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How to Recover from the 3 Biggest Credit Score Busters
Thursday, February 23rd, 2017 | Author:

You lost your job and could no longer afford your monthly mortgage payments. You stopped making them and lost your home to foreclosure. Maybe youve made so many financial missteps that you filed for either Chapter 13 or Chapter 7 bankruptcy protection to get a fresh start.

These are big financial disasters. Each will send your credit score plummeting by 100 points or more. And dont expect to qualify for credit cards, a mortgage loan or auto financing anytime soon.

3 Biggest Credit Busters

There is hope, though. It is possible to recover from each of these three financial disasters. It just takes time and good financial habits to boost your credit score and become an attractive borrower once again.

A lot of times people say that they cant do anything for seven or 10 years after a foreclosure or bankruptcy, says Chris Copley, who has worked as a regional manager for TD Bank. Thats not necessarily true. If you take the steps to rebuild your credit, you might be able to get a credit card or even a mortgage loan before that seven- or 10-year period is up. Dont fall into that trap of thinking that theres nothing you can do.

Foreclosure and short sale

If you began falling behind on your mortgage payments, you may have sold your home through a short sale, a type of home sale in which your lender allows you to sell your residence for less than what you owe on your mortgage loan. Having such a sale on your credit report marks you as a high credit risk, and a far less attractive borrower to lenders.

Losing a home to foreclosure or selling a home through a short sale is a serious blow to your credit, and will send most consumers scores falling by more than 100 points. Even worse, both a foreclosure and short sale remain on your credit report for seven years.

Chapter 13 bankruptcy

Bankruptcy filings stay on your credit report for a long time, too. If you file for Chapter 13 bankruptcy protection, in which a judge creates a payment schedule that allows you to pay back at least a portion of your debts, your bankruptcy filing will stay on your credit report for seven years before falling off.

Chapter 7 bankruptcy

If you file for Chapter 7 bankruptcy protection instead, this filing will remain on your credit report for 10 years. Under this form of bankruptcy youll have to sell most of your assets to pay back what you can. The debt that you still cant afford to pay back is erased.

How to Rebuild Your Credit Score After Financial Disasters

But this doesnt mean that you wont be able to qualify for a loan or credit card for a full seven years. The more years that pile up between you and your foreclosure, the less impact a foreclosure has on your three-digit credit score. In year six, your foreclosure will remain on your credit report, but it wont exert the same downward pull on your score.

Make on-time bill payments

After a foreclosure or similar credit-busting incident, avoid being late on bills, eliminate as much of your credit card debt as possible and keep the balances low on your credit cards. If you practice these sound habits, your score will slowly — but steadily — rise after a foreclosure.

Pay all your bills on time. That is the most important thing you can do, says Patrick Simasko of Simasko Law Offices in Mt. Clemens, Michigan. Dont throw in the towel. Dont think the hole is too deep to dig out of. You can dig out of it. You just have to be fiscally responsible from that point on.

Wait until you can apply for another mortgage loan

Even if you rebuild your credit score and grow your savings account for a down payment, though, you will have to be patient if you want to qualify for a mortgage.

Applying for a mortgage after foreclosure

Youll have to wait at least seven years after a foreclosure before applying for a conventional loan backed by Fannie Mae and Freddie Mac. But you can qualify for a mortgage backed by the US Federal Housing Administration, better known as an FHA loan, as soon as one year after a foreclosure if you can prove that you fell behind on your mortgage payments because of an economic event outside of your control, such as a job loss. If you cant prove this, you can still apply for an FHA-insured mortgage just three years after a foreclosure.

Getting a mortgage after bankruptcy

If you want to apply for a mortgage loan after bankruptcy, youll also need to wait. If you want to apply for a conventional mortgage backed by Fannie Mae or Freddie Mac, youll need to wait at least four years if you filed for Chapter 7 bankruptcy and two if you filed under Chapter 13. For an FHA loan, youll need to wait two years after Chapter 7 bankruptcy. You can qualify for an FHA loan after you have made at least 12 months of on-time Chapter 13 payments.

