Tag: build credit

Why It’s Harder to Get Credit When You’re Self-Employed

Around 6.1% of employed Americans worked for themselves in 2019, yet the ranks of the self-employed might increase among certain professions more than others. By 2026, the U.S. Bureau of Labor Statistics projects that self-employment will rise by nearly 8%. 

Some self-employed professionals experience high pay in addition to increased flexibility. Dentists, for example, are commonly self-employed, yet they earned a median annual wage of $159,200 in 2019. Conversely, appraisers and assessors of real estate, another career where self-employment is common, earned a median annual wage of $57,010 in 2019.

Despite high pay and job security in some industries, there’s one area where self-employed workers can struggle — qualifying for credit. When you work for yourself, you might have to jump through additional hoops and provide a longer work history to get approved for a mortgage, take out a car loan, or qualify for another line of credit you need.

Why Being Self-Employed Matters to Creditors

Here’s the good news: Being self-employed doesn’t directly affect your credit score. Some lenders, however, might be leery about extending credit to self-employed applicants, particularly if you’ve been self-employed for a short time. 

When applying for a mortgage or another type of loan, lenders consider the following criteria:

  • Your income
  • Debt-to-income ratio
  • Credit score
  • Assets
  • Employment status

Generally speaking, lenders will confirm your income by looking at pay stubs and tax returns you submit. They can check your credit score with the credit bureaus by placing a hard inquiry on your credit report, and can confirm your debt-to-income ratio by comparing your income to the debt you currently owe. Lenders can also check to see what assets you have, either by receiving copies of your bank statements or other proof of assets. 

The final factor — your employment status — can be more difficult for lenders to gauge if you’re self-employed, and managing multiple clients or jobs. After all, bringing in unpredictable streams of income from multiple sources is considerably different than earning a single paycheck from one employer who pays you a salary or a set hourly rate. If your income fluctuates or your self-employment income is seasonal, this might be considered less stable and slightly risky for lenders.

That said, being honest about your employment and other information when you apply for a loan will work out better for you overall. Most lenders will ask the status of your employment in your loan application; however, your self-employed status could already be listed with the credit bureaus. Either way, being dishonest on a credit application is a surefire way to make sure you’re denied.

Extra Steps to Get Approved for Self-Employed Workers

When you apply for a mortgage and you’re self-employed, you typically have to provide more proof of a reliable income source than the average person. Lenders are looking for proof of income stability, the location and nature of your work, the strength of your business, and the long-term viability of your business. 

To prove your self-employed status won’t hurt your ability to repay your loan, you’ll have to supply the following additional information: 

  • Two years of personal tax returns
  • Two years of business tax returns
  • Documentation of your self-employed status, including a client list if asked
  • Documentation of your business status, including business insurance or a business license

Applying for another line of credit, like a credit card or a car loan, is considerably less intensive than applying for a mortgage — this is true whether you’re self-employed or not. 

Most other types of credit require you to fill out a loan application that includes your personal information, your Social Security number, information on other debt you have like a housing payment, and details on your employment status. If your credit score and income is high enough, you might get approved for other types of credit without jumping through any additional hoops.

10 Ways the Self-Employed Can Get Credit

If you work for yourself and want to make sure you qualify for the credit you need, there are plenty of steps you can take to set yourself up for success. Consider making the following moves right away.

1. Know Where Your Credit Stands

You can’t work on your credit if you don’t even know where you stand. To start the process, you should absolutely check your credit score to see whether it needs work. Fortunately, there are a few ways to check your FICO credit score online and for free. 

2. Apply With a Cosigner

If your credit score or income are insufficient to qualify for credit on your own, you can also apply for a loan with a cosigner. With a cosigner, you get the benefit of relying on their strong credit score and positive credit history to boost your chances of approval. If you choose this option, however, keep in mind that your cosigner is jointly responsible for repaying the loan, if you default. 

