How Long Will It Take to Go from No Credit to Good Credit?

When you have no credit, working your way up to a good credit score can make you feel like an impatient child on a long road trip, asking, “Are we there yet?” The difficult thing about credit scores is that they take a long time to build up but mere seconds to ruin.

If you start with zero credit and get a loan or a credit card, you’ll have a credit history but not a FICO score. This can make it tough to qualify for good credit credit cards. After six months of having a line of credit, you’ll have a FICO score, but it won’t be a perfect 850. If you make all your payments on time and borrow wisely, though, you could have a score over 700.

What can I do to improve my score right now?

Here are some ways you can give your limited credit history a boost:

Inherit your parents’ good credit

If your parents have good credit and one of their cards reports authorized user activity to the three credit bureaus, ask if they’ll add you as an authorized user. If they do, it will help diversify the types on credit on your report and improve your score.

Learn what counts

If you just got a credit card, take the time to learn how credit scores are calculated so you won’t make a rookie mistake, like forgetting to make a payment or hitting your limit.

Keep up the good work

Unlike bankruptcies and late payments, a good credit history stays on your credit report forever, as long as the accounts stay open. Make sure that you’re putting your best foot forward, even when no one’s pulling your score.

Age matters for credit scores

There’s one thing that all borrowers with perfect FICO scores have in common and younger borrowers lack: age.

Among the 0.2% of credit card users who have a perfect 850 credit score, the average age was 61, according to a 2011 report by SubscriberWise, a risk management firm. These elite borrowers had credit card files that were 30 years old, on average.

If you just got your first credit card, you’re not going to have a score over 800, no matter how hard you try. Instead of getting frustrated, make building your credit a long-term goal.

Keep accounts open — even ones you don’t use that often — so lenders can see your good borrowing behavior over time. Pay your bills punctually. Use less than 30% of your credit limit. By starting all these good credit habits early, your credit score will improve down the road.

---

Credit score illustration via Shutterstock.

The post How Long Will It Take to Go from No Credit to Good Credit? appeared first on NerdWallet Credit Card Blog.

Source Article http://ift.tt/1y39EC7

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How to Transfer a Balance from a Bad Credit Credit Card

If you’ve racked up some debt on a credit card, but have also improved your credit score by making consistent, on-time payments, you may be wondering: How do I transfer a balance from a bad credit credit card to a regular card with a lower interest rate?

A balance transfer can save you some serious cash on interest costs, especially if you transfer your debt to a card that offers a 0% APR period. Here’s what you need to know.

How balance transfers work

When you do a balance transfer, you are basically paying off your existing credit card(s) with a new one, hopefully with a lower interest rate. This will help you save on interest costs and hammer down the principal of your debt.

For example, if you’ve been paying 20% interest on your bad credit credit card with a $5,000 balance and paying just the minimum monthly payment of 2% ($100), you’ll end up paying $5,840 interest, according to TheCalculatorSite.

Transfer that balance over to a regular credit card with a 0% APR period of 12 months or longer, and you can take a big bite out of your credit card balance before any interest is charged.

Find a card that best suits you and apply

Keep in mind that balance transfers typically cost 3% to 5% in fees on the amount you are transfer, so a $5,000 balance transfer could cost anywhere from $150 to $250.

Factor in the length of the 0% balance transfer period versus the fee. If it’s going to take a while to pay off your debt, it’s best to look for the longest 0% period possible, because the interest savings will likely outweigh the fee.

If you plan on carrying a balance after the 0% period ends, you’ll need to consider what the ongoing interest rate is. And if you plan on making regular purchases on the card, see if the card offers any rewards on your spending.

Transfer your balance to the new card

Once you apply and get approved for the card, you’ll be able to do the balance transfer. Most banks allow you to complete a balance transfer online, but you can always contact the bank that you are transferring the balance to and ask them to help you.

