With the economy being a little less than desirable it seems everyone is looking for ways to improve credit.  While it is easy to get rid of a bad pair of shoes, a bad credit score can stick with you for as long as the cycle continues.  Here are some simple tips on how you can improve your credit score.

1. Borrow

If you buy everything with cash, never apply for a credit card, or never use it, then your credit score will stay right where it is – nonexistent.  When I bought my first car the dealer wanted a co-signer because I was 20 years old.  He was afraid of two things: (1) I was too young to make a car payment on my own, and (2) I didn’t have a credit score to substantiate a purchase over $5,000.  After some haggling and a nice down payment, I was able to purchase my first car on my own.  So, for first time borrowers, this is an instant way to raise that nonexistent score.  Apply for credit, then use it within your means.

2. Pay

On time!  Just like the bus, you are a happy person when you get to work on time and creditors love when you send them a check on time.  If you are one day late, that gives the credit card company a reason to tattle on you to the three credit agencies.  Don’t give them the opportunity.  It will only lower your credit score and make it difficult to borrow later.

3. Say bye bye to rent

If you want buying power, which is what your credit score gives you, stop renting an apartment or leasing a car.  By renting, you are telling credit card companies and your own credit score that you are not committed to big purchases and long term commitments.  While it may not seem fair, you have to have some debt in order to raise your credit score.  The type of debt you need should be in the form of a car payment or mortgage.

4. Call on your utility companies

While it seems silly, your utility companies do not have to do a background check on your credit to give you heat and water.  Most companies request a deposit from new customers.  Give it so you can get water, but then each month, call your utility companies and ask them to report your on time payments to the credit bureaus.  Again, it will improve your credit score.

5. Use your department stores

Most stores offer an in-store credit card application to help you save.  As long as your address matches the address on your driver’s license, you will be awarded a small amount of credit.  This helps them keep you coming back when they offer rewards to card owners but also gives you a small increase in your credit score.  The more cards you have that have not been charged off and you are using can help raise your score.  Make sure if they don’t offer it to you (which probably won’t happen, as they get a commission for each application they file) that you ask for it.

6. Use, use, use…

If you don’t use the credit you have been given, your credit score might go down.  During these tough economic times, it is even possible for creditors to withdraw credit if you stop using it or pay a balance off.  That means you should put your groceries and gas on your credit cards and then pay them off every month.  Just be sure to use your credit card at least once a week so you don’t get stuck without credit at the beginning of another month.

What tips do you have to improve credit scores?

You’ll have to check the terms and conditions on the credit card you have to find out if you are eligible for any of them.

1. Additional cardholders

A lot of credit cards offer additional cardholders at no extra charge. If you have a rewards card it can be very beneficial to have this extra feature. More people using the card means more points and bigger and better rewards. In the case of a family saving up for a holiday, a frequent flyer card could be used by all to save up for a special family getaway.

2.Extended warranties and purchase cover

Many rewards cards offer purchase cover as one of their perks, but there are some cards that do not offer official card rewards programs, but still provide purchase cover. Security insurance is offered for 90 days on purchases, which gives you cover if any of the items you purchase are stolen, lost, broken or defective. These purchases must have been made with your credit card. An extended warranty for 12 months is often offered when purchase cover is included with the card.

3. Savings and discounts

Some banks have a customer appreciation program as part of their card rewards. If you have the Citibank Clear Platinum credit card, you will be able to save up to 25% when you shop with their various partners. These partners include entertainment venues, Internet retailers and restaurants to name a few.

4. Exclusive Events

You may be eligible for perks with the Visa concierge if you have a Visa card. This is commonly found on Visa platinum cards. You can use this concierge service to book car hire, get shopping advice, book a hotel room or get tickets to a special show. This concierge service is much like having your own personal assistant.

Read through the terms and conditions on your credit card to find out if you have any card rewards that you weren’t aware of. You may find that you have special privileges that you did not even know about.

Alban is a personal finance writer. He specialises in helping people to maximise the benefits of their frequent flyer credit cards.

Source: Flickr

Guest post by Jessica Swesey who is the Managing Editor of LifeTuner.org, a place to get financial tools, tips and direct access to financial experts who answer your questions online.

New credit card industry laws that went into effect this week may intend to offer consumers more protection, but the unfortunate side effect is that many consumers may find themselves stuck with more fees as a result.

The new rules, which come under the Credit Card Act of 2009, offer more transparency and some protections to those who carry balances. But for those who pay off their balances in full every month, you may find yourself feeling screwed over. The reason is simple: the law takes away methods that credit card companies used to make big bucks from. They have to make money somehow, so now enters the age of new fees for the rest of us.

