Are you born with a credit score?
Nope! Not at all, in fact nothing entitles you to a credit score at all. Lets first discuss what exactly a credit score is in case we are not familiar. Like the name makes it sound, a credit score shows the quality of a person’s credit, or ability to pay back any money that they owe. You probably thought of a credit card just now and yes your ability to pay back any money on your credit card matters, but it is not the entire story.

The laws regarding credit scores are set by none other than the US credit bureau. According to US law, it will take a person six months of obtaining and utilizing some form of credit in order to have an official credit score. So to answer the initial question of where do you start, it depends on how those first 6 months go. For example, if you obtain a credit card and barely pay it off in those first fix months, your credit score will likely be quite low. The lowest possible being 300 and the highest possible being 850.

How to build a strong credit score
So first how to do you go about building that strong credit score you need, and explained later on, why is it so important. (Yes, it is very important in case you were wondering).

In my opinion, the easiest way to build a strong credit score is to obtain a credit card as soon as possible, use it and always pay off your bill in a timely manner. For example, go online to Bank of Americas website and sign up for a credit card. You will be asked personal in formation about your income, location etc, and will be approved for the use of a credit card. Then, start using your card for some purchase like concerts, groceries, clothing, anything, but always pay the full balance owed on your card at the end of each months. Also, only use your card for a small portion of your monthly credit limit. Your credit card issuer will provide you with a limit you can use your card for each month. (They aren’t going to extend you credit of 100k if you’re just starting out, probably more like 1k) your credit will be judged better if you only put $100 on credit and pay it off each month, than if you put $900 of the $1k each month. This is because it is seen ask less risky to the credit card company.

How to ruin your credit score
The best way to ruin your credit score is to, well, not pay your bill off on time. Simple as that. On a larger scale, if you are in the position where you cannot pay for your credit cards, mortgages, car payments, etc. and need to file for bankruptcy (bankruptcy involves a court attempting to work with who you owe money to, to forgive your payments or reduce them). If you file for bankruptcy, your credit score will be seriously negatively impacted! So long term, DO NOT put your self in a lot of debt, unless that debt is expected to make you more money in the future to pay off that debt.

Why does your credit score even matter?
A question a lot of readers may be asking and it is a good one. Let’s answer the question with some questions. Do you ever want to own a home? Send your kids to college? Buy a nice car? Pay for your wedding? Invest in real estate. Well, having a strong credit score will help you borrow money to support all of these activities, and will help your do so with less expense. However, with a low credit score, it may be very difficult to do many of these activities at all. So to me, having a strong credit score is very important, and it should be to you as well.

Credit card debt is one of the most common forms of debt for Americans. It is often a result of getting caught up in the vicious cycle of overspending or not managing your money properly. It happens to a lot of us. Sometimes, credit card debt can be due to your spending issues or even your partner’s.

My husband and I recently cracked down and paid off $4,000 in credit card debt in less than 90 days and freed ourselves from that debilitating debt.

Before I discuss how we did it, here’s a little back story.

How a $4,000 Credit Card Debt Balance Crept Up On Us

I’ve personally never had any credit card debt. Even if I overspent on my credit cards each month, I paid the bill in full each time because I usually had money leftover thanks to living below my means. When my husband and I were dating, he had a few credit cards and didn’t pay much attention to his spending unfortunately.

We also split daycare expenses for our son which was charged on one of his credit cards each week which always made us feel like he was carrying a balance no matter how much we paid. Long story short, some expenses became difficult to keep track of, and while we didn’t take on any debt regarding our wedding we added up our joint debt total before getting married and realized my husband had about $4,000 in credit card debt.

We were shocked and a little scared to be blunt, but we knew we wanted to get rid of the debt asap and avoid paying as much interest as possible. We did a few key things to pay off $4,000 in credit card debt after less than 3 months of marriage.

We Used the Avalanche Method

Choosing a clear method or strategy to help you pay off your debt is key. To decide on the best method, consider your habits, goals, and your current cash flow situation. For us, we knew we didn’t want to pay much interest so the avalanche method seemed best.

There were 3 credit cards and one of them was still on a 0% interest promotion. We started by paying off the credit card that was costing us the most money first. It just happened to be the one with the highest balance and highest interest rate.

Then after that card was paid off, we rolled the money we had available for debt payments to the next most expensive balance until all the balances were zero.

We Used Gift Money Wisely and Prioritized

We received a generous amount of monetary gifts for our wedding. We used a little of the money for our honeymoon and a large portion of it went directly toward our credit card debt. It stung a little to put so much money toward debt when we could have done something else with it but we were committed to our priority and our end goal (debt freedom).

