Tag: credit

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How To Prevent Your Card Being Canceled By Credit Grantor

Not everyone uses their credit cards on a regular basis. Imagine the shock of needing to use your credit card only to find that it has been canceled by a credit grantor. You hear horror stories of people vacationing overseas and discovering this problem, then spending hours trying to fix it.

Unfortunately, the credit card grantor reserves the “right” to cancel or change the terms and conditions at any time. While they are supposed to notify you, this could be lost in the mail, sent to your email spam folder, or simply overlooked.

There are a few main reasons why your credit card might be canceled by a credit grantor. Let’s review the most common ones to prevent this from happening to you.

Not Using Your Credit Card Enough

A credit card company issues a card to you so that they can make money. Not only will they make money when you pay interest and fees, but they do make a small amount of money on each transaction that you use the card for.

This is the most common reason for a credit card to be canceled.

When you do not use the card at all, or only for emergencies, the credit card company makes no money from having you as a customer. Fortunately, this is a problem that is extremely easy to avoid. Simply use the card for the occasional purchase. Try to use it at least once every few months so your account will remain open and active.

You can always use one of the best credit cards with no annual fee to help you keep your account active without having to worry about coughing up the money for any fees.

New Debt

Have you recently taken on new debt? Bought an expensive car or a new home? These are changes that can quickly raise your debt level, change your credit utilization ratio (how much of your available credit you owe), and affect your credit score.

The credit card company may see this new debt and quickly cancel your card. New debt on a credit card changes your credit utilization. But taking out a large loan may affect you as well. The credit card grantor may determine that you have too much outstanding debt to pay promptly.

Changes in Your Credit Score

Any time that your credit score changes or drops, you are at risk for having your credit card canceled by credit grantor. This is one of the most important reasons to keep regular tabs on your credit score. You can avoid having your card unexpectedly canceled. It’s also good to know in case of identity theft.

They Don’t Need a Reason

As mentioned before, credit card companies have the right to cancel your card, for no reason, at any time. Having a credit card is not actually your “right.” The credit card company gets to decide who they want to extend credit to. While this might be you, it could change at any time.

They are supposed to give you notice, but, might not always do so. Sadly, getting a credit card canceled, for any reason, looks pretty bad on your credit report. You definitely want to try and avoid having this happen if you can.

What You Can Do To Prevent Being Canceled By Credit Grantor

First, make sure that you at least occasionally use your credit card so that the account does not go completely dormant. Second, make sure that you keep an eye on how much you owe. Keep your credit utilization as low as you possibly can. Third, follow your credit report on a regular basis (at least once per year) to ensure everything is accurate.

Your credit is important and should be treated as such. You can prepare yourself for the unexpected by following all of the rules and staying on top of your debt carefully.

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Tips to Raise Your FICO Credit Score

Your FICO credit score is one of the major factors a lender will consider when determining whether or not to approve you for credit. There are many things that go into your FICO score, which means that there are things that you can do to improve it. Careful attention to your FICO score can help you build your credit.

Here are tips that can help build and raise your FICO score

Apply for credit cards

You may be wondering if applying for credit cards can hurt your credit, but, just the opposite is true when you use them responsibly. The same goes for installment loans. Those with no credit will be a higher credit risk than someone who has demonstrated responsibility by making payments regularly and on time.

Make every payment on time

When you make your payments late, this shows up on your credit report. Lenders do not like to see you making a habit of late payments. As your FICO score is computed, 35% of the score is dependent upon you making timely payments for credit cards and loans. Never missing a payment is the best way to get the most from this factor. The longer the history that you have of making payments on time, the better this part of your score will be.

Pay off balances in full each month

While this is difficult for some, especially those who have accumulated large amounts of debt, making the largest payments you can afford is smart. This will help you lower the balances. Once you get your credit cards paid off, try to pay the entire amount that you owe each month. Never make less than the minimum payment required. The lower your overall balance, or credit utilization, the better your FICO score will be.

Communicate with creditors if there are problems

If you fall on hard times financially, contact your creditors before you begin to miss payments. Often they can work out a temporary solution, or negotiate a payment plan with you before your credit is adversely affected. When you are making regular payments, even when you are struggling financially, you can often keep your credit score from dropping too far.

Don’t rush to close credit cards to raise your FICO score

Closing credit card accounts can actually have a negative impact on your FICO score, especially if you have had the credit card for a long time. If you close credit cards that are paid in full, yet you still have others open that you carry a balance on, then you are going to see your credit score drop because your credit utilization will increase. This means that you will be using a higher percentage of your available credit. You are going to be better off keeping cards open when they have a zero balance, particularly if you have a long history with that creditor.

