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Everyone wants to rack up their rewards to earn free flights, hotel stays, cruises, and discounts. And travel credit cards give consumers the opportunity to get these rewards fast. Many of these cards even have special introductory offers, allowing cardholders to earn thousands of free frequent flier miles as part of the sign up bonus.

In the hopes of earning more rewards, consumers have started churning credit cards. This is the process of opening multiple credit card accounts to earn the introductory travel bonuses, then closing these accounts soon afterwards to avoid any fees. Oftentimes, consumers apply for several cards in one day, known as an “app-o-rama,” to get the maximum amount of frequent flier miles. Travelers can accumulate hundreds of thousands of miles by churning. With this amount of miles, they can easily stay in luxury hotels and fly to international destinations. As a result, this practice is becoming increasingly common among travelers and credit card users.

Credit card churning sounds great in theory. Cardholders can rack up a lot of miles, and travel without worrying about annual fees, interest charges, and normal credit card issues. However, there are a lot of risks to credit card churning. Take a look at the following before you start churning cards:

  • Churning can damage your credit score significantly. Whenever you open a new credit card, your credit score takes a small hit. Opening multiple accounts at once can result in significant damage to your credit. Plus, lenders will wonder why you are opening so many accounts at once. They may see you as financially risky, so you will be denied from credit cards and other loans. This can also hurt your score. Plus, a large part of your credit score is your payment history. With a lot of different cards, you are more likely to slip up and miss a payment or get into debt. These will all lower your credit scores. Last, by closing accounts, you get rid of payment history while simultaneously increasing your credit utilization. This in turn can hurt your credit score a lot.
  • By churning, you may end up paying extra fees. If you do not close the credit card within a year, you’ll have to pay the annual fee. And if you are unable to make the minimum payment each month, you’ll end up having to pay a lot in high interest charges. Furthermore, many rewards programs have certain terms to get the rewards. If you are unable to keep up with the payments, you may lose your frequent flier miles.

Do your homework before you start churning cards, because credit card churning can come at a huge price. Although you may be able to earn thousands of rewards in theory, it may end up doing more harm than good. And the price of having a bad credit score is not worth a luxurious trip to Paris!

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Are you paying too much interest on your credit card?

If you have high interest rates, you may want to consider calling your credit card company. A quick phone call to your credit card issuer can end up saving you hundreds of dollars in interest charges. And although it may seem too good to be true, simply calling your issuer and asking for a lower interest rate can work. In many cases, your credit card issuer will be more than happy to please you to keep your business.

Many consumers end up dealing with high interest rates for years, just because a card may seem fixed. And it can be quite nerve wracking to complain to your issuers. But as long as you have a good payment history and your balance is low, asking nicely will almost always guarantee you a lower interest rate. Your credit card issuer wants to keep your business, so they will do a lot to insure that you stay loyal to the company. And you’ll be much happier saving significant amounts of money on interest charges.

So what’s the right way to do this?

Keep your request simple. You’ll want to let the customer service representative know that you are a loyal customer. Emphasize how long you’ve been with the company, your excellent payment history, your good credit score, or anything else you think may be helpful. Your specific circumstances can also help. You should then ask them respectfully about your interest rate. Some good ways to do this are: “I am concerned about my high interest rate. Can you do any better?” or “ What can you do to help me out?” Also, mention any low interest credit card offers you may have received. Whether it be from offers mailed to you or ads online, these credit card deals can serve as effective negotiating techniques. Politely speak to them, and let them know that you would like them to match the offers.

If the customer service representative says no, ask to speak to a supervisor. State your case again for them. If this doesn’t work, try hanging up and calling back 15 minutes later. Emphasize that you may have to take your business to another bank if they are unable to meet your demands. Normally, even if it takes a couple tries, someone will be more than happy to help you. However, if your bank is being unreasonable and strict about lowering your credit card rates, think about taking your business to another bank. Many credit card issuers offer great low interest credit cards with 0% intro APRs for specified periods of time. If your bank is not flexible, you might want to think about moving.

You don’t have to be stuck with a credit card that charges high interest rates. Call your credit card issuer if you are concerned, and your problem could be fixed in no time!

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It’s spring, and that means spring cleaning! Time to start going through the house, getting rid of old things, and cleaning from top to bottom. And with all the dusting, scrubbing, and organizing going on, you probably haven’t thought much about your finances. But your finances may need some cleaning too. By simply going through your finances and organizing them, your finances, along with your house, can have a fresh start this spring.

