Having a good credit standing will enable a person to enjoy most things in life compared to the person with a bad credit record. And the sad truth is that, what’s being said on the credit report of some individuals are sometimes not true due to some errors, which could really happen, according to some reports. Credit card application denials, high interest rates on mortgage loans and other negative and embarrassing impacts of a bad credit record could make a toll in the emotions and lifestyle of the individuals involved. But having a low credit score can now be fixed with the help of a good credit repair law firm.

Sometimes, people are wary of getting help to get their credit ratings up, and they do the process themselves. Some have succeeded but oftentimes, the process is long. That’s why people often choose to get the help of a reputable credit repair law firm in order to fix their credit standing or increase their credit rating. The fees of these firms vary considerably and what people are saying about their services also counts. So anyone wanting to find firms in getting their credit status fixed, must also study these firms first and listen to what others are saying in order to get the full advantage.

There are many credit repair law firm that offer excellent services to anyone with low credit score and those actually needing to clean their report. The process could take months, and the firms have monthly fee charges ranging from $9 to $60 or even more per month. Other firms would offer their consultations free of charge, and would extend adequate time to explain the whole process to their clients. Most of them do all the work for their busy clients and sometimes deliver increasing credit scores in less time than expected. Others were able to process their loans with lower interest rates right after their lawyers worked on their cases and many credit card applications were granted.

People who got bad credit reports in the past are especially those needing their services. The bad credit standing for them came when they were out of job or when they were unable to pay their credits due to some emergency situations. Once it was recorded as such in their credit reports sometimes it takes years before it gets clean again, even after the payment of such credits.

It is not only people with bad credit reports who go to these firms. People who need to increase their credit ratings also seek help from these firms. It is important for them to have a high credit score for the ease and convenience of getting their transactions done faster. They could process their car loans or mortgage loans or even get apply for credit cards faster and without much fuss. They could also avail of low interest rates for those loans due to their high credit scores as credit companies have faith in their capacity to pay the said loans.

If you’re a long time credit card holder, you might as well be more familiar with the term “balance transfer”. But if you’re just a beginner in the field, don’t be surprised if the first thing you see, when you wake up in the morning, is a messed up credit card bill on your mailbox.

If you are not sure what to do, you might panic. How can you get out of the muddy pit that you’ve led yourself into. First of all, credit card companies have different rules but very manipulative schemes. There is such a thing called “balance transfer” and it may help you solve your problem with your messed up debt in your current credit card. But mind you that this is not always an opportunity, used incorrectly it’s actually another bottomless pit you could get trapped with.

What is a balance transfer? It’s like salvation when you have nowhere left to go. If you can’t pay up to your first credit card company, you can choose another card company which will pay for your debt. As a result, you only transferred your debt to another company but maybe with a less or 0% interest rate. This time, you’re working to pay for a debt you owe on another company.

For example:

Debt on Company A = $3,500
Debt on Company B = $1,500
A new company (Company C) offers a 0% interest rate for 12 months regarding balance transfer.
The next day you ask Company C to transfer your debts from A and C. It will then pay Company A, $3,500 and Company B $1,500.
Company A and B are now free of debt, but you now owe Company C a total of $5,000 at 0%

The company that let you transfer your current debt from the previous one can offer you as low as 3% or even down to 0%. But you shouldn’t be blinded by these schemes. If you’re not sure how to handle these things, you should ask someone who knows, or research and learn. Usually they offer low rates to attract clients, but these things have some strings attached to it. Words are rather deceiving. The real intention is to drag you into a situation where you have no other choice but to gain more debts and pay more interest. Pathetic! You need to understand how things work.

It sounds so convincing and cool, but it’s not. Please bear in mind that you must never ever spend on a balance transfer card. Whatever you do, don’t spend on it or else your 0% would seem rather useless. Don’t spend, shift balances, or withdraw cash. These are some of the transaction types that you can do with your card. But it’s not the transaction that gives you the trouble; it’s the interaction that’s happening behind it.

Building a good credit history is mandatory so as to lead a hassle free life. Usually, financial organizations refrain from entertaining borrowers with bad or low credit scores or provide loans at higher interest rates. Insurance companies charge higher premiums for such persons. Persons with low FICO scores need to even pay higher deposits for getting a phone or utilize other services.

