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Credit Laws

Can I Repair My Credit After Bankruptcy?

By | Ask a Credit Expert, Bankruptcy, Consumer Rights, Credit Laws, Credit Repair, Personal Finance, Your Credit

Credit Repair After Bankruptcy

Bankruptcy sounds like a dirty word, but for many people, it is a lifeline to starting over. Whether you lost your job, were overwhelmed with an unavoidable expense or found yourself dealing with a costly illness, bankruptcy was designed to give people a chance to begin again. However, bankruptcy does take a serious toll on your credit score.

Understanding the Impact of Bankruptcy

Luckily, that’s not to say that your credit score is going to be ruined forever. According to the Federal Trade Commission, your bankruptcy can stay on your credit report for as long as 10 years after your debts are discharged, and that can make accessing new credit, buying a home or even getting a job difficult. While the impact can be severe, it is possible to repair your credit after bankruptcy. It just takes some proactive efforts on your part.

Look at it like this: Your credit score is meant to be indicative of how risky it is to let you owe money. High balances, late payments and anything else that could show you may be living outside your means is suspect. Filing for bankruptcy is largely the culmination of those issues. Now, you may have had extenuating circumstances that were completely outside of your control, or you may have merely gotten underwater and couldn’t find your way out. Whatever the case, the bankruptcy on your credit report is objective; it doesn’t matter why it happened. To repair your credit, you have to demonstrate that you are no longer a credit risk.

Starting Over After Bankruptcy

The first advice most people hear after filing for bankruptcy or facing some similar credit crushing issue is to establish new credit as soon as possible. That is good advice, but it is incomplete. Repairing your credit after bankruptcy will require that you have accounts on which you make regular payments. Getting a loan and then paying it off will not do nearly as much good for your credit report as making consistent payments.

“The key is to establish at least three positive trades actively reporting on each of your reports with Equifax, Transunion and Experian,” explains Marco Carbajo for the Small Business Administration. “For example, if you’re currently making timely payments on a car note but have no other positive credit that’s active, then you should obtain two secured credit cards and use them regularly.”

Understanding Your Credit Score

Aside from exercising your credit, you also want to practice good spending habits. According to the Federal Reserve Board, your credit score is influenced by whether you make your payments on time, the amount of debt you have, the number of accounts you have, the length of your credit history and how much you owe.

For instance, once you get your first credit cards after bankruptcy, you will want to make sure that you keep the amount of debt on those cards at less than 30 percent of the credit limit, and increase your credit limit whenever you can – the higher your credit limit, the more your creditors trust you and the better it looks on your credit reports. Also, make sure you are making your payments on or before the due date and paying any billable amounts in full.



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Being Selective About Your Credit

After bankruptcy, you want to be selective about where you find your credit as well. Many people with bad credit are sold solutions that promise to provide them access to new credit far more quickly than through any other source, but beware of those offerings. Even if the lender is legit, if the company is known as a “high-risk lender,” using them for your credit or banking needs could actually hurt your credit score. Instead, focus on well-known lenders and credit companies. Choosing a big bank over a high-risk lender, even if it means you have to start with a lower credit limit or a secured credit card over a traditional credit card, looks better and may even give you more options for growing your credit as you repair the damage from your bankruptcy.

Righting the Wrongs in Your Credit Report

You should also take a look at your credit reports to make sure that the debts from your bankruptcy were discharged properly and that all information is accurate. An error on your credit report can really work against you. To do correct inaccuracies, the Federal Trade Commission says that you will need to obtain a copy of your credit report from each of the credit reporting agencies and inform them in writing of any inaccuracies. You may need to provide proof of the inaccuracy if possible, and it may be necessary to tell your creditor that you are disputing the entry. Hiring a credit repair company can make the process easier. They handle the paperwork for you and handle the dispute on your behalf.

