settle credit card debt in collection?

What happens to your credit if you settle credit card debt in collection?

Posted by: Aiden white on

Credit card debt gets worse when they are charged off and transferred to collections!

There are a few things that you should keep in mind when you plan to settle credit card debts, that are currently handled by a collection agency!

Remember, your credit score has already been affected when your creditor wrote the debt off as delinquent! Your score can only get worse, if you delay sorting it out with the collection agency.

So, once a credit card debt goes to collections, it’s now the agency’s duty to report to the credit bureaus about your delinquency. And, your credit score is typically based on what’s getting displayed on the credit reports, issued by the bureaus.

The collection agency will decide whether or not to report your current debt status to the credit bureaus. Till your status gets updated with a credit bureau, you have the game on your side. In fact, you can even make sure that this collection account never gets reported!

What you do is, you enter into a settlement offer with the collection agency.

Is credit card debt settlement easy? How do you do it?

If you are in a pretty messed up situation, where your credit score has fallen to sea level, your expenses have surpassed your income, your debt amounts are in no place to be paid off, then we believe you should go for credit card debt settlement!

Moreover, if your debts are passed onto collections, then a settlement is the best option!
Because, it is far better to settle and get rid of the collection account once and for all, than dragging it for long with balance transfer or other ways to pay off credit card debt!

The credit card settlement process is pretty easy if you work with a settlement company. You might get to read and hear in many places that these debt settlement companies are not worth it, as many are frauds and some don’t have a smart reputation.

But, trust is God! You got to have faith and patience!
The settlement companies take time in handling debts, but they are really helpful, if you can select a settlement company that has a good history with settling credit card debt. Experience speaks a lot while trying to settle debts, especially for the accounts handled by debt collectors.
You can definitely do it yourself – the credit card debt settlement, but collectors are no easy game!

They will try to harass you and pull back the owed amounts by all the means possible. At times it doesn’t go unheard that these collectors use manpower and gunpowder to force the debtors to pay their debts!

How debt settlement affects your credit

See man, to tell you the truth, any form of paying off debt that doesn’t involve the normal schedule of payment will hurt your score, do whatever you may want!

But we can truly try the best, to cause as little harm as possible to the credit score, while doing settlement.

The credit card settlement process is not over, even after the debts get settled. The next step is probably the most vital one.

The collectors should report the account as ‘paid in full’ or anything like that, to the credit bureaus. If the account gets displayed as ‘settled’ or ‘discharged on forgiveness’, and so on, then your credit score will fall heavily. This is a negative mark on your credit report.

I believe the trick is to influence the collectors to display the account as rightfully paid, or there’s no way to help your credit score increase.And, playing this trick is no simple water!!

So, take help of lawyers and settlement companies to accomplish your debt goals!
Still when you are doing a lump sum settlement for credit cards, you actually should not worry about credit scores much. A lump sum settlement is never a favourable condition for creditors. They will always try to avenge it, by smudging the credit reports, as that’s something in their court.

A credit card lump sum settlement can never be good for credit score or your credit history.
Usually we always ask debtors to try to pay off credit card bills on time, to avoid later complications. But, what to do!! Things get so messy at times, that a credit card lump sum settlement is the only viable option for us.

Finally comes the question, can paying off or settling debts in collections help credit?

A good credit card debt settlement done by professionals in the best procedure, can help your credit score to increase!

That’s because it has two aspects. One that I have already discussed above, is to get the collector or creditor send a good status to the credit bureau, once the settlement is over.
The second is, upon you, where you will become a responsible credit user in the future. Now that the debts are settled, and you are freed of the debt burden, you should focus on building your credit score once again. This might sound impractical and hypothetical, but it’s true!

So, next time onwards, take this precious suggestion! Pay debts on time.
If you can’t pay it off in full, then settle it, no matter in what position the debt is! It doesn’t really matter whether it’s with the creditor or a collector, and so! Just get rid of it, before it’s too late.

One way, your scores are gonna drop because you couldn’t pay in time! Hence, don’t waste anymore time!
First deal with the debt, and then you can plan to mend the broken credit score, by learning from your past mistakes.

