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How to Increase Credit Score

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How to Increase Credit Score

Most New Year’s resolutions require consumers to spend money, but here’s one that actually doesn’t cost anything and ultimately helps people save: Boost your credit score.

Low credit scores result in higher interest charges for all types of debt, including credit cards and home loans. Borrowers with a FICO credit score (the score used for most consumer lending decisions) of 700 save an average of $648 in interest on their credit card, $1,392 on their car loan and $2,340 on their mortgage each year, compared with borrowers who have scores below 620, according to a study by CardHub.com , a credit-card comparison website. Those savings get even larger for borrowers whose credit score is above 700. Separately, lower scores can lead to larger home and car insurance bills and make it harder to rent or buy a home.

Fortunately, there are ways to improve a low credit score and most involve scaling back on credit-card usage. That’s because in the world of credit scores, all debt is not treated equally. FICO scores tend to drop as consumers rack up more credit-card debt but don’t decline as much if someone signs up for a student loan, car loan or mortgage. Here are five steps to improving your credit score.

Pay down credit-card debt
To improve their credit scores, borrowers need to lessen their credit-card debt.

Once a borrower surpasses a 10% “credit utilization ratio” — that is, the amount of their credit card debt in relation to their total spending limit — their FICO score will likely drop, says John Ulzheimer, consumer credit expert with CreditSesame.com, a credit-management site, and a former manager at FICO. For instance, borrowers whose credit-card spending limits total $10,000 should not surpass $1,000 in debt — whether or not they pay off their balance in full each month.

That can be an onerous task for many borrowers. They’ll need to adhere to stricter limits if they want the highest score possible. According to FICO, borrowers with the best credit scores — of 785 or greater — use an average of 7% of their total credit-card limit. In contrast, student loans, car loans and mortgages are not considered by the credit-utilization ratio.

Consumers can consider asking their card issuers to increase their credit-card limits, which could in turn increase their credit score. Of course, that will require not swiping for more purchases on those cards.

Convert credit-card debt to personal loans
Borrowers with a lot of credit-card debt aren’t out of luck. They can actually improve their score before they even pay down their debt — with a bit of strategizing: They can consider rolling their credit-card debt into a personal loan.

Here’s why: Credit-card debt tends to be more damaging to credit scores than a personal loan, which is considered installment debt. The credit-utilization ratio (see previous section) does not take installment debt into account. This strategy would result in zero dollars of credit-card debt on the borrower’s credit report, which could boost their score by 100 points or more, says Ulzheimer. They’ll also pay lower rates to boot: The rates on personal loans currently average 11.36%, according to Bankrate.com. In contrast, rates on credit cards average just over 13% to 15.4%.

This strategy will only help borrowers if they stop using their credit cards or if they pay off the charges they make on their card quickly. Otherwise, their score won’t stay up for very long. Of course, consumers should pay off all their credit-card debt with their savings rather than signing up for a loan. But that assumes they have enough cash set aside after paying this debt for their emergency fund. (Financial advisers typically recommend people have savings equal to six to eight months of living expenses in a savings account.) More at 5 ways to boost your credit score

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Top 10 Tips to Show You Ways on How to Pay Off Debt Fast

“Below are the top 10 tips on how to pay off debt fast. Read on as there really is a light at the end of the tunnel!

Debt Relief.. Worry Free..

Debt Relief.. Worry Free..

Trying to pay off a sizable debt is no picnic. It can be discouraging to pay those bills month after month while it seems like the balances are hardly moving.

Top 10 Tips to Show You Ways to Pay Off Debt Fast

  1. It’s usually a good idea to negotiate a lower interest rate on each credit card account. With rates that can reach 30 percent or higher, credit cards can take decades to pay off. The lower the interest rates, the quicker the balances can be paid. Most credit card companies are willing to lower interest rates at least slightly if you just ask.
  2. If asked, credit card issuers will also lower the annual fee on an account, or they may even waive it entirely. This small amount adds up over the years, and you’re better off without it.
  3. Many credit cards come with numerous fees – late payment fees, over limit fees, and cash advance fees – which can pack hundreds of dollars onto your balance each year. It’s first necessary that you become aware of all the potential fees associated with your credit cards and do your best to avoid incurring them.
  4. While cash advance fees are not likely to go away, many credit card issuers will remove late fees and over-the-limit fees if you do not consistently incur these. All you have to do is ask.
  5. If you have gone through a period where you had difficulty paying on a particular account but have since paid at least the minimum due for several consecutive months, a credit card company may be willing to remove all or most of the late fees that were charged. This can reduce your total balance due by a few hundred dollars, depending on the particular situation.
  6. To successfully pay off debt, it’s essential that each credit card is paid on faithfully every month. Each statement will list a minimum amount due, but it’s best to pay more than this each month. Obviously, the more you can pay monthly, the quicker the balance will be paid off entirely.
  7. At the same time, it’s important to avoid taking on new debt. Credit card use should probably be stopped entirely while paying off accumulated balances. You may choose to keep the cards for some future time, or you may need to cut them up to eliminate the temptation.
  8. It can be very helpful to minimize your expenses in other areas and apply the money saved to your credit card payments. For example, you may decide to stop eating at restaurants for the next few months and put the money you would have spent toward paying down a credit card. Expenses like magazine subscriptions, add-ons to your telephone or cell phone service, and automatic car washes can add up quickly. Eliminating these extras for a short time can greatly reduce your credit card balances.
  9. It may be possible to negotiate a lower pay off amount with a credit card company. Many companies will accept around 20 percent less than the total balance due in a lump sum “settlement.”
  10. After paying off a credit card in full, it’s important to take the amount of money you have been paying each month and apply it to another credit card. This approach is sometimes called “snowballing” and will help you pay off the other cards faster….. More at How to Pay Off Debt FastTop 10 Tips to Pay Off Debt Fast

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Budgeting for Dummies – Learn These Essential Steps to Help You Manage Your Finances

“This article will discuss essential steps and tips on how you can manage your finances better. Budgeting for dummies you say? Read on and find out!”

