credit-friendly:
Tip #40: Learn to budget
One of the biggest reasons that people develop poor credit is
overspending. In many cases, this overspending is caused by a
lack of budget. A budget can tell you how much you should be
spending on each item in your life. This allows your financial
life to stay nicely organized.
Contrary to popular belief, a budget does not have to be
constricting or boring or complicated. Simply note how much
you earn each month, and on a piece of paper, write down how
much you really need to spend on savings, rent, utilities, food,
personal care, transportation, spending money, entertainment,
hobbies, education, and other items. Make sure that you
account for every expense.
Then, simply commit yourself to spending that particular
amount on each item on your list. Of course, some expenses on
your list will change each month - you may spend more on
heating bills in the winter than in the summer, for example - but
estimating can help ensure that you can meet all your financial
responsibilities.
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Tip #41: Live within your means
Many people believe that if they only had more money, they
would not have to worry about credit. In fact, this is not true.
Many people who have money - or at least have all the trappings
of money, including cars and nice homes - in fact have terrible
credit.
The secret of this is that it is not your income that decides
whether you are a good credit risk or a bad one but rather how
you handle money. You could be earning $7 per hour and still
paying your bills and meeting your financial responsibilities - in
which case you will have terrific credit.
You could also be earning $300 000 a year and be in terrible
debt and financial shape due to unpaid bills and excessive debt.
The best way to ensure that you have a good credit rating - no
matter what your income - is to spend less than you earn. That
means living below your means. If you have a very small
income, you may need to live with roommates in order to keep
costs down. If you have a medium-sized income, that may
mean saving more and entertaining less.
You may be interested to note that your income is not a factor in
determining your credit score. Although your past and current
employers are listed on your credit report - and although lenders
may be able to guess your financial status from your loan
amounts - your income does not count.
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This means that if you won the lottery today or suddenly
inherited a large sum, your credit score would not increase.
With your credit rating, what matters is how you manage your
money, not how much you make.
Tip #42: Get out of the spending habit
We are surrounded with advertisements that tell us to buy, buy,
buy. When we want to read a book, we buy it. When we want
to go somewhere, we take a cab or drive rather than walking.
Stopping spending consciously can be hard, but heading to your
local library, walking instead of taking a car, buying a used
computer instead of a new one - all can help you spend less and
save more. There are several ways you can save money and pay
off your debts faster by spending less:
1) When you head out, carry a small amount of cash with you
and leave your credit cards at home. That way, you will not be
able to overspend.
2) Stop catalogs from arriving at your house or discard them unread -
advertisements and catalogues encourage you to spend and buy when you don’t need to.
3) Do it yourself. Eat in rather than dining out. Dining at
restaurants or getting food delivered is always more expensive
than doing your own cooking. Also, do your own taxes rather
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than farming the job out to someone else. Wash your own car,
run your own errands, mow your own lawn. When you do
something yourself, you spend less.
4) Watch less television. It sounds strange, but television can
make you overspend - television contains many
professionally-created advertisements pushing us to spend and
spend. These ads are so well done that not spending after
watching them is sometimes very difficult (just what advertisers
want!). Switching off your television can help you avoid
temptation.
5) Make do or do without. While you are repairing your credit,
channel all your extra money into paying off debts and
reestablishing good credit. Make so with what you have and
avoid shopping as much as possible.
6) Buy discount or used. Whether it is furniture or shoes, you
can save money by refusing to pay retail price.
Saving your money by spending less can let you pay off your
debts faster, something that can improve your credit score
dramatically.
Tip #43: Save
One of the best ways to ensure that your credit rating stays good
is to save money each month. Whether you are able to save
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$25 a month or $200 or even more, saving and investing your
savings will prepare you for financial emergencies, will get you
out of overspending, and will allow you to build investments
that can help you in later years.
With savings at your bank, you don’t have to worry that sudden
illness will make you unable to pay your bills, resulting in dings
on your credit.
Saving ten percent of your income is a nice, reasonable goal.
You can use your invested savings to make certain that your
debts never get overwhelming. Most employers and banks will
even deduct a certain amount of money from your paycheck or
account each month to be put into investments.
This can be a very convenient way to save, as you are unlikely
to miss or spend money you have taken out before you can get
your hands on it.
Tip #44: Keep track of your money
Most people are surprised by how quickly their money seems to
be spent. This is because impulse spending and small-change
spending really adds up. Small-change spending is small
spending we do without even thinking about it - buying a coffee
or a newspaper we don’t need.
