Unknown

What Does Coronavirus Crisis Mean For Your Finances?

In the past few months, we have all noticed a crisis brewing due to the COVID-19 epidemic; however, it wasn’t so clear how it was going to affect everyday Americans. Read out what does coronavirus crisis mean for your finances and how to protect credit score during the coronavirus pandemic?

Now, we’re hitting a point where the crisis is starting to affect the stock market, interest rates, working life, business cycles, and even employment.

Cities and states are calling states of emergency, starting to lock down non-essential business and government functions for the coming weeks.

Schools and public spaces have been closed and most large gatherings have been cancelled proactively. There are ways on how to protect credit score during the coronavirus pandemic.

Panic has started to set in because we’re dealing with something that hasn’t been seen in a long time.

It’s scary, and for people who aren’t working or are working fewer hours due to the epidemic, it can have a drastic effect on one’s finances.

We at The Credit Pros want to assess the situation as clearly as possible in order to understand your own personal situation while also alleviating some panic.

Dealing with the Unknowns

There are many people who are worried if they’re going to have a job to go back to after the lockdowns end. You might be one of them.

There is also uncertainty with stock market movements and supply chain management. For many business owners, it can be difficult to even get products ready for sale since fewer and fewer people are working.

Sourcing from China in the last few months had become difficult due to the outbreak in Wuhan and the Chinese government’s responses. 

Unknown

We don’t have an answer for the unknowns. However, we do have some tips to relieve some panic and help you understand the situation from a logical point of view.

  • Stock market movements are not a perfectly accurate measure of overall economic performance or potential. Just because stock trading causes things to move up or down doesn’t mean that your income will necessarily be personally affected.
  • Being specifically told to work from home doesn’t mean that you’re more likely to be laid off.
  • Business activities being temporarily paused affects everybody, and you are not alone in feeling scared.
  • Just because the virus continues to spread doesn’t mean that all business activities will be held in lockdown forever until the virus disappears from the planet. 

It’s important that, during a time of crisis, you’re able to see the situation from a logical point of view rather than get swept up in the emotions of fear and worry.

Keep reading what does coronavirus crisis mean for your finances?

What’s Happening to My Credit?

Your credit will only be affected if your ability to make payments is affected. However, it could mean that credit becomes harder to come by, and that getting more money to borrow may become more difficult for those who have currently lower credit scores.

One should know how to protect credit score during the coronavirus pandemic. Also read about improving your credit scores: The Rule Of 45.

Some banks have taken measures to make it easier for people to deal with their credit situations. It’s doubtful that these will hurt your credit score.

There are a couple of credit myths you will find as for reference credit myth – each credit pull hurts.

What Does Coronavirus Crisis Mean For Your Finances

Your credit is the last thing you should be worrying about, as it’s one of the things that is the least likely to be affected.

Don’t Miss: How To Protect Credit When Unemployed

If the crisis is affecting your ability to pay, it’s important that you not delay and make sure that you contact your lenders.

They may not be in office to take your call, and they may not be in office on the payment due date.

Even so, it’s important that you follow up with them and not let a missed payment slide.

These are the known tips on how to protect credit score during the coronavirus pandemic. Keep reading what does coronavirus crisis mean for your finances?

Final Thoughts

We at The Credit Pros want to urge everyone to stay safe. Work from home if possible, and specifically ask your employer if it’s a possibility for you.

Keep your contact with others at a minimum and stay inside except for the absolute necessities. Wash your hands often and take care to keep your areas clean. 

Final Thoughts

It’s imperative that every American do their part to ensure that the spread of the virus is slowed down enough for the necessary measures to be taken by hospitals, researchers, and pharmaceutical companies. 

With the combined effort of every American, the lockdowns will end and business will resume as normal.

The post What Does Coronavirus Crisis Mean For Your Finances? appeared first on The CreditPros.

Why a Credit Score Matters

Why a Credit Score Matters

Why a Credit Score Matters

Your credit score and history are the most important parts of your entire financial life. Basically, your credit score will follow you forever and it’ll play a big role in numerous major financial situations in your life. Most people think that credit score matters only when it comes to being approved for loans or credit cards, yet it actually goes far beyond it.

