Category: Credit

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Credit Financial

Is There A Minimum Credit Score To Apply For A Credit Card?

Credit inquiries can damage your credit score so it is important to understand your score and your options before you ever submit an application.

Credit cards are one of the best ways to help establish your credit, build your credit, and, in some cases, rebuild your credit. However, if you are someone who has a limited credit history or has some problems on your report that drag down your score, you may have trouble getting a credit card.

That’s not to say that it’s impossible. There are credit card options for all types of credit scores. There is not a clear answer to whether there are minimum scores or not. Sometimes, there are minimums for particular cards that come with high limits, low interest, or a lot of benefits. Sometimes, a lower score could leave your options much more limited and may lead to you needing to get a secured card.

Credit scores can be confusing and you don’t want to apply for too many new lines of credit all at once just to face a slew of denials and a huge hit to your score. In this article, we’re going to explain the different credit options for you based on your score range and explain how you can avoid hard inquiries when you’re shopping around for the best credit card option for you.

How Low Can My Score Be To Get A Credit Card?

The lowest score that you can have and still be eligible for some credit cards is actually zero. The more complex answer is that it all depends on your credit history and the credit card issuer. If you are just getting started on your credit journey, you’re not going to have a score just yet. Even if that’s the case, there are still options for you. If you’re enrolled at least part-time in a college degree program, you will very likely be able to get a student credit card. Student credit cards tend to have lower limits but may also have features like cashback for good academic performance, low interest, and reduced fees.

If you have no credit score or a very poor credit score, it’s going to be harder for you to find a credit card that works for you. Where your score truly comes into play is with the terms and conditions of the cards you’re eligible for. Scores in the 300-580 range are considered to be pretty bad credit.

Your score may be that low because of debt, accounts in collections, a foreclosure or repossession, or missed or late payments. These things can happen to anyone and you shouldn’t let it discourage you from looking for a credit card at all. If you’re someone with a score in this low range, though, there are only certain kinds of cards that you’re going to be able to get. One of the most common occurrences is that you will only be eligible for a secured credit card.

A secured credit card requires you to make a deposit that is (usually) equal to your credit limit. These are different from prepaid cards though because they do report to all the major credit bureaus and will help improve your score as long as you’re smart with them.

You will probably have to settle for a card with a lower credit limit.

Credit cards designed for those with bad credit also come with higher interest rates and will not come with any rewards or benefits that you may see in a more premium card. Even though that’s not ideal, it’s still a great way to get started.

Most credit cards that are designed for those with bad credit report monthly to all three major credit bureaus to help you get your score up faster by giving you a positive payment history as long as you stay current.

Also, settling for a card like this is something that is only temporary. Eventually, your score will improve or the creditor will see that you’re able to make your payments and you can either qualify for or upgrade to an unsecured card with better terms. One thing to keep in mind is that your credit score plays a role but there are other things that creditors will look at before issuing you a card of your own. They’re also interested in your monthly or annual income as well as looking at your history of on-time payments.

In order to qualify for a credit card with good terms, you need to be able to demonstrate to banks that you’re not a risk. The best way to do this is by working on your credit score, but having a steady income and good payment history can help boost your odds.

What If My Credit Is Just Fair?

Fair credit is the term used to describe your financial health if your score falls in the range of 580-670. If you fall into this range, you are very likely to be able to get a credit card without much hassle. Even though that is the case, creditors still consider people who fall in this score range as “subprime borrowers.”

This means that you may not be eligible for very competitive rates such as low interest, rewards, perks, or other benefits that come with more premium cards. If your score is in this range, you will most likely be able to get an unsecured credit card without much issue.

Some of the most popular cards right now for people who fall into this category include the Capital One® Platinum Credit Card, the Capital One® QuicksilverOne® Cash Rewards Credit Card, and the Indigo® Platinum Mastercard®, but there are hundreds of options. The caveat with any of these credit cards that are suited for your category is that you are probably going to face high annual fees.

Many of the most popular credit cards targeted to fair credit customers can have annual fees as high as $99. This is usually based on your perceived creditworthiness from the creditor.

What Is The Ideal Credit Score For Getting A Credit Card?

In America, the majority of people have credit scores that fall into the categories of poor or just fair. The benchmark for what counts as good credit varies depending on where you look for the information, but it is generally considered to be above 670 at the very lowest. Most scores that are considered to be “good” are over 700; to be considered excellent, your score should be over 800.

Because of the huge discrepancy in what is considered to be “good credit” and the credit score of the average American, it is hard to say if there is an ideal credit score at all. To make sure that you have the best possible approval odds for an unsecured card, your score should absolutely be above 600 and most likely closer to 650.

If your score is less than that but you have a positive payment history and limited accounts in collections, you will still probably be able to get an unsecured credit card. If your score is closer to 600 or comes in under 600, you’re probably only going to be able to get a secured credit card even if all of the other factors such as payment history, delinquencies, and inquiries look good.

Credit card companies don’t really have a preference for what score they would like you to have. The main thing that a creditor cares about is the risk. What if they give you all this money and then you are unable or unwilling to pay it back? This is the question they ask themselves any time someone with a lower credit score submits an application. They mitigate that risk by requiring a deposit, having high interest, or charging higher fees.

They also will not offer as many rewards at these lower levels. In order to get the best deal from a creditor, you must have good credit. If you have good credit, you are not going to have any problem getting approved for a credit card. Banks also like to compete for these customers because they’re the least risky and the most profitable for the card issuer. Someone with good credit is smart with their money, makes their payments on time, and is going to be very attractive to a creditor.

Because of that, cards suited for people with good credit have lower fees, lower interest, and more benefits associated with the card. This could be things like cashback, miles, and other perks. So, while there is no set ideal credit score or even a set minimum credit score, banks still show a clear preference.

You will almost always be able to find a credit card that you’re eligible for, regardless of your score. Finding a card that is the best possible deal out there is going to be a lot harder for anyone who doesn’t have good or excellent credit, though.

What If I’m Scared To Be Denied?

If you’re learning about credit cards or shopping around for one, it probably comes as no surprise that hard inquiries on your credit, denied applications, and attempting to open a lot of lines of credit all at once are things that will all negatively impact your score. The first thing you should know is that a hard inquiry on your credit takes as long as two years to drop off.

Fortunately for you, though, they have a very low impact on your score and will likely only bring you down a couple of points. This is something that you can bounce back from in just a few months. The same is true of credit card denials; they bring your score down, but not by much, and you won’t have to wait very long for it to even back out. However, it still isn’t fun to sift through cards and submit applications just to see yourself denied over and over again.

It can be very discouraging. There are a few things that you can do to help keep this from happening to you, though. First, you should make sure that you are researching as much as possible about the cards that you’re considering. Be realistic about what you think you’d qualify for and start there. Read the terms and conditions for the card. Some credit card issuers will even dictate what score range they expect applicants to fall into.

One website that puts it right on the bottom of every card description is Mastercard. Many others do the same. Second, you can make use of online tools like those offered by Credit Karma, Nerd Wallet, and the like. Many websites have tools that allow you to fill out a little bit of information and they will give you a list of credit cards and inform you of your approval odds for each one.

This can be a great way to get a feel for what cards it would be worth applying to if you’re just not sure how your credit score is going to measure up. The final thing that you should make sure that you take advantage of is prequalification.

Many credit card applications are able to collect some basic information about you and let you know if you prequalify, which means that they see your information and decide that you are most likely qualified for a specific card. These tools can be incorrect but that doesn’t happen very often. Prequalifying for credit cards does not include a hard inquiry on your credit and can help you make a more informed decision before deciding to apply.

In Conclusion

There are credit cards out there for people in all different types of financial situations and with all different credit scores. The better your score is, the better the cards that you’ll qualify for will be. You shouldn’t let a low credit score make you feel like you can’t get a credit card but, you should be prepared that you may not be able to get exactly what you want just yet. Settling for the best credit card that you qualify for at your current score is going to help you push your score up to where you want to be, as long as you use it accordingly.

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Credit Financial

How Can I Improve My Credit Score?

How to Rebuild Credit After Bankruptcy

Whether you’re just being conscientious or you have some rebuilding to do, you should know that it is possible to improve your credit score. It might take some time but it’s a very worthwhile undertaking for your financial health.

Your credit score is something that is going to follow you everywhere from the minute your credit journey begins.

It is a three-digit number that is calculated using a variety of factors about your financial life and it is a quick way for lenders to see if they’re willing to lend to you or not. Your credit score also helps them to determine things like the terms of your loan or credit card, your credit limit, your interest rate, and more.

Improving your credit score is something that is going to take time. It can take several years to raise your score back up to where you want it to be. Even though this is a lengthy process, it is absolutely worth it to help better your financial health going forward.

