Credit card debt is not any thing easy to get out of. It sure is easy to get in to debt but you have to scrape and crawl your way out of bottomless black hole.
Americans are saving less and charging more. We live in a world of, I want it and I want it right now. What ever happened to waiting or putting off pleasure? Credit card companies have made it too easy for us to live beyond our means. We cannot blame the credit card companies for all of our debt. We need to learn to tell ourselves "NO". We also need to learn to tell our children "NO" also. We need to learn self control and think about tomorrow and not what is going to make us happy today.
I recently saw a commercial that Gary Coleman was in. It was for one of those "payday loan" places. I am not certain on the company so I do not want to bash the wrong one. Although, I would not promote any of them. I was watching the commercial and then I saw the small print come up on the screen and I have Tivo, so I hit the pause button. I nearly fell off of my sofa when I read that you can borrow $2500.00 at 99.25% interest. After making payments back to the company you will repay over $9000.00.
What part of this sounds like a good idea? I guess desperate people call for desperate measures. Even if a family members’ life depended on me giving them $2500.00, I would sell my car before I would borrow money at nearly 100% interest. That is "highway robbery" at its’ best.
How your Personal Credit Score Helps Generate Capital
Generating capital for your business is highly dependent on your personal credit score. Your Payment History makes up 35% of your entire personal credit score. The other key indicators that make up your credit score are Length of Credit History, New Credit, Types of Credit Used, and Amounts Owed. The percentage breakdown of each in relationship to your personal credit score is as follows:
Payment History 35% Amounts Owed 30% Length of Credit History 15% New Credit 10% Types of Credit 10%
Each of these areas has specific items associated with it to determine that percentage of your personal credit score. The 30% of your score associated with Amounts Owed is made up of: Amounts Owed · Amount owing on accounts · Amount owing on specific types of accounts · Lack of a specific type of balance, in some cases · Number of accounts with balances · Proportion of credit lines used (proportion of balances to total credit limits on certain types of revolving accounts) · Proportion of installment loan amounts still owing (proportion of balance to original loan amount on certain types of installment loans)
The formulas that create your score look at the averages of consumers and compare you to those. For example with the Amounts Owed section the typical consumer has access to $12,190 on all credit cards combined. More then half of all people with credit cards are using less than 30% of their total credit card limit. Just over 1 in 8 are using 80% of more of their credit card limit. About 48% of credit card holders carry a balance of less than $1,000. About 10% are far less conservative in their use of credit cards and have total card balances in excess of $10,000. When we look at the total of all credit obligations combined (except mortgage loans), 54% of consumers carry less than $5,000 of debt. This includes all credit cards, lines of credit, and loans-everything but mortgages. Nearly 30% carry more than $10,000 of non-mortgage-related debt as reported to the credit bureaus.
Based on your current situation you can see how your score may be higher or lower compared to the average statistics of the general consumer. Length of Credit History that makes up 15% of your score is determined by:
· Time since accounts opened
· Time since accounts opened, by specific type of account
· Time since account activity
The average consumer's oldest obligation is 13 years old, indicating that he or she has been managing credit for some time. In fact, we found that 1 out of 5 consumers who recently applied for credit, had credit histories of 20 years or longer. Only 1 in 20 consumers had credit histories shorter than 2 years.
New Credit that makes up 10% of your score is determined by:
· Number of recently opened accounts, and proportion of accounts that are recently opened, by type of account
· Number of recent credit inquiries
· Time since recent account opening(s), by type of account
· Time since credit inquiry(s) · Re-establishment of positive credit history following past payment problems
An important indicator of new credit is inquiries. The number of times someone pulls your personal credit report. When someone applies for a loan or a new credit card account - in short, any time one applies for credit and a lender requests a copy of the credit report - this request is noted as an “inquiry” in the applicant's credit file. The average consumer has had only one inquiry on his or her accounts within the past year. Fewer than 7% had four or more inquiries resulting from a search for new credit.
Types of Credit Used makes up 10% of your score and is:
· Number of (presence, prevalence, and recent information on) various types of accounts (credit cards, retail accounts, installment loans, mortgage, consumer finance accounts, etc.) An average consumer has a total of 11 credit obligations on record at a credit bureau. These include credit cards (such as department store charge cards, gas cards, or bank cards) and installment loans (auto loans, mortgage loans, student loans, etc.). Not included are savings and checking accounts (typically not reported to a credit bureau). Of these 11 credit obligations, 7 are likely to be credit cards and 4 are likely to be installment loans.
Depending on what side of the averages you fall on your score will be higher or lower. Obviously if the average consumer has 11 credit obligations and you have 50, you are likely to have a lower score then someone with 13 with everything else being the same on your credit files.