In case anybody has bad credit scores, it is very much required to take adequate control measures so as to improve them. Below mentioned are some important tips for improving credit scores.

1.Check your credit reports: Credit reports or credit scores are determined based on certain factors that include the past payment history of the individual, the amount one owes as credit and the type of credit one has got or applied for. Also, a person is eligible for getting one free report each year from each of the three credit-reporting agencies. One should always remember to check the credit reports carefully. Any errors or mismatched information in the report must be duly notified to the respective credit-reporting agency along with proper evidence. Consider this fact. One single late payment if reported to the credit-reporting agency, can affect the credit scores by almost 100 points, particularly for those individuals with higher credit scores.

2.Next important tip is to ensure that all the bills are paid on time. This includes aspects such as library fines or parking tickets.

3.Bankruptcies also affect credit scores. In case any individual is facing such a situation, the best strategy is to have consultation with a financial management service or a credit counseling service and find ways to avoid bankruptcy. Any such consultation doesn’t affect the credit scores. An important fact is that bankruptcies are displayed on the credit history of a person for almost 10 years.

4.Do not apply for more credit cards or loans. Many people do not know the fact one single credit inquiry can reduce the FICO scores by 5 points. In case one wants to compare quotations from different companies before obtaining a mortgage loan, best strategy is to go for shopping within a specified time limit where all the credit inquiries are considered as a single unit. Information about this can be obtained by calling any of the credit reporting agencies.

5.Never try to cancel any existing credit source. Older credit accounts ensure long credit history of an individual.

6.Another strategy to improve credit scores is to try and use credit cards as sparingly as possible. Always limit the spending potential up to 30% of the available credit limit. This is because excessive spending is considered as a negative factor.

FICO scores do have a significant impact on the overall social life of an individual, right from obtaining a mortgage loan to get a home on rent. Recently, having good credit scores is becoming a prerequisite so as to obtain a good or high paid job. By avoiding the importance of FICO scores and failing to implement appropriate credit control measures, one might end up losing thousands of dollar every year and also many more opportunities in life.

You’re better off using credit cards if:

* You’re looking to build up a good credit rating
* You’re responsible with paying bills on time
* You pay off your entire bill amount every month instead of just the minimum amount due
* You carry more than one card and are able to compartmentalize your purchases according to work, personal, travel or similar categories, and pay off all the cards each month
* You’re looking for borrowed cash every month without having to pay an interest. You get to keep the money you have, and pay back your bills with your next salary.
* You want to keep track of your purchases.
* You want the incentives and gifts that credit card companies offer.
* You are aware of the APR, grace period and other terms of service before you sign up.
* You never use it for a cash advance – this transaction carries a high interest rate which kicks in immediately.
* You take advantage of co-branded cards where you get points for spending at their outlets.
* You are careless with your cards – while a debit card can be used to steal your money if it falls into the wrong hands, a credit card is more secure in that you can report it when it gets stolen and cut your losses. However, you can minimize your losses to $50 if you report your card or PIN as stolen within two days of discovering the theft.

You’re better off using a debit card if:

* You tend to splurge without a thought for the morrow when you go shopping.
* You cannot seem to pay your credit card bills on time and end up paying an interest every month
* Your credit card debt is accumulating exponentially
* You’ve had bad experiences with your credit cards
* You need to withdraw cash from your account at the ATM
* You are careful with your card and your PIN. Ensure that no one is watching when you swipe your card and enter your PIN when purchasing something.
* You’re using it to teach your child good spending habits.

At the end of the day, it’s your temperament, responsibility quotient and buying tendencies that count when you choose either a debit or credit card. Some people opt to carry both and enjoy the best of both worlds, so if you’re level-headed and understand the way both cards work, you could do it too.

This post was contributed by Kimberly Peterson, who writes about online accounting degrees. She welcomes your feedback at KimPeterson2006 at gmail.com

1. The most important difference with respect to debit and credit cards lies in their definition itself. Debit cards are primarily related to the savings account of the customer. Whenever any individual uses a debit card for a specified amount of money, the same amount of money is debited from his/her savings account. Hence, debit cards can also be termed as secured cards. With a debit card, one can only withdraw or shop for the amount that is present in the savings account. In case of credit cards, card issuing bank provides credit to the customer that must be repaid within a specific period of time.

