It is no huge secret that credit cards can cause a mountain of problems when it comes to credit card debt. Many times individuals will get caught up in the enjoyment they get from the freedom that can be found when they are shopping with credit cards, and this can end up causing a heap of financial problems in a very short amount of time. One major reason that individuals begin to get smothered under credit card bills that can easily pile up is they get into the habit of only paying the minimum amount owed on their credit card bills. This can result in the feeling that you are only spinning your wheels with a balance that never seems to go anywhere except up. You should always pay more than the minimum payment and if at all possible you should try to keep the balance paid off each month. Another problem can arise when you keep a large amount of credit available on your credit cards. If you have a large credit line open, this can keep you from being able to secure a future loan on the automobile or new home, or any other purchase that you have wanted to make. Keeping several credit cards open for that ‘just in case’ occasion can also make it too easy to use your credit cards, and the result of this can many times end up in credit card debt before you realize what has happened.

A high interest rate is another problem for a large number of people. You should always pay close attention to the interest rate you are receiving on your credit cards. Many individuals take advantage of the benefit to be had in transferring their credit card balance to one that offers a lower interest rate. This can be very helpful as long as you are paying more than the minimum payment each month.

Small businesses can benefit a great deal in using credit cards if they have several employees who will need the freedom to make certain purchases, such as gasoline for company vehicles, or even automobile repairs. Making sure that you continuously pay the balance of the credit cards will also help to build your company’s credit line. If you do not keep a close watch on purchases made however, it can also result in the misuse of the credit cards.

If used properly credit cards can help to build your credit and if they are misused, they can ruin your credit. If you will take the time to follow a few simple guidelines, it can help to keep you on track with your credit card purchases.

• The credit cards that you plan to use are the only ones that you should keep
• Always pay more than the minimum balance, and when possible pay the balance in full each month
• Keep close track on every purchase made on the credit cards and do not use them unless it is necessary
• Make sure that you are paying the lowest interest rates possible

Almost all of us are aware that credit cards can do a lot of harm to people’s credit rating and put you in a financial mess very quickly, but when used properly you can enjoy the freedom of using the credit cards when needed, and be able to build a good credit rating at the same time.

Have you come to the point in your life where you are comfortable with your lifestyle, and you feel like you have plenty of extra money coming in each month that you think you should be able to afford a new car payment? Or, perhaps you are thinking about buying that new dream home for your family that you have dreamed about being able to buy for so many years. Then, all of the sudden you come to find out, that there is something that is standing in the way of being able to do either of these things.

Having no credit at all is normally just as frustrating as having bad credit can be. The reason for this is, a bank or a lending institution, a credit card company, automobile dealership, mortgage company, or any other type of business that you are trying to borrow money from will want to be able to see a past credit history of some type. If these companies are able to see a good credit history on your credit report, then they are able to use your credit information to determine the bill paying practices that you have kept, and are keeping.

If you have bad credit, they can look at your credit report and determine what has caused your credit to be bad. Sometimes a person might have had a good credit history, then all of the sudden, an unexpected accident of some sort might have occurred. If lenders are able to see that you had good bill paying practices up until this point, then sometimes your loan can get approved under these circumstances.

If you have no credit at all, there is absolutely no way that any type of lending institution or company will have any type of information that they can base a determination on previous bill paying practices. It is important for them to be able to determine what level of risk a client will, or will not be.

The way various companies can determine someone’s past credit history and bill-paying practices is by looking at your FICO score. The FICO score is simply a means of being able to condense the credit information that is supplied on the credit report into a more easily understood three-digit number. These numbers can range anywhere between the numbers of 300 and 850. A score that is above 750 is considered to be excellent, and a score that is less than 620 is considered to be risky.

There are several different factors that are used in the formula to calculate a persons FICO score.
• 35% – determined by your past payment history
• 30% – determined by the current amount of money you still owe lenders
• 15% – determined by how long your credit history is
• 10% – determined by the amount of credit accounts that are new, that you have either opened, or applied for
• 10% – determined by a mix of the credit accounts that you currently have, such as credit cards, mortgages, etc.

