What if your debt was all in your mind? Before you get your hopes up, I don’t mean that it’s a figment of your imagination, but rather that your outlook on spending could be contributing to the problem and a change in perspective might very well be part of the solution.

In other words, debt isn’t necessarily just about dollars and cents; oftentimes, things like lifestyle and values factor in as well.

That’s what makes the following 5 tips so helpful; they’re geared toward eliminating debt by altering the way you think about money and spending.

1. Change your definition of a necessity

We’ve become so accustomed to many of life’s luxuries that we have forgotten that they are just that, luxuries. And if you’re consistently spending beyond your means, it’s likely that there’s quite a bit of fat to cut. So rank order your monthly expenses based on importance and start adding up costs from top down until what you have equals your monthly after-tax paycheck. Anything below that threshold has to go. This will be your budget. Whenever you wish to buy something not included in this budget moving forward, just think: Will buying this significantly improve my life, and if so, what am I willing to give up to get it?

2. Understand that budgeting is not financial lockdown

While significant spending cuts are certainly in order early on in the budgeting process, there’s no reason why you have to feel like you’re in financial lockdown. Remembering to include some room for fun in your plans increases the likelihood that you’ll stick to your budget for long enough to pay down what you owe since it makes the whole process more tolerable. However, keep in mind that fun does not equal expensive. Get creative with your interests and explore free or low-cost entertainment and recreational options. For example, a well-planned staycation can be an adequate substitute for a pricey vacation.

3. Get a better perspective on everyday spending

If you decide to continue using credit cards after getting your spending under control and embarking down the road to debt freedom, it’s a good idea to designate one card as being for everyday spending and another for revolving debt. This method of segmenting needs is called the Island Approach to credit card use, and its benefits are twofold. First, you will be able to more clearly evaluate spending. Since you should always pay your everyday credit card’s balance in full, the presence of finance charges on your statement will clearly display that you need to cut back. Second, using different cards for different needs allows you to get the best possible terms. For example, you could transfer your current debt to a 0% balance transfer credit card and garner the lowest possible interest rate while at the same time getting the card offering the best rewards for your everyday spending. This would be impossible with a single credit card.

4. Realize that some debt > other debt

Once you have a budget in place and have ceased adding to your tab on a monthly basis, it’s time to work on paying down what you already owe. If you have multiple debts, it’s integral that you avoid treating them all like equals because doing so will cost you money. Paying down the debt with the highest interest first, on the other hand, will save you in interest. That’s not to say that you shouldn’t make payments to other amounts owed, but rather that you should put the lion’s share of your budgeted monthly debt payment toward that with the highest rate and make minimum payments toward the rest. (Keep in mind that if you have multiple balances on a single credit card, only the amount of your payment that is above the minimum will go to the balance with the highest interest rate.) Once you pay down your most expensive debt, apply this strategy to the next most costly balance, and so on, and so on. Depending on how much you owe, this strategic debt payment dispersal could save you hundreds of dollars.

5. Normalize your perception of plastic

You may feel as if you’re completely done with credit card use, and that’s perfectly understandable. Many people simply cannot help feeling that paying with plastic is like using play money, so they don’t trust themselves to do it at all. What’s not understandable is avoiding even having a credit card. Credit cards are the most efficient credit building tools around in large part because they report positive information to the major credit bureaus on a monthly basis as long as they are in good standing, even if you do not make any purchases. That’s why people who don’t trust themselves to spend reasonably with unsecured credit cards can simply open secured cards, which do not allow you to spend beyond your means. Without the omnipresent fear of falling back into a financial hole, you can work on ingraining within yourself the idea that money spent with plastic is no different than cash and should not be spent any more freely.

Ultimately, spending and payments are largely habit based. If you get in the habit of overspending, it’s hard to break. The same, however, can also be said of staying within budget and paying your bills in full every month. Hopefully, the above tips can help you get on a good financial roll.

This article comes from our friends at Card Hub, a leading marketplace for credit card deals and discounted gift cards.

