Sadly, we don’t live in a world where one can realistically be expected to save their money. It just doesn’t happen anymore! A few decades ago that could have happened …
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Smart way to improve credit score
If you have ever had a loan denied it was probably humiliating, embarrassing, and a harsh reality check. So much for that bright red Mustang convertible you wanted. Or maybe it was for an old, beat-up, rusty sedan you thought you could afford to drive back and forth to work. Sadly, that new five bedroom, brick home with the sun porch is out of reach. Or was it your last hope for a deposit to rent a simple one bedroom apartment for you and your family. Some people know before they ever apply for a loan that they will be denied due to a poor credit rating. Others are completely surprised to find out their credit history is hurting. How does this happen?
Sometimes itís just a lack of discipline or good organizational skills. This leads to poor paying habits and late payments which can damage your credit. Sometimes itís temporary circumstances beyond your control such as a job layoff, divorce, illness, etc. You are forced to choose between putting food on the table and making a credit card payment. Thatís a tough one. Thankfully, there are ways to improve your credit rating with a little effort. The following five tips can help.
1. Often, a big part of your credit score depends on your debt to credit ratio. Iíll give you an example. If you have a credit card with a $1000 limit and you carry a $900 balance this would make the percentage you owe to the percentage available 90%. On paper it would look like you were in a credit-tight position. There are three ways to improve this.
A)Apply for another card. Whatever the limit is becomes part of the calculation. If it is $1700 you now have a total limit of $2700. This brings your ratio down to 33% ($1000 original credit + $1700 additional credit divided by $900 balance=33%). Thatís a big difference.
B)You can do the same thing by asking your current credit card company to raise your limit.
C)Pay down your current balance. Make it a priority!
2.Always try to pay your bills on time. Chronic slow or late payments lead to denials or approvals with ridiculously high rates. If you just canít seem to remember when to pay bills try using a personal planning calendar, PDA, or numbered folder. I use a folder that has multiple dividers numbered 1-31 for each day of the month and additional dividers for each month. You can get these at office supply stores. File your bills in the divider where you will see them the week before they are due. Check the folder daily.
3.Get a copy of your credit report and contact the credit bureaus if you find errors. Ask to have them removed.
4.If you have a credit card for every store you have ever enteredÖ.cancel some! No one needs fifty retail credit cards. Retail cards are sometimes viewed less positively than bank cards so get rid of them first.
5.Piggyback on the good credit of a friend or relative. Have them add you to their account (but donít use it). Once youíre on, ask the creditor to report this account to the credit bureaus. Be careful with this one. Donít abuse the goodwill of your friend or family member by using the account without asking first!
In our credit-driven society itís way too easy to bite off more than you can chew. Throw in a couple of lifeís little emergencies and you can quickly get into trouble. The tips here can be helpful, but I suggest you donít just use them for temporary gain. If you go to the trouble to improve your credit, go to the trouble to keep it good. Look at your habits and try to change them if necessary. I know this is a tough one that we all have trouble with, including me. Hope this helps.
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Will You Have to Pay Back the Debt Anyway?
The most widely held misconception about <b>bankruptcy</b> is that itís the debtorís version of the ìget out of jail freeî card in Monopoly. While most people know that bankruptcy affects your credit for 7 to 10 years, very few people know that itís possible that youíll have to pay back the debt anyway, even if you file a <b>Chapter 7 ìstraightî bankruptcy</b>. The formal definition of bankruptcy is ìa proceeding in federal court in which an insolvent debtorís assets are liquidated and the debtor is relieved of further liability.î On the other hand, the commonplace definition of bankruptcy is probably ìthe process of completely wiping out your debts for free.î In the majority of cases, the latter definition may be appropriate, but in some scenarios, itís likely that even with bankruptcy, youíll still have to pay back at least a portion of the debt.