2. With a credit card, transactions can be achieved without any hassles. The same doesn’t hold true for debit cards. This is because if anybody wants to rent a car or reserve a hotel room using a debit card, there are chances where the transaction can be put on hold by vendors until the transaction gets processed and amount gets cleared. Also, the amount of money that is put on hold increases with the value of purchase. In case the savings account doesn’t have enough balance, there are chances of paying for overdraft charges. Using a credit card, there are no such risks.

3. Another disadvantage associated with debit cards is the amount of time taken to process the transaction. In case of debit cards, this time is usually 2-3 days. Also, this depends on whether the amount is present n the savings account or not. In case of credit cards, the transaction gets cleared the moment bill is submitted to the bank for clearance.

4. Debit card transactions, if carried on a swipe machine issue by a different bank, can result in transaction charges because the validity of the customer is established based on the PIN. Normally, these charges are between 25 cents to $1. With a credit card, transactions are usually “signature-based”. As a result, one can avoid such charges.

5. Rewards offered on a credit card are much more in comparison to those offered on a debit card. Some of these rewards include air miles, cash-back bonuses, discounts on purchases and gasoline miles.

6. Only certain banks offer debit cards that are internationally valid. Also, the amount of money that needs to be deposited in the savings account to get an international debit card is much higher. However, almost every credit card can be used internationally.

7. Another danger associated with plastic money is the risk of scams. If the information on the card is not protected carefully, it can be used for fraudulent purposes. However, credit cards do hold certain advantage in this regard. In case of any identity theft involving credit cards, one has to pay an amount of only $50 irrespective of whatever may be the amount that has been stolen. With debit cards, users end up losing the entire amount that has been used in instances of fraud and unauthorized purchases.

Balance transfers allow a credit card owner to transfer the balance on their existing accounts into a new credit card. Many credit card issuers offer this service for free to attract new customers. But it not only does wonders to the credit card company’s business, it can also be good for you.

Here’s how. By transferring the balance of your old credit card into a low or even zero interest rate credit card, you can save hundreds and thousands of dollars on interest fees. Even more, some credit card issuers offer an interest-free period, which is usually from six to twelve months, where the company lends you money for free and without interest. Again, this will save you a lot of money on interest charges. Other incentives also include loyalty points. And the best part is, the process is painless and quick, and can be concluded in just a matter of hours, at the least.

Now, with all the goods laid out in front of you, it might seem a good idea to go for balance transfers right now. But before you do so, there are things you have to keep in mind to make sure you make the most out of it.

Be smart in using your credit card. Just because you don’t have to pay interest for a certain period of time doesn’t mean you go shopping-crazy. Make sure that you are able to pay off your debts or at least switch to another credit card before the grace period is up. Otherwise, your purchases will catch up with you and you will be charged the full interest rates after the grace period.

When you’re offered a 0% interest rate, make sure that the rate is guaranteed and will stay that way once you receive the card. And since other companies charge you fees for every balance transfer, read the fine print to make sure 0% stays at 0% and free means free.

Don’t overlook other features of the credit card. Even if one company catches your attention because of the low rates, don’t ignore certain features such as fraud liability coverage, cash-back plans, and no annual fees. Shop around and don’t limit your criterion to the lowest rates.

Keep track of the time. If you pay late even just once, the low introductory rate might be replaced with a less desirable rate, and you could also be charged a penalty fee. And, make sure you take note of when the 0% introductory rate will end. This is so you can or pay the balance of your purchase without interest or transfer the balance to yet another card before the full APR rate kicks in.

Balance transfers on credit cards really help. Just don’t do it too often because credit card issuers can catch on and it might hurt your credit and make you look bad to other credit card companies. After all, who wants to work with someone known to split once the teaser offer ends?

What exactly is a credit score? A credit score can be rightly described as a number that represents or indicates whether a person has the ability to manage his/her finances or not. Credit scores have significant effect on almost every lending decision. Although there are different ways of determining credit scores, the most universally followed approach is the one that has been developed by Fair, Isaac and Co. In this system, the credit scores of an individual are reported in the form of FICO scores and are normally present in the range of 300 to 850. Higher the credit score of an individual better is his/her credit worthiness in the market. Also, higher FICO scores suggest that the individual is well-versed with his/her financial management. Getting scores greater than 800 is almost impossible for anybody. Hence, one can feel assured if the scores are anything higher than 660.