Once you begin to take steps to improve your credit score after bankruptcy, you can start to see modest improvements pretty quickly. As long as you are careful with your credit, choose the right lenders and maintain accurate credit reports, you can repair your credit after bankruptcy.

Sources

  • Federal Reserve Board, “5 Tips for Improving Your Credit Score” http://www.federalreserve.gov/pubs/creditscore/creditscoretips_2.pdf
  • Federal Trade Commission, “Coping with Debt”, November 2012. https://www.consumer.ftc.gov/articles/0150-coping-debt
  • Federal Trade Commission, “Free Credit Reports”, March 2013. https://www.consumer.ftc.gov/articles/0155-free-credit-reports
  • Small Business Association, “How to Restore Your Credit After Hard Times”, Marco Carbajo, May 2013. https://www.sba.gov/blogs/how-restore-your-credit-after-hard-times

Pay Off Debts – 9 Affects on Your Credit Score

By | Ask a Credit Expert, Bankruptcy, Consumer Rights, Credit Laws, Credit Repair, Credit Reports, Credit Scores

Credit Repair - Pay Debts

Are you wondering how paying off your debt could affect your credit score? There’s no doubt that paying all of your debts is the ideal thing to do, but sometimes it just isn’t possible. If you’ve lost your job or suffered other hardships, you may have to choose which bills to pay. Here’s how each course of action will affect your credit score.

1. Paying in Full

You may be unable to pay in full now, but it’s worth considering in case you win the lottery, find a higher paying job or have some other windfall. When you start paying on time again, you’ll have positive payment history added to your credit report.

Unfortunately, any past late payments or other negative remarks will not be removed from your credit report when you bring the account current. They may affect your credit score for up to seven years from when they happened.

2. Paying Only the Minimum Payment

Paying the minimum payment due by the due date keeps your accounts current and avoids late payment penalties. Even when money is tight, make paying the minimum payment on every account your first priority.

When possible, you should pay more than the minimum. In addition to saving interest, you’ll also be improving your credit profile.

Paying only the minimum payment can lead to your credit card utilization ratio increasing, which will lower your credit score. Credit card companies also have internal models that flag accounts with only minimum payments as high risk, and they may reduce your credit limit or close your account.

3. Paying Late

Paying late should never be an option. Even if you’re trying to pay off a higher interest credit card first, don’t skip paying the minimum payment on your lower interest cards.

If you absolutely can’t make every minimum payment, you should understand the two payment deadlines. The first is the actual due date that must be met to avoid a late fee, while the second is for credit scoring purposes. Late payments aren’t reported to the credit bureau as long as you make the payment within 30 days of the due date.

4. Ignoring Your Bills

If you can’t make your minimum payments and have already had a late payment reported on your credit report, don’t just ignore the bill. It will only get worse.

Unpaid debts will be reported as charged off or result in a lawsuit and judgment against you. These have a much bigger negative impact on your credit report than late payments.

If you’re sued, you’re also at risk of having your wages or bank accounts garnished and losing even more control over your finances.



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5. Using the Debt Snowball Method

The debt snowball method is a strategy you can use once you stabilize your finances and are able to make more than the minimum payment on your credit cards. With the snowball approach, you focus on paying off one credit card at a time — either the lowest balance or the highest interest rate.

The downside to the snowball method is that your credit score may not rise as quickly as it could. It’s typically better to have moderate balances on all of your cards than to have one or two with no balance and the rest almost maxed out.

The credit card companies that you’re only paying minimum payments to may also get nervous, as explained above.

6. Taking Out a Loan to Pay Off Credit Cards

Taking out a loan to pay off credit card debt may or may not be advantageous. The biggest positive impact it will have is to bring up your credit score by reducing your credit card utilization ratio.

However, a loan will often have higher monthly payments than your credit card minimum payments. This puts you at greater risk of making late payments unless you’re absolutely sure you can meet the new payment amount.

