Quick Money Tips to Increase Your Wealth in Time and Money

& Links

Small and steady steps lead to great success. Today, get some inspiration to make those small life changes to boost your overall well being and happiness. Implement these ideas in small bits for lasting success.

In reading Money Magazine’s, Get Happy in 2012, I was intrigued by the research based money tips to improve well being. The following suggestions are shamelessly borrowed from that article.

I found it incredible that in a survey of 28,000 Americans, from the University of Georgia, having an emergency fund is the greatest predictor of financial satisfaction. I wasn’t surprised that having a rainy day fund was important, I’ve been stressing that for eons. But, that is was the largest predictor of financial satisfaction, even greater than paying off credit cards or owning a home was a surprise.

For financial satisfaction, make saving for that emergency fund PRIORITY NUMBER ONE.

It’s not news that having credit card debt causes stress. But here’s an easier way to eliminate it according to State College, Pa. financial planner Jeff McClarren. Choose a monthly amount to pay off (make sure it is much bigger than the minimum payment) and focus only on that amount! Worry less about the total amount of the debt, which can be overwhelming and scary and keep paying that monthly amount and the debt will decline before you know it. Of course, do not charge anything else. Apparently, it’s overwhelming to look at the aggregate amount of debt. You can handle tackling that payment every month.

Frequent little splurges, yield greater happiness than infrequent big indulgences. The result, more happiness at less cost. So get that special bottle of nail polish, spring for a CD or DVD at the used media store, or indulge in a gourmet box of cookies. You’ll feel rewarded and satisfied, on a budget.

Next, check out what I’ve been reading. Lots of money and happiness articles .

BARB RECOMMENDS

Time Magazine reported about happiness and money in a study which found that you need to earn $75,000.00 per year to be happy. I don’t claim to know whether this is true or not, but if you need a benchmark to shoot for, here it is. Read about what others have to say on this money and happiness topic.

Arthur Brooks from The American Magazine also asks, Can Money Buy Happiness? The response is no, but success can! So here’s another take, become successful and increase happiness, of course I bet money will also follow.

Ben Edwards writes, 5 Reasons Money Can Buy Happiness for Wise Bread.

Can Money Buy Happiness? Yes it Can, according to Suba at Wealthinformatics. What are your thoughts?

Happiness and Money; How Much Money do You Really Need? asks KNS Financial? Are you one of those folk who reaches one financial level and then raises the bar? Well what do you think is the limit?

Money and Happiness; What Say You? at the Millionaire Nurse Blog. More thoughts on this age old question.

PT Money says You Need to be Happy to build wealth. I’m not so sure. What about you?

Krantcents asks, Will Money Make Me Happy? Certainly having no money will not make one happy.

Narrow Bridge want to know If Money will Make You Happy? There certainly is a lot of discussion on this topic.

Money Reasons has a new solution to happiness: Multitasking and Making My Family Happy.

5 Reasons Money Can Buy Happiness at the humorous Cracked.com.

Jeff Rose’s guest article on Smart Passive Income is a must read for anyone with a dream! He maps out how his persistence led to both blogging and personal business success.

Barbara Friedberg Across the Blogosphere

Take some time to visit these excellent sites which recently featured my work.

The Yakezi.com; Featured article, Patience and Persistence-The Path to Unlimited Success

FindtheBest; TD Ameritrade Research Tools

Len Penzo Black Coffee

Totally Money Blog Carnival at Mother Miser

Carnival of Personal Finance-Ask the Right Questions at Wealth Pilgrim

Tax Carnival #95 at Don’t Mess with Taxes

The Frugal Toad Weekly Round up-Playoff Edition

Carnival of Financial Planning at Credit Cards Canada

Do you think money can buy happiness?

image credit; Princ Arora

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It’s All About the Interest Rate

When shopping for a mortgage, it’s all about the interest rate. The interest rate, also called the annual percentage rate or APR, is essentially the cost you assume for paying back the mortgage over a period of time rather than all at once. Your credit score will heavily influence the mortgage rate you qualify for – lower credit score means, higher interest rate, and higher

BUY A HOME

monthly payment. When you realize how much money you can save over the mortgage life by improving your credit score, you’ll want to wait to purchase your home until you can qualify for a lower rate.

