The 5 steps for a 850 credit score

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What is a credit score

Your credit score is a three digit number ranging between 300 and 850. This number evaluate your credit worthiness or how likely you repay your debt.

It exists three main credit bureaus-Equifax, Experian and TransUnion which create credit reports, that credit scoring models like VantageScore and myFICO use.

In her blog post How to fix a bad credit score, Brianna McGurran states that a credit score between 580 and 669 is considered fair, and one between 300 and 579 is poor. In fact all score under 670 is considered bad. A good credit score is one between 670 and 739, a very good is between 740 and 799 and an exceptional is between 800 and 850 on FICO score ranges.

On VantageScore, it varies slightly: between 300 and 499 it is a very poor score, a poor score is in between 500 and 600, a fair score is in between 601 and 660, a good score is in between 661 and 780 and an excellent score is in between 781 and 850.

So as a credit user, your goal should be to have a credit score as close as of 850.The closer you are from 850, the more credit worthy lenders will see you and you will pay less on interest than the ones with a bad credit score.

How to start building your credit score

I never thought i will need a credit card in my life. It was when i started looking for an apartment that i learned the importance of having a credit history. In fact my application was denied due to lack of credit history. I’ve never used a credit card before.So to fix that, i went to my bank and ask for a credit card but i couldn’t get one because i needed to show a good history of responsible repayment.

If you are new to credit, and want to get a credit card, you could start with a secured credit card.

I was said.

A secured credit card

To do so,I was required to deposit $300. My credit limit was equal to the amount deposited and i was said if i was able to improve my credit score enough to qualify for a regular “unsecured” card, i could upgrade or close my “secured” card and get my deposit back.

According to a post of Paul SOUCY on Nerdwallet, most secured credit cards require a deposit of $200 to $300. And the more you deposit, the higher your credit limit will be.

And if you are willing to build your credit without a credit card, there’s several other ways you can do so :

Get a credit builder loan :

It is a type of loan created to help people build their credit score. Unlike most loans where you get the money up front and then start making monthly payments until you’ve paid off your debt,a credit builder loan is the complete opposite.

When you are approved for a credit builder loan, you start making monthly payments for several months and at the end of the loan term, you receive the money.

If you are willing to learn more about credit builder loan, the link “here” will send you to a blog post by Brianna McGurran on experian.com

Become an authorized user:

It is a way to build your credit score with a credit card without actually owning one.It is suitable for parents or even siblings willing to help a younger member of the family.

That’s how it works:

You add the relative as authorized user on your card or whoever willing to do the sacrifice. The advantage is he or she doesn’t even need to use or possess a credit card at all in order to benefit of this.

The only concern is to make sure the primary cardholder has a good history of responsible repayment and continue paying on time and that the card issuer reports authorized user activity to the credit bureaus.

If you want to learn more about been an authorized user, head over to click “here” to read a post titled “What you should know about being an authorized user on a credit card” on creditkarma

Experian boost:

It is a new way offered by Experian to make your phone and utility payment count towards building your credit.

The five steps towards a 850 credit score

1-Make always 100% of your payment on time :

This the most important thing to always keep in mind. Your payment history have a huge impact on your credit score.

It is the first factor by which you will be evaluated.So always make sure to pay your balance in full each month before the payment date.

2-Keep your credit utilization low:

It is recommended not to use over 30% of the balance in your account.And if you have less to pay on credit card each month, it makes it easier for you to pay off your balance in full each month. And you are perceived by the credit bureaus as a responsible user. A factor that help increase your credit score.

Even though it can happen that you need to use more than the 30% recommended, make sure not to max out your credit. If it happen, you will have to pay higher interest rates and it will definitely lower your credit score.

3-Do not apply for multiple credit account or loans in a short time span:

When you apply for a credit card, the card issuer will check your credit score in order to decide and that simple check can cause a small, temporary dip in your score, and several in a short time will just make it lower.

If you are rejected for a loan or credit, the best advice is to try to find out why your application was denied. And take steps to avoid denials next time.

4- Check your credit score and reports often and dispute any information that you believe is false:

Some banks or credit lenders offer their clients the opportunity to check their credit score for free. If not, according to a post on Experian titled “How often should i check my credit score?” by Stacy Smith, Federal law allows you to request a free report from each of the national credit reporting companies once every 12 months at www.annualcreditreport.com. You can also get a free report and FICO score at www.freecreditscore.com, which is an Experian company, and does not require any credit card information.

