Bad credit can happen to anyone. It does not mean that you are a bad person or that you are irresponsible. There are any number of reasons that you can find yourself with negative marks on your credit. Lenders, however, see bad credit as increased risk. You are far more likely to be rejected for loans and credit lines when you have bad credit. There are some credit card companies that specialize in providing lines of credit to those with less than stellar credit ratings. Before you sign up, there are a few things that you should consider.

Avoid signing up for credit cards that you do not qualify for.

Every time a credit card company pulls your credit. This shows on a credit report and has a negative impact. Do not waste time applying for cards that you know you do not qualify for. All that you are doing is hurting your credit and wasting your time.

Pull a credit report on yourself.

You can use this to find out if you qualify for a credit card before the application process is even started. When you see an offer that interests you, contact the credit card company and find out what credit rating is required for a specific offer. They may be able to inform you if you would qualify at a specific credit rating.

Do not wait for offers to come to you.

Be proactive and contact different, well established, credit card companies. When you have your credit rating, you can check to see if they have a credit card offering that fits your needs and your credit situation. This limits the risks of being drawn in by predatory lenders.

Look for reviews on the company offering the credit line.

These can be found online or through credit counseling groups. You may find that some companies are better for bad credit borrowers than others. You may also find companies that practice predatory lending. Arming yourself with this information can save you from lenders that may not have your best interests in mind.

Compare the offers.

Review and compare the different offers to make sure that you have the right one to fit your needs. Pay very close attention to fees, charges and interest rates. Federal regulations mandate that all credit card companies disclose this information to consumers. If you have questions or difficulties, make sure to ask questions. Only by comparing different credit card offers can you find the one that can help you get the credit that you require, even with bad credit.

Of course, always make sure that you fully read the information on the card. Federal regulations require that credit card companies disclose all fees and interest rates. Make sure that you fully understand the cost of owning the card.

Following several years of very strict lending, several lenders and banks across the country have begun to open up their wallets and make it simpler for consumers to get approved for unsecured personal loans. According to SmartMoney.com, TD bank has reported a 6% increase in the amount of personal loans issued in 2011 while SunTrust Bank reports a 25% increase!

In addition to introducing less rigid credit requirements that will enable individuals with poor credit and high debt amounts to achieve approval, banks are also trying to entice applicants with good-excellent credit by offering lower interest rates. For example, in March of 2011, US Bank introduced unsecured personal loans with interest rates beginning @ around 9%, lowered from the previous starting point of 13%. The amount of loans serviced since have more than tripled.

Proof of income is still a requirement for all applicants of good and bad credit. And those with higher credit scores/rating in conjunction with minimal debt amounts are still considered ideal candidates with approval being likely, accompanied with favorable rates and terms. If you are able to receive an approval, the interest rates you receive will heavily depend on your ability of being able to pay the loan back timely. Interest rates are fixed, but if you fall behind on payments, you are going to incur late fees…which can end up being pretty costly at $20-$50/pop. If you neglect to make your payments, your account will be handed over to a collection agency which can equate to being sued in court. You don’t want to go this route. Therefore, don’t apply for a personal loan if you do not think you will be able to satisfy payment obligations.

Loan amounts offered by the majority of lenders are still pretty generous. Wells Fargo comes in at top, enabling consumers with excellent credit to apply for personal loans for as much as $100,000. Capital One is currently offering maximum borrowing amounts of $25,000 and OneMain Financial (formerly CitiFinancial) $10,000. And then you have online only loan providers like Choice Personal Loans that service the entire country, offering good and bad credit loans for as much as $150,000.

It is very important to note that being able to obtain easy credit also has its downside. For instance, many consumer advocates contend that these types of loans invite consumers to spend money that they should be saving. Choice has reported that many of their clients utilize their loans for buying large-ticket merchandise like flat-screen televisions, stereos, etc.. These types of purchases are not satisfying life’s necessities and should be carefully evaluated before proceeding. It is also common for borrowers to use the funding they receive for paying off high-interest credit card debt.

