Blog
6 Major Credit Card Mistakes
Are you having trouble getting your credit card balances under control? If so, don’t beat yourself up over it – you’re in the same boat as thousands of other consumers. Once you choose to change you spending habits, however, it is possible to make your debt manageable.
Use these simple tips to stop adding to your existing credit card debt and start regaining control of your finances.
Pay More Than the Minimum Balance
It’s tempting to send in the minimum monthly payment (often $15 to $25) when you’re under financial duress.
Don’t do it.
Not only will you never pay off your bill, but the interest rates that credit card companies charge will actually keep your bill growing every month. Instead, send as large of a payment as you can afford to. Where possible, reduce your spending in other areas to focus on paying off your credit card debt. It might be worth going without extras like cable television or new clothes for a while if it means you can sleep easier at night knowing that you’ll soon be free of debt.
It may not feel like you’re saving money when you increase your credit card payments, but you are. Depending on your interest rate, you’re saving an average of 10-29% per year in interest on any balance that you manage to get off your cards. That means that if you pay off an extra $1,000 this year, you’re actually coming out $160 to $290 ahead, depending on your interest rate. If you’re already in debt, chances are money is tight for you, so freeing up this extra money can really start to give you some breathing room in the long run. Whether you use this money to accelerate your debt payments further, start an emergency fund, or invest in your retirement, the power of compound interest will start working for you instead of against you.
Don’t Use Your Credit Card for Everyday Items
Except in extenuating circumstances, you should have your budget under control enough that you can at least pay for your monthly necessities with your monthly income. By keeping required purchases like groceries and utility bills off of your credit card, you’ll be taking a major step in the right direction to getting your spending under control. Consider that a $3 bottle of milk purchased with a credit card can quickly turn into a $30 bottle of milk if you don’t pay off the balance at the end of the month. There’s no need to incur interest charges on necessary items that you should be paying for with your monthly income.
Be Wary of Credit Card “Rewards”
The rewards you can earn from credit cards, while a nice perk, are worth far less than the extra interest you’ll accrue if you can’t pay off the money you spend to earn such bonuses. The credit card reward schemes that allow you to earn points on your credit card purchases often come out to a reward of 2% or less. For example, you may receive one point for each dollar that you spend, but you must redeem 5,000 points to get a $100 discount on a plane ticket. Because the amount of interest that is charged on outstanding account balances exceeds the 2% bonus that you received, it may not be worthwhile to incur the interest charges for such a small reward.
You should also avoid signing up for multiple credit cards, regardless of the sign-up bonuses they may offer. If you already know that you don’t manage credit cards well, don’t give yourself more temptation in the form of more cards. It’s also easier to miss a payment deadline when you have more cards than you can comfortably keep track of, and a few $39 late fees or interest payments will quickly obliterate any $100 gift card you may have received when you applied.
Once you have your credit card debt paid off, if you understand how your cards work and you trust yourself to not go into debt again, you can start using credit cards as convenience cards. As long as you pay your balance in full and on time each month, there is nothing wrong with using credit cards to avoid carrying around cash or to take advantage of rewards like frequent flier miles – as long as your purchases fit within your monthly budget, of course.
Say “No” to Cash Advances
The main reason why taking a cash advance is such a bad idea is that you start accruing interest the minute you take the advance – unlike with regular credit card purchases, there is often no grace period. You’re also charged an automatic fee, usually around 2-4%, on the amount of the cash advance in addition to a higher interest rate than what you’re paying on the rest of your credit card balance. To add insult to injury, the credit card company often won’t consider the cash advance to be paid off until you’ve paid off your balance for your other purchases.
Many credit cards will also send you a pin number shortly after you sign up for a card so that you can use your credit card to get cash from an ATM. Shred that pin number, too – cash advances are a terrible deal for consumers.
