Posted on June 14th, 2008 — in Mathematics Hall
How will credit card balance transfers affect my credit score and rating?
Transferring balance from a high interest credit card to a new lower interest
card can definitely save you money on interest, if nothing else at least until
the introductory rate ends (if applicable). We all receive those infamous credit
card offers in the mail, urging us to apply for a new card and transfer our high
interest balance over, in order to take advantage of the lower interest rate
that this new card has to offer.
This seems like a logical thing to do, right? I mean, lower interest rates on
your credit accounts equals more money in your pocket, true? Yes,
transferring your credit card balance from a high interest credit account to a
lower one is an excellent way to save money on interest, especially if you carry
a lot of debt on your credit card(s).
But how does this affect your credit rating and credit score?The answer to that question really depends on your
situation, and how you go about it.
A closer look
Lets say you have $5,000 in debt on a credit card account from “ABC
Credit Services”, which has a total credit line of $10,000. For this
example, lets just say this is currently your only open credit card
account. Since your debt takes up half of your total credit line, this would put
your percentage of debt compared to your credit line, for this account, at 50%.
We’ll call this your “debt percentage”.
You’re making payments to ABC with no problems and you seem happy with the
account and the interest rate. That is, until one day you check your mail, and
there it is, a credit card offer from “XYZ Credit Services” with a
fixed interest rate set at half of what you’re paying now with ABC! Suddenly
dollar signs start popping up in your head, and you start trying to figure out
how much money you could save by transferring your $5,000 balance to XYZ. You
then decide you’re going to apply for the account at XYZ. Your credit is good
right? No problem! You receive the card in a week or so, and go ahead with the
balance transfer.
So how does this affect my credit score?
How this balance transfer affects your credit rating and credit score really
depends on what you do from this point on, and also what your credit line is on
your new card from “XYZ”. If your credit line on your new card is
lower than that of the original “ABC” credit account, then your
“debt percentage” will be higher, which generally will lower your
credit score. This would be true if you closed the original account at ABC, and
kept your new account as your only open credit card account.
If you’ve had your “ABC” credit card for a while (maybe 2 years or
more), and you have a good payment history with them, then it will most likely
be in your best interest to keep that account open, even if you don’t use it.
Especially if your credit line with your new lower interest card is below
$10,000. Usually for the sake of your credit score, you don’t want to
increase your “debt percentage”, you want to decrease it.
For example, if you keep both accounts open, you will have a total credit
line of $20,000. With your $5,000 in debt on your new card, and your original
account at ABC having no balance, your debt percentage would only be 25%,
which is a good percentage and your credit score will reflect that.
Now reverse that and say that you closed your credit account from
“ABC”, given that your credit line at “XYZ” stays the same,
you would have a debt percentage of 50%, which is what you started out with in
the beginning. Add to that a newly acquired credit card with little or no
payment history on it, and you’re credit score would almost surely decrease, at
least until you establish a longer payment history on your new account.
So for this example, it would probably be best to keep both accounts open.
Your lower debt percentage could possibly offset the hit your score took from
obtaining your new credit card. And looking to the future, it should
look better on your credit report this way too.
Avoid increasing your debt percentage
When trying to keep your credit score as high as possible, try to avoid doing
anything to increase your debt percentage. Even though the amount of debt you
are carrying on your “revolving credit” is the same, it will always
look better if you’re using 25% of your total credit, compared to using up 50%
of it.
But don’t try too hard to decrease it either
Be sure not to take it too far by applying for more credit than you need,
just because you think it will help your credit score by having an even lower
debt percentage. Obtaining any new credit will generally bring down your credit
score slightly, at least for a short period of time. Applying for credit too much and too
often will almost always have a negative impact on your credit score, which
is exactly what you don’t want. Your time would be better spent on trying to
pay down this debt instead.
As with anything, being informed is the key
Balance transfers such as this can and will save you money on interest, if you do it
right. Stay informed about how things like this affect your credit, and you should be just fine!
Jake Rustenhoven is the webmaster of http://www.freebiecreditreport.com and the author of many other self-help and how-to articles related to credit reports and credit scores.
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Posted on June 3rd, 2008 — in Mathematics Hall
Credit cards have become a major part of the world economy, allowing for paperless transactions and reducing the need for cheque ledgers and extensive monthly chequebook balancing. With all of the options available for credit cards, however, it can be difficult to decide on which card best fits your personal needs.
Below you’ll find a little bit of information that will hopefully help you to find the right card to fit your personal and financial needs without fees or features that you don’t need.
