Category Archives: Advice

Life 101 for the New Millennium: Why and How You Should Build A Good Credit History

Advice, Budgeting & Money, , , , , , , , , , , , , , , , , ,
credit history score
Photo by Giovanna Baldini

Although some financial gurus like Dave Ramsey recommend avoiding them altogether, credit cards can help you establish a credit history. You’ll need a good record of credit when it comes time to finance large purchases like a car or home. When I was a college senior, my parents let me get a Discover card. I paid off the debt for every month I had a balance and was never late with payments. Thus, I began my credit history.

Not carrying too much debt, not having too many credit cards, paying your utilities and rent on time, and never being late on credit card payments are some major ways you can build a good credit history. And like I’ve preached before, try to pay off your whole credit card balance each month. Not only will you avoid paying interest on the unpaid balance, but it makes for a good habit of staying within your means.

Your credit score is derived from your credit history (also called a credit report.) It is a numerical representation of the health of your credit at any point in time and also an indicator to prospective lenders of how much of a risk you are as a borrower. Avoid pulling a credit report on yourself too often, and make sure you’re doing so with a reputable online vendor.

The three credit bureaus are Equifax, TransUnion, and Experian and all will have a slightly different score for you. These numbers are fluid and will change over time depending on your spending habits, how you handle your credit, etc. And here’s how to request your credit score from the three bureaus . Here’s how your score is calculated:

35% – Payment history
30% – Amount owed vs. total credit available to you
15% – Length of credit history
10% – New credit
10% – Types of credit used 1

And here are what the score ranges mean: 2
Credit score ranges

If you tend to forget payments, create recurrent reminders in your phone or calendar, or set up automatic payments that draft your checking account. Definitely avoid allowing a bill to become so overdue that it’s sent to collections. Again, like with a lease, if you see that for some reason you will not be able to make a full payment, work with the lender on the best course of action instead of letting it go overdue, which can negatively affect your credit score.

Don’t max out your card, spending up near the limit. 3 Just because you have a high limit doesn’t mean you should take advantage of that regularly or with too many purchases of non-necessities.

Making good financial choices isn’t always easy. But being informed, staying on top of your finances, and guarding your credit history will keep you on the path of financial stability and maintain your good reputation as a borrower (not to mention lowering your stress!)

References: 1Myfico.com 2usleaseoption.com 3regions.com/mygreenguide

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Life 101 for the New Millennium: Demolish Your Debt

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debt reduction, budgeting, interest
Photo by Erwin Zueger

Some people may not think about recent grads when it comes to debt. After all, how many recent students have a house, luxury vehicle, kids, etc. But those graduates who didn’t have the benefit of scholarships or parents who paid their way through college most likely had no other choice than student loans.

The faster you pay off the debt you owe—be it on a car, student loans, etc.—the better. Unless there’s a prepay penalty on the loan, you’ll save in interest when paying it off early. And student loans and/or credit card debt are a great place to start this practice.

First, make sure you have a budget. This way you can make sure you are covering your needs before your wants each month. Live within your means, spending what you have and saving up for anything that costs more than you have the money for. Then list out all your debts: the creditor, the total, the interest rate, and the minimum monthly payment.

The preparation above will help ensure (or identify if) you have some discretionary income to apply toward debt reduction (always pay against the principal when paying more than the minimum payment). You can also pick up additional work on the side, be it freelance or a part-time job in the hours around your full time job. For example, my friend Jason bartends two nights a week.

Pay off the debt with the highest interest first, then on down the list. Obviously, don’t take out mini loans from your bank, do Cash Advance type loans, or go on shopping sprees with your credit card. You don’t want to add to your debt when the goal is to be as debt-free as possible.

You may want to investigate consolidating all your debt into one lower interest loan. This strategy may help reduce the amount of interest you accumulate monthly, providing you more cash to use toward paying off the balance.*

If you have a month where for some reason you will not be able to make the full payment, contact that creditor. Creditors are used to working with their customers and would rather you be proactive in working out an alternate arrangement than get behind on payments. Further, you may have more options if you get in touch before that month’s deadline rather than waiting until the payment is overdue.

If you ever see you cannot make, for instance, your car payments, contact the lender to discuss options. It’s far better to do this than to allow repossession…or in the case of an apartment, eviction. Eviction has many consequences, and just running from the aftermath of that situation will not absolve them.

Though having your debts paid off may seem like an ideal but distant goal, don’t give up. Chip away at that debt. Getting it off your plate can reduce stress, save you money, establish good money management habits, and help raise your credit score.

*“How to Pay Off Debt: Six Steps to Success,” 2014 Regions Bank article

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LIFE 101 FOR THE NEW MILLENNIUM: Apartments, Roommates, & Renters’ Insurance—Oh My!

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roommates apartments renters insurance
Photo by Brandon Hoover

It’s been 21 years since I finished college. For at least half that time, I’ve had a myriad of roommates (and colorful experiences), so believe me, I can really speak to this topic! After college, you’ll most likely move away from your parents place—especially if your new job is in a different city.

First, finding your new place: Consider living as close to work as you can. This will save not only gas, but time commuting to and from the company. If you have friends in the city where you’ll be living, ask them about where they live or other places they’ve heard recommended. Frequently, at convenience stores/gas stations or retailers like Target or Wal-Mart, there are racks of free Apartment Finder guides near the front door. You can also surf the web at places like rent.com, forrent.com, or apartments.com.

Let’s say you simply want to find an apartment or house where the current renter needs a roommate. Again, your social media network is a great place to inquire. So start by seeing if anyone your network recommends needs a roommate or wants to partner with someone to find a place. I’ve had friends that had great luck with Craigslist. Here you can find many people that need a roommate. Roomates.com, roomster.com, or easyroommate.com are also options.

Obviously, consider if you can afford your part of the rent before you show up to check the places out. Then, inquire about the security deposit (how much it is and how much you’ll get back when you move out), and make sure both you and your roommates’ names are on the lease (so anyone failing to pay their portion can be held accountable.) Depending on how long you feel you’ll stay at that location, you can choose a 6 or 12 month lease—the more months, the lower the rent will be. Remember, depending on which living situation you choose, utilities will need to be assigned to one name, so you may want to split up who registers for what so it’s all not on you. The better your credit, the less likely a deposit will be required. Some places will not charge tenants for water or trash pickup.

Beyond the place, the people you live with are just as or more important a consideration! I’ve found that rooming with friends of friends or new acquaintances (e.g., people I met at musicians or association groups are the best since you have a common tie but aren’t long time friends.) Rooming with a close friend can tend to strain or mar the relationship since you add the stresses of dealing with cleaning, bills, noise, etc. to the mix when you live together.

Whoever you choose, remember that you’ll be not only sharing space, but dealing with division of chores, shared bills, the security of the place, safety of your things, and both of your friends and love interests. As an extra level of caution, or if you don’t have the luxury of being referred to someone by a friend, you could always try to run a background check on the people you consider.

Finally, whether you have roommates or not, it’s always a good idea to have renters’ insurance to protect your belongings in case of fire, theft, flood, etc. Renters’ insurance is specifically for those who do not own the place where they live and usually costs less than insurance on an owned residence. Shop around for the best price, and refer to my previous post on insurance for tips on doing so. Usually this is billed as one payment per year. I preferred the type that reimbursed me for the cost of replacement of my items vs. getting the current value of those items back. Check with the owner as to what’s covered, since you’ll want renters’ insurance in cases where the owners insurance doesn’t or is insufficient to cover the loss of your things.

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