Ask Wealthy Joe: All About Balance Transfers. Are They Good For My Credit?

One of the main reasons people have a low net worth, and/or are unable to invest in stocks, is credit card debt.

I acknowledge that it’s not the only reason, but it is definitely among the top two or three among many people.

Here’s a Q & A with a person who is carrying some credit card balances and looking to pay them down.

Q: My credit card balances have high interest rates.  Is there anything I can do?

A: The first thing you could do is call the credit card company and ask if they would lower your interest rate.

The next best step is to transfer your credit card balance to a card with more favorable terms. If you can find one that will not charge you interest for up to 28 months, that’s all the better. No interest payments will allow you to pay off the principal much sooner.

Q: How do I find the best offer?

A: It depends on your credit score. The higher your score, the easier it will be to find a card with better terms. If you have a low score, unfortunately you might be stuck with the card you have.

Q: Will the balance transfer affect my credit score?

Since the new company will have to run your credit, your score will take a slight hit. However, a deal that allows you to pay down your principal for a year or more is well worth the five points it will cost you!

Remember, a balance transfer will not erase any derogatory information from the prior credit card. Any late payments will unfortunately remain.

All in all, a balance transfer is a very smart move if you can find a good deal. Let’s say you are paying $100 a month in credit card payments. Once you pay that off, you’ve freed up $1200 a year – to invest in stocks!

 

My book, The Stock Market is For Everyone, is a short guide for the beginning, inexperienced investor that is easy to understand and can be put into action immediately.

Click the image of the book at left to be taken to its Amazon page.  (Disclosure: As a participant in the Amazon Services LLC Associates Program, I earn a small commission on each sale generated through these links.)

 

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What Are Soft And Hard Credit Inquiries?

Good morning!

At least once a year, you should get a copy of your credit report to make sure all the information on there is accurate.

One category of items you want to check is called inquiries.

A credit inquiry is when an outside party – like a prospective employer, credit card company, or some other entity – runs your credit.

It’s important to know the difference between hard and soft credit inquiries, so as to not do anything that will damage your credit score.

Soft inquiries are pulled for the purposes of gathering information, and not to qualify for a loan.  If you apply for a job, for instance, and they pull your credit, that is considered a soft inquiry.  Soft inquiries will not affect your score.

I use Credit Karma, which updates me on my score monthly.  That’s also a soft inquiry.

A hard inquiry occurs anytime your credit is pulled for the purpose of borrowing money.  This includes applying for credit cards, auto loans, mortgages, and credit checks done by a prospective bank lender.

Each hard inquiry can lower your score by five points.  However, the credit bureaus assume that you are going to shop around for the best deal when looking for credit, so they allow you to pull your credit multiple times over a 30-day window and will only count those inquiries as one.

You should keep hard credit inquiries to no more than a few every three years.  Think about it: three inquiries in a year could cause your score to drop 15 points.  That can make a huge difference in your credit rating.

 

My book, The Stock Market is For Everyone, is a short guide for the beginning, inexperienced investor that is easy to understand and can be put into action immediately.

Click the image of the book at left to be taken to its Amazon page.  (Disclosure: As a participant in the Amazon Services LLC Associates Program, I earn a small commission on each sale generated through these links.)