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The Practical Reasons Why Married Couples Should Share Finances

Money management can be tough when you are single, but incorporating your spouse’s finances when you get married can be overwhelming. It is nothing new that financial conflicts can cause major problems in relationships and is one of the main reasons couples end up in divorce.

Traditionally sharing finances was a part of the journey after marriage but nowadays it is becoming more and more common for couples to either divide expenses down the middle, or delegate certain expenses to each. This is becoming more common especially for working couples.

However, at the end of the day, there are advantages of sharing your money with your life partner. This does not mean that you cannot have separate bank accounts for certain things. But you have to make a financial plan TOGETHER and consider all the money to be family money to make both your money and your marriage work. Here are a few practical reasons why married couples should share their finances.

1. Builds A Stronger Relationship

Many couples avoid discussing finances and it is the number one issue that they wind up bickering about. It is also the second leading cause of divorce in America.

However, by sharing your finances with your spouse you start to work as a team to build your financial roadmap and start thinking in terms of “us”. You also learn to see individual financial decisions from your partner’s perspective instead of your own which will result in an overall stronger and happier relationship.  

2. Enables You to Understand Household Budget in Totality

When you share finances you have what you call a “household income”. You can figure out what lifestyle you as a couple have together if you have a full picture of your total income including both your earnings, investment income, and income stream. Also, you will fully understand where the money is going after each paycheck, which would not have been possible if you had kept your spending from your spouse and your spouse did the same to you. It will also lead to transparency which has a positive impact on your overall relationship and will help you to figure out where to cut costs to save money for the future. However, having a   “household income” does not mean that you cannot assign money for yourself, to spend as you see fit.

3. Allows You to Save For Short-term and Long Term Goals

Sharing finances will fully allow you to plan for your future and create a list of actionable steps that can bring your short-term as well as long-term goals to fruition. Whether you saving for the holidays, a vacation, or a buying a vehicle you can achieve your goal faster and also reduce the risk that your partner may become upset or bitter about money matters in the future. 

Your spouse’s cooperation maybe even more important if you are planning to buy a home together because if you are applying for a mortgage together, both your incomes and debt and credit histories are applicable. Secondly, you may also have to address issues such as credit utilization before you are approved for a mortgage. This process will be more of a headache if you have two sets of accounts instead of one.

 Sharing finances and having a shared budget can make these decisions easier and can envisage a future that meets both partner’s desires.

4. Allows You to Make Retirement Goals

Saving for retirement needs to be coordinated as one day neither of you will be working. When you share finances your “retirement savings plan” will be the result of a joint decision based on your long term commitment and saving level you are both comfortable with. But if each of you contributes for retirement separately it will be much harder to coordinate these goals. That is probably why couples who share finances tend to save more.

5. Leads to a Family Focus, not a Self-Focus

One of the benefits of sharing your finances is that if one person goes through a period of unemployment the other steps in and helps. If one of you is sick (or just delivered a baby) or if one wants to start a business the other one covers. You may be more likely to take certain career risks if you have someone to back you up. And in the end, these risks can be good for you. But on the other hand, if you keep paying your share of bills you might be less likely to take the leap. When you are committed to the relationship then both of you can start to do what is best for your family.

6. Help in Case of Emergency

Marriage means complete transparency. If you do not provide your spouse with your financial information it can build distance. It can also be dangerous if one of you is incapacitated, hurt or worse and the other needs access quickly.  Your spouse will be able to continue managing your financial assets and also help support your responsibilities. But if you keep your spouse in the dark about your financial situation it will a challenge for him/her to help out in the case of an emergency.

Final Word

If you are looking to build a life together than the best thing is to be open and share goals. The goals between two people cannot be aligned without talking about money matters and coming up with a solid plan to deal with budgeting, spending, and investing. In the long run, this will help you to grow closer financially as well as emotionally.  

Here’s Why Your Credit Score May Have Recently Gone Up

Credit Scores and credit reports play a vital role in the life of most Americans today. It determines the interest rates consumers pay for the credit card, mortgages and car loans and can ascertain if they qualify for a loan or not. 

Your credit report may get a makeover as the three big reporting agencies (Experian, Equifax, and TransUnion) are doing things a little differently and have started excluding certain items from your credit report that used to damage your credit. This comes in the wake of a study by the New York Federal Reserve which found problems with credit reporting. It has recommended some reforms to improve the accuracy of their credit reports and also remove some negative items so that it can help consumers’ improve their credit scores. Some of the changes that can boost your all-important three-digit credit scores are:

CREDIT SCORE

1. Tax Liens and Civil Judgments

Because of improved standards for utilizing new and existing public records, Experian, Equifax, and TransUnion have scraped most of the tax liens and civil judgments from consumer credit files in July 2017. Again in April this year, they went a step further by deciding to remove all tax liens from credit reports. Once this data is removed some credit scores can go up by as much as 30 points.