So when is it likely that youíll have to pay back your debts? Here are the most common scenarios when youíll get all the <b>negatives of filing bankruptcy</b> (severe credit impact for 7 to 10 years), but none of the benefits (youíll still have to pay back at least part of the debt):
1) You make more than the average person in your state. If this is the case, then itís likely that youíll be forced into a <b>Chapter 13 bankruptcy plan</b>. In a Chapter 13 bankruptcy, the court orders that you pay all your disposable income to a court appointed trustee, who in turn disburses payments to your creditors. Keep in mind that the court determines your disposable income by national and county statistics on average necessary expenses, not what youíre paying. So just because youíre paying a lot for a car doesnít mean the court will approve it. There are numerous cases when a judge ordered families to stop sending their children to private schools so they can have more money to pay back their creditors. In Illinois, here are the latest statistics on the Illinois median income by size of household:
Illinois Estimate
1-person families 41,650
2-person families 52,891
3-person families 62,176
4-person families 72,368
2) You have assets. If you own a home or car, then itís possible that the bankruptcy court will force you to sell them to generate sufficient cash to pay back your creditors. Chances are if have a good chunk of change invested (unless itís in a tax-exempt account like an IRA) then youíll also be forced to liquidate it. If you have a second home or another vehicle (assuming you own both completely), then youíre really out of luck. Fortunately, there are some safeguards to protect consumers from bankruptcy hell. In <b>Illinois</b>, every resident is entitled to at least $7,500 of the value of their home, $1200 of the value of their vehicle, and $2,000 for anything that they want (known as the wildcard exemption). Also, these values double if youíre married (assuming the property is in both of your names).
What does this actually mean? Consider the following example.
Letís say you have a house thatís worth $250,000, and itís in both yours and your wifeís name. You still owe about $200,000 on your mortgage, and you decided to file Chapter 7 bankruptcy. In this example, you would be forced to sell your home, and with the proceeds you would pay back the mortgage company what you owe on the outstanding balance of the loan ($200,000), youíd pay yourself the Illinois real estate exemption ($15,000), and then youíd pay back your other creditors whatever was left ($250K-200K-15K=$35,000).
Let say your house was only worth $215,000, but everything else in the above example remained the same. In this case, you wouldnít be forced to sell your home because the proceeds from the sale wouldnít amount to anything after you paid back the mortgage company and then paid back yourself the Illinois real estate exemption.
3) The creditors can prove that you were fraudulent and never had any intention of paying them back.
For the majority of us it means that unless a) you donít have a lot of equity in any of your property, b) you donít have any investments like stocks, real estate, ect., c) you donít care about having to sell anything mentioned in points a and b, or d) you donít care about having to give up your disposable for 5 years in a Chapter 13, then bankruptcy may not be your best option.
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You Can Bank On It
Most U.S. citizens walk into, get online to, or drive up to their bank several times each week and hand over their hard earned dollars. Why do they do it? How many other strangers would they trust to hold their savings, and return the money and additional funds back to them at any point in time? What makes banks safe, and how do we know they are?
Well, the first indication that you’re money’s in a safe place is the placard that greets you at the door – FDIC. This federal U.S. agency, the Federal Deposit Insurance Corporation, typically protects up to $100,000 of your deposited funds from loss. Established in the 1930′s, the FDIC became a way to curtail the runs on banks that occurred directly after the Depression. By 1934, with the initiation and support of the FDIC legislation bank runs had been reduced by nearly 4000.
In addition to FDIC protection, banks also pay for supplemental banking insurance from private carriers. This insurance is set up to protect investors’ funds from vandalism and bank robberies.
Banks offer a variety of options to their customers, many of them an evolution of the traditional checking and savings account operation. While a checking account is still the most familiar and most common banking feature, there are now a variety of checking account choices – some, known as negotiable order of withdrawal (NOW) accounts, actually pay interest on the balance. Besides the traditional savings account, banks also now offer loans, certificates of deposit, and money market accounts. Some offer IRAs and education savings accounts.
With a traditional savings account, you are able to deposit and withdraw virtually at will, with no minimum deposit or balance required. For this you earn a small interest – currently at an all time low range of .6 – 2 percent.
A money market account offers the immediacy and convenience of a traditional checking account along with the interest bearing advantage of a savings account. There are some limitations, however. Generally you can write just a few checks per month – at some banks as few as three. You are also limited to just a few more withdrawals as well. You’ll also be held to a minimum running balance, although a money market account almost always pays more interest than a traditional savings account.
