Where Are You In Your Financial Lifecycle?

A financial lifecycle is a term that financial professionals use to describe where we are in our life and how it affects our financial situation. It’s a way of measuring where we are and where we should be in the next few years. Many of us tend to lag behind in the financial lifecycle, having the good habits that served us well in the previous stage of our financial lifecycle, but not having suitable skills for the stage we are at present and barely planning for the next stage. If you know where you are in the financial lifecycle you can then judge where you fall short and which skills you can learn.

1. The Early Years

The first part of your financial lifecycle is your childhood and early adult years. In these years you are mainly studying and the jobs that you can pick up tend to be part time, unskilled and poorly paid. They are more useful in teaching you what work is like rather than the spending money that they bring in. It is OK to be financially dependent on your parents; they don’t want you to drop out of education in order to get some quick money now. It is also OK to build up (some) long term debt as your education should in the end pay for this several times over.

2. The First Jobs

You then have the period of early earning. This is the period of the first few jobs, when although the pay is lower than it will be later in the career, costs are so much less as there are no spouses, children or homes to pay for. Salaries also rise rapidly. During this period a large chunk of student debt can be paid off, it is also a period when a new career can be tried out with little being lost. Starting a pension and getting on the housing ladder may not be the most fashionable things at this age but doing these things now will pay dividends later.

This period is also a time to start dabbling in investments as money lost now can easily be replaced, and so high risk investments can be considered. A big win now could be worth an enormous amount later while lost money can easily be replaced. All the time lessons, from both winning and losing investments will be learned that will pay off later.

Many people don’t fully use this exciting period. For a start they may put this period off by getting more and more college degrees with no idea of where they will be in the future. They may also still spend more than they earn, remaining dependent on their parents into their thirties or building up greater debt. More importantly there is not much desire to learn about saving or investing at this age, missing out on the best time to start a pension. 

This early stage continues on into the early stages of marriage. It is a period of relative affluence that should be enjoyed, but it is also a period where a good deal should be learned about investing and saving, as you will need those savings later.

3. The Young Family

Most people remember the early years of having a family as one where there never seemed to be any money. At this time one of the spouses often stops work for a few years, or sharply cut down their hours. The other spouse would see their pay rising slower than it had been previously, and there are sudden expenses. Children are never cheap.

In these times there needs to be a new frugality. Investment needs to be maintained, if for no other reason to keep in the habit. Debt will seem to get larger, but it should be a different type of debt from student debt, being for a larger house. Purchases will also be more practical and less glamorous. The sports car is replaced by a station wagon, and the flat in the fashionable area of town is replaced by a house in the suburbs. There is also a need to start (or continue) saving for college funds.

There is a desire to retain the old lifestyle which can mean that debts build up more easily. This is made possible by greater access to credit as the house is now a substantial asset and while the pay is not rising at the fast rate that it was, the pay rises have still compounded and so the money that is being earned is more than ever before. 

Debt to fund a lifestyle is the biggest problem at this stage. Unfortunately the lifestyle does take a hit when children come along. This is not easy when friends from school and colleagues at work are still enjoying exotic holidays and constant nights out.

4. A Growing Family

The next stage is when the children are growing up. The expenses start to seem less. The pay is still rising, and in fact many people are at the peak of their earning power at least in real terms (the pay may still keep on rising after this but for most people inflation starts eating away at the pay rises). The spouse who may not have been working can now restart a full time job.

The temptation here is to keep the savings at the same rate as before. The idea here is not to maintain the savings and investments that were made when you were, to all intents and purposes, quite poor but to expand them. Debts should no longer be treated in maintenance mode; this is no longer something that is excusable as it was when the children were very young. Credit card debts should be paid down quickly, and then the mortgage needs to be attacked and preferably paid off. The mortgage in particular will be more manageable as inflation will make the amount of the mortgage seem far lower. At the same time there should be a step up in payments to the investments that were being maintained over the early years of family building.

5. The Empty Nest

After the family has left, there is an empty nest period. The children are out of college and earning a living and even if they are at home they are paying their own way. It is OK to enjoy yourself at this time, as the disposable income will rocket. However this is not a long time. 

