Credit Repair Blog
What Happens to your Credit When You Only Make Minimum Payments?
If you’re trying to get out of credit card debt, it’s important to get in the habit of making regular payments on your credit card balance. Making your payment on time is important to avoid late payment penalties and fees. But is it enough to make only the minimum payment on your credit card, even if it’s on time?
As it turns out, making only the minimum payment may be costing you much more than you realize. Here’s how.
5 Unexpected Ways Your Credit Score Affects Your Life
You already know that your credit score will affect your interest rates for loans, or whether or not you will even be approved for a loan, but did you know that your credit score affects more than just your ability to borrow money? Your credit score and credit report tells your financial history, and more importantly whether or not you’re good at making payments on time and in full. Your ability to make prompt and complete payments is important to more than just those from whom you seek home or auto loans. Here are five other ways your credit score and history affect your way of living. 1. Landlords One of your biggest monthly payments is usually for your home. If you don’t have a mortgage, you might not have thought that your credit score mattered much when it came to your living arrangement, but landlords are very much interested in your ability to pay rent on time. Most rental applications will include a credit check, and a low credit score or a short credit history may result in a bigger deposit or even being turned down for a property. 2. Cell Phone Companies Smartphones are essentially mini computers these days, and their price tags reflect that. With most smartphones costing hundreds of dollars, many people opt for paying monthly for their phones as a part of their phone plan. Most cell phone companies will want to make sure you’ll be good for your monthly payments, so they’ll run a credit check before they let you walk out with your new smartphone. 3. Utility Companies While they are not allowed...
Credit and Financial Questions to Ask before Getting Married
When you’ve finally met that special someone it seems you’ve been missing your entire life, you probably feel like there’s nothing in the world that could put a rift between the two of you. But don’t let love cloud your judgement – there are a lot of details and logistics to be handled before you can merge lives, one of the most important being your finances. It’s unlikely that you discussed finances on your first few dates, or even at all before you decided to get married or move in together. But discrepancies in financial responsibility are one of the most common sources of contention in relationships. Before you and your partner find yourself at odds because of spending issues, take the time to ask and discuss these topics to make sure you’re on the same page 1. Bill Payment Sharing a home means sharing the home payment, utility payments, and merging several other financial aspects of your life. Before you move in, ask your partner how they manage their bills on their own. Find out if one of you seems to have a better system than the other, and delegate the responsibility of paying the bills to whomever will ensure a timely and full payment. 2. Credit History If you haven’t yet, pull your credit reports and go over them together. Learn how to read them together if you don’t understand all of the terminology, and identify any negative items on either of your reports. Set goals to improve your scores if necessary, and identify the reasons behind the negative items to prevent any future credit dings in...
5 Creative Ways to Pay Down Debt Fast
If your current spending and saving plan isn’t paying down your debt fast enough, it may be time to change things up a bit to get rid of your debt faster. Although this means making some sacrifices in the short-term, you’ll be saving possibly hundreds of dollars of interest in the long-run. Here are some creative ideas to help you pay down your debt faster. 1. Flip on classifieds If you have a knack for do-it-yourself projects, home repair or improvement, or art and crafting of any sort, you could use that knack to make some money flipping furniture and appliances on classifieds ads. Spend some time each weekend browsing yard sales or classifieds ads and look for items you could paint, touch-up, or even just clean-up. Factor your time and cost of materials into the redo, then re-sell it to make a profit. Use what you earn to pay down your debt. 2. Have a no-spend month Prepare in advance for a no-spend month. You’ll have to decide how disciplined you’ll be, but some ideas to do a no-spend month are: No eating out – prepare recipes and meal plan in advance to avoid it. Give yourself a budget and stick to it. No clothes shopping or recreational shopping. Entertain at home – no movies, bowling, sporting events, etc. Get creative at home with entertainment. Set a gas budget. Plan your errands wisely to eliminate excess driving. Use whatever money you saved to pay down debt. 3. Sell your stuff Chances are you have several clothing items and pairs of shoes you don’t wear. You might have a...
