Daily Archive: February 7, 2018

Feb
07

Brexit: Official forecasts suggest economies throughout UK will be hit

Government assessments predict the biggest hit for regions that voted to Leave.

Feb
07

Rabobank pays to resolve money-laundering case in US

Radobank admitted to trying to obstruct an examination by US authorities.

Feb
07

Stock markets: US shares steadier after wild swings

US markets slipped lower on Wednesday but were steadier than in recent days.

Feb
07

Full report into RBS must be published next week say MPs

The regulator must publish its report into GRG small business unit by the end of next week, say MPs.

Feb
07

How to Raise Your Credit Score 100 Points or More in Less Than 5 Months

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Raising your credit score 100 points is easier than many people might think, especially if you currently have bad credit.

Step 1 – Know Where You Are

Pull your credit score to determine where you are and how much damage control you need to do. There are dozens of websites that you can use, but GoFreeCredit.com is one of my personal favorites.

Go Free Credit is secure, easy-to-use, and the best part – it’s only $1 to get BOTH your credit report and score. It Not only shows you your credit score, but it also explains why your credit score is that number. This means showing you factors like credit inquiries, credit card usage, age of credit history, payment history, and other aspects that impact your credit card score and how it holds up against the credit score scale.

Go Free Credit is great, but their one drawback is that you only get your score and report from TransUnion. This means you may be missing on some of the information from Equifax and Experian. For most people this will not make a big difference since what is most important is seeing your report. I do have to warn you that you are signing up for a service and the $1 is a trial for seven days. After the seven days they will charve you $19.99 per month and you get a really good credit monitoring service. If you just need your score and reports then you will need to cancel within the 7 days. I had no problems and the whole thing went very smoothly.

In order to find out all three scores, you need to go through MyFICO. This will give you your FICO score – but it isn’t free.

MyFICO has a monthly fee of $29.95, which includes credit tracking and instant access to a 3-bureau credit report and FICO score. If you only need to check one of the three credit reporting agencies, then it will cost $19.95.

Step 2 – Fix Credit Problems

Now that you know your credit score, we can start working to make it better. One of the best ways to earn a great credit score is to always pay your bills on time. Missing one bill can lower your credit score by as much as 100 points.

To begin your credit card recovery journey, make sure you pay all of your late payments and don’t miss another bill payment. While paying those outstanding debts isn’t going to raise your credit score, it will keep it from getting any worse.

Step 3 – Run Up the Score

Now that you’re paid up on all your bills, it’s time to give your credit score a serious boost. One of the best ways to improve your credit score 100 points is to have a credit card, but not use it. Sounds crazy, right?

One of the biggest factors that impacts your credit score is your credit utilization.

Credit utilization basically refers to how much of your credit card limit you use.

So, if you have a $10,000 credit card limit, don’t get anywhere near it. In fact, we would suggest using only around 20%-30% of your total limit.

If you have little available credit, this may be difficult. If your score isn’t too bad, you may be able to open an additional credit card or get your utilization down on any maxed out cards using one of the many balance transfer credit cards.

If your credit is hurting, though, you may need to look at a secured credit card to get your utilization down.

This next section is how one of my interns, Kevin, did just that and made a HUGE impact on his credit. His parents had always told him not to open a credit card in fear that he would get in massive credit card debt and ruin his future.

Unfortunately, his parents were wrong.

To help Kevin out, I asked him to find out what his credit score was through MyFICO.com. Sadly, he was unpleasantly surprised. The story that follows is about how Kevin improved his credit score 100 points with a surprising tool – a secured credit card. Please welcome Kevin…

As a Junior and Senior in college, I was always told that applying for a credit card could be my first step in the wrong direction.

With a credit card in hand, my parents worried I would spend money I couldn’t pay off and build a lifestyle I couldn’t really afford, rather than learning to save money.

While these are legitimate concerns, I had to let them know I felt as if I had some control over my spending.

My response was always the same: “How would I know until I was able to try for myself?”

My First Humbling Credit Experience

When I was finally prepared to get a credit card on my own, none of the banks I applied to would give me a chance. I had to walk into the banks and tell them what is probably the typical story for most recent grads or anyone in their final years of college. It went like this:

“I am unemployed, have no credit history, and have a couple thousand dollars in college debt that I will have to start paying on in the next year or two.”