One of the things that should be done is to start de-risking investments. Losing a bundle at this stage is going to have far more long term effect than it will at any of the earlier stages as you will not have the time to make this money back. A cold hard look at investment accounts should be made and your investment portfolio should become far more boring. Also debts should finally be paid off (if they have not been already). This will be fairly easy, but just because it’s easy doesn’t mean it should be shunned. 

One of the shocks at this time, particularly if you put retirement off for a while to continue working, is that wages can often start falling. This is not just the case for lifestyle reasons, as part time working or a job close to home suddenly makes more sense, but for the very fact that employers want younger people who aren’t about to retire. 

6. Retirement

Finally there are the pension years when you are living off past earnings. This is a time to live off your past good habits. The disposable income will start to drop off, and inflation can be bitter during this time (even if the pension is index linked). However if you have saved up enough these are likely to be golden years.

This is a period where people tend to hold on to things that they don’t need to. The main example is the large family house. It is a good idea to downsize and to live off the money. At a later stage a reverse mortgage may be a good idea so that you can benefit from the equity in the house. Your children may not be ecstatic about the choice, but they have got a career and a home and should be in a saving habit. It is also time to put the investment portfolio into income generating assets; high risk fast growth companies aren’t much use now.

Everyone will hit different stages of the financial lifecycle at different ages. However your investment and spending needs do change throughout your life, and if you are not consciously recognizing you will be playing catch up as you use the good habits that you obtained in the last stage of your financial lifecycle but learning the habits that you need in the current stage only by your mistakes.
Where Are You In Your Financial Lifecycle? Maiane Cassanego 5 of 5
A financial lifecycle is a term that financial professionals use to describe where we are in our life and how it affects our financial situa...

Make Better Financial Decisions And Take Care Of Yourself

If you want to make better financial decisions, one of the best things you can do is to take care of yourself. It’s not just about seeing a lower health insurance bill because you are in better health. Your physical and mental state can actually influence the decisions that you make — including your financial decisions.

Stress = Poor Spending Choices

When you’re stressed out, you’re far more likely to make poor spending choices. If you want to make better spending choices, then you need to make sure that you aren’t making them when in a state of stress and anxiety.
Often, shopping while stressed results in buying more than you expected. An unhealthy mental and physical state can mean that you are less disciplined, and more inclined to make impulse purchases. You’re also more vulnerable to your child’s whining and begging for specific things. How often, when you’re stressed out, do you snap, “Ok, fine!” just to get your child to stop pestering you. This applies to shopping as well.
And, of course, the biggest stress shopping issue is that of shopping therapy. Shopping can trigger better feelings and lead to increased spending as a way to address feelings of stress and anxiety. My husband uses online shopping as stress relief. When he feels over-stressed, he looks at eBay — and usually ends up buying something he had no intention of purchase, for more than he wanted to pay.
When you feel good, you are more disciplined, and less likely to make poor spending decisions. Take care of yourself, and you will feel less stress, and your spending decisions will be more informed and you’ll practice better discipline when it comes to saying “no” to the superfluous purchases.
It’s not just about the day-to-day shopping decisions. When you are stressed and afraid, you might not make wise choices about your insurance, how much you should be setting aside for retirement, or how you are investing. Fear and stress can really mess up your long-term investment plan. Try not to make any financial decision when you are feeling frazzled and uncertain.

Before You Make A Financial Choice

One of the best ways to avoid impulse purchases and make better money choices is to live a healthier lifestyle. At the very least, though, try not to make financial decisions — from spending to insurance to investing — while feeling at your worst. Here are some things to try before you go shopping, and before you head into a meeting where serious financial choices will be determined:
  • Sleep well: Tiredness reduces mental faculties and reasoning skills. A good night’s sleep can help your mental acuity and improve your decision-making capabilities, including financial decisions.
  • Exercise: Physical activity gets the blood flowing and the brain working. You’ll be alert, and have heightened reasoning skills. A little exercise before you tackle the tough choices of the day can really help you improve your decisions.
  • Eat a good meal: Make sure that you eat a good meal. Think about it: When you’re hungry while grocery shopping, you tend to spend more and even buy more junk food. But hunger also affects your ability to make other decisions. Eat a good meal, or have a healthy snack, before you start in on something. Consider nuts and berries as great “brain food” as well as healthy choices that can help your energy level.
  • Stay hydrated: Drink plenty of water and you’ll feel better in general. You’ll avoid the mental and physical fatigue that comes with dehydration, and you’ll be in a better place to resist poor decisions.
  • Take time for you: Refresh yourself with a relaxing activity that you enjoy. This can include reading, meditation, or even a power nap. Taking time out to do something that helps you feel good can increase feelings of contentment and boost your mental faculties.
Following healthy habits on a daily basis can help you maintain financial discipline, and think more clearly when confronted with money choices. At the very least, don’t go shopping when you’re tired and hungry. Just following that bit of advice can save you hundreds of dollars a year in terms of impulse purchases. But, if you can, work on improving your lifestyle so that most of your financial decisions are savvy.
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If you want to make better financial decisions, one of the best things you can do is to take care of yourself. It’s not just about seeing a ...

