Debt is Like a Vampire that Sucks Your Lifeblood from You

The average American will work from age 20 till 68 and earn an average of $45,000 a year. Believe it or not that works out to be more than 2 million dollars. Where does it all go? They sure don’t have it when they retire.

Even if they spent $400,000 on a home and another $100,000 on cars and furniture, that leaves 1.5 million unaccounted for. Maybe a half a million went into savings and taxes and healthcare but that still leaves a million that disappeared.

That million was what they paid the banks and credit cards in interest. If they hadn’t paid interest they would have had an extra million in their pocket.

Stop paying unnecessary interest, visit www.DebtSolutions99.com or email me at DebtSolutions99@gmail.com to find out how you can keep about $750,000 of the million that most people will pay in interest.

Be careful. When you contact debt resolution services they call the credit rating companies and it actually hurts your credit score even if you don’t use them. We don’t do that. In fact if you use our service, it will actually improve your credit score.

 

How many Credit Cards should you have?

Credit cards are one of the most powerful financial tools you can have available to you. You can use your credit card to buy tickets to a concert or pay for an emergency auto repair while waiting for your paycheck. Depending on what type of card you get, you may even accumulate benefits or perks. Some cards will give you cash back or reward points every time you spend on groceries, gas or when you eat at restaurants. Some cards also give you rewards by tracking your air mileage. It’s very tempting to sign-up for these great reward plans, right?

But have you ever wondered, how many cards is too many before it negatively impacts your credit score? 1, 2, 6, 7, or 10? Is it smart to get a credit card for every type of rewards? Or is it better to just stick to that one credit card you had since you were 18? The answer: there is no magic number on how many cards you can have. It really depends on how you utilize your cards and how you manage your debts. Sounds confusing? Alright, let’s dig deeper…

Having multiple cards can be either a good or a bad thing

Okay, let’s look at the PROS. It’s true, some credit card companies offer exciting rewards on their cards. And sure, it’s pretty nice and convenient to have those extra perks while using your card. Also, having multiple cards can save you from unexpected situations, like when a place doesn’t accept your primary card. Because some cards are more widely accepted than others, having a backup card is a smart idea. Or if one of your cards gets stolen or lost, it can take several days before the replacement comes. Having another card on hand can keep you from overdrawing your checking account in case the money is short and your paycheck is not coming until next week.

And now the CONS… Managing multiple credit cards can be tricky. Making a mistake can break your credit score. Applying to have multiple credit cards in a short amount of time can really hurt your credit score. It’s probably smart to wait 6 months to a year or two to stabilize your score before you apply to another one. Also, keeping high balances on all of your cards could bring down your score. If you are juggling cards, remember to pay those due dates and keep your balances at least below 20% of your total credit line.

Signs that you may have too many credit cards already…

A high DTI ratio

You can always do a DTI (Debt-to-Income) ratio calculation just like how lenders evaluate loan application. Calculate it as if you maxed out all your cards and see if the ratio reaches above 37%. If it does, then it’s time for you to close some of your credit card accounts, especially new ones that has a $0 balance.

A high credit utilization

This indicates how much debt you have, and it is such a major factor that is accounts for 30% of your credit score. Ideally, your utilization should be less than 30%. Let’s say the total of your credit card limits is $5000 and the total of your credit card balances total $3000. Your credit utilization is 60%, which is way high from ideal. The more cards you have, the more likelihood there is to increase your credit card balances and credit utilization. In order to keep it low, you have to minimize the number of cards you have and the balance you carry on those cards.

Not having other types of credit

If you have multiple cards but no other types of credit accounts, it could affect your credit score. Your credit profile, or the mix of the types of credit you have, accounts for about 10% of your overall credit score calculation. It’s not a huge factor, but it is still important to consider.

Having difficulty managing your cards

Too many cards can become confusing, as cause you to miss payments. You should be able to track your credit cards including due dates, interest rates, charges, and fees you’ve made upon purchase. It might be easier to manage three cards as opposed to having five to six cards.

The Decision

Ultimately, there is no clear cut answer. Everyone has a different capacity for how many cards they can effectively manage. So if you are going to do it remember:

• Too many cards could impact your credit score (negatively)
• Having no credit history could also hit your credit score
• Keeping one card for over a few years can improve your score
• Different card types offer various services
• There is no right amount of cards to have if you are responsible enough to meet the repayment dates and manage balances

Understanding Your Credit Score & the Impact of Debt on it

We have all heard about – “The Credit Score”. But what is it exactly? Well, a credit score is the 3-digit numerical expression based on the information in your credit report. It represents the creditworthiness of a person which is typically sourced from credit bureau. Hence, it is one of the factors that lenders use to pass or fail a person for a new credit application. Credit scores typically range from 300-850 and a good credit score is generally at 700.

What Constitutes a Credit Score?

As just mentioned, credit scores range from 300-850 and are based on the standard FICO Score, or the score given by the Fair Isaac Corporation, which is recognized as the largest company that provides software for calculating credit score. Occasionally, you will see an industry specific score which can range from 250-900. Either way, the same rule still applies, a higher credit score is better.

