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Banks vs. Credit Unions: Making the Right Financial Move for You

By | Ask a Credit Expert

Selecting your financial institution is one of the most momentous decisions you will make in your adult life. You may be seeking out a trusted, highly esteemed name to protect your valuable assets, but don’t rule out the lesser-known establishments in your hometown. Both banks and credit unions offer a full slate of banking services including checking and savings accounts, loans, lines of credit, mortgages, and other services. As you’re considering whether to choose banks versus credit unions, check out the top features that set them apart.

Structure and Rates

The key difference between banks versus credit unions is that the former is for-profit and the latter is not-for-profit. Because banks are for-profit businesses owned by a group of investors, they’re more likely to charge higher rates in the interest of turning a profit. Credit unions are organizations owned by their members. That structure allows them to extend free checking and higher interest rates on savings accounts — as well as lower interest rates on loans. However, there are certainly exceptions to the rule. Small local banks might operate in a similar way as a credit union. And there are some credit unions whose rates meet or exceed those charged by big banks. Make sure to compare rates as you’re deciding whether to choose banks versus credit unions.

Qualification Process

Credit unions impose more restrictions on their customer base. Because they are not-for-profit, they must limit their clientele. That means they may require their customers to work for a certain company, belong to an organization, or live in a specific geographic area. However, not all credit unions impose the same restrictions, and it’s fairly easy to find one that will offer you membership — particularly one that just requires you to live in a designated locale.

Loan Availability

The not-for-profit nature of credit unions makes them ideal for those who don’t boast a completely blemish-free credit record. They’re more likely to work with you and approve you for a loan at a lower interest rate. By comparison, a bank — which needs to abide by a set of corporate loan qualifications — might either turn down a poor-credit applicant or charge them a much higher interest rate.


A credit union or small bank may offer a more personalized experience. You may develop relationships with the employees — who can assist you when you have a problem or want to take a major step, such as applying for a loan. The customer service experience at a large bank might be less personal but could deliver quicker and more convenient results. Consider whether you will actually want to walk into a branch and greet the employees by name. A credit union or local bank would likely be the best fit for this preference. If you’re more likely to do all your transactions online, just make sure the institution offers a user-friendly website and or app — and a dedicated phone line if you have any concerns. While many credit unions now have this capability, a larger bank is more apt to have a fully streamlined online user experience.


Even if the institution closed its doors, your money would be safe in either a bank or a credit union. Banks insure their money through the Federal Deposit Insurance Corporation (FDIC). Most federally insured credit unions use National Credit Union Share Insurance Fund (NCUSIF) insurance. Whether you store your money in a bank or credit union, both types of institutions will offer up to $250,000 in insurance protection per account. The exception is a state-chartered credit union, which typically uses private insurance that may not be as fail-safe as federal insurance backed by the U.S. government.

Making the Decision

Your choice will ultimately come down to your own priorities. Make a list of your “must-have” qualities that you’re seeking in a financial institution — and then see how your top candidates stack up. If you’re looking for a nationally known bank with easily accessible ATMs wherever you travel, a bank might be the right choice for you. But if you prefer to frequent hometown organizations and businesses, you may feel more at ease in a credit union (or a small neighborhood bank). If lower fees and interest are important to you, choose the institution that extends the best rates.

Reach Out

Weighing the pros and cons of banks versus credit unions is just one of the many tough financial decisions. For more help sorting out your financial life and your credit, get started with a free consultation at Ovation Credit with a professional credit analyst.

Choosing the Right Credit Card for You

By | Ask a Credit Expert, Credit Cards, Credit Repair, Credit Reports, Credit Scores, Personal Finance, Your Credit

Choose credit cards

There are dozens of credit cards on the market, so choosing the right one may be difficult. Do you want a card that gives you airline miles, or would you prefer cash back when you shop for groceries or buy gas? The options are almost limitless, so be sure to get a card that suits your needs. Credit comparison sites such as CardRatings can help you choose a card that’s right for you.

Cards and Your Credit Score

One of the most important things to keep in mind before you get a credit card is how it will affect your credit score. Also, depending on your credit score, you may not qualify for every card out there. Always keep in mind that credit cards report to the credit bureaus, so if you don’t pay your bills on time, it will negatively impact your credit score.

