The Simplicity of Your Credit Score

If you are looking to make any significant purchase that may require financing in the near or even not so near future knowing and correcting any credit score issues can save you a great deal of time and money. The lower your credit score the more difficult it is to find financing and the higher your interest rate will be even if financing is available.

When evaluating your credit score you just want to look at the following items, negative information, positive reporting, and length of time. Just about all information on your credit report falls into one of these areas. If you want to improve your credit score you just need to minimize the negative and keep the positive, length of time is the most difficult to control because time can only be what it is.

First thing to do is to pull a free copy of your credit report this can be done once a year from all three credit agencies at www.annualcreditreport.com, you will have to pay a small fee to see your score but the report itself is free. Review all the negative information and see if there is any incorrect information. If any information is incorrect follow the site listed guidelines to dispute it. If you see negative information that is correct but you want to try to clear up then contact the creditor directly and see if you can pay any late or past due payments on the contingency that they remove the negative reporting or show it paid in full.

If you need more positive loan history consider taking out a secured loan from a bank and making payments on it for one year. This is usually accomplished by perhaps opening a certificate of deposit at the bank for a certain dollar amount and then taking out a loan against that amount. This will help you to show timely payment history and will bring up your credit score.

Monitoring and correcting credit issues will make a significant difference in the financing terms you are able to secure when you are ready to borrow money.

 

How to Use Your Credit Card the Right Way

Credit cards can be great things when it comes to making big purchases, budgeting your expenses relative to your income and assets, or even just making those every day purchases from gasoline to groceries.

Having a credit card can help you build much needed credit as you get older, as well as give you the option to pay later on what you purchase today. However, there are some important things to know about credit cards and when and how to use them.

Know What You Can Afford

Credit cards are a benefit to your financial planning, but only if you use them to buy what you can afford. If you purchase large goods on credit that you are unable to pay back later, you not only hurt yourself in the long run with having your products repossessed, you also hurt your credit score.

Make it a point to be sure that you can afford what you’re buying, regardless of when you have to pay it back, when you purchase goods using your credit card.

Understand The Interest Rates

Credit cards come with interest rates, so it is critical that you understand how they work and where you can benefit from them before signing on that dotted line. There is nothing worse that getting a credit card, only to find out that the interest rate is something you are unable to pay back in time!

Find out what you’ll be expected to do before you have to make a payment, and learn what the interest rates are – and how they will affect you – before you sign up for that credit card that seems to be too good to be true.

When In Doubt, Don’t Take It Out

In doubt about a purchase, or thinking that you might be cutting it close with that next big credit card purchase? Resist! When in doubt, leave the credit card in your wallet; either pay in cash that you know you have, or resist the purchase altogether and save the money instead.

There’s nothing worse than overextending yourself on credit, only to find that you are unable to pay back what you owe. So, make it a point to err on the side of caution and avoid overpaying all those credit card fees by leaving it in your wallet.

Credit cards, when used properly, are a financial asset and can help build your credit. But one wrong move with the card can land you in significant trouble. Avoid these issues by being smart when you buy on credit, and watch your financial future glow instead of sink!

How to Manage Money in College

College is a fun time, as well as a time of opportunity. From learning, to living, to relationships, it provides the opportunity for young people to grow up and learn how to become functioning, healthy adults.

In addition to all those benefits of college, the school years can also teach a young adult how to save, manage and track their money and purchases while on campus. And for many people, it can be the first time that a budget and the realities of managing and saving money come into play. Here are a few money management tips.

Make A BudgetAnd Stick To It!

This is critical no matter what you do, or where you live as a college student. Regardless of the amount of money you may have, it’s important to understand what you are able to pay for, and what you need to be saving.

Make a budget that you can live with reasonably – food, clothing, entertainment, and beer – and pledge to stick to it! No unnecessary purchases allowed, though you can build in some fun money to your budget so you’re not all business.

Hit Free Events For Food

One of the best parts of college is the free food. Pizza is everywhere! Hit up free on campus events for food instead of constantly buying food wherever you are, and save some money. In the process, you get to hang out with great people, and meet new friends.

Plus, when you join a few great organizations that offer all this free food at events, you can really help boost your resume and maybe even help make the difference in whether or not you get a job in the future!

Work In Your Free Time

If you’re able to do it, take on a part time job now. Whether it’s on campus, or off campus at a restaurant or company, it’s never too soon to start working and saving money as you go through college.

Take on a job that you can handle and make a little money now, so that when you graduate, you not only have some money to be flexible with, but you’ve also got valuable work experience that you can use right away.

Saving and managing money in college can be a true reality check. Whether it’s making sure that you aren’t overpaying on products and services or making sure that you’ll have enough in the bank when you graduate, it’s critical that you learn to manage money properly if only for the reason that it will build a great habit for your future as a responsible adult.

