Connect with us

Credit Cards

Habits of The 800 Club — The Path to Perfect Credit

Published

on

The information provided on this website does not, and is not intended to, act as legal, financial or credit advice. See Lexington Law’s editorial disclosure for more information.

A credit score of 800 or higher is considered a perfect score. At this level, individuals are given the best rates on their mortgages, credit cards, loans and any other form of credit. Americans who boast a credit score of 800 or more are exclusive members of the 800 Club. Keep reading to find out all about the 800 Club and how you can become a member.

What Is the 800 Club?

“The 800 Club” is a common phrase used to describe Americans who have a credit score of 800 or higher. According to FICO, in 2019, just 22 percent of Americans were a part of this exclusive group.

Being a part of the 800 Club gets you access to the lowest rates for borrowing costs, as well as plenty of other benefits. First, you’ll be approved for any type of credit card. This includes credit cards with no annual fees, cards with significant initial spending limits, cards with 0 percent financing, no-foreign-fee credit cards and cards from hotels, airlines and retail stores.

You’ll also get the best rates when it comes to taking out a mortgage, an auto loan, a credit line, a personal loan or student loan refinancing options. And anytime your credit score is checked—such as for an apartment rental or a job application—you’ll pass inspection with flying colors.

It’s essential to understand that you can still get the same or similar benefits once your credit score is 700 or higher. That’s why it’s good to shoot for higher credit, even if a score of 800 feels impossibly far away right now. The higher your credit score climbs, the more benefits you receive.

How Can You Be Like Consumers in the 800 Club?

There are everyday habits that consumers in the 800 Club all have. If you understand these habits and emulate them, you’ll be guaranteed to see a rise in your own credit.

Maintain a Zero Balance

When used correctly, credit cards can be an asset rather than a liability. Those in the 800 Club understand that using credit is beneficial to your credit score, but only if you pay off the amount owed in full every month.

By completely paying off your balance every month, you pay zero interest, maintain complete debt control and show lenders you’re responsible with money. Paying off balances in full needs to happen on time and every month.

You should also work to understand credit utilization. Your credit utilization is the amount of credit available to you versus the amount you use. Generally speaking, it’s ideal to keep your credit utilization ratio under 30 percent. If you pay everything off every month but have a high credit utilization ratio, your credit score will be negatively impacted.

For example, if you have two credit cards with credit limits of $5,000 each, you have $10,000 available every month. If you spend $7,000 on those cards every month and pay it off in full, your credit score may still suffer because your credit utilization is 70 percent. Lenders prefer a low credit utilization ratio as it shows you’re not relying on credit to cover your expenses.

Have a Diverse Mix of Accounts

Having a healthy credit score means having a diverse mixture of accounts. Lenders want to see that you can handle many different types of debt and still maintain responsible habits. 800 Club members often have a portfolio mix of revolving credit (credit cards, credit lines, etc.) and installment debt (mortgages, personal loans, student loans, etc.).

However, it’s not recommended you increase your overall indebtedness just for the sake of improving your credit diversity.

Be Selective About New Accounts

As you look to build your credit, you may start to open some new accounts. Whenever you do this, make sure always to read the fine print and look out for good benefits. There are plenty of lenders out there competing for your business, so always do some comparison shopping.

Avoid retail credit cards, which often have high interest rates and fees. Instead, find cards with the best rates, sign-up bonuses, reward programs and no annual fees. Smart credit will help you spend and save.

And make sure to never sign up for any credit that’s too risky, such as payday loans.

Avoid Cosigning

Cosigning may feel like a nice gesture for someone who needs your help, but it’s often a road to credit problems. When you cosign on anything, you accept full responsibility for paying it back if the other party fails to make payments.

Additionally, anytime the other party makes a late payment or misses a payment, it impacts your credit score too. It’s too risky to have your credit score tied to someone else’s actions. If possible, avoid these problems by politely declining any requests to cosign on credit.

Lower Your Debts

One of the main factors in determining your credit score is your debt-to-income ratio. Individuals who are part of the 800 Club live well below their means and have a low debt-to-income ratio. This means they prioritize paying off their debts and don’t overspend.

If you have any debt, from student loans to mortgages, lowering these balances can infinitely improve your credit score.

Stick to a Budget

In order to ensure you’re not spending beyond your means, you’ll need to stick to a budget. People don’t just get into the 800 Club by accident. They plan their finances, make smart decisions and stick to the plan. A budget will allow you to quickly pay off any existing debts and, once your debts are paid off, maintain a zero balance.

