Tag Archives: credit scores

Financial Tips Presented At The National Black Book Festival

Posted on by Leave a comment

At the beginning of June, I attended the National Black Book Festival in Houston, TX.  While there, I facilitated a seminar on the Rags to Riches Financial Model.  The presentation highlighted the essential components needed to lay a foundation for financial success.  Included below are some of the helpful tips that were shared with seminar participants:

  • Money matters are matters of the heart.  If you have a personal mission for your life, it becomes easier to be disciplined in your finances.  In order to succeed financially, you must have a mission for your money
  • To increase the amount of surplus (income-expenses) you have on a monthly basis, consider the following:
    • Combine your insurance policies in order to receive the multiple policy discount
    • Interest rates are at historic lows.  Explore opportunities to refinance your home and / or vehicle.  If you are struggling to pay your mortgage, consider investigating several of the governmental programs that have been established to help homeowners stay in their homes.  My post, Don’t Walk Away From Your Investment, outlines a few of these programs
    • If you have a cell phone, consider eliminating your home phone or opt for basic service
    • Measure your financial health based on your net worth and not your annual salary.  Your net worth is the difference between your assets (what you own) and your liabilities (what you owe.)  You can evaluate your net worth by using the following formula:

Net Worth = Age X Pre-Tax Income (Gross) / 10

  • You can’t fix what you’re not aware of.  That being said, you should obtain your credit report from the three major credit bureaus on an annual basis by visiting www.annualcreditreport.com.  This is a free service
  • Know your credit score.  For tips on improving your credit score, please review my post, Three Ways to Increase Your Credit Score
    • A low credit score will increase your liabilities and expenses and decrease your surplus and net worth
  • Set sound financial goals.  The following four steps are key ingredients to goal setting:
    • Be Precise – Include dates, times, and amounts so you can measure achievement
    • Be Realistic – It’s important to set goals you can achieve
    • Set Priorities – We often have several goals; give each a priority
    • Write Down Your Goals – Documenting your goals activates them and increases your chances of success

I hope you find the tips in this post helpful.  Establishing a solid financial future requires a plan, time, and money, but it’s never too late to get started.  To review the seminar presentation in its entirety, please click here:  NBBF Rags to Riches Seminar Presentation

Three Ways to Increase Your Credit Score

Posted on by One comment

Credit is a significant factor in building wealth.  The truth of the matter is people without credit or with poor credit pay more for basic services (e.g., home mortgages, auto loans and insurance.)  Additionally, it’s important to know that no credit is the equivalent of poor credit.  That being said, whether you use it or not, if you want to build wealth, you need credit.  To ensure we’re on the same page, I’d like to introduce three key terms:  credit, credit reports, and credit scores.

Credit is the ability to buy now with a promise to pay later.  According to the Federal Trade Commission (FTC), if you’ve ever applied for a loan, credit card, insurance, or job, you have a credit report.  Your credit report is similar to a report card; it conveys a story to creditors.  It shows whether you’ve been a conscientious consumer, if you honor your credit agreements, and whether or not you’re carrying too much debt.  In today’s economy, credit is more important now than ever before.  Not only will it prevent you from being able to purchase or rent the home you desire, it can also prevent you from obtaining the job you want.  If you’ve never reviewed your credit report, there’s no time like the present.  Each year, consumers qualify for a free credit report from the three major credit bureaus.  To request your free credit reports, please visit www.annualcreditreport.com .

If you have a credit report, you have a credit score.  In an effort to ensure objectivity, many creditors use credit scores to assess an applicant’s credit worthiness.  A credit score is a numeric value that ranks an individual according to their credit history at a given point in time.  Credit scores typically range from 400 to 850 – the higher, the better.  Although obtaining your credit score from the three credit bureaus is not free, it’s worth the investment.  You can obtain your credit score from Experian, one of the three major credit bureaus, by visiting www.freecreditscore.com .  Because the information in your credit report may vary, you should obtain your credit score from all three major credit bureaus.

