Tips to Improve Your Credit Rating

At present, the economy of United Kingdom is experiencing another recession. The solution to the problem is not completely apparent. Moreover, there is a higher insecurity ahead because the effects of a federal Europe or a pending Greek or Spanish withdrawal from the Eurozone are still not identified.

However, in spite of the economic condition, it is getting clear that one of the causes of the problem was bad debt and irresponsible lending. As a result, we’re currently facing a credit crunch. Banks are more hesitant in terms of lending and consumer spending is little.

Because of this trend, the lending market is more demanding and even with the Government’s measures to improve liquidity, the flow of cash from banks to small firms and the people is still staggering and unstable.

On the other hand, one approach that can boost the odds of getting credit is to keep a good credit rating. Having a good credit rating convinces banks that the money they are lending will be paid back in full and on time and the borrower will have more chances of getting approved for a loan.

A person’s credit rating shows their ability to pay back debt. Consequently, improving your credit rating means getting and responsibly paying off the debt.

When applying for a credit card, put a lot of thought into it because once you have a credit refusal, it will be recorded and can have a negative effect on your credit rating. To avoid these negative effects, consider checking the Internet for opinions and experiences of others found in several forums.

Another great way to increase your credit rating is to get on the electoral roll. Some credit ratings agencies take into account a person’s presence on the electoral roll when giving a credit rating. Contact your local government authority and fill up an application form, which can be found online at times.

Capital One Got the Most Complaints Compared with Its Market Share

In terms of picking the best credit card, most of the consumers take into consideration the interest rates and rewards. However, a recent study found another factor: complaints against credit card issuers filed with federal authorities.

Based on a report by Ken Thomas, a Miami banking analyst, some of the credit card issuers that got the most complaints in relation to their market share are SunTrust, TD Bank, GE Financial and Capital One. On the other hand, issuers with the least complaints in relation to their market share are HSBC, American Express, Discover, JPMorgan Chase, Bank of America and Citigroup.

According to Thomas, besides getting a good interest rate and benefits, it’s also sensible to check complaints so that you are aware of the kind of customer service offered. Reports like the one conducted by Thomas will convince banks to work more in order to meet the needs of their customers.

Thomas examined 13,502 credit card complaints filed with the Consumer Financial Protection Bureau that had the name of a particular user. The bureau started getting complaints on July 21 until May 15. Due to the Freedom of Information Act, Thomas was able to get the necessary information.

The results showed that Capital One had the highest number of complaints, accounting for 20 percent. Following is Citigroup, with 17 percent and tie at third are JPMorgan and Bank of America, with 16 percent each.

American Express and Discover got only a few complaints because both are known for their high customer satisfaction, according to credit card surveys done by researcher J.D. Power.

At present, credit card accounts in the United States have reached more than 500 million, which is more than the country’s residents of approximately 310 million. Credit cards have the highest interest rate among all loans that consumers can apply for. Outstanding credit card debt already exceeded $730 billion.

Assistance Programs for Refinancing or Buying a New House

In terms of refinancing or purchasing a new house, there has been a wider range of options compared to the past for consumers who have little or no equity in their homes or who have experienced some financial problems.

Homeowners had a few or no option in refinancing into a loan with a low interest rate after the fall of home prices during the middle of the year 2007. Moreover, homeowners who lost their homes had to wait for a long time to buy a new one.

However, throughout the previous couple of years, there has been a development of several government assistance programs. Also, in the private sector, programs that are intended to assist consumers who encountered financial difficulties are being offered by banks and credit unions.

According to the president of residential lending for Zions Bank, Kim Casaday, only a few people are aware of the available resources. In fact, a free counseling is being offered by Zions for Utahns in order to assist them in terms of homeownership. Options for homeownership can be checked in Zion’s website, Thehomeownerscafe.com.

One of the major assistance programs is the Home Affordable Modification Program (HAMP). It helps consumers get a lower mortgage rate, lower monthly payment or other kinds of assistance to avoid losing their homes.

Another assistance program is Home Affordable Refinance Program (HARP). It helps homeowners who are not late in their mortgage payments but are not able to refinance due to the fall of home prices.

On the other hand, Utah First Credit Union is offering a no-wait housing loan intended for those who are not eligible for conventional financing. Consumers can apply for loans with a maximum of $320,000, and they may apply immediately after their short sale, foreclosure or bankruptcy. However, those who are qualified for the loans will be charged a higher interest rate and must have a 20 percent deposit.

Effects of Banks Downgrades

Last Thursday, the credit ratings of 15 of the largest banks in the world were downgraded. While the deposits are completely protected, the downgrades could negatively affect people in other ways, for instance, an increase in the fees charged by the banks and more difficulty in getting a loan. Consequently, mortgages, credit cards and the job market can be affected as well.

According to Jim Nadler, chief operating officer at Kroll Bond Ratings Agency, it is common that people are anxious about their money’s safety before anything else. However, the actual costs might be concealed.

Unfortunately, the downgrades come to banks currently in a fragile situation. Several of the fees that are charged on credit cards and checking accounts have been removed because of the most recent rules adopted after the financial crisis. Moreover, banks are excluded from making profitable bets in the stock and bond market, which eliminates a lot of money in the form of trading income.

Together with the downgrades, current fees might increase even further and new ones could emerge.

The three top rating agencies, Moody’s, Standard & Poor’s, and Fitch, give ratings on a scale that corresponds to the ability of a company and state or local government to pay off their debt.

In addition, the downgrades will direct money into reserves and decrease the amount of capital that banks have to loan.

Americans applying for home mortgages, auto loans, and credit cards will experience the effects. Banks have been very selective regarding lending money, approving only those that have stellar credit or a steady employment history. Also, since people with bad credit are not given cards, the numbers of credit cards issued by banks have decreased significantly.

The effects of the downgrades will be felt even more by small and medium-sized businesses. They provide jobs for people within the country but recently, there are lesser jobs to offer. These businesses are finding it hard to get bank loans as well.

401 (k) Too Expensive to Pay Off Current Debts

If you are 27 years old, married,and an expecting mother; you may have encountered a situation where you have a credit card debt of let’s say $20,000 that has a high interest rate, 9.5%. The amount is killing you and you would like to pay it off with your sitting 401 (k) deposit in the bank, but the question is should you withdraw all or a few amount of your 401 (k) savings to pay off the liability?

Well, the answer is “no”, here are the reasons why you should not touch your money in the 401 (k) to pay off your debts: first, there is an instant cost involved you pay income tax and a penalty of 10% if you withdraw an amount from your 401 (k) savings. So for example you have a $10,000 savings in your account, it could decrease your balance by 25% from $10,000 you might only have $7,500 dollars left, or less.

Another reason is, withdrawing from this account will affect you dearly in the future. If you withdraw the money, there is a chance that you might not be able to get the long-term growth of your 401 (k) amount. Your $10,000 is going to grow 6% every year for 35 years, and by the end of those years, your money would have grown into $76,861. If you withdraw $1,000 from your account, you will be losing $7,686 in the future.

So what should you do to pay off your excruciating debt? The best remedy is to sit it out with your partner. You and your husband must work out a plan and promise each other to handle your family’s finances more wisely and create a budget and think of ways to make your future financial problems manageable. Paying off all your credit card liabilities is just one of the many stages you must go through in this plan.