Have you ever wondered how to get a perfect credit score?

So MUCH of what we buy or finance depends on our creditworthiness. Everything from which type of credit card rewards you enjoy to your mortgage is determined by this one score. So it’s definitely not something to be taken lightly!

Recently I applied for my fourth credit card in the past 12 months. I’ve been doing this to get tons of rewards points that I can then use for travel. Last summer, we were able to take two incredible vacations and saved almost $5,000 in the process!

Whenever I tell people I’m applying for this many credit cards, the thing I always hear is “you’re going to kill your credit score!”

… Will I?  Don’t be so sure …

As of the writing of this post, I’ve got a 797 FICO score!  In case you don’t know, the highest it can go is 850. That means my score is pretty much in “excellent” territory.

So how does that happen? How does a guy who’s applied for a handful of credit cards over the past year or so still maintain a solid credit score?

The answer lies in understanding how that score is calculated and emphasizing the parts that work to my benefit.

My story actually pales in comparison to other people.

Case and point: Meet Walter Cavangh. The Guinness Book of World Records has dubbed him the title of “Mr. Plastic Fantastic”.

Why? Because he holds the world record for having the most amount of credit cards; 1,497 to be exact! This amounts to a $1.7 million line of credit.

So what’s his FICO credit score like? Cavanagh says his credit score is great. “It’s nearly perfect. I have a nearly perfect credit score. I only use one card and I pay it off at the end of the month.

How is this possible?

Again: The actual number of cards isn’t what hurts you. It’s all in how you handle them.

Therefore, let’s see exactly what elements contribute to your FICO score.

How Do You Get a Perfect Credit Score?

First things first, you should know that when we talk about your “credit score”, there can be more than one.

There are lots of companies and agencies that claim to give you a score, but the most widely popular one (and the one that most people think of when you say “credit score”) is your FICO score.

FICO was introduced back in 1989 and it stands for “Fair Isaac Corporation”, the company’s oridingal name.

FICO bases its score on the information collected and reported by the three national bureaus: Experian, Equifax, and TransUnion.

As difficult or mysterious as some people might think your credit score is, there’s really nothing tricky about it. It serves one purpose: To provide lenders with some way of quantifying your ability to payback the money you borrow.

In other words, what level of “risk” you are to them.

So what makes one person more of a risk than another? Consider what aspects go into your credit score.

Payment History = 35%

As you might guess, paying off your loans is a huge part of your credit score.

Pay them back on time, and you’ll be in good shape. Pay them back late (or not at all), and you’ll start to accumualte a lower score.

Late payments are not treated as black and white. Details about the late payment such as many days overdue, how much was owed, how many times this has happened, etc. will determine how severe the mark-down is.

Types of payments:

Note that “payment history” refers to only certain types of accounts. These would be things like your credit cards, retail accounts (like department store credit cards), mortgages, installment loans (i.e. car / student loans), and payments to other finance companies.

Payment history for things like your cable or water bill are not considered.

But watch out! That doesn’t mean you can stop paying them and have no worries about your credit score.

Lawsuits and liens are considered more serious offenses and can negatively affect your score. Other public records for things like bankruptcies, foreclosures, and wage attachments will make an impact too.

What about paying just the minimum?

Paying the minimum on your credit cards is okay in terms of payment history. Technically, you’re meeting the contractual obligations of using the card. However, you’ll get in other ways.

Types of Debt = 30%

This next cateogry is a big one because it takes into consideration several important facts:

1. Amount owed on all accounts
2. Amount owed on different types of accounts
3. Credit utilization ratio on revoloving accounts
4. Number of accounts with balances
5. Total credit line is being used
6. How much of the installment loan is still owed

Without getting too deep into each of these areas, its best to think of them in two main respects: Your installment loans and credit cards.

Installment loans:

The process here is simple: Make your payments in full every month! If your mortgage is $1000 and your car loan is $500 each month, then pay them.

Does paying off these accounts early hurt you?  

Not likely. In the eyes of your FICO score, paying according to the normal terms would be best. But there is usually a lot more financial gain (such as avoiding tens or even hundreds of thousands of dollars of interest) if you pay them off early.

Credit cards:

Credit cards is where this category gets more tricky.

In general, you want to keep your credit utilization low; meaning you don’t ever, ever come close to maxing out any of your cards.

