Managing Credit Cards Around Christmas

Sometimes, especially if your company happened to cut back on holiday bonuses, or worse, but them out all together as many companies have done as of late with the financial conditions in this country, it can be extremely hard to budget for the spendy holiday season without pulling out the credit cards. We all know that it’s fine and dandy to pull out the plastic – as long as you plan on repaying it almost immediately to avoid that all too sinister finance charge that nails ya every time you pull out a credit card without full intent to pay it off before the interest charges kick in.

Credit card companies are not only increasing their interest rates for people all over the place, but they are also increasing their minimum payments per month, which is putting a lot of people under duress since they can barely afford the payments to begin with. Of course, Congress is attempting to minimize the inequitable practices by creditors in this fashion, but many people are actually seeing things get worse before they get better because the legislation keeps getting stalled.

In fact, as we speak now, I’m not even sure that they’ve enacted the pieces of legislation that are needed to help stop the unfair practices and help Americans get back on their feet quickly who are drowning in unfair financial debt that could be helped by more fair terms from their creditors. After all, what is “fair” I wonder, when it comes to financing American’s lives?

Since I’ve been through the wringer with the mortgage refinance process, I’ve often wondered what, if anything, is fair when it comes to a financial institution financing my mortgage. When you look at the incredible amounts of money they collect from you over the years, coupled with the time that it takes you to fall far enough behind that they can take your house with no questions, then you have to look and say “I don’t think this is really fair after I’ve made so many thousands of dollars in interest payments over how many years”.

And also, couple that with the PMI and the other fees you get stuck with, and buying a house is the most expensive thing you’ll do in your life, and it’s only offset by the fact that mortgage interest is tax deductible, and that you’re going to own something in the end, but no without paying a ton of money in interest first.

Anyone Can Be an Identity Theft Victim

With all the news coverage and seemingly sensationalized coverage on identity theft, as well as numerous safety services that prey on people’s outright fear of being targeted for identity theft, it really is a problem that is widespread. But there are also increasing ways to provide protection against identity theft which helps to keep consumers safe, and the bad guys from stealing their hard earned money, whether it be by making purchases on their credit cards or under their identity, or downright stealing money right from an account.

God knows we all need to keep what money we have right now since the economy is still in flux, and it is quite scary that anyone, rich or poor, famous or not, can be a victim of identity theft. Not only is is a hassle and time consuming to clear you name and make sure you get any money reimbursed that was lost, but also it can tarnish your credit if it’s something that goes undetected for a while until you start getting fees and over the limit charges and also late fees. It’s a good thing that most credit card companies will work with you on this stuff, but what if they wouldn’t?

Well, none other than the chariman of the Federal Reserve, who was just reappointed to another prison sentence, sorry I mean term, as Federal Reserve chairman for doing a great job previously, Ben Bernanke, was a victim of a huge identity theft ring that targeted more than five hundred people by stealing their purses, checkbooks, and other personal belongings containing valuable financial instruments and writing checks or making charges, stole his wife’s purse and wrote checks out of their checking account.

The identity thievery ring actually got around 2 million dollars from both consumers as well as financial institutions, but it was brought down and the proper arrests were made thanks to a coordinated effort between divisions of law enforcement that were equipped to handle this sort of thing. There’s no doubt, it’s still easy enough to make it worth it for large scale identity thieves, but a lot of them do not get away with it any more thanks to more sophisticated monitoring and safety measures. Hopefully we can beat it all together some day, and these thieves will learn their lesson and go out and make an honest living instead of trying to make money from stealing from others.

Why Good Credit is Even More Important Now

With the way creditors are still clamping down on their financing stores of cash, it’s more important than ever to have as good a credit score as you possibly can. And what does that get you, exactly? Well, it gets you into a club that most can only dream about, since the pool of people who’s FICO score, that little score that is so important for every credit line, mortgage, car loan and small loan you take out in your life, including the credit card limits and terms of interest rates you get, is high enough to achieve just about every great credit offer known to man, are very few and far between.

It is said that anything over an 800 FICO score is pretty much useless, because if you can even achieve a 750, which is great credit, your doors are already opened to the cream of the crop when it comes to credit card offers with low apr’s and high credit limits, mortgage interest rates that are the lowest offered at the time, and car and other small loans that are offered at awesome terms that most of us can only dream about. It means basically that you get things a lot cheaper than all of us average schmoes out here that are just trying to get the best deal we can with only mediocre or “good” credit.