Payment History 35% Amounts Owed 30% Length of Credit History 15% New Credit 10% Types of Credit 10%
Each of these areas has specific items associated with it to determine that percentage of your personal credit score. The 30% of your score associated with Amounts Owed is made up of: Amounts Owed · Amount owing on accounts · Amount owing on specific types of accounts · Lack of a specific type of balance, in some cases · Number of accounts with balances · Proportion of credit lines used (proportion of balances to total credit limits on certain types of revolving accounts) · Proportion of installment loan amounts still owing (proportion of balance to original loan amount on certain types of installment loans)
The formulas that create your score look at the averages of consumers and compare you to those. For example with the Amounts Owed section the typical consumer has access to $12,190 on all credit cards combined. More then half of all people with credit cards are using less than 30% of their total credit card limit. Just over 1 in 8 are using 80% of more of their credit card limit. About 48% of credit card holders carry a balance of less than $1,000. About 10% are far less conservative in their use of credit cards and have total card balances in excess of $10,000. When we look at the total of all credit obligations combined (except mortgage loans), 54% of consumers carry less than $5,000 of debt. This includes all credit cards, lines of credit, and loans-everything but mortgages. Nearly 30% carry more than $10,000 of non-mortgage-related debt as reported to the credit bureaus.
Based on your current situation you can see how your score may be higher or lower compared to the average statistics of the general consumer. Length of Credit History that makes up 15% of your score is determined by:
· Time since accounts opened
· Time since accounts opened, by specific type of account
· Time since account activity
The average consumer's oldest obligation is 13 years old, indicating that he or she has been managing credit for some time. In fact, we found that 1 out of 5 consumers who recently applied for credit, had credit histories of 20 years or longer. Only 1 in 20 consumers had credit histories shorter than 2 years.
New Credit that makes up 10% of your score is determined by:
· Number of recently opened accounts, and proportion of accounts that are recently opened, by type of account
· Number of recent credit inquiries
· Time since recent account opening(s), by type of account
· Time since credit inquiry(s) · Re-establishment of positive credit history following past payment problems
An important indicator of new credit is inquiries. The number of times someone pulls your personal credit report. When someone applies for a loan or a new credit card account - in short, any time one applies for credit and a lender requests a copy of the credit report - this request is noted as an “inquiry” in the applicant's credit file. The average consumer has had only one inquiry on his or her accounts within the past year. Fewer than 7% had four or more inquiries resulting from a search for new credit.
Types of Credit Used makes up 10% of your score and is:
· Number of (presence, prevalence, and recent information on) various types of accounts (credit cards, retail accounts, installment loans, mortgage, consumer finance accounts, etc.) An average consumer has a total of 11 credit obligations on record at a credit bureau. These include credit cards (such as department store charge cards, gas cards, or bank cards) and installment loans (auto loans, mortgage loans, student loans, etc.). Not included are savings and checking accounts (typically not reported to a credit bureau). Of these 11 credit obligations, 7 are likely to be credit cards and 4 are likely to be installment loans.
Depending on what side of the averages you fall on your score will be higher or lower. Obviously if the average consumer has 11 credit obligations and you have 50, you are likely to have a lower score then someone with 13 with everything else being the same on your credit files.
Good Reasons to get a Student Credit Card for your Son or Daughter
Many parents are concerned when their children go off to college. Living on your own for the first time is an expensive proposition. That's why it's important to make sure that your child is taken care of financially without having to call home for funds. Getting a student credit card for your child is a better way to provide the money needed to live away from home. If the bills are sent to you, you can even track their spending, something that's hard to do with cash.
Of course, you'll want to be careful. If you're not certain how well your child will deal with the responsibility of the credit card, you may wish to get one that doesn't allow them to take out cash advances. Many students can be tempted by what is apparently "free money", without thinking of the consequences. The money is not free, they are only "renting" it, and the sooner they understand this reality, the better off they will be. For this reason, you'll want to pay close attention to what a student credit card permits. College is a time for learning new responsibilities, however. There are a number of benefits to providing your child with a student credit card. Here are just a few of them:
Of course, you'll want to be careful. If you're not certain how well your child will deal with the responsibility of the credit card, you may wish to get one that doesn't allow them to take out cash advances. Many students can be tempted by what is apparently "free money", without thinking of the consequences. The money is not free, they are only "renting" it, and the sooner they understand this reality, the better off they will be. For this reason, you'll want to pay close attention to what a student credit card permits. College is a time for learning new responsibilities, however. There are a number of benefits to providing your child with a student credit card. Here are just a few of them:
- Your child will learn to manage their financial responsibilities. Remember that you don't have to foot the bill for their student credit card if you choose not to. Instead, your child can get a part time job to pay for non-college related expenses.
- Your child will learn about interest, particularly if he or she is paying the bills. Interest can accumulate quickly if the bill isn't paid off by the end of the month.
- Likewise, late payment fees can be an eye opening experience for many young students. College credit cards are more likely to assess this fee than cards given to people with better credit ratings.
- Learning to budget is an important part of college. If there's only a small amount of credit left on the card, your student will have to learn to plan living expenses and book fees around that amount.
Many credit card companies provide college student credit cards. These often come with a lower credit limit, say around five hundred dollars is common. These cards also often come with higher interest rates, since students are viewed as a greater risk by card companies. Keep this in mind when you choose to get your college student a credit card for personal use.
However, a credit card does offer the opportunity to learn financial responsibility and helps with the transition to adulthood. Having a credit card can also begin to build your child's credit, which will be helpful should he or she want to buy a car or home after graduation. Having one's credit established while they are still in college can be a tremendous asset instead of having to establish credit after graduation, when they are also facing new challenges, like where to find a job in their major.
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