Credit Card Debt Management

There are many online services that allow you to receive your credit report once a year for free. One of the most popular is Freecreditreport.com. No matter which service you decide to use, you are making a good choice. It is very important that you review your credit report from time to time. Here are three reasons why:

1. Check for mistakes. Did you know that millions of people find mistakes on their credit report every year? Not only may you find mistakes, but you may also learn that your identity has been stolen and somebody else is using your name to open new accounts. Don’t you want to catch these problems before they get any worse?

2. See your progress. Your credit report will show information on all your debt, as well as what you have paid off. It is nice to see the progress you have been making. This can serve as great motivation as you move forward.

3. A good reminder for anything you may have forgotten. Did you forget about that small store credit card balance that you have been meaning to payoff? When you carefully review your credit report you can find accounts that may have been slipping through the cracks and killing your score.

Now can you see why so many experts suggest that you review your credit report once a year? You can do so for free so you might as well take advantage. If you are willing to pay, you can even receive your credit score online. The reasons above show just how important it is to review your credit report. If you have not done so in more than a year now may be the time for you to get started.

If your credit has taken a hit, or you haven’t established any credit at all, a secured credit card may be a good solution for rebuilding your good name. It’s a card with a credit limit determined by the amount of your own cash that you load onto it, and the credit limit could possibly eventually be raised by the card issuer by a certain percentage. But carefully consider your options before choosing a secure credit card to ensure you get the right deal for your situation.

Is there an application fee?

You should not have to pay a fee just for applying for the card. However, chances are good that you will have to pay an annual fee, as is standard with secured credit cards. So make sure your card’s annual fee will be reasonable. It truly pays to read the fine print so your card balance isn’t eaten up by fees before you can ever even use it.

Is an insurance policy required?

Just like you shouldn’t have to pay an application fee, you shouldn’t have to purchase payment insurance. Also known as a payment protection plan, this feature covers your payments in the event of death or injury. It’s supposed to be optional, not mandatory, so look for a secured credit card with as few strings attached as possible.

Which credit bureaus does the company report to?

The point of a secured credit card is obviously to build a good credit rating. The only way that can happen is if the credit bureaus are attuned to your progress and how you manage your payments and spending. Make sure your secured credit card issuer will be reporting your payment history to all three credit bureaus, Equifax, TransUnion and Experian. This is important because you never know which credit bureau a lender will use to determine your loan eligibility. Then, the ball is in your court. Buy a few items and pay off the balance in full each month. This will reflect well on your self-control and fiscal responsibility, and enable you to move on to unsecured credit cards with lower interest rates and no annual fee.

So your credit has taken a few dings over the years. Maybe you went through a divorce, got swamped by medical bills or simply forgot (or were unable) to pay a bill or three. You know your FICO score is critical to your financial future, everything from obtaining loans to getting a good auto insurance rate. So what’s a hard-working consumer to do? Don’t run off to the nearest debt consolidation service or credit repair clinic. You can handle this, one step at a time.

Consider a prepaid debit card. A prepaid debit card is stocked with your own money, so it gets you into the mindset of, ‘If you don’t have the money, don’t swipe the card.’ This is the mindset of a responsible credit card holder. Furthermore, some prepaid debit cards have the option of reporting your monthly payments to the credit bureaus to help improve your credit rating over time.

Go shopping. Store credit cards offer some of the most lenient credit approval policies, albeit some of the highest interest rates. Regardless, it’s a good way to get in on the ground floor of the credit world once again. Just use it when you know you’ll be able to pay off the full balance when the bill comes each month (that’s the full balance, NOT just the minimum payment). Otherwise, you’re setting another bad debt trap for yourself.

Pay on time. Paying any bill late is never good, as it can allow your credit card issuer to jack up interest rates - even if the utility bill was late! It is, however, especially damaging to make a loan payment late because this can easily be reported to the credit bureaus as 30 days late, 60 days, and so on. Major ding on your credit report, and it stays with you for about seven years.

Don’t card-hop. Once you’ve been with a company for a while, don’t leave them. Creditors like to see you as a long-term customer, not a fickle “flavor of the week” customer.

Find a good mix. Secured loans are the ones secured by property like cars or houses, i.e. things your creditors can repossess should the loan turn sour. Unsecured debt is essentially credit card debt. That is, unless it’s a secured credit card, secured with your own cash, which is similar to the prepaid debit card concept. Confusing, I know. Creditors like to see a good mix of both secured and unsecured debt on your credit report. It shows you are able to juggle two different types of debt and makes you seem like a responsible consumer.

Adhere to these tips and pack along plenty of patience and perseverance. You’ll be sailing in the good to excellent credit score range in about seven years, the average time the bad stuff starts dropping off your report.