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May 21, 2009

5 Simple Credit Tips Before Availing a Loan

Your chances of securing a loan relies heavily on the kind of credit score you have. The better the score, the higher your chances of getting that loan will be. A good credit score can also get you a relatively painless set of terms for your loan. So when you plan on getting a loan, make sure your credit score looks good first.

credit card tips Here are a few tips to get your credit score up to muster.

1. Credit Score Review. To determine how things stand with your credit score, make a review of it. See where your problem areas are and correct them. Also, make sure of the accuracy of the report. If there are any errors, inform the appropriate people immediately.

2. Pay On Time. How soon you pay your bills weighs greatly on your credit score. It actually accounts for 35% of your credit score. You should do as much as you can to avoid paying late. Make automatic reminders for you to pay your bills. You can also use the services of automatic payment systems to make the payments for you. Of course, make sure you have the balance to cover it.

3. Keep Balances Low. 30% of your credit score depends on the ratio of the amount that you owe and the available credit that you have. This means the larger your credit balance is, the lower the ratio that you will get. Thus, if you keep your balance as low as you can every month, you can be assured of a high credit score.

4. Keep Up Card Activity. Aside from keeping your balances low, you can also get a lower ratio between your credit balance and your available credit by getting multiple lines of credit. With multiple credit lines, you have a higher credit amount available, which will actually give you some leeway with your credit balance. Don’t get tempted, however.

Of course, to continue enjoying your higher credit amount, you must keep your multiple cards active. To do this without bloating your balance, use your cards for small purchases every once in a while.

5. Avoid New Cards. While having a number of credit cards can help your credit score, getting too many can actually hurt it. Avoid opening too many cards, as they will hurt your credit score in the short term. The burden of juggling bills and purchases over many lines of credit might make it difficult for you to keep up. Also, opening multiple lines of credit in a short time can ring warning bells amongst most creditors.

May 11, 2009

Three Ways To Win Against Credit Card Debt

Credit card debt is a fact of life. That needs to change as soon as possible, especially if you want to survive the economic crisis. To do just that, read on.

Don’t Spend What You Don’t Have

Credit cards are very convenient, no argument. With credit cards, you don’t have to carry a wad of cash every time you go out, you only use a small, thin card to pay for your purchases and you get to shop even if you don’t actually have the money to pay for it. That last one is the problem.

Credit cards make it easy for you to buy something on the assumption that you can pay for it someday. Most people rationalize that they can easily pay off their credit card purchase by paying a fraction of the item’s price every month. Unfortunately, that is not always the case which is, of course why many people are finding themselves in credit card debt nowadays.

If you really want the convenience of a credit card, use a debit card. With a debit card, you are buying with your own money. Thus, you can be sure that when you buy, it is paid for then and there. You won’t have monthly payments or interest rates. It’s a win-win, unless you want to buy something which you don’t have the money for. If, you really need to spend what you don’t have, read the next one.

Pay Your Debts Right

If you read your monthly credit card bill, you’ll see some figures their labeled as “minimum amount due”. Avoid paying that as much as you can.

If you only pay the minimum amount on your bill, you’re not actually paying to lessen your debt balance. You need to remember that the longer your balance stays on your bill, the higher the interest you are getting. So what you really want to do is ignore that deceiving “minimum amount due”, calculate the highest amount you can pay towards your actual debt balance and pay that amount. That way, you avoid the high interest rates and get to congratulate yourself on playing smart.

However, if you’re in over your head already, the last one is for you.

Move To A Cheaper Card

Credit companies love to sell you credit cards. It can be annoying but it can give you a break with your credit card debt problem. If your credit card is an old one, the interest rate on that card is probably higher than that of a new card.

What you should do is to get a new card with a low or even zero interest rate and move your card balance to that. Just be aware that the low or zero interest rate is usually offered for a limited time, usually a few months. Make sure you maximize your payments during that period to get the best out of the deal.

May 9, 2009

MakingHomeAffordable.gov May Help Mortgage Woes

As a result of the drop in the property markets, many homeowners have found themselves in a difficult situation. The drop in property values has left many homeowners with properties whose values are way below what they owe in their mortgages. Thus, should these affected homeowners want to sell their properties, they would have to bring cash to the table.

MakingHomeAffordable.gov May Help Mortgage Woes The mortgage problem is at the forefront of the economic concerns that the Obama administration is trying to solve. Early last March, President Obama launched the foreclosure prevention program.

