May 28, 2009

How to Avoid Being Charged-Off?

What is Charge-off?

When an account is delinquent for a certain period, normally for 180 days, the issuer usually writes off the outstanding balance of the cardholders, considering it as uncollectible and declares the account charged off. It is a loss on the part of the issuers. However, they are compelled to do so as they cannot invest more time in collecting the unpaid debt from the cardholders.

Does a Charged off account free you from debt?

A charged off status on your account does not free you from your debt. Instead, it affects your credit in the worst possible way. You are more liable to pay towards your debt than before. If you fail this time, the issuer may file lawsuit against you. Moreover, the issuers will sell your charged off accounts to a third party agency, namely Collections agencies who own the debts as an asset to their company. They will try hard to collect the debts from you. Sometimes, they adopt unscrupulous and intimidating methods to collect debts from debtors.

How does a charged off status affect your credit?

Your account will be reported to the Credit Bureaus as charged off and this will remain on your credit report for seven years from the date you went delinquent. Even after seven years when the lenders are to offer you credit, they will pull your credit records and see the negative remarks on your credit report. This will hamper your chance to get a loan or a good credit card with better interest rate. Your credit score will drop significantly and you would be required to improve it before you get any better credit favor. Your payment history takes 35% of your credit report. Hence, any negative mark there is seriously taken by the lenders understanding the fact that you were once not able to repay your debt.

How to avoid being charged off?

The simplest way to keep your accounts going is to make at least the required minimum payments each month. Make sure you are not late on any payments. If you are late for consecutive six months, your account may be charged off. Try to use your credit within the assigned limit. If you are late on payment in one month, make a larger payment in the next month. This may not stop your account going past due, however, it will lessen your burden of debt and hence, prevent you from going past due again.

What to do if the account is already charged off?

If your account goes charged off, do not panic. You still have ways to get away from this. The only way for you to circumvent this is to wait for seven years or to cut a deal with your creditors. It is always advisable to deal with your creditors rather than the collections agencies. Contact your banks and try to strike a lump-sum settlement with them. Do not commit to payment until you are very sure that you can actually make the payment. You can also ask for a monthly payment agreement in which you may need to make a minimum payment to get the charged off status removed from your credit report. Always ensure all the negotiations are done in black and white. If they agree to your settlement proposal, they should mark your account “paid as agreed”. This should reflect on your credit report too.

To sum up, you should not panic, if your account is charged off. However, it must be avoided. It will for sure affect your credit but will not end your world. So, be prudent while using your credit and try to make your payments on time. You will never have to live a life under the fear of having accounts charged off. A charge-off is bad but losing hope on this is worse.
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May 21, 2009

Cash Advance Fundamentals

Cash advance is a privilege, which cardholders enjoy borrowing instant money using their credit cards against the available credit in their accounts. It is a convenient way to get a small loan with no real paperwork. Cardholders can avail of the cash advance facilities at any of their nearest ATMs. Cash can be withdrawn against the available credit and within the cash advance credit limit, set by the banks. It is generally a small percentage of the overall credit limit assigned to one credit card. It is easy and for sure helps in emergency.

Why do you need a cash advance and when?

When you are badly in need of instant cash, the cash advance option on your credit card is the best way to go for. Get any ATM in your locality and withdraw money to your needs. Before you do this, make sure you know of your cash advance limits. Stay under your allotted cash advance limits. Even though you exceed your limit, the ATM will still dispense the money but this will result in exorbitant finance charges and penalties (like the over limit fees). If you do not know your credit limit, call at your bank customer care number and get information in details. Your probable queries should be like, how much of your total credit limit can be used for a cash advance? What is your available credit now for a cash withdrawal? Is there any maximum limit up to which a cash withdrawal can be processed in a single day? What are the fees associated with cash advances, namely fees charged using ATM for such transactions, etc.

Fees and interest rates for cash advances:

The fees and finance charges for cash advances are higher than those for a purchase. Whenever you withdraw money, you are charged with a transaction finance charge along with some other charges. The cash advance finance charge is added to your account on the very day you use the card to take cash and will continue to be chargeed until the full amount of the withdrawn money is not paid in full. You cannot avail of any grace period to pay it later and if so, additional finance charges will be assessed. Remember, even though you may pay off your outstanding balance for the card, you will still be charged with a finance charge for the cash advance. Sometimes your credit card checks are also considered as cash advance.

What should you do for cash advances?

