The whole world revolves around money. unfortunate, but all too often the case. When you’re young, you quickly spend money without giving a second thought to the possibility of adverse effects. You’re certainly not thinking of how to avoid debt.

It’s essential that children are educated about the value of money, so they understand it’s worth in the real world. Saving money is one of the most important things to learn if the goal is to establish a financial foundation.

Many of us learned to save money through experience. It was not really taught at school. But, by teaching and developing habits to avoid debt from an early age, we can empower the next generation. However, it is not as easy as it sounds though to inculcate the idea of money management. Listed below are a few ways that will help you teach the tots about managing money from an early age.

It all starts with a piggy bank

The piggy bank is one of the most common forms of “savings” for a youngster. For those that aren’t familiar, a piggy bank is a small plastic bank (usually shaped like a cute pig), for coins. As simple as that, but a couple coins every week fills his belly pretty quickly.

For young kids, it can be the simplest way to start saving money early. They can set goals, and then use the piggy bank to save towards those goals. The main lesson of the piggy bank is to teach saving for the future, and how money grows as you save it.

Open up a bank account

The next step is to open a bank account. Once the piggy bank has run its course, take your child to the bank to open up a savings account for them. A first savings account is a big deal for a kid. The feeling of responsibility, and your very own place to save all of that money. Of course, you’ll need to make some money first 🙂

With a new savings account comes many lessons. Interest if applicable and how it can increase wealth simply by saving money. How to deposit money, and review financial statements. You’ll find many other lessons in this process, maybe more than you hoped for!

Avoid debt using savings jars

Kids always long for the latest and greatest toy or a new action figure. The good news is, they can have it, they just need to make a few smart financial decisions.

Give them a jar for their desired toys and offer them small pocket change each week to bolster the savings.

For example, if you give your child five dollars a week, give it to them in one dollar bills, once a day. They can save all their cash for one purchase of one toy if they wish, or they can contribute to different “jars” for more than one saving goals. Some will learn the hard way, and spend that dollar every day. The lesson comes when a youngster learns discipline to put that dollar in the jar every day.

Each day may be tough as you learn discipline. But, the reward of a new toy at the end of the week cements the lesson of saving with a purpose. Not only does this result in a new toy, it teaches children to avoid debt by saving for their wants.

Creating a timeline

As a kid, it can be hard to grasp the concepts of money and time. In order to make the message clear, money education should be repetitive and ongoing. One way to keep money lessons ongoing is to create a timeline so that your child can visualize their set goals.

For example, if you give them five dollars a week and they want to save up fifty dollars. If they saved one hundred percent out of their pocket money, they’d reach their goal in ten weeks.

Every time an amount is saved, ask them to keep track of how much was saved. Let them know that they will get small perks at each checkpoint. Small rewards can encourage kids to retain their interest and keep going. Visuals are also helpful in explaining their goals for savings and about how their money is growing.

Teach your kids about why and how you are saving for their college education. Teaching little ones about saving money may seem like one of the toughest tasks. But using these tips, you can help your child understand the concept of saving money in a play-way method. It’s actually an investment of knowledge which truly pays the best interest.

The post Avoid debt by teaching money management early. appeared first on Consumer Credit News.

When an account becomes severely past due, the account is turned over to collections by the creditor. This generally occurs between 60 and 180 days of being overdue. The creditor will either pass it on to their in-house collections department, or sell the debt to a an outside collection agency. The collection agency then become the “owner” of the debt, and can begin pursuing you for repayment.

If you have old collections on your credit report, then you know it can drop your FICO score significantly. Let’s discuss how collection accounts from your credit profile can be removed?

When you are thinking about paying off old collection accounts, the date reported should be noted. The older the reporting date, the better. If you were to pay off the collection, you would be changing the date reported to today. This action will temporarily make the credit score go down.
My credit contains old collection accounts, should I pay those off first or focus on current/open debt?

There are different factors on which your payment of old collection accounts depends. If the collections are a settled amount and are not accruing interest or penalties, it is advisable to pay off the credit card first as it accrues interest on the debt.

The general rule is to pay off whatever is costing you more to have outstanding. This means the interest that accrues every month and of course, penalty you might incur from missing an agreed repayment schedule.

How paying off old debts affects your score

Debt collections are bad for your credit report for sure. Now, any past due account along with old collection accounts leaves a negative mark on your credit. The factors below will help you decide whether or not the old collections should be paid off first or not.