Are you curious as to what is the best way to eliminate credit card debt? Well, you’re not the only one. If you can’t pay-off your monthly liabilities entirely on your own, or send payments well above the minimum required, then debt negotiation (also referred to as debt elimination) is the most effective strategy of debt elimination.

Debt Elimination: “Let the Negotiations Begin”

What is debt elimination? It’s the art of negotiating with your credit card lenders in order to substantially reduce the balance of your debt-load. Reducing your debt-not reducing your interest rate is the best way to eliminate credit card debt!

Debt negotiation is the best way to eliminate credit card debt for the vast majority of people that have an excessive amount of unsecured debt. Debt elimination is the best option for debtors that dug themselves in a hole by accumulating too much unsecured debt.

Debt Elimination Is a Bankruptcy Alternative, Without The Extreme Consequences.

Pros:

• Quickest method of erasing your debt-get rid of your bills in 12-48 months.
• Lowest monthly payment program. Slashes your payment by $100-$600 per month. The more debt you owe, the more your payments are lowered.
• Stops or greatly reduces collection agency harassment.
• Combines your bills into just one payment.
• May reduce your debt-load as much as 80%.
• Relieves stress.

Cons:

• Has a negative impact your credit.
• Your may get sued.
• Due to the recent surge in demand, there are many unethical and /or inexperienced debt settlement companies. A state license to offer debt negotiation services is not required in many states.

Credit Scores Are Not Etched In Stone, They Are Continually Changing

Although debt settlement affects your credit, it’s only temporary. Credit scores are constantly changing. It’s possible to raise your credit score 50 points or more in one month!

Besides, a credible debt negotiating firm should offer you a free, comprehensive, credit repair program that should increase your FICO score.

Debt Collectors May File Lawsuits as a Scare Tactic.

They know that most people don’t know the law. Therefore, many debtors will get scared and pay the debt collectors in full. That’s exactly what the debt collectors want.

Debt collectors don’t want to plead their case in court. It’s too expensive and risky. Think about it. They would have to hire an attorney to represent them. Also, there are court costs, administrative fees, and a substantial amount of labor involved. As you can see, this adds up to thousand of dollars. Consequently, it makes no sense to spend $5,000 to sue someone for an unpaid debt of $4,000!

Even if the debt collector wins the case there’s no guarantee that the debtor has the ability, or the desire to pay. In addition, there’s no guarantee that they will win the lawsuit if the debtor can prove that the debt collector violated federal or state law, the judge may throw the case out of court.

So, as a result, many debt collectors would much rather negotiate a settlement or a payment plan before going to court- especially if they know that you have an attorney on your side to consult with.

The last potential negative aspect of debt negotiation is the chance of hiring an unethical or inexperienced company.

In order to dramatically reduce the possibility of choosing the wrong firm, do some homework and check the following:

• The debt settlement company is licensed by a state government agency to extend debt or credit related services.
• There are few or no complaints filed against the firm with state government agencies, the Better Business

Bureau, the Department of Consumers Affairs, the Federal Trade Commission, and your state’s General Attorneys Office. It’s also smart to do a Google search and view the “rip-off report”.

If eliminating debt fast, and lowering your monthly payment is most important to you, then debt negotiation may be the best way to eliminate credit card debt.

Credit reports and credit scores govern our lives, from applying for jobs to trying to get financing for a loan, what your credit report says about you can make a difference. There are rules regarding our credit reports and how items are reported, how often you can check your report, and how to get wrongful items removed. Most of this is governed by the Fair Credit Reporting Act of 1970 or the Fair and Accurate Credit Transactions Act of 2003.

Credit Reporting Agencies

There are three main credit reporting agencies, Equifax, Experian, and TransUnion. When items are reported to your credit, they may be reported to one, two, or all three of these credit reporting agencies. Each company operates independently and all calculate your credit score based on their criteria and the items reported to their agency.

Getting A Credit Report

Once a year you are entitled to a free credit report from each of the reporting agencies. You can contact each agency directly or visit annualcreditreport.com to request your free copy. As a consumer, you are free to check your credit report when ever you wish, but you must pay for it outside of the one free report per year.

In 2003, the Fair and Accurate Transactions Act was passed which established the website annualcreditreport.com to make access to free credit reports more readily available to consumers.

