Credit score

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…

6 Infuriating Ways You’re Ruining Someone Else’s Credit

Your credit score is one of the biggest deciding factors in your financial health. It influences whether you qualify for the best interest rates on mortgages or auto loans, it can impact your insurance rates, and it can even determine whether you land that dream job or not.

Establishing good credit requires managing your credit accounts responsibly. But your own credit score isn’t the only one that can suffer the consequences of poor credit management. In the same way money can ruin a friendship, your financial carelessness could ruin someone else’s credit. Here’s how.

1. Charging up someone else’s credit card

Becoming an authorized user on someone else’s credit card helps build your own credit history. You’ll receive a credit card in your name, and you’re allowed to make charges on the account. But even though your name is on the card and the account shows up on your credit report, only the primary account holder receives the statements. This person is ultimately responsible for any purchases you make with the card.

If you’re an authorized user, the mature thing to do is pay whatever you charge each month. If you don’t or can’t pay, this sets in motion a chain of events that could ruin the other person’s credit.

Any purchases you charge to the account can raise the primary account holder’s balance and increase their credit utilization ratio beyond a healthy range (utilization ratio is the credit card balance compared to the credit limit). Ideally, credit utilization should never exceed 30 percent of a credit limit — the lower, the better. A high utilization ratio can lower credit scores.

In addition, ringing up charges on someone’s credit card and not paying what you owe could trigger payment problems. This can happen if the primary user doesn’t have enough money for higher minimum payments. If they can’t pay the credit card bill within 30 days, the credit card company could report the late payment to the credit bureaus. While a 30-day delinquency won’t tank a credit…

4 Questions to Ask Before Getting a Credit Increase

Feeling penned in by the low credit limits on your credit card? You might be able to boost your credit limit to a higher amount. Often, all it takes is a single call to your card provider. The bigger question, though, is whether you’re financially prepared for a higher limit.

Your credit card providers will always set a credit limit on your cards, the maximum amount you can borrow. If you have a short credit history or a low FICO credit score, your credit limits might be low ones, sometimes under $1,000. If you have a long credit history and high scores, your limit might be $10,000, $20,000, or more.

How do know if you’re ready for the financial responsibility of a higher credit limit? Here are some questions to ask yourself.

Do You Pay Your Credit Card Bill Late?

Do you pay your credit card bills by their due dates every single month? Or have you missed payments in the past? If it’s the latter, you might want to hold off on requesting a higher credit limit.

Paying your credit cards 30 days or more late will cause your FICO score to drop by 100 points or more. Your credit card provider will also charge you a penalty, and your card’s interest rate might soar. If you have a higher credit limit and a high balance, an interest rate spike could cost you quite a bit in extra interest payments.

Having a history of late payments will also give your credit card provider pause; the financial institution might not want to boost your limit if you don’t always pay your bill on time.

Do You Carry a Balance on Your Card?

The smart way to use a credit card is to pay off your balance in full each month. This way, you boost your credit score by making on-time payments, and you won’t get hit by the high interest that is often…

6 Credit Card Mistakes That Could Be Ruining Your Credit

This post contains references to products from our advertisers. We may receive compensation when you click on links to those products. The content is not provided by the advertiser and any opinions, analyses, reviews or recommendations expressed in this article are those of the author’s alone, and have not been reviewed, approved or otherwise endorsed by any bank, card issuer, airline or hotel chain. Please visit our Advertiser Disclosure to view our partners, and for additional details.

It’s difficult to overstate how important your credit record and credit score are. Not only will good credit enable you be approved for the most attractive credit cards, it’s vital for receiving the lowest rates on a car loan, a mortgage, and on home and auto insurance premiums. It can even make the difference in whether you get the apartment or job you want, since both landlords and employers often run credit checks on applicants. (See also: 15 Surprising Ways Bad Credit Can Hurt You)

Unfortunately, many credit card users are making big mistakes that are ruining their credit. Since it can take years for some of the most negative items to drop off your credit report, it’s crucial to avoid making these mistakes in the first place. Here are six credit card mistakes that could be ruining your credit.

1. Paying Late

The most important factor in your FICO score — the most popular credit score lenders use to evaluate you — is your payment history. It makes up 35% of your score. (See also: 5 Things with the Biggest Impact on Your Credit Score)

If you are using a credit card, your first priority should be to always pay your credit card bill on time. While one bill paid a few days late won’t cause lasting damage to your credit score, paying late frequently will hurt more. On top of that you’ll usually be subject to late fees.

Thankfully, there are many tools to help you pay on time. Most credit card issuers offer automatic payments to ensure that you never pay late. You can also request a specific payment due date so you can arrange all your bills to be due at the same time each month. That way you can sit down and pay bills just once a month rather than keeping track of various bills as they come in. Additionally, you can sign up for payment reminders by email or text.

2. Paying Less Than the Minimum

Paying just the minimum payment on your credit cards will hurt you financially, but paying below that is even worse — much worse.

To avoid being considered delinquent on a credit card account, you not only have to make your payments on time, but the payments must be at least the minimum amount required, which is stated on your bill. If…

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…