87% interest rate.
15 year fixed rate mortgage with 0 points is 3.39% interest
10 year, 7/1 arm and 5/1 arm mortgage rates will be low however there are possibility of APR fees and/or points.
This also will depend if you lock in the rate at 30 or 60 days

Tips for Refinancing should be used whether it is for a mortgage which can bring down your monthly payments to ease the burden on the family budget or on a home improvement loan. The longer the mortgage term the less your payment will be monthly giving a person a peace of mind and a way to avoid financial hardships in the future. In addition consider if paying off the loan or debt at a higher payment will benefit them or place a burden on their budget. This is where a savings for long term loan can be beneficial especially if the person is living from pay check to pay check trying to pay their monthly bills. The Tips for Refinancing is just to help individuals get a better understanding on what they can do before going to a financial firm.

Compare Financial Firms

People can find online websites that will help calculate the APR and interest rates for each state in the United States. All the person will need to do is read carefully and follow what they need to put into each box. The comparison will show at least five different financial companies that offer the lowest interest rates. This way the person can make a wise choice on the company to contact by phone or email. Once they make the initial contact the financial firm will also give them a check list before making any appointment to see them. The financial firm will probably give them some of their firm’s helpful Tips for Refinancing. Comparing the companies along with the interest rates on their own will save them time and money. The key points below are to help the person make a check list to accomplish before making an appointment with a lender.

Compare financial firm’s online websites.
Talk with the lender they already have a loan with.
Check with local banks that refinance for the best in interest rate.
Ask questions if they do not understand.
In advance check credit score and financial status before making any appointments.
Check to see if the lenders they have chosen are reputable and not trying to scam costumers.

Another key point for consumers is that they will need to decide on is how much cash flow they currently have and why do they want to refinance in the first place. The result should not be just because of a low interest rate, but because of a financial problem in the family budget. This could be from a serious illness of a loved one, an accident that has left a loved one with disabilities, a loss of employment or combination of any of these can cause financial problems. For this reason a person should look at their financial status before considering refinancing.

Options for Payment with Credit Cards

August 24, 2013 by penn

Why Must Your Business Be Able to Process Payments with Credit Cards?

A major transformation is in process throughout the consumer driven economies of the developed world. To say that cash is “out” as a medium of exchange, and credit cards are “in”, may be a bit of an overstatement, but the phrase neatly summarizes a trend that all sellers of goods and services must pay attention to. Mints around the world are still producing good old coins and paper currency, and there are many minor purchases that are quicker to complete with a dollar or two and some big pocket change. But an increasing number of transactions such as renting a car or checking into a hotel, can only be accomplished with a credit or debit card. The same is true for the rapidly increasing proportion of purchases we now routinely make online. Small and medium businesses that set up to accept payment with credit cards find that the ability to accept payment with credit cards brings a wide range of advantages, with only a few minor downside concerns. On the plus side, small and medium-sized business owners report advantages including:

Purchases of expensive products or services are easier and more convenient for customers if they do not need to have hundreds of dollars of cash in their wallet to complete the transaction.
More and more people prefer not to carry more than a few dollars of currency on their person. If your business doesn’t “take plastic”, that increasing portion of the population is excluded from your potential customer base.
The consumer’s sensible resistance to indulging in high-margin impulse purchases is often undermined by the simple phrase “I’ll just put it on the card”.
For some kinds of shopping, credit card users spend more per store visit because they are not limited by the amount of cash they are carrying. Cash customers, by contrast, make the more visits, and buy less per visit. Larger sales per customer visit works to the advantage of the business owner.

[Reported] Downsides of Accepting Payment with Credit Cards

The card processing companies take a small portion of each credit card transaction to cover their expenses, and frequently charge monthly or annual account maintenance fees.
Sales completed with credit cards carry a slightly higher risk of fraud than cash sales.
It can take up to several weeks longer for credit card sale proceeds to show up in the company’s bank accounts than cash sale proceeds.
The time lag between the sale of an inventory item and the receipt adds an extra layer of complexity to company bookkeeping.

How Does Accepting Payment With Credit Cards Actually Work?