Keep track of your credit utilization

If you have a high credit utilization or a high debt-to-credit ratio, contact your creditors to see if you can have your credit limit raised. This can help improve your ratio and also your FICO score.

Don’t open too many accounts too close together

This is especially important for new credit users. When you are just starting out, one or two cards is plenty. Even if you have well-established credit, opening too many credit cards in too short a time period will have a negative impact on your FICO score.

Make sure your creditors know how to reach you

Always notify your credit card companies if you have an address change. If you miss a bill because they moved, it will not be their fault. You will likely see a change in your FICO score as a result. This is a common mistake, and one that is completely avoidable.

Immediately report if your card is lost or stolen

Reporting a lost or stolen card as soon as you are aware of it is crucial. Most credit card companies will not hold you liable for unauthorized purchases under these circumstances. If you do not promptly report it, you could be held responsible for large purchases. This will also affect your FICO score.

Check your credit report regularly

You should check your credit report at least once a year. Make sure that there are no inaccuracies. Most free credit reports will get information from the three major credit bureaus—TransUnion, Equifax, and Experian. Checking your credit report will not hurt your credit score. It will help you keep tabs on any accounts that you are responsible for. If you notice any inaccuracies, contact those creditors immediately to have the issue resolved.

Your FICO score is important. You should know what it is and make efforts to keep it solid or improve it. Use these tips to keep your credit great!

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How Many Credit Cards is Too Many?

 

When it comes to your credit score, bigger, and more, is better. With the exception of how much debt you have (obviously you want that as small as possible if not gone completely), you always want bigger with your credit line. If you have more credit cards, then your credit limit rises, which means you can have that much more available credit to your name. Although more credit cards is a good thing, not being able to manage them wisely can end up being pretty devastating to your score. With all these pros and cons, how can you decide what the magic number of open and running credit cards is right for you and your situation?

Below are some factors to consider in deciding just how many active credit cards is right for you to have in your wallet at once.

 

Why would I want more available credit?

Credit lenders check to see that you are wise with the amount of credit you already have available and at your disposal, and you want them to see you as responsible as possible. A single credit card, for example, may give you $1000 in available credit, and if you are wise in your credit usage, you keep your usage to below 50%. That means that you only have about $500 dollars of for-the-most-part guilt free usable credit that won’t be too heavily scrutinized by credit lenders.

Now $500 dollars is not so bad in terms of guilt free credit for when you are first starting out, but as time goes by, the expenses that need to be immediately covered get taller and taller, and you may want to stretch out and use the other $500 dollars of available credit that you otherwise leave ignored and unused. Although it may seem that you are just using what it rightfully yours, if you spent $999 of an available $1000 credit limit, guess what that tells your lenders? “I like to spend as much money that isn’t mine as possible!”

Jokes aside, you don’t want to look like you abuse your credit. To avoid going over that sweet spot of 30% to no more than 50% of your credit, expand how much available credit you can use. You can do this by either appealing for a larger credit limit on you already existing credit card, or you can apply for more credit cards. For example, your already standing $1000 limit gets raised to $1500, and you add two more credit cards each offering a $500 limit, and you have $700 in expenses due. Your debt to credit ratio went from 70% of a $1000 limit, to 28% of $2500. By expanding how much credit is available to you, you dropped your ratio all the way from being in the danger zone (70%) safely into the green sweet spot (28%). Lots of numbers flying at you, we know. Just bear with us.

Your available credit works as a pool that you can constantly add to and grow, and if can realistically keep track of every available card that you add you your pool and keep accounts in balance and in check, then more cards can be a great help to you. However, the more cards you add, the more difficulty it becomes in keeping everything straight.

 

 

No one card is accepted everywhere

Keeping one single card is much easier to manage than five or six, to be sure. One single bill, one single payment, and one set of rewards to monitor and keep track of. The disadvantage of having a single card is that your limit can only get so high, and your credit service may not be accepted everywhere. Visa, MasterCard, Amex, and Discover are some of the major services, and as we’re sure you can recall from time spent out and about shopping for goods, not every location accepts the same cards.

Sadly there is no universal currency out there that is accepted by all vendors with absolutely no fees (other than cold hard cash, but who uses coins and paper anymore??), but when you are out to dinner and are rocking a cashless wallet with only an Amex, and they only accept Visa, what are you going to do? We’ve all had this nightmare at one point in time, and the only way to avoid this scenario, besides asking right up front what cards they accept every time you go outside, is to get the most common credit card services.