3. Go Straight to Your Local Bank or Credit Union

If you have a long-standing relationship with a credit union or a local bank, it already has a general understanding of how you manage money. With this trust established, it might be willing to extend you a line of credit when other lenders won’t. 

This is especially true if you’ve had a deposit account relationship with the institution for several years at minimum. Either way, it’s always a good idea to check with your existing bank or credit union when applying for a mortgage, a car loan, or another line of credit. 

4. Lower Your Debt-to-Income Ratio

Debt-to-income (DTI) ratio is an important factor lenders consider when you apply for a mortgage or another type of loan. This factor represents the amount of debt you have compared to your income, and it’s represented as a percentage.

If you have a gross income of $6,000 per month and you have fixed expenses of $3,000 per month, for example, then your DTI ratio is 50%.

A DTI ratio that’s too high might make it difficult to qualify for a mortgage or another line of credit when you’re self-employed. For mortgage qualifications, most lenders prefer to loan money to consumers with a DTI ratio of 43% or lower. 

5. Check Your Credit Report for Errors

To keep your credit in the best shape possible, check your credit reports, regularly. You can request your credit reports from all three credit bureaus once every 12 months, for free, at AnnualCreditReport.com. 

If you find errors on your credit report, take steps to dispute them right away. Correcting errors on your report can give your score the noticeable boost it needs. 

Related: How to Dispute Errors On Your Credit Report

6. Wait Until You’ve Built Self-Employed Income

You typically need two years of tax returns as a self-employed person to qualify for a mortgage, and you might not be able to qualify at all until you reach this threshold. For other types of credit, it can definitely help to wait until you’ve earned self-employment income for at least six months before you apply. 

7. Separate Business and Personal Funds

Keeping personal and business funds separate is helpful when filing your taxes, but it can also help you lessen your liability for certain debt. 

For example, let’s say that you have a large amount of personal debt. If your business is structured as a corporation or LLC and you need a business loan, separating your business funds from your personal funds might make your loan application look more favorable to lenders.

As a separate issue, start building your business credit score, which is separate from your personal credit score, early on. Setting up business bank accounts and signing up for a business credit card can help you manage both buckets of your money, separately. 

8. Grow Your Savings Fund

Having more liquid assets is a good sign from a lender’s perspective, so strive to build up your savings account and your investments. For example, open a high-yield savings account and save three to six months of expenses as an emergency fund. 

You can also open a brokerage account and start investing on a regular basis. Either strategy will help you build up your assets, which shows lenders you have a better chance of repaying your loan despite an irregular income. 

9. Provide a Larger Down Payment

Some lenders have tightened up mortgage qualification requirements, and some are even requiring a 20% down payment for home loans. You’ll also have a better chance to secure an auto loan with the best rates and terms with more money down, especially for new cars that depreciate rapidly.

Aim for 20% down on a home or a car that you’re buying. As a bonus, having a 20% down payment for your home purchase helps you avoid paying private mortgage insurance.

10. Get a Secured Loan or Credit Card

Don’t forget the steps you can take to build credit now, if your credit profile is thin or you’ve made mistakes in the past. One way to do this is applying for a secured credit card or a secured loan, both of which require collateral for you to get started.

The point of a secured credit card or loan is getting the chance to build your credit score and prove your creditworthiness as a self-employed worker, when you can’t get approved for unsecured credit. After making sufficient on-time payments toward the secured card or loan, your credit score will increase, you can upgrade to an unsecured alternative and get your deposit or collateral back.

The Bottom Line

If you’re self-employed and worried that your work status will hurt your chances at qualifying for credit, you shouldn’t be. Instead, focus your time and energy on creating a reliable self-employment income stream and building your credit score.

Once your business is established and you’ve been self-employed for several years, your work status won’t matter as heavily. Keep your income high, your DTI low, and a positive credit record, you’ll have a better chance of getting approved for credit. 

The post Why It’s Harder to Get Credit When You’re Self-Employed appeared first on Good Financial Cents®.

