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Improve Your Mortgage IQ By Learning These 8 Important Facts

Street of residential housesIf you are thinking about buying a house, you’ll undoubtedly need a mortgage. Mortgages can be complicated and have a language of their own. There are some important facts you need to know about mortgages that could save you money and keep you from getting in financial trouble. Here are eight of them.

Choosing an ARM could make good sense

An ARM or Adjustable Rate Mortgage is different from a conventional mortgage because its interest rate will move up and down each month as market interests change. These mortgages generally have a fixed rate that can range from a month to 10 years during which time the interest rate doesn’t change. Then there’s a longer period during which it can change at predetermined intervals. The standard for ARMs has become a 5/1. This loan has an initial fixed interest rate period of five years with the rate then adjusting annually after this. This is usually called a hybrid mortgage. Other popular hybrids are 3/1, 7/1 and 10/1.

If you believe you’ll be in the house for seven years or fewer an ARM could make good sense, as its lower interest rate would translate into a lower monthly payment. But if you were to choose a 5/1 where the interest rate would reset after five years, there starts to be a change in the math. This is because your interest rate typically would go up two points every year after that.

If you’re applying for a conventional loan be prepared to pay for PMI

The three most popular types of mortgages are VA, FHA and conventional mortgages. Both VA and FHA mortgages are backed by the federal government. This reduces the risk to the lender. Unfortunately, conventional mortgages are not federally backed and, therefore, represent more of a risk to the lender. In this case, the lender will likely require you to buy PMI or private mortgage insurance. This protects lenders against a loss if you were to default on the loans. If your loan has a loan-to-value (LTV) percentage in excess of 80%, most lenders will require you to buy private mortgage insurance. The good news for you as a borrower is that this would allow you to make a down payment of 3% to 19.99% in comparison with the 20% you would be required to put down without PMI. You would pay on your PMI every month until you have enough equity in your home that the lender would no longer consider you to be a high risk.

It costs no more to use a mortgage broker

A mortgage broker is different from a mortgage banker. When you use a mortgage broker it serves as an intermediary between you and the lender. It will gather all the paperwork from you and then pass it along to the mortgage lender for underwriting and approval. The funds for the mortgage are lent in the name of the mortgage lender and not the mortgage broker. However, a mortgage broker will collect an origination fee or a yield spread premium from the lender as compensation for its services In other words, using a mortgage broker is really no more expensive than using a mortgage lender. Which you choose will be mostly a matter of your personal preferences. Some people are just more comfortable going through a broker instead of having to deal directly with the bank or lender. Plus, brokers can sometimes smooth out the transaction and make things simpler and easier for the borrower.

An FHA loan almost always has a lower interest rate

FHA or Federal Housing Administration loans generally have lower interest rates than conventional loans because the federal government backs them. This reduces the risk to the lender. One of these loans can be a good choice for a first-time buyer that doesn’t have much money to put down, as the down payment can be as low as 3.5%. This means you could buy a $200,000 house for just $7000 down. However, the downside of FHA loans is that you would be required to buy two forms of private mortgage insurance. The first is an upfront mortgage premium that would be 1.75% or $3500. However, this can be added to the loan so you would not be required to pay it out of pocket. But there is also an annual mortgage premium. In this case with a down payment of less than 5% you would pay 1.35% of the total loan balance. This works out to be $214 per month on a $200,000 mortgage. If you continue paying on that mortgage for five years you’ll have paid $15,708 just in mortgage insurance and over the life of the mortgage you would pay an incredible $49,479.

There are times when you might want to pay points up front

If you don’t know what a point is, it’s a fee equal to 1% of the amount of your loan. As an example of this a 30-year mortgage $150,000 might have a 7% interest rate but also a charge of one point or $1500. Lenders can charge one, two or more points. These are called origination points. The lender charges them to cover the cost of making the loan. In comparison a discount point is prepaid interest on your loan. If you want to lower the interest rate on your loan you should pay more points. You can generally pay from one to three or four points. This will depend on how much you want to lower your interest rate.

The decision of whether or not you should pay points and how man will depend on a number of different factors including how much money you have to put down at closing and how long you intend to stay in your house. If you intend to be there for a while, paying points is prepaid interest will reduce your interest rate which could be an advantage. However, if your goal is to get the lowest possible closing costs that you should choose the zero-point option on your loan program.

The good news of discount points is that they are tax deductible.

You can refinance that mortgage as often as you like

Despite what a mortgage banker or broker might tell you, it’s possible to refinance a mortgage whenever the mood strikes you. Of course, there are always transactional costs involved with refinancing a mortgage so its best to refinance only when this would reduce your interest rate to the point where you could recoup the costs while you are still in your home.

You could buy a house as soon as three years after  bankruptcy

There is a common myth that if you file for bankruptcy you can’t buy another house for anywhere from 7 to 10 years. The truth is that if you’re a veteran you might be able to qualify for a VA loan in as soon as two years. If you’re not a veteran you might qualify for an FHA-insured loan after just three years or even fewer if you can prove extenuating circumstances such as a medical emergency. However, both Fannie Mae and Freddie Mac generally will not insure loans to people until after seven years if they had lost their homes to foreclosure.

It might take more than 10 years before you’re really paying down the principle on a conventional mortgage.

If you had a conventional mortgage and 3.5%, the first $.35 of every dollar of your mortgage payment goes towards reducing the balance of your mortgage and the amount slowly goes up from there. It’s not until you’ve made 123 payments that half of your payment goes towards paying off your principal. And of course the higher interest rate, the longer it will be before your paying off half of your principal.

Mortgage mistakes

There are mistakes that can be made in choosing a mortgage and it’s important not to make them as this will probably be your biggest expenditure ever.  Here’s a short video about these mistakes and  how to avoid  making them.

10 Little Marriage Secrets Your Friends Won’t Tell You

Couple Using Laptop And Discussing Household Bills Sitting On Sofa At HomeAre you and your significant other starting to use the “M” word? Are you asking questions like should we get married? Do you want to get married? When should we get married? Or what would your parents think if we got married?

There’s no question about the fact that marriage can be a wonderful thing. Your husband or wife can be your best friend, your partner, your confidant and, of course, your lover. These are the things your friends will emphasize if you’ve discussed marriage with them. “Oh, yes, marriage is great.” “Marriage is just the best thing we’ve ever done.” Or “you really should get married – it’s wonderful.”

But while your friends are telling you how great marriage is, there are things they’re just not telling you and if they did, you might give the idea of marriage a second or even third thought. Here are 10 of these nasty, little marriage secrets.

