If you are not familiar with looking at a credit report, the information can be overwhelming. For those of you unfamiliar, a credit report essentially tracks and reports on your performance when it comes to…credit! So anytime you borrow money from a financial institution, your pay history will be tracked. Other companies use this report to determine whether or not they would like to lend money to you. The factors that go into this decision is the timeliness of your payment, the amount of debt you have out there now, whether you have any collection accounts or judgments against you, or if it appears you are trying to get more debt (inquiries). Credit reports are complicated, and we could spend volumes explaining everything about them. However, for the purpose of this article, we will assume you are familiar with them, and focus on what you should periodically review on your report. As a rule of thumb, it is good practice to pull your report at least every year, but some prefer to do so more often.
1. Any inaccuracy. As I said earlier, there is a lot of information available on your credit report. Not only does it list your current and past payment history, but it also will list personal information just has your address, both past and current, and your employment history. Inaccuracies can have a great impact on both you credit worthiness, as well as be a leading indicator for potential fraud. First, let’s discuss the credit worthiness aspect. There could be inaccuracies with your payment history, or perhaps an account is listing negatively when it shouldn’t. You can follow the process dispute this information. Keep in mind, companies are fairly accurate in their reporting, but mistakes can happen. They are also pretty fair with fixing mistakes when brought to their attention. However, this isn’t a quick fix way to erase actual delinquencies or negative payment histories.
As for the fraud aspect of things, inaccurate personal information such as work history or addresses can be a way that identity thieves feel out “soft targets”. They change some information to see if anyone is noticing, and if it seems that a particular individual doesn’t check their credit report often, they will attempt more brazen attempts to fraud, which will typically include opening credit accounts in your name.
2. Inquiries. Any time you apply for credit, a company will review your credit report to determine your credit worthiness. At that point, an inquiry is placed on your file. This serves two purposes. First, it tells anyone reviewing your credit file how often you are applying for credit. The perception is that the more often you apply for credit, there might be something wrong with your finances and it may lead to future problems and impact your ability to repay. The second purpose is that it gives you the ability to see who is looking at your credit report. Only companies that you apply for credit should review your file. In addition, these inquiries should only last for two years, but sometimes they stay on longer than that. Since inquiries cause a slight deduction in your credit score, you should be sure to have long lasting inquiries removed.
3. Unfamiliar accounts. As stated earlier, someone attempting fraud will not normally try to use one of your existing accounts. Instead, they will open a new account and run up a balance on it and hope to disappear before you notice. That is why you should review your credit report and ensure that you know each account that lists under your file. Sometimes the reasons will not be nefarious, but rather simply accidental. Either way, you do not want to have an account that you do not have control over appearing on your record, and impacting your overall credit worthiness.
Let’s face it; debt is a reality in our world today. So much so that the largest forms of debt aren’t really considered debt anymore. The three main investments people make are their home, their car, and their education, and it has become commonplace to borrow money to make them. So when people say that they are “debt free”, they typically mean that they have no consumer debt, meaning personal loans and credit cards. Sometimes, that will include the car payment as well, but finding someone that is free of debt the Dave Ramsey way (no mortgage, no student loans, and no debt at all) is like finding Bigfoot these days.
I don’t mean to imply that it there aren’t people that are completely debt free, but our society is setup in a way that most people can afford their mortgage and car payments. What causes the most trouble in people’s personal finances is the consumer debt that they rack up sustaining a lifestyle that is really outside of their means. So the focus on this article will be how to get out of that debt, and giving you a chance at simple and sustainable financial life, that allows for saving.
1. Cut up the cards. Okay, no one claimed this article was going to be rocket science. This is most basic step in getting out of debt. By cutting up your cards, you prevent adding to your total debt, making paying it off that much simpler; which leads directly to our next step. In addition, it also creates a disciple that makes you spend what you have, not what you can borrow. This will drastically change your perspective on the cost of things.
2. Write down all of your debt. This step is more psychological than practical. Often times, it is hard to quantify how much you putting on your card until you take the time to make a list. Debtors can get real sticker stock when doing this. Granted, the amounts probably aren’t going to seem drastic next to your mortgage, but a good exercise is to write down how much you make per month (take home). Then calculate how long it would take if you took every penny you earned and paid down your debt without paying any other bill. That puts buying that new pair of boots in perspective.