The Statute of Limitations

A debt actually becomes time-barred after an account has been inactive for a long period of time. The best way is to find out the statute of limitations in your state to help decide whether you should pay an old debt. Keep in mind, a debt statute may be reset if ANY activity occurs on the account, sometimes even acknowledgment of the account.

Moral Obligation

Since you’ve already consumed the goods or services financed by the debt, it’s your moral responsibility to pay for it. For old debt collections, you can have the debt collector first validate the debt. Then, decide if you should pay it off.

Impact on your credit score

According to FICO, paying an old collection debt won’t hurt your credit score, as long as it is not listed in the credit reports.

Future Credit card and Loan applications

New loan or credit card applications may not be approved easily as long as you have outstanding debt on your credit report. Or, if you get approved, you may not be offered a very good interest rate.

So never pay old collections?

Not exactly. Pay them when it makes sense to for you personal financial situation. Unfortunately, simply paying off a collection account without getting it removed from your credit reports won’t improve your credit scores. As long as a collection account is listed on your credit reports, it’ll have a negative impact on your credit scores.

While it’s discouraging to know that paying collection accounts won’t directly help your credit scores, remember that as this information gets older, it’ll have lesser of an impact. That’s particularly true if new, positive credit references are in process.

Paying off an old debt won’t necessarily do much to reduce the negative credit score caused by the delinquency.

How to Remove Collection Accounts from Your Credit Reports

The stain of collection accounts on the credit reports lowering the credit score can be removed using the following steps.

• Do a little homework to get information from your credit reports and your own records. Pull all reports, review and have a good understanding of your credit picture.
• Dispute any lingering debts or error in collection accounts.
• Seek Goodwill Deletion if you already paid the debt.

Benefits of Paying the Old Debt

You may not want to spend money to clear off an old collection debt. But, it can be a good feeling, and it does have some benefits.
Improves points in the payment history portion of your credit score report.

• Debt-to-income ratio decreases
• New credit can be easier to obtain as you will have less obligations.
• If the collections are a settled amount and do not accrue interest or penalties, it’s advisable to pay the credit card first as it is accruing interest on the debt.

The rule of thumb is to pay off whatever is costing you more to have outstanding. This means interest that accrues every month and any penalty you might incur from missing an agreed upon repayment schedule.

It’s a stressful, tedious process to clear off your collections account. That said, you must still persevere and get it done to avoid further negative marks on your credit account.

The post Should my old collections accounts be paid off first or focus on current debt? appeared first on Consumer Credit News.

The task of landing in your dream apartment doesn’t end with just signing a lease notice, paying the rent, and shifting your things. You also have to set up some or all of your utilities. These include Electricity, Water, gas, sewer, and TV/Internet, etc. Are you prepared to pay a deposit to open these accounts?

When you create a new account with utility companies, they require you to pay a deposit in advance before they will turn on your utilities. As with the other security and pet deposits, utility deposits are meant to insure against losses that may result from your unpaid or underpaid bills.

The deposits are based on your credit score, which is checked during the signup process for most utilities. Often times, the initial deposit is equal to one month utility cost of the previous resident at that address. However, with bad credit it may be 2 or 3 times that amount.

When I moved into my first apartment, age 18, I remember paying a $350 deposit for electric in a 650 square foot loft. I had very little credit, and what I did have wasn’t good. This changed in later years, once my credit was back on track the deposits were lower or non-existent.

You have to pay a deposit on utilities, and other recurring services.

If you are a new utility customer, utility companies create a new account which means they are actually issuing you credit. Because you are going to use the utilities and services before their payments are made. A utility is much like an unsecured debt. Obviously, they can’t repossess used water or power, so they rely on your credit to determine trustworthiness. Therefore, individuals with a good credit history will be welcomed by them with little to no deposit.

There are utility deposits to be paid on almost all utilities and recurring services like Electricity, Water, Telephone, Sewer, Natural Gas, etc. Moreover, Service connection fee is also applied to newer, transferring or reconnecting after disconnection for non-payment residential utility accounts.

These reconnection fees are typically $30 to $40 and add up quickly if you’re habitually behind on your payments.

What factors contribute to deposit amounts for consumers? How can I avoid deposits?

Your utility deposit may be reduced or waived if your credit history is good. If you have a bad credit history, you may have to pay a higher deposit amount. The good news is, unlike a car loan, the utility company is not going “turn you down” – they are just going to impose higher deposit amounts on you.

