Tuesday, 27 January 2015

Can you get credit with bad or no credit score?

An individual with low or no credit score has a hard time getting a loan as they are looked upon as a lending risk that may default and leave the lender in losses. People with no credit find themselves into a muddle state since banks refuse to give them credit as they have no credit history and they need credit to build themselves a credit history. So what do you do in such situations? How do you get credit to build your credit history:

Be ready to pay a deposit: 
Understand that you do have a bad credit score and you’ll be needing to pay a deposit to get a card or loan. Many people shy away from secured cards as they have to pay a deposit against it. But remember that, a secured card is the best way to improve your credit score, as in almost all cases you’ll be denied a card or loan with bad credit. So this is the easiest way to build your credit score quickly and then apply and get accepted for better loans.

Also make sure you apply for a secured card which reports your on-time payments to the credit bureaus. Some cards do not do so, and all your efforts of being credit responsible will go to waste as your good habits aren't reported to your credit report and there will be no difference to your credit score.

Credit builder Loan: 
This is something similar to a secured card but in the form of a loan. Here the bank will lend you a small loan for an object you needed to buy. The object is being held by the bank while you make monthly payments to the bank and the possession is given back to you when you pay off the whole loan. This not only gets you the object which you wanted to buy but also helps you build a good credit record.

Avoid Multiple credit applications:
In all these though, you need to avoid applying for multiple credit lines. Applying for multiple credit lines  at the same time does more damage than help. Multiple credit applications leads to several hard enquiries against your credit report which lowers your credit score. So be slow, research well and be selective about the credit you apply for. It is very dangerous for people with no credit as they look as an individual having no credit to bursting into the credit scene which can be bad for their credit health. Don’t waste your time on credit cards or loans which require excellent credit- it is a waste of time as well a dent in your score due to the multiple enquiries.

Discuss with lenders:
Talk to your lenders before you apply for a loan. Some lenders have services wherein they can pull out your data which may be not be included in your credit score but may show your repayment patterns and credit worth. Though it is not included in your credit score, but the lenders may be willing to take a risk and give you a loan despite your bad credit.

Saturday, 24 January 2015

How does Balance Transfers affect your credit score?

Balance Transfer is when the credit card company gives you a service for a limited period of time, where you can transfer your debt to a new credit company which has low or zero interest. Balance Transfer is basically the bank giving you time to pay off your loan and not be held down by high interest rates too.

But the main question is- whether balance transfer affects your credit score? The answer depends on how you go about the process and how you use it. Depending on many factors, it can either hurt or help your credit score.If balance transfers are used responsibly, they can help you reduce your debts and even give a boost to your rating. And though it does help you in saving money, we should consider the overall impact of it on your credit score.

When you apply for multiple balance transfer cards with low interest rates, you can negatively affect your credit score. Applying for several cards means several “hard enquiries” against your report. Hard enquiries stay for 2 years on your report and can take your score by several points. They also reduce your chances of approval and indicate that you may be a lending risk. Do proper research and then apply for one card than multiple cards. Also compare the balance transfer cost and the long term cost of keeping that high interest debt,

Average credit account age: 
Credit history of your account forms 15% of your credit score. The longer the lengths of your accounts, the higher your score. When you open a new balance transfer account, since it doesn't have a long credit history, the average age of your credit accounts comes down. Also most people tend to close their old accounts after balance transfer, which further decreases their average age and in turn the credit score. So even if you opt for balance transfers, keep your old accounts open- they’ll help you in the long run.

Credit utilization rate:
Credit utilization rate forms 30% of your credit score. The lower your credit utilization rate, the higher your credit score. When you open a new balance transfer account, since you will be using all of the account to pay off your debts, your credit limit is fully utilized which will lower your credit utilization ratio and then your credit score. So it is better to get an account which has a credit limit more than what you need for your debts. Don’t close your old account, it’ll keep the available credit more and won’t let your credit utilization ratio go up and thus won’t decrease your credit score.

Friday, 23 January 2015

What to choose- Credit Card or Debit Card?