To ensure that you are able to enjoy the benefits from having good credit, instead of having no credit at all, pay careful attention to the management of your finances and your bill paying practices.

One of the most important things you should do in managing your finances would be to set realistic goals. These goals can include such items as saving up for that long awaited dream vacation you have always wanted to take your family on. Some other goals you might choose could possibly be for your child’s education, the purchase of a new automobile, saving money to make additions to your existing home, or even to save money for the down payment on a new and larger home. Making sure you keep your goals as something that can be realistically done will ensure that you don’t set yourself up for disappointment and failure of being able to meet goals.

A very beneficial way to help with the management of your finances is to take advantage of the many available tools there are today that can be very beneficial in managing your money well. Some of the software that is available today such as Microsoft Money, Quicken, and Excel, can be very helpful tool to help you be able to create a good budget that you can use throughout the week, or month. These programs are very beneficial in helping individuals be able to keep up with expenses they have. If the particular bank that you use offers online banking, this can be another useful tool that you might choose to use. Using this tool will allow you the advantage of being able to check your account frequently, and always be able to know the status of your account.

Take the extra time to sit down and create a budget for your family for each week, or even monthly. If you would like to be able to manage your finances well, this is one step that you cannot forget about doing. If you will create a well-planned budget for all of your expenses, then make sure that you stick to your budget, it can be very important to successful financial management.

If you have decided that you would like to benefit from the advantages to be had in managing your finances wisely, you will be able to find many useful websites that are available online to help you. Many of these websites will include very useful tips and ideas on ways that you can better manage your money, and have the peace of mind that comes from knowing that you are on top of the game when it comes to your finances.

The majority of credit bureau scores in the United States are produced by Fair Isaac and Company, or FICO®. The three major credit reporting agencies, or bureaus, are TransUnion, Equifax and Experian. They all provide FICO® Scores to lenders, and they all three use a slightly different formula to make their determination on what score will be given for your credit rating. All three could have identical information and the scoring system would be different.

However, most of the time they do not always end up having the same information in being able to determine your credit score. This is simply because not all businesses such as credit card companies, auto lenders, home mortgage companies, and various others will use the same agency to report any type of activity on your account.

There are specific factors that will influence the overall credit score. Issues such as your personal payment history on your accounts, any outstanding debts that you may have, the amount of credit you have versus what you have available, how long you have had each line of credit and very importantly, any derogatory or negative information that may be on your accounts. The frequency of late payments, any charge-offs or collections and a big factor is bankruptcies or credit repair companies you may have used.

There are also other factors that are weighed in determining your credit risk that do not have anything to do with your credit or any open accounts at all. Those factors are issues such as how long have you lived in your current home, how often do you move, or the length of time you have been at your job. It is never a good idea to change jobs right before applying for any type of credit, but especially so if it is a home or automobile loan. Lenders like stability.

Following a few simple steps can optimize your credit rating: be sure to always pay your bills on time or even before they are due, try to always ensure that you use 30% or less of the credit that is available to you, take the necessary precautions to always ensure that your good name is protected from the chances of identity theft. Protect your credit rating.

A young person needed to establish credit. In order to do so he/she applied for one credit card with one of the companies that specialize in helping to establish or re-establish credit. Although the interest rate was significantly higher than what this young person was comfortable with, he/she decided it was the best option at the time.

As previously recommended, this young person opened a revolving credit line at a jewelry store that also specializes in helping people to establish credit. He/she also had a cell phone, automobile insurance and a monthly car payment to make. The automobile was difficult to obtain because this youngster had no prior credit.

This young college student decided at the time of the vehicle purchase, it was time to start creating a positive credit history. Paid twice a month, utility, rent, car, insurance and cell phone payments never coincided with due dates for the bills, which left this youngster always running a few days late on every payment.

