Posts in Category: credit

Credit Report 101 

A Simple Guide to Building Your Score
December 09, 2014 Categories: credit

How Millenials Can Improve their Credit Scores 

Today's young adults carry lower credit balances and are less likely to pay their bills late. So why are their credit scores so low?
March 17, 2014 Categories: credit

Financial editor of NBC’s Today Show and financial expert Jean Chatzky writes about credit cards all the time. Just last week she wrote about varying credit cards, how to know one from the other, and how to move them all in the right direction.

But, she points out in her latest article, choosing credit cards and managing them all is much easier if you “get off on the right credit foot initially”. And unfortunately, that's something many millennials aren't doing right now.

And it’s not because they’re irresponsible young adults still depending on Mommy and Daddy and racking up debt on frivolous things and then forgetting to pay the bill at the end of each month. On the contrary. According to Experian's 2013 State of Credit report, released late last year, baby boomers are actually the ones that tip the high end of the scale. They carry an average balance of $5,347 on their (again average) 2.66 credit cards. Millennials carry $2,682 on their 1.57 cards. Gen Xers and members of the Greatest Generation fall somewhere in between. Millennials aren't even highest when it comes to late payments—that dubious honor goes to the Xers.

And yet, Millennials’ credit scores aren’t reflecting the same fiscal resposibilty. A just 628, millenials’ scores have the lowest average on the list. They're more than 100 points lower, on average, than the Greatest Generation at 735. (Boomers average 700 and Xers 653, for those of you looking to see where you measure up.)

So what's the problem? Utilization. This factor—defined as the percentage of credit you have available to you that you're actually using—is responsible for about one-third of your credit score. Ideally, you want to keep that percentage under 30%. Millennials are at 37%.

Looking at these stats, it's clear that if millennials had more cards in their wallets—but continued to use them sparingly—they'd have substantially better scores. And those better scores would help them get better rates on auto loans, mortgages, insurance, and other credit cards going forward. In other words, they'd save them real money, creating a cycle of funds that will help them a lot in the long-run.

Chatzky has a few suggestions for parents on millenials who want to help them start out on the right foot and/or for millenials themselves to follow as they consider their credit scores:

  • Get a credit card. Or help your child get one. "All the parents who are weaning their kids away from credit and forcing them to use debit cards are [making a mistake]," says Maxine Sweet, vice president of consumer education at Experian. "Just like you need academic credentials you need credit." Under the Card Act, if you're under 21 you're not supposed to be able to get a credit card unless you have the income to prove you can manage it or can get someone over 21, a parent being a likely choice, to co-sign, Chatzky points out. She also points out that she’s not a fan of co-signing, but there is another way: Add a child to one of your own credit cards as an authorized user. Just make sure that the issuer will report on behalf of the child to the credit bureaus.
  • Understand how much you can/can't use the cards you have. As Chatzky points out, 30% is the line when it comes to utilization. If you can see you're going to cross it, either request an increase in your credit limit or—if you've proven to yourself that you can handle having credit—get a second card. (You'll want to use that one, too, but sparingly. Just enough so that the issuer doesn't quit you. Then be sure to pay it off entirely every month.)
  • If the thought of getting another card rubs you the wrong way and you know your utilization is creeping up there over the course of your monthly billing cycle, try this: Pay your bill in-between. Sweet explains that'll reset the clock and help boost that portion of your score. If you're carrying a balance, it'll save you some scratch on interest as well.

Concerned About Rising Interest Rates? Looking to Refi, Buy a Car, Etc? 

Check Out CNN Money's "5 Things to Know About Rising Rates"
July 24, 2013 Categories: credit tips

After years of decline to rock-bottom levels, interest rates on the rise. The average rate for a 30-year mortgage was recently 4.35%, more than a point about the 2012 low of 3.3%

Interest rates are one of the prime factors in making a financial decision. Check out CNN Money's tips on how to prepare for rising interests and also how to save yourself some money. 

