Month: January 2018

The Credit Card Churning Trap

credit trap

Guest article by

Since the days of the first rewards credit cards of the 1980s, credit card use — and the rewards you can earn from it — has skyrocketed. Millions of US consumers now use plastic to make their purchases, both for the single-swipe convenience and the savings offered by credit card purchase rewards.

As popular (and valuable) as rewards can be, however, it wasn’t until nearly every rewards card started offering lucrative signup bonuses that obtaining a new credit card became a truly effective way to score free stuff. Frequently offering hundreds of dollars in cash back, rewards points or airline miles, signup bonuses can often earn you a free flight or hotel stay in no time, particularly if you save up the rewards from multiple bonuses.

Hence, credit card churning was born. Those who participate in this potentially rewarding hobby obtain a new credit card, earn the signup bonus by meeting the specified spending requirements, then typically cancel the card after several months. In this way, card churners can amass hundreds of thousands of rewards points (or cash back, or miles) in a very short period.

Churning Can Have Many Credit Impacts

Given that many of the most valuable signup bonuses are generally offered by cards that require you to have at least good credit to qualify, you need to start out your churning career with a decent credit score. And since a credit score in the 700s range can usually rebound quickly from the impacts of a hard credit inquiry and/or new account opening, credit card churners can typically maintain a good credit score with responsible card use.

But therein lies the kicker. Depending on the size of the bonus being offered, signup bonuses can have minimum spending requirements in the thousands of dollars. While it may be easy enough to meet one or two four-digit spending requirements in a period of months, doing so on one card right after another — or even concurrently, if you’re in a hurry — may be beyond the reach of many budgets.

Drawn in by the promise of free flights or cash back, many consumers may be tempted to spend more than they can afford simply to earn the bonus, racking up debt they can’t pay back. And unless you happen to be churning introductory 0% APR credit cards, the interest fees will begin to pile on after the grace period ends; fees that can eat into that signup bonus you spent so much to earn.

Furthermore, carrying thousands in debt can easily make your utilization rate skyrocket, which will send your credit score in the opposite direction. Worse, should you fall behind on that debt and your delinquent payments are reported to the credit bureaus, your credit score can drop 100 points or more. And though your score may bounce back quickly from one or two inquiries, a series of inquiries in a short span can have a bigger negative impact.

Getting Out of the Trap Takes Time

As alluring as a giant signup bonus can be, unless you know you can easily pay off the purchases required to meet the spending requirement, you may really be signing yourself up for a damaged credit score and years of recovery. That’s because most negative items take seven years to fall off your credit report, and while the best credit repair companies have the expertise to remove many types of items, they won’t be able to do anything about legitimate debts and inquiries dragging down your score.

But it may not need to reach that point, provided you take action before you fall behind. For those churners in over their heads, the first step is to stop churning. Don’t take on any additional credit cards — or even look at their applications, if you are easily tempted. Instead, focus solely on paying down the debt you’ve accrued on the ones you have already.

If your credit score is still in good shape, you may be able to use introductory 0% APR balance transfer offers to move your debt and lower your interest rate, making that debt easier to pay off. Be aware that many credit cards charge balance transfer fees, usually 3% to 5% of the transferred amount, though the APR savings is usually more than the fee when transferring from a high-interest card to one with a lower APR.

If your credit score has already fallen due to churning damage, the only things you can really do are pay down your debt — and wait. Provided you continue to make at least the minimum required payment for each card on time every billing cycle, you can rebuild positive payment history to help offset your mistakes, and your credit score will recover with time.

If you’re concerned about your credit being negatively affected, learn how you can start repairing your credit here.

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Monitoring Your Credit Score: Subsidized vs Unsubsidized Student Loans

Student Loan and Credit

Guest article from Credit Zeal

When going to college, one of the biggest challenges you’ll be faced with is how to pay for it. After filling out the FAFSA, you might find that you’ve been approved for both subsidized and unsubsidized loans. If so, you’re probably wondering which is best for you. What is the difference between the two? How do they affect your credit score?