Types of Credit Cards

According to the American Bankers Association, 83 percent of people with a credit card have at least one rewards card. Why are they so popular? People like getting rewards for purchases they’re making anyway. You can earn free hotel stays and airline miles just for using the right card.

Here are a few types of credit cards that you may want to consider:

  • Cash-Back Rewards – As the name suggests, you earn cash back each time you make a purchase. These are growing in popularity, and there are a lot of options out there. Some flat-rate cards will give you 1.5 percent cash back on all purchases, while others offer accelerated cash back earnings in certain categories. If you like cash back, look for a card that offers generous rewards and bonuses in categories that you spend more on, such as gas or restaurant purchases.
  • Co-Branded Cards – These are often called partner cards and give you extra rewards at a retailer that you frequent while giving you rewards on all other purchases. These are great if you frequent a particular retailer.
  • Secured Cards – Secured cards are a bit different and are generally used to help people establish or fix their credit score. The idea is simple: You deposit money in a savings account at a bank, and the bank gives you a credit line up to that amount. Secured cards offer a couple of advantages. First, the money that you put in your savings account stays there. Secured cards aren’t debit cards. Second, secured cards report to the credit bureaus, which can help improve your credit score if you pay your bills on time. A credit repair service may recommend that you get a secured credit card to reestablish your credit.

Words to the Wise

A few years ago, a survey found that as much as $16 billion in rewards go unredeemed every year. Make sure that you take advantage of the rewards you earn. You should also review your monthly statements and take advantage of bonuses that card issuers sometimes offer. Also remember that miles and points may expire. Don’t let your hard-earned miles go to waste.

Read the fine print. Some credit cards require that you register for revolving rewards every quarter, while other cards place restrictions on the miles that you can use. Before applying for a credit card, make sure that you’ve read the fine print and get a card that matches your spending habits and lifestyle.

Lastly, watch out for fees. Check the benefits and rewards that a card offers and determine whether they’re worth the amount of the annual fee. Also look out for other fees, such as foreign transaction fees if you travel overseas.

Credit cards can be a great way to improve your credit score while being rewarded for purchases. The best advice is to read the fine print on the card that you’re looking at and use the card wisely to maintain a good credit score.

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.


  • Federal Reserve Board, “5 Tips for Improving Your Credit Score”
  • Federal Trade Commission, “Coping with Debt”, November 2012.
  • Federal Trade Commission, “Free Credit Reports”, March 2013.
  • Small Business Association, “How to Restore Your Credit After Hard Times”, Marco Carbajo, May 2013.

How Is FICO Different From VantageScore?

By | Ask a Credit Expert, Credit Reports, Credit Scores, Your Credit

If you make use of any credit monitoring tools, you may have noticed that FICO isn’t the only scoring model in the game anymore. Worse, you may even have experienced a shock if your credit score appeared to change after your monitoring tool switched models.

Yes, it’s true. FICO has a competitor in the (relatively) new scoring model from VantageScore. Because VantageScore usually sells its credit reports to businesses more cheaply than FICO does, chances are your credit monitoring tool has already switched to it, or will soon.

But what is VantageScore, how is it different from a FICO score, and what impact does it have on your credit options?

The History of FICO and VantageScore

While many Americans use “FICO” to mean “credit rating” the way we use “Kleenex” to mean facial tissue, that’s a mistake for the same reason. FICO is simply the brand name for the credit scoring model first developed by the Fair Isaac Corporation (FICO) in 1958.

FICO was a niche business for nearly 30 years, but after releasing its first scoring model intended for general use in 1989, it quickly established a near-monopoly over modeling personal credit scores. Indeed, to this day, it remains the only scoring model approved by the Federal government for evaluating mortgage applicants.

FICO charges each of the three major credit bureaus to make use of its scoring algorithms, and in response, Experian, TransUnion and Equifax struck a deal in the mid-2000s to collaborate on the development of their own, cheaper scoring model. The result: The first official release of the new VantageScore credit scoring model in 2006.

Both primary scoring models undergo changes every few years, and as of 2016, we’re on version 3.0 of VantageScore, and version 8 (soon to be 9) of FICO.

