Letâs face it: The worst thing about having to go to the hospital to receive medical treatment is being slammed with a huge bill afterwards. Sometimes, these medical bills are so expensive that you simply donât have the means to pull it off right away, especially without health insurance. While we may find it easier in the short term to pretend that our unpaid medical bills donât exist, avoiding the problem could only make it worse. Many medical providers are aware of this, which is why there are ways that you can negotiate your medical debt when you are unable to pay in full. In this article, we will discuss the different ways you can go about taking care of those medical expenses so that they donât stack up later and wreak havoc on your credit.
Negotiate for insurance rates
Without health insurance, youâll most likely be charged a much steeper price. If you want to negotiate your medical bills, one thing you can do is research what the fair market value is for whatever treatments you received. Usually, this is the price that insurance companies have to pay medical providers, and most of the time, itâs a lot cheaper.
Once youâve found the dollar amount youâd like to ask for, you will need to get in touch with the billing department. If the person on the phone turns you down, ask to speak to their supervisor. Itâs important to remain calm and polite while doing this but be persistent. Continue to ask to speak to a higher ranking individual until you reach someone who agrees to make a deal with you.
Pay it in cash
Cash payments are hard to turn down in most cases. if you want to negotiate a lower price on medical bills, you can offer to make a cash payment. Call your medical provider or the billing department and ask them if they would be willing to knock down the price of your bills if you were to pay in cash. Explain to them that if they canât offer you any other sort of financial assistance, then this is another route you can take.
Not only will this save them money on credit card fees and hours worked by office employees, but it will also save time spent on processing paperwork. This is a smart offer to make, as instant cash payments as opposed to electronic payments are a lot harder to say no to for any business or institution.
Ask for a payment plan
Thereâs a good chance that even after youâve asked for a lower price and offered to pay in cash, your medical provider will be unwilling to give you a deal. When this happens, there is still one more thing you can try. Before readily handing over your credit card, ask them if you can make payments on your bill. Most companies will allow you to do this and are used to working with people who are unable to pay their bills in full. Be honest about how much you are able to pay at a time.
Itâs likely that they will try to negotiate a higher payment amount, but politely tell them that itâs not feasible for you. Most of the time, they will be understanding and take whatever payment they can get. If youâre struggling financially, making small payments on your medical bills is the best way to go to keep your credit score in tact. As long as you are making payments on your bills, the companies will not report you to the credit bureaus.
Take precautionary measures
A lot of medical providers and medical facilities have programs that offer financial assistance, but you are going to have to ask them for it. Be transparent at the time of or even before your medical treatment occurs. If the treatment you are seeking is not a medical emergency, ask ahead of time if there is a cheaper option or if you can get a discount. If you donât have health insurance, this needs to be explained as early on as possible. Let your doctor know if you are living off of low income or if you are in the midst of some other type of financial hardship that is keeping you from being able to pay for service.
If you are successful in negotiating your medical bills, you might want to get it in writing so that you have proof. In some cases, you may even want to make your request in writing so that you have it on record in case anything goes wrong later. Once a deal has been agreed upon by both you and the medical provider or billing department, type up a summary of the conversation including key details of who you spoke to and the prices that were negotiated.
Other options for paying bills
There is no one-size-fits-all way of clearing your medical bills once and for all.Â Some people have insurance, some can afford to pay in full, and some are going to have to negotiate a lower price. If you have already tried negotiating medical bills and were unsuccessful, there are other options to explore. Here are some other ways you can go about paying your medical bills:
Medical credit cards: Thereâs no guarantee that your medical provider will accept a payment plan. However, most of the time, they will accept payment with the use of a medical credit card. If you have no other choice, ask your doctorâs office about how you can apply for a medical credit card. Usually, you are able to apply at the office right then and there. Most medical credit cards offer zero interest for up to 12 months. If you can manage to pay off the medical debt within that timeframe, then perhaps a medical credit card is a good choice for you. Be wary of this if you already have poor credit.
Personal loan: If youâve already been through all of your other options and were unable to make something work, it might be time to look at taking out a type of unsecured credit, such as a personal loan. If you have a significant amount of medical debt looming over your head, this might be a good idea as you can usually take out anywhere from $1,000 to $100,000. Once again, if you donât have a good history with using credit, seriously consider the pros and cons of doing this.
Interest free credit card: If you donât end up qualifying for a payment plan or a medical credit card, you can use a 0% interest credit card to pay the tab as long as you have good or outstanding credit.
Hire a medical bill advocate: If you feel overwhelmed by the task of reading through your medical bills and looking for errors, you can hire a professional to do it for you. Medical bill advocates are familiar with common procedures and the prices of treatments. If you have been wrongfully charged or overcharged, a medical bill advocate will be able to find this right away. Aside from pinpointing any errors, experts in medical bills will also do the negotiating for you.
If you are feeling overwhelmed by a large medical bill, remember that you have several options for taking care of it. It might be tempting to ignore the bill altogether but doing this could really damage your credit. Being honest with your medical provider from the beginning can prevent you from having to deal with extra costs. However, sometimes medical bills are ineveitable and we have to pay them. Consider payment plans or a medical credit card, but whatever you do, donât let your unpaid medical bills be a show stopper!
How to Negotiate Your Medical Debt is a post from Pocket Your Dollars.
The best student loans can help you earn a college degree that will lead to higher earnings later in life. They also come with low interest rates and reasonable fees (or no fees), which will make it easier to keep costs down while youâre in school and once youâre in repayment mode.
For most people, federal student loans are the best deal. With federal student loans, you can qualify for low fixed interest rates and federal protections like deferment, forbearance, and income-driven repayment plans. To find out how much you can borrow with federal student loans, you should fill out a FAFSA form. Doing so can also help you determine if you qualify for any additional student aid, and if so, how much.
While federal student loans are usually the best deal for borrowers, many students need to turn to private student loans at some point during their college careers. This is often the case when federal student loan limits have been exhausted, or when federal student loans are no longer an option due to other circumstances. We’re providing the top 8 options, at least according to us, as well as a guide to help you get the best rate.
Apply now with our top pick: College Ave
Most Important Factors When Applying for Student Loans
Start with a federal loan. Fill out a FAFSA form prior to applying for a private loan to make sure youâre getting all the benefits you can.
Compare loans across multiple lenders. Consider using a comparison company like Credible to do so.
Always read the fine print. Fees arenât always boasted on the front of a lenderâs website, so take time to learn about what youâre getting into.
Start paying as soon as you can to avoid getting crushed by compound interest.
Best Private Student Loans of 2021
Fortunately, there are many private student loan options that come with low interest rates and fair terms. The best student loans of 2021 come from the following private lenders and loan comparison companies:
Best for Flexibility
Best Loan Comparison
Best for Low Rates and Fees
Best for No Fees
Best Student Loans from a Major Bank
Best Student Loans with No Cosigner Required
Best for Fair Credit
Best for Comprehensive Comparisons
#1: College Ave â Best for Flexibility
College Ave offers private student loans for undergraduate and graduate students as well as parents who want to take out loans to help their kids get through college. Variable APRs as low as 3.70% are available for undergraduate students, but you can also opt for a fixed rate as low as 4.72% if you have excellent credit. College Ave offers some of the most flexible repayment options available today, letting you choose from interest-only payments, flat payments, and deferred payments depending on your needs. College Ave even lets you fill out your entire student loan application online, and they offer an array of helpful tools that can help you figure out how much you can afford to borrow, what your monthly payment will be, and more.
