Credit Score and Balance Transfers

A good credit score has its perks. Credit card companies may send you interest credit card offers with a 0% interest rate. But if your credit report gives them a less favorable credit history on you, you may still receive lower interest rate credit card balance transfer offers in order to tempt you to transfer one or more balances over to their credit card. But beware…

What You Should Know About Balance Transfers

Credit cards are big business for financial institutions. After checking your credit report and credit score, financial institutions may choose you to offer balance transfers from your old credit cards to theirs, hoping you will see it as an attempt for debt relief. But they know there is a big chance you won’t be able to pay it off before the grace period ends and the actual interest rate kicks in…probably 20% or more.  The grace period is anywhere from six months to eighteen months.

Transferring Your Balance May Lower Your Score

There is a FICO formula that determines your score. FICO is fickle. Taking advantage of the lower interest rate to pay off credit card debt, which is a good thing, can actually hurt your credit score.  If your balance transfer offer is on a credit card account you already hold, then it might not be as bad. But, if you open a credit card just to take advantage of the lower interest rate, it can badly hurt your FICO score.

Using the balance transfer to consolidate credit card debt? Think twice, maybe three times. By consolidating debt, your score is lowered again. Why? Because it will appear that you are closer to maxing out your credit limit on that card. If you have to make balance transfers, try not to consolidate the balances into one card.  Spread the amount thinner to keep that gap between the amount of credit you are actually using and what is available to you farther apart.

I always told my husband I needed to have more credit cards…to spread the wealth around. I actually liked seeing lower balances on several cards rather than a larger balance on one card. He insisted I use only one because it was easier to track my spending…LOL. I guess my instincts were right!

What this means is that FICO would rather see you have $700 on four different cards with limits of $5000 rather than $2800 on one card with a limit of $5000.

Check the Credit Card Offer Small Print

Liz Pulliam Weston of MSN Money and Market Watch gives this advice:

If you’re planning to take advantage of a balance-transfer offer, read the fine print and consider the following:

  • Limit the number of accounts you open. If you want to improve your credit scores, don’t keep bouncing your balances from card to card.
  • Pay down your debt. Use the lower rate as an opportunity to reduce your debt load. Paying off debt is good for your wallet and good for your credit scores.

And from Nana,

  • Be sure to figure in the cost of the transfer fee which may be around 4%. Ask if the transfer fee is on each balance transfer to one card!
  • Call and ask questions of the customer service person to go over the small print.
  • If you do transfer to another credit card, don’t use it for additional purchases. By doing so, you may not be able to pay it off by the end of the grace period…and you may not get another offer!
  • If you leave the original credit card account open, put the card away so you aren’t tempted to use it. A home safe is a good place to keep your credit cards.
  • And those checks they send you? You’ll pay a transfer fee on each one you write after you call to activate them!

Before you do a balance transfer, get your free credit report first. After you review your free credit report, think about whether you want to go through with this. Will the balance transfer help or hinder your credit score?

How to Get and Fix Your Free Credit Report

What is a Credit Report?

If you have applied for credit, be assured there is a credit report on you including where you live, date of birth, place of employment, income, and whether you pay your bills on time or not. It is very detailed. Your credit report is used to evaluate your debt-to-income ratio and you as a credit risk. There are three separate credit bureaus (Credit Reporting Agency) that create the reports: Experian, Equifax, and TransUnion. The credit bureaus are in business to earn a profit by selling your credit information to banks, employers, landlords, credit card companies, mortgage lenders, car dealers….

How to Get Free Credit Reports

It is your right to receive one free credit report from each of the three credit bureaus annually. Your free credit reports can be obtained directly from only one government authorized website, annualcreditreport.com. Be aware that other websites and companies claim to give you free credit reports, also. Those companies require you to buy something to get it “free.” Use only Annual Credit Report as your source for your free annual credit reports.

After identifying yourself through answering a few security questions related to your credit history, you can download the free printable credit report.  You have two other options on how to receive your credit reports via either ordering it by phone (1-877-322-8228) or completing the printable annual credit report request form which can be found along with the mailing address on the official website noted above.

Correcting Credit Report Errors

With the number of credit data submitted to each of the three credit bureaus and the billions of updates performed each month, there are bound to be mistakes. Humans update the data and no one is perfect all of the time, so it is inevitable.  That is why it is important for each of us to take advantage of the free credit report we are entitled to from each of the three credit bureaus once a year. Correcting your credit reports may also help in your credit repair process.

