Credit (finance)

5 Myths About Credit Cards That Won’t Go Away

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The idea of evaluating a person’s creditworthiness goes back as early as 1899, when Equifax (originally called Retail Credit Company) would keep a list of consumers and a series of factors to determine their likelihood to pay back debts. However, credit cards didn’t make an appearance until the 1950s, and the FICO score as we know it today wasn’t introduced until 1989.

Due to these timing differences, many U.S. consumers hold on to damaging myths about credit cards. Let’s dispel five of these widely held but false beliefs and find out what to do to continue improving your credit score.

Myth #1: Closing unused cards is good for credit

Remember when United Colors of Benetton used to be all the rage and you shopped there all the time? Fast forward a decade; you don’t shop there anymore, and you’re thinking about shutting down that store credit card. Not so fast! Closing that old credit card may do more harm than good to your credit score.

Your length of credit history contributes 15 percent of your FICO score. If that credit card is your oldest card, then closing it would bring down the average age of your accounts and hurt your score. This is particularly true when there is a gap of several years between your oldest and second-to-oldest card. Another point to consider is that when you close a credit card, you’re reducing your amount of available credit. This drops your credit utilization ratio, which makes up 30 percent of your FICO score.

What to do: Keep those old credit cards open, especially when they are the oldest ones that you have. Just make sure that you’re keeping on top of any applicable annual fees and they’re not tempting you to spend beyond your means.

Myth #2: Holding a credit card balance is good for credit

Your payment history is a more influential factor to your FICO score than your total amount owed to lenders (35 percent versus 30 percent, respectively). This means that if you have a choice between paying off and holding on to debt, it’s generally better to pay it off. However, responsible…

5 Providers of Debt Consolidation Services and Loans for Businesses

Debt Consolidation Services

Business and entrepreneurship in particular is among the riskiest endeavors you will ever take. Most of the time, you find that you have a unique business idea and a ready market. Things look up and to generate more revenue, you may choose to use your business credit card or take up a few loans just to finance and to build your business.

Unfortunately, there is an economic crisis, and you are unable to repay your loans and your sales drop. What do you do then? File for bankruptcy? Of course, this is the first idea that will cross your mind, but it may not be the best way out for you.

There is a better alternative – debt consolidation.

Debt consolidation refers to the putting together all your existing loans and credit card debts into one. Basically, you will take up a loan to repay your loan, now consolidated into one unit with a lower interest rate. The one big loan taken up pays off all your existing loans and credit debts and you will have one loan to service.

Your business is eligible for debt consolidation if you have several creditors breathing on your accountant’s neck monthly and when you need a better system of repaying all your creditors.

The first step is to determine the amount you owe against the amount you have or what you can afford to repay monthly. Choose a plan[1] that will work well for your business. After that, you should find a company or a reliable debt consolidation service provider. There are various service providers, but the main ones include:

1. Online debt consolidation companies/peer-to-peer lenders

There are many of these nowadays and you may be stuck on which company to choose, especially when inexperienced. As a rule of thumb, research, review, and ask, even though online businesses have debt consolidation loans[2] made easy. Your financial counsellors, colleagues, or acquaintances will guide you in the right direction. Some of the leading online debt consolidation loan companies include:

  1. LendingClub: This is one of the nation’s biggest peer-to-peer lenders. If your business’ credit score is strong, then you will enjoy debt consolidation services at low interest rates from this online entity. Their rates are easy to understand and calculate because all the necessary items are described clearly. The LendingClub has been accredited and you can trust…

8 Ways to Build Credit Even as a Student

Between classes, extracurriculars, and social activities, most college students have no trouble staying busy. Building credit may be low on their list of priorities, but that doesn’t mean it’s too early to start thinking about it. Being mindful of credit as a young adult can make it easier to land a car and a place to live, and secure lower interest rates on loans. Here are some steps that will set you on the path to stellar credit for the times when you need it most.

1. KNOW YOUR CREDIT SCORE.

The first step to building excellent credit is learning your credit score. Even without car payments or credit cards to pay off, anyone with student loans will have a credit history. A federal law makes it easy to check credit reports from the three main reporting agencies online. Annual reports are free, but according to a recent survey only half of college students take advantage of them. Having an idea of your credit score isn’t the only reason to check it: The report may contain mistakes or traces of fraud you weren’t aware of. Staying on top of your credit status means you can take care of any complications before they become an issue.

If you haven’t been checking your report because you’re afraid doing so will lower your score, fear not: When you check your score yourself, you’re initiating what’s called a “soft” credit inquiry. These kinds of inquiries do not have an adverse effect on your credit score—only the hard inquiries conducted by financial institutions do. (Generally speaking, a hard inquiry can only happen with your consent.)

2. FIND THE RIGHT CARD.

Contrary to popular belief, using a debit card exclusively isn’t a savvy financial move. Responsible credit card use shows credit agencies that you can be trusted to make payments on time. But deciding that you want an extra card in your wallet is half the battle—next you’ll need to narrow down your choices. First and foremost, compare the interest rates on different cards—the lower, the better. Next, consider the extras. Some companies offer cards designed for students with perks like rewards for good grades. Not every student will qualify, however—especially those without any income or bad to nonexistent credit history. If this sounds like your situation, a secured credit…