How to Use The Snowball Effect to Clear Out Your Debts

First, you want to start by collecting your credit card statements as you receive them in the mail. If you receive them online, then log into the creditor’s website and print your most recent statement from each company.

Using a pen and paper or using an spreadsheet program on your computer, write down the following information for each card:

1. The name of the card
2. The current balance on the card
3. The due date
4. The minimum amount due for your monthly payments.

Notice I didn’t ask you to record the interest rate. At this point, unless you have two or more cards with the same balances, the interest rate isn’t important when you use the snowball method to pay off debt. If you get to the point where you have two cards with similar balances, choose the one with the highest interest rate first. Once you’ve completed this step you can move on to the next one.

Next, sort the credit cards by the amount due, with the smallest balance first. This is because the snowball method of paying down debt requires that you pay off the bill with the smallest balance due first. This way you’re able to see progress quickly, which is important, because it motivates you to continue chipping away at those big bills when you can pay off individual cards quickly.

The third step, which is the most confusing, is to determine how much extra you can spare from your budget each month, to use to pay down debt. Pay the minimum amount due on all of your cards except the one with the lowest balance. Normally you’re told to always pay more than the minimum, but you’re only going to follow that advice for the card you’re paying off first.

For the credit card you’re paying off right now, pay the minimum amount plus the extra from your budget. For example, if your minimum payment is $25 and your budget allows an extra $20 towards credit card debt each month, pay the minimum balance on all of your cards, but pay $45 ($25 minimum + $20 extra) towards the first card. Follow this formula every month until you’ve paid off the first card.

That’s it! That’s the entire plan. Easy, right? But now you’re wondering what to do after you’ve paid off that first bill. I will tell you. You simply repeat the same process on the next card.

After you pay off that first card you’ll have a new card with the lowest balance. We will call this one Card Two. This time you’ll really be able to “snowball” your efforts because you’re going to pay the regular minimum balance to that card, plus the extra $45 that you were paying towards the card you just paid off. So if the minimum balance on Card Two is $30, you’re going to pay $75 each month towards this car ($30 minimum + $45 that you’re no longer paying towards the first credit card bill).

Every time you pay off a bill, you just add that payment to the minimum payment on the card with the lowest balance. Before you know it, you’ll be debt free.

Tips on Improving Your Credit Score – Using Online Monitoring

Improving your credit score can be done with little effort when using your computer and the Internet.

One can shop, do business transactions, research, learn and enjoy the world on the Internet. Savvy internet users can make new acquaintances and communicate with family and friends anywhere with the use of the computer and internet.

Nowadays, there is no need to leave the comforts of one’s home, no need to physically tire oneself out shopping in malls, and definitely no need to wait for days for letters and business correspondence to arrive via the postal service. Many consumers have traded snail mail for email and they have opted to even pay their bills online.

Consumers can now just access the internet and get the latest updates on their credit reports for a small fee and little effort. You can monitor all activities on your report through a monthly monitoring service.

Getting a copy of your credit report online is the most accessible way to get it delivered to you quickly, securely, and safely at anytime.

One of the benefits of monitoring your credit report online is the ability to detect errors that can be corrected before the lending institution reviews your history when thinking of making a major purchase.

You can review your latest payment history for errors and make sure the personal information in your credit profile is accurate. Many credit rating repairs are straightforward and easy and are the difference between a higher or reduced rate of interest.

Lending institutions also use monitoring to stay abreast of their borrowers’ credit profiles. This type of monitoring is used by the lender when offering additional and/or upgraded services to the clients.

Some online credit reporting advertisements that offer free credit reports and credit scores may turn out to be just scams that are phishing for your personal information. Others might offer you programs like free trials and after which will require you to pay a monitoring fee when the initial free period expires. Just be sure to do your due diligence when selecting to use any online service.

The best option for you is to look for legitimate online credit reporting bureaus which offer their services for a small fee.

The internet is indeed the absolute ideal place to obtain your credit information quickly. TransUnion, Experian, and Equifax are the three major credit reporting agencies who compile your credit information. Each agency has their own website for access to their services.

Under the Fair and Accurate Transaction (FACT) Act, at your request, each of the 3 major credit reporting agencies, will provide you with one free credit report every 12 months. However, these reports may not include your credit score.

The health of your credit history is important. Monitoring your account and improving your credit score whenever needed is beneficial to you. A good credit history can save you thousands of dollars on a major purchase in reduced interest rates.

CLICK HERE to discover other related articles on improving your credit score.

Credit Repair Tips – How to Remove Items From Your Credit Report

Having a good credit score is essentially cash in the bank. Good credit is the key to being able to borrow money from a bank at a low cost; or low rate of interest, so that you can use the banks money to purchase the things that you need, such as a home or a car.

It is extremely important that you actively monitor your profile from Experian, Equifax, and Transunion frequently; so that you don’t run into any surprises when applying for a loan. Now, in the event you may have negative items attributed to you, worry no more, because here we will show you how to remove those items and repair your credit score!

First tip is to find out what your credit report looks like. Start out by getting access to a free copy. Avoid websites that create their own version of a credit score. Scan through your free credit report to make sure everything that’s supposed to be on there reporting positively is… and that anything that looks like it shouldn’t be on your credit report isn’t. For example, what constitutes a negative item and why should it be removed? Better yet, are removing negative items legal? We all saw what happened to that poor women on 60 minutes two weeks ago who could not get a mortgage even though she assumed her FICO was excellent.