There are a lot of tips and tools out there that advertise that they will be able to help raise your score. In this article, we’re going to explore how your credit score is calculated, which of those tips are worth your time, and exactly how much time it might take to get your score back where you want it.

How Are Credit Scores Calculated?

When you’re not very informed about your credit history or how credit scores work, it can seem completely arbitrary and that makes having a less-than-stellar score even more frustrating.

One thing that may shock you right off the bat is that you probably have a ton of credit scores floating around out there that you don’t know about. The reason for this is that there are three types of credit reports that you have for lenders to look at.

These include FICO, TransUnion, and Experian. Once your potential lender gets that report, they apply a unique mathematical algorithm to those reports and that is what calculates your score. The most common credit-scoring model is the FICO Score. Most models do tend to look at the same factors, though.

The main factor is your payment history, which is going to show them how often you make your payments, if you do so in full, if you do so on time, or if you just didn’t pay altogether. The length of your credit history is also examined, which will show them how long you’ve had at least one credit account open; this is a smaller portion of your score.

Credit utilization is another one of these factors, and it is in second place in terms of how much it can impact your score. Credit utilization can be a little bit confusing but it basically looks at all of the credit that is available to you and how much of it you are regularly using. It may seem silly to have credit and be limited on how much you can use it, we understand.

However, this helps lenders understand what your outstanding balances are, and keeping them low is going to help your score. The other two factors are not as important as the others, both of them account for just 10% of your score each.

These are your credit mix, which is how many different types of credit you have; and something called “new credit,” banks think it is a little bit of a red flag to open multiple credit accounts too closely together. They look at how many new lines of credit you’re opening to make sure that you’re not burdening yourself with debt.

What Can I Do If My Score Is Low?

If you’re dealing with a credit score that is below your goals right now, you’re keenly aware of just how frustrating and limiting it can be. The important thing to keep in mind is that bad credit isn’t the end of the world and now that you’re aware of it, you can get on the right financial track to fix it. Experts all across the board will tell you that the single most important factor to help your credit score is to make sure that you’re making all of your payments on time.

Establishing a positive payment history is important whether you’re building or rebuilding your credit; it is especially important if you know that you have any accounts in collections. Those collections are going to drag your score down, so making sure that you make all of your payments is going to help counteract the damage that does to your credit.

This doesn’t apply just to your loans and credit cards, either. Making sure you get all of your bills paid on time and in their full amounts is going to show that you can afford your lifestyle, which is what creditors want. If you do currently have accounts in collections, make sure that you try to get those resolved.

That debt is going to drag you down and it is going to take your credit score down with you. You can call the collection agency, ask who the original creditor was, ask what you owe, and set up a payment plan. If you don’t recognize the creditor, you should dispute the account as soon as possible.

Make sure that whenever you are dealing with collections agencies that you explicitly ask that the negative hit on your credit will be removed. Get this information in writing. It is important to be smart not just about what you spend, but also what you owe. In order to keep your credit utilization rate low and help avoid massive amounts of accrued interest, you should work on paying down your cards with the highest balances first.

To help keep your balances in check, try paying your credit card bill twice a month any time that you can afford to do so. This helps keep your credit use low, helps you avoid accidental late payments, and it goes a long way towards improving your payment history. Another important tip is to monitor your credit reports. Check your score often, keep track of any inquiries made on your credit, make sure that everything is accurate.

Mistakes can happen. If you’re dealing with a low credit score, you don’t want those mistakes to be dragging you down at the same time that you’re trying to get on track. You can dispute anything that seems out of place, and you will be able to see what areas you need to improve on by looking at your reports. Your credit utilization rate, as you read above, is the second-largest factor that is used to calculate your credit score. Lowering your credit utilization ratio is also going to help you to get your score under control.

Most financial experts recommend that you try to keep that ratio under 30%. You can do this by making sure that you pay down your statement balances. For example, if you have a credit card that has a limit of $6,000 and you owe $3,000 on it, your credit utilization ratio for that card is 50%. That’s much too high.

Another sneaky way to help lower your credit utilization is to try to increase your credit limits on your cards. For example, if you call up that credit card company and ask if you could raise your limit to $9,000, your credit utilization ratio would drop to 30% with a $3,000 balance.

Asking for your credit limit to be increased does not create any inquiries on your credit and can’t negatively impact your score. The best way to keep this in check, though, is to make sure you are staying on top of your payments. For those of you with really low scores, try to aim for just 10% credit utilization as you’re working on getting back on track. If you’re trying to raise your credit score, you should be careful about opening new credit accounts.

Multiple hard inquiries on your credit will lower your score if you do not get approved. It can also hurt your score to open several new accounts in a short period of time. If the situation is getting to the point that you feel it is a little overwhelming, you can also shop around for a debt consolidation plan. This is something that can and will bring your score down when you enroll.

We know that sounds antithetical to the point, but it is one of the easiest ways for you to get a handle on your debt quickly. Instead of keeping track of multiple payments to multiple lenders or collection agencies, you could just make one easy payment. Just make sure you understand this option and know what you can afford before looking into it.

How Long Does It Take To Fix A Bad Credit Score?

The bad news about low credit scores is that they take a while to fix. If you have negative items on your credit report that are impacting your score, there is not much you can do beyond paying your bills and waiting it out. Delinquencies can stay on your credit report for up to seven years, car repossessions stay for up to seven years, and inquiries can stay on your report for up to two years.

You can’t do much of anything to make those disappear faster. In the short-term, self-reporting and score-boosting tools may also help bring you up a few points. In the case of delinquencies, you can try to get them removed faster by paying off the debt and getting the collections agency to agree (in writing) to remove it from your report. Most collections agencies will allow you to set up payment plans and may even allow you to pay a lower amount than what you actually owe if you can pay it off all at once. Inquiries that you didn’t authorize can be disputed.

Any mistakes you see on your credit reports can be disputed and getting those knocked off can bring your score up a couple of points in just a few weeks. Credit reporting agencies have to investigate disputes within 30 days of them being filed.

Overall, the amount of time it is going to take for you to see the improvement you’re looking for is going to depend on how many negative items are on your report and, just as importantly, how many positive ones you can start putting on there by taking the right steps.

You could see a noticeable improvement in just a few months once you start getting a handle on things but you should expect it to take a year or two to raise your score significantly. Don’t let the amount of time that it’ll take to fix your credit discourage you at all.

Working on this now is going to save you a lot of money in the form of interest payments and a lot of hassle later on. Low credit scores can create a barrier between you and financing a car, opening utilities at your home, purchasing a home, and even renting an apartment. Regardless of what your score is, keeping a close eye on it and being smart with your money will help bring it up and put you at ease.

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Credit

How Do I Get My First Credit Card?

Getting your first credit card can be a stressful experience but it is an important step on your credit journey. Being prepared is the best way to help you make the smartest decisions for your credit.

Your first credit card is an important rite of passage in your financial life. It is also an important decision that is going to impact your credit for the rest of your life and it is one that you should make sure that you are entirely prepared to make when the time comes. And please don’t max out your credit cards!

Unfortunately, a lot of the credit cards that are marketed to beginners are not going to be the best of the best. This is because a lot of the perks and rewards that come with credit cards come when you have a positive credit history.

Building a positive credit history and simply establishing your credit history is a big part of what getting your first credit card is all about. You will need to look at your options, decide on a card that fits your needs, and then go through the application process.

Another unfortunate reality of getting your first credit card is that there may not be a lot of options out there for you in the beginning. However, don’t let that fact discourage you. There are still some great beginner options out there.

Before doing anything, you should make sure that you meet the minimum requirements for a credit card. You must be at least 18 years old, though it is easier to get a credit card after the age of 21. You also must have an income, and most credit issuers will prefer that this income comes from a job; however, some other forms of income like child support or Social Security/Disability income may be accepted.

Once you’ve figured out how credit cards work it’s time to dive into the process of getting your first credit card. That’s what this article is going to focus on.

Credit Cards For Beginners

There are a few different types of credit cards that are catered specifically for those who are just getting started on their credit journey. These are often called starter credit cards and have a few features that set them apart from other credit cards. These features don’t typically make them more attractive options, instead, they’re designed to mitigate risk to the banks that issue them. Starter credit cards usually have lower credit limits, have higher interest rates, and offer limited rewards if any at all.

Another type of credit card that is designed for beginners are student credit cards. If you’re in college, there’s a good chance that you will have no problem getting approved for this type of card. Student credit cards are easier to get than other types of beginner credit cards and may offer more attractive terms. The only catch is that you must be enrolled at least part-time in a qualifying college or university program to be eligible to apply.

