I’m about to say something about teaching children about credit cards. And you are probably going to think I’m crazy.
Here goes …
If you have teenage children, you should give them access to your credit accounts.
Now, I know what you are thinking …
What? My teenagers can’t even pull their pants to their waists, much less manage credit responsibly.
And this is exactly why I think you should give kids access to your credit accounts.
Because most minor children never buy homes, apply for lines of credit, or purchase cars with installment loans, most have no credit. And credit bureaus assign really terrible credit scores to people with no credit. In some ways, no credit is just as bad as poor credit.
So if your kids go out into the real world without first establishing credit, they will pay higher car insurance premiums, and they will pay higher interest rates on their first car loan and credit cards. Landlords might not want them as tenants (or you might be required to co-sign), and some employers might not hire your kids.
In other words, your children will be at a disadvantage when they leave the next.
So while I might sound a little crazy for suggesting that you give your teenager access to your credit, weigh the dangers associated with not teaching children about credit cards.
Teaching Children About Credit? If you aren’t, here is Danger Number 1:
As soon as they become adults, your kids will be heavily solicited by credit card companies. They will receive offers for credit cards with astronomically high interest rates and fees. Your kids might walk by booths on their college campus, pick up a credit card application, fill it out, and agree to lousy terms with interest rates that will cost them an arm and a leg.
Teaching Children About Credit? If you aren’t, here is Danger Number 2:
If your kids don’t know about credit cards, and have experience using them, they will likely try to establish credit by using methods that don’t work. So they will end up with lousy scores, and overpay on car loans and credit cards. And, like I said, they might even be turned down for job opportunities.
Teaching Children About Credit? If you aren’t, here is Danger Number 3:
Guess who your kids will turn to when they need financial assistance? Probably you, the parent. And if they are paying high interest rates and unschooled in debt management, they will likely need to borrow money from you.
But as the old adage goes, if you give them the tools to fish and teach them how to fish, you will never need to give them fish again.
Over the next few weeks, I’ll take you through my seven-step plan for teaching children about credit! Stay tuned!
Author: br_admin
Build Your Credit Score in Five Minutes
Want to know how to build your credit score in just five minutes?
I’ve got an easy tip that you can accomplish in about five minutes…
Ask your credit card company to increase your credit limit. This will lower your utilization rate and, as a result, help you build your credit score.
You see, the credit-scoring bureaus place a lot of emphasis on your balance-to-limit ratio (also known as your utilization rate). The lower your balance as a percentage of your limit, the higher your credit score will be. Credit bureaus prefer that your utilization rate is never higher than 30 percent, meaning that if your credit limit is $1,000, your balance is never more than $300.
So when a credit card company increases your limit, be sure you do not increase your balance.
A lot of people worry that asking for a limit increase will hurt their credit scores. While it is true that your credit card company might need to pull your credit report, the credit inquiry will hurt your score only nominally, and only for a few months. In the long run, the limit increase (coupled with a balance that stays the same or decreases) will help build your credit score.
And in some cases, you might be able to ask for a limit increase without having an inquiry added to your credit score.
If you are worried about adding another inquiry to your credit request, ask the credit card company these three questions before making a request for a limit increase.
1. “Do I qualify for a limit increase without having you run my credit report?”
If you do, simply ask for the full amount you want your limit increased to. If the creditor wants to run your credit report, remember that an inquiry will be added to your credit report, and your score will drop slightly. Ask the next two questions and decide whether you want to take the chance or not. Like I said, if your request is granted, the inquiry won’t matter because the limit increase will help your score in the long run. But if your request is denied, your score will suffer for a few months.
2. “Can I request the maximum increase, or must I provide you with a specific limit request?” If the creditor requires that you provide a dollar figure to which you want your limit increase, you will need to ask the third question. If not, you can request the maximum increase.
3. “If I request too much, will you deny the request completely, or will you make a counteroffer?”
If asking for too much means that creditor will deny the request completely, you might want to start by requesting a 10 percent or 20 percent increase, especially if your credit report is going to be pulled. If the creditor will make a counteroffer, request the full amount you need to raise your limit enough so that your balance is less than 30 percent.
If your request is denied, your score might drop a little due to the inquiry. But don’t worry too much about it—inquiries stay on your credit report for two years, but they only affect your credit score for twelve months. And inquiries from several months prior won’t impact your score more than a few points. Just work on lowering your balance, which will build your credit score by lowering your utilization rate.
Credit Inquiries Won’t Hurt, As Long As …
“But Phil,” my client was saying, “I don’t want to pull my credit report. Won’t that hurt my credit score because of the credit inquiry?”
