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Don't Ruin Your Credit Score! Avoid These 4 Follies

Legendary American investor Warren Buffet once said, "It takes 20 years to build a reputation and five minutes to ruin it." The same could be said of good credit. It isn't built overnight or by accident. Most Americans with stellar credit scores have exercised financial discipline for years. That's why lenders are willing to offer them mortgages and car loans at favorable interest rates. Like a good reputation, a strong credit score can be easily ruined. Here are four ways to devastate your credit score:

  • Max out your credit cards and don't make required payments. Your credit score is a number between 300 and 850 (worst to best) that most lenders use when deciding whether to extend credit. About 35% of your credit score comes from your payment history. Paying late or paying less than required minimums can wreak havoc on your credit score and may signal to lenders that you're overextended.
  • Co-sign on an irresponsible friend's loan. There's a reason why your pal needs a co-signer: he or she is perceived as a high credit risk. If your friend defaults on the loan, then you're responsible for the unpaid balance. As William Shakespeare once wrote, "Loan oft loses both itself and friend." Remember this: If you co-sign for a loan, the status of the loan will appear on your credit report.
  • Close credit card accounts in quick succession. Shutting down a credit card or line of credit account may adversely affect your debt-to-utilization ratio (how much you owe in relation to your credit limits). As this ratio climbs, your credit score tends to sink. For example, you have three credit cards and each has a $1,000 limit. You carry a balance of $500 on one of those accounts. That's a debt ratio of $500 to $3,000 or about 17%. If you close one of the accounts, the ratio will jump to 25% ($500 to $2,000). Though you haven't accumulated more debt, your credit score may be hurt.
  • Default on your installment loan or home mortgage. This is another surefire way to trash your credit score. A home foreclosure, for example, may cause your credit score to plunge by 200 points or more. Because most negative information stays on your credit report for seven years (10 years for a bankruptcy), lenders may be reluctant to offer you money for a very long time.

Avoid these follies to keep your credit score in tact! This will help you build long-term equity so that you can take out larger loans with favorable interest rates.

Source: J.P. Spillane, CPA, PA


10 Steps to Making a Financial Budget

In a 2013 national survey, the National Foundation for Credit Counseling found that only two out of five Americans have a monthly budget and keep close track of their spending. Learn how to budget by following these 10 steps:

1. Understand the necessity of a budget.
A budget will help you get a grip on your spending-and help you make sure your money is being used the way you want it to be used.

2. Know the three steps of creating a budget.

  • Identify how you're spending money now.
  • Evaluate your current spending and set goals that take into account your long-term financial objectives.
  • Track your spending to make sure it stays within those guidelines.

3. Use budget software.
If you use a personal finance program such as Quicken or Microsoft Money, the built-in budget-making tools can create your budget for you.

4. Don't drive yourself nuts.
One drawback of monitoring your spending on your computer is that it
encourages overzealous attention to detail. Once you determine which
categories of spending should be cut (or expanded), concentrate on those
categories and worry less about other aspects of your spending.

5. Watch out for cash leakage.
If withdrawals from ATMs seem to evaporate from your pocket, it's time
to keep better records. In general, if you find yourself returning to the
ATM more than once a week, you need to examine where that cash is going.

6. Don't spend beyond your limits.
But if you do, you've got plenty of company. Government figures show
that many households with a total income of $50,000 or less are
spending more than they bring in. This doesn't make you an automatic
candidate for bankruptcy, but it's definitely a sign you need to make
some serious spending cuts.

7. Beware of luxuries dressed up as necessities.
If your income doesn't cover your costs, then some of your spending is
probably on luxuries-even if you've been considering them necessities.

8. Remember to save.
Aim to spend no more than 90% of your income. That way, you'll have 10%
left to save for big picture items.

9. Don't count on windfalls.
When projecting the amount of money you can live on, don't include dollars
that you can't be sure you'll receive, such as year-end bonuses, tax refunds or investment gains.

10. Beware of spending creep.
As your annual income climbs from raises, promotions and smart
investments, don't start spending for luxuries until you're sure that you're
staying ahead of inflation. It's better to use those income increases as an excuse to save more.

The 2013 Financial Literacy Survey
CNN Money - 10 Steps to Making a Financial Budget


10 Tips for Spending Your Tax Refund Money

Can't wait to get your tax refund? Don't spend it all in one place! Here are 10 tips for spending your tax refund money wisely:  