8 Simple Steps To Financial Freedom

Financial FreedomYou can achieve financial freedom as long as you want it and work hard for it. Unless you are part of the 1%, your journey on the road to financial freedom will be a long one. In this article, I want to walk you to through a few steps which I think are critical to any financial improvement effort. This road map pulls together information and ideas that I have learned by studying other financial plans, and reading books. It includes information that I learned on my own financial journey, and I hope that you will be able to use this as the starting point for your own.

1. Set Your Mind to It

Improving your finances involves a lot of work and patience. You cannot turn things around and make things better overnight. So the first step is to recognize this and put all your attention and effort into doing something.

2. Set Up Goals and Milestones

Next, set up some rough financial goals. You wont have it exactly correct the first time, but that's okay. You can start with a wishlist of reasonable objectives for now and make them better later. Some of your goals may look something like this.

Start a budget

  • Lower my expenses by $100 a month in 3 months
  • Pay off my car loan by the end of the year
  • Start saving $50 a month
  • Do 3 things to better my finances each month
  • There is no correct way to do this. Just make a list of 3-5 things and you can just go from there.

3. Spend Less

Improving your finances is really as simple as the old cliche “spend less than you earn”. Once you can get your expenses and spending under control, everything else — e.g., paying down debt, building wealth, etc. — will be that much easier to accomplish. When it comes to improving your finances quickly, nothing beats cutting your expenses. To get going, here are plenty of ideas on how to cut expenses and save money.

4. Get Out of Debt

If you are in debt, the best thing you can do with the money you saved is to pay down your debt. Being in debt is like trying to win a race with one foot on the accelerator and another on the brake. Whether they are good debt or bad debt, they are costing you money and slowing you down.  As such, one of the early step toward achieving financial success is to get out of debt.

Here is a good primer on how to get out of debt and protect your credit score

5. Start an Emergency Fund and Have a Plan

Once you’re debt free (excluding your mortgage), it’s time to start building your wealth. But before you can do this, you need to have an emergency fund and a good emergency plan in place. This is your “Get Out Of Jail Free” card — always good to have one around. 

6. Earn More

You can only take it so far with cutting expenses, so the next step is looking at ways to earn more money — especially by building alternative income streams, diversifying your income sources, and becoming less reliant on your job. To get you started, here are some ideas on how to make more money.

7. Save and Invest

After you get all the basic stuff out of the way, now it’s time to get serious and work toward your short-term and long-term goals. 

8. Protect Your Finances Against Risks

Uncertainties and risks are your biggest enemies. They can throw you off track and destroy your progress. However, there are many ways to mitigate these risks and prepare for uncertainties. To protect yourself and your family against catastrophe.

Obviously, there are much more to achieving financial success, but I believe these are the 8 most essential things to work on.

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You can achieve financial freedom as long as you want it and work hard for it. Unless you are part of the 1%, your journey on the road to fi...

Savings In America

Savings in America
We all know that we’re supposed to save. You have to save for retirement, emergencies, college, large purchases, etc. However, this doesn’t mean that everyone is saving or knows how much they should be saving. During the peak of the housing bubble, the savings rate for Americans dropped to an all time low of .9% meaning we were saving less than a penny for every dollar that we spent.

