Credit score – Do you know its importance and its components?

When we are discussing about managing personal finance , then what is the first thing that comes to your mind? Yes, I know – budgeting. It is one of the most common answers and which is true. You need to plan a suitable budget to manage your financial situation efficiently. Among other things which your need to consider, one of the most important ones is credit report and score. It is a prerequisite to have a good credit report in order to have a good credit score. In turn, it’ll help you have a good lifestyle.

Importance of credit report and score

If I ask you “How the interest rate on your loan is calculated?”. You might answer that the lender/creditor analyzes your credit record to find out your creditworthiness to decide the interest rate. Now, if I ask “On what basis your creditworthiness is assessed?”, do you know the answer? It is assessed on the basis of your credit report and score. The lender/creditor pulls out your credit score from the bureaus which is a reflection of how you’ve managed your credit in the past. And, this credit score is calculated on the basis of your credit report, which you can say is your financial report card. So, you should try to have a positive credit report in order to have a good score.

In this article, let’s focus on credit score – Its components; that is, what constitutes your credit score.

Components of a credit score

The FICO credit-scoring model is not known completely. However, there are 5 key components, which are prime factors of your score calculation, which are discussed below.

Payment history

You can say, 35% of your credit score is decided on the basis of whether or not you’ve made your payments on time. It is said that your past financial behavior can somewhat predict your future behavior. Though you should try to manage your loans equally, yet your credit score is hit more if you default on a larger amount – that is, a mortgage, in comparison to defaulting on a smaller revolving loan.

Length of credit history

About 15% of your credit score depends on this factor. It depends on the length of time you’ve opened an account and recent action on it. So, a longer credit history provides a better picture of your financial behavior. Therefore, there are chances of having a better score if your credit history is comparatively long.

Credit utilization

Your credit utilization determines 30% of your score. It means the percent of available credit which you, the debtor, have borrowed. As per FICO, you should try to have no more than 7% credit utilization ratio in order to have a good score.

Credit mix

It constitutes about 10% of your credit score. It determines whether or not you have a variety of debt. It will be in your favor if you have a mix of credit instead of managing only one type of credit – say, a mortgage loan. Statistical data reveals the fact that a person with a good mix of installment loans and credit cards usually possess less amount of risk for the lenders.

New credit

This factor also decides about 10% of your credit score. To get brownie points in this category, you shouldn’t open too many credit lines at the same time. If you open too many credit lines, then it might possess a threat to your future lenders. Experts say that people usually take out more credit when it makes better sense for them to do so or, when a person is in urgent need of it.

These are the factors which compute your score. However, there are certain misconceptions regarding the factors which many people think are valuable for credit score, but actually they’re not.

I will discuss about these factors in my later posts along with discussing about how to maintain a good credit report.

Categories: Finance

Do you know how to excel yourself to get your dream job?

When we are talking about personal finance management, then one thing comes with it – yes, you are right. Income! You need to have a stable income in order to manage your personal financial situation efficiently. Most of us depend on getting a job in order to have a decent monthly income. So, it is very much essential that you know how to excel a job interview so that you can get your desired job.

Here are 8 tips which you can follow in order to excel in an interview.

1. Do some background work

The background work is quite important to excel in an interview. First of all, ask yourself – whether you are fit for the job role and whether or not you have the required qualifications. Then, ask yourself, whether or not you can do the job. Finding the answers to these questions will prepare you for the job interview. Regarding the required qualifications, if it’s a technical job, then you might have to show your in-depth knowledge in the interview.

2. Research about the company

You should research about the company before you appear for the interview. Usually, you can get a brief idea about the company if you research online. All you have to know is the history of the company, its reputation, products, size. etc. This will help you in the interview. However, you don’t have to be an expert about that company. Just you have to have an idea regarding the company and how your job role fits in. You can chalk out some questions which you can ask in the interview.

3. Prepare yourself for the interview

It is not possible to change your experience or personality so that you fit in the job role better. However, you can highlight your selling points and downplay on your deficiencies. Though they are there in your CV, but you should be able to talk about those points and elaborate on them what you’ve written in your CV. First of all, find your strengths and weaknesses. These are most questions often asked in any interview. You should know how to answer those questions. Try to highlight how you can be a good contributor to the company.

