Posted in Budgeting for Everyone, Credit Cards, Debt Free, Financial Freedom, Saving for Your Future, Winning with Your Money, You and Your Money

The Credit Score Game – Part 2

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Your credit score is your financial reputation.  It is the only accurate picture the world – and you – has of how you handle your money.  And we all know a picture is worth a thousand words.  We should never become obsessed about our score, but we should all understand what it means so that we can make good financial decisions that will move us forward and not backwards in the area of our finances.

Last week, we talked about the biggest part of the pie – your payment history which makes up 35% of your score.  Today’s factor makes up 30% – which means that just these two things make up almost 2/3 of your score.  In my mind, that means that they are pretty important.  These two things show us very quickly how we handle our finances.  The first factor shows whether we honor our commitments and use tools such as budgets and spending journals to make sure we can follow through on our promises.  It also shows whether we are prepared for emergencies when they arise.  The next factor shows us how much we rely on debt in our finances.  Let’s take a look at factor number two!

Part 2 – 30% of your score is your credit utilization.  This is the percentage of your credit limits you use.  For example, if a credit card has a limit of $5000 and you have a balance of $1000, your utilization is 20%.  Here is a huge factor when it comes to the utilization percentage – it is the balance as of the statement date.  This means that even if you pay your cards in full every month, your utilization can be high.  In a minute, I will share a tip on how to avoid this.

The ideal percentage to keep a good score is 30% and below.  However, if you stay below 10%, your score will get a boost as that is considered excellent.  If you are a person who relies on debt to buy stuff, it may take a while to get this into a good position.  The only way to do this is to pay off your debt.  Unlike part one where you could start today and see results pretty quickly, this will take a little longer based on where you are and how much credit you have access to.  If you owe $400 on a $500 limit, you can knock that 80% down in one month.  But if you owe $5000 on a $10,000 limit, it may take months to get that 50% down.  This factor isn’t about timing so much as it is about the math.  And depending on where you are getting your score from, your percentage can be based on each individual account or can be an overall average of accounts.

There are two keys to helping this as soon as possible – one if you are a pay in full person and one if you are a debt person.  If you pay your card in full every month, the key is to make sure that your payment post before the statement date.  Paying it off then can be the difference in an 80% utilization and a 0% utilization.  Big difference!  If you are a debt person, the best thing you can do is start attacking your debt smallest to largest.  This will start to show zero percentages on cards and will lower your average utilization.  This will weigh heavy on the positive side especially the more you pay down.

The one thing you need to know about all of the parts of your credit score is that what is done is done.  You can’t go back and change it.  However, you can make better decisions going forward which will begin to outweigh the bad ones.  Trying to do it all can seem very overwhelming which is why I wanted to talk about the top 3 factors so that you can begin there.  You may not be able to start paying everything on time immediately if you have struggled with this for a while, but there is no better time than today to sit down, list out all of your bills with their minimums, set up a budget and begin to make it happen.  Doing this will automatically improve your utilization – lower debt = lower utilization.  You can do it!  I was $200,000 in debt making just $10,000/year with a 560 credit score when I started the process.  And look at me now – debt free, making way more than 10 grand, and my score is over 800.  It is not impossible and I hope that these small tips that I will be sharing will help you to start the journey now.

Credit is a part of life – we need it for things other than debt in today’s world.  It is your financial reputation.  And it’s okay if your reputation is scared a little right now.  Just make the decision to start over – start today making one better financial decision, pay one bill on time, pay one debt off, anything!  Today is your day!

Posted in Buying Your Dream House, Credit Cards, Debt Free, Financial Freedom, Winning with Your Money, You and Your Money

The Credit Score Game – Part 1

credit-score-report-historyWhen I was getting out of debt, I was told numerous times, credit scores mean nothing.  However, I learned that that is not exactly true.  Your credit score is your financial reputation – plain and simple.  When necessary, it shows people how you handle your finances – the good, the bad and the ugly.  I agree that your primary focus in your financial life should not be your credit score.  However, when you make positive financial decisions, your credit score will reflect that and in essence take care of itself.

In order for you to understand how that happens, you need to understand how the credit score works and what positive, on purpose money decisions you can make to help your score along.  So for the next 3 blog posts, we are going to cover the top 3 most important factors of your score and I will share tiny tips that you can do to raise your score simply and easily.  When I started focusing on getting out of debt and making positive decisions, my score went up 100 points in just one year – some take longer, some are quicker, but you have to start somewhere.  So here we go!

Part 1 – 35% of your score is your payment history.  That is over 1/3 on just this one thing.  And this is where many of us go way wrong.  Anytime you are overextended financially, someone doesn’t get paid.  If you don’t have the right health insurance and emergency fund, medical bills don’t get paid and end up in collections.  When you go credit card crazy and look up and owe hundreds every month that you don’t have, bills end up in turmoil.

Your payment history is very important to your financial reputation.  It shows people whether you have it together or not.  People don’t have to look at your bank accounts to know if you have a proper emergency fund – they simply need to look at your credit report.  You don’t have to show anyone your budget for them to know if you are doing one or not.  It is all reflected in your credit report.  Many people fall on hard times and if you are not properly prepared, it will affect your credit history and your financial reputation.

