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Some Common Lies about Credit Cards

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It is hard to determine what is true and what lies about credit cards are. The truth is, it all depends on your credit.

Lies about Credit Cards

Understanding the FICO Score

To understand if there are lies about credit cards concerning your cards, you first have to understand how the FICO score works with credit. Five categories are important to the FICO score:

  • Payment History 35%
  • Amount Owed 30%
  • Length of History 15%
  • Credit Mix 10%
  • Credit Mix 10%

[Read: How to Avoid Credit Card Fraud]

Now if you do not have a long history of credit (15%) and it is a poor payment history (35%) then you are in trouble. If your payment history is good, you are in good shape. That doesn’t necessarily get you what you want, though.  You could be new to the credit world with low balances on a credit card, paid on it for six months, was able to get a small loan, kept payments up on that. You have been at your job for a year and a half and just got your own place eight months ago. Everything is looking good. Now you need a newer car. The one you’ve been driving since high school is about to die. According to your FICO score, things are looking great:

  • Payment History: Payments on time
  • Amount Owed: Slightly higher but still good
  • Length of History: It was good enough to get that 1st loan
  • Credit Mix: Credit card and loan
  • Credit Mix: Fairly new credit

This is where your FICO score ends and the rest of your information begins. A lender is going to consider things like:

  • Your age
  • Your Income
  • The years at your Job
  • The years at your residence
  • The manner of credit you are requesting
  • The amount of credit you are requesting

A FICO score is a three-digit number that represents who you are, financially and you got there through credit, including credit cards. So let us clear up some of the lies about credit cards.

Applications and Lies about Credit Cards

The truth of the matter is this: Multiple applications will hurt your score if you are denied by one credit card and you try another and another, and so on. Unless you have flawless credit, it will hurt you at the rate of 10% per application because it is considered a hard inquiry to your credit score.  The lies about credit cards are that it will stay on your credit for a long time. This is untrue.  If you do not make repeated applications, it usually will drop off your credit record in about two to three months.

Debt-Utilization Ratio and Lies about Credit Cards

The easiest way to explain this debt ratio is:

Total Debt Balance Divided by Total Available Credit Equals Utilization Ratio

Or

$200 ÷ $300  equals    67%

This is an example of a person who has a higher ratio than lenders want to see. Lenders prefer to see a ratio of 30%-35%.  If this person could get the Total Debt Balance down to $100 or less, that would put the ratio at 33% or lower.

If cardholders consistently maximize his debt balance to the available balance and just make the minimum payment thinking everything is okay as long as it is current, he or she has bought into the lies about credit cards on this one. The equation above is what matters to the credit bureaus.

Lies about Credit Cards and Carrying a Balance

You have probably been told somewhere that carrying a balance is bad because you pay unnecessary interest so you should pay it off in full. You have probably also been told that it is good because it helps you build a good payment history. Therefore, you are caught in a catch-22. Lenders want to see a pattern of responsible credit payments. If you spent a bit much then go ahead and make a few payments, but make them for more than the minimum. If you want to pay that balance off, wait until your grace period is almost up. The credit card company will report that you paid and you still will not have to pay interest. That is a win-win situation.

Lies about Credit Cards and Closing Accounts

This is one of the biggest lies about credit cards out there. If you close an account, by either you or the extender of the card, it reduces your available credit. The reason I say the extender of the card is that sometimes when a card is dormant, the extender will close the account for non-activity. All available credit is useful on your credit report.

Checking Your Credit Scores and Lies about Credit Cards

Please, please, please, don’t fall for this, if any, lies about credit cards. You need to check your credit reports. The easiest way to access your reports is to go to AnnualCreditReport.org. You can check once per year. There, you can gain access to all three (Equifax, Experian, TransUnion) credit reports. You will be able to download or print them off and look them over for errors. If you find any, you can challenge them. This is an important step in your financial history. You need a report that reflects correct information, without errors. Sometimes things are put on your credit report that don’t belong to you or are no longer supposed to be there. After seven years, most credit (good and bad) should come off, unless it is ongoing. Some things, like certain bankruptcies, can affect your credit for up to 10 years.

[Read: Sneaky Credit Card Fees: They Are Out There]

If you are unsure about something you heard about credit cards, don’t just believe it. Search it out or ask someone. We need to shed light on the lies about credit cards.

A Credit Card Lifestyle

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Many people, especially those with little to no credit, think that this may be the best way to establish and build credit. Use the credit card for simply everything, and you have a great credit score in no time, right?