Note that this rule applies to both your overall credit as well as specific ones. FICO is a bit unclear about what they mean by “specific ones”. To be on the safe side, some experts recommend never going above 30% of your credit limit for ANY of your cards. Personally, I like to cap mine at around 25%.

Keep in mind that this number can be different than the number you know every month. For example, Let’s say you have a credit card with a $10,000 limit and you rack up $2,500 this month. You setup automatic payments to pay right around the due date. But in the meantime, you rack up another $2,500 in debt. Depending on when the credit card company reports your balances to the agencies, this could reflect as a $5,000 balance; 50% utilization!

Therefore, a few strategies would be to:

1. Keep your credit utilization ratio very low for any given card (15% level)
2. Ask to have your limits raised.
3. Pay your balances off earlier than scheduled

Paying off the minimum (again):

Here is where you can see paying the minimum will negatively impact your score. The more balance that hangs around on your card(s), the greater your chances of exceeding this ratio or having too many cards with balances.

What about balance transfers?

Balance transfers can be very helpful for eliminating high interest debt. But in the eyes of your FICO score, moving your debt around from one account to the other doesn’t help. It might help reduce how much is on one particular card, but then it will increase the amount on another. In the end, your overall debt is still your overall debt.

Length of Credit History = 15%

How long you’ve had credit is the next consideration.  This will include things like:

1. Oldest account
2. Newest account
3. Average age of all accounts
4. Age of specific accounts
5. How long its been since you’ve used some accounts.

The negative impact here is if you open too many “new” accounts. This will make it seem as though you have ran into some type of financial trouble and be perceived as risky.

Keeping accounts open is good?

You’ve probably wondered what happens to your credit score when you cancel your credit card?

Contrary to what you might think, the elements above seem to suggest that keeping your accounts open is actually a good thing; especially if they are old!

For example, that 797 I mentioned above?  I’m sure part of that is a Discover Card that I’ve had for over 15 years.  Why do I keep it around?  Because its my oldest account, and I know that it has a positive influence on my score.

Of course, if there’s an annual charge for keeping your account open and you don’t use it, then close it. Paying unnecessary fees is no good for anyone.

Good or bad, closed accounts (and how you managed them while they were open) will stay on your record for 7-10 years. So if you ran into trouble, it will take a while for it to fall away. But even if the account was in good standing, it too can eventually no longer become part of your score.

Credit Mix = 10%

As we said before, credit cards aren’t the only thing that FICO considers. Other types of loans like mortgages or installment loans are considered too.

In general, a higher FICO score is usually given to those who have a good mixture of each. This shows that you are good at managing your money.

Often you’ll hear some extreme financial advice to not use credit cards at all. While there might be some positive benefits to this strategy, in the eyes of your FICO score, it will hurt you. This is because you are not building any history for one of the major re-payment areas they consider to be important.

My advice to those who dislike credit cards is to open at least one card and use it for something completely minimal like gas or groceries. Set your card to auto-pay every month and just keep it at that. Your risk will be low and you’ll build solid credit history every month.

Credit Inquires = 10%

Credit inquires means opening new cards or loans. Too many in the short term can signal financial trouble, and that will negatively impact your score.

Inquiries will remain on your report for 24 months but will only be considered for your FICO score calculation over the last 12 months.

In general, FICO states that they have a low impact. If you want to shop around for a mortgage refinance or great car loan rate, then go ahead. Just don’t go too overboard or do too many at once. Though they don’t define “how much is too much”, common sense can be used.

Does checking my own score hurt me?

Checking your credit score from the agencies won’t hurt your score. You can request one report per year from each of the three agencies, meaning you could get your information every 4 months.

Summary

Knowing how to get a perfect credit score will involve a great deal of details.  There can be a lot of misconceptions about what actually helps and hurts your score.  On average, if you just exercise some common sense by making your payments on time, using a good mix of accounts, and not over-extending yourself, you’re going to maintain a relatively high score.

Readers – What actions do you take to strive towards a perfect credit score?  What mistakes or things do you try to avoid?

Featured images couretsy of Pexels and FreeDigitalPhotos.net

The post How To Get a Perfect Credit Score & How You Can Improve Yours appeared first on My Money Design.

I have been been doing my homework in this area, and I am thrilled to report that my credit score has risen dramatically due to some simple efforts I made. Here’s what was holding me back.

