A credit limit is the maximum amount that you can charge on your credit card. Credit card companies setyour limit when you apply for a card by considering several factors. For starters, they’ll look atyour credit score, which is a number that represents your entire credit history.The scoring system analyzes how you’ve repaidloans in the past and predicts yourability to pay back future loans. Companies also will look at your income, debt levels and repayment history. Another factor that comes into play is how much other outstanding credit you have available to you, such as through other credit cards.
Your credit limit may increase over time as you build a steady track record of paying your bills each month. Make sure that you keep your total charges well within your credit limit. Why? Your credit score may be affected if your balance is above the credit limit because it signals to creditors that you may be having financial difficulties and thus are a riskier borrower. Some credit card companies, however, offer electronic and/or mobile reminders to let you know when you’re nearing your limit.
Your credit card company mayraise your credit limit without you requesting them to do so. However, you may have to call your company’s customer service number to ask them for an increase. If you have ahistory of paying your bills on time, a credit card company is more likely toraise your limit to accommodateyou, though the increase may be small.This may help you avoid overextending yourself financially.A couple of important factorsa creditor considers are yourincome and your ability to repay. So not only is the amount of money you earn important but so is your debt-to-income ratio. If you were a lender, would you want to loan $4,000 to a client with $400 income and$300 debt? So, income and current debt ratio is important.
The length of residency often comes into play when establishing limits, too. If yourelocate from place to place frequently, you could be considered less stable. Lenders clearly want to see stability when establishing your credit limits.
The final major factor in granting credit is how many other credit cards you have. The more credit cards you have, the less likely creditorswill grant you a higher limit. However, if you've had the same credit card or cards fora long period of time, that would nullify the issue of having too many cards. Again, it's a reflection of your stability. A history of long term timely payments demonstrates stability.
Showing posts with label personal finance. Show all posts
Showing posts with label personal finance. Show all posts
Monday 15 April 2013
Wednesday 30 January 2013
Top Causes of Credit Default
An adverse credit rating by receiving a credit default can impact you applications for credit for 5-7 years. Most people don't realize the impact of receiving a credit default until it's too late. A credit default can impact your applications for any credit such as obtaining phone or internet accounts, or even various other home or business services. A credit default is something that can be avoided by simply understanding why people have issues, and how they can be avoided. By being more informed about people who deal with a credit default, you can help to make sure that you do not find yourself in the same situation. While there are seemingly endless causes for a credit default, there are three major causes.Know these, as it can help you avoid a credit default.
Unknown Missed Payments
Many people only realize they have a Credit Default when they are declined for some form of credit. There has been a credit default listed on their Credit Reportand it has resulted in the decline. They may not even have any had any financial issues, but may have only mismanaged a bill or a service or phone contract. You may think your bill has been taken care of by closing the account; but if you cancel a contract early you may still have cancellation fees payable. It is quite common for the feesto canceled a telephone contract to be anywhere from $2000 to $3000. The Phone contract will at times include the cost of the mobile handset, which can run into thousands of dollars. Other instances where a credit default is listed can be where a person has moved house, and there is an outstanding amount owing from a phoneor service bill.
Known Missed Payments
Some people, however, are completely aware they are facing credit defaults, but they are facing financial hardship and struggling to make their commitments. People do not simply decide to not pay their bills,it is a result of some other circumstance that puts them into this situation. The various situations that may put you at risk are:
- Divorce
- Sickness or inability to work.
- Loss of a job
- Failed Business
In these situations there is usually a loss of an income, but in the case of divorce there is an emotionally devastating event that affects how a person operates in their everyday life. There may be a change in living situation for both parties with a breakdown in communication, a ripe situation to cause a credit default.
Over committed by high interest debts
Over the last few years many people have applied for and received loans they could barely afford. As first home buyers they may need to spend money on buying furniture and getting their house in order and hence get themselves into large amounts of unsecured, high interest debt. A combination of credit cards, personal loans and a loss of an income can be devastating for a dual income family. The loss of anincome in these circumstances can be from the birth of a baby, or a sickness, or loss of a job.
Being informed and knowing about the causes ofcredit defaults can help youto keep yourself from receiving a credit default.
Unknown Missed Payments
Many people only realize they have a Credit Default when they are declined for some form of credit. There has been a credit default listed on their Credit Reportand it has resulted in the decline. They may not even have any had any financial issues, but may have only mismanaged a bill or a service or phone contract. You may think your bill has been taken care of by closing the account; but if you cancel a contract early you may still have cancellation fees payable. It is quite common for the feesto canceled a telephone contract to be anywhere from $2000 to $3000. The Phone contract will at times include the cost of the mobile handset, which can run into thousands of dollars. Other instances where a credit default is listed can be where a person has moved house, and there is an outstanding amount owing from a phoneor service bill.
Known Missed Payments
Some people, however, are completely aware they are facing credit defaults, but they are facing financial hardship and struggling to make their commitments. People do not simply decide to not pay their bills,it is a result of some other circumstance that puts them into this situation. The various situations that may put you at risk are:
- Divorce
- Sickness or inability to work.