Here are some easy ways to organize and set yourself up for financial success:

  • Organize your spending, and make a budget if you don’t already have one. Sit down and take a look at your spending over the past few months. Are you spending more than you should? How much are you spending on extra activities (ex: entertainment, dining out, merchandise,…)? If you have any problems overspending, now is the time to make a new budget. Assess where your money should be going each month based on your income and needs. And stick to that budget!
  • Clean up your accounts. While you’re throwing out dusty old appliances, it’s also important to toss (or archive) dusty old checks, statements, and accounts. Having old paperwork sitting around may not do you any good. As long as you have records of your accounts, most of your bank statements can be tossed. However, make sure to shred documents that have valuable information on it (like a bank account number) so you don’t fall victim to identity theft! In addition, take a look at all your accounts. Be careful before closing old accounts as it can lower your credit score. But if you do have an old account with a high annual fee that you don’t use, you may want to think about closing it.
  • Go paperless. Everything is done online nowadays anyways, so now is the time to go paperless. You won’t have to worry about digging through files looking for old bills and credit card statements, and you’ll even be making your home less cluttered in the process. Plus, when everything is online, you can set up direct deposits, automatic transfers, and payment reminders. Going paperless is a quick way to make your finances easier and more organized.
  • Check your credit score. You can access your credit score from each of the 3 major credit bureaus (Experian, Equifax, and TransUnion) each year for free from AnnualCreditReport.com. Take a look at your score, so you know where you stand. Also, check the report for any errors that may need to be fixed.
  • Consolidate your accounts as much as you can. For example, if you have a lot of debt on many different credit cards, you may want to look into getting a balance transfer card. You can then consolidate all your debt onto that one card, making your life much easier. Plus, many balance transfer credit cards offer 0% APR for a specified period of time, so you can save a lot on interest!

So, include your finances this spring when you start cleaning. You’ll be surprised how great you feel after giving your finances some fresh air too!

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It is never too early to start teaching your children the basics of money management. And one of the most important things to understand is how to use credit. By educating your children at an early age, you can insure that they become financially responsible and credit savvy. They will then have the tools to succeed financially. Here are some easy ways to help your children build credit:

  • Open a savings and checking account in your child’s name. The first thing to do is set up banking accounts, especially a checking account. Although just having these accounts will not build credit, it is important to establish solid money management skills. Educate your child on the dangers of overdrawing accounts, bouncing checks, and making late payments, and have them use a debit card to practice using credit skills safely.
  • Get a credit card. Once they are responsible debit card users, they can start building credit. It can be hard to be approved for most credit cards as they have no credit, but there are several options to get them started. With a secured credit card, your child will have to secure their credit line with a deposit. Once they have the deposit, they can use the card to build credit. Student credit cards, on the other hand, are actual credit cards. They are much easier to get approved for, and they even offer many rewards for the things that students buy. Store credit cards are also easy to get approved for, but they must be used responsibly.
  • Add your child as an authorized user on your account. Another great way to build credit is by adding your child as an authorized user on your account. All you need to do is call your credit card issuer, and your child will be able to get the benefit of the credit card without having the official responsibility. Your child can then build his or her credit score by using your credit card.
  • Put a utility account in your child’s name. Before your child leaves home, you can always put a utility account under his or her name. Whether it be phone, electric, or gas, monthly on time payments will insure that your child’s credit score improves. Just be sure to pay these on time so you don’t end up lowering their score.
  • Co-sign a loan with your child. This is an easy way to build credit and add a different type of credit (installment versus revolving) to your child’s history. Lenders like to see a mixture of different credit types, so having both types will help them even more. So, if your child needs to get a student loan or a car loan, think about co-signing the loan. As long as the payments are made on time, the loan will be able to improve both of your credit scores.

Don’t wait until it’s too late. Follow these tips, and you can start your child off with a great financial foundation by helping them build credit in their own name!

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Are you satisfied with your credit score?

Credit scores are one of the most important components of a person’s financial wellbeing. If you have a low credit score, you may find it hard to get approved for credit cards, loans, rent properties, and even get jobs. And if you are approved for credit cards and loans, you will have much higher interest rates. Having a low credit score can make it a lot harder to get the things you need. Even with just a fair or average score, you may still feel the stresses of your credit score on your finances.