A certificate of deposit is a banking account purchased in a specific amount for a specified period of time. Banks traditionally offer a variety of time periods for certificate maturities – anywhere from 30 days to 15 months. The longer the time to maturation the higher the rate of interest paid. For the length of the certificate, however, you are not able to withdraw any of the funds.
Individual retirement accounts (IRAs) and education savings accounts are designed to accrue a substantial amount over a lengthy time period for a specific purpose, IRA’s for retirement, education savings account for college education. They generally offer the highest rate of interest but also deliver hefty financial penalties for early withdrawal except for emergency hardship situations.
With as many options as are offered by today’s banks, and the protections established by the FDIC, you can indeed bank on your local bank.
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Credit Care for Teens and Young Adults
It’s great when parents are willing to help out with their kids’ futures, but make sure that you understand all of the implications before you help your kids build credit.
A credit card is a great way to start building credit as a teen or young adult, and many young people receive their first credit card from their parents. Before you hand your teen a credit card as they head off to the mall, think about whether it’s helping (or possibly hurting) their future credit.
Authorized Users vs. Co-Applicants
Often, a teen’s first introduction to credit is becoming an authorized user on a parent’s credit card. This is an easy way to get a credit card, but it’s not usually the best way. In almost every case, an authorized user does not build positive credit of their own, but if the primary cardholder goes into default, it can be reflected on the authorized user’s credit report. In other words, your child does not stand to benefit from your good credit but could suffer if you fall into hard times.
Placing your child on your account as a co-applicant can have even more harmful consequences. If your credit card company requests a signature from the child, they are likely adding the child as a co-applicant. Think long an hard before you take that step. Being a co-applicant means that they are equally liable for any debts that you incur. If your child is an authorized user and you run up $25,000 in debt that you can’t pay, your child could get an ugly stain on his or her credit. However, if you list your child as a co-applicant, the credit card company can expect them to pay back that money, and even take him or her to court!
Make sure you look at all the factors. Even if your credit is great and you have no intention of racking up debt, is there a possibility that a lost job, medical bills, or another disaster could change your circumstances? If there is virtually no chance of that happening, your child might be fine being a co-applicant or an authorized user. However, even if you won’t hurt your child’s credit, you won’t help them much either. The best course of action is to get a card in the child’s name tied to his or her social security number only. If you’ve been thinking of adding your child to one of your cards, call you credit card company and ask to open a separate account in your child’s name instead. Since you already have an open account with the company, and are bringing them additional business, you will usually get a better rate for your kid than he or she could get on his/her own.
Why Start Early at All?
Even if he or she has to open a starter credit card offer with a high interest rate, it will still help your child’s credit in the long run, as long as you teach him or her to act responsibly. The easiest way to help them build good credit is to have them use their card for one use, paying his cell phone bill or buying gas, and pay it off each month. When your kids get an early start on credit, they’ll have a huge advantage over their peers. If you show them how to use their new card responsibly, the credit card company will reward them in the future with higher credit lines and lower rates, so they can gradually use their credit card for more “adult” things, like furniture for their first apartment or a post-graduation vacation.
Don’t let common mistakes like adding your child as an authorized user or a co-applicant harm his or her future credit. Imagine what a shock it would be if she attempted to buy a car or pass a credit check for an apartment, and she found out that the credit card she’d been making payments to for years isn’t on her credit report. And furthermore, imagine the phone call you’d get shortly after asking for a loan! Your kids’ credit can have a negative financial impact on you as well, so start early! Stay safe.
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Why You Need a Virtual Safety Deposit Box
Advances in information technology, paired with recent weather-related disasters and a growing awareness of the need for access to vital documents has lead to the creation of a new solution designed to protect your most important documents: a virtual safety deposit box. Whether you are looking for a safe place to store vital records such as birth certificates or marriage licenses, or other important documents such as health records, insurance policies, living wills or financial data, a virtual safety deposit box can help keep your critical documents just a few keystrokes away from any computer in the world.
Considered a safe alternative to traditional archives in bank deposit boxes or in-home lockboxes, a virtual safety deposit box provides peace of mind paired with instant access in times of need. Gaining popularity during the aftermath of Hurricanes Katrina and Rita in 2005, this safe method of document storage has become a preferred method of protecting assets around the world. The news media is filled with stories of families who lost everything during the hurricanes, banks whose records were in shambles and law offices whose records perished in high water and storm-damaged conditions.