Best vs. Worst Interest Rate Examples

The difference between APRs with a good and bad credit score can be as much as 1.5%, possibly more depending on the lender. The difference is significant for monthly payments and total interest paid. For example, on a 30-year fixed rate $200,000 mortgage loan, a person with a 630 credit score qualify for a higher 5.19% interest rate. The monthly payment would be $1,097 and the borrower would pay a total of $194,915 in interest on the loan.

Now, consider a person with an excellent credit score of 770. This person would typically qualify for the lowest interest rate, which is around 3.6% these days. On a $200,000 mortgage, the monthly payment would be $909 and total interest paid over 30 years would be $127,385.

The bottom line, you’ll spend almost $100 more on your monthly mortgage payment if you have the lowest credit score. But the real shock is the $67,530 more you spend over the life of the mortgage. That’s enough money remodel the home, pay for a child or grandchild’s college, or put toward retirement.

The Difference Just 50 Points Makes

The first two examples are the extremes – the lowest and highest credit score/mortgage scenarios. If your credit score is at the lowest range, it might take several years to bring it all the way up to excellent. Raising your credit score just a little bit can still produce significant savings. For example, a borrower with a mediocre credit score, around 680, might get a 4% interest rate, pay $955 monthly, and spend a total of $143,739 in interest.

With just a 50-point increase in your credit score, you could shave $46 off your monthly mortgage payment and $51,176 off the total interest you pay over the life of the mortgage.

With higher mortgage amounts, the interest rate differences become more significant and saving money is more imperative. On a $250,000 mortgage, there’s a $234 difference in the monthly payment and a $84,413 different in the amount paid over the life of the mortgage.

The numbers in this scenarios were generated from my FICO.com’s Loan Savings Calculator. You can use the calculator yourself to see how much money you could save on a mortgage of a different amount.

Before shopping for a mortgage, check your credit score to see where you stand. If your credit score is in the low range, spend a few months repairing your credit and focusing on your credit score. The money savings will be well worth delaying your home purchase.

J.D. Roberts is a seasoned writer in personal finance, specializing in credit repair. You can find more of his articles at CreditRepair.org.

image credit; inspiration gallery

What steps have you taken to improve your credit score?

Which Credit Card is Right for You?

For a quick overview of Investing Strategies, pick up my FREE eBook; 20 Minute Guide to Investing (top right of the page). If you like what you’re reading, sign up for my RSS feed or email subscription and follow me on twitter so you get the word immediately.

You probably have, like most of us, more than one credit card. But did you know that there are many different types of cards? It’s possible that you might not be using the card that’s best for you!

You can compare rates and apply online for new cards these days at online comparison sites such as moneysupermarket.com.

Here are some of the main types of credit cards:

A balance transfer card has an extremely low rate of interest – often as low as 0% – on balances that you transfer onto the card from elsewhere. If you already have an amount of money on a credit card, it can often be worth transferring the amount onto a balance transfer card in order to reduce the amount of interest that you pay.

A purchase card keeps interest rates low for purchases you make on it. As with the balance transfer card, the rate can be as low as 0% for many months. A purchase card is ideal if you know that you will be making large purchases over the next few months and want to spread the payments over a longer period.

A reward card is one in which spending made on the card gives you points which can be traded in for rewards. Rewards can be anything from airline travel to free holidays or goods.

Reward cards are best for those who pay their balance off in full at the end of each month, as this will keep charges to a minimum. Many cards will not charge you interest at all if the credit is paid off in full, so this can be an excellent way of maximising the value of your spend.

Credit Scoring

Whether or not you’ll be given a credit card upon request – or if your credit limit will be increased – is determined by a system called Credit Scoring. It’s used to measure what sort of risk you’re considered to be and therefore how likely you are to pay back any money that is lent to you.

