Are you facing problem in securing a line of credit in spite of making regular bill payments? If yes, then it may be because there are certain items on your credit report, which are making the potential lenders worried. Read through the article to gather knowledge about 5 items that may persuade lenders to not lend you money.

5 Scary items on your credit report

Here are the 5 items that may terrify lenders and make them run away from you:

1. Short sale: Homeowners often go for short sales when they are unable to repay their mortgages through loan modification or refinancing. Most of them assume that short sales won’t affect their credit adversely. But this is not true. In a short sale, you’re actually settling the debt by paying much less than what you owe. The lender will report the deficit balance on your credit report as “balance owed“, which in turn can hurt your score.

2. Multiple loan applications: There is nothing unusual if you take out a credit card in a month. But if you take out 4 credit cards within a month or two, then it implies that you can’t manage your finances well. Lenders will surely not like the fact that you’re requesting each person in the city for a plastic card.

3. Continuous minimum payments: Do you make only minimum monthly payments on your card? If yes, then you need to change this habit. Lenders regard the consumers making only minimum payments as risky borrowers. They assume that the consumers are making minimum payments due to financial difficulties. Lenders would obviously don’t want to lend money to the consumers who are going through money troubles.

You should try to make more than the minimum payment on your credit cards. It will not make much difference if you make minimum payment once in 3-4 months. For example, if you pay the minimum amount after Christmas, then it is completely understandable. But if you always make minimum payments on the cards, then it will be a red signal for the lenders. They’ll think that you don’t have the financial resources to make the full payment.

4. Too many credit inquiries: A lot of consumers face serious problems in getting credit cards. These consumers submit applications to numerous credit card companies for increasing the chances of securing credit cards. There have also been instances where the consumers have applied several times in the same company.

Lenders check your credit report each time you apply for a credit card or a loan. So, this means that the credit inquiries will increase as you go on submitting multiple applications to the credit card companies, which in return will hurt your credit score.

A good trick to avoid this problem is to submit all the application within a period of 14 days. This is because the scoring models consider all these inquiries as a single inquiry. However, you can take advantage of this facility only when you’re applying for a mortgage or an educational loan.

5. Payday loans: Usually, people take out payday loans when they are in urgent need of money. In most cases, consumers go for these loans when they are laid off or underemployed. The interest rates on payday loans are higher than that of the credit cards. So, these loans are considered riskier than that of the credit cards.

When you take out a payday loan, it gets reported to your credit report. Your debt balance increases due to this loan, which in turn reduces your available credit. This makes a negative impact on your credit score. Lenders will always check your score before approving your loan application. When they come to know that you’ve low credit score, they may refuse to lend you money.

Finally, you should try your best to avoid co-signing for a loan. The reason is, as a co-signer you’re legally responsible for a loan. If the original debtor defaults on the loan, then you’ll have to pay it off. Moreover, the delinquent account will get reported on your credit report. This may in turn go against you when you apply for a loan in future.

If you are drowning in debt and are desperately trying to reduce it, then it is quite possible to commit some mistakes without fully understanding the possible implications of them in future. You can get into further financial problems by committing some awful debt reduction mistakes. These mistakes can sabotage your best efforts to reduce your debt burden. This is why it is important to avoid committing some mistakes when you are in the midst of erasing your debts. Have a look at the article to gather knowledge about 5 debt reduction mistakes that you should avoid by all means.

Debt reduction mistakes you must avoid

Go through the following lines to know about 5 debt reduction mistakes that may aggravate your financial situation:

1. Creating unrealistic debt repayment plan: Creating an unrealistic and impractical debt repayment plan will be a big mistake. You can’t clear debts in one instant just like you can’t lose 10kgs of weight in 1 day. It will take a few months to change your lifestyle to reduce your debt level. Make sure you make a debt payment plan that will help you fulfill your debt obligations with ease.

2. Managing all the debts simultaneously: You should not try to handle all your debts at the same time. When the debt amount is quite huge and there are multiple accounts to deal with, it will be quite problematic for you to manage them simultaneously. So, it is advisable to focus on 1 debt each time. Your sole focus will be to eradicate one debt at a particular time. This will help you achieve steady progress.

3. Canceling credit cards: It is better to not cancel the credit cards in a hurry. Canceling credit cards with balances will not solve your problem. Rather it will aggravate it. The reason is, it makes a negative impression on the credit card company. You will not be the customer of the credit card company after closing the accounts with them. Thereafter, the credit card company will have less interest to work with you. So, you should not close your credit accounts until you have paid off the outstanding balances.

4. Taking out second mortgage: A lot of consumers consolidate debts through second mortgage. But studies have shown that most of these consumers end up getting into credit card debt and mortgage debt problems in future. Some of them have even lost their homes to foreclosure. This is why, it is better to think rationally before consolidating debts through second mortgage. You should check whether you can afford to pay off the credit card debt without using second mortgage. Ask yourself whether you can make mortgage payments timely. This is because your home is at stake. If you can’t make the required payments on second mortgage, then it is better to not pay off your credit cards through it.

5. Making large purchases: You should not make huge purchases with your credit cards when you are trying to eliminate your debts. If your television is damaged completely, then purchasing a brand new tv with credit cards will be a big mistake. Wait till you eradicate your debts completely. Once all the debts are repaid, you can gift yourself a television as your reward.

Apart from the above mentioned points, you should never reveal your account details to anyone over phone. It may happen that you get a call from a collection agency regarding a debt of yours. They may offer you a fantastic settlement offer and ask your savings account details. You should not give them your access details so as to grab the offer. The reason is, the moment you give them your account details, the collection agency will start debiting amount from your account without even informing you. You can tell them that you will make the required payments through online banking. But you should start making payments only after receiving a written settlement agreement from them.

