There is often a lot of confusion surrounding credit cards, their usage, their impact on a person's credit score, how long it takes to pay them off, etc... The purpose of this article is to educate on responsible credit card usage and clear the air about some of the rumors surrounding credit cards and and some of the questions about them as well. Thus, read on to find out more information about credit cards and their usage.
Credit cards can be a very convenient tool to use for access to quick cash when the cash may not be readily available or when an emergency arises and one does not have the money to take care of the emergency. However, all too often many consumers become trapped underneath credit card debt, use credit cards to pay for non-necessary items, and get overwhelmed by the amount of credit card debt they are able to rack up in a short time. Smart credit card usage and spending is imperative when obtaining and using credit cards.
So what is smart credit card usage? Smart card usage is when you only limit credit cards to either emergency use only or limit their usage only to when they will be able to be paid off within the next 30 days. Also, when using credit cards, never should you borrow more than 50% of your available credit limit. What this means is that if you have a credit card with a $1,000 maximum limit then you should never use more than $500 of this limit. This will help to maximize a person's credit score. Finally, it is smart to own 2-4 credit cards for good credit scoring as well.
So how long does it take to pay off a credit card? This question has many answers. In the past when you made the minimum only payment each month it would take approximately 33 years to pay off a $3,000 balance. However, because of a lot of heat the credit card companies have taken, minimum payments with most credit card issuers has been increased so that consumers will pay this debt off much sooner. Actually, if you take a look at your monthly credit card statements it should show you on there how long it will take you to pay off your credit card if you make the minimum payment only.
Finally, credit cards play a HUGE role in a person's credit score. Credit cards demonstrate a person's ability to handle credit in a responsible manner better than most other types of debt. Besides making late payments on a debt, credit card utilization plays a close second place for impact on a credit score. Credit history generally is responsible for 35% of a person's credit score while credit utilization accounts for approximately 30% of a person's score.
Therefore, credit cards play an important role in credit and credit scoring. It is way too easy to find yourself in credit card debt with no quick end in sight. Use your credit cards wisely if you must use them, and try to always only borrow a small portion of your available credit limit. A low credit score can have a major impact on a person's life, and thus credit must be utilized effectively and efficiently.
Monday, November 29, 2010
Wednesday, November 10, 2010
Improving Credit Scores - Part II
Here is part II of the improving credit scores article which I posted the other day. As mentioned previously, there are approximately 5 major categories used for determining credit scores. The first two categories were credit history and credit utilization. Now it is time to learn about the 3 smaller categories used in calculating credit scores.
First, we have the length of a person's credit history, which accounts for approximately 15% of a credit score. This means that it is smarter for a person to establish a long history of open credit accounts than to open and close accounts frequently. For example if you had 2 credit cards with a 10 year credit history, it would make a lot of sense to keep these accounts open, even if they are rarely used to continue to grow the history and age of these accounts. If you were to close all of your credit card accounts and open up new accounts this could potentially have a very negative impact on your credit scores.
The next contributing factor is the type of credit used, and this accounts for about 10% of your score. It is much better to have a variety of different accounts than to only have one type of account. Some of the different types of credit are credit card accounts, mortgage accounts, auto loans or installment loans, retail accounts, etc... Thus, a good combination of these accounts would be preferred to maximize your credit rating.
Finally, the last contributing factor to determining a credit score is new credit. This category includes number of new accounts opened, the time and type of accounts opened, recent credit inquiries and how long ago the inquiries were, and a re-establishment of a good payment history after payment problems. Under this category one would not want to have tons of credit inquiries, a lot of new accounts, or a lot of new accounts opened in a short period of time.
Any one of these 3 areas mentioned above can play a great deal into the overall calculation of a credit score. Therefore, it is very important to make sure it is understood how a credit score is calculated in order to have the best opportunity for the best and lowest financing rates available. Hopefully, this will give people a better understanding of the credit scoring system and how these scores are indeed calculated.
First, we have the length of a person's credit history, which accounts for approximately 15% of a credit score. This means that it is smarter for a person to establish a long history of open credit accounts than to open and close accounts frequently. For example if you had 2 credit cards with a 10 year credit history, it would make a lot of sense to keep these accounts open, even if they are rarely used to continue to grow the history and age of these accounts. If you were to close all of your credit card accounts and open up new accounts this could potentially have a very negative impact on your credit scores.