- Loss of a job
- Failed Business
In these situations there is usually a loss of an income, but in the case of divorce there is an emotionally devastating event that affects how a person operates in their everyday life. There may be a change in living situation for both parties with a breakdown in communication, a ripe situation to cause a credit default.
Over committed by high interest debts
Over the last few years many people have applied for and received loans they could barely afford. As first home buyers they may need to spend money on buying furniture and getting their house in order and hence get themselves into large amounts of unsecured, high interest debt. A combination of credit cards, personal loans and a loss of an income can be devastating for a dual income family. The loss of anincome in these circumstances can be from the birth of a baby, or a sickness, or loss of a job.
Being informed and knowing about the causes ofcredit defaults can help youto keep yourself from receiving a credit default.
Saturday 10 November 2012
The Role Of Life Insurance
Insurance is one of life's necessities and probably the least-understood financial product. Insurance reimburses people for covered losses in the event of an unfortunate occurrencesuch as an illness, accident, or death. At the same time, itcan encourage prevention and safety measures, provideinvestment capital, lend money, and help to reduce anxiety for society at large.
As a mechanism against loss of income and a means of safeguarding assets, most Americans have insurance in one form or another. These coverage's may include public coverage, such as disability insurance under Social Security, a health care policy from an employer, or personal insurance to protectproperty such as computers, homes, and cars.
You may save money in yourpension and other investments and have capitalin your home. But if you don't know exactly what your life insurance policy covers or have only glanced at your employer-provided health and disability insurance policies, you're neglecting an important aspect of your financial plan.
Until something happens, such as a car accident, an illness, or the death of a loved one, paying for insurance may seem like buying something you'll never use. But even if you never submit a claim, insurance is an investment inyour future, as important as pensions and personal investments. Indeed, many financial planners argue that you should have an adequate insurance safety net in place before considering investment strategies.
The function of insurance is to protect you against losses you can't afford. This is doneby transferring the risks of a person, business, or organization -- the "insured"-- to an insurance company, or "insurer." The insurer then reimburses the insured for "covered" losses - i.e., those losses it pays for underthe policy's terms.
As the insurance consumer, you pay an amount of money, called a premium, to the insurer to transfer the risk. The insurer pools all its premiums into a large fund, and when a policyholder hasa loss, the insurer draws funds from the pool to pay for the loss.
Life is full of unexpected events that can create large financial losses. For example, whenever you drive, it is possible that you may have acostly accident. Risks affect you by causing worry about potential loss and how to deal with the consequences. Insurance reduces anxiety over a possible loss and absorbs the financial brunt ofits consequences.
However, while insurance coverage is essential, how much and what type of insurance people need differwith each individual. You must decide how much risk you're willing to tolerate without insurance. For example, benefits for disability policies typically begin after a waiting period of one to six months. Therefore, you should ensure that you have some form of coverage or financial resources before the policy period begins.
As a mechanism against loss of income and a means of safeguarding assets, most Americans have insurance in one form or another. These coverage's may include public coverage, such as disability insurance under Social Security, a health care policy from an employer, or personal insurance to protectproperty such as computers, homes, and cars.
You may save money in yourpension and other investments and have capitalin your home. But if you don't know exactly what your life insurance policy covers or have only glanced at your employer-provided health and disability insurance policies, you're neglecting an important aspect of your financial plan.
Until something happens, such as a car accident, an illness, or the death of a loved one, paying for insurance may seem like buying something you'll never use. But even if you never submit a claim, insurance is an investment inyour future, as important as pensions and personal investments. Indeed, many financial planners argue that you should have an adequate insurance safety net in place before considering investment strategies.
The function of insurance is to protect you against losses you can't afford. This is doneby transferring the risks of a person, business, or organization -- the "insured"-- to an insurance company, or "insurer." The insurer then reimburses the insured for "covered" losses - i.e., those losses it pays for underthe policy's terms.
As the insurance consumer, you pay an amount of money, called a premium, to the insurer to transfer the risk. The insurer pools all its premiums into a large fund, and when a policyholder hasa loss, the insurer draws funds from the pool to pay for the loss.
Life is full of unexpected events that can create large financial losses. For example, whenever you drive, it is possible that you may have acostly accident. Risks affect you by causing worry about potential loss and how to deal with the consequences. Insurance reduces anxiety over a possible loss and absorbs the financial brunt ofits consequences.
However, while insurance coverage is essential, how much and what type of insurance people need differwith each individual. You must decide how much risk you're willing to tolerate without insurance. For example, benefits for disability policies typically begin after a waiting period of one to six months. Therefore, you should ensure that you have some form of coverage or financial resources before the policy period begins.
Friday 9 November 2012
10 Tips & Ideas of wise Money saving
1. Here's another old adage -"One man's trash is another man's treasure." Before you decide to trash something, find out if it hasvalue. Sell it at Ebay, CraigsList, sell it on consignment, or sell it at a garage sale. You can alwaysthrow it away later if it doesn't sell!