The good news is that there are ways to improve your credit score. Whether you have no, bad, average, or good credit, you should continue working to make your score better. Keeping a good credit score will take hard work and consistency over many years, but here are some simple ways to get you headed in the right direction:

  • Check your credit score. Although this seems obvious, many people don’t know their credit score. You can access a free credit report from each of the 3 major credit bureaus each year on AnnualCreditReport.com. You will then know where you stand. In addition, you can check the report for any mistakes or discrepancies.
  • Make your payments on time. 35% of your credit score, the largest part, is your payment history. So, it is incredibly important that you make at least the minimum payment on time each month. If possible, pay the full amount each month so you don’t have any outstanding balances. If you do have a hard time remembering your due dates, set up payment reminders or automatic transfers.
  • Pay down your balances. The amount of credit you use versus the amount of credit available to you is also a factor in determining your credit score. The smaller you use, the better it is for your credit score. So, pay off your balances in full and try not to use close to your credit limit. By just using a small amount of credit each month, your score can go up.
  • Diversify your credit mix. Credit cards are not the only ways to boost your credit score. Add an installment loan if you think you will be able to pay it back. Having a mixture of revolving credit (credit cards) and installment credit (personal loans, auto, mortgages, and student loans) looks good to creditors, because they know that you are financially responsible in a variety of different ways.
  • Don’t overspend. This is simple, yet one of the hardest for many consumers. If you are trying to improve your credit score, the best thing you can do is make a budget for yourself and don’t exceed it. By doing this, you will be able to pay off your balance each month and won’t have to worry about getting more in debt.
  • Leave old accounts open. Even though you may no longer use a credit card, do not just close the account. Cancelling your card will delete the history of that card from your credit report. And credit history plays a role in your credit score. Even if you do not have the best history with that credit card, just the fact that you have been using credit for a long time is enough to keep your credit score high. Closing that account will only ensure that your score drops.

By following these tips consistently, you can easily improve your credit score and have a better financial future!

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You’re walking through Walmart, and you see a TV you’ve been wanting. Wouldn’t it be nice to have that new TV? Luckily, Walmart offers you a free credit card to cover the cost of your TV with 0% interest for 12 months. Seems perfect! Now you can get a deferred interest credit card, buy your TV, and not have to worry about paying it off until later.

It seems great, but there’s a catch. Deferred interest credit cards can be dangerous to consumers if not used correctly. So, if you’re thinking about getting a deferred interest credit card, read up and know what you may be getting into!

What is a Deferred Interest Credit Card?

Deferred interest credit cards are advertised as free credit cards with 0% interest for a specified period of time that you can get on the spot. Many major retailers, including Walmart, Home Depot, and Best Buy, offer these credit cards to shoppers who want to to buy something but don’t have the money. These offers are incredibly enticing, because you automatically get approved and don’t have to pay until much later. Sometimes, you won’t have to pay for several years. It seems like a great way to get something you want now.

So What Makes Them Bad?

Although a deferred interest credit card sounds great in theory, any slip up in payment can result in massive amounts of debt. Many times, these credit cards have exponentially high interest rates and bad terms that may not be disclosed at the time of your purchase. Many consumers report being charged an average of 25% APR on the full amount of their purchase, including that on which they have already paid off. This is much higher than the APRs of normal credit cards. And even if you only have a couple dollars left to pay after the payment period, you will still be charged the full amount of interest, leaving you in a lot more debt. With a deferred interest credit card, there is no forgiveness for the debt.

One consumer reports being charged $1300 in interest for his $800 initial purchase. Like many other deferred interest credit cards, the original receipt did not specify the terms and conditions. So, when he received the bill, he was quite surprised. He was slammed with interest, unable to pay the bill, and left with a low credit score and a lot of debt.

This story is typical of consumers who buy deferred interest credit cards. As a result, many Consumer Reports, including the National Law Center, warn shoppers against deferred interest credit cards. Some have even lobbied the U.S. Consumer Financial Bureau to place a ban on deferred interest credit cards as an abusive financial practice. However, as of now, these credit cards are still in place.

Should I Get a Deferred Interest Credit Card?

If you are thinking about getting a deferred interest credit card, the first thing to do is research. Don’t fall for just any store offer. Make sure you understand the terms and conditions, and read the fine print before you sign up for anything. If you pay everything back within the payment period, a deferred interest credit card can be a helpful way to buy a product.

But if there is even the slightest chance that you may not be able to pay it back, there are other options for you. Many credit cards offer 0% financing for a set amount of time too, with much lower interest rates. Check out these no interest credit cards, and you won’t have to get stuck in a deferred interest debt cycle!

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If you’ve made a late payment, you may be wondering how it will impact your credit score.  And unfortunately, even just one late payment can have a major effect on your credit score.

So how long will a late payment stay on my credit report?