According to an estimate by LexisNexis Risk Solutions, about 11% population had a tax lien or judgment removed from their credit file. 

2. Collections

Credit Bureaus have also been removing certain collection accounts from credit reports under the terms of the National Credit Assistance Plan (NCAP). Since the new rules came into effect in June 2017 some eight million people had collection accounts completely removed from their credit reports, according to the New York Fed.

3. Medical Debt

The new rules will make it harder for medical debt to hurt your credit scores. Medical billing process can be complicated and confusing. To give time to resolve medical issues the three important credit bureaus have agreed to exclude medical bills on credit reports until they are at least 180 days due. Another plus is that unpaid medical bills that later get paid by your insurance should be removed from the credit bureau files so that it does not linger on and damage your score.

4. Fines and Tickets

 Due to the recent changes by NCAP, library fines, unpaid gym memberships or traffic tickets that have been lurking in your life will now be removed from your credit records and not damage your credit score.

As a result of these changes consumers are now witnessing a steady stream of changes which have boosted up their scores and according to the findings of New York Federal Reserve report the:  

  • Credit scores of consumers’ have gone up by 11 points on an average.
  • 18% of people saw credit scores go up by 30 points. In some cases, this increase was enough to make a difference between qualifying for a loan and getting it turned down.
  • About 8 million people had collection accounts completely removed from their credit reports after the second half of 2017.
  • The study also found $11 billion reductions in the total collection account balances.

According to Bruce McClary, Vice president of Communications at the National Foundation of Credit Counseling, “If anyone has experienced a jump in their credit scores due to these changes, they should take advantage of the momentum and work towards improving their credit health.”

If your credit score has also seen an increase, you could consider calling your credit card company and negotiate a lower interest rate. This can result in major savings.

The other financial moves you could consider with this better score is taking out a new loan for a mortgage, refinancing your car, getting a better credit card or checking insurance rates, said Kimberly Palmer, the personal finance expert at NerdWallet.  However, you should be strategic, she added.

It is important to note that because of the prevalence of reporting errors, FICO recommends that you should double-check your reports for inaccuracies that can hurt your score.  The recipe to keep your score moving and reaching a good score is that you should consistently pay your bills on time and keep your credit utilization low. You should also apply for credit only when needed and reduce the amount of debt you owe as much as possible.

6 Times When You Are Smart Not to Pay Off Your Mortgage Early

Plenty of homeowners would like to pay off their mortgage early as it is a hassle and a headache. Itis their largest monthly payment and takes out a good chunk out of their budget.

It is understandable as there are many reasons to pay off your mortgage early. It will not only help yousavehundreds (even thousands) in interestbut will also helpyoufeel secure at the thought of owning your own home.

At the same time, there are benefits of not paying your home loan ahead of schedule.

The approach which is better for you will depend on your financial situation and goals. If the following situations apply to you, sticking to your mortgage payment schedule and using the extra cash for other purposes will be the best option.

  • You Do Not Have a Hefty Source of Emergency Cash.

Financial ups and downs are inescapable. Though the house you own free and clear is a significant piece of wealth, it is not something that you can quickly convert into cash in a crisis. It takes months even in a strong market to sell a house. You could secure a home equity loan more quickly but this also will take a few weeks and will put you back into debt with possibly a higher interest rate than you had on your original mortgage.  So, the best way to ensure that you can cover any unexpected expenses like a job loss or medical bills without having to take on new debt is to make sure that you have set aside a healthy “rainy day” fund to cover at least six months’ worth of household expenses. 

  • You Want to Lower Your Tax

Before you decide to reduce your mortgage debt, make sure you have fully funded any tax-advantaged account such as 401(k) or individual retirement accounts(IRAs). According to Patrick Whalen, a certified financial planner at Whalen Financial Planning in Los Angeles “Paying off a mortgage early competes with the priorities that can help lower your taxes, like funding a 401(k) plan up to the maximum amount.”

The tax advantages of these contributions coupled with the potential for long-time growth in your retirement investments makes them the first place you should be stowing any extra cash you have.

  • Is There A Prepayment Penalty On Your Mortgage?

Prepayment penalties are rare in new mortgage contracts but some older mortgages containrequirements that you must pay several thousand dollars if your mortgage loan is paid off ahead of schedule.

Prepayment penaltiescould be the equivalent of a certain number of monthly interest payments or equal to a percentage of the mortgage loan amount. So, if your mortgage loan contains such a prepay penalty clause you should compare the penalty amount with what you will save in interest by paying off the loan early. You should make sure that you do not lose money by triggering a penalty.

  • You Can Earn a Better Rate By Investing

The smartest choice to make when you have extra cash to pay off a mortgage loan with a low-interest rate is putting it into the stock market or mutual funds and building up a diversified portfolio. It is reasonable to expect a long-term return of 6 to 8 percent when you invest in a broader market.Meanwhile, your mortgage rate may be around 4.5%, so over time you are likely to earn better returns on your money and can benefit from years of tax breaks and be much better off in the long haul.

