When It Pays to Make a Balance Transfer

When It Pays to Make a Balance Transfer

In a perfect world, you’d pay your credit card bill in full each month. But, life happens — your basement floods, your daughter needs braces, your refrigerator dies — and before you know it, you’ve got a balance that you can’t pay off. Fast forward several years later, and you’re still carrying a revolving balance.

As a result, those balance transfer offers that show up in your mailbox each week sound pretty enticing. But you’re wary because you’ve always heard that they are simply a way for the card issuers to make even more money off of you. After all, many cards charge a balance transfer fee around 3 percent.  (This means that it’ll cost you $150 to transfer a balance of $5,000.)

But transferring a balance can get you out of debt. And not only can it get you out of the red quicker, but it can do so for less money, too. Here, three scenarios when it pays to make a balance transfer:

If you have good credit

When your credit is strong, card issuers are going to throw their best offers your way. So if you have a good credit score, it’s likely that you’re going to have your pick of 0% APR balance transfer offers to choose from. Transfer your balance to one of these cards and take advantage of the promo period, which typically offer 12 to 18 months to pay off your balance interest free. Remember though, the goal is to pay off the debt and save on interest while doing so,  so you’ll want to avoid charging anything on the old card after you clear the balance with a balance transfer.

If you have an extremely high interest rate

Are you paying 20 percent or more in interest on your plastic? If so, you have to ditch it ASAP. With that high of an interest rate so much of your payment is going towards interest that it can feel next to impossible to pay off your balance.  Transfer your balance to a card with a 0% APR introductory period  (or one with a low teaser rate) and work to pay off the balance within the promo period. If you can’t completely ditch your balance during that time, transferring it can still make sense — provided that the regular interest rate is lower than what you’re currently paying. To avoid any surprises,  be sure to read the fine print before you apply and make sure you know what the interest will revert to after the promotional period ends.  Remember to keep it open and use it now and then to keep the monthly reporting on your credit file to keep your "A" rating.  It is an odd fact lately, that the credit monitoring websites are stating that the number of credit and loan accounts on your credit report is graded as well. They are stating that whether open or closed, 22 accounts will get you an "A" rating with the new FICO scoring system.  Every account, good or bad, stays on your credit report for 7 years, so 22 accounts showing on your report is not impossible.

If you’re carrying a balance on several cards

It goes without saying that keeping track of the due dates of several credit cards can get confusing. And if you’re not diligent, you can easily miss one of them, leaving you on the hook for a costly late fee. Make your life easier by consolidating all of your balances on one card — with only one interest rate and due date to remember. And if you do tend to carry a balance on your cards from month-to-month, use the promotional period to focus on paying it off.

A balance transfer credit card can be a great way to pay off credit card debt and save on finance charges. The goal is to save on the interest and get out of credit card debt altogether. Once you have paid off your balances, focus on only charging what you can comfortably afford to pay off — in full — at the end of each month when your credit card bill arrives. By doing so, you’ll never have to worry about credit card debt and you’ll never pay a dime in interest.

If you're ready to obtain higher credit limit cards with balance transfer options, please visit:  www.FreeDebitCardStore.com

Tips for Understanding Your Credit Score

Tips for Understanding Your Credit Score

As you know, your credit score is important. How important? So important that an entire industry exists solely to monitor and report your credit score. 

So, what does your score mean? It tells lenders (companies who offer lines of credit) whether or not you’re good about repaying your debts and paying them back on time. If you pay on time and don’t carry a lot of debt, then you’re a good credit risk, and you’ll get loans, credit cards, mortgages and great interest rates. If you pay late and max out your existing cards, you either won’t be eligible for additional loans or you’ll end up with much higher interest rates.

Understanding Your Credit Score: Who Are the Major Players?

When it comes to credit reports and credit scores, there are three major players: Experian, Equifax and Transunion. These are the three credit reporting agencies, or credit bureaus, that collect information about your lending habits. These credit bureaus compile credit reports, which determine your credit score.

These reports include several factors:

-Your personal identifying information, such as current and past addresses and your Social Security Number.

-Credit accounts called trade lines, which is essentially a list of creditors who report your credit usage and payment history.

-Any public record information dealing with your finances, including bankruptcies, foreclosures, delinquent accounts, wage attachments, and anything from collection agencies.

-Credit inquiries (anyone who requests your credit report) for the last two years.

Understanding Your Credit Score: What’s in a Credit Score?

