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Dr. Pearlena Wallace

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Closing Account Hurts Credit Score

Don't cancel credit card when account is paid off. Canceling a credit card, especially if it's an older account, could have a negative impact on your credit score. The reason is that about one-third of your credit score is based on the length of your credit history and your balances in relation to your available credit. Canceling a credit card could end up costing you thousands of dollars. By the way, canceling an account will not remove it from your credit history.
Perhaps the most important score you'll ever have is your FICO or credit score. Your credit score, which ranges from 300 to 850, affects just about every aspect of your life -such as getting a job, insurance, renting or buying a home or even medical care. The credit scoring model is based on a number of factors like how promptly you pay your bills, amount of debt, length of credit history, and credit type or mix.
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5 Factors That Determine Credit Score

Payment history - 35%. Do you pay your bills on time?
Amount of debt owed - 30%. How much do you owe in relation to your available credit limit? Keep this ratio low - under 35%.
Credit history - 15%. How long have you had credit and paid as agreed?
New credit - 10%. Each inquiry will lower your score.
Type of credit - 10%. Good mix of accounts (bank loan, credit cards, etc) raises score.
Be sure to review your credit report at least once a year to check for and correct any errors. You're entitled to a free credit report every 12 months from the three major credit bureaus (Equifax, Experian and TransUnion).

Tips For Dealing With Debt Overload

Priority #1. Stop doing the things that got you into debt trouble.
Contact your creditors immediately to workout a payment plan, if you can't pay your bills. Ignoring your creditors only compounds your problem.
Get help from a non-profit organization, if you can't get your debt under control. To find a non-profit near you, contact the National Foundation for Credit Counseling at www.nfcc.org or 800-682-9832.
Beware. Some non-profits provide little or no valuable help. And some are outright wolves in sheep skin.
Use extreme caution when considering debt consolidation services. Unscrupulous ones may take your money and never pay your creditors.
If the debt consolidator comes looking for you, RUN!

Tighter Credit, Higher Rates: How to Fight Back

As credit-card issuers prepare for the day of heckoning - when the new legislation takes effect - they are busy hiking rates, fees, and penalties and slashing credit limits. But cardholders can and must fight back. Here’re are some tips:

1.    Most important, pay your bills on time. Or risk getting slapped with higher interest rates, fees and minimum payments.
2.    Cut back your credit card use. These skyrocketing rates and fees should be enough incentive to encourage you to pay with cash.
3.    Make a big push to pay down credit card debt. Pay more than the minimum and use our instant cash tips, click home page, to find extra money to whittle down your debt.
4.    Break the habit of reaching for plastic when you're short on cash. Ask yourself if the purchase is a 'need' or 'want'.
5.    Look for credit cards related to your work or membership organization, like credit union and association cards. These credit cards tend to offer much better rates and terms.

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4 Top Ways to Get Debt-Free

Consumers currently owe $917 billion in revolving debt, mostly credit card debt, according to the Federal Reserve data. If you’re one of those individuals buried in credit card debt, here’re four top ways to get debt-free.

1.    Get psyched up. You must first get you mind ready to get out of debt.
2.    Curb your spending. Stop using credit cards and cut back on all spending.
3.    Put it on paper. Make a list of all your credit cards along with the balance owed and interest-rate.
4.    Pay off highest interest-rate credit card first. Continue to pay the minimum on all credit cards, but put extra money and effort toward paying off the highest interest rate card. Then repeat the scenario with this next highest interest-rate card and so on.

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6 New Credit Card Rules You Should Know

1.   Under the new law, credit card issuers must notify you 45 days instead of the 15 days before raising interest rate or hiking fees. This gives you a chance to shop around for a card with a better rate or maybe pay off the debt.
2.     Your monthly statements must now be mailed at least 21 days before the due date. Previously, issuers could mail the statement 15 days before the due date. But don’t look at   this as extra time to pay your bill. Instead it’s a good idea to pay the bill when you receive the statement to avoid running the risk of being late.
3.    Overdraft fees, costing up to $39 every time you exceed your balance, are prohibited, unless you agree to allow overdraft protection.
4.    You have the right to opt out of rate or fee increases. The new law makes it mandatory for credit card companies to allow cardholders to opt out. If you decline the rate or fee increase, you can no longer use the card and you must pay off the balance within the allotted time.   But the companies cannot raise your rate.   If you opt out, you must notify the credit card companies in writing that you decline the increase and want to opt out. Send your letter by certified returned receipt mail in a timely manner.
5.   Requires issuers' promotional rates to last at least six months.                                                                                                                                                                                                      6.   Starting in February 2010, cards won’t be issued to people under age 21 without verifying their ability to pay or getting parents’ permission. And there are more protections that will go into effect in February

Tips to Stave off Foreclosure

1.    The first thing you should do is contact your lender as soon as you know you have a problem.
2.    Talk with a HUD-approved housing counselor. 1-800-569-4287
3.    Seek a loan modification to lower your mortgage payment. Your lender, as part the Obama’s Administration housing rescue plan, can lower your interest rate or allow you to defer payments, or extend your loan term. Also, ask your lender to help you file a partial claim, if you have private mortgage insurance. This will allow you to get an interest-free loan to bring your mortgage current.
4.    Refinance. If you have not lost your job or had a big drop in income, and are current on your mortgage payment, this may be an option for you.
5.    Consider a short sale if you are unable to refinance or modify your mortgage. But a short sale is only possible if your lender agrees to a selling price less than what you owe on your home.
6.    Borrow from your 401(k) or life insurance and take advantage of low interest rates.
7.    Avoid foreclosure rescue scams. Do not sign over your home (deed) to anyone, except your lender in special circumstance (deed-in-lieu of foreclosure). But get professional advice.