There are certain criteria that are considered while calculating the FICO score of an individual. Some of these include

• 1.Past Payment History: This includes whether the individual has any past history of delinquency or has ever failed to make payments in the past or not. Higher number of failed payments in the past greater is the chance of repeating the same in the future.
• 2.Type and amount of credit: Another criterion is the amount of credit an individual owes and also the type of credit. Individuals who had reached close to their maximum limit on their credit card are considered as less credit worthy. Also, individuals depending entirely on their secured credit cards are also considered as risky in comparison to those with revolving payments on their loans.
• 3.Age of the credit: Also, persons with longer credit age are favored in the Fair Isaac system.
• 4.Under the Fair Isaac system, higher credit requests are considered as negative. In this system, individuals are considered risky when they apply for a greater number of credit cards, loans and other type of debt instruments within a very short period of time.

Each one of these criteria is given certain points based on their fulfillment. All these points are included in a formula and the FICO scores are determined. The credit scoring formula developed by Fair Isaac Corp is used by all the three major credit reporting bureaus in U.S including Equifax, TransUnion and Experian. However, the fact is that the scores provided all these bureaus with respect to an individual are not the same. The reason behind this is that all these three credit-reporting agencies may or may not receive the same information. Hence, it is important to get the FICO scores from all these three agencies whenever anybody wants to evaluate his/her personal credit ratings.

FICO scores are relative numbers calculated on the basis of certain factors. The entire objective of a FICO score is to determine whether or not an individual has the capacity and the required intention to pay back the credit. Many tend to consider a FICO score as a simple number. However, an important factor that one should remember is that if these scores are not maintained properly, one might end up losing hundreds or thousands of dollars by paying extra for home loans, car payments, credit cards or other utility bills.

Credit Monitoring Service: Under this service, all the credit card transactions are regularly monitored including the credit report of the customer. Any changes are duly notified to the customer with the help of customized alerts. Also, all the data is regularly shared with all the major credit bureaus.

Identity Theft Insurance: The most commonly occurring credit card fraud is identity theft. As per the records available with Federal Trade Commission, identity theft cases account for almost 25-30% of credit card frauds. The best way to guard against any financial damage that is caused to a customer as a result of identity theft is to get insured under identity theft insurance policy. All the costs including the legal fees or even the phone bills are reimbursed. In fact, this clause can be added to even a homeowners or renters insurance policy by paying a small amount of money.

Photo Security: Another good way of monitoring the credibility of a credit card is to have your photo on top of the card. Most of the companies offer this service. Photo security would prevent thieves and other people from using the card at any of the sales counters. Also, this is a very effective security measure even if one manages to forge a signature.

Purchase Monitoring Service: This benefit is offered by some of the major credit card companies such as American Express, Discover, MasterCard and Visa. Interestingly, this service is available to customers at absolutely free of cost. Under this service, past purchase history and the existing purchase behavior of the customer is regular monitored by the card issuing bank. Any irregularities in the card transactions are immediately notified to the customer. Also, there are chances of freezing the credit account until and unless confirmed by the customer as legitimate. In case of any fraud, the entire transaction gets canceled including the card number. Another card is issued by the bank to the customer as a replacement.

Temporary Purchase Numbers: Again this feature doesn’t involve any charges and is offered all the major credit card companies including Bank of America and Citibank. In this service, a temporary or virtual credit card number, which is linked to the customer’s actual credit account, is provided to the customer so as to complete the transaction. Even the amount is specified in this virtual card and can be used only within the limitations specified by the customer. Once the transaction gets over, the card becomes invalid. This service is exceptionally beneficial for realizing online purchases.

Opting for all these security measures is entirely at the discretion of the customer. However, one should remember that most of these features are available to customer at certain fees.

1) Do Your Research

Once you‘ve decided you want an airline rewards card, you need to spend time doing a little research to find one that will give you the most rewards based on how you personally use a credit card. There are a lot of programs out there. The most popular for airline rewards are the co-branded cards. These cards have the name of the airline and the name of the credit card institution that supports the program, such as Visa, Discover or Mastercard.

Find the card offering the best dollars to mile ratio. Most airlines offer a free trip in the contiguous United States for every 25000 miles. There are even bonus miles offered at the time of signing- with some travel rewards programs offering a free companion ticket when you pay for one using your credit card.