Essentially, even if you don’t make a lot of money, if you have a great credit score, the world is pretty much your oyster when it comes to the financial and goods purchases that you can make at excellent terms that are beneficial to you. Some of the ways that you can improve this FICO credit score are a lot more easily said than done, especially when so many are losing their jobs, getting cut back on their salaries, or are having a hard time in sales jobs that rely on an essentially nonexistent customer base since consumer’s wallets have been on lockdown for months.

One of the first things to remember for your credit score is to ALWAYS make sure you pay your bills on time. This is one of the principal things they look at when determining that four letter score, and if you are religious about paying them on time, you will benefit immensely with the credit companies. If you don’t have a reminder system to make sure you’re paying on time, set one up.

Another rule of thumb for good credit is to make sure you aren’t constantly opening new accounts up, and also to make sure that you aren’t maxing out older accounts, and using all the credit that’s available to you. Also make sure that when you stop using an account, you keep it open rather than canceling or closing it out.

Disturbing Truth Behind the Majority of Bankruptcies

A fact that I read recently really troubled me. It troubled me because I felt for these people who had to claim bankruptcy, one of the most emotionally devastating things anyone has to do in their lives, which can destroy relationships and ultimately create depression and unhappiness, had to file it because their medical bills were sinking them to a point where they couldn’t pay them any more, or couldn’t pay their other bills because their medical bills were too numerous. This, in the land of opportunity and what is supposed to be one of the richest places in the world, economically speaking, is a travesty.

This really shows that our health system is in desperate need of an overhaul, and that Americans are being fleeced if they become seriously ill, so much so that they cannot even continue to pay their bills or have the same quality of life they had before they got sick, because of the heavy burden of thousands of dollars in bills that come from hospitals, testing facilities, medications and all the other stuff that goes with keeping a person healthy or treating a disease and preventing them from dying in the modern medical world.

While we often mistakenly think of bankruptcy as a last resort for people who have mismanaged their money of overspent on items they did not absolutely need, this enlightens us that the majority – over fifty percent, is through no fault of their own, only that they are trying to take care of their health and have maybe been struck with an unfortunate illness which requires a lot of expensive medical care and follow up. Diagnosing and treating disease is positively cost prohibitive and astronomical these days.

Even if you have good health insurance, you can find yourself with thousands of dollars in doctors bills if you have had a bout with a serious illness. So much for the American dream of getting a house and spending it on things that keep the economy going. I think that if the Obama administration can address this problem of horrible health care, then maybe it can have an economically healing effect.

Surprise Expenses and Protecting Your Credit

It’s always hard when you think you’re getting ahead and something major sort of explodes into a big bill that you totally weren’t expecting, nor did you fiscally plan for. In other words, you didn’t have one of those cool “emergency funds” that everyone seems to talk about having that’s so important and yet no one I know seems to be able to actually afford to build up since they pretty much live paycheck to paycheck. Heck, I consider myself to be very responsible when it comes to finances, but even I don’t have an “emergency fund” per se, instead I just try to make sure I budget so I have enough “cushion” in the account that I use to pay all my bills, and living expenses from.

Financial gurus like Suze Orman will tell you how important it is that you have an emergency fund set aside at all times that consists of about six months of mortgage, living expenses etc. But how many people can realistically do this when they can barely pay their bills as it is? Or, should I say, how can most Americans discipline themselves enough to save that kind of money without having to dip into it before it reaches that six month cushion? It’s a feat much easier said than done, that’s for sure. And like I said, I don’t consider myself a slouch when it comes to self discipline and finances, but even I have had a really tough time coming up with a whole six months in an account that is set aside specifically for emergencies.

What constitutes a financial emergency, exactly? Well, it can be things like something that goes wrong with your house or your car. It can even be a huge unexpected Dr. bill that you weren’t exactly banking on paying. Even with insurance these days, you still have to pay a lot out of pocket if a major health issue comes up. This is why hospitals and doctors are required to offer payment plans, because they realize that not everyone can pay off astronomical medical bills because they are usually considered an extra emergency expense.

A great example of an emergency expense for me is that our septic tank recently needed to be drained, and although I had planned on paying $250 to get the tank drained, it ended up being another $250 to replace the pump that had broken and then another $175 to do a finding fee because the plumbers couldn’t find where the septic lids were when they dug around in the ground, making that part of it an unforseen and unplanned for expense. We also happened to have our income taxes due since we pay them quarterly, so it is an example of an unplanned expense that had to be dealt with.

Knowing Your Credit Score Can Save You

This is a day and age where your credit means everything. It means the difference between getting or not getting the house you’ve always wanted to own, the car you need to get around, and the extra things in life that make it pleasant and enjoyable. Your credit score is vital to your financial future, and not knowing what’s on there is dangerous because if you don’t know something is creating a blemish on your record that might be the difference between getting an important loan and not getting it, how are you going to be able to take care of it?