Credit Card

[Read: Smart Credit Habits Worth Starting]

It doesn’t work quite that easily. Due to the way that banks and other credit businesses calculate your score, this is a way of life that requires actually more sacrifice, and discipline than paying your bills by check or in cash. But, in a few cases, this can actually have benefits.

The effect on my credit score

One of the fastest effects of using your credit card for everything is that your quickly rack up thousands of dollars in charges. This can be great, but ONLY if you are able to pay off your credit card in full. Carrying any balance forward will hurt your available credit, plus the extra fees and interest will impact your payment.

Making sure that you have enough credit available for this is the single most important factor in deciding to use this. All of your bills, miscellaneous expenses and ‘fun money’ should total no more than 30% of your credit.  And a lower percentage is even better. This will give you the cushion that is needed just in case of emergency.

If you aren’t quite at this level of credit, continue using your credit card, and paying off your entire balance on time. Eventually, you will be offered a rise in your credit limit, or a different card with more credit. Then with the newly- earned credit, you can move more towards this system, continuing to be aware of the 20 to 30 percent limit you should use of your available credit.

Other benefits

Purchase protection: items bought on a credit card have purchase protection, as well as a method to dispute transactions, and withhold payment. This is great if you buy something that breaks, or is damaged, and in some cases if it is stolen! With any other payment method, you have the money already gone, and a refund is the only solution.

If you have a hobby or business, using your credit card allows a very easy look at how much you are spending on each section of your life. If you rarely use cash or debit, you can see exactly where your money is going, and make any needed adjustments to your budget to make sure these expenses are covered.

With the rise of petty theft, not having cash is an advantage. Keeping small bills and change for the small necessities, and no more. But, this also requires that you have a way to protect your card, and are aware of the ways that credit card number theft is done.

For those that simply dislike paying bills, having auto-pay on as many bills as possible, and only having the one credit card bill to pay can be a real advantage. However, please remember that you cannot use one credit card to pay off the balance of another card. This has been a rule for years, and is a sensible one to avoid creating a cycle where the bills are out of control.

Before making the change

Look closely at your budget

Using your credit card for every expense is a great way to find hidden expenses, but also requires a mental shift. Just because you are using credit doesn’t mean that the bill won’t be here soon, and additional items on the card will affect your ability to pay the balance, which will affect your credit rating.

Look at the rewards

First, this is less benefit unless your credit card gives you rewards that you actually will use. If you are terrified of flying, earning thousands of miles in free airfare (that can only be used for travel) is not very useful for you personally. This should have been at least a minor consideration when you applied for the card in the first place, but if you have a card that offers rewards you don’t want, you may want to re-think using credit for everything until you can upgrade or switch cards.

Credit Card

One card only

This plan works if you only have one credit card, and use only that one. Look at where you go, and what your plans are: this will help you determine which card will be accepted at all of the places that you are likely to go.

Additional fees

This is something to be well aware of: some places pass along the credit card processing fee that their bank charges them. On top of this, some cards have a fee for each use, or a fee if the credit card purchase is under a certain dollar amount. For these, it may be best to use your checking account for these bills.

[Read: Secured Credit Cards: Your First Choice?]

Avoid the debit card

This will not help your credit: instead, it will take the money (and any fees) out of your bank accounts, leaving the possibility of running cash-short when it comes time to pay the bills.

What You Need To Know About Your Credit Limit

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So you just got your credit card, upon receiving this credit card you find out it has a credit limit. Bummer. You were looking forward to doing some shopping and now you have a credit limit. That’s kind of a killjoy. Isn’t the point of having a credit card to purchase items you normally couldn’t? Well, yes, essentially it is. Well nevertheless there are some things you may want to make yourself aware of upon finding this piece of information out. Although it should be noted that this could potentially be a good thing, keeping our spending in check so iu do not end up in debt. But what if you did want to make a purchase larger than your assigned credit limit? What then? Well there’s always options. You just have to make yourself aware of them is all.

Credit Limit

[Read: It’s Time to Dump Your Credit Card]

What Is There To Know About My Credit Limit?

1. You Get A Choice.

Yes that’s right. You get to choose if you want your purchases go over your credit limit. This is a good and bad thing. So yes, you can go out and do some shopping, you just have to call your credit issuer and tell them you’d like your purchases to go over the limit. That’s it. Although this may not be the wisest decision ever made it can be good if you really need it. Worries aside, happy spending!

