Another Case For Emergency Savings – Credit Score

Emergency Savings Bank

You know you need emergency savings right?

Should something come up where you need money quick you want to have emergency savings handy to help take care of the situation.  Well here’s another aspect to think about:

You need emergency savings to protect your credit score!
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My Experience With myFICO – Review

myFico Scores

We were real close to closing on the sale of our co-op.

As result we needed a place to move to.  These days landlords and realtors tend to ask for a recent credit reports and scores in order to rent from them.  Rather than pay each time we find an apartment we liked, we decided to check our credit reports and scores ourselves to have on hand if needed.  We were also curious to see our credit scores and of course we wanted to make sure our credit reports were accurate.
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Credit Scores Matter More Than You Think

credit-or-cash

Credit scores are important when you want to borrow money or get a new credit card.

They’re important when you want to rent an apartment or a house, since the landlord will usually run a credit and background check on you before they’ll hand over the keys.  If you thought all those people checking their free FICO credit score were wasting their time, you might be surprised to hear that it affects more than loans.

If you thought the importance of your credit stopped there, unfortunately, you’re wrong.  There are several places where your credit score and your credit history can have an affect, even though it has nothing to do with you borrowing money.

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Never Mind A New Economic Stimulus Package – Save Yourself!

There’s been a lot of talk in the news about a new economic stimulus package.  Some are talking about a new one being approved this year while others speculate that it won’t happen until President-Elect Obama takes office.  There’s been talk that a new economic stimulus package would be more infrastructure and not checks as the last package was.  And there definitely has been a lot of talk of whether we even need a new economic stimulus package; questioning if it even makes a difference.  Here’s what I say:

Never mind a new economic stimulus package – Save yourself!

Don’t count on the government to come through with legislation to help you make ends meet.   That attitude will never get you ahead.  You need to take matters into your own hands.  If you are in a bad financial situation you need take control and ownership of the problem and fix it yourself.

Here are 12 ways you can take matters in your own hands and save yourself:

  • Make sure you excel at your job.  Unemployment is the highest it’s been in quite a while and I’m sure there will be many more layoffs to come.  Don’t be the robot at work that does just enough to get by.  Get yourself interested and make yourself valuable to your company.  Don’t just get your job done – get it done well!  If layoffs are coming you may be able to save yourself from the chopping block.  Hey, maybe you could even get a promotion?
  • Build networking relationships with friends and co-workers.  Sometimes, as unfair as it seems, it’s not what you know but who you know.  Keep up with co-workers when they move to other jobs.  They can be your foot in the door if you leave your current job.  Stay in contact with friends as well.  Even if they don’t work in your industry they could prove to be a valuable contact.  Network!
  • Pay your bills on time.  Lenders are getting shy about giving out their money these days.  If you pay late you may find your interest skyrocketing.  Universal default allows one credit company to raise your interest rate if you’re late on a different company’s card.  A late payment can make all of your credit cards have high rates.  If you aren’t paying off your balances every month you can find yourself sinking faster into debt.
  • Put money away for emergency savings.  Really you don’t know what the future holds and as the saying goes: “when it rains it pours!”  What happens if you find yourself out of a job?  Then the car breaks?  Then you need a doctor’s appointment?  Hopefully you don’t need your savings but put yourself in good shape by having savings in place.
  • Make sure your credit report is clean.  Errors on your credit report can be costing you in higher interest rates on your credit cards and loans.  Make sure your credit report is accurate.
  • Check you credit score.  Your credit score is like your code of honor among credit agencies.  A low score means higher interest rates and could also mean you won’t get a needed loan or credit.  Credit scores are also used in housing and in job hunting.  Get that score up!
  • Cut costs.  Remember that emergency savings?  A way to help build that up is to cut costs.  Cut a few corners here and there and you can find yourself with significant savings!
  • Analyze your tax withholding.  Are you paying too much?  Pay what you need to and no more.  Many like to get a big tax refund but you’re better off having that money in each of your paychecks instead.  You don’t earn any interest when the government is holding your money!  Adjust your tax withholding so you maximize your paycheck.
  • Re-evaluate your holiday spending.  The holiday spending frenzy is starting.  Don’t get caught up in the current!  You don’t need to spend exorbitant amounts on every person you know this holiday season (here’s a challenge: see if you can keep a $100 holiday).  What really the point in spending so much if it puts you in a bad financial situation?  Budget what you can spend on gifts and don’t go over.  Make sure your budget is within reason of your financial situation (don’t spend more than you have!).
  • Go to school.  Yes, school is an expense.  But taking some extra courses or pursuing/finishing up a degree can help make yourself more marketable to employers.  This can be as simple as taking an advanced Excel course to working on a higher degree.
  • Work on building alternate sources of income.  Try your hand at blogging.  Work on developing a hobby that could earn money such as photography.  Other streams of income are a good thing, especially when money is tight.  And you never know, what you start could develop into something bigger.

