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Why Is It Important To Pay Your Bills On Time, Every Time?

A late payment is simply a payment that you have not made to the lender before the due date. This happens to the best of us as we can make mistakes due to oversight or shortage of cash. Unfortunately, these mistakes will negatively affect your credit score and cause it to drop dramatically as your payment history is the key component used to calculate your credit score.

In this article, we will discuss how late payments affect your credit score, the other potential penalties, and tips on how to keep your future credit in tip-top shape.

THE EFFECTS OF LATE PAYMENTS ON YOUR CREDIT SCORE

You know that late payments can negatively affect your credit scores. However, you may not be aware of how much your credit scores can fall or how long it will take you to repair the damage. You should because credit scores can boost or drain one’s finances.

According to Experian, a single 30-day-late payment will lead to the ding of 90-110 points if you have a good credit score of above 780 and a drop of 60-80 points if you have a score of say 680. However, the number of points that your credit score can drop when a late payment is added to your score depends on many factors. The FICO scoring models will consider all the points given below to determine the impact a late payment will have on your credit score.

  • It depends on how long you wait before paying the bill. Your payment will be reported after 30 days past the due date and again after 60 days, then 90 days and then again after 150 days. The longer your bill goes unpaid the greater will be the impact on your credit score. And after that, your account will be written off as a loss of charge and that will be very bad news for your credit scores.
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  • Late payments that have occurred in the past year do more damage than from several years ago. So, your recent credit history severely harms your credit score but this negative impact lessens over time.
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  • The number of points your credit score can take a ding also depends on the number of late payments on your credit report. If you have many late payments already then you are on the low end so the addition of one more late payment may not cause a lot of damage to your credit score as most of the damage has already been done.
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  • The amount of your late payment can also play a role as a small amount of say $200 and $300 will not harm your credit score as say a $300 and $3000 late payment. So the more you owe the more your score drops.

OTHER POTENTIAL PENALTIES OF LATE PAYMENT

  • You will usually be charged a late fee by the lender and if you continue to miss the due date you can be charged additional late fees too.
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  • The interest rates of your future loans will increase.
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  • Your interest rate can be reset to a penalty annual percentage rates (APRS) or default, depending on the creditor’s policy. Credit cards penalty APR can go up to 29.99%
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  • You can also forfeit your 0% promotional rate on a balance transfer card if you have one and it can be reset to the default interest rates. So, you will pay much more interest on your outstanding balance if this is done.
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  • It will remain in your credit report for seven years so you may not qualify for a mortgage (at the best interest rates), get a personal or auto loan, or even receive the best credit cards or rewards programs.

HOW TO MASTER YOUR LATE PAYMENTS

You may be just forgetting to pay your bills or struggling to pay your bills, or just forgot to pay one small bill. Either way, there are ways to master your late payments.

  • You should select a payment due date that coincides with your paydays or a time when you pay all your bills together. Many credit card issuers do allow you to select a due date.
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  • Set up bill payment email reminders or text alerts that will remind you about the bills that are due in a few days. If you require more than one alert you can set up multiple electronic prompts.
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  • Consider setting up automatic payments, especially if you have made late payments in the past due to forgetfulness or being too busy. However, you should ensure that you have sufficient funds in your account so that you do not get to pay overdraft fees. Once you start paying your bills on time your credit scores will begin to improve over time.
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  • Even if money is tight you can review your budget. You may be able to find ways to cut back on spending and make it easier to pay your bills on time
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  • Prioritize which payments you need to pay if you do not have sufficient money to pay all bills. The essential bills like mortgage, rent, and utilities should be paid first. Then pay the bills that have a hefty late fee. Finally you can pay the bills that are about to go into collections.
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  • Finally, a smart move would be to set up an emergency fund that will help you when you have unexpected expenses.
 

 If you need help to improve your credit scores do contact our financial experts at Zinucreditrepair.com.

Can Medical Debt Impact Your Credit Scores?

Are you worried that your medical bills will harm your credit score? The answer is that determining the impact of your medical bills on your credit report and credit scores is not a perfect science. It depends on an individual’s credit history which will be factored into the formula for determining one’s credit score.