Determining this was not a good system, he/she decided to make some changes. Every month he/she started paying everything except the rent with his/her new credit card. At the end of the month, one week prior to the due date, the balance on the credit card was paid in full. After two years of having this credit history showing everything paid on or before its due date, applying for a home loan was a breeze.

The reason some would think this is not a good idea is because many do not have the discipline necessary to use their credit cards in such a manner. Far too often, monthly bills only get paid by credit card when finances are tight or something such as illness or job loss deems it a necessary.

This young person also applied for a gas card. While unwise for most under the age of 25, he/she managed to never exceed his/her monthly budget for gas. Although he/she lived with the mantra of “if I can’t pay cash for it, I don’t buy it” finding this method of bill paying actually worked for his/her advantage. After two years of perfect credit, with three or four lines of credit open and nary a single late payment on anything, his/her credit rating was flawless.

This is a rare scenario for a person under the age of 21, but in this case, it was the right thing to do. It took diligence, determination and a will power not possessed by many, young or old. By the time this young person reached the age of 21, he/she owned his/her car, was purchasing a home rather than continuing to rent and had a credit score in the mid 800’s. He/She also set into motion a format for paying all of his/her bills on time, every month and without worrying about which bills fell due between paydays. In the two years that followed the purchase of his/her first home, this young man/lady had the credit limits raised on one of his/her credit cards and has gained enough reward points to take a trip to Hawaii. Not a bad result for something others told him/her was not a sound financial decision.

Whether you are wanting to purchase an automobile, a home for you and your family, furniture for your home, items for a business you just opened, or anything else in between, your credit score can either be something that will be helpful or it can be something that can be harmful to you in being able to achieve these important goals. Having bad credit can even stop you from being able to get approved for a credit card, as well as opening up a checking account.

We can try to ignore our credit and pretend it isn’t there, but the fact remains, it is something that will hang over each of us for our entire life.

Wouldn’t it be much more simple to put the effort forth in keeping our credit free from black marks and bad ratings? The first step in doing this would be to make sure you do not commit to any obligations or contracts that you aren’t able to handle making the payments for. You should never overextend your line of credit. This means you should never have more money going out, than you have coming in.

This can sound simpler than it actually is. More often than not, people will only commit to certain obligations that they know they are able to handle financially, then out of nowhere an unexpected sickness or tragedy will occur. Before they even realize what is happening, they find themselves overextended financially, and then they are unable to pay some of their bills, or make payments that they’re obligated under.

It is best to always try to plan ahead as much as possible, and leave room for those unexpected events that seem to always sneak up on us when we least expect it.

Your financial trail will follow you around everywhere you go in life. Always taking care to be sure and manage it wisely is something you will benefit from for a long time to come. It will also be well worth the time and effort to always stick to good planning and good budgeting.

Now is the time to be careful. In the coming weeks and months, you will be inundated with every credit offer known to man. The invitations will bog down your mailbox asking you to apply for this credit card or guaranteeing you acceptance for that credit card (for a low annual fee, and possibly a secured amount of funds in the bank) and then the car dealerships will get to you.

You are wondering why in the heck this is happening. However, more than wondering why, you just may be tempted to immediately start rebuilding your credit by applying for all those wonderful lines of credit that are suddenly open to you.

The old saying “buyer beware” should seriously go into play about now. Read the fine print on every offer. The interest rates are going to be astronomical. Repayment terms will be stiff. Penalties for late payments are going to ask for everything shy of your first-born.

Why is this happening? Well, because since you just cleared a bankruptcy, you have no debt. Your debt to income ratio is zero debt to 100 percent income. You cannot file bankruptcy or ask for court intervention if you get yourself into trouble again for close to a full decade from now. You are no longer a risk. The banks, credit card companies and automobile dealerships have recourse they did not have a few short months ago. Now if you default, it will be far easier for them to attach your wages, bank accounts or any assets you may have held onto during the bankruptcy.