Don’t Ignore Your Debt
Some people become so stressed out or embarrassed by their credit card debt that they simply stop opening their bills and pretend that the problem isn’t there. While this tactic may appear to work for a month or two, it’s a bad approach because while you’re ignoring your bills, interest rates are causing the balance you owe to grow every day. In fact, if you miss a payment or two, the interest rate itself may even increase under the terms of your credit card agreement. Not paying your bills on time also has a detrimental effect on your credit score.
If you’re feeling overwhelmed, you can call each of your credit cards and ask to renegotiate the terms of your agreement. Sometimes you can get your interest rate lowered, set up a payment plan that will allow you to pay off your debt, or even get some of your debt forgiven, all with a simple phone call. If your first call doesn’t work, remember that just because one person says no doesn’t mean that’s the final answer. Keep calling the company back – you’ll get a different customer service rep almost every time, and talking to different people may allow you to negotiate a better deal.
Ignoring your debt can also spur debt collectors into action, and you definitely don’t want to do anything that might put you on their radar. Finally, don’t let embarrassment prevent you from taking action; you might assume that most people you know have their finances under control, but some of them probably have at least as much debt as you do.
Conclusion
Cleaning up your credit card debt takes time and self control, but the steps outlined here aren’t difficult. There’s no reason that credit cards can’t be a helpful, convenient tool – assuming you can learn to use them sensibly and responsibly. These tips will help you keep control of your cards instead of letting them control you.
Source: Investopedia
We Are Credit Repair Experts
We Fix Credit is the unrivaled leader in the credit restoration, credit repair industry with unmatched service. We have raised the industry standards by creating the first pro-active and interactive process ever offered!
With industry leading automation and digital processing, We Fix Credit service leads to removal and correction of thousands of adverse listings on the credit reports of our clients each and every month……
We Fix Credit is a personal credit repair service helping individuals get a Fresh Start. In the last two years, more than 20% of the population have fallen into the category of having bad credit  which can keep them from purchasing a home, buying a car, and even obtaining a credit card.
Your credit report can be the most important data record in your life. A Clean credit report can lead to savings of hundreds of thousands of dollars over the life of a mortgage. In addition, an adverse credit report can set you back from obtaining your short to midterm financial goals.
Sometimes, though, life can get a little out of hand and you may fall behind in bills, run up a lot of debt or make other mistakes that can ruin your credit report. A default will raise your interest rates and make it even more difficult to catch up. That is where we come in.
We offer a professional service and work to clear your credit report  so you can recover and save thousands to hundreds of thousands on your mortgage, credit cards and more.
Are Credit Report Disputes Pointless?
Credit report disputes are one of the most common credit repair strategies. By law, you’re entitled to an accurate report and you have the right to dispute information you believe to be inaccurate, incomplete, or misleading. Credit Reporting Agencies have to remove this type of information from your credit report after an investigation proves your dispute to be accurate.
Debt Collection Agencies – and adverse credit default listings…
Clearing up your credit history often will involve handling collection agencies that have assumed your old debts. Collection agents are infamous for using tactics that are less-than-nice when trying to get back money owed. In many cases, a collection agent will get paid a percentage of the debt they are collecting on so they attempt to collect as much as possible to increase their monthly profits and as for the debt collector themselves, – to reach their monthly targets and keep their position within the company.
For some consumers who show collection agency information on their credit report, it can prove to be difficult to negotiate the removal of the adverse listing  from the report. At We Fix Credit we utilize legislation and mediation  methods  to clear a collection agency debt from your consumer credit report.
When it comes to credit reports, the credit reporting agencies are just a third party – an intermediary between you and the companies who place information on your credit report. There was a time when you had to submit disputes to the credit reporting agency to get anything changed on your credit report. The credit reporting agency would then do an investigation and would change (or not change) your credit report based on the results of their investigation.
Credit Reporting agencies have the right to throw out disputes it thought were frivolous or unjustified, sometimes the communication between yourself and the credit reporting agencies is not only limited but confusing and intimidating, particularly when you may not have a clear understanding of what your rights are or the credit provider’s obligations are when it comes to a default listing.