This lack of savings that we saw in 2005 seems to have caught up with us. The Employee Benefit Research Institute found that most Americans have less than $25,000 saved up for retirement. 27% of Americans even said they are not at all confident about retirement. The Harris Poll also found the 27% of Americans had no personal savings.
With the subsequent recession following the housing bubble, many Americans struggled to pay for the basics, let alone save anything. This has caused about one third to tap into their savings to cover basic expenses.
However, it’s not all bad. Due to the amount of mortgage foreclosures, banks have had to write off billions in loans that went bad. That means they were much less willing to extend loans or credit, forcing many people to stop living off of their credit cards. With no other option, this has caused many Americans to start saving and paying down their debt.
In fact, according to the Commerce Department, Americans are now saving about 6% of their disposable income. On top of that, Americans now have 7% less mortgage debt, 12% less in auto loans and 15% less in credit card debt. Even retirement savings were up, with the average 401(k) balance hitting a 10-year high. Talk about a massive overhaul!
Building up savings and paying down debt are key factors that can help the economy. Once consumers get to the point where they are comfortable with their savings, they will start spending again – boosting the economy. Of course, finding the right balance between saving and spending will also help to avoid another recession.
Recession or not, everyone should create a budget to see how much they can save and where their money is going. Look into your company’s 401(k) plan (if you haven’t already) and set up automatic deductions from your paycheck. Most companies will even match contributions, so you’re losing retirement money if you don’t take advantage of this.
Hopefully, this new outlook on saving becomes a trend rather than a fad. Only time will tell if consumers have actually learned anything from this experience or whether we will see another generation of Americans reach retirement with too little too late.
Do you think we will continue to save or fall back into spending?
Savings In America Maiane Cassanego 5 of 5
We all know that we’re supposed to save. You have to save for retirement, emergencies, college, large purchases, etc. However, this doesn’...

Starting A Business With Bad Credit

Starting A Business With Bad CreditWhile having bad credit can make it more difficult to start a business, it doesn’t make it impossible. If you are truly dedicated to the idea of entrepreneurship, there are some ways to help you get the financing you’ll need for your business

First, reevaluate your funding plan. Studies show that credit card and bank loans account for only 25% of the total funds you’ll need. This means that 75% of the money you need won’t rely directly on your credit score, which is good news! However, that also means that you’ll have to convince a lot more people that your plan is solid to get funded, so make sure your business plan is polished.

To get the other 75% of funding, experts recommend that you start by asking your friends and family to invest in your business. It is reported that 50% of all business owners get financial help from friends and family. Your loved ones most likely won’t look into your credit score, so they might be easier to receive funding from.

However, don’t forget that this is still a loan, and they expect to be repaid. Talk with your potential donors about a repayment schedule and possible interest rates to make sure that you maintain good relationships with these investors. These relationships can be valuable to your start-up needs as well as your credit. If you choose to do so, you can hire a loan management company to help you report these personal loans to the Credit Bureau, which will help boost your credit over time (as long as you don’t default).

If you still need more funds, the Internet is a great resource to find private lenders. Sites like Prosper.com are great sources of capital for people with bad credit and they will also report your timely payments to the Credit Bureau. Take some time to compare different rates though to make sure you’re getting the best lending deal possible.
Depending of your type of business, you may also be eligible for state or federal government grants, so look into what’s available where you live.

Once you’ve received the initial financing, make sure to establish business credit that is not linked to your personal credit. Experian will calculate your business’s credit score based on credit obligation information from your company's suppliers and lenders, public records and the company's background information. If you can establish good credit with your business, you will be eligible for more and better loans if you apply as the business rather than an individual.

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While having bad credit can make it more difficult to start a business, it doesn’t make it impossible. If you are truly dedicated to the id...

Pay Yourself First to Grow Your Savings Automatically!

Pay Yourself FirstOne of the best ways to avoid dipping your fingers into your savings (especially your emergency fund for non-emergencies) is to automate your savings accounts so that your money flows through your personal economy without much interference from you. When you automate your savings accounts, you can force yourself to practice financial discipline and work toward financial freedom.

Pay Yourself First

You can have money from your checking account automatically transferred into a savings account each month; however, you are probably better off having your paycheck deposited into your savings account, and then having the money you live on transferred into your checking account.

1. Set Up a Savings Account

Look for a good savings account, either in town, or online. Make sure the financial institution is FDIC insured. An online bank account can be a good choice, since it forces you to think things through before making a big purchase. Having your savings account at a different institution than your checking account can be helpful, creating another barrier to raiding your savings.