The foreclosure prevention program is aimed at reducing the debt problems that around 4 million U.S. citizens are facing. The $75 million plan approaches the problem in a number of ways. Mortgage investors, loan servicers and borrowers will receive government incentives. Subsidies for interest rate reductions will also be made available.

In return for these incentives, the foreclosure prevention program tasks companies to modify loans to make them more affordable. In particular, the plan aims to change loan rates so that a typical household’s housing payments would amount to at most 31% of its gross monthly income. Those homeowners who have kept up with their payments also get the chance to refinance for lower-cost loans, even in cases where they have minimal or no equity.

During the launch of the foreclosure prevention program, borrowers were already informed to contact their respective loan service companies. However, the companies said that they would need a few weeks before they could actually begin to process applications. Just recently, banks have begun to do just that.

A number of homeowners have started receiving the benefits of President Obama’s foreclosure prevention program. The previous week, Chase Mortgage of JP Morgan Chase issued 15,000 or more mortgage modifications. Bank of America has also released around 100,000 letters to its borrowers and actually began assisting borrowers at risk in April.

For those who are interested in getting their mortgages adjusted, the best solution is to visit the website MakingHomeAffordable.gov. From there, they can take an online quiz to see if they qualify for the program. Eligible borrowers are then given a list of paperwork to prepare. Once the paperwork is ready, they can then contact their loan service company and follow their instructions to apply for debt modifications. Not all loan service companies are participating in the plan, however. Also, borrowers should be able to negotiate with their lenders through the phone and there is usually no need for a face to face meet.

After contacting the lending company, borrowers will have to wait for the company to decide how to help them out. The company can choose to lower the loan’s interest rate, reduce the balance of the debt, or extend the life of the loan. The goal of the lender will be to lower the monthly payment to at least 38% of the borrower’s monthly income. Once 38% is reached, the government will pay the lender in order to bring that figure down to 31%.

With President Obama’s foreclosure prevention plan, many homeowners in danger of losing their homes can breathe easier. With a lowered monthly payment rate, a majority of homeowners should make it through. An important thing to remember, however, is that the loan modifications do not become permanent until the borrower keeps up with the monthly payments for three months consecutively.

May 9, 2009

Consumer Borrowing Falls, Smart Spending is the Order of the Day

Consumer Borrowing Falls, Smart Spending is the Order of the Day The economic recession, the rise of unemployment, and the fall of the property markets have hit the country quite hard. For the average American, the reality has been rising loan rates, the risk of losing homes, and the threat of unemployment. As a result, every American has had to rethink the way they spend their earnings.

Today, Americans around the country are moving away from their old, consumer-driven spending habits. The order of the day for most Americans is now spending smart. It seems that frivolous spending, a common practice just a few years ago, is now on the way out.

Paco Underhill, an expert in consumer psychology, has stated that the consumer mindset is undergoing a major change due to the recession. He was recently quoted saying, “Our retail culture is in a major transition. Conspicuous consumption is now bad manners. Too many of us have spread ourselves far beyond our means. We can’t do this anymore.”

“Our closets are full, our houses are too big, we have too many cars. It’s time to make some very wrenching changes,” he further elaborated.

It seems that American spenders are doing just that. A report released by the Federal Reserve last Thursday shows that consumer borrowing dropped to $11.1 billion this March. Reuters had earlier polled industry analysts who had expected consumer borrowing to drop to $3.5 billion for March. The annual rate of consumer credit fell to 5.2% this March. This totals $2.55 trillion. Not since December 1990 has consumer credit percentage dropped so low.

The drop in non-revolving credit was to the tune of $5.7 billion, which is equivalent to a 4.2% rate, to $1.6 trillion. Non-revolving credit encompasses closed-end loans, such as those taken out for holidays, cars, boats, and college educations. On the other hand, the drop in revolving credit in March was at $5.4 billion, which is at a rate of 6.8%, to $946 billion. Revolving credit is composed of borrowings from credit cards and charge cards.

The sales figures of major retailers for April are also quite telling. Discount stores and supermarkets are winning out against their more high-end competitors. From food to clothing purchases, most Americans are moving towards where the best value is. Consumers are beginning to recognize the importance of holding on to their dollars and are being very careful in their spending. As a result, previously scoffed at buying practices such as buying pre-owned items and “private label” store products are becoming more and more the norm.