There are some exceptions that allow consumers to check their report for free more then once per year. These exceptions include if a person has had an adverse action against them, has been a victim of identity theft, is on public assistance, or is unemployed but looking for work within 60 days.

Credit Disputes

If you notice a wrongful item on your credit report, you are allowed to dispute that item. The credit agency is required to look into the dispute within 30 days, and the company who reported the item also has 30 days to look into it. If the item is determined to be wrongful, it must be removed from your credit report and the company reporting the item can no longer report that item.

You may also request a copy of your credit report if you have been denied credit or employment based on your credit report. This would be an instance where you are entitled to a free report.

Who Else Can View Your Credit Report

Credit reports are considered private information. Only those with a permissible purpose may view your credit report. Those considered to have a permissible purpose are lenders, collection agencies, and insurers. Some employers are are allowed to view your credit report before offering employment.

It’s a good idea to at least check your credit report once per year with your free annual credit report option. Knowing what is on your report can help you avoid an adverse credit score or alert you to identity theft. Since so much of our lives depend on our credit and credit score, it only makes sense to know what your credit report says about you.

photo credit: me and the sysop

For most people a credit card is a tool for financing what they want to buy. Too many people see a credit card as tool for spending money and getting the things they want. They take their credit card out shopping and buy stuff with it. These purchases add up to a significant debt, one that simply cannot be paid off by the end of the month.

Because of this they let their credit card balance carry over to the next month, where it accrues a very high interest rate. This type of spending represents the complete opposite of what you should be using a credit card for. A credit card should not be seen as a method of finance, but instead it should be seen a specific style of payment. By understanding this simple fact you are well on your way to being frugal with your credit card. Frugal use of a credit card can actually save you money rather than cost you money!

Pay Off Your Balance

In order to successfully make using a credit card a tool for savings, you absolutely must use the card properly. This means using it as tool for payment and not a tool for finance. The number one rule to being frugal with your credit card is to pay off your monthly balance. This means paying off your balance each month, on time, without exception. As soon as your card carries over a balance from month to month- you are screwed. You will lose any potential savings in interest. So pay off your monthly balance.

How do you set yourself up to be able to pay off your balance on time each month? By using your card for a few specific purchases only and by never purchasing something that you will not be able to pay for. Try to think of your card as a payment option. Say you want to buy something for $200.

If you have $200 or are 100% sure you will have $200 by the end of the month, then you can purchase it on your card and pay off the balance at the end of the month. If you want to buy something for $200 but you don’t have that amount or by the end of the month you will only have $150, then do not make the purchase. The process can be made simpler by having a set purchase to make and then pay off each month. A good example of this is your car insurance payment. Place that bill on your card each month because you already have a plan to pay it off.

Don’t just go shopping with your credit card. The temptation to buy things that you do not have the money for is too high and it will ruin your plans for frugality. Once you have created a habit where you always pay off your monthly credit card balance, you will be set up to use your credit card as a money saving tool.

Using A Credit Card As A Money Saving Tool

It is possible to use your credit card as a money saving payment option tool. One more time- this can only be performed if you always pay off your monthly balance. Now, assuming that you do always pay your monthly balance off, you can take advantage of many promotional rates and rewards that credit card companies offer. First you have to choose a card that will help you

save money according to your lifestyle. When choosing a credit card to use as a money saving tool, think of what you want from it. Do you want reward points or airline miles, or if you want cash back options? Don’t worry about the card’s interest rate. Even if it is high you will be paying your card’s balance off each month anyway.

The next step is to find the best sign up bonuses offered by credit card companies. In an effort to grab the attention of new customers, many credit card companies are offering outstanding bonus offers just for signing up. With this type of card you will get a huge amount of airline miles or reward points just for signing up. So, right off the bat you are saving money. As airline miles can depreciate over time you may want to choose a great cash back rewards program. Cash is always useful! If you are getting a rewards program card, take the time to figure just how much you will save in a year by staying with the program. If it is viable then go for it.