But don’t worry – it is never to late to fix it.  The first thing you need to start doing is get on a budget and pay every bill’s minimum payment every month on time or early.  If a bill is due on the 20th, pay it no later than the 15th – I mean the payment posts on the 15th.  Online payments usually posts within a day, but mailed payments can take 10-20 days to post.  Take this into consideration.  If you have to start with one, then another, then another and so on.  This is better than every single bill being late every single month.

Once you have everything being paid on time or early, begin to work on cleaning up any collection items that may be sitting out there.  They are already being reported as not being paid, but once you settle them (even if it is for a written settlement partial) it will show paid and raise your score.

The one thing you need to know about all of the parts of your credit score is that what is done is done.  You can’t go back and change it.  However, you can make better decisions going forward which will begin to outweigh the bad ones.  Trying to do it all can seem very overwhelming which is why I wanted to talk about the top 3 factors so that you can begin there.  You may not be able to start paying everything on time immediately if you have struggled with this for a while, but there is no better time than today to sit down, list out all of your bills with their minimums, set up a budget and begin to make it happen.  You can do it!  I was $200,000 in debt making just $10,000/year with a 560 credit score when I started the process.  And look at me now – debt free, making way more than 10 grand, and my score is over 800.  It is not impossible and I hope that these small tips that I will be sharing will help you to start the journey now.

Credit is a part of life – we need it for things other than debt in today’s world.  It is your financial reputation.  And it’s okay if your reputation is scared a little right now.  Just make the decision to start over – start today making one better financial decision, pay one bill on time, anything!  Today is your day!

Posted in Building Wealth, Car Buying, Debt Free, Financial Freedom, You and Your Money

The Day Before

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I am so excited for this week!  My daughter is coming home from college and every moment spent with her is a blessing.  I consider myself one blessed lady.  Blessings that would take up hundreds of pages if I listed every one.  But I made a habit years ago of celebrating those blessings everyday of the year, not just the 4th Thursday of November.  This is one of the reasons I have no issue with listening to Christmas music now and singing at the top of my lungs.  Because I have made everyday Thanksgiving Day.

Thanksgiving for many is about Black Friday shopping and all of the deals you find – I do love a good deal and usually that is what my blog post is about this week.  For many it is about seeing family that you haven’t seen in a really long time.  And for some it means deer season is just a few days away.  All of those are great and all of those are fun, but I wanted to focus this week on helping you see the many blessings you may not know you have.  When asked “What are you most thankful for?”, most answers are the same – family, specific people, animals, and food.

But I want to take a journey with you to another part of your town, city, state where people actually have less than you.  Many of us talk about all the things we don’t have and all the things we can’t afford.  Many of us are stressing over finances right now because we have bought things without having the cash to back it up.  But I want you to please read the list below of just a few of the things I am thankful for everyday because I know that there are people on my street, in my town, and in my area who don’t have what I am blessed to have.

  • Food – there are children everyday whose only meal is at school.
  • Clothes – there are women with just one pair of shoes and they have holes in them.
  • Water – there are people who do not have running water right here in the U.S.
  • Toilet – there are people who have to use outhouses and buckets even in 2016
  • Heat – I remember when my grandmother would heat the living room only and when we went to bed, we used an electric blanket.  The whole house was never heated.  My husband deals with clients everyday who choose to use their ovens for heat because they do not have any.
  • Jackets – many kids go to school with just the shirt on their back, many times a t-shirt in the middle of winter.
  • Transportation – a pet peeve of mine is when people say they need a car to justify a huge car payment they can’t make.  There are many people who would love just an old used car to get somewhere without having to walk.
  • Bible – I have many Bibles all around my house including on my iPad and phone.  There are people who would love to have just one.
  • Electronics – we all say that we “need” computers, internet, phones, TV’s, tablets, etc.  These are actually the last things we need.
  • Washer/dryer – I am washing clothes right now in my heated house – doing 4 loads.  Do you remember the scene in “The Blind Side” where Mike would go to a laundromat at night, hand wash his “other” shirt, slip it into someone else’s dryer and then spend the night there?  That is not fiction.
  • Income – you may not like your job (and I hope you will pursue your passion), but be grateful you have some source of income.  Many people, more than we realize, are one check or emergency away from having nothing.

The biggest thing I realized years ago was that even at my bottom – in debt with 5 zeros and making $10,000/year, I still had way more than other people.  I want to ask you today – don’t ever say you are broke.  Don’t ever say you aren’t blessed.  Don’t just be thankful for family and people.  Take a look around, focus on things you never saw as blessings, and start being thankful for everything.  There are treasures in every trial.  There is something to be thankful for in every situation.  2 1/2 years ago, my dad had a massive heart attack and basically left us – until God stepped in and saved his life.  Not for one moment did I focus on the heart attack and what could have happened.  Until this day, I focus on every blessing that came out of that and make sure I tell God and my daddy everyday that I love them to the moon and back.  I don’t know why daddy had to go through that, but I know that for me, only good will come from it.

You are blessed.  You have someone who loves you – God and me.  You are an awesome person!  I hope you have a blessed Thanksgiving and from my family to yours – thanks for everything!  We love you!!!

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