You must be very smart about how you are going to go about rebuilding your credit. Do it slowly. There are a couple of very good credit card companies that will help you rebuild your credit at a slow pace and with minimum of risk for them. Usually that means you will pay a fee for their services and frequently they will start you off with a secured credit card. A secured credit card is one where you put a specific amount of money into a checking or savings account, reserved for this amount of money only (say $200.00 to $400.00). If for whatever reason, you do not make your payment, the company will take the money from the account immediately to pay the full balance due and close your credit card account.

What would be a more prudent course of action, is to give yourself a few months for the offers to stop or at least slow down a bit. Make sure that for a given time, the only bills that you have are your rent (or mortgage), your car (if you still have it), and your utilities. Most cell phone providers report to a credit agency, therefore if you do not have a cell phone, that is a good place to start building credit. Within a year, open three minor, preferably secured lines of credit and do not allow any of them to come close to reaching the full balance. Purchase something minor on the card, pay it off at the end of the month and make sure there is no balance to carry over for the credit card company to charge an interest rate on.

Take time to build your credit slowly – I cannot stress that enough. It took a long time to reach the point of bankruptcy. It will take a while to get the credit cleaned back up. It can be done. Just do not be in such a hurry that you do it the wrong way or unwittingly get yourself in over your head.

Daily advertisements tell the consumer to go to one place or another to obtain free credit scores. Unfortunately, once you are lured onto the site, you will normally discover that indeed you may obtain a free credit report, but the score itself costs a fee. This fee may require a one-time payment or a monthly fee to keep you up to date if there are any changes in your credit.

Regardless of the advertisement or which method you choose for obtaining a copy of your credit report and ultimately the score, it does you no good if you do not know how to read it or what it all means.

Most people do not know what all those mysterious codes next to each entry means or how the information posted weighs into the final calculation to reach that magical number known as your credit score.

Each institution uses a different scale to weigh each item. If you are looking to purchase an automobile for example, the car dealership is going to put more weight on your former automobile loans, vehicle insurance, and outstanding utility bills (if there are any). Their focus will be on items such as previous addresses and length of employment. Automobiles by design are mobile. Therefore, it is much easier to move about with them and leave a lender stuck holding the loan and attempting to repossess a vehicle than with other types of credit.

Items such as outstanding medical bills, or that short period of time where things got behind, will be much less important than knowing where you (or the vehicle) can be found should payment not be made.

A credit card company looks at each item presented in a totally different manner. They are more concerned with the number of credit cards that you already possess. What the open line of credit on each is, frequency of late payments, and the amount of available credit currently being used.

The “unspoken” calculation which weighs heavily is: if this person should suddenly fall ill or be out of work and used all of his/her available credit, would he/she be able to make more than the minimum payments of each card?

Mortgage lenders use a completely different set of eyes for weighing each item than automobile dealerships or credit card companies do. They scrutinize every item carefully and give it a weight that is unique from what other lenders do. The “not so important” illness or divorce that caused a blip previously ignored by the automobile lender or credit card company might be a major issue when obtaining a home loan.

These lenders look to see if the illness may reoccur or if the divorce left huge debts to pay. Frequency of changing jobs or residences may be explainable as being “upwardly mobile” to one lender, while in the mortgage arena those items are considered major red flags of instability.

As with credit card companies, mortgage lenders are concerned with debt to income ratio and what your final numbers are. Debt to income ratio is a fancy way of comparing your monthly debt to your monthly income. When the debt is higher than a specific percentage, regardless of how great your payment history may be, your risk levels rise.

Of course, this is an oversimplification of the entire credit process. However, one important thing to remember where credit is concerned, the more you have, and the higher the risk you become. Little to no credit or bad credit can literally cripple a person’s future.

It can prevent a person from getting specific jobs, apartments, credit cards, or even insurance. Learn what yours is, how to fix or improve it, and the steps you can take to protect it. Ensure that should you decide one day you want or need more credit – you can obtain it at a rate that you can live with.