Elsewhere in the country and the world, stories are common about houses burning to the ground with vital records still inside, families denied access to important documents after a loved oneís death and important paperwork swept away by vicious tornados. Any asset that you have that is paper-based can easily be converted for storage in a virtual safety deposit box. For a small monthly or yearly fee ñ comparable to the price you would pay for a bank deposit box and less than the purchase price of an in-home safe ñ you can choose to upload copies of your documents on your own, fax or mail documents to secured processing sites, or have a technician visit your home or office to complete your archival work for you.
After your virtual safety deposit box is set up, you can access your information safely and securely 24 hours a day, 7 days a week, and 365 days a year from any internet-connected computer on the planet. All archived data is guaranteed against breaches in security and fraud and virtual safety deposit box providers utilize many reliable, prove and trustworthy safeguards against any wrong-doing. Securing your familyís future and well-being is job one, and using a virtual safety deposit box only makes that job easier.
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Your Options in Car Financing
There are so many car financing options available how do you know which one is right for you? Read on to obtain information about all of the different options available and how to determine which one will provide you with the best benefits.
Many people take advantage of an option known as dealer financing. This is when you handle the financing of your new vehicle directly through the lender. Now, that doesnít necessarily mean youíll be making your payments directly to the dealer. Usually, they work with a finance company to provide the financing to you. There are definitely some benefits to this option. First, depending on your situation you may be able to obtain extremely low interest rates; in some case you may be able to obtain a zero percent interest rate. In order to obtain this special rate; however, you will need to have excellent credit with no problems. If you have any problems at all on your credit history you will not qualify for the special interest rate although you will probably be able to still obtain a loan; just at a higher rate. When your credit report is not perfect ask yourself whether you could get a better deal at a bank.
Bank financing is an option that is typically available as long as your credit history is good. This means it doesnít have to be perfect but you shouldnít have any major flaws either. If you have already worked with the bank in the past this will increase your chances of obtaining a loan. While a bank interest rate may not be as low as what a car dealer can offer for individuals with excellent credit, it may be better than what you could obtain at the dealership if your credit is only ëgood.í
Another option you may wish to consider is credit union financing. Of course, this option is only available if you belong to a credit union. If you do happen to have a credit union membership; however, the rate available to you may be much better than what you can obtain through a bank or dealership.
These days it is also quite easy to simply go online and surf around for a quote from an online lender. This option has become so popular many lenders are now willing to compete with one another and offer very attractive rates. In the event you do not have perfect credit, this can be a good option for you; just make sure you fully understand all of the terms of the loan before accepting it.
Another option would be to simply borrow the funds from a family member of friend. Of course, this is extremely risky because it could cause problems in your relationship in the event that you run into a problem with the payments. But, if you canít obtain a loan elsewhere because of credit problems this may be a good option.
Finally, you may wish to consider refinancing your home or taking out a home equity loan in order to finance the cost of your new home. This basically allows you to pay cash for your vehicle with the proceeds of the loan and then paying back the money through the refi loan. In some cases you may be able to get a better interest rate with this route than you would with a traditional bank auto loan. In addition, the interest you pay on the loan is tax deductible. Like other options; however, there are some disadvantages. With this option, be aware that you could be putting your house at risk, not just your car, if you run into a problem and canít make the payments in the future.
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You Might Still Want to Refinance
Even though rates are on the rise, that doesn’t mean you shouldn’t refinance.
Practically everyone has refinanced or thought about it at one point in time. We’ve seen the dozens of commercials that urge us to do it. With rates at record lows over the past few years, refinancing has helped many borrowers lower their monthly payments.
But rates are now on the rise. Refinancing applications have fallen slightly. Most people don’t think you should refinance when rates are going up. However, many refinancings are “cash-out” refinancing. That means that equity is handed over to the homeowner in return for a larger mortgage. Many people need that cash.
Some people are refinancing their homes for a “cash-out” because they have a significant home-equity line of credit balance. This line of credit has an adjustable-interest rate, which is going up on them. They refinance it in with their first mortgage at a fixed rate. They aren’t eliminating the debt, just fixing the interest rate and monthly payment. If you don’t need the revolving line of credit, you should probably take advantage of the fixed rate.