3. Occupy your time. For some, shopping is a something they do in their free time. An idle mind is a devil’s work shop, right? So if you have a lot of free time, you are going to try to fill it, and there is a lot of money spent on advertising that is trying to convince you to spend your money. This isn’t some crazy conspiracy theory; it is just the facts. Just watch the Super Bowl commercials; each one is trying to convince you to buy something. So instead, take up a hobby or even a part time job. Something that isn’t expensive!
4. Build up a savings fund. Another reason people fall into debt, or at least add to it, is that they have no reserves saved up for a rainy day. So they use their credit card to buy an umbrella; but since it’s on credit, they get an umbrella that lights up and has a radio. Okay, that’s an extreme example, but the fact is that if you are using borrowed money to purchase something, you are much less disciplined in your choice. If you have set amount of money to spend, you are going to be more mindful of your purchase.
5. Create a household budget. While it is important to establish an emergency fund, it is equally important to create a budget that allow for spending money each month. The same principle is at work here, just on a smaller scale. If you have $25 per month to spend on entertainment, you will find creative ways to make the most of it, but if you are putting it on debt you won’t care. For example, with $25 per month, you may opt to just go to the matinee movies at a discounted price, or even consider just not going. Finally, the most important part of the budget is that you have to budget paying down your debt. We have established ways to prevent adding to your debt load, now you have to whittle it away.
Everyone has heard it before, “A penny saved is a penny earned…” Well, we keep hearing it because it is true. The problem is that saving money, for most people, isn’t much fun. It requires sacrifices from things you may find enjoyable. Even worst, it may require a complete overhaul of your lifestyle. Just think about it, take an honest assessment of your daily grind, and see think about instance in which you are handing money over to someone else. It can really add up. It could be the bus fare you pay, the gas it cost for you to commute, that morning coffee you buy, the newspaper you got at the newsstand, the bagel you like, or even tolls and parking costs. All of that is before you get to work! There are probably literally hundreds of ways you can start saving money today, and here a just a few.
1. Limit eating out. It is expensive to eat out. Depending on where you are with your life, it may be impossible to eliminate eating out all of the time, but let’s assume you buy lunch every day at work. In most big cities, the cost of lunch can run around $10. Let’s be generous and say that you just buy $5 foot-longs from Subway. So every week, you are spending $25 on lunch. No let’s assume you limited eating out to only two days per week. That would save you $15 per week, or $60 per month. Think you can find something to do with $60 per month? Keep in mind that is only assuming you spend $5 per day, and in most cases, it is much higher.
2. Coffee v. latte. I have heard for years that the best way to save money was eliminating Starbucks, or any coffee house, from your life. Obviously, there is some financial merit with that, but the goal shouldn’t be changing your life to live like a monk. The point is to find a balance where you are happy while still leading a financially sustainable life. What I would propose is instead of ditching the latte, you just downgrade to flavored coffee instead. They typically run $2-$3 less per cup, and with enough sugar and cream, you can get it to taste pretty close!
3. Cut down on memberships. People have a tendency to sign up for plans in lieu of just purchasing a product. Be wary of this strategy and make sure it really fits your lifestyle. For example, let’s say you like listening to audiobooks because you have a long commute. Instead of buying these books through iTunes you opt to sign up for a monthly plan through audible.com. This may make sense for a while, but if you get a new job, you may not have a need for that monthly plan anymore. The same goes for gym memberships, cellular plans, internet packages, or anything that requires a monthly outlay.
4. Install a programmable thermostat. If you own your own home, this is a great way save to on your energy costs. It plays right into the overall theme of only paying for what you really use. Why heat your home when you aren’t home? However, why walk into an extremely cold or hot home either? A programmable thermostat can do both for you, it can ensure you don’t waste money heating a home that no one is in, while also ensuring that it is nice and room temperature by the time you get home. This could easily cut 15-20% off your energy bill.
5. Keep credit cards for emergencies only. Nothing gets people into financial hot water like their misuse of credit cards. Changing your focus and treating them like something you would use for an emergency is the best practice until you feel comfortable with your financial discipline. Once you do, there are many ways you can take advantage of offers such as rewards points and 0% interest balance transfers. Until then, these are just traps to capture the undisciplined.
Your monthly expenses could be strangling your finances to death. That’s right, you could be overpaying for things that you consider to be set in stone. When families sit down to finally create a budget, they usually split their expenses into two categories, fixed and variable. A lot of focus is spent on things such as spending habits and other discretionary items, and rightfully so. However, if you don’t take a critical look at some of expenses that you may consider fixed, you are probably leaving money on the table. Below are a few common places you can look, to cut back on your monthly expenses.