2. Set Up a Checking Account

After you have opened your savings account, build up a cushion in your checking account so that your finances can survive the lag associated with transfers between institutions.

3. Set Up the Direct Deposit

Once your checking account is squared away, go to the human resources office at your work and ask about having your paycheck deposited into your savings account. If you own your own business, have money automatically transferred from your business account into your savings account.

4. Set Up the Transfer From Savings to Checking

Once you have your direct deposit into your savings, automate further by setting up a recurring transfer so that some of the money automatically goes into your personal checking account.
For example:
If you are paid on the 1st and 15th of each month, and receive $1,500 a paycheck (after taxes, retirement, health premiums, etc.), you have that money automatically deposited into your savings account. Every 8th and 23rd of the month, you can set up an automatic transfer so that $1,200 goes into your personal checking account. This way, you live only on what is in your checking account, and you automatically bank $300 of each paycheck, leaving it in your savings.

Adjusting Your Savings System

You can, of course, adjust your savings system as needed. If you find that you have a great deal of money left over at the end of each month, you can adjust your automatic transfer so that you are keeping $400 of each account in savings. Or, if you find that you are cutting it too close for comfort, you can adjust so that your savings account is transferring more money to your personal checking.
Another thing you can do is automate your main savings account so that it sends money other places. You can have money sent to an investment account for an automatic transaction every three or four months, or send the money to other accounts for long term savings goals, short terms savings goals and even your emergency fund.
Check your main savings account every few months and consider whether you can do something else with that money to help it grow more efficiently, meeting more of your financial goals.

Things to Keep in Mind About Automated Savings

It is important to carefully consider your automated accounts. Carefully track deposits and withdrawals initially to make sure that lag doesn't result in an overdraft situation in one (or more) of your accounts. Allow plenty of time, and build up a cushion of cash before you automate your savings accounts.
Also, make sure you understand the transfer rules. You may be limited as to the number of transfers that can be made out of your account in a month. Organize your finances so that you are well within the prescribed limits.
Finally, be aware of account minimums. If you fall below an account minimum, you may not get the full benefit of the advertised yield, or you may have to pay fees. Make sure you understand the terms of the account before opening it. Once you are satisfied that the account will work for you, then you can begin automating your finances so that your savings accounts take priority.
Pay Yourself First to Grow Your Savings Automatically! Maiane Cassanego 5 of 5
One of the best ways to avoid dipping your fingers into your savings (especially your emergency fund for non-emergencies) is to automate yo...