Unsecured personal loans are an excellent financing option, if used properly. They not only help satisfy unexpected financial crisis, like paying for doctor bills or home repairs, but can help you save money by paying off balances on high-interest credit cards. In addition, eliminating credit card debt will also help improve your credit score and rating since the carry on an unsecured loan is not as much of an impact on your credit.

image by images_of_money

Are you under the impression that consumers all over the world generally adhere to the same consumer banking practices? If so, you are way off. And By comparing consumer banking practices in the United States and Australia, you will quickly see that there are some major differences. This does not mean that one country is better than the other or that one nation and group of people has a stronger grip on their money. However, it clearly illustrates that consumers in both countries take a different approach to their personal finances.

Here are several ways to look at how consumers bank in the United States and Australia – many of which show some very important differences.

Availability of Online Banking Tools

Before we go any further, it is important to note that both US and Australian based banks are at the forefront of the online banking industry. In other words, financial institutions in both countries are making major strides in their online services.

When doing a head to head comparison, it would be next to impossible to say that one country is ahead of the other. Both are deeply invested in online banking, making it simple for consumers to move their money around via the internet while also offering advanced features such as e-statements.

Mobile Banking Apps

If you live in the US or Australia you have probably heard the buzz associated with mobile banking. Those with a smartphone, either iOS or Android, probably realise that this is an option.

At the present time, US based banks have the edge in this department where more institutions are offering mobile banking apps. According to a recent study by KPMG, 40 percent of Australians are not aware of whether or not their bank offered mobile capabilities. However, it should be noted that Australian banks are working hard to bridge the gap and inform customers of new apps for mobile banking with all the ‘big four banks’ offering at least an iPhone app.

Saving vs. Spending

Due to the recession and more Americans being forced to live payday to payday, the savings rate has dipped. In fact, some experts put the rate as low as 0 to 1 percent – making things as bad as they have been for quite some time.

Although it is widely believed that the savings rate in Australia is higher, this is not saying much. Most experts put this number at approximately 2 to 3 percent. Australia is every bit the consumer economy that the United States is.

Personal Indebtedness

Australia has a major problem when it comes to personal debt. Not only does the country come out on top (which is not a good thing) when compared to consumers in the United States, but it goes one step further: it leads the world in terms of personal indebtedness.

If you compare Australia’s position to that of the United States, you will see just how bad things have become. Currently, the average Australian adult has debt of roughly $56,000. This is compared to the average debt of an American of $44,000.

When you add together personal loans, credit card debt, and mortgages, it totals more than AUD$1.2 trillion. To put this number in comparison, it is 71 per cent higher than it was just five years ago.

Real Estate Value

While the United States may be doing better in terms of personal debt, they are taking a huge step back in the real estate department.

In the last year, Australian home owners had no trouble, in general, making mortgage payments. In fact, nearly 50 percent overpaid on their mortgage. On the flip side, while the real estate market in Australia had been booming for years with a steady increase in property valuations, many analysts now think that the market is now on the edge of a precipice. It’s well known that in the United States, the housing market and mortgage industry has taken a huge hit over the past five years. More than 2.9 million home owners received foreclosure filings in 2010 alone. Along with this, there are currently 5.5 million home owners in the United States that are at least 90 days late on their mortgage. In short, this means that one out of every five home owners are late.

Chris writes for the CreditCardCompare.com.au comparison website, one of Australia’s leading impartial comparison services where they rank the best credit cards to make it easier for users to quickly identify the best money-saving or most rewarding offer based on their personal financial circumstances.

With all the credit card debt out there, it seems like it would be helpful to define what appropriate credit card usage is.