Let’s start answering these questions by first defining each type of loan and helping you identify the benefits of each. Then we can determine which is ideal for your situation.

Subsidized Loans: Learn Now, Pay Later 

First, let’s start with subsidized loans, as these are generally the more favorable option – if you are eligible for them. The catch is that they are more difficult to qualify for.

To obtain a subsidized loan, a student must demonstrate a financial need to have the aid paying for their educational expenses. They come with lower loan limits compared to unsubsidized loans. In addition, they are available to undergraduate students only. However, if you meet these requirements to get subsidized loans, they tend to be the best option for you.

Why? What makes subsidized loans so great?

The primary benefit of these loans is that, while you are enrolled in college, the Education Department pays the interest that accrues on them until the time that you graduate. This means that when you graduate school, you will owe the same amount that you borrowed on your subsidized loans – and not a penny more. You also don’t need to start making payments on these loans until you graduate.

Unsubsidized Loans: Getting You the Money You Need 

To contrast, unsubsidized loans start accruing interest from the moment you take out the loan – just like most loans work. However, because these loans are for educational purposes, you will not be required to start making payments on them until you have graduated from your university. This allows you to get through school without worrying about how you’re going to make your next payment – however, that interest is adding up all the while.

The benefits of unsubsidized loans lie in the fact that they are much easier to qualify for. In addition, students are typically able to qualify for them in higher amounts – getting them the funds that they need to pay for their education.

What About Your Credit Score?

Before you take out loans to help you pay for school, it is normal to wonder how this is going to affect your credit. Are student loans bad for your credit? Does subsidized vs unsubsidized make a difference in terms of credit?

First of all, student loans are not bad for your credit at all. In fact, they are a great way to establish your credit history. Many college students have not been in the game of establishing credit for very long, but student loans are a great way to get started. Student loans are considered “good credit” whereas things like credit cards aren’t viewed as favorably by banks.

Fortunately, both subsidized and unsubsidized loans are viewed similarly in terms of your credit score. Having either type of loan is good for your credit – as long as you make your payments after graduation.

If you do need help with improving your credit score you may want to consider working with a reputable credit repair service. Lexington Law has more than 20 years’ of credit repair experience and have helped more than half-million clients

So, Which Type of Loan Is Right for You?

In the long run, you will save more money by opting for subsidized loans and paying less money in interest. However, you may not be offered enough money to get you through school with subsidized loans alone. If you are offered both types of loans, the decision that many students make is to take out the subsidized loans they are offered and supplement them with the unsubsidized student loans to get the rest of the funds that they need.

Remember, you don’t have to take out the entire amount that you are offered! You have the option to take only what you need to help you save money in interest in the long run.

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Why You Should Monitor Your Credit, Even if You Do Not Use Credit Cards


In light of recent security breaches, you have probably heard plenty about the need to monitor your credit. If you are among the 29 percent of Americans who do not have a credit card, pay attention: These recommendations still apply to you.

Although many people have few or no credit cards, or they rarely use the ones they do have, there are various factors in addition to credit utilization that can put your credit score at risk. The fact is, everyone needs to regularly monitor their credit score, no matter how little or which types of credit they use.

Why do I need to monitor my credit?

The credit world is not limited to plastic, and credit cards are not the only type of credit that affect your credit score. Every type of loan impacts consumers’ credit. Even if you do not have credit cards, chances are you may still have a mortgage loan, an auto loan, a personal loan, a student loan, or all of the above. Also, how you manage each of these accounts is among the factors that go into calculating your credit score.

Even if you do not have credit cards, you may still have a form of established credit in your name that you should watch. Credit monitoring does more than protecting yourself against credit fraud and identity theft. Doing so also helps you to make sure that you are maintaining positive credit reports and score.