The Big 3 Credit Reporting Agencies

The Big 3 Credit Reporting AgenciesA credit reporting agency is a repository of information that holds an individual’s credit or payment history.  An individual’s credit report is created when a request for a report by a lender, credit card company or other authorized party requests it.  Credit bureaus or credit reporting agencies hold the consumers credit data in their databases.  The data is always there but the credit report does not really exist until it is asked for.  It is then compiled by the credit reporting agency based on the information stored in the credit reporting agencies file. 
Information in a credit report is supplied by lenders, from court records, credit card companies, banks, mortgage companies and other creditors including the individual to create an in-depth credit report.  A credit reporting agency or credit bureau collects and reports the credit information from these sources and retains the data until called for.  An individual’s credit history is compiled and maintained by these credit reporting agencies as needed following their procedures and legal guidelines.  The information held in the report is also used to calculate an individual’s credit score best a computer scoring model at the credit reporting agency.
There are three big national credit reporting agencies in the United States.  Experian, TransUnion and Equifax are the three biggest credit reporting agencies.  They are not the only credit reporting agencies in the United States but they are the biggest by a considerable degree.  There are many smaller, regional and even industry specific credit reporting agencies that provide clients with credit reports.  There are also many different international credit reporting agencies that operate in specific regions.
These big credit reporting agencies are the ones in which most of the attention about credit reports and credit scores is focused on because they maintain the largest national databases of consumer credit information.  The big three credit reporting agencies perform two similar basic services: collecting and reporting credit information. 
The three credit reporting agencies are independent of one another and though they conduct their business of data gathering to compile credit reports in a similar fashion they do not operate in the same way.  This is the primary reason why consumers who obtain a credit report from the three largest credit reporting agencies get a report back with some different data.  Therefore, a credit report from Experian will contain slightly different information than a credit report from TransUnion and Equifax.  Not every creditor and lending institution such as credit card companies, banks or mortgage lenders report to all three credit bureaus, leading to additional difference between the three big credit reporting companies.
The majority of the credit data supplied to a credit reporting company is on a voluntary basis.  A credit card company or lender can choose to supply the data or simply not choose to be burdened with the responsibility of supplying data files on their customers to the credit agencies.  A common example of this is small and regional credit unions.  It is likely that loans and credit accounts from these entities will not be found in a credit report.  However, thousands of creditors, lenders and other businesses do send credit information and updates to each of the credit reporting agencies, frequently once a month.
The lending institutions and other creditors that do not supply information, send updated consumer credit information to one or more of the big three credit reporting agencies.  The information often includes how much the consumer owes at that institution, the original amount of money extended, when the account was opened and the payment history.  The same lending institutions and creditors that supply information to credit reporting agencies may also be the ones requesting credit reports when a consumer applies for credit.
The three credit reporting agencies also review public records for information, such as court records from bankruptcies, foreclosures and legal judgments.  Information retained also includes recorded information about credit applications and credit inquiries.
TransUnion, Experian and Equifax now market their credit reports directly to consumers, in addition to its primary business of providing the reports to potential creditors.  The big three credit reporting agencies can be contacted at the following numbers.  Please note, in order to get your free credit report you want to go to annualcreditreport.com or call 877-322-8228.  All of the services performed by the big three offered directly to the consumer are fee based.
Equifax, Inc. is a consumer credit reporting agency that is one of the big three credit reporting agencies.  The company was founded in 1899 and is the oldest of the three agencies.  Equifax is based in Atlanta, Georgia.
For general information and to order a credit report or score directly from Equifax you can contact the company at:
P.O. Box 740241, Atlanta, GA 30374
Experian is a consumer credit reporting agency, also part of the big three credit reporting companies.
General information and credit report order information can be obtained at:
888-EXPERIAN (888-397-3742)
P.O. Box 2002, Allen TX 75013
TransUnion is a consumer credit reporting agency, considered one of the big three agencies.  TransUnion was created in 1968 and is based in Chicago, Illinois.
General information and to order credit report and score:
P.O. Box 1000, Chester, PA 19022
The Big 3 Credit Reporting Agencies Maiane Cassanego 5 of 5
A credit reporting agency is a repository of information that holds an individual’s credit or payment history.  An individual’s credit repo...

What are FICO Scores

What are FICO ScoresFICO scores are one of several credit scores that are used by lenders, banks, insurers, credit card companies and other companies to measure consumer risk objectively.  A credit score can be created by different companies based on information in a credit report, but FICO® scores are the most used credit bureau scores in the world.  According to the Fair Isaac Corporation, the creator of the FICO score, more than 100 billion scores have been sold by the company and three out of four US mortgage originations are based on a FICO score. 
Most credit bureau scores are often called “FICO scores” because most credit bureau scores used in the U.S. are produced from software developed by Fair Isaac Corporation.  In fact, Fair Isaac Corporation or FICO pioneered the wide spread use of credit scoring models.  The FICO score is available through all of the major consumer reporting agencies in the United States and Canada: Equifax, Experian and TransUnion.  But not all credit scores retrieved or sold to consumers are FICO scores. 
Credit scores, including FICO scores are derived from the data in an individual’s credit report.  Different credit scoring models can be used by different companies.  And there are different credit scores and credit score modeling programs available.  There is some significance to the fact that the FICO score is the biggest and as of now has the greatest impact in credit related decision making.  The FICO score is a mathematical algorithm that is made available to the three main credit reporting agencies in a software package.
Different credit bureau scores will evaluate a credit report differently and comparing the absolute numbers between different credit bureau scores is meaningless.  A higher number from one company does not necessarily mean it indicates the borrower is less of a credit risk.  FICO scores currently range in value from 300-850.
The credit score, whether it is a FICO score or another model, is used primarily determine a numerical valuation on the quality of credit risk an individual presents.  Credit scores are designed to be a guide to future risk based solely on credit report data.  All current credit score models, including FICO scores, evaluate the data in the credit report and quantify it with a number in which the higher the number or credit score, the lower the risk.
One bit of confusion that can arise within the lending industry over FICO scores is the different named scores that are actually developed by Fair Isaac Corporation.  FICO scores technically have different names at each of the credit reporting agencies.  All of these scores, however, are developed using the same methods by the Fair Isaac Corporation.
Like an individual’s credit, a FICO score will change over time.  As your data changes within the credit report or through the credit reporting agency, so will the credit score since it is based on the data in the credit report.
It is also important to note that since each credit reporting agency will have similar but not identical information about an individual’s credit profile, therefore the FICO score or any credit score will be slightly different from each of the major credit bureaus, Experian, TransUnion, and Equifax.  This all means that an individual will have three potentially different FICO scores, one for each of the three major credit bureaus.
Remember, regardless of credit score obtained, the score is based on the information contained in the credit report.  To change a score, you have to change the underlying data the score is based on.  Any information not found in your credit report is not used to calculate a credit score or FICO score.
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FICO scores are one of several credit scores that are used by lenders, banks, insurers, credit card companies and other companies to measur...