Source: goodfinancialcents.com

By February 3, 2021.    DIY  , , , , , , , , , , , , , , , , , , , , , , , , , , , , , , , ,  

How to Use Your Shopping Addiction to Build Credit

If you love to shop, you can use your fashion sense to build or even rebuild your credit.

Store-branded credit cards are some of the easiest cards to qualify for and are often extended to those who have bad credit because they have lower criteria than traditional credit cards. Using them, especially if you’re loyal to a particular store, can bring card rewards, discounts and, if you pay your balance off every month, better credit.

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Immediate Savings

In most cases, when you apply for a card, the retailer will offer a discount on that day’s purchase. Sometimes the discount will be extended to purchases made within a short time frame (24 hours, for example), as an incentive to spend more. The risk is that instead of saving money, you end up spending more than planned, so it’s wise to be wary.

Watch Your Credit Scores

When you open your new credit card, you may see a dip in your credit scores for two reasons: one, the inquiry created when the issuer checks your credit score, which may cause your scores to drop, though usually not more than a few points. Second, a new account with a balance is often seen as a risk factor. As long as you pay on time and keep your balances below 30% of your credit line, or ideally 10%, you could eventually see a slight rise because you’ll have a positive new credit reference, which is beneficial if you are trying to build or rebuild credit.

As you use your new card, you can track how your usage and payments are affecting your credit by signing up for Credit.com’s free credit report summary. In addition to getting two free credit scores, you’ll get your own credit report card that shows how you’re doing in five key areas on your credit report that also determine your credit score — payment history, debt usage, credit age, account mix and inquiries.

Know the APR

Interest rates for department store credit cards are almost always high, often between 19% and 22%, or more. If you carry a balance, the interest you pay will likely exceed the amount you saved with the discount. This means carrying a balance could hamper your goals, especially if you fail to make on-time payments.

Given store credit cards’ high APRs, you won’t want to go on a shopping spree with them, nor will you want to put more purchases on the card than your budget can handle. (For tips on cutting back without feeling deprived, you can go here.) That said, making a couple of small purchases a month, say, on home essentials or groceries, and paying them off quickly (and on time) will likely beef up your credit.

Before You Apply 

Before you fill out an application, you’ll want to know where your credit stands so you have a good sense of what type of card you might qualify for. Knowing your score will also inform your decision to apply for a card in general, as inquiries on your credit report can cause your score to take an unnecessary hit.

More on Credit Reports & Credit Scores:

  • The Credit.com Credit Reports Learning Center
  • What’s a Good Credit Score?
  • How to Get Your Free Annual Credit Report

Image: diego_cervo

The post How to Use Your Shopping Addiction to Build Credit appeared first on Credit.com.

Source: credit.com

By February 2, 2021.    Building Credit, Credit Card Guide  , , , , , , , , , , , , , , , , , , , ,  

Seven things college freshmen don’t need — and ten they do

This article originally appeared on NerdWalletThose ubiquitous checklists of “dorm room essentials” for college freshmen are filled with items that will be ditched by the end of first semester.

Some parents “go to the store and grab a list like they did when their kids were in elementary and high school and just go straight down the list,” says Lisa Heffernan, mother of three sons and a college-shopping veteran. Or they buy things they only wish their students will use (looking at you, cleaning products).

You can safely skip about 70% of things on those lists, estimates Asha Dornfest, the author of Parent Hacks and mother of a rising college sophomore who’s home for the summer.

What Not to Buy or Bring

Freshmen really need just two things, says Heffernan, co-founder of the blog Grown and Flown: a good mattress topper and a laptop.