A large part of the Credit Score is due to how much credit you already have – so if you’ve already maxed out all your cards, you’re unlikely to be given another.

On the other hand, if you never use a card at all, they might not want to give you a card either!

Sometimes through no fault of your own, you may end up with a low credit score. The best way of rebuilding your credit score is to borrow and repay money.

Bad Credit? There’s Hope

Some credit cards are specifically designed for those with poor credit scores.

A secured credit card acts as a normal card, but the debt is secured against one of your assets. This could be a car or savings in the bank, for example.

You should take special care when using secured credit cards, though, as if for any reason you find yourself unable to repay the debt, you could find yourself losing whatever property it has been secured upon!

Secured credit cards also tend to have low credit limits – but if they are used carefully, they can prove to lenders that you are a good bet, which will improve your credit score.

Guest article

Which type of credit card do you prefer? Or, are you a cash only shopper?

image credit; catfishstu

& 3 REASONS TO BE WARY OF THEM

UPDATE; Over the next month my family is moving across the country to a new home. Please enjoy a variety of guest articles from top notch bloggers and sponsors. Also, catch up with earlier favorites from Barbara Friedberg Personal Finance.  

For a quick overview of Investing Strategies, pick up my FREE eBook; 20 Minute Guide to Investing (top right of the page). If you like what you’re reading, sign up for my RSS feed or email subscription and follow me on twitter so you get the word immediately.

No Debt MBA writes at NoDebtMBA.com about personal finance and education.  No Debt MBA has been accepted to a top 5 business school and is trying to graduate without taking out any student loans.

These days it seems that no college education is complete without a mountain of student loan debt.  College costs are rising faster than inflation and in a recession families have fewer resources to put towards the back breaking price of tuition, room, board, fees, and books.  Student loans are pitched as necessary, normal and a great investment.  But only one of those things are true – student loans are unfortunately a normal part of our college and university landscapes.  But here are three reasons you, your family or your student shouldn’t be “normal”:

1. Once you take them out you’re stuck with them.  Unlike most debts you can take out like a mortgage, car loan, or credit cards student loans are extremely difficult to get rid of during bankruptcy proceedings.  There’s also nothing associated with your student loan to foreclose on or repo. This often goes for cosigners too.
2. They’re hardly “cheap money”.  With origination fees of 1%, 4% or more of your disbursements and interest rates at 6% or above, most student loans hardly qualify as inexpensive in the current economy.  Their interest rates (and interest typically accumulates as soon as the money is distributed) are higher than those for mortgages right now.
3. They can encourage you to lose track of costs.  When the money going out for another semester’s bill doesn’t come directly from your pocket it can become easy to end up with a higher than intended student loan balance.  Experts recommend not taking out more loans than you can reasonably expect to pay for with your first year’s salary. But with tuition hitting $50,000 or more per year at some private colleges and graduates expecting less than that in salary it can be easy to blow recommendations out of the water.

So great, we’d all like to avoid student loans, but college is expensive, how can we do it? 

 Here are five ways to reduce your usage of (or maybe even avoid entirely!) student loans for college:

1. Pick a cheap school.  Not the most fun suggestion, I know, but your selection of college or university is the single biggest factor in the cost of your education and it is under your control.  Think about state schools, scholarship offers, financial aid packages and more. (Barb’s comment; I attended 3 state schools and received an excellent education at each one)
2. Negotiate.  Did you know that you could do this?  My SO got a full tuition scholarship from one college and got another to match it.  The second college hadn’t offered any aid or scholarships to start with.  If you’re a high performing student or have significant financial need you can ask, very politely, if the school of your dreams can match a better offer you have on the table.  
3. Appy, apply, apply.  Not to schools, that gets expensive and excessive, but for scholarships, internships, financial aid and other opportunities like being a resident assistant (RA) to help defray your
   costs.  Getting scholarships can be even harder than getting into your top college so keep practicing.
4. Get cheap textbooks.  Plan your course schedule ahead of time if possible so when students want to unload their books at the end of the semester you can snatch up books for your next semester’s
   classes.  You can also look online for used books and there are several useful aggregators that will comparison shop for you. These saved me hundreds of dollars with just one search. (Barb’s comment; Amazon.com has great affordable textbook options)
5. K.I.S.S. – Keep it short smartie!  An extra year in school means 25% more in costs and even more in student loans.  Many scholarships will only cover your first four years.  So go in and get out!  Stay focused so college isn’t extended by failed courses, irrelevant minors, or leaves of absence.   Even better, if you can get AP credits to transfer in, take courses online or during breaks you might be able to graduate in three years for much less than the full four years.