All the information on your credit report is measured and weighed, and the bureaus assign a score to your report for lenders to use. Each bureau has a slightly different way of determining your score, but they should all be fairly similar. Some factors that weigh into your credit score count more than others:

Payment history (35%). On-time payments mean a higher score. Late payments, delinquent or over-limit accounts, bankruptcies, and liens will significantly lower your score.

Debt-to-Credit Ratio (30%). This is also called “revolving utilization” and is specific to your credit card accounts. If your credit limit is at $1,000, creditors don’t want to see you maxing out the entire credit limit. Try to keep your total revolving utilization ratio as low as possible – 30 percent is good but 25 percent is better and if you really want to maximize your credit score, aim to keep your revolving utilization at 10% or less. This goes for your total revolving utilization and for each individual credit card. Maxing out your credit lines can lower your score. If you have an excess of available credit, ask your credit issuer to reduce the amount on credit lines you’re not utilizing.

 

Length of credit history (15%).  This shows how long you have been using credit and how you have managed your finances in the past. The longer your credit history, the better, so avoid closing accounts which have been opened longer, even if you don’t use them.

 

New credit accounts and inquiries (10%). This includes accounts you’ve opened recently, and recent inquiries from companies you have applied to for credit. Credit inquiries remain on your credit report for two years but are only factored into your credit score for the first 12 months. The main point to remember is that applying for a lot of credit in a short period of time can lower your score.

Diversity of Credit (10%). Having credit cards is a great credit builder, but lenders want to see that you can manage other types of credit as well, such as installment loans and mortgages.

 

Understanding Your Credit Score: Keeping Tabs on Your Credit Score

While creditors and credit bureaus are watching your credit, so should you. Experts recommend that you review your credit reports at all three bureaus at least once a year to make sure there are no inaccuracies. To order a free copy of your credit reports, use the federally mandated website at www.AnnualCreditReport.com or call (877) 322-8228.

If you do find errors, each credit report will direct you on how to file credit disputes with each of the individual credit bureaus.

In the end, your credit score is your responsibility. Making the grade is a lifelong test on which you’re constantly being graded. Turning good payment and credit usage behaviors into habit should be a top priority.

5 Secrets to Earning Great Credit Scores

5 Secrets to Earning Great Credit Scores

Love them or not, credit scores have become an integral part of our financial lives. From lending to insurance to tenant screening credit scoring models are now one of the factors used to determine whether or not we’re going to get what we’ve applied for, and at what costs. It’s in your best interest to earn and maintain great credit scores, and here’s how:

1.  Don’t miss payments, ever.

Both FICO and VantageScore credit scores consider your payment history as being extremely influential. In all actuality this category could better be described as the presence or lack of derogatory information. You don’t ever want to give a lender an excuse to report something negative to the credit reporting agencies or your scores could suffer significantly. Late payments, defaults, collections, tax liens, judgments, bankruptcies, settlements, repossessions, and foreclosures can all devastate your credit scores for seven to ten years.

2.  Avoid too much credit card debt.

Despite the noise made by some of the self-proclaimed credit experts, credit cards are not bad for your credit scores. To the contrary, a well-managed credit card portfolio is actually very helpful to your credit scores. In fact, of the most common forms of credit (mortgage, auto, student loan, credit card) only the credit card allows you to choose whether or not you get into debt.

Still, maintaining a modest balance on your credit cards is a great way to improve your credit scores. The balance relative to the credit limit is an important measurement in credit scores. If you can keep that percentage as low as possible, less than 10 percent preferably, your credit scores will reward you.

3.  Apply for credit only when you need it.

While applying for credit isn’t necessarily a bad thing, applying too often suggests that you are credit dependent and can have an adverse impact on your credit scores. Each time you apply for credit a new hard inquiry appears on your credit reports. Hard inquiries are the type that can have an adverse impact on your credit scores. Note: I used the word “can” instead of “will,” as inquiries don’t always lower your credit scores.

4. Be careful when closing unused credit cards.

Closing an unused credit card can, in fact, lower your credit scores. The reason it can lower your scores is due to the loss of the unused credit limit. As explained in number two above, having low balances relative to your credit limits is helpful to your scores. If you close accounts that you no longer use, then you’re no longer getting the benefit of the unused credit limit associated with that account.

Note: There are some people that will suggest that closing credit cards can lower your scores because you don’t get the benefit of the age of the card any longer.  That’s simply not true. Closed accounts still appear on your credit reports and you do still get the value of the card’s age. In fact, closed cards continue to age.