  • You Have Other Debt

The mortgage loan should be the last debt you pay off. If you are payingother debt that has higher interest rate such as car loans, school loans, credit card debt or home equity lines of credit, it is technically better to put any extra funds towards these debts than your mortgage.

Many of these debts can carry 0%interest at least for a time. However, in most cases, these 0% deals apply to either temporary or relatively short term loans. So, paying off these loans should always be a higher priority than your mortgage loan.  

  • You Are Still Savings For Big Purchases

It is not enough to only pay off debt and save before tackling the mortgage, you should make sure all your future cash needs are addressed. Generally, you should plan to cover all significant expenditure for at least the next five years or preferably for ten years that include:

  • Child’s education
  • Home remodeling,
  • Car purchase
  • Wedding
  • Vacations

There is no point of paying off a mortgage early if you are getting into more debt for a large purchase.

HOW WOULD PAYING OFF YOUR MORTGAGE LOAN AFFECT YOUR CREDIT SCORES?

They will not be a dramatic change in your credit scoreas a consequence of closing your mortgage loan. But closing credit cards can hurt your credit score as it reduces the total amount available to you to borrow. Mortgage loans like paid off student loans and auto loans will remain on your credit reports for 10 years as a “closed account in good standing.”

FINAL WORD

 Whether you should pay off your mortgage early or not depends on how much money you have to spare, what other alternatives you have and other factors that are unique to you. If paying off your mortgage loan early is on your radar you should seriously consider all your options so that you are sure it is the best path forward for you. 

6 Smart Ways to Protect Your Data, Your Devices, and Your Digital Identity.

The data breach at credit reporting agency in 2017affected nearly 148 million US consumers, giving hackers access to Social Security numbers, names, credit card numbers, and partial drivers’ license numbers. This information can be used by identity thieves to destroy your credit, file fake tax returns and collect the funds and also hijack your medical data.

But it is not only identity theftwe need to worry about. It is important that you protect your personally identifiable information (PII) all year round as criminals harvest personal details to access banking websites, launch sophisticated phishing and spear-phishing campaigns and hack loyalty programs.

You can greatly minimize these risks by changing some habits and spending a few hours improving your online security.Here are 6 simple ways to protect your all-important personal information.

  • Protect everything-Use strong passwords, employ two-factor authentication, and consider an all-in-one password manager.

All your digital devices should be password protected. That includes your computers, smartphones, tablets and other gadgets that have personal data on them. The same advice applies to all your online accounts.  Creating strong passwordsand never using the same password for more than one site is the most important thing you can do to protect your online identity. Also, change them often and never save them on your device.

Secure password generatorsincluded in many all-in-one password management solutions can help you create long complicated passwords and also remember them for you.

You should turn on two-factor authenticationfor any site that supports it. This requires you to enter your password and then verify your identity by entering the unique passcode that you receive via text message or email. This means your account has a second layer of protection and protects your account even if a hacker does get your password. The security questions designed to help you recover a lost password is not very secure because some of them are very easy for hackers to find out. It is recommended that you makeup answersinstead and keep that information in your password manager.

You should also change the default passwords for anything that is connected to your home network. Your router is an important device as it could give a hacker complete access to your home network. You should also not forget about the other connected devices like baby monitors.

  • Keep your computer virus-free

Digital security has much to do with digital privacy. If your computer is affected by malware or virus, hackers can dig through your data to steal youridentity. They can also lock up your files to ask for a ransom to get them back. The solution is to install the latest antivirus software not only on your computer but on your mobile devices as well. There are a lot of freeas well as paid versions available from trusted companies like Webroot, Kaspersky’s and Norton.

  • Be wary of Public Wi-Fi connections.

It is no doubt free Wi-Fi makes traveling easier. But you must be careful how you use it as there is no telling who is watching that internet traffic. So before joining a network confirm the name and password with the staff of the coffee shop or library. You should take extra security measures when you log into an account as even a password-protected Wi-Fiis only safe as the people who have the password. If you must log in or transact online on public Wi-Fi you should use a VPN(virtual private network) serviceto encrypt all the data you send so that others on the same network cannot easily see what you are doing.

In addition, you should force your browser to use HTTPS. This can be done through an extension like HTTPS Everywhere. Finally, you should make sure you log off services you were signed into after concluding yoursession and ask your device to forget the Wi-Fi network.

  • Be careful about opening suspicious emails, clicking links, annoying pop-ups, and “too good to be true” ads or offers

Majority of people are connected in some way or the other to the Internet and social media and so we need to know the basics of security awareness.  You should use caution if you receive an email from someone you do not recognize with a request to click a link or take urgent action. Familiarize yourself with tell-tale signs of phishing scamslike spelling errors in the body copy, a vague salutation that does not include your name, and URLs or email addresses in the message that are not quite in line with the company they are supposed to be associated with. You should mark it as spam or delete it immediately.