Determining what you’re looking for
The first thing that you need to do when looking for a new credit card is determine exactly what it is that you’re looking for in a credit card. If you’re looking for a simple card to help cover petrol expenses, then your needs in a card will be much different than in you’re looking for a card with a good incentive program that you’re planning on using for major purchases. Take the time to write a few notes about what you’re wanting to use your card for, and what features you’d like the card to have.
How much credit do you need?
Once you’ve determined what you’re looking for in the way of features and uses, you need to figure out exactly how much of a credit limit you want on your card. If you’re only planning on using your card for minor purchases, you might want to find a card with a lower credit limit. If you want a card for larger purchases, then you’ll likely need to find a card with a higher limit. Just remember that you’ll have to pay back whatever you charge to the card with interest, so make sure that you don’t get more credit than you can afford.
Credit card incentive programs
When considering credit card incentive programs, you should take a moment to consider how useful the incentive will actually be to you. Airline miles are wonderful, but they don’t do you much good if you never fly. The same goes for discounts at certain stores or from certain manufacturers… if you rarely shop there or don’t buy the products that the manufacturer sells, then the discount is wasted. If you’re getting a card with an incentive program, make sure that you get one that you’ll get good use out of.
Comparing card offers
Before deciding on a particular credit card, you should take a little time to compare offers from different credit card companies and see what interest rates and terms are available. Check the different cards for any additional setup fees or annual fees that they may charge, avoiding any unnecessary costs if possible. Take the time to check online for other cards that you might not have seen before, seeing if there are any features offered by these cards that you might not have thought of previously. Use this comparison process to help you find the right card for your needs by consulting the list of what you’re looking for and comparing it to the various card offers.
Choosing your credit card
Once you’ve sorted through various credit cards, it’s time to make your decision and submit your application. In most cases, you should be able to apply for the card online… this can save you time by instantly transmitting your information, and you can often get an answer on your application within a minute or two from an online application.
You may freely reprint this article provided the following author’s biography (including the live URL link) remains intact:
About The Author
John Mussi is the founder of Direct Online Loans who help homeowners find the best available loans via the http://www.directonlineloans.co.uk website.
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Posted on May 23rd, 2008 — in Mathematics Hall
Let’s say you’re the type of person who’s constantly in debt, and what’s worse, you find it difficult to repay those debts. Or perhaps you’ve declared personal bankruptcy once too often. Or maybe you’ve been a victim of credit card fraud and found that your credit report has been adversely affected because of this. You’re at your wit’s end and are uncertain about what you should do. Can a credit repair company fix all these problems?
Sadly, the answer seems to be a big and resounding no. The majority of financial experts all seem to agree that one would be better off doing the legwork in attempting to repair his or her credit rather than paying a third party to do the fixing for him or her. Despite what most of them claim, a credit repair company can’t just wave a wand and make all your credit problems disappear like magic. If, however, there are inaccurate statements in your credit report, a credit repair company can help you. For a fee, representatives of the company will contact your creditors on your behalf to get errors in your credit report fixed. But then, this is something you can always do by easily yourself, so it isn’t advisable to spend money that you could use to repay part of the debts you have.
What you should be wary of are credit repair companies that promise to remove any and all blemishes in your credit report; even if these blemishes are verifiable, accurate, and not obsolete. If you really do have bad credit, not even the most popular credit repair companies can do anything about it. If any such company promises to fix your credit no matter how bad it may be and especially if the information in your credit report is correct, stay away from them. Most likely, they will use unsavory or downright illegal methods to accomplish this and your personal credit will be ruined.
One tactic they use is this: they will contact your creditors or credit bureaus and claim that the data in your credit report is inaccurate. Your creditors will naturally investigate these claims and while they are doing so, they will remove the “bad” information from your credit report. Meanwhile, you mistakenly believe that all bad credit information is removed from your report and are happy with the way things are going. True, if credit reporting agencies cannot verify the truth of an entry within 60 days, the offending data may be deleted from your report. But after your creditors finish their investigation and find the information to be accurate after all, the unfavorable data will be returned to your credit report - leaving you in the same boat you were in before, or even worse.
Take for instance two such companies: ICR Services Inc. and National Credit Education and Review. They were charged with fraud by the U.S. Federal Trade Commission (FTC) in 2003 for promising the impossible to consumers; they falsely claimed that they had a computer disk that could free a person’s credit report from notations of late payments, foreclosures, bankruptcies, and the like. Of course, such a disk did not even exist. These two companies did not admit to any guilt, but settled their case for $1.15 million.
