Tag Archives: credit score

How to Make Realistic Personal Finance Goals

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According to Kiplinger, every person needs a steady income, financial reserves, and insurance against catastrophes, whether that’s formal insurance or a large savings or investment account. Whether you already have those things and you want to work toward a more rewarding financial future, or you’re nervous that you don’t have one or all of those things, you’ll need to set financial goals to get where you want to be.

Regardless of your current life stage, your financial goals will be dictated by your life goals. Whether you want to retire early, send your children to college, or travel more, you will need to manage your money well in order to plan for your future. In addition to developing a solid emergency fund, you may plan to have a wedding or purchase a house soon. Automatically depositing a chunk of your paycheck every week or month is one way to pay yourself first and plan for these goals.

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Setting aside money for specific goals is a good idea, but how do you decide how much to set aside, and how often? That depends on your long-term, medium-term, and short-term goals. Long-term goals may be that elusive retirement, while medium-term might be making a large purchase like a vehicle or a house, and a short-term goal might be paying off that pesky credit card. To meet those goals, you need to make them even more detailed and specific.

Applying the SMART method to your financial goals is one way to get a clearer idea of what you really need to do to make your money matters work for you. “SMART” stands for Specific, Measurable, Achievable, Realistic, and Time-Limited.

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The “specific” characteristic directly addresses the thing you want your money to pay for: the house, the college degree, or the new car. It is important to make your goal specific because then it will have meaning. “Measurable” means applying a specific amount to that goal, such as $18,000 for the car or $30,000 for the down payment for your house. Find out how much you will need to reach that goal and apply that amount to your goal.

To figure out whether a goal is “achievable” is a big challenge, and sometimes very closely linked to the “T” in SMART. A financial goal is only achievable if you give yourself enough time to do it. If you want to buy your own island in the tropics, but you only have $10,000 in your savings account, you may need to make it a long-term goal for it to be achievable. If you just want to buy some property that doesn’t necessarily need to be adorned with palm trees, you may be able to make it a medium-term goal with a starting point of $10,000.

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But we skipped the “R!” Well, that’s because you have to know if your goal is achievable and time-limited to know if it is realistic, and that might be the most challenging element of all. For a goal to be time-limited, you simply need to give it a deadline, but how can you tell if that time limit is realistic? Setting unrealistic goals is the best way to shoot yourself in the foot when it comes to financial planning, because you can spend so much time focusing on the dream that you don’t actually see the way your money is really being spent.

Whether or not your goals are realistic depends on how well you prioritize. For example, if you want to buy a house in the next year but pay $600 in rent and $600 in student loan payments while making $2,000 per month, you’ll need to consider where you spend the remaining $800 each month. Does it leave enough to save for the down payment you’ll have to make? Furthermore, do you have good enough credit to get a homeowner’s loan? If you spend all but $50 of the remaining $800 on groceries, a car payment, a credit card balance, medical bills, and utilities and have only decent credit, you may want to re-adjust the time limit on your goal and add another goal to the mix: increasing your credit score.

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Without setting financial goals, you will not be able to pay for the things you want. Without setting realistic goals, you won’t have a clear idea of how to approach the future. So SMARTen up and start setting goals today!

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The Ups and Downs of Doing a Balance Transfer

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So you’ve gotten yourself into some credit card debt and you’re feeling a little overwhelmed about how to get out of it. It seems like every time you look at your balance, it’s gone up way more than you expected because of those pesky interest charges, and you’re beginning to wonder whether you’ll ever be able to get it back to zero.

But then, a beacon of hope arrives in the mail. Your bank is telling you that you can put a stop to those interest charges—at least for a little while—by putting all of that debt somewhere else. Or, maybe a new bank is telling you to bring your debt over to them by opening an entirely new account. Whether or not you should take advantage of one of those balance transfer offers depends upon the current state of your credit and the merits of the offer itself.

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If you’re interested in opening a new card, one of the negative sides is that, even though the direct mail letter may make it seem like you can basically call them and the card will appear in your hand, you still have to apply for the new line of credit. Because of that, the process can take time and you risk being denied. Daily Finance advises against applying for several lines of credit at a time because it will work against your credit score, decreasing your chances of actually getting a new credit line. However, if you are approved, your credit score could increase because your credit utilization rate (or your credit-to-debt ratio) will improve.

Using an existing line of credit may be a great way to consolidate your debt as well, especially if you already opened a new line of credit in order to complete a balance transfer in the past. CreditCards.com shares the important reminder that you may not be able to open a new line of credit because creditors could see you as a risk if you continue to carry a balance even after getting new credit. Being seen as a risk would make it harder for you to get different types of credit, such as loans for cars or a home.