This begins with a preliminary observation. That is simply this – credit card usage is a choice. Thus, if you’ve proven to yourself that you can’t use them appropriately, then you’re better off (and so is your bank account) if you simply stop using credit cards.

www.istockphoto.com/ alexandernovikov

1. Always pay off your balance in full every month.

Good guidelines always have good consequences. In this case, I suggest that if you ever go beyond this rule that you should either stop using credit cards for a six month period, or stop using them all together.

Credit cards in the hands of people who don’t pay off their bills are a very dangerous thing.

2. Never purchase anything over $100 (or a similar threshold) on a credit card unless you decided to buy it before you left the house.

This has been a long standing rule in our home. If I’ve left home with the plan to buy a TV for $300, then I can use the credit card because it is not a spontaneous purchase. If, however, I’m standing in front of a nice new TV, I cannot use the credit card because I may be tempted to go beyond my budget.

3. Never purchase anything over $100 (or a similar threshold) on a credit card without discussing it with your spouse.

Discovering a larger than normal purchase when looking over the bill at the end of the month is not an appropriate way to find out about a household expense. Communicate with your spouse beforehand.

4. Always review your monthly statement.

One of the keys to credit card usage is paying attention. I remember a few years ago when I noticed a charge on our credit card bill. I came to find out that I had signed up for something that would continue charging me every month until I cancelled. By reviewing my statement I was able to catch this discrepancy.

5. Always purchase electronics on your credit card.

One of the nice benefits of credit cards is that they offer certain purchase protections and warranties. You can review the terms and conditions on your card to see what benefits you have. If you pay with cash, you’ll lose out on this benefit that is included with your card. Remember, you should follow this in line with the other appropriate usage tips above.

6. Always maximize your credit card rewards.

If you are responsibly using credit cards as I’ve outlined above, you may as well be getting some credit card rewards out of your spending. This can be in the form of cash back rewards, travel rewards, or both. As an example, the Chase Sapphire Preferred card allows you to earn Ultimate Rewards points. Those points can be used to buy gift cards, purchase travel, or transfer to select frequent flyer mileage programs.

What guidelines do you use to help regulate your credit card spending?

This is a guest post by Craig Ford. At Help Me Travel Cheap Craig teaches people how to find the best travel credit card sign up bonuses so they can get free travel.

A recent article on Yahoo Finance referenced 7 credit card traps to watch out for.  It was a good article outlining a few of the traps out there with credit cards.

Personally, I find credit cards to be extremely helpful as a business owner, and in our personal finances, but that comes only after a toilet-cleaning campaign wiped out $10,000 of credit card debt and after much-needed self control was applied to my use of credit.

Credit cards can be a slippery slope, and I can assure you that if you want to become a millionaire, you’ll have to get the plastic under control quickly!

These first seven credit card traps are the ones referenced in the Yahoo article by Tal Boldo, and the last three are my additional traps to avoid.

www.istockphoto.com/deepreal

1. Application and Balance Transfers

Tal says, “There are two credit card traps to avoid here. Be sure to include your balance transfer request with your application, and be sure to transfer funds from a credit card in your name, rather than a spouse, as the loan officer reviewing your application will see that your debt-to-income ratio will remain unchanged, which will increase your chance of being approved.”

2. Fixed Promotional Rates

Tal makes a great point to understand the promo rate.  Sometimes the card company can pull one over on you without you even knowing it.  She says, “To avoid this credit card trap ask the customer service representative helping you with the balance transfer whether the fixed rate applies “for the life of the loan.” Otherwise, find out when the rate will expire and what the new rate will be.”

3. Variable APR Rates

Variable rates are the bane of any credit-card-debt-carrying consumer!  A simple nudge upward in the rate can send your payments skyrocketing.

Tal says, “This credit card trap can be avoided by applying for a credit card with a fixed APR, or balance transferring to a fixed APR promotional rate.”

