“Credit” is the most powerful term in business.
Credit is indeed the key term for first-time home-buyers, college graduates, and even for the Fortune 500 Companies. The credit value of a borrower is evaluated before any loan is issued and it is important to have an excellent credit history for easy loan approval. Most of the lending institution would offer car loan, home mortgage, and the interest rate according to your credit history. Your credit history comprises of your financial transactions including timely credit card bill payment, and any loan defaults etc.
According to statisticbrain.com, the National average FICO score (300-850) in America is 691 and 749 according to VantageScore (501-990). The average credit score in the age group of 35 to 55 lies close to 650. However, if you look pass these national statistics, there is a huge portion of American population which has less than perfect credit score and has to bear with high interest rates. If you are a part of that group, here are some excellent tips to start 2014 on a good credit note.
Get Your Credit Score on Track
- Put shame aside, discuss with your spouse: The most important step to improve your credit situation is to confront it. You need to absolve your partner and yourself of any financial guilt. Get rid of any emotional remorse and you can face it together without blaming each other for past decisions.
- Analyze your current financial status: It is not possible to achieve a target without a goal. You need to collect all your financial statements including credit card, bank account, 401(k), mortgage, and brokerage account. Find out about your mortgage, check the status of your checking account. An on-line banking account should be your priority because it allows paying bills quickly and it is comparatively easier to keep track of it.
- Consult a professional for your credit card strategy: Credit card debt should be your priority and you need to deal with it for once and all. Credit card debt is under your control and it does not come up with other investment uncertainties. For a credit card debt with an interest rate of 15 percent, you get a 15 percent return on your money every time you make the complete bill payment. It is best to look of a balance transfer fund with an introductory low rate for the next 12 months. Avoid paying new bills or charges with your credit card and try to pay off the maximum you can every month.
- Analyze your spending and try to save more: Most of the people blame their expenses and use it as an excuse for spending more. However, you need to find hidden money and cut down those extra $50/$100 expenses that you can do without. You can cut down utility bills within a week. Some of the best places to start are to get down to silver cable package, prepaid mobile phones, and comparatively slower internet speed. Most of the common users are not even able to use half of their allocated internet capacity. In addition to it, increase your car insurance deductibles and drive your car for at least 5 to 7 years instead of changing it every 2-3 years.
- Understand the difference between savings and investments: It is important to keep your money working for you and grow in the process. One of the simplest differences is that the money you need in the next few years should be kept in savings whereas the money that you don’t need for the next 7 to 10 years classifies as investments. Money that you need for the down payment for a new house or car and money that you need for emergencies should be in an interest savings account. On the contrary, money that you need for retirement account or for future needs should go into the stock market to make the maximum out of it.
- Find out your credit score: The Economic Meltdown in 2008 made banks very less eager to lend money and left most of the borrowers with miserable credit score. According to staticbrain.com, nearly 37 percent of the American adults are not aware of their credit score. You need to improve your credit score and reach up to 700 to get things going for you. The only possible way to improve your credit score is to make your monthly bill payments on time and keep the credit card debt to the lowest.
- Get a life insurance for financial protection of your family: One of the most important steps in your financial transformation is to get a life insurance for your family for their financial protection. Choose a firm with a strong financial background. You need to work on emergency fund for your family that can last up to 8 months. Open an account in a FDIC insured bank because the Federal Deposit Insurance Corporation will help you get every penny back, in case your bank runs into trouble.
Take a pledge that you will be the controller of you financial destiny and you will not stop until you become financially independent.