Bad Credit Loan Articles and Blog Posts

Submitted by Alice Bryant  on Thu, 06/25/2015 - 15:50

When you have a large amount of debt, it can seem overwhelming to pay it all off. However, it is possible to tackle debt one payment at a time, and many people have continued to pay off their debt even while unemployed or underemployed. Here are some of the ways to get your debt under control.

Prioritize Debt Payments

If you’re in a place where you’re living month-to-month, you may not always have the money to pay each bill. However, it’s important to prioritize your debt payments. If you default on the debt, your debt load will go up even further and affect your credit, so it’s important to make consistent payments even when you don’t have enough cash flow coming in.

One way to do this is to pay your debt payment as the first bill each month. Even if you have bills that are due earlier in the month, you can pay what’s most important and then see if you have the money left over to cover all the bills. Aside from your debt payment, prioritize paying back any bills that will incur a lot of interest if they’re not paid. Whenever you enter a situation where you can’t pay all of the bills, consider which ones will affect your credit if not paid; try to negotiate with companies to make a different payment plan if necessary.

Pay Back High Interest Loans First

If you have multiple sources of debt, it’s important to pay back the highest interest debts first. This is because these are the ones that are accumulating the most interest and leading to your high debt load. Whenever you can afford to make more than the minimum payment on your debts, apply the money to the highest interest loan until it is paid off in full. Then, begin to make high payments on the next highest interest loan.

Use Credit Cards Wisely

In some cases, you can actually use your credit cards to help you pay off your high interest loans. For instance, if you have a low-interest credit card that hasn’t reached its maximum yet, consider making a large payment towards your high-interest loan. Essentially, you’re transferring your high-interest loan to the low-interest loan, giving you a lower interest rate while you attempt to pay everything off.

Consider Consolidating Debt

The advice to consolidate debt is sometimes controversial. In some cases, it can certainly help you manage debt from a lot of different sources. Before you agree to consolidate your debt, be sure to calculate how much interest you’re paying in total for all of your debts, and compare it to the new, single interest rate. In some cases, when you have several sources of high- and low-interest debts, a debt consolidator can help you get a better rate overall.

Delay Big Ticket Items

Unfortunately, if you are thinking of making a big ticket purchase such as a car or buying a home, you may need to wait until you are clear of your high debt load before you begin. Lenders will look at the amount of debt you’re currently in when deciding what kind of interest rate to give you. When you have a high debt to income ratio, they will give you very high interest rates for any new purchases that you make. Consider postponing any major purchases until you can pay down your debts a little; you’ll be able to get better rates on these items and avoid putting yourself into an even bigger debt problem.

Dip into Your Savings

When you have a lot of debt, your savings account may be your best option in paying back loans. If you choose to use your savings to tackle a large loan, then you will be able to start rebuilding more quickly without debt looming over your head.

Ask Family and Friends

If you have a lot of close friends and family, you may consider getting some money from them in order to help you cover your loans. While you may still have to pay them back, they probably won’t charge you interest; at least this way, you aren’t accumulating more debt as you try to pay off your current debt load.

Ask for Options

Banks can sometimes be understanding when you have a major loss such as a loss of job or other major financial setback. Depending on what type of institution you have your loan from, there are a few ways to get help in managing your payments.

If it is a student loan or a loan from a government source, then you may be able to get a forbearance claim. In that case, you would submit an unemployment or medical claim to the financial institution and ask to defer payments for 6 months of more.

If your loan comes from a major financial institution, then you could still apply for having the debt refinanced. Banks may be able to offer you lower interest rates if your credit is in good standing. This can be especially helpful if your credit was worse when you took out the loan. Another thing to consider is getting the loan refinanced. Ask your bank if they can reduce the monthly payment if you’re struggling to make ends meet.

Keeping Your Credit in Good Standing

Ideally, if you are able to make minimum payments on all of your loans each month, your credit should remain in good standing. Even when you have a long road to repaying debt, a good line of credit can be really helpful should you need to take out more loans to cover short term costs, whereas bad credit can cut you off from other sources of income to pay back your loans.

The benefits of straightening out your debt load and managing your credit are the keys to financial freedom, and so it’s important to keep working towards paying back your debts even when it seems difficult. Creating a budget can help you plan your debt payments around all of your other responsibilities. If you need more help in deciding how much to pay and to whom, seek out a professional financial counselor.

The process of managing a lot of debt can seem daunting at first, but with these tips you can begin to chip away at the debt, little by little. The most important things are to be consistent in your payments and to seek out expert financial advice when you’re not sure how to proceed. With a little perseverance, you can one day be debt free again.

Submitted by Alice Bryant  on Tue, 06/09/2015 - 08:16

When it comes to buying a home, many factors play into getting the best deal on a mortgage. One of the most important factors is a person's credit score, which can make the process easier or harder depending upon the score. For those who have bad credit due to previous financial difficulties, their low credit scores more often than not result in obtaining a mortgage that is much more expensive in the long run than those whose credit is excellent.

Conventional Loans

For most people seeking a mortgage, obtaining a conventional loan is the usual path to home ownership. Known for having very reasonable terms and fees, conventional loans generally offer long-term affordability for most homeowners over the length of the mortgage. However, that applies only to those borrowers who have excellent credit scores and other factors going in their favor. For those who have low credit scores and little if any equity, the terms of these loans can be far less attractive.