Lower credit card debt

If you want to apply for a new credit card or auto loan, you wont have to wait as long as for a home mortgage. Youll simply have to build up your credit score over time by never making another late payment and reducing your credit card debt. Depending upon how low your score fell, you might have to practice these good financial habits for a year or more before you start to see any improvement in your score.

Just as with foreclosure, the negative impact of bankruptcy filings lessens over time. Again, youll need to pay your bills on time and keep your credit card debt low to see your credit score slowly rise as the years pile up after your filing.

Show you can handle new credit responsibly

You want to reduce your current credit card debt to a manageable level, but what if you want to apply for a credit card? This is probably a good idea, if you can handle this new credit. Once you get a credit card, you can begin making charges each month. Pay off your full balance each month on time. If you do this for a long enough period of time, your credit score will steadily rise.

Look into a secured credit card

Dont expect to qualify for a premium credit card with a low interest rate when a bankruptcy filing is still on your credit report. Instead, Simasko recommends that you apply for a secured credit card. To do this, youll need to make a cash deposit in an account tied to the card. Your credit limit is set based on the amount of your money in that account. This provides protection for the financial institution giving you a card. If you dont make your payments, the bank behind your card can simply take the money out of your security account.

Banks do, though, report payments on secured credit cards to the three national credit bureaus of Experian, TransUnion and Equifax. Make these payments on time each month and youll improve your credit score.

Diversify credit types and prove youre a low risk

Another way to raise your financial standing is to diversify the types of credit you have on your credit report, such as an auto loan. You can still qualify for an auto loan as long as you show that you can afford the monthly payments. Prove your ability to pay with copies of your most recent paycheck stubs, bank-account statements and W-2 forms. But do expect to pay higher interest rates. Charging these higher rates provides some protection to lenders who are taking on more risk by loaning you money.

You are going to have to wait for a while after one of these financial issues to apply for new credit or debt, Copley says. But just because you filed for bankruptcy doesnt mean that you can never become a fiscally responsible consumer. You can. You just have to make it a habit to pay your bills on time. Do that long enough, and banks and lenders will work with you again.

More from MoneyRates.com:

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Credit Card Monthly Payment Calculator

Low Interest Credit Card Savings Calculator

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How to Raise Your Credit Score By 200 Points
Saturday, February 04th, 2017 | Author:

For those of you looking to increase your score, here are some tips on how to raise your credit score by 200 points (relatively quickly):

How to Raise Credit Score By 200 Points

There are a few things you can do right away to help your credit score. Although you won’t see immediate progress, you canstart with these steps:

  • Check your credit score and report.If you want to know how to raise you credit score by 200 points you’ll need to know what your score is now (and what it means). You’ll also need to see a full credit reportto know what steps you need to take to improve it. See the range of credit scores in the chartbelow.

  • Set up payment reminders.Payment reminders are a great way to help increase your credit score. The majority of credit problems are due to nonpayment or late payments. By setting up payment reminders (on your phone, computer or even through your bank) you can stay on top of your bills, which will help your credit over time. Check out the graph below and see how important paying your bills on time is to your credit score:

  • Reduce your debts.The most obvious piece of advice on how to raise your credit score by 200 points is to reduce your debt. If you have a lot of debt your credit score will remain low.
  • Research secured credit cards.According to Good Financial Cents, a secured credit card is a great way to raise your credit score. A secured credit card is a credit card that you provide cash down payment for. You then use and pay off that credit card over time. Eventuallythe credit card company you opened the card with will give you a higher credit line.
    • Put down a cash payment you can afford and use the card sparingly.Make sure that the cash you put down for the secured card is money you can afford not to have in your pocket. Think of it as an emergency savings account that you’ll only use if you can put the money right back.
  • Make payments in full.Once you have a secured credit card (or any line of credit) pay it off in full when you can. This will help you increase your credit score as well.