The appeal of high priced, luxury branded goods is also beginning to wane.
The changes in buying behavior have its positive and negative effects. Some retailers, for example, are being hit by the change in consumer practices. Clearly, they will have to adapt to this new consumer behavior trend or risk losing everything.

May 8, 2009

Pull Yourself Out Of Debt

With rising credit interest rates and ever increasing credit fees, everyone desperately wants to get out and stay out of debt. Unfortunately, more than it has ever been before, this is something that is much easier said than done. Still, there is hope. With a bit of belt-tightening, some smart spending decisions and keeping an eye on the details, it is possible for you to live debt free, even with the current economic climate.

Pull Yourself Out Of Debt According to industry insiders, the average American family owns at least one credit card. Credit cards are very convenient when it comes to payment. They can even be lifesavers in situations where there is no cash immediately available. However, credit cards can be deceptively convenient when it comes to purchases. So much so that most credit card owners find themselves surprised by the amount that they have to pay after they’ve gone through a spending spree.
Sooner than they think, they find themselves deep in debt.

According to experts, if a person’s take home pay loses 20% to nonhousing debt, then he is overextended. Another indicator of overextension is when 30% of a person’s monthly income go directly to paying the rent or the house mortgage. Other indicators include not knowing the total amount of debt, paying only the minimum balance in credit card bills and borrowing in order to pay debts.

If you find out that you are overextended and unable to keep up with your debt payments, don’t panic. You can still get yourself out of debt, though it will require some effort.

The first step to get out of debt is to keep track of where the money is going. This is not as trivial as it sounds. Little purchases, bank fees and other small amounts that most people take for
granted often add up to a considerable amount at the end of the month. It is best if you keep a written record of the month’s expenses. This makes it easier to track where the month’s budget is going.

By keeping track of your expenses, it is then easier for you to find out where the money is going and whether some of it can be diverted to payoff your debts. This often mean that you will have to get creative. For instance, you might consider bringing lunch instead of buying lunch from the cafeteria or your favorite fastfood place. The main goal is to minimize your monthly spending. This way, you can free up money to pay off debts.

When paying of your debts, make sure to prioritize debts with higher interest rates. If at all possible, transfer your high rate debts to your low rate credit cards. Look for low rate cards and transfer to them. Try to minimize using your credit cards and, if you really have to, comparison shop. Also, limit your credit card purchases to necessities as much as possible.

May 7, 2009

Keeping Finances Afloat: Avoiding Bank Fees

Today’s economy being what it is, the ability to keep one’s finances float can spell the difference between surviving the economic downturn and going bankrupt. People in the United States have had to quickly adapt their financial habits to fit the requirements of the current state of the economy. While keeping an eye on savings and foregoing the luxury buys are one of the most obvious ways to avoid going bankrupt, some people might be overlooking keeping their eye on their credit card and banking fees.

1176251_27831922 One of the industries most affected by the financial crisis is the banking industry. As more and more credit holders delay payment on their monthly bills, banks are coping with the rising rate of credits being defaulted. As a result, banks are beginning to see bank fees as one of the ways to recover. Case in point, a recent study from bankrate.com has shown that the average ATM fee is now at $1.97. Compared to figures from last year, this represents an 11 percent increase.

Bank fees are one of the most overlooked financial leaks that banking customers miss. These small fees may seem inconsequential at first but, as they begin to add up, they often translate to a considerable amount of lost cash every month. Aside from the aforementioned ATM fees, another fee that banking customers need to be aware of are overdraft fees. Overdraft fees are standard fees that have to be paid when the cost of the transaction is higher than the money available in the account. Overdraft fees can be quite high and estimates from Consumer Reports place the interest as high as 1000%.

Most banks have some form of membership fee for their customers. However, what most customers do not know is that they may be able to negotiate for a lower membership fee with their bank. This, however, depends on the bank. There are also some banks that have a monthly maintenance charge for their clients. As much as possible, these banks should be avoided. Some banks will only demand payment if the account falls below a certain amount, the maintaining balance. So, it is best to know what the minimum balance in the account is and to take care that the amount in the account never falls below it.

Another bank fee vacuum according to bankrate,com are ATM surcharges that are charged when customers use their card on another bank’s ATM. According to the study of bankrate.com, 99.2% of ATMS have these surcharges. It is therefore best to avoid using ATMs, if at all possible. A good strategy is to use a debit card for purchases.