Keep in mind that you’re still required to make minimum monthly payments on the new card. Failure to do so can result in a cancellation of the 0% APR promotion, so this is crucial. Consider setting up automatic monthly payments to be drafted from your checking account.

When it comes to your old card, continue making the minimum monthly payments if you still have a small balance after the transfer. If the card’s paid off in full, don’t cancel it: you’ll want to keep it open to maintain a low credit utilization ratio, which should help your credit score. But avoid running up new debt on the old card at all costs, as you’ll cancel out the benefit of the balance transfer and put yourself back where you started.

Transferring a balance from a bad credit credit card to a traditional card with a 0% APR promotional period can be a very smart way to pay down your debt. You just need to find a card that’s a good fit for your own personal situation and continue to make payments on time.

---

Image via iStock.

The post How to Transfer a Balance from a Bad Credit Credit Card appeared first on NerdWallet Credit Card Blog.

Source Article http://ift.tt/1y39EC7

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Credit Card Debt vs. Student Loan Debt: Which to Pay Down First?

For college graduates with student loans and credit card debt, paying off what you owe can be a daunting task. But with a solid plan, it doesn’t have to be. One of the first things you’ll have to hammer out is what you’ll pay down first—your credit card bill or student loan debt.

How to get started

Financial experts agree that you should always make at least the minimum monthly payment on both your credit card and student loan accounts. Paying on time will ensure that your credit history remains in good standing.

After that, credit card debt should be your top priority when it comes to making extra payments. The reason is simple—federal student loan rates are almost always lower than the interest you’ll pay on credit cards. The average interest rate on new credit cards in December topped 14%. By comparison, federal student loans for the 2014-2015 school year carried a rate of 4.66%.

If you can’t pay

Keep in mind that if you run into a financial hardship, you’ll have the ability to defer your student loan without hurting your credit rating. In some cases, the federal government will also pay your interest fees during a deferment. These options are not available with a credit card.

On the other hand, in the unfortunate event that you have to file for bankruptcy, your unsecured credit card debt can be discharged, or forgiven, by a court. Student loan debt can almost never be dismissed through a bankruptcy filing.

Verdict

On balance, it’s clear that paying down credit card debt, starting with the card that carries the highest interest rate, should take precedent over your student loan.

One method that will help you reduce and manage your debt is to apply for a 0% balance transfer card. That will allow you to transfer your high interest credit balances to a card with 0% APR introductory period.

But keep in mind that your 0% interest rate will eventually expire. That is why it’s important to pay off all or as much of the debt you transferred before the expiration, or you won’t be saving much money at all—money that you could have put toward paying off your student loan.

---

Image via iStock.

The post Credit Card Debt vs. Student Loan Debt: Which to Pay Down First? appeared first on NerdWallet Credit Card Blog.

Source Article http://ift.tt/1y39EC7

Read More

How Long Will It Take to Go from No Credit to Good Credit?

When you have no credit, working your way up to a good credit score can make you feel like an impatient child on a long road trip, asking, “Are we there yet?” The difficult thing about credit scores is that they take a long time to build up but mere seconds to ruin.

If you start with zero credit and get a loan or a credit card, you’ll have a credit history but not a FICO score. This can make it tough to qualify for good credit credit cards. After six months of having a line of credit, you’ll have a FICO score, but it won’t be a perfect 850. If you make all your payments on time and borrow wisely, though, you could have a score over 700.

What can I do to improve my score right now?

Here are some ways you can give your limited credit history a boost:

Inherit your parents’ good credit

If your parents have good credit and one of their cards reports authorized user activity to the three credit bureaus, ask if they’ll add you as an authorized user. If they do, it will help diversify the types on credit on your report and improve your score.

Learn what counts

If you just got a credit card, take the time to learn how credit scores are calculated so you won’t make a rookie mistake, like forgetting to make a payment or hitting your limit.