Keeping Your New and Improved Score

Knowing how to raise your credit score by 200 points is only a small portion of mending your credit. If you are going to spend the time and energy it takes to raise your score you will want to maintain the score you earned. Here are a few credit tips that will help you keep your score high:

  • Pay your bills on time.As mentioned above paying your bills on time is important for raising your credit score. It is also important for maintaining a credit score.
    • If you arebehind on bills, get up-to-date and stay there.Being behindon your bills will hurt your credit score greatly. Get caught up and make sure you stay there.
  • Keep balances low on credit cards.Any lines of credit you have should have no balance or a low balance. Your credit score stays high when you available line of credit remains open.
  • Don’t close unused accounts.If you have any line of credit you don’t use very often, don’t close it! Closing accounts can actually hurt your credit in the long run.
  • Establish new credit history.Once you’ve been able to raise your credit score you’ll want to begin to establish new credit history. Open new credit card accounts or get a department store charge card. Having more available lines of credit will help your credit score.
    • Don’t openunnecessary accounts. Even though you should open new account to establish new credit history you shouldn’t open any account you find.Opening too many new accounts, however, can hurt your score.

Even though there’s no sure-fire “how to” to raising your credit score these are all great starting points. The bottomline is thatraising your credit score will require work fixing your credit history and being able to maintain the work you’ve done. If you’re looking for more tips check out this video on lesser known ways to improve your credit score:

Have you raised your credit score a significant amount? We’d love to hear your story. Contact us here.

Photos: PhotosbyCafeCreditunderCC 2.0

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Can Your Credit History Just Disappear?
Thursday, July 07th, 2016 | Author:

What do expatriates, prison inmates and people whove never had a credit card or loan have in common? While this question sounds like a joke setup, its not. These people all are at risk of seeing their credit records vanish into thin air, along with their credit scores.

Most negative credit information remains on your credit file for seven years, while positive accounts are reported for 10 years. But if you haven’t had any active credit accounts for that period of time, you may find your credit history has all but disappeared.

While it might not seem like that big a deal, there are ways that not having a credit score can hurt you.

Fortunately, if youre worried about maintaining your credit records, theres plenty you can do to avoid the hassle trying to re-establish credit.

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Your first step will be to find out whether your credit reports are still active. To do that, you can request your free annual credit reports. You can also see credit scores using a service such as Credit.com’s free Credit Report Card. If you are told that no credit reports or scores are available, then you’ll know you are going to have to build credit as if you were just starting out. (You can read more about how to build credit here.)

If your reports and scores are still available, here are some simple steps you can take to ensure they dont disappear.

Living Abroad

If youve been living in a foreign country for several years and closed out all of your US-based credit cards and loans, your credit history could be steadily fading. That’s because your credit reports only report US-based credit. Different reporting systems and privacy laws specific to each country don’t permit an American’s credit history to follow them to other countries.

Thats why, if you plan to return to the United States, its a good idea to maintain an active American credit card account that you use for a couple of routine purchases each month. Choose a card without foreign transaction fees and pay balances in full to build credit without acquiring debt.

And if you bank with a multinational bank, you may be able to transfer your credit card accounts to the banks US division, which would be reported in a US credit history, according to Kristine Snyder, an Experian spokesperson.

Being In Prison

Being incarcerated doesnt necessarily remove you from the credit reporting system, but maintaining your credit while you are in prison can be difficult. If you have a joint account with a spouse or relative, and they continue to use the card and pay the bills, then those credit references will continue to be reported on your credit reports and help you maintain credit.

According to a study titled “Collateral Costs” by the Pew Charitable Trusts, “more than two-thirds of male inmates were employed and more than half were the primary source of financial support for their children” before they were jailed. That means many inmates and their families suffer financial hardships that may not make maintaining good credit possible.

And prisoners can be at a higher risk of identity theft as well, which is why its a good idea for inmates to check their credit reports. Any prisoners who want to review their credit reports while they are in jail will need to get a letter signed by prison administration verifying they are a resident of that facility.

Only Using Cash

If you once had credit, but because of a debt management program or other reason you decided to cut up all your credit cards and just use cash for the last several years, you mightve lost your credit records.