Marriage is going the way of the dodo bird

According to the Pew Research Center, the percentage of American adults that have never been married has reached a new high. Two years ago, about 20% of American adults aged 25 and older (about 42 million people) had never been married. This compares with the 10% of those of that same age in 1960. There are several reasons for this. For one thing Americans are staying in school longer. They are also focusing more on their careers after they graduate and then getting married later in life. In fact, the median age for women getting married is now 27 and 29 for men, which is an increase from age 20 for women and 33 for man in 1960. But as you might guess there is one group of people where marriage is on the rise – same-sex couples. This has increased more than 50% to about 130,000 in 2012.

We’re into infidelity

Two years ago a research company affiliated with the University of Chicago found that some 12.3% of all married women and 19% of married men admitted that they’ve had extramarital affairs. While most Americans seem to favor monogamy, many of them would cheat if they thought they could get away with it. An interesting contradiction is that a survey done by the USA Network found that 82% of those that responded said they had “zero tolerance” for cheating but 81%, said they would cheat if they believed they wouldn’t get caught.

We planned our divorce before we planned our wedding

If you’re contemplating marriage have you thought about a prenuptial agreement? A recent survey done by the American Academy of Matrimonial lawyers found that about 63% of the attorneys queried said they have seen an increase in the number of people requesting prenuptial agreements. The major reason for this is probably the fact that so many people are marrying later in life and have amassed a significant amount of assets by the time they get married. This makes the idea of a prenup more attractive.

The more money spent on the wedding, the shorter the marriage

Another interesting fact is that the more money that is spent on a wedding the shorter will be the marriage – at least according to a study done recently by economics professors at Emory University. What they found in surveying 3000 couples is that those who spent $20,000 or more on their weddings were 46% more likely to get divorced than the average couple. In comparison, couples that spent between $1000 and $5000 were 18% less likely to split up.

Social media can kill a marriage

In the survey done recently by the USA Network, 86% of those that responded said that it’s much easier to cheat thanks to social networking and almost 33% said they had had an emotional or romantic relationship online. How can you prevent this? One thing you might try is setting time limits and boundaries on social media usage. For example, you might agree that each of you will spend no more than one hour an evening on Facebook, Twitter or whatever. But don’t start spying on your spouse’s use of social networking. This not only signals a lack of trust in your partner but if you’re caught could actually get you kicked out of the house.

Money keeps us together

According to the Emory study quoted above, the more money you make the more likely it is that you will stay together. Couples making more than $125,000 a year are 51% less likely to divorce than those that earn less than $25,000 a year. Of course, there is a strong correlation between earnings and education and people with better educations appear to be more likely to stay married. People with a high school diploma have a divorce rate of 42.8% by the time they reach middle age while only 26.5% of people with a bachelor’s degree or higher split the blanket.

You can’t be too old to get a divorce

While you might think that by the time married couples reach their 50s they would’ve gotten past the idea of divorce but this is not necessarily true. Adults that are 50 or older accounted for more than 25% of divorces in 2010, which is up from less than 10% in 1990. The good news is that the national divorce and annulment rate fell from four per 1000 people in 2000 to 3.6 per 1000 people in 2011. So more people are staying together and for longer.

The cost of our wedding left us broke

Do you know the average cost of a wedding? In 2014 it was $29,858 according to a survey that was done by of 20,000 brides. This includes an average of nearly $13,000 for a venue (including the necessary food), more than $5500 for the engagement ring and $2400 for a photographer – and this excludes the cost of a honeymoon. Why is this? Couples that marry later are more likely to be spending their own money. This means they no longer have to stick to a budget set by mom and dad.

It was her idea to split up

Women initiate two thirds of divorces according to the Marriage Project. This is because, for one thing, divorce laws tend to favor women with regards to child custody. A less kind hearted explanation is that women are more likely to have unfaithful husbands than husbands are to have unfaithful wives. In addition, women have become stronger and more independent over the past 30 years, and are more confident that they can stand on their own. Many of them have well paying jobs so that the idea of being on their own doesn’t seem as frightening as it might have 30 years ago.

We sort of screwed our guests

Finally, as our economy has improved there has been an increase in destination weddings that have more lavish ceremonies. This means that the poor folks on the guest lists are spending more money accordingly. In fact, this year guests were projected to spend about $592 per couple on the average per wedding. Plus, they were dropping another $109 on gifts per wedding. One of the results of this is about 43% of us say that we have declined attending a wedding for financial reasons. This is based on a poll done by the nonprofit organization American Consumer Credit Counseling.

Love conquers all?

There is the old saying that love conquers all but this may not necessarily be true. What conquers all in marriage is usually a combination of hard work and compatibility.  But then as Jenna McCarthy points out in the following video, for women the secret to staying married might be as simple as making sure you’re always thinner than your husband …

Tell Us Your Generation And We’ll Tell You Your Financial Mistakes

We don’t have a crystal ball but if you tell us your generation, we’ll tell you the mistakes that you’ve made or are most likely to make. That’s right, there are some mistakes that every generation makes.

frustrated woman with a paper and calculatorFinancial mistakes made by twentysomethings

People in their 20s have a number of things in common besides their age. Most have just either left home or finished college and are starting out on their real lives. They also tend to make the same mistakes. For example, one of the biggest mistakes made by people in their 20s is putting off debt repayment. You need to start paying off your student loans as quickly as possible as this will keep you from having to pay extra interest over the years. Plus, do you really want to still be paying off your student loans when you’re in your 40s or even your 50s?

A second financial mistake made by twentysomethings is not thinking about retirement. We understand that age 55 or 65 can seem like a long way away but that’s actually a good thing. The more time you have to save for retirement the more money you will be able to save and the more money you will earn in interest. You should be putting at least 3% of your annual salary into a 401(k) or a Roth IRA. Do this and the future you will be eternally grateful.

A third mistake is to avoid making investments. You may not have a lot of money to sock away but it’s important to get started. Your bank probably offers a free investment advisor to help you choose your investments. If not, just pick an index fund and get started. But above and beyond all, get started.

The mistakes made by thirtysomethings

If you’re in your 30s one mistake you may be making is short term financial planning. Whether you think this or not, you are going to really zoom into your 40s. Don’t let these next years slip by. You should be setting goals for the next five, 10 and even 20 years. As an example of this, your unborn or very young child may be years away from college but now is the time to start preparing for these expenses.

Trying to keep up with the Joneses is another mistake that’s almost always made by people in their 30s. You might think it’s fun to compete with family members and your peers but you need to understand that when that relative or friend comes home with a new car all he or she is doing is taking on new debt. The fact is that people who have nicer things are not necessarily better off financially than you and in fact might be worse off.

What’s better is to take pride in how your savings account is growing and not that you have the newest car or toy?

Many thirtysomethings have made the mistake of going back to grad school. In some cases it can be a good idea to get an advanced degree. And in today’s economy, many people are finding it hard to get a job in their field and they are returning to school to try to fix this. The problem is that this only increases your student debts and you might find your new degree doesn’t really lead to a better job or a higher salary.