How do you keep from getting sidelined from a bunch of new fees and what can you do when it happens? Eleanor Blayney, a CFP and Consumer Advocate for the Certified Financial Planner Board of Standards, offers these tips:

Read the fine print! Credit card companies now have to be more transparent about their practices, but that also means as a cardholder it’s up to you to pay attention to what they are telling you. Check the inserts that may come with your bill. Many companies have already started implementing things like inactivity fees (for those account holders who don’t use their cards that much), annual fees and even curbs on rewards programs.

While the new law prevents companies from raising interest rates on existing balances, they can still increase rates as high as they want on future purchases (after you’ve had the card 12 months) as long as they give you 45 days’ notice. If there is a new rate or fee that you don’t agree with, you can opt out and will be given a 45-day period in which you can pay off your balance under the old terms. But again, here’s the catch: you have to read your mail to know that a rate increase is coming.

Pay attention to your utilization ratio before closing cards. This one’s potentially a big deal for your credit score. Say you get a letter in the mail from your credit card company saying that they are going to start charging you a $100 yearly fee. And you immediately say, “Bump that – I’m not paying this fee. I’m just going to cancel this card.”

Hold it right there! Take a moment to think about the consequences of closing your card on your credit score – particularly if this is a card you’ve had for a long time. Blayney says you want to first take a look at your utilization ratio by looking at the amount of credit you use divided by the amount of credit that is available to you. So if you have two cards, one with a $1,000 limit and the other with a $1,500 limit, you have $2,500 in credit available. If you have a balance of $300, then you’re using 12 percent of your credit. But cancel that card with the $1,500 limit and suddenly your utilization ratio shoots up to 30 percent. Blayney says you generally want to keep this ratio below 20 percent.

Additional tips from Blayney:

• Don’t be late. Be sure to pay your bills on time to avoid late fees.

• If you need to close cards, close ones that have the lowest credit limit and that you’ve had for the least amount of time.

• If you want to avoid inactivity fees, put a small balance on each of your cards and pay them off promptly.  This way, you’re keeping all of the available credit open and your utilization is low.

Blayney also answers individual questions over at LifeTuner.

Source: Flickr

This is a guest post from Mr Credit Card of www.askmrcreditcard.com. Mr Credit Card is going to talk about how he uses credit cards to help in his budgeting efforts, in addition to being a convenience tool. If you are looking for a credit card, please check out his best credit cards list section

Firstly, I would like to thank budget pulse for allowing me the opportunity to guest post here. Today, I am going to talk about how to I use credit cards as a part of my budgeting tool. But first, here is a background. I charge everything to my credit card. There is a reason for that. I pay my bills in full every month (which everyone should) and I use it to earn rewards (which I’ll explain in more detail later). So how does my credit card help in my budgeting. Here is how I use it.

Expenditure Breakdown via Statement Summary – I get statement summaries from my credit card issuer once a year. It breaks down my expenditure into various categories. Because I charge everything to my card (except my mortgage), I have an accurate breakdown of my expenses and I use that as a basis for budgeting and adjusting our expenses.

Pay on time via autopay – I am extremely bad at paying my bills. I simply hate going through all the bills and writing my checks every month. So what I do is to use automatic payment with the credit cards I have. Every month at a set date, money is taken out of my bank account. I have never had any issue with this arrangement. There are tons of advantages of doing things this way. Firstly, you’ll always pay your bills on time. That is so important improving your credit score. Secondly, your credit card issuers can never accuse of being late if there was a mess up from their end.

Budgeting for my vacation – Believe it or not, but I’ve taken more vacations than not if not for my credit cards. For about the first ten years of my working life, I traveled quite a lot on my job. Because I was given a business credit card from my company, I managed to rack up lots of points (btw – I was given the Amex corporate charge card). These points were invaluable to me because they did not expire and I was able to get many free airline tickets simply because I was using my company’s credit card. It was not even my expenses. But what I did was that I also got the same card for my personal use and earned even more points. After a couple of years, I was able to figure out roughly how much I spent on my company’s business credit card and my personal credit card. With that data, I was able to plan and budget for my annual vacation. Very often, the cost is much lower because of those reward points I have earned.

Most credit cards also provide car rental collision insurance if you charge your card for the rental. This has also saved me a few hundred dollars every year on my vacation where I had to rent a car.

Saving Money – After I stopped traveling for work and switched companies, I realize that I would be better off earning cash rebates rather than reward points (since I would not be earning as much points). Hence, I got myself a credit card with cash back rewards. On average, I have been earning about 2.3% in cash rebates every year. This works out to be about $1000 every year. Once I got through the first year using the card I had and getting a feel for the rebates I earned, I could once again factor in the savings that I would get.