Credit Score vs Credit Report

You’ll hear credit report and credit score interchanged, yet it’s essential to understand the primary difference between the two. Basically, your credit report is your credit information’s detailed history. It’ll contain current credit information, delinquent payments, balances, personal inquiries and identifying information, and bankruptcies.

On the other hand, your credit score is the 3-digit number based on your credit report information. After considering each of the aspects on your report, there is a mathematical formula used for determining what your score must be. If the score is high, it is better. The industry’s leading credit score is FICO, which ranges from 300 to 850.

Insurance Rates

Whether you’re buying homeowners insurance or insuring your vehicle, your credit score would likely play a role to determine your premium. Typically, insurers make what’s called insurance score, which is based largely on your own credit score, yet with some factors. Poor credit score may cost you lots of money in extra premiums every year while good credit score may qualify you for discounts.

Beyond Loans

Everybody knows that if you have low credit score that it’ll be much harder to find banks or credit card company that will lend you cash, yet it goes beyond that. Other than that, not just your score will affect whether or not you could borrow cash and at attractive rates, yet it could affect everything from your insurance rate to employment opportunity.

Employers May Check Your Credit

A controversial and increasingly common practice now takes place as the employers check the credit of potential new employees. Arguments for doing it are that employers believe they could use credit history to determine the responsibility. There are situations where bad credit history can be because of something completely out of one’s control, yet it’s still something you should bear in mind.

Resources for Credit Score

You might need to pay to get your complete credit history and credit score, yet it’ll be worth it and might be the difference of you getting that mortgage or loan you’re hoping to get.

Should You Think about Your Credit Score?

If you are worried about your credit score, it is worth putting some time to raise your credit score. Other actions that could help with it include the use of your credit card in a responsible manner such as maintaining a low ratio of credit utilization, paying bills on time monthly, as well as being thoughtful regarding how and when new accounts you open in the long run.

However, you do not really have to think about your credit score. You do not need FICO to tell you that you’re making great financial decisions. You can live life with poor credit score, but having a good credit score can still make a difference.

 

 

The post Why a Credit Score Matters appeared first on Creditmergency.

If you don

How Do Closed Accounts Affect Your Credit?

Most of the time, when we talk about credit, we are talking primarily about the impact of open accounts. But are we underestimating the importance of closed accounts? Let’s shed some light on the less commonly addressed question of how closed accounts can affect your credit.

What Is a Closed Account on a Credit Report?

A closed account on your credit report is simply any credit tradeline that has been closed, whether it was terminated by the customer or the creditor. 

There are several different reasons why an account may be closed.

If you don't use your account for several months, it could get shut down for inactivity.

If you don’t use your account for several months, it could get shut down for inactivity. Photo by Hloom on Flickr.

If you don’t use a credit card for several months, for example, you could get your credit card closed for inactivity. In this case, your credit report might say “account closed by credit grantor” for that account since the lender was the party who terminated the account.

Other reasons a credit card may be closed by the creditor include:

  • The credit card issuer is no longer offering that type of credit card or is replacing it with a different card
  • The credit card issuer determined that there was fraudulent activity on the account
  • The card was stolen or lost

Consumers may also want to close their own credit accounts from time to time, in which case the account might be notated as “account closed by consumer.” As an example, if one of your credit cards increases its annual fee or if you no longer feel that the fee is worth it, you might decide to close that account.

What Do Closed Accounts Mean on Your Credit Report?

Closed Accounts and Credit Utilization

Use our tradeline calculator to calculate your credit utilization ratios.

Use our tradeline calculator to calculate your credit utilization ratios.

Now that you know what a closed account is and why an account may be closed, you may be wondering what a closed account on your credit report means for your credit. 

The main impact of closing an account on your credit is the effect on your utilization ratio. By closing an account, you are reducing your total available credit limit, which could increase your overall utilization ratio if you have balances remaining on your other accounts.