Here are seven items you can skip:

  • Printer. Don’t waste desk space or, worse, store it under the bed; printers are plentiful on campus.
  • TV. Students may watch on laptops or on TVs in common areas or in someone else’s room. Bonus: Your teen gets out and meets others.
  • Speakers. Small spaces don’t require powerful speakers; earphones may be a good idea and respectful of roommates.
  • Car. Some colleges bar freshmen from having cars on campus or limit their parking. You also may save on insurance by keeping the car at home.
  • Luggage. If you bring it, you must store it. Heffernan suggests collapsible blue Ikea storage bags with zippers.
  • Toiletries to last until May. Bulk buying may save money, but you need storage space.
  • Duplicates of anything provided by the college, such as a lamp, wastebasket, desk chair or dresser.

Items left behind when students pack for the summer are telling. Luke Jones, director of housing and residence life at Boise State University, sees unopened food — a lot of ramen and candy — and stuffed animals and mirrors.

Jones says many students regret bringing high school T-shirts and memorabilia and some of their clothes (dorm closets typically are tiny).

What Can You Buy, Then?

Before you shop, find out what the college forbids (candles, space heaters, electric blankets and halogen lights are common). Have your student check with assigned roommates about appliances (who’s bringing a fridge or microwave?) and color scheme if they want to set one. Know the dimensions of the room and the size of the bed. And most of all, know your budget. Not everything has to be brand new.

Ten things — besides the all-important mattress topper and laptop — that many students consider dorm room essentials include:

  • One or two fitted sheets in the correct bed size, plus pillowcases. Heffernan says most students don’t use top sheets.
  • Comforter or duvet with washable cover.
  • Towels in a distinctive pattern or light enough for labeling with laundry marker, plus shower sandals.
  • Power cord with surge protector and USB ports.
  • Basic first aid kit.
  • Easy-to-use storage. If it’s a lot of work to get something out, your student won’t, Heffernan says.
  • Cleaning wipes. Students might not touch products that require multiple steps, but they might use wipes, according to Heffernan.
  • Reading pillow with back support for studying in bed.
  • Area rug. Floors are often hard and cold.
  • Comfort items. Dornfest says it could be a blanket or a picture of the dog — something from home that will make the space a bit more personal.

Afraid you’ll forget something important? You might, Heffernan says. But chances are, you or your student can order it online and get it delivered. Consider doing this with some items simply to avoid the hassle of bringing them yourself, and remember that “dorm necessities” often go on sale once school starts.

Do a Reality Check

If you or your student still want to replicate the rooms you’ve seen on Instagram and Pinterest, think about how the room will actually be used.

Once your son or daughter moves in, the room will never look like that again. Opt for sturdy items and be realistic. Will throw pillows make the place look more homey and inviting, or will they be tossed on the floor until parents’ weekend?

Dornfest, a co-host of the Edit Your Life podcast, offers a compelling reason not to make things too comfortable. “A freshman needs to be encouraged to get out of the dorm room,” she says. “Anything that pulls you into campus life can be good.”

She’s not advocating a monk-like environment, but rather one that encourages breaking out of routines. College should be a time to try new things and meet people from different backgrounds. Dornfest advises making the bed as comfortable as possible and keeping a few reminders of home. The ideal dorm room is more launch pad than cocoon.

More from Nerdwallet

  • Budgeting for College Students
  • How to Build Credit at 18
  • How to Choose a Student Credit Card

The article 7 Things College Freshmen Don’t Need — and 10 They Do originally appeared on NerdWallet.

Source: getrichslowly.org

By January 19, 2021.    College, Education, Market News  , , , , , , , , , , , , , , , , , , , , , ,  

How Many Credit Cards Should You Have for Good Credit?

Have you ever wondered, "How many credit cards should I have? Is it wise to have a wallet full of them? Does having multiple credit cards hurt my credit score?"

If you’ve been following this blog or the Money Girl podcast, you know the fantastic benefits of having excellent credit. The higher your credit scores, the more money you save on various products and services such as credit cards, lines of credit, car loans, mortgages, and insurance (in most states).

Even if you never borrow money, your credit affects other areas of your financial life.