Budget planning has never been easier than it is today. There are plenty of automated budgeting apps, such as Mint (free) and YNAB (subscription-based), that link to your bank accounts and provide insights for you. You’ll be able to set budgets and goals and receive alerts when your finances are off-track.

Clean Up Your Credit Reports

If you have the goal of getting into the 800 Club, it starts with knowing where you currently are and what’s holding you back. Start by getting a free copy of your credit reports and reviewing your credit score.

If any negative items are incorrect on your credit reports, you can dispute them. If you find any other information that has negatively impacted your credit reports, you can ensure you don’t make those mistakes again.

Start Working Now to Improve Your Score

It’s never too late to start working on your financial habits and improving your credit score—and the earlier you start in life, the better. Start building healthy financial habits now and you’ll see your credit score steadily increase.

You’ll greatly benefit from your efforts with better interest rates, more financial opportunities and easier approvals for all types of applications. And, in no time at all, you’ll be a member of the 800 Club yourself!

If your credit score is low and you don’t understand how to tackle fixing your score, consider credit repair services. Lexington Law has credit professionals who can review your credit report and dispute any inaccurate or unfair negative line items.

We save you the time and effort of dealing with the credit bureaus, and we know how to get results because we’ve dealt with them before. Contact us now to find out how we can help you fix your credit.


Reviewed by Kenton Arbon, an Associate Attorney at Lexington Law Firm. Written by Lexington Law.

Kenton Arbon is an Associate Attorney in the Arizona office. Mr. Arbon was born in Bakersfield, California, and grew up in the Northwest. He earned his B.A. in Business Administration, Human Resources Management, while working as an Oregon State Trooper. His interest in the law lead him to relocate to Arizona, attend law school, and graduate from Arizona State College of Law in 2017. Since graduating from law school, Mr. Arbon has worked in multiple compliance domains including anti-money laundering, Medicare Part D, contracts, and debt negotiation. Mr. Arbon is licensed to practice law in Arizona. He is located in the Phoenix office.

Note: Articles have only been reviewed by the indicated attorney, not written by them. The information provided on this website does not, and is not intended to, act as legal, financial or credit advice; instead, it is for general informational purposes only. Use of, and access to, this website or any of the links or resources contained within the site do not create an attorney-client or fiduciary relationship between the reader, user, or browser and website owner, authors, reviewers, contributors, contributing firms, or their respective agents or employers.

Source link

Continue Reading

Credit Cards

Does Getting Joint Credit Cards Have an Impact on Both Spouses’ Credit?

Published

on

couples credit history

While marriage can help you improve your financial situation, it does not automatically mean that you and your spouse will share a credit report. Your credit records will remain separate, and any joint accounts or joint loans that you open will appear on both of your reports. While this can be advantageous, it’s critical to remember that joint account activity can effect both of your credit scores positively or negatively, just as separate accounts do.

Users Who Are Authorized

An authorized user is a user who has been added to an existing credit account and has been granted the authority to make purchases. Authorized users are typically issued a card bearing their name, and any purchases made by them will appear on your statement. The primary distinction between an authorized user and a shared account owner is that the account’s original owner is solely responsible for debt repayment. Authorized users, on the other hand, can always opt-out of their authorized status, although the principal joint account owner cannot.

If your credit score is better than your spouse’s as an authorized user, he or she may benefit from a credit score raise upon account addition. This is contingent upon your creditor notifying the credit bureaus of permitted user activity. If your lender does report authorized users, the activity on your account may have an effect on both you and your spouse. However, some lenders report only positive authorized user information, which means that late payment or poor usage may not have a negative effect on someone else’s credit. Consult your lender to determine how authorized users on your account are treated.

Joint Credit Cards Have an Impact on Your Credit Score

Opening a joint credit account or obtaining joint financing binds both of you legally to the debt’s repayment. This is critical to remember if you divorce or separate and your spouse refuses to make payments, even if previously agreed upon. It makes no difference who is “responsible,” the shared duty will result in both partners’ credit histories being badly impacted by late payments. Regardless of changes in relationship status or divorce order, the creditor considers both parties to be liable for the debt until the account is paid in full.

Accounts Individuals

Whether you’re happily married or divorced, you and your spouse may decide to open separate credit accounts. Most creditors will enable you to transfer an account that was previously joint to one of your names if both of you agree. However, if there is a debt on the account, your lender may refuse to remove your spouse’s name unless you can qualify for the same credit on your own. Depending on your financial status, qualifying for financing and credit on a single income may be tough.