Here we are going to examine how unpaid medical bills can impact your credit score. 

The Danger of Ignoring Medical Bills

You may maintain good health insurance and do everything you are supposed to do like choosing in-network doctors and hospitals. But, despite your best efforts your medical bills can still rack up quickly and affect your credit standing. And, if you are uninsured even a simple emergency visit can turn into an alarming amount of debt.

The myth that medical bills will automatically spell trouble for your credit reports and scores – is just a myth. Simply acquiring medical bills will not have any impact on your credit score. It is not the doctors and hospitals you visited that report your medical bills to the credit bureaus. Medical providers will usually turn over your unpaid bills to a debt collection agency after attempting to collect fees from you for a few months. The debt collector, in turn, reports it to the credit bureaus. So, it is only unpaid medical debt that can typically lead to credit problems as they can turn into collection accounts. They can even lead to potential court judgments if your debt collector decides to sue you for your outstanding medical bills and will stay on your credit report for seven years.  

Therefore, if you are overwhelmed with large medical bills that begin to arrive in your mailbox, you should not ignore them.   Ignoring them is a very big mistake as they can show up in your credit report. But, the degree of damage will depend on other score factors from your credit reports.

Medical Collections and Credit Scores

Many people believe that medical collections are not a big deal because no one would choose to get into medical-related debt. According to a survey a staggering 52% of collection accounts on credit reports are medical bills. It is estimated that 43 million consumers with a credit report have one or more medical accounts in collections.

 Credit scores are inclined to take the line of least resistance. That is to say, it is very easy for a good credit score to turn into a bad one than it is for a bad credit score to turn into an awful one. If your credit score is currently very good then the addition of a collection account or “just” a medical collection may potentially have a very damaging impact on your credit score. However, if you already have problems with derogatory information appearing on your credit reports then one more medical collection may not have a much additional negative impact on your credit scores.

New Regulations May Help

The older FICO scores were designed to treat medical collection bills like any other collection accounts. But, the good news is that after an agreement between the three credit bureaus (Experian, Equifax, and TransUnion) and a group of the state attorney general the FICO and VantageScore have released a new set of rules. These scoring models (FICO Version 9 and VantageScore 4.0) which have come into effect from June 2018 have made it harder for medical debt to kill your ability to borrow money. Collection agencies cannot report medical collections to the credit bureaus unless it is 180 days past due. Secondly, the new regulations also require collection agencies to remove from your reports any medical bills that are eventually paid by your insurance company. This is great news as the time frame of 180-days will give you time to make payments or payment arrangements with insurance companies and medical providers before it goes for collections. Secondly, it will help if a medical collection has been unfairly added to your credit reports when it should have been covered by your insurance plan. Matt Schulz industry analyst at Creditcards.com says, “It is a big deal as it builds time into the mess of getting insurance claims taken care of.”

Debunking the Myth

 No doubt, when these newer and better scoring models (FICO Version 9 and VantageScore 4.0) become more widely adopted a new medical collection will cause fewer credit score problems.

 Though, this special treatment of credit scores may make life a little easier for medical debts but, it is important to keep in mind that many lenders still use older versions of credit scores. So, it is likely that creditors would view a medical collection account negatively when applying for insurance, credit or loan as medical debt. 

Your goal should be to prevent your medical bills from being turned into collections or being reported to the credit bureaus. That may mean that you should:

  • Call the doctor and your insurance company monthly to check on the progress of any reviews that are delaying the payment of your medical bill. In some cases, you may need to pay the bill and then seek reimbursement from your health insurer.
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  • Negotiate with your health provider if you cannot afford to pay a medical bill and try to reduce the amount owed or set up a payment plan.
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  • Examine all the medical bills you receive carefully and compare it with the benefits provided by your health insurance provider. If you feel you have found an error you should contact your health insurance company and file a dispute with the three major credit bureaus.
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    No doubt all this may cause some inconvenience, but it is better than another blow to your credit scores.

    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.

    1. 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. 

    2. 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.

    3. 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.

    4. 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.

    5. 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.  

    6. 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.

    If you know about any other credit card myth or rumor you want details on you can connect with us on Facebook or Twitter.

     

    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.