Therefore, if you have balances on any of your other cards, you probably don’t want to close an account that is helping to keep your overall utilization down, as well as improving your ratio of low-utilization to high-utilization accounts.

On the other hand, if you pay down all your other credit cards to 0% utilization, you can safely close an account without impacting your credit utilization.

Try using our tradeline calculator to calculate your individual and overall credit utilization ratios and see how closing one of your accounts could affect your utilization rate.

Closed Accounts and Credit Age

Many people believe that once an account is closed, it will no longer count toward your credit age. However, according to an article by credit expert John Ulzheimer in The Simple Dollar, this is a myth.

Credit scoring models like FICO and VantageScore do indeed consider the age of your oldest account and the average age of your accounts when calculating your credit scores. However, closing an account does not remove its history — including its age — from your credit reports.

Not only will the history of a closed account remain on your credit reports, but credit scoring models will continue to consider the age of the account as well. And, even better, a closed account continues to age. So, if you closed a five-year-old credit card today… in 12 months it’s going to be a six-year-old credit card.”

Are Closed Accounts on Your Credit Report Bad?

Closed accounts on your credit report are not inherently a bad thing. In fact, they can often be a good thing, as we will elaborate on below. 

Closed accounts on your credit report, unless they are derogatory, are not bad for your credit. In fact, they are probably giving your credit a boost.

Closed accounts on your credit report, unless they are derogatory, are not bad for your credit. In fact, they are probably giving your credit a boost.

However, derogatory closed accounts can definitely have a negative impact on one’s credit.

For example, if you had a credit card closed due to delinquency, meaning the creditor closed the account because you had stopped paying it, the account likely still has a balance owed.

Having a closed credit account with a balance on your credit report could really hurt your credit. According to some sources, closing a credit account removes its credit limit, so a credit card account closed with a balance would be considered maxed out or over-limit.

Credit utilization is a major influence on your credit score, so maxing out your utilization by having a credit card account closed with a balance could result in a big dip in your score.

However, other sources say that a closed account with a balance will be treated as an open account until the balance is paid off, at which point you can expect some damage to your score, especially if you have balances on your other credit cards.

The specific way that closed accounts are treated may depend on which credit score algorithm is used to calculate your score as well as other variables in your credit profile.

Should I Pay Off Closed Accounts on My Credit Report?

If your account was closed with a balance but remains in good standing, maintain its good standing by continuing to make payments until the account is paid off.

If your account was closed due to delinquency, the first thing to do is call your credit card issuer to check the status of the account. If the debt hasn’t been sold to a collections agency yet, you’ll want to start paying off the account immediately to prevent it from going to collections. You could end up with bad credit if you have a collection account on your file.

If the account is already in collections, however, whether or not you should pay it off is an entirely different question that depends on your individual situation.

See our article on collection accounts on your credit report for more information on how to handle collections.

Open vs. Closed Accounts on Credit Report

In the tradeline industry, we often get questions about whether closed accounts have an impact on one’s credit and, if so, what value they hold relative to open accounts.

It is possible to have a good credit score while having only closed accounts. Photo by CafeCredit.com, CC 2.0.

It is possible to have a good credit score without having any open accounts. Photo by CafeCredit.com, CC 2.0.

This is an important question, because generally when you buy tradelines you are an active authorized user for two reporting cycles, and after you are removed from the account, it will begin to show as a closed account on your credit report.

Therefore, it is useful to know what impact the tradeline might have after it converts to a closed tradeline.

From what we have seen, closed accounts often can still be a very powerful influence on one’s credit score. 

Remember, the age of a closed account still factors into your credit, and accounts continue to age even after they have been closed. Age and payment history go hand-in-hand and together make up 50% of a FICO score, and since closed accounts can still contribute to these factors, this implies that closed accounts can still have a strong effect on your credit. 

However, closed accounts may have a diminishing impact over time, since credit scores tend to prioritize recent events.  

Can You Have Good Credit With Only Closed Accounts?