My response was, “Nope. A credit inquiry won't hurt your credit score—at least, not if it is soft.”
Let me explain …
The only kind of credit inquiries that hurt your credit score are “hard” inquiries. Hard inquiries are defined as inquiries into your credit score by a lender for the purpose of determining whether to extend you a loan.
All other inquiries are considered “soft” inquiries, and while they appear on your credit report, they do not hurt your score. So pulling your own credit score is considered a soft inquiry. Likewise, if a landlord or a potential employer pulls your report, the inquiry will not hurt your score. A lender’s inquiry might even be considered soft if it is done to determine whether to change your interest rate.
In other words, pull away! Checking into your own credit report is considered responsible behavior, and you won’t be punished for doing so.
So how many times can you pull your credit report? As many as you want. You can pull your own credit report every single day of the year, and your score won’t drop a single point. But if you have more than two credit inquiries by a lender within a six-month timeframe, your score will probably dip a few points.
Bankruptcy Options, James Montgomery
Listen to this interview to learn some great information on what to do when you are considering bankruptcy.
7 Ways to Live the Good Life on a Budget
Let’s face it, if you’re being honest, you really want more money. However, you don’t want it simply for the idea of having more actual dollars in your bank account, but to live a better more fulfilling life. Having access to money certainly allows this happen, but when you’re in the process of getting things going, it may feel like this “fulfilling life” is out of reach. The good news? No matter what your income situation is, you don’t need to skimp out on what life has to offer. If you’re looking for some fast and easy ways to start living the good life, read on…
Dine like royalty
Enroll in a cooking class or download some recipes online and improve the quality and presentation of the food you eat.
Vacation for free
Offer to housesit or house swap with a friend for a free stay somewhere different. This works really well when you have friends who live in different states.
Learn something new
Nothing makes you feel alive and like you’re on the right track quite like learning something new. Take advantage of all the opportunities to get a free online education.
Trade services
When times are tight, a lot of service-oriented businesses have to look at more creative ways to get their needs met. If you have a talent that a local service provider can benefit from, consider proposing a trade of services.
Enter local contests
You may not win, but chances are if you enter enough times, you’ll win something down the road. It may not seem like much, but a free dinner or a massage could come at just right time.
Get involved in your community
Laughter and fun are what’s really at the heart of living the good life. Local community organizations are a great way to find new opportunities for this. Consider getting involved in a local church or other organization for free events and socialization.
Look for deals
You may want to try that new fabulous restaurant everyone is talking about, but the meal may currently be out of your price range. Instead, look for coupons or special “deal” nights to help control costs. You may even want to go for lunch instead. Many local businesses offer special discounts to get more business during their non-peak hours. This can translate to big savings for you. You get the same experience at a fraction of the cost.
Share your money saving tips for others to benefit from below!
Retail Store Credit Cards: How Many = Too Many?
“Would you like to save 10 percent on your purchase today by applying for a retail store credit card?”
Does that sound familiar? Just about every major clothing and electronics store has promotion aimed at getting people to sign up for a store-specific credit card. But what you don’t know about retail store credit cards could hurt your wallet and your credit score.
In 7 Steps to a 720 Credit Score, I talk about the importance of revolving credit cards in building your credit score. Indeed, a large portion of your credit score is determined by your credit card behavior. One of the best ways to earn a high credit score is to responsibly manage three to five revolving lines of credit, which include your major credit cards (Visa, MasterCard, and the like) as well as retail store credit cards, which are credit cards affiliated with a store like Gap or Chevron.
Before we talk specifically about how retail store credit cards can hurt your credit score, let’s take a look at the method credit-scoring bureaus use to gauge your creditworthiness. The credit-scoring bureaus want to see that you can responsibly handle a number of credit accounts at the same time. Having three to five credit cards allows them to tell whether you can make regular payments and determine whether you are a responsible person. If you do not have at least three cards, they do not have enough information about you to tell whether you are reliable or not. On the other hand, if you have fifteen credit cards, they know that you could quickly get in over your head by racking up huge credit card bills you are unable to pay.
In the words of Goldilocks, three to five is “just right.”
Of course, you must also show a record of timely payments. Doing so will cause your score to increase whereas failing to make payments on time will cause your score to drop.
You must also keep a card active. Inactive cards don’t tell the credit-scoring bureaus anything about your ability to manage debt.
Though retail store credit cards will help you boost your score, they cause unnecessary problems:
- How will you keep your retail store credit cards active? If you do not need to buy a new washing machine each month, you might have a hard time keeping your Sears card active.