Turning Dreams Into Reality…
We have taken credit repair to a whole new level. We combine awesome personal service, meticulous attention to detail, and a total mastery of the laws that govern the credit reporters, creditors and collection agencies. You want your credit to be as clean as possible. We will get the job done. You should not settle for less. Discover why most of our customers come from referrals and why we’re committed to your Clear Credit Success!
Changes to credit reporting; A breath of fresh air or a storm on the horizon?
With credit providers becoming ever more selective on whom they want as clients, the introduction of a more consistent and predictable credit reporting system is becoming a high priority for many mortgage professionals. The good news is help is on the way, well maybe.
Before we can attempt to fix the problem we need to have an understanding of what’s wrong. I hear a lot of people talking negatively about Veda Advantage and how they have a lot to answer for so let’s start there. I’m not saying that there isn’t room for some improvement within Veda however let’s not forget that they are essentially a warehouse for other people’s data. The truth is they have little control over the accuracy of the information entered by credit providers and although they do have a data accuracy division, it is for the most part reactionary and only able to respond to issues after the data has been entered, or to put it another way, after the damage has been done.
There still seems to be a great deal of confusion by credit providers of their obligations to creditors when making a listing, by this I’m referring to compliance with certain passages of legislation such as Section 80 of the Consumer Credit Code or offering relief under Section 66. This misunderstanding often leads to inappropriate or unlawful listings being made against consumers. There also seems to be little consequence to the credit provider if a wrongful listing is entered, even if real loss to the consumer has occurred.
IOne must remember that Veda is owned by Meryl Lynch which is a profit driven organization. There is a strong argument to support that our credit reporting industry should be under government control, after all in the case of Veda and Dunn & Bradstreet it’s difficult to remain impartial when profits are the primary motivation.
I feel this is a genuine opportunity for the credit reporting agencies to lead the way and adopt a focused education program to their subscribers on the necessary steps required to make a listing and the potential ramifications to a consumer should this process not be followed. I feel that such a program would result in less mistakes being made and therefore fewer consumers being wrongfully affected. Of course the full weight of this responsibility does not lay solely on the credit reporting agencies and support would also need to be show from the relevant government bodies.
Let’s take a look at the banks credit scoring systems and why they have become so restrictive. There is no mistaking this is partly brought about by the GFC, the fact is the credit markets have retracted significantly and the cost of funds has increased. Although lets be honest, the banks still seem to be doing quite nicely thank you very much so how much of this is a genuine response to the current markets and how much is a money grab is up for debate.
I have heard people saying they think rejecting a borrowing because of a small historic credit issue is the banks way of culling applications. I’m not saying this is the case however when one looks at the amount of applicants currently submitted to the banks each week it doesn’t sound all that far fetched. The bottom line is the banks and mortgage insurers are run by numbers and statistics and they have all the evidence they need to show that a client that has defaulted in the past is more likely to default again, of course no credit scoring system is able to work out what listing is right and what listing is wrong so given we know that a very large number of negative listings on credit reports are not lawful there are many clients suffering inappropriately. Is this the banks fault? No, and really we shouldn’t expect them to somehow know the difference. I don’t expect to see any real relaxing of credit policy from the banks for some time so like it or not, it is what it is, at least for now.
The other issue is the very nature of the credit reporting system in Australia. We are one of the few countries on the world to still carry a negative reporting system which means that only enquiries and negative items are listed. Because of this a credit report can become a very slanted document and not necessarily a true reflection of an applicant’s current position or credit worthiness.
In most other countries such as the US and Europe a positive reporting system is utilized which means positive outcomes are noted as well as negative ones. By positive I mean a credit facility that has been taken up, serviced on time and retired without incident. This is potentially a good thing as a credit provider may form a different view of an applicant that has one small blemish but a number of positive listings rather than just being able to view the negative item alone.