A negative item on one of your three credit reports could be a 30, 60, 90 late payment on a credit card or car loan, a collection account, a tax lien against a property that you own or any number of things along those lines. They may be legitimate items but the credit bureaus reporting of these items may be less than accurate… or factual shall we say. As a consumers we are protected by the “Fair credit reporting Act” and the “Truth in lending Act.” As such, we have the right to dispute or argue against any item on our credit report that may be deemed inaccurate.

Perhaps that 30 day late payment on your Visa card is reporting the wrong month it was late. Maybe the account number on the credit report differs from the sixteen digit account number on your card. Perhaps the debt was charged off and is reporting more than once therefore lowering your score. In any of these cases, you can simply write a detailed letter to each of the credit bureaus demanding that they immediately delete these items. Challenging negative items and ultimately removing them from each of your credit reports can go a long way towards increasing your credit score.

Credit Awareness for College Students

There are many and more college students who refuse to use a credit card, afraid that it will put them into instant debt. On the other hand there are some that are already ahead of the competition and building up their credit scores.

Need to know terms:

FICO: Fair Isaac Corporation, created what can be argued as the most “popular” credit scoring model

Credit Score:There are many different models of scoring credit however the one we are most concerned about is our FICO score. These scores can range form 300-850, the higher the score the better!

Experian: One of the 3 major credit bureaus we are concerned about

TransUnion: Also one of the 3 major credit bureaus we are concerned about

Equifax: Sounds like a shipping company like the rest but is also one of the 3 major credit bureaus.

AAoA: Average age of accounts

Hard Inquiry: This something that falls on your credit report when someone who is not you checks it (with your permission of course). This will bring your credit score down a couple of a points. These typically show up when you: apply for a credit cards, loans, credit increases and things of that nature.

Soft Inquiry: This is when you look at your own report. Businesses cannot see this but they will see a hard inquiry.

some things to keep in mind with credit:

1) credit is not free money, you must pay it back
2) APR will not matter if you make your payments on time and in FULL
3) the earlier you start building your credit the better

So what is this credit report I keep talking about:

Your credit report is something that contains all the information about your credit history and account information/standing. It will tell a business and you how much credit you have available to use, how long you have had it for (credit history), if you make your payments on time, how much credit you are using (credit utilization) and if anyone is after you to collect a debt as well as any public records such as judgements, liens and bankruptcies to name a few. The 3 major credit bureaus I named earlier, Equifax, TransUnion and Experian compile these reports from the services you use such as a credit card company or bank.

Why should I care?

They are just three digit numbers you say, not scary at all. Wrong! Those three digits are much more important than you might think and can affect your life in a few ways. Lenders use this information to determine how likely you are to repay your loan and if those payments will come on time.

1) No lender will give you a loan if your credit report is nonexistent or says something bad about you.

2) If you manage to get a loan (hard inquiry when they check your report) your interest rates will be very high compared to what you could have had.

3) Your ability to rent and buy a home depends on your credit report. Why should anyone give you a loan when you don’t have a credit report, no credit history to say “Hey, look at me I am responsible”.

4) Your insurance rates will vary with your credit report, the better the report the greater the rates

5) The jobs you can get, some employers do check your credit report as it shows what kind of person you are among other things of course

OK, OK, I give in, how is my score calculated.

Payment history – represents 35% of your credit score
Amounts owed – represents 30% of the score
Length of credit history – 15% of your total
New credit – 10%
Types of credit used – 10% (credit cards, student loans, auto loans, etc)

The exact scoring model is a secret of the company

What is not included in my score? Good question.

1) Any type of credit counseling you may be in
2) Your age
3)any information not on your credit report
4) Any information that provides no value of discerning your credit performance
5) Where you live
6) interest rates on a credit card or loan
7) rental agreements, child and/or family support
8) Salary, title, occupation, employer, or employment history though if you apply for a credit card or loan they may ask you where you work for their purposes not the credit bureaus
9) Race, color, religion, ethnicity, sex and marital status
10) Promotional inquiries from credit card companies, administrative inquiries from lenders to review an account and your own inquiries

Where can I go check this?

If you want it for free you can go to: https://www.annualcreditreport.com and do not worry it is safe, the website was setup by the 3 major bureaus due to law. One catch with that is while you will see the report you will not get to see your score.

If you want to see your score you have to pay for it sadly and it can cost $14.00 – $20.00 + to see it. There is http://www.myfico.com as well as your banks which may offer a paid service and the 3 bureaus themselves.

On the other hand there are free credit report services that use a different unofficial formula to create a score. Now while these scores are not used by any business they provide valuable information on what is bogging your score down and how to fix it up as well as what everything you are doing right now is effecting it. Go check out credit.com or my favorite and definitely the most informative creditkarma.

One of my parents have a credit card, can I use theirs?

Yes. You can be added to someone’s card as an authorized user. This means you will inherit the cards history, credit limit and payments on time as well as some other things. It can be extremely helpful if you are starting out or if they have a long credit history and a very high limit. Only 2 of the major bureaus count authorized users towards your credit score.

Why are all 3 of my scores different?

When you go apply for a credit card, loan or whatever the case may be each lender may not pull your credit report from the same bureau though all three give you a score. This means one bureau you may have 0 hard inquiries while the other may show 99. In this way your scores can vary.

Do my hard inquiries ever go away!?

Yes they will go away in due time. Hard inquiries will fall off 2 years from the date they were requested in cases of credit cards. For account reviews such as a credit limit increase they will go away in one though in all cases the impact of the inquiry lessens after 6 months. They are nothing to be afraid of and the amount of points deducted are typically small.

If you are going to look for a loan there is an exception so you can “shop” for the best interest rates. All inquiries made within 14 days will be counted as one.

I hope this information has been of some use to use. More will come in the future!