There are many homeowners that piggyback their mortgages when they are buying. They end up with one mortgage for 80% of the value of the home and a second mortgage for 10%. They put the remaining 10% down on the home. Since the first mortgage is only for 80% of the purchase price, they avoid having to pay PMI.
Many piggybackers have a line of credit as the second loan. Others simply want to consolidate into one loan that would be easier to keep track of. Either way, refinancing into a fixed-rate isn’t a bad idea. And one payment is easier to make on time each month than two.
Those out there with adjustable-rate mortgages are starting to get a little nervous. Interest rates have been rising pretty fast. The gap between the rate of a adjustable mortgage and a fixed mortgage has narrowed so much that you really don’t save much by taking the adjustable mortgage. Many are looking to avoid rising interest rates by financing to fixed-rate mortgages.
Refinancing can be a good thing. You can get a fixed rate to counter the rising interest rates. You can use cash from a refinancing to consolidate your debt. You can improve your home. But you should be careful about taking too much equity out of your home.
Many advisors warn consumers not to use their homes as personal piggy banks. If home prices decline, you could owe more than your house would sell for. In a cooling, or slowing, real estate market, you do not want to be maxed out on the equity in your home. If something happened and you had to sell, you want to walk away from the closing table with money, not have to go to it with a check. Paying to sell your home isn’t how you want to do it.
Fixed-rate mortgages are always a good and solid financial choice. Anytime you are looking to refinance, your best option is to go with the shortest-term, fixed-rate mortgage you can afford.
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What is Financial Securities
It is true that bankers also invest money in securities, and that some of these are foreign, but here again the proportion invested abroad is so small that we may be reasonably sure that any money left by us in the hands of our bankers will be employed at home.
But in actual practice those who save do not pile up a large balance at their banks. They keep what is called a current account, consisting of amounts paid in in cash or in cheques on other banks or their own bank, and against this account they draw what is needed for their weekly and monthly payments; sometimes, also, they keep a certain amount on deposit account, that is an account on which they can only draw after giving a week’s notice or more.
On their deposit account they receive interest, on their current account they may in some parts of the country receive interest on the average balance kept.
But the deposit account is most often kept by people who have to have a reserve of cash quickly available for business purposes. The ordinary private investor, when he has got a balance at his bank big enough to make him feel comfortable about being able to meet all probable outgoings, puts any money that he may have to spare into some security dealt in on the Stock Exchange, and so securities and the Stock Exchange have to be described and examined next. They are very much to the point, because it is through them that international finance has done most of its work.
Securities, then, are the stocks, shares and bonds which are given to those who put money into companies, or into loans issued by Governments, municipalities and other public bodies. Let us take the Governments and public bodies first, because the securities issued by them are in some ways simpler than those created by companies.
When a Government wants to borrow, it does so because it needs money. The purpose for which it needs it may be to build a railway or canal, or make a harbour, or carry out a land improvement or irrigation scheme, or otherwise work some enterprise by which the power of the country to grow and make things may be increased.
Enterprises of this kind are usually called reproductive, and in many cases the actual return from them in cash more than suffices to meet the interest on the debt raised to carry them out, to say nothing of the direct benefit to the country in increasing its output of wealth. In England the government has practically no debt that is represented by reproductive assets.
Our Government has left the development of the country’s resources to private enterprise, and the only assets from which it derives a revenue are the Post Office buildings, the Crown lands and some shares in the Suez Canal which were bought for a political purpose. Governments also borrow money because their revenue from taxes is less than the sums that they are spending.
This happens most often and most markedly when they are carrying on war, or when nations are engaged in a competition in armaments, building navies or raising armies against one another so as to be ready for war if it happens. This kind of debt is called dead-weight debt, because there is no direct or indirect increase, in consequence of it, in the country’s power to produce things that are wanted.
This kind of borrowing is generally excused on the ground that provision for the national safety is a matter which concerns posterity quite as much as the present generation, and that it is, therefore, fair to leave posterity to pay part of the bill.