Finally, perhaps the least attractive option, are secured credit cards. This type of card is going to require you to make an initial deposit in order to receive and use your card. Deposits typically start around $200 and whatever you deposit will determine your credit limit.

While these do have an upfront cost associated with them, they do come with the best approval odds for someone with little to no credit history. Regardless of which option looks most attractive to you, you’re going to want to compare each card carefully to see what’s going to fit your needs.

Picking Your First Credit Card

Once you understand what type of card you’re going to try to get, it helps to compare your options in that category as well. You should look at a few key things when you’re making your selection. The most important thing is your APR. APR stands for Annual Percentage Rate and it refers to the interest you’ll be required to pay on your purchases.

Among beginner cards, the average rates range from as low as 15% up to 23%, but some can be higher. In an ideal world, you will be able to pay off your full statement balance every month, which would allow you to avoid paying any interest; however, that may not always be possible.

Interest can sneak up on you quickly, so trying to get the lowest possible APR is something you should always focus on when picking your first card. The APR that your credit card advertises is only for purchases, by the way. Cash Advances and Balance Transfers come with a different APR.

There is also something called a Penalty APR to look out for. If you fail to make at least the minimum payments on your statement balance each month, that’s when the penalty APR kicks in.

Next, you will want to consider fees. The biggest fee to look out for is the annual fee. Many credit cards, especially those for beginners, will not have an annual fee at all. However, there are plenty of cards out there that still carry them, and they are generally around $50 per year.

Some of them can be as high as $95 per year. For your first credit card, you should try to find one that carries no annual fees at all. You should also look out for monthly fees, fees for sending paper statements, late fees, and any other fees listed by the card issuer.

Before you apply for a credit card, it is best for you to read through the entire terms and conditions or the cardholder agreement. This is especially true for your first credit card so that you can have an understanding of how interest works, how the card works, and more.

You should also make sure you determine when your statements will be sent, the grace period between the end of your billing cycle and payment date, and how your payments should be made (such as online or by mail).

One mistake a lot of young people make when it’s time for their first credit card is getting a store card from somewhere like Macy’s, Walmart, or Ulta. Store credit cards can be great because they allow you to make large purchases over time and can provide you with awesome deals at the store. However, they can come with higher interest rates and can only be used for that specific store, which means they’re probably not a great choice for your first credit card.

Understanding The Application Process

You’ve compared your options, you’ve read through the terms and conditions, and now you’re ready to apply for your first credit card. Awesome! It’s important to make sure that you’re being realistic with your expectations before you apply for your first credit card because this will help you make the most informed decision. You’re probably not going to be eligible for a very high credit limit or a great APR right out of the gate and that’s okay.

Building credit is a process. If you feel like you’re properly informed and are applying for the best card for you, the application process can begin. Some websites offer you the option to go through a preliminary application process in which you’ll answer a few questions about yourself and then the tool will present you a list of potential cards based on your approval odds.

You may want to try out a tool like this. This process is usually called prequalification and it helps you avoid multiple hard pulls on your credit from cards that you do not have good approval odds for. Even if you use a tool like this, you will need to complete a formal application.

A credit card application is going to ask you a lot of personal information. This includes your name, phone number, address, and social security number.

You will also be expected to provide details about your income, average expenses, and your employer. Banks use your income information to verify that you’ll be able to pay them back and to determine your credit limit when opening a card.

You will also need to already have a checking or savings account, and you may be required to provide your routing and account numbers in your application.

Make sure that you complete your application on your own device and make sure it is done over a secure connection to protect your details. Never fill out a credit application on a website that you don’t feel comfortable with! Once you submit your application, it’ll be sent out to the lender.

The lender will pull your credit report, which is called a hard pull or hard inquiry. Every hard inquiry does impact your credit score, which is why it is so important to make sure you’re applying for a card that you feel like you meet the requirements for.

It’s no big deal if you end up getting denied but, you should be careful about filling out a ton of applications because your credit score can take a significant hit. Your lender will look at your application, credit report, and income information that you provided to see if you meet their standards.

Most credit card applications provide instant results online. If you’re approved, they will send out your card through the mail. If you’re approved for a secured credit card, you will be required to make a deposit equal to the credit limit they set for you before you can receive your card and start using it. If you’re denied for a credit card, they will tell you right away and will mail you a letter explaining why you were denied in the next couple of days.

Should You Even Get A Credit Card?

The answer to this question is almost always yes. Having good credit starts with establishing a positive credit history. Credit cards are the quickest way to establish credit and they give you the opportunity to create a positive payment history.

Payment history is the number one thing that is used to calculate your credit score. Things like credit card utilization and length of credit history are also factors that will impact your score. Starting your credit history early and making sure that you make timely payments are key in keeping your score where you want it to be.

Having a good credit score is something that you will probably take for granted; however, if you have no credit history or end up with a bad credit score, you will absolutely regret it later on. Good credit allows you to qualify for lower interest when financing a car, makes it easier to secure a mortgage, and can come in handy if there’s ever an emergency or if you have a specific goal that leads to you taking out a loan.

Having a credit card can be kind of scary because no one wants to incur debt that they can’t pay back. Make sure that you’re using your credit card wisely by making only necessary purchases, making payments on time, paying your full statement balance, and avoiding maxing out your card as much as possible.

Make sure you keep an eye on your credit reports and credit score. Also, avoid hard inquiries by making smart application decisions. Approvals will help boost your score but denials will always drag it down.

The bottom line is that having a credit card is a positive thing and can be a really helpful tool to keep in your wallet. Just make sure that you consider all your options, understand the terms of your card, apply smartly and sparingly, and use your card wisely once you have it.

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Credit Financial

What Is A Secured Credit Card?

If you’re just getting started on your credit journey, or have some credit problems in your past, you may be seeing a lot about secured credit cards. Are they a good option?

A credit card is the quickest and most effective way to help you build a positive credit history. However, some people struggle to get one because you have to have a credit history to prove that you’re a worthy candidate for a credit card. For others, it’s hard for them to build a more positive credit history because their history hasn’t been positive to date. If this is a problem you’ve run into, a secured card can offer you a better way.

\Secured credit cards are often offered to people who have little to no credit history, or have a damaged credit history. They are particularly popular options for people who may have a checkered past when it comes to their credit.

It isn’t a bad thing to have credit issues, it can happen to anyone and it happens for a lot of different reasons. Regardless of which category you fall into, secured cards can be a very handy tool to have in your financial arsenal. In this post, you’re going to learn more about secured credit cards, how they work, and if they may be a good choice for you.

What Exactly Is A Secured Credit Card?

To put it simply, a secured credit card is a credit card that is backed by an initial cash deposit. They are specifically designed for people who have limited or damaged credit and provide them an opportunity to fix some of the issues they may have run into in the past or just give them an opportunity to get started. It’s no secret that it can be hard to get a standard credit card, which is unsecured. This means that those types of cards don’t require anything upfront.

This can be very risky for banks if you’re someone who has yet to have the opportunity to prove your ability to repay credit that has been extended to you or if you’ve had trouble repaying credit card debt in the past. Secured credit cards help eliminate the risk for banks when extending credit to you because you will be required to pay a deposit upfront. That deposit is held as collateral for the entire time that you have the secured card.

You are still expected to make your payments with a secured credit card; however, if you are unable to do so, the bank can keep your deposit so that they haven’t lost any money. The deposit that you pay upfront doesn’t cover your payments at all because secured credit cards are not prepaid cards. They are just a different type of credit card. Secured credit cards are also the easiest type of credit card to get approved for. Some of them will still have minimum requirements when it comes to your credit score; however, most of them look more at your income, your ability to make payments, and, of course, the size of your deposit.

They often have fewer fees and lower rates, as well, which can make them easier for you to use to strengthen your credit. Secured cards may not offer rewards, though, and may come with higher interest rates. As long as you make timely payments, interest won’t be something you need to worry about.

How Do Secured Credit Cards Work?

Just like with any other type of credit card, you will have to fill out an application for this type of card. The application will collect information about you and your income. You can expect to provide your name, date of birth, social security number, and address. You will also be required to provide details about your income and employment. Some secured credit cards, specifically those for clients with damaged credit, may request contact information for your employer or require you to present them with pay stubs to help prove your income. Even though they collect all of this information, most banks will still do a hard pull on your credit.

That means that even if you are denied for a specific secured credit card, this inquiry will show up on your credit report. Keep in mind that getting denied for one secured credit card doesn’t mean that you will be denied for all of them; however, it isn’t a good idea to allow for a lot of hard inquiries on your credit. It is best to apply for the credit card when you know you will be able to make your deposit. When you’re approved for a secured credit card, you will be expected to make your deposit before they send you your card.

