The decision to rent your home instead of selling it is both a financial and emotional decision. After all, this isn’t just an asset; it’s a place where your life has been centered. So think carefully before you become a landlord. [Read more...]
Many successful businesses began with a loan from a family member but many families have had problems with business loans. So it’s best to be cautious. Whether a relative has asked you for a loan, or you’re the one who wants to borrow, here are some guidelines. [Read more...]
Reverse mortgages can be worth exploring for older homeowners who are house rich and cash poor. These loans draw against your home’s equity to put money in your pocket, and unlike home equity loans or traditional “forward” mortgages, they don’t require income or a credit score and are not repaid monthly. Instead, the total loan plus interest isn’t due until the last surviving borrower sells the home, leaves it for 12 consecutive months or dies. Of course, it’s important to carefully compare the available options and fully understand the ramifications before proceeding. [Read more...]
Sudden wealth—whether from a gift, inheritance, business sale or other source—can be overwhelming if you’re unprepared. Careful planning can mean the difference between preserving your wealth and watching it evaporate. [Read more...]
No, not marriage. Money. Some couples have trouble discussing money, not because they don’t do it, but because of how they do it. Whether you’re a comfortable, well-established couple or new lovebirds, you might appreciate some tips to keep your financial conversations calm and strategic, instead of emotional and reactive. [Read more...]
Consumer credit scoring is commonly misunderstood, but it’s important to understand. Your credit score is a key consideration in loan applications and helps determine the interest rate you’ll pay on those loans. The lower the interest rates on your loans, the more income you’ll have available for retirement savings and other uses. So let’s shed some light on five common misconceptions.
“All credit scores are FICO scores.”
The most widely-used credit score model is FICO (Fair Isaac Corporation). Most lenders do use FICO, but you have three different FICO scores from the three major credit bureaus—Experian, TransUnion, and Equifax. Many lenders use their own credit scoring system, which often includes the FICO score as well as other information. A good place to learn more about credit scoring in general is www.myfico.com.
“Carrying a big balance helps my credit score.”
Not so. It’s true that a history of good debt management gains you a higher score than having no debt at all, but the less outstanding credit you have, especially on credit cards, the better. And paying on time is critical. In fact, if you run up an especially-big credit card bill in any given month, try to pay it off a few days early, because outstanding debt is reported to the credit bureaus at the end of the month.
“Wiping out a delinquent debt will immediately fix my score.”
Unfortunately, negative information on your credit report is slow to disappear—seven years for credit delinquencies and ten years for bankruptcy information. It’s far better to avoid credit trouble in the first place.
“I should close my accounts as I pay each one off.”
Closing accounts can actually hurt your score, because credit bureaus look at your “utilization ratio” of credit used vs. credit available. A closed account has zero dollars available, so it’s better to keep your accounts open and only charge (then pay off) one or two small amounts each year. Another reason to keep accounts open is that your score considers both the average age of all your accounts and the age of the oldest one. If you do want to eliminate a line of credit, call or write the lender to ask that your account be closed “at the cardholder’s request,” with written confirmation.
“I only use cash so my score must be great.”
Unfortunately, no. You must use credit to build credit and demonstrate that you pay your debts. Living on cash only doesn’t establish a payment history, and that could be a problem when you want to buy a house or car.
This One’s No Myth
To maintain a good credit score, pay your bills on time, keep your total debt low in proportion to your available credit, and review your credit report regularly to look for errors. Also remember that it’s not only the number of your credit score that’s important, but also the information contained in your report. Be sure to review your credit report from all three reporting agencies annually at AnnualCreditReport.com.
Studies of the human brain have shown that we actually have two brains. There’s the neocortex, where our higher thought processes take place. Below the neocortex is a primitive brain left over from our distant ancestors. This primitive brain doesn’t think. It reacts. All it cares about is survival. So when danger looms, the primitive brain shuts down the neocortex and enters fight-or-flight mode. This was a good survival strategy in the days when you had to run from saber toothed tigers. It’s still useful if you’re trying to avoid a car accident and have only seconds to react.
We all know that there’s a huge imbalance between what the government takes in and what it spends, but how did we get in this mess? On this subject the public has been bombarded with misinformation. Let’s look at some facts.
Identity theft is not quite the epidemic the media would have you believe, but it is a real threat. The Federal Trade Commission (FTC) estimates that every year up to 9 million Americans have their identities stolen. That means that someone will use your name, your Social Security number or one of the many other numbers that define your life to commit fraud.
We’re all familiar with debt. Few of us can buy a house or a car without help from the bank. But sometimes the bills pile up on us. If your debts seem to run your life, keep in mind that there are ways to fight back. Here are a couple of practical approaches to help you live a debt-free life. All you need is the willpower to start today.