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Is paying off your credit cards in full bad?

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Paying down your credit card is always a good idea. But is paying it off completely a credit score no-no? (iStock)

Paying off credit cards should be a big priority for U.S. financial consumers. After all, Americans tallied up about $893 billion in credit card balances in the first quarter of 2020, according to the New York Federal Reserve.

Any move to curb that mountain of debt is a good one for credit cardholders. But there may be misconceptions about how paying off your credit cards could affect your credit score.

Here’s what financial experts have to say about paying off credit cards, eliminating debt altogether, and how that impacts your overall finances.

To compare credit card companies fully and accurately, visit multi-lender marketplace Credible, which offers credit cards for consumers with good and bad credit.

Is paying off credit cards in full bad?

Not really, financial experts say. In fact, paying off your credit cards in full can actually boost your credit score — and that’s not the only positive impact of paying off your debt.

“Paying off your credit card balances is beneficial to your credit score and your financial health,” said Nami Baral, chief executive officer at Harvest, a personal finance platform. “Paying off a debt does lower your credit utilization ratio (the amount of available credit you’re using) and is the second most important factor in credit scores, right behind your payment history.”

According to Baral, depending on what other debt accounts you have on your credit file, your credit score will typically go up. “That’s why it’s always a good idea for your credit score and financial health to make timely and consistent credit card payments so that you’re paying more than just accrued interest,” she said.

Having a good credit score can also boost your chances of getting approved for credit cards with perks — like rewards credit cards, which allow users to earn cashback, points, miles, or merchandise when they make a purchase. Check out the best rewards credit cards here.

HOW TO CHOOSE YOUR SECOND CREDIT CARD

If you don’t think rewards credit cards make sense for you right now, you can always use Credible’s free online tools to find the recommended credit card for your needs.

CREDIT CARD CASH BACK VS. POINTS: WHICH IS BETTER?

Paying off a credit card can have a significant impact on your credit score, depending on how much it affects your overall credit utilization.

“Paying off a small credit card balance won’t have a large effect if you have other significant credit card debt,” said Joel Klein, founder of Crafty Dollar, a digital money management platform. “It is a good idea to pay off a credit card, however, if you are doing it to raise your credit score.

No credit card debt also means most importantly means you’re not paying high-interest rates each month to credit card companies.

“Your credit will increase as well, so you’ll get approved for lower interest rates on loans, which could be tens of thousands of dollars when looking at a home loan,” said Jordan Parker, a former financial advisor and founder of the ByJordanParker.com business and investment website. “Lastly, there is that emotional/mental sigh of relief of having your debt paid off.”

How are credit scores calculated?

Getting a grip on credit score models and formulas can give financial consumers a better idea of how a credit card paydown impacts credit scores.

“First, realize that credit reports and credit scores are different,” said Freddie Huynh, vice president of credit risk analytics with Freedom Debt Relief and a former data scientist at FICO, the benchmark credit scoring organization. “The three main credit bureaus (Experian, Transunion, and Equifax) use the information from credit reports to develop credit scores, so you will want to make sure the information on the reports is accurate.”
The credit score ranges that most lenders use generally fall between 300 and 850, with high credit scores representing better credit risk than lower scores.

Basically, there are five factors that make up credit scores.

  1. Payment history
  2. Credit utilization
  3. Average age of open accounts
  4. Credit inquiries
  5. Mix of different credit types

“Your payment history makes up 35% of your overall credit score making it the biggest factor in determining your score, followed by credit utilization at 30%,” said Randall Yates, founder and CEO of The Lenders Network
Beyond that, the average age of your open accounts makes up 15% of your score. “The remaining 20% are credit inquiries (10%) and having a mix of different credit types (10%),” Yates said.

Consequently, when a cardholder pays down a credit card to zero, the decline in credit utilization should boost that cardholder’s credit score. “The increase can be significant considering credit utilization makes up 30% of your credit score,” Yates said.

WHAT IS SUBPRIME CREDIT SCORE?

