The single most important determinant of your FICO, accounting for 35 percent of your score, is your track record of paying back debt. Do you pay your bills on time? Have you always paid your bills on time? Do you pay all your bills on time? All of this matters. As far as prospective lenders go, your past is prologue. Delinquencies in paying back debt in the past, especially the recent past, will raise concerns over your future ability and/or willingness and/or discipline to pay back creditors regularly and promptly.

One or two late payments aren’t necessarily going to wreck your score if your overall history with credit reflects timely repayments. By the same token, because your entire history is factored into this portion of the score, it will take time—perhaps a year—for the ill effects of late payments to subside. So, if you’re thinking of buying a house soon or taking out a home-equity loan, make sure you improve your payment history, and therefore your score, at least a year before you start applying for mortgages.

The reality is, a majority of consumers always make at least their minimum monthly payments on time. According to Fair, Isaac, less than 40 percent of all consumers have ever been 30 days or more past due on payments. Fewer than 20 percent have ever been more than 60 days past due. Fewer than 15 percent of all consumers have been more than three months late with their payments. And less than 10 percent have ever defaulted on a loan or credit account.

All in all, this is good news. But it still means that nearly 40 percent of the population has been late at least once—at least for a short period of time. And remember, it does not matter why you were late with a payment. You could have been sick. There could have been a glitch at your bank that caused your payment not to go out. The post office could have made an error. As long as it gets reported to the credit bureaus, it will affect your score.

 

Even if you’re one of the 60 percent with an absolutely clean

record, keep the following in mind:

• The more accounts with no late payments, the better. You don’t have

to pay back your debts quickly or in one fell swoop to score well.

As long as you get your minimum monthly payments in on time

for mortgages, car loans, credit cards, department store cards, and

any installment loans, you should be fine. But be careful: As we

discussed earlier, credit card issuers have quietly shortened grace

periods between the time billing cycles end and when bills are due.

The average card grace period is currently only 21 days.11 So make

sure you know exactly what day and time your lender requires

monthly payments, and get those payments in beforehand.

• Time and frequency matter. The more days your payment is past

due, the worse off you’ll be. However, how recently that mistake

occurred counts too. For instance, according to Fair Isaac:

“A 60-day late payment made just a month ago will count more

than a 90-day late payment from five years ago.”

 

You’ve just moved out for the first time, and if you’re lucky, you have yet to accrue any real debt. If you’re looking to avoid the plague that has spread across America, sucking their finances dry, then you should use the following tips to help you save money and avoid outrageous debt.

Forget Cable, Sign Up for an Online Subscription 

Netflix continues to dominate the video streaming industry, but there are others that you can use to get your daily dose of entertainment. Cable bills are high and rarely offer you the shows and movies you really want to see. Some days, you may not even flick your television on. So why waste money on cable when you can sign up for a subscription that is a fraction of the cost and allows you to watch whatever you want? Not to mention, there’s no contract — so when money gets tight, you can just not pay and then restore your account whenever you’re ready.

Switch to Prepaid Debit Cards

Credit cards are a dangerous path that you should avoid. There are other ways to build up your credit, such as financing furniture and vehicles. Since you won’t be needing a credit card, you don’t really need a bank account either. You can instead use a prepaid card that comes with a routing number and account number, so that you can have payroll and government checks directly deposited into it. At least this way you never have to worry about overdraft fees.

Start Couponing

Using coupons isn’t just for moms and old people. Starting young is a financially savvy way to get the things you need without going totally broke. You can get great deals on clothes at stores like American Eagle, or even on sports gear, shoes, appliances and furniture. Groupon has over 50,000 coupons for over 8,600 stores, which means lot of coupon clipping for you. If you like to shop online, great because these can be used online as well. There’s no fee or purchase required to start using Groupon Coupons, so check it out today!

Saving money is a part of growing up and in today’s economy, it’s more important than ever. Use these three tips to help get you started with setting aside more cash for your piggy bank.

The feeling of having debt hanging over your head can be stressful. If you are behind on your payments, it’s even worse. Because Bankruptcy can cause serious problems with getting loans in the future, finding a way to pay your debt off as quickly as possible is the best way to alleviate the strain and put yourself back in the black again. Here are a few tips from Low Income Financial Help to help you give your debt the old heave-ho – Get more information about different debt relief options here.

Pay the smallest debts off first: This may sound counterintuitive. It seems like it would make the most sense to pay off debts with the highest interest rates first, but this isn’t always the best solution. Paying low debts first make it easier for you to get your first success. This success is a great way to motivate you to keep moving forward.