Qualify in Just 3 Minutes with College Ave
#2: Credible â Best Loan Comparison
Credible doesnât offer its own student loans; instead, it serves as a loan aggregator and comparison site. This means that, when you check out student loans on Credible, you have the benefit of comparing multiple loan options in one place. Not only is this convenient, but comparing rates and terms is the best way to ensure you get a good deal. Credible even lets you get prequalified without a hard inquiry on your credit report, and you can see loan offers from up to nine student lenders at a time. Fixed interest rates start as low as 4.40% for borrowers with excellent credit, and variable rates start at 3.17% APR with autopay.
Compare Dozens of Rates at Once with Credible
#3: Sallie Mae â Best for Low Rates and Fees
Sallie Mae offers its own selection of private student loans for undergraduate students, graduate students, and parents. Interest rates offered can be surprisingly low, starting at 2.87% APR for variable rate loans and 4.74% for fixed-rate loans. Sallie Mae student loans also come without an origination fee or prepayment fees, as well as rate reductions for students who set up autopay. You can choose to start repaying your student loans while youâre in school or wait until you graduate as well. Overall, Sallie Mae offers some of the best âdealsâ for private student loans, and you can even complete the entire loan process online.
Get Access to Chegg Study FREE with Sallie Mae
#4: Discover â Best for No Fees
While Discover is well known for their excellent rewards credit cards and personal loan offerings, they also offer high-quality student loans with low rates and fees. Not only do Discover student loans come with low variable rates that start at 3.75%, but you wonât pay an application fee, an origination fee, or late fees. Discover student loans are available for undergraduate students, graduate students, professional students, and other lifelong learners. You can even earn rewards for having a 3.0 GPA or better when you apply for your loan, and Discover offers access to U.S. based student loan specialists who can answer all your questions before you apply.
Apply for a Loan with Discover
#5: Citizens Bank â Best Student Loans from a Major Bank
Citizens Bank offers their own flexible student loans for undergraduate students, graduate students, and parent borrowers. Students can borrow with or without a cosigner and multi-year approval is available. With multi-year approval you can apply for student funding one time and secure several years of college funding at once. This saves you from additional paperwork and subsequent hard inquiries on your credit report. Citizens Bank student loans come with variable rates as low as 2.83% APR for students with excellent credit, and you can make full payments or interest-only payments while youâre in school or wait until you graduate to begin repaying your loan. Also keep in mind that, like others on this list, Citizens Bank lets you apply for their student loans online and from the comfort of your home.
#6: Ascent â Best Student Loans with No Cosigner Required
Ascent is another popular lender that offers private student loans to undergraduate and graduate students. Variable interest rates start at 3.31% whether you have a cosigner or not, and there are no application fees required to apply for a student loan either way. Terms are available for 5 to 15 years, and Ascent even offers cash rewards for student borrowers who graduate and meet certain terms. Also note that Ascent lets you earn money for each friend you refer who takes out a new student loan or refinances an existing loan.
Get a Loan in Minutes with Ascent
#7: Earnest â Best for Fair Credit
Earnest is another online lender that offers reasonable student loans for undergraduate and graduate students who need to borrow money for school. They also offer a free application process, a 9-month grace period after graduation, no origination fees or prepayment fees, and a .25% rate discount when you set up autopay. Earnest even lets you skip a payment once per year without a penalty, and there are no late payment fees. Variable rates start as low as 3.35%, and you may be able to qualify for a loan from Earnest with only âfairâ credit. For their student loan refinancing products, for example, you need a minimum credit score of 650 to apply.
Learn Your Rate in Minutes with Earnest
#8: LendKey â Best for Comprehensive Comparisons
LendKey is an online lending marketplace that lets you compare student loan options across a broad range of loan providers, including credit unions. LendKey loans come with no application fees and variable APRs as low as 4.05%. They also have excellent reviews on Trustpilot and an easy application process that makes applying for a student loan online a breeze. You can apply for a loan from LendKey as an individual, but itâs possible youâll get better rates with a cosigner on board. Either way, LendKey lets you see and compare a wide range of loan offers in one place and with only one application submitted.
Pay Zero Application Fees with LendKey!
How to Get the Best Student Loans
The lenders above offer some of the best student loans available today, but thereâs more to getting a good loan than just choosing the right student loan company. The following tips can ensure you save money on your education and escape college with the smallest student loan burden possible.
Consider Federal Student Loans First
Like we mentioned already, federal student loans are almost always the best deal for borrowers who can qualify. Not only do federal loans come with low fixed interest rates, but they come with borrower protections like deferment and forbearance. Federal student loans also let you qualify for income-driven repayment plans like Pay As You Earn (PAYE) and Income Based Repayment (IBR) as well as Public Service Loan Forgiveness (PSLF).
Compare Multiple Lenders
If you have exhausted federal student loans and need to take out a private student loan, the best step you can take is comparing loans across multiple lenders. Some may be able to offer you a lower interest rate based on your credit score or available cosigner, and some lenders may offer payment plans that meet your needs better. If you only want to fill out a loan application once, it can make sense to compare multiple loan offers with a service like Credible.
Improve Your Credit Score
Private student loans are notoriously difficult to qualify for when your credit score is less than stellar or you donât have a cosigner. With that in mind, you may want to spend some time improving your credit score before you apply. Since your payment history and the amounts you owe in relation to your credit limits are the two most important factors that make up your FICO score, make sure youâre paying all your bills early or on time and try to pay down debt to improve your credit utilization. Most experts say a utilization rate of 30% or less will help you achieve the highest credit score possible with other factors considered.
Check Your Credit Score for Free with Experian
Get a Quality Cosigner
If your credit score isnât at least âvery good,â or 740 or higher, you may want to see about getting a cosigner for your private student loan. A parent, family member, or close family friend who has excellent credit can help you qualify for a student loan with the best rates and terms available today. Just remember that your cosigner will be liable for your loan just as you are, meaning they will have to repay your loan if you default. With that in mind, you should only lean on a cosignerâs help if you plan to repay your loan amount in full.
Consider Variable and Fixed Interest Rates
While private student loans offer insanely low rates for borrowers with good credit, their variable rates tend to be lower. This is why you should always take the time to compare variable and fixed rates across multiple lenders to find the best deal. If you believe you can pay your student loans off in a few short years, a variable interest rate may help you save money. If you need a decade or longer to pay your student loans off, on the other hand, a low fixed interest rate may provide you with more peace of mind.
Check for Discounts
As you compare student loan providers, make sure to check for discounts that might apply to your situation. Many private student loan companies offer discounts if you set your loan up on automatic payments, for example. Some also offer discounts or rewards for good grades or for referring friends. It’s possible you could qualify for other discounts as well depending on the provider, but you’ll never know unless you check.