But even if you never borrow money, your credit affects other areas of your financial life. For instance, having poor credit may cause you to get turned down by a prospective employer or a landlord. It could also increase the security deposits you must pay on utilities such as power, cable, and mobile plans.

Credit cards are one of the best financial tools available to build or maintain excellent credit scores. Today, I'll help you understand how cards boost your credit and the how many credit cards you should have to improve your finances.

Before we answer the question of how many credit cards you should have in your wallet, it's important to talk about using them responsibly so you're increasing instead of tanking your credit score.

5 tips for using credit cards to build credit

  1. Make payments on time (even just the minimum)
  2. Don’t rely on being an authorized user
  3. Never max out cards
  4. Use multiple cards
  5. Keep credit cards active

A common misconception about credit is that if you have no debt you must have good credit. That’s utterly false because having no credit is the same as having bad credit. To have good credit, you must have credit accounts and use them responsibly.

Having no credit is the same as having bad credit.

Here are five tips for using credit cards to build and maintain excellent credit scores.

1. Make payments on time (even just the minimum)

Making timely payments on credit accounts is the most critical factor for your credit scores. Your payment history carries the most weight because it’s an excellent indicator of your financial responsibility and ability to pay what you owe.

Having a credit card allows you to demonstrate your creditworthiness by merely making payments on time, even if you can only pay the minimum. If the card company receives your payment by the statement due date, that builds a history of positive data on your credit reports. 

I recommend paying more than your card’s minimum. Ideally, you should pay off your entire balance every month so you don’t accrue interest charges. If you tend to carry a balance from month-to-month, it’s wise to use a low-interest credit card to reduce the financing charge.

2. Don’t rely on being an authorized user

Many people start using a credit card by becoming an authorized user on someone else’s account, such as a parent’s card. That allows you to use a card without being legally responsible for the debt.

Some credit scoring models ignore data that doesn’t belong to a primary card owner.

Some card companies report a card owner’s transactions to an authorized user’s credit report. That could be an excellent first step for establishing credit … if the card owner makes payments on time. Even so, some credit scoring models ignore data that doesn’t belong to a primary card owner.

Therefore, don’t assume that being an authorized user is a rock-solid approach to building credit. I recommend that you get your own credit cards as soon as you earn income and get approved.

3. Never max out cards

A critical factor that affects your credit scores is how much debt you owe on revolving accounts (such as credit cards and lines of credit) compared to your total available credit limits. It's known as your credit utilization ratio, which gets calculated per account and on your accounts' aggregate total.

A good rule of thumb to improve your credit scores is to keep your utilization ratio below 20%.

Having a low utilization ratio shows that you use credit responsibly by not maxing out your account. A high ratio indicates that you use a lot of credit and could even be in danger of missing a payment soon. A good rule of thumb to improve your credit scores is to keep your utilization ratio below 20%. 

For example, if you have a $1,000 card balance and a $5,000 credit limit, you have a 20% credit utilization ratio. The formula is $1,000 balance / $5,000 credit limit = 0.2 = 20%.

There's a common misconception that it's okay to max out a credit card if you pay it off each month. While paying off your card in full is smart to avoid interest charges, it doesn't guarantee a low utilization ratio. The date your credit card account balance is reported to the nationwide credit agencies typically isn't the same as your statement due date. If your outstanding balance happens to be high on the date it's reported, you'll have a high utilization ratio that will drag down your credit scores.

4. Use multiple cards

If you need more available credit to cut your utilization ratio, there are some easy solutions. One is to apply for an additional credit card, so you spread out charges on multiple cards instead of consistently maxing out one card. That reduces your credit utilization and boosts your credit.

Having the same amount of debt compared to more available credit instantly reduces your utilization and improves your credit.

For example, if you have two credit cards with $500 balances and $5,000 credit limits, you have a 10% credit utilization ratio. The formula is $1,000 balance / $10,000 credit limit = 0.1 = 10%. That’s half the ratio of my previous example for one card.