Debt stack: This method of paying off debt is called several different things including debt stacking and debt snowballing. Essentially, you keep making minimum payments on all of your debt, except one (your smallest debt). You add whatever extra money you can with your minimum payment until you get the debt paid off. Once that debt is paid off you take all of the money you were paying on that debt and apply it to your next debt. For example:

Debt A: $450 with a $100 minimum payment and $50 extra you scrounge up each month. (Total payment: $150).

Debt B: $1,000 with a minimum payment of $200. Total payment $200.

Debt C: $2,000 with a minimum payment of $200. Total payment $200.

First you tackle debt A. Once that is paid off (roughly 3 months, if you do the math), you take that $150 and add it to the $200 you are paying towards your $1000 debt for a total payment of $350. Once debt B is paid off you take the total payment of $350 and add it to the $200 payment you are already making towards Debt C. Now your payments are $550 and that last debt will get paid off much faster.

You aren’t spending any more than you already were; you are just combining payments as other debts are paid off to get your debt paid off faster.

Cut spending: You cannot pay off your debt if you keep your credit cards handy. Chop them up into a dozen pieces and start using cash. Additionally, curb your spending every month and use the money you save to pay towards your debts. This extra cash will help your debt fall much faster.

Motivate yourself: Keep a chart of your debts and track them as they get smaller and smaller. It may seem overwhelming at first but as you keep making payments you will see your balances start to shrink. As an additional motivator, figure out what reward you want to give yourself for paying off your debt. Once your debt is paid off you can use the funds you were sticking towards debt to save up for a vacation or other surprise. The best part is that you’ll be able to afford whatever it is without the worry of debt hanging over your head. 

The question of when to refinance your mortgage is not a simple one. Many things must first be considered before the decision is made. If you are not careful, refinancing can actually hurt your bottom line rather than help it. With this in mind, let us take a look at some of the issues you may encounter when trying to decide to refinance and some reasons why you may or may not choose to do so.

Why Refinance?

The most common reason why a person will think it is time to refinance a mortgage is when they believe that they can reduce their monthly payment or interest rate. This may or may not be the right time to take such an action.

If a person has an adjustable rate mortgage (ARM), they may want to switch to a fixed rate mortgage. Many times, it is the case that the ARM rate has risen from its initial low point and now a fixed rate mortgage actually carries a lower rate. Other times a person may have a fixed rate mortgage that they obtained many years back. Over time, they have improved their credit score and they now have the ability to obtain a lower interest rate. Still other times the state of the economy is such that lower rates are generally available.

Why Not?

In any case, one should not judge the book by its cover. Most importantly, you have to realize that refinancing is not free. First, you will have to pay a fee for applying for a refinance. This pays the cost to run a credit check on you. Then there is the cost for the lender to check your title and get title insurance. Next, you will need to pay for the borrower’s lawyer. You will likely want a lawyer for yourself. There will also be other legal fees. Finally, you will need to pay points, taxes and an origination fee. Points can be especially confusing and you can learn more about them here. There may even be other costs not mentioned above.

Cost of Refinancing

In the end, the decision of whether or not to refinance in order to reduce payments comes down to math. You need to calculate all of the closing costs regarding the refinancing. Then you need to look at how much money you save each month after you refinance. Next, you consider how many months it will take for the money you saved to pay for the costs you incurred. If it turns out that you will be remaining in your home long enough to cover the costs of refinancing, then you should refinance. You can use the free mortgage calculator at Credit Sesame to help you figure out if you should refinance.

Example: You incur $10,000 in closing fees while refinancing and in the end, you save $500 a month. It would take you 10 months to recoup the costs of refinancing. If you will be remaining in the house for more than 10 months, you should refinance. 

Penalties

Another consideration you must be wary of is a clause in your original loan that penalizes you for paying it off early. When you refinance a mortgage, you are actually paying off the original loan and taking out a new one. Therefore, if there is a penalty for paying off the original loan early you will incur that penalty by refinancing.

Interested?

Finally, you must realize that if you decide to refinance a 30-year mortgage to another 30-year mortgage you may be paying less monthly but besides paying for a longer period of time, you are also paying more in interest. In this case, whereas the cost is less monthly, the overall cost is greater.

The way a mortgage works is that you pay more of the interest at the beginning of the mortgage. So if, for example, you have a 30 year fixed rate mortgage for $200,000 at 5% interest, your monthly payments would be $1,073.64. However, that payment is broken up differently between interest and principal depending on how long you have been paying. Your first payment of $1,073.64 would consist of $240.31 in principal and $833.33 in interest. In contrast, your final payment would consist of $1,069.19 in principal and $4.45 in interest.