Reduce Debt Yourself

Some consumers believe that in order to reduce their debt, they must go to a professional. The truth is, anyone can pay off their debts with hard work and dedication. You have to commit to getting rid of your debt and make every effort to do so. It may take several years—depending on the size of your debt—but it will definitely be worth it.

You can do it yourself, without anyone’s help. First step is to find how much you have. Add up all loan and credit card balances that you owe. Calculate the monthly payments you make on them. Now, to pay off your debt, you must pay more than the minimum payment due. Credit card companies calculate the minimum payment based on the outstanding balance. It is usually little more than the finance charge. For example, the minimum payment on a credit card is $30. About $20 to $25 cover the finance charge. The rest is applied towards the principal balance. How long will it take to pay down $1,000 when you pay only $5 to $10 towards the balance each month? It will be at least five years. Can you afford to pay $60 or $100? Pay as much as you can to pay it off sooner.

Use an online debt reduction planner (such as CNN Money Debt Reduction Planner at http://cgi.money.cnn.com/tools/debtplanner/debtplanner.jsp) to calculate how long it will take to pay your debt off based on the balance, interest rate and payment amount. You can set a debt-free deadline and work towards it.

When you make a decision to pay off your debts, remember to control your spending. Put away or cut your credit cards. Use cash when making purchases. Before buying something, think whether it is a necessity or a luxury. Save money aside for luxuries and only purchase them when you have the full amount.

Beware of the “quick fix” advertisements. They claim to be able to settle debts at 60 to 70 percent less than what you owe. However, many of these companies scam consumers out of money by charging high fees and failing to deliver what they promise. They prey on those who want a quick way out of debt. Only a little over 1 percent of debtors complete these programs. Others drop out when they realize that they are being scammed.

Is Debt Cancellation a Good Option?

Consumers, who are knee-deep in credit obligations, are turning to debt settlement companies to reduce the amounts they owe. Many creditors are willing to forgive as much as 60 to 70 percent of what debtors owe in order to receive at least part of the money back, because many consumers file bankruptcy when unable to pay their debts. While it may sound like a great deal, debt cancellation has certain tax ramifications for the consumers who choose to take this step.

When a creditor cancels more than $600 in debt, he is required to report it to the IRS and mail the Form 1099-C to the debtor for the year in which the debt was forgiven. Even though consumers never see this money, the IRS considers this the debtor’s income and charges tax on it. Debtors must file this form with their tax returns and pay any applicable tax on it. The IRS keeps a close eye on these forms and will come after those who fail to file the 1099-C forms and pay the tax. While a few hundred dollars may not significantly increase the tax amount due, several thousand dollars definitely will. When considering debt cancellation, a consumer should contact a tax advisor to find out how it will affect his taxes.

Debt cancellation may have other financial ramifications. Creditors may cancel a consumer’s debt and sell it to a collector. As a result, the consumer will have to pay the tax while still owing the debt. As of right now, there are no laws that prohibit creditors from doing so. Consumers may need to contact an attorney to resolve this situation.

Besides the tax consequences, debt cancellation is reported to the credit bureaus and will affect the debtor’s credit for up to seven years. The creditor reports it because the balance is not paid as agreed. In addition to the negative record, the settled accounts, including credit cards, will be closed. This will affect the credit score, because the amount of the available credit will be significantly reduced.

Most consumers are not aware of the debt forgiveness ramifications. Banks generally do not disclose the possible tax consequences when they cancel debts. Debtors need to know that accepting a debt settlement may have a negative affect on their credit and finances.

Myths About Debt Settlement

Debt settlement is also known as debt arbitration or credit reduction. A debtor and a creditor negotiate and agree on an amount which will be less than the balance due but will be considered as payment in full. Debt settlement companies advertise that they dramatically reduce the amount you. Many consumers don’t really know how these companies operate and what exactly they do. Here are the top few myths about settlement companies.

 

Debt settlement will not hurt your credit.

The truth is, it will hurt your credit. It may ruin your credit for many years. Creditors do not negotiate debt settlement with borrowers who are current on their payments. Debt settlement companies collect your payments and put them in an escrow account to make your accounts severely delinquent. It may take six to nine months for creditors to agree to negotiate a settlement. At the same time, your credit score plummets to the all-time low, the balances are sky-rocketing due to late fees and high interest charges. The creditor may also sue you and garnish your wages. If you go through the process to the end, late payments, credit settlement, and wage garnishment will be reported in your credit file for up to seven years.

 

You don’t have to do anything once the debt settlement company takes over.

Actually, this isn’t true at all. The creditor has an agreement with the borrower, not the settlement company. They may even have a policy not to work with settlement companies. This means that they will not negotiate with their representative. If you fail to take their calls and respond to the letters as the representative advises you, the creditor will sue you and start collecting debt through garnishment. Another common practice for debt settlement companies is to mail a seize-and-desist letter to creditors. This letter orders the creditors and collectors to stop calling the debtor. This action usually angers the creditors and prompts them to take legal action against him.