Another strategy to cut your utilization ratio is to request credit limit increases on one or more of your cards. Having the same amount of debt compared to more available credit instantly reduces your utilization and improves your credit.

5. Keep credit cards active

Credit card companies are in business to make a profit. If you don't use a card for an extended period, they can close your account or cut your credit limit. You may not mind having a card canceled if you haven't been using it, but as I mentioned, a reduction in your credit limit means danger for your credit scores.

A reduction in your credit limit means danger for your credit scores.

No matter if you or a card company cancels one of your revolving credit accounts, it causes your total amount of available credit to shrink, which spikes your utilization ratio. When your utilization goes up, your credit scores can plummet.

Anytime your credit card balances become a higher percentage of your total credit limits, you appear riskier to creditors, even if you aren't. So, keep your cards open and active, especially if you're considering a big purchase, such as a home or car, in the next six months.

In general, I recommend that you charge something small and pay it off in full several times a year, such as once a quarter, to stay active and keep your available credit limit in place.

If you have a card that you don't like because it charges an annual fee or a high APR, don't be afraid to cancel it. Just replace it with another card, ideally before you cancel the first one. That allows you to swap out one credit limit for another and avoid a significant increase in your credit utilization ratio.

If you're determined to have fewer cards, space out your cancellations over time, such as six months or more. 

How many credit cards should you have to build good credit?

Now that you understand how credit cards help you build credit, let's consider how many you need. The optimal number for you depends on various factions, such as how much you charge each month, whether you use rewards, and how responsible you are with credit.

There's no limit to the number of cards you can or should have if you manage all of them responsibly.

According to Experian, 61% of Americans have at least one credit card, and the average person owns four. Having more open revolving credit accounts makes you more likely to have higher credit scores, but only when you manage them responsibly. 

As I mentioned, having more available credit compared to your balances on revolving accounts is a crucial factor in your credit scores. If you continually bump up against a 20% utilization ratio, you likely need an additional card.

You can keep an eye on your credit utilization and other important credit factors with free credit reporting tools such as Credit Karma or Experian.

Also, consider how different credit cards can help you achieve financial goals, such as saving money on everyday purchases you're already making. Many retailers, big box stores, and brands have cards that reward your loyalty with discounts, promotions, and additional services.

If you continually bump up against a 20% utilization ratio, you likely need an additional card.

I use multiple cards based on their benefits and rewards. For instance, I only use my Amazon card to get 5% cashback on Amazon purchases. I have a card with no foreign transaction fees that I use when traveling overseas. And I have a low-interest card that I only use if I plan to carry a balance on a large purchase for a short period.

There's no limit to the number of cards you can or should have. Theoretically, you could have 50 credit cards and still have excellent credit if you manage all of them responsibly.

My recommendation is to have a minimum of two cards so you have a backup if something goes wrong with one of them. Beyond that, have as many as you're comfortable managing and that you believe will benefit your financial life.

Source: quickanddirtytips.com

By January 19, 2021.      , , , , , , , , , , , , , , , , , , , , , ,  

Should You Get Another Credit Card? What to Consider

A woman looks at her laptop computer with a thoughtful look on her face.

Credit cards play a significant role in your financial life—from establishing credit and determining your buying power to potentially being a financial lifeline during times of crisis.

Before you add another credit card to your wallet, you should consider your buying habits and financial strategies. The answers to the following five questions may help you decide if another credit card is right for you.

New Cardholder? Wait a Year

If you’re a new cardholder, try holding off for one year before applying for another credit card. It can take six months to a year for your card usage to affect your credit score.

Without an established credit history, it may be difficult to get lenders to extend you credit. A short credit history can also impact your interest rates, keeping them higher than desirable. If you’ve had your credit card for less than a year, getting a new one may not be the best choice right now.