Of course, you’ll also need to compare the interest rate of the loan to your credit card rates to see if it’s worth it. This is more likely to be the case if previous late credit card payments have pushed you up to the penalty APR.

7. Offering a Settlement

If lenders believe there is a risk they won’t be paid in full, they’re often willing to accept a lump-sum settlement or a modified payment plan. Legally, you won’t owe them any remaining balance, but your account won’t be reported as in good standing on your credit report.

Your credit report will also reflect that you settled the account for less than what you owed. As with other options, past negative history is not deleted.

8. Paying for Deletion

Paying for deletion is a type of settlement where you ask the creditor to remove negative items from your credit report in exchange for your payment. You may also be able to ask that the account be marked as paid in full rather than settled or charged off.

Technically, the credit bureaus don’t allow this practice, but many creditors bend the rules if it helps them get paid. If you’re successful, the negative items will be removed from your credit report, and your score will be the same as it would have been if they were never added.

9. Declaring Bankruptcy

A bankruptcy in itself has one of the largest negative impacts on your credit score, and it also doesn’t erase negative history. However, bankruptcy will stop collections and prevent new negative marks from being added to your credit report.

If you can’t keep up with your payments, bankruptcy may be the best option to stop the damage and allow you to focus on rebuilding your credit score.

Sources:

  • https://www.consumer.ftc.gov/articles/0152-credit-scores
  • http://www.consumerfinance.gov/askcfpb/317/what-information-goes-into-my-credit-score.html
  • http://www.federalreserve.gov/pubs/Bulletin/1996/796lead.pdf
  • http://www.sites.ext.vt.edu/newsletter-archive/fmu/2002-04/factors.html
  • http://citeseerx.ist.psu.edu/viewdoc/download?doi=10.1.1.203.3472&rep=rep1&type=pdf
  • http://www.myfico.com/crediteducation/whatsinyourscore.aspx

Credit Myths Debunked

By | Credit Laws, Credit Repair

If you don’t work in the financial industry, it’s likely you are confused about at least one or two items that affect your credit. There are so many myths floating around about credit scores, credit reports, and the factors that contribute to a high score, that even the most educated consumers are still confused on certain items. We’re here to help debunk some of the popular myths and help set the record straight.

  • Closing your oldest account immediately improves your credit. Since the length of your accounts determines fifteen percent of your credit score, many people believe that closing their oldest account will immediately affect their credit. However, the truth is, that account will remain on your report for several years and will still be taken into consideration when determining your score. Closing your oldest account will lower your average length of credit history; therefore, it will actually end up lowering your credit score.
  • Medical debt has a different effect on your score. Many people believe that medical debt that has gone to collections does not affect your credit score. However, all debt reported to collections, including medical debt, is generally reported. In general, debt that is in collections will have a negative impact on your FICO score.
  • Carrying debt is necessary to build credit. Many consumers believe that they must carry a certain amount of debt in order to continue to build their credit. But, it isn’t necessary to overload yourself. What is important is demonstrating responsible use of credit rather than not using credit at all. In addition, it’s important to ensure that you limit your credit use to keep your credit utilization ratio down.
  • Short sales are better than foreclosures. Despite popular belief, short sales and foreclosures have the same impact on your FICO score. The reason is that both are considered to be defaults on your obligations.
  • Lenders are required by law to report your account activity. There are actually no laws that require lenders to report your activity to credit reporting agencies. The only law surrounding this subject is that what lenders report must be accurate.

The most important thing consumers need to understand and realize is that if it’s in your credit report, it will be used to calculate your score. Your credit score is calculated by software systems. The software must be written in a way to identify and consider new items. Calculating your credit score is actually a science and not subject to human interpretation or error. Knowing and understanding your credit score is intimidating, but crucial for your financial success.

If after learning your credit score, you determine that you are not in a good position for financial success, you may be a good candidate for credit repair solutions. At Ovation, we are here to help. Our credit repair plans are customized to meet your unique needs.