Beware of Fees
While the interest rate on your student loan plays a huge role in your long-term loan costs, donât forget to check for additional fees. Some student loan companies charge application fees or prepayment penalties if you pay your loan off early, for example. Others charge origination fees that tack on a few additional percentage points to your loan amount right off the bat. If you can find a student loan with a low interest rate and no additional fees, youâll be much better off. Since loan fees may not be prominently advertised on student loan provider websites, however, keep in mind that you may need to dig into their fine print to find them.
Make Payments While Youâre in School
Finally, no matter which loan you end up with, it makes a lot of sense to make payments while youâre still in school if you’re earning any kind of income. Even if you make interest-only payments while you attend college part-time or full-time, you can save yourself from paying thousands of dollars in additional interest payments later in life. Remember that compound interest can be a blessing or a curse. If you can keep interest at bay by making payments while youâre in school, you can squash compound interest and keep your loan balances from growing. If you let compound interest run its course, on the other hand, you may wind up owing more than you borrowed in the first place by the time you graduate school and start repayment.
What to Watch Out For
A private student loan may be exactly what you need in order to finish your degree and move up to the working world, but there are plenty of âgotchasâ to be aware of. Consider all these factors as you apply for a new private student loan or refinance existing loans you have with a private lender.
Interest that accrues while youâre in school: Remember that subsidized loans may not accrue interest until you graduate from college and enter repayment mode, but that unsubsidized loans typically start accruing interest right away. Since private student loans are unsubsidized, youâll need to be especially careful about ballooning interest and long-term loan costs.
Getting a cosigner: Make sure you only apply for a private student loan with a cosigner if youâre entirely sure you can repay your loan over the long haul. If you fail to keep up with your end of the bargain, you could destroy trust with that person and their credit score in one fell swoop.
Youâll lose out on some protections: Also remember that private student loans come with fewer protections than federal student loans. You wonât have the option for income-driven repayment plans with private loans, nor will you be able to qualify for federal deferment or forbearance. For this reason, private student loans are best for students who are confident in their ability to repay their loans on their chosen timeline.
In Summary: The Best Student Loans
Best for Flexibility
Best for Loan Comparison
Best for Low Rates and Fees
Best for No Fees
Best Student Loans from a Major Bank
Best Student Loans with No Cosigner Required
Best for Fair Credit
Best for Comprehensive Comparisons
The post Here Are The Best Student Loans of 2021 appeared first on Good Financial CentsÂ®.
In borrowing, there are two types of debts, recourse and nonrecourse. Recourse debt holds the person borrowing money personally liable for the debt. If you default on a recourse loan, the lender will have license, or recourse, to go after your personal assets if the collateralâs value doesnât cover the remaining amount of the loan that is due. Recourse loans are often used to finance construction or invest in real estate. Hereâs what you need to know about recourse loans, how they work and how they differ from other types of loans.
What Is a Recourse Loan?
A recourse loan is a type of loan that allows the lender to go after any of a borrowerâs assets if that borrower defaults on the loan. The first choice of any lender is to seize the asset that is collateral for the loan. For example, if someone stops making payments on an auto loan, the lender would take back the car and sell it.
However, if someone defaults on a hard money loan, which is a type of recourse loan, the lender might seize the borrowerâs home or other assets. Then, the lender would sell it to recover the balance of the principal due. Recourse loans also allow lenders to garnish wages or access bank accounts if the full debt obligation isnât fulfilled.
Essentially, recourse loans help lenders recover their investments if borrowers fail to pay off their loans and the collateral value attached to those loans is not enough to cover the balance due.
How Recourse Loans Work
When a borrower takes out debt, he typically has several options. Most hard money loans are recourse loans. In other words, if the borrower fails to make payments, the lender can seize the borrowerâs other assets such as his home or car and sell it to recover the money borrowed for the loan.
Lenders can go after a borrowerâs other assets or take legal action against a borrower. Other assets that a lender can seize might include savings accounts and checking accounts. Depending on the situation, they may also be able to garnish a borrowerâs wages or take further legal action.
When a lender writes a loanâs terms and conditions, what types of assets the lender can pursue if a debtor fails to make debt payments are listed. If you are at risk of defaulting on your loan, you may want to look at the language in your loan to see what your lender might pursue and what your options are.
Recourse Loans vs. Nonrecourse Loans
Nonrecourse loans are also secured loans, but rather than being secured by all a personâs assets, nonrecourse loans are only secured by the asset involved as collateral. For example, a mortgage is typically a nonrecourse loan, because the lender will only go after the home if a borrower stops making payments. Similarly, most auto loans are nonrecourse loans, and the bank or lender will only be able to seize the car if the borrower stops making payments.
Nonrecourse loans are riskier for lenders because they will have fewer options for getting their money back. Therefore, most lenders will only offer nonrecourse loans to people with exceedingly high credit scores.
Types of Recourse Loans
There are several types of recourse loans that you should be aware of before taking on debt. Some of the most common recourse loans are:
Hard money loans. Even if someone uses their hard money loan, also known as hard cash loan, to buy a property, these types of loans are typically recourse loans.
Auto loans. Because cars depreciate, most auto loans are recourse loans to ensure the lender receive full debt payments.
Recourse Loans Pros and Cons
For borrowers, recourse loans have both pros and and at least one con. You should evaluate each before deciding to take out a recourse loan.
Although they may seem riskier upfront, recourse loans are still attractive to borrowers.
Easier underwriting and approval. Because a recourse loan is less risky for lenders, the underwriting and approval process is more manageable for borrowers to navigate.
Lower credit score. Itâs easier for people with lower credit scores to get approved for a recourse loan. This is because more collateral is available to the lender if the borrower defaults on the loan.
Lower interest rate. Recourse loans typically have lower interest rates than nonrecourse loans.
The one major disadvantage of a recourse loan is the risk involved. With a recourse loan, the borrower is held personally liable. This means that if the borrower does default, more than just the loanâs collateral could be at stake.
Loans can be divided into two types, recourse loans and nonrecourse loans. Recourse loans, such as hard money loans, allow the lender to pursue more than what is listed as collateral in the loan agreement if a borrower defaults on the loan. Be sure to check your stateâs laws about determining when a loan is in default. While there are advantages to recourse loans, which are often used to finance construction, buy vehicles or invest in real estate, such as lower interest rates and a more straightforward approval process, they carry more risk than nonrecourse loans.
Tips on Borrowing
Borrowing money from a lender is a significant commitment. Consider talking to a financial advisor before you take that step to be completely clear about how it will impact your finances. Finding a financial advisor doesnât have to be difficult. In just a few minutes our financial advisor search tool can help you find a professional in your area to work with. If youâre ready, get started now.
For many people, taking out a mortgage is the biggest debt they incur. Our mortgage calculator will tell you how much your monthly payments will be, based on the principal, interest rate, type of mortgage and length of the term.
Credit cardÂ billsÂ can be confusing. If everything was straightforward and clear,Â credit cardÂ debtÂ wouldn’t be such a big issue. But it’s not clear, and debt is a massive issue for millions of consumers.Â
One of the most confusing aspects is theÂ minimum payment, with few consumers understanding how this works, how much damage (if any) it does to theirÂ credit score, and why it’s important to pay more than the minimum.
We’ll address all of those things and more in this guide, looking at howÂ minimumÂ credit cardÂ paymentsÂ can impact yourÂ FICOÂ scoreÂ and yourÂ credit report.