If you receive an email from your credit card issuer, financial institution, or utility provider, remember that they are instructed not to ask for any sensitive information like Social Security numbers or passwords.

If annoying pop-upsappear on your screen, do not click on any flashy ads or viral looking headlines. You should just safely close the window by clicking the X in the corner.

  • Monitor your credit reports and financial activity.

You should scan your credit reportsfor an abnormal activity like accounts or credit cards that you did not open along with any unexpected credit checks. You can also put fraud alerts, freezes or locks in place with all the three credit bureaus-Equifax, Experian and TransUnion. Also, you should review your bank and credit card statementsdaily for suspicious transactions.

  • Back up ALL your data on a regular basis.

Whenever a new ransomware attack occurs, victims realize that they could have protected themselves beforehand by just creating automatic backups of all data. For comprehensive protection, your data should backed-up, encrypted and stored by a trusted IT provider who can ensure that your critical information is stored safely in different data centers. This way, if a hacker did gain access to your network or computer you can easily clean your machines and then restore them again.

You may feel powerless against cybercrime as no protection method is 100% full proof. Buttaking steps like these and educating yourself on the latest security tricks and tactics can keep your information safe and protect you against fraud. 

What Is A Hardship Program & How Can It Impact Your Credit Score?

While we all hope that we will never be in a situation where we can’t afford to keep up with our payments, things do happen. Rising debt can cause excessive stress, especially if you are facing financial hardship due to circumstances beyond your control like health issues, unemployment, sudden major expenses or any other change in income. Even if your financial hardship is temporary it does not mean it is easy to handle. Things can become tricky if you rely on your credit card to make ends meet on your bills. This strategy can greatly raise your debt and lower your credit score.

The good news is that assistance is available. Your card issuer likely offers an unadvertisedhardship programthat could give you the breathing space you need to dig out and get back on the road to good credit. Let us dive into what a credit card hardship plan is and how it might impact your credit in unexpected ways.

  1. WHAT IS A HARDSHIP PLAN?

A hardship plan is also known as a credit card payment plan. It is offered by banks to provide immediate relief to customers who are dealing with a financial crisis and cannot make regular payments due to unforeseen circumstances. This plan allows a consumer to temporarily reduce monthly payments to a manageable level.

 Hardship plans are either short-term (i.e. six months or one year), or permanent (till the card balance is paid).  They often involve lowered interest rate, altered repayment plan, or a combination of the two. Some companies also waive certain late payment fees, over-limit charges, and the like.

2. WHO IS IT FOR?

You may be eligible to enroll in this type of plan if you are struggling to make your credit card payments each month and have some sort of financial hardshipgoing on in your life. The eligible hardships situations include:

  • Major medical issues.
  • Loss of employment.
  • A death in the family.
  • The breakup of a marriage.
  • Unexpected home or automobile repair costs. 
  • Emergency event or natural disaster.
  • HOW TO ENROLL:

The credit card companies typically do not advertise this benefit so it is you who should initiate it. Shore says that most creditors will have a phone number right on the statement which will not be obvious, but you should look for language along the lines “If you have problems paying your balance, call this number.” The number could connect you to the hardship departmentor, more likely, a customer service departmentthat will screen you. But, before you contact the company make sure you have organized your finances and know what kind of help you need. You must be honest with your credit card company about why you need to enroll in such a plan and offer details about your hardship (including the reasons), and how much you can afford to pay monthly and how long expect you expect the problems to last.

3. HOW IT CAN IMPACT YOUR CREDITCREDIT SCORE?

Just signing up for a hardship plan has no effect on your credit. However, figuring out how it will impact your creditwhile you are in it (and after)can be tricky. According to Barry Paperno, consumer operations manager for FICO, “It depends on how it appears on your credit report.” He says, that how the issuer will report your agreement to the credit bureaus is the first question that you ask.So, before you sign up for a payment plan, you should talk with your issuer about what note (if any) will be sent to credit bureaus.

Secondly, while you are participating in a hardship program there is a likelihood that your card company will close or suspend your account until your payment scheduled is complete. This can affect your credit scores by:

  • Increasing your credit utilization ratio. When an account is closed, you eliminate some of the available credit and your score will drop to reflect the increase in  utilization ratio
  • It will also affect the credit mixas FICO® rewards you for having a combination of credit cards, car payments, mortgage and other types of loans. So when a card is shut down your credit mixture changes and that could affect your scores.
  • It can also affect the length of credit historyif your company closes one of your older cards when putting you on a payment plan. As a result, your average credit age will decrease, and your scores could go down.

However, if you successfully complete your program, the initial dip in your credit scores could get your credit back to where you would like it to be. Here is why:

If you are signing up for a hardship program, it is likely that you have already missed some minimum payments on one or more of your credit cards. This means that you have already seen your credit scores decline.

Fortunately, if you stick to a hardship plan’s payment schedule you will rebuild your history of timely debt repayment. Your lender who reported your late payments to the credit bureaus will now report your consistent, on-time payments.  This means good news for your scores.