In its simplest modern form, credit card processing starts when the seller enters the transaction information into a terminal connected to a modem. The buyer then swipes his or her card through the terminal, which then encodes both buyer and seller information, and transmits that information to a “merchant account” in a bank or specialized credit card processing company. The merchant account immediately accesses the buyer’s credit or debit card account. If sufficient credit (or cash, in the case of debit cards) is found in the buyer’s account, the transaction is authorized, and funds are transferred from the buyer’s account to the merchant account, and then on to the seller. Variations on this process exist to accommodate the special needs of restaurants, resort hotels, and other product or service providers.

Credit Cards and Online Purchases

The ability to accept payments by credit card opens the door for sales through company websites and other online venues. It is not uncommon for revenue from online sales to quickly surpass direct sales revenues. With a little help from website design experts, business owners can learn a great deal about the age, gender, and web browsing habits of current and potential customers. This information can be used to place targeted ads with links to the company website at online locations most likely to be visited by potential customers. Privacy concerns notwithstanding, the emerging science of precisely targeted Internet marketing has become a powerful force in today’s consumer driven economy.

Online payment by credit card can be transacted using a merchant account as described above, or through an online payment processor such as PayPal. Fees are generally similar even though the buyer’s local currency may be different from the seller’s.

Beyond the Credit Card

Technology has existed for some time that allows the connection of handheld card readers to cell phones, allowing credit card transactions to take place almost anywhere that cell phone coverage is available. This technology has been used in a surprisingly diverse range of financial exchanges.

There are a number of competing technologies that permit a buyer to complete a transaction using a smart phone application instead of a credit card. In most cases, the seller must have a specialized receiver for the process to work. Some major retailers have installed terminals for one such application, perhaps hoping to attract the demographic group most likely to find the technology interesting and fun.

How Debt Consolidation Takes Care Of Your Credit Score

April 17, 2013 by penn

Debt consolidation is one of the debt relief options that will not make your credit score suffer. In fact, as you continue to stick to the program, you will see that your score will continue to improve and reflect that you are now a more responsible credit holder.

Unlike the other debt relief options, you will still end up paying off the balance of your debt. Since there will be no reduction, your account will not be marked as “Settled” or worse, “Included in bankruptcy.”

Also, opting for debt settlement will require you to default on your payments. This is one way to really pull down your score. You need to allow it to happen so your creditors will be convinced that you have no money to pay your debts and the only solution, apart from bankruptcy, is to allow you to settle your debts. That means you will only pay off a portion of your balance and have the rest forgiven. Once completed, your score will be much lower than before and will be marked as “Settled” and not “Paid in full” – which is more preferable than the latter.

While debt settlement is effective when used under the right financial circumstances, it all depends on what you are willing to sacrifice. Bankruptcy is much worse because it gets your score even lower than settlement and that taint will stay on your record for the next 7-10 years.

Debt consolidation, at the very least, will indicate that you are current on your payments. If you apply the program at the right time, you may even avoid showing any late payments on your credit report. It will continue to reflect as “Current” which means you are still in debt but you are not missing out on payments.

Consolidating your debts allow you to make lower monthly payments to ensure that you can keep up with your contributions without putting too much restriction on your budget for basic necessities. In debt consolidation loans, you accomplish this by getting a loan with a lower interest than your current average. You then pay off the other debts, completing payments, without missing any due date. You will be left with this one bigger loan that you will pay off in the next 3 to 5 years. This could lower your score a little since your debt amount will increase. However, it will improve as you completely pay off your other debts and regularly pay back the loan.

In debt management, you will be assigned a credit counselor who will help create a debt management plan. The plan will show lower monthly contributions that are stretched over a longer payment term so you still end up paying for the whole balance of your debt. In most cases, this has hardly any effect on your score.

Some financial experts used to find credit score concern quite ridiculous. It is like taking care of your debt so that you are eligible to take in more loans. However, recent changes show that it has become a vital part in our society. There is more at stake when you do not take care of your credit history.

For instance, a good credit score will keep the interest rate on your mortgage loan low. In most cases, landlords also look at your credit history to see if you will be a responsible tenant. Even employers look at this figure to gauge how you will perform in the workplace.