4. Be confident and have a positive attitude

You can win half the battle if you’re confident and have a positive attitude. You have to sell yourself as you would sell a product. It is not possible to anticipate every question you would be asked in the interview. However, if you’re somewhat aware about the questions that would be asked, then you can be confident throughout. Another important thing, always have a positive body language. Try to use positive words like ‘yes’, instead of ‘No’.

5. Talk about what you’ve achieved

As I’ve mentioned already, you have to sell yourself in an interview. So, be prepared to talk about your achievements. You should know how to talk about your achievements even if you’re not directly asked to say so. And, never lie about your achievements. If asked about your weaknesses, tell them and at the same time, explain how you’re working on them. Also be ready to talk about how you has failed in some of your assignments but how you overcame it and succeeded next time.

6. Ask questions about the company and your job role

Make sure you ask questions about your current job role, what you’ll be doing exactly if selected, your future prospects in the company, whether the job required travelling, etc. Ask for permission to take notes and write down down the points so that you can think about them later, in order to decide whether or not to accept the offer, if you’re offered the job.

7. Take time to accept the offer

No interviewer expects you to tell a ‘Yes’ or a ‘No’, on that interview itself. So, when asked, politely ask for some days to think over it and get back to them. Usually, it’s reasonable to ask for about 24-48 hours to respond. But, you may need several days to think over it and discuss with your family members if you have to relocate.

8. Some final tips for the day of the interview

Now, you have done your background work and you’ve arrived at the venue. Here are some tips to follow:

  • Arrive 15-20 minutes early for the interview
  • Be prepared with 2-3 copies of your printed CV
  • Be ready to produce documents of your achievements if needed
  • Try to have a smile on your face
  • Always smile back when the interviewer smiles
  • Make a trip to the restroom and get rid of sweaty hands
  • In the restroom, check your teeth, hair, make up etc. so that they are perfect
  • You should look professional
  • Always maintain eye contact with the interviewer
  • Wash your hands and keep it dry for a firm handshake for about 305 seconds
  • Have mouth fresheners ready so that your breath is fresh

Do you have unique experience as an interviewer or as an interviewee? Share your story here…

Categories: Miscellaneous

Real cost of owning a home – Are you sure you’re aware of it?

Do you think that only you have to consider the mortgage payments when you buy a home? You might be calculating the cost of mortgage payment and including it into your budget plan and counting how many years are left to own the full equity in the property. Or, you may also looking for options to lower your mortgage payment or to pay it off fast. But, when you own a home, there are other costs to consider some of which you have to bear lifelong since they’re unavoidable.

These costs are discussed in the following lines:

Paying the property tax

You have to pay a local property tax to the government. This money is used to develop schools, sidewalks, parks and for public expenses. If you want to get an idea regarding the current annual tax on your property, you can ask the seller’s real estate agent. However, even if you have to pay the property tax, you can deduct the amount from your income tax.

Buying a homeowners insurance policy

You should also purchase a homeowners insurance policy, the monthly payment of which is usually included in your monthly mortgage payment. How much you have to pay will usually depend on the market value of your house along with the deductible amount and the type of coverage you’re opting for. However, you can reduce the price by installing certain safety features like security systems, deadbolt locks, etc. in your home.

Repair and maintenance work

You will have to include the cost of repair work and maintenance in your annual budget. This is because, you’ll have to do certain basic maintenance work. However, if you’re buying a home from a seller, make sure you hire a qualified home inspector, who can suggest the required maintenance work. The idea will help you negotiate the price of the property.

Replacement of certain structures and items

You will have to replace certain structures and items from time to time. For example, you’ll have to replace the roof of your house usually after every 15-30 years. I know it’s a long time; but a roof replacement might cost several thousand dollars, every time. And, you’ll have to shell out more if you replace it after a long time. Similarly, exterior door may also need to be replaced after about 15 years. You need to replace the main exterior door frequently if you experience extreme weather conditions.

Monthly utility expenses

Apart from considering the cost of electricity, water and internet, you may also have to keep an amount for sewer and garbage service and recycling. So, if you’re buying a home, then ask the seller to provide you the record of utility bills for past 1 year. Doing so, you’ll get an idea regarding the monthly utility expenses in that area.

