Category: BQ Press

How to avoid falling into debt

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Doug Constable is one of the best pre-insolvency advisors specializing in helping business with cash flow difficulties. He is a professional bankruptcy and insolvency expert and the author of “What to do When You Can’t Pay Your Debts”.

4 Steps to help avoid falling into debt

Avoid Falling into debt

Fast internet services and instant gratification has made it harder for people to avoid falling into debt today. All you need to do is make a few clicks on your mouse, and you can buy anything you want and have it delivered to your doorstop.

However this ease of buying things may leave you spending more than you can afford. Moreover, the unstable economy wherein businesses lay off employees or reduce their paycheck by half, and the rising cost of living has led to many people falling into massive amounts of debt. This is why you need to be very careful about your spending habits to avoid falling into debt. You also need to follow the following information to avoid falling into debt.

1. Creating a budget is the best thing you can do to avoid debt. With a budget, you know how much money you need, how many bills you need to pay, and how much you can afford to spend. After paying off your monthly expenses, you can place the rest of the money in a savings account for a rainy day. Avoid spending money on unnecessary things.

2. Make only cash payments. You tend to spend less paying in cash than by using your debit or credit card. Fix and spend only that money every day. With physical money in hand, you know how quickly money comes and goes, and this encourages you to spend less.

3. Making investments help you avoid falling into debt, especially in an economic turmoil. By starting an investment plan, you have a more secure financial future, also there are good options like doing day trading, using resources online for this you can see more here about this subject. While investing in precious metals is a wise decision, it’s better to invest in different items to protect your assets. Precious metals like gold and silver retain its value even when the value of paper currency drops as their value depends on supply and demand, where its demand is usually higher than its supply.

4. Another great way to avoid falling into debt is by opening a savings account for a rainy day. Open a savings account through your bank or online store; just make sure its interest rate gives you more bang for your buck.

It is very important that you know how to avoid debt, especially in tough economic times. If you learn how to create and stick to a budget, keep an eye on where you spend your money, make wise investments, make only cash payments and open a savings account, you will be able to avoid debt and have a secure financial future.

Need Help?

If you still need help with controlling your debt and/or improving your credit, fill out the form below and get a free credit consultation from a credit expert at Better Qualified.


Multiple Credit Card Applications Can Affect Your Credit

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Multiple Credit Card Applications

It is true that you need to get credit to build a good credit score and this can be done by getting a credit card and using it responsibly. However, making various credit card applications in a short  span of time can also damage your credit score. The reason multiple credit card applications affect your credit score is because 10% of your FICO credit score is determined by new credit inquiries you make. Each time you make an application,  your credit is checked by the creditor to decide if your credit card should be approved. This  leaves an injury to your credit report which is included in your credit score.

Various Applications Hint Desperation

Multiple Credit Card Applications Hint Desperation

Consequently, the more credit card applications you make, the more your credit score drops. So as 10% of your credit score is affected by a new credit application, your credit score can fall as  much as 70 points if your credit score is 700. Then again, it also depends on the other information in your credit report. If your credit score  isn’t affected by the various inquiries, there is a chance of creditors denying your application  only because you had recently made various applications. This is because multiple applications are considered to be a sign of desperation for credit, where  desperation is always a turn off. While most people can regain these points within six months of applying for a loan or credit card application, the points may really count for those who had a poor credit score to begin with.

Makes You Look Like A Financial Risk

Opening numerous credit cards in a short time span is a negative indicator of a person’s financial  responsibility. This leads to a negative impact to your FICO score as it indicates you are a  financial risk. As your FICO score predicts how dependable you are with borrowed money, showing any  behavior which is correlated to mismanaging of credit is reflected with a drop in your credit  score. However, if you have already made the mistake of applying for many credit cards at once,  responsibly managing these multiple accounts leads to a quick re-bounce of your FICO score. This is done by paying bills on time and keeping balances below 30% of available credit. Unfortunately, data collected over the past few decades prove that this is not the case most of the  time, and those consumers who open various accounts in a short span of time end up running up  balances and missing payments.

Need Help?

If you still need help with controlling your debt and/or improving your credit, fill out the form below and get a free credit consultation from a credit expert at Better Qualified.