The government is well aware the current system is far from perfect and is in need of some fixing, the first step is to try and bring our system in line with most of the world and adopt a positive reporting platform. The big question is at what cost? In 2011 the government is proposing a number of changes to the laws surrounding credit reporting that will coincide with the responsible lending legislation, also due in 2011. The list of proposed changes is extensive however I’ll cover a few of the proposals that could be of particular interest to you as a mortgage professional.
- Stopping the client merry go round.
One proposed change is to try and stop the consumer “merry go round” by placing the onus to resolve a dispute on whoever the consumer complains to first. At the moment consumers tend to get passed from pillar to post when trying to resolve a credit issue, often ending in many months of frustration with no resolution. This proposal has the potential to at least elevate some of this frustration for the consumer which can only be a good thing.
- An external dispute resolution scheme
Other than the applicable ombudsman, consumers currently have very few avenues when making a complaint with regard to credit reporting. It is proposed to introduce an external dispute resolution scheme (EDR) that credit providers will have to be a member of before they will be entitled to list information on a credit file. How effective the EDR will be remains to be seen however this may go a long way in credit providers making sure the listing they are intending to make is correct and the required procedures under such acts as section 80 have been complied with. This will also mean that should a credit provider not be able to substantiate a disputed listing they will have to refer the dispute to the EDR scheme.
- More information to be included in a credit report
At present a listing only contains very limited information such as the creditor’s name, the amount, date applied etc. Under the new legislation it is proposed to include items such as the type of facility (such as credit cards, personal loan etc) the date the account was opened, the credit limit and date the account was closed. I feel this is also positive as it may help alleviate some of the issues surrounding multiple enquires as a potential credit provider will have additional information to be able to determine what listings are relevant.
- Items such as utility payments being made available to credit providers as a separate item
That’s right; the proposal is to allow credit providers access to payment histories such as utility bills etc. Even though this information will help support a more positive reporting environment I’m concerned by how this would work from a practical standpoint and whether it has the potential to disadvantage the consumer even further.
If we accept that in the current market lenders are using negative listings as a means of culling applications what would the outcome be if a client had a perfect credit report but some inconsistent utility payments? Could this be yet another reason to reject the application? It would all depend on the attitude of the lender at the time however in the current market this possibility does not sound far fetched.
Of course there’s nothing set in stone yet however there is no doubt there are big changes on the way. We can only hope that the regulatory bodies such as ASIC seek the necessary advice from industry professionals to help ensure what is decided on is truly a step forward and of real benefit to the consumer.
We Fix Credit Pty Ltd
A Builder’s Story
I’m a building contractor and recently had an issue with a supplier as I was unable to bring my account into order because work had been slow. I spoke to the supplier directly to try and work out something out but they weren’t interested. I couldn’t afford to pay the entire bill but did pay them what I could and promised to pay the balance as soon as possible. Some weeks later I learned that the supplier had started legal action against me and a judgment had been listed on my credit report.
I had just secured a new job which I was very happy about as the proceeds would allow me to clear my debt with the supplier and get me back on track. I attempted to open a new account with two other suppliers but was refused credit due to the judgment.
I got the number for We Fix Credit from the internet and called them. They were very professional and after leaning about my situation were willing to help.  In a very short time they had managed to work out a deal with the supplier and had the judgment removed from my credit file, I couldn’t believe it!  With this I was able to secure an account with a new supplier and get on with business. I’m happy to say I am back on track and have repaid the supplier in full.
I would be happy to recommend We Fix Credit to anyone.
T. Davies – QLD
Is There Life After Default?
I am sure you all know the impact that a negative listing on a credit report can have on a borrower when applying for finance.
With the tightening of credit policies, even the smallest credit issue can be the difference between an approval and decline.
What you may be surprised to learn is that a large number of defaults and judgments are listed incorrectly. By this I mean the required steps were not followed or the details of the default are not correct. The difficulty for the mortgage professional and client alike is, in the current market, most lenders’ automated application systems do not account for this fact and are most likely going to decline the application regardless.
Read more of this article by Alicia Candido – Download the article here.
Regards
The Team at We Fix Credit