The next contributing factor is the type of credit used, and this accounts for about 10% of your score. It is much better to have a variety of different accounts than to only have one type of account. Some of the different types of credit are credit card accounts, mortgage accounts, auto loans or installment loans, retail accounts, etc... Thus, a good combination of these accounts would be preferred to maximize your credit rating.
Finally, the last contributing factor to determining a credit score is new credit. This category includes number of new accounts opened, the time and type of accounts opened, recent credit inquiries and how long ago the inquiries were, and a re-establishment of a good payment history after payment problems. Under this category one would not want to have tons of credit inquiries, a lot of new accounts, or a lot of new accounts opened in a short period of time.
Any one of these 3 areas mentioned above can play a great deal into the overall calculation of a credit score. Therefore, it is very important to make sure it is understood how a credit score is calculated in order to have the best opportunity for the best and lowest financing rates available. Hopefully, this will give people a better understanding of the credit scoring system and how these scores are indeed calculated.
Tuesday, November 09, 2010
Improving Credit Scores
So have you ever wondered what the make up of credit scores consisted of? How are different factors calculated when figuring credit scores? Is there really a method to the credit scoring madness? How is it that a person with a bankruptcy only 1 year ago can have a 680 credit score, yet someone who pays there bills on time and has never been late only has a 580 credit score? These are all actual questions that I have been asked over the years and I will try to explain what factors are weighed in when the credit bureaus determine a credit score.
There are 5 main categories for determining credit score. Today we will discuss the top two. First, 35% of your credit score is determined by credit history. This is simple enough to understand. Make your payments on time and you will have a good credit history. However, notice this is only 35% of your credit score. Therefore, while this is the main factor for determining your credit score, it is definitely not the only factor.
The second main factor for determining a credit scores is credit utilization. What this means is you need to monitor how much available revolving credit you have in comparison to how much you have available. Revolving credit is basically credit card accounts and home equity line accounts (and the similar). Ideally, you want to keep your balance to limit ratio at 20% or below, and you definitely want to try to keep your limit ratio to below 50%. An example of this would be if you had 3 credit cards, all with $1,000 maximum credit limits, you would want to try and ideally never borrow more than $600 total between the three credit cards (this would keep you at 20% or below). You definitely would not want to borrow more than a total of $1,500 on these credit cards or it will start to negatively impact your credit score.
For more help on improving, repairing, correcting, or increasing your credit score please visit http://www.creditrepairxyz.com/. I will be posting more on the determining factors of your credit score in days to come.
There are 5 main categories for determining credit score. Today we will discuss the top two. First, 35% of your credit score is determined by credit history. This is simple enough to understand. Make your payments on time and you will have a good credit history. However, notice this is only 35% of your credit score. Therefore, while this is the main factor for determining your credit score, it is definitely not the only factor.
The second main factor for determining a credit scores is credit utilization. What this means is you need to monitor how much available revolving credit you have in comparison to how much you have available. Revolving credit is basically credit card accounts and home equity line accounts (and the similar). Ideally, you want to keep your balance to limit ratio at 20% or below, and you definitely want to try to keep your limit ratio to below 50%. An example of this would be if you had 3 credit cards, all with $1,000 maximum credit limits, you would want to try and ideally never borrow more than $600 total between the three credit cards (this would keep you at 20% or below). You definitely would not want to borrow more than a total of $1,500 on these credit cards or it will start to negatively impact your credit score.
For more help on improving, repairing, correcting, or increasing your credit score please visit http://www.creditrepairxyz.com/. I will be posting more on the determining factors of your credit score in days to come.
Monday, November 08, 2010
The "Authorized User"
So does adding a person to another person's credit card account as an authorized user really help to increase the credit score of the person being added as the authorized user? This is a very popular question which has been coming up for years and even more so over the last few years. The reason it has become even more commonly asked over the last few years is because there has been a lot of controversy, discussion and changes made by the credit bureaus in regards to authorized users.
The credit scoring guidelines began to change around September of 2007 for how accounts with authorized users impacted credit. Before this time, adding someone as an authorized user to a credit card account would greatly impact the authorized user's credit score (as long as the credit history and credit usage of the credit card account were excellent). However, new guidelines to credit scoring were created to stop this from happening. Therefore, no longer will adding a person to a credit card account have any impact on the authorized user's credit score.