Credit and Debit Card both are very similar in their usage; the main difference being that in debit card, the money is used from your account where you deposit your money, while in credit card the money is used from your line of credit which you have to repay at the end of each month. So which card gives better benefits than the other? Check the reasons below to find out:

Building Credit Score: 
It is common knowledge how a credit card is very useful in improving and maintaining your score. The only criteria is that you should keep your credit utilization ratio low, preferably below 30% to demonstrate responsible use of credit. While a debit card is obviously not a credit account, therefore it can hurt or help your credit score.

Protection from Fraud:
The liability for fraudulent charges is fixed in a credit card. If your card or card number gets stolen, fraudster cannot steal money beyond a certain limit while in a debit card, the liability is unlimited, depending on how fast the fraud is reported. Your whole account balance is at a probable risk.

Protection during purchases:
During purchases, if you are unsatisfied with the services or products of the seller, the credit card allows you to reverse the purchase charges that have been charged on your card. So that is why in large purchases, even if you can use cash go for a credit card. You can use the cash later to pay off the credit card bill. In debit card, there is no such protection. Money once charged from your account cannot be taken back. Your debit card cannot save you from a poor customer experience.

Perks & Rewards:
Credit Cards offer various perks and rewards for using the card like air miles, purchase points, travel points, gift cards etc. So even if the credit card does charge you an annual, the rewards would overpower the fees any day. While in debit cards, there are very few cards which can offer such rewards and even if they can offer rewards the rewards aren't of much par with the debit cards.

Thursday, 22 January 2015

Does paying off an instalment loan early affect my credit score?

You may be paying off your loan early to save money and free up some of your debts. But if you are hurrying up, in hopes of increasing your credit score then you may be on the wrong path. Just paying off the loan early won’t increase your credit score. Though it is known that paying off debts increase your credit score, you need to know that you should use credit accounts in order to maintain good credit.

Paying off an instalment loan according to the term of loan can benefit your credit extent.

Shortened Credit History:
Credit History is one of the factors in calculating the credit score. The longer credit histories you have, the better it is. That is why open accounts work in favour for your credit history. When you pay off the loan early, it shortens the average length of your credit history and may work against your credit score. A history of on-time payments works greatly in favour of a good credit score.

Closed Account:
Paying off a loan early means your account will be closed off earlier than before. Closed accounts don’t mean much to your credit score. Credit scoring models weight open, active accounts more than closed ones. If you are paying monthly payments on your loan diligently, you are maintaining a good credit score.

Mix of Credit:
Having a mix of credit is one of the factors for a  good credit score. You need to show a positive credit history and timely payments for both, instalment loans as well as revolving credit accounts(Credit cards & other lines of credit) Paying it off early will shorten your credit history and it won’t show up to indicate that you have a good mix of credit for your credit score.

Making timely payments each month than closing your account indicates to the lender that you know how to manage credit responsibly. That is why making timely payments and paying off the loan in its terms has more benefits than paying it off early.

Wednesday, 21 January 2015

How to stay safe from Credit Card Fraud

Consumers have been warned multiple number of times to guard their financial information very diligently, with the number of credit card fraud cases increasing day by day. Your credit card information is usually at risk for theft, which is why consumer should take steps to stay from scams and avoid credit card fraud. Identity theft forms the path way to Credit card fraud.

Cut old credit cards and shred papers where you have written your credit card information:
You may be aware of credit card fraud by dumpster divers where thieves dive into trash cans and take out information from thrown away receipts and statements. Therefore it is advisable to shred such statements and receipts into pieces rather than tossing them in the dustbins to save your credit card number from getting in the hands of the dumpster divers. Also cut your expired/cancelled cards and put them in different bags to thwart thieves from putting it together again.

Avoid sharing your credit card information on-line or phone: 
Many thieves posing as credit card issuers and banks may call you or email you asking for your credit card number. Though they may look or sound genuine, beware of such people they are scammers. Even while paying something on-line, be careful and check if it is secure website before giving out your credit card info. Check for a lock beside the URL to see if the website is safe.

Don’t sign empty receipts:
Always verify the amount before signing the receipt. Also check for any blank spaces on the receipt, if there are- then draw through them as the cashier could write an amount there and get the money from your credit card issuer.