Looking for the Best Credit Card, Credit Unions Might Be the Answer 

November 15, 2012 Categories: bank alternatives credit

Big banks are known for their fees lately and big bank credit cards are no different. Many people have switched to credit unions for their banking needs to avoid big bank fees and many are wondering if they should do the same with their credit cards.

A recent article by Janna Herron published on reviews the good, the bad and the tricky about credit union credit cards, outlining all the things to consider before making the switch.

Like most credit union loan products, the rates are much better than with the big banks. The average APR on a rewards credit card with a credit union was 9.38% as of November 1, 2012 compared with 12.89% for big banks. More interestingly, credit union credit card interest rates are capped at 18%. The National Credit Union Administration (much like the FDIC for banks) mandates the 18% cap for most loans made by federally chartered credit unions, although some short-term small loans have a 28% cap.

Credit union credit cards are also known for lower late payment fees, having a five-day grace period for late payments (compared to one at big banks), and having the same variety of credit card options, such as secured cards, reward cards and platinum cards.

One of the drawbacks to having a credit union credit card are lower limits than with the big banks. Credit unions are risk averse and new accounts will often face lower initial credit limits. Consistent on time payments can often increase the limits more quickly, but it is still a consideration before making the decision to switch.

To read the entire article, click here.

New Study Shows 1 in 4 Have Been Victims of Credit Card Fraud 

October 17, 2012 Categories: credit protect yourself

NAPLES, Fla. – A recent global study of more than 5,200 consumers conducted by ACI Worldwide and Aite Group found that one in four say they have been victimized by credit card or pre-paid card fraud during the past five years.

The study surveyed consumers in 17 countries with Mexico (44%) and America (42%) reporting the highest fraud rates.

“The results of the survey show that card fraud continues to be one of the greatest threats and concerns for consumers, financial institutions and retailers,” said Mike Braatz, a senior vice president of ACI Worldwide, a Florida-based payments company.

Some key findings of the survey include:

Many consumers continue to exhibit risky behaviors that put them at a higher risk of financial fraud, including keeping written records of PIN numbers, throwing unshredded documents containing sensitive information into trash bins and using public computers or computers without security software for Internet banking services and to shop online.

If their financial institution notices unusual activity on their bank account or card, 82% of respondents are “very interested” in being notified prior to the bank taking action.

Consumers prefer immediate and direct communication from their banks when fraudulent activity is detected. The most preferred method of contact was found to be a call to the respondents’ mobile phone, followed closely by e-mail or text message. This illustrates a change from 2011 where contact via home phone was the second most preferred method.

“The 2012 Fraud survey paints a compelling picture of the global nature and threat of fraud,” said Shirley Inscoe, Senior Analyst, Aite Group.  “Financial institutions, issuers and retailers need to enlist customers in the fight against fraud, educate them on prevention best practices, and reassure them of policies should fraud occur.  Maintaining customer satisfaction, loyalty and preserving wallet share can be achieved by communicating with and enlisting the customer in the fight against fraud.”

To read the full report click here.

Credit Union Credit Cards Offer Lowest Rates on Rewards and Platinum Cards According to Recent AB Article 

July 31, 2012 Categories: bank alternatives credit

American Banker recently published an article highlighting credit union credit cards as offering the lowest rates on rewards and platinum credit cards based on research by SNL Financial.

The research for the report can be found by clicking here.

SNL ranked institutions by average credit card rates for the most creditworthy borrowers, listing the top 15 banks and thrifts and the top 15 credit unions with the lowest rates for the specialty cards.

The national average interest rate is 10.86% for rewards cards and 9.85% for platinum cards, according to SNL.

Advantage Federal Credit Union in Rochester, N.Y., posted the lowest rate, 5.25%, for its rewards cards.

Educational Systems Federal Credit Union, of Greenbelt, Md., has the lowest platinum card rate of 3.25%.

To read the full American Banker article, click here.

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