You may also want to choose a card that offers you flexibility with your rewards and bonuses. Sometimes card companies offer great rewards but don’t let you use them when and how you want to. Pick one thing that you want to get from your credit card and stick to it. So if you want airline miles, pick a card that offers long range and flexible airline rewards. If you want cash back, then look for a card that offers a cash back percent of over 1.5%. Anything below that will not be worth it. Take the time to figure out how much you will benefit by getting rewards, whether you will save more with airline miles on a trip or whether you can get cash back.

Conclusion

If you are smart about your credit card use then you can truly make credit card companies work for you. You can save money and earn rewards by taking advantage of credit card companies’ bonus offers and promotional deals. All of this requires that you are disciplined with your card. If you are not yet disciplined enough to make sure that you can always pay off your monthly balance, then you need to work on how you can be more frugal with your credit cards. Remember, a credit card is a payment option tool, not a way to finance purchases that you cannot afford to make.

This article was written by personal finance writer Timothy Ng from Sydney, Australia. He is genuinely passionate about helping people compare credit cards and helping them through researching to find the best credit card.

Understanding the cost of using your credit cards requires that you understand how your Annual Percentage Rate (APR) is calculated.  The more you know regarding your personal finances, the harder you will try to stay or become debt free.  The APR is the interest rate charged to you for the privilege of borrowing money.  It’s calculated on a yearly basis.  If you are comparing one credit card to another to determine which one offers the best deal, you can compare each card’s APR to see which one will cost you the most when you borrow money.

photo credit: Qiao-Da-Ye??????

How to Calculate Credit Card APR

On your credit card statement, you’ll see the finance charges shown as a monthly or daily periodic rate as well as the annual percentage rate.    To calculate the APR as a monthly rate, you divide your total annual percentage rate by 12.  If your annual percentage rate is 19%:

Understanding Credit Card APR

If you take the time to figure out how much you’re actually paying to use your credit cards, it’s probably going to encourage you to become more careful with your credit card use.  Responsible credit card use doesn’t cost much (if anything) more than using cash – for people who pay their balances off in full each month during the grace period.  When you start carrying a balance from one month to the next, you pay interest and fees.

Also look for credit cards that do not charge annual fees, or charges a low annual fee in exchange for a very low APR.

When comparing credit cards, always look at the APR to determine which card offers the lowest cost of borrowing.  It’s also a good idea to get a credit card that offers a low APR for both balance transfers and new purchases whenever possible as it’s easier to keep track of your finances when all balances on the credit card receive the same APR.

If you currently have credit cards with balances on them, try to pay more than the minimum monthly payment each month.  The faster you pay off the debt, the less interest you will pay.  In some cases, finance fees and interest cost more than the minimum payment, which means if you are only sending the minimum payment each month (even if you’re sending it before the due date) you could wind up with a balance that is larger the following month!   If possible, consider transferring high interest credit card debt to another credit card with a lower APR, or paying if off with a low interest loan.

I have three kids and parents will understand when I say that along the joys of raising kids come with the many decisions we have to make as parents that may define how they turn out as adults. In this post, I would like to share some tough decisions I have to make. Hope it rings a bell.

Today, Mr Credit Card from www.askmrcreditcard.com is going to take over and write a post about decisions you will inevitably face when you have kids. Hope you enjoy it. And if you are looking for a new credit card, please check out his best credit cards section.

photo credit: Susan NYC

Will you buy a WII or a Nintendo DS For Your Kids – Computer games! That is one of the things every kid is an expert these days. Once my kids are in first grade, they would have been exposed to the world of WII, Playstation, Nintendo DS! When they discover that friends have these games, they keep bugging us to buy them stuff. This initially caused us quite a bit of stress because we did not want them to be glued to their games. But at the same time, we realized that they live in a different era than us and it is important that they know the games that other kids are playing as well.

So we actually bought our kids a WII game. In fact, we were actually innovators in that we were one of the first one to have them. When we first got the WII, they would be so excited over it and in fact got addicted to it for a while. We has to put in a rule where they could only play over the weekends and they actually to earn it through good behavior. This kind of took care of the problem of them wanting to play with it all the time once they understood the rules.