According to the FICO, there are essentially five major factors that compose your score:

1. Payment History is 35%
2. Current Debts is 30%
3. Credit History is 15%
4. Current Credit is 10%
5. New Credit Application is 10%

Payment History

Payment history is the biggest influencing factor in determining your credit score. The more payments you make on time, the more chances your credit score will improve. Sometimes, even one late payment can be a sign of a bad credit habit.  So, make sure you do not miss any because later on, those that are not on your credit report can be added eventually if they fall behind.

Current Debts

Your credit utilization is the ratio between your credit balance and credit limit for each of your credit cards and overall credit utilization. The higher credit balance you have or have consumed, the greater the risk it gives to the credit score. So, a maxed out credit card or a credit balance reaching its limit are worst of all. Ideally, your credit utilization should be less than 30% and of course, lower than 10% is significantly better for your credit score. For instance, if you have a total of $10,000 credit card limits and a total of $4,000 credit card balances your credit card utilization is 40%. And this looks unhealthy to your credit score. This concept also applies to any kind of loan you take out, by comparing how close your loan balance to the original loan amount. This utilization rate for loans affects your credit score the same way.

Credit History

Some say debt consolidation can have a negative impact on your credit score, because opening a new account can lower your average credit.  However remember, the credit history is not just comprised of the age of credit or how long you have had access to it. A positive trend in the payment patterns and credit applications are also important. So while having a long and commendable history of good credit can boost your credit rating, a habit of missing payments can dramatically decrease your score.

Types of Current Credit

Diverse types of accounts such as one or two credit cards and loans such as, a mortgage, car loan, or home equity loan, are better to have than multiple credit cards. Again, a credit score is concerned with how well you will be able to accommodate timely payments. However, it is never a good idea to take out loans solely to boost your score – it could haunt you in the long run.

 

Things to Consider Before Jumping on a Credit Counselling Service

Debt Solutions 99 Gives You TIPS Before Jumping on a Counselling Service

There are few things in life more confusing and overwhelming than struggling to pay off debts. Trying to pay off your debts can be really stressful and time consuming. Often, the feeling of desperation during the process can leave you wanting to cry out for “HELP!” At some point you have to admit it to yourself, you need help, and a credit counselling service and/or a debt management program may give you the best chance at avoiding an even larger problem – bankruptcy.

A Credit Counselling and/or a Debt Management company offers services that can help reduce the total amount of debt you owe. The process includes a third party company coming in and representing you in negotiating interest rates, payment amounts and other necessary fees with your creditors. This service usually charges you a fee on a monthly basis.

However, as simple as the process sounds, you still need to proceed carefully if this kind of service appeals to you. Just because you’ve employed a Service, it doesn’t mean your debt situation is guaranteed to get better. Here are some pros and cons/points to consider before working with a debt management agency.

Ok, let’s start with the benefits you can expect:

• Your interest rates will go down once your debt management company reaches out to your creditors. Normally, your creditors will immediately agree to lower your interest rate to between 12% and 16%. If you have been paying a default APR of 20% or more, reduced APRs can save you a lot.
• The risk of late fees can be eliminated since your debt management program may request your creditors to adjust your payment schedule.
• A Debt Management Program has the ability to consolidate your debt payments into one monthly payment. The service just distributes payment to your creditors.
• Your debt payment will be on autopilot since your payment is auto-debited from your bank account. When you are financially able, you’ll have the option to pay off your debt faster by making larger payments. The sooner the better.
• You can avoid bankruptcy once you are enrolled in a debt management program by letting them pay all your creditors each month.

Looks promising, doesn’t it? But consider the following points before you decide:

• Debt settlement scams are everywhere! Know the facts first and do some research. The National Foundation for Credit Counseling, which is a non-profit organization of reputable credit counselors, can direct you to a legit organization.
• Non-Profit Status does not always mean they act in a non-profit manner. Most of the debt management companies are organized as a non-profit business; however, these companies still charge you monthly fees to make money for the organization.
• Even if you are current on all your payments when you enroll in a debt management program, your credit score may drop, especially if you have loads of debt. This happens because at the beginning of the process, as your debt management company renegotiates terms, they may change when payments are made, which can result in triggering late payment reports on your credit history. Furthermore, debt accounts with good history, i.e. accounts that contribute positively to your credit score, will be closed by many creditors while you are in debt management.
• Once enrolled, you will be prohibited to sign up for new lines of credit.
• The effect takes time in the process. It can take a month before your first payment is received by your creditors. Most likely, you will be required to start a double payment just to avoid late marks on your credit reports.
• Everything the debt management company does, you can do yourself, which can save you money. With discipline and time management, you can attempt to negotiate with your creditors to pay off your debts faster yourself. Again, it can be stressful, but it’s not impossible.

Understanding all the factors when settling your debt is always helpful. This gives you an understanding of all the options you may need depending on your situation. Either you work with a debt management company or you do the whole process yourself, there’s always a help available for you!