I’m pretty conscientious when it comes to paying my bills on time. But a year ago my wife and I moved to a new city. Though we canceled our utility accounts only after the final balances had been paid, my credit report showed an unpaid partial month.

Because we changed addresses twice in 3 months, I guess written confirmation never found me, and we were never notified any other way. I only noticed the negative mark on my credit report when I checked AnnualCreditReport.com, after it had already moved to collections. Luckily, this was the only problem on my report.

It was about this time that I finally received a letter from collections. They had received the rights to my debt. The dollar amount was small, but I decided to ask for validation of the collection agency’s right to the debt. They are required by law to prove to you that they actually have the right to pursue you and demand payment. These laws are in place to eliminate some of the old, predatory practices that used to be the norm in the industry.

Fortunately for people like you and me, the requirements placed upon these collection agencies are very strict. Unless they are able to provide very detailed proof that they own the rights to your debt, they must clear your record. They also, in this case, have to prove that the charge is valid in the first place.

Mistakes on your credit report are surprisingly (or maybe not so surprisingly) common. Because the three Credit Reporting Agencies get their information about you from every lender/creditor you use, there are many opportunities for mistakes.  If you’d like to know how to remove disputes from credit report history, then read on to see how I was able to do it.  Within time you’ll have the CRA (or collection agency in this case) jumping through all the hoops to prove to your satisfaction that your debt is valid. Or they might just delete the offending item, because it’s too much trouble to gather all the materials to validate your debt. For you, this would be the ideal result.

I sent the collection agency a letter like this. This is just an example. I’d recommend that you put it in your own words if you decide to send one of your own. But there are some key points to note:

1) Identify the specific debt they say you owe. Company name and account number.

2) Explain why you believe this to be an error.

3) Get a certificate of mailing to prove you sent the letter. You have 30 days from the time the Collections people contact you to take action.

4) Tell them to either verify the debt or have it removed from your account.

5) Inform them that they can only contact you by mail, not phone or any other form of communication.

The linked sample letter has some other helpful hints that will help make this process successful.

My story all happened some weeks ago. I waited and waited, never getting a written response from the collection agency. Then about a week ago I received a notification from Experian that my credit score had suddenly jumped 57 points. When I checked, the old item was removed. This was the first time I had personally taken advantage of the debt validation requirements of the FTC. The resolution was pretty swift, and the difference it made on my credit score was surprising. I expected it to go up a bit, but this took me from a pretty good score to a really excellent one.

I wish this mark had never appeared on my report in the first place. Because my wife and I made a couple of major purchases in the past year, I’m sure we could have secured slightly lower interest rates had my score been where it is now. Whatever the case, I’m going to pay close attention to this in the future.

Luckily, this was my only negative mark. You may have far more. Here is a link to AnnualCreditReport.com’s credit report and dispute filing page. Here is some more information from the FTC on disputing credit report items such as this.

This may take a little work, but it can work wonders for your credit history. Take advantage of the free resources for learning about how to dispute credit report history and take the steps necessary to better your credit standing. This will make a huge difference in the interest rates you pay and for many financial opportunities in your future.

Author Bio: Andrew is a freelance writer currently writing for the Modest Money personal finance blog.  Check out Modest Money for all kinds of great financial advice and product reviews including this Barclaycard Arrival World review, one of the hottest travel credit cards available today.

Images courtesy of FreeDigitalPhotos.net

The post How to Remove Disputes from Credit Report History and Get a Higher Score appeared first on My Money Design.

The below article was composed by contributor Elaine McPartland.  If you are interested in writing for My Money Design, please feel free to contact me.

Debt, in general, can be extremely difficult to get a handle on. Between the misleading terms and harassing creditors, you may feel lost in a sea of uncertainty. Fortunately, there are ten easy ways for how to pay off debt fast that you can tackle and attain financial liberation once and for all.

How to Pay Off Debt Fast – 10 Easy Ways:

1. Contest Credit Card APR Increases:

If you feel at the mercy of the creditors and think you have to accept all their “conditions,” think again. Rate-jacking has become a widespread trend to which far too many people fall victim.  Luckily, interest hikes can be contested if you contact the company within 60 days. The downside is you won’t be able to use the card during that period but it’ll be a good opportunity to repay what you owe at the lower rate.

