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How your student loans affect your credit score

How Student Loans Affect Credit Scores

isotretinoin online pharmacy (Dallas, TX – National Credit Solutions) It’s a fear that most recent grads have: how will my thousands of dollars in student loans affect my credit score?

The fact is, student loans are loans: they can be beneficial to your credit score if you pay them off on time, or they can be harmful if you don’t.

According to FICO, a student loan is treated like an installment loan (mortgage or car note). The good news is that most credit bureaus treat installment loans differently than revolving credit; they look more at your revolving credit (such as how you pay off your credit card bills) than at your installment loans.

The second piece of good news is that student loan deference of forbearance will not hurt your credit score. Deferment or forbearance allow you to put your student loans on hold, whether because you lost a job or suffered another economic hardship. You can defer these payments anywhere from a couple months to a couple of years without damaging your credit score. Student Loans

Many people are under the impression that student loans can only harm their credit score. This is far from true, however, as student loans help you establish credit history – an essential step in building good credit. Your credit scores can actually improve because of your student loans, as you now have an installment loan on your credit resume, and this adds to the diversity of your credit history. The more types of credit you have, the better your score will be (provided you pay off your debts on time).

Some people may decide they want to pay their student loan off as quick as possible, so they don’t have that weight hanging over them. There are so many resources on loan forgiveness for students who are in this position. However, you do need to think about your loan in a positive way. Although you may have accrued thousands of dollars in student loans, remember that you used this money as an investment in your future. Instead of stacking up debt with superfluous credit card charges, you built up a “good” type of debt. While your credit score does not reflect this “good credit”, individual banks often take this into consideration when deciding whether or not to give you a loan. Since you took out these loans for a productive purpose, most banks view student loans in a positive light.

So despite what most people assume, student loans can actually help your credit score. As long as you make your payments on time (unless, of course, you need to defer your loans for a short period of time), your credit will thank you for taking out those student loans and furthering your education. Not only can pursuing higher education give you a leg up in the job market, but it can also give your credit score a helpful boost that will help you down the road.

Millennials Are the Worst at Managing Debt

Millennials Are the Worst at Managing Debt

Millennials Are the Worst at Managing Debt

here (Dallas, TX-National-Credit-Solutions) Millennials have had a rough entry into adulthood: not only have they struggled to find entry-level jobs in a tough economy, but they are also the worst at managing their debt.

Most Millennials (ages 19-29) have piles of student loans to pay off, shaky job prospects, and a poor understanding of how to properly manage their credit. Experian’s “State of Credit” study found that the average credit score of Millennials is shockingly low: 628.

This low number is surprising, considering that Millennials own an average of only 1.5 credit cards and carry an average balance of $2,700. While other generations have higher balances than these Millennials (the national credit card balance average for people 30-65 is $5,300), this younger generation has little knowledge of how to properly manage its debt.

Although Gen-X and Millennials are just as likely to make late payments or max out their credit cards, Gen-X has more assets and longer credit histories than the Millennials, which means that their credit scores do not suffer like those of Millennials.

Experian’s study also showed that Millennials are the most hesitant generation to accept loans, which is largely due to the unstable economy and the poor job market for young adults. Yet despite the fact that more young adults are avoiding borrowing money, their generation still finds itself burdened with debt and at a loss of good debt-management skills.

It seems as though many Millennials were never taught how to properly build credit or how to manage their debt so as not to damage their credit score. So if you are one of the millions of Millennials struggling with debt, here are three ways you can improve your credit score:

1) Get a Credit Card

More and more Millennials are avoiding credit cards, perhaps because they fear they won’t be able to control their spending habits. However, since you need credit history to have a credit score, it is essential for young adults to have a credit card. Even if you only charge a small amount to your credit card every month, you are still building good credit!

2) Pay your bills on time

This one might seem obvious, but many young adults are juggling new careers, student loans, car loans, and rent, so many of them decide that making a late payment now and then is acceptable. Unfortunately, this is not the case. Since Millennials have a short credit history and few assets, it is important that you pay your bills on time. Start budgeting your money to ensure that you can make your payments every month.

3) Choose transportation wisely

Don’t splurge on that expensive SUV that will eat away at your bank account. Instead, find a reasonable, affordable car or rely on public transportation. This will help you save money so that you can pay off your bills on time and keep your credit score strong.

Although Millennials are facing a tough job market and are wary of borrowing money, it is important for them to learn how to manage their debt more effectively in order to improve their credit scores.

