The holidays can take a toll on your financial wellbeing for many reasons — the high costs of holiday feasts, travel expenses, and gifts for friends and family add up quickly. It has been approximately one billing cycle since many Americans racked up high credit card balances, and now it is time to face the reality of that spending.
A LendingTree survey found that one in four Americans struggle to pay their holiday shopping debt. If the balance on your credit card is higher than 30 percent of your available credit (e.g., if you have a $1,000 limit your balance should not exceed $300), this will negatively impact your score. If you have multiple credit cards with high balances, your credit score will especially be taking a hit.
While the only way to truly improve a damaged credit score caused by high credit card debt is to pay the debt down, there is one method that can make it easier for you to do so, and that is through a personal loan. Here are three reasons why this can help:
Credit utilization ratio
When you transfer your credit card debt to a personal loan, this frees up your available credit and improves your credit utilization ratio. This ratio accounts for nearly 30 percent of your credit score. The most important thing not to do is use your newly available credit and end up in the same situation. Avoid impulse purchases by not carrying your credit cards in your wallet. Stow them away so that they are only accessible in times of dire emergency.
You may be tempted to close your credit accounts to ensure you do not accrue new debt, but that would negate this potential boost to your credit score because your improved credit utilization ratio would be erased from your credit report.
The attorneys at Lexington Law Firm are experienced and can help you move forward with your credit situation. One of those credit situations may be medical expenses — which can harm your credit. Contact Lexington Law Firm today to find out how we can help you with your credit situation.
On December 16, 2015, the Federal Reserve decided to raise the target range of its key interest rate, the federal-funds rate, from a range of 0.00% – 0.25% to 0.25% – 0.50%, based on its reasoning that the American economy is recovering at a moderate pace from the Great Recession. In addition, the Federal Open Market Committee forecasted that the appropriate rate at the end of 2016 would be 1.375%, which implies multiple rate hikes throughout the year. The question that lingers is how might these rate increases affect consumers?
To answer this question, it is imperative to understand what the federal funds rate is. Quite simply, the federal funds rate is the interest rate that banks charge each other on loans used to meet reserve requirements. It is the base rate that determines the level of all other interest rates in the United States. Consequently, as the base rate increases, it becomes more expensive to borrow money. An increase in the federal funds rate generally discourages banks from borrowing to meet reserve requirements which they do by lending less money. Meanwhile, a reduction in the rate encourages banks to borrow which makes more money available for lending. …
A FICO or credit score can range from between 300 to 850 points, with 780 and above being excellent, and 600 or lower dismal. While it may seem there is plenty of space with which to keep a score afloat, most credit card users find that it’s the tiny mistakes that sink a FICO score.
Never pay late
The biggest way to ding your credit score is by missing a payment. A payment becomes delinquent if it’s between 30 to 60 days late. According to the Motley Fool, a payment that is 90 days late can damage your score as much as filing for bankruptcy. Your payment history is the most important component of your credit score. Any late payments on current loans like a mortgage count against your score. Even a long-past delinquent bill that has been transferred to collections can harm an otherwise adequate score and cost you 100 points on your FICO score.…
Credit health is illusive without the proper tools. In addition to our services, there are several preemptive and free ways to get serious about financial improvement in the New Year. Begin by taking advantage of the following resources. They will help you on the path to stability.
Credit reports. Thanks to the Fair Credit Reporting Act (FCRA), every person is entitled to free annual copies of their credit reports from the major bureaus—TransUnion, Experian and Equifax.
Credit repair fix: Review your reports carefully, highlighting any information that is incorrect, outdated or suspicious. Clean credit requires correct information, and identifying the errors is the first step.