 

Don’t open cards just for the rewards

A misconception that may be reached here is that you can just keep opening accounts and rack up a whopping pool of available credit that you can dip into at any time the mood strikes you. If this sounds like a great way to live to you, know that every time you open an account, a lender checks your credit, which dings your score. To that end, if your account goes unused for too long, or is deemed to be too risky to keep open by the lender, your account will be closed which also dings your score. So before you think about applying for 40 or so new credit cards so that you can soak up all the rewards, think about your already fragile and delicate credit score and the stress that it will endure as you go about opening new accounts and closing old ones.

 

So how do I know how many cards I should have?

The bottom line is that there really isn’t a set number of cards that blankets everybody’s financial and credit situations. Some individuals can keep track of an endless list of pending payments and billings, and others can’t even keep track of the one credit card they already do own, and even though it is set to “Automatic Bill Pay” online, it still causes them stress. It depends on how well you can keep track of your expenses and bills.

Opening and having access to more credit cards, such as two or three, or even as high as six or seven can have its perks, but if you cannot handle the mental strain that ensues to keep track and balance all of your accounts and not miss or be late for a single payment, then keeping your card count down may be best for you. Same goes for having less cards. One single bill and one set of rewards to keep track of can be freeing and stress-less, but it does limit where you can use your card and what kind of rewards you can have at your disposal.

 

How many can you manage best?

These factors in mind, consider if you can handle having two to three credit cards. Having different cards opens the door to varying rewards, raises your usable credit limit and also protects you from the embarrassing but at some point inevitable “I’m sorry ma’am, but we don’t accept that kind of card here”. Only acquire what you can realistically handle, but if you do decide to get more cards, learning how to balance your accounts and remain on top of the ball is a useful skill to obtain.

 

So as of right now, how many cards and accounts do you think you can honestly manage and manage well?

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You May Be Eligible For A Credit Card Retention Bonus

Earning miles and points from your credit card is fun—especially when the annual fee is waived for the first year. Once that anniversary comes around, however, you may be required to pay an annual fee—which might not be what you planned. Since you have earned tons of points, you don’t want to simply cancel the card. Let’s talk a little bit about your options and what might be available to you.

Consider the Retention Bonus

Many of the bigger credit card companies will offer you a special “retention bonus” on your anniversary date. This can range from a tidy sum of extra bonus points to a free baggage check, to a free night in a hotel, and more. Often the value of the retention bonus is far greater than the cost of the annual fee—so consider this part carefully when you are thinking of canceling the card. It might be well worth it to keep the card. While there are some cards that have pretty hefty annual fees, taking a look at what you get is a wise move. See if it is worth it to keep.

Consider the Credit Impact

Closing a credit card can negatively affect your credit score, so consider this move carefully. Now, this doesn’t mean that you should automatically keep a card with an expensive annual fee just because you don’t want a short-term ding on your credit. But, you should not be opening and closing credit cards on a whim if you want your credit to stay clear and clean.

Take an inventory of all of the cards you have and consider the fees and benefits. Also, consider your history with them and your available credit. Then, and only then, should you determine whether or not to close a card when your annual fee is up. Don’t rush to close a card simply because the fee is due.

Make Your Plea

You may not realize this, but you can actually request that the fee is waived for another year. Keep in mind that if you are a good customer, the credit card company will not want to lose your business. They may agree to waive the fee for another year. Sure, that will put you in the same position next year, but that gives you time.

Ask for a Downgrade

Many credit cards offer no-fee versions of their more expensive cards. The perks are fewer, but you don’t have to close the card and take the hit on your credit score. If you have a good history with the credit card, consider this option. When you can keep the line of credit open for free, and not have a hit on your credit card, this is really a win-win.

Final Thoughts

You will hear about loopholes and how you can exploit the system by getting a retention bonus just before the anniversary and canceling. Alternatively, you can pay the annual fee for a huge retention bonus and then cancel and keep the bonus. But the reality is, many of the best credit cards out there will offer you some sort of incentive to stay.

Whether you get a companion certificate, bonus points, or something else, it is up to you to determine if that is worth it for you to stay. Don’t impulsively cancel a credit card. You may regret it when it hits your credit score. As with any decision related to your credit, be careful and do your homework to figure out what is going to be the best decision for your personal situation. Often you won’t be able to reapply for a card once you cancel, so make sure it’s really what you want to do!

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Why Your Credit Score Might Dip When You Pay off Your Debt

When you start reading the advice of financial advisors, you will discover that most of those experts agree that the first step toward getting out of debt is paying off your credit cards. This will make your budget more flexible when you do not have to make credit card payments each month.

But what they don’t tell you is that your credit score may drop a little as a result. Doesn’t make sense? Well, there are a few reasons why it happens. However, it is not usually a serious problem. Let’s discuss some of the reasons so that you can understand and be prepared if this happens to you.