Smart Credit Decisions for Entrepreneurs – Business Credit

Smart Credit Decisions for Entrepreneurs – Business Credit

Smart Credit Decisions for Entrepreneurs

click (Dallas, TX-National-Credit-Solutions) Without inventive young entrepreneurs, we would have no iPhone, no Facebook, no Starbucks, and no Disneyland. Thankfully, bright young thinkers still continue to take risks and dream big, but many of the most creative entrepreneurs still have trouble funding their startups. Here is a look at how entrepreneurs can make smarter credit decisions that will help them transform their ideas into reality:


1) Open a business credit card

Many entrepreneurs do not have a long credit history, which can be problematic when applying for small business loans. However, it is crucial to start building good credit as soon as possible to further your business. Once you have enough personal credit history to open a business credit card, create a separate account for your business so that you can start funding it with credit.

2) Don’t mix business with your personal life

While there are a few success stories where entrepreneurs have used their personal credit cards to build their business, this often causes more problems than not. Separating your personal finances from your business finances can save you a great deal of stress and endless headaches.

3) Create a cash reserve

It is a good idea to build a cash reserve in case of emergencies. Entrepreneurs often hit snags in their plans, and many have to fail a couple of times before they succeed. Don’t let this deter you from pursuing your ideas, though, just consider setting aside a certain amount of cash each month in case you run into a rough spot. This cash can help bail you out of debt that could (if left unpaid) wreck your credit score.

4) Be aware of your debt-to-income ratio

While ambition is one of the most admirable qualities of entrepreneurs, it can also lead them into tumultuous financial situations. Instead of being overly ambitious and optimistic about your new business, play it a little safer so as not to max out your credit cards and become burdened with debt. Keep your debt-to-income ratio low to avoid sinking your business.

Entrepreneurs need to maintain a good financial record for various reasons: to appeal to potential partners, to obtain a loan for business expenses, to start another business, and to attract investors. It’s no secret that entrepreneurship requires risk, but it also requires attentive financial maintenance and smart credit decisions.

5) Know what’s on your Dunn & Bradstreet report

Do you know how potential creditors view your business credit?  If not, it may be time to check your D&B report.  Dun & Bradstreet has a huge database of more than 140 million business records.  Similar to the Credit Report Agencies, Experian, Equifax and TransUnion, D&B is a data furnisher that is used by potential investors, lenders and business owners to determine the credit-worthiness of a business.  If you are the owner or authorized business agent of a business, you can obtain a Dun & Bradstreet Report and Score online for free.

The credit card companies find new ways to make lemonade, part 2

Part 2 of 2

Banks are evil

How to protect yourself.

  • Keep in mind the interest rate increases won’t affect you if you’re not carrying large balances.  Going from 9.99% to 14.99% isn’t going to really impact your wallet if you’re already living within your means rather than living on credit.
    • Be aware of the fine print on your credit cards.  If you know that the new card with the 0% introductory rate for the first 12 months is going to instantly jump to 24.99% if you’re even a day late during that time frame, you’ll probably be a little more careful about making sure the payment is sent on time.
    • Pick cards with lower long term rates rather than teaser rates that expire and then go up.  The longer you have a card the better it is for your credit score, so you want cards that will still be useful to you 2 or 3 years down the road.
    • Read the mail you get from your credit card issuers.  I too have been guilty in the past of just finding the payment due and ignoring the rest of the information stuffed in the envelope, and I’ve been burned by it.  The banks are notorious for slipping in information about rate changes or changes in your terms of service.  Stay informed, that way you’ll be able to change your spending habits before the card goes to 99.99% next month.
    • Cash advances…  just don’t do it.  The interest charged on cash advances is always significantly higher than the rate charged on regular purchases, and to add insult to injury, when you pay your bill each month the credit card companies are going to apply your payment to your normal purchases, not the higher interest cash advance balance, first.
    • This one may be obvious, but PAY ON TIME.  Don’t count on the postal service to get the payment to the bank in a timely manner, send the payment early to be safe.  Remember that until the new laws are being enforced you’re still subject to universal default, so that one late payment could cause the interest rates to go up on all your cards.
    • Along with the obvious pay on time, there’s also stay under your credit limit.  Over limit fees and the increased interest rates are only getting worse and worse, so do your best to avoid them completely.
    • Pay in full to avoid interest.  Credit cards should be used as a convenience, not a replacement for income, so if you’re spending within your means this should be easy to do.  If you’re not living within your means, it’s time to draw up a reasonable budget and figure out what it’s going to take to get your finances in check.
    • If you find yourself using your cards more than you should just to make ends meet, don’t be afraid to ask for help.  Feel free to give our experts a call at 1-888-WHY-FICO.  We can give you the unbiased advice based on our experience that will help you get on track.