Aside from using our gift money, we prioritized paying off credit card debt whenever we got paid. It was practically the first bill we paid and we were happy to do it. All of our other expenses were paid for with money we had leftover and this was a fool proof way to make sure we eliminated our debt quickly.

We Lived on One Person’s Income

Maximizing how much extra money we could put toward our credit card debt was key. We decided to live off one person’s income and use the other income to make extra debt payments to speed up the process.

We created a new budget to stick to and kept our impulse purchases to a minimum in order to make it work.

Now That the Credit Card Debt is Out of the Way…

We still plan on living off one person’s income for as long as we can since we still have other debt to pay off, but it feels great to be credit card debt free again! My husband and I are thinking about closing some credit cards we no longer need anymore to avoid getting back into credit card debt and we’re committed to living well below our means.

We are hoping that we can continue to save more and work on knocking out my husband’s car loan next.

Do you have credit card debt? What is your strategy for getting rid of it?

According to data from the Corporation for Enterprise Development (CFED), 56 percent of American consumers have credit scores that are rated “fair” or “poor.” Consumer with low credit scores are often required to pay much higher interest rates for loans and credit cards and higher premiums for insurance. They may also be disqualified for certain types of job and housing opportunities. Keeping your credit score as high as possible is very important in today’s society. If you have already damaged your credit, you can fix bad credit fast with these simple tips.

Put Away The Credit Cards

You will never be able to eliminate your credit card debt if you continue placing charges on your credit cards. Instead, limit yourself to the funds from your paycheck for your monthly spending. If you find it difficult to handle all of your expenses with the money from your paycheck, you are living beyond your means and need to find ways to reduce your spending quickly to avoid financial devastation.

Pay Down Your Credit Card Balance

Once you have gotten your spending under control, start focusing on paying down your credit card balances. A big part of your credit score calculation is the ratio of the amount of credit available to you to the amount of credit you are currently using. If all of your credit card balances are close to the limit, then your credit score will be much lower than if your balances were nearly paid off. Put the credit card payments into your monthly budget and pay as much as you can each month until the balances are paid off.

Make All Of Your Bill Payments On Time

If you are trying to fix bad credit fast, the last thing you want to do is anything that prevents your credit score from rising. Paying all of your bills on time is a big part of that formula. Paying a bill late or missing a payment completely will cause a considerable drop in your credit score and the negative mark will remain on your credit report for years. To ensure that all of your bill payments are being made on time, consider using the automatic bill payment features available on your bank’s online portal.

Review Your Credit Report For Errors

Finding and fixing errors on your credit report can help you fix bad credit fast by giving your credit score an immediate boost. It is estimated that nearly a quarter of consumer credit reports contain some type of error that brings down the credit score of the consumer. Anyone can get one free copy of their credit report from each of the three major credit monitoring companies from www.annualcreditreport.com. Review each of them for accounts you did not open, missed payments that you can dispute, and personal information that is incorrect.

Do Not Apply For New Credit Cards

While it may be tempting to open new store credit cards at the checkout to earn an immediate discount on your purchases, don’t do it if you are trying to repair your credit. Each time your credit report is pulled for a credit inquiry, points are deducted from your credit score. While your credit score will eventually regain these points, it can hurt your credit score for a short term.

One of the benefits of having a credit card is the ability to obtain cash from your credit card when needed in the form of a credit card cash advance. To secure the funds you need, all you have to do it go to the nearest ATM, punch in your passcode, and wait for the money to be dispensed. Sounds like an easy way to get cash quick and repay it over time. Unfortunately, many people forget to review the terms and conditions of their credit card agreement before taking out a credit card cash advance and are unpleasantly surprised when they get their next credit card statement. Here are some things that you should know about a credit card cash advance before deciding to take one out.

Higher Interest Rate

The interest rate charged for a credit card cash advance is often much higher than the interest rate that you pay for purchases or for carrying a balance from month to month. The average interest rate for a credit card cash advance is currently 24 percent, with some lenders charging as much as 36 percent. While this is less than the rate you would pay to a payday lender for a two-week loan, it is considerably higher than what you would pay for a personal loan or to put a purchase on your credit card.

Interest Charges Begin Immediately

While purchases made on a credit card typically have a grace period before you are charged interest, the interest charges for credit card cash advances begin immediately. As soon as that money leaves the ATM, the lender is charging you interest on the amount withdrawn. Some people that are used to having a grace period for their purchases are shocked to find the interest for the cash advance on their next billing statement, even if they had already paid off the amount withdrawn.