Keep up the good work

Unlike bankruptcies and late payments, a good credit history stays on your credit report forever, as long as the accounts stay open. Make sure that you’re putting your best foot forward, even when no one’s pulling your score.

Age matters for credit scores

There’s one thing that all borrowers with perfect FICO scores have in common and younger borrowers lack: age.

Among the 0.2% of credit card users who have a perfect 850 credit score, the average age was 61, according to a 2011 report by SubscriberWise, a risk management firm. These elite borrowers had credit card files that were 30 years old, on average.

If you just got your first credit card, you’re not going to have a score over 800, no matter how hard you try. Instead of getting frustrated, make building your credit a long-term goal.

Keep accounts open — even ones you don’t use that often — so lenders can see your good borrowing behavior over time. Pay your bills punctually. Use less than 30% of your credit limit. By starting all these good credit habits early, your credit score will improve down the road.

---

Credit score illustration via Shutterstock.

The post How Long Will It Take to Go from No Credit to Good Credit? appeared first on NerdWallet Credit Card Blog.

Source Article :http://bit.ly/1zBVxpx

Read More

How to Transfer a Balance from a Bad Credit Credit Card

If you’ve racked up some debt on a credit card, but have also improved your credit score by making consistent, on-time payments, you may be wondering: How do I transfer a balance from a bad credit credit card to a regular card with a lower interest rate?

A balance transfer can save you some serious cash on interest costs, especially if you transfer your debt to a card that offers a 0% APR period. Here’s what you need to know.

How balance transfers work

When you do a balance transfer, you are basically paying off your existing credit card(s) with a new one, hopefully with a lower interest rate. This will help you save on interest costs and hammer down the principal of your debt.

For example, if you’ve been paying 20% interest on your bad credit credit card with a $5,000 balance and paying just the minimum monthly payment of 2% ($100), you’ll end up paying $5,840 interest, according to TheCalculatorSite.

Transfer that balance over to a regular credit card with a 0% APR period of 12 months or longer, and you can take a big bite out of your credit card balance before any interest is charged.

Find a card that best suits you and apply

Keep in mind that balance transfers typically cost 3% to 5% in fees on the amount you are transfer, so a $5,000 balance transfer could cost anywhere from $150 to $250.

Factor in the length of the 0% balance transfer period versus the fee. If it’s going to take a while to pay off your debt, it’s best to look for the longest 0% period possible, because the interest savings will likely outweigh the fee.

If you plan on carrying a balance after the 0% period ends, you’ll need to consider what the ongoing interest rate is. And if you plan on making regular purchases on the card, see if the card offers any rewards on your spending.

Transfer your balance to the new card

Once you apply and get approved for the card, you’ll be able to do the balance transfer. Most banks allow you to complete a balance transfer online, but you can always contact the bank that you are transferring the balance to and ask them to help you.

Keep in mind that you’re still required to make minimum monthly payments on the new card. Failure to do so can result in a cancellation of the 0% APR promotion, so this is crucial. Consider setting up automatic monthly payments to be drafted from your checking account.

When it comes to your old card, continue making the minimum monthly payments if you still have a small balance after the transfer. If the card’s paid off in full, don’t cancel it: you’ll want to keep it open to maintain a low credit utilization ratio, which should help your credit score. But avoid running up new debt on the old card at all costs, as you’ll cancel out the benefit of the balance transfer and put yourself back where you started.

Transferring a balance from a bad credit credit card to a traditional card with a 0% APR promotional period can be a very smart way to pay down your debt. You just need to find a card that’s a good fit for your own personal situation and continue to make payments on time.

---

Image via iStock.

The post How to Transfer a Balance from a Bad Credit Credit Card appeared first on NerdWallet Credit Card Blog.

Source Article :http://bit.ly/1C75BGH

Read More

Credit Card Debt vs. Student Loan Debt: Which to Pay Down First?