Considerations

While creating the majority of your accounts jointly with your spouse may make it easier to obtain financing (two salaries are preferable to one), reestablishing credit independently following a divorce or separation is not always straightforward. To make matters worse, your spouse may wind up causing significant damage to your credit rating following the separation, either intentionally or through irresponsibility – making the financial situation much more difficult.

Before you rush in and open accounts with your spouse, take some time to discuss the shared responsibility of these accounts and what you and your husband would do in the event of a worst-case situation. These types of financial discussions can be difficult, especially when you rely on items lasting a long time, but a mutual understanding and respect for each other’s credit can go a long way toward keeping your score when sharing an account.

Continue Reading

Credit Cards

Should you pay down debt or save for retirement?

Published

on

rebuilding credit

While establishing a comprehensive, workable budget is undeniably one of the most important factors in maintaining a healthy financial life, it can also be one of the most difficult. For those who are struggling with personal debt, building a budget can be particularly challenging. When the money coming in has to stretch like a contortionist to cover expenses, it can be hard to determine where to focus — and where to trim.

Sometimes, the battle of the budget can come down to a choice between dealing with the present — and thinking about the future. When your income is running out of stretch, do you pay off your existing debt, or do you start saving for retirement? At the end of the day, the solution to that particular dilemma depends on the type of debt you have and how far you are from retiring.

If you have high-interest debt, pay it down

When considering how to allocate your budget, it’s important to understand the different kinds of debt you may have. Consumer debt can be categorized into two basic types: low-interest debt and high-interest debt, each with its own impact on your credit (and your budget).

In general, low-interest debt consists of long-term or secured loans that carry a single-digit interest rate, such as a mortgage or auto loan. Though no debt is the only real form of good debt, low-interest debt can be useful to carry. For instance, purchasing a home with a low-interest mortgage can actually save you money on housing costs if you do your homework and buy a house well within your price range.

High-interest debt, on the other hand, typically has a hefty double-digit interest rate and shorter loan terms, such as that of a credit card or payday loan. High-interest debt is the most expensive kind of debt to carry from month to month and should always be priority number one when building a budget.

To illustrate why you should focus on high-interest debt above everything else, consider a credit card carrying the average 19% APR and a $10,000 balance. If the balance goes unpaid, that high-interest credit card debt will cost $1,900 a year in interest payments alone. Now, compare that to the stock market’s average annual return of 7%, and it becomes clear that you’ll see significantly more bang for your buck by putting any extra funds into your high-interest debt instead of an investment account.

If you are having trouble paying off your high-interest debt, there may be some steps you can take to make it more manageable. For example, transferring your credit card balances from high-interest cards to ones offering an introductory 0% APR can eliminate interest payments for 12 months or more. While many of the best balance transfer cards won’t charge you an annual fee, they may charge a balance transfer fee, so do your research. You’ll also want to make sure you have a plan to pay off the new card before your introductory period ends.

Most balance transfer offers will require you to have at least fair credit, so if your credit score needs some work, you may not qualify. In this case, refinancing your high-interest debt with a personal loan that has a lower interest rate may be your best bet. Make sure to compare all of the top bad credit loans to find the best interest rate and loan terms.

If you’re nearing retirement, start to save

The closer you get to retirement age, the more important it becomes to ensure you have adequate retirement savings — and the more pressure you may feel to invest every spare penny into your retirement fund. No matter your age, however, paying off your high-interest debt should always remain the priority, as it will always provide the best rate of return (as well as likely provide a credit score boost).

Indeed, no matter how tempting it becomes, you should avoid reallocating money you’ve dedicated to paying off high-interest debt to save for retirement. Instead, the focus should be on re-evaluating your budget to find any additional savings you can. To be successful, you will need to make a strong distinction between want and need — and, perhaps, make some tough lifestyle choices.

Though simply eliminating your daily coffee drink won’t magically provide a solid retirement fund, saving a few bucks by homebrewing while also eliminating a pricey cable bill in favor of an inexpensive streaming service — or, better yet, free library rentals — can add up to big savings over the course of the year. The ideal strategy will involve overhauling every aspect of your lifestyle, combining both large and small cuts to develop a lean budget structured around your long-term goals.

Of course, while you should never allocate debt money to your retirement savings, the reverse is also true. It is almost always a horrible idea to remove money from your retirement account before you hit retirement age — for any reason. Withdrawing early means you will be stuck paying hefty fees for withdrawing money early and, depending on the type of account, you may also have to pay significant taxes.