Have you bought more house than you really need? This is another mistake commonly made by people in their 30s. We understand that it can feel great to buy that first home. And it’s a good investment. But don’t make the mistake of buying a house that’s too big for your budget and your needs. Do this and you’ll not only have a bigger mortgage, but you’ll also have higher taxes and bigger utility bills. A better idea is to start smaller and then move up as your needs and your net worth change.

House with cash on the roofFinancial mistakes made by fortysomethings

By the time you reach your 40s you’re probably well entrenched in your career and the idea of changing to a new one can seem very scary. But it’s a mistake not to consider this. If you want to change careers you don’t necessarily have to start at the bottom. You have good, valuable experience that should help you land an equally good job in a new career.

A second financial mistake made by people in their 40s is about their mortgages. You’ve probably been paying on your mortgage for so many years that it’s just become automatic. However, you should now start looking at your end goal. Could you do something to payoff your mortgage even faster? Maybe you would like to pay it off before you become an empty nester. If this is the case, you need to determine to increase your monthly payments to achieve that goal.

If you still have credit card debt this is yet another mistake made by people in their 40s. What you want to do at this time of your life is to get rid of your debts as much as possible. There’s no way to know what will happen to you in the next decade. You might lose your job, see your kids go away to college or be hit by big medical bill. To prepare for these emergencies, you need to not have any debt hanging over you.

Finally, people in their 40s often make the mistake of not having a will. We understand that thinking about your own death is not a fun subject. However, you need to have a will. This is the only way you can control what happens to your money and your other assets when you die. A will also makes sure that your loved ones are not left confused as to what they need to do if something were to suddenly happen to you.

Fiftysomethings and their mistakes

Unfortunately, one of the most common and worst mistakes that people in their 50s make is dipping into their savings. You should have a retirement fund that’s fairly impressive by now and it can be tempting to use some of that money, especially if you’re facing a financial pressure such as paying for your kids’ education or helping support your aging parents. What’s best is to leave your retirement money alone and figure out some other way to deal with any new financial pressures.

It’s also a financial mistake to underestimate what retirement will cost you. Today, the biggest cost most retired people face is healthcare. Whether you like to think about this or not, you have to plan that you might need long-term care in your 80s. This can cost as much as $6000 a month so it’s important to understand this and plan accordingly.

Third, it’s a mistake to let your children use you. We understand that you want to help your kids but they do need to develop some financial independence. You could start with small steps such as refusing to pay for their car insurance or taking them off your family cell phone plan. And, of course, they should eventually pay you rent, which can be a great way to encourage them to move out on their own.

10 Things That College Admission Counselors Won’t Tell You

student with a notebook and calculatorIf you’re a high school senior or even a junior the time is near – when you’ll need to apply for admission to the colleges or universities of your choice. You’ll also soon to need to fill out the dreaded FAFSA or Free Application For Federal Student Aid. While the deadline for submitting the FAFSA is not until June 1, the earlier you complete and submit it the better. And, yes, you need to fill it out and submit it even if you don’t intend to get any federal student aid. The reason for this is your FAFSA will be sent to all the schools where you apply for admission and it will be used in determining whether to award you a scholarship, a work-study grant or some other form of financial help.

There are other things you need to know besides the importance of filling out your FAFSA and here are XX that college admission departments just won’t tell you.

1. It pays to be nice to your teachers

Given today’s skepticism about the value of GPAs and test scores, there are admissions department that are weighing more heavily on the recommendations from high school teachers and counselors. And it when it comes to recommendations the most useful ones are the ones that show that you’re intellectually curious and that you contribute to class discussions.

2. We only sound as if we were exclusive

Admission was offered to less than one-third of the applicants in 2013 by 100 US colleges. This can make a school look “exclusive” and it is believed that some schools try to manipulate this rate. The way they do this is by encouraging high schoolers to apply for admission even though they have no intention of intending. In addition, some schools count incomplete applications to increase their applications-to-acceptances ratios.

3. Politics can play a role

Whether we like it or not, the NACAC says that about 33% of colleges and universities consider race as a factor in accepting students. Some of our states have banned racial admission preferences but their schools have been accused of using workarounds against those bans. Unfortunately or fortunately – depending on your parents – one practice that is usually considered legal is “legacy.” This is where the kids of wealthy alumni or powerful lawmakers get special considerations in the application process.

4. We don’t trust it

In this era of “helicoptering” parents, many schools worry that the essays submitted by some students weren’t written by them. The way they weed out ghost writing is by asking students to supply other pieces of school writing that were graded by a teacher. One retired dean of admissions said that “if the essay looks like it was written by Maia Angelou but the school work looks as if it came from Loman, this will definitely raise eyebrows.

5. We prefer students that can pay full price

How many college freshmen come from outside of the US? In 2013 it was 10%. Colleges love these people because most of them pay full tuition. At publicly funded state schools, the higher tuition charged out-of-state students often works to subsidize the education costs for those who live in the state. As an example of this, the in-state tuition at the University of California – Berkeley is $13,000 a year. But for an out-of-state student or foreign resident, tuition is about $36,000 a year.

6. We need you more than you need us

Would you like to do some negotiating when it comes your tuition? This year the number of high school graduates leveled off at 3.2 million. And it’s expected to stay at that level until about the year 2020. As a result, more colleges will be chasing fewer students. If you are accepted to more than one school, you may be able to do some horse-trading on the cost of your tuition. In fact, you could view it as about the same as if you were to go to an automobile dealer and try to negotiate a better rate for a new car.

7. We laugh that you obsess over class ranking

Less than 20% of admissions counselors think of class rank as being “considerably important.” However, it is more likely to come into play at larger schools where it’s just not possible to do detailed reviews of applicants.

8. You could be admitted but not stay admitted

One sad fact is that about 22% of colleges and universities revoked at least one admission offer in 2009, which is the most recent year that was studied. The most common reason for these were final grades followed by disciplinary issues and then lying about application information. For that matter, the postings put on social media have prompted some universities to reconsider their offers.

9. All grades are not equal

Have you taken college prep courses? If so, the grade you got in them will probably be given more weight than other grades. The reason why schools are becoming more skeptical is due to what’s known as “grade inflation.” The College Board, which is the organization that administers the SAT has research showing that the average GPA for all high school seniors increased from 2.64 in 1996 to 2.90 in 2006 despite the fact that SAT scores remained about flat. This was seen as proof that there are teachers using grades to reward good effort instead of achievement.

10. Were wondering about the SAT

For almost as long as anyone can remember the SAT has been the big benchmark in forecasting how students will handle college-level work. However, today many people argue that the SAT gives wealthier students an unfair advantage as they could afford those pricy test prep classes. In fact, around 800 of America’s 2800 four-year colleges now consider the SAT to be optional. The NACAC endorsed a study done recently that looked at the performance of 123,000 students that had been admitted to college between the years 2003 and 2010. What this study found is about 30% of the applicants had not taken either the SAT or ACT … and that there was no significant difference in college GPAs or graduation rates between those who took on of these tests and those that took neither.