Credit Tips From Paul Oster “The Nation’s Credit Repair Man”

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Credit tips

Credit Tips To Help You Avoid Dangerous Mistakes

Credit cards help you easily and conveniently buy things you want (not necessarily need) and even help bail you out of a jam. Unfortunately all this comes at a price; moreover, uncontrolled spending and credit card use leads to various financial mistakes which come with long-term effects. While you may know the dangers of running up credit card balances, there are a few other dangerous mistakes you may make and some tips for avoiding them. These credit tips are even more important than ever coming into the holiday season.

Credit Tips PAYING THE BARE MINIMUM

PAYING THE BARE MINIMUM

While banks use different formulas for calculating the minimum amount due every month, most start with one or two percent of the outstanding balance. This is then added to fees for late payments, monthly interest charges and exceeding credit limit. Whichever way it’s calculated, just paying the minimum leads to lots of interest payments with time. Try to pay off as much of your balance, if not all every month.

LATE PAYMENTS

FICO states that payment history is the largest component, consisting about 35% of the score. This is sensible as lenders want to know how promptly their borrowers were at making payments in the past as no one likes getting paid late.
Not only do late payments lead to a low credit score (1x30day = 20-100pts), it also results in late payment fees from the bank. This not only costs you more but also boosts your monthly minimum amount.

HIGH UTILIZATION RATIO

Next to payment history, FICO checks the ‘amount owed’ which constitutes 30% of a credit score. This is calculated using the borrower’s credit utilization ratio or the amount of available credit used. So if you have card with a $6000 credit limit and you use $3,000, you have a 50% utilization ratio.

High ratios harm your credit score and affects your ability at securing loans on favorable terms. It also leads to less credit availability during emergencies. As high utilization ratio also indicates deeper financial problems, it’s time to do some serious budgeting if your ratio creeps up. On an average, Oster recommends, “keeping your utilization ratio below 30%.”

NOT READING YOUR STATEMENTS

As banks move towards paperless billing and automatic bill pay services, you may forget to check your monthly statement. This is dangerous as you may overlook some wrong charges and pay for services or products you haven’t bought. There is also a chance of you becoming a victim of identity theft or other forms of credit fraud.

Moreover ignoring your monthly credit card statement may lead to your losing command over your finances. This in turn may make it difficult for you to reach your personal finance goals. So make it a point to set aside a few moments every month to review your paper and digital statements and make it a part of your monthly budget review routine.

You will have to wait for the next post to learn about a few more credit card mistakes you should avoid making.

Need Help?

If you still need help with controlling your debt and/or improving your credit, fill out the form below and get a free credit consultation from a credit expert at Better Qualified.

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The Walking Debt – A Guide to Eliminating your Debt

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If you’re like me, then every Sunday night you’re glued to the TV watching AMC’s The Walking Dead, hoping your favorite character isn’t the next to be killed off. The show focuses around a group of survivors constantly stressing over how they are going to overcome a growing zombie threat known as walkers. The stress of having crippling debt can give you a similar sensation as being surrounded by a bunch undead zombies. If the stress of debt is getting too overwhelming, consider trying cannabis vape carts to relieve some of your stress.

As of October 2015, the average US household had $16,140 in debt. That’s a pretty outstanding number! This is mainly because most consumers are in a state of debt denial. They know they have debt but they are not treating debt like a priority and continue to spend their money on unneeded luxuries. The result: their debt continues to grow and grow like a zombie horde.

Two of the biggest debt factors can be linked to poor money management and medical bills. Sometimes we make mistakes and pay for things when we don’t have the money to do so (something you should stop doing once you realize it.) Other times it might not be intentional. No one plans on getting sick or taking a trip to the ER. Although you may feel like you’re surrounded, debt doesn’t have to last forever. In this article I’ll supply you with the correct planning, ammunition, and faith to take on your walking debt!

Step 1: Locate and List All of Your Debt

Debt Survival Guide

Let’s begin with creating a debt survival plan. Like I said before, the creditors you owe are your enemies. They’re the zombies that are trying to do your bank account harm. Before we go and attack them we need to asses the situation. Much like a real apocalyptic invasion, we would never want to go out blind shooting in every direction. By that method you’ll do more harm than good. Ask yourself: “How many accounts are there? What are the balances? What are the APRs? (interest.)”