We also got our kids each a Nintendo DSI. The purpose of it was to keep them occupied whenever we drove long distance to the beach or if we were having dinner with other adults and wanted them to be occupied in a restaurant. This has actually worked out well.

Will you make them learn a musical instrument? – We have this view that our kids should at least be exposed to learning a musical instrument (to be a little well rounded). So the three of them have weekly piano lessons. But my eldest son really hated it (even though the teacher said he was talented) and eventually we had to stop sending him to lessons because he just refused to play. Our second and third kid are still taking piano lessons.

I’m really quite torn about this one. It is great that they are exposed to learning a musical instrument. But it cost money and the kids do not expect to be learning this forever. We make them practice every day. But at most, they practice 15 minutes a day. So given their interest and how little they practice a day, they will never be great pianist! So what should I do? My two youngest kid are still OK about going to piano lessons. But are we just wasting our money? Your thoughts?

How serious will you push them in sports? – My kids play soccer and baseball. And they actually love the game. In fact, whenever I ask them to play with me in the evening, they always agree and we have a great time. Very often, they play themselves and enjoy it too. So here is the six million dollar question? How much and how hard should I push them in sports? Many parents do because they feel that it is a ticket to a sports scholarship. But at the same time, I would rather have my kids make the move by being motivated and doing extra training themselves before I push them further. I also feel that sometimes, we as parents push too much on kids in sports because we want them to live our dreams.

When will you buy them a cell phone? – Our eldest son will be in middle school this coming school year. Back where we are, parents (it seems) start giving their kids a cell phone when they start middle school. I suspect part of it is that they want to be able to reach their kids. But I also think that parents give their kids a phone because other kids also have a cell phone. My eldest kid keeps asking me if he could have an iPhone!! Urghh…the peer pressure. At the stage (time to think over it during summer time), we are inclined to get him a cell phone, but probably a cheap basic one.

Would co-sign a credit card for them? – It used to be that a college student could simply just get a student credit card. But with the passing of the CARD Act, they now need a co-signer if they do not have any income. This is actually a good thing since it stops students from racking up credit card debt out of sheer ignorance. But it also makes me think harder about how to teach my kids about money so that when they are old enough to get a credit card or when they move out, they are well equipped to handle all the money problems that are being thrown at them. One of the things that come to my mind is should I get them a prepaid credit card and start teaching them about using a card responsibly and instilling the sense that you only spend what you have?

Will you save up for their college education? – Big decision here. It cost a lot to send your kid to college. At this stage, we won’t be able fully fund their college education. We will be saving up for them. But at the same time, the question lingers : How much to save for them versus how much to set aside for our own retirement. We do not want to leave our kids saddled with lots of debt even before they make a dime. And yet, we have to think about ourselves as well. This situation is still playing out in our minds and I guess we can only provide a true update years later!

So what’s your story with the kids? – To end it all, I would like to invite everyone who has kids to share their experience here.

Most credit card companies offer credit card protection plans.  It’s insurance that’s meant to cover your minimum credit card payment in the event you become disabled and unable to work for a certain period of time.  Many people have credit card protection coverage and don’t even realize they’re paying for it.  Have you fell victim to that?   Let’s do some investigating to find out.

photo credit: -Ant

What is Credit Protection Insurance?

Credit protection is offered by credit card companies, car dealers, banks, stores, and other lenders. The average cost for insurance is around 75 cents to $1 per $100 credit card balance, per month.  So if you’re paying $1 per $100 and are carrying a balance of $1000, you’re paying $10 a month toward credit protection – do that all year and you’re looking at an extra $120 per year.

There are different types of credit protection plans, including involuntary unemployment insurance, which will cover your minimum payments for a certain period of time if you are fired from your job; property insurance which will pay to replace or fix items you bought on credit card that become damaged or stolen; and credit life insurance which will pay off the debt entirely if the borrower dies before it’s paid.

How Credit Protection Works

Most policies feature voluntary enrollment – although a large percentage of people are paying for credit protection plans without realizing it; and members can cancel any time although you may need to deal with a pushy sales person when you try to cancel and they try to keep you as a member.  The policy fee is calculated based on how much you owe on your card.  The typical benefit for people who put in a claim on their policy is the minimum monthly payment, and the credit rating of the individual making the claim on their protection plan is maintained during the disability or unemployment period.