It is possible to have a good credit score while only having closed accounts in one’s credit report. We have seen examples of people with credit scores in the 700’s who only had closed accounts in their credit file.

Can I Have Closed Accounts Removed From My Credit Report?

If you have closed accounts on your credit report that are not delinquent or hurting your credit, then there is no need to remove them. They may actually be helping your credit, even though they are closed.

Accounts that were closed in good standing should automatically fall off your credit report after 10 years, while delinquent closed accounts will fall off your credit report after 7 years. 

How to Get Rid of Closed Accounts on Your Credit Report

If your credit card has been closed, you can try calling your credit card issuer to ask if the account can be reopened, but don't wait too long.

If your credit card has been closed, you can try calling your credit card issuer to ask if the account can be reopened, but don’t wait too long.

If a closed account on your credit report is reporting inaccurately, then you can dispute it and have the credit bureaus update the account with the correct information or remove it.

Contact each credit bureau or check their websites for instructions on how to dispute accounts on your credit report.

If a Credit Card Is Closed, Can It Be Reopened?

In some cases, consumers may be able to reopen closed credit cards.

If your account was closed due to fraud or delinquency, banks typically do not allow these accounts to be reopened.

If it was closed voluntarily on your part or closed due to inactivity, however, you might have a chance to reopen the account if you don’t wait too long. 

Only some banks will allow this, and those that do have varying time limits as to when you can reopen an account, so check with your credit card issuer.

If you’re within the time window and your account is eligible to reopen, here’s how to reopen a closed credit card account:

  • Call the phone number provided on the back of your credit card (or if you don’t have the physical card anymore, look up the phone number for the customer service department for that card).
  • Be ready to provide your personal information and answer security questions.
  • Explain why you closed the account and why you are requesting to reopen it.

Some issuers may require a hard inquiry before they can approve your request, which could cause a small, temporary drop in your credit score.

How Do Closed Accounts Affect Your Credit? - Pinterest graphic

If your bank doesn’t allow you to reopen the card, the next best solution might be to re-apply for the same card or apply for a new credit card altogether.

Take-Home Points About Closed Accounts

  • Accounts may be closed voluntarily by the consumer or closed by the creditor due to inactivity, fraudulent activity, or delinquency.
  • Closed accounts are not necessarily bad and can even help your credit.
  • Closing an account could affect your credit utilization.
  • Closed accounts still contribute to your credit age and they continue to age even after they are closed.
  • Closed accounts can still have a powerful impact on credit scores.
  • Continue paying off accounts that were closed with balances to prevent them from going to collections.
  • You can dispute closed accounts that are not reporting correctly.
  • You may be able to reopen a closed credit card account depending on the circumstances.
Make sure your payments are made on time

Simple Credit Tips for Recent Graduates

If you’ve recently graduated from school and are getting started in the full time workforce, you may have come in with some goals for yourself, then these simple credit tips for recent graduates are really helpful.

Top most common goals are:

  • To pay off student loans (How To Save Thousands of Dollars On Student Loans)
  • To start an investment account for retirement
  • To purchase or pay off a vehicle
  • To save up for a down payment on a house

The good news is that you can achieve all of those goals! However, they will take some time and a little bit of financial discipline.

Here are a few simple credit tips for recent graduates on how to improve their credit so they can achieve their goals faster!

Tip #1: Make sure your payments are made on time

This sounds obvious, but paying your bills on time is so important to your credit that missing a single payment could hurt your credit.

Make sure your payments are made on time

If you’re not able to make a full payment, you will need to make a minimum payment. If you can’t afford a minimum payment, it’s better to call the lender and explain the situation to see if you can work something out. There is a list of credit building tips for recent graduates to follow.

Tip #2: Increase your credit limits over time

A big part of your credit score is your credit utilization ratio. Credit utilization ratio just refers to the amount of credit that you’re using compared to the amount of credit you have available. For example, if your credit card balance is $3,000 and your credit limit is $10,000, your utilization ratio is 30%.

Increase your credit limits over time

Once you keep your credit card spending relatively consistent, increasing your credit limit will decrease your credit utilization ratio.