Young black college graduate with tuition debt, horizontalTo borrow or not to borrow, that is the question

Another decision you’ll have to make besides choosing a college or university is how to fund your education. Generally speaking about 50% of students graduating from college needed to borrow money to pay for their educations. Of course, it’s much better if you don’t have to borrow the money and can start plus, life after college free of debt. If this is just not possible, be sure to get federal student loans and not private loans. Student loans have a number of advantages over private ones, such as the ability to change payment programs. For example, instead of staying in the Standard 10-year Repayment program you could switch to Graduated Repayment where your payments would start low and then gradually increase every two years. This can be a real boon if you’re just starting out in your career and are a low earner. Or you could choose one of the income-driven repayment plans such as Pay As You Earn that would tie your payments to your disposable income. Plus, federally backed student loans also offer options such as loan forgiveness, deferment and cancellation that are normally not available in private loans.

How To Have A Happy Low Income Household

povertyAre you struggling with your finances because you come from a low income household? When your income is not enough and you have a family to feed, it can be a bit stressful. And we all know that when there is stress, happiness will eventually go out the window. At least, if you cannot do something about your financial situation, you will soon find that it drains the happiness out of your life.

While we do not want to appear materialistic, it is a fact that the lack of money oftentimes drive couples to a fight. In fact, one of the most common reasons for marital fights involve finances. And we all know we do not fight about abundance of money. Usually, financial related fights stem from the lack of it.

According to an article from, the US poverty rate is already at a decline but it is still a high rate. In 2013, it was reported to be at 14.5% – a slight decline from the 15% rate in 2012. This is still higher than the pre-recession days of 12.3% in 2006.

The reason for this decline is the fact that people are now finding full-time work. However, thanks to the inflation rate and the higher cost of health care, this is not really making a difference for most people. There are still a lot of people that are living from paycheck to paycheck. If you want to improve your financial situation and get out of a low income household, you need to do more than that. You need to find a way to find extra money to propel yourself forward to a better financial position.

But before you can do that, you need to find the motivation to make the sacrifices necessary to reach your goal. And here is where it might become a bit confusing. In order for you to find motivation that will last you until you reach your goal, you need to put yourself in a happy disposition.

The reason for it is for you to be able to set the right goals and change the habits that will make you happy with what you are trying to reach. Take note that finding happiness is more than just getting more money. It is about teaching yourself to value what is important and be content with what is necessary.

4 ways to live a happy life despite poverty

That last part can be quite a challenge because it is hard to find happiness when you can barely give your children what they want. When you are constantly worrying about paying the bills, it is tough to say that you are feeling light and happy about your current predicament. So what can you do?

The key is to determine the simple truths that will help you find financial happiness. Here are 4 tips that might help you get started.

  • Concentrate on the experience rather than your possessions. Not that we are saying that you do not need material things. We all need them. But, you need to learn how to concentrate on the experience that you will get from the materials – rather than from the mere satisfaction of owning something new. A study published on, authored by Leaf Van Boven, said that focusing on the experience will help consumers get more positive memories about their lives. Happy memories are more evident when you have the experience in mind. It is also stated that it will help you foster better social relationships. That is because the experience is mostly associated with something that happened to you and those around you – whether directly or indirectly connected or not. So concentrate on having meals together – regardless of what is put on the table. Concentrate on enjoying cost-free weekends with the family – as long as you are together.
  • Have goals and monitor their progress. The next thing that you can do is to have a goal. A goal is something that will give your life direction. It will give you a reason to get up every morning regardless of the situation that you are in. It is one way to help you proactively motivate yourself further. Make sure that your goal is realistic. Big or small, it has to be well defined and something that you schedule to achieve sometime in your life. This will make it more tangible. As you track your progress, do not concentrate on how little you have. Instead, focus on being thankful that you are able to contribute anything to it at all. Even if the going is slow, at least there is progress.
  • Be close to people with the same situation as you. We mean surrounding yourself with friends coming from low income households too. This is to have someone to talk to and understand what you are going through. You can cheer each other up, find support during trying times and you cannot judge each other because you all going through the same thing. Not only that, you can find things to do together with the same budget. You do not have to work too hard to impress people because they know where you are coming from.
  • Change your mindset. Finally, you want to change your mindset about a low income household. It is not the end of the world. Granted that it is tougher compared to those who have more financial abundance. However, you both have something in common – you can both decide to take control of your finances. You need to accept that you have limited choices and instead of giving up, you take that as a challenge. Start by focusing on what you have accomplished despite your lack of finances. That should help make you feel better about your life.

Happiness, if you ask anyone, is actually just a state of mind. If you are willing to put yourself in a happy position, you do not need a huge amount of money to gain that.

How to level up from a low income home

Despite your pursuit  of happiness despite coming from a low income household, you need to make sure that you will still strive to make things better for you and your family. You want your kids to have the opportunities that were limited to you because of your financial state.

An article from revealed that poverty is still quite high in the US. 14.5% of Americans are living in poverty. That means 1 out of 10 people reading this article might be poverty stricken. The good news is, you can get out of that predicament. Here are some tips that will help you level up from a low income household.

  • Live a frugal life. First of all, you have to start living a frugal life. Face the facts that you have limited income. That means you need to prioritize where you will put your money. Live in a smaller home, get rid of the clutter and buy only what is essential. Frugality, when done correctly will give you a new perspective about your life.
  • Make sure you have extra money. The reason why you want to live a frugal life is so you can lower your spending so you can have some extra money. This is the money that you need for wealth building. It will help you increase your savings for your emergency fund. It will also allow you to invest some of your money to help it grow. Get that extra money and you should be able to grab opportunities that you never had before.
  • Involve the family. Getting out of a low income household will involve everyone in the family. You need to ask everyone to be wise about spending and to find extra money where they can. This is very important. It will keep the load from being too burdensome for you.

Here is a video from Bank of America that will give tips on how you can be smart with your money.

Is Yours An Egalitarian Marriage?

couple looking at a laptopA number of things have changed in our society over the past 40 years. For example, as we learned recently it’s no longer okay to punish your child by spanking or whipping him with a branch. And while it was maybe never okay to hit a woman we know now it really, really isn’t – especially if you’re a pro football player.

The idea of marriage has also changed dramatically. Some states now recognize same-sex marriages. And many of those that haven’t done this at least recognize civil unions. Divorce has become almost as common as, well, the common cold as about 40% to 50% of married couples in the United States now divorce. Finally, one of the biggest changes is due to the fact most families cannot afford to have one parent stay home with the kids while the other works. As a result two working parents now head 44.8% or nearly half of all US families. There are also couples known as DINKS (Double Income No Kids).

