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Credit Score and Credit Rating – Weekly Round-Up

As everyone probably knows, credit scores play a very important role in an individual’s personal finances. It can determine how much interest one will need to pay and even whether they will be granted a loan or not in the first place. The credit score, though most might not be fully aware of it, affects a person’s lifestyle and standard of living simply because of the number of financing options available to you depends on it.

This week’s round-up will focus on the blogs that talked about credit history, credit rating, and the tips that will help your record. Essentially, the important aspect that can affect your credit score is outlined here:

Jim Wang @ Bargaineering wrote a useful post titled, “How to Build Your Credit History with Tradelines“. He starts the blog post by simply stating that getting a good credit history depends on how you act when given credit. This particular article goes into the core of what goes on in establishing credit history. Tips on how you can use tradelines to build a good record are also outlined here.

David @ My Two Dollars tries to help a reader prevent their credit record from being damaged in his post, “What Damages Your Credit Score the Most?” His answer to this is straightforward: late and missing payments. The credit score always comes back to a person’s ability and willingness to pay their financial obligations. This ability will show in one’s payment history.

JC @ Get Rich Slowly posted an interesting article, “Should Repaying Debt Be an Obsession?” As mopst are probably aware, the economic crisis today occurred not only because of banks’ careless behavior, it actually became worse because the average American simply has too much debt. So is going to the other extreme the solution to today’s problem? JC doesn’t seem to think so; he states that balance is important.

Carrie Reader @ Hints Club shares her thoughts about getting a good FICO Score with her article, “Good FICO Credit Score? Tips to Getting the Most Out of Your Home Mortgage Loan with Good Credit“. Well, the title actually says it all. The blog post basically talks about how homeowners can take advantage of their good credit history with the four tips outlined in the article.

Credit Card Traps – How to Avoid Them

Credit cards have a variety of uses and can provide different benefits including rewards points, cash back, free airline travel, and even a better credit rating for responsible consumers. However, if it is used incorrectly, it can mean that the customer can end up knee-deep in debt. Before anything else, it is critical to determine if you can actually pay for an item before you charge it to credit. Otherwise, your debts will pile up not only because you keep borrowing but also because of compounded interest.

This is easier said than done though. According to the Federal Reserve, 40 percent of US household have credit card debts. A significant percentage from this figure is struggling with repayment. To help you avoid this problem, we have compiled a list of tips you can follow:

  • Pay Your Credit Card Bill By the Due Date – late fees can be significant. It can readily amount to $30 or higher depending on the credit card company. Take note that missed or late payment can also adversely affect your credit card score and increase the interest you need to pay on future loans.
  • Limit the Number of Your Credit Cards – most people have more than one credit card. An average person holds two to three cards while some have as much as six credit cards. This serves no purpose other than make the temptation to buy almost irresistible to you.  Try to close one account at a time if you have more credit cards than you should. Don’t close two at the same time because it might lower your credit score.
  • Learn to Negotiate – it is possible to negotiate for a better rate especially if you have a good credit score. Compare several offers and then call your credit card company to ask them if they can match these offers.
  • Read the Fine Print – find out how much you need to pay as interest, the grace period, and any hidden fees that may be charged by the credit card company. Congress has recently passed a bill that prevents abusive credit card practices but it will not be in place until July 2010. In the meantime, it is important for you to remain cautious in using your credit card.

It is undeniable that credit cards are essential financial tools today. However, like most financial products, you should know your spending limit whether or not you’re using credit. Many companies offer various types of features including low interest and rewards points. Be sure you know what you’re getting into before you charge anything to your card.

Credit Card Regulations – Senator Dodd’s Push

In response to the financial crisis, Americans need to be well-aware that changing our frivolous spending habits is crucial; however, this week, Congress is holding credit card companies responsible for their practices as well.   Consumers are subject to credit card companies’ terms and conditions upon signing their detailed agreements; however, what happens to consumer rights when these credit card companies change terms at their own discretion?  The results have proved disastrous for everyday Americans’ bank accounts, as abusive credit card practices find new ways to create endless amounts of monthly fees.

Credit Card Companies’ Abusive Practices

To understand both the importance and potential impact of laws that protect consumers against credit card companies, it is crucial to be aware that credit card rates change unexpectedly.  Fees often appear on your monthly statement out of nowhere, even when you pay your bills on time and have made serious efforts to be in good credit standing.  These companies raise interest rates and dramatically cut credit limits, with little or no regard for how these changes affect loyal customers.  Struggling consumers are left with a large bill and little support-until now.