Risk-Based Pricing

What makes conventional loans harder for those borrowers with low credit scores is risk-based pricing. Essentially, this allows the bank to assess the borrower's financial picture and assign loan terms accordingly. With conventional loans, consumers can expect to have higher rates and fees with these loans when their credit score is between 620-679. For example, homeowners who want to refinance in order to lower their monthly payment will have higher costs, as will those who have down payments of less than 20 percent or whose loans total more than $417,000.

Mortgage Insurance

Another part of the mortgage puzzle that often results in higher rates for those with bad credit is mortgage insurance. This hits those with bad credit hardest when they have little to offer in the form of a down payment. Generally, when a down payment of less than 20 percent is made, the lender will require the borrower to pay a higher mortgage insurance premium to lessen the bank's risk. On average, these premiums total 110 percent of the loan amount on an annual basis. When this is the case, it can translate into thousands more dollars per year being paid out for the premiums. For example, a person whose credit score is 630 may find themselves paying more than $4,500 per year for mortgage insurance, while a person whose score is 700 may pay just over $3,000 annually. As a rule, the lower a borrower's credit score, the more they can expect to pay in mortgage insurance premiums.

Options for Reducing Mortgage Costs

While it's clear having bad credit can make a mortgage much more expensive, the good news is there are steps that can be taken to improve credit scores and lower mortgage costs. When purchasing a home, most borrowers have thousands of dollars in credit card debt that has often contributed to having bad credit. By paying down these debts, credit scores can often increase, which can lead to lower mortgage costs. Unbeknownst to most borrowers, lenders will often offer a free credit analysis, which allows the borrower to see how much of an improvement they would have by completing certain steps. Lenders are often willing to work with customers in an effort to improve their credit scores, knowing if that happens there's a good chance they will have a long-term customer with a new mortgage. Another way to reduce mortgage costs is to save up as much money as possible for a down payment. The more money that's offered for a down payment, the less risk the lender takes on and the result is lower mortgage insurance premiums as well as decreased interest rates and other fees.

FHA Loans

While most people continue to use conventional loans when purchasing a home, more and more people with bad credit are turning to FHA loans as more affordable options. While in the past an FHA loan was considered to be the most expensive mortgage option available, events in recent years have dramatically changed how people view FHA loans. Insured by the Federal Housing Administration, these loans were given new life recently by the federal government to help energize the housing market as well as the overall economy. One of the biggest advantages of these loans is the fixed rate on their mortgage insurance premiums, which now stands at .80 regardless of a borrower's credit score or total amount of their loan. The loans also take credit scores into account far less than conventional loans and are not limited to first-time home buyers, meaning anyone can use them to either purchase a new home or refinance their current one. The biggest drawback to these loans is the 1.75 percent mortgage insurance premium that is charged upfront and financed in the loan, but overall these loans have proven to be smart options for those with bad credit who are in need of a mortgage.

Multiple Loan Programs

While bad credit almost always makes a mortgage more expensive, borrowers who have a lender willing to work with them can often find options that can fit into their budget. Along with conventional and FHA loans, many other lending programs are available through the federal government to make sure those seeking home ownership can see their dreams become reality. A good loan officer will be willing to find out how many programs a customer qualifies for, because it will increase the chances of the bank providing the loan. The major benefit to borrowers is it lets them have many more options to consider, and also lets them hand-pick which option works best for them based on their cash flow and budget constraints.

Despite the difficulties and frustrations that sometimes go along with attempting to obtain an affordable mortgage, more and more people are still chasing the dream of home ownership in the United States. Whether it's a credit score of 620 or 800, the good news is there are affordable mortgages available for virtually anyone. By taking the time to research and ask questions of their loan officers, smart consumers can find themselves not only living in the home of their dreams, but having an affordable payment at the same time.

Submitted by Alice Bryant  on Fri, 05/22/2015 - 08:32

Chances are good you've noticed an increase in how many credit card offers the banks have sent you. If you have bad credit, you might question the point of giving them a look, but it might actually pay off. Right now, the biggest banks in the nation want to build up their portfolios for credit cards by having existing customers get more plastic. To help up the incentive, they're providing extra goodies.

Those who are good with their finances likely already know the feeling of credit card companies throwing their cash to try and get them as a customer. Issuers do everything possible, even offering straight bonuses for hundreds of dollars, doing everything they can to grab a hold of the economy on its rebound.

Credit cards are in the unique position of offering great returns thanks to low interest rates. Banks don't have to pay as much to fund, and consumers are getting confidence to borrow credit again. In October 2013, credit card debt went up $3.98 billion, followed by an increase of $457.8 million the following month, achieving the highest level in the previous three years. Charge-offs and delinquencies are down as well, fostering the banks' hunger to loan out money via credit cards.

Considerations

Credit cards are generally sold as wise ways to make a payment. The sign-on bonuses are generous and certainly tempting, whether it's a steep discount at a retail store or the promise of free frequent flier miles. These rewards make it easy to overlook the interest rate, especially for those who don't actually believe they'll ever borrow money with the credit card. As long as you reach a good balance between sign-on rewards and interest rate, the rest is all about being smart with your money.

Credit limits are usually more than what you make each month. Large lines often exist to tempt people into purchasing more than they can afford, leading to interest payments and generating revenue for the loaner. It's a tactic that works, although it's not one that has to spiral out of control; if you're capable of maintaining a minimum payment, you won't run the risk of defaulting.

Penalty Rates May Extend to All Accounts

If you elect to take on an additional bank credit card, realize that making a late payment on just one of the credit cards could cause a penalty rate on all cards, even if those payments were on time.