2. You Can Not Be Charged More.

You can not ever be charged more than your purchase that goes over the credit limit. Isn’t that a relief! So say you Find a cute pair of shoes for your child. You buy them at thirty dollars, well it goes over the credit limit. Now you have a thirty dollar purchase that went over, that’s all your allowed to be charged over. No interest no nothing, just the thirty dollars.

3. Credit Score.

You could have guessed this one. Yes this will affect your credit score. If your credit limit is increased this means you are being a phenomenal spender, great with your finances. Your credit score will go up because you are showing you are being a responsible spender. So the lesson here is if your good with your finances you will get rewarded. Be patient you get get to spend more money than what’s on the card eventually. You just have to work your way up there.

4. Your Credit Limit Is Based On A Number Of Things.

So as you can guess what your credit limit amounts to is based on a couple things.

  • Credit history.
  • Credit score.

So naturally if your credit score is low so will your credit limit. But as we discussed above you can have that raised. You just have to prove your some ding is different than it used to be. Also if you have other credit cards and have outstanding balances on them, this affects your credit limit as well. So essentially, it’s just best to be good with all the credit cards you have. Make a good reputation and you will receive many rewards for good financial behavior. So patience is the key here to success.

5. Negotiate.

What this means is you don’t ha e to accept the exact credit limit they give you. It doesn’t hurt to ask for a little more than they are offering. It’s not set in stone, just because they are your card issuer does not mean you have to accept what they offer. Take a chance the only thing they can tell you is we can’t do that. Just make sure your offer is reasonable. If they offer you a five hundred dollar credit limit maybe ask for a six hundred dollar limit. You see if you ask for a thousand dollar limit when they offered you a five hundred dollar limit that doesn’t sound reasonable even in the least. If they do grant your offer be sure to be responsible and naturally they will keep extending your credit limit.

[Read: Sneaky Credit Card Fees: They Are Out There]

In Closing

So there you have it. The five things you should know about your credit limit. These aren’t all bad but not all good. There’s good and bad for everything. Having a credit limit is a wonderful thing to improve your credit score, and it’s pretty darn easy. It can be increased over time if you are deemed responsible and when it does that’s when you improve your credit score. There’s really not much to it. Credit cards are handy no matter what the limit. Take it and run with it, spend what you can and when the limit goes up you can spend a little more. Remember you can negotiate a little with the card issuer, you don’t always have to accept their offer. Just be reasonable about it. Most of all, have fun with your new card!

How to Avoid Credit Card Fraud

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Credit card fraud is something that everyone should be aware of. There are several people out there who believe that they are not at risk for such fraud, but the reality is that if you have a credit card, you are at risk. There are also actions that people are doing every day that are putting them at an even higher risk for this type of fraud. Knowing what these actions are can greatly help to lower your chances of becoming a victim. However, keep in mind that no matter what you do, you can still become a victim, which is why it is essential to monitor your statements and credit to pinpoint this fraud before it affects your life severely.

Credit Card Fraud

[Read: Unfair Debt Collection Practices: When Debt Collectors Go Too Far!]

Things you May do to Promote Fraud

Credit card fraud occurs every day. However, the things you do today may be making you the target of fraud tomorrow. Here are just some of the ways in which you could be putting yourself at risk:

Loaning your card to others to use

This seems like a no brainer, however, everyday people are letting their relatives or friends use their card to pick up items from a store or the like. Though it may not be this person that commits the credit card fraud, these people may not be as careful with your card, meaning that other people can gain the information from it to use against you.

Utilizing your credit card at a gas pump

Most people do this, but they are taking a huge risk with doing this. Many hackers and criminals are now putting credit card skimmers onto the gas pumps as a gas station. The problem with this, is that the gas station owner may not even realize that this is on one of their pumps. For every person that scans their card, the skimmer is picking up the information. This allows a criminal to commit credit card fraud on a high number of people at once.

Putting pictures of your card online

For many people the thought of this is absurd. After all, with all the identity theft that takes place, doing this is a sure way to get your information stolen. However, there are those who have done just this and posting their credit card numbers online via a picture on social media. Sometimes, this may have been intentional. Other times, you may post a picture with your credit card in the background, and all it takes is the wrong person to notice this and zoom in on the information.