Most secured credit cards only require deposits around $200 to $300, but some of them may allow you to deposit a higher amount if you meet certain eligibility requirements. Your deposit is used to determine your credit limit. As an example, if you are approved for a secured credit card with a limit of $500, you will be required to deposit $500 in order to receive and start using your credit card.

In most cases, your annual fees will come out of your card right away. Working with our example of $500, that deposit will cover the opening of your card and the annual fee immediately. So, if the card that you select has an annual fee of $95, you will already have a charge of $95 on your card. That leaves an available balance of $405 for you to use. Not all secured credit cards have annual fees.

Secured credit cards can be used anywhere that credit cards are accepted. In some cases, such as with hotel deposits, car rentals, or some online services, your secured card may be ineligible. This is determined by whoever is providing the service, not your card issuer. It provides them an extra layer of security but it also does the same for you! If a rental car company assesses damages beyond your credit limit, they will be unable to charge you, which can lead to more financial trouble later on.

You will receive monthly statements and be expected to make prompt payments on your secured credit card just as you would with any other card. If you do not pay off your full statement balance, meaning that you choose to carry a balance, you will incur interest on the charges you made to your card. Secured credit cards work just like unsecured cards; the only difference is that you’re required to make a deposit upfront. In the event that you close your secured credit card and have made all your payments, you’ll get your deposit back.

It is important to understand that secured credit cards are not the same as prepaid cards. Prepaid cards may seem similar in theory because you have to add money in order to be able to use them but they are distinctly different.

Even if you use a prepaid card that is issued by one of the major credit card providers, they are not the same because the issuer is not lending you any money or extending any credit to you. Prepaid cards do not report to any of the major credit card bureaus and will not help you establish or repair your credit.

Is A Secured Credit Card A Good Choice?

Yes! If you’re someone who is unable to get an unsecured credit card for any reason, secured credit cards are a great choice. Building credit when you’re just getting started is very important so that you can prove your credit “worthiness.” Establishing good credit is critical if you’re someone who will eventually want to finance a car, secure a mortgage, and more.

If you’re someone who has damaged credit and struggles with a low credit score, secured credit cards provide you with a great road to better credit.

You can use a secured credit card to help you create a positive payment history and shed a better light on your financial responsibility going forward. It may seem daunting to know that you have to pay a deposit upfront and that is completely understandable. Even though that can be a little bit of an inconvenience, it doesn’t take away from the fact that secured cards are a great option to help build or rebuild your credit. Also, you should try to make sure that you’ll be ready to make your deposit when you submit your application; however, some secured credit cards will give you a 30-day window to make your deposit without having to reapply.

Something else that makes secured credit cards a good choice is that you can often increase your credit limit later on. After a few months of making timely payments and using your card responsibly, you can call your issuer and discuss expanding your line of credit by making an additional deposit.

Many of the major banks offer both unsecured and secured credit cards, so with a demonstrated positive history, you may be able to transition to an unsecured card later on. Even if those options aren’t available to you, the secured credit card is going to give you the chance to create a positive history and help boost your credit score.

Making The Most Of Your Secured Credit Card

It goes without saying that credit cards should be used responsibly. If you’re someone who is relying on a secured credit card to repair your credit, you may understand firsthand the problems that can come with biting off more than you can chew when it comes to credit cards.

There is always a chance that an emergency is going to come up and you’ll have to rely on your credit card to help get you out of a sticky situation. To make sure you have the credit available to do that, and to keep you on a positive trajectory, you should keep the following tips in mind when using your secured credit card.

  • Try to use your card sparingly or use it for routine purchases you’re accustomed to paying out of pocket. This will ensure that you will always have the funds to pay your full statement balance when it arrives, which will reflect most positively on your credit history.
  • Do not fall into the trap of minimum payments. Minimum payments are a great option when you come up short on a given month; however, paying your full balance on time every month is always the best choice. This helps you avoid paying high amounts of interest and demonstrates to your lender that you are responsible with your credit card.
  • Stay below your credit limit if you can. We know you got your credit card to be able to use it but there’s a hidden bit of information that makes this a worthwhile tip to stick to. Maxing out your credit card every month is not a positive habit to get into and the amount of your available credit that you use can impact your credit score. There is no magic number; however, credit experts suggest that leaving a larger percentage of your available credit untouched can help improve your credit.
  • Keep an eye on your credit score. Secured credit cards are designed to help you improve your credit history. Watching your credit score is a good idea because once you have established a good credit history for beginners, or improved your score if you’re repairing, you can think about calling your issuer about increasing your credit limit or transitioning to an unsecured card.
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Credit

How To Repair Your Credit

Rule of Thumb to Redeem Credit Card Points

Having a good credit score is way more important than some people initially think. If you do not have a strong credit score, you will struggle to be able to get loans for a new vehicle, or a new house, or a personal loan for when an unforeseen emergency might arise. These are the commonly known things that your credit score can have an impact on, but they are not the only things in life that can be dependent on your credit score.

Did you know that your hiring eligibility—that is to say if a company will hire you or not—can be influenced by your credit score as well? If you do not have a strong credit score, this can be used as an indicator of how reliable you are, even though it might necessarily reflect your actual reliability when it comes to doing your job.

Additionally, whether or not you are able to get things like a cell phone service plan, or a credit card can also be dependent on what your credit score is. There are a lot of things that are a necessity in life and many more things that would be considered as “luxuries” in life that hinge on you having an overall good credit score.

Even if you are able to get a loan or a line of credit, your credit score will play a major role in whether or not you are able to get a manageable interest % rate. Having a higher interest rate on a loan will increase your monthly payments, increase the overall cost to repay the loan, and even decrease the lifespan of the loan (how long you have to pay the loan back in full), all of which will drastically increase your out-of-pocket costs, which can have a negative impact on every facet of your life.

An example of how having a “bad” credit score can impact you, assuming that you are even able to get a loan to begin with:

Assume you take out a home loan for $100,000.00 USD, and the loan agreement comes with a loan term of 30 years at an interest rate of 3.72% (which is the average interest rate in the United States for the year 2020, according to financial analytics company S&P Global), you can expect:

  • A monthly loan payment of $461.41 USD per month for the 30-year loan term, with a total loan repayment cost of $166,109.37 USD. This is the principal loan cost of $100k, with an additional $66,109.37 in interest cost.

If we take the exact same situation, but instead increase the interest rate of the average American (3.72%) just a little bit, up 5.48% (which isn’t an unreasonably rare interest rate offering, all things considered), then the same situation outlined above suddenly becomes the following:

  • A monthly loan payment of $ 566.53 USD per month for the 30-year loan term, with a total loan repayment cost of $203,952.53 USD. This was the principal loan cost of $100k, with an additional $103,952.53 in interest costs alone.

Between these two situations, there is a monetary cost difference of $37,843.16 for the total loan cost, with a difference of $105.12 per month between the two monthly payment costs. If you take the above examples and instead apply a normal interest rate that someone with a superb credit score could get (2.382%), they would only be paying $389.01 per month, with just a total loan repayment amount of $140,044.76—a difference of $72.40 per month, and a difference of $26,064.61 in the total loan repayment amount between the person with a superb credit score’s potential interest rate and what the average American’s interest rate is.

The costs of having bad credit can get staggeringly high, which can easily place you under an unfathomable financial burden that can easily have an impact on so many different aspects of your life. Because of how your credit score can really limit what you can and can not do in life, it is very important that you are aware of what your credit score is, what exactly is on your credit score, and how you can begin repairing a bad credit score.