Just one mistake can cost more money in interest as long as you have an existing balance on the credit card. Be sure to keep logging in to your accounts to monitor your interest rate so you are not taken by surprised.

Checks Can Cost More

If you get bills in the mail from the bank for your credit card, don't write a single check for all your bills in the assumption that this saves time and money for everyone. In fact, many balance transfer checks will result in a 3 to 5 percent fee for the amount written on the check. Even if the interest rate is less than what you pay on a different account, the fee negates that. As such, it's best to separate your checks or pay online.

If you feel you're paying too much in interest fees, you may be able to negotiates for a lower rate or take an offer for a balance transfer credit card in an effort to reduce the burden of your debt.

Credit cards are one of those necessary conveniences of modern times, but how you treat them is completely up to you. Be sure you have the money to pay for most of your charges; they offer perks and convenience, but mistreatment can lead to lifelong debt.

Good Debt and Bad Debt

In today's world, it is fairly impossible to live without any debt. Most cannot pay for college or housing with hard cash, but too many allow debt to get out of control.

According to experts, it's ideal to keep your long-term debt to 36 percent of your gross monthly income or less. This is a metric that a mortgage banker will look at when looking at your creditworthiness.

It's easy to spend more than you can reasonably afford to pay back, especially if you are going to pay by credit card. Households in the United States that have at least one credit card also hold nearly $16,000 in debt.

On the other hand, it's not smart to avoid all possible debt if it means you can never save any money. The goal is to figure out which debt is smart to take on and which should be managed with your money instead.

In this case, good debt means something you need but aren't able to afford yet without making liquidations or wiping out savings accounts. If the debt makes sense to take on, then take on the debt on your credit card as long as you can afford making the payments each month.

Bad debt is something you can't afford but also don't need, such as a vacation or even that one little tool or appliance at the store.

Sometimes, it isn't about how much you can afford to spend but whether your money can work harder than it does now. If you have low interest rates, think about how much you'd spend on interest compared to how much you might make in an investment. If you might make a higher return investing your cash compared to taking on debt, then it might make sense to borrow while rates are low.

If you want to revolve a balance, consider offers that offer low APR instead of seeking generous bonuses. On these cards, the APRs tend to be somewhat higher, so you would end up paying more in interest than needed.

Even though now that those with bad credit are being courted once again, those with the best credit still have the best rates available. Regardless of your previous credit history, however, you must always think beyond the sign-on bonus and introductory offer, seeking a credit card that offers the most reliable valuable for long-term debt.

Submitted by Alice Bryant  on Thu, 05/14/2015 - 13:22

Debt is a financial problem that can quickly spiral out of control. Falling behind by a little bit can lead to a big credit card bill building up, which becomes harder and harder to pay off the longer it builds. Things go from bad to worse- interest makes the debt grow, and falling behind on payments leads to higher interest rates and penalty fees. Many American households are perpetually in debt without even realizing it- they carry significant balances on credit cards and other loans without considering the consequences. That's dangerous. This article will explain five primary reasons for big debt loads. By knowing these reasons and understanding how they affect attitudes toward spending, Americans can make progress towards climbing out of debt and avoiding getting in the hole again in the future. It is important in the long term to avoid falling into a debt spiral, because getting out of that will mean putting a lot of other things on hold, like retirement saving and preparing to buy a home.

1. Keeping Up With The Joneses

Many American households buy things just to show their friends and neighbors that they can. This is risky. Someone else owning a new car, sound system, or similar item might inspire envy in people who know them- these things are status symbols. But trying to keep up with other people's purchases is a fast way to get into debt by overspending on pointless consumption goods. Keep in mind that other people might be borrowing to buy their fancy new car, so the purchase isn't really a sign that they are doing well- it is just a projection. Buying things to keep up with other people doesn't bring happiness, because there will always be someone a little richer. The desire to show off by buying things can never be satisfied, even after the household is thousands of dollars in debt.

2. Living For Today

Another way people often get into debt is by trying to buy large, expensive items without saving up. This stems from a desire to own things now, rather than deferring the purchase. When there is a big item that the household wants to buy, it is frustrating to put off the purchase and wait, but by making the purchase now on credit, the household winds up paying more for it. Interest will accumulate on that debt. The cost of buying something now is paying more for it in interest. It is better to save credit for emergencies and just save up money over time until the item is affordable- this will save money and also feel more rewarding when it is finally in reach.

3. Going With The Flow

Contemporary American culture makes light of debt- it is routine for people to discuss buying things on credit and how they are carrying credit card balances. That doesn't make it a good idea to go along with the debt culture. There are a few purchases that really require a loan to handle at all, like a house and a college degree, but others do not. For example, it is common to buy a new car with a large loan, but by buying an older model or a used car, it is often possible to get a car without going into debt at all. It means giving up on the prestige of driving a new car, but the financial stability of being out of debt is worth it.

4. Not Saving

Even for people who only use credit in emergencies, it is easy to get into trouble if they are not also saving. It is surprisingly common not to save- almost half of all American households cannot cover three months' worth of expenses. Living without savings is like living on the edge of a cliff- if one thing goes wrong, it is easy to get deep into the hole. Getting out of that debt again will be uncomfortable. It is a very good idea to maintain at least a few months of emergency savings. Even if an emergency winds up costing more than that, the savings will at least lessen the blow. Remember that nobody ever anticipates a sudden emergency, but with savings, it is much easier to manage. Just because it cannot be foreseen does not mean it is impossible to prepare for a sudden need.