In fine, I would say that you should stay very careful while using your card for a cash withdrawal. Before you get a card, you had better make sure that you know of the fees and finance charges along with the privileges of the card in details. Investigate into any different or additional finance charges/fees for cash advances. Try avoiding your card for frequent cash withdrawals. Use your card very wisely and enjoy the privileges of it. Withdraw cash when and only when it is urgent.
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May 13, 2009

Income vs. Savings

Like any other habit, savings is also a good habit, which requires a lot of attitude and endeavor. They say, it does not matter how much you earn; what matters how much you save from that earnings. A person can earn $5,000 per month but he spends $4,500 on his income. In this case, his total earnings should be calculated on how much of his income remains unspent. It is $500. This should be his actual income. On the other hand, you may earn $1,000 per month but your spending is limited to or within $300. Therefore, you earn actually $700 per month. You are, in fact, richer than the former. Income helps in savings but spending should be restricted to this income and if so, your savings will set off. Inculcate the habit of saving a little money. It will boost your financial status and, hence, your satisfaction.

Why do you need to save?

If one thing is certain in life, it is the uncertainty. Any time some unexpected things may happen in any one’s life A natural disaster, a sudden lay-off, the collapse of economy, unexpected illness etc. are a few to mention. At these crunch moments, you need to have some bank balance to move on. If you have significant money at hand at that time, a financial crisis can also keep your chin up. You can steadily analyze your needs and make your plans accordingly. Besides, you may wish to purchase a house or a new car in future. A well-maintained savings plan will help you realize your goal and will also not make a hole in your pocket. You will not be in debt and have enough money to spend too.

How to start off?

First, open a savings or a checking account, if you do not have one. Deposit a substantial amount of money in the account. Frequent your bank and deposit more money. Try spending less than you earn. It may not be easy but it is not a Herculean task too. If you do intend to have a good portion of your money at the end of the month, review your expenditure. Make a budget. You need to be aware of your incoming and outgoing money. Once you know about this, you can find some areas where you can actually save money. Spend as much as you truly need and keep the unspent money in your bank account. Record your expenditure and earnings, and evaluate this off and on. Check this video below which will guide you to saving money.

In fine, you would believe that savings is more satisfactory than earning itself. Earn as much as you can and spend as much as you need. Utilize the value of any product or services to the most and avoid wasting the same as far as possible. After this, you will surely have some bucks to spend more, which will add to your existing income and hence, pave the way for more expenses. Wish you all the luck.
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May 11, 2009

How to get a good credit card?

A credit card is a plastic with a magnetic strip across it and it is connected to a credit account. Issuers, namely banks, issue credit cards to their cardholders with a promise on the cardholders’ part to repay the credit on time. Banks allocate a limit to their respective users, called credit line or credit limit, up to which they can use the credit. The credit line is subject to change depending on the usage of the credit given.

Your chance of getting a card with a good credit limit and a low interest rate depends upon many factors. Your credit history tops the chart. If you have a satisfactory credit score, you will no way be denied of a credit card with a good package. However, remember, if your application for the card is disapproved, do not go for repetitive applications. It may go against your credit report. Do possess a valid Social Security Number before you apply for a credit card, as you will need it for the credit card application. If you do not have one, apply for it first and then go for a credit card. Look for the best card, which will suite your current financial needs.

Always make sure that you go through the terms and conditions of the prospective issuer before you take a decision to have a card from them. Points like credit line, interest rate, additional fees, hidden charges, grace period, balance transfer options etc. are a few to be given a good thought.

Credit card applications are generally accepted online by most of the major issuers apart from the company solicitations. Provide all required information in the application form such as your driving license number, your SSN, contact information, your annual income, and other relevant information. Your application is subject to approval and if you are accepted, then you will get a letter informing you of the same. You should get your card within a few weeks. Your card will not be accompanied with your PIN for security reasons. It will be sent to your address in a different letter. In case, you do not receive both or either of them, call your bank and report the same. They will issue a new card with a new account number to you.

However, unfortunately, your application is not approved, you should receive a letter from the issuer informing you of the reason of rejection. They should also send you another letter with information of the credit bureau from which they got your credit report. You are entitled to get a copy of your credit report free of cost from the same credit bureau and this is law. If you discover any error on your report, get it corrected at the earliest and apply again to the same creditor explaining how you got your credit report rectified. If you do not find out any discrepancy, then you need to wait for some time and, in the meanwhile, you need to improve your credit score. Below you will find a video explaining how you may get a good credit card with bad credit. All the best.

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May 7, 2009

Your Credit Score

A credit score of an individual is a numerical value that lenders use to determine your eligibility to get any financial favor and also to decide how likely you will repay your debts. Your credit report, in which your repayment history and your earlier debt are listed, is taken into account while preparing your credit score. Fair Isaac Corporation (FICO), the developers of credit score, considers several factors while making your credit score. The picture given below may better illustrate how much percentages of those factors constitute your credit score.

• Your payment history comprises the number of accounts you have paid as agreed;
• Has any of your accounts ever been to Collections?
• Has any of your existing or earlier accounts ever been delinquent?
• How long your accounts have been over the credit limit or past due?