Bottom line

Do you think a hardship plan is right for you?

Nitzche says “They are not right for everybody.”

If you are facing a relatively minor problem or a temporary financial crisis with just a few cards you can call up your credit card issuer and make your case. This could be a turning point in conquering your credit card debt.

 However, if you are somebody who is struggling with being organized, have multiple creditors, or are intimidated by contacting all of them directly and feel that managing all individual payments is daunting then you should see a credit counselor and consider debt management.

Rapid Rescoring Can Help Raise Your Credit Scores Quickly

When you apply for a loan, a credit card or any other form of
credit, every point in your credit score counts. So, you may
want to consider boosting your credit score before applying
for any type of credit as even a few points added can make a
large difference. With a higher credit score, you can save on
fees, annual percentage rates, higher bonuses, and perks.
There are many things that you can do to improve your credit
score over time, but credit bureaus often do not make the
relevant adjustments for several months. So if you do not have
the time to wait for creditors and credit reporting agencies to
update your scores, especially if your credit score is just
below the range to qualify for a large loan like a mortgage you
can consider rapid rescoring.
What is Rapid Rescoring?
Rapid rescoring is a service offered by some lenders,
including banks and credit unions to make updates to your
credit reports. The goal is to improve and update the
information in your credit reports considerably quicker than if
you were to work directly with the credit bureaus. Normally it
takes 30-60 days but with rapid rescoring, you can update
your credit within 3-5 days. By reflecting the most recent
positive information your credit score will increase to meet
the time-sensitive aspects of a low-cost loan.

How it can help you?
A rapid rescore is best used when your credit score is within a
few points of qualifying for a large loan, credit card or any
form of credit. It will ensure that your entire credit profile is
completely updated and ready for any loan application
process. Your updated credit score will also result in a
significant difference in the interest rate available to you.
The rapid rescoring process is fairly predictable as lenders
generally use simulator beforehand to see how the update
would affect your credit score. According to Adam Carroll,
Chief Education Officer at National Financial Educators, “A
0.5%-1% difference in interest rate may not seem much when
you are not looking at long term costs. But, every single
percentage that you can decrease means massive amounts in
savings later on.”
For example, say your current credit score will get you a
4.75% interest rate on a typical 30-year fixed-rate loan of
$250,000 and after rapid rescoring, your new credit score
qualifies you a 4.25% rate. Then this can help you save you
$74 a month or $26,737 over the life of your loan. You can
use online calculators to calculate the exact difference in your
case.
When it may not work
A rapid rescore does not raise your credit score alone but
rather updates your current credit profile. So, it will not work
if have recently missed a credit card payment, closed out a

line of credit, had a raise in hard inquiries, or any other form
of negative entry.
Rapid rescoring will also not work if the reporting creditor
does not acknowledge the item in question is a mistake. For
example, if you dispute a late payment and the creditor has no
record of timely payment or you cannot prove it then the
lender will not even attempt a rapid rescore.
It isn’t Magic
To succeed with rapid rescoring you need to participate in the
process. For example, if you are late on payments you will
have to pay up and get it to your lender before you order an
updated credit score. Likewise, you would also collect the
documentation to prove that the accounts were paid up. This
takes time and effort and you cannot depend on your lender to
do all the work.
Are there fees involved?
Rapid rescoring is a service provided by your lender or
mortgage broker and typically you do not have to pay a
separate fee for the service under the federal law (FCRA).
But nothing comes for free, so sometimes there may be a
small fee involved in using the service or even if they do not
charge you will be paying for your lender’s capabilities in the
interest rate and closing costs that you pay. However, in the
long run, this service can save you much more money than
what you pay.
Plan Ahead

Would it not be better to have one less thing to worry about
when you are in the middle of a stressful and complicated
transaction? Rapid rescoring does help fix inaccuracies
quickly. But ideally, if you check your credit reports
regularly, fix errors and keep your credit card balances low
you will have nothing to fix the next time you apply for a live

5 Credit Card Myths Unveiled

 

Credit Cards are a keystone of Americans’ purchasing habits. They are no doubt the best financial tool available today as it is easy to carry, provides funds for an emergency and increases your credit scores.

However, like any other financial product credit cards do seem to create a certain amount of anxiety. A Nerd Wallet survey found that a surprising number of Americans are struggling with basic credit card issues ranging from credit scores to revolving debt to reward cards. This is due to the fact that credit cards are surrounded by certain rumors and myths.

So, when it comes to credit cards, it is important to know how to separate truth from myth. Here are five popular credit related myths which plague the consumers, plus the facts that repudiate them.

 

Myth 1: Using a Credit Card can hurt your credit score.

Fact-   Credit card usage does not hurt your credit score.

