Bryan C. Fleming

It’s a mysterious thing that we hear people talking about all the time. Credit ratings. For the uninitiated, it holds a mysterious quality and power over the kind of financial clout a person has. Credit ratings seem to affect what we can and can’t buy, what kinds of vehicles we drive, and even where we live in some mysterious way.  Credit ratings appear to be cloaked in a curious jargon the banks seem to hold over us. We’re sure they’re a powerful tool that can work for or against us but we’re not always sure of the ins and outs of how. 

           There are actually two areas of the total package. One is called the credit rating and the other is called the credit score. The information used in both includes your social security number, your address, where you work and your bill payment history. It’s a composite picture of who you are and how you do business and its put together usually by three companies that vary depending on where you live. It’s important because any agency that might consider lending you money will have access to your credit rating or credit score and many of these agencies like banks actually provide information to keep these records accurate.

  So how do all those bad things like a bankruptcy affect your credit rating? Simple. A bankruptcy can hang around on these reports for up to ten years and a criminal record stays with you indefinitely. Even habitually missing payments stays on the reports for up to seven years.

 But because it’s called a credit rating, it stands to reason that the evaluation comes from somewhere, so there must be a credit score as well. The three credit bureaus in your area put together all the information on late payments, any collection actions as well as any outstanding debts. When they have all this information packaged, you get a score between 300 and 850. Obviously, the higher the number the more credit an institution loaning out the money will be happy to give you. There are certain cut off points as well. It seems that a person with a score at 619 or lower will have a hard time getting a credit card no matter where they live.

 There are several ways to monitor you credit rating or credit score and all the institutions that know about these things stress that you should make the proper inquiries at least once every six months. It’s also possible to pay a monitoring company who will let you know immediately if there are any noteworthy changes.   In America the three major companies that deal with your information are Equifax, Experian, and Trans Union. Although you can contact them and get the necessary information in one of the more traditional methods, going online and paying a monthly fee will get the scores and rating quite a bit faster.  Keeping track of this information is also a good way to monitor for Identity Theft.

There are many things that your bank fails to tell you when have a credit card with them.  One of the biggest things that they neglect to tell you about is the truth about interest rates and just what they can do with them.  Before getting a credit card with your bank you need to be well educated on interest rates and what the rules are with them.

First and foremost don’t get pulled in by the claim of interest free time if you transfer the balance from one card to the new credit card.  What they neglect to tell you is that only the balance of the other credit card is subject to the interest free period.  Any new purchases that you make will be charged interest and this can be misleading for many as they do not read the fine print.

Another thing that the bank may not tell you is that they can raise the interest rate on your credit card if you late with payments for other cards.  You need to be sure that you make all of your payments on time so you can avoid these unwanted increases in your interest rate.  This is known as the universal default clause and it is becoming a general rule for most credit lenders.

Another thing that most people are not aware of is that the bank has no limit set on the amount they can charge you on a late payment.  Even if it is just one hour late the fees can be as little as $5 and as high as $30, sometimes even higher then that.  The amount of credit a bank will give you and the amount of the interest rate you will be assessed is based on your FICO score.  This is the score a person gets from their credit history.  Lenders such as banks and credit card companies look at the amount of dent that you have and how many times you have been late on your payment history.

Banks do not tell you that there is no federal limit as to what interest can be charged on a credit card.  You need to be sure that you read the tine print to know exactly what you are getting into with any loan or credit card that you obtain.  Be sure to talk things over with your bank prior to signing any papers.  You need to know what you are getting into completely before the final signing of the papers.

There is usually a 3 day waiting period when a loan is processed.  This is to allow you the opportunity to cancel the transaction.  This is the only window you have in which to rescind the loan or credit.  Again, this is something you need to discuss with the bank prior to signing the final papers.  You need to know what all of your rights are and what penalties that the bank will instill for breaks in the signed agreement.

Many people make the sad mistake thinking that they need to have a great deal of money in order to invest.  That’s far from the truth.  You do not need to have a lot of money to invest you just need to know where to invest it at.  You can make small investments that will have big pay offs in the end.

There are many options for first time investors to get started with $1000 or even as little as $50.  One of the easiest investments that you can get into is a 401(k) Plan.  You do not need any money at all to start with and you can add a minimum of 1% of your pay to the plan with each paycheck.  A great perk of these kinds of plans is that your employer will also put money in at the end of their fiscal year so that means you will get free money each year that is earning money for you.  

This means if you earn a yearly income of $30,000 with bi weekly paychecks, you can have as little as $11.50 taken out for your retirement fund from each paycheck.  This is taken out pretax so you will only see about $9 missing from your check.  Most people recommend that you contribute at least 10% of your pay to your retirement in order to save enough to live a comfortable life style when you retire.  

You can save for college with a 529 plan and you can start it up with as little as $25.  You would then need to have at least a $15 automatic deduction from another account like a savings or checking that will go directly into the 529 plan.  This is a great way to invest in your child’s future and there are great plans that you can get into such as Upromise where you save on things that you buy each day.  

These plans are tax exempt when they are used for qualified education costs of the beneficiary on the account.  With plans like Upromise, you can sign up with different credit cards from yourself as well as family and friends.  Each time they take certain purchases with those credit cards, a percent of the purchase is places into an account for your child for college.  You can then take those savings and use them in a 529 account.  

Another great investment choice would be U.S. Savings Bonds.  All you need to buy one is $25 dollars and you add to it in $25 increments.  Generally you can buy Savings Bonds right through your payroll as an automatic deduction.  The good thing about this is that the interest on the Savings Bonds are exempt from both state and local taxes and most often federal taxes as well.  

Investing doesn’t have to take a great deal of money.  Just do a bit of research before you invest your money so you can go with the best option for your goals.