 In theory, there is no reason a student or their family has to take out student loans to pay for a college education and there are many reasons why they should try to avoid it. There is no substitute for planning ahead and saving, but there are many strategies you can take advantage of to keep the total tab low and prevent student loans from becoming an enormous burden.

What are your suggestions for saving money while receiving a higher education?

image credit; Bill McCallen

UPDATE; Over the next month my family is moving across the country to a new home. Please enjoy a variety of guest articles from top notch bloggers and sponsors. Also, catch up with earlier favorites from Barbara Friedberg Personal Finance.

Guest article; NerdWallet.com is an online resource that gives people information to make the best decision amongst available credit card rewards, and was founded by its current Chief Executive Officer, Tim Chen.  Tim goes further to educate folks about credit and debt management by writing for major publications including the Huffington Post, US News, and the Forbes Moneybuilder Blog.

Should You Insure Your Credit Card Payments?

It’s possible for Payment Protection insurance to seem like a good idea when you’re being sold by a pro. With some variation, depending on the issuer, this service costs around one percent of your monthly balance, along with keeping up on minimum payments. Your benefit is that if you are not capable of making your payments due to losing your job or becoming seriously ill, you can have that obligation deferred for up to two years.

That’s a pretty good deal on the surface. One percent isn’t much, and if you sacrifice that, you don’t have to be concerned with being charged extra for being tardy.

Be Skeptical About What You’re Getting…

There are some snags to watch out for when considering whether to purchase this service. Firstly, think about what it is you’re purchasing insurance on: unsecured debt. Unlike secured debt, which is anchored by some form of collateral like a home or automobile, unsecured debt is only based on your continuing to be capable of paying off your balance.

In a case where a debtor goes bankrupt, the creditors who have secured collateral are the first priority for restitution of outstanding debt. Only after the balances owed to these creditors have been resolved are the creditors without collateral able to be paid…assuming there are still assets that can be paid to them.

Because of the fact that they deal in unsecured debt, firms issuing credit cards actually tend to be fairly lenient with their customers. A long history of reliable payment can easily get you forgiveness for a few months in case you end up out of a job or in the hospital.

The reason for this is because they ultimately want to get paid back. So, if getting a few installments late means avoiding taking your entire debt as a loss in the end, then credit card companies tend to see it as worth their trouble.

…And What You’re Paying For It

Insuring your ability to pay your monthly minimum is also costlier than it often seems. However, charging 1% monthly comes out to 12% annually if the amount you owe remains the same. Except for those who carry a low interest credit card, your annual interest is probably around 15%, so tacking on this insurance would bring your total within the range of 28%.

The difficulty is easier to see when discussed in regular dollars. If you have a $1,000 balance on your card, the average issuer might oblige you to pay 2% of that amount monthly—in other words, a minimum payment of $20 per month. If you get your payment ability insured, it’ll tack on $10 per month, bringing the total you pay to $30 monthly. So, let half a decade pass and you will have parted with $600 for this service. While this amount could be smaller if you shrink your balance, a larger balance will make this insurance even more expensive.

The drawbacks are compounded when you realize that our theoretical $600 does nothing to pay down the $1,000 balance. And that sum only benefits you in case of a major problem. Plus, if you do invoke the coverage, the monthly payments on which a grace period is given will still include added charges for the very same insurance that allows them to remain unpaid, for a period, without consequence. Not to mention the fact that since those waived bills are just added to the balance of what you owe, that coverage instantly becomes more expensive.