Now consider that since you are paying more interest than principal initially, you will not have even paid off half of your loan after 15 years. If you were to refinance halfway through your first mortgage you would be taking out a mortgage to pay off more than half of what you borrowed initially and on top of that, the initial payments for the new loan will again be mostly interest. It is clear that refinancing for the same loan term can cost you a lot in interest.

One way to ease this problem is to attempt to get a loan that will end at the same time as the original loan. The reduced rate will not be as low as it would have been had you extended the time frame out another 30 years, but if you have a good credit score and some equity in your house then you will still likely get lower monthly payments without bleeding interest.

Attention to Details

All of the above is not to say that you definitely should not refinance to a lower rate. As often as not, you will actually save money in the long run. You just need to pay careful attention to all of the details before you make the decision to refinance or you could wind up in trouble. Never be afraid to ask questions of the lender and do not sign anything until all of the terms and conditions are clear in your head. With careful attention to detail, you could end up saving substantially.

In the end, the decision of whether to refinance is a difficult one. If you feel bogged down in the mire and would like some helpful information that will make the choice easier you could check out Credit Sesame.

Today’s guest post is from my fiancé and it’s been a long time coming! Please leave him a comment to keep him motivated on his journey!

Throughout our existence as humans, we have always gathered as a natural instinct.  The people of long ago would hunt and gather food for the approaching winters, and to stay safe from nature’s elements.  People today are no different.  We are often seen “gathering” clothes for the winter months.  And in the modern day, we are often found trying to gather as much money as possible for financial security.

There are many different ways to save money.  Many tactics are about a small amount being saved, but every bit counts.  I have never been very good at “stacking my chips”.  I have always spent the money that was left over.  My fiancé always gets on me for being such a free spender.  At times, I would notice myself spending twenty dollars every day on things I thought I needed.  I would spend around ten dollars a day on my Starbucks habit, as well as seven dollars every day on cigarettes.

Smoking meant everything to me.  It was my best friend, my worst enemy, as well as my biggest nightmare.  Smoking was always a crutch.  If I had a toothache (probably caused from smoking) I would light a cigarette in the middle of the night whenever I would wake up in pain from the throbbing.  Oddly enough it would calm my nerves enough to fall back asleep.  The same would be true for me when it came to getting a cold and cough.  Whenever I couldn’t sleep from coughing, I would simply get out of bed and smoke.  This gave me relief for enough time to get back to bed and fall asleep.  Was it all mental you ask?  Who knows.  Maybe because cigarettes are a stimulant?  No clue.

Today marks two weeks since I stopped smoking.  I have my reasons for quitting smoking, but the main player in my decision would have to be S, my fiancé.  She has been trying to get me to stop since we became a couple six years ago.  In the past I would think of quitting, and quiver in fear.  The thought of dropping my best friend of fifteen years was unbearable, and downright impossible.  I grew up with a short fuse and can be confrontational at times, so the thought of the monster I would become during the nicotine deprivation period was more than concerning to me.  This was mainly the factor in not quitting earlier.

Since making the leap to become tobacco free, I could not help but notice that I haven’t witnessed the monster in me come out like I was sure he would.  In fact, it seems like it’s the little things making me happy instead of the puffs off a dirt (slang for cigarette) I seem to be sharing more laughs with S.  Of course there are things that still bother me, like anxiety in the night hours, and some mild depression from losing my long time friend, but the reward will be worth it in the end.

One thing that motivates me is the money that’s not going to this disgusting habit.  The break down goes a little like this.  Cigarettes are expensive when they are a daily habit.  If you are a smoker, and need extra money to put away but cannot figure out how to do it, the answer is right in front of you.  Just think, a pack a day habit after quitting can save you around two hundred dollars every month.  That comes to $2,400 in savings annually.  Over a ten-year period, with the price of cigarettes going up every year, you are looking at $27,000 to $30,000 going to cigarettes. Want to get away?  Maybe take your significant other away on a nice tropical vacation?  The money is there to enjoy those things in life as long as you stop spending it little by little, day in and day out.  2014 is the year I will prove to everyone that I can beat the addiction.  This June we will be going to The Cook Islands for our honeymoon, and I also plan on using that trip as a reward to myself.  It’s the little victories during the process of quitting that get you through it all. I am currently taking this day by day, and understand it’s a long road, but I am ready for the journey.  The longer I go without tobacco, the more tools I develop in my arsenal to combat the urge.  The fact that I will be saving a small fortune while doing so will also help a lot.