The credit card companies find new ways to make lemonade

Part 1 of 2

Banks are evilI’ve spoken a lot recently about what credit card issuers are doing before the Credit Card Reform Act goes into effect next February. They’re justifying their practices by saying that their revenues are suffering with the ever increasing unemployment and default rates. Sadly their solution is to penalize the paying customers. Here’s a list of specific things to watch out for in handy “10 things to watch out for” format.

• Increasing interest rates. The phrase of the day with the card issuers seems to be “any time any reason” price changes. This isn’t just happening to sub-prime customers either. One of the major banks just raised the interest rate on their low risk prime cards to 29.99%. Interest rates like this have been ridiculous in the past even on sub-prime cards. Rates for sub-prime cards are even worse.

• Penalty rates are going up. Those are the rates that are put in place if you’re late, go over your limit, etc.

• “Unprofitable” accounts are being shut down or getting their limits reduced. In other words, people that pay their cards off each month, denying the card issuers interest and penalty fees, are being closed down. The issuers want to keep the people that carry balances and are late here and there.

• Cash advance and balance transfer fees are skyrocketing to all time highs. The days of no cost, 0% interest balance transfers are long gone, and those “convenience” checks are going to significantly increase the real cost of your purchases.

• Annual fees are being added and increased. Last year less than 20% of credit cards had annual fees, but it’s predicted that by February nearly all credit cards from the big banks will have them. The cards that already had annual fees are seeing them doubled, tripled, even quadrupled.

• Fixed rates are being changed to variable rates. In the past with fixed rates meant that if the prime interest rate went up your rates remained the same, decreasing the profits of the banks, but now if the historically low prime interest rate goes up (which it will since it can’t really get any lower), your rate will go up. If prime is 3% and your rate is prime +24.99%, and prime goes to 6% your rate goes to 27.99% instead of staying at 24.99%. Oh, and the best part, there’s no provision for the rates to go back down. So if prime goes back to 3%, your interest rate doesn’t go back to 24.99%.

• The banks are changing the terms of their special fees to make them all inclusive. For example, banks charge a special fee for “international transactions” in other forms of currency, but they’re changing the terms so those fees apply even when the transaction is still in American greenbacks.

• They’re making rewards an endangered species. Cash back rewards are being lowered or eliminated while things like airline miles are getting tougher restrictions making it harder, if not impossible, for people to use them.

• The banks are getting creative and creating new fees in addition to the old ones. Not using your card? Here’s an inactivity fee. Not using it enough? Have a low activity fee.

• The banks are closing cards with no notice. That’s means you might not even know until you go to use the card and your transaction is embarrassingly declined.

I’ll follow this up tomorrow with some suggestions on how to protect yourself.

Credit Unions & Big Banks

With the meteoric rise in credit card interest rates and the plummeting credit limits I often wonder why more people don’t turn to credit unions for their credit needs. There was a time when going through the big banks for credit cards made a lot of sense—back when they’d offer no interest on balance transfers for 12 months or more, or when their incentive programs were actually a savings compared to their rates. Those days are long gone though as the big banks offer less and less attractive rates and incentives by the day.

The advantage to credit unions is that they are, technically, nonprofits run by their members. This means they can offer interest rates and fee schedules far below those offered by the big banks (you know, the for profit ones). Many might contend that credit unions have membership limitations, such as you have to work for a certain company or live within a certain geographical area. In my experience, and I’m speaking as someone who has dealt exclusively with credit unions since I opened my first passbook savings account over 2 decades ago, the membership limitations they have always contain loopholes. If you go in and tell them you want to open an account, they’ll find a way. They’ve earned my loyalty over the years, and I’m not speaking of any one particular credit union because I have opened accounts at 6 different ones due to relocations, because they have universally offered me better interest rates on car loans, home loans, checking accounts, lines of credit, and credit cards. In addition they have just plain treated me better, like a valued customer and not just a number.

I found a chart in a recent Pew Report that shows clearly the differences in rates between the big banks and your average credit union. Look it over and keep them in mind if you’re looking to minimize the amount you pay in interest, fees, and penalties.

Banks versus CUs