  1. Save for an Emergency: You can't always predict life events that will affect your finances, but you can prepare by establishing an emergency fund. Use your tax refund to start saving for the future.  
  2. Pay Off Debt: If you have fallen behind on your bills, use your tax refund to help you catch up. Or, pay off some of the principal on a loan balance-this will reduce the interest charges, saving you money in the end.
  3. Save for Retirement: Save for your retirement by putting some of your tax refund in an IRA. This is a great way to grow your retirement and help ensure you enjoy your golden years.
  4. Invest in Your Career: Have you been thinking about going back to school to earn a few more credits or your next degree? If so, you can use your tax refund to help fund your education.
  5. Improve Your Health: Use your tax refund to get healthy. Start buying fresh organic fruits and veggies or invest in a gym membership and make a commitment to actually go!
  6. Tackle Big Projects around the House: House repairs are difficult to afford when bills pile up. Use your tax refund to get rid of those termites, paint your house, upgrade your plumbing or whatever else your house needs.
  7. Make Your House Energy-Efficient: Use your tax refund to make your home more energy-efficient. Start buying incandescent light bulbs with LED or make a bigger investment by purchasing energy-efficient appliances.  
  8. Buy Life Insurance: Consider buying life insurance to protect your spouse and children in the event of your death. A good policy will cover funeral costs as well as your household's expenses for a year or more.
  9. Save for a Family Vacation: Family vacations are not only fun, but also provide a good opportunity to bond! Whether you go to a relaxing beach or a national park, this is a great chance to make some memories together!
  10. Give to Charity: During a down economy, charities are especially in need of money because people are donating less. If you do not have debt that you need to pay off, give some of your tax refund to your favorite charity.

Source: Can Do Finance 
GCU claims no responsibility or ownership for this content. 


Tips For Cutting Medical Bills

With the burgeoning cost of pharmaceuticals, doctor visits, and hospital stays, staying healthy has become an increasingly expensive proposition. In addition, health insurers are passing along more and more of their costs in the form of higher deductibles, increased premiums, and larger co-payments. Out-of-pocket costs for even one hospital stay can break a household budget, and it may take years to recover. That's the bad news. The good news? You can control some of these ever-increasing health care costs by following a few simple strategies:

  • Negotiate, negotiate, negotiate. You haggle when buying an automobile. Why not use a similar tactic when discussing items on your hospital bill? In fact, out-of-pocket costs for a surgery may even exceed the cost of that shiny vehicle sitting in the driveway. Fortunately, health care providers are often amenable to reducing invoiced amounts, and some may offer discounts for upfront payment. You might also research the cost of similar services in your area and use those figures as a starting point for negotiation. One place to start is healthcarebluebook.com.
  • Scrutinize the bill. Hospitals are notorious for double billing and mischarges. When you receive the itemized bill, pore over it - line by line. Look for charges that don't make sense ($50 charges for hospital supplies that are available for a dollar at the local department store); charges for services you didn't receive (physical therapy that never happened); or more than one charge for the same item (separate charges for the hospital room and standard amenities like bed sheets). Examine the rates for these items as well. Your insurer may have negotiated lower rates, but you may have been charged more-expensive uninsured rates. And make sure all eligible out-of-pocket expenses are credited toward your deductible.
  • Comparison shop before you buy. Unless you're being treated for an emergency, you may have time to locate more cost-effective health care alternatives. For example, using a stand-alone MRI imaging center may cost significantly less than the same test if offered by a hospital. A walk-in clinic or urgent care facility is generally cheaper than a visit to the local emergency room. Switching to generic drugs, when available, can save you up to 60% over name-brand equivalents.

If in doubt, call your insurer's hotline to ask for help. Remember: insurance companies have a vested interest in your good health.

Source: J.P. Spillane, CPA, PA  
GCU claims no responsibility or ownership for this content. 


Know Your Credit Score
It's that time again. Time to consider those annual routine tasks we need to make sure get on our list and get done!

  • Make an appointment for my yearly physical. Check.
  • Gather my documents for taxes. Check.
  • Pull my credit score.... Really?

Yes! Knowing your credit score is important because it shows lenders how responsible you are with money. Don't let this annual task fall by the wayside!If you have a good credit score (generally above 700), you will have an easier time getting a loan, since lenders will see that you are likely to pay it back. And the better your score, the more likely you are to get lower interest rates.Surprisingly, your income does not affect your credit score at all. But more than 25 other factors do, including:

  • How much credit you have been extended (credit cards, loans, etc.)
  • How much you owe (total debt)
  • Whether you pay off your debt on time
  • How many times you have asked for credit
  • How long you have had credit In the United States

There are three nationwide consumer reporting agencies: Experian, Transunion and Equifax.You can get a free copy of your credit report every year. That means one copy from each of the three companies that writes your reports. The law says you can get your free credit reports if you call Annual Credit Report at 1-877-322-8228 or go to AnnualCreditReport.com.Check your credit report annually and review the information to ensure all of the information is correct and you have no disputes with the data.If you find a mistake, write a letter telling the credit reporting company that you have questions about information in your report. Explain which information you think is wrong and why you think so. Send them a copy of the report with the items circled and send supporting documentation as to what the data should say.  Make sure to mail the information Certified mail. Ask the post office for a return receipt. The receipt is proof that the credit reporting company got your letter.The credit reporting company must look into your complaint and answer you in writing.

Source: consumer.gov
GCU claims no responsibility or ownership for this content.