How Good Your Credit Score Is Matters

If your credit score is already high (over 720), then you probably have nothing to worry about when you pay off your credit. You might see a slight, temporary dip in your credit score, but when you have a solid credit history you have nothing to worry about.

Having an 850 is not necessarily required. There is a range when it comes to “excellent” credit. Generally anything in the mid-700s and above will get you approved for any financing you need.

Why Does A Credit Score Drop?

It might seem strange to have your credit score drop when you show that you can pay off what you owe. But, when you understand the various things that go into figuring a credit score, and you understand the concept of credit utilization, it might make more sense.

For most of the credit bureaus, 30% of your credit score is based on credit utilization. While you should aim to keep this figure low—by owing no more than 30% of what you can borrow, having no credit utilization is not necessarily the best thing.

What Should I Do To Keep My Credit Score High?

For the best credit scores, it is wise to utilize your credit cards regularly. Do so within the appropriate credit utilization recommendations, and pay off your credit card monthly. When you do this, your credit score will stay high. Plus, you will show that you are responsible and creditworthy. You will not suffer by having to pay any interest charges.

Applying for more and more credit is not a good idea though. Keep a small number of cards, and choose them well (i.e., based on terms and conditions, rewards, or whatever factors are most important to you). Monitor your credit report regularly to ensure that it is accurate. Immediately address any problems should there be any.

What’s the Bottom Line?

The bottom line is that, when it comes to good credit, you have plenty of control. Make wise credit decisions. Don’t spend beyond what you can pay off. Make every single payment on time. Don’t have more credit than you need.

This is how you can get the best credit score, or raise a poor credit score most effectively! Don’t worry too much if your score dips slightly when you pay off your card. Simply get back to your good credit habits and you will be fine.

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Will Canceling My Credit Card Hurt My Credit Score?

We’ve all heard the importance of paying close attention to our credit scores. Many of the credit card companies are beginning to catch on to the importance of having consumers keep it in control, and helping them track it—whether on a monthly statement, like Discover, or through the online account, like Chase and US Bank. But the question remains: will canceling my credit card hurt my credit score?

Once you start to pay attention to your credit score and understand just how it is calculated, you should be doing everything you can to keep it in a good range, or make it better. Canceling a credit card is one thing that many people do without realizing that it can have a damaging effect on your credit score.

Here are the answers to some common questions about canceling credit cards and how it might affect your credit score:

Will closing a card I don’t use hurt my credit score?

In general, it won’t hurt you to keep a credit card open. It will have more of an effect on your credit score if you close it, especially when you have had a card for a long time. The length of time that you have had a card is a factor in determining your credit score. That said, you definitely don’t want to close your oldest cards, even when you no longer use them.

Of course, if they have high annual fees, you may want to weigh this decision heavily. Consider using the card if they offer great perks, downgrading to a no-annual-fee version, or making a request to the credit company to waive the fee for a year. They just might consider this, depending on your relationship with them.

Is there such a thing as too much credit?

Some people are under the assumption that you can have too much available credit. This is not really the case. You can open too many cards in too short of a time period, which can hurt your score. You can ring up too many purchases too quickly, which raises your debt level. This can hurt your credit score. But, for the most part, you can’t have too many credit cards that are paid in full.

If you do choose to close a credit card, the credit history will remain on your credit report. If you were a customer in good standing for 10 years, this will show up on your credit report, and it will help your credit score. If you do take a hit to your credit score for closing an older, unused credit card, the ding should be temporary if your credit is solid.

Are there reasons to close a credit card when trying to raise my credit score?

If you have a good history with a credit card, and there is not a huge annual fee, then, no, there is not really any reason to close a credit card. It won’t help your credit score to close it. Keep it, especially if you have had it for a long time, even if you don’t use it.

What happens if the credit issuer closes the account?

While closing a credit card yourself is usually better, a closed account is a closed account. It will show up as “closed by consumer” or “closed by creditor”. Unfortunately, some reading your credit report may assume you had problems.

The best thing to do is try to avoid having creditors close your account. If it does happen though, don’t worry. It doesn’t really make a difference in the long run. You will take a hit to your credit score either way, and you can get your card closed due to inactivity. Each company has different policies so checking with their terms and conditions may be in your best interest.

Should I close my store credit cards?

Store credit cards are the ones most commonly closed by creditors when they are inactive. Store credit cards do have an impact on your credit utilization. Let’s say you owe $500 to a store and you have a $600 credit limit. This is a high credit utilization for this card.

Make sure that your other cards have lower rates of utilization. It would be even better if you can pay something off. Closing store credit cards does have less of an impact on your credit score than closing major bank credit cards. Your credit report will focus on the bigger picture—mortgages, loans, major credit cards, revolving credit lines, etc. when calculating your score.