So what type of marriage do you have?

When both people work, what’s the division of labor? Is it sort of typical where the woman is responsible for cooking, cleaning and grocery shopping, while the husband takes care of the lawn and home repairs? Or is it what’s now called “egalitarian?”

The dictionary definition of egalitarian is “asserting, promoting, or marked by egalitarianism, which is defined as “a belief in human equality.” So how does this relate to marriage? It’s a marriage where tasks and responsibilities are shared equally and not based on sex. For example, in an egalitarian marriage, the husband may do some or all of the cooking and vacuuming, while the wife handles storage, dishwashing and home electronics. They may split the grocery shopping or one of the two might take full responsibility for menu planning and food shopping. In other words, responsibilities and tasks are split based on each partner’s idiosyncratic preferences, skills and interests.

Where problems arise

While an egalitarian marriage can be a good thing for many couples, it can have its issues unless boundaries are drawn very firmly. For example, consider the kitchen. Let’s suppose that the wife is responsible for kitchen equipment, organization and cooking but the husband is in charge of dishwashing and storage. Guess what can happen? The woman has a carefully thought out scheme of what goes where that is completely intuitive. However, the husband has no idea where measuring spoons go so he puts them wherever he thinks makes sense and half the time the wife can’t then find them.

That old way of doing things

In traditional marriages things might not have been great but they were simpler. Either dad handed over his paycheck to mom and in return she gave him an allowance for beer and cigarettes. Or the man took care of the money and mom had an allowance for household stuff and clothing and then had to beg dad for big purchases such as a dishwasher.

Live like roommates

How does this work in an egalitarian marriage? There have been a number of alternative solutions created by couples to try to get around the problem of who pays for what. Some choose to live like roommates where each person contributes money to household expenses. This can reduce the need for negotiation but may create even larger problems with “gaps.” What are gaps? These can be fights over things such as whether one partner needs to pay when the other calls a plumber about a slow drain.

Pool some of your income

A second option for handling finances in an egalitarian marriage is where you pool some income but each of you keeps some back. This can work well for young couples whose earnings are nearly equal. Unfortunately, if the earnings are unequal this can lead to problems such as you’re enjoying your new computer while your partner is trying to decide whether to buy a suit for a job interview or replace his dying phone. Under this option, you have fewer gaps but more overlap over personal and joint expenses. These then have to be negotiated, as does the issue of how you spend the larger pool of joint money.

Pool all of it

Of course, you can always pool everything and then each person could have an allowance. This can be a satisfactory solution if you have joint expenses that have begun to dominate your individual expenses. This would include things such as home renovations, having kids, pets and the like. This option does have a decided advantage in that it forces couples to define household goals and then enables them to direct all of their money towards them. However, to make this work you will need to create a detailed budget, track expenses and then negotiate basically everything that you spend money on.

Everyone spends what he or she wants

A fourth and final option is where everyone spends whatever they want out of the joint account. Unfortunately, this is the worst possible system outside of living like roommates. It is the favorite of DINKS until the day of reckoning comes when they wake up and find that they are 45 years old, overextended on their mortgage and have nothing saved up for retirement. The benefit of this is that right up to that point there will be a lot fewer fights over money.

What the modern family needs

As you have read, there is a downside to all of these options for handling a couple’s money. The best solution for the modern family is to use modern financial controls. This is where you have an explicit plan for how you handle money, use good accounting and recognize that no matter the system you use, there will be gaps and overlaps that you will need to resolve or figure out how to prevent them.

What is that explicit plan? It’s basically tracking all of your expenses, creating a budget and then determining precisely who is responsible for what. The good news for those that are seriously budget adverse is that tracking expenses and creating a budget is much simpler than it used to be. There are numerous financial apps and software available that make these tasks incredibly simple. For example, one of the most popular is It’s available for use on all types of smart phones and computers and is just amazingly simple to use. It will track your spending for whatever amount of time you decide and then organize it into logical categories such as clothing, entertainment, food, utilities, transportation and the like. You assign an amount to each of these categories and should you overspend in one of them, Mint will alert you via email. It will also alert you if it finds a financial product better than something you’re currently using (think credit cards).

Another good money management tool that’s becoming increasingly popular is Learnvest. With it you can sign up and add your bank accounts directly from your iPhone so that it’s very simple to track spending, stay within your budget and master your cash flow. It also offers access to financial advice and money-saving tips.

If you feel like you could use some help with your budgeting, here’s a video courtesy of National Debt Relief with some information that  features noted financial expert Dave Ramsey …


There are even apps available that can help if you’re having a problem with debt. One of the most popular is ReadyForZero, which will help you create a debt-repayment plan and then track your progress as you get closer and closer to zero or owing nothing.

After you’ve created a budget

You may find that creating a budget is not half as troublesome as deciding who will be responsible for what. This is where you will need to do some good negotiating and try to draw firm boundaries. But understand that no matter how good a job you do there will always be gaps and overlaps and the real secret of good money management is how successfully you are in resolving them.


Amazingly Simple Solution To Money Problems – Shred Your Credit Cards

cutting a credit cardCredit card debt has become an increasingly big problem for many Americans. We owe an average of $13,177.75 per household just in credit card debts. But that’s only an average. The fact is that many individuals owe $15,000, $20,000 or even more on their credit cards. Here’s an example of what this amount of debt could mean. If you owe $20,000 at an average of 16% interest, and paid $400 a month on your credit cards it would take you 83 months to pay them off and would cost you $13,177.75 just in interest alone. And that’s assuming you charge exactly nothing on those cards for the whole 83 months (nearly seven years).

We’ve become a nation of credit card junkies

The fact is we’ve become a nation of credit card junkies. As of July of this year, there were 1,895,834,000 credit cards in use here in the U.S. That’s nearly two billion credit cards. And wee have an average of 3.75 credit cards per person. Given these numbers it’s no wonder why many Americans are struggling with their credit card debts.

It’s borrowing from your future

The really destructive thing about using credit cards is that it means borrowing from your future to pay for things today. There’s an old saying that if you want to dance, you’ll have to pay the piper. In the case of credit cards what this means is if you want to buy things today you can’t really afford by using credit cards, you’re basically borrowing money you’ll have to repay some time in the future. And when that some time rolls around, you’ll have less money available to pay for the things you’ll want then.

The nasty power of compounding interest

If you don’t pay off your credit card balances every month, you’ll soon run into the power of compounding interest. If you’re not familiar with this it’s when the interest you owe on a credit card debt is added to your balance so you end up paying interest on the interest. Here’s an example of how this works. Let’s say you have a credit card with an interest rate of 20% monthly on your unpaid balance. If you factor this into an unpaid balance of $1000 at the beginning of the year this will turn into $1200 in debt by year’s end. Multiply this by 20 (an unpaid balance of $20,000) and you will see how much you could be hurt financially by compounding interest.