Pay close attention to what are considered “eligible dollars”. Regular purchases count towards rewards earnings, but balance transfers, cash advances, returns, interest fees and finance charges do not count. Look to see what the restrictions are: is there a limit to the number of miles you can obtain in a year? Are there black out dates on days you want to redeem mileage and travel? Are there annual fees? There are websites that rate frequent flyer cards and other travel incentive rewards programs offered by various credit cards. Have a look before you sign on the dotted line.

2) Don’t Sign Up for More than One Program

In almost every situation, it’s a waste of money to try and have more than one travel rewards program. You’ll end up spending more money to get your miles and you could end up deeper in debt than when you started if you aren’t careful! It’s better to select a rewards program that offers more of the rewards you want than to try and use two or more credit cards to build different types of rewards.

Make sure you pay off the balance on your rewards credit card in full every month in order to gain the most rewards. If you carry a balance from one month to another, chances are the amount you pay in interest and finance fees will be more than the amount of rewards you’ve earned that month. Make sure your favorite stores, restaurants and other hangouts accept your rewards card so you know you can use it when you make purchases.

3) How Do You Accumulate Travel Rewards?

You’ve got your card, now what? Miles and travel incentive rewards can be accrued through non-travel purchases. Years ago, the only way to earn airline miles was to make an airline ticket purchase, but today, more than 50% of mileage points and other travel incentives (like hotel stays and car rentals, for example) are earned without flying or traveling. You can accumulate travel rewards through every day shopping, eating in restaurants, long distance phone service, and mortgage and stock trades. The most popular way to earn rewards is through credit card usage. Most of us have about $1800 in monthly expenses that the card could be used for, which can quickly add up to free airline tickets or other travel based rewards.

With mergers and acquisitions happening every day, your favorite airline may be gone tomorrow. Airlines are not obligated to redeem your miles or transfer them to the parent company, so watch carefully for any changes, restrictions or closures. Know your rights.

4) Redeeming Your Miles and Travel Rewards

If you can choose off season and mid week flights you’ll have more options and your miles will go further. If you don’t mind layovers, you can use the extra miles and rent a car (using travel rewards, of course) to take you the rest of the way to your destination. Use your miles or rewards points to make your stay more pleasurable by upgrading your hotel room, getting a better rental car or finding other non-merchandise perks that you want? Go for it! Enjoy yourself. Reward yourself. Isn’t that the point?

* * *
Debbie Dragon is a freelance writer who provides articles for CreditorWeb.com. She frequently writes about credit cards, rewards programs, and general personal finance issues.

The average American has anywhere from five to eight credit cards and can carry a debt of more than $20,000, and for some the number is even higher. Learning the ins and outs of credit management may save you from a bleak financial future and thrust you into the light of financial freedom.

Ignore the Rules of What Financial Institutions Deem Your Acceptable Debt Level

In financial matters, debt to income ratio is a deciding factor in the level of credit you receive. You can carry debt of at least 25% of your income, but is that a wise decision? Keeping your debt to income ratio to a more modest 15% is always advised. Many people live from paycheck to paycheck and if something unforeseen should happen, the amount of debt you carry can send you spiraling downward financially. Just because a credit card has a spending limit of say $10,000, it doesn’t mean you have to charge that amount because as so many forget, the debt must be paid back and you are paying back far more than you borrowed.

Minimum Amount Due

Paying just the minimum amount due on your credit cards will have you beholden to the credit card company for almost your entire adult life. The amount is calculated to keep you paying for many years to come with a profit to the financial institution that is astronomical. Finding the lowest possible interest rate for your credit cards is often not enough. Paying above and beyond the minimum due will have you paying off your credit cards quicker and for a lot less money.

Keep Your Eye on Fees

If they can charge you, they will. Not only do you have to worry about late fees, you need to be aware of many of the other charges that financial institutions try and slip under your nose. If you lose a credit card you will likely have to pay a replacement fee. If you think you are not going to make the due date, paying by phone can cost you too. Credit cards are not required to tell you that the purchase you make is going to put you over your credit limit so you will end up paying over the limit fees until you pay down your debt to the acceptable level.

The convenience check offers you receive in the mail often come with a price tag as well. You may pay a higher rate of interest by using these “convenient” checks that are supposed to allow the card holder to relax and buy what you want and you may also be charged a fee for simply utilizing it.