 

Once the debt is settled, you don’t have to worry about it.

Unless you receive an official letter from the creditor stating the settlement amount, the payment received, and that your debt is paid in full, don’t assume that it has been settled. Creditors may agree to cancel your debt and then sell it to a collection company that will attempt to get the money from you. When a representative tells you that your debt is settled, ask for a letter from the creditor stating that. Even those of you learning how to survive on minimum wage need to worry. Debt collection is an unscrupulous practice and they don’t care how little money you make.

Getting a Co-Signer on a Loan

If you have bad credit, no credit or insufficient income, you may not qualify for a loan on your own. A lender will ask you to get a co-signer who meets the requirements. You can ask your spouse, a friend or a relative, as long as he or she has the necessary qualifications and is willing to co-sign a loan.

 

When considering a co-signer, choose a person with a good credit score and no recent negative information in the credit file. The lender has to see that the co-signer takes his credit obligations seriously and pays them on time. The information on your and your spouse’s report is probably very similar if you have joint loans or credit cards. If you don’t qualify due to a low credit score, your spouse’s score is within a few points of yours. In this case, he is not a good candidate for a co-signer.

 

Any negative information on your potential co-signer’s credit report may also disqualify him. If he has had a recent bankruptcy, collections or a garnishment, the lender may not approve him. Negative information remains in the credit file for seven to ten years and may affect lenders’ decisions during this time.

 

A lender may request a co-signer for a loan if your income is low. In this case, ask a relative or a friend who has had his current job for at least two years with the same employer or in the same industry. His monthly credit obligations should be no higher than 35 to 40 percent of his monthly earnings. The debt-to-income ratio requirements vary among lenders. Qualification guidelines are different for mortgages, home equity loans and student loans.

 

Before asking someone to co-sign on your loan, consider several things. The loan will be reported on your co-signer’s credit file. Any negative information—late or missed payments—will affect his credit score. If you default on your loan, your co-signer will be responsible for repaying the balance. Are you completely sure that you can afford to make the payments and to keep the loan in good standing at all times? You should not put your co-signer at risk if there is any chance that you may default on the loan.

 

 

Are Payday Loans a Good Deal?

Unlike banks, payday loan lenders don’t have strict qualifications for applicants. They tend to target people who have difficulties obtaining a loan at a financial institution. When you need to get a loan fast and do not qualify or cannot wait several days to get an approval from a bank, a payday loan may seem like a perfect solution.

 

Payday loan process is very easy to understand even if you are not financially savvy. You give a payday lender a personal check for the amount of the loan plus a finance fee and receive cash in exchange. When your next paycheck is deposited into your checking account, the payday lender cashes your personal check. If you are unable to pay the loan on that day, you can extend it for another pay period for an additional finance fee. You may pay off your loan early with cash. The finance charge may be prorated based on the number of days you had the loan.

 

Of course, a payday lender won’t give money to just anybody. You must provide the proof of income, such as paycheck stubs or bank statements showing the direct deposits from your employer. You may need to provide two or three most recent bank statements to show that your account is in good standing and has not been recently overdrawn. Loan requirements may vary by lender.

 

A payday loan may seem like a reasonable solution when you don’t have access to cash. Keep in mind that the finance charges are usually very high. Some states have adopted laws to keep the payday loan charges low, between 15 and 20 percent. Lenders in other states may charge as much as 50 percent. If you cannot pay the loan off in the first month, the charges add up and after a few months may even exceed the original loan amount.

 

If you find yourself getting payday loans every month to fill in the gap between your paychecks, you probably need help from a financial counselor. He can help you assess your financial situation, find a solution to your cash-flow problem and to create a budget that will let you live within your means.

The Dwindling Round Up: 10-17-12

Here at the Dwindling Round Up we discuss the weeks 5 best posts, in our humble opinion anyways.  With the plethora of finance sites to choose from this is no easy task.  The topics vary, however, the quality of writing does not.  Each article is well thought out, interesting in nature, and just a plain good ole read.

 

Buying and maintaining a car is a huge expense, and one that most us endure one time or another in our lives.  Making Sense of Cents tells us to buy and maintain our cars from a used dealership, stop by and see why.

When is the right time to have a baby, financially?  Ahhh yes, the age old question.  Work Save Live attempts to tackle that question in this article.  I have to say I’ve found myself asking this same question as of late.

Objective Wealth gives us some tips on how to manage a windfall!  Granted I may never experience one of these (no matter how many twinkly little stars I wish upon), but if I ever do then I will know exactly how to manage it all.

We all dream of financial freedom, but so few of us ever achieve it. See Debt Run provides us some shortcuts on how to get there.

Read up on Money Beagle’s shady bank story…there’s nothing worse than big bad companies who beat up on the little consumers…this bothers me to no end.