So if a person needs to fix his or her credit status and wants to avail of the services of credit repair companies, what should he or she do? Well, you surely wouldn’t be helping the state of your personal credit any if you just go by the seat of your pants and hire the first credit repair firm you find on the Internet. First, you should make sure of your rights as a consumer under the Credit Repair Organizations Act by reading the booklet “Consumer Credit File Rights under State and Federal Law.” Find a reputable credit repair organization by contacting the Better Business Bureau and make sure that the organization you’re planning to hire clearly sets out in print the services they will be providing, the length of time it will take to accomplish what you’re hiring them to do, and a justification of the fees they’ll be charging.
Using a credit repair company to improve your credit rating is not your best bet; it’s not even a good bet at all, according to the experts. Remember that erase information in your credit report if that information is true and not out-of-date. Hiring one for that purpose would just be a waste of money.
Credit-reparation.com provides you with information on credit related issues like credit repair company, annual credit report, credit scores and free credit report info. Take a look at http://www.credit-reparation.com.
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Posted on May 4th, 2008 — in Mathematics Hall
Credit cards are a form of unsecured credit. The issuer is
extending you a line of credit, usually tacking on all sorts
of little surprises in the fine print. This type of credit
is probably the most commonly used.
If you have a great credit rating, you’re probably bombarded
with offers of new cards. They usually carry no annual fees,
the interest rates are reasonable (as far as credit cards go),
you get close to a month’s grace period and there might be
some fetching initial offers, such as no interest for 6 months
on balance transfers and new purchasers.
Others of us who are not so lucky, might have to pay $20 or more a year for a card, the interest rates will be higher and the come-ons less enticing or non-existent. Grace periods may be as short as 20 days and you might have to make sure you payment is received early enough so the credit card company will consider it paid on time.
Still others might not be able to get anything other than a
secured credit card, one where you make a deposit first and then are allowed to charge to the extent of the deposit. This kind of card, while expensive, can be helpful in rebuilding credit if you have had credit problems.
Then there are cards like the original American Express or Diner’s Club cards, where you’re expected to pay the entire bill every month as it comes due. This kind of card forces you to be more careful with your spending, although it is becoming more frequent for a line of credit to be attached to them also, to allow you to pay for some purchases over time.
Credit cards are not bad things in and of themselves, but can
become bad things very quickly. You can charge just about anything and get to pay for it about a month later. You can take part in the many rewards programs and get points for things you would have bought anyway, like food or gasoline. This is all great if you pay off the bill every month.
The problem is that if you run up your credit card debt, but only pay the minimum payment, that $300 TV you got on sale will really cost well over $1000. It can take 10 or more years to pay off a $5000 debt if you only pay the minimum each month. Most people are unlikely to want to pay off a tank off gas ten years after it was used up.
If you read your monthly statements closely, you will see that the monthly minimum payment is barely enough to cover your interest due for that month. You are not making any dent in the amount you owe.
So probably the best solution is to stay away from credit cards. But that probably is also not a realistic solution for most people. And credit cards are necessary for some things; for example if you want to rent a car. They can be very handy in an emergency.
The only realistic solution is to charge only what you can pay off quickly. The next best choice is to pay as much more over the minimum payment due as you can afford. Or consolidate your credit card debt into a lower interest loan or line of credit, but only if you destroy all your cards and never apply for new ones.
Many people made a habit of maxing out their cards and then going bankrupt. Their credit card debt would be wiped out in the bankruptcy court and they would get a “fresh start”. In March 2005, the US Congress drastically changed the bankruptcy code, limiting access by individuals to Chapter 7 of the code, which was the section of the law that sharply limited repayment of debt.
Credit card companies now check your credit report frequently, sometimes every month. Even if you are never late in your payments to them, they may decide you are no longer a prime customer and may raise your rate.
Some of the things the banks are looking at is your use of your overall debt - if your ratio gets too high they get scared. Another event that may trigger a rate increase is a late payment to another credit card company or even to the phone or electric company.
Being even one day late with a payment to any creditor may trigger up to a four times increase in your interest rate. If you’re using one of the free or very low interest offers banks use to lure you to them, they will likely hike your rate as high as 29%.
So, one final note about credit cards: do not ignore the little messages the banks send you either in your statement or separately. They may contain nasty surprises, like an increase in your interest rate that you can avoid by simply writing the credit card company and no longer using their card. I personally got one of those love notes, trying to
raise my interest rate from about 14% to almost 24%. Needless to say, that card went into the garbage.
Now more than ever, you must learn to use credit responsibly. The quick escape of bankruptcy will be harder to come by and it is just too costly over the long term to ruin your credit rating at any point in your life.
A bad credit score not only affects the interest rate you will pay on credit cards, personal loans and mortgages, but also may affect your ability to get a job, rent an apartment or result in an increase in your auto insurance premiums.
So take those little pieces of plastic seriously and handle them wisely.