If you’re having trouble figuring this out then you may want to take a look at your credit report. Credit reports will generally report all of your debt, which will give you a bird’s eye view of every account that needs to be paid off and eliminated. You can get a free credit report each year by visiting annualcreditreport.com. This report won’t give you your score, but it will show you all of the accounts you’re looking to pay off.

After you get the report, find out exactly how much debt you are in and don’t forget to include the interest rates. List your debt and come up with a number you need to hit. If you are having trouble reading a credit report, you can always contact a credit expert and have them go over your report with you.

Step 2: Create a Monthly Budget & Payoff Plan

Okay, so we’ve located all of the threats. Next we have to devise a plan of attack! Create a budget to find out exactly how much money we will have to put towards your debt. Calculate your budget by listing your expenses. Make sure you list EVERYTHING from your mortgage payment to your morning coffee purchase. Start with your necessary expenses and work your way down. The top of your list should include loans and bills that need to be paid (mortgages, auto loans, utilities, etc.) If you have a family, a business, or others who depend on you, you can visit lifecoverquotes.org.uk to get life insurance.

Now that you have your list of expenses, study it. See all those expenses at the bottom of the list that you don’t need? (yeah I’m looking at you Netflix.) Take all of those expenses and cut them out of your life. You know how in every zombie movie or show there’s always that group of bumbling idiots that slow everyone down? Well that’s those unneeded expenses like Netflix and Starbucks. It’s time to get serious and right now is not the time for fun. All of those expenses you cut just became more ammunition to put towards defeating your debt.

If you’re looking to really get serious consider selling some of your bigger toys. Things like classic cars, jet skis, boats, and motorcycles can be sold for large amounts of cash that will take a huge chunk out of your debt.

After you’ve figured out your budget, set goals for yourself and stick by them. Never decrease the amount you’re paying towards your debt. If you stick to your budget and goals this should come as no problem. You can attain even more help with the use of apps like mint.com, ReadyForZero, and DebtPayoff. These apps make it easy to set payoff goals and stick to them.

Step 3: Do Your Research

research

The last step in planning before we spring our attack. Let’s research your accounts and look for anything that might benefit us even further. Many consumers are left in the dark when it comes to cheaper options to paying off debt.

Credit Card Debt

If credit card debt is your main concern, then look into applying for 0% balance transfer cards. 0% balance transfer cards can be your secret weapon when attacking your accounts. Like their name, these cards carry 0% interest for a certain period of time and will transfer your balances from an account to the new card. You’ll be surprised how quickly you can pay off your debt when not paying interest.

Medical Debt

Medical bills is one of the largest causes of debt. Recently the credit bureaus had decided that medical debt would weigh less on your credit report and wouldn’t report until 6 months past due. In the past, insurance companies would take extended periods of time to pay off the debt, which would hit the consumer’s credit report and drop their score. If you do have medical debt, make sure you keep in contact with your insurance company and straighten out all of the payment arrangements. If you are unable to pay your bills on time  then let the creditor know so you can work something out.

Student Loan Debt

Currently student loan debt is at an all time high of $1.2 trillion! Putting it well beyond credit card debt which sits at $884.8 billion. If you have a large amount of student loan debt, then you may want to consider student loan consolidation or look into student loan forgiveness programs. If student loans are the majority of your debt, check out my article Game of Loans – A Guide to Defeating Student Loan Interest.

Step 4: Attacking Your Debt

You’ve located and listed the accounts, you’ve prepared a plan of attack, and you’ve researched your enemy’s weaknesses. Now let’s get out there and attack that lingering horde of debt!

When it comes to paying off the debt there are 2 methods you can go by. One is called snowballing and the other avalanching.

Snowballing happens when you go after your smallest accounts first and work your way up the chain. The feeling of accomplishment when paying off these accounts will fuel you to keep going until you take down the big one.

Avalanching happens when you attack the largest account with the most interest first and work your way down. This method will actually save you the most money in the long run because you’ll be eliminating those high-interest rates first.