Is Credit Protection Worth the Cost?

Consumer Reports claims that credit insurance sales exceed $6 billion annually.  Is it worth the cost?  Companies offering the protection plans claim that it’s well worth the expense for people who carry large amounts of debt.  Critics of protection plans claim that it’s just another way for credit card companies to make money off consumers, and that the level of protection offered is minimal.

The common issue with credit card protection plans is that it is reportedly difficult to put in a claim and receive benefits from your plan.  The plans are rarely effective for self employed individuals or people who are disabled before they apply – but many people report signing up for protection plans without ever being asked about their employment status or disability status.  These people pay for credit card protection plans that they’re not even eligible to put in a claim for.

Most life insurance policies would offer credit card insurance (take over your minimum payments or even pay off the balance completely depending on the policy and the nature of your illness or injury); along with other benefits which makes them a better choice for insurance.  People with lower incomes rarely have life insurance though, and so the argument is that credit protection plans give everyone the opportunity for insurance.

Are you looking for a credit card with a sweet introductory rate that won’t gouge when the intro period ends? If so, you want to consider the Citi Platinum Select Mastercard. There have been some recent improvements to the card that make it that much more attractive. Take a look below of some of these great features.

Identity Theft

One of the benefits of the Cit card that impress me the most are the Identity Theft protection measures that they have instilled.  Citi safeguards your account and personal information with Citi® Identity Theft Solutions.  It’s always a comfort knowing that you are protected from a number of different potential attacks such as:

• Citi® Photocard
• Virtual Account Numbers for safer online shopping
• Fraud Early Warning alerts
• Retail Purchase Protection and more.

Citi also gives you the option to keep close tabs on your cards activity with their secure online account management.  The best part about that is that it’s free!

The updated bullet points for this card now read:

• 0% Intro APR on balance transfers for 18 months and 0% Intro APR on purchases for 12 months. After that, the APR will be 11.99%-19.99% based upon your creditworthiness. This APR will vary with the market based on the Prime Rate*
• Extra Cash from Citi: enjoy discounts on gift cards, travel, merchandise and more
• Citi® Identity Theft Solutions
• Secure, free online account management
• No annual fee*

Although there have been some drastic changes in the credit card realm, there are still several good offers available to card holders.   Recently, Citibank just released an update to their Citi® Diamond Preferred® Rewards Card and the Citi CashReturns® Card.  If you’re looking a good credit card that is offering 0% on Purchases and 0% on balance transfers, then you need to take a look at these latest two offers.

photo credit: TheTruthAbout…

The Citi® Diamond Preferred® Rewards Card

• 0% APR for 12 Months

• 0% Intro APR on Purchases and Balance Transfers for 12 months. After that, the APR will be 9.99%-19.99%. This APR will vary with the market based on the Prime Rate. Both the rate and duration of this offer will be based on your creditworthiness*
• Concierge service that caters to your needs 24/7
• Citi® Identity Theft Solutions
• Secure, free online account management
• No annual fee*

The Citi CashReturns® Card- 18 Month 0% Balance Transfer (This Offer is no longer available)

The Ciit Cash Returns Card has been one of the best cards for 0% balance transfers and it just got better.  The card now offers the following:

• 0% APR for up to 18 months on balance transfers (formerly up to 15 months)

Additionally, customers can earn a full 2% cash back on all purchases for the first 6 months and 1% cash back thereafter.