Most of us don’t take the time to read the fine print when it comes to our credit cards. Being knowledgeable about the many hidden fees you may be charged may save you enough money to send your child to college. Don’t let the financial institutions line their pockets with your money; learn your lessons and charge responsibly.

1. Max Out Your Credit Limit: Though it might seem like a fun game at first, attempting to reach your credit limit as fast as possible should not be your goal. Don’t view the ceiling set by your creditor as a challenge that needs to be met. In fact, using over 30 percent of your spending limit will adversely affect your credit score, so it is best to avoid even sniffing distance of your limit.

2. Only Pay Your Minimum Monthly Balance: Interest on any remaining credit balance is compounded every month, so even if you pay the minimum on time every time, you are not managing your credit. Continue to pay the minimum each month and you may eventually pay off your debt, but you will end up paying two or three times more for your purchases than they are worth.

3. Don’t Pay Your Bills on Time: Many companies have harsh penalties, often twenty dollars or more, for being a day or even an hour late with your monthly payment. With online payment options that include automatic monthly withdrawals from your checking account, there is no excuse for incurring these exorbitant fees.

4. Pay Off Small Balances Before Big Ones: If you have more than one credit card (a dicey situation to begin with), you might be tempted to pay off the smaller balances before the larger ones. Though it might make you feel better to check a card off of your list, it rarely makes sense to pay off smaller debts first. Larger balances generate larger interest charges and associated fees, so make every effort to pay your biggest debt down first, even if it takes you a bit longer.

5. Use Your Card for Cash Advances: Though this option might seem like a lifesaver in a crisis, borrowing cash from your credit card company can lead you down a steep path towards financial ruin. The excessive fees and high interest rates associated with cash advances are not subject to a grace period and can result in debts that become increasingly difficult to rectify.

6. Use Your Credit Card Like an ATM Card: Borrowing cash from your credit card company is bad enough; using an ATM machine to do so is exponentially worse. Fees from your credit card company will likely be even higher for this type of transaction and the financial institution that owns the ATM will tack on their inflated charges just for good measure.

7. Cancel a Well-Established Card: It is best to retain strategic credit accounts, which are generally those that you have held the longest. Canceling older credit cards will make your credit history appear younger than it actually is and hurt your credit rating. Hold on to your well-established accounts, even if you rarely use them.

The preceding was a guest post from Heather Johnson, a freelance business, finance and credit writer, as well as a regular contributor for BusinessCreditCards.com, a site for comparing small business credit cards. She welcomes questions, comments, and freelancing job inquiries at her email address heatherjohnson2323@gmail.com.

Others have received the same offer, and I found some good discussion about the topic at Fat Wallet.

Many people are rejecting the offer. One of the reasons being that the new card has no credit limit, which can hurt your credit score. If you don’t have a credit limit, credit scoring companies often use your total balance as the limit. So instead of having a low credit utilization, you will have a high credit utilization (100%). And credit utilization accounts for 30 percent of your credit score.

If you receive the same offer, there are a few things to consider, and I recommend checking out the Fat Wallet discussion to compare the options. As for me, I think I will most likely reject the “upgrade”.

A woman in North Carolina started with a payday loan of “$50 or $100,” and before she knew it, she was getting one loan to pay another and had racked up $700 in high-interest debt.

These are only two examples of the many people who get sucked into the irresistible rollover gimmick of pay day loans. Friendly store managers reportedly call customers to tell them how easy it is to defer repaying the loan on time by simple writing another postdated check.

What they don’t explain is the concept of compounding interest. And, as I’ve mentioned before, those who understand compound interest are destined to collect it. Those who don’t are doomed to pay it.

Payday loans are short-term cash loans. Borrowers typically write a personal check for the amount borrowed plus the finance charge and receive cash or sign over electronic access to their bank accounts to receive and repay payday loans. On the next payday the loan and finance charge must be paid in one lump sum.

Payday loans can range in size from $100 to $1,000, depending on state legal maximums. The average loan term is about two-weeks and loans cost on average 470% annual interest (APR). Finance charges normally range from $15 to $30 to borrow $100. For two-week loans, these finance charges result in interest rates from 390% to 780% APR. Shorter term loans can have even higher APRs.