5. Don’t co-sign for loans, ever.

If someone asks you to co-sign for a loan it’s likely because a bank has denied their credit application. Asking for a co-signer is their way of making the bank more comfortable because they’ll now have someone who is actually creditworthy on the hook for payment. You co-signing for a loan is really no different than you applying for the loan on your own. Not only will the debt show up on your credit reports but any mismanagement of the account will also blow back on your credit scores.

Sign up for a secured card to help rebuild your credit by clicking on one of our links on the right or visit the website directly at: www.FreeDebitCardStore.com

Email us at: info@CherokeeFinancialinc.com for the opportunity to make money from your excellent credit on any of your high limit credit cards that have at least 2 years payment history.  You'll be surprised to find that doing something simple that will put money in your pocket to pay down your debt or use however you want.

Why There's No Such Thing As Too Many Credit Cards

Why There’s No Such Thing As

Too Many Credit Cards

John Ulzheimer has 13 credit cards, but he’s never paid a cent in interest, his credit score stays above 800, and he’s never dug his way out of consumer debt.

That’s because he knows exactly what he’s doing.

Ulzheimer, credit expert at CreditSesame.com, has over 23 years of experience in the consumer credit industry and has even worked for credit bureau Equifax and for FICO, the creators of the most widely used credit score in the country.

“The initial strategy wasn’t to just open a bunch of cards,” he remembers, “but when I went to work for FICO, I realized that if you have a lot of cards, pay them all on time, and keep your balances low, you’re actually benefiting from that.”

“A lot of people are critical of my example,” he acknowledges. “But having a lot of cards is only a problem if you aren’t responsible with them — if you let the cards control you.”

Here, we’ve highlighted nine of the credit lessons to learn from Ulzheimer’s experience. Even if you plan to stick with the three or four held by the average American consumer, see what you can glean:

1. Have a reason for opening each card.

You should have a use in mind for every card before you apply. Ulzheimer only opens cards that have a purpose, like his Delta Reserve card. “I live in Atlanta and fly Delta all the time,” he explains, “and the card earns Medallion miles, which allow me to do things like upgrade to first class and check bags for free. It makes my travel much more convenient and enjoyable.”

2. Keep your cards open.

Unless you’re paying exorbitant fees, or find that you can’t control yourself with too much credit, there’s no reason to close your cards. While closing a card won’t shorten your account history, it will decrease your total amount of credit available and therefore increase your credit utilization rate, which could have an adverse effect on your credit score. Ulzheimer’s oldest card is from 1999.

3. Keep your cards active.

“I don’t use all 13 cards at the same time,” explains Ulzheimer. “I rotate one or two into regular use to make sure they all get some activity, so the issuer doesn’t proactively close them.” Credit card companies want you to use their cards, so if you haven’t touched yours in awhile, they can take it upon themselves to lower your balance or close the card altogether. They must notify you if they do, but why would you want to take that chance?

4. Be deliberate about which card you choose to use.

On the recommendation of his accountant, Ulzheimer uses a business credit card for his professional expenses, a credit union card for small, everyday purchases like gas or dry cleaning, and his favorite rewards card — the Delta Reserve — for bigger purchases, like furniture or auto work. When he signed his son up for a summer of camps, he used three of the cards that have lain dormant for a few months.

5. Never spend money just to get rewards.

“I call this chasing rewards, where you buy things or open cards you wouldn’t normally to get the points,” Ulzheimer says, noting that he uses his cards only to spend money he would anyway. “It’s incredibly dangerous. Most people who find themselves in terrible credit card debt attribute it to using cards this way.”

6. Get close with your account statements.

Ulzheimer logs into his accounts every day — sometimes more than once. He doesn’t find it difficult to keep track of them because he’s familiar with exactly which cards he’s using and how much he’s spending. “I’m very engaged with my bank accounts,” he says.

7. Be on top of your payments.

Ulzheimer pays all of his credit card bills manually — no auto-pay for him — and makes a point of logging into his account and paying the balance even before the statement period closes and a bill is sent to him. “That way, I never carry a balance, and it doesn’t show up on my credit report,” he explains.

8. Space out your new accounts.

There’s no need to go out and get a dozen credit cards today. In fact, Ulzheimer advises against it. “Don’t acquire a bunch of cards all at one time because the hard inquiries will destroy your credit score, and you probably won’t be approved for all of them,” he says. “This is a long-term strategy.”

9. Use credit cards as they were intended.

Credit cards aren’t meant to let you spend money you don’t have, and treating them that way is what gets too many of us in trouble. “You have to use credit cards for what they were designed for: convenient shopping,” cautions Ulzheimer.

Sign up for a secured card to help rebuild your credit by clicking on one of our links on the right.