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Regardless of whether you need to open a new account or are considering using an existing line of credit, make sure to read the fine print to find out how much it will cost. Every balance transfer will have a fee associated with it, regardless of the bank or the newness of your account, but some balance transfer offers have lower fees than others. Another consideration is the length of the zero or low interest rate promotion: some give you 18 months to pay off the amount, while others give you 24 months. USA Today makes an important point for debtors: creditors have no legal obligation to remind you of the end of your promotional rate, so it’s important to be diligent about paying off the entire amount in time or be prepared for the appearance of interest charges when the promotional rate expires.

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In addition to enjoying a lower interest rate on your debt, you’ll have the added benefit of easier, streamlined payments. If you have found yourself confused by due dates and bill cycle closing dates, this may be a very real perk to help you get back on top of your debt. The phrase “consolidating debt” sounds a lot fancier than it really is: all it means is that you put all of your debt in the same account, typically using a method like a balance transfer. But, keep in mind that many balance transfer offers have a limit on the amount of debts you can transfer.

If you do a balance transfer, be careful not to forget about the debt or only pay the minimum just because you are enjoying a zero percent interest promotion. Make regular payments and remember, if you have zero debt, you won’t have to worry about finding a card with zero interest!

Fixing Mistakes on Your Credit Report

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Are you one of the 35 percent of people who have never, ever scanned your credit report for mistakes? Do you have complete faith that the credit bureau and your banks have never accidentally put a mark against your credit score that did not belong there? Or, are you maybe one of the whopping 56 percent of people who simply do not know their credit score, and therefore have no idea as to whether your credit score features glaring problems that make you look financially incompetent?

If you are one of those people, it might be time to start finding out more about your credit score. If you are already aware of an error on your credit score, then perhaps you’d like to find out ways you can fix mistakes you’ve discovered. In 2012, the Federal Trade Commission reported that about 20 percent of participants in a study found errors on their credit reports.

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The first thing you should do if there is an error on your credit report is check with other credit reporting companies. For example, if you found the error on the report generated by Credit Karma, check Experian, Equifax, and TransUnion. You may find that the error is only on one report, which means you only have to deal with that one company. If you find that the error is on multiple reports, contact the credit bureau directly.

According to U.S. News & World Report, identity errors are the number one cause of credit report mistakes. Identity errors are different than identity theft, because they are a simple error made by the credit reporting company. In other words, they think John Doe is the same person as Jon Doe, or they confuse family members who may have lived at the same address. This type of error can result in a huge decrease in your credit score, especially if the person with your same name has been less than responsible. A more subtle credit score identity error may occur if a consumer has ever had a linked account with anyone, or if their name was on another person’s account as an authorized user.

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Identity theft is a common cause of errors—often major errors—on consumer credit reports. IdentityTheft.gov advises victims of identity theft to first call the credit card company and report the fraud. Next, victims should place a fraud alert on their credit report with one of the credit report companies, which is obligated to tell the remaining two. Once identity theft is recognized, it is a good idea to scour the credit report for specific errors in preparation for talking to the Federal Trade Commission and the police. In addition to reporting the problem to the credit bureau, victims should report it to the FTC and the local police department.

Another common credit report mistake might be a little harder to spot: incorrect account information. This may include an incorrect credit limit or an account showing as open when it is closed. While an incorrect credit limit may not seem like a big deal, it is important to correct it so the part of your credit score that calculates the amount of credit you are using is accurate.

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In any situation, try to be as clear and specific as possible with the credit reporting agency or federal department representative with whom you are working. This will not only expedite the process, it will prove to be a less confusing experience for you. Creditcards.com advises against discussing all of the errors in the same letter, and writing each letter from scratch. Using form letters that sound official will not get the consumer any further than a straight-forward, specific letter, and could possibly only result in confusion.

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What happens if you let your credit report go completely unchecked? You may be denied new credit, a credit line increase, or charged higher interest rates. Do your future a favor and check the details of your credit score for errors today.

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Solving the Credit Card Debt Enigma

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Everyone hears about how ‘Americans are in debt,’ but what does that specifically mean?  Where are these debts stemming from, and most importantly, how do we combat them?

There are 4 major categories that dominate the debt umbrella.  These are credit card, student loan, auto loan and medical expenses.  Most Americans dealing with significant debt face at least one of these main groupings, and sometimes all four.  Mortgage debt is another big one, but this obviously only affects Americans who own property.
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