Fortunately, one of the easiest ways for folks with cash on hand to establish credit and get a credit card without credit is to start with a secured credit card.

Re-Establishing Credit

Something else they may want to consider is asking someone with a strong credit history to cosign for them, Snyder said. If a person cosigns on their behalf, he or she is accepting equal responsibility for the loan or credit line. 

Once you’ve established a long enough history of on-time payments on your secured card, you can “graduate” to a credit card that can help you build credit — check with your issuer for guidelines.

Using credit again is the first step. But you will need the following to have a credit score, according to FICO:

  • At least one account that has been open for six months or longer
  • At least one undisputed account that has been reported to a credit reporting agency in the past six months

(Not sure where your credit stands? You can get a free copy of your credit reports once a year from AnnualCreditReport.com. You can also see two of your credit scores for free on Credit.com every month.)

More on Credit Reports amp; Credit Scores:

  • The Credit.com Credit Reports Learning Center
  • What’s a Good Credit Score?
  • How Credit Impacts Your Day-to-Day Life

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Smart money moves | Rossi
Wednesday, July 06th, 2016 | Author:

Life is a journey filled with financial choices that ultimately shape your future. While money may be important to many, it is simply a tool to help people focus on the things that mean most to them. Spending time with family and friends, pursuing goals and hobbies, developing yourself and having the time and financial resources to help others may all be benefits that come from making the right money moves at the right time in life. Like the seasons, there are specific things to consider implementing at different times and other pitfalls to avoid. This is the first of a two-part series on the financial moves that should be considered at various pivotal points in your life.

20s

Moves to make: Believe it or not, one of the most powerful financial moves that can be made in your twenties is to start saving for retirement. From taking full advantage of a 401(k) match at a first job after college to socking away money in a versatile Roth IRA (up to $10,000 may also be used for a first time home purchase), developing a save for the future mentality at this age is critical.

Moves to avoid: It is not a good idea to develop a pay in the future mentality during this period. The 20s can be a time when poor spending and credit habits are developed, often leading to sizable credit card and student loan debt. Yes, developing credit is important but the key is to do it in a responsible way. Utilizing secured credit cards that require you to have a balance in the bank that is equal to your spending limit is a great way to put a lid on out of control spending.

Bottom line: Rather than allowing the 20s to be a time when you start out by digging yourself in a hole, use it as a time to jump-start your future.

30s

Moves to make: The 30s are often a time when new families begin. Marriages, children and major home purchases often occur during this time and represent significant financial responsibilities. With financial responsibility also comes risk, making life insurance an important consideration during these years. Since life insurance is cheaper the younger and healthier you are, the 30s are often a fantastic time to establish coverage outside of an employer. Remember, statistics show that most of us will jump between jobs and you cant depend on each new employer to offer coverage. Locking up coverage with a 30 year term policy can be a great way to protect your family in a way that is independent of your job. Assets and responsibility also necessitate the need to contact your attorney to discuss wills, guardianship for children, powers of attorney and living wills.

Moves to avoid: Purchasing more home than you can afford is often a major issue during the 30s as it may compromise your ability to increase retirement savings, establish education funds for children and can also lead to ballooning credit card debt.

Bottom line: Rather than allowing the new financial responsibilities of the 30s to overwhelm you, begin by taking a systematic approach to addressing all of the new goals on the table.

40s

Moves to make: The 40s are often a time when career momentum builds and the financial rewards begin to increase. Career development may begin to pay off with higher salaries and benefits. The 40s are also a time when it is important to realize you may only be twenty years off from retirement, making this an important time to capture that higher income and double down on retirement savings. Financial trickery may help – Consider pretending that your raise never happened and dump the extra income right back into your retirement account. Remember, saving the maximum amount in a retirement plan does not mean that you will be on track for your goals. Instead, consider developing your own plan, tailored to meet your personal needs.

Moves to avoid: If you have children, college expenses can be a cause for concern during this phase. Too often, parents choose to make unrealistic commitments to paying college costs that ultimately end up pushing retirement dates back by decades. It is important to remember that children have many years of earning potential ahead of them while the parent does not. Do not allow college funding to compromise retirement and try to avoid refinancing your home to pay for it.

