Credit Strategies Raises Credit Scores

Paying off past due accounts most often does not, in itself, raise your credit score or change the way lenders see your credit report. Outdated information about you, late bills (depending on the creditor, these may be reported anywhere from 30-90 days after the payment is late.), and even uncontrollable events such as a recent change in address can hurt your credit. Financial counseling can be helpful in identifying problems and improving your credit.

The aspects of an individual’s life that are either negatively or positively affected by credit are vast, and having bad credit can evoke a chain reaction of financial hardship. Your credit affects your ability to finance an auto, obtain credit cards, mortgage a home, rent an apartment, to carry insurance, and even to get a job.

Loan or credit denials can be extremely inconvenient, and borrowing with sub-prime credit can be costly. Your FICO score, one aspect of your individual credit, can range from 300-850. In today’s economy, creditors frequently look to loan only to consumers who have credit scores over 700. Those with scores below 680 who do borrow for a home or auto will often spend an extra 1,000 dollars per year or more in order to borrow, as they are given less than prime interest rates. Financial counseling can be beneficial to repair credit before a large debt is incurred to reduce the fee of borrowing, saving the consumer money over the course of the loan.

Today, it is clearer than ever that individuals and business owners need good credit to thrive. Certain actions on your credit report can change the way the lender sees you, and these days the lenders are looking deeply into your credit history. It is important that your credit score and credit report are as optimal as possible. Credit Experts like Mick Bernard are professionals that are experienced in helping to achieve good credit.

The key to understanding the true cost of payday loans is the concept of compound interest. The example given in The Kansas City Star was of a single mother who used a payday loan to borrow $300 for a trip to the dentist. When she couldn’t pay the loan two weeks later, she extended it and paid $50 twice a month for almost four months ($50 x 2 months = $100 a month… x 4 months = $400) and still owed the entire principle amount.  If she paid it off at that point, she would be paying back $700 on a $300 loan. That’s 233%. But she didn’t pay it off then.

The article that used that example was from Accumulating Money.com, and they say that the average loan term is about two-weeks and loans cost on average 470% annual interest (APR). Finance charges normally range from $15 to $30 to borrow $100. For two-week loans, these finance charges result in interest rates from 390% to 780% APR. Shorter term loans can have even higher APRs.

Though the Truth in Lending Act says the cost of payday loans must be disclosed to the consumer, the finance charge in dollars probably seems small and easily paid, and the annual percentage rate or APR may mean little, since most borrowers aren’t planning to be paying for a year.

At the end of 2006, The Center for Responsible Lending reported about 25,000 payday loan outlets in the United States and now there are internet payday lending sites too.

You’re juggling your monthly payments and only paying the minimums
Maybe your hours have been cut back at work, or an additional expense came up that sapped your savings.  If you’re finding that you’re just not able to pay your bills, it may be time to take a look at what else may have changed. Additional fees or interest rates may be costing you more than you can manage.

You don’t know the full extent of your debt
Generally, problems begin to happen, and then build, when we’re not looking.  Especially if you’ve been making automatic payments to your credit cards and on your loans, you may not have been looking at the statements. Interest rates or credit limits may have been changed if you weren’t paying attention, and you could now owe more than you thought.

You’ve almost reached (or exceeded) your credit limit
If you’re running out of “space” on your credit cards, that means that your income isn’t covering your expenses. Once you reach the limit on your card, you’re unlikely to be given more.  Credit card companies look at how close you are to the limit on all of your cards and loans, and if they’re all high, they sense that you soon won’t be able to pay your bills.

You don’t know your credit score
Your credit score is important for securing loans on larger purchases like cars and homes, and if you haven’t been in the market for them, you may not have been paying attention. Changes in the economy mean that credit card companies have been reducing people’s credit limits, which can have a big impact on your credit score. Be sure to check and make sure that the information is correct at least once a year.  If it’s not, you might want to enlist the help of a financial counselor to straighten it out.