What Are Charge-offs and How Do They Affect My Credit?
A charge-off occurs when a creditor determines that a debt is unlikely to be paid. If a debt is unpaid, usually for 180-days or more, it will probably be declared a charge-off. This allows the creditor to write it off as a tax deduction, since the loan is no longer considered an asset for them. But this doesn’t mean you are off the hook for repaying the loan. On the contrary, your debt is owed until it is paid, and a charge-off is the worst thing you can have on your credit report. If you were under the impression that your debt would just go away if you didn’t pay it, you were sorely mistaken. Not only will you have to repay it, but you will probably have a hard time getting any kind of credit in the future. After all, the purpose of your credit report is to show lenders your ability to repay debt. A charge-off shows them that you’re their worst nightmare – a borrower who will not repay. What can I do about charge-offs on my credit report? The charge-offs will stay on your credit report for seven years, until they must be removed under the Fair Credit Reporting Act. However, some states do not have a statute of limitations for debt collections efforts, so you could find yourself being hassled by collectors and even facing lawsuits years after the delinquency date if you fail to pay your debt. The best thing you can do if you have a charge-off on your credit report is to make a plan to pay it as quickly as...
What Happens to Your Credit If You Miss a Car Payment?
Illness, losing your job, or having another expensive emergency come up can all result in lacking the funds needed to make your car payment. Before you panic and assume that your car will be repossessed, know that you have some options available that can help you keep your car without damaging your credit, depending on your payment history and credit score. Before Your First Missed Payment The worst thing you can do is ignore your problem. No matter what, you must call to discuss that matter with your lender. The sooner you call the more options you’ll have. Repossession is the last thing you and your lender want – it’s a lose-lose for you both. So just know up front that your lender wants to help you, so let them. So when you crunch your numbers and realize you won’t be able to make your monthly car payment, call your lender first thing. They may allow you a grace period, called forbearance, that allows you to skip your payment for a few months. This means they’ll usually just extend your loan period and tack on the missed periods at the end. You may also be able to refinance your loan to lower your monthly payment, but you’ll need to have a pretty good credit score to refinance. If You Have Already Missed a Payment If you missed your payment completely, you can expect a call from the lender inquiring as to what happened. Then they’ll probably begin discussing your options, as mentioned above, but are more likely to charge you a late fee. The good news at this point...
Why You Should Avoid Car Title Loans
Car title loans are financial products that allow you to borrow money using your car as collateral. Usually this means that you’re in a crunch and need some money quick, so you hand over the title of your car and a spare set of keys to the lender to use as collateral. You still get to drive the car in the meantime, assuming you’re paying back the loan on time. Which is very difficult to do. Astronomical Interest Rates The truth is most people have a hard time paying back what they borrowed from a title loan because the interest rates are ridiculously high, and the repayment period is too short. Chances are if you didn’t have the few hundred dollars to cover whatever bill you’re trying to with the title loan, then you’re not going to come up with that amount plus the interest to repay the loan in just 30 days. In states where title loans are unregulated, interest rates range from 30 to 36 percent monthly, which comes out to be 360 to 432 percent APR. In practical terms, this means that people who take out the average amount from a title loan, about $950, end up paying $2140 in interest by the time they finally repay the loan. Paying over $2000 to borrow $900 doesn’t sound like such a good deal, does it? Car Repossession Remember, you put your car up in order to get this loan. So if you somehow don’t come into all of that extra cash during your repayment period, the lender can come take your car. And they will come take...
