Prime Rate Credit

After deliberation, and weighing of various options over concern of inflation, the Federal Reserve decided at their May 10th closed-door meeting to raise the federal funds rate to 5%, which is the highest it’s been in 5 years.

The Federal Reserve started the campaign to raise the rates after concerns of inflation, to tighten credit in June of 2004.

Newbie Fed chairman Ben Bernanke decided to stay open to the possibility of additional rate hikes “in view of the risk that the outlook for inflation could worsen,” according to public meeting minutes.

The decision to ultimately boost the rate by one quarter point was unanimous, and won out over not raising the rate at all, or raising it a half point, so it’s what you might call a “compromise”.

The reasons cited were primarily to keep inflation in check as well as help economnic growth and expansion in the financial service sector.

The fourth tip I have for improving and maintaining a good credit score is to create a set spending budget for every month, considering what you plan on bringing in for that month (this usually doesn’t change for most salaried people, but may change if you are a commission employee or a salesperson of some sort).

Sit down, with your spouse or your family if you have one, or just yourself if you don’t and write down all of your earnings, after taxes, that you will definitely make for that month. If you have money that may be coming to you that month, but it is not a sure thing, do not include this at this point.

The point here is to make sure you can budget what you will spend on any line of credit or credit card, so that you may pay the balance off in it’s entirety for that month. This is important if you want to remain as debt free as possible.

There are going to be times when this just isn’t possible I realize, but the more strict you can be with your credit spending guidelines, the less stringent you have to be at the end of the month when it comes time to pay that credit card balance off. If you can’t then we all know what that leads to : Stress and Anxiety, which we can all do without.

Another tip, which seems very “common sense”, but is actually key in keeping good credit and building good credit from virtually nothing, is to pay your bills on time, all the time.

Paying your bills in a timely manner is important because some companies report late payments as well as just plain old delinquencies to the credit bureau, who is in charge of your individual credit report.

A system that I’ve found works very well for me is to keep track of them either on a written list, which I keep in my purse with me at all times, usually in my checkbook, so it’s easily accessible, of all of my bills for the month, when they are due, and mark them off when I’ve paid them so I know I don’t need to worry about them.

I then write down the same bills again the next month, and start with a new list, and do it allover again. This way, I know EVERY MONTH I am paying my bills on time. Not only does just doing this one simple and obvious thing help dramatically improve your credit, it also prevents you from having to pay those silly late fees on credit cards and phone bills. Heck, I think even my phone company now charges a nominal late fee in the form of about $.20.

The credit cards are the worst because many of them charge anywhere from $30 to $40 just for being late on one month’s credit payment. This can really set you back, especially if you’re only able to pay the minimums on your cards!

Remember late payments and missed payments are an almost fail safe way to damage your credit, and we all know that repairing our credit takes much longer and takes much more gumption to correct than it does to mess up.

Take care of your bills on time, it will save you a lot of headaches and a lot of wasted money in higher interest on loans that you will need to take out later in life.

Most of us would love to pay off all of our outstanding credit - there’s just one little problem - we don’t have enough “disposable income” to actually accomplish that feat. Below I’ve put a link to a really helpful salary calculator that I found. I think it’s a powerful tool to see how much you should be getting paid for your skill set and knowledge, or any degrees you may have, as well as how much your specific geographic area sets these salaries at.

Yahoo Salary Calculator

What are secured credit cards? I found myself asking this question, although I knew what “secured” meant in general, as related to the financial and lending industry - it meant you had to put up some sort of “collateral” in oder to secure a line of credit from a bank of lending institution.

So for example, you want to secure a line of credit or a credit card for whatever purpose.

You may need to sign over your vehicle or a portion of your home equity in order for the lending institution to guarantee they would have something of value in the end if you failed to pay off your debts to them as promised.

Secured credit cards are really no different of a concept.

Here are the definitions of a secured credit card, as defined by lending institutions and authorities in the financial industry themselves :

A secured credit card is a credit card which is secured by a savings account that has been established in advance by the individual borrowing the money.

The amount of money in the account usually directly determines the lending ceiling on the credit card. These types of secured accounts are very low risk for creditors since they are guaranteed to come out with something, and are much easier to obtain because of that fact.

OR : A credit card secured by a savings account where the amount of credit extended to the borrower is equal to the amount of savings in the account.

If you haven’t already done so, you MUST open a checking account. When creditors are looking at the variables that make an individual a “qualified borrower”, they are looking for a good, steady, established credit history.

A checking account history shows that you have responsibly maintained (hopefully without overdrafting) a checking account, and can be held accountable for maintaining and keeping track of how much money you spend.