One of the key reasons for this change is because this credit building tool was being highly abused. There were companies and people out there charging others large sums of money to add them on as an authorized user as a method of quick credit score boosting. This helped people who may not have otherwise qualified for loans, credit cars, home, etc... to now qualify or to qualify for better rates than they were deserving of according to the credit professionals. Thus, this practice has been changed to make adding authorized users as a method of quickly improving credit scores worthless.
So why did credit bureaus permit this in the first place you may be asking yourself? They did this to allow parents to help their children try to establish strong credit when the children were ready to start building credit. Obviously this was very helpful to many. However, due to the abuse which happened from this credit building technique, lenders began to pressure the credit bureaus to change their scoring policies to prevent these inflated credit scores.
Remember if you need help in establishing, rebuilding, fixing, or improving your credit please visit www.CreditRepairXYZ.com. Make it a great week everyone and looking forward to posting again very soon.
The credit scoring guidelines began to change around September of 2007 for how accounts with authorized users impacted credit. Before this time, adding someone as an authorized user to a credit card account would greatly impact the authorized user's credit score (as long as the credit history and credit usage of the credit card account were excellent). However, new guidelines to credit scoring were created to stop this from happening. Therefore, no longer will adding a person to a credit card account have any impact on the authorized user's credit score.
One of the key reasons for this change is because this credit building tool was being highly abused. There were companies and people out there charging others large sums of money to add them on as an authorized user as a method of quick credit score boosting. This helped people who may not have otherwise qualified for loans, credit cars, home, etc... to now qualify or to qualify for better rates than they were deserving of according to the credit professionals. Thus, this practice has been changed to make adding authorized users as a method of quickly improving credit scores worthless.
So why did credit bureaus permit this in the first place you may be asking yourself? They did this to allow parents to help their children try to establish strong credit when the children were ready to start building credit. Obviously this was very helpful to many. However, due to the abuse which happened from this credit building technique, lenders began to pressure the credit bureaus to change their scoring policies to prevent these inflated credit scores.
Remember if you need help in establishing, rebuilding, fixing, or improving your credit please visit www.CreditRepairXYZ.com. Make it a great week everyone and looking forward to posting again very soon.
Saturday, November 06, 2010
Self-Help/Do It Yourself Credit Repair
Well it has been quite some time since my last post and for that I sincerely apologize. However, it is time to get back to the grind and start writing about some very important topics which can provide some genuine help to people out there. Today's topic of interest is going to be about how to repair, improve, and/or correct your credit by yourself without paying some company top dollar to do it for you.
The topic of credit repair has garnered a lot of attention over the years, and rightfully so. Most people would be absolutely amazed to find out how tough, time consuming, and frustrating fixing errors and/or improving your credit scores can be. The importance of excellent credit is of the utmost importance in this day and age as credit is used for the following: obtaining a loan, getting a credit card, buying a home, financing a vehicle, renting a house or apartment, getting a job, obtaining many different types of insurance such as homeowners insurance and automobile insurance, and many, many other things as well.
While the correlation between trying to obtain credit and your credit score may seem like an easy concept to understand, many of you might be asking what does your credit and credit score have to do with getting a job or qualifying for some type of insurance. According to the studies and the "so-called" experts, the worse a person's credit rating is, the higher risk the person is to make an insurance claim be more of a liability to an employer. Therefore, insuring your credit rating, credit scores, and your overall credit are as good as possible will help to provide consumers with more opportunities than those with less than stellar credit.
Please do not get me wrong, I am not agreeing with the way the system works and I think there is way too much emphasis placed upon credit and credit scores, but for now this is the system in place, and all we can do is to be aware of how it works and try to work the system as best as possible. This leads us to our main topic of credit repair and do it yourself credit repair. There are plenty of companies out there who will offer to fix and improve your credit for a hefty price, but how can you avoid paying these high fees to these companies and insure your credit is as good as possible?
You have a few options available to you in order to maximize your credit scores for as cheap as possible.
1. You can try to educate yourself on the industry of credit and credit repair and handle the situation by yourself. This method would be the most cost effective method, but probably the most time consuming and frustrating. There is a great deal of information available on the Internet, but to find everything you need to know in a reasonable amount of time and become an expert in the credit and credit repair industry could prove to be a very daunting task.