Chris Cooper is a retired attorney who is very familiar with debt, being in it too many times in his life. These articles pass on some of the knowledge he has gained striving to become debt free. He is editor-in-chief of http://www.credit-yourself.com a website devoted to debt management.
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Posted on April 27th, 2008 — in Mathematics Hall
It is very apparent that a credit card will charge fees in some way or the other. One has to bear the fees somehow or the other.
The key is to look for the card which charges fewer amounts for the services you use. A credit card is used for many purposes. These purposes include shopping, taking cash advances etc. Bank charges different amount of fees for different services for instance if you use cash advances, the fee may be higher, So you should investigate properly about those fees with credit card companies before you sign up with them.
Upfront fees: Every credit card does not charge upfront fees. So try to find out a card, which doesn’t charge such a fee. There is an annual fee for every credit card and if you can bargain for the right rate of upfront fees. This can save a lot of money for you.
Extra fees: This type if fees can be often avoided. But it would be better if you research properly. Some fee like late payment over the credit limit, credit increase, if bargained properly, can save a lot of money for you. Unless a card is offering exceptional rates, these types of programs should be avoided.
Low fees Equal high Rates: If you pay a small amount of fee, you can reduce a large
Balances or balance transfers. It is true that nobody wants to pay extra fee, but there is nothing wrong about it if you get good rebate on your large balances by doing so, there are incentive programs also that you may find with a monthly fee that will still allow you to come out ahead. People who want to pay their balances every month; they can opt for a low rate of interest credit card.
Research Fees: Under federal law, credit card companies are required to list fees and APRs before you apply. This information is often present in a table form. This table includes annual, minimum finances cash advanced transaction, transfer, late payment and over the credit limits fees. This information helps you to decide which card is best for you.
The key is to find the credit card, which charges a lesser fee and rate of interest from you for the services.
Andy Eaton is the owner of http://www.credit-cards-4us.com a site decdicated to helping consumers find the right credit cards, helping them get out of debt.
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Posted on April 4th, 2008 — in Mathematics Hall
When you find yourself in a bad credit situation it is easy to find hope in credit counseling agencies. You feel safe when someone says that they are a “non-profit organization.” But often, those that are offering help are only helping themselves.
Federal and state regulators are warning consumers that some credit counseling agencies are not what they seem. They may actually be using a non-profit status to avoid consumer protection laws. This gives them the ability to advantage of you, the trusting consumer.
What makes the agency non-profit? All they have to do is provide free education and counseling services. But many agencies are using these as a way to hustle clients into debt-management plans, which pay off big time.
With most debt-management plans, the client pays the agency a certain amount of money each month. The agency then pays the client’s bills. The agency negotiates lower interest rates and the waiving of fees with the client’s credit cards and loan companies. The credit card companies will usually give the agency a kickback, a percentage of the amount repaid.
Many experts say that clients are often pressured into the plans, even if they don’t need them. Some agencies don’t pay the bills on time, and you are the one who suffers.
Even the IRS has stiffened its review of agencies seeking non-profit status.
There are legitimate credit counseling agencies out there that can help you with your financial problems. You just have to shop around and do your homework when choosing an agency.
Talk and visit several agencies before selecting one. Don’t let the non-profit label fool you into thinking that a certain agency is better than the others. Non-profit status doesn’t differentiate the good from the bad, you must do that yourself.
Watch out for agencies that want “voluntary” contributions and high monthly service charges. If you are having financial problems, chances are that you can’t afford to pay high fees. Before you sign up for a debt management plan, request a written statement of all agency fees.
If an agency says that they can get you out of debt quickly or slash all of your interest rates, don’t believe it. First, getting out of debt takes time. You are simply looking for a plan that will get you there a little faster - but it still takes time.
Secondly, interest rates are determined by your credit card companies, not the agency. Many creditors won’t lower your rates. Some will. The agency has no idea of knowing what the future holds.
Check with your creditors to make sure that they are willing to work with the agency you choose. Once you have started a payment plan, make sure that your creditors are receiving their payments on time. If they don’t, it’s your problem.
Ask around for a reputable agency. Check with the Better Business Bureau and your state’s attorney generals office to see if there are any complaints on file. Ask the agency if they are a member of the Association of Independent Credit Counseling Agencies or the National Foundation for Credit Counseling - two well-known groups that have standards and fee limitations.
It’s okay to ask for help, but make sure that you can trust who you ask.
Martin Lukac, represents http://www.RateEmpire.com, a finance web-company specializing in real estate/mortgage market. We specialize in daily updates, rate predictions, mortgage rates and more. Find low home loan mortgage interest rates from hundreds of mortgage companies! Visit http://www.RateEmpire.com today.
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