Also, utility companies may ask new customers to provide a “letter of guarantee,” a letter from a person who agrees to pay the bill if their customer fails to do so.

Utility deposit amounts vary widely

The amounts for utility deposits vary widely, as there are no strict regulations on what service providers and landlords can charge. For example,

According to Duke Energy, which covers several states across the Southeast, electricity deposit may range anywhere from $100 to $250 depending on the user’s monthly bill.

Other utility companies require a lump sum deposit of $300 or more for residential electricity service agreements. If your cable or Internet provider requires a deposit, it may also cover equipment usage. Some utility companies will charge new customers a deposit amount equal to the cost of a month’s service.

Security Deposits.

A security deposit is a deposit of money deferred to the landlord to ensure that rent will be paid and other responsibilities of the lease performed (e.g., paying for any type of damage caused by the tenant). The laws pertaining to these deposits vary from state to state.

Security Deposits: Receipts and Interest

On receiving a last month’s rent and/or a security deposit, the landlord should give the tenant a receipt for each prepayment. If he or she does not, it is perfectly advisable for the tenant to claim one. In many states, the landlord is required to give the tenant a receipt.

What can I do to improve my credit and not have to pay a deposit?

Your credit score numbers give an impression of your financial management. Hence, a good credit history will tempt utility companies to create your new account easily. Adversely, a bad credit score will end up in higher deposit amounts due to lack of faith and trust on your money management. Here are a few tips to improve your credit score.

Accurate credit reports

Check your credit reports from each of the three major credit reporting agencies. Free credit reports can be accessed via AnnualCreditReport.com – Ensure they are correct. You don’t want any mistakes on there costing you money and credit score points.

Avoid your late payments

Set up payment-due date alerts and get organized with all your credit cards and loans. Even better, use auto-draft payment options for some or all of your bills. This ensures you’re never late, and keeps your credit score healthy.

Clear off any outstanding debts

It’s important that you clear off all outstanding dues to get a good credit score. Old collections, debts never paid, forgotten credit cards don’t go away just because you’ve forgotten them. Review your credit report and make a plan to pay off each outstanding debt. This may take some time, but will raise your score significantly once complete.

Use a credit card wisely – Good credit means you wont have to pay a deposit for most things.

If you qualify for a credit card, and don’t currently have one, consider getting one. Now, the card you’re going to qualify for will have an outrageous interest rate.

This is the cost of poor credit. However, if you use the card wisely, you can build your credit and not feel the impact of the APR too severely.

One of the best ways to use a credit card for rebuilding is what I like to call “the gas card” – Put you weekly gas fill up on your card, take the money you would have spent on it and set it aside. At the end of the month, pay your balance in full. This will lead to very little interest paid, because your debt has not sat with the lender for more than a month. And, it will build your credit as lenders will view you as a consistent payor, always good in the banks eyes.

The post I have to pay a deposit on everything: What can I do to improve my credit? appeared first on Consumer Credit News.

In order to pay off your loan sooner, you ought to make extra payments towards your principal balance. Most people are not aware that extra payments do not always go directly to the principal, but are applied to the interest instead.

Remember, the interest is the lenders profit. If you make a $250 payment on a $100 minimum due balance, where does the $150 go? For you, it makes sense to go directly towards the principal, which reduces your debt much quicker than paying interest. For the bank, they’d prefer to apply it towards the principal and balance just like a normal payment.

It looks like a very simple and straightforward process, but there are things you can do to make sure the extra payments go directly to the principal amount not interest.

How Are Extra Payments Applied to Your Loan?

When you make extra payments, your intention is to lower the original amount of debt. You can get rid of your debt sooner by doing this because no portion of your payment is removed for interest.

Some banks provide the option of applying the full amount to the principal of the loan or credit cards directly. Generally, in order to do this you need to call them directly to make a payment. This way you can verbally tell them you want the payment applied to the principle.

Are There any hidden Fees for Extra Payments or Principal Only Payments?

According to the terms of the loan, some banks charge a fee for extra payments on the loan. In other cases, they may charge on a principal only payment.

Though it might be frustrating to pay a fee, you will still save money on interest if you pay the loan or credit card off sooner. Interest payments for a few months will usually be less than a penalty of $1,000.