It always sounds nice when the government offers to give us money back but we have to remember there’s a price to this.  It could mean less services somewhere else or more taxes down the line.  Remember the money has to come from somewhere!

Don’t hope the government will do something to ease your situation.  Get a hold of your finances and take care of it yourself!

What other ways could we take financial matters in our own hands?

Buying A Car – Know Your Credit Score And Get Financing Before Hand

Monster+Car+Sale

A few years ago I set out to buy my first car.

This was a big deal for me, it was to be my most expensive purchase as well as my greatest debt.  Thankfully I was able to get a lot of advice from the site The Motley Fool (check out their steps to buying a car).  Even if you don’t follow each of their steps I think you will find their information useful.

I don’t want to go into what my whole car-buying process was like.  That might be too long a post (there was much drama but that’s for another time).

What I want to discuss is knowing your credit score and getting financing before-hand.

I knew I needed to check my credit report and score before making a big purchase.

 

I purchased all three reports and my score online.   I was surprised at what I saw!  I expected to have a mediocre score due to past late fees and debt but what I found was that my score was actually very good.   I guess my efforts at reducing my debt and transferring balances to 0% cards helped.

With my credit score in hand my next step was to secure financing.

Included in my credit score was a description of how the score was determined as well as what kind of credit I could expect.  I applied for financing through an online bank and received a check to fill out when the purchase was made.  Due to my credit score my interest rate on the financing was favorable and below the average for a car loan.

Credit_report_history_225I don’t know how many of you have purchased a car but you may not know that you aren’t done negotiating after you have figured out the price of your car-to-be.

Oh no!

You spend your time and effort haggling over the car price with the sales person and maybe the sales manager and you finally come to an agreeable price and you let out a sigh of relief.  Finally, all I have to do is pay for the car and it’s mine!

Well at this point the sales person brings you into the office of the finance manager!  Sitting in the manager’s office, he looks over my forms and tells me I can get financing for X percent and goes into what I need to sign (it’s in his interest to give me a loan with as high a rate as possible).   “Whoa,” I say.  “I know my credit score can get me better financing” I tell the manager (keep in mind I already have financing in place).   The manager looks at my credit report and tells me I do have a good score and offers me a lower interest rate.  This rate is still higher than my outside financing!  It’s then I tell him that I already have financing so I don’t need to finance through the dealership.  Wanting to have my debt through his dealership he then offers me a rate about half a point below what my outside loan was.  I accepted the new rate and was finally able to buy my new car.

If I didn’t have a loan already and didn’t know my credit score before hand I would have paid significantly more for my car!

It would have been very difficult to negotiate at this point without those two pieces in place.   Having my credit score and a loan in place allowed me this:

  • I knew what kind to interest rate to expect.
  • I was able to get a rate lower than the financing I already had set up.
  • I saved money.

Finally

Remember, the price you negotiate with the sales person is not what you are paying for the car (unless you’re paying in full of course).  You have to add in the cost of your loan.  When you go into a major purchase you need to have as many tools and as much information as possible because you can be taken advantage of and you might not even know it.

Make sure to check your credit score and know your financing options before-hand!