For college graduates with student loans and credit card debt, paying off what you owe can be a daunting task. But with a solid plan, it doesn’t have to be. One of the first things you’ll have to hammer out is what you’ll pay down first—your credit card bill or student loan debt.

How to get started

Financial experts agree that you should always make at least the minimum monthly payment on both your credit card and student loan accounts. Paying on time will ensure that your credit history remains in good standing.

After that, credit card debt should be your top priority when it comes to making extra payments. The reason is simple—federal student loan rates are almost always lower than the interest you’ll pay on credit cards. The average interest rate on new credit cards in December topped 14%. By comparison, federal student loans for the 2014-2015 school year carried a rate of 4.66%.

If you can’t pay

Keep in mind that if you run into a financial hardship, you’ll have the ability to defer your student loan without hurting your credit rating. In some cases, the federal government will also pay your interest fees during a deferment. These options are not available with a credit card.

On the other hand, in the unfortunate event that you have to file for bankruptcy, your unsecured credit card debt can be discharged, or forgiven, by a court. Student loan debt can almost never be dismissed through a bankruptcy filing.

Verdict

On balance, it’s clear that paying down credit card debt, starting with the card that carries the highest interest rate, should take precedent over your student loan.

One method that will help you reduce and manage your debt is to apply for a 0% balance transfer card. That will allow you to transfer your high interest credit balances to a card with 0% APR introductory period.

But keep in mind that your 0% interest rate will eventually expire. That is why it’s important to pay off all or as much of the debt you transferred before the expiration, or you won’t be saving much money at all—money that you could have put toward paying off your student loan.

---

Image via iStock.

The post Credit Card Debt vs. Student Loan Debt: Which to Pay Down First? appeared first on NerdWallet Credit Card Blog.

Source Article :http://bit.ly/1C75B9o

Read More

What FICO Score is Considered Fair Credit?

Average credit may be nothing to write home about, but you’re definitely in a better place than those with bad or no credit. Understanding how credit scores work and how to take yours from fair to good could open up new opportunities and lower rates for you down the road.

Your FICO score is a number that sums up your creditworthiness. It is a snapshot of your current credit standings and is used by banks in determining whether you’re worthy of a credit card and if so, which type.

Under the FICO scoring system, anything less than 630 is considered “bad credit,” a score from 630 to 689 is considered “fair,” 690 to 719 is a “good” credit score, and 720 to 850 is “excellent.”

As someone with a credit score between 630 and 689, you likely receive credit card offers for fair credit including cards with moderate interest rates and fees. You are still blocked from many of the premium cards with the best rewards offers, however. Gaining access to those cards would take good to excellent credit.

Moving your score up the ranks takes time and concentrated effort, but it doesn’t have to be difficult.

Your credit score is determined from a combination of your payment history, your credit utilization, new credit, the types of credit used and the length of your credit history. By paying attention to how your actions impact these factors, you can move out of the “fair” range and into good credit territory.

Some quick tips on increasing your credit score:

Always make your payments on time.

One late or missed payment can blemish your credit score. Automate your monthly payments, set reminders or take steps to ensure no due dates slip by unnoticed.

Limit new credit applications.

The more you ask for additional credit, the more likely those inquiries will hurt your credit score.

Track your credit score and review your credit report for errors.

Knowing where you stand will help you gauge how your efforts are paying off. Also, if you find errors on your credit report, getting them corrected could immediately raise your score.

Budget and use your credit wisely.

Don’t use your credit card to purchase things you can’t afford. Your credit cards aren’t an exception to your budget; they are part of it.

Fair credit isn’t a bad thing. You’re doing better than many people out there. But there’s certainly room for improvement. Moving your credit from fair to good could translate to better loan terms when you’re ready to purchase a home and better credit card offers from the banks.

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Image via iStock.

The post What FICO Score is Considered Fair Credit? appeared first on NerdWallet Credit Card Blog.

Source Article :http://bit.ly/1AwEsM8

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