Costly Credit Card Reward Mistakes
Managing your credit and knowing what steps to take to improve it or correct past mishaps is comparative to flying an airplane without any pilot training.
As my involvement in the finance and credit industry approaches four years, I've encountered several mistakes people make, but one in particular stands out.
This mistake will compound your current credit problems if you've had some financial difficulties recently that have resulted in late payments on credit obligations.
If your credit has some rough spots in it, which most people do, I ask that you read this article and follow my simple advice.
If you don't take my advice, then don't be surprised the next time you apply for credit, especially a mortgage loan, and are denied for this very reason.
Your credit report contains a history of your past credit obligations.
Contained within this report are the names of creditors, account numbers, balances owed, monthly payments, repayment history and more.
Each credit bureau uses a different mathematical algorithm to calculate what lenders use to determine your credit worthiness - your credit score.
Although your credit score is combination of many factors, many people overlook the importance of a recent credit history; especially over the past 24 months.
This recent credit history is especially needed after late payments, repossession, foreclosure, bankruptcy or any other incident that negatively impacts your credit score.
After people experience a financial hardship or other circumstances that damages their credit, they often avoid credit thinking it will somehow help them.
This is simply not true! Avoiding credit further compounds your credit problems in that you would no longer have a recent credit history - an important factor in determining your credit score and worthiness.
Recently, I was working with a borrower who wanted to purchase a home for his family.
He had gone through some transitions in his life with respect to employment and was forced to either buy food to eat or pay his education loans - he chose to feed his family.
As a result he missed some school loan payments, but made his credit problems worse by "taking a break" as he called it, from continuing to build his credit after his circumstances passed.
He thought that by avoiding credit it would somehow repair itself.
Unfortunately, he was wrong and he was unable to qualify for a mortgage loan because he did not a have a recent credit history, even though he made good money now and was entirely capable of meeting the obiligation to pay a monthly mortgage payment.
I immediately suggested that he find a credit card offer that would help him establish a recent credit history.
Another example is a friend who had to let her home go into foreclosure because of an unknown mold problem.
The mold problem resulted from a leaking dishwasher and fixing the mold problem would have cost her over $20,000.
She was not in a financial position to fix the problem so she handed the keys to her home over to the mortgage lender.
For several years, she avoided credit thinking it would help her, but now that she would like to get some credit, it has become very difficult.
I recommended that she search out credit card offers that she could apply for.
Another I idea I gave her was to be added as an authorized user to a family members cash back reward credit card she had been using the past few years.
By being added to the account as an authorized user, the account history and information would be added to her credit report.
This would create a positive recent credit history for my friend as she starts to rebuild her credit.
As my involvement in the finance and credit industry approaches four years, I've encountered several mistakes people make, but one in particular stands out.
This mistake will compound your current credit problems if you've had some financial difficulties recently that have resulted in late payments on credit obligations.
If your credit has some rough spots in it, which most people do, I ask that you read this article and follow my simple advice.
If you don't take my advice, then don't be surprised the next time you apply for credit, especially a mortgage loan, and are denied for this very reason.
Your credit report contains a history of your past credit obligations.
Contained within this report are the names of creditors, account numbers, balances owed, monthly payments, repayment history and more.
Each credit bureau uses a different mathematical algorithm to calculate what lenders use to determine your credit worthiness - your credit score.
Although your credit score is combination of many factors, many people overlook the importance of a recent credit history; especially over the past 24 months.
This recent credit history is especially needed after late payments, repossession, foreclosure, bankruptcy or any other incident that negatively impacts your credit score.
After people experience a financial hardship or other circumstances that damages their credit, they often avoid credit thinking it will somehow help them.
This is simply not true! Avoiding credit further compounds your credit problems in that you would no longer have a recent credit history - an important factor in determining your credit score and worthiness.
Recently, I was working with a borrower who wanted to purchase a home for his family.
He had gone through some transitions in his life with respect to employment and was forced to either buy food to eat or pay his education loans - he chose to feed his family.
As a result he missed some school loan payments, but made his credit problems worse by "taking a break" as he called it, from continuing to build his credit after his circumstances passed.
He thought that by avoiding credit it would somehow repair itself.
Unfortunately, he was wrong and he was unable to qualify for a mortgage loan because he did not a have a recent credit history, even though he made good money now and was entirely capable of meeting the obiligation to pay a monthly mortgage payment.
I immediately suggested that he find a credit card offer that would help him establish a recent credit history.
Another example is a friend who had to let her home go into foreclosure because of an unknown mold problem.
The mold problem resulted from a leaking dishwasher and fixing the mold problem would have cost her over $20,000.
She was not in a financial position to fix the problem so she handed the keys to her home over to the mortgage lender.
For several years, she avoided credit thinking it would help her, but now that she would like to get some credit, it has become very difficult.
I recommended that she search out credit card offers that she could apply for.
Another I idea I gave her was to be added as an authorized user to a family members cash back reward credit card she had been using the past few years.
By being added to the account as an authorized user, the account history and information would be added to her credit report.
This would create a positive recent credit history for my friend as she starts to rebuild her credit.
