Illinois Debt Consolidation Quote

See how much you can save with debt consolidation programs in Illinois IL

Credit Cards

Some Common Lies about Credit Cards

by

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.

Essential Financial Habits That Make Life Easy

by

You can live a financially comfortable life if you adopt these essential financial habits. We are going to give you the tools and tell you how to apply them it is just a question of whether you are going to provide the necessary “elbow grease” to put these habits into practice.

Essential Financial Habits

Keys to Financial Independence

There are people who think that you are either born rich or need to win the lottery to enjoy financial freedom but that is not the case. Everyone can enjoy some measure of financial freedom you just need to apply two (2) concepts and you will do fine. First is develop a budget, The only way you can reach your goal of financial freedom is by making a plan and start saving, save anything you can but start saving something. The more you save the less you will need in the future, save a minimum six (6) months living expenses before you do anything else. These savings are vital to give you peace of mind and stay away from debt.

Document All of Your Financial Transactions

You need to figure out where all of your money is going before you can find savings. Get receipts for everything you spend throughout an entire month then write down all of these transactions and why you had to spend money. While reviewing these sums you will realize that that premium coffee you have in the morning costs you a few hundred dollars in the run of a month.  By scrutinizing all of the transactions you will be able to find savings and these savings can be put into your emergency savings fund.

Stick to Your Budget

What is the point of making a budget if you are not going to follow it? Your budget needs to be realistic and have allowances for entertainment and other activities or you will become bitter and eventually break the budget.  You need to account for everything from food, rent/mortgage and transportation. If you have extra money left over at the end of the month then you can save that cash or use it and treat yourself to something you like.

Save Often and Never Stop Saving

When it comes to essential financial habits savings is by far the most important. It does not matter how much money you make it is how much you keep. The more money you can save the more stability you will have in your life. There is a simple strategy you could follow which is “pay yourself first”. This is something that most people don’t do much to their regret. When you pay yourself first those funds are set aside. If you paid everything then whatever was left would be used for savings you would have next to nothing because there is always something to take your money.  Start by saving 10-20% of your regular earnings and when you get a bonus put that in there as well. Look for tax free savings accounts that will help you increase your savings without being ravaged by taxes.

Do Not Touch These Savings

Once you have the minimum of 6 months emergency savings put aside you should only use that for legitimate emergencies and not on shopping excursions. Anything you have beyond your 6 month reserve should be invested in high return investments tht will give you a better bang for your bug. The more money you save the better it will be for you and your family. This does not have to be complicated but some people get apprehensive when you mention the words “budget” and “savings” in the same sentence.

How to Track Your Progress

How do you measure your financial success? When establishing these essential financial habits it helps to have the right perspective or you could find yourself suffering emotionally. There are some people who save too much and lead a miserable life and others overspend and end up in a financial mess. What you need to do is take a balanced approach to this problem by first identifying the primary reason people cannot save money and that is debt.

All of these are enemies of your financial well-being, Individuals who use these debt instruments are not able to save and since these credit facilities charge you interest you are losing money twice. The first time you are losing money is when you spend needlessly and the second is when you have to pay interest which runs contrary to the essential financial habits we have been reviewing. If you stick with the suggestions we have provided and are patient you can lead a comfortable financial life that will meet all of your needs and expectations, remember the famous song by the Beatles “can’t buy me love” so keep that close to your heart, money can’t buy happiness and you will always have a smile on your face.

Secure Your Financial Future by Paying Off Your Credit Cards

by

The number one financial problem that people face is credit card debt. When it is properly managed then it can help us even out our bill payments and pay unexpected bills. The problem is when we start to get behind and the repayments start to spiral out of control. It takes hard work and willingness to change but by creating a plan and making paying off your credit cards a priority you can become debt free and secure your financial future.

Paying Off Your Credit Cards

Signs Your Credit Card Debt Is Dangerous

Credit cards are very profitable for the institutions that offer them and so they make them easy to obtain and easy to increase spending limits even though some people default. It is up to us to use our credit cards properly or risk finding our debt levels at dangerous levels. Here are some signs that you need to take action about your credit card debt.

  • Paying the minimum amount an your credit card accounts
  • Not having any savings
  • Delaying paying bills because you do not have the money to pay them
  • Getting reminder calls about bills or late payments
  • Pay one credit card bill with another credit card

These are signs that your finances are under stress and that you need to take action before your finances are harmed and future options are taken away.

Get All of Your Information and Make a Plan

The best way to ensure your financial future and to start paying off your credit cards is to make a plan. The way to start planning is to gather all the information and yes, you will need to make a budget. A budget is not a punishment for getting into financial but a way to understand where all of your money goes from each paycheck and how much debt you actually owe. These are the building blocks that you can use to make a plan that allows you to reign in unnecessary spending and target debt in a useful way. Information that you will need to make your budget and list of debts includes:

  • Recent pay slips
  • Paid and outstanding bills
  • Credit card statements
  • Loan and mortgage documents
  • Bank statements
  • Overdue notices

When you have all of the documents then you can put together a list of debts and payments and a budget that lists your regular payments so you can see your financial position. This will help you to plan out how you can firstly get your debt under control and secondly how to start paying off your credit cards in a structured way.

The next step is to look at way s that you can increase your income or lower your spending so that you have the maximum amount of money available to reduce your debts. This takes real commitment because every step you take will mean more work or sacrificing something but remember that if you do not take action then you could face financial oblivion. Some simple ways that you can increase income and reduce expenses such as:

  • Doing more overtime at work
  • Taking a second part time job on the weekends
  • Cutting service such as satellite and cable
  • Eliminate morning coffees, snacks and expensive restaurants
  • Only make necessary purchases

The best way to reduce debt quickly is to choose either the smallest debt or the debt with the highest interest rate and then put every spare cent you have into reducing that while paying the minimum on your other debts. This will rapidly reduce the debt and when it is eliminated you will be able to devote that amount to the next debt in line.

One of the best ways to stay motivated is to give yourself a small reward every time you have been successful in making the next step in paying off your credit cards. This reinforces that you have done something good and helps you attack the next debt with renewed enthusiasm.

Other Ways to Help Ease Credit Card Debt

In some cases you might find yourself in a situation that needs stronger action. A good way to start is by contacting your credit card providers and discussing the situation with them. They may be able to give you an extension of time to pay for a short period or to reduce the interest rates that you are being charged.

Consolidation can be a great way to roll all or some of your debt into a single monthly payment. This can be done with a consolidation loan or by taking advantage of a low or no interest credit card balance transfer offer. These will give you the breathing space you need to begin paying off your credit cards.

If things have progressed to a stage where you are not able to obtain more credit and cannot make payments to cover all of your debts then seeing a debt specialist at a debt consolidation company may be helpful. They can negotiate a payment plan with your creditors on your behalf and help you to get your finances back on track.