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Your Very Own All-in-one Bank Account
Opening that first bank account is really something else. Few things can compare to the thrill of getting that first passbook. Many of you will agree that it probably marked your independence as well as opened your eyes to financial freedom. Most often, people are in the habit of opening bank accounts in those banks which have been doing business with their parents for years.
No worries there, if they are satisfied with the services of their choice of financial institution. The safety of your money is secured. However, there is a big possibility that their bank might not be offering new and better services that other companies now offer. Smaller, conservative banks do not often introduce new services or options to their clients.
This is the day and age of bank accounts to suit the needs of different people. As the demand from consumers increase, institutions are coming up with ways to be more competitive. For the old-fashioned account seeker, it makes sense to go in for an interest earning checking account which encourages savings. Another is the savings and insurance account for those who wish to protect themselves with an accident insurance, all the while earning interest.
The time deposit now enables you to transfer the interests on a monthly basis, to your specified bank account. With the rise of newer and newer requirements and lifestyles everyday, banks have to ensure that they appeal to customers daily.
Whatever bank account you choose, and whatever services you wish to avail, there are various things that must be considered before making a decision.
- Are you looking for an account that will earn a huge interest? A savings account might be just the thing. Whilst keeping your money secure, you’re earning off of your savings. Savings accounts are also coupled with ATM/Debit cards which you can use to purchase from online stores, restaurants and grocery stores.
And whenever you need money, you can rush off to the nearest ATM machine and withdraw some.
- Are you looking for an account that will enable you to pay for utilities? A checking account could be the answer to your prayers. All lending institutions as well as utility service providers accept checks as payments. Checks are as good as cash – you don’t even have to worry about sending it via mail. However, most banks do not offer interest for checking accounts, and even charge for the services.
- Do you want your money to earn without gambling it? You would benefit a great deal if you made use of the time deposit service. It is just a matter of choosing the institution with the highest interest rates, as well as the terms in which you can withdraw you money. A rolling time deposit gives you free reign to your money, all the while letting you cash in on interests.
You are not limited to just one option. Just take out the time to talk to your bank and ask about their new services or promos. Discovering the ideal bank account may just be as easy as pie.
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Your Credit Score – It Is Important You Understand It
A persons credit score is one of the most important numbers they will ever deal with. A credit score is used by many different companies to determine the credit worthiness of a person. Almost every business a person deals with from utility companies to banks are interested in their credit score.
The credit score is based upon the things reported in the credit report. The higher the score, the better. A higher score means lower interest rates and an easier time getting lines of credit. A credit score is made up of the following information:
- 35% is based upon the persons payment history. It will be affected by making payments or not making payments.
- 30% is based upon outstanding debt. This is any debt that is yet to be paid.
- 15% is based upon the length of time the person has had an established credit history.
- 10% is based upon the inquires made into the account. This is the credit checks, basically, made for this person.
- 10% is based upon the different types of credit the person has.
A credit score is very important to understand. This score holds a lot of importance and should be a main priority. Credit is everything these days and having a bad credit score can mean difficulties even getting the simplest thing done, like getting a telephone turned on in your name.
Low credit scores can be costly. A person with a low score often finds they are charged fees and high interest rates on everything. A higher score gives a person much more freedom and allows them to save their money to pay their debts.
If you have a low credit score then you need to work to build it up. You should not apply for credit, get new lines of credit, but instead pay off debts. Work to bring down your outstanding balances and pay off old accounts. It is also smart to keep older accounts and close out newer accounts.
Doing these things will help to bring your credit score up. If you are unable to figure out how to handle debt then you should use a financial expert to help you. They can make suggests and formulate a plan to help you fix your credit.
If your credit history does become very bad then your chances of obtaining credit will be slim. Lenders will see you as a very big lending risk and will either turn your down or make you pay very large interest rates. That said, more and more lenders are starting to relax their lending criteria in order to service the very sub prime market.
Credit scores can be confusing since the actual calculations are very tedious and almost never outright explained. All a person should be concerned with is keeping their credit reports in good shape. This in turn will ensure their credit score is good.
So you need to make sure that you keep up to date with your mortgage and secured loan payments, pay off your store and credit card bills on time, dont get into more debt than you can afford, do not make too many applications for credit and try not to let your bank accounts become overdrawn.