Balance-Transfer-Know-how-it-helps-to-repay-credit-card-debts-compressor

Balance transfer: Know how it helps to repay credit card debts soon

Posted by: Aiden white on

Most of the people use credit cards to achieve everything that they can’t afford with cash. But this habit can get you into serious financial trouble. Exhausting credit card limit, when you go for shopping, is pushing you towards the vicious cycle of credit card debt. The problem becomes intense when you see that your credit card bills are beyond your affordability and you won’t be able to repay after meeting all your other financial obligations. Soon you will start getting creditors to call for the money, which is frustrating.

If you are one of them who is receiving frequent calls from the creditors, then look for a solid strategy that will help you repay your debts soon.
Read the article to know how you can repay your credit card debts soon.

Considering the balance transfer method can help you repay the debts soon

Remember, you can repay your credit card debts through various methods. But the balance transfer method has come to the center stage.
The main advantage is that the introductory rate is low, or in some cases, non-existent (0% APR) for a certain period.

The consumers find this option handy as it allows them to transfer the high-interest debt into a single credit card with a comparatively low-interest rate.
This allows them to pay off the debts relatively quickly and at minimum interest rate.

What is a balance transfer method?

As per definition, we can say it’s a process of transferring high-interest debts to another card with a lower interest rate. This method will help you to pay off your credit card debt by making payments to the principal balance, rather than towards high-interest charges. The more you’ll pay the principal, the sooner you can eliminate your credit card debt.

A balance transfer is a simple concept where you’ll be using one credit card to pay off another, but with the benefit of a lower interest rate.

How does a balance transfer method work?

If you want to follow the balance transfer method to repay your credit card debts, you have to take out a credit card with a low-interest rate.
Make sure that the interest rate of the new card, you’re taking out, is lesser than that of your existing credit cards.
Now, you have to transfer all your debts to your new card. You have to make only one monthly payment to repay your multiple debts.
This way you’ll be capable of managing your multiple payments and become debt free soon.

Balance transfer method – Its advantages

In balance transfer method, you can club all your credit card accounts into a single account. Once you opt for this method, you would not have to pay separate bills every month. You have to make a single monthly payment to repay the outstanding balance on the balance transfer card.
Go through other benefits of paying off debts with the help of balance transfer method.

It’s a easy and simple method

In comparison to other debt relief options, balance transfer method is relatively simple. To request a balance transfer, you need to provide some information to the bank. The request will be processed automatically and your credit card will be generated.

It helps to lower interest rate

In balance transfer method, you can repay the outstanding balance at a relatively low-interest rate. Even a 0% annual percentage rate (APR) is offered by some credit card companies for a limited time period.

If you’re able to take out a balance transfer card with a low rate of interest, then it will help you to save money on interest. Thus, your maximum payments will be utilized in reducing your principal balance.
When you’ll make your payments you’ll find a gradual decrease of your debt balance. This will motivate you to repay your debts and you’ll become debt free faster.
Since you need to make single monthly payments, it will be easier for you to manage it without missing it. In turn, you’ll be able to avoid paying late penalties.

You can earn rewards

In case you successfully transfer your balances to a rewards credit card, you are entitled to earn points, cash rebates, or other rewards, based on the T&C on the card.
However, to earn the reward points, usually you have to transfer a hefty balance to the card.

It helps you to save money

Considering professional debt relief service is comparatively expensive. You have to pay a third party for consolidating or settling your debts. Considering balance transfer method is relatively cost effective, which will help you repay debts soon.
You just need to pay one time processing fee of 2% to 3 % depending on the card you select. However, make sure, you make the monthly payments on your new card on time.

Balance transfer method – Its disadvantages

It is now clear to you that paying off credit card debts through the balance transfer method helps consumers who are drowning in debts. But it has some downsides too.
You might find this method enticing but you have to be aware of its negative effects.

The interest rate on your balance can increase rapidly

You’ll be able to repay your debts at a low-interest rate with a certain period. If you’re unable to repay your debts within the stipulated time, the interest rate on your card will increase.
In such a situation, you’ll feel helpless and won’t be able to repay your debts and you’ll seriously hurt your credit score.