It’s estimated that FICO remains the credit scoring model of choice for more than 90 percent of all credit approvals, including loans, credit cards and mortgages. But VantageScore’s market share increases a bit every year, and in the meantime, it’s made major inroads with businesses that want to pull your credit score without actually making a credit decision, like credit monitoring services.

So, for the first time in the modern history of U.S. credit scoring, you’re very likely to deal with two entirely separate credit scoring systems when viewing your own credit score versus applying for credit or a loan.

Understanding the Differences Between FICO and VantageScore

As of 2013, VantageScore uses the same 300 to 850 scoring range that FICO uses, but the way your score is calculated between the two models has a few key differences.

Establishing Credit History

While FICO requires you to have qualifying credit activity in the last six months to calculate your credit score, VantageScore considers the past 24 months. This means if you’re a new entrant to the credit market and don’t have an established credit history, VantageScore is more likely to provide you with a credit score than FICO.

Factors Influencing Your Credit Score

While neither company releases detailed information about how it calculates its primary scoring models, FICO has long made rough guidelines publicly available.

Your FICO score is broken down according to these approximate guidelines:

  • 35 percent is determined by your history of on-time or late payments.
  • 30 percent is determined by the total amount of debt you owe.
  • 15 percent is determined by the length of your credit history, that is, the age of your oldest on-record account.
  • 10 percent is determined by the number of recent credit lines or loans you’ve established.
  • 10 percent is determined by the type of credit you use, for example, credit cards, mortgages and so on.

VantageScore has yet to provide the public with a similar percentage breakdown, but it has issued general guidelines on what impact different types of information have on your credit score:

  • Highest impact: Your history of on-time or late payments.
  • High impact: The length of your credit history (oldest account age), the type of credit (cards, mortgages and so on) and the percentage of your credit that’s used (your credit utilization).
  • Moderate impact: The total amount of your current debt.
  • Least impact: Your total available credit and recent credit inquiries or activity.

Frequently Asked Questions About FICO and VantageScore

Can you choose which score is used for a credit decision?

No. Any business you authorize to check your credit score or pull your full report decides on its own which agency and scoring model to use.

How can you view your FICO and VantageScore credit scores?

An increasing number of credit monitoring services now use VantageScore, but there’s usually no way to specifically order one type of score over another. You need to contact or review the business you plan to work with to find out if it offers both scores or only one of the two.

How do you know which score is being used at any given time?

Most businesses should make it clear on your paperwork (credit report, application decision and so on) which scoring model is used, but if you’re ever in doubt, don’t hesitate to contact the business directly for clarification.


What Is a VantageScore?

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.


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By | Ask a Credit Expert, Credit Repair, Credit Reports, Credit Scores, Your Credit just released a review of our premier credit repair services.

In a Nutshell: Ovation is a credit repair company with more than a decade of experience helping clients get over their credit woes. With one-on-one customer service and additional features like fast track same-day service, identity optimization, and letters of recommendation, this agency is a trustworthy means of fixing credit report errors. Committed to customized service for every client, Ovation empowers, educates, and assists people on their way to a better credit standing.

Read the whole review here:

Getting Your Credit Score in Order Before Buying a Home Can Save You Headaches and Money

By | Ask a Credit Expert, Credit Scores, Mortgage

Buying a home is a major life event and one that can bring great joy, but it can also create its share of anxiety. Preparation should begin long before the first visit to an open house. Your credit score is one of the most important things to look at before trying to buy a home. That one three-digit number will be a factor in pretty much every facet of the process. Consider the following:

  • Loan qualifications—Your credit score is the first number that lenders consider when they review your loan application.
  • Lenders—While you may want to borrow from the bank that you’ve had your checking account with for the last five years, not all lenders work with all borrowers. Once again, your credit score will be a determining factor in whether you’ll be able to work with a traditional bank or if you’ll have to turn to a specialty lender.
  • Down payment—This is often the scariest number for home buyers because they will have to put down thousands of dollars to buy a house. Your credit score can impact the minimum down payment that lenders require. For example, Federal Housing Administration-backed loans only require a 3.5 percent down payment if your credit score is above 580. If your credit score is below this magic number, you may need to put down 10 percent or more.
  • Interest rate—Lenders determine the interest rate that you’ll pay based on your credit score and other factors. A $200,000 mortgage at 5 percent will result in a payment of more than $100 a month compared to a loan at 4 percent. That equates to more than $6,000 in extra interest over the first five years of a mortgage.