4. Transaction Fees

Fees, fees, fees. It seems like every company has enacted a fee for something.  Tal says, “Most credit card companies that offer attractive balance transfer offers also often charge a transaction fee of between 3% to 5% of the total amount transferred. This fee is added to your total debt at the moment of transfer.”

The sneaky part used to be that the card company wouldn’t apply any future payments to your high rate existing debt, but rather to the new low interest rate balance transfer. What that meant was essentially that you were racking up interest charges at a rapid pace.

5. Membership Fee and Cash Back Bonuses

Tal says, “Avoid credit cards that require membership fees unless other services like life insurance, travel insurance or higher cash back bonuses make the membership fee worthwhile.”

I refuse to pay a membership fee for any card.  I don’t care how great the rewards are, it just doesn’t seem worthwhile to me.

6. Hidden Information

Tal mentions, “A common credit card trap involves the confusing presentation of information.”  Just like with the sneaky balance transfer payment method, there can be hidden tricks these cards are using to get you to keep spinning your wheels with your debt.

7. Pay Off High Interest Debt First

Tal says, “Until the Credit Card Accountability Responsibility and Disclosure Act of 2009, credit card companies would apply your monthly payments to your lower interest rate loans first. Many consumers are not aware that this is no longer the case. You can now make use of balance transfer promotional rates even if your credit card has a high interest balance on it already. When you send your monthly payments in they will apply to the higher interest balance.”

8. Extended Credit Limit

Card companies have tightened up with the credit limits since the 2008 meltdown.  This is still something to watch out for – where the card company extends your credit limit because of your great payment history.  If you don’t have the self-control to handle such a move, you’ll find yourself thinking you’ve just gotten a raise!

9. Minimum Monthly Payment

This might be the trickiest trap of them all!  Card companies love when you only pay the minimum payment.  And that amount looks so attractive doesn’t it? I mean, who wouldn’t want to just pay $50 on a large debt amount!? But, if you continue paying the minimum, it will oftentimes take decades to pay off your debt!

This is what suckered me when I first used credit cards in college. I ended up paying the monthly payments thinking I would just pay it all off when I earned more money. Two IRA withdrawals later, which resulted in IRS penalties and the wiping out of my savings, I learned my lesson.

10. Free “Checks” Received in the Mail

I remember the first few times I received these in the mail thinking I had just won some promotion or contest! I nearly cashed a check until I read the fine print. That’s when I realized they essentially counted the check as a cash advance (which naturally has higher interest rates), which results in your charges adding up faster than a Paris Hilton shopping spree!

Credit cards are not for everyone. You need to have the self-control and ability to pay the debt.  But, if you’re able, credit cards can be a great tool.  Either way you slice it, watch out for these 10 traps!  Card companies are just waiting for you to trip up!

What other credit card traps would you include?

This was a post originally posted on Christian PF. You can view it here.

We all know there are tons of credit cards on the market which offer extra rewards for certain types of spending, such as gas and groceries.

However what you may not know is that a handful of rewards programs give you extra rewards for charity donations, too.

istockphoto.com/pcatalin

Here are the 3 most popular rewards programs that I am aware of:

1. U.S. Bank FlexPerks Travel Rewards Visa

As the name implies, this is a travel rewards program. It gives 1x points on regular spending, 2x on the category you spend the most (gas, groceries or airline travel), and 3x points on charity donations. Its annual fee is $49.

This has a tiered redemption structure when you cash out your rewards program. Let me demonstrate this by showing you the first two tiers:

20,000 FlexPoints = Up to $400 ticket value
30,000 FlexPoints = Up to $600 ticket value

As you can see, your rewards program has the potential to be worth up to 2 cents per point (which is amazing) but if you are stuck with a plane ticket that costs, say $405, the value you get per point drops dramatically.

Regardless though, this rewards program will still probably give you a reward value that’s significantly above 1.0 cent per point. That means the 3x points on charity donations will essentially be earning you at least 3% and possibly much higher (up to 6%).