It works even better if you pay off your balances every month, so your credit utilization ratio ends up very low as you increase your credit limit! Know how to reduce your credit utilization rate.

Tip #3: Take advantage of low or no cost financing to increase credit mix while not incurring unnecessary costs

This works much better when your credit score is a little higher, but if you want to improve your overall credit score, you will want to have a good mixed credit files. It is known as one of the simple credit tips for recent graduates.

Credit mix just refers to the diversity of credit account types. Mortgages, credit cards, car loans, all of these are considered different types of debt.

If you’re able to take advantage of low or no cost car financing, for example, you could get a car loan that you can afford, with very little or no interest payments!

Tip #4: Refinance your student loans

This is a slightly different tip, as refinancing your student loans will DECREASE your credit score in the short run. However, getting your loans refinanced might be a huge help to you for the future. Again one of the simple credit tips for recent graduates.

If your interest costs are super high, refinancing your student loans might be able to lower the overall cost of the debt. This could save you thousands of dollars and years of paying down student debt, so you can achieve your goals faster. Not only that, but paying down your principal improves your credit score over time!

In Summary

New graduates need to take advantage of as many ways to improve their credit as possible.

It’s paramount to be responsible with your credit. Responsibility just means paying your bills on time and not taking out debt you can’t afford.

Having access to credit while using it responsibly improves your credit rating.

The post Simple Credit Tips for Recent Graduates appeared first on The CreditPros.

How to Avoid Paying Interest on Credit Cards

How to Avoid Paying Interest on Credit Cards

How to Avoid Paying Interest on Credit Cards

 

If you are struggling to pay off credit card fees and interest rates due to accumulated penalties, interest, and fees, you are not alone. Using credit cards offer convenience and numerous benefits. You can make payments without the need to withdraw cash using cash advance facilities and indulge money you don’t have yet. However, good things are not free. In return for facilities and conveniences, credit card incurs charges and fees including cash advance fees, over limit fees, credit card interest fees, and later payment fees.

With a credit card, APR or Annual Percentage Rate is known as an interest rate. APR is an effective interest rate you would pay once you borrow money on credit cards for a year.

Credit cards are a kind of loan. If you use credit cards, you are borrowing money until you are done paying the bill. Since it is a loan, you can expect to pay interest always. But, with majority of credit cards, you may avoid paying interests completely.

A lot of credit cards have various APRs. These include the following:

  • Introductory APR

There are credit cards that offer low APR. Frequently, it is zero percent for a limited time after opening credit cards. It could be for balance transfers, purchases or both. It is introductory since the special APR lasts only for a limited period of time.

  • Balance Transfer APR

If you transfer balances from a certain credit card to another, it’s the APR you will pay for the debt. There are times that it is the same as Purchase APR, yet it can be different. Majority of banks begin changing interests on balance transfers.

  • Purchase APR

It’s the APR that credit card companies charge on every normal purchase. Sometimes, it is known as regular APR. Many cards have grace period. It means they do not charge interests on purchases once you pay credit card bill on time as well as in full monthly.

  • Cash Advance APR

Once you use credit card to withdraw money at ATM, you will pay the rate. Usually, interest charges begin the day the money is withdrawn, so there is no grace period. Oftentimes, APR is higher than Purchase APR and thee are typically some fees aside from the APR.

Below are some of the ways to avoid paying interest on your credit card:

Know Your Outstanding Balance’s Due Dates

It is easy to forget when the outstanding balance has to be settled, particularly if you hold different cards. Keep your own calendar to remind you of the dates. Other banks give a grace period where you could settle your bill beyond due date without paying additional charges.

Always Pay in Full

There is no simpler way to avoid such fees through paying credit card bills in full and on a timely manner. If you can’t, try paying the minimum payment amount to avoid some unnecessary interest charges and penalties. You have to be reminded that banks require credit card users to pay extra fees for paying below the outstanding balance’s minimum fee.

 

The post How to Avoid Paying Interest on Credit Cards appeared first on Creditmergency.