2. Opt for Credit Union Loans or CDFI’s:

Credit unions are non-profit organisations that generally offer cheaper loans because they are owned and operated by their members. These loans are generally smaller in amount but they do not incur the general fees (set-up, administration, early redemption, etc.). At most, a credit union can charge 2% interest a month. This low rate makes it a much better value than any payday or doorstep loans. Other advantages include:

• Avoiding the large banks
• Supporting a community-based program
• Convenience (there are over 450 credit unions in Britain so you’ll have no problem locating one near you)

Community development finance institutions (CDFI’s) are comparable to credit unions except they are not-for-private-profit organisations that help individuals who can’t access the mainstream financial services. Explore these options to limit your debt.

3. Stay Clear of Payday Loans:

Stay clear of payday loans at all costs. In addition to being outrageously expensive, (some APRs are over 4,000%) they make use of the continuous payment authority that is in place to make requests for payment in case a transaction hasn’t already been verified. What does this all mean? This means that you are likely to dip into the red, so only take out a payday loan as a last resort.

4. Give Your Credit Score a Boost:

One of the easiest ways to qualify for lower credit card rates is to have a good credit score. Use a service like Callcredit, Equifax, or Experian to get a detailed report of your credit score and history. Once you have a solid understanding of where you stand, you can start working to improve it. Also look out for any mistakes on your file which could have a serious impact on you score.

5. Ask for an Overdraft:

Going into unauthorized overdraft is guaranteed to be a costly mistake accompanied by all sorts of extra charges. To avoid this financial fatal error, talk to your bank about increasing your authorized overdraft. They’ll be more likely to work with you if you speak with them ahead of time rather than arguing with them after the fact.

6. Seek Debt Consolidation:

Asking for help is nothing to be embarrassed or ashamed of. Debt consolidation involves taking multiple unsecured debts and combining them into one monthly payment. This in turn reduces the number of bills you have to pay and helps you get a handle on your debt. Consolidated Credit is a professional resource which offers debt relief solutions customised to meet your financial needs.

7. Pay Off Debt First:

Before you start stashing away extra cash in your mattress be sure to pay off your existing debt. It doesn’t make sense to invest your current earnings in a savings account in you are constantly hounded by creditors for the money you owe. Right now, the best savings accounts pay around 2.3% AER. Compared to the average interest rate of 18% on a credit card, you’d be better off repaying what you owe.

8. Patience Is a Virtue:

Tackling your finances is no easy feat so just take it slowly. Don’t rush into any programs before you fully understand the terms and conditions as well as the current affair of your budget. Practice patience and take it one step at a time.

9. Budget:

There’s no better tool for lowering your debt than a well constructed budget.  In essence, a budget is just a spending plan that takes into account your monthly inflows and outflows of cash. By documenting how much money comes in versus how much goes out, you can determine how long and how much you should dedicate to your debt.

10. Start Small:

If you’re bogged down with debt and don’t know which ones to pay off first, consider making a scale of your lenders from highest interest rate to lowest. Pay off the debts with the high interest rate first. Also take into consideration the “priority” debts. These include:

• Mortgage or rent arrears
• Gas and electricity arrears
• Council tax arrears

Getting a handle on your debt doesn’t have to be impossible. Keep these ten suggestions for how to pay off debt fast in mind and you’ll be on the right track to financial freedom.

Related Posts:

1) Ten Ways Stock Investments Can Be Used With Your Credit Card Debt Reduction Strategies

2) How to Clear Credit Card Debt By Clawing Your Way Out

3) How Does Bankruptcy Work? What You Should Know Before and After Filing

Image courtesy of FreeDigitalPhotos.net

The post How to Pay Off Debt Fast in 10 Easy Ways appeared first on My Money Design.

Although it may end some of your financial troubles, filing for bankruptcy is not just something that you do once and the work is over. In fact, unless you want to file repeatedly throughout your life, the real work begins after your debts are discharged. Asking how does bankruptcy work is a question that few people ever really take the time to understand, but they should so they can save their finances.  If you don’t have debts like student loans or overdue taxes, you may get your debt balance reset to zero, but if you remain in an impossible financial situation then the relief is only temporary.

Pre-Bankruptcy Counseling:

Even before you can file for bankruptcy, you have to consult with an approved credit counseling agency to see if there is any other way to resolve your debts. This can be done either online, over the telephone or in-person. You do have to pay a fee, generally around $50, for the counseling, but if you can prove that you can’t afford the fee it may be waived. The credit counseling agency will look at your personal financial situation and see if they can come up with a feasible plan to repay your debts. You must complete this step before filing for bankruptcy in order to prove that you have explored other alternatives.