While it’s better to keep all your big cards and close the store cards, it’s not the end of the world if you can’t. One thing to keep in mind about store cards is that they may be your oldest credit card since they are often easier for people to get. If you have had a store credit card in good standing for 15 or 20 years, then there is really no reason to close it and more good reasons to keep it open.

Final Thoughts

Closing credit cards can have a temporary effect of lowering your credit score. As long as you are not closing your oldest cards and are keeping all of your cards in good standing, there is no reason to close any. Keep track of what you have. Make sure you are not paying any unnecessary annual fees. Understand how your credit score is calculated. You will likely find that you won’t need to close any cards and can keep your credit shining!

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What Effect Do Student Loans Have on Your Credit Score?

should i refinance my student loans

It’s no surprise that the average college student graduates with well over $30,000 in student loan debt. However, too many people fail to realize that not paying their student loans, or not paying them in a timely manner, can seriously hurt their credit. A student loan is just like any other loan. It must be paid back according to the terms and conditions that were agreed upon at the time the loan was given.

Paying a student loan is a great way for college grads to build up credit. A good credit history makes it easy to get a car loan or qualify for a nice place to live. A good credit history can also help students qualify for a credit card.

Making Your Student Loans Work In Favor of Your Credit

Unfortunately, there isn’t a magical solution to this. One of the best things that you can do for your credit is to pay your student loans on time and pay off your student loans as agreed. So, for those who feel frustrated by paying student loans, realize that there is something very positive that can come from having student loans.

Additionally, when you make your student loan payments on time each month, the three major credit bureaus will be notified. You will appear to be a responsible, low-risk borrower. That will open more opportunities for you.

What If You Cannot Make Your Payments?

Defaulting on your loan, or just not paying it, is the least desirable option. Defaulting on a loan has terrible consequences for your credit. A loan default will leave you struggling with your credit for years. Not only will it affect your ability to get loans and credit, but some employers and landlords check credit to see how trustworthy you are. Seeing a defaulted student loan doesn’t leave the best impression.

If you find that you are struggling to make your student loan payments, you should contact the lender before you actually fall behind. If you explain your situation, you might be able to negotiate a smaller payment or even get a temporary deferment. When you try to work with the lender, you may be able to protect your credit, which you definitely will not be able to do if you default on the loan.

What About Interest Rates?

You should realize that when you defer on a loan, the interest continues to accumulate. Hence, you will end up paying more in the long run. But, when you can’t make the full payments, or any payments at all (which is more common than you might think), paying what you can and getting through is important enough. In some cases, it can help justify the deferment.

You’ve spent the last several years carefully attending your classes, completing your projects, and making sure you had a great GPA. You don’t want to disregard the next part of your life—becoming a responsible adult with a good credit score. Make your student loan payments on time each month. Slowly but surely, the amount you owe will go down. Someday it will be paid in full!

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Popular financial advice we tell everybody that’s actually pretty harmful

There are tons of advice givers and wisdom providers out there. Regardless of what topic you seek help and guidance on, there is always someone within arm’s length who is eager to drop some knowledge on you. This surplus of advice is great, considering that years and years ago, you were limited to the advice of your grandmother and maybe the milkman who was for some reason very involved in your life and decision making processes.

Things haven’t changed much since those days (except the extinction of the milkman), and your grandmother is still going to try and give you advice on everything. A new avenue that has popped up in the last 10 years though is that of the internet forum –a global community of bloggers and self-proclaimed wisdom mongers. The advice these individuals put out isn’t always bad, in fact some can be pretty fantastic, but any advice you hear or receive from anyone should always be taken with a grain of salt –especially advice received from a stranger online that doesn’t know all the details of your personal life.

An article was posted onto a great PF website not too long ago by the very talented blogger Mary Parisi entitled “11 People On The ‘Good Money Advice’ That Turned Out To Be Bullsh*t”. In this blog post, Parisi writes about some of the most common nuggets of advice that are given to young folk about how to set themselves up financially, and the advice is given to them was handed out with good intent but more often than not –it lacked in execution.

Here are some of the most popular pieces of personal finance advice and why they are not as helpful as they were intended to be.

 

“Buy everything in bulk!”

We’ve all bought into the rumor that if you buy everything that is available on a shelf in a store in bulk, that it will end up saving you money. Sounds about right when you think about it, huh? You use paper towels all the time, so why don’t you just buy a bigger pack and decrease the amount of times you have to run back to the store to get more? Brilliant advice –but what about things you have to buy that don’t have a shelf life of longer than a week?