The introductory offer can be canceled

If you are late with a single payment, the card issuing company can cancel the introductory rate and may start charging a higher rate.
Lastly, before taking out a balance transfer card, check whether or not the lender is charging you higher fees for transferring your debts.
Search for lenders who will charge you reasonable balance transfer fee. It will help you save your hard-earned money and you can use it to repay your debts.

How to choose the best balance transfer card

There are a few things you should remember to avoid major mistakes while choosing the best balance transfer card.

Check the introductory period and interest rate

As per the law, the credit card promotional rate should last for at least 6 months. But some credit card companies may offer you 18 months, and even 21 months. So, choose the card that will give you the longest introductory offer period.
In that introductory period, many balance transfer cards might offer a low or 0% rate for transferring balances. The low-interest rate will help you to pay off your credit card debts by eliminating monthly finance charges on that card. So, you must check out the interest rate before applying for a balance transfer card. Practically, 0% to 2.99% interest rate will be the best choice.

Check out the balance transfer fee

Normally 3% to 5% of the balance is applicable as balance transfer fee to most of the balance transfer cards. The bigger the amount you transfer, the higher your fee will be. Practically a balance transfer fee reduces your savings. So, if you are getting any card that offers you zero fee on balance transfer, don’t hesitate, just get it.

Check out your credit card provider

Choosing the right credit card provider is an important thing. You can’t transfer your credit card balances between two credit cards issued by the same company. So, always pick balance transfer cards from separate companies.

Check the qualification criteria

Normally credit card companies offer a huge number of pre-approved cards to consumers who meet their basic criteria. But when you apply, the credit card company will definitely examine your income, credit history, and other financial factors. It might also happen that your application might get rejected. So, check out the qualification criteria and proceed accordingly.
Now, it is time for you to know the best way to transfer your credit card balance through a balance transfer card.

How to avoid balance transfer mistakes smartly

List the balances as per the priority

List all of your credit cards as per their interest rates and balances. As per your choice choose one or more cards to transfer your credit card balances. The high-interest balance might be in your name or your spouse’s. If you have an excellent credit score it will be easier to get a 0% offer. You can pay off your spouse’s old balance and start a debt-free life together.

Remember the promotion expiry date

The 0% rate is normally valid for 12 to 18 months. You must calculate whether or not you can afford to pay your balance in full within the introductory period. If it is not possible for you, then you should know what interest rate you have to pay at the end of introductory period. Your credit card company will not send you a reminder that your promotional period is about to end. They would rather expect that you miss the deadline and start paying interest on your balance.

Remember the penalties

Do not forget about the balance after the transfer. You still have to pay it before the promotional period ends. Before the due date, you must make the minimum payments, it’ll help you to maintain the 0% rate.
If you miss one payment, the balance will start building interest. Similarly, if you make late payments, use your total credit limit and beyond or your check gets bounced, the interest rate will start jumping again as penalty, typically as high as 29.99%.

Decide how much you want to transfer

Remember the new credit limit on your balance transfer card. You aren’t allowed to transfer a balance more than your available credit limit. The balance transfer fees are included within the credit limit. If you have $20,000 credit limit on your new card, you won’t be able to transfer a $20,000 balance with a 3% balance transfer fee.

Calculate your balance transfer fees

Check out the balance transfer fee before you start the balance transfer process. Calculate how much you have to pay in total on the amount you want to transfer. The balance transfer fee might range between 3% to 5%. Ask yourself, how much can you save even with the new interest rate, if you still have to pay such huge transfer fee? It’ll be easier for you to calculate the fee through an online balance transfer calculator.
Fortunately, some cards have an amount cap on the balance transfer fee. If you have such card in your wallet, that can be the best way to transfer your credit card balance, especially the large balances. For example, there’s a balance transfer fee of 4%, up to a maximum of $95. You transfer a balance of $6,000 but due to the cap, you don’t have to pay $240 (4% of $6,000) but only $95.