2. Chase Freedom

Chase heavily promotes this credit card so there’s a good chance you already know quite a bit about it. The Chase Freedom rewards program gives 5% cash back in categories which change every quarter. After you exceed $1,500 in spending for the 5% categories during a given quarter, the payout drops to 1%.

During the 4th quarter of 2011, one of the 5% categories is charities. That means in theory, you could earn up to $75 on a $1,500 charity donation, assuming you didn’t spend any money in the other 5% categories that season (which are dining, movies, and department stores).

Because it only offers 5% on charity donations for one quarter out of the year and it imposes a rewards cap, I would say this is not the best choice for a rewards program for charity donations. The card from U.S. Bank would be a much better idea.

3. AAdvantage Mileage Program

Although it’s catered to those who have the AAdvantage credit card, you don’t actually need it to earn these rewards. To the best of my knowledge, you can use any credit/debit card! You will earn miles for every dollar donated to participating charities, when you use this link.

Right now, the USO, Susan G. Komen for the Cure and the National Foundation For Cancer Research are offer 10 miles/per dollar. This is quite good, considering the fact that each mile is usually worth more than 1 cent. The U.S. Fund For UNICEF is also listed but I do not see mention of how many miles are awarded for it. If you are passionate about these particular charities, then getting up to 10 miles per dollar is certainly a very generous incentive.

The Pros and Cons of Rewards Programs for Charity Donations

We’ve gone over the rewards programs, but now let’s review the possible drawbacks that may be involved by using these programs for your charity donations. Let’s look at the pros and cons…

The Cons

1. Processing fees
Without a doubt, the biggest drawback will be the cost incurred by the charity. If they have to pay 2.5% to process your cards, then that means only 97.5% of your donation is going to the charity.

2. Distortion of organization’s financial picture
Like many people, the most important thing to me when considering a charity is its efficiency. Which percentage goes towards the cause and which percentage goes towards administrative and fundraising?

My concern here is that depending on the accounting method used, it might make an organization look slightly less-efficient than it actually is (by increasing the fundraising costs). In turn, this could affect its ratings on CharityNavigator, GuideStar, etc.

With that said, if payments are handled 100% entirely by an intermediary company, then maybe it won’t affect the charity (because the charity would only count the money they get from the intermediary as the donation amount). Ultimately, this is something you will need to investigate if it concerns you, because I do not have the answer.

The Pros

1. Might be more efficient
For smaller charity donations made via check, the amount of time it takes for the charity to open the envelop and manually process the donation also costs them money. So for larger donations I would say check is always the way to go. But for small amounts, credit cards might be more efficient.

2. Rewards encourage giving
Some people say rewards programs encourage spending. Well, if that spending is on donations to good charities, that probably isn’t a bad thing. If the higher rewards plus the added convenience of a credit card means you will be more inclined for charity donations, then in my opinion that’s a positive thing.

This guest post was written by Mike, who is the founder of CreditCardForum. He has been writing credit card reviews for years, including a recent review of the Freedom card by Chase. On the topic of charities, his favorite is World Vision.

When trying to pay off debt, there are a lot of different obstacles that you must overcome. For some people, they are able to look past every roadblock, and focus on the finish line. For others, these things can cause them to get discouraged and give up, resigning themselves to a lifetime of debt!

4 Obstacles When Trying To Pay Off Debt

These things can add years to your financial goals, or even destroy them completely. Find out what they are so you can be better equipped when they show up!

It Takes Sacrifice

This is the most common and most practical reason why it is hard for the average American to pay off debt! We are so used to things being made easy for us – even our so-called struggles are nothing compared to other nations.

We are so used to being able to get what we want, when we want, because of credit! It takes a lot to overturn that mentality and begin to sacrifice. In order to get out of debt, you have to give up certain things. It may be certain expensive forms of entertainment, eating out, vacations, or even selling a few possessions (including your car and/or house)!