What to Do

Be patient. Use your current credit card on a regular basis and pay on time and in full each month. Your payment history is the largest factor that determines your credit score. When you do apply for a second credit card, the lending company will see how responsible you’ve been. They will then be more likely to extend you credit with a lower interest rate.

Trying to Build Credit? One Card May Be Enough

If you want another card because you’re trying to build your credit, one card may be enough. The most important part of building credit is using your existing accounts wisely—not adding more. Two cards could improve your credit utilization ratio, as long as you don’t rack up debt on either card. And if you don’t plan on actually using your second card, keep in mind that some credit card companies have a policy of canceling credit cards due to inactivity—and a canceled credit card can cause your credit score to take a dip.

What to Do

Instead of getting a second card, focus on using your current cards more effectively. Pay your balances on time and in full to help improve your credit score. If you’re ready to open a new type of account to increase your account mix, consider a small personal loan.

Already Have Multiple Cards? Review Your Payments

It may be tempting to have more spending power at your disposal, but before you apply for another credit card, make sure you can financially handle it. Examine how you’re currently managing your credit cards.

Are you struggling to pay the minimum each month? Are you unable to make payments on time? If you answer “yes” to either of these questions, it’s probably not a good idea to apply for another card right now.

What to Do

If you’re already having a hard time paying your credit card bills, ask yourself why you think you should get another credit card. Is it because you’ve already maxed out the cards you have in use? Don’t open yourself up to more debt by opening another line of credit.

Instead, develop a plan to lower your current credit card balances and create a budget to help organize and control your spending. A balance transfer credit card may be a solution if you’re looking to consolidate your debt into one, easy-to-track payment plan.

TD Cash Credit Card

Apply Now

on TD Bank’s secure website

Card Details
Intro Apr:
0% Introductory APR for 6 months on purchases

Ongoing Apr:
12.99%, 17.99% or 22.99% (Variable)

Balance Transfer:
0% Introductory APR for 15 months on balance transfers

Annual Fee:
$0

Credit Needed:
Excellent-Good

Snapshot of Card Features
  • Earn $150 Cash Back when you spend $500 within 90 days after account opening
  • Earn 3% Cash Back on dining
  • Earn 2% Cash Back at grocery stores
  • Earn 1% Cash Back on all other eligible purchases
  • $0 Annual Fee
  • Visa Zero Liability
  • Instant credit card replacement
  • Digital Wallet
  • Contactless Payments

Card Details +

Running a Balance? Check the Interest Rates

Carrying a balance from month to month can affect your credit score by increasing your utilization rate. It can also put a big dent in your wallet depending on your interest rates. If you regularly make your monthly minimum payments but keep a balance, it could be beneficial to get a new card with lower rates—as long as you can use it responsibly. If you want to keep your old card active, split the same amount of spending between the two cards, rather than doubling your spending, and your utilization rates and fees could go down.

What to Do

Check the interest rates on your current card. If you’ve been keeping up with your payments and your overall credit score is good, you could qualify for a better interest rate to replace this one with. While some credit cards may hit everything on your perk and benefit checklist, if the interest rate is too high, skip it. Look for credit cards with low interest rates that will be sustainable for long-term use.

Got Excellent Credit? Try a Rewards Credit Card

If you have established excellent credit, you may be receiving offers from a variety of credit card companies. If you know that you can financially handle another credit card and are looking to take advantage of the many perks and rewards available, you may want to consider applying for another credit card.

What to Do

Before you move forward, do your research on each one. Don’t get taken in by flashy offers that won’t benefit you in the long run. The best perks and rewards are the ones that suit your lifestyle. Decide which are most important to you and would give you the most bang for your buck.