Because of the possibility of mistakes with over 2 billion downloads per month (and that’s just for one of the three companies), it is imperative that you check your credit report very closely. Highlight each entry that looks suspicious or not familiar to you or even misspellings, then contact the creditor listed and the credit bureau that included the information in writing. By law, the credit bureau you contact must investigate and correct the incorrect or incomplete information that proves to be in need of attention that you reported. On average, the corrections should be taken care of within 30 days unless your report turns out to be more complicated than the average. For further information on how to report credit errors, follow this link.

Tips On Correcting Your Credit Report

  1. Don’t expect each of the three credit reports to be the same – they won’t be. Take time to look through each one very closely.
  2. If you find things that need correcting or deletion, put it in writing – keep a paper trail just in case files get misplaced or additional copies are needed.
  3. Follow up on your request if you don’t get a response within a reasonable amount of time, allowing time for receipt and processing.
  4. Include a copy of the credit report in which the misreported information appeared. Remember to highlight the disputed data on the copy.
  5. Don’t get discouraged if you need to do more footwork than you expected. You may find names and accounts that are not yours. You need to prove that that isn’t you and the creditor needs to support your claim.
  6. Look for evidence of  identity theft such as credit card accounts under your name that you don’t remember applying for – any unauthorized activity. If you do find it, contact each of the credit bureaus to report a Fraud Alert on your files.
  7. If you order a credit report directly from the credit bureaus, then you will be charged for the report.
  8. You don’t have to order all three free credit reports at the same time. Space your free credit report orders four months apart so you can monitor your credit activity and possible identity theft throughout the year.
  9. Make lists of all the accounts listed on your three credit reports. Divide the lists into closed and open including account name, account number, type of account, date opened, date closed if applicable, and balance reported. Update your two lists during the year as needed. Next year when you get your free credit reports, you can compare your accounts to those listed.

AnnualCreditReport.com is the only website you should use to obtain your free credit report. The following information is from The Federal Trade Commission:

AnnualCreditReport.com is the ONLY authorized source for the free annual credit report that’s yours by law. The Fair Credit Reporting Act guarantees you access to your credit report for free from each of the three nationwide credit reporting companies — Experian, Equifax, and TransUnion — every 12 months. The Federal Trade Commission has received complaints from consumers who thought they were ordering their free annual credit report, and yet couldn’t get it without paying fees or buying other services. TV ads, email offers, or online search results may tout “free” credit reports, but there is only one authorized source for a truly free credit report.

Help with Debt Relief: Pay Day Loans

Help with Debt Relief

Everyday we have choices to make. Serious choices, not which pair of shoes to wear or what TV show to watch. Difficult choices such as which bill to pay and which to not. Such decisions are stressful when it comes to paying your rent or mortgage so your family will have a place to live or making the car payment so you can get to work in order to keep your job so you can earn the money to pay your bills…and the cycle continues. Your decisions may come down to food or electricity…school shoes for the kids or the phone bill. You may want to pay for Christmas gifts for your children so they won’t be disappointed Christmas morning. We all have priorities, sometimes there are more on the top of the list than just one.


What are Pay Day Loans?

A pay day loan is a small cash or paycheck advance loan deposited into your personal checking account, usually within a day or two – some may be received on the same day as you apply, which you can use for whatever reason you choose. Most pay day loans are used to help with immediate debt relief. If your application is approved, you will be required to repay the loan within two weeks – the common pay period. If you don’t repay each loan by the predetermined due date, late fees will be added on – usually very costly to the borrower…causing more debt troubles. If you know you can pay it and it won’t interfere with other debt payments, then it could be a temporary solution to  help with your immediate problem.

Pay Day Loan Companies

There are many pay day loan companies online eager to help you with debt relief, but at a price of course. Do some comparison shopping for the best interest rates and fees. If you have a valid checking account and email address, you may qualify for a small pay day loan for up to two weeks until your next pay day. The interest you will be charged may be around 15 percent or more, plus there may be other fees so be sure to ask. Because you are short on money now, make sure you can pay the loan back in its entirety without jeopardizing other important financial obligations plus the added cost of a late pay day loan payment.

Educate Yourself Before You Borrow

The pay day loan companies know you are desperate or you wouldn’t be contacting them. Not all pay day loan companies are located in your country. Be sure you know who you are doing business with. You will be giving the pay day loan company your personal and banking information. Check with organizations such as the Better Business Bureau where the loan company is located to learn if the company you may choose is legitimate and not a scam.

Do your research now! Don’t wait until you are desperate. Please be careful. A quick loan to pay a bill is only a band-aid for debt relief, but it may help you keep your head above water for the time being. Hopefully, you can find a way to improve your finances before the next time this happens.