How a Balance Transfer Could Lower a FICO Score: Interest-Free Credit Card Transfer without Hurting Your Credit Score

Balance

Consumer debt has risen sharply over the past decade. The Nilson Report showed that the median credit card debt stood at $10,679 at the end of 2016. Not surprisingly, this has led many U.S. consumers to turn to interest-free credit card transfers in order to reduce any outstanding personal debt.

A balance transfer performed incorrectly could damage a FICO score and make other borrowing sources, such as home equity loans, less affordable. It is important to establish the correct approach to reduce interest payments on credit card debt in order to protect a personal credit score.

What Does an Interest-Free Credit Card Transfer Involve?

After using a comparison site to trawl the market, select the best credit card deal. An interest-free credit card transfer or a transfer at a low rate for the life of the balance is most preferable. Select the right card, provide all the requested information, enter the balance transfer details and the FICO score will be checked by the lender. The new card provider will carry out the balance transfer. It will take a few weeks to take place and most lenders charge a transfer fee of approximately 3%.

How Not Making Interest Payments Helps to Clear Credit Card Debt

A consumer has $10,000 of credit card debt at 15% APR. An interest-free credit card transfer fee of $300 will be added to the amount owed. However, after a period of 12 months, the balance transfer will help save $1,200 in further interest payments. This gives a consumer the opportunity to reduce personal debt.

Why Does a Balance Transfer Reduce a FICO Score?

  • Each credit search is recorded and will cause a credit score to go down slightly.
  • A balance transfer from a card with a high credit limit to one with a low limit will negatively affect a FICO score. Provided that the consumer pays-down the level of credit card debt, a FICO score will recover within a few months.

Interest Free Credit Card Transfers May Soon End

President Obama changed the law with regard to the application of card fees and charges. Credit card debt is no longer the cash cow it once was which means that balance transfer deals will shortly become fewer in number. Providers have traditionally banked on the fact that they were able to apply fees and charges to client balances for making late payment. They have enjoyed the complete freedom to increase the rate of APR on a balance at any time. Neither of these will be possible from February 2018.

* Legal changes were introduced by the Credit Card Accountability, Responsibility and Disclosure Act.

It is sensible to take advantage of interest-free credit card transfer whilst they are still available to consumers. Always pay-down the debt if transferring from a card with a high to a low credit limit in order to ensure that a FICO score isn’t negatively affected. Balance transfers normally involve a fee of 3% which will increase the level of personal debt in the short term.

Consumer Credit and Debt Counseling: Receive Financial Help and Learn Essential Economic Instruction

help

In the current economy, more and more people are facing debt issues. Debt is piling up and many people no longer have the appropriate means to handle the situation. Many consumers are reluctant to ask for professional financial help, and insist on handling the situation by making private financial adjustments.

Sadly, if an individual is in moderate or severe debt, imposing personal economic restriction rarely succeeds. Due to this issue, when a consumer finally turns for professional help to address debt concerns, the problem has become critical and paramount.

When fiscal hardships can no longer be handled in a proper fashion, consumer credit and debt counseling can provide relief as well as essential financial education.

Credit Counseling

The job and objective of a credit counselor is to look over an individual’s entire financial history. Credit counselors not only review debt, but income, expenses, and personal finances as well. Using the entire financial picture, counselors are able to determine the proper credit solution for an individual’s situation.

Credit counselors will also discuss the consumer’s credit debt with that individual’s credit card company. This process allows the credit card companies to possibly lower the interest rates so the individual in question can pay off debt in a sensible fashion.

Debt Management Programs

When a consumer becomes enrolled in a debt management program, all of that individual’s debt is entered into the program and all credit is halted. The individual is also forbidden from applying for additional credit. This process allows the “brakes” to be applied and the consumer can focus on paying off the mature debt rather than accumulating new financial difficulties.

In the debt management agenda, the consumer makes a monthly payment to the debt management counseling service. The counseling service will then compensate the creditors.

Debt Settlement Plan

When an individual doesn’t qualify for a debt management program, debt consolidation is always a recommended option as well as the idea of debt settlement. In the debt settlement process the counseling service will consult with the individual’s creditors for a reduced balance.

Debt settlement allows the individual to pay the reduced balance instead of the original balance. Debt settlement is usually the last debt counseling option and is usually reserved for those in very large debt.

Live Debt Free

When a consumer takes advantage of these debt recovery options he or she can regain financial stability. Through the consumer credit and debt counseling process an individual can learn better spending habits and money management skills.

How to Pay off Your Debts: What to Do in Order to Become Debt-Free

pay

The following is a guest post from Brabble Director of Business Development Patrick Mackaronis.

There is no magical way to get out of debt. It requires careful planning, sticking to a budget, consolidation of debts, and then calculating the best order in which to pay them off.

Controlling Expenses by Sticking to a Budget

In order to control expenses, one must first know what they are. So the first step is to record everything that is being spent. This is difficult to do, but quite possible. The individual should then work out where money can be saved, perhaps on food by shopping at cheaper supermarkets, or on fuel bills by changing supplier. Money can be saved on things like car insurance and home insurance by shopping around, and every little bit saved can go towards making you debt-free.

Consolidating Debts

All debts have different interest rates. Many people have a great deal of credit card debts at a high rate of interest, because over-spending on credit cards is so easy. Bank loans, on the other hand, have a much lower rate of interest. If possible, get a relatively low interest loan, and use it to pay off the credit card and other high interest debts.

What Order to Pay off Debts – the ‘Debt Snowball’

The ‘Debt Snowball’ is the tried and tested way of paying off debts – and it works.