Check both of your old and new accounts

You should ask your credit card provider about the transfer time frame if it’s not stated anywhere. You should allow a minimum of 2 to 3 days, and up to 10 days to complete a transfer. Your new creditor might take that time to pay off your old creditor. Check each old account after the balance transfer whose balance you’re paying off. In the meantime, don’t miss any payment due date on those accounts to avoid late fees. Check your new account also to see when the balance has transferred over.

How does balance transfer credit cards affect your credit score?

Balance transfer credit cards give you big support for paying off credit cards. They give you the option to get credit card help without asking anyone for money. So it saves you from the tedious task of buttering your friends for cash. However, that leaves one question unanswered, and that is,
How does it affect your credit score?

Depending on various factors, credit card balance transfer can either help to boost your credit score or hurt it.

Initially, your credit score may go down when you apply for several cards with low introductory interest rates. Now, the average age of your open credit accounts constitutes 15% of your credit score. The longer the age of your accounts, the better for your FICO score.

When you open new credit accounts, you lower the average age of your credit accounts. This hits your credit score and it drops by several points.

Whenever you apply for a credit card, it triggers a hard inquiry on your credit report. One inquiry has the potential to drop your credit score by 35 points. Now, you do the calculations. If you apply for 6 credit cards with 0% APR, then you might lower your FICO score by up to 210 points.

What’s the way to consolidate your credit cards without hurting your FICO score?

1. Apply for only one card:

Do extensive research and apply for one balance transfer credit card to minimize the negative effect on your FICO score. Make sure you apply for a credit card that gives you a higher credit limit than the amount you need to transfer. When you exhaust your entire credit limit, your credit utilization ratio becomes 100% and that drops your credit score. The credit utilization ratio accounts for 30% of your credit score. When the total available credit is high and the money owed is low, your credit utilization ratio drops. This makes a positive impact on your credit score.

2. Keep the other accounts open:

Don’t close your old accounts because they will hurt your credit score. Keep the accounts with long and good payment history open because they help to keep your average account age high.

3. Pay off credit card debt fast:

Balance transfer helps to boost your credit score only when you pay off credit card debt fast. This means if the teaser rate is applicable for only 18 months, then you should pay the total transferred amount within that period only. It helps to improve your payment history and credit score alongside.

Is balance transfer better than debt consolidation loan?

See there are 3 credit card debt consolidation options. The first option is a credit card debt consolidation program. The second option is a credit card debt consolidation loan and the third option is the balance transfer credit card.

All the 3 credit card consolidation options have different pros and cons. Usually, a credit card consolidation program is considered as the best option to consolidate credit card bills because the stake is not high. The risk factor is 0. But what about balance transfer credit cards and debt consolidation loans? Can we say the same thing regarding them? Let’s find out.

Balance Transfer Credit Cards Debt consolidation Loans
Risk Factor Moderate
Reason: You may have to pay high-interest rate if you can’t pay off the balance within the introductory period.
High
Reason: You can lose the collateral if the loans remain unpaid.
Eligibility Criteria Not too stringent
Reason: You only need to have a decent credit score.
Tough.
Reason: You need to have a good credit score to qualify for a low-interest rate.
For secured loans, you need to pledge a collateral.
Late payment repurcussion One late payment can cancel the entire deal. You may have to pay high-interest rate. One late payment is enough to put a negative mark on your credit report. You may have to pay late fees.
Fees You have to pay a 3% fee on the total amount transferred. You may have to pay origination fee. The fee depends upon the type of loan you choose.

Everything is there right in front of you. Both the options have some positive sides and some negative sides. Compare all the salient features and then decide which one is the best option to consolidate credit card bills.