What is aÂ Credit CardÂ Minimum Payment?
TheÂ minimum paymentÂ is the lowest amount you need to pay during any given month. It’s often fixed as a fraction of yourÂ total balanceÂ and includes fees and interest. Â
If you fail to make thisÂ minimum payment, you may be hit withÂ late feesÂ and if you still haven’t paid after 30 days, your creditor will report your activity to the majorÂ credit bureausÂ and yourÂ credit scoreÂ will take a hit.
When this happens, you could lose up to 100 points and gain a derogatory mark that remains on yourÂ credit reportÂ for up to 7 years.Â MakingÂ minimum paymentsÂ will not result in a derogatory mark, but it can indirectly affect yourÂ credit scoreÂ and we’ll discuss that a little later.
Firstly, it’s important to understand why you’re being asked to pay aÂ minimum amountÂ and how you can avoid it.
How Much is aÂ MinimumÂ Credit CardÂ Payment?
Prior to 2004,Â monthly paymentsÂ could be as low as 2% of the balance. This caused all kinds of problems as most of yourÂ monthly paymentÂ is interest and will, therefore, inflate every month so that every time you reduce the balance it grows back.Â
Regulators forced a change when they realized that some users were being locked into a cycle ofÂ credit cardÂ debt, one that could see them repaying thousands more than the balance and taking many years to repay in full.
These days, a minimum payment must be at least 1% of the balance plus all interest and fees that have accumulated during that month, ensuring the balance decreases by at least 1% if only theÂ minimum paymentÂ is met.
Do I Need to Make theÂ Minimum Payment?
If you have a rolling balance, you need to make the minimumÂ monthly paymentÂ to avoid derogatory marks. If you fail to do so and keep missing those payments, your account will eventually default and cause all kinds of issues.
However, you can avoid theÂ minimum paymentÂ by clearing your balance in full.
Let’s assume that you have a brand-newÂ creditÂ cardÂ and you spend $2,000 in the first billing cycle. In the next cycle, you will be required to pay this balance in full. However, you will also be offered aÂ minimum payment, which will likely be anywhere from $30 to $100. If this is all that you pay, the issuer will start charging you interest on your balance and your problems will begin.
If you spend $2,000 in the next billing cycle, you have just doubled your debt (minus whatever principal theÂ minimum paymentÂ cleared) and your problems.
This is a cycle that many consumers get locked into. They do what they can to pay off their balance in full, but then they have a difficult month and thatÂ minimum paymentÂ begins to look very tempting. They convince themselves that one month won’t hurt and they’ll repay the balance in full next month, but by that point they’ve spent more, it has grown more, and they just don’t have the funds.
To avoid falling into this trap, try the following tips:
Only Spend What You Have:Â AÂ credit cardÂ should be used to spend money you have now or will have in the future. Don’t spend in the hope you’ll somehow come into some money before the billing period ends and theÂ credit cardÂ balanceÂ rolls over.
Get an IntroductoryÂ Interest Rate:Â ManyÂ credit cardÂ issuersÂ offer a 0% intro APR for a fixed period of time, allowing you to accumulate debt without interest. This can help if you need to make some essential purchases, but it’s important not to abuse this as you’ll still need to clear theÂ full balanceÂ before the intro period ends.
Use aÂ Balance Transfer:Â If you’re in too deep and the intro rate is coming to an end, consider aÂ balance transfer credit card. These cards allow you to move yourÂ full balanceÂ from one card (or cards) to another, taking advantage of yet another 0% APR and essentially extending the one you have.
Pay the Minimum:Â If you can’t pay the balance in full, make sure you at least pay the minimum. AÂ missed paymentÂ orÂ late paymentÂ can incur fees and may hurt yourÂ credit score.Â
Why Pay More Than the Minimum?
You may have heard experts recommending that you pay more than the minimum every month, but why? If you’re locked into a cycle ofÂ credit cardÂ debt, it can seem counterproductive. After all, if you have a debt of $10,000 that’s costing you $400 a month, what’s the point of taking an extra $100 out of your budget?
Your interest and fees are covered by yourÂ minimum paymentÂ and account for a sizeable percentage of thatÂ minimum payment. By adding just 50% more, you could be doubling and even tripling the amount of the principal that you repay every month.
What’s more, your interest accumulates every single day and this interest compounds. Imagine, for instance, that you have a balance of $10,000 today and with interest, this grows to $10,040. The next day, the interest will be calculated based on that $10,040 figure, which means it could grow to $10,081, which will then become the new balance for the next day.Â
This continues every single day, and the larger your balance is, the more interest will compound and the greater theÂ amount will be dueÂ over the term. By paying more than yourÂ minimum paymentÂ when you can, you’re reducing the balance and slowing things down.
Does Paying the Minimum Hurt MyÂ Credit Score?
Paying theÂ minimum amountÂ every month ensures you are doing the bare minimum to avoid hurting yourÂ credit historyÂ or accumulating fees. However, it can indirectly reduce your score via yourÂ credit utilizationÂ ratio.
YourÂ creditÂ utilizationÂ ratioÂ is a score that compares theÂ credit limitÂ of allÂ availableÂ creditÂ cardsÂ to the total debt on those cards. It accounts for 30% of yourÂ credit scoreÂ and is, therefore, a very important aspect of theÂ credit scoringÂ process.
The moreÂ credit cardÂ debtÂ you accumulate, the lower yourÂ credit utilizationÂ rateÂ will be and the more your score will be impacted. If you only pay the minimum, this rate will become stagnant and may take years to improve. By increasing theÂ payment amount, however, you can bring that ratio down and improve yourÂ credit score.
You can calculate yourÂ credit utilizationÂ score by adding together theÂ totalÂ amountÂ ofÂ creditÂ limitsÂ and debts and then comparing the latter to the former. A combinedÂ credit limitÂ of $10,000 and a balance of $5,000, for instance, would equate to a 50% ratio, which is on the high side.
CanÂ Credit CardÂ Fees Hurt MyÂ Credit Score?
As withÂ interest charges,Â credit cardÂ fees will not directly reduce your score but may have an indirect effect. Cash advance fees, for instance, can be substantial, with manyÂ credit cardÂ companiesÂ (includingÂ Capital One) charging 3% with a $10 minimum charge. This means that every time you withdraw cash, you’re paying at least $10, even if you’re only withdrawing $10.
What many consumers don’t realize is that these fees are also charged every time you buy casino chips or pay for some other form of gambling, and every time you purchase money orders and other cash products.Â
Along with foreign transaction fees and penalty fees, these can increase your balance and yourÂ minimum payment, making it harder to make onÂ time paymentsÂ and thus increasing the risk of aÂ late payment.
Does Paying the Minimum Hurt Your Credit Score is a post from Pocket Your Dollars.
When you are considering leasing a car, your credit history and credit score are critical determinants on whether or not you get approved and the kind of deal you get. Scores of 720 and over translate to the best terms. As the scores get lower, the terms of the lease get less and less favorable. […]
The post What Credit Score Do You Need To Lease a Car? appeared first on Credit Absolute.
