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Asking for a higher credit card limit

What You Need to Know Before Asking for a Higher Credit Limit

By | Credit Laws

Sooner or later, most consumers who use credit cards regularly toy with the idea of requesting a credit limit increase. You might ask for a higher limit in order to finance a large-scale purchase or because you’ve outgrown the original limit. Either way, it’s up to you to present a compelling case to the credit card issuer. You will likely want to highlight your past payment history and your reasons for asking for an increase. The rep for the credit card company may also want to know if your circumstances have recently changed, such as a boost in your paycheck, which could serve as a mark in your favor. Since a credit limit increase could affect your credit limit and financial condition, make sure you have carefully weighed the benefits and the risks as they apply to your specific situation. Here’s what you need to know before you ask your card issuer for a higher credit limit.

An Approval May Be Easier Than You Think

A credit card company is poised to make more money from a consumer with a higher credit limit — so it’s generally in their best interest to approve a request like this. If you already pay on time every month, you should have no problem meeting their guidelines for an increase. A word of caution: the credit card company might extend a larger increase than you actually need or want — so be prepared with a number in mind that’s still well within your spending limits.

Your Credit Utilization Ratio Will Be Affected

With a higher credit limit, your credit utilization ratio — also known as the amount of credit you’re using compared to the overall amount of available credit — will likely decrease. That, in turn, can lift your credit score. Lenders look favorably on consumers who are keeping their ratio at 30 percent or lower, and a credit limit increase will certainly help in that regard. The more room between your balance and the overall credit limit, the better — that way, you’re demonstrating to potential lenders that you practice responsible spending habits. However, it can be tempting to use the higher limit as an excuse to charge more purchases, but that will eventually increase the credit limit utilization and eat away at any progress you’ve made on your credit score.

Some Increases Happen Automatically

Some credit cards will offer automatic increases to customers as a reward for consistent on-time payments. It’s worth asking if this is a perk your card offers. If it is, find out how periodically your account may be reviewed for a potential increase. That can save you the trouble of having to request a higher limit.

Your Financial Standing Matters

Even though it may be fairly easy to snag that credit limit increase, a credit card issuer will still undertake a thorough review of your credit history. They’ll likely assess your recent payment history, as well as how much you’ve paid in proportion to your overall balance. If you’ve missed any payments or paid only the minimum amount due, that’ll send up a red flag to the credit issuer. You want to be able to prove that you’re spending within your means — and not just requesting a credit limit increase to cover up other financial woes.

Your Credit Report May Be Reviewed

The credit card issuer will probably pull your credit report if you’re asking for an increase. That query tends to drop your credit score by a few points. Although it will not result in any dramatic difference to your score, you should still hold off on applying for loans in the near future. When they review your credit report, the card issuer will be able to tell if you have applied for other loans or credit limit extensions recently, which could signal you’re in financial distress. That’s why it’s a good idea to limit your request to one card only — and make sure it is the one you tend to use the most often.

Before you ask for a credit limit increase, be sure you’ve done your homework and evaluated whether you’re a good candidate. Now is an excellent time to check in with your credit report and clean up any old debts or errors that could be hurting your score. At Ovation Credit, we offer a free consultation so we can help you track down any errors and tune-up your credit report before you ask for that credit limit increase.

Shopping store centers and retail credit

Everything You Need to Know About Retail Store Credit Cards

By | Credit Cards, Personal Finance

Everything You Need to Know About Retail Store Credit Cards

When you shop at a certain store frequently, you might think opening a credit card account there makes solid financial sense. After all, many retail establishments tout incentives as a perk to their loyal credit card holders — such as, for example, Nordstrom’s offer of a $20 gift certificate once shoppers spend $1,000. Other cards dangle discounts to attract bargain-hunting shoppers — perhaps only credit card holders get access to special sales and promotions, or they might receive cash back for certain purchases. But is a retail store credit card really a benefit to your credit — or does it simply encourage you to spend money that you don’t necessarily have?

They can be a good credit-building tool — but proceed cautiously.

If you are trying to establish a good credit record, retail credit cards are a relatively safe way to do so. Most retail credit cards have a low barrier to entry — meaning that even if your credit score is less than stellar, it is fairly easy to be approved for one. Using a store credit card judiciously — that is, keeping your spending habits in check and paying at least the minimum amount due every month — can serve as an excellent exercise in building your credit properly. But be careful. If you open up an account at every store, that will end up looking like too much open credit on your credit report. Also, having a store credit card can tempt you to spend money that you don’t have, or go hunting for items that you don’t really need.

You can easily hurt your credit.