Basically one pays off the debts with the highest interest rate first. The individual first needs to list all their debts in descending order of interest rate, regardless of the balance. Determine the most money you can make available from your budget to pay off debts, and apply that to the debt with the highest interest rate. As soon as one does that, the amount owing will be reduced. The next month, the individual pays off the same amount of the debt with the highest interest rate. On all other debts, continue to make the minimum payment.

When the first debt is paid off, continue the process with the debt with the next highest interest rate. At all times, stick to your budget, and continue to pay off the same amount each month.

As the individual continues to do this, the amount of interest gradually reduces, and more money is being used to pay off the actual debt, ie the process ‘snowballs’.

Various websites provide online Snowball calculators so that the individual can see for himself how the process would work for him.

If a person follows the above process, he or she can become debt-free in a surprisingly short time. It is not easy, but the main things that are required are planning, self-discipline, and organization. It can be done!

How to Use the Certificate of Deposit to Save: Are Certificates of Deposit (CDs) Worth Investing Spare Cash in?

Free

Many people look to build up some savings in case they need them in the future. Standard savings accounts may not give fantastic returns and many will invest their savings in one or more certificates of deposits (CDs) as an alternative. How do these products work and are they worth it?

What is a Certificate of Deposit?

This savings account, like any other traditional deposit account, is designed to give the individual a return on their investment by paying them interest. The difference between CDs and other savings alternatives is that the individual will commit to tying up their savings for a set period of time with the issuing bank or brokerage.

This gives the individual the potential to earn more interest. They may, for example, invest a fixed sum in a CD to get a specific rate of interest that is paid according to the CD’s schedule. Investment periods vary here but will typically last between 3 months to 5 years. Once the product has come to an end the individual can take their cash out or keep it in the account for another term.

The Advantages and Disadvantages of Investing in CDs

For many, certificates of deposit are the primary way to invest their spare savings. The advantages of using standard CDs for the individual include:

  • Higher rates of interest compared to standard deposit accounts.
  • Lower risk than many other investments as their principal investment is secure as long as they stick to the terms.
  • Increased security as federal deposit insurance protects these investments to the tune of $250,000.

It is important to consider all relevant factors, however, before using this kind of investment. So, for example, the individual should be aware that:

  • They may lose interest and perhaps some of their principal in penalty charges if they don’t stick with the term of the CD and want to take their money out early.
  • They may not see the kind of high investment returns that may be found with other investment products.
  • Some products may be available on a national basis but some may be reserved for local investors.

There are also various types of certificates of deposit to choose from within the financial sector so it is important to investigate the terms and conditions before investing. Whilst traditional products will give a fixed rate of return for their investment period others may offer variable rates and different terms that may make investment a little less secure.

Bear in mind as well that shopping around to find the best investment deals may be worth doing. Interest rates and deals may vary widely and using a CD yield rate comparison site or service online may give a quick snapshot of the best options in terms of returns. This may also be useful if the individual is looking to set up a CD laddering strategy.

House Stripping Common With Foreclosed Homes: What a Person Can Take From a Home After a Foreclosure

The following is an article by Natural Resources Management president Tracy Suttles, a figurehead in the Houston, Texas real estate development scene.

An individual facing foreclosure is only allowed to remove certain items from the home prior to vacating the premises. Removing unapproved items from a foreclosed property is known as “house stripping”. Many former owners engage in house stripping without ever realizing that the practice is illegal.

What A Former Owner Can and Cannot Take From the Home After Foreclosure

Many former owners are under the impression that if they purchased an item and installed the item in the home, they have the right to uninstall the item and take it with them when they leave. This is not the case. The removal of any item that directly affects the value of the home is considered house stripping at best, at worst, defacement of bank property. The former owner is free to take the following items:

  • Personal belongings
  • Unattached appliances (blender, coffeepot, etc.)
  • Garden equipment
  • Furniture
  • Unattached storage buildings

Items that cannot be removed include:

  • Attached appliances ( I.e. dishwashers, stoves, etc.)
  • Built in furniture
  • Carpet or flooring
  • Doors
  • Home fixtures (chandeliers, door knobs, fans, etc.)

Home fixtures and attached appliances may be taken by the former homeowner provided that the individual provides and installs a functional replacement.

House Stripping May Be Considered Defacement of Bank Owned Property

Because taking items such as carpets and doors reduces the value of a home, the bank may not be able to sell the home for enough money to cover the outstanding balance of the former owner’s mortgage loan. Any potential buyers will see the job of replacing flooring or repairing extensive damage done to the home when built in furniture or shelving was removed, as an added cost. The home will be less appealing to buyers and thus sometimes cause a significant financial loss for the bank.

Although this is the intent of some angry former homeowners, many individuals do not realize that when they pack up their new dishwasher and the custom fans they purchased for the bedrooms they are actually defacing bank owned property. They believe that because they purchased it, it belongs to them. Once a fixture or appliance is installed in the home, however, it must stay with the home following a foreclosure unless the former owner elects to replace the item.

Legal Consequences of House Stripping

In 2008 in the town of Sharpsville, PA a man by the name of Scott McCusky was tried and convicted for stripping his home. A local newspaper ran the story along with the verdict–that McCusky pay $174,000 in restitution to the bank and serve 3-15 months in the county jail.

In yet another piece, The Chicago Sun Times ran a story concerning house stripping and its consequences. According to Patrick Zomparelli, a Chicago realtor, some banks are offering homeowners money to leave peacefully without damaging the property.

Although house stripping is illegal, it can be difficult to prove that the act was done by the former homeowner and not thieves or vandals preying on an empty house.

Tracy Suttles can be reached on Twitter at @tracydsuttles.