Shred them but don’t close your accounts

According to a recent study done by the National Foundation for Credit Counseling about 20% or one in five people live without credit cards. This means it obviously can be done. So if you want to get your finances back under control, you need to shred all your credit cards. But don’t close the accounts. You may eventually want new credit in the form of an auto loan or mortgage. When you apply for new credit the first thing your lender will do is check your credit score, which is made up of five components. One of the most important of these is your debt-to-credit ratio as it accounts for 30% of your score. This ratio is calculated by dividing the amount of debt you have by the total amount of credit you have available. For example, if you have $10,000 in available credit and only $2000 in debts, your debt-to-credit ratio would be 20%, which would be excellent. But if you were to close your credit cards your available credit might drop down to something like $2000 and your debt-to-credit ratio would be 100% and that would have a dramatically negative effect on your credit score.

How to live without credit cards

Despite what you might think, it should be fairly easy to live without those credit cards. While you have to basically pay cash for all of your purchases, this could be in the form of a check or debit card. You could also purchase prepaid credit cards or secured credit cards and use them to pay for your purchases.

The differences

Before you trot off to get either a prepaid or secured credit card, you need to know their differences. A prepaid card is just that – you deposit money in advance and then use the card to pay for your purchases until your balance reaches zero. At that point, you can then either add more money to the card or simply throw it away and get another one. A secured card is different in that you make a cash collateral deposit usually $300 or $500 – that gives you a line of credit, which usually will be a percentage of your deposit or possibly the full amount. You then make monthly payments on your balance just as you would with a standard credit card. Also like a standard credit card if you fail to make your payments on time you will be charged a late fee and there will probably also be a fee for any over-the-limit transactions. However, unlike a regular credit card if you exceed your balance or default on your payments you could lose your deposit and your account would likely be closed.

How could you pay cash for all your purchases?

If you’ve been living on a steady diet of credit card usage the idea of shredding your cards and paying cash for everything can be scary. But it shouldn’t be. The secret is to start tracking your spending so that you can develop a budget. There are a number of apps available that make tracking spending just about brain dead simple. One of our favorites is It’s free and not only tracks your spending but will automatically divide it into categories such as rent or mortgage payment, groceries, utilities, medical bills, clothing, entertainment and so forth. You could use this information to create a budget and we’ll even help you stay on it. In fact, if you overspend in any of your categories, Mint will send you an alert via email.

Is A Frugal Budget Really HelpfulWhen you know what you’re spending, you’ll know where you can make cuts

Once you’ve had some experience with your budget, you should be able to find areas where you can cut your spending. Most people divide their budgets into two major categories – fixed expenses and discretionary expenses. You may not be able to do much about your fixed expenses such as your rent or mortgage payment, auto loan and utilities. But you should be able to find areas in your discretionary spending where you could make cuts. Take groceries as an example. If you focus your attention on cutting your food costs by careful shopping and the use of coupons, you might be able to cut those costs in half or better. This will free up money you could use to pay down and ultimately pay off those credit card debts.

The snowball strategy

If your goal is to get those credit card debts paid off, one of the best ways to do this is what’s called the snowball strategy. This means ordering your debts from the one with the lowest balance down to the one with the highest. You then focus your attention on paying off that debt with the lowest balance while continuing to make at least the minimum payments on your other debts. When you get that first debt paid off, you will have extra money to pay off the debt with the second lowest balance and so on. If you’re wondering why this is called the snowball strategy it’s because the idea behind it is that as you pay off each of your debts, you will gain momentum to continue paying them off just as a snowball rolling downhill gathers momentum.

Note: If you’d like to know more about how to snowball your debt, here’s a short video with more information …

Los Angeles To Be Among The Highest Minimum Wage Cities

minimum wage signThe minimum wage is always something that we will aspire to increase. According to the definition from, it is the lowest hourly wage that employers are required to pay a worker. No legal employer will ever give you anything lower than the minimum. That will give you grounds to sue them.

While a lot of people are convinced that a higher minimum compensation rate will lower the poverty level in the country, some people believe it is not the real solution. In case the minimum salary does increase, soon enough, we will be asking for another increase, again.

One by one, local governments have come forward to express their intention to follow through with the encouragement from President Obama to increase the minimum wage. And among, them, Los Angeles is the last to consider raising the income level of its local constituents.

Los Angeles plans to increase the minimum salary

Ever since the President announced that he will be increasing the Federal minimum wage, local governments have started considering if they will impose the same changes in the private sector. If the local governments decree that the minimum salary will increase, the private businesses will be forced to increase the wages of their respective employees.

Of all the cities, Los Angeles, is the last city to declare that they have plans to follow the suggestion of the President when it comes to increasing the wages of American workers. According to the article published on the, Mayor Eric Garcetti intends to raise the minimum wage as high as $13.25 per hour.

The Mayor said that this raise intends to help workers improve their financial situation. Those who are working hard, according to the Mayor, should not have to live in poverty.

Before employers raise their concerns, this increase will not be done immediately. The initial increase during the first year will be $1.25. In the next two years, the increase will be $1.50 per year before it finally reaches $13.25 per hour in 2017.

This is intended to keep the inflation rate from rendering the hike useless. In the past, the wage hike fails to alleviate the consumers from poverty simply because it cannot keep up with the inflation rate. Of course, we cannot increase the wages immediately because a lot of businesses will suffer. This is why the local government is targeting a slower and more gradual increase of wages.

The current minimum wage in California is $9 and the intention of Los Angeles to increase the minimum wage to $13.25 is considered to become the highest among the other cities.

This announcement is met with mixed reactions from the public. Workers take it as good news, because a higher wage means better financial conditions for them and their family. For one, an increase in income can help pay off debt. It can also boost savings. Not only that, it can also allow consumers to spend on things that they used to hold back on – especially when it comes to their kids.

However, some workers, especially part time employees are concerned about job stability. After all, to cut back on the overhead expenses, business owners might end up laying off workers to keep the higher minimum wage from eating their bottom line.

But the article stated that a study done on the plans of Los Angeles revealed that the effects on employment might not be as significant as one would fear. There may be increase in commodity prices but the article mentioned that businesses should be able to absorb this change without a problem.

Effects of increasing the minimum compensation rate of workers

According to the analysis done by the, the minimum wage increase has two effects on low income households.

It will increase the household income.

Obviously, low wage workers will not have an income boost. For instance, a $9 per hour income that is increased to $13.25 is a big increase. If you work an average of 8 hours a day, that means having $34 more each day. Even if you have a part time job of 5 hours, that is still an increase of $21.25. For a full time worker, that increase means they have $170 extra a week. For part time workers, that is $106.25 increase each week. For a low income family, that is something big. It can guarantee better food for a lot of people.

It will jeopardize employment conditions.