- If you are limited to no more than five revolving credit cards, why waste one on a card that will only be accepted by one merchant? You cannot book a plane ticket using your Old Navy credit card (but you can purchase an Old Navy shirt using a MasterCard).
Retail store credit cards have limited use. If you apply for too many of these cards on top of the Visa, American Express, MasterCard, and Discover cards that you use for traveling, meals, and other expenses, you will soon find yourself with more than five credit cards.
And there is another downside to consider. Many stores promote their store-specific credit cards by offering a 10 or 15 percent discount on same-day purchases if you open an account.
Let’s do the math and see how this adds up. Imagine that you are buying a pair of $60 jeans from the Gap when the cashier tells you that you will get 10 percent off your entire purchase—$6—if you open a Gap credit card. You figure it is a wise move, so you sign up on the spot.
Consider all the downsides:
- I should take advantage of this offer, you might think, piling a few more items in your shopping cart. Sure, you “saved” 10 percent, but you also just made a rash decision to splurge on things you probably do not need.
- You have added a credit inquiry to your credit report. Credit inquiries count for 10 percent of your credit score, so your score drops a few points. This might not be a big deal, unless you plan to open another credit card, apply for a home loan, or get a car loan in the next few months. If you do, you might pay higher interest rates, which means that $6 “savings” just cost you a bundle.
- If you do not pay this and subsequent bills immediately, you will have to pay interest
- Ever heard of retail therapy? Having credit cards in your wallet strengthens your ability to make emotional buying decisions by creating opportunities for you to charge things you do not need.
- Especially during the holidays, you will be more likely to make purchases you cannot afford.
My point is that you most certainly do not save a single dollar by opening retail store credit cards.
Still not convinced? Think of it this way: Why would retail stores promote these cards with discounts unless they know they can eventually make money off the retail store credit cards?
A final note: Upon reading this article, you might be inclined to close those retail store credit cards. Resist this temptation as closing credit card accounts could damage your credit score by lowering the average age of your credit cards. Instead, pay off your retail credit cards so the credit-scoring bureaus know you are being a responsible borrower. Then make a commitment to say good-bye to retail accounts.
How to Build Credit from Scratch
When you’re faced with the situation of having no credit, you might be surprised at how creditors treat you. It can often feel like you’ve been lumped into the same group as people with bad credit. This is because creditors use your past credit history to determine whether you are or will be a responsible borrower. If you have no past history, there’s no pattern to establish your credit worthiness.
This wouldn’t be a significant issue if it weren’t for the fact that credit has become such an integral part of our society. Employers use it when looking for potential hires, auto insurance companies use it to determine rates, not to mention the savings a high credit score can bring you in interest rates alone. The problem is that you need credit in order to have credit. Luckily, there are a few steps you can take to get you on the right track towards building credit and achieving a high credit score.
Get a secured credit card.
Secured credit cards work the same way as regular credit cards, except they require a deposit. The amount you are allowed to borrow usually reflects the exact amount of the deposit you paid or a percentage of that deposit. One common misconception regarding secured cards, however, is that they work like debit cards. This is not true. The creditor only uses your deposit as a guarantee in the event of non-payment. When you make a charge on your card, you need to pay that amount back just like a normal credit card. The payment will not be taken out of your deposit. There are a number of secured credit cards to choose from.
Only charge what you KNOW you can pay off in FULL each month.
Now that you have a card, you need to show that you are a responsible borrower. To do this, you need to make sure that you only charge what you absolutely know you can pay off each month. If you pay off your balance in full each month, you’ll avoid interest rates.
As much as the temptation exists to spend your newfound access to money on something splurge-worthy, the best use for your credit card money is to pay something you’ve already budgeted for each month. Some ideas include gym memberships, subscription services and other routine purchases.
Keep your balance under 30%.
A very little known fact is what we like to call the 30% rule or your utilization rate. When your overall balance goes over 30% of your credit limit, your credit score is negatively affected. That means if your credit limit is $500, your balance should never go over $150. In fact, it’s wise to keep it even lower because many credit card companies actual report lower credit limits than what you actually have, therefore increasing your percentage.
Pay your bills on time, EVERY month.
There’s no need to fall into the trap of creating more debt. To avoid unnecessary interest rates and dips in your credit report, make sure you pay your bills on time every single month. To make sure you’re covered, we recommend setting up automated payments. That way no matter what is going on in your life, your credit score isn’t going to suffer from forgetfulness.
Monitor your credit report.