Bottom line: Making poor financial choices in your 40s often leads to trying to play catch up in your 50s. Maxing out retirement savings with increased levels of income while limiting the education costs to what you can truly afford may help you build momentum as you move into your 50s.

As you can see, your life is more than just numbers. In the next installment we will discuss the 50s and beyond. True Financial Life Planning is a process designed to advise you at the intersection of your money and your life, helping you to pursue your unique goals during different phases of your life. Consider speaking to someone who specializes in this unique process as it may help you bring financial clarity to your life. Since everyones situation is unique, consider speaking to your financial advisor to determine the most appropriate approach for you.

Kurt J. Rossi, MBA is a Certified Financial Planner Practitioner amp; Wealth Advisor. He can be reached for questions at 732-280-7550,kurt.rossi@Independentwm.com,www.Independentwm.com,andwww.bringyourfinancestolife.com- LPL Financial Member FINRA/SIPC.

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What to Do if You Have Bad Credit
Saturday, July 02nd, 2016 | Author:

Having good credit is essential when it comes to things like getting approved for new credit cards, opening utilities in your name and renting or buying a home. Unfortunately, not everyone has the best credit, whether its by the fault of their own mistakes, such as missing payments, or circumstances out of their control, like falling victim to identity theft. The good news is that you dont have to have bad credit forever, as there are several things you can do to help undo the negative marks on your credit reports and credit scores. It should be noted that if you’re a victim of identity theft, you can get fraudulent information removed from your credit reports, but it will take some time. As such, taking some steps to alleviate your bad credit will help revamp your credit history sooner. Weve detailed a few things you can and should do if you want to make changes to your bad credit.

Check your credit reports

Its important to know where your credit stands, which is why you’ll want to be sure you not only check your credit reports before you start making any steps to improve your credit, but also make sure you continue to check them after you implement any changes. Its also important to know what your credit reports look like so you can report any errors, which may be dragging your credit scores down, as soon as you spot them. Although many people may be unsure exactly how to check their credit reports, its a fairly simple process. In fact, every US citizen is legally allowed to view all three of their credit reports — Experian, Equifax and TransUnion — once a year through AnnualCreditReport.com. If you want check up on your reports more than once a year something you’ll definitely want to consider if you’re rebuilding your credit you may want to look into a credit report monitoring service, as most services allow you to receive regular updates of all three of your credit reports and scores as well as alert you if there are any changes to your credit reports.

Pay your bills on time

While this may seem like an obvious one, missing just one payment on a credit card, loan or mortgage bill can and will affect your credit. And if you begin missing multiple payments, or worse, you miss multiple payments over a period over time and the account is sent to collections, the damage to your credit scores can take quite some time to repair. Thats why its vital to pay all of your bills on time, even if it’s only the minimum payment, as any on-time payments will have a positive impact on your credit reports. That said, paying a little more than the minimum payment even if it’s just an extra $5 will help you pay off the balance more quickly, which will have a positive impact on your credit reports.

Look into a secured credit card

If you have bad credit and keep getting denied for the credit cards youve applied for, a secured credit card may be the option for you, as these cards are designed to help people build credit. In fact, most secured credit cards report to all three of the credit bureaus so you can rebuild credit with responsible use. These types of credit cards look and function like traditional credit cards do, but the difference is secured credit cards require a security deposit when you open the account. This security deposit serves as a safety net for the card issuer or bank in the event that you don’t make your payments. The amount of the deposit depends on the type of card you decide to open. For example, your available balance with the Discover it Secured Credit Card No Annual Fee matches your security deposit. So if you put down a $250 security deposit, you would have a maximum line of credit of up to $250. On the other hand, the Capital One Secured MasterCard gives you an initial $200 credit line after you make a security deposit of $49, $99 or $200 the amount required is determined by your creditworthiness. Regardless of the security deposit you put down or the card you select, if you use it responsibly, you can build a positive credit history in no time. Visit our secured credit card reviews to find the best option for you.