Tree removal and yard maintenance

Apart from the things discussed above, there are some things which buyers often overlook while calculating the real cost of owning a home. One of these overlooked cost is tree removal. You may not find out while buying a house, whether you buy a new home or from a seller. After sometime, you may notice that you need to cut some trees, for which you’ll have to hire a professional, because it might not be possible for you to cut large trees.

Expenses related to changing decor

Yes, this is perhaps an expense which you may have to bear frequently. It’s quite obvious that you won’t like the same decor for a long time. And, a minimal project will cost you a significant amount. However, you can choose DIY option to reduce the cost of any project.

In short, I want to say that when you analyze your finances to buy a home, also consider these expenses and some miscellaneous ones. This will help you take out a mortgage loan, which you can manage comfortably. Otherwise, you may fall into debt problems when these real costs will creep in.

So, be a smart homeowner and be ready to shell out extra money to make your living a comfortable one, and to turn your house into a sweet home.

Categories: Finance

Planning a summer vacation? 6 Tips to plan it within your budget!

Staying in Milwaukee, I always look forward for the summer months to come. It’s not that I don’t enjoy winter and spring but, summer is what I always look forward to. Summer is for planning vacations, spending time in a beach, going out with friends and lot more.

Have you planned your summer vacation or yet to plan it at the last moment, just like me? If you’re planning one, here are some tips which can help you plan your summer vacation within your budget.

1. Plan a budget for your vacation

First of all, calculate how much you’re ready to spend on your summer vacation. Then, plan a budget on how much you want to spend on food, accommodation, on enjoyment and so on. While planning, always allocate an extra amount for miscellaneous expenses and more importantly, for unknown expenses. You never know where you need to spend more. And, what if you’re able to save the amount? Give yourself a pat on the back and save it for the rainy days. Not happy? Well, you can spend a little on summer shopping. But don’t spend a lot!

2. Plan your vacation before August

Are you planning your trip in August? Plan in July instead. Most of the travellers plan trips in August just before the summer breaks in the schools end. Though travelling in June might be the better option, but you can plan during July, too. If it’s possible for you, you can also plan your trip during September; doing so, you’ll have enough time to look for great deals.

3. Try to visit less popular destinations

It is quite obvious that you’ll have to spend relatively more if you choose a destination which is popular during summer time. For example, you might not find many tourists in Florida during summer, as much as you find in winter. This time, you can also look for less travelled destinations in the nation. Ask your friends for advice. I’m sure you’ll find such a place to explore!

4. Look for restaurants where kids can eat free

It is not necessary that every time you eat outside, you have to spend a lot on kids’ meal, when most of the time, they can’t finish the whole plate. Moreover, if you’re planning to stay at your hometown this time, don’t spend on premium food every time. Search for restaurants which offer special deals on kids meal or package where kids eat at no extra cost. This will help you stay within your budget and enjoy at the same time.

5. Take a staycation this time

Everyone wants to visit other countries or other states. However, this might not be possible every time due to various reasons. So, this time why not plan something different? This summer, consider taking a ‘staycation’; become a tourist in your own hometown. I’m sure you haven’t visited each and every place in your hometown. So, make a list of the activities which you’ve wanted to do for a long time. It might be spending the weekend with your friends at a local resort or taking a camping trip at your nearby park. Think and plan something exciting!

6. Buy an extra set of toiletries

How much do you hate the idea of unpacking your luggage as soon as you come back from your vacation? Packing is fun and exciting as you look forward to going to your trip. So, this time, look for good deals of toiletries and buy one extra set or a travel pack, whichever suits you. Doing so, you can come back and get your essential items right at their place. You can also refuel your extra set when you get time and by doing so, you’ll be ready for your next trip. Doing so, you’ll also save the money for not having to buy extra set the next time.

Some additional tips:

  • Get your vehicle tuned up if you’re planning a road trip since emergency road service is relatively expensive
  • Always research for airfares and hotel accommodations to find the lowest rate
  • Know how much you can daily withdraw by using your plastic cards and whether or not you’ll be able to use them where you’re planning to visit
  • You can invest in a season’s pass where you want to visit frequently
  • Resist the temptation of having coffee at a coffee shop and save the money by finding the recipe online
  • Use coupons to buy grocery items at reduced price and carry with you on your road trip

Categories: Miscellaneous