Chase Sapphire Preferred® Card

Apply Now

on Chase’s secure website

Card Details
Intro Apr:
N/A

Ongoing Apr:
15.99% – 22.99% Variable

Balance Transfer:
15.99% – 22.99% Variable

Annual Fee:
$95

Credit Needed:
Excellent-Good

Snapshot of Card Features
  • Earn 60,000 bonus points after you spend $4,000 on purchases in the first 3 months from account opening. That’s $750 toward travel when you redeem through Chase Ultimate Rewards®
  • 2X points on dining at restaurants including eligible delivery services, takeout and dining out and travel & 1 point per dollar spent on all other purchases.
  • Get 25% more value when you redeem for travel through Chase Ultimate Rewards®. For example, 60,000 points are worth $750 toward travel.

Card Details +

Ready to Apply? Go for It

Once you’ve learned how your charging and payment habits can affect your credit score, you can determine if and when the time is right for you to get another credit card. Our Credit Card Finder makes it easy to find the best card for your needs.

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By January 19, 2021.    Credit Cards  , , , , , , , , , , , , , , , , ,  

The Best Things to Charge on Your Credit Card When You’re Rebuilding Credit

Charging a few small, easy-to-pay-off items to your card each month can help you rebuild credit.

If your credit needs rehabilitation due to late payments, accounts in collections or other negative items, it might be time to rebuild. Rebuilding your credit requires an understanding of your current situation, identifying past mistakes and implementing the right strategies going forward.

Wise use of a credit card is one way to start. Surprising, right? But if you use that plastic correctly, it really can help you. Good credit card strategies include keeping a low balance, making payments on time and paying your balance in full each month. To do that, it’s best to start small and only charge things that won’t kill your credit building project before it takes off. (You can check on your progress with a free credit report snapshot on Credit.com.)

Here are a few things you can charge on your credit card to help you boost that score.

Gas

The cost of gas can add up, but if you already have room for gas in your monthly budget, you can charge your gas expenses and pay them off in full using the funds in your bank account. Some credit cards offer special cash back rates on gas purchases so you can earn a little money back in your wallet (although getting a new unsecured credit card might not be the best move for you at this stage as the inquiry will cause your score to take even more of a hit).

Groceries

Groceries are another staple you likely already have built into your budget. Instead of handing over cash or a check when you pick up the necessities for the week, charge your groceries to your credit card and pay those purchases off in full each month. There are several credit cards on the market that offer special cash-back rates on groceries, as well.

Streaming Services

Monthly streaming services usually cost less than $20 a month. You could conceivably set up your credit card to pay for a streaming service, pay it off in full each month and never use it for anything else.

Balance Transfers

If you have a large balance on a high-interest credit card, it could be damaging your credit score and affecting your ability to make your payment. If you have a lower interest credit card, you can transfer the balance and reduce the interest. If you can qualify, a card with a long 0% intro APR period can help you pay your balance off interest-free.

(Cheap) Dining & Recreation

It’s probably not a good idea to use your credit cards at the club or restaurants, as it’s easy for costs to spiral out of control. But if you’re on a date at the movies or taking the kids out for mini golf and milkshakes, low-cost dining and recreation purchases might be a safe bet.

Small Everyday Expenses

Sometimes you have to run into a local store for a roll of duct tape or some socks. Small everyday purchases can be fairly easy to pay off in full.

Using Your Credit Card Wisely to Build Credit

For the most part, small purchases you can afford to pay off each time the statement arrives are the best things to put on your credit card, as payment history is the biggest influencer of your credit scores. Plus, carrying a balance means you’ll be hit with interest and it will take you longer to pay down your balance.

But even relatively small purchases can threaten your credit if they pile up too quickly. (Credit experts recommend keeping your credit utilization ratio — that is, your amount of debt in relation to your credit limit — at 30%, ideally 10%.) So, a good practice is to treat your credit card like cash and only purchase things you can cover with available funds.

Have any questions about improving your credit? Ask us in the comments below and one of our credit experts will do their best to help.

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The post The Best Things to Charge on Your Credit Card When You’re Rebuilding Credit appeared first on Credit.com.

Source: credit.com

By January 18, 2021.    Building Credit, Credit Card Guide  , , , , ,