5. Not Budgeting

Making a budget should be one of the first things on everyone's agenda each month. It doesn't need to be monthly, in fact- it could be weekly or biweekly. The key is to be able to account for all of the money coming into the house in advance. Even if some of it goes into a general "fun" category, placing limits on how much money goes to food, entertainment, and similar transactions makes it much easier to stay out of debt. With a good budget, households don't suddenly wind up hundreds of dollars behind- they already know where their money is going and how much they have allowed themselves. This kind of organization prevents "surprise" spending or impulse buys from turning into a pile of debt.

After reading this article, it should be clear that there are cultural trends and forces that push Americans to take out loans and use their credit cards too often, but by understanding how they work, it is possible to sidestep these forces and stay out of debt. It isn't easy, and it requires giving up a bit of comfort in the present in order to ensure financial stability. The reward is well worth it, though. Being out of debt opens up a lot of possibilities for saving up for the future, like saving for retirement, a house, or some other major goal. Don't give in to the pressure to swipe that credit card- account for your money, only buy what you need, and save up for things you want. That is the best way to ensure that you are buying things that you can afford.

Submitted by Alice Bryant  on Fri, 05/08/2015 - 10:27

Opposites attract, or so the saying goes, but when it comes to money, different spending styles can spell big problems in a marriage. One of the most common reasons cited by couples filing for divorce is disagreement over money. Nevertheless, if you are married to an overspending spouse, there are things you can do to help improve the situation.

Set a regular date to talk about money.

Many know about the value of a regular romantic date night for strengthening a marriage, similarly, the value of a monthly money meeting cannot be overestimated. If you have an overspending spouse, communication is key. Talking about finances can be stressful, which leads to many couples avoiding the topic altogether. However, if things are going to change, couples need to get everything out on the table. A spouse who overspends has to become aware of the consequences of their behavior. That said, be careful not to approach your overspending spouse with an angry or accusatory tone. Be open and honest in a loving manner. You can talk about shared financial goals like a vacation or retirement, and what you can do to help get there together.

Create a budget together.

If you do not already have one, work together to set up a budget. Figure out how much your shared income is and where it all needs to go. You can show your spouse how many spent frivolously is eating away at savings, or is causing you to go further into debt. Again, try not to be accusatory in the process of getting the point across. It helps to lay it all out in a matter-of-fact way, and ideally, they will come to the conclusion that their overspending isn’t worth it all by themselves.

Set up a fun money account.

Creating a fun money account can give the overspending spouse a little bit of financial freedom. This is money that is specifically set aside to be spent without limitations or comment. Once the money in that account has been spent, your spouse has to wait until the next payday to start spending again. If you are in debt or rebuilding bad credit, the amount you put into this fun money account should be relatively low. If you aren’t in debt and can afford it, put in the amount you are both comfortable with spending on fun or unplanned purchases.

Let the overspender hold the reins, for a short time.

This might appear to defy logic, but putting the overspender in charge of household finances for a month can serve as a wake-up call. Let them pay the bills and manage the budget. The purpose of this is to open their eyes to the reality of your financial situation. They will see how much money is coming in, and how much is going out. It can help them to truly understand why spending on frivolous purchases is a problem. It’s advisable to only do this for a month or two since they don’t have the best track record for financial money management. Though who knows, they might surprise you.

Switch to an all cash system.

One widely recommended method to curb out of control spending is to switch to an all cash system. Stop using credit cards altogether and instead pay for everything with cash. You can tie this into your budget by having envelopes labeled with each budget category, such as groceries, gas, and fun money. When the envelopes are empty, that’s it until the next payday. This will show your spouse visually how much money there is to spend. That can be a more difficult concept to grasp for someone who is in the habit of using credit cards to pay for everything.

Cut up all credit cards.

If you still are not getting through to your spouse, you may have to resort to drastic measures. Some financial experts recommending cutting up all of your credit cards and closing the accounts. If you feel the need to have a credit card in case of an emergency, one trick is to freeze the card in a block of ice. Then, when the emergency arises, you have the time while the block of ice is melting to think hard about whether it is an emergency or not. Unfortunately, if your spouse is a spendaholic, even a credit card on ice might be too much of a temptation.

Get to the heart of the issue with counseling.

If nothing seems to be working, or your spouse if refusing to face their problem with overspending, it may be beneficial to seek help from an outside source. Marriage counseling can help with communication within the relationship, and it is possible that your spouse may need individual counseling to explore deeper issues that may be behind their problem with overspending. Many times, people who overspend had felt deprived at some time during their childhood. There are many possible motivations of which they may not truly be aware. Counseling can be a place to begin to find answers.

Receive support by joining a group.

If none of these tips work, your overspending spouse may have a more serious issue. An addiction to shopping is no different from an addiction to gambling, drugs, or alcohol. Debtors Anonymous is a 12-step program whose aim is to help members gain control over their spending. It can also offer support to spouses of overspenders. Some of the signs that a spouse may have a problem include compulsive shopping, having bad credit, being unable to pass up a good deal, living in chaos or drama around money, being unclear about their financial situation, and having poor savings habits. The odds are high that if they have a serious problem, both of you know it.

Remember that reaching any goal takes time. Breaking bad financial habits will take perseverance, awareness, and effort. Above all, do not forget to be kind. Holding regular discussions with your spouse about finances and taking steps to make overspending less convenient can start both of you on the path to financial success, together.