 

budgeting for dummies

Learn and Be an Expert in Managing Your Finance

Learning how to budget is essential to becoming financially healthy. Many people are intimidated by budgeting simply because they have never learned how to budget. Budgeting is simple. It’s a process where you write down what you make each month, what you spend each month and what’s leftover (or overspent) each month.

The whole goal of a budget is to tell your money where to go each month. If you haven’t been budgeting or just simply don’t know how to budget yet, you finances are likely getting out of hand. There is hope in learning how to budget your money. Let’s dig in to the five steps of learning how to budget:

  1. How to Budget, Step 1 – Track Your Income
  2. How to Budget, Step 2 – Track Your Expenses
  3. How to Budget, Step 3 – Estimate How Much You Will Spend in the Next Month in Each Budget Category
  4. How to Budget, Step 4 – Give Your New Budget a Try For a Month
  5. How to Budget, Step 5 – Keep Working at it and You’ll See a Difference

How to Budget, Step 1 – Track Your Income

Yes, you will need to track everything. Do you know how much you make each month? No is not an acceptable answer. Get out those pay stubs, log into your company’s online pay stub system or just look at your bank statement. Note: If you’re income is irregular, you should do additional research on how to budget with an irregular income. There are some great articles out there. For those of you who get regular paychecks, make sure to get your numbers and do the basic calculations on what your income is each month. Once you have your income number totaled, write it down at the top of a blank sheet of paper.

How to Budget, Step 2 – Track Your Expenses

This is the hardest part of budgeting. Learning how to budget won’t do you any good if you’re not tracking your expenses. It’s important to track everything you spend each month because then you can make educated guesses on how much you think you’ll spend each month. The goal of making a budget is to to learn how to estimate your expenses and allocate a specific amount of money each month to certain categories.

A typical budget is broken down by categories of expenses. Some common categories of expenses are:

  • Mortgage and Rent
  • Bills & Utilities
  • Loans and Payments
  • Shopping (clothing, gifts, toys)
  • Giving (church donations, non-profits)
  • Cable TV
  • Cell Phone
  • Internet
  • Gasoline
  • Insurance

To successfully learn how to budget, you’ll need to get a feel for how to categorize your expenses. Mint.combudgeting for dummies does a great job of breaking your expenses into categories, In fact, Mint.combudgeting for dummies has a budgeting tool set which can greatly speed up the process of learning how to budget and get your first budget going. I would highly recommend getting started budgeting with Mint.combudgeting for dummies.

If you decide not to use an electronic system to learn how to budget, an old fashion paper and pencil will definitely do the trick. Write down your budget categories, which are categorized expense types, down below your income on your piece of paper. There could be anywhere from 10 to 50 budget categories. Try to lump them into around 15 or 20 categories as this will make it simpler in figuring out how to budget.

How to Budget, Step 3 – Estimate How Much You Will Spend in the Next Month in Each Budget Category

Once you have your categories decided upon. Try to estimate how much you will spend during the next month in each category. If you haven’t been tracking your expenses up until this point, you’ll likely be WAY off, but that’s okay. If you have been tracking, you may still want to estimate higher than you initially think for each category. When I was first learning how to budget, I tried cutting down many of my category allocations because I thought, “Oh, I don’t need to spend all that”, but I was wrong. Just allocate a number that you regularly spend. Don’t try to short change yourself and make it hard on you to hit the numbers. Budgeting should be a real number, not a fake one that’s too low to realistically hit.

How to Budget, Step 4 – Give Your New Budget a Try For a Month

During and after the first month of learning how to budget, you will likely get frustrated. You likely won’t stay below your estimates. We usually spend way more than we think we do. We just never have tracked how much all that eating out costs us each month. So, if you’re shocked on how much you spend in some categories after learning how to budget, don’t worry. It will take a few months to get this stuff right. For the next couple of months, try tweaking your budget in the direction of over or underspending and see how that goes.

How to Budget, Step 5 – Keep Working at it and You’ll See a Difference

Budgeting is hard at first when you’re first getting started, but after you learn how to budget effectively, it can start getting fun. The results of telling your money where to go each month and being in control of your spending can be huge. I learned how to budget only a couple of years ago and have since gotten out of debt, built an emergency fund of 6 month of living expenses and have saved a significant amount of money that I plan to use either toward a home purchase or toward an investment portfolio over the next few years. I’m definitely glad I took the time to learn how to budget and hope you will too….More at Budgeting for DummiesHow To Make A Budget- A Budgeting for Dummies Article Solution

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