Contact us today to see how we can help.

 

More Credit Myths Debunked

By | Credit Cards, Credit Laws, Credit Repair

Here at Ovation, we feel that knowledgeable consumers are empowered consumers, which is why we spend so much of our time and effort providing education about credit laws, credit cards, and credit repair. We want you to be informed, perceptive credit users who use credit as a tool instead of being a slave to credit.

Part of being a savvy credit consumer is being able to move beyond the myths that surround credit. Your credit score is more than just a number; it is your ticket to better interest rates, strong purchasing power, and sometimes a better job. Today, we’re busting a few credit myths and bringing you the truth.

I can boost my score by cancelling credit cards.

While it might seem logical that closing accounts would boost your credit, the opposite is actually true – especially if you close accounts you have had for a long time. Credit history carries a lot of weight – 35% of your credit score – so closing older accounts can actually be very bad for your overall credit score.

I can’t apply for credit because too many inquiries are bad for my score.

While it can be detrimental if you’re always applying for new credit cards and opening new accounts every month, credit-reporting agencies recognize when a consumer is simply shopping. If multiple mortgage or auto credit inquiries come in during the same 30-day period, the credit agencies will assume you’re on the hunt for the best deal and it won’t count against you.

I pay my bills on time every month, so I don’t need to check my credit reports.

Every single person absolutely must take responsibility for actively managing their credit and reviewing the information on their credit reports. Even if you are paying all of your bills on time every month, you should be making certain that no one else is using your good credit and that your efforts are being properly reported. You can request a free copy of your credit report from each of the three reporting agencies once per year.

As long as credit myths keep popping up, you can count on us here at Ovation to keep peeling away the layers of confusion so that you can be an empowered, informed consumer in charge of your own financial destiny. If you have questions or concerns about your credit, feel free to contact us today for a free consultation.

 

Proper Spending Habits will Protect Your Credit Card Health

By | Credit Laws, Credit Repair, Credit Scores

When we bag our groceries, we are encouraged to choose paper over plastic, in the effort to protect our environment. We suggest you do the same when protecting your credit card health: choose paper, not plastic.

Banks make their money from plastic. Every time you as a consumer use your credit card instead of cash, a percentage of your purchase goes into the coffers of the bank.  Subsequently, banks want you to use plastic as much as possible. They will bribe you to use your credit cards even when you don’t need to – or when you shouldn’t – use plastic instead of cash.

Points are often awarded to frequent credit card users. As travelers are awarded points for flying with a particular airline regularly or frequenting a specific hotel, credit card users are awarded points for regularly using a particular credit card and often for a particular purchase.

Seasoned credit card users realize that a different interest rate is assigned to cash advances; this rate is higher, and fees are often added to this higher rate. In contrast, lower interest rates are assigned to balances transferred from a competitor’s credit card, as the lender offering the lower rate wants your business. In their efforts to remain competitive, however, banks are now awarding points, double points, and triple points.

One lender may give you double points if you use their credit card for gas. Perhaps the lender may give you double points if you use their credit card for groceries. Another lender may offer triple points if you use their credit card to pay utility bills. Beware!

Banks will try a multitude of tactics to get you to use their credit cards and to continue using them on a regular basis. You will find that you are developing habits that will cost you more in the long run, and unless you are a credit card user that pays off your full balance every month, you are building interest that increases the cost of the service or item for which you are paying.  Develop habits that will protect your credit health.

Do not pay interest for gas. Do not pay interest for groceries. Both gas and food prices have increased enough over the past couple of years; do not make the situation worse.  If you must use your credit card, use the purchasing power of the card for larger ticket items, saving your cash for basic energy and grocery essentials. Also, realize your spending habits. If you are one to buy impulsively, train yourself to walk away from a prospective purchase. Give yourself 24 hours; you may find that you do not want a particular item as much as you originally thought you did. If you don’t need the item and you don’t have the cash, don’t buy it.