If you are not willing to make sacrifices, you could very well be headed for a lifetime of debt! I’ve actually had people tell me that it is impossible to get through life without accumulating, and living with, a lot of debt! But then when I took a look at their finances, I saw plenty of areas where they could save hundreds, and sometimes thousands, each month, if only they were willing to sacrifice.

What they were really saying is that it is impossible to for them to live without debt, because they will borrow to buy everything they desire, when they first desire it, and will never make a sacrifice!

It Could Take Years To Pay Off Debt

When many people look at how long they can pay off debt with their current income, they get discouraged. Not only will they have to make sacrifices, but they may have to do so for what seems like a long time!

It can be very difficult to stay motivated when you see everyone else around you buying what they want, and you have 3 years of sacrifice in front of you! It can become tempting to only pay the minimum balance on all your debt, and use the extra money to fund your indulgences.

The key here is to set up a sound plan, budget fun into your finances, and check your progress often. That is the only way that you will be able to stay on track with your goals!

No Emergency Fund

If you do not have an emergency fund, then you will not be able to deal with any unexpected expenses which may arise. Not having an adequate cushion in your finances will mean that you may need to rely on credit whenever something comes up!

I’ve been in that place before. I placed every extra penny into debt repayment, and didn’t have anything set aside for emergencies. Then I lost my job and was forced to put all of my basic expenses on credit cards. My lack of a “rainy day” fund added thousands of dollars to my total obligations, and made it extremely difficult to pay off debt!

You May Have To Change Your Lifestyle

We already talked about the need to make sacrifices when trying to pay off debt. However, that word can be vague, and can mean different things to different people. No matter how you choose to attack this problem, you will have to make strong changes in the way you live.

The most simplistic reason for getting into debt is spending more than you make. So, at the very least, you will have to make severe cuts in a few budget categories in order to see any real progress. You may have to forgo your cable/satellite television package, sell your car and buy a cheap one with cash, stop dining out completely, and other things that are seen as drastic – such as living with friends or relatives.

Another huge change that you may have to make, is to look for more income. This could mean getting a second full-time or part-time job (maybe even cleaning toilets to get out of debt), taking on a lot of overtime, or looking for a higher paying job altogether. This will mean a huge change in your lifestyle, and many people are not willing to do something that drastic to get out of debt!

No matter what you choose, it will mean a huge adjustment to the way that you’re used to living. This can be a major barrier to paying off your obligations, if you do not have the proper mindset.

photo by Renjith Krishnan

Reader Questions

1. What has been the biggest stumbling block to you paying off your debt?
2. How were you able to overcome it?
3. How often do you do something fun, or celebrate your victories when it comes to your finances?

The current economic environment is making it a great time to refinance an existing home loan. Interest rates are as low as they have been in a long time, and with good credit borrowers are qualifying for great deals. Refinancing makes a whole lot of sense for anyone stuck with a high interest loan or that needs to use some of the built up equity in their home. For anyone in the market to refinance their existing home loan, here are a few things that you should know.

Find out your home’s value

Refinancing lets you take cash out of the price appreciation built up in your home. Housing prices have dropped dramatically in recent years so you need to find out exactly what your home is worth. You can check online and see what homes have been selling for in your neighborhood. This will give you a ballpark figure of your home’s values.

Another option is to hire an appraiser and find out the true value of your house. This way you will know exactly what you are working with in the event of a refinance and how much cash you have available in your house. Your home needs to have a much higher value than what you owe to qualify for a loan.

Credit scores do count

Over the past decade, qualifying for home loans was incredibly easy. There were lots of loan products available that required little to no documentation. Just about anyone could get a home loan that was in the market for one. Today, things are a whole lot more difficult. Refinancing a loan requires that you have a good credit score.

You should run a check of your credit before financing and make sure that your credit score is satisfactory. The interest rate that you qualify for is based largely on your credit score. Improving your score will reduce your rate and save you money on the amount that you refinance over the life of your loan.