Once you have completed the requirement, the credit counseling agency will issue you a certificate as proof that you received the required counseling. A word of caution though, if the credit counseling agency finds a feasible way for you to repay all of your debts, then the court may force you to file a Chapter 13 bankruptcy, which means that you will have to agree to a repayment plan. However, even if this is the case, you may be able to negotiate with the court which debts you should legitimately have to pay and which you shouldn’t. Ultimately, the court will decide which debts you will remain liable for.

Post-Filing Debtor Education:

Even after you file bankruptcy and your debts are discharged, you still have to attend another educational session. As with the pre-education, the post filing debtor class must be conducted by a state approved debtor education provider. This is a condition of filing Chapter 7 bankruptcy and it is court-ordered, so you cannot skip this requirement even though you may feel that it is unnecessary. Although many people feel that the information provided about financial planning, creating a budget and managing money better is “useless”, the education is mandatory.

Post-filing debtor education is indeed useful, but it is a difficult pill to swallow for those whose expenses for human needs still outweigh their income. The education will help you manage your money, but it doesn’t force you to make the type of lifestyle changes that you need to make in order to become financially sound again. In that sense, the post-course is only partially helpful because it gives you information and tools to help you manage your personal finances better, but when it comes down to actually using those tools, the choice is entirely up to you.

Creating a Financial Plan:

If you truly do want to take advantage of your new start and do a better job of managing your money, the first thing you will need is a financial plan to budget your money. A basic financial plan will include your income and your expenses. If the latter exceeds the former, then you have to either reduce your expenses or find a way to significantly increase you income. However, if you really want to put yourself on financially stable ground, then your financial plan should include saving goals such as creating an emergency fund and putting money away for your retirement as well.

Keep in mind that while cutting out overspending is imperative, it is equally important to leave yourself some wriggle-room in your bank accounts. Your income needs to always exceed your expenditures so that you have some “funny money” on hand for the unplanned expenses, because they can and will happen, usually at the worst possible time. The last thing you want to do is have to borrow money and go back into debt when you’re trying to recover from bankruptcy. There will be a time when you should start to repair your credit scores, but that should be after you learn how to keep your budget balanced and you can manage credit responsibly.

You Have to Change:

It bears repeating that filing for bankruptcy, getting financial education, and creating a budget, unless you stick to it, will all fail to do any long-term good unless you remain disciplined. According to debtconsolidation.com, you need to evaluate all purchases on a “want” or “need basis. Limit your “wants” to what you can pay for with cash, without cutting yourself short in other areas of your budget. This means that you might have to sacrifice things you enjoy like nights out with your friends, premium cable services, and seasonal shopping sprees.

Changing bad spending habits is like quitting smoking or starting a healthier diet; it is one of those things that you have to do in order to reach a goal. Your goal should be to make your living situation financially viable without accruing massive amounts of debt. In other words, you have to live within your means and accept the fact that there are simply some things that you can’t afford no matter how much you may want them. Like dieting and smoking cessation, your finances will be much healthier in the long term if you make some short-term sacrifices.

Filing for bankruptcy may work for existing debt, but it is really only a temporary solution unless you stop recklessly accruing debt. Some people, even celebrities, file for bankruptcy repeatedly because they refuse to change how they manage, or, more appropriately, mismanage their money. If you want to be one of the people who succeeds where others often fail, then realize that filing bankruptcy is only the first step in the process. All the other steps are doing whatever you need to do to keep yourself from getting overwhelmed with debt ever again.

About the Author: Tony Standin is a personal finance specialist. In terms of bankruptcy, he speaks from experience, and his goal is to help others either avoid or move through the process as painlessly as possible.

Images courtesy of iStockphoto

The post How Does Bankruptcy Work? What You Should Know Before and After Filing appeared first on My Money Design.

This post was written by Kevin Donovan from financialupdate.org.uk. He often writes about how the decisions made by politicians and bankers affect our daily lives and the ability to cope with the economic stress of an ever more debt ridden world.

Every day we see large companies take large substantial hits.  This one to wonder: If they can’t survive this bleak economic climate, how can we?