Regardless of which method you choose, allocate the money you were putting towards eliminated accounts to your next payment. The more your accounts start to fall off, the quicker you’ll see your debt drop off. Always remember to pay on time so you’re not hit with any late fees. Sign-up for auto payments if you’re the kind of person that might forget your payment dates.

Step 5: Put Extra Income Towards your Debt

A few times during the year you may come into some extra income. Treat this extra income as added ammunition in your battle against debt. Your tax refunds are your debt clearing grenades, job raises are your anti-debt rounds, and freelance or side job pay is the unstoppable tank you drive to clear a path through interest.

Putting all of your extra income towards your debt can be a game changer and should see your debt deplete in record time.

Step 6: Reward Yourself (Without Spending)

You’re reaching your debt goals and every time your knock off an account you should be rewarded. Now this doesn’t mean go out and splurge on some of those unneeded expenses you’ve had in the past (that would defeat the purpose of this entire campaign.) Try to find ways to reward yourself with little or no expense. Take time from your nightly routine to watch your favorite show or movie, make your favorite meal or dessert. Perhaps buy yourself a coffee (just one!) Don’t spend over $5-10 on a small reward.

Step 7:  Congratulations You’re Debt Free!

walking debt thumbs up

You stuck to your plan, you attacked your debt, and now you’ve come out victorious and debt free. Your a debt-zombie slaying machine and Rick Grimes has got nothing on you! Now you can safely maintain your debt from here on out.

This is where you and me part ways. I had an abundance of fun coaching you through your debt battle and I hope my zombie/debt analogies weren’t too much for you. Before I go just remember: Don’t spend your money on unneeded expenses and make sure you can always pay off what you charge. Stay focused on what is important and use our Credit Blog to help you along your way. You can do it! I believe in you! Godspeed!

Need Help?

If you still need help with controlling your debt and/or improving your credit, fill out the form below and get a free credit consultation from a credit expert at Better Qualified.


Build Credit With Holiday Spending

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Holiday Shiopping

It’s never too early to start planning your holiday spending budget. In 2014 average shoppers around the country were on pace to spend a whopping $861 on holiday gifts alone. With an expense that large, shouldn’t you get something back in return? (aside from the joyous feeling of gift giving of course!)

Truth of the matter is, if done correctly the holidays are a fantastic time to help build your credit and increase your score. Sure you can apply for layaway at Wal-Mart, bust out your Discover Card, or even put some of your spending on your hefty store cards (it’s about the only time you use them anyway,) but these methods can sometimes hurt your score, especially if you start to rack up your balance. So what are the best methods to build your credit during the holiday season? We recommend secured cards and a Fingerhut account.

Building Credit With Secured Credit Cards

Secured Credit Cards have all of the benefits of a regular credit card without most of the risks. A Secured Credit Card works just like a regular credit card. You use the card to make purchases and pay them off each month. They’re accepted everywhere credit cards are, the only difference between the two is secured cards are backed by the consumer. That means you decide how much of a credit limit you want by putting your own money into it. Once you close the card out in the future, your money will be returned to you.

Secured cards were created solely for building credit. Most cards don’t require you to have a good credit score (or a credit score at all for that matter.) Just like any credit account, you will have to pay on time each month, and if maxed out, it will bring down your score. Make it your priority to try and stay under 30% of your credit limit and pay off your balance at the end of the month.

Secured credit cards hold benefits over regular credit cards. When getting approved for a regular credit card or a loan, your credit score will always drop. This is because the creditor is unsure of how you will use your new line of credit. A few months of on-time payments will see your score bounce back to normal or even increase. Since the consumer is the backer of secured cards, there won’t be an initial decline in score, meaning your score won’t suffer for months while you struggle to bring it back to normal. Regular credit cards will also create a hard inquiry on your credit report, bringing your score down a few points regardless of being approved. Most secured cards will not create a hard inquiry and scores won’t be dropped. Better Qualified has a page of recommended secured cards for you to choose from

After making holiday purchases on your secured cards, always be sure to:

  • Pay your balance off or down to 30% or lower
  • Always pay on time
  • Never max out your card

Spend and Build

shop-791582_640

If you’re looking to incorporate building your credit score into your holiday spending this year, then now is the time to start. Another recommendation to help build your credit this holiday season is the Fingerhut Credit Account.

