Monday, February 29, 2016

How Credit Score Points Affect Your Credit


Your credit score it is one of the most critical factors in your financial life. Your credit score determines if you are approved for a loan or line of credit. Credit scores are used to determine: if you will be hired for a job, interest rates, terms and conditions, downpayment costs, rates for medical and other insurance coverage, approval for cable and internet service and more.

A credit score is a mathematically calculated number developed by the Fair Isaac Corporation (FICO) that lenders use to rate potential customers in determining the likelihood that a customer will pay their bills on time.

A credit score or credit rating is determined by using five main criteria as defined by your payment history which accounts for 35% of your credit score, the amounts owed which accounts for 30% of your credit score, the length of your credit history which accounts for 15% of your credit score, new credit which accounts for 10% of your credit score, and the types of credit used which accounts for 10% of your credit score.

Payment history shows the history of how you paid your bills either on time or late. Amounts owed shows the total amount of credit you have available. The length of history indicates how long you have had credit. New credit indicates how many times you have applied for new credit. If you open too many new accounts in a short period of time this may lower your credit score. The types of credit used indicate the types of accounts you have such as revolving or installment accounts. Revolving accounts are usually credit cards and installment accounts are usually mortgages, auto loans, etc.

The FICO credit score model ranges from 300-850 with 850 being an excellent score and 300 being the worst score. The higher the credit score the lower the interest rate you will receive for a loan or line of credit. Possessing a good credit score can save you thousands of dollars in interest over the life of the loan or on a line of credit. A good credit score is generally in the range of 720 or above but may vary from lender to lender.

When applying for credit or a loan if all three credit scores are pulled, the middle score is generally the score used with the application.  Your credit score varies from each bureau because each agency collects their own data from various sources and may collect different data for the same account. Your score can vary anywhere from 5-40 points between the three credit bureaus.

Your credit score changes due to updates to your credit file which changes based on account activity such as balance changes or additions to your credit file (i.e. new accounts or deletion of older negative accounts more than 7 or 10 years old). As a result, you may see a difference in your score from one month to the next.  Here are some guidelines to help you determine how payments affect your credit score:


  • Paying a 30 day late payment can increase a score by 3-80
  • Paying collection accounts can increase a score by 20-90 points
  • Paying public records (judgments, tax liens, Chapter 7 or Chapter 13 bankruptcy) can increase a credit score by 75-150 points
  • Paying a charge-off can increase a credit score by 50-100 points
  • Paying a repossession can increase a credit score by 50-100 points
  • Paying delinquent student loans which can increase a credit score by 50-80 points

The major disadvantage of credit scoring is that it relies on information in your credit report that may contain errors. It is estimated that 75% of credit reports contain at least one error.  That is why it is so important that you check your credit report at least once a year to ensure that all information is accurate and up to date.  

If you plan on purchasing a large item such as a car, house or investment property, it is best to pull your credit yourself to see if any negative items appear so you can fix those issues before applying for a loan. The best way to understand your credit score is to do research and read the information that is included when you order your credit report.

Thursday, February 25, 2016

Helpful Tips Regarding Frequent Flyer Programs


Frequent flyer programs are offered by airlines companies to customers who fly more than the average flyer.  Some programs offer points, upgrades, priority seating, discounts on products, credit for purchasing products from partners and more.

Some frequent flyers obtain miles for personal and business travel.  Avoid confusing business travel with personal travel miles.  Open a separate account for your business travel miles if you can.  If not, be sure to keep track of your personal miles.  Some frequent flyers have been prosecuted and convicted for redeeming business frequent flyer benefits that were used for personal travel.

Frequent flyer programs can be tricky and can prove difficult to get due to all of the restrictions. Some programs you have to travel at least 25,000 miles or more before you can start redeeming benefits.  When looking for a frequent flyer program to participate in consider the following:  

  1. Perks
  2. Do their fly to your home airport or preferred airport
  3. Do your points expire or have to be used within a certain time period
  4. Do they provide other options for using points that will soon expire
  5. What are the restrictions and guidelines
  6. Do they offer points for partner company purchases
  7. Does the program match your travel habits

Here are some tricks frequent flyer programs use
  1. The number of seats are limited
  2. Increased the number of points needed and offer fewer flights
  3. May have to book months in advance and settle for an inconvenient flight time

Here are some perks of frequent flyer programs
1.      If you can’t use your miles before they expire use alternatives such as using them for magazine subscriptions, making purchases at airline websites or sites such as, renting cars, gift cards or giving them away.
2.      Trade frequent flier miles or buy miles at another airline using  Ask friends or family to share miles with you.
3.      Sign up for a frequent flyer miles check card. You may be charged an annual fee but if used frequently you can get a free airline ticket.
4.      Look for partners that offer miles for your frequent flier program. Find airlines which are compatible.
5.      Sign up for email promotions and use them to earn bonus miles. You will get email invitations to take surveys to try out new products which helps you earn bonus miles.
6.      Sign up for dining rewards. 
7.      Open a credit card which is usually free the first year.  Make sure you meet the minimum spending requirements. After your miles post plan your next trip.  This method works best when you use the miles quickly.  You can cancel the card after the first year to avoid the fee charged the second year. 
8.      Purchase layover flights instead of non-stop flights. 

Sunday, February 21, 2016

Are You a Victim of Instant Gratification


Do you use your credit card or debit card to make all of your purchases? Have you stopped carrying cash? Do you feel lost without your credit card or debit card? You are not alone. There are over 5 billion debit cards in use in the United States. There are over 1.4 billion credit cards in use in the United States. This signal a major shift in the primary form of payment for Americans.

It can be difficult to resist the temptation of the instant gratification culture of America. Retailers and advertisers make it so easy for consumers to buy everything instantly by creating online shopping, instant cereal, instant coffee, instant meals, text messaging and the ability to make credit card or debit card purchases anytime anywhere. Most Americans buy an item immediately when they see it either in a store or online. This bad habit has caused many Americans to overdraw their account, pay overdraft fees, overspend, damage their relationship with their bank and lower their credit score.

Some advantages of using a debit card: it is easier to obtain versus a credit card, can be used in place of checks, accepted everywhere, transactions can be made quicker and can be used to get cash from an ATM or retail store that offers cash-back during a purchase. The disadvantages of using a debit card are: you can spend more than you have in your account; you can incur overdraft fees and can become a victim of identity theft. Here a 10 ways to rein in your spending:

  1. Create a budget. Create a budget to track your spending daily or weekly. Set aside a specific amount for extra things you want (wants).
  2. Track spending. Take all of your receipts from your credit card or debit card purchases and put them in an envelope. Use pen and paper, an Excel spreadsheet or a software tool to track spending. 
  3. Wait. Wait a few days before making a purchase that is more than $50. Go back to the store to see if you still want the item. If you still want the item, comparison shop to see which store offers the best price.
  4. Pay your bills first. Put a portion of any extra money left over in a savings account.
  5. Alternate payment. Use cash when making purchases. Use credit cards for emergencies.
  6. Get a receipt. Get a receipt each time you make a purchase and keep it.
  7. Retail therapy. Avoid shopping when you are emotional. This will prevent you from spending more than you have or buying unnecessary items.
  8. Leave at home. Leave your credit card or debit card at home unless you know you will make a purchase. This helps to reduce the temptation to make an unnecessary purchase.
  9. Influences. Avoid spending time with people who love to shop. Avoid reading magazine catalogues, window shopping and watching shopping television channels.
  10. Get cash. Go to the bank and withdraw the amount of cash you need for the week. Once you spend that amount, don’t money withdraw anymore or use your credit or debit card unless it is an emergency.