The reality is that everyone is at risk of becoming an identity theft victim, especially as many consumers continue to conduct their personal business online. For example, even the simple act of paying a bill online comes with some degree of risk that affect your credit profile. By regularly keeping an eye on your credit report, you can be proactive and quickly take the necessary steps to fix your credit in the event that something does negatively impact it.

Use it or lose it

While avoiding credit cards can be a smart financial decision, having too little or no credit can actually hurt your credit. Avoiding credit cards is wise for those who are likely to abuse it by running up high balances and getting behind to the point that they need credit help Generally speaking, though, securing a loan can be difficult if you have not established any credit history.

Even if you intentionally choose to avoid credit cards, life happens. Getting through life without the need to open a line of credit or to take out a mortgage can be a difficult. Establishing and monitoring your credit can improve your chances of securing a lower interest rate, which is important for loans that have five (5) to thirty (30) years terms.

Ultimately, monitoring your credit report and credit score will allow you to better protect your identity. It can also put you a position to be approved for the best available terms and interest rates in those times when you need to utilize credit.

If you discover inaccurate or fraudulent items on your credit reports, you may find yourself in need of credit repair. Lexington Law can help. We will work with you to exercise your legal rights and ensure that the information on your credit profile is fair and accurate.

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Notifying Creditors After the Death of a Loved One

rebuilding credit

The passing of a loved one is often an emotionally challenging time as well as a stressful one. There’s a lot of planning to do and many loose ends to tie up. Unfortunately, many of these loose ends may be related to a person’s finances. Even in the event of death, some money may still be owed, depending on the type of debt, the size of the decedent’s estate, and in which state they lived.

When someone passes away, it’s important for the executor of their estate to notify creditors as soon as possible. Here are a few things you must do shortly after the death of a loved one to ensure their estate remains in good financial standing:

Identify an executor

If your loved one owned any type of assets, they likely had a will. A will usually names one person or a group of people as the executor of the estate. The executor is responsible for paying off any remaining bills in the deceased person’s name, and finalizing payments to any other creditors one way or another.

Send copies of the death certificate

Creditors and credit repair companies need proof that a person has actually passed away. In some cases, the obituary itself may serve as the notice of death to creditors. They will then have a certain amount of time to file for payment against the decedent’s estate, which may or may not have to be paid. Some creditors may require proof of death in the form of a death certificate, which is issued by local government authorities.

Check all accounts for other names

In cases of jointly-held accounts, such as joint credit cards or mortgages in the names of both spouses, the living person listed on the accounts may still be liable for outstanding debts. If the accounts are in the decedent’s name only, it is possible that the debt may be erased, depending on the type and the state in which the decedent lived. (Community property states may still hold spouses liable for certain debts accrued during a marriage.)

Notify the Social Security Administration

Though many funeral homes will take it upon themselves to notify the Social Security Administration (SSA) of death, some may not. Some people may also make different types of arrangements for their remains, forgoing the funeral home altogether. In these cases, the executor of the estate will need to notify the SSA of their loved one’s death. This is another way to help prevent identity theft.

Notify credit bureaus

Make sure to call one of the three major credit bureaus – Transunion, Equifax, and Experian – and tell them that your loved one has passed. If you share this information with one credit bureau, they will let the others know as well. They will then flag his or her name with a note not to issue any credit. This helps prevent identity theft of a deceased person – sadly, an all-too-common occurrence.

If possible, have difficult discussions about death and finances while your loved ones are still alive. This will help ensure that when your family member passes, these types of situations can be dealt with as quickly and efficiently as possible. For questions, or to learn more, please visit

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Business Credit vs. Personal Credit

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By now, you probably know about the importance of good credit in qualifying for low interest rates, getting a loan, and the various other impacts a good FICO score can have on your finances. But unless you’re already a business owner, you may not know that there is a credit score associated with your business too.

Much like personal credit, business credit is an important metric lenders use to assess your aptitude as a borrower. However, there are significant differences between the two, and aspiring entrepreneurs need to be aware of the importance of business credit to help protect their professional and personal finances.