Consider using a credit repair service

Although any combination of the options above will help you build a positive credit history, sometimes you may need a little extra help. That’s where credit repair steps in. Sometimes confused with credit monitoring services, credit repair is something entirely different. While credit monitoring allows you to view your credit reports and scores, credit repair can help you to fix any errors on your credit reports. Whether the errors on your reports are due to identity theft or if its an error on the end of a creditor or a credit bureau, credit repair services can help address and fix any mistakes that may be on your credit reports, which could help to raise your credit score. These services will communicate with credit bureaus on your behalf to help contest, dispute and remove the necessary incorrect items. Its important to note that these services are only effective in removing inaccuracies on your credit reports, and they wont help to remove any factual negative marks on your credit, such as late or missed payment history.

Follow our personal finance blog to learn more about credit cards, credit scores and other things that affect your financial health.

Disclaimer: This content is not provided or commissioned by the credit card issuer. Opinions expressed here are authors alone, not those of the credit card issuer, and have not been reviewed, approved or otherwise endorsed by the credit card issuer. This content was accurate at the time of this post, but card terms and conditions may change at any time. This site may be compensated through the credit card issuer Affiliate Program.

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Why your credit score is important
Friday, July 01st, 2016 | Author:

How to build credit

Applying for a credit card is a good way to build credit if youre starting from scratch.

Unsecured credit cards can be easy to qualify for, but they typically have high annual fees.

Secured credit cards require the borrower to make a deposit. The credit limit on the card is usually the same amount as the deposit. Secured cards can sometimes have annual fees as well.

Student credit cards have high acceptance rates and sometimes offer rewards. The cards tend to have high interest rates and lower credit limits.

Retail credit cards are another option. The cards tend to have higher interest rates than normal credit cards, but approval is possible even with no credit history.

How to maintain good credit

The best way to maintain good credit is to make payments on time.

Pay attention to due dates and use online payment options that let you schedule payments ahead of time.

Credit card bills, utility bills, rent, a car note or any other service for which you owe money can all affect your credit score if you dont pay on time.

Automatic payments can also be useful for helping pay credit cards in a timely, manageable way.

Click here to learn more about the costs associated with college and how you can start preparing.

You can set up an automatic payment plan with your bank to pay your bills monthly, directly from your bank account.

Never skip credit card payments, and always pay at least the minimum.

Paying less than the minimum or paying late can lower your credit score.

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6 Ways You Can Lose Your Credit Card Rewards
Wednesday, April 06th, 2016 | Author:

Your points, miles and cash back are not nearly as secure as the money you deposit in a federally secured bank. Your credit card rewards are subject to some rules and terms that you need to follow in order to redeem and use them.

Credit card rewards come in several different forms, and each has its own vulnerabilities. To make sure that you never lose your valuable rewards, consider these six ways that it can happen, and what you can do to prevent it.

1. Making Late Payments 

Some credit card issuers will not grant customers rewards for spending when they fail to make an on-time payment, or pay less than the minimum amount required. For example, the terms of some American Express cards state that customers will forfeit the points they received during their billing statement when they make a late payment. However, points can be reinstated for a one-time fee. To avoid making late payments, take advantage of the email and text reminders that most credit card issuers offer, or set up automatic payments.

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2. Closing Your Account 

With credit card reward programs operated by banks, you will often lose your points if you close your account. On the other hand, if the rewards program is operated by an airline, hotel chain or retailer, the points are often transferred each month to another company’s account, and are unaffected when you close your credit card account. To avoid losing your rewards, learn what your bank’s policy is before you close your account. For example, some banks will offer a time period to redeem rewards after your account is closed, and Discover cardholders are still entitled to redeem their cash-back rewards after account closure.

3. Returning Purchases That Earned Rewards

If you make a larger purchase, you will earn rewards, but those rewards are not yours to keep if you later make a return. Because credit card rewards are issued based on your net purchases minus any returns or credits, your card issuer could deduct the rewards you earned if you later return your purchases and have a net credit on your account.