When you buy food in bulk, it makes sense to buy A LOT only if you are trying to feed an entire family for longer than a weekend, but what about if it’s just you and your S.O., or just you and your cat (which can also count as your S.O.)?

A lot of the advice that is thrown our way by wisdom givers is often not adapted to fit different situations, and when you are just starting out fresh with your own personal finances, how are you supposed to know how to make what works best for you as compared to your grandmother’s situation? She was trying to feed and stock up for a family of like, 12, and you are just trying to feed and stock up for yourself.

Buying in bulk when it’s just you? Consider passing when it comes to perishables. It’l save you from wasting money on items that spoil before you get to use them, which happens faster than you think.

 

“Get a job with a big paycheck and benefits as soon as possible.”

A conversation about possible futures between you and an older advice-giver might go along the lines of “Just get a job with a paycheck and benefits. As long as you have those two things for yourself, you’ll be happy. You can get by by making your real passions into hobbies for the weekends.” They probably shared that message with you a little less bluntly, but it goes something like that.

Yes, a PHAT paycheck (as in, Pretty Hot And Tempting) is something that is amazing and usually unignorable, but if it means that you have to dive into mind-numbing and soul-killing labor that you don’t care about all day every day, then is that paycheck worth it?

Benefits are also great, but not an end-all when it comes to job options. Sometimes the pay might be so high for a job that doesn’t offer benefits, that you can pick up the insurance to cover the benefits yourself. Is it as easy as picking up a job with a tall paycheck and benefits already included? No, I’ll be honest. But don’t waste your time on a career that you are going to hate. Better to take a gig doing what you at least mildly enjoy that compensates less than a gig that you abhor but still funds you. At least, don’t stay there for too long or you’ll get stuck.

 

“Always put at least 1/3 of your paychecks into savings.”

Parisi brought up a great point on this one. She interviewed a lot of young people for the piece who were just getting started on managing their own personal finances and the horrible advice that they blindly were given, and this one in particular is a really common one.

This was a response from reader “Meagan”, and she said that she was told to put one-third (1/3) of whatever she earned and put it directly into her savings account. Good advice as it stands right? It makes since, especially if you are saving for a big purchase or number goal that you want to get to. But what about the people that don’t make that much, and one-third is actually a pretty huge chunk of their income?

When you first started working, chances are that you didn’t hit the ground running with a salary of six figures. If you did, I don’t think we can be friends, but I’m putting my money on the thought that you didn’t. When you are pulling down minimum wage earnings on every pay cycle, one-third is a hefty portion, and that doesn’t leave you with much fun money –if at all. The remaining two-thirds goes straight to necessities and leaves little room to treat yo’self (I’m a firm believer in treating oneself every now and then).

Responder “Morgan” wrote about how after she continued to deposit her one-third away, she was living a really “low quality life”, and overall, things pretty much sucked as far as fun. She decided to alter that rule of one-thirds (or whatever fractions you want to apply) and alter it. She wrapped up by saying “Sometimes you’re just not getting paid enough to focus that heavily on savings.”

Do what fits your own situation, people. Personal finance is not a blanket set of rules. The definition is in the title: its personal.

 

“Can’t afford that dream school? Just take out a student loan.”

Unless you have scholarships on top of scholarships and even then also have a massive inheritance that you are soon to be in control of –you might want to stay away from student loans. Unless you have a plan to knock it down and out rather quickly, it can really stall your entire life.

Responder “Sam” talked about his experience on how everyone he talked to about going the student loan route made it seem like it was as normal as putting cheese on a sandwich. What he wasn’t told early on about attending a private university states away from his home is that his education would be about the same if he stood local and attended a university that was much cheaper. Millions of student remorse stories are identical to “Sam’s”. It’s no secret that college is crazy expensive, and masking the monster that is “student loans” is something that can officially sink a huge part of your future down the drain.

 

“Open up a credit card as soon as you can because you can start building good credit!”

When you are young, the first thing you want to do is be seen as older, and when you start earning money, you want a credit card.

Responder “Kayla” wrote about how she was told by everybody that she needed to get to work on her credit score as soon as possible. So as soon as she could, she got a credit card, and of course had no idea how to use it. Everybody was quick to talk and tell her to get one, but no one shared how to wisely use it. Interest, balance carryovers that wound up costing her more every month, knowing usable credit ratios… she had no clue how to use it “properly”. And how could she? She was only 18.

I have heard many advice givers sing the praises of the credit card and how everyone needs one as soon as possible. A card can be a huge help, but no, it’s not for everyone, especially for those who don’t know what it can do. When it comes to managing money responsibly, a debit card can be enough, or even just straight cash. A credit card can be a parachute in case of emergencies, but a necessity for an 18 year-old or individual just getting started in the world of personal finance –probably not.