How to boost your credit score

There are other ways to raise a credit score besides credit utilization. Once these strategies become a habit, anyone can improve their credit score.

“The best ways to boost credit scores are making timely payments on credit cards, student loan payments (without interruption and more than a minimum amount particularly for credit card), and on personal loans and mortgage payments,” said Baral. “These consistent payments will keep your balance and interest rates low.

“Other quick ways to improve credit scores is to pay off any revolving debts, don’t close unused credit cards, and avoid applying for new credit cards,” Baral added.

Parker adds some handy thumbnail credit boosting tips, as well.

The best ways to boost a credit score include:

  • Making all payments on time (biggest impact on your credit report).
  • Keeping credit card utilization under 25% (companies don’t want to see you spending 100% of your available credit).
  • Disputing and remove all inaccurate marks on your report.
  • Making credit card payments twice/month to ensure low balance when reported to bureaus.
  • Increasing your credit limit (calling your creditor or becoming an authorized user on someone else’s card).
  • Using a tool like Experian Boost to add bills you’re already paying (utilities, etc.) to your report.
  • Don’t close accounts (old credit cards can increase available credit and the average age of credit).

FICO SCORE VS. CREDIT SCORE: WHAT’S THE DIFFERENCE?

To find the best credit card that will get you on the path to a great credit score, visit an online marketplace like Credible, where users can compare all kinds of credit cards within minutes.

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Warner Robins GA Credit Repair Finance Score Improvement Service Launched

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New credit repair services have been launched by the expert team at Fresh Start Consumer Services. They work with clients in Warner Robins, GA and the surrounding areas.

New credit repair services have been launched by the expert team at Fresh Start Consumer Services. They work with clients in Warner Robins, GA and the surrounding areas.

Fresh Start Consumer Services has launched a new credit repair service for clients looking to improve their financial future. Interested parties can sign up for credit consultations, in-depth credit analysis, credit recommendations and more.

Full details can be found at: https://freshstartconsumerservices.com/index.html

The newly launched services are designed to ensure clients can repair bad financial credit history, track their improvement campaign in measurable ways, and secure a better future for themselves and their family.

Clients can work with Fresh Start Consumer Services to clean up their past. This is achieved by working with the major credit bureaus and creditors to challenge the negative report items that affect the credit score.

Based in Warner Robins, GA, the expert team at Fresh Start Consumer Services is passionate about helping citizens to improve their credit score to give them more buying power. As a result of this, clients are able to secure more options in life.

The team understands that sometimes bad things happen to good people, and their services are designed to ensure that clients can get the most out of life. They also realize that a bad credit score can harm clients’ quality of life – and can be a difficult situation to get out of.

Fresh Start Consumer Services offer courses in credit repair and restoration, budget management, credit education and purchase assistance. Clients get easy access to their account 24/7 for live status updates on improvements, allowing them to fine-tune the management of their credit score.

Service options include personalized dispute options to fit each clients’ exact credit repair needs, an experienced case analyst and case advisor working personally with them throughout the process, custom dispute letters, and more.

For clients, there are a number of reasons to work with a credit repair specialist. Clients are able to secure significant savings on interest rates, attain better terms on loan products, and get access to the best credit card deals. They also gain access to more housing options.

The team states: “Fresh Start Consumer Services offers a unique combination of services that gives our clients the quality of life they deserve. We specialize in helping our clients achieve qualifying credit and the financial health they desire.”

Full details can be found on the URL above.

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Is it Possible to Trade In a Car Early?

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Yes, early trade-ins are possible when you finance a vehicle. In fact, there’s no set time frame on trading in a car. Most dealers won’t take a trade-in that’s too fresh, though, and it’s best to wait until there’s equity in your vehicle before you try to trade it in.

What’s a Trade-In?

When you trade in a car, you’re essentially selling it to a dealership and financing something else from their lot, without the hassle of selling and buying with separate transactions. There are no hard-and-fast rules about how and where you have to trade in your vehicle.