Fingerhut has been around for 60 plus years as a catalog retailer. Fingerhut now sells its thousands of products online to its members. With Fingerhut you’ll be able to find all of those name brands available at Wal-Mart, Amazon, and Target. Using a Fingerhut Credit Account to do your holiday shopping will be the most beneficial to your credit in the long run.

Fingerhut makes it easy to do your holiday shopping on their site, all while building your credit up.

What is a Charge-Off?

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what is a charge off

Although the term “charge-off” sounds good, in reality, charge offs are devastating to your credit report and score. Having an account report in charge off status can bring your score down hundreds of points and may even put that account into collections.

What is a Charge-Off?

charge off question

An account can get changed into charge off status once a consumer is late 6 months or more. The creditor assumes the debt will not be paid and “charges off” the account. At this time, the entire balance becomes due and the account may be purchased by a 3rd party collector.

How Do I Handle a Charge-Off?

call charge off

Charge-offs can be considered a serious derogatory account and may hinder you from getting future credit. If you have a charge-off on your credit report, the first thing you should do it contact the original creditor. The charge-off will still need to be paid so try to negotiate with them for a payment you can afford. Creditors will usually be willing to make a settlement for less than the amount owed. However, making a settlement can cause the derogatory account information to remain on your credit report for years to come. Your best option is to see if the creditor is willing to do a pay for deletion.

Send a Pay for Deletion Request Letter

Charge off Letter

Ask the creditor if you can do a pay for deletion. You may have to pay more than the average settlement amount, but your account will get removed from your credit report, which will increase your score and be beneficial to you in the long term (use this guide to create a pay for deletion letter here.) If the creditor agrees to a pay for deletion, make sure you get the agreement in writing so you can take it to the credit bureaus to ensure the account gets removed.

If the creditor refuses to budge on a pay for deletion, see if you can get them to change the status to “closed” rather than charge-off, as that will also affect your score. Make sure you satisfy the debt regardless of the outcome. If the debt remains unpaid, your account could fall victim to a collection account, or even worse, a judgment.

Removing the Account

If the account remains on your credit report after the debt is settled, you will want to dispute your account. Disputing your account with the bureaus can get your account removed much sooner than its 7 year lifespan. You can dispute your account online with the bureau’s website, by mail or by calling a credit repair company like Better Qualified.

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click on the link below for your free credit consultation with a credit analyst.

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3 Simple Steps for Creating a Budget

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What’s your favorite day of the month? Most people will agree, it’s payday. For some consumers though, paycheck to paycheck is a way of life (albeit not a very financially smart way of life.) “Where did all my money go??” If you ask yourself this question on a consistent basis, then it’s time to create a budget and find out exactly why your finances are so depleted. Read along and follow these steps to help get a better understanding of your spending habits.

Step 1: Calculate

 

First, let’s get a rough overview of your budget. Open up an excel doc or grab a pen and paper because we’re going to determine just how much you’re taking in vs how much you’re spending.

Calculate all sources of income. Make sure to include part-time work and side jobs you have or any real estate income you may collect. If you have a spouse or significant other you are living with, it will be easier to combine income and make a shared budget.

After you calculate your total income for the month, start listing all of the expenses you have. This includes EVERYTHING you are currently paying for monthly. When making your list, start with your necessities and work your way down. Top of the list should include:

  • Mortgage/Rent
  • Groceries
  • Household Bills
  • Autoloans
  • Insurance
  • Taxes
  • tender help
  • Gas
  • Cell Phone Bills
  • Loans

Now subtract your expenses from your income. If you get a negative number, then start looking to get rid of some expenses or take up a part-time job to help pay for them. Ask yourself if you really need the expense when looking to penny pinch. Is that magazine subscription or Netflix account really doing you justice? Or is it just another account adding to your growing expense list? Leave yourself a little bit of “entertainment money,” but use it sparingly. A budget with absolutely no fun is a budget that is doomed to fail.