I have the perfect example actually. Before I got my free credit report for the first time, I had no idea that there was an outstanding bill that was out there for a Dr. appointment I had about seven years ago. I had moved after the bill came to my old address you see, and I had no idea that this bill was still outstanding because the bill was never forwarded to my new address, even thought I had filled out the forwarding paperwork at the post office.

Naturally, when I saw that, I called and had it paid and taken care of right away, but before I had learned that you could get free credit scores, I didn’t have any way of knowing that creditors were looking at this blemish as a negative aspect of my competency to pay them back in the event they were to extend credit to me. I had purchased a car prior to this, and perhaps I could have gotten a better interest rate if I had known about what was showing on my credit report, good and bad, before I settled the loan.

You see, not only does your credit history determine whether lenders will even consider loaning sums of money to you for purchases big and small, but it also almost always plays a huge determining role in what kind of terms you get on your loan. This means what kind of annual percentage rate they are going to give you as a “fee” for them lending you money, also known as your interest rate. Do you know how many thousands of dollars you can potentially save in interest on a mortgage loan or even any other standard installment loan by simply having stellar credit and a clean history?

It’s mind boggling actually, and it only hammers home the important of keeping up with what your credit history is and if there are any items on there that could be seriously hampering your chances at getting great APR’s from lenders. Not only that, but of getting a loan at all to be honest. Many creditors in this day and age are (understandably) getting more and more stringent about their terms of acceptance, and the bar is being raised on the important of a good credit score.

I guess you live and you learn though, I was younger then and have since been schooled in the financial importance of your credit history. You could have all the cash in the world, and your credit would still be important. You can’t open a business, buy a high ticket item, or sometimes even get a credit card with a high limit and low interest rate without having at least good credit, and if you don’t have the tools to attain that by getting your free credit score, then you understandably will not take care of the items that are creating a bleak outlook for your credit worthiness to lenders in a timely fashion so you can repair your record and get on the road to extreme creditworthiness.

Consumer Spending Casts Doubts on Recovery

It seemed for a while that everything was smelling like roses when it came to the economic recovery that has been so hotly anticipated. Not all good news of course, but we had people like Ben Bernanke saying that there were signs of life showing, which to me was a breath of fresh air after all the other negative nellie news. However, there’s a huge difference between glimmers of life and the recovery that we really need right now.

My first thought when I hear pseudo positive news like this is “gee, we pumped billions of dollars in to these financial institutions with a huge recovery package, shouldn’t we be showing a little more than glimmers of hope from that?” Call me a total cynic, but I feel a little like sunshine is being blown up our collective you know whats. And I fear I may be right and a recover is much further down the road than once thought.

First of all, the company I work for, which is a Fortune 500 company which shall remain nameless, just had a RIF, or Reduction in Force again, and I keep hearing about more and more job losses, which take a long while to recover from in and of themselves, and second, the news just came out that consumer spending is not improving, which is another propeller to a healthy economy that quite frankly just isn’t happening right now.

Consumer spending is one of the key elements to get this economy moving again, and people are keeping their money in their pockets, which will do them good individually but of course will keep our economy stalled as well as our jobs in the minus zone. This means that consumer confidence is still no the brink, and that we need to get that back in order to get people spending. People are having their credit card limits reduced, having a hard time getting credit in the first place, and there is still a relative credit freeze going on, which means people can’t buy on credit, the former American way. Even credit cards for bad credit are getting harder and harder to come by.

That’s a little tough when we can’t even seem to turn on the news every day without hearing of massive layoffs, how hard it is for people to get jobs now, and we experience the same fear and doom at our jobs individually. I know at my job right now there is a large fear that you may “be next” to reduce costs for a company, and the more you make the more at risk you may be. Once we can get over that fear is when our economy will really look up, until then I’m convinced we are still in trouble.

Just Got My Annual Free Credit Report

Did you know that now you are supposedly entitled to three free credit reports a year instead of the previous one a year? I did not know this had changed, because last I heard, it was just one, and when I did a little reading in an unrelated article, it said you are now entitled to getting three a year from any of the big suppliers like Experian and Transunion, per year.

It’s a very basic report though of course. It only tells you certain things, and I’m sure the pay services tell you more useful information, but if you’re just looking for a very basic report to see if there are any issues you can fix with your credit before applying for a loan or going to rent a place out or something else where your credit is run, then the free one should do the trick for you since it will tell you of any flags on your report. Free credit score checks are a great resource for spot checking your credit and getting any issues resolved that you might now even know about.

