People with a poor credit standing have already seen for themselves just how hard it is to secure a credit card with good terms. Failure to pay credit card debt or even consistently making late payments, contributes to a poor credit history resulting and in you receiving a negative rating from the credit bureaus. No matter what your reason is for failing to make good on your credit card obligations, whether it is because of pure neglect or simply not having enough money, your resulting low credit score will make it harder for you to get a credit card. So how do you get a credit card if you have a bad credit standing? The best way to do this is to improve your credit score. It is fairly common knowledge that people who have higher credit scores stand a better chance of being given credit cards with good terms than people who have less than ideal credit scores. A higher credit rating will also give you the added advantage of being eligible for lower mortgage and car loan interest payments. Here are some of the ways by which you can improve your credit standing. Check for any errors in your credit report and correct them. You should check all your credit reports for any errors, since any mistakes present can result in you having a low credit rating. This should be done well in advance, since correcting a mistake can take anywhere from one to three months and possibly even longer. Make payments on time One of the things that credit card companies look into when determining how eligible you are for a credit card with good terms is your payment history. Even a single missed payment can cause your credit rating to decrease considerably. If you want to improve your credit rating, paying your bills promptly is a great way to do that. Pay off the balance on your credit card One other factor that will have an effect on your eligibility for a credit card with better terms is the amount of your balance compared to your credit limit. Keeping your balances below 25 percent of the limit is a good way to raise your credit score. Keep your past accounts open. People have traditionally opted to close their old accounts that were unused. The change in the way that credit ratings are calculated however has made it more feasible to keep older accounts open, thereby increasing your credit score. Closing old accounts will actually have a detrimental effect in that it will shorten the length of your credit history, thereby decreasing your available credit, as well as increase the ratio of your credit balance in relation to your credit score. While closing your old accounts will only lower your credit score slightly, keeping them open may just spell the difference between being approved or rejected for a credit card with better terms.
If you're presently having problems with your credit card debt, perhaps you're thinking about applying for a debt consolidation loan or looking at the option of credit card debt settlement. Both a loan and a settlement are methods of debt reduction but is there a difference between the two? If so, what are these differences?
Simply put, a debt consolidation loan is a loan that you take out to pay of all of your debts at once. If you own several credit cards and you have a large outstanding balance on each, this may just be the more practical choice for you. With a debt consolidation loan, all your credit card debts are consolidated or combined into a single debt with only one, low interest rate to pay.
What about debt settlement? A settlement involves a negotiation between you, the credit card holder and your credit card company. If you are experiencing financial crisis due to uncontrolled circumstances, you can actually ask for a settlement in the hope that your credit card company would be considerate enough to grant your request. For example, if you owe $6,000, your credit card company may allow you to settle your debts by paying at least half or a third of your total debts. So instead of having to pay $6,000 in full, you may be asked to submit only $3,000 or $4,000 according to your settled agreement. A debt settlement can also be referred to as a ?debt workout?, ?debt relief? or debt reduction. Will a creditor agree to a settlement? This really depends on the situation. Usually, a creditor will give in to a settlement if the borrower is on the brink of bankruptcy. Since a bankruptcy often ends in total debt elimination, a creditor will prefer to make a settlement and take at least half or even just a portion of the debts owed. Otherwise, if the bankruptcy is approved, the lender will get nothing.
If a credit card debt settlement has been agreed upon, the borrower is expected to submit the agreed payment in a lump sum. This means, the borrower cannot pay in installments since part of the debt has already been forgiven. Nevertheless, if the debt owed involves a really large amount, the credit card company may agree to give you a repayment plan. This would depend on the lender's decision and the repayment period may range from three months, six months or even a year.
Take note that a debt settlement will often appear on your credit report as ?paid as agreed? which will tell other creditors that you did not pay back the full amount you owed. A ?paid as agreed? is better than having the debt appeared as charged off on your credit report. Charged offs mean your creditors have given up all its efforts to collect debts from you because of your deliberate refusal to pay your debts.
If you are contemplating a debt settlement, getting the help of a legitimate credit counseling agency is recommended. Keep in mind not all credit counseling agencies will do a ?true settlement? for you. Many of them will simply ask that all late fees be waived and request a lower interest rate and call that debt settlement. You want to find one that will call your creditors and negotiate your debts so you see at 20- 75% reduction in the amount you owe. These companies may charge a higher fee for their services but the savings you receive more than make up for it. Also, make sure that the credit agency you'll work with is legitimate and really sincere about helping clients with debt problems. One way to do so is to check from the Better Business Bureau or to consult the FTC's list of government accredited credit counseling agencies.
Both Barry Waters & Liz N. Roberts are contributors for EditorialToday. The above articles have been edited for relevancy and timeliness. All write-ups, reviews, tips and guides published by EditorialToday.com and its partners or affiliates are for informational purposes only. They should not be used for any legal or any other type of advice. We do not endorse any author, contributor, writer or article posted by our team.
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