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Are Credit Card Sign Up Bonuses a Scam?

Are Credit Card Sign Up Bonuses a Scam?

Credit card sign up bonuses may sound like a scam sometimes, but they aren’t if you’re smart about managing your credit card spending and bill payment.

Sign up and get $350 cash back! Sign up and get 5000 points! Sign up and pay 0% interest! You’ve seen these claims on everything from the billboard to your junk mail. Every credit card advertisement seems to be selling a card and a deal that’s too good to be true. How can they give away points and money just for registering for the card? Everyone knows that first lesson in economics: there’s no such thing as a free lunch. So, with credit card sign up bonuses, who’s paying?

 

credit card close up-600

It’s a Contract: Follow it and You’ll be Fine

Each of the sign up bonuses comes along with a contract between you and the credit card company. The sign up bonus is an offer that is available to you under specific conditions. The condition may be that you are required to put a certain amount of money on the card within a certain period of time. Or, the great terms may be limited to a certain length of time. These conditions are usually clearly listed and they must be meticulously followed.

For example, the Chase Sapphire Preferred card has a sign-up bonus where you can earn 50,000 bonus points when you spend $4,000 on purchases in the first three months of opening the account. Those points are the equivalent to $625 in travel when you redeem them through Chase Ultimate Rewards. It sounds like a pretty sweet deal, and it certainly is – if you’re planning on charging $4,000 to your credit card the next three months. And, most importantly, it’s a sweet deal if you’re also able to pay off $4,000 from your card by the payment due dates.

What is a credit card?

When considering all the sign up bonuses, it’s important to remember what kind of product you’re signing up for. Credit cards allow you to borrow money from your bank to make purchases that you then pay back later. It’s a convenient tool for purchasing anything from a latte to airfare to Rio. You have a certain period of time to pay back the money, but if you don’t do so in that grace period, you’ll need to pay back the money and a percentage of interest on the amount owed. Banks don’t loan money for free and this interest is big businesses.

In the example above, the sign up bonus is provided if you spend $4,000 in three months. For some people, this amount of money is a normal amount that they charge and pay off in three months. For other people, they need to spend more to meet the $4,000 bonus sign up. If this is more than they usually put on a credit card, it’s also more than they usually pay off of a credit card. Even if they pay off part of the balance, but $1,000 is left and is charged interest. Depending on how long balance remains and therefore how much interest is charged, the interest payment can eliminate any bonus that came with the sign up points. Alternatively, they find out they can’t afford to put $4,000 on the credit card in three months. In this scenario, they avoid paying interest, but they also lose the sign up bonus.

Another potential pitfall is in the zero interest sign-up bonus. The Discover it® credit card charges 0% interest for the first 12 months. This is a sweet deal if you want to make a large purchase, like a laptop or minor home renovation supplies, and pay it off over a few months. You can borrow that money for no interest at all over that first year. However, after that first, glorious year, you will have to pay interest on any remaining balance. Carrying a balance on your card went to being worry-free to whoa-expensive. Also, once the interest kicks in, it’s as a variable annual percent rate (APR), which is connected to your credit score. You can get a great rate if you have great credit. If your credit score isn’t so hot, you could end up on the high end of the APR scale. Any balance left on in Month 13 will be costly.

Sign Up Bonuses are a Scam Only as Much as Credit Cards are a Scam

The sign up bonus is no more a scam than credit cards themselves are a scam. Credit cards are an extremely expensive way to borrow money. They are very useful when used wisely and with prudence. However, as soon as a credit card has a late payment or a balance that collects interest, they are a big money maker for the banks. There is nothing unclear or evil with a credit card or a sign up bonus. They are simply financial agreements between you and the company. So long as the contract is followed, there is no issue. However, the sign up bonuses can require balances that some consumers cannot pay off, and so will accrue interest. However, it’s the responsibility of each consumer to decide if they can meet with conditions to receive the perks without any downside. The contract is clear, but it’s up to you the consumer to keep up their end. The credit card company stands to make a lot of money if you don’t.

Conclusion

Credit card sign up bonuses are not a scam. They are a marketing tool with clear terms and conditions. Some may be built on setting people up to hold a balance on their card, but the decision to sign up and accept the financial conditions is up to the consumer. Companies provide clear statements about the bonus conditions and timelines. If you can use a credit card with clever caution, you can save money and even make money with these bonuses. However, you have to remember that there’s no such thing as free lunch. If you’re not careful about paying off your credit card and remembering the changes in your card conditions, you will pay for your free lunch with your card balance interest.

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How to Dispute Inaccurate Information on My Credit Report

How To Dispute Inaccurate Information on My Credit Report

How to Dispute Inaccurate Information on My Credit Report?