I went to AnnualCreditReport.com to get mine, since this is the site that helps consumers go through the motions to get their free one, but it does mention that you get one free one a year, so now I’m unsure of the other information that I got about three free ones a year, that may not be right after all, unless they only advertise one but you are actually entitled to three.

I got my credit report through Experian, and found to my delight that there were no issues and all the open credit accounts, loans and lines of credit I have that are still open are in good standing and that there are no issues I need to fix. Now, what it doesn’t tell you is your FICO score or any numbers that are actually used by the companies that will extend you credit when you need it, that could definitely be useful information that you don’t get through the free version, and may have to pay for or find an additional service for.

Here’s what your free credit score shows you : All open accounts, who they’re with, what your monthly payments are to them, how much you have in an available balance with the credit line, and also how much you have left to pay off in your balance. Here’s how accurate that is, I literally had just made a car payment the day before and had a new balance, and it had already shown on my credit report as the newer balance, so they must send the information quite quickly over to the credit vendors.

It will also highlight to you any companies to whom you are on record as owing money to, and any potential red flags that can alert you to someone you still owe that you have been sent to collections for, which of course adversely affects your credit.

What is the Debt to Limit Ratio?

This term was a new one to me, but it is actually one of the most important financial terms if you’re interested in knowing the ins and outs of your credit score, and how certain items and happenings may impact this vital score, if you go to get a home mortgage loan or happen to need credit for some other major purchase such as a car or home improvements such as an addition or other major home improvements that require large amounts of capital.

The term I’m talking about is the “debt to limit ratio”, and what it means is how much, out of your total available credit have you used thus far? This means that yes, credit card and other companies are looking at not only whether you’ve ever surpassed your credit limits on lines of credit and credit cards, but also how close you are to maxing them out. So essentially, it doesn’t matter if you haven’t maxed your card out or even gone over the limit, they actually look at how close you are to your various limits as a means of determining what type of credit risk you are.

Take for example, you have a $10,000 total credit line through various banks and credit card lenders. You have spent $9,500 of that money though, so this means that you have used most of it and have not made much progress in paying it down. This is looked at by lenders as a higher risk loan or line of credit, and therefore in response to that higher risk what do you think they will do?

Well, of course they will either charge you a premium annual percentage rate for taking on a larger risk in their eyes, or increasingly many lenders are saying no to these loans that they view as a higher risk of not being paid back, not being paid timely, or of being a poor risk in the near future as far as ability to pay the loan or line of credit off.

What you can do is make sure that first of all, you do not have a whole lot of credit cards floating about out there. This means that some of your favorite airline miles credit cards, gas credit cards and other special interest credit cards that you may like to use, such as a retail store card, should either be paid off every month to avoid the breaching of the credit limit, or you should just use them very minimally.

What I find works best for me is that I use primarily one major credit card, which happens to be my favorite one, the airline miles card by United, and when I do get new retail cards, for example I currently have a World Market credit card and an Express credit card, I make absolute certain that I pay those charges off every month so that not only do I not incur additional charges for the interest on these items, but I am also watching that my debt to limit ratio is not reaching anywhere near it’s maximum capacity for credit.

This means that when I do finally go out to get a loan to get a deck put on the back of our house, I won’t need to worry about this aspect, the debt to limit ratio, messing up my chances of getting the loan in the first place, and also of getting a good APR if I do get it.

Net Worth Calculation

Well, I’m not really sure sometimes if reading these help yourself, millionaire-aspiring types of books if helpful to the ego or the self perception, and this is one of those examples, although I will say that it has made me realize that if what they say is true, and the calculation they have you run to see what your “net worth” should be at a certain age is correct, then I’m more than a little behind – along with most of the world!

According to the popular best selling book “The Millionaire Next Door”, their equation for what your net worth should be is your age, divided by ten, then multiplied multiply that by your yearly income. The number I came up with makes me fall about 50% short, maybe a little more than that, however it doesn’t really account for all variable either and is just a simple equation.

What I mean is, does that really mean that I have to have that amount saved to live the same or a better lifestyle that I’m living today when I retire? And what about if my salary that I pay myself has gone up incrementally higher every year? Am I punishing myself for those years that I wasn’t making nearly what I make now? So, if my income went up 30% in one year, I’m still sticking myself to that high number that I should have because this last year I happened to make a lot more money than I had in the past few, and was then able to save a lot more?

While I do have these questions, I still think the books’a good read and really drives home that the people who become millionaires are the ones with self discipline who don’t just spend every cent they make. Saving and investing are pounded into your head again and again, and rampant consumerism is definitely discouraged by the authors, which I agree with and am striving to become more like, because I don’t know about you, I’d like to live the same lifestyle I do now or better in my golden years, and maybe even be able to help out some family members or friends here and there if I can.