While the article from CBS Local stated that the effects to the employment will not be significant but they did not say there will be no effect. It will affect some people and low wage workers might lose jobs in the process. That is because increasing the wages of the minimum earners does not mean companies do not have to increase the wages of the high income earners. Some of them could ask for an increase as well. If that happens, business will have a hard time coping with the increase in minimum wage.

In truth, the drive to boost the minimum salary is brought about by the growing debt in the country. It is not really just about poverty, it is about debt. But you have to keep in mind that an income increase will not help you stay away from debt. You can earn more but if you do not change your financial habits, you might end up still feeling like your finances are not enough.

Tips after getting a salary increase

Since the minimum wage increase are all likely to happen, you may want to ensure that you will be maximizing the benefits that it will give you. Here are 4 important tips that you need to follow so this increase will lead to your financial independence.

  • Improve your debt payment plan. Most low income earners have debts. This is why our first tip is for you to improve your debt payment plan by making more payments towards your debts. Try not to do anything else until you have paid off what you owe – or at least a significant percentage of it. By freeing yourself from debt, you are actually increasing your extra money for basic commodities.
  • Do not be too quick to upgrade your lifestyle. Do not move to a bigger apartment or do not buy new clothes if it is not needed. Concentrate on the things that matter the most like your debts or savings. The only thing that you can improve on is your food purchases but that does not mean you will eat out more often. Be wise about where you will put this extra money that you have.
  • Come up with saving goals. If you do not have one, make one up. Save up for your emergency fund. Save up so you can purchase more energy efficient appliances. These are better uses for your extra money. Instead of blindly increasing your purchases, it is best to just save up for future needs so you do not have to borrow money in case of an unexpected need.
  • Invest your extra money. The last tip is to see if you can invest your money. This is the most proactive way that you can use your money to improve your finances. You do not have to invest a lot – you can start small and then increase that as soon as your initial investment gained profit. Soon your investment will grow without you knowing it.

While the minimum wage seems like the answer to your prayers, make sure you do not depend on it to improve your financial situation. It is best to work with what you have right now and save or invest whatever increase you will get in the future. That is the secret to being rich.

17 Nuggets Of Wisdom That Could Help Improve Your Financial Life

Couple Using Laptop And Discussing Household Bills Sitting On Sofa At HomeLet’s face it. Thinking about personal finances isn’t much fun unless you’re a member of that fortunate 1%. Of course, if you’re a member of the 1%, you probably don’t have to think much about your financial life anyway. But if you’re like us and are a member of the other 99% then finances are something you think about a lot. You’ve probably read articles or even books about personal finance with advice about creating a budget, having an emergency fund, paying down your debt and so forth. Beyond this, there are some other things you could do that would help improve your finances and here are 17 of them.

Create a roadmap of your goals

Just sitting down and asking what are your goals can get you on the path to realizing them. Don’t be afraid to think big and pursue those really big dreams even if they don’t seem doable. If you want to increase the chances that you will succeed, create a spreadsheet and do some number crunching to make sure you will have enough money to fund those adventures.

Drive less

This may seem a bit radical but the less you can drive your car the better. While driving is very handy, it can also be incredibly expensive when you take into consideration the oil and gas, insurance and depreciation. Automobile accidents are very common these days and if you get into one – even if it’s not your fault – you would have to at least pay the deductible. If you do have to drive a lot, make sure you do regular oil changes and all of the maintenance recommended by your car’s manufacturer.Avoid products that could be dangerous

Avoid products that could be dangerous

The Consumer Product Safety Commission is now issuing hundreds of product recalls a year. This makes it hard to keep track of all of them. It’s easier if you sign up for alerts from the Commission or download an app that will alert you when a recall occurs. Be particularly careful when it comes to used baby products, as there has been a number of crib, stroller and highchair recalls.

Cut your spending dramatically

If you focus your attention on monthly expenses such as cable, phone and Internet, you should be able to reduce them and your spending dramatically. Once you’ve done this, get to work on some of your variable expenses like groceries. We know of one person that did all of this and managed to cut his spending by $1000 a month.

Use the new online tools

There are a wide variety of web-based tools and apps available to help you manage your money. The company Corporate Insight recently found there are more than 100 new startups with apps or software that could help you manage your finances. In addition, there are apps such as Shopular, RetailMeNot and RedLaser that make it easy to use coupons and discounts when you’re making purchases.

Commit to earning more

If you’re one of the many Americans that are under-earners, commit yourself to earning more money. The best first step is to promise yourself to earn more and to make sure you say “yes” to any opportunities you come across that would allow you to do it.

Keep your finances off of Facebook

While it might be fun to brag about your high credit score on Facebook, it’s much better to keep that kind of information off the Internet. Facebook and other types of social media are very public and are places where the scam artists hang out and look for financial information they could use to defraud you. When it comes to your personal finances, a good rule is that less sharing is better.

Review your auto and life insurance policies

Automobile insurance policies can have different deductible amounts, coverage limits and important limitations. These are things that could surprise you if you’re in an accident. Review your policies and make sure you understand them including your life and disability insurance. If there is insurance available where you work think about supplementing it with your own policies.

Be ready for an increase in interest rates

Interest rates are now very low. However, most financial experts say they will eventually rise and possibly more sooner than later. To get ready for this, you need to pay off any debts where your interest rates could rise, and if you are a homeowner you should think about refinancing if you haven’t already done so. If you are a first-time buyer and are looking to buy a home, you might want to think about doing it very soon so that you could get rates that are still low.

Reduce your tax bill

The ugly fact is that many people pay more in taxes than they really should. If you put money into a retirement account that is pre-tax, buy some municipal bonds or start your own business, you will pay less in taxes. If you’re part of a gay couple you might also check to see what refunds you’re entitled to for the past two or three years as the Internal Revenue Service now recognizes same-sex marriages for income tax purposes.

Trade for or rent a high fashion dress

While you may not be aware of this, you can rent and trade for high-end clothes on the Internet. For example, Tradesy makes it very easy to sell and buy seldom-worn fashion items including designer dresses. This gives you the opportunity to wear fancy clothes without buying them. There is also a number of websites growing in popularity such as Bag Borrow or Steal and Lending Luxury where you can rent accessories and dresses for that big party. While it will cost you some money, you will spend a lot less than if you were to purchase the items and will still look like a million bucks.

Kick something off on Kickstarter

More than one hundred thousand projects have been launched on this site and about 44% achieved their goals as of December 2013. You don’t have to be a celebrity to use Kickstarter to fund that creative idea of yours. If you do go for it, promote your project first on Facebook and Twitter and to your friends. Make a great video and, above all, have a very appealing product like the Coolest Cooler that just raised millions of dollars.

man holding credit cardsGive gift cards

While gift cards might seem a little soulless, they really are an ideal gift in a lot of ways. And this reduces the time and strain of gift giving. The majority of people say they really like to get these cards. If you choose cards that are retailer specific (think Cabela’s or Ace Hardware), they generally don’t have fees or penalties for delayed use. Be careful about gift cards from the credit card companies as they generally come with fees that can range from $4 to $6.95. Also, you can get some additional protection by registering the card in the event it is stolen or lost.