If you’re credit challenged, the following steps will help you improve your credit score:

  1.  Pay Your Bills on Time.  Creditors do not report your account as late to the credit bureaus until your account is 31 days past due.  Because we now have the ability to pay our bills online, many creditors have eliminated the grace period for late fees.  For example, if your credit card bill is due on June 1, most creditors will assess a late fee if your payment does not post to your account by that day.  Although you may incur a late fee, your account will not be reported as late to the credit bureau until it’s 31 days past due.
  2. Keep credit card balances below 50% of your approved credit limit.  Your credit score factors in how much credit you use.  In essence, just because you have it doesn’t mean you have to use it.  If you can’t pay off your balance at the end of the month, keep your balances low.
  3. Pay outstanding judgments.  If you have debts that are not in good standing, it’s important to make arrangements and pay them.  As you develop a plan to pay outstanding debts, you should focus on the most recently reported first.  You should also take an opportunity to request settlements.  Most creditors will accept settlements on bad debts.  As you work with a creditor on a potential settlement, try to settle the account for 50-60% of the outstanding balance, and make sure you obtain the terms of the settlement agreement in writing and honor them.

Restoring credit takes time, but it’s worth it.  Proverbs 22:1 states, “A good name is more desirable than great riches; to be esteemed is better than silver and gold.”  If you desire to build wealth for future generations, it begins with striving to maintain your credit worthiness.  For more information on how to restore your credit, please consider the book, Rags to Riches.

Get Your Credit Straight!

Posted on by One comment

One of the most important things to remember in wealth creation is your credit rating is important.  If anyone tells you it’s not, it is very likely that they are credit challenged.  The reality is, in spite of well thought out plans and precautionary measures, life happens.  It can be an illness or a leaky roof.  At some point in your life, the unexpected will occur and it will cost you.  Additionally, in today’s society, in order to obtain basic necessities (e.g., job, insurance, etc.), a good credit rating is required.

I know there can be several reasons for impaired credit, and that a poor credit rating does not mean you’re a bad person.  However, many organizations rely on information in your consumer credit report to assess your integrity and how well you honor your commitments.  Today’s job market is very competitive; you don’t want to win the job, but lose out on employment because a consumer credit review revealed poor judgment.

Poor credit is costly.  What’s most alarming is if asked, many of us don’t know our credit rating, and have never reviewed our credit report.  How can you change something when you’re unaware?  You don’t want to sit across the table from an employer or creditor and realize that they have access to information about you that you don’t have.  It can be a very embarrassing experience.  First and foremost, you are responsible for the consumer choices you make.  Your credit reports and scores are merely the result of your choices – your report card.

As a result of the Fair Credit Reporting Act (FACT Act), consumers are eligible to obtain a free credit report from the three major credit bureaus on an annual basis.  To obtain yours, visit www.annualcreditreport.com.  Although your credit reports are free, there is a nominal fee for the related credit scores.  A credit score is a numeric value that ranks you according to the information included in your credit report at a given point in time.  Credit scores typically range from 400-850; the higher, the better.  The table below provides the range for credit scores:

If you’ve obtained your credit reports and scores and are discouraged because of the story yours tells, all is not lost.  Over time, you can improve your credit rating.  The following six steps are essential components of an effective credit restoration plan:

  1. Pay your bills on time.  Do not allow your bills to exceed 30 days past due
  2. Correct false information in your credit report.  A survey conducted by the U.S. Public Interest Research Group (U.S. PIRG) concluded that 79% of all credit reports contain errors  
  3. Settle charge-off accounts, collections, and other past judgments; address most recently reported derogatory information first.  Your credit report will include contact information for your creditors; use it to negotiate terms for paying off outstanding debts.  It is very important that you honor the agreed upon terms
  4. Keep revolving account (credit card) balances below 50% of your credit limit
  5. Contact creditors to add positive information to your credit profile
  6. Do not “lend” your credit to anyone.  In all likelihood, if they need to use your credit, it’s because they’ve ruined their own.  Don’t allow them to ruin yours

Improving your credit rating takes time.  However, it can only be accomplished if you are aware of the problem.  Ultimately, accept responsibility for your choices.  If others have contributed to your negative credit rating, it’s still your responsibility unless you are a victim of identity theft.  To learn more about identity theft, visit www.ftc.gov.  Remember, taking ownership of your future means understanding the impact of decisions from your past.