Here’s a recap of the updates:

• 0% APR on Balance Transfers for up to 18 Months*
  
• Earn a Full 2% Cash Back on All Purchases for the First 6 Months and 1% Cash Back Thereafter
• Earn Cash Back on Eligible Cash Advances and Balance Transfers
• Average 5% Cash Back at Over 400 Leading Retailers Through the Citi Bonus Cash Center
• No Annual Fee

This post is featured in Clear Choice Credit Card Carnival

What does it mean to have a good credit score?  How is it calculated? Is it important to you … and … how can you improve your score?  I’m sure by now you’ve seen plenty of commercials sharing ways to get free credit scores.  Is it really that big a deal to find out if you have a good credit score?  Let’s take a look.

photo credit: me and the sysop

Your credit score is important to attaining credit at a reasonable cost.  Loans aren’t free and the amount you pay for them over the life of the loan can be substantially different depending on your credit score.   A good credit score is important if you are planning on getting the best interest rates on most loans and any other types of credit.  A bad credit score can either prevent you from attaining a loan or cost you thousands of dollars over the duration of a loan or mortgage.

What Is Your Credit Score?  How Can You Improve It?

How your score is determined:
FICO stands for Fair Isaac Corporation, a leading monitor of consumer credit.  When most lenders reference your credit score, they are talking about your FICO score.   FICO scores are calculated from five factors:

1. Your payment history (counts for 35% of your score)
2. The amounts you owe (counts for 30% of your score)
3. The length of your credit history (counts for 15% of your score)
4. The types of loans and credit cards you have (counts for 10% of your score)
5. Any new credit (counts for 10% of your score)

Your FICO score can range from 350 to 850.   850 is the best, 350 is the worst.  

Break Points! Good and Bad

A  FICO score that is 720 or higher is considered good.  If your score is 720 or better then you’re most likely to be in good shape for attaining a low interest rate loan.  If your score falls below 720 you could be in for some frustration.  It doesn’t necessarily mean you won’t get the credit, but it may mean you pay a higher interest rate.  As you move down the scale the interest rate continues to go up and at some point may disqualify you completely from the loan you desire.

Almost all mortgage lenders have firm “break points” – If their break point happens to be 700 if your score is 699  that single point could mean half a point on a mortgage loan.  Over the life of the loan that can mean thousands of dollars.

How Can You Raise Your Credit Score?

Some things you can do to improve your score:

• Pay down your credit card debt to Zero dollars.  This can sometimes improve your score by as much as 20 points in 60 days.
• Don’t simply cut up credit cards without paying down the debts on the accounts.
• Don’t necessarily close credit card accounts simply because you don’t use them or need them anymore.  Having multiple credit cards can actually help you;  it’s better to have four cards at 20-30% capacity than one card that’s maxed out.
• Get a copy of your credit report and look for errors.  Check for: 1) accounts that aren’t yours,  2) “late” payments that you really paid on time, and 3) old debts that shouldn’t be on your report today.  After seven years negatives are supposed to be taken off your credit report.  After ten years bankruptcies are supposed to be removed.

Rapid Re-scoring.  What is it?

“Rapid Re-scoring” is a tool provided by various companies to update and correct your credit score.  The general population cannot access “rapid re-scoring” companies directly, rather they must go through their mortgage professionals, and only if they are in the market for a mortgage loan. These services are only extended to mortgage lenders and brokers.  But, if you’re applying for a mortgage, you may want to ask your lender if they are a customer of a rapid re-scoring service.  You could have your credit score re-scored in about 72 hours, and if you’ve recently improved your credit situation, re-scoring could save you big money over the life of a mortgage loan.  Re-scoring will typically cost you about $50 per credit account that needs to be scored.  Don’t look for miracles.  Consider the situation and don’t fall prey to scams.

I think the Cubs ought to spend the fifty bucks and try some rapid  re-scoring.  Nah, … I already said don’t look for miracles.

Where to Get Your Credit Score

If you want a more complete look at your credit score, you will have to pay for it. The major credit bureaus offer packages that include credit scores and credit reports from all of the bureaus. This can cost between $40 and $70, depending on which products you purchase. You can, however, usually get just a score from one of the bureaus for between $7.95 and $10.95. You can also go to MyFICO.com and purchase your score. MyFICO offers the score from Fair Isaac Co. Most lenders use a formula based on the FICO score to create their own scores.

Other paid services include CreditReport.com or Equifax Score Power.  These companies will give you a free trial initially, but then want to sin up to a monthly subscription.  You can must get your score and cancel the service.  Just don’t do it too often and familiarize yourself with the credit score scale.

PB.