It’s a good sign if you are asking yourself this question because it means that you clearly understand the gravity of the situation. If you have learned to live with debt, that is a start.  It means that you probably know enough to not get in any deeper while managing what you have.

But you can take it further.  If you follow these simple steps for how to clear credit card debt, you will be able to pay off your cards and give yourself the much needed chance to start saving some money.

How to Clear Credit Card Debt Steps:

1)      Firstly you have to understand why you are getting into debt. Banks and other lending institutions are making it far too easy to apply for a credit card in the first place. Often you can get an application form in the mail or online without having even asked for it.

You have to understand:

• These companies have a vested interest in getting you in debt because that is how they make money.

Often even if you have just stepped into the workforce or became a university student, they will target you by making it even easier to apply.  You barely even need substantial income or in some cases any income at all for that matter!

2) You get into debt because you believe that these cards are manageable.  They offer you low repayment options and they give you the option of staying in debt indefinitely. Don’t get trapped!  If you are already, here are some tips of how to get yourself out of that rut.

• First: Start by ensuring that you have direct payments set up on all your cards for at least the minimum amount.  If you can help it, payoff more!!  Setting up your account automatically will make it so you don’t have to worry about doing it manually and incur fees.
• Second: Be disciplined and ensure that you stop using the cards altogether. To do this you are going to have to manage your income in such a way that you are always left with enough money to make the more vital purchases you need. Once you have managed to organize this far you are now going to want to try to put a little bit extra aside to start repaying your cards.

3) Consider if you have any consolidation options. If you want to consolidate all of your debt into a single place, make sure that you have a good enough credit rating.  Then you can start by trying at your bank, a loan from your bank with a repayment scheme will be the cheapest option on the market.

If this is not an option then you might want to consider about doing a balance transfer onto a single card that offers a low interest rate for an initial period. This will allow you to ensure that your debt is all in one place and that you can have an initial period where you can control the amount of interest you pay.

If you are unable to consolidate your debt due to factors such as your credit score, you have to make sure to resist the temptations of short term loans. The massive interest rates on these will force you further into debt and will in no way help your problem. These should only be used when you are sure that you can pay them off at your next pay cheque and if you have no other options.  If your debt has become unmanageable another debt relief option you should consider is debt settlement. This option allows you to settle your debt. Usually your debt can be reduced up to 50%. A debt settlement lawyer should be able to evaluate your case and let you know if you are a good candidate for debt settlement.

4) Lastly if you can’t consolidate your debt and you have multiple credit cards, make sure that you pay off the card with the highest rate of interest first. This will ensure again that you don’t fall any closer to having to declare yourself bankrupt. The main thing you will have to concentrate on during this period, is that you are disciplined enough to not break a constant form of chiselling away at your debts a little at a time.

Readers – How do you help yourself to clear credit card debt?  What options have worked for you in the past?

Related Posts:

1)      Ten Ways Stock Investments Can Be Used With Your Credit Card Debt Reduction Strategies

2)      How Much Could You Save Paying 0% Interest Using Balance Transfer Credit Cards?

3)      When You Need Fast Cash Now and Where to Find It

Image courtesy of FreeDigitalPhotos.net

The post How to Clear Credit Card Debt By Clawing Your Way Out appeared first on My Money Design.

If you have credit card debt, balance transfer credit cards are kind of an incredible option to help you. And odds are you probably know nothing about them…

How Balance Transfer Credit Cards Help:

First, think about the interest you’re paying on your credit card bill each month. The average American pays a little over 15% interest on their credit cards, where as bad credit or no credit consumers pay anywhere from 20% to 30% interest each month if they carry a balance.

So let’s say you have a $1,000 in credit debt, you make a $50 minimum payment each month and you pay 15% in interest. Assuming you’re making no new purchases and further adding to your debt, it will take you at least 23 months to pay off that debt and it will cost you nearly $160 dollars in interest to do so! ($157.94 if you want to be exact…)

By comparison, when you transfer that balance to a credit card with 0% interest during its intro period, you would pay $0 in interest and it would take you 20 months to pay off that debt at $50 a month. Unfortunately, the longest 0 interest credit card introductory periods clock in at 18 months so you would have to tweak those numbers slightly but, you get the idea…

If you’re paying the minimum on your credit card balance each month and getting seemingly nowhere because of interest, then it might be time to transfer that balance to a new card offering 0% APR on balance transfers during the intro period. You can save some serious cash while raising your credit score and establishing a good credit profile in the long run.