Credit card rewards are a bonus for those consumers who can afford to pay their balances and avoid hefty interest rates. These same rewards, however, are bait used to lure the user into a dangerous cycle of revolving debt that siphons additional money from the consumer that the user does not have.

Credit Card Act of 2009 Puts Consumers Back in the Driver’s Seat

By | Credit Cards, Credit Laws, MasterCard, Revolving Debt, Visa

Credit card companies have long been greasing the wheels of government with high priced lobbying, but in 2009 Congress struck a blow for the common man (and woman) – you know, the ones that actually voted for them. Few people know about the Credit Card Accountability Responsibility and Disclosure Act of 2009 and that’s exactly how the credit card companies would like to keep it, but this act puts the power back in the hands of the people and makes credit card companies accountable for their actions.

Follies of Youth

Most college students would likely contemplate selling a kidney if it meant a free pizza on Friday night. Money is tight and college cafeteria food is barely edible. It used to be that students going to sporting events or even walking around campus would be greeted by friendly credit card company reps who were passing out free stuff, from frisbees to t-shirts (letting laundry day wait one more day), just to get the students to fill out an application. It didn’t take long before thousands of college students had a lot of free shirts and a ton of credit card debt.

Credit card companies preyed on these groups because students were impulsive and an almost-sure money-maker. The credit card industry knew there were plenty of minimum payments and tons of interest to be collected from the free pizza generation. The Credit Card Accountability Responsibility and Disclosure Act of 2009 took away the credit card companies’ ability to market on campuses, much to the chagrin of dirty-shirted and hungry college students everywhere.  You can’t even get a credit card before you’re 21 anymore, unless you can prove you have income or have a co-signor. Credit card companies also can’t visit a sporting event or other venue to entice new customers without a valid reason for being there.

Interested in Interest

Credit card companies once had the ability to raise a person’s interest rates for almost any reason. Miss a few payments? Default on a previous credit card? Wear white shoes after Labor Day? Ok, so a fashion faux pas is a little exaggerated, but many people found their interest rates rising with little or no warning.  Your interest rate could jump by 18 points over night, and you were left holding the bag.

The Act has several provisions to protect the public from unreasonable interest rate increases. Companies now have to give 45 days notice before raising rates, so you can decide whether or not you want to keep the card. That 45 days is designed to give you time to pay off and close the card without incurring the new interest rate. It also keeps them from retroactively using the new rate on a balance in good standing.

We’ve all made credit mistakes, and credit card companies were taking advantage of that to increase rates if you were late on your payment by so much as a minute. The Act protects consumers by requiring a 45-day notice for increases in rate and, if you make six months of consecutive on-time payments, then your interest rate must be lowered back to the rate you had before the missed or late payments.

The main downfall of the Act is that it did not set a cap on interest rates. This means companies can still charge upwards of 30, 40 or even 50 percent interest if they want to.

Fees! We Don’t Need No Stinking Fees.

Credit card companies seem to have a fee for everything. There were late fees, over the limit fees and you-ate-too-much-chocolate-on-Thursday fees. The Credit Card Accountability Responsibility and Disclosure Act of 2009 gave credit card companies rules about when they are allowed to charge fees.  Before the Act, if you got your payment in too late at the post office or went one cent over your limit, they took the opportunity to rake you over the coals.

Now, credit card companies can only charge an over-limit fee for three consecutive billing cycles.  Also, payments made on the payment date before 5 p.m. cannot be charged a late payment fee.

Credit card companies are complying with the law, but they are counting on consumers not knowing about their rights. Grab the credit bull by the horns and turn your credit score around by exercising your ability to take control thanks to the Credit Card Accountability Responsibility and Disclosure Act of 2009.

When Do Interest Rates Vary?