One common misconception regarding the usage of credit cards is that many people fear that it would hurt their credit score. Well, it is time to burst this myth. The fact is that it should be the first step a person must take towards building a credit score. Credit scores are calculated on the basis of the past use of debt and credit. The irony of credit score is that if you do not have debt or you do not use your credit, you don’t have a score. It will be difficult for you to get certain jobs, apartments and loans in the future.

Tip:  Even if you like paying your bills as you go, it is wise to get a credit card and pay off your credit every month to maintain a credit history. You should also keep your credit utilization ratio between 20-30%.  A credit card can hurt your credit score if you do not use it wisely and rake up huge outstanding bills.

 Myth 2: Maintaining a balance on your credit card helps your credit score

Fact: Not paying your dues can hurt your credit score.

A majority of consumers (54%) are under the impression that carrying a monthly debt balance improves their credit history. This is entirely wrong as this is the worst financial mistake you can make. The minimum amount due is the amount you need to pay to avoid any late charges. It is only a fraction of your total due and varies from bank to bank.

In a short term it is nothing but a myth. You will be relieved that a burden has been lifted from your shoulders but the trouble will start when the interest on the balance unpaid amount accumulates and will be bouncing back to be paid. Your debt will build up in a huge pile and you will soon find yourself neck deep in a pool of debt. Your credit scores will see new lows along with your finances and it will also hamper your ability to raise funds in future.

 

TIP: The best strategy is to use your credit cards and pay off your bills in full each month, so you can keep your overall debt-to-credit limit low. 

 

Myth 3: Getting Rid of Old Cards Helps Your Credit Score

Fact: No, it is just the opposite

Another myth about credit cards is that old credit cards hurt your Credit Score. But, the truth is just the opposite. The saying “old is gold” is very true in this scenario. If you leave your old cards open it may have a number of benefits.  Firstly, they bear testimony to your long time money management skills. Secondly, the older the credit account the more value it adds to your credit history (determines 15% of your score). The other important benefit is that it will keep your credit utilization ratio (the amount of available credit compared to the credit limit) low. It influences 30% of your FICO score.

TIP:  You should avoid closing an old card without a good reason to do so. If you find that the fees associated with your old card are outweighing the benefits you might consider closing the account.

MYTH 4: You can improve your credit score by using a debit card. 

Fact: It will have no effect on your credit score.

 

Though both credit cards and debit cards appear identical, they are at the opposite side of the spectrum and serve different purposes. With a debit card you withdraw money out of your own account whereas, on the other hand a credit card means borrowing short-term funds from financial institutions which you should pay back in full. Your credit score reflects your repayment ability and lenders look at your behavior when you borrowed previously. Prepaid cards and debit cards will not help you better your CIBIL score as there is no involvement of debt in the process.

TIP: You should use your credit card for everyday purchases and loans which you really need and pay them off in full before the due date. Avoid withdrawing money from your credit card as you will be subjected to high fees and high-interest rates and this   will quickly subtract any short-term gains.

 

Myth 5 – Keeping many cards is bad for my credit score.

Fact- The number of credit cards that you’re holding will have no bearing on your credit score.

This myth is conceived from the belief that every card plays a role in increasing your debt.  But the fact is no one credit card can satisfy all your needs. You may need an Airline Credit Card for discounts on flights and hotels, a cash-back credit card to get some hard earned money back in your account and a shopping credit card to get special discounts. Your friends and relatives may discourage you to have more than one card as they are worried that it would play a role in increasing your debt. But as long as you are using your credit cards wisely it will not negatively affect your credit scores. You just have to keep a tab on the amount you spend on each card and pay your bills in time.

TIP: You should not apply for too many credit cards at one go. This could lead banks to reject your request as you will look like a person who is desperate for finance and you have no means to repay your debt. So you should space out your applications for credit cards.  Secondly you should not be impulsive with your purchases. Finally, avoid piling up tons of credit cards that have high annual fees.

If you have been assailed by any such myths it is time to embrace facts. It will help you to be more discerning in decision making and build a strong financial foundation.

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Everything You Should Know About Store Credit Cards

With today’s fast lifestyles credit cards are important for consumers and retailers because carrying cash or using checks are often more time consuming compared to retail electronic payment technology. Consumers have a lot of choices when it comes to credit cards like standard credit cards, premium credit cards and store credit cards.

There are many reasons why you would take out a store credit card. Whether you are just waiting in line at the shop to find out if you can save on that day’s shopping or the store offers you the promise of saving money in future, these cards will regularly find their way into your wallet (or phones via an app). Almost all big retailers offer their own cards which will allow you to take your purchases home with a very nice discount and without having to part with a penny at the cash counter.

These rewards and discounts are often tempting but can applying for a store credit card come back to bite you? Here is what you need to know about the upsides and downsides of using these cards and also the effect they will have on your credit scores.

Upsides of Store Credit Cards

    • Special Perks: The main benefit of store cards is that it offers an initial discount of 10% to 20% when you sign up and you may also get extra discounts the entire year if you shop at that retailer. Many store credit cards offer even more such as rewards programs which may feature other special benefits, such as bonus coupons, free shipping, free gift wrapping or free exclusive financing offers.