Watch out for online scams

It’s easy to buy items on websites like Craigslist but there are fraudsters that prowl these sites. To make sure you’re safe, always arrange to meet the person face to face when paying cash for goods. Be sure to meet some place public and if possible bring along a friend for added protection. And under any circumstances do not wire money before you see the item, as this is how much fraud occurs

Talk to your honey about money

Finances are one of the biggest reasons why couples end up splitting. You should always be honest with your spouse or partner. One good idea is to make a periodic “money date” to review your finances, talk about the big decisions and consider each other’s financial mindset. Do this and you should be able to work together to set and reach big-money goals whether it’s buying a home or traveling to Europe.

Stop worrying and be happier

Finally, sitting around and worrying about money can waste a lot of time. One recent study found that 36% of the people queried said that they spent at least two hours a day worrying about their money or managing it. There are a number of free resources available that can help reduce some the strain of personal finances and save you time to boot. So get busy, find a few apps and stop worrying so much.

Wake Up, People! You Absolutely Must Know These Things About Your Credit Score

Video thumbnail for youtube video 6 Tips For Simplifying Your Financial LifeA study done in 2013 revealed some amazing facts about how ignorant many Americans are regarding their credit scores and credit reports. For example, 2/5ths of those surveyed did not know that credit card companies and mortgage lenders use credit scores to determine their eligibility for credit. Another 2/5ths incorrectly believed that personal characteristics such as marital status and age are used to calculate credit scores. Between 25% and 33% did not know when it is that lenders must inform borrowers of the credit scores used in their lending decisions. More than 25% do not know how to raise or maintain their scores. And 36% incorrectly believed that credit repair agencies are usually or always helpful in improving credit scores and correcting errors in credit reports.

Wake up, people!

If you don’t understand credit scoring and credit reports you could be facing big trouble. If you’re not aware of this, you definitely need a good credit score to qualify for an auto loan, a mortgage and other financing. And if you make just one misstep such as forgetting to pay a credit card bill, you could be on the slippery slope to serious credit problems.

Do you know who compiles your credit reports?

Your credit reports are compiled by the three major credit bureaus – Experian, Equifax and TransUnion. The information they use comes from banks and the financial institutions with which you do business and includes every credit contract you’ve ever had related to debt. Debt collectors even report to the credit bureaus. So if you have an old unpaid medical bill, this could pop up on your report and damage your credit score.

In addition, the three credit bureaus collect information from public records on tax liens, court judgments and bankruptcies. Any time you apply for any type of credit (called a credit inquiry), this will be reported to the three credit bureaus. In turn, the credit bureaus provide your credit report to the lenders when you apply for new credit.

Banks and credit card companies aren’t the only ones that access your credit reports either. Cell phone providers, landlords, insurers and utility companies will also ask for a credit report in determining whether or not they want to deal with you.

What about employers?

According to the Fair Credit Reporting Act, employers can check your credit reports but they have to get your permission to do this. Of course, if you’ve applied for that dream job and your prospective employer has asked to check your credit reports, you’ll probably feel pressured to say yes. If you say no this would be as good as saying that you have poor or bad credit. And under no circumstances are employers or prospective employers permitted to check your credit score.

The inverse ratio

There is an inverse ratio to credit scores. The higher your score the lower the interest rate you will be charged on an auto loan, a personal loan, credit card, and a mortgage. Even your auto insurance will cost less if you have a high score. Conversely, the lower the score, the higher your interest rates will be.

One freebie a year

You can get a free copy of your credit reports once a year. This is a perk that was legislated by Congress a few years ago. There is a website,, where you can get all three of your credit reports either simultaneously or one at a time. Alternately, you can get your credit report free from each of the “big three” credit bureaus. You should get these reports and review them carefully to make sure they do not contain errors. If you do find an error in one of your reports you need to immediately dispute it with the appropriate credit bureau. What some people do is get their report from one of the credit bureaus every three months, which is a way to monitor their credit and immediately spot any fraud.

Man climbing range of credit scoresThey won’t include your credit score

Your credit reports will contain a lot of information but they won’t include your credit score. While there are a lot of different credit scores floating around the most important one is your FICO score as this is the score that most lenders use in determining whether or not to extend you credit. You can only get your FICO on the website

Where else to get your credit score

Getting your credit score used to be a fairly big job. But it’s becoming much easier. You can get your score free on websites such as and and from the three credit reporting bureaus. These won’t be your true FICO score but should be close enough to give you a good idea of how you stack up. Whatever your number is, don’t fixate on it. The important thing is to understand how you stand in the range being used. FICO scores range from 300 to 850. This means that a score of 800 would put you in the range of very good or excellent credit. However, the VantageScore, which was developed by the three credit reporting bureaus, has a range of 501 to 990. It also assigns a letter grade to scores. If you were to have a VantageScore of 800 you would be ranked as C or Prime, which wouldn’t be as good as an 800 FICO score.

It’s becoming easier

If you have a Discover card you’re probably seeing your credit score every month on your statement. The credit card companies, 1st Bankcard and U.S. Bankcard have said that they will soon be sharing FICO credit scores and related information with their customers. This is in response to the US Consumer Financial Protection Bureau (CFPB), which has been urging the credit card companies to do this because it believes the more information a consumer has, the better a job he or she will do in managing their credit. While this has not yet proven to be true, it certainly can’t hurt for people to be able to see their credit scores every month and whether they’re getting better or worse.

How your score is calculated

No, your age, marital status, number of children or any other personal information is not used in calculating your credit score. It is based on six factors: Your payment history, debts owed, length of credit history, amount of available credit, types of credit and your credit inquiries.

If when you get your credit score you find that it’s either poor or bad there’s nothing you can do about your payment history. History is, after all, history. You also can’t do anything about your length of credit history. However, there is one factor you could get to work on – which is your debt-to-credit ratio. It’s calculated by dividing your debts owed by the amount of available credit you have. For example, if you have available credit in the amount of $10,000 and $5000 in debts owed, your debt-to-credit ratio would be 50%. Since this accounts for 30% of your FICO score this is an area where you could do something to affect it positively. The two alternatives are to either pay off some of your debts or ask one or more of your creditors to increase your credit limits. Do either one of these and you would lower your debt-to-credit ratio and this should have a positive effect on your credit score. If you’d like more tips for improving your credit score, watch this short video courtesy of National Debt Relief.

The net/net

What all this boils down to is that your credit score pretty much rules your credit life. And since your credit score is based on your credit reports – or how well you’ve used credit – the best policy is to always use it sensibly.

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