On the surface, reward cards are a great way to make a few extra dollars or grab some air miles without increasing your spending or your debt. If you spend a lot of money at a particular shop, store cards will seem like an equally beneficial prospect. But these cards exist for a reasonâtheyâre there to make more money for the providers and the retailers, not you.
Sure, reward/store cards have other benefits if you use them properly, but there are a host of disadvantages and hidden terms that you need to be aware of before signing on the dotted line.Â
What are Store Cards?
Store cards are tied to specific stores and offered by chains of retailers. These cards work just like traditional cards and are often branded by networks like Visa and MasterCard. The difference is that they can only be used in the issuing stores and their rewards are tied to those stores.
In essence, they are store loyalty cards that come with a lien of credit attached.Â
What are Reward Cards?
Reward cards are also tied to credit card networks, including American Express and Discover, as well as Visa and MasterCard. They award points every time theyâre used for qualifying purchases and these points can then be swapped for air travel and other benefits.Â
Some reward schemes award a specific amount of cash back, often fixed to 1% or 2% of purchases made on specific items, such as groceries or utility bills.
How Can Providers Offer These Rewards?
If a provider offers you cash back every time you spend money on your credit card, someone has to foot the bill. Many consumers assume that the credit card network covers the cost, and to an extent, they do. But itâs not quite as simple as that.
Every time you use your credit card to make a purchase, the retailer is charged a fee, often between 1% and 3% of the purchase. This is the networkâs charge. With reward cards, this fee increases, and the extra money is used to fund the rewards program.
As a result, retailers are not exactly happy with these programs as they drive their costs up and reduce their profits. The only way around this, is to increase the cost of the product or, more likely, to reward customers who pay with cash/debit. Retailers are not allowed to add a surcharge for credit card use, but thereâs nothing stopping them from choosing which cards they do and donât accept.
Your local Mom & Pop enterprise isnât being antiquated and old-fashioned by refusing credit cards. They just canât cover the costs. 5% may not sound like a big deal, but for retailers with minimal buying power and the massive overheads of running a brick-and-mortar store, 5% can be a deal breaker.
Smaller retailers are fighting back against reward cards while bigger ones are embracing them by adopting their own store cards. With a store card, they have more say, more control, and they know that those small losses will be offset by the increased purchases.
Issues with Store Credit Cards
Store cards carry a big risk and have far few benefits than reward cards. The advantages of these cards are obvious: If you shop a lot in a particular place, you can save money via the cash back schemes.Â
They can also help with emergency purchases, providing you clear the balance in full. But, while the benefits are obvious, the same canât be said about the disadvantages.
Con 1: They Have High Interest Rates
The average credit card interest rate in the United States is around 16%. The average rate for store cards is over 20%. That 4% may not seem like much, but if you donât repay your balance every month that interest will compound, grow, and cost you a small fortune.Â
At 16% with a $10,000 balance and a 60-month repayment term, youâll pay $243 a month and over $4,000 in total interest.
Increase that rate to 20% and your monthly payment grows by $20 while your total interest increases by nearly $1,500. The longer you leave it and the smaller your monthly payments are, the greater that difference will be.
For example, if you repay just $200 a month on that balance, the difference between 16% and 20% is 26 extra months and close to $5,000. Of course, store cards rarely offer such high limits, but this is just as example to show you how much of a difference even the slightest percentage increase can cause.
Itâs worth keeping this in mind if you ever apply for a traditional rewards card. Getting rewards in return for a higher APR is great if you repay your balance in full every month and terrible if you donât.
Con 2: They Have High Penalty Rates
If you miss a payment on your store credit card you could be hit with a penalty APR as high as 29.99%, as well as a late payment fee of $39. The rates are high to begin with, but these penalty rates are astronomical and will make a bad situation worse.
Thatâs not all, as some providers are known to be very unforgiven when it comes to missed and late payments. In some cases, your account will default even if you underpay just once and just by a few dollars.Â
Con 3: They Have Low Credit Limits
Retailers are not lenders. They donât have the time, funds or patience to chase debts and deal with collection agencies. As a result, they donât offer high credit limits and generally youâll get a fraction of what an unsecured credit card might provide you with.
This might not seem like much of an issue. After all, a smaller credit limit means youâre less likely to accumulate large amounts of debts. However, this has a massively negative impact on your credit score that few borrowers consider.
30% of your credit score is based on something known as a credit utilization ratio. This looks at the total available credit and compares it to the debt that you have accumulated. If you have several cards with a combined credit limit of $10,000 and a balance of $5,000, then your ratio is 50%, which is considered to be quite high.
If a store card is your only account and you spend $450 on a $500 limit, then you have a credit utilization ratio of 90%, which will reduce your score. Your credit report is also negatively affected by maxed-out credit cards, a feat thatâs much easier to achieve when you have a low credit limit.
Con 4: There Are Better Options
Itâs better to have one good reward card than multiple store cards. The former will provide you with far better interest rates and terms, while the latter will hit your credit report with several hard inquiries and new accounts.Â
A rewards card will still benefit you when shopping at those stores and will also provide you with a wealth of other benefits.
Con 5: You May Spend More
Store cards are not designed to make your life easier and give you a few freebies. Regardless of what the store tells you, theyâre not made to reward loyalty, theyâre made to encourage spending.Â
This doesnât always work, and research suggests that many individuals use reward cards just like they would normal cards. But for a small minority, the idea of acquiring points is enough to convince them to spend more than they usually would.
Some good can be good debt, such as when itâs used to acquire an asset or something that wonât depreciate. But very rarely do we use credit cards for this purpose and generally, if youâre spending more on a store card it means youâre wasting more money on things you donât need.
Con 6: You Canât Use Them Anywhere Else
A store card can only be used in that particular store. This renders it redundant as an emergency card and also means youâre encouraged to shop in that one place. You donât have a chance to shop around and find the cheapest price; you may spend more just to use your card and get the benefits, with those benefits rarely covering the additional money you spend.
What About Reward Cards?
Some reward cards have very high rates as these rates are used to offset the rewards program. However, this isnât always the case, because, as discussed above, networks often charge retailers more to offset these purchases and therefore donât always need to cover the costs themselves.
Some credit cards, such as the Discover It, offer solid reward schemes and would also be included on any list of the best non-reward credit cards. Itâs a solid all-rounder and itâs not alone. However, many reward cards charge high annual fees and penalty rates, just like youâll find with a store card.
Itâs important to study the small print and make sure the card is viable. If youâre going to clear the balance every month, a slightly higher interest rate wonât hurt, especially if it comes with some generous rewards. But if there is any doubt and even the slightest chance that you wonât clear the balance, itâs always best to focus on a low-interest rate first.
Even the most generous 5% cash back reward card will not offset the losses occurred by paying a few more percentage points of interest.
Will Reward/Store Cards Affect my Credit Score?
Credit cards trigger hard inquiries, which can reduce your credit score by up to 5 points. This is true for every credit card that you apply for. Rate shopping can combine multiple inquiries into one if they are for the same type of credit, but this doesnât apply to credit cards.
A new account will also impact your score. This impact is often minimal and if you keep up with your repayments then it will vanish in time. However, if you miss a payment, max-out your card or increase your credit utilization score, it could have a detrimental effect on your score and your finances.