Choose the Best Strategy for Extra Payments

Now you understand the fees associated with extra payments and the way your payments are applied to the principal.  With this information, you can now work on the best strategy to pay off your loan. You may need to pay just one large monthly payment on the loan in order to avoid fees and to pay it off as quickly as possible. If you are paid multiple times a month, you may need to put the money for payments into savings so you will not be tempted to spend it.

If no extra fee is charged by the bank, you can opt for paying the extra amount received by bonuses or tax returns. This strategy will also help you to avoid overspending your money so that you don’t fall in an over-debt situation.

Making the Last chunk of Payment

When it’s time to pay off your loan, you ought to contact your bank and enquire about the final payment figure. The interest accrued will change daily. The bank may quote the amount of payoff for a set period. You can make the extra payment personally if you wish to, or you can do the same by email or pay it online.

Four alternatives to paying extra towards your mortgage principal

Before you plan to make extra principal payments on your mortgage, it’s best to plan to take into account your overall financial goals. Assess your current financial position and future goals to identify the ideal use for your funds.

1. Clearing off credit card debt

If you’re having a tough time with credit card debt like many Americans, it’s more than likely you don’t have enough available cash to pay extra on your mortgage. Your credit card rates are going to be significantly higher than your home loan interest rate so it makes sense to tackle credit card debt first.

2. Refinance to an affordable rate

This can prove to save you more and still let you keep the extra money you’d pay toward your principal for other alternatives.

3. Build up an emergency fund

It is recommended to save for an emergency and unexpected costs. Without those financial reserves in place, you could put your extra money to put toward it if you’re making extra mortgage payments.

Conclusion.

Focusing on clearing just one debt at a time will enable you to channelize your extra payments and also to clear your debt faster because this will lower the principal on one loan and reduce the amount of interest payment. Paying off your highest interest loans first can help you in saving money.

The post How do I ensure my extra payments are going to the principal and not interest? appeared first on Consumer Credit News.

Secured loans with negative equity

An example of a secured loan would be a title loan. Title loans use your automobile title as collateral. In case you don’t repay the initial loan amount the lender will take ownership of your vehicle. This is known as repossession.

Real estate property that is valued below the current amount owed is also considered to be a negative equity loan. Negative equity essentially refers to any asset which is valued at below the amount owed on said asset. You can have a negative equity loan with pretty much any physical asset if the value has decreased over time.

So, how is it affecting my credit?

Having an outstanding negative equity loan doesn’t necessarily directly affect your credit score, however you want to clear up any issues as soon as possible. You may have heard the phrase “upside-down” mentioned before in relation to auto loans. This is another term for negative equity. Having an upside-down loan can happen to anyone if you aren’t paying attention. Automobiles are the most common asset that people have negative equity on. This is because cars depreciate in value quite quickly.

Negative equity in real estate

For real estate owners, a significant drop in property value or market rates can seriously impact the value of your property. This leads to the initial loan becoming a negative equity loan. The really tough part to deal with when it comes to negative equity is that you don’t really have many options for resolving the situation besides simply paying it off. You can also wait for the asset value to increase however this very rarely happens in a sufficient amount of time that would provide any immediate benefit to you.

if you have an upside-down loan, it can affect the interest rate at which you pay the current loan amount. This puts the lender at a larger risk for losing money if you default, which leads to increases in interest rates over time. While your credit won’t be directly impacted by this situation, it can certainly become affected if the negative equity loan defaults or goes into collections.

Having a negative equity loan on your credit history can also affect how potential lenders will process your applications in the future. Seeing that you have a history of upside-down loans, many lending companies will charge you more interest upfront so it’s wise to always stay on top of the status of your loan.

Many people have negative equity loans

Negative equity is never a good thing to have. This is due to the possibility of loan inflation, credit denial, increased interest rates and a wide range of other potential hazards. The best way to avoid a negative equity loan is by contacting the initial lender to see if they offer refinancing options. By refinancing your initial loan, you’ll receive a new estimated value for the asset in question based on current market conditions and its value.

Refinancing your loan is basically like getting a new loan at current market value instead of being stuck paying the amount you were originally financed for. Banks, loan companies, mortgage lenders, and more offer refinancing services so if you suspect or know that you’re in a negative equity loan situation, you may want to consider contacting them to see what options are available to you.

The post What is negative equity? How does it affect my credit and buying power? appeared first on Consumer Credit News.

Many people ask about the time it takes for their credit report to update once they pay off a past debt. If you’re anything like me, you wait a few weeks and then start checking to see if the derogatory mark has dropped. It can never happen soon enough; the suspense of just how much it may improve your score gets me every time.