The conclusion

Credit card balance transfer is a tool to help you get out of debt faster and save money on interest. It also helps to avoid hurting your credit report. If you understand the fine print terms and conditions, grabbing a 0% interest offer on a new card could be very easy.
However, you should consider transferring your credit card balances as a loan. Don’t make purchases by using the card until you’ve paid off the balance transfer entirely. If you want to do the both things together, find a credit card that’ll offer you a 0% introductory rate for the same number of months with balance transfer and purchase benefits.

ways-to-achieve-financial-independence-sooner

9 Ways to achieve financial independence sooner

Posted by: Aiden white on

Do you feel if you could go back in your 30s, then you would manage your finance differently? Do you wish to go back in the past to get more time to prepare for retirement? You’re not alone. There are many people who are struggling in their retirement. Most of them are drowning in debt burden even after retirement. Some people have to stretch their work life to survive. They often regret the financial mistakes that they did.

Some people have achieved financial independence at an early age. They have proved that achieving financial independence sooner is possible.

How can people achieve financial independence?

Saving more is the key to achieve financial independence at an early page. Apart from it, you have to plan your finances carefully.

Here you go:

  1. The more you save, the sooner you can announce retirement

    The best way to secure your financial future is by saving money. You need to decide how much money to set aside to pay yourself every month. The amount can depend according to your income; no matter how much your monthly income is. Try to make a habit to save as much as possible of your gross monthly income. It will help to make some positive changes in your financial graph. Save more in a case of higher monthly income.

  2. Enroll in your 401(k) account

    According to the most financial experts, you must enroll in a 401(K) account to secure your retirement.

    If you’ve still not enrolled in your company’s retirement account plan 401(k), then you’re lagging backward. The 401(k) account is an unparalleled savings option. It will help you put in your pre-tax dollars and qualify for an employer match that could help you literally to save free money. Keep updated on the third-party investment advisory services to avoid confusion on this subject.

  3. Start investing money

    Be always confident when it comes to investing money. Invest money in the safe investment vehicles but make sure you have enough funds available at your disposal to fight any financial emergency.

  4. Questions that you should ask before investing

    Before choosing an investment opportunity, it is important for an investor to ask a number of questions like:

    • In what way the various investments match your objectives and which is the best one for you?
    • How easy will it be for you to sell off the investment?
    • How much will it cost you to buy, hold, and sell the item you are going to invest in?
    • What are the returns that you can expect on the amount you had invested and when can you get back the money?
    • From where can you get more information about investments?

  5. Invest in mutual funds

    Stick to investing in low-cost and no-load mutual funds that can help you gain huge returns on minimum investment. Clever investment can often be beneficial for those who are looking for ways to build wealth.

  6. Be the early bird

    You need to start early to get better investment results. Remember, the type of financial instrument you’re choosing and the age you’re starting off are very important.

    For instance, a person who starts contributing $100 a month when he is 22 will earn more than a person who wants to be 32 to set aside $100 per month. If their money grows at a rate of 8%, the first person will have $234,600 and the second person will get $177,400 (If they both retire at the age of 64). This proves the importance of investment at an early age to build wealth and address your financial obligations. So, make the decision wisely.

  7. Live a frugal life

    Leading a frugal life is the ultimate secret when it comes to achieve financial independence. You should try to save as much as possible on daily basis. Living a frugal life can help you to do that.

    Living a frugal life doesn’t mean you have to deprive yourself. You just need to prioritize saving money. Spend money on what you need instead of on wants.

  8. Don’t welcome debt

    If you are in huge debt, you have to pay them off as early as possible. The sooner you get out of higher interest rate debt, the quicker you can start saving money for your future. You should get financial advice to get out of debt faster. After that, you shouldn’t accumulate further debts in the future. To do so, you have to build an emergency fund that works as a debt shield.

  9. Increase your earning

    Traditional income is not enough when it comes to achieve financial independence at an early age. You should find out other income sources to increase cash flow.

    For example,

    • You can give rent to a portion of your home.
    • You can start blogging.
    • You can do part-time jobs.

Lastly, most of the Americans forget to plan their retirement as they’re far busier with planning their vacations. As a financially responsible citizen, it is your duty to plan your retirement so that your finances do not go out of control when you have no mainstream income. If you truly want to enjoy your life, then secure your financial future fast. This is the ultimate key to achieve financial independence and early retirement.

Those who don’t want to retire early also need to secure their financial future. Otherwise, you may have to work till their death or live a poor life in their golden age.