Cost of a Bad Credit Report

Cost of a Bad Credit Report

Your credit report can impact a many areas of your life.  Although creditors usually consider a number of factors in deciding whether to grant credit, most creditors rely heavily on your credit history.  Credit card companies, mortgage lenders, insurers and employers all use your credit report to make decisions about you and your life.  The fact is that all legitimate creditors want to know whether you are likely to be a good credit risk.  If there are inaccuracies in your credit report, it can cost you money by resulting in increased interest rates.  It could also keep you from your dream job.

Job opportunities are becoming increasingly dependent on credit reports and credit profiles.  Prospective employers are getting a credit report on new job applicants as a way to assess their character as well as measuring financial stress. 

Insurance premiums with insurance companies are becoming correlated to credit scores and credit reports.  Most insurance companies consider that there’s a association between good credit scores and fewer insurance claims, so you may get better rates with a higher score.  In worst cases, a low score could even mean fewer insurers are willing to offer you coverage at all.

Other services that may be dependent on a good credit score include deposits and agreements for gas service, electric utilities, cable service, phone and cell phone services.
At a minimum a consumer should make sure everything in their credit report is accurate and up to date to avoid the delays and problems a poor credit report and credit score can cause.  After that, if the credit report shows significant blemishes or a low credit score there are a few actions to take.

Check your credit report regularly.  Check your report with the three largest credit reporting agencies, Equifax, Experian and TransUnion at least once or twice a year.  If you plan on making a major purchase, such as a house or a car, review your credit reports at least 3-6 months beforehand.  If there are errors in your credit report, this will allow you time to investigate and correct any mistakes before they affect your purchase.

Know what to look for.  Make sure that in addition to late payment reports, you are aware of other damaging information that may be more difficult to spot.  Verify the balances, account status and the dates all accounts were opened.  These errors can have a big impact on your credit score, which can affect your ability to get a loan.

Typographical errors or mistakes in your address wont have a major effect on your credit score, so these inaccuracies are not important.  If you find inaccuracies, you can dispute them to have them removed from your credit record.  If the reports are accurate, they stay on your record for up to 10 years.

Report the problems in your credit report right away.  If you spot an error in your credit report, make sure that you report it immediately.  You can contact the creditor directly and if you can provide documentation, they will contact the credit reporting agency and correct the error during the next scheduled update.

If you are unable to work with your creditor to remove any inaccuracies, you can dispute errors directly to the credit bureaus.  Credit inaccuracies can be dispute online or through the mail.  Once you start dispute proceedings, the credit bureau has 30 days to investigate and correct the error.  By keeping your credit report free of errors, you will be ready for your next major purchase or transaction or any other service that is dependent on a good credit report and credit score.
Cost of a Bad Credit Report Maiane Cassanego 5 of 5
Your credit report can impact a many areas of your life.  Although creditors usually consider a number of factors in deciding whether t...