However, it’s beneficial to shop around and see which dealers can give you the best price, but you shouldn’t just head to a car lot and ask what they’re willing to offer you. When the time comes, there are several steps you may want to take to get ready for the trade-in process, especially if you’re looking to trade in early before you’ve had the chance to close the equity gap.

Trading In Early and Equity

Are Early Trade-Ins Possible When You Finance a Car?When you’re trading in a vehicle soon after you’ve financed it, you’re more likely to be in a negative equity position – owing more on your auto loan than the car is worth.

This is especially true if you financed a new vehicle, or a certified pre-owned car. Newer vehicles depreciate faster than used ones, which have typically already seen their biggest drop in value.

Depreciation is the loss of value over time and it can’t be stopped. It can be slowed, though. The best way to do this is by using a large down payment when you finance. This reduces the amount you have to borrow, and leaves you owing a price closer to what the car might cost after you drive it off the lot. New vehicles typically lose around 10% of their value as soon as they touch the road.

If you don’t have the equity to recoup your investment in a car, you have to make up that difference out of your own pocket. It’s much easier to trade in a vehicle that can pay for itself, but this isn’t always possible when you’re trying to do so early.

Preparing Your Early Trade-In

When you know that you’re starting with a deficit on your trade-in, it’s a good idea to be prepared to get the most you can. Clean the car thoroughly, both inside and out, and make sure to fix any minor damage that may have occurred in the short time since you took out your loan.

Getting the vehicle detailed and fixing major mechanical issues isn’t likely to result in a worthwhile increase to the cash in your pocket, so don’t go overboard. Remember, you want to make as much money on this trade as you can, and it’s probably cheaper for the dealership to fix any large issues.

Before you set foot in a dealer to get your trade-in appraised, it’s a good idea to know approximately how much your car is worth. You can find this out by going to online valuation sites such as Kelley Blue Book or NADAguides. Be sure to be honest when you’re inputting information, since it’s the only way to get an accurate estimate of possible value.

Shopping for Trade-In Values

Once you have the estimates (which you should print or save to your phone), it’s time to take your trade-in to get looked at. Taking it to a few different dealerships is a good way to find the best deal you can.

We recommend taking your early trade-in to at least three different dealers, making sure at least one of them is a franchised dealership that sells your vehicle’s brand. A franchised dealer that sells your car’s brand may be more likely to offer a higher price.

Depending on your credit situation, it’s likely a good idea to ensure you’re trying to trade in your vehicle to a dealership that can work with your situation, especially if you have poor credit. And that’s where Auto Credit Express can come in handy.

We have a nationwide network of special finance dealers that are signed up with subprime lenders who can help people in many different types of credit situations, including bad credit, no credit, and even bankruptcy.

The process is easy to get started – just fill out our free auto loan request form. We’ll match you to a local dealership that can get you started on the financing you need after your early trade-in.

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Jackson receives financial reporting award

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JACKSON, Mich. (WILX) – The City of Jackson is getting international recognition for its transparency in financial reporting.

The Government Finance Officers Association of the United States and Canada (GFOA) awarded the Certificate of Achievement for Excellence in Financial Reporting to Jackson for its Comprehensive Annual Financial Report (CAFR) for the fiscal year ending June 30, 2019.

The CAFR was judged by an impartial panel to meet the high standards of the program. Standards include demonstrating a constructive “spirit of full disclosure” to clearly communicate the financial story of the City and encourage users and groups to read the CAFR. The Certificate of Achievement is the highest form of recognition in the area of governmental accounting and financial reporting.

“This is great for the City as a whole because it improves our bond rating,” said City Manager Jonathan Greene. “We believe this award will help our residents understand the work we do to make the City’s finances transparent and easy to understand.”

Bond Ratings are letter grades assigned to bonds that indicates good or bad credit for an entity like the City of Jackson. By having a strong bond rating cities are granted opportunities to pay back interest at lower rates.

The CAFR can be viewed HERE.

Copyright 2020 WILX. All rights reserved.

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