1. Groceries. Families, especially, will sometimes set a specific amount aside to cover their grocery bill each month. So when it comes time for planning, this gets lumped into the fixed category and is considered nonnegotiable. However, there are many ways you can lower your grocery bill, but it may require a change in your habits. The first way to do so is coupons. Take advantage of saving money that only requires you to simply cut out a piece of paper. This will work out for you especially is you are someone who only wants to buy name brand products, which leads to my next point. Buy generic! Find the ones that work for you, experiment a bit. Often times, these products are manufactured at the same place and include the same ingredients. Not all of them are though, so be sure to try different items. Peanut butter is a good example of where it pays to go generic, but laundry detergent is not.
2. Transportation. Public transportation is available in most cities, so why not take advantage of it. Over the past few decades, the trend has been to move farther away from cities and into suburbs. However, many people still work in these cities and commute to work every day. When planning their finances, many people have simply accepted what they are shelling out in gas and tolls every month. In fact, in many areas, commuters have to pay for parking as well. Take a moment and look into your public transportation options. This doesn’t work for everyone, but if you are lucky enough to have these schedules and routes sync up for you, you could save hundreds or even thousands of dollars per month. For example, let’s say you have a one-hour commute, you go through two tolls, and you have to pay for parking each day. Think about how much you could save by just paying a bus fare instead.
3. Internet and TV. These prices fluctuate so much; you should stop reading this article and immediately call your provider and see what type of deal you can get right now. If you live in an area with competition, then you can take advantage of this and leverage one company against another. Even without competition, there are plenty of bundling options that allow you create the best plan for you and your family. Many plans will even allow you to include your cellular and data plans to further provide savings.
Over the last few years, there have been many efforts to help homeowners save money on their largest monthly expense, their mortgage. As home prices have retreated, more and more families and individuals have found that they are under water in their homes. Making a large monthly payment on a mortgage that is worth far more than the home is not an attractive option for many people. In response to this, there have been a number of government sponsored programs to help homeowners make their mortgages affordable. Below are just three of the ways to lower your mortgage payment.
1. Home Affordable Modification Program (HAMP) If you are a homeowner who is having difficulty maintaining your payments, the Home Affordable Modification Program may be the best option for lowering your payment to something that is more affordable. Provided that you are employed, you may be eligible for this program. In the past, only primary residences were eligible for modification however recent expansions to the program have included non-primary residences provided the home is either rented or intended to be rented. Also, qualifying debt-to-income ratios have been expanded to include lower ratios. Provided you are demonstrating a financial hardship or are currently delinquent, you may be eligible for this program. This program is designed for mortgages owned or guaranteed by Fannie Mae or Freddie Mac.
2. Principal Reduction Alternative (PRA). If your mortgage is not owned or guaranteed by Fannie Mae or Freddie Mac, you may still be eligible for a measure of assistance. If you owe more than your home is worth and occupy it as your primary residence, you may be eligible for the Principal Reduction Alternative. This program essentially reduces your principal amount to a level that is more in line with what the home is worth. In order to be approved for this program, you must demonstrate a financial hardship or be currently delinquent. There are more than a 100 servicers participating in these programs; the largest including CitiMortgage, JP Morgan Chase, and Wells Fargo.
3. Home Affordable Refinance Program (HARP). This program is designed for those homeowners who are current on their mortgage, but are underwater to the point that traditional refinancing programs will not be approved due to loan to value issues. Refinancing through the Home Affordable Refinance Program is designed to help you manage your personal finances more effectively by making your mortgage more affordable, and therefore giving you a mortgage payment that should lead to more stable payments on your part. This program does require a full application and underwriting process. Any applicable fees apply. Eligibility in this program is very similar to other government programs. The mortgage must be owned or guaranteed by Freddie Mac or Fannie Mae, and must have been sold on or before May 31, 2009. In addition, the current loan-to-value ratio must be greater than 80%. One main difference is that the HARP requires a good payment history over the past 12 months.
Debt has become necessary in today’s society. Most people won’t be able to make the larger purchases in life without getting into some sort of debt. Whether it is a home, a car, or even an education, getting into debt is just a natural part of American life today. Unfortunately, the line between normal and excessive use of debt has been blurring for the past decade or so. People are getting deeper and deeper into debt, especially since rates are at an all-time low.
