Credit Education & Asset Management
National Credit Education Month:
National Credit Education Month is observed every March to educate people about credit and the importance of good credit management. This also serves as a reminder to consumers like you, to review your credit reports and check for errors or inaccuracies. You are able to print a free report from AnnualCreditReport.com once a year from one of the following agencies, Equifax, Experian and TransUnion. This report will not include a credit score. You may have heard of FICO Credit Score, which is important to understand because the majority of all decisions involving credit scores will be based on the FICO score. FICO score attempts to predict your likelihood of making your future debt payments on time. The factors in your FICO score include your history of payments, your total balances, your individual account balances, how long you have had the credit, what you are doing with new credit, and what types of loans and credit lines you have. Scores can range from 300 on the low end to 850 on the high end. Most lenders consider a score of 750 or 760 on up to be excellent. To obtain a free credit score report you can check out CreditKarma.com, Mint.com, Credit.com just to name a few.
One way to help manage your score is to manage your revolving credit. Credit cards are the most well-known examples. Because of the additional disciple required to manage credit cards properly, credit scores tend to weigh activity on credit cards more heavily than activity on installment loans. A tip for old credit card accounts, do not close them even though you may be tempted to do so. Closing old accounts will often hurt your credit rating by eliminating some of your credit limits. To keep it active, just make a small purchase every so often and pay the balance off in full when you receive the bill.
Another tip to help keep your credit score up is to automate your payments. Because the history of payments to your creditors is the most important factor in your credit rating, this will ensure your future payments are always on time. Login to your account and link to your bank account to draft the minimum payment on the due date. You can always pay more than the minimum or with a separate payment at any time.
Lastly, paying down your debt is a crucial piece to keeping your credit scores higher. If you have credit card balances at their limits (maxed out), this will drag down your score. The idea here is that you have no wiggle room for emergencies. The rule of thumb is to keep three to six months of income in a savings account. Some folks like me say for a married couple you may want to keep six to nine months in savings for a catastrophic emergency. However, I know that building this may be difficult, just start with $10 or $20 a month, that’s just one less dining-out meal a month!
Asset Management Awareness Month:
An asset is anything of value or a resource of value that can be converted into cash. Most of us have personal property such as a car, jewelry, boat, collectibles, and investments to name a few. Asset management encourages individuals, businesses, and organizations to focus on the importance of proper asset management. Usually, a financial institution will help manage all or part of the assets. This can be done by a financial advisor or investment bank depending on the asset type. You want to partner with an expert to help you determine how to track your assets, grow, or preserve and mitigate risk. You also need to review and monitor your assets so that you can stay on track to meet your short-term and long-term goals.
Blog written by Carmella Nodine, CFP®
Carmella is an independent CERTIFIED FINANCIAL PLANNERTM with a passion for financial literacy education.
