Tag Archive: credit score

  1. Student Loans and Credit Cards

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    Is It Possible To Manage Both Credit Card & Student Loan Debt?

    Going off to college comes with new found financial freedoms, and for many students that means their first foray into a world of credit and debt.

    The Credit CARD Act of 2009 restricted students under the age of 21 to open a card without a co-signer and direct promotional card offers on college campuses. This helped reduce the number of cards issued to students, but unfortunately only made a small dent in decreasing debt for those graduating.

    According to an Experian College Graduate Survey conducted in April 2016, 58 percent of soon-to-be-graduates said they had a credit card, while 30 credit cardspercent said they had credit card debt with an average balance of $2,573. Another survey found 63 percent made purchases without having funds to pay the bill.

    It’s no secret that average student loan debt has been steadily growing. In 1993-94, about half of bachelor’s degree recipients graduated with debt averaging more than $10,000. Two-thirds of the Class of 2017 graduated with debt and the average student loan debt was at $35,000 after graduation. This number more than tripled in two decades.

    We wouldn’t be overreaching to say there is a correlation between higher student loan and credit card debt. As a new grad, you’re facing some tough financial decisions as you begin life in the real world. For instance, which debt do you pay off first?

    Credit card interest rates are typically higher than student loan interest rates, which means this debt is more expensive. For example, a $10,000 student loan at a 6.8 percent APR paid over 20 years would cost $8,321 in interest. A $10,000 credit card balance at 17 percent APR paid over 20 years would cost $25,230 in interest, and that’s assuming both interest rates remain fixed over that payment period. The long-term interest cost goes up if the interest rate increases.

    In the end, both student loans and credit cards can keep you in debt for many, many years and it’s easy to get overwhelmed by them if you’re only making minimum payments. What it comes down to is making the proper decisions to meet your financial goals. Making the a few smart decisions when your in 20’s could set you up financial success instead of struggling with debt for years.

    This is where The Debt Doctors can play an important role in helping you decide what is the best financial plan for you to manage your debt. To receive the guidance you need for a brighter financial future, you can schedule a free consultation today.

     

  2. Save For Retirement Now, Benefit Later

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    Start Your Retirement Investments Now to Better Your Financial Future

    When is the best time to start saving for retirement? The answer is simple: as soon as possible. But like most things in life, that is easier said than done. Given the job market, high student loan payments and other personal situations, the last thing young adults want to do is sacrifice a portion of their retirementhard-earned paycheck for a retirement that is not happening for at least 30-40 years.

    A recent Pittsburgh Post-Gazette article highlights how putting away even as little as $20 a month can compound and grow into much more by the time retirement rolls around:

    Click for Post-Gazette Article

    As the article explains, saving money takes discipline and financial planning. Our financial expert, Matt Herron strongly believes the only way to acquire wealth is through saving and earning interest, not paying interest. So take advantage of your automatic deduction 401k plans to help save without effort. Additionally, avoid borrowing and taking withdraws from you retirement or 401k. Your 401k is not a checking account. Early withdraws and loans are expensive and will dilute your ability to compound money.   If debt is keeping you from making your best effort to save call us to eliminate your debt and develop a plan to start saving your financial future depends on it.

  3. Take Action – Improve Your Credit Score

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    Improve Your Credit Score

     

    “How do I improve my credit score?”…a question the attorneys at The Debt Doctors are very familiar with. The answer depends on a client’s specific financial situation, but there are some general ways to improve your credit score that apply to everyone.

    To get started, you will want to first evaluate your credit score.  To get a free report, you can visit www.annualcreditreport.com. After you’ve pulled your report, carefully review it and identify if there are any mistakes.  If there are, dispute the mistakes directly to the credit bureau. If the mistakes are not fixed, you can call The Debt Doctors.

    Next, you should try to establish 2 years of on-time payments for all of your accounts. This is a very important step since lenders look closely at your last two years of credit history. You will also want to utilize your credit by making sure you have at least 3 open accounts.

    Additionally, it’s essential to have available credit.  If you don’t and all your credit cards are maxed out, your credit score will go down.

     

    The best ways to improve your credit score:

    1. Pay your bills on time—not paying them on time can have a significant impact on your credit score

     

    1. Make sure you keep your balances as low as possible on all of your credit cards

     

    1. Only apply and open new credit cards if you absolutely must

     

    1. Don’t just move your debt around—pay it off

     

    1. Use the credit you have—show your ability to manage your credit responsibly

     

    Remember—time is your friend when trying to improve your credit score. After all, fixing a bad credit score doesn’t happen overnight. You can even rebuild credit after bankruptcy—it will take you 2-4 years to get your score back at a good healthy level. However, you can start rebuilding credit right after your bankruptcy discharge (something people are not always aware of).