In short, it takes 7 years before a late payment is completely gone from your credit report. This is true for certain late payments, foreclosures, certain completed bankruptcies, and certain collections and public records. As for late payments, your credit report will only reflect the late payment if that payment was made 30 days or more past the due date. So, if you are one day late, you may incur late fees, but this will not be reported to the credit bureaus.

For many consumers who end up paying 30 days or more after the due date, unfortunately, there is no way to remove the late payment from your credit score. However, your credit score may not still be as low as you think it is. Even though it takes 7 years for your late payment to completely go away, the older information has less of an impact on your credit score. FICO takes into account the recency and frequency of late payments, as well as the severity of your late payments (ex: 60 days late is more severe than 30 days late). So, your one late payment from 5 years ago will hurt much less than someone who just made 3 late payments in the past 6 months.

But how can I get the loans I need in the meantime?

My advice is to check your credit score again. You can access a free credit report from each of the 3 major credit bureaus each year. You may find that your credit score has gone up enough to get the mortgage loan you need. However, if your score is still not up to par, you may want to wait. Having a low credit score will affect your ability to qualify for low interest rates, resulting in you paying a lot more for that loan. Keep paying your bills on time, paying down revolving debt, and checking your credit score each year. If you continue to use credit wisely, your score should improve enough for you to get a good rate on your mortgage loan. Although your late payment may not be completely gone from your report, your score may improve before then.

In Conclusion

Try not to make late payments. As many consumers know, late payments can have a lasting record that will make it much harder for you to get approved for loans. So, set up automatic transfers or payment reminders for yourself. If you don’t have the money to pay off all your debt, at least pay the minimum amount each month. This will keep your credit score from taking a hit.

And if you do have a late payment on your credit report, don’t just wait the 7 years. Keep working on ways to improve your credit in the meantime. A late payment does not mean that your financial future is ruined. It may be a bump in the road, but your credit score will improve over time.

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You’ve tied the knot, but what happens to your credit score now? Many couples have misconceptions about how marriage will affect their credit ratings. They may fear that their reports will merge with their spouse’s and their credit scores will fall. But, these fears are simply not warranted. Here are the most common marriage myths to help you separate fact from fiction.

1. When you and your spouse get married, you will have a joint credit report.
Couples about to get married often fear that their credit scores will merge, and they will be stuck taking on their loved one’s credit. This is completely false. If you are getting married, your credit report will remain the same. You and your spouse will each maintain separate credit files at each of the 3 major credit reporting agencies. Your credit report is linked to your individual social security number; so, it is yours and yours alone.

2. My spouse’s bad credit will hurt my credit score.
This is a common concern for couples. However, your spouse’s credit is entirely separate from yours. Your score will be yours, regardless of your spouse’s credit. When you get married, you may share other things, but you do not merge or share credit scores. Marriage will only affect your credit score if you apply for credit together. So, if you have a joint credit card or take out a loan in both of your names, then it will show up on both of your credit reports. Those are the only cases in which your spouse’s bad credit can affect you.

3. When you change your last name, your credit score is erased.
If you or your spouse chooses to change your last name, you should let your creditors know. Once they have processed your requests, your new name will be automatically changed on the credit report. Your credit history does not disappear when you change your name. Instead, your new name will be listed along with your old name as an alias. All of your old credit history will be there, and you can continue to build your credit score.

4. I become a joint user on my spouse’s accounts automatically.
Getting married does not mean you automatically have access to your spouse’s accounts. If you want to be an authorized user on these accounts, you will have to call the creditors and make that request. However, being an authorized user will not have any influence on your credit score. Lenders do not have access to who is authorized to use the account. All activity will affect your spouse’s account.

5. I can use my spouse’s good credit to get a loan together.
If you are applying for a joint loan like a home mortgage or car loan, both you and your spouse’s credit scores will be taken into account. Even if your spouse has a great credit score and you don’t, you cannot choose which one they look at. Lenders will factor in both of your scores to determine your interest rates and eligibility for that loan or credit card. Your application may be denied because one of you has a bad score. So, it is important for you to both maintain good credit scores.

Now is the time to start your life together, and knowing the truth about how marriage affects credit will get you off to a great financial start!

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One of the biggest questions people have about credit is “What Makes Up My Credit Score?”