For folks who have debt, doing a credit card balance transfer will help in your budgeting as well when it comes to interest expense.

Ending Thoughts – Some folks got into massive credit card debt and hate to use them. For me, they have been an invaluable tool for budgeting for my vacation and actually saving money with them. All this only happens when you pay off your bills in full every month. I hope these little tips were helpful to you.

Source: Flickr

By Mala

It is a difficult time when you find yourself below the red line when it comes to your credit score.  And if you find your credit score below 650, it will be difficult to climb the credit ladder.  However,  There are ways to improve your credit score.  Some have a cost associated, but other methods require a little bit of time.  Follow these guidelines to help get out of the hole.

You probably have bad credit because of debt you currently have.  The first thing to do, before applying for credit cards, is to pay down your debt.  That will help your credit rating rise.  Here’s another tip:  if renting, ask your landlord or apartment complex management to report your paying on time to the credit bureaus.  The same can be done for your utilities, cell phone included.  After your debt has been paid down to a manageable level, you are ready to begin applying for credit again.

There are a variety of places to start when applying for credit.  It can be for a small specialty card, like a department store credit card.  They usually approve on the spot provided your bank card address and driver’s license address match.  Try those places out first, but do not apply for many over a short period of time.  Wait three months in between applying, as those companies will eventually check your credit score out and numerous inquiries into your credit history can have a detrimental effect.

After you have established a small line of credit through department stores, you probably will have the urge to fill out one of the credit card offers that comes in the mail.  Stop!  Don’t apply for those yet, as it is easier once you complete one process before.  Banks offer credit cards to those with “less than perfect credit.”  They usually have an annual fee or are more like a debit card but with more buying power.  If your credit is bad, and you need a credit card for emergencies or big purchases that you know you are able to pay off, pay the fee and begin to reestablish credit.  Below are some companies that offer these types of programs.  You can visit creditcards.com to see different offers.

Credit cards to look for

The first credit card that is geared for people with bad credit is the Applied Bank Secured Visa Credit Card.  It has an annual fee of $50.00 and a fixed interest rate of 9.99%, regardless of when you pay your bill.  You can have up to $5,000 in credit and there are no income or credit requirements.  You deposit money into this secured account and whatever money is there you are able to spend without the money being directly debited from your account.

Two other credit cards may be more helpful because they do not check your credit report.  First Option Visa and Next Millennium MasterCard offer up to $5,000 in secured credit and have an annual fee of $59.00.  By not checking your credit report, you are able to secure some new credit without it have an effect on your credit report.  Check into both to see which option is best for you.

While you may feel like hope is lost, it is possible to regain your credit reputation.  Keep working on paying off your debt, paying on time, and you will be able to lose the label.

A few weeks ago my wallet of 10 years was stolen.  I remember the day I bought it with my mom at Marshall’s it was my first grown up wallet and it had a lot of sentimental value to me.

Here are steps you should take right away when your wallet is stolen/lost.

1. Cancel all cards
2. Get replacement cards
3. Get a new ID
4. Get a new Wallet

Immediately I canceled all my credit cards and debit cards, and contacted the necessary people to get replacements.  After the initial shock of having my wallet stolen and fear that someone has my id, bank information, and cards, I made sure I took these steps to make sure no identity theft or money would be stolen.  It can be such a hassle but if you step back for a few seconds, you will realize that it’s not the end of the world, and getting things in order can be done fast.  In fact, it helped me save money.

How?  Even though I had $20 and cards stolen, it took a few days for the new cards to come in the mail.  In that time period I did not purchase anything, basically because I had no means.  Not having any cards prevented me from any quick impulse buys that may have happened on small items that could add up over the course of a week.

The place I really saved money was with a lack of an id.  Not having my id restricted the activities I could do.  I didn’t feel comfortable driving without an id, so I saved some money on gas.

I also could not go out to any bars with friends so I instead had more low key movie nights instead of going out in DC.  I was able to save a lot of money on night activities from not having to pay for taxis, covers, drinks, and good.  The more low key movie option may not have been exactly what I wanted to do, but for the short term until I had my id back, it was fine.

With all those activities gone, I was able to save at least $100 in a one week period.  Don’t get me wrong I would rather have not had my wallet stolen, but I managed to put a positive twist on it and in the end actually had more money to put in my now new wallet.

Have you ever had a wallet lost or stolen?

The mentalities of spending have been changing over the past year based off the recession and lack of job security.  People are budgeting more and studies show that more attention is being put on savings now.  One of the areas that has seen less usage is in credit cards.  With high interest rates and credit card debt piling up among many Americans, the “I’ll pay later and charge it” mentality is switching.