The point of building your credit is to get a high score, so it makes sense to keep an eye on that statistic. 80% of all credit reports have errors, making it even more crucial to stay on top of things. Don’t fall victim to the free credit report sites either. When you need to get your credit report, make sure it’s giving you your FICO score.
Apply for an unsecured card after about a year.
Once you’ve had a good amount of time with good credit payment history you should be eligible to receive an unsecured credit card. Call your creditor to see if you qualify for a move from an unsecured account to a secured account. Unsecured cards carry many benefits such as higher limits and reward perks. Just keep in mind the same tips when using your credit card.
Building credit can be a slow process that requires a lot of patience. However, like most things, it will be worth the wait whenever you need to make a large purchase or an emergency situation arises.
How to Improve Your Credit Score in 5 Easy Steps
There are a variety of reasons why you’d want to improve your credit score. You could be getting ready to make a big purchase such as buying a house, or you may want to make sure your options are open in the case of an financial emergency. In fact, in today’s world, your credit score is a key element to financial freedom. In addition to higher interest rates, low credit scores can affect your life in many other areas as well. Companies run credit checks before employment, and low credit scores can affect your auto insurance rates. All of these are great motivators for making improvements, but there isn’t always a great amount of information on exactly how to improve your score.
To help address these concerns, we’ve compiled a list of five ways you can improve your credit score. Some actions may have an immediate positive result, while others will help improve your score over time. It’s important to remember that there are no fast fixes, however, your efforts will be rewarded with lower interest rates and better credit opportunities. To get started, read on…
1. Keep your credit balance below 30% of your credit limit.
Credit bureaus determine whether you are living within your means by evaluating how much debt you obtain in relation to your credit limit. This is referred to as your utilization rate. The bureaus reward consumers with a rate of 30% or lower. That means if you have a $1,000 credit limit, you will never want your credit balance to exceed $300. In fact, to be safe, it’s better to aim lower than the 30% rate because some credit card companies erroneously report lower credit limits, which would result in a higher utilization rate.
2. Make your monthly payments on time every month.
Your credit history is one of the largest factors in determining your credit score, with your recent activity weighing in considerably. In fact, your payment history makes up roughly a third of your credit score. That’s more than any other factor. If you’re at a loss as to where to start building your credit, creating a good payment history would be the best place to focus.
3. Maintain three to five credit cards and one installment loan.
Credit bureaus need to see credit history to determine whether you are a good investment. To provide this, you need to show credit activity. Having three to five credit cards that never go over the 30% utilization rate and a monthly installment loan that is reported to the credit bureaus each month will help to establish your credit habits. Keep in mind that retail credit cards are NOT a good option. This is due to the fact that they typically have very high interest rates and you are forced to shop at their location to keep the card active. If you do not shop there on a frequent basis, you may find yourself making unneeded purchases to maintain current credit history.
4. Check your credit report for inaccuracies and report them.
Did you know that nearly 80% of all credit reports have errors on them? These errors can negatively affect your score and therefore increase your interest rates resulting in higher payments. As a beginning step to building your credit, you should always get your credit report and check for errors. If you find any, you’ll want to report the credit errors to the appropriate credit bureaus.
5. Don’t close older or unused credit accounts.
Fifteen percent of your credit score is derived from the age of your credit cards, with older credit accounts giving you a better score. If you close these accounts, your average age immediate lowers and can result in a lowered credit score. Instead of closing these accounts, use them to pay small recurring fees such as Netflix or gym memberships. Then set up an auto-payment from your bank to pay the credit card a day afterwards. This way, you never have to actually use the card, however, you still reap the benefits of active payment history and an aged credit card.
For more information on how your credit score is determined, download our free eBook, What Your Bank Won’t Tell You About Credit.
20 Keys To Financial Success
Your money and what you do with are very personal matters. If managed wisely, your money can lead you down the path of financial freedom and living the life of your dreams. If managed poorly, you can spend your days in debt worried about how to make ends meet. Luckily, personal financial success can be obtained by following a few principles of good money management. Even if you’ve made a wrong turn, you’re only a few decisions away from the path to success. To help you on your way, keep these personal finance tips in mind:
- Start saving money for retirement as early as possible.
- Don’t skip out on health insurance.
- Avoid unnecessary health costs by staying healthy.
- Live below your means.
- Start saving early and save frequently.
- Building credit is good, but not every offer for credit is good for you personally.
- Always determine whether debt is going to increase your wealth or just put you more in debt.
- Keep your investments diversified. You never want all your eggs in one basket.
- Learn everything you can about credit and how to increase your credit score. The money you save from lower interest rates will more than make up the effort and time you spent.