Losing a credit card

This is most often how credit card fraud occurs. You may have lost the card or had the card information stolen. Those who lose their cards or suspect stolen information need to cancel the card as soon as possible so that thieves cannot rack up charges on these.

Downloading attachments via email from a source that is unknown

If you were to download an attachment from some unknown source, you never know what you have invited into your computer network. Many times criminals are putting in spyware to spy on those who download the link. The spyware may be collecting the credit card information for the hacker to utilize later.

Shopping with a business that has had a data breach

This is an issue that leads to more credit card fraud these days than almost all other methods out there. Data breaches are becoming more common place, but you cannot stop shopping for the things that you may need or want. However, the best way to prevent this is to utilize cash when shopping. Otherwise, you are going to want to ensure that you are keeping a close eye on all that is taking place.

What to do if you Suspect Fraud

If you do suspect that credit card fraud has happened to you, there are several things that you need to do:

  • Contact your credit card company immediately and let them know of the issue
  • Monitor other accounts, including your bank account and the like to ensure that criminals were not able to get information from these accounts as well
  • Let the credit bureaus know if you feel that these criminals could use the information to stela your identity, as the bureaus will put an alert on your file so that new accounts cannot be opened
  • Once you get your new credit card, be sure to put “Ask for ID” on the back where the signature goes, as this can make it harder for someone to steal and use if this on the back
  • Also ensure that you are taking care of information on your computer and protecting this through using protection software

[Read: Your Rights With Credit Reports]

Having to go through a situation in which fraud has occurred is nerve racking. That is why you want to do all that you can do now to prevent this from happening.

Secured Credit Cards: Your First Choice?

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Building credit is a long process, and rebuilding it an even longer one. Making the correct choices to start your credit is a decision that should not be made in a hurry, since this will follow you for the next dozen years, regardless of what you do. There are many more options than there used to be, but a credit card has become a near-necessity. A secured credit card should help you develop good habits, and provide a firm financial basis for future purchases and needs.

secured credit card

[Read: How to Use a Credit Card Wisely]

Normally, these are offered to those with little, no, or bad credit. This type of card is initially expensive, requiring a deposit of funds to activate the card. This will provide the basis for offering you credit, since the money is there to cover any payments you may miss.

The issuing bank will offer you an actual line of credit: and report all your activity -including missed or early payments – to the credit reporting agencies. Since many jobs that require handling money check your credit report, this is something that will help you find a job, or maybe assist in getting you a promotion at work.

Things to watch for with your card

Before applying for a secured credit card, there are several things to look at:

  • Do you have a job? Employment history will be a factor in establishing if you are eligible for a card.
  • Make sure that the card will report to credit agencies; occasionally there will be cards that do not routinely report your credit to the national agencies.
  • Look at how much of your money is going to be available. Some cards only offer access to half the funds you deposit, and a few may offer a temporary amount higher than your deposit.
  • Fees and other charges. Secured credit cards seem to have some of the highest fees, due to the chance that the bank is taking. These may include activation fees, monthly fees on unpaid balances, and late fees, as well as high interest rates.
  • Other requirements. Some of the cards may insist that you pay for insurance in case you do not make your payments, or may ask for minimum purchases per year, or additional deposits if your need to raise your limit.

So now that you have seen what some of the points to watch for with a secured credit card,you are now set to look for a card. Since this will be treated as applying for credit, be aware that your credit report will show, and react, to every application that you turn in. Too many applications will result in a denial for overextending your credit, which will show as a negative on your credit reports.

You may be turned down for a card: the bank offering the card needs to have an assurance that you will be able to pay any bills you may run up. Nerdwallet.com provides  brief look at the differences between unsecured and secured credit cards, and may offer insight into whether this is a good option for you.

Moving from a secured credit card

Things are not all bad. You may earn eligibility for a higher limit with no additional deposit, or  be moved to an unsecured card in the future. Secured credit cards  help prove your credit-worthiness, and this will serve you well in the future.

With all of your activity reported, this will allow you to build the credit you need. But be aware, any negative information will move your score downwards, and this can be tough to recover from.

Habits to practice with your card

Secured credit cards are a great place to learn about how your credit is affected by the daily activities you do. Keeping a close eye on your score will let you see how you look to a bank or an employer. In addition, you will know what will cause your score to go up and down.  This is information that you will need to know, in case you ever need to apply for more credit in the future: like for a car or home loan.

If you find yourself unemployed or injured, using the card is not a good option. It will provide the needed items, but at the cost of higher payments, and a negative effect on your score. This seems to be an obvious fact, but is one of the more-ignored facts of credit in the world today.