Submitted by Alice Bryant  on Fri, 05/01/2015 - 08:10

What Is It Good For?

A credit card operates by allowing the cardholder to borrow money conveniently from a bank or retailer to be repaid at a later time, typically a month’s time. It allows a customer with insufficient cash to charge the purchase on the card instead of waiting. A credit card differs from a debit card, which deducts the amount of the transaction from the linked bank account at the point of the sale. Consequently, a debit card holder cannot spend more funds than reside in his or her bank account.

It’s wise to keep in mind that a credit card is not a source of additional income, but only a temporary loan.

Secured or Unsecured

General purpose credit cards are almost universally accepted, whereas cards issued by retailers and gasoline companies are only accepted by their issuers. Both general purpose secured credit cards and unsecured cards are offered. Secured cards benefit those with low credit scores or no credit history -- credit is extended based on funds deposited with a bank that will be forfeited if the cardholder defaults on payments.

Different Cards For Different Purposes

One can apply for several kinds of unsecured credit cards depending on one’s needs, so determining online which is the most suitable card will minimize unnecessary credit applications. There are credit cards that specialize in 0 percent interest on balance transfers, earning cash back, collecting frequent flyer miles, and gas rewards, as well as student cards or small business cards. Applicants should also have an idea of their spending and bill paying habits. As long as one pays the total amount due before the due date, or within the grace period, there is no interest charge for this month’s purchases due on next month’s bill. Some credit cards also charge an annual fee for special programs and privileges.

Credit Limit

The credit limit is the amount of money that one is allowed to borrow from the bank for purchases. It is set by the borrower's credit rating and income level. A credit card account from a bank or a store differs from a direct bank loan in being a revolving account. The credit card holder can keep charging while maintaining a monthly balance as long the total balance on the account remains within the credit limit. Credit limits are counted as part of the total credit extended to the cardholder on his or her credit record. On the other hand, charge cards, like American Express, have no predetermined limit. Their monthly spending authorization is determined by the customary spending and repayment pattern of the cardholder.

Annual Percentage Rate

The fee that is charged a borrower for the use of the bank's money is the annual percentage rate (APR). Generally, the interest due is calculated as the average daily balance, divided by the number of days within the payment cycle, multiplied by the APR divided by the number of days in a year. The annual percentage rate typically reflects the type of borrower, with lower rates offered to borrowers with high credit scores and an excellent payment history. The APR is applied to purchases, or payments for goods or services. Other types of transactions offered by credit card companies are balance transfers and cash advances with interest rates that may differ from the APR for purchases. Note that if one pays the monthly balance in total each month, then the APR doesn’t matter since there will never be any interest charge!

Balance Transfers and Cash Advances

In balance transfers, a transaction fee is charged to transfer an amount from another higher rate credit card account. Occasionally, there will be a limited time offer for balance transfers at a special low-interest rate for a fixed term, typically six months or one year, after which the interest on the remaining unpaid balance reverts to the APR for purchases. If the payments on balance transfers are not paid on schedule, by the monthly due date, any special balance transfer rate can be canceled. When this happens, a penalty rate can be levied on the unpaid balance, often a rather high rate, as much as 29.99 percent, until that balance is paid off. Cash advances are similar to balance transfers in that a specific interest rate may be applied for the advances, along with a transaction fee set by the bank. In every case, reading the fine print on any offers will inform one of relevant information and conditions.

Extended Warranties and Protections

Credit cards can offer extended warranties on purchases, lowest price protection, and anti-fraud protection. In the case of a lost or stolen credit card, one is liable for only $50 of fraudulent charges as long as the credit card issuer is notified promptly of the loss.

Pay More Than the Minimum

In order to avoid paying interest charges, it’s best to pay off the balance owed every month. However, banks and card issuers prefer that their customers pay off only part of the balance owed so that they can make money by charging interest on the remainder. There is a minimum amount that must be paid every month keep the account in good standing. However, it’s not at all in the best interest of the customer to pay only the minimum amount. If a card holder owed a balance of $5000 at 17 percent APR and paid just the monthly minimum consisting of 3 percent of the balance plus interest charges, without creating any more charges, it would take 158 months to pay off the original balance and the total interest paid would amount to another $4030.56.

Late Charges and Penalties

Like other businesses, credit card issuers depend on a steady and predictable stream of revenue monthly. They, therefore, discourage late and missed payments by means of late charges that can sometimes be larger than the minimum payments on low balance accounts. Frequent late or missing payments will impact credit records negatively.

Managing Credit Cards

While it’s normal to hold more than one credit card for different purposes, managing multiple cards can become difficult if the number exceeds five. Holding one card is appropriate for someone who is new to managing credit, or is rebuilding credit. Keeping track of interest rates, payment due dates, fees and charges is much easier when the number of cards is between one and three. If keeping track becomes unmanageable, then there are too many credit cards involved, and it’s time to reduce their number.

Credit cards are a feature of modern life. They provide a record of credit history that is needed for major purchases, as well as things seemingly unrelated such as job applications and apartment rental applications. Managing credit cards well is essential for keeping one’s finances operating smoothly.

Submitted by Alice Bryant  on Thu, 04/23/2015 - 10:35

In the past few years, times have gotten challenging for the average working-class American. The banking crisis, a recession, job losses, changes in healthcare and tax requirements, as well as a number of other factors, have led to a dwindling middle class. More and more working class Americans are relying on credit cards, loans, and other temporary measures to get through difficult economic times and lenders are taking advantage of the situation in which demand exceeds supply.