 

    • Easier Qualification: Store credit cards are specifically designed to work for individuals with all levels of credit quality. So if you do not want to apply for a secured card or are unable to qualify for a general-purpose credit card then a store credit card can be a good option. It also allows retailers to escalate their customer reach.

 

    • Retailer Discounts: Most retailers promote credit cards as a great way to save money. So, when you sign up for a store credit card you will not only receive an initial 10 -20 percent discount but may also be in line for extra discounts all year long.

 

    • Many stores may also offer you 0% interest on financing offers. They will give you twelve or eighteen months interest-free finance to pay off a major purchase with their credit card.

 

    Store credit card holders are also the first to receive special coupons or gain access to exclusive sales events. Everyone loves saving money, but make sure that you do not overindulge and go on a spending spree.

Downsides of store credit cards.

    • Limited Use: Some retail credit cards may offer the same flexibility as a regular card, but most of them are closed-loop credit cards that are limited to purchases at that particular store or a chain of stores. In addition, these store credit cards may have a low spending limit and can impact your credit score.

 

    • Have a High-interest Rate: The biggest negative is that they always have high-interest rates. So, if you plan to carry a balance or have trouble staying within your budget store credit cards is not a responsible choice. According to a survey by CreditCards.com in 2016 the average APR on America’s retail-branded credit cards had increased to almost 24 percent, which is far higher than the average for all credit cards (15.18%) The high APRs of typical store credit cards mean that you will have to pay hefty interest charges if you do not pay your balance before the end of the grace period and that would completely negate the 10-15 percent discount that you had received on your initial purchase.

 

    • They Encourage Debt: Another negative is the temptation to spend more when you have a retail credit card. Stores frequently offer cardholders’ incentives like discounts, emails about sales and also rewards on your spending. Many retailers will continuously raise the credit limit of your card to increase your spending. You should follow the rules of spending only on what you can afford and keep the balance below 30% of the credit limit. If you are not disciplined with your spending you could easily find yourself in debt.

 

    Potential misunderstanding: Generally when you sign up for a store credit card in-store you are not given a full explanation of all the terms and conditions at the point of sale. Typically you will be given a brochure with the credit card terms and you really may not have enough time to examine the costs of the card and compare it with other credit cards and be sure that you are getting a good deal.

How Store Credit Cards Affect Your Credit

People who are looking to establish or rebuild credit history may find a friend in retail store cards. If your credit score needs some polishing a store credit card can help you build credit. It is a great way to build credit as retail store card issuers normally approve people with lower credit scores. However, co-branded store cards are harder to qualify as people with higher credit scores will get lower interest rates.
When you apply for a new credit product like a store credit card, the issuer will perform a hard inquiry on your credit report. This is generally not harmful to your credit as many consumers will see only a temporary credit score hit of about five points. However, if you apply for several store credit cards at once it could be harmful to your credit rating especially if you have a short credit history or few accounts.
Your credit utilization ratio is one of the key factors that influence your credit scores. Store credit cards usually come with a low credit limit of about $500. So by using store credit cards, you can reach a credit utilization ratio of 30% with a purchase of just $150 dollars.
However, if you use your store credit card sparingly, keep a low balance and pay off your bills immediately, the available credit on your store card can drive down your utilization rate and increase your overall credit.
You can establish a credit history by using and paying off the bills on time and also reduce your debt-to-credit limit ratio by using it sparingly and keeping statement balances low. This makes up 30 percent of your credit score. It will also establish a pattern of good habits which in turn will boost your score.

Bottom Line

You can benefit from store credit cards if you are responsible and pay your balances each month. Still, you should take time to understand the advantages and drawbacks of store credit cards. You should also check out the other credit cards in the market to find out one with better rewards and lower interest rates.

The New Fico Score To Be Unveiled In 2019 Could Boost Your Credit Worthiness

For the past 27 years, FICO Credit Scores have been the
bedrock of most consumer- lending decisions in the US.
These scores were based mostly on consumers’ history of
paying mortgages, credit card balances and loans. The FICO
model has been periodically updated to help lenders to be
more informed about credit-granting decisions and help the
consumer get access to the credit they need. The most widely
used version is FICO Score 8.
The latest update is that Fair Isaac Corp. (the company
behind FICO) has decided to test out a new type of scores
called UltraFICO with credit reporting agency Experian and
a technology company called Finicity. This will be unveiled
early next year (2019) and will consider the borrowers’ bank-
account balance and cash-management behavior in addition
to the traditional credit.
The move to test the new scoring system comes in the wake
of some financial companies who are supplementing
traditional credit scores with an analysis of customer’s bank
account to assess consumer’s creditworthiness.

KEY FEATURES

Here are a few key features as to how it works and who could
benefit from the new UltraFICO scoring system.