Most credit cards offered in-store boast a low credit limit. How much trouble can you really get into with a credit limit that low? Well, you might be surprised. Low limits mean there’s little wiggle room if you happen to overspend one month. Also, if you continually carry a high balance from month to month — and you are close to hitting your max — it will start to negatively affect your credit score, as you will appear to be maxing out your credit limit. And each time you open a new retail store account, it registers as a hard inquiry on your credit report, also known as the store’s check into your creditworthiness, which can lower your credit score.

The interest rates tend to be higher.

Retail establishments certainly tout the benefits you’ll enjoy as a cardholder, but you’re less likely to hear about the interest rate or APR — that is, unless you dig into the fine print. A 2016 report from CreditCards.com found that store credit cards charge an average of 23.84% interest, up from the average credit card interest rate of 15.22%. That means you actually end up spending more money than you’re saving when you don’t pay the full amount due every month.

Some retailers also waive interest for a certain period of time — such as six months or a year — if you promise to pay off the balance in full in that time period. That can be a good benefit if you want to finance a big-ticket item. But again, it can be a risky move if you are unable to pay the full amount within the promotional period. Many retailers will then begin charging you all of the interest that would have accrued from the date of purchase.

Weigh the risks versus rewards.

It helps to weigh the risks versus rewards when you’re deciding whether to open a store credit card. Do you already have a solid track record of paying your debts every month? Then a retail credit card might be a good idea for you, as long as the store is offering you considerable incentives to become a cardholder. However, store credit cards don’t necessarily provide better benefits and loyalty packages than, say, a major credit card that can be used at all establishments. So, you might be better off sticking with one credit card that offers cash-back rewards across a range of different retail stores, rather than just one.

Do your research.

The bottom line: Make sure you do your research before signing up for just any retailer’s offer. Read into the interest rates and compare the incentives and rewards to those offered by other establishments or major credit cards. And be honest with yourself about how responsible you’ll be with a store credit card, so you don’t end up digging a deeper financial hole.

Retail credit cards are just one way you can improve your credit and build a pathway to a smarter financial future. At Ovation Credit, we aim to guide clients through the process of rebuilding credit and becoming a more responsible credit card user. Contact us today for a free consultation to review your credit reports and answer any questions you may have.

Man receives tips on co signing a loan

Co-Signing a Loan? Read This First

By | Personal Finance

If someone asks you to co-sign a loan, it is typically because they do not possess the requisite credentials needed to qualify for a loan on their own. Your friend or family member might have another shot at getting their application approved if you are willing to co-sign the loan. As a co-signer, you will be contractually obligated to pay off the debt if and when the primary account holder defaults. Co-signers serve an important purpose, helping those with little or negative credit history overcome those limitations and qualify for loans. If all goes well, you may help that person cultivate positive credit history that will allow them to later qualify for a solo loan. However, if the arrangement were to sour — as it unfortunately does all too often — it could have a disastrous impact on your own credit. Before you dive into co-signing a loan, here’s what you need to know.

How It Works

A co-signer is just as critical to the loan as the actual borrower — so that means you will have to show up for the actual signing in person. If you are taking this step, it’s best to treat the situation as if you are applying for the loan yourself. Just as you would with your own applications for loans or credit, you need to evaluate your financial situation and whether you can afford the risk. Simply put, if you could not easily cover the payments if the primary account holder defaulted, co-signing would be the wrong choice.

What It Means for Your Credit Score

Even though you may not submit a single payment as a co-signer on a loan, all of the loan payments will be reported to the credit bureaus as if you had made them yourself. That means that if the primary borrower stops paying, all of the missed payments will show up on your credit report, too. Late and missed payments are the quickest ways to sink a credit score — even if yours was rock-solid when you initially agreed to co-sign the loan. Your score could plummet even more dramatically if the borrower defaults on the loan and it winds up in collections or litigation.

Protecting Yourself

If you decide to proceed with co-signing a loan despite the risks, make sure you let the primary borrower know that you will be keeping tabs on their payments. Find out what day the payment is due and give them a heads-up a few days before. It’s in your best interest to ensure the payments are made on time every month — even if it means you have to nag the primary borrower.

Loan Approvals Will Get Trickier

Adding another loan to your financial load — even if you aren’t technically making any payments on it — will make it tougher for you to qualify for loans or credit. Creditors or loan officers will observe that your amount of debt has risen but your income, most likely, has not.