Eileen Soherty, the director of the Colorado Gerontological Society says “[senior’s are using credit] for gasoline, they’re using it for food, they’re using it for prescriptions, they’re using it for copayments.”  Doherty also mentioned that in many cases, seniors are using credit cards to help their adult children with expenses.

Aside from the usual problems that come along with credit card debt such as poor credit, those over 55 who are retired often face a special set of problems.  Often, without much income, seniors are often forced to keep up with credit card bills on a very fixed income.

While in a recent poll, 40 percent of American had raked up credit card debt and stated that they were not concerned about how they were going to repay it, experts predict that most seniors are actually quite different than their younger American counterparts.  Kim McGrigg of Money Management International says she believes many seniors actually are very concerned about their money problem, but are too quiet and proud to discuss their issues. You need to make sure that when faced with credit card debt or poor credit, it’s important to seek out expert solutions including consulting with a credit repair specialist.

Doherty of Colorado Gerontological notes that seniors should try to refrain from using plastic to pay for prescriptions and copays in order to avoid debt and bankruptcy.  Instead, she recommends seeking out different insurance, a medical insurance supplement, or a charitable organization to help pay for the costs.  There are also many credit counseling services that are available to seniors.  Seniors should check their local listings for help and remember that they can always contact with Mick Bernard when in need.

“A lot of people think the math is wrong. They don’t realize it will take two decades to pay (the balance) off if they only pay the minimum,” said John Ulzheimer, president of consumer education for Credit.com in an article on Yahoo Finance. “That box was a clear win out of the CARD Act.”

That information may be quite a shock to many people, but it may push people into a greater awareness of their finances and how to manage them. You can get an even clearer financial picture if you combine this information from all of your credit cards.  Also look at the balance, interest rate, due date, and minimum payment for each card.

Once you can see the whole picture, you’ll probably want to start paying your cards down to avoid spending that extra amount on interest. Look at the option of paying off the card with the highest interest first. Can you transfer some of the balance to a card with a lower interest rate?  If so, be sure to look at what the balance transfer fee is and calculate that against the interest you’d be paying. If you come out ahead, go ahead and do it.

You might also want to look at paying off your lowest balance first. It will reduce the number of cards you have to keep track of, make you feel like you’re accomplishing something and allow you to put the amount of that payment toward a higher interest card.

If you find it overwhelming, or think it seems impossible to pay off what you owe, you might want to contact Mick Bernard a fully trained and certified credit expert. Trained counselors know the “loopholes” and hidden secrets to FICO and how to get further than dispute letters will get you. They know how to help you raise your credit score, and settle collections and debts.

As a result of the credit crisis and recovery act initiatives we’re seeing some of the lowest interest rates in history.  Although interest rates have been low at other times but the recent bubble bursts has created a very unique situation.  As the economy naturally began to flatten out, prices across several market sectors in have been lowered a great deal as well.  Borrowing to finance a new business, a home, a new car, or just about anything else is just about as “inexpensive” as ever, but does this make now the perfect time to take out new loans and more debt?

Credit industry experts have warned that although today’s current economic conditions may make it tempting to finance new purchases, it is important to remember to avoid the same mistakes many Americans have made in the past.  Now may be the time to continue to save more, pay down debt, and work on repairing your credit score instead.

Job growth prospects remain slim.  If you haven’t already lost your job, there is still always a possibility that you may lose yours and be left without one for a long period of time, like millions of other Americans.  With your current job, you may be capable of taking advantage of the current market by taking on new loans, but if a job loss arises, you may become behind in payments or even have to default on your loan, badly damaging your credit.  If you’re currently unemployed already, there is a good possibility that taking on new debt will not be worth it.

In addition, obtaining credit can be much harder today.  If your credit score is less than excellent, you may not qualify for a new loan as you would have easily qualified in the past.  Even those who are looking to refinance a home now will generally need at least 20% in equity in the home as well as stable income.

If you do decide to take on a new loan to take advantage of today’s climate, make sure you will be able to maintain good credit.  If you do need to borrow now, but your credit score is leaving you with less than the best interest rates, talk to Mick Bernard, in order to work towards obtaining the best possible rates.