Do your friends, family members, relatives, give you financial tips day and night? Do you follow those tips rigorously? Are you sure that the tips will help you in leading a financially fit life? If no, then it is crucial for you to distinguish between the good financial tips from the bad ones. Otherwise, a day may come when you’ll find yourself in financial mess as a result of acting upon bad financial advices. Read through the article to get acquainted with 4 common financial tips you must not follow.

Financial tips you must not follow

Here are the 4 financial tips that you must not follow by all means:

Stay away from plastic cards: You may come across various people who will tell you to avoid credit cards like plague. They’ll advice you to not use credit cards by all means. However, acting upon this advice will not help you in the long run. The reason is, plastic cards help you build credit history. So, if you don’t use credit cards, you may find it extremely difficult to get loans or line of credit. Lenders prefer to lend money to those consumers who have good credit history, which is only possible when you use credit cards responsibly for a long time.

Avoid 401(k) loans: Most people will tell you that that using 401(k) loans to clear your unsecured debts will be a big financial mistake. However, financial experts are of the opinion that withdrawing money from 401(k) account to repay your debts is not a bad idea at all. Rather it may help you save money. This is because if a lot of individuals find that they can use 401(k) loans to meet their emergency expenses, then they can be tempted to deposit more money in their retirement accounts. So, if you know how to use 401(k) loans efficiently and a good plan to repay it, then this may be a wise move.

Repay debts through home equity loans: Apparently, this may not seem to be a bad financial tip. After all, the interest rates on the home equity loans are lower than that of the plastic cards. However, several financial experts are saying that it is a bad idea as it makes you vulnerable to short-sale, foreclosure, bankruptcy in the event of non-repayment of the loans.

Take out educational loans: One you start preparing for your higher education, your relatives and friends are most likely to advise you to take out student loan as it will help you secure your financial future. Some people will even encourage you to take out a huge student loan to opt for the best private college. Well, contrary to the popular notion, it is the worst financial tip you can ever get. In the present circumstances, most graduates are starting their career with big student loan debt on their shoulder. Rather than going for expensive private colleges, opt for the low cost colleges. You can even enroll in the community colleges as they are quite affordable. You won’t have to take out student loans for meeting the college expenses.

Finally, don’t listen to the people who encourage you to take out a huge mortgage loan to purchase a biggest mansion you have ever seen. The housing market has not yet recovered. The price of the houses is not appreciating much. Apart from that, if you can’t afford to pay the loan interest rates, very soon you may find yourself engulfed with debt.

It often happens that we give our credit cards to various individuals without thinking the implications of doing it. These are the individuals whom we trust blindly. But are we doing the right thing? The reason is, the credit counselors are of the opinion that if we really want to protect our credit accounts, then it is better to not hand over credit cards to certain individuals. Now, who are these certain individuals? How do we distinguish them from the others? Read along to know about them.

People to whom you must not give your credit cards

You should try to avoid giving your credit cards/store cards to the following individuals.

1. Credit scam investigators: If a police officer or a credit card representative asks you to reveal your credit account details to verify your identity over phone, then know for sure that it is a scam. The reason is, a genuine credit scam investigator or a police officer don’t work in this manner. It is said that most consumers give out their credit card access details as these scammers/callers have already made some research on them. They gather information about you from various lists. Then they will call you and reveal some key details about you to make you believe them. If you receive such a call, then either terminate the call or directly call the customer care representative of your credit card company.

2. Friends or relatives: It is most natural to assume that your friends, family members are the most trustworthy people. But sometimes, these are the people who misuse your trust. According to a recent survey, it has been found that friends and relatives are responsible for around 13% of identity theft cases. So, lending your card to your buddy is not at all a good idea.

3. Person working for you: Sometimes, we give our credit cards to the people who work for us for purchasing supplies. The person can be your cook or your personal assistant. They may be outstanding in their work but it is vital to remember that they’re after all strangers. You don’t know what is going in their mind. So, it is better to not hand over your credit cards to them.

4. Debt collector: If you have defaulted on an account and are working on a payment arrangement with a collection agency, then never make payment through your credit card. Pay the collector in cash or via money order.

Finally, several parents reveal their credit account details to their children. Never, ever do this mistake. If your kid is addicted into playing online games and asks you to give your credit card access details, then you should politely refuse to do it. This is because an hour of playing online games can cost you a lot of money. Your credit card bill can even run up to $800, which is a great amount of money. Your child may not understand about these hard facts now and may end up cost you a huge bill. Surely, you would not like that to happen to you.

It is true that all of us make personal finance mistakes in life. But there are some mistakes that may have a lasting impact on your finance. Therefore, it is important to avoid them as much as possible. Glance through the article to know about 5 personal finance mistakes you should avoid.

Personal finance mistakes you should avoid

Here are some major personal finance mistakes you should avoid:

1. Indulging into frivolous spending

Many people indulge into unnecessary expenses such as eating lunch and dinners in restaurants, watching movies at theaters, purchasing clothes every week, etc. What they don’t realize is that this type of spending drains their savings accounts gradually. Hence, it is important to curtail these expenses as early as possible.

2. Using credit cards for making all purchases

Several people have the habit of making purchases through their credit cards when they have adequate cash in their pockets. They don’t realize that companies charge high interest rates on credit cards. So, more you use credit cards, your bills add up. Hence, it is better to make all the purchases in cash. This will also help you avoid overspending. Read the rest of this entry »