Keep store cards to a minimum and only sign up if youâre 100% sure youâre getting a good deal that will benefit you in the short-term and the long-term.
Truth About Reward and Store Credit Cards is a post from Pocket Your Dollars.
AreÂ Credit Card to Credit Card Payments Possible and a Good Idea?
Paying the balance on one of your credit cards with another credit card is possible. But when you make aÂ credit card to credit card payment, you’re not reducingÂ debtâ you’re simply moving it from oneÂ account to another. Whether or not this is a good idea depends on factors such as interest rates, your overall credit andÂ debt situation and whether you have a plan or are scrambling to keep up with payments.
How Can IÂ Pay My Credit Card Bill with Another Credit Card?
Typically, you can’t simplyÂ pay your credit card bill with another card as if you wereÂ paying your utility or phone bill.Â Credit card companies don’t usuallyÂ accept credit cards as a regular form of payment, in part because it opens the door forÂ debt to revolve through your accounts in an infinite loop. But that doesn’t mean you can’t use one credit card resource toÂ pay off or make payment on another’s balance.Â Cash advances andÂ balance transfer offers are two ways you can make this happen.
How Do YouÂ Pay a Credit Card with aÂ Cash Advance?
AÂ cash advance involves usingÂ your credit card to take out money from an ATM or at the teller window at your bank. You mayÂ pay a fee for this, and you’re usually limited to the amount you can advance yourself during each day, statement cycle or withdrawal attempt. That makes it difficult to get enoughÂ cash toÂ pay off a large balance, but you might be able to take out enough to make yourÂ minimum payment every month.
Once you get theÂ cash, you have to convert it into a format that lets youÂ pay your credit card bill. You can deposit it into yourÂ checking account or buy a money order to mail toÂ your credit card company.
Remember that you haven’t cleared theÂ debt, though. It’s now on a different credit card. And since some cardsÂ charge a higher APR forÂ cash advances, you might have increased the cost of yourÂ debt.
UsingÂ cash advances in this manner isn’t an ideal situation and can be an indication that your personal financesÂ need some work. But if you’re dealing with a short-term financial emergency and just want to avoid having a lateÂ credit card paymentÂ hurt your interest rate orÂ credit score, this may be a better option than turning to payday loans.
Can You Transfer Money from a Credit Card to Another Credit Card?
Yes, if you have a credit card that allows balance transfers, you can move all or part of a balance from another card to it. You must keep the transfer belowÂ yourÂ credit limit, though. If you have a card with aÂ credit limit of $3,000, for example, you can only transfer up to that amount.
Balance transfersÂ are typically a better method forÂ credit card to credit card payment thanÂ cash advances are. This is especially true if you have a new card with aÂ lowÂ introductory APR offer. If the new card has 0% APR on balance transfers for up to 18 months, for example, you can transfer an existing balance andÂ pay it off in that time withoutÂ paying more in interest.
Consider the scenario below to understand the benefits of balance transfers. They can help you get a handle on yourÂ debt andÂ pay it off faster if you’re responsible in the way you manage them.
You owe $3,000 at 21% interest on a card.
You have aÂ balance transfer card with a 0% APR for 18 months.
You can transfer the $3,000 to that card, make payments of $167 each month on it andÂ pay it off withoutÂ paying more interest. You may need toÂ pay aÂ balance transfer fee, which could be 1 to 5%. So, $30 to $150 in this case.
Compare that cost withÂ paying on the balance for 18 months at 21% interest. You would need toÂ pay$196 a month andÂ pay a total of $522 in interest.
TheÂ balance transfer saves you more than $350 as long as you doÂ payoff the balance and don’t use the old credit card to run up moreÂ debt.
Many people successfully useÂ balance transfer cards as a stand-in for otherÂ credit card debt consolidations. But if you can’t get a card big enough or want to clear the slate and have a single payment instead of multiple credit cards to deal with, you might consider aÂ personal loanÂ toÂ pay off your balances.
When Should IÂ Pay MyÂ Credit Card Balance?
You should make at least theÂ minimum payment every month before the statement due date to avoid negative impacts to yourÂ credit score. You shouldÂ pay off yourÂ credit card balance every statement cycle to avoid interest expenses â unless you have a 0% APR offer. In that case, you shouldÂ pay the balance off before the end of theÂ introductory period to avoid expensive interest that can, in some cases, be back dated to the origination of theÂ debt.
Can YouÂ Pay a Credit Card with a Credit Card to Get Points?
BecauseÂ cash advances and balance transfers are not eligible for points inÂ credit card rewards systems, you can’t earn miles or points byÂ paying off your other credit cards. You can, however, earn points with many rewards cards byÂ paying other bills, such as your mortgage or utility bill.
The post Are Credit Card to Credit Card Payments Possible? appeared first on Credit.com.
Editorial Note: This content is not provided by the credit card issuer. Any opinions, analyses, reviews or recommendations expressed in this article are those of the authorâs alone, and have not been reviewed, approved or otherwise endorsed by the issuer.
If left unchecked, extensive amounts of credit card debt can cripple your finances. The good news is there are many ways to handle debt, though each requires a dedicated effort on your part. But if you can manage to consolidate credit card debt, you will reduce your burden relatively quickly. In the process, youâll avoid the exorbitant interest rates that accompany most credit cards. Below we take a look at some of the most effective techniques you can use to make this goal a reality.
Find Out Your Credit Score
Before you can work on improving your credit and minimizing your debt, you have to know where you currently stand.
Many credit card issuers allow cardholders to see their FICOÂ® credit score free of charge once a month, so check out if any of your cards include that free credit score. The three major credit bureaus â TransUnion, Experian and Equifax â also give out free annual credit reports. If thatâs not enough, websites like Credit Karmaâ¢ and Credit Sesame provide a free look at your credit score and reports as well.
It is vital to review your credit report with a fine-tooth comb to ensure the accuracy of the information. If you find errors be sure to let the credit bureau in question know so the issue can be eradicated as soon as possible.
Zero Interest Balance Transfer Cards
Although it might seem counterintuitive to apply for another credit card to lessen your debt, a zero interest balance transfer card could really help. These cards typically include an introductory 0% balance transfer Annual Percentage Rate (APR) for six months or more. This ultimately allows you to move debt from one account to another without incurring more interest. However, once the introductory offer concludes, any leftover balances will revert to your base APR.
These offers arenât totally free, though. Most cards also charge a balance transfer fee thatâs usually between 3% and 5% of the transfer. Even with this initial payment, you will almost always still save money over leaving your debt where it stands currently.
If you want to consolidate credit card debt, here are three different balance transfer credit cards you could apply for, with varying introductory interest rates and transfer fees:
Balance Transfer Credit Cards Card Intro Balance Transfer APR Balance Transfer Fee Chase Slate 0% APR for first 15 months; then 16.49% to 25.24% Variable APR, depending on your creditworthiness No fee for first 60 days; then $5 or 5% of each transfer, whichever is greater Citi Double Cash Card 0% introductory APR for 18 months from date of first transfer when transfers are completed within 4 months from date of account opening; then 15.49% to 25.49% Variable APR, depending on your creditworthiness $5 or 3% of each transfer, whichever is greater BankAmericardÂ® credit card 0% APR for first 15 billing cycles; then 14.49% to 24.49% Variable APR, depending on your creditworthiness No fee for first 60 days; then $10 or 3% of each transfer, whichever is greater Take Out a Personal Loan
The thought of taking out another loan probably doesnât sound too appetizing to consolidate credit card debt. But a personal debt consolidation loan is one of the speediest ways to rid yourself of credit card debt. More specifically, you can use it to pay off most or all of your debt in one lump sum. That way, your payments are all merged into a single account with your lender.