Why is a credit score so important?

Lenders use your credit score as a tool to measure risk. The score is based on a number of factors, including past payment history, the outstanding amount on existing loans, and any negative marks against you. Lenders prefer high credit scores because they see the borrower as less of a default risk.

What is a good credit score for buying a home?

BankRate says that a credit score of 740 or more will help home buyers get the best interest rates. The FHA has programs that offer low down payment options for borrowers who have a score of 580 or more. The credit score range to qualify for a mortgage varies significantly, and even if you meet the minimum, it’s recommended that you have the highest credit score possible.

This could be where a credit repair service can help. Even if you have a score that might qualify you for some loans, improving your credit score will help you get better interest rates, avoid having to pay mortgage insurance, and save you money over the duration of your mortgage.

Using a credit repair service can improve your credit score in a number of ways. First, removing incorrect information can help improve a credit score. According to Ovation Credit Services, 79 percent of credit reports contain errors and 54 percent have outdated information. Ovation provides tools for customers to dispute credit report errors and help them improve their credit score.

There’s no doubt that having a healthy credit score can be important in the home buying process. The higher your credit score, the better chance you have of buying the home of your dreams with the best possible terms. You’ll also have multiple lenders that want your business instead of having to work with lenders that prey on customers who have poor credit scores.

Buying a Car: Cash vs. Financing

By | Ask a Credit Expert, Loan

auto-financingThere are so many reasons to need a car – and many more reasons to want a car. Oh the love affair we have with our vehicles. But deciding how to pay for a new car can sometimes be as difficult as choosing the paint color.

Pay in cash or finance? There are pros and cons to both options. Ultimately, the best course of action will be determined by your overall financial health and goals.

Cash Pros

Imagine a life without a monthly car payment – sounds great right? That money could be used for savings, paying down debt or investing for retirement. And that’s not the only reason to pony-up cash at the dealership. Cash buyers usually pay less than those who finance. Even if the dealership is offering 0% APR, there are often rebates for cash customers, not to mention having cash-in-hand puts you in a stronger bargaining position. Owning your vehicle from day one also gives you the ability to decide when and if you want to sell your car

Cash Cons

Paying cash will seem a lot less fun when you realize what your budget allows. Even for luxury vehicles the financing terms may seem affordable, but when you need to scrimp and budget your way to a lump-sum payment for a vehicle, your dream car might be out of reach. Another con of paying in cash is handing-over that hard earned savings. Maybe you had to deliver newspapers or swear off Starbucks to save your car money and now that you bought your car, you no longer have that financial cushion you worked so hard to build. But, remember, without a monthly car payment you should be able to rebuild a sizeable savings account (even if you do return to your latte habit).


Financing Pros

Banks, Credit Unions, car dealerships – they all want to pay for your car, so let them. When you finance a vehicle, the lender technically “owns” the car and they will want to protect their asset. That means warranty programs that may not be available if you pay in cash. Financing is also particularly smart for people, like students, who need to build credit history. Part of your credit score is determined by the types of credit you have (mortgage, credit cards, student loans, etc.) and a car loan is one type of credit. Also, if your credit score is good (in the 700s) you will likely get offered one of the best interest rates.

It may seem counter-intuitive, but if you have a really great credit score and you have enough savings to pay cash (without depleting your emergency fund), you should finance. If you take the cash to pay for your car and put in a high-interest savings account, finance your car for 0%APR and have the car payments set-up to automatically come out of that savings account – you will actually make a little money from the interest earned. You get the benefits of not “paying” for your car every month, plus the warranty benefits of financing.


Financing Cons

Of course, there are cons to financing. As mentioned before, the monthly payment can really drain your budget and eat-up your free cash. Also, cars always lose value. When your financing terms are over and you decide to sell, you will sell the car for much less than you paid for it. If your credit score is suffering, that vehicle purchase can get really expensive, really quick. No matter what your credit score, there are many lenders who are willing to offer car loans – but, at very high interest rates. That monthly car payment will hurt a lot more if it’s the size of your mortgage payment.