[Read: It’s Time to Dump Your Credit Card]

Paying off your balance on time, or making more than the minimum payment – just like with an unsecured car, will reflect well on your secured credit card use and habits. With the additional fees, this will also save you money in the longer term. Being smart with your credit is an excellent habit to develop now for future security.

Secured Credit Cards- The Inside Scoop

Sneaky Credit Card Fees: They Are Out There

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Having a credit card in this day and age is almost a necessity. Not only do many companies require that you have one of these on file, but there are just as many people who utilize these credit cards as a way to get their credit ratings to go higher with proper credit techniques. With this being said, when shopping around for a credit card, you must be aware of the sneaky credit card fees that many companies place into the contract, but most people are not even aware of these.

Sneaky Credit Card Fees

[Read: Getting a Credit Card with No Annual Fees]

These sneaky credit card fees could mean that you are paying more for the credit that you have, while this is not benefitting you at all. What is worse is that these fees may be disguised in a way that makes it nearly impossible to realize that you are being charged for certain aspects of your credit card.

Fees to watch out for

Though there are several fees to watch out for, the following sneaky credit card fees are some of the most offensive fees that have been seen by people:

  • A fee for adding an authorized user that is charged to the account each month
  • Fees for asking for statements, even via the online profile you may have set up
  • A reopening fee for those who may close their account then decide to reopen it
  • Fees for when you make what they consider an alternative payment such as with a debit card or via the phone
  • A onetime processing fee for when you first use the card
  • Annual fees just for being a card holder with that company

In most cases, sneaky credit card fees are usually six fees per one card that most people are not aware that they are even paying.

How to Spot Sneak Fees

The main question that people ask is just how they can spot these fees that credit card companies are adding onto your bill. The sad part is that most of us when we open a bill, we simply look at the payment that is due and write out a check or pay this online. We are not looking at why the payment is what it is. Therefore, that is the first step in combating these fees, you must look at your bill. A few aspects to take notice of on your bill are:

  • Interest that is being charged
  • Additional fees that are being tacked on
  • Many times these fees may appear to be hidden behind other fees, so pay close attention

For those who find these fees, chances are your credit card company is not going to change these fees for you. These are fees that are put into the printed terms and conditions that you agreed to once you used the card. So it is nearly impossible to get these fees waived.

[Read: How Do I Consolidate My Credit Cards?]

Avoiding these Fees

Once you start paying on these sneaky credit card fees, it can be hard to get away from them. So that is why it is important to avoid these fees. The only way to do this is through shopping around for a credit card that is not going to tack on these fees. It can be difficult to find a card that does not charge any fees, so you must look at what is important to you in terms of what types of fees you are going to have to pay. Here are some tips to help you in your search:

  • Ask to read a complete terms and conditions before deciding to go with any company
  • Thoroughly read through all paperwork, as these fees may be listed in tiny print that is hard to see through just skimming the paper
  • Ask questions to customer service, and specifically ask about the fees that they charge. They will have to disclose this information to you.
  • Look at reviews of that credit card company from other people, did people complain about the fees that they charged? Were there fees that seemed to be ridiculous?

If you cannot find a company that you feel comfortable in doing business with, then do not just settle for whatever may come your way. With sneaky credit card fees it can be possible for a person to only pay a small percentage of their credit card with their minimum payment, while the rest goes to the fees that these companies are charging. There are several other card choices out there, thus you do not have to settle for the one that is going to charge you fees for accessing you own bill or adding on your spouse as an authorized user.

[Read: Credit Card Fees and Ways to Avoid Them]

The key is to do your homework, realize that these sneaky credit card fees do exist, and educate yourself so that you are not the person who ends up realizing that they paid several thousand dollars in fees that they did not know they were paying.

Smart Credit Habits Worth Starting

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As the shift to teens workers continues, the landscape of the financial world is having to shift with it. Younger and younger people are eligible for credit, and the major card companies take advantage of this, and send out mass mailings offering cards.  Starting now with smart credit habits will prevent future problems, and also provide you with the security of having money when you need it, as well as having some for fun.

Smart Credit Habits

[Read: Essential Financial Habits That Make Life Easy]

Making habits is something we do daily, but an awareness of what habits we are developing will go a long way to avoiding having bad spending habits that we later need to break. Smart credit habits are simple to learn, and if followed faithfully, will be a benefit when you are ready for major purchases later in life.