Step 2: Track

 

Now that your budget is planned out, it’s time to track it. Mark down every bill you pay and purchase you make. Do this step for 1 month to get a general view of where everything is going. Based upon your spending habits, make changes to where you see fit. For example: if you see that ordering out for lunch is becoming too costly, you may want to start bringing a bagged lunch to work.

You can use an excel spreadsheet to keep track of your expenses or use a free program such as mint.com. Using an app like mint can make budget planning easy. Most budget apps will connect to your banking account and automatically categorize your spending. Now you can physically see where everything is going and adjust your budget to fit your needs. If you don’t have a bank yet, try finding a brand in the Business Savings Account industry.

Step 3: Agree on a Budget and Stick to It

 

You’ve planned, you’ve tracked, now it’s time to maintain! Take that planned budget from step one and the results from step 2 and make adjustments. Add any category you may have forgotten and start setting financial goals. If you have a joint budget with a spouse or significant other, make sure you’re both on the same page.

Make sure you’re also giving your savings account the love it deserves too. When it comes to saving, most financial advisers will tell you to put away 10% of your paycheck. The best way to do this is have it automatically come out on payday, and then go to a check cashing store near you to encash the rest of your check. Money that goes unseen will not be missed. Set up an automatic savings deposit and then leave the account alone so it can grow and flourish.

Just like savings, the same can be said for that family vacation or big purchases you’re planning to make in the future. Everyone needs time to get away and relax. When planning for a vacation, set up a separate account to which money will automatically get deposited into every paycheck. Map out how long it will take before accumulating your goal amount and adjust that into your monthly budget. If your dream vacation is looking to be too costly, then start looking at cheaper options. Maybe you should only go away for 5 days instead of 7? Or maybe you could get just as much enjoyment driving to a closer vaca spot rather than traveling across the country. Use this same method when looking to make a big purchase such as a new appliance.

 

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Things People with Good Credit Have in Common

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What_people_with_good_credit_have_in_common

Good credit is not a commodity to be bought or sold; it’s something which has to be cultivated with time. All it takes is the right strategies and financial moves to acquire a good credit rating and its associated perks.

Your credit score falls anywhere between 300 and 850. The higher your score, the lower risk you are in the eyes of credit reporting agencies and lenders. Similarly, the lower the score, the riskier you are. While a good credit score can be considered anything over 720, a low credit score is permanent and can be changed with some hard work and good tactics. What are these tactics? Here are some financial moves people with good credit consistently make:

Use Available Credit Sparingly

use credit sparingly

The amount of money you owe in relation to your credit limits helps determine your FICO score. This is known as ‘credit utilization’ and people with good credit don’t usually max it out. In fact, they keep their utilization limits rather low.

People with good credit make it a point to pay their bills on time every month. FICO credit scoring scale considers your payment history to be 35% in determining your score. Pay your bills on time before your due date to improve your score.

Stable Credit History

good credit sparingly

People with good credit have a long history of taking their debts seriously. They have proof of paying their bills in full and on time and are never on the lookout for how to make $5000 fast for some unexpected expense. Patience is key to build a positive credit history. The longer accounts are open and in good standing, the more positive weight they will hold on your credit.

A Mix of Credit

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FICO considers your mix of company accounts, credit cards, mortgage loans and installment loans while determining your credit score. Those with various types of open credit like car loans, credit cards and mortgages have the best scores. So diversifying the type of credit you use proves helpful to you.

No Frequent Opening or Closing of Accounts

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Frequently opening and closing accounts will cause your credit utilization ratio to change and almost always bring down your score. Every time you open a new account, your credit will automatically drop. The credit bureaus are unsure of how the new account will be used. After several months of on tie payments you will see your score bounce back.
Closing old accounts will also drop your score because your utilization and credit history are changing. Often times those old accounts in good standing are your super star accounts, giving you the best positive credit. You should only consider closing old accounts if your card has outrageous annual fees or interest rates.

Remember, you can’t get a good credit score overnight. No matter what your financial situation may be, you need time to prove your creditworthiness. Patience and good practice will increase your score on your journey to the 700 club.