The APR and length of the offered loan and the minimum credit score needed for approval are the main factors that should go into your final decision on a lender. By concentrating on these three components of the loan, you can map out what your monthly payments will be. As a result, you can more easily implement them into your financial life.
Applying for a personal consolidation loan can have a detrimental effect on your credit. Unfortunately, most institutions will run a hard credit check on you prior to approval. However, many online lenders donât do this, which might ease your mind depending on the severity of your debt situation.
These loans are available through a wide variety of financial institutions, including banks, online lenders and credit unions. Here are a few examples of some of the most common debt consolidation lenders:
Common Debt Consolidation Lenders Banks Wells Fargo, U.S. Bank, Fifth Third Bank Online Lenders Lending Club, Prosper, Best Egg Credit Unions Navy Federal Credit Union, Unify Financial Credit Union, Affinity Federal Credit Union Auto or Home Equity Loan
If you own assets like a home or car, you can take out a lump-sum loan based on the equity you hold in them to consolidate credit card debt. This is a great way to reuse money you paid toward an existing loan to take care of your debt. When paying back your auto or home equity loan, youâll usually pay in fixed amounts at a relatively low interest rate. Even if this rate isnât great, itâs likely much better than any offer youâd receive from a card issuer.
Equity loans are technically a second mortgage or loan, meaning your house or car will become the loanâs collateral. That means you could lose your house or car if you cannot keep up with your equity loan payments.
Create a Budget
To build a budget, you first need to figure out your approximate monthly net income. Donât forget to take into account taxes when youâre doing this.
You can then start subtracting your variable and fixed expenses that are expected for the upcoming month. This is where you will likely be able to identify where youâre overspending, whether itâs on food, entertainment or travel. Once youâve completed this, you can begin cutting back where you need to. Then, use your surplus cash to pay off your debt one month at a time.
It shouldnât matter if youâre dealing with substantial credit card debt or not. A monthly spending budget should always be a part of how you manage your finances. While this is likely the slowest way to eliminate debt, itâs also the most financially sound. At its core, it attempts to fix the problem without taking funding from an outside source. This should leave very little financial strife in the aftermath of paying off your debt.
Professional Debt Counseling
Perhaps since youâve found yourself in serious debt, you feel like you want professional help getting out of it. Well the National Foundation for Credit CounselingÂ® (NFCCÂ®) is available for just that reason. The NFCCÂ® has member offices all around the U.S. that are certified in helping you consolidate credit card debt.
These counselors wonât only address your current financial issues and debt. Theyâll also work to create a plan that will help you avoid this situation again in the future.
Agencies that are accredited by the NFCCÂ® will have it clearly displayed on their website or at their offices. If youâre not sure where to look, the foundation created an agency locator thatâll help you find a counselor nearby.
Borrow From Your Retirement
Taking money early from your employer-sponsored retirement account obviously isnât ideal. Thatâs means borrowing from your retirement is a last-ditch alternative. But if your credit card debt has become such a handicap that itâs affecting all other facets of your life, it is a viable option to consolidate credit card debt.
Because you are technically loaning money to yourself, this will not show up on your credit report. Major tax and penalty charges await anyone who has trouble making payments on these loans though. To make matters worse, if you quit your job or are fired, youâre typically only given 60 days to finish paying it off to avoid incurring a penalty.
Tips To Consolidate Credit Card Debt
If you take the time to come up with a budget, donât let it go to waste. While you might find it tough to stick to, especially if youâre trying to cut back, it is the best way to manage your money correctly. Even if a budget becomes habit, stay vigilant with where your money is being spent.
Although a financial advisor will cost money, he or she might be able to help you keep your finances in check while ultimately helping you plan for the future as well. However, if this isnât an option for you financially, stay on track with your NFCCÂ® debt counselorâs plan.
There are so many ways to gain access to your credit score that thereâs virtually no excuse for not knowing it. It doesnât matter if you do it through one of the top three credit bureaus, FICOÂ® or one of your card issuers. Just remember to pay attention to those ever-important three digits as often as possible.
Editorial Note: This content is not provided by the credit card issuer. Any opinions, analyses, reviews or recommendations expressed in this article are those of the authorâs alone, and have not been reviewed, approved or otherwise endorsed by the issuer.
The COVID-19 coronavirus pandemic has affected everyone all around the world. Extended isolation and sudden job losses have everyone thinking about their futures. Lots of people are concerned about losing a reliable income source during this time of crisis. Some have even been forced to shut their businesses. The global pandemic has turned many people’s financial lives upside down.
As you work on keeping your bills in good standing and your finances going strong, you should also pay attention to your credit score. Even if you’re delaying some major purchases like buying a car or a home or going on a trip, you still need to maintain good credit. You’ll eventually start spending again, and you’ll need a good credit score.
But how can you protect your credit score during COVID-19? Keep in mind that your credit scores and reports play a crucial role in your future financial opportunities. The following steps will be your handy guide in managing and protecting your credit score during this global pandemic.
Stay on Top of Your Credit
Even on good days, make sure you regularly review your credit reports from the three credit bureaus. You can get free annual credit reports at AnnualCreditReport.com. Through April 2021, Experian, Equifax, and TransUnion are allowing consumers to access their credit reports for free weekly. Take advantage of this offer to make sure that any accommodations you request from lenders are appropriately reported and that your identity is safe and secure.
You can also sign up for the free Credit Report Card from Credit.com. With our report card, youâll see your VantageScore 3.0 from Experian, as well as personalized information on what is affecting your credit score and how you can improve. If you want to dive deeper, sign up for ExtraCredit to see 28 of your FICO scores from all three credit bureaus.
Keep Up with Your Payments
Late payments can affect your credit history and credit reports for up to seven years. Prioritize paying your bills on time when you can, even during financially difficult times. You can do this by setting up reminders to alert you of payment deadlines. Also, you should make it a habit to make at least the minimum payment each month. Doing so will help you in keeping a good payment history record and prevents you from paying late fees.
Contact your lender whenever you can’t
make payments on time. Lots of lenders have announced proactive measures to aid
their borrowers affected by the global pandemic. Some are willing to provide
loan extensions, interest rates reduction, forbearance, or repayment
flexibilities. The best thing to do is to get in touch with your lender and
explain your current situation. Don’t forget to ask for written confirmation if
any agreements were made.
Be Aware of Your Protections
The Coronavirus Aid, Relief, and Economic Security Act (CARES Act) has protections to help your credit score remain unaffected during the pandemic. This Act puts special requirements on some agencies and companies reporting your payment information to the credit reporting companies. The requirements are applicable if you’re affected by the COVID-19 pandemic and specifically covered by the Act.
