Understanding the Difference Between Credit Card Bad Credit and General Bad Credit

Understanding the Difference Between Credit Card Bad Credit and General Bad Credit
If you think all bad credit is created equal then you don't
understand the differences between credit card bad credit
and the other types of bad credit out there. How much of a
difference does it make? Believe it or not, quite a bit.
Some bad credit isn't too bad at all, while credit card bad
credit can prevent you from getting a car or a home. If you
want to understand why credit card bad credit is worse than
the other forms of bad credit, here are some things to keep
in mind.

1. Understand Your Credit Report

The first step in understanding the differences between
credit card bad credit and other types of bad credit is in
understanding your credit report and the information it
contains.

Your credit report consists of a multitude of facts
pertaining to your payment history. In addition to your
credit card activities, things like car loans, utility
bills and even unpaid medical bills show up on this report.
When a creditor looks at this report, they don't just see
whether you make your payments on time, they see if you've
ever been sued, claimed bankruptcy, let medical bills go,
etc.

2. Realize That Bad Things Happen to Good People

Let's say you work for ABC Bank. It is your job to approve
or deny mortgage applications. You have three applications
in front of you. Let's see who you would approve.

Applicant A has a credit rating of 595. This person has
paid their credit cards on time except for a period of one
month when two of her cards were 30 days late. There are
also quite a few unpaid hospital bills from this period,
but you have a note saying there is a dispute with the
insurance company and that is why the medical bills have
not been paid. Other than that, her credit looks clean.
This is general bad credit.

Now you look at the credit report from Applicant B. He's
also got a credit rating of 595, but he doesn't have unpaid
hospital bills. Just a bunch of late credit card payments
and a missed car payment or two. This is credit card bad
credit.

Now we're on to Applicant C. This person also has a credit
rating of 595, but she's maxed out all of her credit cards
and has been only making minimum monthly payments. She's
made a few late payments recently, and you have a feeling
it's because she's over-extended her credit. Again, it's a
case of credit card bad credit.

Who would you approve? Starting to see the picture?

3. Keep In Mind It's Not Bad Forever

So are you doomed if you have credit card bad credit? No.
However, you will be if you don't change your ways. You're
going to have to make your payments on time each and every
time for at least 6 months before your credit takes an
upward climb. Remember, credit card bad credit may be ugly
and it may be hard to get out of, but it's not the end of
your financial world.

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Steps to Eliminating Debt

Steps to Eliminating Debt
Debt is easy to get into. We all buy things on credit,
take loans out to get instant money or pay for goods on
credit cards. Credit can take minutes to build up, but
years to pay off. When debt builds up we end up paying
regular monthly payments that simply increase every time we
get more credit.

The first thing we all have to do to clear debt is stop
getting into any more debt. If you never took out another
loan and cut up your credit cards then after a while you
will pay off all your debt (provided you are making regular
monthly payments).

However, there are lots of clever ways to pay off debt
quicker and help you to become debt free. Simply make a
list of all the debt you have. This is everything that you
pay to a creditor and includes any loans, credit cards,
financed items such as the finance on your car or furniture
and also the big one, your mortgage.

You should know:

1. How much the debt is for or the total amount 2. How much
is left to pay off the debt 3. What you pay every month 4.
How many months you have left to pay 5. AND the interest
rate you are being charged

If you add the amount of debt (number 2 above) you have
left on each one of your debts then this is how much you
owe to creditors. If you then add up all the monthly
payments (number 4 above) then this is what you have to pay
every month. Once you have worked this out then you are in
a good position to start working out the fastest and
cheapest way to clear this debt.

Paying off the debt as quickly as possible:

There are several ways you can pay off debt quickly. Some
will be better than others and it also depends on the type
of debt you have.

The interest pay off "" Targeting number 5 on the list above

If you have a credit card or mortgage then you should be
charged interest monthly on the amount of credit you have
left to pay. If you pay off larger amounts off this then
amount you have to pay every month goes down. The more you
pay off the less you have to pay in interest every month.
If you take the credit card or loan that charges you the
highest rate of interest, then paying this off earlier
saves you the most amount of money every month. Once it is
paid off, you move to the next credit with the biggest
interest rate. Because mortgages usually have the lowest
interest rate out of all your loans or credit cards and is
secured debt you should leave this until last on your list.

For some loans, creditors can sometimes charge the entire
interest on the full amount across the time you have to pay
the loan so that if you decide to pay a loan off early, you
may still end up paying the same amount as if you continue
to pay the loan every month. In this case you are probably
better off not paying that specific loan early and focusing
your efforts on a different loan.

The minimum loan pay off "" Targeting number 2 on the list
above

If you take a look at all your loans and start paying extra
on the smallest loan then this will be paid off the
fastest. Once you pay this off, take the amount you were
paying on that loan and use it towards paying off the next
smallest loan. Eventually you will again end up with only
your mortgage left which if you use all the money you used
for your other loans this will also be paid off much faster.

The biggest payment pay off "" Targeting number 3 (or 4) on
the list above

This works best for small loans with fixed payments and is
great for people who find themselves with lots of loans
with money to pay off on all of them. Because you want to
reduce the amount of time and money you have to use to pay
off the loan you simply target the largest payment you have
to make every month. This may be the loan with the highest
interest or the one the one with the highest balance. Once
you put everything you can into paying this off your
monthly payments will suddenly drop.

You can also do this by targeting the loan that has the
least number of months left to pay off the debt. This will
reduce the monthly payments quicker.

This will leave you with a lot more money every month and
helps to control your finances better especially for people
that struggle to pay off their loans. Clearing the loan
that takes the highest payment every month has the biggest
effect on your bank balance every month. Clearing the loan
that has the least number of monthly payments left has the
fastest effect on your monthly bank balance.

The clever part is to then use the money you save once you
have paid off the loan to pay the other loans off faster
and not to get comfortable with the debt you have left.

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