Given this information, it’s clearly beneficial to be skeptical about how much insuring your ability is worth and the value of the coverage they’re offering.

Wouldn’t you get more out of your dollar if you deposited $600 into an emergency savings account?

In that case, you could use that money for anything you deem necessary and won’t need to worry about the card issuer’s assessment of the situation blocking the availability of those funds.

Or, short of that, just use the amount you’d otherwise use to pay down one percent of what you owe every month. If you don’t have a balance, then you don’t have to think about insuring your ability to pay it.

For a quick overview of Investing Strategies, pick up my FREE eBook; 20 Minute Guide to Investing (top right of the page). If you like what you’re reading, sign up for my RSS feed or email subscription and follow me on twitter so you get the word immediately.

Have you considered credit card insurance? Do you think it is a good investment?

image credit; insurancekatytx

UPDATE; Over the next month my family is moving across the country to a new home. Please enjoy a variety of guest articles from top notch bloggers and sponsors. Also, catch up with earlier favorites from Barbara Friedberg Personal Finance.  

For a quick overview of Investing Strategies, pick up my FREE eBook; 20 Minute Guide to Investing (top right of the page). If you like what you’re reading, sign up for my RSS feed or email subscription and follow me on twitter so you get the word immediately.

Aren’t Credit and Debit Cards the Same? 

Credit and debit cards seem, on the surface at least, much like each other. In fact there are several important differences worth exploring that might save you money.

 The credit card system is based on the credit worthiness of the user where the card issuer provides a revolving line of credit to the user. This means that the user is effectively spending the issuer’s money.

 The card issuer is the bank or institution to which a user will apply for a card. You can read more here to find out about the issuers and their terms and conditions.

 The debit card system is based on the account holder’s personal account details. While there are some subtle differences, a debit card is best understood as a form of advanced ATM card.

 Again, the debit card may be operated by Visa, Mastercard or one of the local equivalents. The important distinction is that with the debit card, you are spending your own money.

 This means that with a debit card, you only spend what is in your account and, unless previously agreed with your bank, you are limited to your available funds.

What Happens When You Spend More Than is in Your Account? 

In reality this is not always the case with a debit card, and in fact you may be able to spend more than your bank balance, but you will be charged for this facility.

In the US you have to ‘opt in’ if you want this facility, but most issuers will stop any transactions that are over and above your balance.

What Happens When You Go Over Your Credit Limit? 

 With a credit card, you have an agreed limit that you cannot exceed. If you pay off your balance within the “grace period” you will not have to pay any interest. However, in some cases, if your balance is $1.00 short of full payment you may be charged interest on the full amount that you spent for the preceding period since the balance was zero. 

The methods of calculating interest are complex and differ between institutions. It is always a good idea to get a firm handle on the fine print before signing.

 Should one be a victim of fraud, that is, you lose your card or it is stolen and somebody tries to use it, then you are better covered with a credit card than a debit card.

 In the US, the customer is liable up to $50 if the card is reported lost or stolen within two days (48 hours) of the theft or loss. In some cases, the issuer will swallow this cost to maintain customer loyalty.

 However, between 2 days and 60 days after the loss/theft is noticed, the credit card issuer is still liable for all funds over and above $50 but in the case of the debit card, the customer is now liable for funds spent up to $500. (Barb’s comment, when my credit card was compromised, the company waived my $50.00 liability)

 There is relatively good consumer protection on both debit and credit cards and until recently, both Visa and Mastercard prohibited minimum/maximum spends on cards controlled by merchants.

 There are advantages and disadvantages to both card systems and your choice will depend on your personal spending habits. (Barb’s comment; I use a combination of both debit and credit, as well as some cash)

 Guest post by Money Supermarket, from across the pond, with international applicability. 

 image credit; hmt08

UPDATE; Over the next month my family is moving across the country to a new home. Please enjoy a variety of guest articles from top notch bloggers and sponsors. Also, catch up with earlier favorites from Barbara Friedberg Personal Finance.  