Finding Out Your Credit Score:

The first step in repairing your credit is to actually find out what your credit score is. There’s a number of ways that you can find your credit score, through a number of different service providers, which we will detail in this section:

  • United States Federal law allows each and every American citizen to request a copy of their credit report once per 12 months, at no cost to the requester. These 12 months have to be between your last request and your new request, the annual reports are not provided simply once per year (as in you’re not able to request a free report in December, and then request another free report again in January). You can additionally request a copy of your credit report either by phone (at 877 322 8228) or by filling and printing out this form which you can mail to: Annual Credit Report Request Service
    P.O. Box 105281
    Atlanta, GA 30348-5281 This service is handled by Central Source LLC., which is a joint venture between the three largest credit reporting agencies in the United States (each of which are detailed below) and which was started in cooperation with the Federal Trade Commission (FTC) in order for those three companies to comply with the Federal law known as the Fair and Accurate Credit Transactions Act of 2003 (also called FACT Act or FACTA), which was an amendment to the 1970 Fair Credit Reporting Act;
  • Experian: established in 1996, Experian lets users check their credit score as reported by Experian for free. Experian uses the FICO® Score 8 model in order to aggregate and generate an individual’s overall credit score;
  • Equifax: originally founded in 1899 as a retail credit company, Equifax is a paid service (which currently costs $19.95 USD at the time of writing, plus tax where applicable) which provides customers with Equifax 3-Bureau credit scores, 3-Bureau credit report monitoring, and Social Security Number (SSN) scanning to prevent identity theft;
  • TransUnion: established in 1968, TransUnion offers a paid service (which currently costs $24.95 per month at the time of writing, plus tax where applicable) which provides customers with daily credit score refreshes, up-to-date credit reports daily, 3-Bureau credit monitoring, and identity theft monitoring, and;
  • Numerous other credit report service providers (both free and premium service providers), such as: Credit Karma, Innovis, Connect (formerly PRBC), myFICO, and ChexSystems, among many others. These credit report service providers might aggregate your credit score using one or multiple reports from the three major CRAs in the United states (Experian, Equifax, or TransUnion), so they might report your credit score as being vastly different when compared to a credit score that is reported by a different provider. Experian, Equifax, and TransUnion (and similar companies) are what are known as credit rating agencies (which are also referred to simply as CRAs, or as rating services). Credit rating agencies are companies that assign credit ratings to individuals. These credit ratings are the metric for measuring a debtor’s ability to pay back a given debt by making timely principal and interest payments over the lifespan of the loan term and is what gives a loan provider a key indicator of the likelihood of the loan being defaulted on (the debtor’s failure to pay off the loan). Experian, Equifax, and TransUnion are the three largest CRAs in the United States and are the companies that worked with the FTC in order to provide American citizens with an annual credit report for free. Checking Your Credit Report For Errors: After you have found out what your credit score is, the next step would be to make sure that your credit history is up-to-date and correct. By using a credit rating agency’s services (or, preferably, using the services of multiple credit rating agencies, such as obtaining your yearly free credit report provided by Experian, Equifax, and TransUnion), you can get a detailed report on what is impacting your credit score. This report will provide you with information on the status of any outstanding loans that you have, information about any loans that have already been settled, and information regarding the overall age and health of your credit history. It is recommended that everyone keep up-to-date on what their credit reports have to say, particularly because sometimes something will be erroneously reported on your credit history, which can be having a negative impact on your credit score, despite the fact that it was incorrectly reported. According to a report published by the FTC, around 5% of consumers in the United States have at least one error on one (or more) of their three major credit reports, which could lead to them having higher out-of-pocket expenses for obtaining a loan. By ensuring that your credit report is error-free and that you are aware of what your credit score is, you will be able to be better informed on what your financial obligations could look like if you decide to apply for a new loan now, or sometime in the future. Experts say that there are some errors that could appear on your credit history that you shouldn’t worry about, as they will not actually have an impact on your credit score, such as: However, there’s a handful of errors that really should be a cause for concern should you see them on your credit history, and you should take the necessary steps required to getting these errors fixed ASAP. The errors you really should look out for are:
    • Wrong account status, such as a payment being mistakenly reported late even though you paid on time;
    • Negative reports that are too old to still be reported, because most derogatory marks on your credit history must be removed after seven years has passed from the time they were first reported;
    • An ex-spouse being incorrectly listed on a loan, a credit card, or another line of credit;
    • Wrong account numbers, or account numbers that are not yours;
    • Inaccurate credit limits or wrong loan balances;
    • Accounts that you do not recognize, and;
    • Addresses being listed on your account that you have never lived at.
    There is a section at the end of this article that is designed to help you report any inaccurate credit history information, or to dispute marks on your credit history that you feel were made in error. How Keeping Up-To-Date With Your Credit Score Also Protects Your Credit Score: Another important reason that you should be aware of what your credit report says about your credit history is that, according to a 2019 identity fraud study performed by Javelin Strategy & Research, there were more than 14.4 million victims of identity theft in the United States in 2018 alone. According to the same study, 3.3 million people out of the 14.4 million total victims had unreimbursed personal expenses in 2018 due to being responsible for a portion of the liability of the fraud that was committed against them. Moreover, these 14.4 million victims’ out-of-pocket costs due to the fraud totaled more than $1.7 billion USD. What Affects Your Credit Score: So, what actually has an effect on what our credit score is? What is being used to determine the risk of offering a line of credit to a particular consumer? There are a number of factors that play a role in calculating what your credit score should be. Each of these factors can have different amounts of impact on your credit score, but each factor is still overall important to take into consideration. The most important factors that affect your credit score are:
    • Your payment agreement history;
    • How much debt you have in total;
    • The age of your credit history;
    • New credit reports made to your credit history, and;
    • Credit utilization and diversity.
    It is a very common misconception that other financial factors such as your age, your employment status, the amount of assets that you might own, and your income, among other related factors, have an influence on your credit score. None of these factors actually do, however. Nothing outside of the five factors that are used in determining your FICO score (payment history, the burden of debt, credit history age, credit utilization, and newly made “hard” credit inquiries. Despite none of these other factors playing a role in determining your credit score, it does not prevent lenders from asking and accounting for these factors when making a decision as to whether or not to extend a loan agreement and using these additional factors in order to determine the loan agreement’s terms. As for the five factors that do play a role in determining your credit score, we will attempt to provide you with a strong understanding of exactly what these credit score affecting factors are, and how they play a role in determining what your credit score is in the next five sections of this article. What is FICO, the Credit Scoring System: Now that we have covered the basics of finding out your credit score, and how to ensure that your credit history is up-to-date and is free of any incorrect information in addition to explaining why keeping track of what is on your credit report can be important, we should take a deeper look into how exactly your credit score is actually determined. Experian, Equifax, and TransUnion use what is known as The FICO scoring method in order to assign each consumer with a credit score. The FICO model is used by the vast majority of banks and credit grantors in order to assess the risk of giving out a loan to an individual. The FICO scoring model was first introduced in 1989 by FICO, who were operating at that time under the name of Fair, Isaac, and Company, which is where the name originally came from. The FICO score assigns each credit affecting factor with a specific weight (percentage amount) based on what the model considers to be the most important factors in assigning a consumer with their specific credit score. The FICO scoring systems breaks down in the following way:
    • Payment history (whether or not you have consistently paid loans off on time / made timely loan payments): 35%;
    • Burden of debt (how much debt you have in total): 30%;
    • Credit history age (how long have you been paying on one or more loans): 15%;
    • New credit inquiries (recent “hard” credit inquiries, or “hard pulls”): 10%, and;
    • Credit utilization / portfolio diversity (which types of credit are being used): 10%
    Not every credit rating agency uses The FICO scoring system, and not every credit affecting factor is reported to all credit rating agencies (even among CRAs that use The FICO scoring system, and even among just the “Big Three” CRAs), which can—and often does—lead to credit reports being different for the same consumer. Because a consumer’s credit history file may contain differences in the information that has been reported by each of the three bureaus, a consumer’s FICO score can vary wildly depending on which bureau is being checked in with by a loan provider, which is why it’s important to know roughly what range your credit score is in among the “Big Three” CRAs, and even why it can be important to know which agency a loan provider checks a consumer’s credit history with, so you will know what to expect when they run a credit check. The FICO credit score has a scoring range from a minimum of 300 up to a maximum of 850, and according to FICO in 2019: 59% of people in the United States had a FICO credit score that was between 700 and 850, 45% of them had a score that was between 740 and 850, and only 1.2% of Americans held a perfect FICO score of 850. The “Big Three” credit reporting agencies each have their own views on what a specific credit score should be classified within a range: Experian classifies a FICO credit score that is lower than 580 to be “Very Poor”, a credit score that is between 580 and 669 as “Fair”, a score that is from 670 to 739 as “Good”, 740 to 799 is “Very Good”, and finally 800 to 850 are “Exceptional” credit scores. Equifax considers a FICO credit score that is lower than 580 as “Poor”, credit scores in the 580 to 669 range is “Fair”, 670 to 739 is “Good”, credit scores from 740 and 799 are “Very Good”, and those that fall in the 800 to 850 range is “Excellent”. Equifax considers individuals with a FICO score that is below 670 to be “subprime borrowers”. Subprime lending (which is also sometimes referred to as near-prime, subpar, non-prime, and second-chance lending) is a type of loan that is generally offered to people who may have difficulty in maintaining a normal loan agreement’s repayment schedule. TransUnion uses the VantageScore 3.0 model in order to classify credit score ranges. Credit scores that fall between 658 and 719 receive a “C” rating, scores that are between 720 and 780 are within the “B” rating range, and scores that fall within the range of 787 to the perfect credit score of 850 are considered to have an “A” rating. How FICO’s Five Categories Affect You: Now that we have covered how FICO calculates what your credit score should be, and how the “Big Three” credit reporting agencies use this FICO information, we will next be detailing how exactly each of the five categories that FICO looks at (payment history, the burden of debt, the age of your credit history, the number of hard inquiries being made against your credit history, and your credit history portfolio’s loan diversity) actually have an impact on your credit score. We feel it is important to first explain how each of these categories will impact your credit score before outlining what you can do to mitigate (or hopefully prevent) any negative effects that a particular occurrence can have on your financial stability and your ability to take out a new line of credit in the future. How Your Payment History Affects Your Credit Score: This can also be described as your “presence” in terms of your payment history. What is being looked at for this specific credit affecting factor is whether or not you have any derogatory information present in your credit history. Things such as declaring bankruptcy, being subjected to liens, the presence of judgments being made, the presence of settlements, the presence of charge-offs (or write-offs, where the loan provider has “given up” on collecting what is owed), whether the individual has ever had something repossessed from them, whether the individual has ever been foreclosed on, and if the consumer has ever made a late payment on a loan agreement. Remarks that have been reported to a credit reporting agency can take a long time before they stop having an effect on your credit score, this applies to both positive remarks and negative remarks.
    • Missed payments: up to 7 years;
    • Student loan delinquency: up to 7 years;
    • Account charged off or account sent to collections: up to 7 years;
    • Repossession or foreclosure: up to 7 years;
    • Filing for bankruptcy: up to 7 years for Chapter 13, and up to 10 years for Chapter 11 and Chapter 7;
    • Closed accounts paid as agreed: up to 10 years, and;
    • Active accounts paid as agreed: Remains on your report while “Active”