What You Need to Know About Credit Counselors

Credit counseling organizations are designed for people who are so far in debt that they are facing bankruptcy.  This is an important distinction.  If you find yourself with poor credit and a poor credit score but are not drowning in debt, what a counselor will suggest is what you already know: be disciplined to create a workable budget and stick to it while you work out repayment plans for any creditor with which you are in arrears.  Now if you have tried to do this with little success you may benefit from the service.
We all know how easy it can be to get off track and spend a bit more than we can afford to have a decently comfortable life.  There are times when we don't realize just how much credit card companies charge in interest and late fees.  A nonprofit debt consolidation program or credit counseling organization will work with your creditors to reduce or eliminate late payment charges and delinquent fees.
There is another point to consider before you decide to get involved with a credit counseling or repair company.  Once you are enrolled and under contract, this may show up on your credit report.  With this on your report, you will most likely have trouble working out any financing or loan until you complete the contract.  Credit counseling organizations can be a helpful service but make sure you understand what they can and can’t do.  They will not be able to reduce the vast majority of your debt, which would require an agreement with the creditor itself.  In addition, the payment arrangements they make may fall short of the contractual amount due on your credit cards and other debts.  These companies, even when they agree to waive late fees, will report to the credit bureaus the late payments that will be a result of the reduced payments coming from the credit counseling organization.  In these situations, your credit history and credit report will show increased delinquency levels and your credit score will most likely drop further.
The idea of a nonprofit credit counseling program should be to help the consumer become educated about how credit works and provide counseling to help them handle their finances.  They also provide services to help lower the existing debt wherever possible and work with creditors to lower your monthly payments.  In many cases, you will pay one monthly sum to them and they will disburse payments to your creditors.  There will be a fee for this service which will be added to your payment to them each month.
If You Want to Take the Next Step
Understand Your Rights before you look for a credit counseling company.  Most programs assess your financial situation, taking into account your monthly liabilities, expenses, and assets.  They then work with your creditors to work out a payment schedule to pay down the debt.  Once an agreement is in order, you will pay the credit counseling company a set amount each month and the company will in turn pay your creditors taking a piece of the payment as a fee.  Just because an organization says it’s “nonprofit,” there’s no guarantee that its services are free, affordable, or even legitimate.
You can expect a start-up fee and a monthly maintenance fee, and although it may only be $10-15, this can add up fast, adding to your debt.  Beware of credit counseling companies who use your first payment as the total cost of the start-up fee, which could amount to several hundred dollars.
The reason most people sign with a credit counseling company to have them work with creditors to stop those recurring fees and new late fees and penalties.  These companies may not do much more than that.  You still need to make the painful decisions to cut your expenses – like turning off the cable service for a period or selling a second car and taking the bus.  You will still pay old late fees, interest charges, and most of the original balances on your charge accounts, as well as whatever fees the credit counseling company charges.
Reputable companies can truly help those who are in danger of foreclosure and bankruptcy.  Non profit debt consolidation programs may help someone get out of debt faster or help alleviate some of the difficulty in handling credit card and debt payments as well all help educate individuals on how to handle credit and debt.   Credit counseling can help those with credit issues become more educated about debt and how it affects your life, and teach you how to stay debt free.  This will hopefully show you how to avoid financial problems in the future.  You will receive one-on-one advice from a certified credit counselor who will work with you and your budget to design a payment plan that is unique to your situation.  Credit counselors know the particulars of creditors rules and policies.  This gives them an inside track when it comes to negotiating with your creditors.
Individuals who are jeopardy of foreclosure or need to file bankruptcy can find a state-by-state list of government-approved organizations on the website of the U.S. Trustee Program, the organization within the U.S. Department of Justice that supervises bankruptcy cases and trustees.
The term “nonprofit” does not mean free.  Being nonprofit does not make them a better choice when it comes to helping you consolidate your debts.  You should always do your homework and find the company and program that is right for you.
If you’re in trouble, but not on the brink of bankruptcy, consider working with your creditors directly to create a payment plan or try to consolidate debt on one single card at a low fixed rate.  You’d be surprised at how many options are available to you if you take the time to look around and ask questions.  The conversations are uncomfortable and debt consolidation is no fun, but remember banks and lenders want your business and will usually work with you.
What You Need to Know About Credit Counselors Maiane Cassanego 5 of 5
Credit counseling organizations are designed for people who are so far in debt that they are facing bankruptcy.  This is an important ...