With that said, is there a hard and fast rule as to when a satisfied debt may fall off your credit report? It’s a simple yet tricky question, with an equally tricky answer.

Congratulations on paying off some debt!

The most important step in re-establishing your credit history is paying off your debts and removing negative marks. So, congratulations on that. As far as when the derogatory mark may drop off, well, there’s a few possibilities:

• Moneylenders, including credit card workers, typically update your account information once a month. For this reason, we advise you to let a minimum of 30 days and up to 50 days for the account information to be updated.
• Though, the updates could be finished much sooner depending on how rapidly the lender reports the updated account status. Some lenders do this at the end of every month, some throughout. It depends on where you fall in the cycle for that particular creditor.
• The best solution is also to continue using your credit card each month and keeping your balance well under your limits. Also, try to pay in full each month.
• This careful and current usage will demonstrate that your credit is being managed well. It will help with removing negative marks from your reports and also will update credit score rather quickly.

When you will finish paying off your credit card loans, it’s natural to feel you’ll get the reward of a better credit score. And, you’re right, you will, but it won’t happen overnight. Remember, once you’ve pay off a past debt, it’s up to the creditor’s schedule for reporting that information back to the credit bureaus.

A few important things in updating credit history:

Credit Usage Ratio

It’s safe to say that your credit utilization will fall to zero once your debts are paid off. But it’s a bonus for you as credit usage accounts for 30 percent of your score. The lower the better in this case.

Credit History

A score’s most important part is credit history, consisting 35 percent of your final amount. The reason for its importance is obvious as it’s the best predictor of your future payment and report history. The thing is that anyone can make huge payments to get a zero balance but it will not erase a history of missing payments. It will take years to clean negative scores.

Credit Score Updates

Recalculating credit scores immediately after a final payment clears would be nice. In reality, the card companies report to the three main credit bureaus once in a month. So, it will make a minimum of 30 days to show any actual improvements.

Credit Score Improvement

Credit card agencies are deliberately vague concerning precisely how long it takes to recover your credit score. What is identified, though, is the bureaus retain negative information such as public records, late payments, and foreclosures on your report for seven to ten years. The influence of negative information weakens over time, which is great if you’ve behaved well and balanced after a few minor slip-ups. If you have fresh or extreme negative marks on your credit report, it’ll take an extended time for your score to recover even if your balances are as low as zero.

How long will Credit Bureaus take to Update Your Scores?

The important thing is that when the bureaus receive information related to your accounts, they usually add it to your credit immediately. They will recalculate credit scores on the basis of this new information. You might not see a quick change in your credit scores, though, if the current information doesn’t have an important effect.

For example: if you are paying your credit card payments on time for a year, then the one payment on time will not cause your scores to jump significantly high. You are just managing a positive status queue. But when you miss a payment, you will see your scores dropping down. In other words, maintaining steady on time payments builds positive credit slowly, while missing payments hurts credit quickly.

Rapid Rescoring in a Pinch

This is something that can help bring the situation back into your control, but it’s not something that can be done on your own. A moneylender must demand a rapid rescore on your behalf, typically when you smear for a mortgage and your credit score is close to getting you a better interest rate. If you can pay down a balance or any similar action to update your credit scores, the lender can request one or more credit bureaus to include this information in your report and recalculate your score at a specific point in time. The results can be tremendous as credit score changes can be reflected in days.

Note: Rapid rescoring cannot handle faults on your part as in if you made a payment late, it can’t be erased.

Check your report consistently after you pay of a past debt

It’s always best to check your report and try to correct errors ahead of time using the dispute process. As mentioned, it may take up to 30 days for the change to be reflected, so keep your eye on it. If the change is not reflected, you can use one of several dispute filing methods through the credit agencies. When you pay off past debt you may have to wait a little while to see the reward, but it’s worth it. Keep up this strategy of eliminating small, manageable, debts and your credit will be on a fast track to improvement.

The post Once I pay off a past debt, how long until my credit updates? appeared first on Consumer Credit News.

If you are planning to buy a home but your income leaves something to be desired, don’t despair. There are certain ways you can still own a home, though they’re not as straightforward and conventional as a traditional mortgage. Rent to own, which is also known as lease to own, permits you to rent a residence with a choice to buy the home within a defined period. A share of your monthly rental costs will go toward a down payment.

