Tag: Credit Scores and Reports

Prepare for Holiday Shopping with These Timely Credit Tips

According to a YouGov Parent Survey in 2019, a quarter of parents entered the 2019 holiday shopping seasonstill paying down debt related to 2018 holiday spending. Deloitte numbers put holidayretail salesgrowth in 2019 at 4.1% year-over-year. In 2020, Deloitte predicts growth of between 1% and 1.5% year-over-year for the holiday season.

It might be that some people no longer want to pay for holiday gifts, decorations and food a year down the road. But it’s also true that the COVID-19 pandemic has hit consumerwallets and some people might be cutting back this year.

That doesn’t mean that people aren’t shopping. Google and other thought leaders note that changes to shopping habits and the need for social distancing and other measures will likely spread the holiday shopping season out longer. Shoppers are also likely to turn to online shopping.

With a ton of shopping opportunities, a longer holiday shopping season and pent-up pandemic energy, it might be easy to overspend and create debt you’ll deal with into the future. Follow these tips to prepare for holiday shopping so you can protect your financial standing, save money and make the most of the resources you have this season.

1. Check your credit scores

Begin by checking your credit scores and reports. They tell you where you stand if you want to apply for credit. They also give you a baseline of where you are so you know if your score goes up or down later with no explanation.

An unexplained drop in your credit score can be a sign your financial information is compromised. Unfortunately, the holidays are prime time for many scammers. Using a service, such as ExtraCredit’s Track It feature to keep tabs on 28 of your FICO scores, helps you know when you need to act to protect your credit.

2. Ask for a credit limit increase

If you have existing credit cards and you’re a cardholder in good standing, the months prior to the holidays can be a good time to ask for a credit limit increase. You’re not asking so you can spend more-it’s typically advisable to keep spending in line with your budget no matter how much credit you have.

You’re asking for a higher limit so you can spend what you already planned to without hurting your credit utilization. Credit utilization is the second-most important factor in determining your credit score-second only to payment history. It’s the ratio between your credit limit and how much of that credit you have used.

If you have a card with a limit of $1,000 and you spend $300, that’s a utilization rate of 30%. But if you get approved for a credit limit of $2,000 and you spend $300, that’s a utilization rate of only 15%, which is better for your score.

3. Apply for a credit cardwith a 0% APR introductory offer

Those with good or excellent credit might want to consider applying for a card with a 0% APR introductory offer. If you qualify for such a card, you typically have one or two years to pay off purchases made during the introductory period without accruing any interest.

This can be a way to finance your entire holiday without paying anything more for the privilege of doing so. However, it’s still important to maintain your budget and not overspend just because you won’t be paying the balance off until later. Otherwise, you make this season’s holiday festivities next season’s problem.

4. Pay down debt before-and after-the holidays

Speaking of last season’s debt: If you can pay it down before you start spending this season, that’s a great accomplishment. It also frees up your credit and your budget so you can better enjoy the current holiday season. If you’re paying $100 a month on your debt, that’s $100 a month that might go toward gifts or celebrations that you don’t have to put on a card this year.

If you do use credit to pay for the 2020 holidays, have a plan for paying it down as soon as possible. That’s especially true with 0% interest cards. The longer you wait, the greater the chance you’ll miss the introductory period and potentially be on the hook for a lot of interest expense.

5. Create a holiday spending budget

Whether you’re using cash or credit-or a mix of both-enter the 2020 holiday shopping season with a plan. Take an honest look at your personal budget. If you don’t have a budget, create one before you move forward. Then decide how much you can realistically spend during the holidays.

Consider which gifts you want to buy and which events you want to host or attend. You might not be able to do everything, and that’s OK. Be honest with yourself, your family and your friends about what you can afford to do with your time and money this year.

Then make a list and assign each item a monetary budget. That can include:

  • Gifts as a total
  • Gift extras, such as wrapping and tags
  • Shipping, both for receiving items you buy and for shipping gifts to others
  • Food and drinks
  • Travel
  • Decor
  • General festivities, such as tickets to holiday events

Once you assign a dollar amount to a category, stick to it. That’s a good idea even if you’re spending with credit.

6. Align budgeted spendingwith credit cardrewards

Once you know how much you want to spend, decide how best to spend it. If you’re using credit cards for the holidays, check your accounts to see if any offer cash back or rewards points. If they do, double-check which categories or stores you can shop in to earn the most points with each card.