Keep your credit card in safe places:
Always keep your credit card in safe places, tucked away in your purses and wallets properly. Specially take care of them in crowded places and always check your credit card is with you before you leave from a shop where you have used your credit card to pay.

Report stolen/ lost cards immediately:
Report your stolen card to your bank as soon as you can, to save yourself from fraudulent charges made from your account. The faster you will report to the bank, the faster will they freeze your accounts, thus saving you from any further losses.

Review your monthly statements monthly:
Reviewing your reports regularly will make you aware if any unauthorized charge have been made from your account. Even though the charge may be small but it’ll make you aware and you can report it to the bank and avoid credit card fraud.
Identity protection packages are there to protect your identity and avoid credit card fraud.

Tuesday, 20 January 2015

Can you get a car loan with bad credit?

It is wrong to think that with a bad credit you won’t ever be able to buy a car, but this also doesn’t mean that you think you’ll get a car loan as per your own terms and within your monthly budget. Getting a car loan with bad credit is not impossible; it is possible but not always on your terms. You’ll have to compromise on some of the terms of the loan. It also depends on how bad your credit is, like if it borderline some lenders might still see you as a prospect and would be willing to take the risk.

Checking your credit report: 
It is not uncommon to have errors in your credit reports. So it is better to check your reports beforehand to see if there are any errors which may have reduced your score. If there are any inaccuracies, correct them before you apply for a loan. This can save you time as well as money.

Improve your credit score:
Some people are on the borderline of good credit and bad credit. In such situations it is better to wait and improve your score before applying for a loan. You can also request credit reports from other credit rating agencies to check if there are any differences in your score.

Have realistic expectations:
You have to realize that though you’ll be able to get a loan, you are likely to pay more due to higher interest rates than a person with a higher credit rating. Accept your situation and aim for cars which are not out of your financial league. Also accept that since you have a bad credit, you are obviously going to miss on some attractive loan offers so it is advisable to go for less expensive cars which are in your budget and wouldn't lessen your chances of getting a loan.

Payments paid off:
Having unpaid payments is always a bad idea before applying for a loan. Even though the lender is willing to give you a loan despite your bad credit, the unpaid payments won’t go well with him. So clean up your payments records by paying it all off in the months preceding your loan application. Your payments records should be clean at least for 6 months before you apply for a loan.

Check your options:
Since you are in a bad place with your credit, you are obviously going to get loans with higher rates but accepting and settling with the dealer financing your loan without looking at options may prove to be harmful. Yes, the dealer does want to sell his car but he may also be looking for profit in the financing you are likely to get a higher rate with the dealer. Check out with financial institutions, credit unions, your bank and the loans they offer. Compare their interest rates and other terms and choose which would suit you the best. It is better to secure your finance in advance, before you go to the showroom.

Monday, 19 January 2015

What is Credit Counselling and how does it work?

When you are in debt, lots of advices are thrown your way to improve your credit score. So how do you know what advice to follow and which advice would work.  People are always in a dilemma to follow what advice and what to do in such situations. This is where credit counselling comes in- to guide on the right path to become credit healthy.

 Credit counselling is basically professionals i.e. certified counsellors showing you the right paths to clear your debts and get a good credit score. Credit counsellors analyse your total financial situation including your credit obligations, to carve out a plan to successfully pay off your debts.

Credit counselling can be a positive experience, only if you are completely committed to the process and determined to pay off all your debts and work towards a good credit score. The counsellor will only be able to help you if you are willing to get help. The first and foremost thing to do is find a trustworthy credit counsellor with whom you can share your financial situation comfortably. You need to be forthcoming about your financial situation, clearing stating what you owe and the paying off period for the debt you are given. You also need to be up front about your present incomes and expenses so that the counsellor knows how much money you can have available for the payments.

Credit counselling is not an action, only an advice. Credit counsellors won’t pay off your debts for you. They’ll only analyse your credit reports to chalk out a plan for you and advise you on how to pay off the debts. In the end, it will all come down to how well you follow that advice and plan and how determined you are to improve your credit score