Habits to build

These are habits you have likely heard many times. They are vital for your future credit health, and need repeated once more.

  • Monitor your credit. With all of the data breaches happening all over the world, this is a vital part of the smart credit habits to develop.
  • Pay your bills on time.
  • Don’t overspend.
  • Pay yourself first.
  • Educate yourself about credit, and how it is currently calculated.
  • Avoid giving out personal information that may let someone access your credit.

Followed carefully, these will secure your credit information, provide you with a growing emergency fund, and gain you positive entries on your credit reports. After following these basic rules, build on them for the future, as better jobs and more money -as well as more responsibilities and necessities – come into your life. Forbes has an excellent article on the modern need for smart credit habits to be established and continued until retirement age.

Money for the future

  • Credit is now everywhere, and the way we need to think about it is changing. There have been financial breakdowns, and break-ins. Credit may be calculated differently than in the past, and it is worth spending a few minutes on the internet or with your bank to make sure you are aware of what changing laws and local situations are affecting your credit available.
  • Savings can be difficult. An item from a rent-to-own company is expensive, but try this trick. Make double payments! Not only will this cut the amount of interest you are charged (even the rent-to-own companies have interest charges, occasionally more than average), you will gain the satisfaction of having the item paid off,  you can now add that amount you have been paying to a savings account until the term of your contract. You have done ‘without’ this money already, so saving it will be easy. And you have a larger savings account, plus the interest the bank pays, at the end of the contract period.
  • Smart credit habits will allow you to be aware, and  react to anything that seems off on your credit score. Some of the major card companies are partnering with credit agencies, and will allow you to view your score on a monthly basis.  Rather than the old once-a-year that was the standard advice, this is now a wise thing to do. However, be aware that checking it manually may affect your score!
  • If you see something that you do not recognize on your credit score, you need to take immediate steps to stop the problem. Most banks and other institutions have ways to report potential problems, either after the fact, or real-time, such as placing a hold on your charge until they speak to you if it is activity from a location or shop you normally do not go.
  • The hardest habit may be to pay yourself first- this smart credit habit is difficult, especially after not working for a while. Setting aside money for savings, when you know that every penny has one or more demands on it is a real test of self-discipline. But even $20 a month will add up, and allow you to have a bit of savings. Once you get the immediate needs paid down, the amount should be increased-similar to the tip above on rent-to-own companies. This will keep this smart credit habit in play, and allow you to build your emergency fund where you can get to it if needed.

[Read: The “Coffee Addicts” Money Saving Tips]

Once these smart credit habits are established, you will have a good basis  for your future: your credit score will reflect positively on you, and will be a base to build a future on. With a small amount of patience and work now, you will have a workable budget and savings that will help you go forward and live your life with the financial security that  those who do not have these habits will not.

Smart Financial Habits To Start (And Stick With)

Be Careful Of Credit Scams

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Nowadays we hear of credit scams on a regular basis. Victims of these credit scams are often left to try and sort it all out, which could be costly in both time and money. We will look at the more popular credit scams so that people may be better equipped to avoid or identify them.

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Common Credit Scams

Repairing Your Credit

You will find many adverts in newspapers that tell you that they can clear your name of bad credit so that you will no longer be blacklisted. This comes at a fee, of course. So you end up paying the money over in the hopes of a simple solution and these scammers run off with your money never to be seen again. Nobody can alter your credit file and simply wipe away your bad credit record. The only way to do this is to pay off the debt that put you there in the first place. Should you not be able to pay a lump sum to cover your entire debt, you can contact debt rescue companies if there are multiple bad debt scenarios or simply contact the company who you owe the money to and ask to setup a payment plan.

Credit Insurance

Credit and loan companies offer credit insurance to clients to cover their loan in the event that they cannot pay it off as expected. This could be due to unemployment, death, health issues or disabilities.

There exist other companies who will offer clients credit insurance at reduced premiums than what you would typically get from your common loan and credit companies. This is a scam – you pay these premiums over to them and all seems fine but when you suddenly cannot pay off your loan due to unemployment or disability, these companies cannot provide you with the insurance cover that you were promised and you are then stuck with the debt.

To avoid this credit scam it is incredibly important to do your homework on the credit/loan company, and when it comes to signing the credit agreement, it should be optional to include insurance and there should be a policy in place in the event you wish to cancel the insurance.