Borrowers who obtain payday loans generally have cash flow difficulties, and feel that they have few, if any, lower-cost borrowing alternatives. All they need to get a payday loan is an open bank account in relatively good standing, a steady source of income, and some identification. Lenders do not conduct a full credit check or ask questions to determine if a borrower can afford to repay the loan.

At the end of 2006, The Center for Responsible Lending reported about 25,000 payday loan outlets in the United States and annual loan volume of at least $28 billion, with almost $5 billion in loan fees being paid by consumers.

As the examples have shown, payday loans trap consumers in repeat borrowing cycles due to the extreme high cost to borrow, the very short repayment term, and the consequences of failing to make good on the loan amount. Consumers who use payday loans have an average of eight to thirteen loans per year at a single lender.

Under the Truth in Lending Act, the cost of payday loans must be disclosed to the consumer. Among other information, you must receive, in writing, the finance charge (a dollar amount) and the annual percentage rate or APR (the cost of credit on a yearly basis). However, in a Consumer Federation of America (CFA) survey of 100 Internet payday loan sites, only 38 sites disclosed the annual interest rates for loans prior to customers completing the application process, and only 57 sites quoted the finance charge.

Internet payday lending adds security and fraud risks to payday loans. The CFA warns consumers to exercise extreme caution when using Internet payday loan sites. According to the CFA, small loans involving electronic access to consumers’ checking accounts pose high risks to consumers who borrow money by transmitting personal financial information via the Internet.

Contracts from Internet payday lenders often include a range of one-sided terms, such as mandatory arbitration clauses, agreements not to participate in class action lawsuits, and agreements not to file for bankruptcy. Some lenders require applicants to agree to keep their bank accounts open until loans are repaid.

If you need credit, a payday loan is probably the last place you want to look. Consider other options first such as a small loan from your credit union or small loan company, an advance on pay from your employer, or a loan from family or friends. A cash advance on a credit card may also be a possibility, but you’ll want to understand the terms before going that route.

If you ignore everything I have just said, and still feel that you must use a payday loan, please, for the love, borrow only as much as you can afford to completely pay off with your next paycheck while still having enough left to make it to the next payday.

According to a Teens and Personal Finance poll conducted by Junior Achievement Worldwide, 11 percent of all teens now have credit cards. Of teens ages 13 to 14, 6 percent already have credit cards.

Many of these teens don’t know enough about borrowing to use a credit card, but issuers know a lot about them, and they want their business. Encouraged by the numbers, and the fact they have saturated the adult card market, issuers are eyeing post-pubescent, internet-savvy teens.

Some people think that if kids use credit cards while they’re still at home being watched by their parents, they will handle credit responsibly when they’re on their own, but giving your teens credit cards is a little like letting them use drugs early so that they won’t turn into addicts.

A better way to teach kids to manage credit is to have them start with cold, hard cash. Spending money is more real to kids when they have to count out the bills and look down into an empty wallet. To them, plastic is magic money.

FHA mortgage insurance also encourages mortgage companies to make loans to otherwise credit worthy borrowers and projects that might not be able to meet conventional underwriting requirements, by protecting the mortgage company against loan default on mortgages for properties that meet certain minimum requirements–including manufactured homes, single-family and multifamily properties, and some health-related facilities.

Section 203(b) is the centerpiece of FHA’s single family insurance programs. It is the successor of the program that helped save homeowners from default in the 1930s, that helped open the suburbs for returning veterans in the 1940s and 1950s, and that helped shape the modern mortgage finance system.

Section 203(b) has several important features:

Down Payment
Down payment requirements can be low. In contrast to conventional mortgage products, which frequently require down payments of 10 percent or more of the purchase price of the home, single family mortgages insured by FHA under Section 203(b) make it possible to reduce down payments to as little as 3 percent. This is because FHA insurance allows borrowers to finance approximately 97 percent of the value of their home purchase through their mortgage, in some cases.

Down Payment Gifts
The down payment for an FHA mortgage can be 100% gift funds. This is one of the key benefits to the FHA program. Verification of the source of gift money is not required. However, it is necessary that the gift funds be deposited in the borrower’s bank or savings account, or in an escrow account, prior to underwriting approval. Proof of deposit is required.