Slipping into excessive debt can happen almost without anyone noticing. Often times, by the time you recognize that you are in the situation, it is too late. Instead, it is important to attempt to spot the warning signs, so you can make the hard decisions while they won’t hurt as bad.
1.Paying for groceries with a credit card. Okay, so it doesn’t have to be only groceries. Pretty much any everyday item would count. The fact is that once you are at a point that you cannot afford to pay for these items out of your normal checking account, then that means that you are either living outside of your means or that you are so bogged down with debt payments that you need to use credit simply to make these normal purchases. Either way this is a major warning sign.
2. You are paying your bills late. Another major warning sign is that you are starting to pay your bills late. This could mean a number of different things, and all of them are bad. Perhaps you are overwhelmed with the sheer number of payments and can’t organize them. Maybe you simply just don’t have enough money left over after paying the other bills. Again, these are warning signs that your debt load is simply too large.
3. You are maxed out on your credit cards. The award for most obvious warning sign goes to this one. If you are maxed out on your credit cards, then it is an obvious warning sign that you have too much debt. However, this isn’t as obvious to most people as it should be. Credit limits are established by banks based on what they feel the borrower’s capacity to pay is. If you get to a point where you have maxed that out, the typical response for borrowers is to request an increase. Provided the pay history is okay, this will usually be granted. The question is whether or not the request should have been put forth in the first place.
4. You have no savings. Expanding on earlier themes, if for whatever reason you do not have savings, or the ability to save, that is typically a warning sign that you have too much debt. This isn’t always the case though, as it could simply mean that your income or other bills, such as medical bills, is the culprit.
5. You got turned down for credit even though your payment history is great. Banks are in the business of managing financial risk. If they are declining you for credit even with a great payment history, then they are making the statement that you have too much debt, which is a clear warning sign.
Purchasing a home is a huge life decision. Doing so should not be taken lightly. Too often, young home shoppers will simply look at the mortgage payment and compare it against what they are paying in rent. When looking at home ownership in that light, it seems like a no brainer that you should, and could, purchase a home. However, owning a home entails much more than just making the mortgage payment. It includes coming up with a decent down payment. It also includes paying for anything that breaks in the house; remember, there is no landlord anymore. So, before you try to get your slice of the American dream, you should make sure you can afford to do so. Below are some signs that you may not be.
1.You have no savings. If you have to scrounge every last penny to simply meet the closing costs and down payment to get into the home, then it is very likely that you aren’t ready to own a home. Things will break in your house. Even if they don’t, you have more bills than you did when you rented, so you will be paying out more than you ever did. Finally, if you have any delusions on furnishing this home with your good looks, good luck. Furniture stores only take cash…or credit.
2. Excessive use of credit cards. If you are using credit cards for everyday items, then you probably aren’t ready to buy a home. Using credit cards to cover basic living expenses is a sign that you are a bit overextended right now. Once you purchase a home and move in, you will have a lot of difficulties maintaining a budget.
3. Making only minimum payments. This is another sign that you may not be ready to buy a home. Having debt is one thing, but only being able to pay the minimum payments is an indication that you are stretched financially.
4. You are going to borrow against your retirement for your down payment. If you need to borrow against your retirement to come up with your down payment, that is probably a big red light that you aren’t ready for home ownership. If you haven’t been able to save over time, then your budget after you move in will prove to be very tight and most likely you will have difficulty keeping up on routine maintenance or simply paying bills.
5. You need to work two jobs to get approved for a mortgage. If you are in your career of your choice and still need to work a second job, then it may not be a great idea for you to purchase the home you are looking at. Perhaps a smaller home may be a better a choice. Better yet, continue to rent until your income gets to a level to support home ownership.
6. You need roommates to cover the mortgage payment. Just the same as needing a second job to pay your mortgage, requiring roommates is equally as troubling when it comes to owning a home. That isn’t to say that it is a bad idea to bring in roommates to help out, but if you are requiring them, then that is sign that you may be in over your head. Keep in mind, roommates aren’t contractually obligated to pay your mortgage.
The average American is estimated to hold $47,000 in debt. Now, for some debt, like mortgages, it takes time to payoff. However, much of what Americans are using today is credit card debt. By living outside of their means, they are contributing to the growing problem in today’s financial world. The fact many people would like to start paying down debt, but they simply can’t find the extra money in their budget to do so. What is the answer? Well, in some cases, the best answer is to drastically change your lifestyle and cut back on spending. However, many people have done that, and still find themselves unable to gain enough critical mass to make a dent into their debt load. In those cases, the only possible answer is to get extra income somewhere. Below are a number of part-time jobs that are available for any man trying to get his debt paid off quickly, in no particular order.