2. When you need to buy, shop and save by planningyour shopping trips in entirety.
*. Always comparison shop for large ticket items. Subtract coupon and rebate offers from prices before you buy and check sale priced items against competition's regular priced items to see if the offered discount really is a bargain.
*. Buy groceries and department store items at the store that offers the most savings overall. With gas prices these days, it justisn't practical to drive across town to save a nickelon a can of vegetable soup.
*. If you wouldn't buy it without a coupon, don't buy it with one. If you are shopping with coupons, besure to check and see if a comparable brand (or a generic item) is less expensive even with no coupon. If it is, toss that coupon out. You won't be needing it!
*. Using a shopping list can eliminate return trips for forgotten items and also help you resist impulse buying. Crossing off items as you find them lets you know when it's time to go to the checkout.
3. Pay attention to fees when withdrawing cash at ATMs with debit cards. Look for ATMs that offer free cash withdrawals.
4. Credit card balance transfers and debt consolidation offers may look very lucrative at first glance, but before you transfer that balance or rollyour debts into one loan, make sure the total package, including fees and future interest rates adds up on the plus side of your budget. The FTC (Federal Trade Commission) has a wealth of tips on finding and doing business with reputable companies.
5. Many insurance companies offer significant discounts when you bundle your insurances with them. Before you decide to purchase lower priced vehicle insurance, add up the totals for house (or renters), vehicle, life, and medical insurance policies and go with the company or companies that offer the best overall plan.
6. Useful utility savings.
*. Set your thermostat to the temperature where you feel most comfortable and leave it there. Furnace and air conditioner stops and starts are big power drains, especially when they needto reheat or re-cool your home.
*. Before you turn on air conditioning in warm weather months, spend a few days with open windows and doors.
*. Before you turn up the heat, put on a sweater. When sitting idle while reading or watching television, stay cozy with a lap robe or small blanket.
*. Turn off the lights when they're not in use.
*. Turn off your computer when you're finished for the night.
7. Consider going cell phone(or landline) only. Internetservices like Skype offer affordable ways to reach out and talk to someone.
8. Cable and satellite dish television connections are wonderful luxuries. However, do you really need 30 premium channels? Frequently check with your provider to see if new packages might better suit your needs at a lower price.
9. Keep your checkbook in balance. Aside from the embarrassment of reclaiming a bad check, bank and merchant overdraft fees can quickly bust your budget.
10. Track your spending for 30 days. Then decide what items you are willingto sacrifice to save money.
2. When you need to buy, shop and save by planningyour shopping trips in entirety.
*. Always comparison shop for large ticket items. Subtract coupon and rebate offers from prices before you buy and check sale priced items against competition's regular priced items to see if the offered discount really is a bargain.
*. Buy groceries and department store items at the store that offers the most savings overall. With gas prices these days, it justisn't practical to drive across town to save a nickelon a can of vegetable soup.
*. If you wouldn't buy it without a coupon, don't buy it with one. If you are shopping with coupons, besure to check and see if a comparable brand (or a generic item) is less expensive even with no coupon. If it is, toss that coupon out. You won't be needing it!
*. Using a shopping list can eliminate return trips for forgotten items and also help you resist impulse buying. Crossing off items as you find them lets you know when it's time to go to the checkout.
3. Pay attention to fees when withdrawing cash at ATMs with debit cards. Look for ATMs that offer free cash withdrawals.
4. Credit card balance transfers and debt consolidation offers may look very lucrative at first glance, but before you transfer that balance or rollyour debts into one loan, make sure the total package, including fees and future interest rates adds up on the plus side of your budget. The FTC (Federal Trade Commission) has a wealth of tips on finding and doing business with reputable companies.
5. Many insurance companies offer significant discounts when you bundle your insurances with them. Before you decide to purchase lower priced vehicle insurance, add up the totals for house (or renters), vehicle, life, and medical insurance policies and go with the company or companies that offer the best overall plan.
6. Useful utility savings.
*. Set your thermostat to the temperature where you feel most comfortable and leave it there. Furnace and air conditioner stops and starts are big power drains, especially when they needto reheat or re-cool your home.
*. Before you turn on air conditioning in warm weather months, spend a few days with open windows and doors.
*. Before you turn up the heat, put on a sweater. When sitting idle while reading or watching television, stay cozy with a lap robe or small blanket.
*. Turn off the lights when they're not in use.
*. Turn off your computer when you're finished for the night.
7. Consider going cell phone(or landline) only. Internetservices like Skype offer affordable ways to reach out and talk to someone.
8. Cable and satellite dish television connections are wonderful luxuries. However, do you really need 30 premium channels? Frequently check with your provider to see if new packages might better suit your needs at a lower price.
9. Keep your checkbook in balance. Aside from the embarrassment of reclaiming a bad check, bank and merchant overdraft fees can quickly bust your budget.
10. Track your spending for 30 days. Then decide what items you are willingto sacrifice to save money.
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