4. Breaking the Rules

Every rewards program has a lengthy document called the terms and conditions, and it’s necessary for customers to agree to abide by those rules in order to participate. And in nearly every program, there are rules that you can break that can result in the forfeiting of reward points, miles or cash back. For example, airlines have strict rules against buying or selling frequent-flier miles or award tickets. The airlines even train their check-in agents to try to spot travelers who have purchased frequent-flier awards. And when caught, the buyer can lose his or her ticket while sellers can find their frequent-flier accounts closed and their loyalty points lost. Therefore, you should familiarize yourself with the terms of your credit card and any third-party loyalty program linked to your cards.

5. Forgetting About Your Rewards 

Surprisingly, many credit card users simply forget that they are earning rewards, or in which program the rewards are being earned. As years go by, and rewards aren’t redeemed, they are as good as gone. To avoid losing your rewards this way, keep track of your accounts and regularly redeem your rewards.

6. Death

While many reward programs allow rewards to be transferred to others in the event of your death, not all do. For example, the terms of the Delta Airlines SkyMiles program state that the airline reserves the right to close an account if the member has passed away. While you cannot prevent death, you can try not to hoard your miles indefinitely, and you can always redeem miles for other people to travel, so long as you do not sell them.

Before applying for a credit card, you should know where you stand to make sure you don’t apply for cards you’re unlikely to qualify for. To see where you stand, you can get two free credit scores every month on Credit.com.

More on Credit Cards:

  • Credit.com’s Expert Credit Card Shopping Tips
  • Find the Right Rewards Credit Card for You
  • Are Annual Fee Credit Cards Worth It?

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Secured credit cards require you to make an upfront deposit (usually equal to your line of credit) that is returned when you close the account. You cant use the money to pay off your balance — the bank uses it as collateral in case you default. Because secured credit cards are lower-risk, their eligibility requirements may be more flexible.

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When to look at new credit cards
Wednesday, March 30th, 2016 | Author:

Americans tend to be loyal to their credit cards, even as better offers emerge, a new report finds.

More than a quarter of people 30 to 49 years old say they haven’t changed their favorite credit card in at least six years, according to a survey from CreditCards.com, a commercial card comparison website.

Older people are even more loyal to their credit cards, the survey found: Thirty-one percent of people 65 and older say they have been using the same card for at least a decade, and 20 percent say they have never changed it.

The information comes from a telephone survey of US credit card holders conducted by Princeton Survey Research Associates International. The survey, which questioned 639 people in early February, has a margin of sampling error of plus or minus 5 percentage points.

In terms of maintaining a healthy credit score, longer-term card holders are generally on the right track, said Ethan Dornhelm, senior director of analytic development at FICO. One factor in a credit score – the three-digit number that summarizes your credit report and determines what interest rate you pay on loans – is the length of your credit history, including the average age of your accounts. So a years-long run of using a card responsibly is generally a smart thing to do.

Card loyalty also helps if you ever have to negotiate with your card issuer, like asking to have a one-time late-payment fee removed, said Matt Schulz, senior analyst with CreditCards.com.

But these days, aggressive competition among credit card issuers for new customers means many are offering signing bonuses, like increased cash-back offers or rewards points. Someone who hasn’t switched cards in five or 10 years, Schulz said, may be missing out on better terms – not only on bonuses but also in continuing perks like cash back based on spending.

“Cards are offering the most lucrative rewards we have seen in some time,” he said. CreditCards.com earns a fee if someone gets a card through the website.

Consumers may be able to combine bonus offers from different cards to maximize rewards. For example, Schulz said, the Chase Sapphire Preferred card is offering 50,000 points when the new holder spends $4,000 in the first three months. The Chase card allows users to transfer points directly to certain hotel and airline partners.

One is Southwest Airlines, which is offering bonuses of 25,000 to 50,000 points for new customers of its Rapid Rewards Premier credit card. Someone approved for both the Chase and the Southwest cards would earn a bonus equal to 75,000 to 100,000 points.