Consider your entire financial picture when you decide how to purchase your next vehicle. Do you have a good enough credit score to secure reasonable financing? Will a used car fit your needs until your debt is under control? Your car needs to be able to get you where you need to go in life, but it shouldn’t detour your financial goals on the way there. If your credit is on a detour then call Ovation Credit for a Free Consultation and see what you can do to bring your credit report and score back on track.


How to Establish Credit

By | Ask a Credit Expert, Credit Scores, Personal Finance

In the right hands, credit cards can be tools for financial power. The catch-22 of credit is that it takes credit history to establish credit. If you’ve never had a credit card or a loan, establishing credit can be difficult. There are still a few successful paths, however, to building a solid credit record.

Credit history is not the only factor lenders consider when deciding to extend you credit. Factors such as employment history, bank accounts and residence history are likely to be investigated as well. Someone who has difficulties holding down a job or struggles to keep their bank account in the black will make a lender worry about whether or not debts will be repaid. However, showing reliability in these areas will increase your chances of getting approved for a loan or credit card.

If you have an account at a bank or a credit union, that is often a good place to start when asking for a credit card or loan. Department stores are usually more than happy to provide you with a line of credit, so that can be a great way to establish credit and prove that you are capable of handling a credit card. However, beware of the high interest rates these cards often carry. If at all possible, pick a department store where you already make purchases to ensure that you don’t spend money unnecessarily; then use the card to buy what you typically would purchase, and pay it off each month.

Even without credit history, you may still be eligible for certain types of credit cards. College students may be able to obtain a student credit card. These types of cards require little or no credit history and are a great start for a college student trying to establish credit. The only thing to keep in mind is that with the Credit Card Act of 2009, applicants under the age of 21 will need a co-signer or a proof of steady income before a credit card will be granted.

Additionally, a secured credit card is a great way to build credit, and is often easier to get than a traditional credit card. The downfall of a secured credit card is that you’re required to deposit money in order to get the card.

Once you have a credit card, be smart about how you use it and how you pay it off. A credit card can help you establish credit but it can also destroy it, if you aren’t careful. Use the card regularly, but pay off what you spend, and don’t use the card to buy things you don’t need.

Stop Living Paycheck to Paycheck

By | Ask a Credit Expert, Budgeting, Personal Finance

Do you pay your credit card payment, then immediately feel like you have money to spend because you have available credit?

Do you get your paycheck and immediately spend every bit of it without putting any in savings?

Do you have trouble keeping at least two months of salary in your savings account because you are always using the money to buy something?

Do you run out of money before the next paycheck arrives, just hoping you can survive until the deposit hits your account?

Have you bounced more than one check in the last two years?

If you answered yes to any of the questions above, you may be the kind of person who feels pressured to spend money if you have it. The behaviors listed above are telltale signs of a person who has grown accustomed to living paycheck to paycheck.

While some people work very hard and still barely scrape by, most of us have unnecessary expenses that we can reduce or cut in order to start changing the way we spend and the way we live, stretching paychecks further and finding a little extra money to either pay off credit debt or put in savings.

If you are living paycheck to paycheck, in debt up to your eyeballs, and you spend money on any of the following items, you may be able to reduce the amount you are spending. (We’re assuming you don’t have a maid or gardener, don’t spend $100 a week at the racetrack, and don’t have season tickets to the professional sports team in your area):

  • Cable – switch from cable to Amazon Prime or Netflix streaming and save $60-200 per month
  • Cell phone – switch from a contract plan to a prepaid phone and save $40 – $175 per month.
  • Magazine subscriptions – cancel subscriptions and read articles and news online for free and save money every month.
  • Acrylic nails, expensive hairstyles, weekly massages – try reducing how often you obtain these services or cut them out all together and watch your paycheck stretch.

There are many other expenses you can reduce or eliminate. Many more debts (such as student loans) can be deferred or have the payment structure changed to make them easier to manage.

If you are living paycheck to paycheck, even the smallest of changes can make a difference in your financial health, and the money you save can quickly add up when used to pay off high interest credit cards.

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