Here’s how to transfer your credit card balance…

Step 1 – Calculate How Long It Will Take You to Pay Your Debt:

If you’re hoping to pay down your entire debt with a 0% APR credit card, then you should first calculate your own payment plan; determine what you can afford to pay off each month, and be honest with yourself so that you’re calculating a realistic payback plan that will eventually get you to ZERO credit card debt.

Step 2 – Find a Balance Transfer Card That’s Right for You:

Once you figure out how long it will take to pay down your debt, then the next thing to do is to find and apply for a 0% interest credit card that applies to balance transfers. The longer you determine it will take to pay down your debt, the greater the intro period you should apply for. The good news is there are some excellent balance transfer credit cards available for consumers that have determined it could take up to 18 months to pay down their debt.

For example, the new Discover it Card – 18 Month Balance Transfer not only includes the longest intro period of any card on the market today, but it also comes with one of the very best rewards program available. Members can earn 5% cash back on up to $1,500 in purchases when they enroll in rotating categories that change each quarter, plus an unlimited 1% cash back on all other purchases.

Then again, if you’re more interested in consolidating your debt than anything else, a 0% card like the Citi Simplicity Card keeps spending, well, “simple”; no annual fees, no late fees and an 18-month intro period that applies to both purchases and balance transfers.

Remember, once a credit card is yours, it’s yours for good. You’ll want to be happy with your credit card long after the intro period expires, so make sure you’re applying for the right credit card for you over the long haul.

Step 3 – Initiate Your Balance Transfer:

Once you apply for and receive your new credit card, the next thing to do is to initiate your balance transfer.

This is done simply by contacting your new credit card company and telling them you’re interested in transferring your balance. You can do this online, by phone or via snail-mail; just remember that once the balance transfer takes place, it could take up to two weeks before your balance is cleared on your old card.

So if you’re paying off your entire debt, don’t forget any remaining payments you may have left on your old card. Also, don’t hesitate to transfer your balance since you’ll want to take advantage of as much of the intro period as possible. Plus, why wait to make another payment with interest?

Get that balance transferred as soon as you activate your card to rid yourself of interest fees. Finally…

Step 4 – Start Making On-Time Payments to Pay Down Your Debt:

You’re putting your 0% intro period eligibility – and your credit score – at serious risk if you start making late payments, or defaulting on them altogether.

Many credit cards require that cardholders make on-time payments to remain eligible for their 0% interest rates. And a good payment history is the number one factor FICO-makers Fair Isaac consider when calculating your credit score.

So if you plan on paying zero interest for as long as possible while maintaining a good-to-excellent credit score (the credit required to become eligible for the best balance transfer cards), then it’s imperative you make on-time payments on your new credit card.

Now that you know how much you can save by making a balance transfer and what kind of cards are available for such a transaction, it’s worth checking your own credit card account to determine whether or not a balance transfer is the right personal finance move for you.

(If you’re paying interest on your credit debt with no end in sight, then we’ll go ahead and say that it probably it is…)

Image courtesy of sixninepixels / FreeDigitalPhotos.net

The post How Much Could You Save Paying 0% Interest Using Balance Transfer Credit Cards? appeared first on My Money Design.

Naturally the Papa Bear instincts kicked in and I called the credit card company. Thankfully when I told them her age they quickly realized they had made a mistake, apologized, and took her name off their list for any future offers. The service rep could not answer how her name got there on the credit card offer list in the first place.

I was glad to see that at a minimum her credit card offer application wasn’t pre-approved, because that would be really ridiculous. Right now her only source of income is her bi-weekly allowance from cleaning her room and feeding the pets.

Didn’t Financial Institutions Learn Their Lesson Yet? 

We were certainly not the first family this has happened to.  Other parents have been shocked to see their kids receive a credit card offer in the mail.  In some instances it may indicate that their identity has been stolen!

Obviously there is a problem with the system here. Everyone knows that credit card companies aggressively target college students and young adults that are just starting out (and likely to rack up large balances to which they can collect hefty interest fees upon).

However, I would have thought that after the Great Recession of 08’ that a little more discretion would be used. Rather than just soliciting everyone to fill out a credit card offer application, perhaps maybe there might be some quality standards in place to filter out people such as nine-year-olds. Maybe I’m expecting too much.