Unfortunately, this model of doing business may seem helpful on the surface, but is designed to keep middle-class people stuck in a cycle of paying off interest rather than debt. It also often leaves those below the poverty line seeking help from all the wrong places.

Bad Credit Financing: The Good, The Bad, And The Ugly

Although there are a number of good and reliable companies, things such as credit cards, payday loans, and home and car loans for those with bad or no credit come with interest rates as high as 400%. In some cases, the terms of financing designed for those struggling financially are worse than what one would see from a local neighborhood loan shark.

While visiting a loan shark is a foray into criminal activity, those lending to desperate Americans at rates of interest and payment terms that count on the borrower not being able to meet the burden of on-time payments has gone largely unchecked. Sadly, it has also driven many into default, repossession, and bankruptcy. However, in 2008, things began to change when the bottom fell out of the banking industry.

The collapse of many of the major banking institutions, as well as much smaller ones, was perilously close to the start of the Great Depression in 1929. That fate was narrowly avoided by government intervention, but one of the factors responsible for the crisis was predatory lending. In short, banks were targeting poor Americans for home and car loans and betting on the fact that these loans would not be paid back. The rich got richer and the poor got poorer, until the model of doing business caught up with everyone. Suddenly, even the wealthiest banks in America were as bankrupt as the people who went to them for help.

After such a catastrophic event, the United States government started to pay more attention to lending practices across the country. Credit card companies were given new sets of rules preventing them from abruptly raising interest rates, and predatory lending was swiftly put to an end. However, services such as payday loan companies and "bad credit" credit cards have still been considered legal and not committing any infractions in charging rates of interest up to 400%. Unethical, perhaps, but the government decided people understood the terms when agreeing to these loans. Meanwhile, these business practices hurt those lenders that offer reasonable terms on lending to middle and lower-class Americans. It is the ones taking advantage that end up being advertised the most, that work to be the most successful, that promise "the money you need now" while minimizing the strings attached.

Putting An End To Exploitation

In 2014, all of that changed when President Obama decided to look into these forms of financing, and declared many of them to be predatory lending practices. While not illegal, measures are being put into place to put a cap on the maximum rate of interest and penalties handed out by those offering bad credit loans. As a result, the institutions in business to take every last dime from those struggling to make ends meet, or those who offer loans and wait for borrowers to default and get money back from the government are being forced to close up shop.

While the government is working to protect people who need to borrow money in the form of a payday loan, credit card, or traditional loan, it is still each individual's responsibility to avoid falling into traps that will make a bad financial situation worse. For those in need of a payday loan or bad credit financing, it's important to remember that reputable lenders do exist and it is not wise to choose the most popular option without comparison shopping. However, even the most honest of lenders will charge a higher rate of interest to those considered a poor credit risk.

Strong Financial Decisions Begin With Information

A good start for every American is to know what's on one's credit report, and to actively monitor the situation. Establishing good credit is not a privilege reserved for the rich, but it does require responsible financial behavior and diligence when it comes to keeping an eye out when lines of credit are required. Borrowing money is certainly not a bad thing, not even if a payday loan or bad credit financing is needed. Having no credit presents as badly on the credit report as having bad credit, so choosing the right lenders and only borrowing what you can afford is essential to building a better credit profile. Of course, a better credit profile leads to lower rates of interest and can end up saving a borrower thousands of dollars as a consequence.

For those who aren't sure where their credit stands, it is important to take a look at the nitty-gritty details, especially if poor credit is leading to a payday loan or credit card company. There are services available online that give you a free credit score. However, this is in actuality not always what a lender sees when doing a credit check.

There are three bureaus that run credit reports on every American: Equifax, Transunion, and Experian. The problem is, not every lender reports to all three bureaus, so a score may be substantially higher or lower on one report than another. It is best to invest in a service that shows the details of each bureau's report, including the all-important FICO score, a number that defines your credit-worthiness in three digits. These services also provide monthly updates, helping the average person to keep track of financial decisions and dispute anything that may be an error.

Can Payday Loans Still Be A Good Thing?

In the meantime, if one does need a payday loan, it is important to use it as such and pay it off as quickly as possible. These lending sources are not bad when used properly; in fact, they are designed to benefit working-class Americans who have been put in bad situations due to an unexpected emergency. Unfortunately, studies have shown that over 70% of those who need payday loans are using them to pay for food, shelter, and other basic needs. This becomes a cycle that feeds itself and only ends up in extraordinary debt. While the government is cracking down and putting laws in place to govern those who offer payday loans and bad credit financing and keep the poor from being exploited, it is also the borrower's responsibility to make intelligent choices that don't end up keeping the wheel of debt and borrowing money turning.

Submitted by Alice Bryant  on Fri, 04/17/2015 - 10:06

Everyone needs a break once in a while, but having bad credit can limit your ability to take that much needed vacation. However, it is possible to still take that break. Smart planning is the best way to overcome this obstacle, while still being able to maintain the ability to improve your credit standing. What are some strategic methods that can help put vacation plans into motion?

1. Set a Realistic Savings Goal

Decide the type of vacation the family desires, and then consider the cost of the entire getaway. Once that amount is known, then it is important to consider the weekly budget and determine the amount that can be put aside each week towards the vacation fund. Make sure this amount is reasonable, and that it does not cut into the money needed to pay bills or buy groceries. As the vacation fund starts to grow, the family will become more motivated to save instead of splurging on a new outfit or eating out at a fancy restaurant. Any extra, unnecessary purchases can end up postponing the vacation for additional weeks or even months.