2. The most preferred method to self-credit repair or do it yourself credit repair would take a combination of the first option above and also entail the purchase of a low cost do it yourself credit repair/credit improvement program. Most of these programs can be purchased for less than $100 and the knowledge the programs provide, the time the programs can save, and the time-tested methods for improving your credit they use are well worth the cheap cost. Most programs such as the 37 Days to Clean Credit and Credit Repair Magic also include many bonus features such as the exact letters you will want to use to send to the credit agencies and the credit companies, along with step by step instructions, special interviews, and much more. This option will not only arm you with the knowledge, the documentation, and step by step guides to help you now, but also to help you with your credit for your future as well.
3. The third and least preferred method would be to search for a credit repair company to handle the matter for you. There are several problems with this option. First, these companies can be quite costly and can sometimes cost a consumer well over $1,000 for a single person. Second, just because something gets fixed or removed from your credit report does not necessarily mean it will stay that way. Errors contained within a credit file often seem to have this mysterious way of reappearing or resurfacing. In this case, if something was to show back up on your credit a year or two later, you would be back in the same situation you were in to start with. However, if you repaired your credit yourself, you would be armed with the information, documents, and knowledge you need to be able to fix your credit by yourself without having to hire a third party company again.
Therefore, hopefully this information has proved to be quite helpful for many and will help you to get your credit on the right track and make sure it stays there. For more information and product reviews on some of the most popular do it yourself and self help credit repair programs out there visit http://www.CreditRepairXYZ.com
The topic of credit repair has garnered a lot of attention over the years, and rightfully so. Most people would be absolutely amazed to find out how tough, time consuming, and frustrating fixing errors and/or improving your credit scores can be. The importance of excellent credit is of the utmost importance in this day and age as credit is used for the following: obtaining a loan, getting a credit card, buying a home, financing a vehicle, renting a house or apartment, getting a job, obtaining many different types of insurance such as homeowners insurance and automobile insurance, and many, many other things as well.
While the correlation between trying to obtain credit and your credit score may seem like an easy concept to understand, many of you might be asking what does your credit and credit score have to do with getting a job or qualifying for some type of insurance. According to the studies and the "so-called" experts, the worse a person's credit rating is, the higher risk the person is to make an insurance claim be more of a liability to an employer. Therefore, insuring your credit rating, credit scores, and your overall credit are as good as possible will help to provide consumers with more opportunities than those with less than stellar credit.
Please do not get me wrong, I am not agreeing with the way the system works and I think there is way too much emphasis placed upon credit and credit scores, but for now this is the system in place, and all we can do is to be aware of how it works and try to work the system as best as possible. This leads us to our main topic of credit repair and do it yourself credit repair. There are plenty of companies out there who will offer to fix and improve your credit for a hefty price, but how can you avoid paying these high fees to these companies and insure your credit is as good as possible?
You have a few options available to you in order to maximize your credit scores for as cheap as possible.
1. You can try to educate yourself on the industry of credit and credit repair and handle the situation by yourself. This method would be the most cost effective method, but probably the most time consuming and frustrating. There is a great deal of information available on the Internet, but to find everything you need to know in a reasonable amount of time and become an expert in the credit and credit repair industry could prove to be a very daunting task.
2. The most preferred method to self-credit repair or do it yourself credit repair would take a combination of the first option above and also entail the purchase of a low cost do it yourself credit repair/credit improvement program. Most of these programs can be purchased for less than $100 and the knowledge the programs provide, the time the programs can save, and the time-tested methods for improving your credit they use are well worth the cheap cost. Most programs such as the 37 Days to Clean Credit and Credit Repair Magic also include many bonus features such as the exact letters you will want to use to send to the credit agencies and the credit companies, along with step by step instructions, special interviews, and much more. This option will not only arm you with the knowledge, the documentation, and step by step guides to help you now, but also to help you with your credit for your future as well.
3. The third and least preferred method would be to search for a credit repair company to handle the matter for you. There are several problems with this option. First, these companies can be quite costly and can sometimes cost a consumer well over $1,000 for a single person. Second, just because something gets fixed or removed from your credit report does not necessarily mean it will stay that way. Errors contained within a credit file often seem to have this mysterious way of reappearing or resurfacing. In this case, if something was to show back up on your credit a year or two later, you would be back in the same situation you were in to start with. However, if you repaired your credit yourself, you would be armed with the information, documents, and knowledge you need to be able to fix your credit by yourself without having to hire a third party company again.
Therefore, hopefully this information has proved to be quite helpful for many and will help you to get your credit on the right track and make sure it stays there. For more information and product reviews on some of the most popular do it yourself and self help credit repair programs out there visit http://www.CreditRepairXYZ.com
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