Let’s face it, this is not exactly a winning pitch when you are trying to convince someone to give you a line of credit!

Two banks denied me, but one banker was kind and shared some info that has helped me raise my credit score over 100 points in the past five months. I think everyone should be aware of this “trick”, which is why I’m sharing it today.

The gist of it was that I should stop trying to apply for credit cards and getting denied. His reasoning was that, when you apply, they do a hard credit check which, in turn, can lower your credit score even more.

His second piece of advice was to…

Get a Secured Credit Card

He told me that no major bank was going to accept my credit application, but that there was actually an alternative option available – one that was especially perfect for those in my exact situation. This was to sign up for what is called a “secured” credit card. While the terms for these are horribly one-sided in favor of the lender, I assure you it is a small price to pay for the result you receive after only a few months.

With secured credit cards, you give the lender a cash deposit up front, and that cash deposit is typically equal to your credit limit. This process truly confused me at first, since I thought the deposit was money I could actually spend.

What I learned, however, is that the deposit is there in case I default. I couldn’t spend the deposit itself, but I would get it back if I kept my account in good standing until I closed the card. This wasn’t an ideal proposal, but I knew it could help me build my credit score – and that was my real goal anyway.

There is also an annual fee associated with most secured credit cards, but I felt it was a small price to pay for the opportunity to build some credit history. After you make your deposit, secured cards are also treated just like traditional credit cards. Your secured card will typically look and act just like a regular credit card, so no one will know it is secured.

This is the route I had to take, and I suspect there are many others out there who are also in a similar situation. Even though you have to put all the money up front and pay an annual fee, it is still very much worth it when you consider the long-term benefits.

Long-Term Benefits: My Experience

When I first checked my credit score with MyFICO in March of 2011, it was sitting at 621. I set up my new secured credit card with a credit limit of $1,100. The credit limit should be a function of what cash you have, and also what you plan on using the credit card for. According to many bankers and friends I talked to, you should try to run a 75% utilization rate on your credit card to maximize your potential to raise your credit score.

So, if you only spend around $300 a month, you should give your secured credit card a $500 dollar down payment so that you are utilizing your credit rather than having a $1,000 dollar limit and only spending $300. My expenditures were approximately $700 dollars a month so the $1,100 dollar limit fit my needs.

After I received my secured card and started spending, I made sure that I would only spend money I already had, or would receive before the next pay period. I ended up paying off my credit card roughly four times a month to ensure I never carried a balance from one month to the next. I would never let my credit limit exceed $800, and I would never pay it off if the card balance was under $300 unless the pay period was coming to an end.

I would put every penny of my spending on the credit card – from the smallest expenses such as a drink from the gas station, to major purchases such as airline tickets or hotel rooms. I repeated this process for five months to establish a credit history of regular use and always paying on time.

Second credit check: YES!

In August of 2011, I had to purchase a car so that I could switch jobs. When I filled out the credit application to see if I qualified for the lower financing rates, my credit score came back as 731.

In other words, I raised my credit score from 621 to 731 in just five months!

This is a very big deal because, at 621, I would have been denied a loan for the car, or would have had an interest rate that exceeded 9% on the auto loan. Since I chose to get a secured credit card, I was able to take the car loan on my own, and qualify for the low rate of 3.99% financing.

The difference in the loan between the two interest rates would be $750 over the life of the loan, far surpassing the card’s annual fee, and the opportunity cost of my secured credit card holding my $1,100 for five months.

A Message to Parents

To all of the parents out there who worry about letting their college kid apply for a credit card, I can tell you it worked for me in five months and will change my financial future for many years to come.

Secured credit cards offer a foolproof way to raise your credit score when it is not possible through a regular bank credit card, and is a safe way to earn credit if you do not trust your kid to spend responsibly. The worst that can happen with a secured card is that you cannot pay your bill, your company closes out the account, and they pay off your credit with the money you already have on deposit.

My secured card worked perfectly for me and I have now been accepted for a credit card with a major bank.

Secured credit cards are a great way for someone to build credit.
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How to Make a Secured Credit Card Work For You

Here’s the truth: If you have a low credit score and cannot qualify for traditional credit, a secured credit card is the best way to build a credit profile that will last.