Additional Fees For Credit Card Cash Advances

Credit card cash advances typically have an additional fee associated with them, over and above the interest you are charged for the cash advance. In many cases, that fee is 5 percent of the amount withdrawn. This would mean you would pay an additional $69 to take out a credit card cash advance of $1,000, even if you paid it off within 30 days because you would be paying $50 in fees and $19 in interest. These charges also apply if you use the “convenience checks” sent to you by the credit card company to pay expenses like rent or utility bills. Make sure that you know how much you will be charged before deciding to take out a credit card cash advance.

According to statistics from the Consumer Financial Protection Bureau, home equity represents a large portion of the average retiree’s net worth. Leveraging that home equity properly is an important part of an effective retirement plan. There is a variety of ways available to tap into one’s home equity, but one of the most popular ways is to take out a reverse mortgage. In April 2015, new rules were implemented to solve several previous issues often associated with reverse mortgages and make them more financially feasible for senior citizens.

Reverse mortgages are not the right financial strategy for everyone, so it important to know what you are getting into before you sign any paperwork. A reverse mortgage allows homeowners who are aged 62 and older to obtain a loan that taps into their home equity, giving them the ability to extract money from their home without losing their home in the process. The amount of money the homeowner gets from the loan is based on the value of the home, the ages of the homeowners, and the current interest rates.

There are a number of financial benefits associated with obtaining a reverse mortgage. As long as the homeowner continues to live in the home, the loan does not need to be repaid. The loans are non-recourse, so the bank extending the loan is only eligible to recoup the value of the loan, even if the home value exceeds the loan amount. On the other hand, the homeowner will not owe more than the value of the home if home values fall or the loan value exceeds the value of the home.

Properly utilized, a reverse mortgage can significantly improve a senior’s financial security during their retirement years. There are several different ways to obtain money from a reverse mortgage. Many people who take out these types of loans elect to go with a tenure option payment, which gives you a monthly payment for as long as you live in your home. You can also receive the money in a lump sum or have it issued as a standby line of credit, allowing you to borrow money when and how you choose. The choice made will depend on your financial situation, the amount of money needed, and how quickly you need to access the funds.

As part of the new rules, the government has added a financial assessment screening test to help determine whether potential borrowers can afford to enter into a reverse mortgage. Potential borrowers must demonstrate their ability to pay the additional costs of property taxes, fees, and insurance premiums using a calculation based on their current income and the amount of credit available to them. While this new requirement will disqualify some seniors that would have qualified before, the rules ensure that fewer seniors will find themselves in financial distress during their retirement years due to the taking out of a reverse mortgage.

A credit card can be a good financial instrument for managing your finances if it is used properly, but many of the people that accumulate massive amounts of debt do so by using credit cards irresponsibly. It is not that these people intend to get themselves into financial trouble, but the features of a credit card make it easy to overspend and difficult to pay off the debt. It is much easier to avoid the credit card pitfalls that lead to excessive credit card debt than to try to repair the damage to your credit rating and your finances afterwards. Here are some common credit card pitfalls to avoid if you do not want to wreck your credit rating.

Using Your Credit Card To Buy Unnecessary Items

Many people make the mistake of treating their credit card balance like it is extra money in the bank and use their credit cards to purchase things that they cannot really afford. This happens quite often with store branded credit cards as people rack up purchases of unnecessary items to earn rewards or use store discounts. If you cannot pay off these balances quickly, they will cause your credit score to drop and eat up an increasing amount of your income with interest payments on the debt.

Instead of using the credit card to purchase any item that catches your eye, ask yourself whether you really need the item and whether the item is so important that you are willing to pay more for it my placing it on your credit card. If the answer to both questions is no, leave that merchandise on the shelf and save your credit card balance to be used in true financial emergencies.

Trying To Take Advantage Of A Program You Don’t Understand

Credit card companies are geniuses at coming up with new programs and card features to entice more people into signing up for their credit cards. However, many of these advertised programs and features come with hidden catches that could cost you a lot of money if you do not understand that they are there. For example, many balance transfer and 0 percent interest on purchases offers are only valid for a few months, and if you do not pay off the balance within this time period, you could be hit with retroactive interest charges from the date of the opening of the account.

It is usually not a good idea to open up a new credit card just for the advertised promotion, but if you do choose to, it is best to have a plan in place for using the credit card before you even receive it. If you are transferring a balance to take advantage of a lower interest rate, make sure you can pay off the amount of the transfer well before the promotional period expires. If you are opening the credit card to make a large purchase with a 0 percent interest rate offer, pay it off as quickly as you can to ensure that you will not be paying interest on the purchase.