5-Keep your credit card account open:

Sometimes, when you have a bad credit score or you want to limit your debt, you may think of closing your credit card account. But it is not always a good idea. And before doing so, i recommend to read a post by CHIZOBA MORAH on Investopedia titled “Should you close your credit card?”. This blog post features reasons to close and reasons not to close a credit card account.And always make sure to consult a financial adviser before taking such decision.

Thanks you guys for reading my post. What steps are you taking in order to improve your credit score. Let me know in the comments below.

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Your Guide to an Emergency Fund

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Introduction

78% of Americans live paycheck to paycheck. An unexpected event like an accident, job layoff or even disease can turn your life upside down if you don’t have a solid emergency found.”Unexpected expenses can just throw you into a spiral” said Jennifer Barret , Chief educational officer of Acorns. In case, you may wondering, Acorns is an investing app that help you start investing with as low as $5.

What is an emergency fund?

An emergency fund is basically money set aside for unexpected events. These events could be a job lay off, a disease, an accident … As you may be thinking nobody wish for such things to happen in our lives but nevertheless you should prepare for it. According to CNBC, about 57 million Americans have no money in their emergency fund.Those are sobering numbers. But the good news is you don’t need to start big, you can start by setting aside $5 per week and increase as time goes by. To build an emergency fund, you first need to develop a strong habit of savings. And to start, you need to create your own budget that will help you minimize your expenses.

How to start an emergency fund?

If you don’t have money aside for emergency, maybe your first priority should be to build one. Start by creating a savings account to your local bank or choose an online bank and have a percentage deducted each week or after each paycheck.

If you won’t have to think about it, it’s easier. Then look for ways to add irregular income as credit card rewards, cash backs or even a part the cash left in your wallet when payday is close.

How much savings is enough?

The standard financial advice is to save up to three to six months worth of your take home pay.

A recent post on CNBC by Kathleen Elkins says that economists recommend saving at least $2,467 in an emergency fund for low-income households.

And Dave Ramsey author of “The Total money makeover” and seven national best sellers, advises to save $1,000 first if you have debt to take care of.

Where to put your savings?

An emergency fund is supposed to be used when facing unexpected events that require you to pull cash out immediately. So the best advice is to have a separate checking account or a money market account different from your principal one. That way you can access your money easily and quickly with a debit card.

When it happens that you need money or want to use your emergency fund, ask yourself those three questions as suggested by Rachel Cruze in her blog post A Quick Guide to Your Emergency Fund :

  1. Is it unexpected?
  2. Is it necessary?
  3. Is it urgent?

If you answer yes to all those questions, so you need to use your emergency fund.

If you can put aside $20 a week, at the end of the year, you will have a little bit over $1,000. And this will give you confidence to continue saving because you know that won’t reduce or impact negatively your lifestyle.

Thank you guys for reading me. I heard that some people use their credit card to cover emergency expenses. Tell me what you think about that in the comments section below.

A practical budget

What is a budget?

A budget is a plan based on your income meant to structure your expenses. By doing your budget, you estimate how much you’ll be spending over a certain period of time.

Most budget are made on a monthly basis.

There are many ways to establish a budget.Some people prefer to write it out by hand, while others use computer based software like Excel to create spreadsheet or mobile phone budgeting apps.

That being said, the most common way to start structuring your budget is by using the 50/30/20 rule. This rule was explained in depth on YouTube by Marko-WhiteBoard Finance (click here to watch it) This method suggests you to set aside 50% of your monthly income after-tax for necessities, 30% on wants and the remaining 20% will be allocated for savings and paying off debt.

Goals setting

Another important step of budgeting is goals setting. While neccesities are regular expenses that need to be paid off, your wants are expenses you plan ahead for and save for it. So the 30% part of budget will be allocated to fulfill your goals.

You can include in your list goals, an emergency fund, a trip or vacation at the end of the year, a car or a house…

Now that you have your goals set, class them by priorities: which ones do you want to get done first. They are your high priorities goals and need to be done first because they will have a meaningful impact on your life, they could propel your career …. then will come the less important, they ones you think you should do but won’t have an immediate effect on your life. And then the last ones at the bottom of your list. These are the “fun” goals. I call them this way because I think it’s a way to reward yourself for your hard work.

One last word !! Know that you are the one who determine which types of financial goals might fall into each category. So decide for yourself which goals are high priorities and when you expect to achieve them.