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How to Build Your Credit From Scratch

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Build Your Credit From Scratch

From Zero To Hero

Consumers who have no credit often have a hard time getting approved for loans. If you are one of these individuals then you probably already know this. Normally you’ll need a credit card or loan in order to establish credit, yet you need established credit in order to get approved for a credit card or a loan. Sounds almost like a catch 22.

Credit can be tricky, but never fear! There are ways to build your credit from the ground up without hopelessly applying for credit cards only to keep getting declined. First, let’s take a gander at the credit score influences to better understand what makes up your score.

How are Credit Scores Generated?

What Determines your credit score? (Source myfico.com)
What Determines your credit score? (Source myfico.com)

A couple of months ago we wrote an article (and released a video): What Makes Up Your Credit Score. In the article, we went over the 5 main factors that are responsible for generating your credit score. They are as follows:

  • Payment History (35%): Make your Payments on time. Just one late payment will bring your score down drastically and can go against your credit score for up to 7 years!
  • Amounts Owed (30%): Credit utilization plays a big factor when it comes to determining your score. Best practices say you should use your cards regularly, but never go over 20%-30% of your credit limit.
  • Length of Credit History (15%): Try your best to keep cards open for as long as possible. Closing old accounts will cause your utilization to rise and credit history to shorten.
  • Variety of Credit (10%): Having a variety of credit shows the credit bureaus that you can handle different types of credit. This is something that should be obtained over time.
  • New Credit (10%): Any new credit account will drop your score simply because the bureaus aren’t sure of how well it will be maintained yet.

Now that you understand the basics of scoring your credit, let’s start focusing on what we can do to build your score.

Check your Credit Report

Check Your Credit report

In 2013, a study by the FTC found that 1 in 5 consumers had errors in their credit report. Your credit report should be checked on a regular basis. Every consumer has a right to a free credit report from all 3 bureaus. Go to annualcreditreport.com and check to make sure everything is reporting correctly. These reports won’t give you a credit score, just the history (that’s alright though, if you have no established credit you won’t be able to generate a score yet anyway.)

Apply for Cards

build your credit from scratch apply for cards

Without any established credit, chances are you’ll get declined for most credit cards. Luckily, there are other options for people with no credit.

Secured Credit Cards: Secured credit cards are credit cards that are backed by a cash deposit. The credit limits are usually low (only a few hundred dollars) and you’ll get the deposit back once you close the card. Once backing your secured card, you’ll use it just like a regular credit card. Pay of the account each month, don’t max it out and make sure you make on time payments.

After a couple months of use, the secured card should generate you positive lines of credit. At this time you can graduate to a regular unsecured credit card. You can obtain secured credit cards from your bank or our website here.

Become an Authorized User: You know that family member or friend you have with immaculate credit? If it’s okay with them, you can become an authorized user on their account. After becoming an authorized user, your credit report will start show the said account, helping you generate some positive credit!

Student Credit Cards: Student credit cards are great options for a young person looking to start building their credit. Although the credit limits are usually low with a high interest rate, the acceptance rates are high, allowing you to build credit at a young age.

Retail Cards: Retail store cards can help consumers save money at their favorite stores and are pretty easy to get approved for. There are some drawbacks to retail store cards though. Aside from the fact that you’ll have to go shopping regularly, they usually have a small limit with above average interest rates.

Get a Cosigner: If you don’t like the previous options, you can still obtain a regular credit card with the help of a cosigner. Just know you will be partially responsible for the fate of your cosigner’s credit. Any derogatory remarks you make on the cosigned account will also appear on your cosigner’s credit report, so make sure you always pay on time and keep your utilization low.

Use Best Practices

build your credit from scratch. use best practices

After getting your card, make it a point to use it correctly with these best practices:

  • Use your card regularly: The credit bureaus want to see you use your card (just make sure don’t live beyond your means and charge what you can’t afford.) If you don’t use the card the lender may close it due to inactivity, which will cause a drop in your score.
  • ALWAYS Pay On Time: Late payments are the #1 reason for declines in credit scores. They’ll drop your score and go against your credit for years. Make sure you always pay on or before the due date each month.
  • Pay Off the Balance Every Month: Pay off the balance so you don’t get killed with interest. Doing so over a period of time will also generate you a good credit score.
  • Keep Your Balances Low: Consumers with the best scores have them because they keep their balances between 1%-10% every month. Try to replicate their practices and give yourself a limit of 30% or lower of your high credit limit and NEVER max out!
  • Keep Accounts Open: Old credit cards aren’t like old appliances. The older they get the more beneficial they are to your credit. Try to keep your old accounts open as they are helping your credit the most.