    You should also keep in mind that your credit score goes up when you engage in behaviors that banks like. But be careful because they may not be what’s best for your finances. The best indication of a healthy financial situation—cash. Make sure you budget to save your money and fund retirement. To learn more about how to improve your credit score and turn around any financial distress you may be facing—contact The Debt Doctors today.

  4. Things Millennials Should Know About Credit Cards

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    Image courtesy of 3 Style Life

    Getting a credit card is a great way to start building credit, which is crucial for several important life decisions, including securing loans and getting the best insurance rates. Despite this fact, many Millennials are still foregoing credit cards all together—approximately 31% have never applied for a credit card. Additionally, according to a recent study done by NerdWallet, Millennials have the lowest average credit score—28.1% have scores below 579—and the shortest credit history of all age groups. What you have to realize is that not using credit is as bad as having bad credit. Banks want you to use credit, because that’s how they make money.

    Here are a few of the things that Millennials should know about credit cards so they can make smart decisions and build healthy credit:

    Your Credit Score is Important, but it’s Not Everything
    Keep in mind that your credit score rewards you for behaviors that the banks want you to engage in. If you are using credit only to build your credit, it is best to use it only for small purchases and pay it off every month. It’s important to use your first credit card wisely because it will likely have a high interest rate. Once you establish some credit keep in mind that your high credit score doesn’t necessarily mean you have a healthy financial situation—a good credit score can never make you rich, it can only help you get into debt. The best indication of a healthy financial situation is having the ability to save and having money in the bank, which isn’t a factor considered on your credit score, because it’s a behavior that mostly benefits you.

    Don’t Apply for the Wrong Credit Cards
    One of the most important discoveries made by the NerdWallet study was that Millennials are often applying for the wrong types of credit cards. Many Millennials with low credit scores are actively seeking new credit cards, but are often rejected by issuers because their credit score is not within the appropriate range for approval. Rejections can damage a person’s low credit score further, as each denied application elicits a hard inquiry on their credit report. The more inquiries a consumer has, the riskier they appear to lenders.

    To avoid rejections and inquiries, Millennials need to make sure that they are applying for credit cards within their credit score range. Look for secured or student cards, as these types of cards are designed for people with low credit scores.

    Avoid Late Payments
    Failing to pay your bills on time is a big credit card misstep that many people often make. It may not seem like a big deal, but when you pay your credit card bills late, credit card companies may penalize you with two surcharges on one delinquency. These can come in the form of a late fee and a penalty rate, which is an interest increase that can quickly raise your APR to incredibly high rates.

    For Millennials with bad credit, it’s important to be aware that a large portion of your credit score (35 percent) comes from your history of making on-time payments. A good tip for making sure you make payments on-time is to set an alert—whether it’s a text, email or calendar reminder—so that you’ll never miss another deadline again. Over time, the negative marks on your credit report from late payments will be eroded by the positive information you create by making payments on-time.

    Fixed Rates Aren’t Really Fixed
    Many Millennials are quick to believe credit card advertisements that boast low, fixed rates. But the reality is that credit card issuers can raise your APR whenever they want. Although this information isn’t a secret, it’s often hidden so deeply in the fine print of your agreement that card companies think that you’ll miss it. Knowing this, it’s important that Millennials understand the terms of their agreement before committing to a card in order to avoid surprises down the line. And once you do sign on to a card, be on the look out for notices about a raise in APR, so that you’re able to prepare.

    Millennials can avoid many of the pitfalls of applying and using a credit card by doing enough research in advance. Picking the right credit card and managing it responsibly will help you build a healthy credit score in the long run. Additionally, always remember to only use credit to supplement your finances not as the basis of your finances, because the only way to build wealth is by having money in the bank.

  5. Do You Know Your True Credit Score?

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    Trying to determine your true credit score can sometimes be confusing, particularly when you are coming out of bankruptcy. We are inundated daily with advertisements online, television, and print from credit monitoring companies claiming they can offer you free credit scores.

    This recent blog post from Cure My Score, “Why Are Credit Karma’s Scores Higher Than What My Bank Tells Me?” discusses the scoring models one particular service uses to tabulate your credit score. In this case, the company provides you with four different credit scores.

    It’s critical you do some research on the sources of the credit scores. For instance, be sure the credit monitoring company uses FICO scores since most lenders use this to determine your credit risk and interest rate you will be charged. Vantage Score, developed by the big three credit reporting agencies, is another credit score some services use. However, there is a new version of Vantage Score so you have to ask if your credit score is based on the old version or new version.

    As the author of this post points out, understanding the scoring system is the first step to improving your credit score. We’ve found that most credit monitoring or free credit score services don’t really offer you any useful service. For more reliable and trustworthy information about improving your credit score, give us a call or our partners at Equity Lending Group or Cure My Score. We can offer you real information actual lenders will use in making credit decisions.

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