1.Pizza delivery. Want a job where you get paid every night, get to spend most of your time in the car, and probably get to take home good pizza’s at the end of the night? Well pizza delivery is probably the best bet for you then. There are a ton of pizza joints littered across the country, especially national chains such as Papa John’s and Dominos.
2. Paper route. We aren’t talking about waking up at 6am and getting on your huffy to throw newspapers at houses. These days, adults manage many of these routes as they can cover a lot of ground using their cars. It is a nice early morning job to have before you head off to your 9-5, if you are a morning person that is.
3. Casino dealer. Casinos have started to pop up all across the country as states pass laws legalizing them to help with revenue. Becoming a dealer does take some classroom work, but once out, you can easily start to supplement your income by working nights and weekends at the local gambling spot.
4. Home improvement stores. If you are a handyman and wouldn’t mind some discounts, or being surrounded by tools all day, then getting a job at one of those huge home improvement chains might be a great idea. Many have extended hours or will require overnight shifts for stocking.
5. Waiter. If you don’t mind talking to people all of the time, then being a waiter may be a nice way to spend some evenings while getting a paycheck. This gig isn’t for everyone, but for the right people, it could be a blast.
6. Delivery driver. Ever wonder where all of the food at your local grocery and convenience store come from? Well, someone delivers them in a big truck. Most of the time, it is done very early in the morning or overnight. If you want to be left alone for a few hours, this is the job for you.
7. Toll booth operator. Tolls don’t shut down, so if you need a job during nights or weekends, why not sit at a toll booth sucking in fumes for a few hours? Granted, with electronic passes, the need for toll booth operators has gone down, but they are still required.
8. Wal-Mart. There are Wall-marts everywhere. Most of them are open all of the time, so there are tons of available shifts and hours.
9. Grocery store. Want a job where you show up, throw some things on some shelves, and then go home? Who doesn’t? Stocking shelves is a great way to pass the time if you are relatively physically fit and don’t really like interact with customers.
10. Banquet staff. If your day job or family life doesn’t allow you to work a steady part-time schedule, then getting into the rotation at a banquet staff might be the best approach for you. Typically, you would only work weekends, and you would only work when there are events. The customers are easier to deal with, unlike a normal restaurant.
Identity theft is a growing problem today. Not only is there a direct financial impact that come from this, but it can also prove to be very disruptive to the lives of the victims. From employers to utility companies, more and more companies are reviewing credit histories to make determinations regarding your character and trustworthiness. If there is inaccurate data on your credit report directly related to identity theft, then you could be creating a situation in which you will struggle to keep your name and reputation clean.
The repercussions of identity theft can be long lasting, and in many cases, is something that can be avoidable. Unfortunately, it isn’t always preventable, and some people will just have to deal with the unfortunate event. Luckily, there are some things you can do either before or after identity theft occurs to help mitigate both the risks and the impact of identity theft.
The best thing you can do to stay on top of identity theft is to frequently and periodically checking your credit report. This will show if inquiries or new accounts are being opened. This is your best and first line of defense in the defense of your identity. Often time, identity thieves will probe people to see if they can open small account unnoticed. By staying vigilant with pulling and reviewing your credit file, you can ensure the accuracy of your report.
This should go without saying, but getting smarter about your information will help prevent a lot of identity theft from happening in the first place. The first thing to remember is that anything you put online can potentially be used by someone for nefarious purposes. The more information you put out there, the higher the risk that you will become a victim of identity fraud. Be sure that when surfing the internet, or entering personal information into a website, that you use secure sites, as well as virus and anti-phishing software.
Another thing to know about identity theft is that there are different versions. The most common type is financial identification theft. This is where someone will attempt to use your name and social security number to apply for credit to be used for their own purposes. A second type is criminal identity theft. This is where thieves will use your information to conduct criminal activity as a cover for their actions in case they get caught. In this case, you may never know this is happening until much later. The last type is something called cloning. Cloning essentially attempts to create a new identity under your name and social security to create a new life, not just apply for credit. Ultimately, this leads to credit requests, but it is much more involved than that.
Finally, if you have been victimized, the first very first thing you need to do is contact the authorities and all three credit reports. In addition, if you are aware of any accounts that have been opened, then you must contact those companies immediately.