For example, some travel rewards cards offer 6x points when you shop at supermarkets. You could use such a card to cover the food-and-drink portion of your holiday budget and reap the biggest rewards possible from that spending. You might also be able to maximize rewards when purchasing gift cards.

7. Guard your financial information and identity

As you enjoy holiday shopping, be on guard. Don’t use debit card PIN numbers unless you have to, and shield the keypad when you enter your information. Keep a close eye on your wallet or purse, and check your credit card statements regularly to ensure all charges are yours. You can also use ExtraCredit’s Guard It feature to help keep your identity and account information safe during and beyond the season.

Sign up for ExtraCredit today!

The post Prepare for Holiday Shopping with These Timely Credit Tips appeared first on Credit.com.

Source: credit.com

Perch unveils impressive credit building app

Perch is a new mobile app available for iOS that can improve your credit score by incorporating your rent history and recurring subscriptions such as streaming services.

Currently, Perch is only available through the Apple Store. There are some similar offerings out there, but I think this one is better. It’s completely free and it reports to more credit bureaus.

Read more from our credit card experts.

Ask Ted a question.

Rent

Typically, your rental payment history does not appear on your credit reports. That’s a shame, because rent is the largest monthly expense for many households. It would be great if paying your rent on time helped you build your credit score.

There are some existing services that facilitate reporting your rent to the credit bureaus, but they typically charge fees. They can also get complicated, since many require your landlord to respond to the tracking company each month or mandate that they receive your payments through their platform). With Perch, you provide your lease details and grant read-only access to your bank account via Plaid’s secure API. That allows Perch to verify your payment history – without bugging your landlord or forcing you to change your payment method.

Even better, Perch can retroactively add up to 24 months of rental payment history to your credit reports with all three major bureaus. This could jumpstart your credit score in a big way. The company tells me their average customer improves their credit score between 60 and 160 points. And many who were previously unscorable instantly land between 670 and 690 – placing them in the “good credit” category. That’s incredible!

See related: How to pay rent with a credit card

Subscriptions 

Perch also has a novel approach to monitoring subscriptions. Users notify the company which recurring subscriptions they want to include, and Perch provides them with a virtual debit card loaded up to that pre-approved amount. The user pays Netflix, Hulu, Spotify, Apple Music or another subscription service with that virtual card number. They then pay Perch back. Perch reports this virtual card payment activity as an additional tradeline on users’ credit reports (note that Perch currently reports subscriptions to Equifax and TransUnion; it plans to add Experian by July).

See related: I signed up for Experian Boost. This is what happened

I asked Perch founder and CEO Michael Broughton what happens if someone doesn’t pay them back – would that end up hurting their credit score? He said no. Perch really wants to help their users build credit, so it will not place a negative mark on a customer’s credit report in that situation – or even charge a late fee.

Instead, Perch relies on proactive measures such as cash flow underwriting and warnings if your account balance falls too low. If you don’t pay, they’ll eventually prevent you from making future purchases. Broughton explained that their liability is very limited because they pre-approve these virtual card purchases and the eligible subscription services tend to charge modest amounts. He assured me that no one can get away with buying $500 Nikes and skipping town.

About Perch

Broughton is a 21-year-old graduate of the University of Southern California. He was inspired to found Perch after he had difficulty securing a loan for a $10,000 tuition shortfall. One of seven children born into a military family, Broughton was the first member of his family to attend college. He’s now assisting others who wish to improve their financial lives. The company’s investors include heavy hitters such as Citi, Sequoia Capital, SoftBank and Y Combinator.

The market is huge. FICO reports that 79 million Americans have subprime credit and another 53 million can’t be scored because they lack a sufficient credit history. Broughton told me Perch’s initial sweet spot is 18-25 year-olds, but he also noted that many older adults could benefit, particularly immigrants and people rebuilding their credit after a misstep. He has big plans for expansion and believes Perch can benefit 100,000 people in 2021. The app formally launched in late January and is onboarding new customers in weekly batches.

See related: How to build credit

Broughton’s ultimate goal is to spread the gospel of financial literacy and credit building. He wants to help people obtain their first credit cards and other financial products. “We want to launch you into the credit world on a better foot,” he said. The way I see it, Perch is off to an excellent start.

Have a question about credit cards? E-mail me at ted.rossman@creditcards.com and I’d be happy to help.

Source: creditcards.com