Prepare for closing costs

The good thing about refinancing is that you do not have to come up with money for a down payment. Down payments can account for as much as 20% of the home’s purchase price. Although you don’t have to pay a down payment, you may have to pay closing costs on a loan.

Loans with the lowest interest rates typically do have closing costs attached. You can always include the closing costs in the loan but you will have to pay a higher monthly payment or get a higher interest rate. Pay for your closing costs in cash and you will save a lot of money over the life of your loan.

Shop around for special offers

Buying a house is just like buying anything else. You will get the best deals if you shop around at multiple places. You can start at a credit union or bank and find out who is offering the best financing options for your needs. There are also online sites like LendingTree in which banks will actually compete against each other for your business.
Another option that is often overlooked by people is to contact a mortgage broker. A mortgage broker is kind of like a middleman who negotiates loans on behalf of loan borrowers. Mortgage brokers work exclusively on your behalf and often have access to additional forms of financing that may not be available at a single bank.

Convert a bad loan product to a good product

The best refinancing situations are when you can switch from a loan product with a much higher interest rate to one with a much lower one. It makes sense to convert adjustable rate mortgages with higher rates to much lower fixed rate mortgages. Refinancing can take an exotic mortgage product and switch it to a traditional one.

If you are unsure about whether or not to refinance, you just need to look at the interest rate. If your current interest rate is two percentage points higher then the current interest rates being offered then you need to look into refinancing.

Negotiate with your lender

Negotiating with your lender can reduce the total amount of money that you will have to pay during the process. There are a lot of areas in which lenders have flexibility to waive fees in the event of a mortgage refinance.

No cost refinancing loans can result in title fees and home appraisal fees being waived or reduced substantially. Taking a few minutes to bargain with your lender could wind up saving you hundreds of dollars.

Ask for a good faith estimate

A good faith estimate will give you a report of exactly how much your new loan will cost you. You will get a detailed explanation of all of the settlement costs that you will have to pay. You can use a good faith estimate to help you make the decision about which loan to take.

Unfortunately, not enough borrowers utilize this valuable document. The Washington Post ran a survey and found that most homeowners ignore their good faith estimates when buying a home. More homeowners should rely on a good faith estimate. It is the single best resource that a homeowner can rely on to help them figure out the total cost of the financing process.

The best borrowers when refinancing a loan are informed borrowers. You can properly equip yourself for the entire process by applying each of these tips. Be sure that you find a company that can provide helpful advice and has a variety of options that will fit your needs. By doing this will ensure that you procure a loan that fits you and your family’s finances perfectly.

Starting a business necessarily involves significant amounts of capital spending. The industry, and the product or service the business seeks to provide, may dictate purchasing equipment, factory or office space and hiring employees.

Entrepreneurs who want to start a business and work at building it full-time have little choice but to go into debt. The alternative is to issue shares of stock to investors in anticipation of future dividends. Since a new business is not likely to attract venture capitalists, financing the creation of a business through debt is the only option.

A new business has access to several potential sources of credit. The business owner can apply for a business loan from a bank, preferably one with whom the owner has a prior relationship. This is risky because the owner may be turned down and have to look elsewhere for credit.

Credit cards may be the answer to his dilemma. Charles Huang of Harmonix maxed out his credit cards to finance the business in 2007. The popular video game series, “Guitar Hero,” grew of his efforts. The founders of the search engine Google, Sergey Brin and Larry Page, also used their credit cards to fund the start-up in the mid 1990s.

[Side note from Jason: There are hundreds of examples of credit cards backfiring as well.  A business credit card can get you through times when cash flow is tight. As always, you must have a solid business plan to grow your sales and increase your revenue]

Personal Credit Cards

The quickest way to starting a business is to use personal credit cards. This route is a fast track to either success or failure, depending on the start-up idea and execution. The trade-off is to go into debt now in order to make enough money to pay it off later. The entrepreneur borrows from his future success in order to start the venture and get it going. The primary motivation for these businessmen is the chance to try something big and turn a hobby or a crazy idea into a profitable enterprise.