Impulse spending refers to simply buying things we don’t use or
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need. In both cases, we end up spending too much
unnecessarily, and this is a problem in credit repair because you
want to be channeling as much money as you can into savings
and debt repayment so that you can repair your credit.
For a month, try keeping a daily record of every penny you
spend - including the money you spend on phones, the money
you spend on tips, everything. You will be amazed where your
money goes. Keeping track of your money this way does two
things:
1) It automatically cuts down on spending. If you have to write
down where you spend your money, you will be much more
careful what you spend your money on.
2) It allows you to see where you waste your money and take
steps to stop the bad habit. If you notice that you always buy
the newspaper on Saturday but never read it, for example, you
can stop buying the paper on that day. Small savings can add
up over the years and can put you in good financial shape which
will be reflected in your credit risk rating.
Tip #45: Take out one pleasure and save it up
Do you have cable?
Do you subscribe to lots of magazines?
Do you build your DVD collection so fast that you can’t even
watch all the movies you collect?
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We all entertain ourselves with money, but most of us have at
least one or two entertainments that we have either outgrown or
don’t enjoy as much as we once did. Cutting that expense out
and investing the savings can put us well on our way to saving
for retirement or paying off our bills. If you give up your cable
television, for example, you can pay off your credit cards that
much faster, improving your credit score.
Tip #46: Build assets and capital
Whether it is buying a car, a home, or creating an investment
portfolio, having assets can help improve your credit score by
allowing you take out secured credit, or credit in which your
assets are used as collateral.
When you take out secured credit (such as a mortgage) you
enjoy lower interest rates and easier approval. As you repay
your secured debt, your credit score will improve. Even better,
lenders do look at the types of credit you have. If you have a
mix of secured and unsecured credit, you will enjoy better risk
rating scores as it will indicate that you have the means to repay
your debts.
Building assets and capital is also a way of building financial
stability which can help protect your credit score. If you have
assets such as savings or investments, then you have a way of
generating income or repaying debts in case of an emergency.
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You also have ready money you can use in case of unexpected
medical bills or other problems.
Tip #47: Find more ways to income
While you are repairing your credit, you will want to channel as
much money as you can into savings and debt repayment. For
this, having a second income or even just a few hundred dollars
a month more can mean that you get your credit into shape
faster.
Having a secondary form of income can also keep your credit
safe - if you lose your job, you can use the money you make
from a secondary source to repay your bills until you find
another form of employment.
There are many ways to get more income:
You can ask your employer for a raise.
You can start to sell something through the Internet or through
a company.
You can establish your own small business that can be tended
to on the side.
You can rent out part of your home to make some extra money.
-You can get a part-time or weekend job.
Whatever you do, finding an alternate source of income can help
your credit immensely.
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Tip #48: Prepare for financial emergencies
Few of us think about what would happen if we lost our jobs or
suddenly became too ill to work. The thought is simply too
terrible to contemplate in many cases, especially if we are living
paycheck to paycheck with a job as it is.
The fact is, though, that financial emergencies happen to almost
everyone at some point and they can have devastating impact in
your credit. In fact, most people who declare bankruptcy do so
because of a huge financial disaster such as sudden
unemployment, huge medical bills, a lawsuit, or divorce.
Despite this, few people plan for these problems, even though
they can happen to anyone.
If you want to keep your credit score in good trim, you should
know exactly what you would do in case of an emergency.
Developing an actual written plan can help you by letting you
take action to save your credit as soon as an emergency occurs.
Some items that could be on your financial emergency plan
could include:
1) A list of all assets you could liquidate if you had to.
2) A list of all extras or luxuries you could cut out of your life
right away if there was a problem (i.e. newspaper subscriptions,
cable television, water delivery service, Friday nights at the
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movies).
3) A list of any resources you have that could help you in case of
an emergency. Maybe you know a lawyer who deals in
financial facets of the law. Maybe you have insurance that
could help you. Maybe your employer offers a severance
package. Whatever it is, write it down. Keeping a list of these
resources will make them easier to access in case of an
emergency.
4) Other ways you could get money if you had to - jobs you
could take, things you could rent out to others.
Tip #49: Get overdraft protection, insurance on your credit
cards, or other services to keep your credit in good shape
Talk to your bank and lenders about services they offer to keep
you safe. Overdraft protection, for example, is a basic service
that often costs nothing or very little extra but which protects
you in case you withdraw too much money from your bank
account.
With overdraft protection, you do not get a “ding” on your credit
report or a charge for insufficient funds. In most cases, you get
a day or two to add more money to the account to cover the gap.