Senate Banking Committee Approves Bill to Regulate Credit Card Companies

Good news: the Senate Banking Committee, led by Chairman Senator Chris Dodd of Connecticut,  approved legislation that will begin the fight against unfair credit card company practices.  Below is what was outlined in the bill:

  • “Protect consumers from “any time, any reason” interest rate increases and account changes.”
  • “Prohibit unfair application of card.”
  • “Protect cardholders who pay on time.”
  • “Limit abusive fees and penalties.”
  • “Prohibit issuers from using a consumer’s card history with another creditor to raise interest rates.”
  • “Prohibit issuers from charging interest on debt that has already been repaid.”
  • “Ensure that cardholders are informed of the terms of their account.”
  • “Protect young consumers from aggressive credit card solicitations.”

What will the Credit Card Accountability, Responsibility, and Disclosure Act do for Everyday Americans?

This bill will give a voice to consumers that goes beyond the 24/7 customer support that most credit card companies offer.  The consumer’s voice will now have legal backing, as the government is taking the first step to acknowledge the role credit companies have played in the US financial crisis.  According to The Consumer Federation of America’s Legislative Director Travis Plunkett, “Congress is taking a strong stand against the traps and tricks that many credit card companies use to increase their profits at the expense of financially vulnerable consumers.” With a July 1, 2010 deadline to implement the bill’s outlined changes, Americans can begin to feel good about the progress we are making towards fixing the credit crisis.  The crisis certainly cannot be fixed overnight, but bills like this make accountability a priority for both businesses and consumers.  With legal backing, credit card companies will be forced to take an active role in getting our economy back on track.

Tips to Save Money

We all know that saving money is important, especially during these tough economic times.  Ideally, putting away large chunks of money every time you get paid will build that savings account in no time; however, with a multitude of bills to pay, doing so is not always possible.  In this entry, we take a look at the everyday things consumers like you can do take small steps towards saving money.  In the long-run, when these everyday actions are put together, they will certainly help you fatten your wallet.

1. Call your credit card company and ask them to lower your interest rates

By placing a one-time call to your credit card company, the interest rates you pay on your credit card can be lowered.  Credit card companies want to keep your business; if you mention that you are considering taking your business elsewhere, you have a good shot at getting them to lower your overall interest rate.  Month to month, even a slightly lower interest rate will put additional money back in your pocket that you may not have had before.  Make the call-you have nothing to lose-except the extra bucks you could be saving each month!  Our past post explains other tips you can use when credit card rates change on you.

2. Bring your own caffeine to work

Stopping at Starbucks once, twice-or for all you hard-core coffee drinkers, even three times per day-is nothing abnormal in today’s world of long days and endless projects.  The problem is, the overpriced coffee that coffee chains sell can wreak major havoc on your wallet over time.  By bringing one pound of coffee beans that you buy from the store, you can get 40 cups of coffee.  Even the gourmet coffee beans run at about $4.00 per bag.  Now consider that you’re spending anywhere from $2 to $4 per cup by stopping at a coffee shop every day.  At $10 per week, that’s $40 per month and almost $500 per year.  By bringing your own coffee, that $500 will go straight back to your wallet.

3. Cut your cable bill in half by downgrading to basic cable

With tons of fancy cable packages out there to choose from, it’s no wonder Americans are spending an arm and a leg every month on cable.  Think about it-if you’re really serious about saving money, will cutting out the 300 plus channel plan really make a huge impact on your entertainment life?  You can still watch your weekly shows, you just may not have access to all of the fancy channels.  What will you have instead? An extra $50 to $100 in your pocket each month-over a year, that could lead to an extra $1200!

4. Cut out the lottery tickets

Sure, we all have the faint hope, somewhere in the back of our mind, that one day we will “hit the jackpot” and win that $20 million lottery.  The truth is, if you’re really looking to save money, consider this:  the odds of winning the Mega Millions are 1 in 135,145,920.  With people spending up to $150 per year in some states on lottery tickets, the odds that you will get that $150 back are slim to none.  Anything is possible, but when you’re serious about pinching pennies, play the odds that are in your favor-and skip on the lottery tickets.

5. Ask yourself where you get your news-online or via the paper?

Many Americans enjoy the morning ritual of reading the morning paper; however, many people find that their morning paper goes straight to the recycle bin.  As the world has moved to the Internet, more and more people get their news via websites that they check on a daily basis.  Ask yourself this important question-do you really read the paper every morning?  If you find yourself using the Internet for your daily news updates, consider canceling your subscription.  Over time, the money you were spending to actually fill your recycle bin will start to actually fill your wallet instead.