You’ve got your eye on a new credit card with great rewards and a sweet sign-up bonus. You completed the application, and you know that it’s just a formality because you have good credit and there will be no problem getting that new card. But then, you hear back from the credit card company and they tell you that your application was rejected. Impossible! Or perhaps your application is accepted, but your borrowing terms are terrible and not at all what you were expecting. Something is wrong, and the problem is likely with your credit report.

Who Has Your Credit Information?

In the United States, there are three national consumer  reporting companies: Equifax, Experian and TransUnion. These companies compile all the information available about your personal credit history. This information can be public information such as liens and bankruptcies, to information provided (or furnished in industry terms) by creditors about loan repayment or current available credit, to debt collector actions. These reports are continuously updated with all available information on your credit.

What Kind of Information Can Be Inaccurate?

Any part of your credit report could potentially be inaccurate, and the cause can be anything from human error to identity fraud. You may find a late payment from eight years ago reported though the record should be removed after seven years. An address where you did not live could be listed. A loan that is completely paid off could show up as partially unpaid. A misspelling of your name could appear on your report. The credit reporting companies rely on the information provided by the creditors. The most reliable way to ensure the information on your credit report is accurate is to review it with your own eyes.

How Do I Check My Report?

The Fair Credit Reporting Act requires that each of the three national credit-reporting companies provide you, at your request, with a free copy of your personal credit report every 12 months. You can request them all at the same time, which is helpful for comparing the reports, or request them throughout the year, which is useful for on-going monitoring of your credit. You can order your reports through this handy website: Annual Credit Report. If you would like an additional report within a year, you will have to pay a fee to receive it. However, if your credit card application is rejected or your lending rates are increased based on your credit report, the credit card company is required to provide you with the name and contact information of the credit-reporting agency that provided your report and, as a small consolation, you are entitled to a free credit report from that agency within 60 days of the notification.

Once you receive your report, you should review each detail thoroughly. Check your report for all personal information, ensuring everything from your name to you Social Security number is error free. Confirm that all addresses and accounts listed on your report are familiar and valid. Verify that all the credit information is accurate and current. Recent payments and account closures may not appear as there is a delay in reporting, but details older than 60 to 90 days should be recorded. Finally, check that credit issues listed haven’t passed their expiry. Missed payments should come off your report after seven years and bankruptcies after 10 years. If you do find any inaccurate information, highlight the error or, heaven forbid, errors directly on the report.

What Documents Do I Provide?

If you find errors on your credit report, you will need to back up the correction with evidence. The credit reporting agencies rely on, and defer to, the reporting creditors. In order to remove the error, clear documentation for the correction must be provided. This evidence may be a lease verifying your address, a loan repayment statement indicating amounts paid, or other paperwork, depending on the inaccuracy. When you have this paperwork collected, you will need to write a clear, simple letter outlining the dispute. The letter should include your full name, address, telephone number, report number and the account information, if applicable. In the letter, outline each error found, explain why it is incorrect, provide the evidence, and specify your request to have the error either removed or corrected. If you have the bad luck of having incorrect information on multiple credit reports, write a separate letter and provide separate paperwork for each reporting company. Once your paperwork is complete, make you keep a copy of everything submitted for your own records.

Credit Report Dispute Paperwork

Who Do I Talk To?

Your paperwork should be sent to two parties: the credit reporting agency whose report shows the error and the creditor who provided the incorrect information. When you submit a dispute, both organizations are legally obliged to investigate. To make sure your dispute gets through the door of the organization that can fix it, be sure to send the letter by certified mail. You can now also submit your disputes through the agencies’ websites, but be sure to save online confirmations.

What Happens Next?

Once you submit your dispute, an investigation will take place within 30 days of submission, or up to 45 days if your dispute arises from a review of your free annual report. Once the investigation is complete, the credit reporting company has to notify you of the results within five days. In addition, you will receive a shiny new copy of your credit report from that company.

If the investigation shows that the creditor company provided incorrect information, they are required to update all three credit-reporting companies of the corrected information. The error-free news will continue to spread as, upon your request, the credit reporting company must provide an updated credit report to anyone who requested it in the last six months, and to any employers who requested it in the last two years.

What if the investigation does not find agree with your dispute? The error will remain on your report, but you have the right to add a statement indicating that you dispute the listed information. You can also seek advice from the Consumer Financial Protection Bureau or a lawyer.

Conclusion

Credit reports are continuously being compiled and updated for every person with credit across the country. With that much data, there are bound to be errors. The most important step is to view your credit report first hand and make sure it is error-free. If you do find an error, make a clear, evidence-based case for your dispute and set the record straight.