In short, Rent to own is a legally documented transaction with which a tangible property, such as consumer electronics, furniture or home appliances, is rented in exchange for a monthly payment. Along with your monthly payment and agreed upon terms, you have the option of purchasing at some point during the contract.

Tip: Renting to own provides you extra time to work on your credit score which results in increasing funds used for a down payment. This also permits you to use the property/product before deciding if you actually want to own it.
Understanding Lease Option vs. Lease Purchase

While making a rent-to-own agreement, there are two available choices: a Lease Option or a Lease Purchase agreement. A lease option provides the renter the choice of whether to buy the property/product, or not. A lease purchase agreement requires the renter to purchase the property/product at the end of the lease term.

Note: Make sure you understand all aspects of the agreement before signing any paperwork.

How it works:

The details of rent-to-own depend on the renter lease agreement. This agreement should state the final purchase price of the property/product. But be cautious, the agreement may also state that the price can increase each year.

In a nutshell, a renter pays a set monthly price for a product or property. A portion of that monthly payment is going towards a final purchase price, or a down payment for very large purchases. Once your payments are complete, or if you choose to payoff earlier, you will own the product you’ve been paying on.

Most agreements contain a condition that the renter may buy the property/product at any point during the lease. Often times consumers choose to rent-to-own because they’re not in a stable position. This type of lease can help you when there’s items you need, but don’t have a lump sum to spend. If your situation changes during this time, such as getting a pay raise or a better job, you can always choose to purchase.

Let’s understand it with an example:

n this example we’ll look at at rent to own housing situation. This is very common these days, especially with younger generations who aren’t making as big of purchases as previous ones.

Suppose, a monthly payment of $2,000 may designate that $300 of the money goes to your down payment. At the end of a two-year lease, you should have $7,200 in money directed to a down payment. The $300 monthly payment, which is also known as the rent premium, is placed into an escrow account by the owner.

Does “Rent-to-own” have any effect on consumer credit?

You can purchase TVs, furniture, cars and even houses by rent to own agreement. As with a mortgage or payday loan, you usually make a monthly payment for a fixed period of time. Still, while timely mortgage payments may aid your credit, your rent-to-own expenses typically have no effect on your credit score at all. If a rent-to-own contract does appear on your credit report, it’s typically going to hurt instead of helping your scores.

To make it simple, a rent-to-own organization isn’t a lender, so they don’t report your good payments to credit. This means you’re not accruing good credit for on time or early payments. But rest assured, if you stop paying and face repossession, lawsuits, or other legal actions, this could show up on your credit.

Considerations

Any kind of rent-to-own agreement could make its way onto your credit report only if you end up breaking the lease. After breaking a lease, you could end up going to court. Credit bureaus frequently check court records for decisions and that information can be added to your report.

The post What is rent to own, and does it affect my credit? appeared first on Consumer Credit News.

The average credit card debt in the U.S. is $5,331 on an individual level. But, if you’re new to the credit game, you’re not likely part of this statistic. For those of us that have been building and maintaining credit for a while now, we know there are some common techniques to keep balances and interest rates low. You’ve likely heard of balance transfers between credit cards. This is essentially chasing low or no interest initial offers, then moving your balance once the incentive runs out.

I know, this sounds great, right? Well, before you go any further and transfer your balance, we suggest you have a look at how it works and what the pros and cons are:

How does it work?

The process is pretty simple to understand. When you have a high interest rate on your credit card, you try to move that balance to a new credit card with a lower APR (annual percentage rate). This way, you reduce the amount of interest you are paying on all of your credit card debts. This is usually done by moving your balance as incentives expire.

Credit cards are a competitive business, and offering a 0% introductory interest rate is a common practice. After the first year, the interest jumps back up to a standard rate. Before this happens, the borrower opens a new line of credit, transfers the balance and closes the old line.
It seems like a solution to all of your debt problems like a messiah for your finances, right? Well, that’s because you don’t know its drawbacks yet.

Remember, if it is too good to be true, it sometimes is! If you want to know the common advantages and disadvantages associated with credit card balance transfer, then have a look at some below:

Pros of Credit Card Balance Transfers:

• Lower Interest Rate: A new credit card can provide you with as low as 0% APR for a temporary time.
• Get Better Terms: You may get better terms like lower fees, purchase rewards or more grace period.
• Consolidate Your Debt: You can combine multiple balances onto one credit card. This is good for credit utilization and simplicity of payments.