The Credit Card Offer – Marketing Towards Vulnerability:

Thankfully I’ve never had a problem with credit cards. I owe it to my Dad explaining to me at age 18 the basics of how quickly the interest charges can compound into an amount that you’ll never be able to pay off. And with that, I’ve always lived by very simple rules:

1) Never buy anything I couldn’t just otherwise buy with cash

2) Pay off my balance in full every month

That simple strategy has transformed years of purchases into a growing basket of credit card bonus rewards; this year topping out at over $1,000. When used properly a credit card be a major convenience.

But what about the kids and young adults without fathers, mothers, or people in their lives they can trust to protect them from these types of mistakes with credit card offers? Young adults are especially so anxious to prove their independence as adults that they neglect to seek advice on commitments such as this. But the devastation can be very real and take a long to fix.

So as stewards of financial knowledge, I see this as an obligation to protect those we know from bear-traps such as this. We can’t stop marketers from sending mail, emails, advertising on TV and in magazines, etc. But we can prepare our children, nieces, and nephews with the information they need to make good choices. Even if you don’t tell them directly, you should at least let them know that the invitation exists should they ever need your advice.

So for now, I hope to not see another credit card offer for my nine-year-old daughter. Papa Bear is watching!

Readers – Has anyone else’s kids received a credit card offer in the mail, at a ridiculously young age?

Related Posts:

1) What is Keeping Me from a Perfect Credit Score?

2) Props to Chase Freedom’s Fraud Protection Service

3) The Process of Repairing Bad Credit

Image Credit: freedigitalphotos.net

The post My Nine-Year-Old Daughter Received a Credit Card Offer appeared first on My Money Design.

I was almost the victim of identify theft.

On the evening of Dec 23, I received a call from the Chase Freedom Visa Card Fraud Protection alerting me that someone had tried to buy almost $500 worth of goods from a Macy’s in California. Because I live in Michigan, the purchase was quickly red-flagged and denied. Fortunately, I was spared.

The phone call with Chase was quick and painless. They asked me which transactions I’d like to dispute, closed my old account, and told me I’d have a new card with a new number within a matter of days.

Thank You Chase Freedom Card:

I’d like to give a sincere “Thank You” to Chase for protecting my family and I from this fraudulent attempt. I am not sure how other credit cards handle this situation (since this has never happened to me before), but I’ve got to say they have some pretty high standards to live up to.

I’ve been a Chase Freedom Visa card member since 2009. I originally sought them out after seeing a $100 sign-up promotion plus knowing that they had a pretty generous 5% cash back rewards program. At last check, they have raised the sign-up promotion to $200.

Identity Theft Prevention:

I’m not sure how this scammer got a hold of my credit card info. It just goes to show you that you always have to be on your toes no matter how careful you are. However, there are a few precautions you can take to make sure you don’t make yourself as vulnerable as possible:

• Don’t give your info out on the phone. When I first got the phone call from Chase, I actually hung up the phone and called them back using the number on the back of my card. This is my defense mechanism for letting me know that I am talking to the legitimate source. Just like the computer virus that poses as anti-virus software, scammers like to call people posing to be credit card officials and try to get your personal information. No matter what their story is, never give out your information unless you have complete confidence that you are talking to the real company.

• Check your statements regularly. Go online and check your purchases once a week. If anything looks funny or stands out, question it.

• Get a free credit report. Sometimes scammers get your information and open accounts without you even knowing. Requesting a free credit report is the best way to check which accounts are in your name and what activity they have. Again, if you don’t recognize something, take action! [link Equafax]

• Keep that PC clean. Regularly scan your computer for viruses or Trojan worms. These are the back-door programs that hackers use to steal the information you enter online; even if it was entered into a legitimate site. I use a freeware program called Malwarebytes’ Anti-Malware to regularly scan my computer.

• Use common sense. Don’t enter your credit card (or any other personal info) into a website you don’t recognize. It doesn’t matter if the sale appears to be a good deal. Stick to known and reputable merchants. Remember that if a deal is too good to be true, it probably isn’t real.

Photo credit: Rosie O’Beirne, Flickr

Related Posts:

1) Easy Money – Update – Now Get a $200 Sign-Up Bonus with the Chase Freedom Visa Credit Card

2) Get $150 with a New Discover Card

3) Easy Money – Cash Back on Gas and Groceries with the “Blue Cash Everyday” Card by American Express

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