  • File Segregation

File segregation is a credit scam where companies offer vulnerable and/or desperate people with a bad credit history a new identity so that they can take out a new line of credit. This is done by giving them a new Employee Identification Number and a new Social Security Number. You are then told to use these new numbers when you fill out a credit application. What people fail to realize is that this is actually considered a felony and can land them in a whole lot of trouble with the law.

By declaring bankruptcy you will have trouble obtaining loans for the next 10 years because it will remain on your credit history. However these scammers make it seem entirely impossible for you to get a loan and thus they draw you towards using a new social security number and buying into their scam. You can obtain loans during your bankruptcy period, it may be difficult but different companies have different credit criteria and you may get a loan with a higher interest rate.

  • Identity Theft

Stealing your identity is done by obtaining your social security number and/or credit card details. People then apply for things such as credit cards and loans with your name and details and they may also buy things using this information. People only realize their identity has been stolen when they start getting called by credit and loan companies because ‘they’ have defaulted on their loans. In order to avoid this it is important to protect all of your sensitive information. Some precautions would be to request you credit report yearly, which is free to see that you don’t have some obscure marks against your name. Another thing to do would be to ensure that all paperwork, which contains sensitive information, is shredded or torn in to small pieces before being thrown away. If you identity has been stolen go to the Federal Trade Commission website for further instructions on how to proceed.

  • Lottery or Competition Scams

This credit scam is one I am sure many have experienced. You usually receive a text message or an email saying that you have won the lottery or some competition. You are usually prompted to pay a small fee using your credit card to claim your prize. This is where your credit card details are stolen as well as the money and you never see the supposed money you won. Legitimate competitions and lotteries will never ask you to pay a fee in order to claim your winnings.

Be Prepared And Alert

This list is but a few of the credit scams that exist out there today. One should always be alert and always question things that seem too good to be true. Research things thoroughly before you do anything.

It’s Time to Dump Your Credit Card

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You might have been using the same credit card for years now while thinking you’re getting a great deal the entire time. You don’t pay those junk letters and advertisements for new credit cards any mind because you’ve got it so good with your current provider, right? You might think you’re right, but it might also be time to dump your credit card. There’s most likely some weaknesses in the structure your current card provider has built and you could be missing out where you don’t have to. The credit card industry is running over with competition and offers that exist to try and undercut the next company’s business, so you can believe there’s always a new product or service out there that you could be taking advantage of. Are you sure there’s got to be better rewards or interest rates out there for you? Just dump your credit card this year and start searching for some of the other options out there for you!

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Help over the Phone Is Lacking

Have you ever ran into issues with your bill that you needed to have rectified over the phone only to find no help at all? The customer service department is there to help each customer in some way or another. If you find that your company doesn’t seem to have much concern for your issues, you might want to dump your credit card for a provider that’s more understanding and helpful. Your time and problems are important, and you should get that sense from the customer service department: regardless of what you’re calling about.

It should be very easy to find information about the credit card providers with the best customer service departments.

Those Rewards Aren’t Useful Enough

The value of a good rewards program has been driven up in recent years and the person that’s had the same credit card for ten years is almost certainly not getting the same rewards and perks as the person that just opened up a credit card account this year. Cash back rates have risen astronomically and the lists of perks you could seem to be getting longer and longer. There’s no reason that you should be missing out on upgraded rewards and you might want to dump your credit card to see what’s out there waiting for you.

In some cases, if you’ve already got one type of card with a provider you like, you might be able to switch to another, more valuable credit card in their lineup without incurring any fees or penalties: this is especially true of the clients with strong payment histories.

Your Credit Score Is Even Better Than Before

It’s no big secret that different clients are offered different rates at the time of application depending on their credit score and worthiness. As long as you keep up with your payments and you pay down at least your minimum balances or more regularly, your credit score should improve over time. If this is the case, you’ll most likely get stuck with an interest rate that’s not very fair or reasonable. If you like your credit card provider enough, you could ask them to adjust your interest rate. If they don’t want to budge, you should just dump your credit card account and start with a new provider that’s likely to be more reasonable.

You might want to apply for a new credit card before cancelling your old account. Make sure you search around well for the best rate you can get before going with the first one you find.

Your Life Is Different and You Need More

Maybe you were a less responsible person when you initially applied for your credit card. Perhaps you used to be in the habit of racking up hefty balances only to pay them off little by little, but now you strive to pay your bills off in full before they’re due. If that sounds similar to your situation, you probably could afford to pay a little more in interest to get even better rewards that you can use.