It also shows a steady income history, since they can clearly see how long you’ve had an income and have been able to deposit money, write checks, and so on and so forth. Without a checking account or any established credit, ie credit cards and loans in your own name, it can be very difficult to get a car loan or a personal loan, or even a credit card for that matter - at least one that isn’t “secured”.

If you can’t get a checking account, try going to a local retail store and applying for their in store credit card, or even a gas card, which are reportedly fairly easy to get.

This may seem like starting small, but sometimes you have to start small to move on to the bigger leagues of credit - ie buying a house and making major home improvements, small purchase loans , and other larger loans for houselhold items or necessities.

Tip # 1 is to know where you are currently with your stance in good credit. Order a credit report. A lot of companies now will provide a free credit report, and options to continue to receive your credit report at designated intervals for a nominal fee or membership (ones I’ve seen are generally yearly).

Ordering your credit report can open your eyes to a lot of things you may have forgotten about that occurred months or years ago, and had no idea was affecting your good credit rating.

Credit Reports and the Importance of Reviewing for Errors and Ommissions :

By doing this, you allow for the removal of ommissions and errors that may be present on your credit report, and to pay any old debts that you didn’t know you still had out there, like an unpaid balance or delinquency that can negatively affect your rating, and then affect the rate you get from the next lender.

The funny thing is, many times people will go in for a loan or a mortgage and only find out then that they have an outstanding delinquency or unpaid balance that they weren’t even aware of. Then that’s when they take care of it, but the problem is the damage has already been done. Good part is, going forward they’ve wiped that little blemish off their credit history.

It’s important to note the long term affects on your credit rating and report that not paying something has. Negative payment information, like consistently late payments (usually a loan company will report late payments after so many, or if they’ve been considerably late, delinquencies, liens, and any financially related judgments against you, should be dropped 7 years after they’ve occurred or were reported.

On the other hand, bankruptcies, a much more serious and not so easily rectified financial and credit issue, can stay on your credit report for up to 10 years.

After you’ve reviewed your credit report, if you find errors, there is a process by which you may ask the credit bureau to investigate what you’ve deemed as errors listed on their provided reports. You can usually use a form that’s included if the credit report was mailed, or if you order your credit report online, you are usually provided with a web link to rectify the problem, or at least have it investigated to see if it is in fact legitimate.

Forecasts for the Prime Rate - which is the best going rate you can possibly get in a given time period, are usually given by financial forecasters and banks about once a month. Yep, the Prime Rate changes that often.

It just goes to show the true volatility and dynamics of the financial and lending industry. Below you will see the most recent forecasts - which means they are estimates.

Why Knowing the Prime Rate is Important

Knowing what you’re getting into, and what the rate is that you would be getting a great deal at is important because it allows you to go into the lending game as a knowledgable consumer who knows a good deal when they see one. Basically, it helps prevent you from getting a raw deal on your loan.

Prime Loan Interest Rate Forecast for the Next Few Months in 2006

May 2006 - 8.0
July 2006 - 8.0
August 2006 - 8.25
September 2006 - 8.50
October 2006 - 8.50

We all know that in order to get the best loan rates, mortgage rates and general loan rates including car loans, you need to have good credit and be deemed a good risk so that the lender will place a higher value on your business (they know you are more likely to pay them back, and in a timely manner if you’ve established a good credit history).

So, the next few posts are going to be on what you can do to establish and maintain good credit, so that you pay a lot less in the future for both long term and short term loans, mortgages and credit cards. I have to admit, I’m going to have to do a little investigating, as my knowledge in this area is just about the same as the average joe on the street.

There are some ways to building good credit that aren’t all common sense, or common knowledge for that matter. We’ll discuss those in the coming days.

I was just reading about the 26.5 million veterans whose records have been stolen and possibly sensitive information compromised, such as their social security numbers, which can basically get you a loan, credit card or other purchasing powers fairly easily today.

The worst part is, breaking news is saying that these identity thefts were kept secret for days before the press got ahold of the story. The good news is, the thief may not even have bad intentions, although I’d be willing to bet someone who steals information would have no qualms about selling that information to the wrong people.

The FBI has launched a full investigation of the crime, and is hoping to have some answers for these people soon. With the publicity about identity theft, and the increasing importance of sensitive information such as SSN and other personal information due to online buying, and other forms of buying where a person does not need to be physically present to make a purchase, identity thieves are getting more and more creative in how to steal and use to their benefit, other people identities.

It’s even happened to me, although it wasn’t really a case of a stolen identity in the sense of personal information, but my Paypal account got hacked once, and someone made several charges with my account without my knowledge or permission.

To my relief, paypal and my backup credit card caught on to the suspicious activity and did not allow the last few transactions through, but it taught me a lesson that nothing is safe any more.