By | Budgeting, Credit Cards, Credit Laws, Debt, MasterCard, Revolving Debt, Visa

You probably see credit card offers all over the place. They’re in the mail box, in your email, on TV, and on the web. Every one of them boasts about the great interest rate they’re offering, and the temptation to click and apply or fill out a form is great, especially when you need some financial relief.

Suppose you accept one of the offers. Will the sponsoring credit card company increase their rate after a couple of months? And what excuse will they use?

In the past, credit card companies could make changes with the wind, but new laws have stopped practices such as raising the rate on your card simply because a competitor raised your rate on their card. Credit card companies can still raise your rate, but they have to let you know when and why.

General Change of Rate: If you’re in good standing, your interest rate can change only if the credit card company changes the rate for everyone having the same kind of account with them, and they have to give you 45 days notice. The notice gives you time to pay the outstanding amount and cancel the card before the rate goes up.

Late Payment: Sometimes the credit card company will raise your rate to their default rate if your payments are late for two months. To do that, they have to give you the 45 day notice, and, if you make the required payments for six months – on time – at the new rate, then the company has to reduce the rate to the rate you had before the increase.

Cash Advances: A credit card company can offer a teaser rate coupled with a flat fee. After a period of time, the interest rate on cash advances can increase to a rate that’s higher than your credit card rate. What many companies don’t advertise is that your payments are applied to the minimum payment requirement on your credit account first. Only after that payment is made is anything applied to the cash advance, which is why we don’t recommend taking cash advances from credit cards.

Balance Transfers: Credit card companies will offer a lower interest rate on balance transfers to entice you to transfer your credit debts to their card so you have a bigger balance with them. They know that most folks won’t pay off large transfers during the teaser period and will end up paying the normal interest rate on the larger amount they now owe. Of course, you come out ahead if you do pay the transfer off during the teaser period, particularly if they offered you a zero percent interest rate.

Resist the temptation to fall for the pleas from credit card companies. Instead, take stock of the credit cards you currently have, work with them to lower your interest rate as much as possible, and focus on managing and reducing the debt you have instead of adding more.

How To Handle Domestic Fraud

By | Ask a Credit Expert, Credit Laws, Fraud Protection

You hear about identity theft all the time. There seems to be tons of stories in the news these days about someone hacking into a business and stealing data on customers or their credit card numbers. It’s easy to know what to do when a stranger steals your information and commits fraud, but fraud can also be committed against you by someone you know.  It might sound more like something that happens in a movie, but maybe your brother-in-law dug that pre-approved credit card application that came in the mail out of your trash and helped himself to your better credit and opened the account.

At Ovation, we’ve seen it all – from clients whose family members have opened cable accounts and cell phones in their names without their knowledge to family members who rack up thousands of dollars in credit debt. Until you get a bill for a line of credit or a service you never opened, or you see a delinquent account on your credit report, you may never even know they’ve done it.

When a stranger commits identity theft, there is no hesitation about phoning the police and filing a police report (the surest way to protect your credit). With domestic fraud, it’s not always that easy to call and turn in your brother, mother, or nephew. Sometimes, you can handle the fraud privately between you and the family member responsible. Try talking with that person to see if you can work out a way to repay the debt that resolves the problem without impacting your credit score or sending your loved one to jail.

While some creditors may not even ask you who committed the fraud or care if you do know who was responsible, it’s likely they’ll ask for a police report. Generally it makes it easier to prove fraud if there’s a police report, but we understand it can be hard to file one against a relative, even if they are that black sheep of the family who always seems to be looking for a free ride at everybody else’s expense.

If the “figure it out between us” approach doesn’t work, you may be left with no choice other than reporting the abuse.  You can try to handle the debt yourself, and you may have the resources to do this, but if you don’t and you end up with a delinquent account on your credit report, then you’ll need to consider calling the credit bureau and telling them that the negative account on your credit report is the result of fraud. No matter who committed the fraud – friend or stranger – you have the right to dispute the charges and repair your credit score.

Will Your Credit Score Affect Potential Employment?