Contracts Are Rock Solid

You may think that you can easily request a release from the loan if circumstances change. Unfortunately, loan terms and conditions are ironclad for that very reason — so that if the primary borrower shirks their commitments, the loan officer can seek you out for payment. You’ll be on the hook for as long as the debt is unpaid. Don’t rely on a verbal agreement with the primary borrower. You may be better off asking the loan officer directly if the contract includes a provision for release.

Worst-Case Scenario

Unfortunately, the doom-and-gloom scenario may very well play out in reality. If a loan officer is hesitant to take a risk on a borrower, they have a very good reason. Your friend or family member may likely default, leaving you fully responsible for repaying the debt — plus any interest and collection costs that have accrued when the original account holder’s payments lapsed. Even though that is exactly why you co-signed in the first place, it can still be hugely unsettling to begin receiving collection notices and even warnings of legal judgments. Beyond the financial repercussions, your relationship with the borrower may not recover.

Although co-signing a loan is a generous gesture, you may decide it is ultimately not worth the risk. Consider alternatives, such as offering financial assistance in another way — one that doesn’t put your credit score on the line.

We offer a wealth of educational content to help you navigate credit and financial concerns here at Ovation Credit, but that’s not all we do. Head here for a free consultation to find out more about how we can give your credit reports an instant boost.

improve your finances stress free and breath

3 Stress-Free Ways to Improve Your Finances

By | Personal Finance

Committing to bettering your finances doesn’t just have to be a new year’s resolution; it’s a worthy goal you can tackle any time of the year. But if just thinking about giving your budget a second thought is enough to make you break out in a cold sweat, don’t worry. We’ve compiled three easy steps you can take today that will help you improve your finances completely stress-free.

Ready to get started?

1. Automate Your Savings

Between mobile apps and extra services offered by banks, it’s easy to automate your savings so you can build your nest egg without worrying about over-spending. One easy way to do this is to split up your direct deposit paycheck between checking and savings. Because the money automatically goes into your savings account, you’re not tempted to spend it on non-necessities throughout the month.

Another tactic is to sign up for a mobile app that helps you save when you perform certain behaviors. There are countless options, such as rounding up each purchase to the next dollar and depositing the change into savings. Pick one that makes sense for you and you’ll see your savings grow without even trying.

2. Weed Out Extraneous Expenses

While you eventually want to give your monthly budget an in-depth review to see what you can cut back on, there’s no time like the present to make a few small changes that can quickly add up. Here are three suggested expenses you can reduce or eliminate today to improve your finances stress-free.

Cancel One Subscription Service

The first place to consider cutting back on is your monthly subscription services. It’s easy to accumulate these automatic fees that may only seem like a few dollars a month. From streaming music and movies to receiving regular subscription boxes, it’s very possible that you could be shelling out a large chunk of change without even realizing it.

For a totally stress-free tactic, challenge yourself to cancel just one subscription. If you’re trying to build your savings account or pay down debt, make sure that extra money is going toward your financial goal. Otherwise, you can put it toward any other savings goal you have, like an upcoming vacation. Even saving an extra $12 can add up to $144 a year, and if you can cancel one additional subscription each month, you’ll really start to see your financial situation improve.

Opt Out of Overdraft Protection

While overdraft protection might seem like a wonderful convenience, it’s also an expensive one. Overdraft fees can cost as much as $35 per incident and if you come up short just once a month each year, that adds up to a whopping $420 you’ll spend annually. To avoid this costly service and get motivated to stay on top of how much cash you have in your bank account, opt out of overdraft protection completely.

Yes, you may end up having your card declined at a cash register, but you also won’t be adding a $35 premium to that purchase. To help improve your finances stress-free with this tactic, sign up for balance text alerts with your bank. That way, you’ll know when your account is about to hit $0 and you can avoid the cash register altogether.

Downgrade Your Cell Phone Plan

You might be tempted to moan and groan at this suggestion; after all, most people use their phone for just about everything these days. But downgrading your cell phone plan is a simple way to cut back on expenses without having to adjust other areas of your spending. One easy way to do this is to limit your data usage.

You don’t need to totally cut back on your phone browsing. Instead, connect your phone to your home Wi-Fi network to avoid using up your data. You can do the same thing on public networks at school, the coffee shop, or the office. Just be cognizant of entering passwords or other sensitive information when on a public network. A simple step can help you gain control over your finances with just a simple Wi-Fi login.

3. Fix Your Credit

Another easy way to improve your finances while staying stress-free is to repair your credit. This can save you money on expensive interest rates on credit cards and loans. Once you see a boost in your credit score, you can negotiate for a better rate on your credit card and potentially refinance loans to lower your monthly payments.

For a free credit repair consultation, contact Ovation Credit today.

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