Closing Costs
Many closing costs can be financed. With most conventional loans, the borrower must pay, at the time of purchase, closing costs (the many fees and charges associated with buying a home) equivalent to 2-3 percent of the price of the home. This program allows the borrower to finance many of these charges, thus reducing the up front cost of buying a home. FHA mortgage insurance is not free: borrowers pay an up front insurance premium (which may be financed) at the time of purchase, as well as monthly premiums that are not financed, but instead are added to the regular mortgage payment.

Fees
Some fees are limited. FHA rules impose limits on some of the fees that mortgage companies may charge in making a loan. For example, the loan origination fee charged by the mortgage company for the administrative cost of processing the loan may not exceed one percent of the amount of the mortgage.

Limits
HUD sets limits on the amount that may be insured. To make sure that its programs serve low and moderate income people, FHA sets limits on the dollar value of the mortgage loan.

FHA Mortgage Insurance Costs
FHA requires a mortgage insurance premium (MIP) for its home buying programs. An up front premium of 1.50% of the loan amount is paid at closing and can be financed into the mortgage amount. In addition, there is a monthly MIP amount included in the PITI of .50%. Condos do not require up front MIP – only monthly MIP.

The mortgage insurance premium paid on an FHA loan is always significantly higher than on a conventional program. On an FHA loan the borrower will be charged a mortgage insurance premium equal to 1.50% of the purchase price of the property and a renewal premium of .500% in subsequent years. By contrast the mortgage insurance premium charged at closing on a conventional program is as low as .500% (with 10% down payment) with renewal rate in subsequent years as low as .300% in subsequent years.

Should you choose an FHA loan?
Many people, especially first-time buyers, use FHA loans because the qualifications are a bit more lenient and they can purchase a house with a 3-percent down payment. While it is possible to get a 3-percent down payment for a conventional loan — and even zero-down loans — interest rates are normally higher than with FHA-backed loans.

For your three FICO scores to be calculated, each of your three credit reports must contain at least one account which has been open for at least six months. In addition, each report must contain at least one account that has been updated in the past six months. This ensures that there is enough information – and enough recent information – in your report on which to base a FICO® score on each report.

What’s In Your Score
Your credit score consists of five parts: payment history, amounts owed, length of credit history, new credit, and types of credit used. The following tips will help you increase your credit scores.

Payment History Tips

* Pay your bills on time. Delinquent payments and collections can have a major negative impact on your score.

* If you have missed payments, get current and stay current. The longer you pay your bills on time, the better your score.

* Be aware that paying off a collection account will not remove it from your credit report. It will stay on your report for seven years.

* If you are having trouble making ends meet, contact your creditors or see a legitimate credit counselor. This won’t improve your score immediately, but if you can begin to manage your credit and pay on time, your score will get better over time.

Amounts Owed Tips

* Keep balances low on credit cards and other “revolving credit”. High outstanding debt can affect a score.

* Pay off debt rather than moving it around. The most effective way to improve your score in this area is by paying down your revolving credit. In fact, owing the same amount but having fewer open accounts may lower your score.

* Don’t close unused credit cards as a short-term strategy to raise your score.

* Don’t open a number of new credit cards that you don’t need, just to increase your available credit. This approach could backfire and actually lower score.

Length of Credit History Tips

* If you have been managing credit for a short time, don’t open a lot of new accounts too rapidly. New accounts will lower your average account age, which will have a larger effect on your score if you don’t have a lot of other credit information. Also, rapid account buildup can look risky if you are a new credit user.

New Credit Tips

* Do your rate shopping for a given loan within a focused period of time. FICO® scores distinguish between a search for a single loan and a search for many new credit lines, in part by the length of time over which inquiries occur.

* Re-establish your credit history if you have had problems. Opening new accounts responsibly and paying them off on time will raise your score in the long term.

* Note that it’s OK to request and check your own credit report. This won’t affect your score, as long as you order your credit report directly from the credit reporting agency or through an organization authorized to provide credit reports to consumers.

Types of Credit Use Tips

* Apply for and open new credit accounts only as needed. Don’t open accounts just to have a better credit mix – it probably won’t raise your score.

* Have credit cards – but manage them responsibly. In general, having credit cards and installment loans (and paying timely payments) will raise your score. Someone with no credit cards, for example, tends to be higher risk than someone who has managed credit cards responsibly.

* Note that closing an account doesn’t make it go away. A closed account will still show up on your credit report, and may be considered by the score.

Credit reports frequently have mistakes, so it’s worth checking yours out. You can do so for free at annualcreditreport.com.