Check your credit report
March 31, 2008
It is very important to check your credit report.
It is also very important to make sure you obtain your credit report through a reputable service.
You are entitled to a free copy of your credit report once a year from each of the three credit reporting bureaus. Checking your credit report each year will ensure there are no errors on your report that could adversely affect your credit score or ability to borrow money.
There are services that advertise they will provide you with your “free” credit report, but in the case of some services once you are on their web site you must give them a credit card number in order to continue. You are then informed that you will be enrolled a free trial period of some other type of service and you must cancel at the end of a certain time period or you will be charged.
Recently, I have talked to several people who have gone to these web sites, obtained their credit reports, but then found it difficult to cancel the other service at the end of their free trial period.
The best place to get your credit report is AnnualCreditReport.com.
According to the company’s web site: “AnnualCreditReport.com provides consumers with the secure means to request and obtain a free credit report once every 12 months from each of the three nationwide consumer credit reporting companies in accordance with the Fair and Accurate Credit Transactions Act (FACT Act).”If you have a complaint regarding a service that offers credit reports, you should contact the Better Business Bureau at http://welcome.bbb.org.
How much do spend on gas?
March 28, 2008
I’m going to go out on a limb and guess that I am not the only person out there who is starting to feel the pinch of rising costs, especially when it comes to gas.
I wince every time I fill up my gas tank. And that’s usually at least twice a week.
I recently came across an article on MSNBC talking about the effect rising gas costs are having on people. Check out the story here. There is a fuel cost calculator included in the article. You can enter in how much you pay for a gallon of gas in your area, how many miles you drive each month and how many miles per gallon your vehicle gets. Then, the calculator tells you how much you are spending each year for gas.
I will warn you that this is not for the faint of heart. I learned that I am currently spending about $2,500 a year on gas for my Subaru, which gets about 25 miles to the gallon. I drive about 1,600 miles a month.
Oh how I long for the days when I drove my little VW convertible and gas was 99 cents a gallon. I figured back then (about a decade ago) gas cost me about $800 a year.
Since I don’t think we’re ever going to see the return of gas for around $1 a gallon, I decided I was going to have to make some changes to my lifestyle and budget so my gas tank doesn’t break my budget.
The first thing I’ve started to try is to have one day a week that I don’t drive my car anywhere. I’m usually on the go seven days a week. Now I try to set aside one weekend day where I keep my car parked. That may mean skipping a trip to visit my family or cramming a few more errands into another day while I’m already out and about.
I’ve reduced some of my luxury spending. I don’t visit the salon as often. I try to cut back on dinners and drinks out with friends. I quit buying the expensive, gourmet cheese that I love.
If you find yourself struggling a little bit with your finances, take a good look at your budget and see where you can cut back. At first it may seem like eliminating little expenditures isn’t that big of a deal, but it can add up to a tank of gas, or more, over the course of the month.
Are you trimming your budget? How? Do you have tips as to how people can scale back on their expenses?
I’m already facing foreclosure
March 12, 2008
I’ve been talking about how to avoid foreclosure. But what if you’re saying, “It’s too late! I’m already stuck with a mortgage I can’t afford.”
You can’t just snap your fingers, reverse time and undo your mortgage. But, you do have options if you’ve got a mortgage and are struggling to make your payments.
The most important step is to take action immediately. I can’t stress this enough. Get help the moment you realize you are going to have problems making your mortgage payment.
Approximately 40 percent of borrowers don’t contact their mortgage lenders before they receive a foreclosure notice. You have a better chance of working with your lender and avoiding a foreclosure if you act quickly.
Some mortgage lenders will work with you through a process called loss mitigation. Lenders have tools available such as putting a temporary hold or mortgage payments, granting a loan forbearance or a pre-foreclosure sale. You can call your lender directly to talk about what options might be available to you.
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Again, if you receive a foreclosure notice, call for help immediately. Don’t wait until the day before your house is to be sold at a sheriff’s sale before you call for help. Our agency is best able to help you if we have the appropriate amount of time to look at your finances and work through the best possible solution for you.
Are you clueless about your debt?
March 11, 2008
As it turns out, most of us are completely clueless when it comes to debt. That’s right, Americans are “financially illiterate,” according to a survey by Harvard Business School, Dartmouth College and TNS.
CNNMoney.com recently detailed the results of the survey of 1,000 people. The individuals were given a hypothetical scenario about credit card debt and asked to determine how long it would take them to pay that debt off.
Only 35.9 percent of the respondents could figure out how many years it would take for the amount on their credit cards to double, and 31.9 percent over-estimated how long it would take them to pay the debt off. What’s worse, 18.2 percent didn’t know how to respond to the question at all.
I wasn’t entirely surprised to read these statistics. Credit cards can be tricky to figure out. Things like interest rates, A.P.R.s and extra fees can be complicated, especially for those of us with less than stellar math skills.
That is why it is so important to educate yourself about credit cards.
Before you sign up for a card, make sure you understand all of the fees and rates that go along with it. If you don’t understand, ask questions. It’s more foolish to get in over your head with credit card debt than it is to have to ask the same question more than once if you don’t understand something.
If you don’t feel like your credit card company explained everything clearly, seek help from someone with knowledge, such as a certified credit counselor.
Likewise, if you’ve already accumulated credit card debt and you are worried about paying off debt, contact Advantage Credit Counseling Service for help. Our credit counselors can assess your financial situation and offer practical suggestions to help you pay off your debt and create a budget.
Also, if you have children, especially teenagers, educate them about the responsibilities and costs associated with having a credit card. The best way to stop someone from getting in over their head with credit card debt is to educate them at a young age.
Do you know your debt-to-income ratio?
March 10, 2008
There are two types of debt-to-income ratios, the front-end ratio and the back-end ratio.
Let’s start with the back-end ratio first. This number, which is fairly easy to compute, shows you what percentage of your take home income is eaten up by debt. To find your debt-to-income ratio, start by adding up your monthly payments on all long-term debts such as your mortgage, car payments, student loans, personal loans or credit cards that you will not payoff within a few months. (Do not include daily expenses such as groceries, utility payments or entertainment expenses.) Take that amount and divide it by your gross (take home) pay. The percentage you are left with is your debt-to-income ratio.
For example: Your monthly take home pay is $2,000. Your debt payments are $800 a month. Divide 800 by 2,000. Your debt-to-income ratio is 40 percent.
As a general guideline, you want this number to be below 36 percent. A higher debt-to-income ratio could make it more difficult to get loans or could impact the interest rate you are offered.
The front-end ratio is used to determine how much of your gross income will be consumed by housing expenses. This number is calculated in a similar manner to the back-end ratio. Take the monthly payments on your mortgage including the principal, interest, insurances and taxes. Divide that number by your gross monthly income.
For example: Your monthly take home pay is $4,000. Your housing expenses are $1,100. Divide 1,100 by 4,000. Your front-end ratio is 27 percent.
In this case, the general guideline is that your front-end ratio should be lower than 28 percent.
Before you even start to look for a home, find out what price range you can comfortably afford by calculating your debt-to-income ratios.
The upcoming and final housing topic is what to do if you’ve already got a mortgage you can’t afford.
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