Trading in an old standby for a new card may not be the best approach for everyone, however. If you end up spending more than you ordinarily do, just to earn the bonus, the move doesn’t make sense.

Ditto, getting a card for the bonus if you are unable to pay your balance in full each month. Any perk you get from a new card isn’t worth the double-digit interest you’ll pay if you carry a balance from month to month.

If you have a balance to pay off, you may want to consider a zero percent balance transfer offer, said Nicholas Clements, co-founder of the financial website MagnifyMoney.com.

Clements said consumers must be honest with themselves about their ability to handle additional credit.

If they can let an older card remain dormant and shift their spending to the new card, it may be worth applying for a card offering a lucrative bonus.

But if adding new credit means spending more, he said, consumers could risk getting into debt.

Here are some questions and answers about switching credit cards:

Q: If I switch to a new credit card, should I close my old card account?

It’s generally best to keep an older account open, even if you don’t use it, rather than closing it, Dornhelm said. That’s because closing it may increase your “utilization,” or the proportion of available credit you are using, which tends to lower your credit score.

If the card you are abandoning has an annual fee, Clements suggests, you should call the issuing bank to ask if it will “migrate” the account to a non-fee version of the card. That way, you won’t have to pay a fee for a card you’re not using.

Q: Won’t opening new accounts hurt my credit score?

Opening a few new accounts is unlikely to cause a “substantial” drop in most consumer scores, Dornhelm said. One possible exception is if someone with relatively few accounts suddenly submits a flurry of new credit applications. That may suggest they are becoming a greater risk.

Q: Can I still get a rewards credit card if I don’t have great credit?

Even some secured credit cards, typically offered to consumers who lack a strong credit history, are offering cash-back rewards these days. The Discover It secured card, for instance, offers 2 percent cash back on spending at gas stations and restaurants and 1 percent back on all other purchases.

With secured cards, the holders typically make a deposit equal to their credit limit, which serves as collateral while they build a record of on-time payments.

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3 Signs You’re Ready for a Rewards Credit Card
Saturday, March 26th, 2016 | Author:

A rewards credit card can certainly add some heft to persons wallet. After all, what other payment method lets you earn points, miles or cash back on all of your purchases?

Still, in spite of the perks, this type of plastic just isnt for everyone. For starters, rewards credit cards tend to carry higher interest rates than their no-frills counterparts. And some carry high annual fees that you may not recoup, depending on your spending habits.

Thats not to say you should be stuck with your starter, secured or student credit card forever. If youre looking to upgrade, here are some signs you may be ready for a rewards credit card.

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1.Youre Paying Your Monthly Balances Off in Full

Rewards credit cards best serve people who dont carry a balance since points, miles or cash-back rewards can otherwise be negated by the interest. If youre in the habit of always paying balances off in full each month, you might be ready for some premium plastic. If not, you may want to stick with a simple or low-interest credit card. And, if youre already carrying a lot of debt, you may want to look into a balance transfer credit card to minimize your interest costs.

2. Youre Meeting All of Your Budgeting Goals

It can feel great to earn points, miles or cash back, but you dont want to spend more than you normally would each month just to bolster those coffers. Your ability to maintain a budget is a good measuring stick of your overall financial health — and can also provide hints about how disciplined you might be with some new plastic in hand.

3. Your Credit Score Is in Great Shape

Not all rewards credit cards are created equal, but a good credit score will help you qualify for the best of them. Plus, having good or excellent credit is another sign that youll use the new line of credit responsibly. In either event, its a good idea to check your credit before you fill out any applications. You can do so by viewing your two free credit scores each month on Credit.com.

Its also important to read all of the terms and conditions associated with a card you are considering carefully. Youll want to comparison-shop to find a card thats right for you. You can check out our recent ranking of the Best Cash-Back Credit Cards in America here.

More on Credit Cards:

  • Credit.com’s Expert Credit Card Shopping Tips
  • How to Get a Credit Line Increase
  • Are Annual Fee Credit Cards Worth It?

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