Here are the steps to moving your credit score in the right direction using a secured credit card:

Step 1.: Learn your current credit score

If you’re worried about your credit, the best thing you can do is figure out where you’re at. By signing up for a free credit score with Credit Karma, you can get an estimate of your FICO score from two of the three credit reporting agencies. Although you’ll only receive an approximate score, it will be close enough to give you an idea of your current standing. Best of all, signing up for Credit Karma is free so you have nothing to lose.

Step 2. Research secured credit cards

The next step you’ll want to take is to research the top secured credit cards available. We recommend the Discover it® Secured Credit Card because of its meaningful rewards and lack of fees.

Step 3. Read the terms and conditions, then sign up for the card that suits your needs best

Once you find a card that meets your needs, you need to read through all the fine print to make sure you understand all fees involved with your new secured card. Once you feel comfortable with the details, simply click on the “apply now” sign and fill out all of the required information.

Step 4. Put down a cash deposit you can afford

Most secured credit cards will ask you to put down a deposit that is equal to your new credit limit. If you want a $500 credit limit, for example, you’ll need to put $500 in cash down as a deposit. You might need to save a few weeks or months to build this up, but the wait will be worth it.

Step 5. Use your secured credit card sparingly at first

As you get used to using credit, you’ll want to use your card sparingly at first. Don’t rush in and begin charging items until you get a grasp on what you can truly pay back. You don’t want to end up with a revolving balance you can’t afford to pay off every month, and you definitely don’t want to pay interest on your purchases!

Step 6. Monitor your bill closely, and pay your secured card off frequently

To make sure you’re utilizing your new secured credit card, you’ll want to keep close tabs on your growing bill. If your card offers online account management, this task should be fairly easy. If it doesn’t, you may need to keep track of your purchases and charges manually. Either way, this step is crucial since staying debt-free is the best way to keep your credit in tip top shape.

Top 3 Secured Credit Card Offers in 2018

I strongly recommend the Discover it® card, but there are plenty of other options to browse through on CardRatings.com. Among the best are:

1. Discover it® Secured Credit Card – No Annual Fee

If you’re looking for a secured credit card to build your credit, look no further than the Discover it® Secured Credit Card.This card comes with NO ANNUAL FEE, which is almost unheard of in this industry.The card also offers a meaningful rewards program. You’ll earn 2x points on dining and gas on your first $1,000 spent each quarter, and 1x points on all other purchases.

2. Capital One® Secured Mastercard®

The Capital One® Secured Mastercard® is another secured credit card that doesn’t charge an annual fee. Once you’re approved for this card, you’ll get a credit limit equal to the cash deposit you put down. You’ll also get access to CreditWise® from Capital One® – a credit tracking tool that can help you monitor your credit over time.

The downside is that you won’t earn rewards with this card. But, since this card does report your credit movements to the three credit reporting agencies, you can use it to build your credit slowly over time.

3. First Progress Platinum Prestige MasterCard Secured Credit Card

While the First Progress Platinum Prestige MasterCard Secured Credit Card does charge a $49 annual fee, it comes with a perk that the others on this list don’t have – a low APR. Amazingly, this card charges only a 9.99% APR on purchases, which is almost unheard of among secured credit cards.

If you plan to carry a balance each month, your interest rate will play a huge role in how much you pay to use credit. By choosing a card with a lower APR, you can save money over time, despite the annual fee.

The Bottom Line

While Kevin’s story is absolutely amazing, it isn’t all that unique. The truth is, this is exactly what secured credit cards are supposed to do. They do receive a bad rap because of the initial deposit and the fact that some charge annual fees, but that’s not really fair. In the real world, secured credit cards are a valuable tool that can be used to build your credit when you otherwise couldn’t.

Whether you like it or not, your credit score is important. If you ever hope to take out a mortgage, borrow money for a car like Kevin did, or borrow funds to start a new business, you’ll need a good or decent credit score to qualify for the best rates.

While imperfect, secured credit cards offer the opportunity to improve your credit and your life. If you are ready to improve your credit and think a secured card could help, don’t delay. Research your options and sign up today.

Have you ever used a secured credit card? What is holding you back?

The post How to Raise Your Credit Score 100 Points or More in Less Than 5 Months appeared first on Good Financial Cents.

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