Some credit cards and other loans offer a similar service or offer
insurance which protects you in case you lose your job and are
unable to pay for a few months.
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Tip #50: Get insurance
Insurance for health, your car, your home, and for liability can
help you avoid the huge legal and medical bills that can occur
from an accident or sudden problem. For a small monthly fee,
you are covered against unexpected events that can drain your
finances and leave you with out-of control debt.
Tip #51: Get a prenuptial agreement and have a lawyer go
over all your business contracts
Most bankruptcies are caused by the fallout that occurs as a
result of business failures, law suits, health costs, and divorces.
Getting a prenuptial agreement helps to ensure that a divorce
will not adversely affect your finances and lead to a ruined
credit rating (keeping accounts separate while married is also a
good idea, as your spouse’s own financial troubles can all too
easily become your own). Having a lawyers look over
contracts can at least reduce the risks of unfavorable agreements
that can put you at a disadvantage in business.
Think Like a Lender
If you think like a lender, you can see which habits and traits
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you need to develop in order to be considered a good credit risk.
Thinking like a lender will help you understand how you must
manage your money to be appealing to lenders. There are few
tips that can put you into the right mind set:
Tip #52: Know how money works
Reading books about money and understanding how your
accounts and loans work can go a long way towards helping you
keep your credit in good repair. For example, if you know that
some loans will charge you extra if you pay off your loan faster
while others will not, you will be in a better position to make
financial decisions.
Plus, the more you know about money in general, the more
comfortable you will feel with it and the better decisions you
will be able to make, which will help improve your overall
financial state and will help you keep your credit in good shape.
You don’t need to do heavy-duty research to appreciate how
money works. One easy way to consider money is to think of it
the way you think of time. You likely hate to waste time and
you want to make the best use of it possible. Apply the same
attitudes to your financial life and watch your finances soar!
If overspending has caused you to have a bad credit score,
consider the following sneaky mind set trick: equate your money
with your time. For example, if you make twenty dollars an
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hour, then a magazine subscription of $20 will represent one
hour of your work.
Imagine an hour of your work and ask yourself whether the
subscription is worth the time you put into the twenty dollars.
Once you start seeing money as something that comes from your
hard work rather than a general “thing” impulse spending will
seem much less attractive, and it will be easier to keep your
credit card limits low and you bank account stocked up with
cash!
Tip #53: Take care of those things besides a credit score that
affect how lenders view you
Lenders will often look at not only your credit score but at other
financial indicators, such as your income, employment record,
and savings. Keeping these things in order can complement
your credit score and can help you get good overall credit. Some
lenders have their own ways of calculating credit scores, so
keeping your overall financial system in good shape is one way
to ensure that you are in good shape in all lenders’ eyes.
Be aware that when lender ask to see your credit score, the
credit bureaus send not only your credit score, but also the top
four reasons why your credit score is lowered. The most
common reasons for lowered credit scores are:
1) Serious delinquency in repaying accounts or bills.
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2) Public record of bankruptcy, civil judgment, or report to a collection agency 3) Recent unpaid or late paid debts or accounts
4) Short-term credit record
5) Lots of new accounts
6) Many accounts have late payments, defaults, or non-payments
7) Large debts or amounts owed.
Knowing that your lender sees these possible problems can help
you see the need to develop the best possible face to present to a
lender. Lenders who look at your entire credit report may get a
more positive picture of you than lenders who see only a number
and four reasons for a lower score.
Tip #54: Follow up on closed accounts
You closed a store card years ago - but is it still listed as an open
account? Bureaucratic mix-ups happen, often quite frequently.
If you want to keep your credit score good, you need to follow
up on financial details.
Whenever you close an account - whether it’s a credit account,
bank account, or utility company account, make sure that you
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get written confirmation that the account is closed and paid in
full and then follow up a few months later with the company to
confirm the closed account. This simple precaution can save
you hours of frustration - not to mention a lowered credit score.
Tip #55: Don’t move around a lot
Lenders like to see stability - it suggests stability in financial
matters as well as in your life, and makes you a better credit
risk. Plus, every time you move, you may have to change your
credit information - including switching banks. This actually
negatively affects your credit score by not allowing you to
develop long-term relationships with lenders.
Remember: Your current and past addresses are listed on your
credit report even if they do not directly affect your credit score.
Any lender looking at your full credit report will be pleased to
see that you create a stable life for yourself. Not moving too
frequently can also save you money on moving costs, which can
add up quite quickly.
Tip #56: Don’t change jobs frequently
Of course, there will be times when you will have to change
jo