What’s NOT Included in your Credit Score
When you’re preparing for a big purchase, you might start worrying about your credit score and what could bring it down. There are quite a few factors that go into calculating your credit score, but some of the omitted factors may surprise you. Here is what you can expect to be considered when calculating your credit score, and also what’s NOT considered. Your Credit Score There are five main components that make up your credit score. These include: Your current debt, whether it’s from credit cards, auto loans, or student loans. Your payment history and whether you’ve consistently made or missed those payments. What types of credit you utilize. The type of loan will be listed and is important, because some types aren’t actively being repaid, such as student loans. The length of your credit history, because a very high score from someone who hasn’t had a credit card for more than a few months does not reflect their ability to responsibly handle debt. New forms of credit you’ve opened, because recently opening a bunch of credit cards or personal loans is a bad reflection of your financial responsibility if you’re applying for a mortgage or other large loan. What’s NOT Considered Now that you know what factors definitively make up your credit score, here are some factors that do not go into calculating your credit score, and some might surprise you. Your income. Although the lender of a loan will ask what your income is, it is not used to calculate your credit score. Interest rates. Although these are often determined by your...
The Road to Homeownership: Establishing Good Credit
If you’re sick of renting and are ready to put those monthly payments toward your own investment, then purchasing a home of your own may be in your near future. However, it’s not as easy as walking into the bank, applying for a loan, and being handed the keys. Why Credit Matters Usually the purchase of a home requires that you make a down payment equaling a certain percentage of the cost of the home. The amount you are required to put down often depends on several factors, including your credit score. In addition to the down payment, your credit score could affect your interest rate and whether or not you’re approved for a mortgage loan at all. It’s important that your credit is in tip-top shape before you apply for a home loan and begin the process of purchasing your home. Review Your Current Credit Report The first thing you must do is review your credit report and assess your current situation. You are entitled to a free copy of your credit report every year from the three credit bureaus. Look it over thoroughly and make a note of anything that seems out of place. Incorrect information is not uncommon on credit reports, and you don’t want any misreporting to bring your credit down. Fortunately, you can dispute anything you think is incorrect and have it removed, and this will improve your credit score immediately. Ask For the Removal of Small Mistakes While reviewing your credit report, pay special attention to the “adverse accounts” section to see what may be bringing your score down that is within your control. If...
China’s Orwellian Citizen Score System: Is this the Future of Credit Scores in the US?
Did you recently buy a new video game? Did you post a negative political sentiment on social media? Do you have a particularly outspoken friend on Facebook who posts anti-government sentiments? If you live in China and answered “yes” to any or all of the above statements, your credit would’ve been dinged several times. It’s true. China has implemented a new Citizen Score system influenced not just by financial decisions, but lifestyle decisions as well. Using big data obtained from the government and big internet companies, an individual’s Citizen Score is calculated using an algorithm to determine even the most casual of relationships between lifestyle choices and using that data to present or take away opportunities. The scores range from 350-950, with rewards given to those with higher scores. For example, a citizen’s score of 650 would allow the citizen to purchase a car without a down payment. The higher the score, the greater the rewards. Some jobs even require a high citizen’s score. Is Big Brother Watching You? If this sounds like something straight out of a George Orwell book, you’re not too far off. This level of control the Chinese government is trying to establish may seem far-fetched, especially for those in the U.S. However, with the increasing reports of privacy invasion and financial turmoil in the USA, it might not be too long before the credit system in the United States is revamped to include more “comprehensive” criteria in order to better screen loan applicants or those requesting credit. Of course this is all speculation and would represent a huge invasion of privacy. We don’t have...
How to Protect Your Credit During Tax Filing Season
The beginning of every year can be a stressful time for those who are not comfortable with filing their taxes, or who know they owe a significant amount in taxes. Unfortunately, there are criminals who take advantage of this stress and fear by exploiting individuals during tax season to con them into sending them money or personal information. To protect yourself, your credit, and your identity this tax season educate yourself in tactics scammers use and learn how to protect yourself in the event that you are targeted. Common Tax Scam Tactics Scammers will make unsolicited phone calls impersonating an IRS agent demanding that you make a payment. You will know this phone call is fake and not from the IRS if: The caller demands you pay immediately, especially if you haven’t received a bill or any other correspondence in the mail You are not offered a chance to appeal the amount they request They only accept specific payment methods, such as a wire transfer or prepaid debit card You are threatened with arrest, deportation, or losing your license You are asked to provide your debit or credit card numbers over the phone The IRS will never do any of the above things, so even if the caller-ID says “Internal Revenue Service” or something related, be leery of the caller and their intentions. You may also get fraudulent emails claiming to be the IRS demanding payment, so it’s important that you are vigilant about protecting your personal information and know how to react if you are victimized. If you receive a call from a suspected scammer Almost a million people...