What is business credit?

Just like personal credit, business credit is a measurement of your likelihood to pay back lenders based on previous payment history. As you establish a business, there may come a time when you need to access credit to cover unexpected costs or continue growing, at which point lenders will assess your business credit before accepting you for a loan.

Business credit has several things in common with personal credit, but it is important to recognize the features that make each unique. Personal credit is a little easier to understand at first, since it is reported by three well-known credit agencies. Business credit, on the other hand, gets a little more complicated due to its unique reporting standards.

Here are some of the different agencies that report business credit scores and the scales they use:

  • Dun & Bradstreet PAYDEX (0 to 100)
  • Equifax Business Failure Score (1,000 to 1,610), Credit Risk Score (101 to 992) and Payment Index (0 to 100)
  • Experian IntelliScore Plus (0 to 100)
  • FICO SBSS (0 to 300)

If you’re confused, you’re not alone. Many people’s first impulse is to shirk away from building business credit, since it’s yet another financial system to learn. But, in reality, business credit is an essential element of entrepreneurship and should not be ignored.

Why is business credit important?

Building business credit might seem overly complicated, and like just another unnecessary headache — after all, you already have personal credit to borrow against, so why bother with business credit?

The most significant reason to build business credit separate from personal credit is to minimize personal risk exposure. If you borrow on personal credit for your business any number of unforeseeable financial crises would not only tank the business, but also your personal credit. It’s better to avoid putting all your eggs in one basket. That way business prosperity doesn’t negatively mark your personal credit.

It’s also important to point out that business loans are notoriously hard to get. You will have a much better chance for approval if you bolster your business credit over time — uninhibited by periodic personal credit hiccups.

Even if you are feeling particularly confident in your personal credit, and its lasting power to fund your business, there is still another significant reason to establish business credit independently: anyone can check your business credit without authorization. For personal credit, you have to give permission to view it, but with business credit anyone can check it at any time.

You never know who will check your credit, and this score is often perceived as a direct reflection of your professionalism. With the added threat of uninvited query, you don’t want to run the risk of presenting an unfavorable business image due to a personal credit score dip.

How to start building business credit

When it comes to building business credit, you have to walk before you run. The first step is to incorporate — meaning you must designate the business as a separate legal entity from yourself. Incorporating is an important step for various legal and financial reasons, and a necessary step toward establishing business credit.

A common rookie mistake new business owners make is funding their business expenses through personal lines of credit or personal credit cards. This actually makes them financially liable for business actions. Not to mention, if you conflate your business and personal credit, lending approval, credit utilization, payment history and other factors will equally affect your standing and that of your business. It’s best to separate the business from your personal credit to eliminate the threat of exposing personal finances to business actions.

Next, you will need to establish business financing. For new business owners, the most common and convenient way to build business financing is to get a business credit card. Just like with personal credit, a starter credit card that you can reliably payoff is a good way to get a foothold on establishing business credit. Otherwise, after you establish rapport with vendors, you can ask them to report your illustrious payment history to credit agencies to build up your score.

Treat your business credit score with care

Overall, a good rule of thumb is to practice the same careful credit habits you would exercise for your personal score: keep your credit utilization under 30 percent, pay debts on time (or even early), and avoid delinquency.

If you enact some of these best practices, you are sure to improve your business credit. But sometimes you need a little jumpstart to get your personal credit score up to snuff. Professional credit repair services are a good place to start. Credit repair professionals can review your credit report and help you work to remove inaccurate or misleading items — resulting in a more advantageous reflection of your aptitude as a borrower.

Backed by over 26 years of service, Lexington Law leverages industry-leading tools and legal expertise to remove unfair, inaccurate, and unsubstantiated credit report items. Last year alone, clients saw 9,000,000 negative items removed from their credit reports. Contact Lexington Law for a free credit repair consultation, and start on the path toward better credit.


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