Aim for both goals by improving income

As you take the necessary steps to pay off debt and save for retirement, you may have already stretched the budget so thin it’s practically transparent. In this case, it is time to consider ways to improve your overall income. Increasing the amount you have coming in not only provides extra savings to put toward your retirement, but may also speed up your journey to becoming debt-free.

The easiest solution may be to look for ways to increase your income through your current job; think about taking on additional shifts or overtime hours to earn some extra cash. Depending on your position — and the time you’ve been with the company — consider asking for a pay raise or promotion, as well.

If you do not have options to make more money at your day job, it may be time to find a second job. Look for opportunities that provide flexible schedules that will accommodate your regular job; many work-from-home positions, for example, can easily fit into most work schedules. Doing neighborhood odd jobs, such as babysitting and dog walking, may also provide a solid income boost without interfering with your existing job.

For some, the need to pay off debt and improve retirement savings can be more than just a source of stress — but a hidden opportunity to begin a new career adventure. Instead of being weighed down by yet more work, use the desire to better your budget as a reason to explore the profit potential of a passion or hobby. Starting a small online store, part-time consulting service, or other small business can be a great way to improve your income and your overall happiness.

While it may sound intimidating, starting a side business can be as simple as putting together a professional looking website and doing a little marketing legwork to spread the word. And no, building a website isn’t as scary — or expensive — as it seems, either. A number of the top website builders now offer simple drag-and-drop interfaces perfect for putting together a professional-looking web page in minutes (without breaking the bank).

Learn how you can start repairing your credit here, and carry on the conversation on our social media platforms. Like and follow us on Facebook and leave us a tweet on Twitter.



Source link

Continue Reading

Credit Cards

How does a loan default affect my credit?

Published

on

loan default

Nobody takes out a loan expecting to default on it. Despite their best intentions, people sometimes find themselves struggling to pay off their loans. These types of struggles happen for many reasons, including job loss, significant debt, or a medical or personal crisis.

Making late payments or having a loan fall into default can add pressure to other personal struggles. Before finding yourself in a desperate situation, understanding how a loan default can impact your credit is necessary to avoid negative consequences.

30 days late

Missing one payment can further lower your credit score. If you can pay the past due amount plus applicable late fees, you may be able to mitigate the damage to your credit, if you make all other payments as expected.

The trouble starts when you (1) miss a payment, (2) do not pay it at all, and (3) continue to miss subsequent payments. If those actions happen, the loan falls into default.

More than 30 days late

Payments that are more than 30 days past due can trigger increasingly serious consequences:

  • The loan default may appear on your credit reports. It will likely lower your credit score, which most creditors and lenders use to review credit applications.
  • You may receive phone calls and letters from creditors demanding payment.
  • If you still do not pay, the account could be sent to collections. The debt collector seeks payment from you, sometimes using aggressive measures.

Then, the collection account can remain on your credit report for up to seven years. This action can damage your creditworthiness for future loan or credit card applications. Also, it may be a deciding factor when obtaining basic necessities, such as utilities or a mobile phone.

Other ways a default can hurt you

Hurting your credit score is reason enough to avoid a loan default. Some of the other actions creditors can take to collect payment or claim collateral are also quite serious:

  • If you default on a car loan, the creditor can repossess your car.
  • If you default on a mortgage, you could be forced to foreclose on your home.
  • In some cases, you could be sued for payment and have a court judgment entered against you.
  • You could face bankruptcy.

Any of these additional consequences can plague your credit score for years and hinder your efforts to secure your financial future.

How to avoid a loan default

Your options to avoid a loan default depend upon the type of loan you have and the nature of your personal circumstances. For example:

  • For student loans, research deferment or forbearance options. Both options permit you to temporarily stop making payments or pay a lesser amount per month.
  • For a mortgage, ask the lender if a loan modification is available. Changing the loan from an adjustable rate to a fixed rate, or extend the life of the loan so your monthly payments are smaller.

Generally, you can avoid a loan default by exercising common sense: buy only what you need and can afford, keep a steady job that earns enough income to cover your expenses, and keep the rest of your debts low.

Clean up your credit

The hard reality is that defaulting on a loan is unpleasant. It can negatively affect your credit profile for years. Through patience and perseverance, you can repair the damage to your credit and improve your standing over time.

Consulting with a credit repair law firm can help you address these issues and get your credit back on track. At Lexington Law, we offer a free credit report summary and consultation. Call us today at 1-855-255-0139.

You can also carry on the conversation on our social media platforms. Like and follow us on Facebook and leave us a tweet on Twitter.



Source link

Continue Reading

Trending