Monitor Your Progress

You’ve educated yourself, you’ve gotten your first card and you’ve learned the best practices, now’s the time to watch your score go sky high. Watching your credit score rise from scratch can be fun and exciting. Enroll with a credit monitoring program to ensure everything is still reporting correctly and make sure you make good use of the best practices above in your journey to the 700 club (or higher!)

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The Right Steps to Applying for Student Loans

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Right Steps to Applying for student loans

Summer is coming to a close and for college students, that means it’s time to head back to school (or start school for you freshmen out there.) Everyone knows college is expensive, and the price only seems to be increasing every year. In fact, the average 2015 graduate with student-loan debt will have to pay upwards of $35,000 making them the most indebted class ever.

Student loans go hand and hand with your personal finances and credit report. One of the critical factors which is considered by financial institutions before they had out a loan to any borrower, is their credit report.  And having bad credit can reject any person’s application. This is one of the main reasons why many personal financial institutions have begun to offer a loan for veteran even if they have bad credit. When you or your kids apply for student loans, make sure they’re taking the right steps to applying for student loans to avoid crippling debt come post-graduation. If you have already graduated and are struggling with your student loans, check out our blog post: Game of Loans – A Guide to Defeating Student Loan Interest.

Step 1: Apply For Scholarships

Applying for Student Loans Scholarships

There are millions of scholarships out there just waiting to be awarded to students like you (assuming you are a student.)  There’s just about a scholarship for everything, whether you’re artistic, intelligent, athletic or speak Klingon (yes you read that right, there IS a scholarship based on the Star Trek language.)

Find out if you are eligible for a scholarship that’s right for you. Use this free search from Discover.

Step 2: Compare Financial Aid Offers

applying for student loans compare offers

I’m sure the financial aid offers will be rolling in. Make sure you read the fine print and compare all of the financial aid packages you may receive. It’s always good to have options, so choose the offer that you believe is the best fit for your situation.

Step 3: Plan a Budget

stepst to applying for student loans budget

Having a good budget in mind will help when determining how much you need to borrow. Always take into consideration the college cost, your cost of living, your contribution, financial aid & scholarships. Crunch the numbers and see how large of a loan you’ll need.

Step 4: Only Borrow What You Need

Just because Sallie Mae is offering you more than you expected doesn’t mean you have to accept it. Only borrow what you need based upon the budget you came up with in step 3. Doing so will mean less money to pay off after you graduate and also less money you’ll be paying in interest.

Step 5: Talk with Your Financial Aid Officer

applying for student loans talk to advisor

Your financial aid officer is there to help you. If you see something you don’t understand, ask questions and ask for their advice. If you think you may need to borrow more, you might want to look into Private Loans. Just so you know, if you are planning to take out private loans you will need a cosigner with good credit.

Step 6: Know your Loans Before you Sign

applying for student loans know your loans

You’re finally ready to sign for your student loans! Make sure your know everything about them before doing so. Read the fine print. Know specifics like: How much is the total amount of the loan? Can you get a lower interest rate? What will the monthly payments be? How long before you will have to start paying? Are any fees involved?

Ask your student loan officer if you have any questions and make sure you know your loan through and through before signing away.

Step 7: Get a Part-Time Job

applying for student loans part time job

Securing a part-time job while away at school can help you cover your living expenses, giving you more money to put towards the loan. You may even want to consider a work-study program at your college.

Step 8: Start Making Payments While in College

applying for student loans pay down accounts

Just because your payments don’t start until after you graduate, doesn’t mean you have to wait to pay. You’d be surprised how big of a chunk you can take out of your loans within the 4 years you are in school. You don’t have to pay a ton of money either. Pay what excess money you can afford, every bit counts!

 

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