How your credit score is calculated isn’t as mysterious as it seems. Your score is calculated by a mathematical formula based on the information in your credit report. Your FICO score is a number between 300- 850, with most people having scores between 600 and 800. However, it may seem complicated, because each of the three major credit bureaus, Experian, Equifax, and TransUnion, composes their own FICO score. Although each of these scores may be different, all of these scores are developed using the same mathematical model. Furthermore, FICO scores are dynamic and continually fluctuate as the information on your credit report changes. So, don’t be confused by these different numbers. Know what goes into determining your score and you can work to improve it.

There are many different factors that FICO uses to make up your score. Some factors are weighted more heavily than others, but they are all taken into account when calculating your FICO score. By understanding the different parts of your score, you can better understand how to improve it. Here are the five major categories that make up your credit score:

Payment History (35%)

Your payment history, the largest factor of your credit score, accounts for 35%. Payment history includes how you’ve paid your bills in the past, placing the most emphasis on your recent activity. This part has all of your account information, including any delinquencies and public records. So, if you have late or missed payments, accounts sent to collections, or declared bankruptcies, this will be factored into your score. However, the most recent activity will weigh a lot more than activities in the past.

Amounts Owed (30%)

The second most important factor is the amount that you owe on your accounts. This is any outstanding debt you have, whether it be money you owe on credit cards, car loans, mortgages, home equity lines, etc… In addition, this part includes your credit utilization ratio. This is the amount of credit you use compared to how much credit available to you. Experts advise that the lower utilization rate, the better. So, if you have a $5000 limit but you consistently spend $4000, you may seem like a bigger risk and your score will be a little lower.

Length of Credit History (15%)

This is how long ago you opened your accounts and the time since you’ve used these accounts. In general, the longer you have used credit, the better your score will be. It is important to keep your old accounts open, even if you don’t use them often, to lengthen your credit history.

New Credit (10%)

This factor is your pursuit of new credit. This includes the number of recently opened accounts and the number of recent credit inquiries. For those with payment problems from the past, re-establishing positive payment history is also taken into account.

Types of Credit Used (10%)

Last, FICO looks to see if you have a mixture of different credit accounts. The best credit scores have a mix of both revolving credit, including credit cards, and installment credit, like mortgages and car loans. A healthy mix of credit shows that you are able to use many different types of credit responsibly.

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Wondering if you should cancel your credit cards?

If you have old cards that you no longer use or that you’ve misused, cancelling your credit card can seem like a smart fix to improve your credit. Many people assume that by cancelling a credit card, you get rid of the debt history of that card. And if your card has just been sitting in your wallet for years collecting dust, you’ve probably thought of getting rid of it. But the truth is- you may not actually want to cancel that card.

Why Shouldn’t You Cancel It?

Contrary to popular belief, cancelling a credit card can actually damage your credit score.

For one, old credit cards lengthen the age of your credit history. Your credit history is one of the factors lenders use to determine your credit score. The longer you have used credit, the better your score will be. If you cancel an old credit card, even if you no longer use it, you are deleting history from your account. As a result, it will look like you have been using credit for less time than you actually have. This has a negative impact on your credit score. Even just taking 1 or 2 years off your credit history can affect your score.

Another thing lenders use in determining your credit score is your credit utilization. This accounts for one of the largest chunks of your score. Your credit utilization is the ratio between how much you spend and your credit limit. Experts advise to keep this number as low as you can, while still using your credit cards. When you have high credit utilization, you continually spend close to your credit limits, and your credit score can drop. When you cancel a credit card, that credit card no longer factors into your credit utilization. So, it looks like your balances are much closer to your limits, resulting in a damaged credit score. Even if you don’t plan on using your credit card, having $X amount of credit gives you a much higher credit limit. Getting rid of this card ensures that your credit utilization ratio will get higher and your score may suffer.

Furthermore, many consumers assume that they should get rid of cards with late or missed payments or other debt problems. However, these things will show up on your report regardless of whether or not you cancel the card. If you have a late or missed payment, you can expect it to be on your credit report for 7 years. Cancelling your credit card will not get rid of this history.

Are there ever any reasons you should?

Why do you want to cancel your card? If the only reasons you have are because you don’t use it often or you made a late payment once, don’t cancel it. If keeping your card is possible, you probably should. Keeping your card, even if you don’t use it often, guarantees that your credit score won’t drop due to bad credit history and credit utilization.

But there are certain times when it is best to cancel. It is important to do what’s best for you so you don’t hurt your credit score even more. For instance, if you have credit problems and you know that a credit card will tempt you to max out, it might be a good idea to close the account. It’s better to take a small hit to your credit score than a massive one by getting into more debt. Or if you have a card with a high annual fee or a high interest rate that’s hurting you more than helping you, you may consider closing the account.

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