Amounts owed:

• How many existing accounts you have with balances?
• How much of your credit limit has been used by you so far?
• How many accounts you have with a zero balance?

Length of Credit History:

• How long has your account remained open?
• Time since your account remains active.

Types of credit in use:

• Different types of accounts (revolving, mortgage, installment, etc.) you have or had

New credit:

• Number of accounts currently you have or recently opened.
• Any inquiry made on your credit report recently.
• How many new accounts you have opened?

How to improve your credit score?

• Pay your bills by the due date on a regular basis. Pay more than just the minimum payment but Do Not less than the minimum payment. If paid less than the required minimum payment, it will aggravate your credit score further.

• Clear your past due bills, which you might have and remain current. It will help you build good score.

• Do not be late on payment or default a payment. In addition, avoid going over the limit. Both the cases will affect your credit score negatively.

• In case you find it difficult to pay your bills, contact your creditors and arrange any payment plan, which they may have.

• Keep your account balance as low as possible. Use the credit wisely and when required only.

• Pay off your accounts and do not transfer the balance of one account to another. It does not actually help at all. Moreover, opening new accounts will not lower your debt; instead, it will put more burden on your pocket.

• Check your credit report on a regular basis so that it remains without errors. Contact the three major credit reporting agencies (CRA) to remain updated. In case any discrepancy is found in your report, ask the concerned agencies to correct it. It is in your own interest. The contact information of the three credit reporting agencies are as follows:

(Contact numbers of the CRAs as of January 2009)

Equifax: 1-800-685-1111. Get a free report if your credit is denied in the last 60 days.
TransUnion: - 800-916-8800 - mail within 6 to 8 business days.
Experian - 888-397-3742 - receive within 8 to 10 business days.
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May 3, 2009

Credit Card Late Fees

Since the time credit cards entered the lives of people, many cardholders tend to spend more than they expect or can afford to spend. Consequently, in most cases, people end up with paying less than what they have spent throughout the months or worse, do not pay the bills at all. Non-payments of the credit card bills on time incur late fees. Late fees have been an issue with the cardholders for a long time. They do not even realize how much they have spent. At times, they are left with no resource also to pay the bills later. This situation may even cause more late fees resulting in a dent of the credit scores.

What is a credit card late fee?

A late fee is an additional fee charged by the credit card companies, according to their company guidelines, for a non-payment of the credit card bills or paying less than what is due on the credit card statement. Payment due dates are marked in the credit card statements/ bills. Being aware of your monthly due dates, at your own interest, is very crucial which in return may help you save some money.

At present, some credit issuers charge late fees as high as $40.00. This may be as per their company rules. Besides, the Fair Credit Billing Act (FCBA) allows the credit card issuers to formulate their own credit card policy, in accordance with FCBA guidelines. Therefore, it is not the time to be sluggish with your card bills.

How do late fees affect you?

When you are unable to make your credit card payments by the specified due dates, you will be charged with a late fee. Assessment of late fees will be marked by your issuers, which, in result, will harm your credit score negatively. If you plan to get a new loan or decide to possess a new credit card, either your application may be turned down on grounds of your low credit scores or you will get a card with higher interest charges because of your late fee history. Hence, make sure you do not default any payment on your credit card bills and pay the required amount by the due date.

How can you avoid Late Fees?

The best way to avoid a late is to pay the bills on time. If you opt to snail-mail your payments, you should send the payments way before your due date. Remember, you may not be sure of any postal delay of your payment processing. Therefore, it will be judicious to send the payments at least 10 days in advance. Make at least the minimum payment by the due date. You will not be charged with a late fee. In case you have an issue to pay your bills by the specified due date, ask your bank to change the due date. Just remember, you are liable to clear your current monthly bill by the current due date and then your new due date will be effective. You may also set an Automatic Payment Deduction Plan with your issuers. Most major issuers accept online payments through Auto-Deduct plan. Just make sure you keep sufficient funds in your bank accounts, otherwise you will be levied with a non-sufficient fund fee as well along with a late fee. Pay-by-phone is also available with some credit card issuers. You need to have a checking account or a savings account for this. Some issuers charge a phone fee. Always ask them before you pay. While calling to make a payment on phone, you need to provide the customer care executives with your checking account number and the routing number, which appear at the bottom of your check. Get the payment confirmation number after the payment is posted. You can also post-date your payments through the phone payments.

Finally, if you are charged with a late fee, you can ask your issuer to get the fee waived, provided you maintain your account in a satisfactory manner during a 12-month period. Most of the issuers will waive the fee as a courtesy because of your good payment history. Hence, enjoy your credit and do not be late. Make due payments on time and relax. This will also help gain more credit in future. All the best.
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