- Learn how to budget your monthly expenses.
- If you’re self employed, charge what you’re worth.
- Keep good financial records.
- Find ways to give into self-gratification other than retail therapy.
- Don’t bet on bonuses, inheritances or other potential lump monetary sums.
- Keep control of your money.
- Find new ways to increase your income potential.
- Invest in yourself.
- Track your spending habits and look for areas you can improve or spend less.
- Make wise purchases. Shop around for the best deals and highest quality products.
Have a tip that wasn’t included? Share it below for others to benefit from!
The Secret to Personal Wealth Through Time Management
You’d be hard pressed to find someone who hasn’t heard the familiar saying, “time is money.” We all know it’s true, but at some point we’ve lost the correlation as to just how much wasted time really affects our financial growth. There’s a lot to be said about time management and its effect on your wallet. It basically boils down to the simple fact that what you decide to do with your time directly affects your personal financial growth.
When you realize this, you come to the understanding that as much care should be given to what you do with each hour of the day as you give to how you spend or allot your income. There’s a basic truth that the more value you can produce, the higher your income potential will grow. If you can produce twice the amount of value in half the time, then you’ll effectively quadruple your income potential. If you’ve been one who’s prone to pushing off organizational tasks, this is a solid argument for taking that necessary admin time to really make sure you’re getting the true value out of every minute you’re awake… and possibly even the minutes while you sleep!
How should you organize your day to take the most advantage of the wealth opportunities out there?
To make this decision, you really need to decide what you want from your day. What are your time management priorities?
- Do you need more independent time to focus on projects?
- Do you need more organization so you can double up on tasks and get more done in less time?
- Do you need help handling tasks that are taking you away from income generating tasks?
The time you spend analyzing your needs and desires will be rewarded with a more streamlined and efficient plan of action. You’ll also see what’s really important to you so it will be easier to prioritize tasks. Maybe cleaning the house yourself isn’t as beneficial as hiring someone so you’re freed up to write more blog posts or finish up more client work. It’s possible you might need to restructure your work day to find more time to work without distractions.
Whatever your desires, take time to structure an outline of how you want to spend your time. For instance, you might want to plan your schedule in blocks of time per day or even by days like the following plan:
- Monday – catch up work day
- Tuesday & Wednesday – no distraction work days
- Thursdays – conference calls and meetings
- Fridays – winding down, tie up loose ends and get ready for the next week.
However your overall plan is laid out, the point is to create something that works for you and allows you the freedom to really create more value.
What should you focus on day-to-day?
The above will help you structure your long-term time management goals, but the real action gets done on a day-to-day basis. For this, you need to break down each day by what you absolutely need to get done. This is best accomplished with a simple method that easily duplicated. Let’s face it – a sculptor doesn’t start with a beautiful piece of art. They have to spend each day focusing on small elements that will eventually give way to their masterpiece. The same is true of your daily time management.
Every night or every morning, make a list of what specific things you need to complete that day. Don’t make a huge list, just decide on three to four things you absolutely MUST finish that day. This will help keep you focused throughout the day when distractions come in. Obviously, some days just tend to snowball with emergencies and potential fires to put out, but overall you should notice a huge improvement in what you’re getting done with the simple daily task list.
Final words of wisdom…
When you’re planning, there are certain traps that can lead to wasted time. To help you avoid some of these common pitfalls, try a few of these tips:
- Always try to multi-task errands whenever possible. Don’t expend unnecessary gas or expensive time with wasted trips.
- Be honest and over-allowing when factoring in how much time you think it will take to complete a task. If you have three task to do that day and they each take four hours to complete, chances are you won’t get them all done.
- Plan out your day in blocks of time. For the most effective productivity, you need to have a 20 minute break every hour and a half. This allows you to reset and actually work for longer “optimal” periods of time throughout the day. Schedule your to-dos around these 90 minute blocks and you’ll notice a vast improvement in not only what you get done, but also the quality of your work.
- Set a timer for when you browse social media sites or you’re doing research. Both of these activities can zap your time without you even realizing it. Setting an alarm to go off in a set time will help keep you in check and will force you to do what you absolutely need to do before your time is up.
- Don’t be afraid to close the door, ignore phone calls or to just say no. Everyone always seems to want a piece of your most valuable asset. Honestly, can you really afford to throw your time away to please someone else? If you know you’ll increase your bottom line by spending another hour doing a certain task, do what you need to do to make sure that time is uninterrupted.
By now, the phrase “time is money” should have taken on a new significance! Share what you plan on doing to increase your wealth through the use of time management below!
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