Cons of Credit Card Balance Transfers:

• Higher Interest Rate: You will only be able to qualify for the promotional lower APR if you have an excellent credit score. Otherwise you may end up with the regular higher interest rate. And even if you qualify, the lower APR won’t last forever; it will eventually expire, and at various times.
  Balance Transfer Fee: You may have to pay a balance transfer fee which is usually 3-5% on the amount you transfer and also a minimum of $5-$10.
• Your Credit Score Could Get Hurt: Applying for a new credit card hurts your credit score. Also, if your new card has a low balance limit and you transfer your debt to this card, and the total balance goes 30% above the limit, you will get a decrease in your credit score as well. Credit utilization is a major factor in your credit score.
• You May Get More Debt: When you transfer the debt to a new credit card, you will have more credit available. This means you can spend more money now and if you are not self-disciplined. Our advice, close the card as soon as the balance is transferred. Otherwise you may end up with more debt than what you originally had.

In Conclusion

Now you may be wondering, is it a good idea to transfer balance? In short, NO! Not only it can it hurt your credit score, it’s a slippery slope to more debt. With that said, if you have excellent credit and money management skills, then yes, you can use this method to your advantage. Just tread carefully, it can be a full time job to manage finances using advanced techniques like this successfully.

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Whether you’re looking to improve your credit score, or building it from scratch, we’ve got some tips for you. Building and maintaining good credit is no easy task, but often times consumers are overwhelmed by the information they encounter online. A low credit score is not the end of the world. Read that sentence again if you need to.

Remember, you started with no credit and built it once. Believe it or not, even with bad credit, it’s easier to rebuild than it is to build from scratch. The trick is to rebuild correctly, and avoid the temptation of payday loans and high interest credit. These things can help get you through a tough spot, but in the long run can cause massive damage.

With that said, we’ve put together some relatively easy tips to help you get started.

5 Ways to Get an Improved Credit Rating – How to Improve Credit Score?

Reduce Your Overall Card Balance:

If you pay more than the minimum monthly payment on your unsecured debt, you will be improving your credit utilization ratio. Your credit utilization ratio or Balance to Limit Ratio is the second most important factor when calculating your FICO score and accounts for 30% of the total credit. Make sure to keep your available balance less than 30% which is ideal if you want to improve credit rating. This article will shed some more light on the factors making up your FICO score.

Avoid Having Hard Inquiries:

A hard inquiry is usually made when you apply for more credit. The lender first checks your history and credit score to ensure if you are eligible to take on more debt. This hard check can also put a negative score on your credit score by 5 points for each inquiry (Source: FICO). So this may not actually improve your credit score, not having a hard inquiry will not decrease your score either.

Make Payments on Time:

Want to know the easiest way to build your credit? Pay your bills on time. I know, this should be obvious, but you’d be surprised how many Americans pay their bills late. This is true even for those with high income and can make their payments. Paying on time consistently will improve your payment history. This is the largest detriment of your credit score and accounts for 35% of your whole rating. So, your best bet is to make a budget and stick to it. When you get your paycheck, first pay all due bills before spending.

Monitoring Your Credit:

If you want to maintain credit, it is imperative that you learn to monitor it. If you know and understand the variance in your credit score, you’ll be in a better position to keep your credit in the green. This will ultimately help you improve your credit utilization. And don’t worry, getting your own credit history through a credit reporting agency won’t decrease your credit score like hard inquiries do. (Source: FICO)

Once you have access to your credit report, monitoring is pretty straight forward. You want to ensure all data is accurate, that you’re not being held accountable for any debts that aren’t your own, and that your credit hasn’t been compromised. With the increase in identity theft year over year, monitoring your credit is more important now than it ever was.

Managing Your Expenses:

Make sure to reduce your expenses where you can, at least until you have paid off your debt. This is because if you don’t put a top to useless spending, not only will you be out of money to pay your debt, you may also need more credit. And both, not paying on time and getting more credit, will decrease your credit score. So people who need to improve their credit score should consider not applying for more credit unless they absolutely have to. This will come under your recent credit history that accounts for 10% of your FICO score.

Over to You:

So now you have a pretty good idea of how to build and maintain a good credit score. Always try to pay more than the minimum each month, pay on time, avoid hard inquiries, keep a check on your credit and manage your expenses and you will surely improve your credit rating.

The post Simple Ways to Improve Your Credit Score appeared first on Consumer Credit News.

