Did you know that each time you take up any kind of credit or loan, or pay one back, it adds to your credit rating. Who keeps a record on you will vary according to where you live, but the three major credit reference agencies are Equifax, Experian and Trans Union. They will supply your credit rating to any business that is considering lending to you.
What Does Your Credit Rating Reveal.
All your current debts are incorporated in to your credit rating. Believe it or not there is a history of all the debts you've had in the past ten years or so, and special note is made of anything that has gone wrong. A Default (missing a payment) on any debt can damage your credit rating. Borrowing a lot before you start paying anything back will make you seem like a very bad risk, as will going all the way up to (or even over) your limit on a credit card.
It's also worth bearing in mind that the credit reports of anyone you live with may be linked to your own report, and in turn could reflect badly on you - your partner's credit rating is coupled to your own quite intimately.
How Your Credit Rating is Worked Out.
'FICO', named after the Fair Isaac Corporation, who invented it, is the most common method of coming up with your rating. Your present credit status is prioritised thus:
1: Whether you've paid previous debts
2: How much debt you now have
3: Your credit history
4: What types of debt you use
5: How many times your credit rating has been checked of late
Things that happened in recent times are given more weight than things that happened a while ago.
Your Credit Rating is Significant.
Each time you get declined for a credit card or any other type of loan, the odds are that it was because of your credit rating. Companies handing over small loans are far more probable to rely entirely on this rating than to bother checking your income, and a poorer rating will mean that you are offered a higher interest rate.
Your rating is important when you get mortgages, loans or car finance too. You wouldn't want to find a house you love only to get declined a mortgage thanks to your habit of paying your credit card bills late.
How Do You Check Your Credit Rating.
Credit reference agencies are not allowed to hold your information on file without disclosing what it is they have. If you write them a letter and pay a small fee, they must send you the full credit report they hold on you.
You can then look over your credit rating and contact them if you discover something that is incorrect. You might find an error has made you look bad or there is a mistake. They store anything you report in your file.
It is possible in some countries to sign up and get credit reports frequently for a small fee, or even free!
Check your local laws to see if this is possible.
Get more help and advice on Credit, Debt, Mortgages, Investing, Real Estate etc. From www.1stFinanceGuide.com.
This article comes with reprint rights. You are free to reprint and distribute it as you like. All that we ask is that you do not make any changes, that this resource text is included and that the link above is intact.
Tuesday, March 07, 2006
Friday, March 03, 2006
Stop Saving If You Have Debt!
People are funny. We don't always do what's best for us instead we do what feels best and try to suppress any reasons why it may not be the best thing to do. Perhaps that's why there are so many people that have both savings and debts.
It's Simple Commonsense.
It just feels better to save. In saving you feel like you are laying a foundation for the future, whereas on the other hand paying off debt almost feels like throwing your money away. You're saving that money for improving your house, or for the kids' education, or suchlike, in an account with a decent rate of interest. What could possibly be wrong with that? Plenty, if you have debts.
Don't Be Foolish With Debt.
There are pretty much no savings accounts that will offer interest rates as high as what the credit card companies charge.
Here's an example:
Say have $10,000 in a savings account at 5% per year
$5,000 on a credit card at an interest rate of 20% per year
How much money do you boast?
After as little as five years, the answer is effectively $0 - your debt will have grown to around $12,000, the same total that your savings are now worth.
It's difficult to accept as true right now, but it really is much healthier to pay off your debt. If you used half your savings to pay off that debt, you'd be in such a better place. You avoid five years of interest on the debt, but you still get to keep that $5,000 in your savings account, earning interest and after five years, that's about $6,180.
If you'd still prefer to keep your savings intact rather than using them to pay off your debts, ask yourself this basic question: is your pride worth $6,380 of your family's money?
Consider A Debt Free Future.
When you have money enough to pay off your debt, there's entirely no reason to keep it. Debt is for people who don't have the money, and need to borrow it. Debt costs money, and savings make money - you want as much of your finances as achievable to be savings, not debts.
If your savings account and credit card are from the same bank, then you're in effect paying for the opportunity to borrow your own money from them. How ridiculous does that sound?
By paying off your debt with savings you'll also be less stressed about your debts, and your credit report score will rise - getting you a much better interest rate if you ever need to go into debt again.
It can be tough. You just have to keep in mind that any money you've 'saved' hasn't in reality been saved at all. It's money you should have been spending instead of making purchases with a credit card.
Of course, it feels bad to spend money thinking that you're spending away your future - but always bear in mind that when you use a credit card to spend that same money, you're spending away your future, plus interest. As it goes, if you've got the debt, then those savings have already been spent.
About the Author
Get more help and advice on Debt, Credit Cards, Mortgages, Investing, Real Estate, etc. From www.1stFinanceGuide.com.
This article comes with reprint rights. You are free to reprint and distribute it as you like. All that we ask is that you do not make any changes, that this resource text is included and that the link above is intact.
It's Simple Commonsense.
It just feels better to save. In saving you feel like you are laying a foundation for the future, whereas on the other hand paying off debt almost feels like throwing your money away. You're saving that money for improving your house, or for the kids' education, or suchlike, in an account with a decent rate of interest. What could possibly be wrong with that? Plenty, if you have debts.
Don't Be Foolish With Debt.
There are pretty much no savings accounts that will offer interest rates as high as what the credit card companies charge.
Here's an example:
Say have $10,000 in a savings account at 5% per year
$5,000 on a credit card at an interest rate of 20% per year
How much money do you boast?
After as little as five years, the answer is effectively $0 - your debt will have grown to around $12,000, the same total that your savings are now worth.
It's difficult to accept as true right now, but it really is much healthier to pay off your debt. If you used half your savings to pay off that debt, you'd be in such a better place. You avoid five years of interest on the debt, but you still get to keep that $5,000 in your savings account, earning interest and after five years, that's about $6,180.
If you'd still prefer to keep your savings intact rather than using them to pay off your debts, ask yourself this basic question: is your pride worth $6,380 of your family's money?
Consider A Debt Free Future.
When you have money enough to pay off your debt, there's entirely no reason to keep it. Debt is for people who don't have the money, and need to borrow it. Debt costs money, and savings make money - you want as much of your finances as achievable to be savings, not debts.
If your savings account and credit card are from the same bank, then you're in effect paying for the opportunity to borrow your own money from them. How ridiculous does that sound?
By paying off your debt with savings you'll also be less stressed about your debts, and your credit report score will rise - getting you a much better interest rate if you ever need to go into debt again.
It can be tough. You just have to keep in mind that any money you've 'saved' hasn't in reality been saved at all. It's money you should have been spending instead of making purchases with a credit card.
Of course, it feels bad to spend money thinking that you're spending away your future - but always bear in mind that when you use a credit card to spend that same money, you're spending away your future, plus interest. As it goes, if you've got the debt, then those savings have already been spent.
About the Author
Get more help and advice on Debt, Credit Cards, Mortgages, Investing, Real Estate, etc. From www.1stFinanceGuide.com.
This article comes with reprint rights. You are free to reprint and distribute it as you like. All that we ask is that you do not make any changes, that this resource text is included and that the link above is intact.
Subscribe to:
Posts (Atom)