By | Consumer Rights, Credit Laws, Credit Scores, Your Credit

A small number of states prohibit the use of credit information by employers as a means for making hiring decisions. California is the most recent state to join those that restrict use of credit information for that purpose. Certainly, it makes sense that if you are applying to work in an institution that demands at least average accounting skills, your ability to demonstrate that you have good credit may be important.  However, if you are applying for a job in which money is not an object (other than earning it), your personal business should remain just that.  Fortunately, states in increasing numbers are seeing the wisdom of separating personal business from business business. Unfortunately, the reality is that the oversight does not exist to prevent employers from screening employees as they see fit.

In a 2009 discussion for National Public Radio, evidence is shown to support the claim that employers indeed use credit ratings to determine the trustworthiness of a candidate, as well as to judge the character of a person they consider qualified to work for them.  While you may consider this to be unfair, unethical, and in some instances illegal, as a potential candidate for any job, your goal is to present the best image possible. Right or wrong, if you want to present such an image, one way to do that is to ensure that your credit score is not considered less than acceptable.

Ovation offers numerous financial tools that can help you manage your payments, save you money, and improve your credit score. From the start, a common-sense approach to your finances will help you avoid a poor rating. Credit is a necessary evil in our society, but you can manage credit by using it regularly yet sparingly. Pay your bills on time, and pay more than your minimum balance. If you have multiple credit payments, pay towards the credit card with the highest balance and the highest interest rate. Do not over-extend your credit, and manage your spending habits. By taking these steps, you will be better able to manage your credit score, thereby putting yourself not only in control of your finances, but also in control of your professional future, regardless of where you want to be employed.

Ultimately, legislation may be drafted compelling employers to ignore your credit score.  Regardless, do not take that risk with your future. Your choice today to manage your credit rating responsibly will demonstrate that you are a professional regardless of the circumstances.

New Credit Card Standards – Not So Sweet

By | Credit Cards, Credit Laws, Credit Scores, Debt

You know how it is. You go on a diet –stick with it a few weeks, maybe months. Even lose weight. Then comes a birthday party, holiday, or stressful moment. Out goes the diet and on come the pounds. It’s the same with credit debt. Coming out of this recession, a lot of people were trying to reduce their dependency on credit cards and they were doing a really good job for quite a while. The recent trend is that people are relying on credit card debt again.

Credit card companies are now loosening their standards. They sweeten the deal to make it easy to accrue debt and then profit from unpaid balances. The total number of bank or credit cards issued jumped 27% in May compared to a year earlier, according to credit reporting bureau Equifax. From January and May, nearly 15 million new bank cards were issued — the highest level in three years.

Our position is that credit cards aren’t used to pay for ordinary living expenses unless the balance is paid off every month. We caution people not to use their credit card just because it’s available. Use it responsibly, preferably only for emergencies. We’ve talked about this in the past regarding cell phones, luxury items and other high end items. It’s important to be very sensitive to how much those items really cost if a credit card isn’t paid off each month. People are wasting $9.73 a day (or more depending on the payment plan) in interest payments. Americans actually added $18.4 billion to their debt load in the second quarter, a 66% increase from the debt they accumulated in the same quarter last year.

Tools like those offered by Ovation can help you understand exactly how much of that hamburger you just had to buy on the credit card is actually going to end up costing you. You can login and see how long you are carrying debt for a particular item; for example, if you’re just making minimum payments or paying a certain amount above the minimum each month. We believe these tools help our customers realize that credit cards are an expensive way to pay for something when you calculate the interest that accrues on top of the purchase price. It’s often better to wait until you can pay cash for the item.

If you find yourself falling back into unhealthy financial habits, tighten your belt again. Turn away from the sweet credit offers – like the calories in the cake you’re trying to give up, the interest will cost you more than you want in the end. By overcoming the temptation, your credit score will weigh in at a healthy level and you will have more money available to manage your budget successfully.

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