For a quick overview of Investing Strategies, pick up my FREE eBook; 20 Minute Guide to Investing (top right of the page). If you like what you’re reading, sign up for my RSS feed or email subscription and follow me on twitter so you get the word immediately.

Having a credit card can be the best thing for your financial situation or a recipe for disaster. It is definitely an important financial decision, and if you don’t approach it with some kind of respect, using a credit card can bite you in the worst way. In today’s economy, you have to be very careful how you handle your credit cards, because although it might be easy to get one, it’s equally easy to end up in financial disaster.

Watch Out For the 5 Biggest Mistakes You Can Make With a Credit Card

1.            Take the first offer you receive. Shopping around for the right credit card for you is imperative. You want to choose one with the best rate, terms and perks that fit with your lifestyle. Don’t opt for the first one in your mailbox or email – shop around and compare before you fill out that credit card application. Shop around and compare credit cards from as many financial institutions as possible.

2.            Don’t read the fine print. If you don’t read the fine print, you’re going to get burned and that’s the bottom line. The credit card companies are not your friends. The only thing they care about is getting as much money out of you as possible. To this end, they will hide nasty little surprises  in their agreements. It’s complicated and difficult to read, but do it anyway.

3.            Missing payments or just making the minimum. Missing a payment will jack your interest rate right into the stratosphere. Making the minimum payment will, on the average, take you approximately 35 years to pay off your credit card, depending on your balance. Neither option does you any favors and will cost you a lot of money in the long run. One way to potentially get around massive credit card charges is to apply for multiple cards and use a 0% balance transfer credit card to shift the balance from one credit card to another.

4.            Exceeding your credit limit. This can also raise your interest rate and cost you expensive penalties. The credit card companies don’t mind extending you more credit as they cackle all the way to their bank account with your money in their pocket. Also, the closer you get to your maximum limit or exceeding it the worse it is for your credit rating. Keep track of your balance and where you stand.

5.            Purchasing things you don’t need. Oh, the temptation of that little plastic square. Hard to resist, isn’t it? However, the credit card companies are counting on that fact. By not paying your balance off at the end of every billing cycle, you’re putting money in their pocket. They like that. When you review your credit card statement, you will probably be amazed at the purchases you’ve made of things you didn’t plan for and probably don’t need. Impulse purchases just add to your balance and may put you over what you can comfortably handle every month.

Credit cards can be a great asset, but only if you handle them with forethought and responsibility. Take a look at your spending habits and how your credit cards impact your financial life and avoid the 5 biggest mistakes to optimize their benefits and minimize potential problems.

 What are your biggest problems with credit cards?

Sponsored article

image credit; ponyinarope 

“That’s why you’re so perky”   Money Crashers replied after I admitted my passion for playing Wii tennis with El Carino. I appreciated that acknowledgement as I am committed to being a “glass half full” woman!*

Every investing scenario has it’s pros and cons. During the late 1970′s and early 1980′s inflation was rampant causing interest rates to rise into double digits. The economy was pessimistic as home mortgage rates topped 10% and prices skyrocketed. But, everyone wasn’t glum, savers were thrilled!

Imagine this, your money market account paid 7 to 8% interest. CD’s yielded even higher returns. And if you were smart enough to purchase long term government bonds, you locked in 12% returns for 30 years! In fact, my dad bought some 30 year tax free municipal bonds yielding 10%. Tax free means the interest is not subject to federal taxes! He received the 10% bond interest until 2010 when the bonds matured and his principal payment was returned.

BE POSITIVE

Trying to get a positive return on cash investments like certificates of deposit, money market accounts, and bank savings accounts today is difficult, if not impossible. Sure you can look for yield in speculative global bonds or low rated junk bonds. But I assure you, if you invest in higher return assets you expose your money to high risk (translation; big chance of losing money).