2. Make all Bill and Loan Payments

It may seem like a good idea to skip a payment on a credit card or a loan payment, but this method of saving money right now will cost much more in the long run. Late fees and other penalties can be added to your bill, and the next time a payment is due, more than twice as much will be owed. Not meeting the agreed upon minimum payment requirements can add additional debt that will make recovery from bad credit more difficult.

3. Search for Deals and Bargains

The internet has several different methods of searching for vacation deals. Decide which type of vacation you wish to take and start comparing prices based on that. Airfares, hotels, and package deals can easily be priced and booked online, plus there is even a chance of catching last minute deals that can come at a huge discount.

Prices for each vacation will vary based on whether it is peak season or off-peak for each specific location. An off-peak vacation will most likely be the more economical choice. Being flexible with the dates and the location is also a plus that can help save money. Check several different travel sites on a regular basis to compare prices and have the possibility of catching that dream vacation at an unbelievable price.

4. Work on Your Bad Credit Score

Regardless of how a vacation is paid for, using credit to make payments is much easier. Make sure to continue making payments on any debt that has accumulated and get a credit score that anyone would be proud of. Always pay at least the minimum amount on any bills, and keep whittling down the account balances.

Once a credit card is able to be attained, it will make booking the next vacation a breeze. Consider a credit card that offers rewards, such as flight miles or hotel stays. Over time, the reward points earned for using the credit card and paying it off on time can be used to save money on another vacation. With enough reward points, a free vacation may be waiting in the future.

The tips that are listed above can help anyone gain a restful vacation away from a debt filled life. Bad credit is an aspect of life that can affect everyone, but it is up to each individual to take control of the problem. Make an effort to pay off accounts that can be credit score changing and do what is necessary to maintain good credit. Doing this will make the next family vacation an easy to plan trip that will create priceless memories, which will not be forgotten for years to come.

Submitted by Alice Bryant  on Thu, 04/09/2015 - 14:44

The unfortunate thing about having bad credit is that once your score sinks low, it can be hard to dig yourself out. You have fewer opportunities to show companies that you can be financially responsible. You know that when your score improves, you'll be eligible for better deals, so it's a smart move to try to improve your standing. Fortunately, if you remain focused on being better with your money, you can get to a score you'll be proud of.

What Causes Bad FICO Scores

A few different things can be causing your low FICO score, but there are three main reasons. The first is simply having a lack of available credit. When you're just starting out in life, banks don't yet know whether you're going to be financially responsible, so they simply deem you "risky". Once you start making regular payments on a card or loan payment -- even if you need to have a cosigner -- you'll start to see some improvements in your score.

Late payments are another major cause of a poor score. When a lender sees that you make payments 30, 90, or more days late, they'll definitely be less likely to give you a card or a loan. Your "credit utilization" can also play a big part. This a ratio of the amount of debt you have to the amount you have available. For example, it looks a lot better if you have only $100 out of $1,000 charged on your card than it does to be using $900 out of $1,000.

The Bad Credit Cycle

What happens when you have a low FICO score is that you get caught up in a cycle. The companies who are willing to offer you a loan or card are going to give you lower limits and higher interest rates. This double-whammy makes it harder to get out of the cycle.

When your limits are fairly low, it's easy to find your utilization rate high. For example, it's common for those who have a low score or no score to get a card that has only a $500 limit. A single trip to the grocery store could easily bring your utilization rate over the ideal 30 percent rate. When you compare this with someone who has a good score and $20,000 in available funds, it's easy to see how this can make a really big difference.

Furthermore, higher interest payments makes it much more difficult to pay down your balances. If you're paying less than the full balance on your card, every time you pay your credit card bill, a portion of it goes toward the interest and a portion goes to pay down the principal balance. When you have a high interest rate, a larger portion of your payment goes toward interest. Lowering the interest rate can help you pay down the bill faster, thus improving your utilization rate, but without a good FICO score, you can't get those lower interest rates. Again, you can see how this cycle means you feel trapped.

Building Up Your Score

Getting out of this cycle means getting serious about improving your FICO score. The first thing you should do is to always pay your bills on time. Your payment history accounts for 35 percent of your score, so when you pay on time, it can make a big difference quickly. Even if you can only make the minimum payment, it's essential to pay by the due date. If you turn this around, you'll start to see improvements in your score. They add up over time.

Secondly, strive to pay down your balances or maintain a low utilization ratio. You may need to stop using your cards in order to get to where you want to be. As your balances go down, your FICO score will start to rise. You may even find that the combination of a higher score and lower utilization means that the lender will increase your limit. Resist the urge to use this higher limit. Remember that your goal is to maintain a low utilization ratio. Spending more will keep you in the bad credit cycle.

Help for Extreme Cases

For some people, the problem comes from having a FICO score so bad that they can't get approved for a card. If you can't prove that you're creditworthy, you can't improve your FICO score. If you've had cards canceled due to non-payment, or just don't have enough on your report to get your first card, you have a big problem.

The key to solving this is to get a secured credit card. These cards require you to pay a deposit that's equal to the amount that will be the limit on the card. Essentially, you're borrowing your own money, but you're also starting to prove that you're financially stable. By keeping a low utilization and making on-time payments with this card, your FICO score will start to increase, and you'll soon be able to get a regular card.