    In addition to the situations that you would assume have an impact on your payment history, there is another situation that can require you to make a payment that can have a negative impact on your credit score, regardless of whether that payment was made on time and has been paid off in full. Any money that was—or currently is—owed to another entity (whether that entity is another person, a business, or the government) because of a court judgment, a tax lien, or because of a similar reason, carries its own negative penalty to your credit score that is independent of any other reports to your payment history, especially if this judgment was made recently. Unfortunately, there is no “easy” way out when it comes to fixing poor payment history. Filing for bankruptcy does not remove negative reports in your credit history. If and when all of your debts have been discharged in bankruptcy, the balances for these debts will all be reported as $0 USD, but the accounts will still remain on your credit report. Any accounts that were included in your bankruptcy filing will be noted as such. Closing an account also won’t eliminate any reports of payment delinquency. If you were to close an account that has a past-due balance, your payment will still be reported as being delinquent until you are able to catch up on the missed payments. Paying a delinquent balance off also doesn’t erase the negative mark in your credit history. Once you have paid the balance off, the account’s status will change to “Current” or to “OK” as long as the account hasn’t been charged-off or been sent to collections. Charge-offs and accounts that have been sent to collections will continue to be reported that way, even after you have paid the balance. How Your Debt Burden Affects Your Credit Score: This category considers a number of debt specific measurements. According to the FICO scoring system, there are five different metrics that should be looked at and accounted for in the debt category, which are:
    • The amount owed in total across all of your accounts: this is the total balance that is owed across all loans and credits;
    • The amount that you owe on different types of accounts: this looks at how much is owed for all specific types of accounts, such as the total that is owed across all credit cards, the total that is owed across all auto loans, et cetera;
    • How many of your accounts in total have balances: this takes into consideration how many “active” loans and credits you currently have, as having too many accounts with balances could indicate that the consumer is financially overextended, making them a riskier loan seeker;
    • Credit utilization ratio on all of your revolving credit accounts: this looks at, for example, how much of the credit limit on something such as a credit card is being used. If you have almost hit the limit on your credit cards, then FICO considers you to be a higher risk, and;
    • How much of the installment loan amount is still owed in comparison with the original loan amounts across all accounts: this category looks at how much of the original installment loan in total is still left to be paid off. So, for example, if you took out a line of credit for $100,000 USD, and you have only paid $10,000 towards this hypothetical loan, then you still owe 90% of the total loan amount. Still owing 90% of a single loan does not look good on a credit report, nor does it instill in a lender any confidence that you are a low-risk borrower. However, if instead of paying $10,000 towards this $100,000 loan, you have actually paid off $80,000, then this would have a positive impact on your credit score, as you currently only owe 20% of the total loan.
    How Your Credit History Age Affects Your Credit Score: As a credit history ages, it will often have a positive impact on a consumer’s FICO score. There are two metrics that FICO takes into consideration in regards to this category: the average age of the accounts on the credit report and the age of the oldest account. By having more accounts that are listed on your credit report that are “mature” credit reports and by having at least one account that is (preferably) multiple years old, you will be more likely to have a better credit score because FICO considers these two metrics as good indicators that you are more financially stable and are more likely to pay off a loan agreement in full, which often takes a number of years to do. How New Credit Report Inquiries Affect Your Credit Score: These new credit inquiries, which are commonly known as “hard” credit inquiries, or “hard pulls,” are inquiries that occur when a consumer applies for a new credit card or for a new loan, regardless of whether the loan being requested is revolving credit or installment credit. Each hard credit inquiry will have a negative impact on your credit score, except in certain situations that FICO accounts for, such as consumers that are “rate shopping” (which is to say, they are shopping around in order to try and get the best rate possible) for a mortgage loan, an auto loan, or even a student loan over a short period of time will likely not experience any meaningful negative impact to their credit score. The period of time that these hard credit inquiries can be made from multiple sources is somewhere between two weeks up to 45 days, depending on the generation of (or the version of) the FICO score that is being used. The FICO scoring model considers these types of hard inquiries that are made within this short period of time as being only one hard inquiry in total, as opposed to numerous separate hard credit pulls. Credit inquiries that are made by the consumer (such as when using a credit reporting agency’s services), that are made by an employer (for employee verification purposes), or that are made by companies that are initiating pre-screened offers of lines of credit or insurance are what are all known as “soft inquiries” or “soft” credit pulls. Soft credit inquiries do not have any impact on a credit score, as FICO does not even consider them when determining your credit score. These soft credit pulls do not even appear on the credit reports that are used by lenders, as they only show up on personal reports. All credit inquiries (soft and hard) are both recorded and displayed on personal credit reports for two years in total, however, any hard credit inquiries that have been made will have no effect on a credit score after the first year, due to the fact that FICO’s scoring system will ignore them after 12 months have passed since the credit inquiry was made. How Credit Utilization and the Diversity of Your Credit Portfolio Affects Your Credit Score: By having a variety of different credit types present in your credit history, you can possibly receive the benefit of having a higher FICO credit score. This is because of how the credit scoring system assesses the overall diversity of your credit portfolio, and because of how FICO makes a determination based on how you’re utilizing your different credit sources. FICO has determined that this is an important factor when determining a credit score because it shows that the consumer is able to be financially flexible enough to pay off a variety of different loan agreements, many of which are likely to have different payment requirements. The more financially flexible a consumer is, the more likely they will be able to take on a new loan agreement and pay off a loan agreement, without suddenly realizing that they have overextended themselves financially without realizing it until it is too late, and they are now more likely to default on one or more loan agreements. In order to help you understand the different types of credit that FICO considers when determining your credit score, we will go over the different types of lines of credit that are commonly used in the next section. Understanding the Different Types of Credit that Can Add Diversity to Your Credit History: There are a variety of different types of commonly used credit that can be taken on by an individual, with each type of credit agreement differing in a variety of ways. These different common credit types are:
    • Installment Credit: this is a type of credit that involves loans where a fixed monetary amount was given, in exchange for an agreement made by the debtee to make a fixed monthly payment which is put towards the overall loan balance until the loan has been fully paid off. Types of loans that are made on installment credits include: student loans, personal loans, and most mortgages;
    • Revolving Credit: this is a type of credit that is usually associated with credit card debt, but can also include certain types of home equity loans. Revolving credit has a hard credit limit, and requires the debtee to make minimum monthly payments at the very least, with these monthly payments being based on how much credit has been used. Revolving credit can (and typically does) fluctuate, and it doesn’t usually have a fixed credit term;
    • Consumer Finance Loans: are types of credits that are also known as alternative financial service (AFS) credits. These types of credits include payday loans, rent-to-own loan agreements, lines of credit issued by pawnshops, refund anticipation loans, and even some subprime mortgage loans and car title loans fall under this category;
    • Rent-to-Own Leases: are types of leases that are generally used for mid- to high-cost products, but are not necessarily just for automobiles and homes. Many typical rent-to-own leases are for products such as furniture, home appliances, and various electronics, and;
    • Mortgage Loans:
    How to “Fix” Factors That Negatively Impact Your Credit Score: There are a couple of different steps that you can take in order to mitigate a FICO-affecting factor’s effect on your credit score, in addition to many more steps that you can take in order to avoid being negatively impacted by one of these factors that FICO take into consideration when calculating your credit score, to begin with. In the next couple of sections, we will provide you with some tips on how you can try and mitigate any negative impacts to your credit score—where possible—and we will also provide you with some information that can help you to avoid any potential future occurrences from lowering your credit score. Credit Payment History: Repairing your credit payment history is often difficult, and rarely will you find success depending on your specific circumstances, but there are a couple of things that you can do that might help:
  • First off, if you have received a missed payment remark, or another negative remark, as the result of an error, you should attempt to dispute it. If you do find an error in your credit history that is being reported by one or more of the “Big Three” credit reporting agencies, we have a section near the bottom of this article that explains how to dispute a negative remark;
  • You can attempt to obtain a “Goodwill Letter” from the creditor that you have missed a payment with. Oftentimes creditors will refuse to provide these unless you have a long history of on-time payments with them as it is. A Goodwill Letter is a request that they remove the missed payment report, and is an excellent way to explain the circumstances that led to you missing an agreed payment. Because the Goodwill Letter is being written in good faith, it also shows to the creditor that you are taking responsibility for the mistake that you made, or for the situation as a whole, which can help to sway them into being more empathetic with you. The main thing to remember is that most creditors and people that are employed by the creditor that you’ll likely be dealing with on a regular basis are regular people that can be very understanding of the circumstances and of your current financial situation;
  • Other than attempting to appeal to the creditor to have the negative remark retracted, the only other real option is to wait for these negative remarks on your report to “fall off” after the period of time that it normally takes (around seven years) has passed since the report was initially made with the credit reporting agency or agencies.
  • Because FICO takes your credit utilization ratio into account when determining your credit score, getting a credit card with a higher limit than what you feel you will need can be a smart decision, as having a larger gap between how much you have put on your credit card and how much you can put on your credit card looks better than being near your credit card’s spending limit. The credit utilization ratio is the amount owed divided by the amount extended by the creditor, with a lower credit utilization ratio being better for your credit score;
  • The number of accounts with balances that you have on your credit report can have a negative impact on your overall credit score, but you can help to fix this problem by targeting the accounts that you have that will take less money to pay off fully, and paying a little extra on those each month if you were only paying the monthly minimum towards those accounts. If you were already paying more than the monthly minimum, you can still try and shuffle your finances around so you can pay even more towards these accounts each month. The sooner you pay them off, the sooner you will have one less “active account paid as agreed” and one more “closed account paid as agreed” being reported;
  • When targeting the debts that you will be able to pay off the fastest, you further want to target those debts that have the highest bill-to-balance ratio. This simply means paying more towards the debts that will reduce your debt-to-income ratio with the least amount of money needing to be paid towards it. It’s a “more bang for your buck” scenario;
  • Try and avoid taking on more debt, if possible. If you take on unnecessary loans, then you will just be fighting against yourself when it comes to lowering your debt-to-income ratio;
  • Use balance transfers to your advantage. If you can shift your debt from a source (such as a credit card) with a higher interest rate to a source (such as a different credit card) that has a lower interest rate, this can help you to balance your budget in a more efficient manner, and;
  • Finally, you can also try and restructure your debt by refinancing your debt with a new lender, such as one that might be able to provide you with an overall lower interest rate, or one that can give you a longer payment agreement, which can help to lower your monthly debt costs. Lenders can refinance your debt by negotiating with the original lenders and buying out your loan agreement for less than what you still owe on it, allowing them to finance it back to you at a discount while they are still able to make a profit off of the loan.
  • Do not apply for loans unless it is absolutely necessary. Frivolously applying for loans will cause the lender to put a hard credit inquiry on your credit history, which will bring your credit score down a little;
  • If you are trying to take out a necessary loan or are having a necessary credit inquiry being made (such as a home loan, an auto loan, or the credit inquiries that occur when applying for a new utility provider), you can and should shop around to try and get the best interest rate and loan agreement that you possibly can. Multiple hard credit inquiries that are made within a span of two weeks to around 45 days for these kinds of loan requests will generally all just count as one hard credit inquiry in total, as each individual hard credit inquiry won’t actually be counted by FICO’s scoring algorithm, and;
  • Plan before even starting to apply for a new loan. Find out as much as possible about any and all new lenders that you might be attempting to get a loan from. Find out if the hard inquiries that they will make against your credit history can be counted as a single hit if you end up applying for a loan from multiple lenders. Find out if you know anyone that has any experience with a specific lender, or ask around online. See how other people feel about a lender. Try and find out as much information about a lender as possible before you ever request a loan quote from them. By doing this, you can potentially cut down on the number of loans that you apply for, find a lender that will work with you, and ensure that your credit history will not be getting hit with multiple hard credit checks as opposed to just having one hard credit check be counted against you.
  • Bank-issued credit cards;
  • Retail credit cards (such as Target’s RedCard, a Lowe’s credit card, or the Amazon.com Store Card, among others);
  • Gas station reward credit cards (such as Shell’s Fuel Card or the Circle K Fleet Card ;
  • Furniture, appliances, or electronics rental agreements, and;
  • Other small rent-to-own agreements.
Categories
Credit Financial Real Estate