It’s switching to the “I’ll pay now because it helps me manage my money better” debit mentality.  Debit transactions allow a person to track their money better.  It’s like paying with cash except actually having to have the cash in hand, something a lot of people feel is unsafe and they are uncomfortable with.

Paying with a credit card forces you to pay more attention to your finances because it is directly being taken out of your account right away.  This is a great approach to more routine purchases like gas, groceries that you need without worrying about always having cash on hand.  I use this approach all the time then when I get home, take the receipt and add the transaction into my account in my personal budgeting software.  I also go onto my bank’s site to make sure the transaction went through properly.  When I use a credit card, I always forget about the purchase and the expenses add up too easily.  With larger purchases I use credit but for the most part I try to always pay with debit.

What do you prefer to pay with?

You’re driving and you happen to pass by one of those suburbs just to avoid traffic. You see a house with a for sale sign on the lawn. You’re just dying to own a house and have been thinking a lot about leaving your apartment. You finally decide that you want to get it, so you look to some financial institutions to provide financing opportunities like loans or mortgages to help you in the purchase. There’s one big catch though: you don’t have a high enough credit score…

A credit score is a term that’s probably not new to you, but the idea of getting a high one is often difficult to understand. Rates on loans are mainly based on how good your credit score is and your ability to pay your obligations. Banks or lenders view your scores all the time, and having a good score is the only way to get financed for much of anything. Thus, the higher your score, the greater your financing options can be, both in terms of availability and rates.

The credit score was developed by the Fair Isaac Corporation (FICO) as a credit model representing how well a person handles his/her finances. The score is computed by determining an individual’s credit payment history, and each punctual payment causes a rise in a person’s credit score. The time of payments is a huge chunk of the final credit score. Credit history length and types of credits used are also factors in a person‘s score. Negative factors that pull down your overall credit scores are payment default and bankrupt history.

How to get or maintain a good credit score

Payment history is 35% of your credit score. Make timely payments on any loans that you have. Payments which are delayed or defaulted pull down your credit score significantly. It is important that you maintain good standings with your creditors and have good personal finance discipline so that your score isn’t affected by poor payment history.

Your amount of debt represents 30% of the score. If you really want to get a good credit score pay off your existing loans and debts ahead of time. If you have an existing loan on your car, for example, the amount of debt from that vehicle is counted as part of your income and properties. The sooner you pay it off, the better your credit score will look.

Length of credit history is 15% of your score. It is not enough that you have no outstanding payments, but you should also show that you’ve been borrowing money for a long time and have good standings with your creditors. This might seem like a catch 22 because you have to pay stuff off early while still maintaining some time on it, but you really have to have both to keep up your score. A lot of financing won’t show up as a score until you’ve had it for over a year, so perhaps the best option is to make regular payments for at least 12 months and then pay off things early. A personal finance management system can help you keep track of your finances so that you can figure out how much extra money you can allot for future payments.

Recent credit history represents 10%. Lenders will look at transactions that you’ve made in the recent past as an indication of your current financial situation. That’s why it’s always important to keep up with your payments because a few missed ones could mess up your credit score at any time. At the same time, bad credit history may be offset if a person shows that he has significantly made improvements in payment of credit. Use that as a chance to redeem yourself.

Analysis of borrowers credit makes up 10% of the score. This comes from a mix of credit that the borrower holds, such as leases, mortgage, car loans, installments and credit cards. Having a variety of sources will improve your credit overall.

Final thoughts

To get the best deals on much of anything, it’s important that you maintain a good credit score. With this simple breakdown of what makes up a credit score, you already have a good idea on where your credit score stands. Budget tools are available for keeping track of expenses. One thing to note though is that opening multiple applications could also pull down you credit score, so be sure that before you apply for something, you have a rough idea of your chances for financing. If you get several no’s in a row, you’ll severely decrease your chances for financing, so avoid a credit pull when you can. Know the banks rates and compare which one gives the best deal.

Before making any big decisions such as purchasing a car and getting that house you’ve always dreamt of, prioritize which is more important. Online budget planner’s are available to help you figure out which one you might be able to afford, but only you can determine which one you really want. Both require long term commitments and affect your credit score. Having an existing car loan pulls down your credit score because it affects your paying power or debt to income ratio. Inquiries on car dealerships generate credit inquiries and also affect your credit rating. Maintaining a good credit score gives you the option of getting the best deals in the market. But the best thing about maintaining that good credit score is gives you financial maturity and makes life a little bit easier.