So where is the positive?

Mortgage rates are lower than they’ve been in several generations. Compound that with the fall of home prices over the past several years and you have the PERFECT TIME TO INVEST IN REAL ESTATE! Mortgage rates have nowhere to go but up. Home prices may not be at the absolute trough, but they are certainly lower than they’ve been in the past several years. I can attest to this personally as we just lowered our home listing price to the sale price of our next door neighbor’s identical home.

Although, I’m not generally a fan of non mortgage debt, if you need to borrow for an appreciating asset such as a business or value creating  home improvement, now is the time.

It is unlikely that you will see interest rates this low again in your lifetime.

THE TAKEWAY

As I stated at the start of this article, investing scenarios have their positives and negatives. As a finance professor and consumer of economic research, I can attest to the fact that economies are cyclical.

Look to capitalize on the opportunities in each economic cycle.

ACTION STEPS:

 Get a notebook and label it: “(your name) Personal Finance” and keep it by the computer. Use it to keep all of your personal finance goals, thoughts, activities, and plans.

• If a home purchase in in your plans and you have a secure income stream, investigate FHA mortgages. They offer low down payment mortgage opportunities.
• Consider investing in rental real estate alone or with a partner if you have access to a down payment.

*Conversation took place during a Wise Bread twitter chat (Thursday’s at noon pacific time), moderated by Ashley Jacobs.

image credit; Douglas County History Research

What are your thoughts and recommendations for investing in this economy?

Enjoy this guest article written by John Williams, A car finance writer for Creditplus.co.uk. John is an avid car enthusiast and he enjoys watching global economy trends and making bold predictions.

A credit rating is a three-digit number that is used to predict a person’s ability to pay back any finance or debt that they incur. The exact details of how these ratings or scores are determined are closely guarded by the credit experts. It is, however, quite easy to unravel certain aspects that will affect your score.

A person’s credit rating will usually be between 0 and 850. The number will often fluctuate according to your financial circumstances and whether you do or do not repay debt in time. It will also depend on your employment circumstances, whether you own your home and many other factors. The numbers will often differ from agency to agency but the core remains the same. In recent times, as a result of the global financial crisis, it can be more difficult for people with low credit scores to obtain a loan. When, for example, trying to get car credit, people with a lower credit score will be charged a higher interest rate.

Attaining and Maintaining

If you have reached a positive credit rating it is vital to maintain this rating. This is an important aspect of keeping your finances in order. Many people struggle with the upkeep of this rating. This is often because people find it difficult sticking to a set budget, or worse still, do not set themselves a budget at all. If you have a bad credit rating, or you have let a positive one slip, there are measures that can be taken to improve your status.

Avoid spending more money than you are able to pay off each month. You may see an item on sale, think it’s a bargain, and put it on your credit card. The problem is if you do not do not pay the full balance when the statement arrives – the purchase can suddenly become much more expensive than you expected due to interest charges.

Budgeting is the Key

When trying to maintain a good credit score, it is important to create a short and long term budget and then, most importantly, stick to the planned budget. You should work out your monthly income and fixed monthly expenditure. By doing this you can calculate what you can afford to spend on other items. By getting a short term budget in place you are better able to plan other long term, bigger expenses such as holidays, a car or home purchase.

A good credit rating can be damaged quickly by overspending and not paying back borrowed money on time. Credit cards offer an easy option to spend money you don’t actually have. They also make it easy to lose track of what you are spending which means credit limits can be reached and people may struggle to pay back this money.

Using credit cards sensibly and paying off the balance of the card each month will actually help your credit score as you will prove you can regularly pay back borrowed money. If, however, you know you will struggle to keep control of your spending or want to live a truly debt-free life, it is best to use cash and not run the risk of owing more money than you can afford to pay back.

Pay Bills on Time

The most important thing you can do to maintain a high credit rating is to pay your bills on time. Late payments can have a very detrimental effect on your credit score and are seen by the agencies as a sign of poor money management. You should always try to pay off your overall debt as quickly as possible as only paying the minimum payment on a credit account can be a sign of someone struggling with debt.