If the opposite is true for you and you’ve got a great rewards program but very high balances, you might want to consider trying to dump your credit card for a lower-interest option that doesn’t bind your finances so heavily.

You’re getting out Of the Country

Most of the credit cards on the market today charge at least three percent for any purchases made outside of the United States. It goes without saying that your balance will add up very quickly if you’re planning a trip out of the country and using your credit card the entire time. If you’ve got an older generation credit card, it might not have the smart chip in it that’s crucial for using an ATM in another country.

If it’s time to dump your credit card, there’s more than enough options out there for you to choose!

Limitations of Free Credit Scores: Know What You’re Getting

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It’s good to know what your credit score is before you go to a lender or make any sort of financing plan for a big purchase. Of course, they’ll run your credit score when you get there but it’s a good idea to know what to expect. If you’re looking to check your credit score there are a number of places you can go to get your credit checked for free, but there are limitations of free credit scores. This is not to say that you shouldn’t use them, but just know that they’ll only be accurate to a certain degree.

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Free Credit Scores

While there are limitations of free credit scores, they are real and can help you up to a certain point. For instance, the credit score that you receive off of such a site like Credit Karma, Quizzle or Credit Sesame will give you a good ballpark estimate that should be similar to your real credit score. This is not to say that the score they give you is fake, but the credit scores that you’ll receive from lenders or from credit card companies is calculated differently and will therefore be slightly different.

Lender’s Credit Scores

Lenders will very often tailor the credit score to fit more directly to the kind of loan that you’re applying for. They will use different scoring models so that the score applies directly to whatever the loan is that you’re applying for. If all the officials are using their own credit scoring models, your credit score is going to vary not only from lender to lender, but it makes a lot of sense that your score might not match up with the score you got online. These tailored credit models are one of the main reasons why the limitations of free credit scores will only allow you to get an estimate of your credit.

Another issue with lenders, is that the lender can choose which credit bureau or combination of bureaus they’re going to get your credit data from. Since the data may be different in each of the three main bureaus they can acquire this data from, it’s nearly impossible to predict what sort of score will be calculated without knowing where exactly they’ll be getting the data on your credit score.

VantageScore VS FICO

While there are limitations of free credit scores, there are some sites that can actually give you a score closer to what a lender will give you since some lenders will calculate your credit using VantageScore instead of FICO (which is the standard for credit scoring.) VantageScore is a tool that is available to the users of Credit Karma. If you use Credit Karma to get your free credit score and then the lender that you go to calculate your credit using VantageScore, the two numbers are going to be a lot closer than if the lender uses FICO.

90% of lenders still use FICO as it has been the standard for so long, but as you may have gathered from reading this, FICO scoring has some major flaws (primarily with inconsistency.) While only 10% of lenders are currently using VantageScore, it may still catch on because of how it calculates credit. Instead of taking information from only one bureau or any possible combination of the three bureaus, VantageScore takes information from all 3 to offer a more accurate and consistent score that looks at the big picture.

To give you an idea of how the scoring is different, let’s take a look at the scoring criteria first for FICO and then for VantageScore.

FICO Scoring Criteria

  • 35% Payment History
  • 30% Amounts Owed
  • 15% Length of Credit History
  • 10% New Credit
  • 10% Types of Credit in Use
  • 32% Payment History
  • 23% Credit Utilization
  • 15% Credit Balances
  • 13% Depth of Credit
  • 10% Recent Credit
  • 7% Available Credit

VantageScore Criteria

When you look at how the two different scoring techniques are used, you can see why there are limitations of free credit scores. These are two of the most standard scoring methods used by lenders, and while neither one of them has been specifically tailored for the kind of loan you want to take out, they’re likely to give you two very different scores. If you and the lender are both using VantageScore, then the score will likely be very similar if not the same, but since FICO is still being used by the majority of lenders, that’s very unlikely to be your situation.

With all of that being said, the best option for free credit scores is most likely going to be if you get your actual FICO score from a site such as Experian, Equifax or TransUnion, which is what lenders are most likely to use. You could also use multiple sites to see the sort of range that your credit score can have so you’ll have a better idea of what your score is likely to be. No matter what, it’s highly unlikely that you’ll be able to determine your exact score until you apply for the specific loan that you’re after, but in the meantime it’s important you understand the limitations of free credit scores.