I recently had the opportunity to attend a church sponsored session with a leader in our church where he spoke to some young married couples about financial management and I am going to post a few things covered in that here.
He talked about how April showers bring May flowers meaning that the more we can do early in life the more it will help us later on establishing good habits makes a big difference in life.
3 reasons for credit cards
You get a detailed monthly statement which can help you follow your expenses (Useful in Budgeting)
Very convenient to use
Possible minor benefits such as air miles
I would add to this the concept of improving your credit history
Warnings on credit cards, they are one of the worst ways to borrow money, pay them off every month and do so as soon as you get the bill. He mentioned that missing the payment by even a day can bring all sorts of extra charges that may not even make sense as well as raise interest rates on all of your credit accounts not just the one card you missed. There is a term called Universal Default which means for a late bill payment of whatever type be it utility or credit card or whatever interest rates can go up for everything because of 1 missed payment.
Rule of thumb: Don't spend what you don't have
Showing posts with label Credit. Show all posts
Showing posts with label Credit. Show all posts
Wednesday, August 1, 2007
Sunday, July 15, 2007
Building Credit
I am sure many of us have heard horror stories about a good person with a good job and no debt trying to get a loan for a house or some other purchase and they are turned down or some other negative thing happens because they do not have a credit history. If you don't have history it is going to be hard to have a good credit score simply because it is a report of your history. Simple approaches can work very well for the problem of building credit. My first experience was very simple it was an overdraft protection on my checking account. I decided to use the overdraft a few times and pay it off promptly even sometimes in the same day. Doing this over the period of only a few months let my credit presence be known and later when applying for a loan I had a good credit score from one little account. A few things to consider about building credit:
You don't have to have large purchases
You don't have to carry a balance for large periods of time
Take advantage of offers early in life for small things to build for later things, students especially have many opportunities with student accounts or credit cards
I do not advise carrying any large amount of debt other than for "necessities" of life principally an affordable home. Building credit helps with future goals such as being able to get a home loan.
You don't have to have large purchases
You don't have to carry a balance for large periods of time
Take advantage of offers early in life for small things to build for later things, students especially have many opportunities with student accounts or credit cards
I do not advise carrying any large amount of debt other than for "necessities" of life principally an affordable home. Building credit helps with future goals such as being able to get a home loan.
Debt
This is a point of warning before any more talk on credit. Debt is a thief of freedom. We value freedom very highly as human beings and even children have a sense of wanting to live their own lives. Debt makes us slaves to our creditors and we will live with much better peace of mind and enjoy our lives when we avoid debt.
Requesting a credit report or Credit Score
There are 3 businesses in the US that monitor credit. Equifax, Transunion, and Experian
The US government has worked with these companies and they now provide everyone to obtain a free credit report once a year. Each company will give you access to your report once a year so you are entitled to 3 reports a year. Some people elect to see all three at the same time or you can space them out over the year to have an updated view of your credit more often. To obtain the free copies of your credit report you can visit http://www.annualcreditreport.com/ which is the site that is listed by the government to access the free reports.
Also available from these companies and others is the opportunity to view your credit score. This service usually comes with a fee and I have not had a use for it as of yet. I took out a small personal loan last year and in the process the lender obtained my score and I was able to ask them the score and hear it in that way, so if you are in that position keep that in mind and when applying for credit you may be able to ask for your score in the process. I have heard that too frequent requesting of your score can have a negative effect on credit and that is one of my reasons for avoiding requesting it. Also, as mentioned in the previous post credit scores are simply a number used by lenders to assess reliability. If you obtain your credit report you can get a feel for what type of a score you might have.
The US government has worked with these companies and they now provide everyone to obtain a free credit report once a year. Each company will give you access to your report once a year so you are entitled to 3 reports a year. Some people elect to see all three at the same time or you can space them out over the year to have an updated view of your credit more often. To obtain the free copies of your credit report you can visit http://www.annualcreditreport.com/ which is the site that is listed by the government to access the free reports.
Also available from these companies and others is the opportunity to view your credit score. This service usually comes with a fee and I have not had a use for it as of yet. I took out a small personal loan last year and in the process the lender obtained my score and I was able to ask them the score and hear it in that way, so if you are in that position keep that in mind and when applying for credit you may be able to ask for your score in the process. I have heard that too frequent requesting of your score can have a negative effect on credit and that is one of my reasons for avoiding requesting it. Also, as mentioned in the previous post credit scores are simply a number used by lenders to assess reliability. If you obtain your credit report you can get a feel for what type of a score you might have.
Credit Score/Credit Report
I know this is something that we hear quite frequently in our day of borrowing money and identity theft.
First lets go over the two terms
Credit Report
A credit report is a list of your credit transactions typically including loans, credit cards or other money borrowed from an official lender. The report has different sections of information that you can review, it may include; a credit summary, detailed account information, inquires made by lenders, any accounts turned over to collections, public record information, and information on your file disputes. In summary it is your history of how you interacted with your lenders and how you managed your accounts.
Credit Score
Using a summary view of a credit report a person receives the all elusive Credit Score. This is a number that is used to predict your credit reliability based on your past experiences. A high credit score suggests that you are a reliable person that has been good with creditors in the past and should continue to do so.
With the two terms better in mind we will talk about what they do. First the Credit Report is a useful tool to you the consumer to get an idea about what things might have and affect on your credit. You get to see your past accounts and check if any information might be suspect. These reports have become an important tool in protecting yourself against identity theft to check that you don't have accounts that you don't know about. For the most part the consumer uses the report or the agencies that give a credit score use it.
Second the credit score, lenders are going to be using this and not the credit report. They don't need every detail of your past experience they simply want to have an idea about the risk they are taking by giving you money. Remember high numbers typically will get you better interest rates and will help you be accepted for a loan.
That is a little bit of explanation about the two Credit watch dogs.
First lets go over the two terms
Credit Report
A credit report is a list of your credit transactions typically including loans, credit cards or other money borrowed from an official lender. The report has different sections of information that you can review, it may include; a credit summary, detailed account information, inquires made by lenders, any accounts turned over to collections, public record information, and information on your file disputes. In summary it is your history of how you interacted with your lenders and how you managed your accounts.
Credit Score
Using a summary view of a credit report a person receives the all elusive Credit Score. This is a number that is used to predict your credit reliability based on your past experiences. A high credit score suggests that you are a reliable person that has been good with creditors in the past and should continue to do so.
With the two terms better in mind we will talk about what they do. First the Credit Report is a useful tool to you the consumer to get an idea about what things might have and affect on your credit. You get to see your past accounts and check if any information might be suspect. These reports have become an important tool in protecting yourself against identity theft to check that you don't have accounts that you don't know about. For the most part the consumer uses the report or the agencies that give a credit score use it.
Second the credit score, lenders are going to be using this and not the credit report. They don't need every detail of your past experience they simply want to have an idea about the risk they are taking by giving you money. Remember high numbers typically will get you better interest rates and will help you be accepted for a loan.
That is a little bit of explanation about the two Credit watch dogs.
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