Another good practice is to make sure that utility companies, government agencies and the voter registry get updated on your address if you happen to move. Failing to do so may appear as if you’re trying to hide your location and suggest that you’ll be hard to track down should something go wrong with your finances.

A good credit rating is something that you should aim to keep. By being aware of your spending habits and creating a budget, you should be able to manage your credit rating and improve it where needed. A good score can make things much easier and can be a positive aspect for your finances, especially if you come to big purchases like a car or even a mortgage for a house. Having a good credit rating will save you money as you are a lower risk to lenders and therefore will obtain better rates.

Barb’s comment; We received a copy of our credit score yesterday. In our quest to purchase a new home, the lender ran a credit report which included our credit score. Even though our report and score were fine, it is quite confronting to see how “picky” these lenders are. Among other things they want to know the length of your credit history and percent of available credit used. Apparently, even though we pay off our credit cards in full every month, we charged too much on one card. And they had our credit limit WRONG. Why do they care how much we charged if we have the resources to pay it off?

Barb’s question; What are your experiences with the dreaded credit score? Ever been penalized for poor credit?

image credit; Rich_lem

 

WANT A CREDIT CARD?

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Ever been turned down for credit because you don’t have any credit history? Sounds bizarre doesn’t it? That’s because it’s a paradox.

 A paradox is a statement which appears to contradict itself, but actually expresses a possible truth. In personal finance, some people find themselves in what I believe to be a credit paradox whereby they cannot get credit because of their credit history, or lack thereof.

 If you’ve been affected by this paradox, you should know that it can be beaten. Here’s a look at how it works, and how you can overcome it.

 First, a head-scratcher

 First off, here’s a fun paradox to get you thinking. The statement: “I always lie” is paradoxical.

 Why?

 Well, if the statement is true and I do, in fact, always lie, then the statement itself must be a lie and since it is a lie we cannot accept its premise.

 I know; it’s a head-scratcher! It demonstrates perfectly the kind of circular argument created from by any paradox. Story-tellers, particularly those in science-fiction like to use paradoxes as plot points to create intrigue.

So what is this credit paradox? Some people are denied credit, whether it is a credit card or a bank loan because they do not have a credit history.

It may be that they have just never borrowed any money before, but lenders like to see your history of debt repayment before they grant your credit application. It gives them a kind of reference of how likely you are to pay back the money you want to borrow from them.

But how are you supposed to start recording a history of repayments if nobody will give you credit? It seems like a paradox doesn’t it?

You can’t get credit without a history of credit repayments, which of course you can’t show because you’ve never been given credit!

Give me an example

Let’s say you want to apply for a credit card to pay for a vacation because it has a low rate on purchases, balance transfers and some nice perks – but you are refused because you don’t have a tangible credit history. What do you do?

Here are some things you can do to start building your credit profile.

1. Firstly, things you are probably already doing, like holding down a full-time job are helpful. This shows lenders you have a regular income which will potentially help to pay back the debt.
2. You should also get yourself a bank account, if you don’t already. Showing your capacity to manage a bank account will go some way to proving your responsibility to potential lenders.
3.  If the bank where you have your checking account has a credit card, you might want to consider applying for that because the bank will already have a lot of information about your banking history and will be able to make a better judgment on your eligibility.
4.  Beyond these simple things, you might also consider things like store cards, which are generally easy to get accepted for and count towards your credit score BE WARNED however, that these types of cards often have very high rates of interest, and you wouldn’t want to get yourself into bad credit through using one.
5.  Barb’s comment; Consider a secured card to get started as well. That type of card requires you to have an amount of money in an account equal to the credit limit on the card.

Barb’s remarks:

Good credit is important. But make sure not to charge more than you can pay off in a month. You certainly don’t want to accrue lots of fees and interest charges, because those will “paradoxically” hurt your credit.

 What have been your experiences trying to get that first credit card?

image credit; debtcovered