Buying a Home With a Partner Who Has Bad Credit

Buying a Home With a Partner Who Has Bad Credit

Buying a home is one of the biggest purchases you will ever make. It takes a lot of time and preparation to buy your first home. Sometimes our partner has less than good credit which can complicate the process.

If you have a partner with less than perfect credit, you may want to read below. We will discuss tips to make the buying process better.

Tip 1

If you are married and want the best interest rate on a mortgage, you can buy a home using only one partner’s credit.  Most states consider a property that is bought during a marriage to be both party’s responsibility.

The partner with the better credit puts the house in their name, using their income and credit. While you may not be able to buy as large of a house as if you used both partners’ income, you will get a better interest rate. It will also help your odds of approval.

Tip 2

Save up for a little while longer, and put down a higher down payment. The bank wants to see that you can be responsible for the mortgage payments. If you put down at least 20% as the downpayment on the loan, the bank will see that you have the ability to save.

A higher down payment means a lower mortgage amount, which can help if one partner has bad credit.

Tip 3

Wait until your partner raises their credit. Sometimes waiting is not fun. But in the end, it is worth it. Have your partner take a credit repair course to understand why their credit score is low. Once they understand why they have poor credit, they can begin to fix it.

Credit repair can be done by eliminating debt, paying credit cards and bills on time, and not applying for new credit. After six months to a year, your partners’ credit can be in a better place. Which will help with mortgage approval.

Tip 4

If your partner has bad credit, maybe you should look at buying a smaller home. If one person isn’t good with finances it may not be wise to buy a home that they can’t keep up with. You want to avoid foreclosure at all costs when buying a home.

Think of circumstances where your partner may be the one responsible for the home. If you lose your job or become injured, will your partner be able to take over a large home?

Tip 5

If you want to buy the home of your dreams, but your partner has poor credit, add another stream of income. The more money you make, the more likely you are to be approved for a home.

All Things Considered

With everything you know about the importance of mortgage preparation, you will want to find a plan that works best for you and your partner. You are not out of luck getting a mortgage if your partner has bad credit.

Categories
Credit Debt Financial

You’ve Maxed Out Your Credit Cards, What’s Next?

Steps to Take When You’ve Maxed Out Your Credit Cards

Consumer debt related to credit cards is a significant issue in the United States. According to Debt.Org, more than 191 million people have a credit card in America. As a result of this, many people struggle with maxed-out cards and knowing what to do when that happens.

Whether you’ve done a little too much online shopping, or you needed to get caught up on bills and other responsibilities, maxing out your credit cards is common. In this article, we’ll highlight those steps and go into detail on how to perform each one.

Stop Using Your Cards

Many credit cards will automatically decline purchases that exceed your available balance. However, if you’ve opted-in to a policy that allows overcharging, it’s best to stop using the cards completely once you’ve reached the limit. After all, this cuts off any possibility of escalating the issue if you don’t add to the amount of debt you owe.

If you used any of your credit cards to pay for subscription services, it’s important to cancel them or transfer the subscription to a debit card. While we’d recommend canceling the service, moving to a debit card is okay if it’s necessary.

Plan Out a Budget

Before you start paying off your credit card debt, it’d be beneficial to plan out a budget and means of payment. Doing this will prepare you for what’s coming in terms of your financial situation. Having a solid plan can also help keep you on track to pay your debt off as soon as possible.

While it may be tempting to make only the minimum payments on your cards each month, it’s more beneficial to pay as much as you can. Paying more than the minimum requirement will offset any interest payments that are tacked on and speed up the process.

