Q:In what order should I pay off my credit card debt? I have a lot of credit card debt and I want to reduce what I owe. I owe about $9,000 on three different cards, each of which is almost maxed out. At the moment I have enough cash to pay back $5,000.
Should I split up the cash and pay something on each card? Will I get a lower interest rate for making such a large repayment?A:You benefit most by paying off the highest APR card in full. But, in doing so, you must remember to also make the minimum monthly payments on the other cards. By using this approach you reduce the total
amount of interest you will pay, and because you made your payments to each of the card companies on time, you also avoid any punitive actions by the card companies.
Once you have paid off the highest APR card, try not to use that card for any future purchases (Also, be careful not to make additional purchases that will put you over your limit on any of the cards. The fees for going over limit are quite high.), and focus on repaying the next highest APR card, while continuing to make the monthly minimum payments on the other, lower APR cards.
You are most likely to be successful negotiating a lower APR if your balance has been paid in full. The card company has access to your credit bureau records, so they know that you have a large amount of credit card debt (both on their card and the cards issued by other banks), and they know that most people in that situation can't pay off the debt and therefore have no choice but to pay a high APR.
But, once you have paid off a couple of cards in full, they will be more willing to consider lowering your APR.Labels: Payment Advice
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Q:Credit card help!!! Confused by a letter from my card company. I recently got this letter...can you tell me what it means?
- We have decided to close the account for the following reasons
- too few accounts paid as agreed compared to total accounts
- Average length of time since bankcards opening is too shortA:The credit card company or bank is closing your account. By law they must tell you
why. Based upon the letter, they are closing your account either because:
a.) you have been late with some payments - that is what is meant by "not paid as agreed", or,
b.) you haven't had a long history using credit cards or repaying loans (like an auto loan or a student loan, or a mortgage). This is called having "a thin file". It doesn't mean you have done anything wrong. It’s just that the credit card company can't use their prior experience with you to know if you will pay them back. With the economy in such bad shape, many banks are doing this, to reduce their chance of having an account go bad.Labels: Account Closure
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Q:When a credit card company raises your interest rate, is that higher rate only applied to new charges? It just doesn’t seem fair if they can apply the increased rate retroactively.A:Under the current law, a credit card company may raise the rate on new or existing balances provided that they give you notice and 15 days to "opt out" of the increase.
he notices are often buried in the midst of other promotional materials and are generally written by lawyers using language that is difficult to understand and is printed in the smallest allowable font. As such, the disclosures are not particularly obvious.
Under new legislation, called the Credit CARD Act (which will go into effect in February of 2010 – although a few provisions will become effective this year), credit card companies will not be allowed to raise the rates on existing balances unless the borrower fails to make timely payments and goes delinquent with that particular credit card company. For much more information on all aspects of the new credit card legislation, check out our Credit Blog for posts on the subject.Labels: APR Increase, Credit Card Act, Interest Rate
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Q:Where can I get my credit score for free? A friend told me that a lot of the companies that advertise “Free” reports and scores, are not really free.A: Free of charge, once a year,
annualcreditreport.com will give you your credit reports from the three consumer credit bureaus. However, these reports do not show your specific credit score.
Unfortunately, there is no way to get your score for free without signing up for some sort of credit monitoring program.
For some straight talk about credit bureaus and credit scores and some options to get your score at a low cost, visit our special section on the subject.Labels: Credit Score, FICO Score
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Q:I have just been turned down for a job because I have bad credit. Is there anything I can do right away to improve my credit rating or convince the company that I am doing everything I can to improve it?A:Unfortunately, if the negative information that is on your credit bureau report is accurate, there is no quick fix. If the information is incorrect or there are errors in what has been reported,
you can contact the credit bureau in order to dispute the incorrect information. Otherwise, the only way to really improve your credit is to get all of your accounts paid up to date and keep them that way by making sure you make at least the required minimum payment each month.
Please be wary of any companies that claim they can "quickly fix damaged credit." These companies are likely to charge you a significant fee and really can't do much to help.
The other thing we would strongly recommend is that you contact the hiring manager or human resources person at the company that turned you down for employment in order to explain why you have poor credit. If you are an otherwise highly qualified candidate with good reasons for your current situation and you are taking steps to improve your credit, you may find they have some room to make exceptions.Labels: Bad Credit, Employment
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Q:My FICO score is 530. I have two items in collections (one that's charged off) that I plan to pay off within 2 months. Will my score be higher within 6 months? I have a store credit card and make monthly payments on it every month.A:It's great you are working to improve your credit and will be able to pay off the two accounts on which you are delinquent in such short order.
Please make sure that the account that has not been charged-off does not get charged-off, keep making your payments! Unfortunately, the account that is charged-off will likely continue to show up on your consumer credit bureau for the next seven years and will effect your score. That said, paying it off is better than allowing it to remain unpaid. Finally, keep your store card up to date and don't miss any payments. If you do all of this, I would expect to see a modest improvement in the next six months or so. However, a charge-off is a very negative item and it will take quite a while before you will see significant improvement in your score.Labels: Bad Credit, FICO Score
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Q:How can I establish a credit history? I am currently a junior in college and have worked full time for the past several summers, and work part-time throughout the school year. I recently applied for a credit card and was turned down. I would like to establish a credit history. What should I do?A:You should try to get approved for a card through a credit union or local bank – ideally one where you already have a savings account. If you are unsuccessful,
you may have to consider building your credit with a secured credit card. With these cards, you put up a deposit for as little as $250 or $500 and you get a card with a credit limit equal to the amount of your deposit. But be careful, many of these have high fees and high interest rates. So it pays to shop around. We at CreditGumbo have already done much of the leg work for you. Check out our Editor’s Picks of the Best Secured Credit Cards.
Good luck and remember, if you do get a card, please buy only what you can afford!
Labels: Credit History, Secured Card
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Q:I’m looking for a new credit card, and was going to apply to Capital One since I see their advertisements on TV. However, I don’t want to apply unless I think I will get approved. What credit score do they require?A:Since Capital One is one of the largest credit card issuers in the country they have a total of 23 different cards spread across four different credit quality categories. With all the cards they have available,
they have something for just about everyone. Their four classes of cards, based upon the credit quality of the applicant, are categorized as: "excellent credit", "good credit", "average credit" and "limited credit". The score required to get a card will vary depending upon the card for which you apply. Also, the APR (interest rate) and the credit line, will vary dependent upon the credit quality and the income of the applicant. If you go to their website, click on the "Compare All Credit Cards" tab. At the top of that page, you will see in small print a link to a page that will help you "Find your credit level". Click on that link and you will see a chart that will easily let you determine which Capital One credit cards are best for you.
You can also check Credit Gumbo's Pick of the Best Credit Cards.Labels: Credit Score
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Q:Someone stole my credit card number and has been making purchases...help? Someone has made multiple purchases by fraudulently using my card number. In the past 24 hours, there has been over $900 in charges. Today, the credit card company told me they are closing the account and sending a new credit card in a few days.What's going to happen? Will I be charged for the items that I didn't buy?A:Most credit card companies carry either $0 or $50 fraud liability limits.
That means depending upon your specific credit card, the most you will have to pay for the fraudulent charges is $50. Most likely you will not have to pay anything.Labels: Fraud, Stolen Card
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