Fixing your FICO score isn't something that's going to happen overnight. It takes some hard work and dedication to turn things around. Fortunately, once you break out of the cycle of low credit, it becomes a lot easier for you to maintain your good score. You'll have higher limits and lower interest rates. As long as you are smart about your money, you'll enjoy the benefits of a better score.

Submitted by Alice Bryant  on Fri, 04/03/2015 - 10:44

Job seekers may find landing the perfect gig difficult with less than perfect credit. When applicants get turned down repeatedly for jobs or promotions, the question arises, “Is bad credit hurting your job prospects?” Today’s employers are not only looking for people with the right credentials and experience, but also the right credit score. They reason that if an applicant has difficulty paying bills on time, they might also lack the character and commitment to meet the demands of full time employment. Applicants with payment histories might be perceived as inconsistent and unreliable. Human Resources directors may be quick to reason that if an applicant cannot meet personal monetary obligations, they might not be a good candidate for working in high profile positions that require attention to detail, financial management or accountability. Increased indebtedness usually translates into increased stress which can affect employee performance or tempt otherwise trustworthy employees to abscond or embezzle funds. Finally, employees facing collections and dodging harassing phone calls can easily become distracted and preoccupied with making extra money by working overtime or moonlighting, lessening their ability to perform optimally in eight-hour jobs. Whether these assessments are true or not, applicants who are not creditworthy could find themselves at a distinct disadvantage for obtaining home financing, loans, rental housing, and sadly, employment.

Where Can You Find Your Credit Score?

Developed by the Fair Isaac Corporation (FICO) to help determine consumer creditworthiness for mortgage lenders, the FICO score gives potential lenders an accurate picture of an applicant’s payment history, good or poor. Every adult consumer in America should have a credit report which reflects past payment practices dating back three to ten years. If you’ve ever bought a car, rented an apartment, or paid a utility bill, chances are that you have a report filed with a credit bureau. Bureaus provide consumer reports to banks and lending institutions, property managers, retailers, and business owners who make decisions about whether to extend loans, lease or sell real estate, or hire potential employees. A consumer with poor or slow credit may have scores of 300-500; whereas, consumers with scores of 700-850 are rated excellent. Consumers can find their reports online through any one of three major agencies: Transunion, Equifax, and Experian. Some bureaus charge a small fee to access reports, while others are free.

How Does a Payment History Impact Your Credit Score?

If a potential employee has filed bankruptcy, failed to meet monthly retail credit obligations, or is habitually late paying rent, that kind of history can result in negative listings and lower scores over time—sometimes as much as 20 to 50 points. Unpaid medical bills, charge-offs, delinquent utility payments, or rental and mortgage payments that are 60 days past due all contribute toward accruing poor scores and adversely impacting a candidate’s ability to find and secure good careers. Low FICO scores can also limit a consumer’s ability to obtain low interest loans, mortgages, or auto financing. Potential lenders usually charge higher interest rates and require larger deposits from consumers with a history of missed payments.

How to Repair a Bad Credit Report

Rebuilding credit is not an impossible task; however, it will take time, commitment, and cash. Before applying for more jobs, applicants should check personal files through one or more reputable reporting agencies. Most consumer credit bureaus offer low- or no-cost online queries to quickly assess scores, review delinquencies and settle disputes.

.A candidate with a poor FICO score has several options:

1. Apply for a position with a company that does not require credit reporting. If applicants seeking better jobs feel that bad FICO scores are blocking their chances of advancement, some may opt to apply at businesses that do not check credit. Temporary staffing agencies, manufacturers, call centers, and privately owned small businesses may hire well qualified individuals without regard to creditworthiness. Taking a lesser paying position provides income while applicants resolve credit report issues.

2. Hire a consumer credit repair company. If debtors don’t feel comfortable handling their own repair, working with a reputable agency is a good option. Such agencies help negotiate settlements with creditors, dispute errors, and get negative listings removed from reports, typically within 60 to 90 days. Counselors may charge a monthly, annual, or flat rate fee to repair credit. Costs can run as much as $75 to $100 per month or a flat fee of $200. Deal with a reputable company that has a good Better Business Bureau (BBB) rating. Debtors should avoid fly-by-night operations that make unrealistic promises. If it sounds like it’s too good to be true, it probably is.

3. Pay bills on time: A consistent payment history can boost scores a few points and go a long way toward reestablishing creditworthiness. Promptly paying small household bills, such as utility, cable and monthly cell phone expenditures can quickly help job seekers get back on track with credit.

4. Open a secured credit account: Several banks and financial institutions offer consumers the opportunity to rebuild creditworthiness by opening accounts with a relatively small deposit, usually $350-400. Secured cardholders can use the account to purchase goods and services based on current balances. The advantage to using a secured account is that it allows debtors to reestablish a consistent payment history when credit purchases are promptly paid.

5. Establish a revolving charge account with a local retailer that offers 90 days same as cash. Short term financing provides a good record of consistent, timely payments. And you don’t have to break the bank to reestablish credit. Simply purchase a $100 piece of furniture and pay if off within three months. Repeat the process a second or third time and the applicant with bad credit is on the way to recovery.

Is bad credit hurting your job prospects? There is a solution to resolving credit woes. Don’t be afraid to implement some of the steps listed above. Promotions, bonuses, a better life with better credit and a higher paying career might well be within reach

Last updated on Jun 30th 12:27 am