And don’t overthink, you can always adjust your budget along the way if needed.

Thanks you guys for reading me. And if you can let me know your thoughts in the comment section below, i will really appreciate. That’s the only way i could improve my posts and deliver valuable information.

If you didn’t watch the video yet click here to watch it. And if you are in couple and wondering how to start budgeting with your partner, there is an article on Forbes written by Asia Martin that discuss the subject. Click here to read it.

And also,make your to follow us so you get notified each time I publish a new post.

Why personal finance is so important?

What is personal finance?

Money doesn’t buy happiness, but bad money management will bring you misfortune . Lack of money is the main reason why many people do not achieve their goals in life. But how can you work five days per week and at the end of the month, not only you don’t have a lot left but you don’t know where your money is gone. And you start wondering if you can have that car, house or vacation you have been dreaming off.

I’ve been through such situation and decided to gain control over my money. I decided to know the difference between people who achieve their financial goals and those who don’t. The difference is quite simple : they have a realistic financial plan. Personal finance is simply the way you manage your money.

What is a realistic financial plan?

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Financial planning is made according to your goals. So it is different for every person and evolves as your goals expand. Whether you are starting out in financial planning or already on that path, your first goals should be to create a practical budget that suit your actual financial state, improve or keep a good credit rating, build an emergency fund and owning a retirement account.

A practical budget

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A good rule of thumb say that 50% of your take home pay should be allocated to regular monthly expenses such as housing, food, utilities bills and transportation. Set aside 30% for occasional expenses like clothing, repairs, books and fun. And use the remaining for investment or retirement.

These percentages are not set in stone. You can adjust it to match your goals. The most important thing you have to remember when setting a budget is that you should not spend your money in stuff you don’t need and keep some savings for future use. Always spend less than you earn.

Keeping a good credit score

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Your credit score is your financial history. Lenders will based on your credit score to decide whether or not you should get a loan or mortgage and what interest you will have to pay. I’m sure you’ve already realized that a bad credit score will slow you down in realizing your goals. But don’t startle, a bad credit score can be ameliorated. You just have to make your credit payment on time every month, including loans, utilities, and mortgage payments. And don’t exceed the limits on your credit card accounts.

A good credit is 700 and above. From 800 and above, your score is considered excellent. So I think everybody should try to get as close as possible of those numbers. After all, you will be paying less interest on loans.

Building an emergency fund

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An emergency fund is a cushion for unexpected events such as a job layoff, sickness, or repairs. Ideally, an emergency fund includes at least two and as much as six months of your monthly paycheck.

It is one of your important saving because it will be your first asset of cash in an emergency. If you happen to use it, make sure to replace it as soon as possible.

A retirement account

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You don’t want to be sixty years old, working hard for money. So in order to have a joyful and peaceful retirement you have to start when you are young. It should be your first investment account.

Instead of hoping to have enough money when you retire, it’s important to determine how much you think you’ll need and save for it. You may participate in a retirement savings plan at work or may have a personal savings plan like a traditional IRA or a Roth IRA. Each plan comes with its unique features but the most important is to start and learn on the way.

Benefits of a good financial planning

  • You will keep more of your hard earned money.
  • You will improve and keep a good credit rating.
  • You will be able to provide for yourself (and your family) financial security.
  • If you are able to fund your retirement account continuously until you retire, you won’t have to hassle for money. You still need to be careful with your spending but your life will be better than the one’s who didn’t planned his retirement.

What to keep in mind when starting out?

  • You have to know that financial planning is not only for today. It is for your entire life.
  • You will have to learn self discipline. It will keep you from overspending or spend money when you don’t have to.
  • You have to know that when starting out, your first budget won’t be perfect and because we can’t predict everything, keep in mind that your budget is a guideline that can be adjusted sometimes.
  • You have to learn also when to break the rules. Ask yourself when you plan on buying something that wasn’t planned: What value does that bring in my life? Is it worth that money?

I think everybody should know about personal finance. By increasing your knowledge in this area, you will build an effective and realistic budget, make wise decision about spending and savings. You can also think about investment in addition to your retirement account to help you build a financially secure future for you and your family in order to have a smooth transition from professional life to retirement.

PS: Thank you guys for reading me. There’s something I want to know. Where are you in your financial planning? Put it in the content below.

I already have a budget, not the best but it allows me to put some money away in an emergency fund and an IRA account.