Using personal credit cards to do this is fraught with pitfalls. Creditors may get jittery when faced with rapidly increasing debt loads and suddenly lower credit limits. Alternatively, using so much available credit increases the credit utilization ratio, which can also trigger negative consequences. The ratio is a useful indicator of the risk of default. The higher the ratio, the higher the risk of default, at least in the minds of creditors.

Small Business Credit Cards

The differences between personal credit cards and business credit cards do not mean that entrepreneurs should treat them differently. For a start-up with no capital and no history, creditors view it as indistinguishable from the owner. The owner’s credit history becomes the business’s credit history. All the steps borrowers can take to clean up their credit report will help them get approved for a business credit card.

The risks are different with small business credit cards than with personal credit cards. The regulations and rules of the Credit CARD Act of 2009 do not apply to small business credit cards. Entrepreneurs have more flexibility for their funding needs at the cost of increased risks, like a sudden rise in interest rates or lower credit limits. The advantages of small business credit cards can help compensate for these risks. Some cashback credit cards are specifically tailored for business purchases and can offer as much as 3%.

But with anything, you must be sure to weigh the costs, and make an informed decision.

Anothony Benedict writes for CreditDonkey.com, a credit card comparison site.

If you have bad credit right now, you probably already know it’s no way to live. These days, bad credit doesn’t just influence your ability to get approved for credit cards and loans.  It also affects your insurance rate, whether you get approved for an apartment lease, and can even prevent you from getting a job. So if you have bad credit, fixing sooner rather than later is key.

1. Start by checking your credit.

You won’t know what’s causing your bad credit until you check your credit history. Your credit report is the document that holds your credit history and your credit score is the number that evaluates your credit history.

You can check your federally-mandated free credit report by visiting AnnualCreditReport.com, the only truly free source to get all three of your credit reports. Credit scores typically must be purchased through credit bureaus or myFICO.com, though you can sign up for the free trial and cancel within a few days to avoid the charge. Once you have these two items, you can tell just how bad your credit score is.

2. Dispute errors on your credit report.

Because mistakes can and do happen, you should review your credit report for accuracy. Any errors can be removed by letting the credit bureaus – Equifax, Experian, and TransUnion – know about the error. Dispute errors with the credit bureau that provided that report online or by writing to the credit bureaus.

3. Pay off past due accounts.

Any account that’s not current and paid as agreed, is affecting your credit score. Late payments have a big impact on your credit score. Getting caught up on your payments won’t remove them from your credit report, but it will keep them from hurting your credit score further. Late credit card payments and debt collections are two types of past due accounts you should take care of.

4. Get new credit.

You’ll have a hard time improving your credit score as long as the negative information on your credit report outweighs the positive information. You can add new positive accounts be opening new credit cards as you can afford them. If you have trouble getting approved for a credit card, consider a secured credit card which is a type of card that requires you to make a security deposit in the amount of your credit limit. In all other ways, the secured credit card is just like a regular credit card.

5. Pay your bills on time.

Timely debt payments are key to building a better credit score. Not only should you pay your credit cards and loans on time, you should pay all your bills on time. Any account that goes past due long enough can reported to a collection agency and added to your credit report. Collections hurt your credit score less as they get older so any new collections will hurt the progress you’ve made with your credit score.

The good news is that negative information can only stay on your credit report for seven years (or 10 years for bankruptcy). Additionally, negative information doesn’t have as much of an impact on your credit score as it gets older. Continue to pay your bills on time and correct any credit-damaging habits and your credit score will improve over time.

This has been a guest post by Ed O’Brien is a writer in personal finance, specializing in credit repair. You can find more of his articles located at CreditRepair.org.