The economic turmoil has placed a lot of pressure on the average American to keep their finances firmly in check. It looks like everyone is going to have to be careful of even the little things when it comes to fighting off the economic turndown.

May 4, 2009

Financial Literacy Survey Results Indicate Americans Not Taking Advantage Of Free Credit Reports

In March 2009 a financial literacy survey was conducted on behalf of The National Foundation for Credit Counseling clipboard (NCFF) by Harris Interactive. One thousand consumers age 18 and over were contacted by telephone to answer various personal finance questions. Despite the fact that lending decisions are based on credit history and score, many consumers seem unaware or uninterested in staying up to date on the information reported on their credit report. The results of this survey indicate 64 percent of respondents have not ordered their free credit report in the last 12 months. More than one-third of the people surveyed admit they do not know their credit score. Reviewing your credit report is essential in spotting inaccurate reports which may cause your score to drop or warning signs of identity theft.

The third annual survey reports the following findings:

Less than half of adults surveyed track their spending which has been proven to help improve savings and reduce debt. Seven percent, nearly 16 million adults have no idea how much money they spend on basic necessities and other expenses. Eighteen percent of adults claim the reason for not having a budget is due to not wanting to be restricted on how much money they spend.
Due to the current economy, 57 percent of adults are spending less than they were last year, although 45 percent of consumers spending less agree they would return to previous spending habits if their financial situation were to improve.
Seventy-two million adults report they have no savings. Generation Y makes up for nearly half of the adults with no savings. Twenty-three percent are saving more than they did in the previous year. If faced with an emergency those with no savings would be forced to either use a credit card or take out a loan to pay for expenses.
Fifteen percent of respondents admit to making late credit card payments in the last twelve months. More than 13 million adults have household debt (credit cards) exceeding $10,000 with balances carrying over from month to month. The same number have accounts in collection and are either considering or have filed for bankruptcy.

These results indicate what most of us already know, many American consumers have a long road ahead in establishing financial security. Increasing financial literacy is vital in saving millions of adults who currently heading down the wrong financial path. The good news however is that 70 percent of respondents report paying all their bills on time with no debts in collection. Other positive results show that 41 percent of people saving money have over three months income in savings. The spotlight often falls on consumers who are struggling with debt, however 46 percent of people surveyed do not carry any credit card debt from month to month and sixty-one percent of respondents currently live on a cash-only basis.

April 16, 2009

Capital One Survey Shows Consumers Are Changing Their Spending Habits

The United States recognizes April as National Financial Literacy Month. This is in an effort to highlight the importance of financial literacy and educate consumers on the importance of developing healthy financial habits.

Capital One, in recognition of Financial Literacy Month surveyed over 1000 American consumers to learn more about their spending and saving habits. The results indicate consumers are definitely making efforts to better manage their finances and save more money. The following results from the survey give an overview of the changing spending habits of American consumers.

Fifty percent of those surveyed have been clipping coupons to save money.
Fifty percent of consumers are canceling or postponing their vacation.
Sixty-two percent are cutting entertainment expenses.
Sixty-eight percent are not dining out as often.

This news is encouraging and indicates that American consumers may finally “get it” when it comes to the excessive consumerism that has taken over our society in the past few years. Unfortunately not all survey results are as positive. While most Americans are making temporary adjustments to their spending habits to survive the current financial crisis, other results indicate consumers are not really making the long term lifestyle changes required for financial security.

Forty-seven percent of respondents are putting less money in their savings account.
Forty-one percent have reviewed their credit report, even though most of the respondents are aware they have access to a free annual credit report.
Twenty percent have never reviewed their credit report.

These results indicate that there is indeed a need to focus on financial literacy in this country as consumers continue to struggle with increasing the amount of money in their savings accounts. In addition to not increasing their savings, it would seem consumers are not taking advantage of reviewing their credit report. Your credit score is important in so many areas and the information on your credit report can affect your score. By not viewing your credit report you are unable to notice and correct erroneous reports or view activity that may indicate identity theft.

Americans must not only focus on the short term benefits of altering their spending habits but also recognize how the positive changes they implement now will have long term benefits financially. To properly manage your personal finances you need to not only spend your money wisely but also save and invest in your future.

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