You know the story: You visit a store, find exactly what you’re looking for, and immediately sign up for a store credit card. Later you find out that agreement came with a snag: an astronomical interest rate. Most of the retailer stores offering credit cards will cost you an interest rate from 15-23 percent, or more. A lower credit score often causes even higher interest rates, which are on top of annual fees.

Millions of Americans are adversely affected by bad credit. In fact, more than 42 million Americans have a credit score of 598 or less. The number grows even higher with time. It’s difficult to secure traditional financing with poor credit conditions. This is problematic for consumers who need a new HVAC system, kitchen appliances, vehicle loan… the list goes on.

No credit needed loans to the rescue?

The Good News (or perhaps bad news) is that some creditors offer No Credit Needed financing. No Credit Needed (NCN) is being promoted virtually everywhere these days. This kind of messaging is being targeted at consumers who have poor or no credit at all. Though, as a consumer, you have a choice to make.

Obviously, the ideal scenario is to avoid no credit needed everything. If you find yourself in the position of needing one of these lines of credit, there’s a smart way to do it. You have to decide which No Credit Needed offer is best for you and even more importantly, which choice is best for your credit and repayment ability. These decisions shouldn’t be taken lightly.

Applicant’s Qualifications for NCN?

It’s easy to get No credit needed financing in terms of payday loans, auto loans, or high-interest credit cards. There are few qualifications needed for such financing as compared to typical standards for a traditional loan.

• The applicant must be 18 years old in order to use this service
• An active checking account of the applicant is also a must.
• The account must have been open for at least 60 days.
• The income verification is also important and needed. The applicant needs to prove that he earns $1200 or more per month.

This relatively easy checklist makes obtaining these lines of credit pretty simple. But, they come at a price. The extremely high interest rates of these loans will likely double the original cost of the goods. They will also take exponentially longer to pay off due to the sky-high interest rate.

Does Your Credit History Impact the Lender’s Decision?

One of the best advantages of NCN is that credit history is not needed. This eradicates many steps involved in the application of a traditional loan. These loans are based on the factors mentioned above. Specifically, if you can prove your income and provide a valid bank account for payments to be auto-drafted from. These lenders are basing their decision on your assumed ability to repay, rather than your credit score.

The only real advantage here is that you can obtain credit without a standard inquiry on your credit report. Not nearly enough reason to sign one, but a positive if necessary.

Advantages of No Credit Needed Financing

We’ve talked a lot about the potential negatives of these loans, but there are some benefits. Specifically to those in a pinch, or beginners with good money management skills. Obviously, if you suffer from a bad credit score, this may be one of your only options.

The first and foremost advantage is that the credit report/check is waived. There are a number of other benefits such as:

• For beginners, the process is much faster, and approval is easier as compared to a traditional loan.
• The average time in filling an application for this type of credit is 20 minutes.
• You don’t need surety to get approved for the loan. It means that there is no need to risk the title or your home or car in order to get approval.

How to Find no credit needed loans?

This is not a kind of loan you get from the bank. Also, while in the past many box retailers offered no credit financing, most have switched to offering their own credit card.

Nowadays, it is easy to find No-Credit-Needed loans on the internet. There are many creditors that deliver no credit required loans for payday and auto loans.
This sounds too good to be true

The payday NCN loans can be both good and bad for the borrower. The main point is to manage these types of immediately approved loans. As a consumer, you should do your homework and use these tips when choosing the right company.

When do I need one and how do I choose?

As a borrower, you should follow these rules before signing:

• Use these loans only in emergencies. These include house repairs, car repairs, or accident, etc.
• Make sure that the lending company has a business permit to work in your area.
• Always choose lenders with a good track record or reviews.
• Use the internet to research the company, see what other consumers are saying.
• Similarly, make sure that you have a handsome running income that can refund the loan within the timeframe allotted.

Will a no credit needed loan affect my credit?

While this type of loan may not require a credit check to receive, it can certainly have an adverse effect on your credit. You’ve accepted the loan terms, signed the paperwork and have your money. The time comes to make the steep repayment conditions, and finances are short. If payments aren’t made, this debt can be sent to collections which appears on your credit report.

So, yes, it can. If you have good money management skills and are able to repay these loans quickly, you’ll likely be okay. Our best advice is to avoid this type of situation if possible. But, when it’s necessary, research your offers and choose the one that benefits you the most. And, as always, pay your bills on time 🙂

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