Three Credit Card Scams You Should Know About
While you may be working hard to repair your credit, there are people out there working hard to thwart your efforts by stealing your information. And even though security measures are always being improved to protect you against scammers, they are always trying to find ways around the walls. To keep yourself and your money safe, stay in the know about the current scams so you can take measures to protect yourself. Here are three common ones you may not know about. 1. Fraudulent EMV Card Information Requests If you haven’t heard, in 2016 all credit and debit cards are being replaced with cards that have an EMV chip, which adds an extra layer of security to your card. The new cards are slowly being sent out to replace your current cards. Ironically, scammers are taking advantage of the slow-paced release of the new EMV credit cards. They are sending out emails posing as credit card companies notifying individuals that their new credit card is ready, but they must verify their personal information before it is sent. To avoid being a victim of this scam, know that your credit card company and financial institution will never use email as its first method of contact to verify your information. If you are unsure of whether an email from your financial institution or credit card company is legitimate, call the number on the back of your card to find out. 2. Mobile Wallet Thieves With the new chip-embedded cards preventing the unauthorized use of your card in a physical setting, scammers are taking advantage of the widespread adoption of mobile wallets...
How to Make a Family Budget Using the “Envelope System”
Committing to a budget can be difficult as you adopt new habits of tracking and balancing to ensure you stay in control of your money. But at the end of the day, adding and subtracting numbers in a spreadsheet doesn’t give you much accountability for your spending habits. This is where the envelope system can become valuable. The envelope system basically consists of using envelopes and cash to divvy out your spending. Each envelope contains an allotted sum of cash assigned to a specific expense. Once the cash is used up, then you’re prevented from spending more money on that specific expense. Essentially, the envelope system helps you from overspending in certain areas, and it can be a useful tool for tracking and sticking to your family budget. Here are some tips for adopting the envelope system. Determine your actual expenses Use your previous months’ bank statement to paint an accurate picture of how much you spend in each area, like groceries, gas, eating out, etc. Using your total discretionary income, subtract each expense from the total monthly income to make sure you’re living within your means. Be Disciplined Once the cash is in the envelope, that’s it. You don’t’ get any other money for groceries, gas, etc. If you notice you’re running low on gas and out of cash, but still have a week until the next paycheck, find someone to carpool with or take the bus. Over time you’ll learn to consolidate trips to the store or accumulate fuel points to save on gas without going over budget. Obviously, unavoidable expenses may cause you to spend more money than is contained in a specific envelope. However,...
How to Overcome Guilt from Debt or Poor Credit
If you’ve found yourself in a tight place as a result of mismanaged money, you may also find yourself racked with guilt. Hindsight is 20/20, and it can be too easy to beat ourselves up over the poor, irreversible choices we’ve made. But guilt and shame are heavy burdens that can prevent us from moving forward. Here are some ways you can overcome those feelings and get your life back on track. Pinpoint the source First, find out why you feel this way. If you evaluate your situation and can identify the source of your worries, you can then make a plan to fix it. Maybe it’s your spending habits when you go on vacation, maybe it’s being too generous with gifts for others, or maybe it’s the desire to have the newest, shiniest cars and gadgets. Whatever it is, own up to it. You can’t face and fix something if you keep hiding from it. Evaluate your source of worth Guilt and shame make us feel little and vulnerable. It’s easy to associate our character with our behavior, but it’s important to realize your credit score doesn’t measure your worth as a person. Your credit card balance doesn’t tell of your kindness. Make a list of your attributes that are unaffected by your current financial situation and build yourself up. You are a good person regardless of your spending habits. Empower yourself to take control, because you are not your debt. Take action Once you’ve identified the source of your woes and have built up the confidence to get over it, then get going! Nothing will change unless...
