Credit and Debt Terms to Know

APR

The annual percentage rate, or APR, is the interest rate charged on the amount borrowed. It is the annual cost of borrowing money. APR makes it easier to compare different loans and credit cards, because you can easily see which loan/credit card would be cheaper. There are two different types of APRs. The nominal APR is the interest rate that's stated on a loan. The effective APR includes fees that have been added to your balance.

Balance Transfer

A balance transfer is the process of moving credit card debt from one credit card to another. Balance transfers are subject to a balance transfer fee that's a percentage (usually 3-6%) of the amount being transferred.

Billing Cycle

The billing cycle is the period of time between billings. It may start on the 1st day of the month and end on the 30th day. Or, it may go from the 15th of the month to the 15th of the next. Billing cycles are varying lengths, ranging from 25-45 days, depending on the credit card and issuer. During the billing cycle, purchases, credits, fees, and finance charges are posted to your account. At the end of the cycle you are billed for all charges and fees made during the billing cycle. Your credit card payment is 20-25 days after your billing cycle ends. The period of time is known as the grace period.

Credit Limit

A credit card limit is the maximum amount that can be borrowed on a credit card without a penalty. Exceeding your credit limit results in an "over the limit fee". Your credit card issuer might also raise your interest rate to the default rate if you go over your credit limit. The default rate is the highest rate charged by a creditor or lender, usually as a penalty for missing a payment or exceeding the credit limit. Exceeding your credit limit or even getting clost to it impacts your credit score. Your credit utilization measures the amount of your credit limit that's being used and counts 30% of your credit score. The higher your credit card balance, the lower your credit utilization and the more your credit score is hurt. It's best to keep your credit card balances within 10% to 30% of your credit limit.

Keith Dienstl is a member of the Financial Empowerment Network Team and Prime Financial Credit Services you can also visit Credit Repair Services for more information on Keith Dienstl.

Loan mods are unintended "score mods"

A 12/28/09 article in Money.Cnn.com showed that even if you are current on your house payment, a loan modification will sometimes be calamitous to your credit score. How does this happen? First off, most loan modifications have a trial period that you are expected to perform in. If you fail to make timely payments for the first 3 to 6 months, then the modification attempt is terminated and the bank will again pursue foreclosure.

During that trial period your Note has not been officially modified, so you are, by definition, on a partial payment plan. Whether it is a partial payment plan on a credit card or a mortgage, it makes no difference. When the lender enters that data to the credit bureaus it will show negatively on your credit. Next, let's suppose you complete the trial period successfully. Once your loan modification plan is accepted, you may still have a delinquent balance carrying forward. This delinquent balance will also serve as a negative mark against your credit even though you are "paying as agreed" based on the loan modification terms.

I don't think the banks are ignorant of the affect these policies have on consumers. Lower credit scores are the pathway to charging higher rates and fees and a loan modification is just one avenue that provides a bank with that opportunity. There is a lot of give and take throughout the loan mod process along with expressed and implied terms. If you think your score has been damaged by a loan modification - remember this, the burden of proof for reporting correctly is squarely on the shoulders of the credit bureaus. To find out how to "audit" the information on your credit reports please visit my affiliate link site.

George Andersen is a member of the Financial Empowerment Network Team and Prime Financial Credit Services
you can also visit Credit Educationfor more information on George Andersen.

Your Credit Score Is Yours to Control

Are you confused by credit, and how to create a better credit score? Don't feel bad, many consumers and business people find it hard to understand why their credit score is low. They pay their bills. And when they are a little late on a payment, they pay extra fees to the Lenders to make up for that. The Lenders enjoy great profits, and yet, the Borrower gets penalized more. Is it fair? I say NO! Enough! It's time for us to take control of our credit scores, and get them to reflect accurately, what kind of people we really are. In fact, the United States government agrees. Toady, there are laws to protect us, and allow us to take back control of our credit histories and credit scores.

Use these laws to make sure you aren't forced to pay more for auto loans, credit cards, mortgages, insurance and utilities. Besides costing you more money in monthly bills, we've been hearing more about people who get job offers that are later taken back, because of a "bad" credit score, a result of having been out of work for a year or longer. They didn't use credit to support a luxurious lifestyle. Ironically, they are penalized by taking away the very thing that they need to get back on their feet and to get back to paying their bills. Is it just me, or does it seem ridiculous to you as well? Credit reporting agencies, and Lenders, seem to believe that it's their right to penalize consumers to any level that they choose. The US government says it isn't their right. It is their right to report late payments and defaults on payment agreements, to the extent that they report it accurately. Is the information on your credit report accurate?

Frits Tessers is a member of the Financial Empowerment Network Team and Prime Financial Credit Services
you can also visit Personal Coaching for more information on Frits Tessers.