If you request an accommodation under the CARES Act, your creditors will report your account to the credit reporting agencies based on the current standing of your credit when the agreement is made. The requirements set by the CARES Act are only applicable to agreements made between 31st of January 2020 and 120 days after the COVID-19 national emergency officially ends.
Get to Know What Impacts Your
If you’re currently unemployed and wondering if it will affect your credit score, the answer is no. Unemployment itself will not impact your score. Making late payments and missing payments are the things that most significantly affect your credit score. This is why we recommend getting in touch with your lender as soon as you suspect you may not be able to make a payment in full on time. Inform them of your current situation. This can also help you cope with your anxiety.
Hard inquiries, account mix, and credit age also impact your credit score, but to a lesser degree. Your major concern should be keeping your credit utilization low and paying bills on time.
Keep Yourself and Your
Securing your personal information and identity is also crucial in protecting your credit score. Identity theft and scams are rampant during this coronavirus pandemic. Your personal information can unlock different financial resources. Hackers and cybercriminals can utilize all your personal information to impersonate you and open credit card accounts, make purchases, transfer funds, and borrow money. If left undetected, this activity can significantly damage your credit score.
Though the damage is reversible, the entire process will be costly. That’s precisely why prevention is always the best option. ExtraCredit from Credit.com, for example, offers $1 million in identity theft protection and dark web monitoring, among other features.
Make Budgeting and Planning a Habit
During this crisis, budgeting is essential for keeping your credit card debt low and your credit score high. Pay attention to how much money you make and the amount of money you spend. Identify expenses where you can cut the usual costs, at least temporarily.
Reworking your budget is necessary, especially if you’re currently unemployed or earning less money. You can consider the following money-saving ideas to maximize your savings:
Put nonessential purchases such as online shopping and clothes on hold
Temporarily suspend nonessential services such as cleaning and lawn care
Cancel subscriptions on cable, music streaming, video streaming, etc.
Search for affordable meal planning solutions
Cancel fitness and gym memberships
Cut back child-related extracurriculars such as tutoring, lessons, and sports
Spend less on takeout
Although reducing costs is not fun, the
result will reduce your financial stress and will allow you to better protect
You Can Protect Your Credit Score from COVID-19
All the things mentioned above have one thing in common: All require taking a proactive approach to your finances and credit. Follow the six credit-protection strategies mentioned above to maintain and protect your good credit even if you are facing a financial crisis.
About the Author
Lidia S. Hovhan is a part of Content and Marketing team at OmnicoreAgency. She contributes articles about how to integrate digital marketing strategy with traditional marketing to help business owners to meet their online goals. You can find really professional insights in her writings.
The post How to Protect Your Credit Score During COVID-19 appeared first on Credit.com.
Depending on the time period in which you were raised, many young children and adolescents had differing opinions (and ideals) about what credit was and how it should or shouldnât be utilized. While some were privileged enough to understandthe complexities and importance of credit, others had to learn at the expense of their own mistakes along the way. No matter where you were or where you are currently, luckily there are always actionable steps that can be taken to clean up, improve, and get smart about your credit â letâs explore.Â
Become familiar with what can impact your creditÂ
There are five key components that are factored into your credit score.Â
Your ability to make timely payments plays a huge role in your credit score. Lenders want to have the confidence that you as the borrower are capable of paying back any debts on time. If there is ever a situation that can impact your payment history, itâs best to notify your lender as soon as possible to avoid any negative remarks on your credit report.Â Â
In order to determine your credit utilization rate, divide the amount of credit currently in use by the amount of credit you have available. For the best possible scores, keep this percentage under 30%. This shows creditors you have the ability to manage debt wisely. To optimize and improve your score, make it a goal to utilize less than 10% if possible.Â Â Â
Length of credit historyÂ Â
Lenders will take an account of all creditors and the length of time each account has been open. In order to improve this average, try your best not to close any accounts as this can have the potential to decrease your overall credit score.Â Â
Credit mixÂ Â
Car, student loan debt, mortgage, and credit cards are all varying types of revolving and installment loans. Lenders view this as favorable when youâre able to manage different types of credit. A good rule of thumb for using a credit card is charging a small amount each month and paying it off in full to avoid any interest payments. Not only does this impact your score positively, but it also creates good habits that donât require you to solely rely on credit cards for purchases. Â
Any time you apply for credit, youâre giving lenders the right to obtain copies of your credit report from a credit bureau. Soft inquiries do not have an impact on your score, such as pulling your own credit report or a potential employer pulling your report as a part of the screening process. Applying for a new credit card, requesting a credit limit increase, financing a car, or purchasing a home are all examples of hard inquiries. For processes such as auto purchases, student loans, or mortgages these are typically treated as a single inquiry if done within a short scope of time such as thirty days. Be mindful of the number of inquiries outside of these scenarios â this mainly relates to retail store credit cards. Inquiries have a greater impact if you have a short credit history or a limited amount of active credit accounts.Â Â Â
Review your credit reports and dispute errors if necessaryÂ
Carve out some time to obtain a free credit report from one of the three credit bureaus (Experian, TransUnion or Equifax) to review. Familiarize yourself with everything that is listed. In the instance something doesnât appear correct, follow the proper protocols to dispute errors. Completing this exercise at least once a year after initially cleaning up any errors can help correct any mistakes, but also ensures accuracy. The credit reporting agency and the lender must be contacted in order to jumpstart the process of resolution. Even in the instance, there are no issues found, youâll have peace of mind knowing the due diligence has been done.Â Â
Communicate and be honest with all creditorsÂ
If you are experiencing any type of financial hardships due to unforeseen circumstances, make it a priority to communicate upfront with all creditors. Explaining your personal situation while proposing reasonable solutions may work in your favor. Refrain from avoiding creditors due to emotional reasons or negative thoughts; your pride cannot overshadow your personal needs. When discussing finances, most of us donât want to disclose any personal information â however, if this can result in bettering your personal finance journey and credit score simultaneously; thereâs no way to lose.Make your requests known and be proactive so the best solutions can be provided.Â Â
Create a plan and remain completely committedÂ
Commit to at least three goals that relate to improving your credit. This could simply start with paying all of your bills on time and regularly checking in with creditors to ensure good standing. If credit card spending is a challenge for you, commit to limiting your credit card usage while paying more than the minimum balance. Rally the assistance of your family and friends to serve as your accountability partners to make sure you achieve your goals. No matter the personal goals you decide to set, commit to staying the course. Often times our personal lack of patience leads us to believe that the hard work thatâs being put forth is in vain. If nothing else, commit to improving your credit for you and your familiesâ wellbeing.Â Â
Protect your hard work (and your credit)Â
Once your new credit score emerges and is here to stay, the first order of business is to celebrate â congratulations! Your hard work and dedication have indeed paid off. In order to make sure your credit score stays in tip-top shape, donât be too quick to take your foot off of the gas just yet! Be sure to stay informed about any tactics or strategies to keep your credit score in the best shape possible. Weâre all on our phones throughout the day, so make it a regular occurrence to do a quick internet search on ways to improve your credit score. Continually staying educated about various credit improvement opportunitiesÂ Â
The post National Get Smart About Credit Day appeared first on MintLife Blog.