Pay Off Your Debt

Once you’ve stopped using your cards and you’ve mapped out a budget, it’s time for the hardest part: paying the debt off. There are several ways you can do this and whichever plan you choose will largely depend on your current financial situation. Here are the main ways you can pay off your credit card debt:

  • Pay it in full: This is certainly the quickest option, however, it isn’t feasible for everyone. Unless you have a significant amount of money in your account, paying in full isn’t an option. This is likely the case for a majority of credit card holders.
  • Negotiate with your credit card company: If you’d like to stop using your cards altogether, some companies may allow you to negotiate a lower payback price. If you choose to do this, it may be worth asking for expert help.
  • Make extra payments when you can: The amount you’re able to pay will depend on your income. If you find you have some extra leeway money in your account, consider putting that toward a credit card bill.
  • Use credit card rewards if possible: Some credit cards come with a rewards program. To help alleviate your balance, you may choose to use any accumulated rewards to put toward a statement credit.
  • Utilize debt consolidation: Debt consolidation is a popular option for paying off debt. If you have a good credit score, you may consider taking out another card with a 0% APR on balance transfers and low interest rates. You may also choose to do this with a personal loan from your bank.

Parting Thoughts

Dealing with any type of debt is certainly stressful. Luckily, credit card debt is easily fixable so long as you have a solid budget and repayment plan. To pay off debt, the most important thing you can do is be smart about your spending while paying off your debt and after you’ve successfully paid them off.

By following the steps we’ve highlighted in this post, you’re setting yourself up to pay off your credit card debt as quickly and efficiently as possible.

Categories
Credit Financial

How to Book a Hotel Without a Credit Card

How to Book a Hotel Without a Credit Card

A vital part of any vacation or out-of-town trip is your sleeping arrangements. Hotels, motels, lodges and the like commonly require credit cards in order to book or at check-in. This can prove to be troublesome if you prefer to carry cash or don’t have a credit card.

It’s certainly possible to book a hotel room without a credit card. However, it’ll require a little bit of extra work to get done. In this article, we’ll explain why credit cards are commonplace among lodging facilities. We’ll also give you tips on how to find a cash-friendly hotel and other important tips.

Why Do Many Hotels Require a Credit Card?

Prior to the 1950s, cash was king in just about every establishment. However, credit cards and the idea of personal credit took the market by storm. So, lodging establishments have adopted a card policy ever since.

While this seems like a hassle to a non-card-wielding person, the policies are put in place to protect the establishment and cover any arising fees. Most commonly, the card will be charged a deposit when you check in and if you cause any damage to the property, they have a card on file to charge you with. If the hotel only dealt in cash, this opens them up to potentially having to cover expenses that were the cash-wielding person’s fault.

Finding a Cash-Friendly Hotel

Although most establishments require a credit card, it’s possible some will accept cash too. Many chain hotels will accept cash for payment including Hampton Inn, Quality Inn, Days Inn, and Holiday Inn. This may vary by location though, so it’s important to call ahead and make sure before trekking there.

If you prefer to book online, using a website like booking.com is helpful because you can filter your results to only show places that accept cash. Local establishments that aren’t affiliated with any chain may also be accommodating to cash payers too.

Booking Tips

Once you’ve nailed down where you’d like to stay, there are a few different ways you may choose to book:

  • Book online using your bank debit card: This will ensure you have a room reserved when you get to the hotel. In most cases, you won’t be charged until checkout, so you can always switch payment methods when you get there.
  • Use a travel agency to help you: Travel agencies are equipped to help accommodate all of your needs. If you don’t feel comfortable calling a hotel, a travel agent will go through the entire process for you up until you leave for your trip.
  • Use a prepaid card to book your hotel: if you don’t want your bank account information connected to the hotel in any way, you could purchase a prepaid card at any major grocery store and book using the prepaid/gift card.

Parting Thoughts

Whether you don’t have credit available or you simply just prefer cash, you can absolutely book a hotel room without a card. Booking a hotel without a card requires a few extra steps, but it isn’t impossible.

Categories
Credit Financial

Can You Use PayPal on Amazon?

Can You Use PayPal on Amazon?

In the world of online shopping, PayPal has become one of the most popular and most convenient payment options. But can you use PayPal to shop on Amazon? The short answer to this is no. There isn’t an option to pay for your Amazon cart directly through PayPal.

However, you can use PayPal indirectly to make Amazon purchases by using the different debit and credit cards PayPal offers. Read on to learn more about how to use your PayPal account to shop on Amazon.

PayPal Card Types

PayPal offers four different cards that connect to your balance: PayPal Cash Card, PayPal Business Debit Mastercard, PayPal Key, or PayPal Credit. Each of these come with there own benefits and drawbacks, all of which will cater to your specific needs and intentions of use. Here’s a quick overview of each card type:

PayPal Cash Card

The PayPal cash card is a debit card that can be used once you set up a PayPal Cash Plus account. The account is free to set up and essentially functions as a bank account. Once you receive your debit card, you can use it anywhere and the balance immediately gets taken from your account balance.

Because it’s a debit card, there are no monthly fees or minimum balance requirements. You can also withdraw money at any ATM without being charged a withdrawal fee. When you set up a PayPal cash plus account, you also receive a routing and account number to facilitate direct deposits.

PayPal Business Debit Mastercard

This card works similarly to the PayPal cash card but gives you the opportunity to earn cashback. Unlike the cash card, you have to apply for the business MasterCard and if you’re approved, you’ll receive the card within 7-10 days.

PayPal Key

PayPal Key is a virtual debit card that functions similarly to the other two options mentioned above. When using this option to online shop, you receive a virtual card number expiration date and security code.

PayPal Key is also free to use and doesn’t require a credit check or a complicated application process.

PayPal Credit

PayPal Credit is a revolving credit line that gives you a reusable credit line to make online purchases. Because it’s connected to your PayPal account, you have the option to pay your credit balance right away or over time and it’s easy to apply for too. This option is subject to credit approval through Synchrony Bank.

How to Use PayPal to Shop on Amazon

While you can’t pay for your Amazon cart with PayPal directly, you can use the options we mentioned previously to complete your purchase. You have the ability to use a PayPal cash card, the business counterpart, or PayPal Key to purchase right away. However, Amazon doesn’t allow you to use PayPal credit to directly pay for your cart.

There is a way around this, though. If you only have PayPal Credit, you can visit any major retailer that offers Amazon gift cards and purchase one there. You’ll then be able to use the gift card to purchase your cart.

Despite the inability to directly use PayPal on Amazon, you can certainly cheat your way around the restrictions.

Categories
Credit Financial

How To Cancel a Pending Transaction

How To Cancel a Pending Transaction

Pending charges on your account happen. When the merchant has charged you for a payment, but your credit card company or financial institution hasn’t caught up yet. This happens every time you swipe your card or make a payment online. However, most transactions are completed so fast that you’ve got a notification on your PayPal or banking app almost instantly.

If you’ve got the funds available or you don’t have any upcoming bills, this isn’t usually a problem. But when your rent and other bills are due or you just simply can’t afford the hold to stick around, you have a couple of options.

Reasons to Cancel a Charge

In some instances, the charge you see is more substantial than you were expecting. When you check into a hotel room or rent a car, you’ll often be charged a deposit. Also, gas stations often place a hold when paying at the pump. These pending transactions can make things challenging. While they usually clear quickly, sometimes you are stuck with the charges longer than expected.

How Long Can a Pending Charge Last

Most situations leave you with your money back in your account within 24 hours, but this isn’t always the case. Some charges stick around for up to 5 days. How long they last depend on a few factors, including when the transaction was made as well as how long the vendor takes to process payments. If you paid with a credit card, the charge will probably last a few days.

The drawback to these pending charges is that they impact your available balance immediately. Most people can’t afford that extra $100 hold for paying at the pump, especially for nearly a week. If you have a charge that needs to be cleared up ASAP, the process depends on your form of payment.

Credit or Debit Card

The credit and debit systems are so similar and nearly instantaneous these days. You can dispute or cancel pending charges in more or less the same way in either case. Once the merchant has released any holds that they have applied, a pending charge can be removed by contacting the bank that issued the card. It doesn’t matter if it’s a credit or debit account.

In some cases, they may not be able to remove a pending charge. However, once they confirm that the merchant has canceled the transaction on their end, they will often advise that the pending transaction will disappear within a business day or two.

PayPal

If you have a pending charge through PayPal, and you need to cancel it for whatever reason, their interface makes it exceedingly easy to cancel or dispute charges. If the pending charge is fraudulent, explain this to their support team. They will often be able to instantly credit your account the disputed amount while the process is finalized on their end.