  • The new FICO score will be optional and will be offered
    only to consumers who opt for it. They will be given the
    choice to do so when they do not qualify by the more
    traditional systems. However, they should also agree to
    share with the lender personal information, and allow
    them to access their banking and saving data to evaluate
    overall financial responsibility.
  • This new system will potentially improve the credit
    scores of many Americans who have less than stellar or
    borderline credit score ( upper 500 to the low 600s ) by
    20 points or more depending on the details of their
    financial profile.
  • “People who have strong credit scores need not consider
    UltraFICO scores but they could use it as a second
    chance,” says Sally TayloShoff Vice President of
    FICO.
  •  Consumers with an average bank-account of $400 and
    with no history of negative balances are more likely to
    benefit because it will take into account how old your
    bank-account is, the frequency of activity and evidence
    of saving.
  • It will particularly benefit millennials( people aged 18-
    34) who did not have the opportunity to build up a
    credit history. It will also help people who are in a
    financial rut and are rebuilding their credit scores.
  • It also might be easier for millions of Americans to get
    any type of loan including a mortgage loan-especially if
    they have a subprime credit score (500-600 FICO) or
    have little or no credit history at all. The new UltraFICO score has “definitely a lot of promise”
    as an alternative scoring method, provided the consumers
    have true control over what level of detail they share and
    whether to share information or not.
    However, it is not clear whether the other two credit bureaus
    Equifax and TransUnion will eventually participate in the
    Ultra FICO test. TransUnion in an email statement said that
    “it applauds all efforts that promote financial inclusion and
    expand economic opportunity” but Equifax did not comment
    on this.“According to Smith” The new scoring system is
    revolutionary as consumers will play a direct role, for the first
    time ever to determine their own credit scores.
    FOR CREDIT SCORE ENQUIRES CONTACTTOLL-FREE NO. (800) 400-ZINU(9468)

How Can Parents Help Their Kids Build Credit At A Young Age

In the day and age that we live in today credit scores have a
great influence on our financial future and that is why many
parents nowadays are not only worried about their child’s health
and safety but also about how their kids can build a good
credit.
How soon should one start to build credit? The answer is that
the teenage years are the best time to start building a credit
history. This means that parents will have to take the lead in
explaining the basics of saving, earning and spending before
their kids become teenagers.
Follow these 5 steps and by the time your kids are flying solo,
they should be well on the way to a good credit score.

1. Help your child open savings and checking accounts:

A savings account is the basic building block to help children
understand the financial world. Parents should encourage kids to
deposit birthday money, allowances and cash from any odd jobs
they go into this account and also save up for something they
want to buy. This will help them to learn firsthand as to how
compound interest works.
When your kids are in the early teens help them open a checking
account and teach them how it works and about penalties if they
overdraw or if their checks bounce. This will not only limit them
to their checking account balance but also give them some

spending independence. It will also help show financial
institutions that your teen can handle money.

2. Encourage your teen to get a part- time job:

Working part-time will not only help teach children the value
of money but will also definitely go a long way in making your
child a responsible adult. The thrill of seeing savings grow and
the disappointment of watching money disappear when they
make bad decisions will be a precursor to understanding credit.

3. Make your child an authorized user of your credit card :

The most conventional way that people start building credit is by
taking on a credit card or loan, but one has to be at least 18 to
do this. However, you can build your child’s credit even before
the age of 18 by making your child an authorized user on your
credit card. The credit card company will issue a second card in
the child’s name. The child can use this card as a card of his
own but the only difference is that the primary holder (parent) is
responsible for the entire balance.

4. Co-signing a loan or credit card:

If you think that it is not a good idea to make your teen an
authorized user on your card, you can co-sign his or her first
credit card. This will pack more punch than authorized user-
ship as your child will be the primary borrower and it will do
more to help your child build a solid credit score. But
remember to educate your child how to use the card responsibly.
You should be comfortable with this possibility before moving
forward.

5. Obtain a secured credit card:

If you feel your child is not particularly responsible with money,
the best option is to help your child apply for a secured card
when he/she is 18 years old. These cards are normally fully
secured and require cardholders to deposit a few hundred dollars
which is usually equal to the credit limit. You can make the
initial deposit together. The advantage of such a card is that your
economic risk is just the amount of deposit and some credit
cards come with some additional attractive features like a
reasonable annual fee of about $29 which allow kids to monitor
their credit scores and use a credit simulator to see what the
consequences will be if they missed a payment or continue to
pay on time over an extended period of time.

If your child uses the credit card regularly for small purchases
and pays off the balances in time he/she can qualify for an
unsecured credit card after six months.

Building up a solid credit score will help your child qualify for
loans, auto insurance and even affect whether he/she can get a
job. Therefore, you should monitor your teen’s activities as
she/he gets into the credit habit and allow more flexibility as
responsibility is demonstrated.

Obtaining a reasonable of credit at an early age and using it
responsibly will definitely pay off in the long run. There are
tricks and techniques to build a good credit score a young age
but in the end, it boils down to being responsible.