How to Celebrate Valentine’s Day on a Budget
When you decide to take control of your finances and stick to a budget, special events like Valentine’s Day might make you nervous. A holiday that is infamous for lavish gifts and pulling out all the stops for the one you love surely doesn’t have a place in your budget, right? If you’ve been one to go all out on Valentine’s Day in the past, it might seem impossible to enjoy it when your finances are restricted. Of course if you’re using Valentine’s Day to propose or do want to go the extra mile for someone special, you can still do so without going into debt. But if you follow these steps and get a little creative, you can still enjoy a romantic Valentine’s Day without breaking the bank and without coming off cheap. Dinner & Movie Variations The cost of movie tickets and concessions in addition to a nice dinner bill can leave a pretty big dent in your bank account at the end of the day. So instead of going with the stereotypical date, switch it up and host your own dinner and a movie. Making your own meal doesn’t have to be difficult to be nice; simply find a recipe for some delicious chicken paired with some pasta, make a simple salad and find a nice, affordable bottle of wine and call it good. Your date will be impressed with your creativity and your cooking skills. And the privacy of your own home might allow for deeper conversation than surrounded by your fellow movie-goers. Road trip Often the best memories are created when we least expect...
5 Top Reasons People Stay in Debt
Accruing debt may seem like a necessary and inevitable part of life, but staying in debt does not have to be a lifelong burden. Unfortunately for many people, once they adopt a lifestyle out of their means by going into debt, they have a hard time getting back out of debt. Here are five of the top reasons that people stay in debt and how to avoid them. 1. Complacency Humans are creatures of habit, and once we get comfortable with something it can be hard to change. We may become so used to the routine of charging our expenses, anxiously awaiting payday, nervously checking our bank account, transferring balances around to make it work, etc. that we can’t imagine managing our finances any other way. To step outside of your comfort zone, make a list of things you regularly purchase with credit and highlight those you could do without. 2. Insecurity When your identity is tied into your possessions, letting go of them or downgrading can be a crisis of self. From expensive cars to regular lavish dinners and exotic vacations, keeping up with appearances can become a way of life that is too difficult for many to shake. The sad truth is that a lifestyle lived out of your means is not sustainable, and can abruptly end in bankruptcy, repossession, and other devastating losses. Take an inventory of your most valued possessions and evaluate why you cherish them so much. If it’s simply because of their monetary worth, perhaps it’s time for some soul-searching to improve your self-confidence and financial situation simultaneously. 3. Stubbornness Getting out of debt...
5 Characteristics of Financially Responsible People
Plenty of people are consistently motivated to make more money, but perhaps a more important goal for all is to actually hang on to that money. While it’s true that your income is a necessary tool for building wealth and eliminating debt, income is only part of the equation. Financial stability is accomplished by saving and managing money, not simply by making more money. Earning a six-figure income won’t help you get out of debt and build wealth if you can’t seem to keep any of your earnings. Regardless of income, there are some common characteristics shared by all who are financially responsible. If you focus on strengthening these traits in yourself, you will find an added measure of financial success regardless of your income or current financial situation. 1. Detail-oriented Financially responsible and secure people know their numbers. They know their account balances almost to the dollar, and track every penny that comes in or goes out. They know their debt, they know their credit score, and they know their budget. They check and balance their accounts daily to ensure nothing is out of line. This is how they avoid making purchases they can’t afford and living within their means. 2. Patient You won’t find the “I want what I want, when I want it” attitude among the financially responsible crowd. These people can walk past an appealing purchase if they don’t have the immediate funds for it. They create a savings plan if they do have a big purchase ahead, but they know that impulsive behavior leads to trouble, usually in the form of debt. Patience and self-control...