Out with the old, in with the new. No matter whether you apply the expression to changes in attitude or to life adjustments, the end of the year is a great time to assess your household finances and prepare for new opportunities. Here are suggestions.
Review your credit report. Request a free copy of your credit report from each of the three major credit bureaus. If the reports contain errors, get them corrected.
Make or update your home inventory. Go through your house and make a video describing what you see, along with information such as purchase dates, prices, and estimated values. Your home inventory can be vital for getting insurance claims approved in case of disaster.
Calculate your net worth. Your net worth is the value of your assets, including your house, personal property, bank accounts, car, and investments, minus liabilities such as your mortgage, credit card balances, and loans. This is a great yardstick for measuring your household’s financial growth (or shrinkage) from year to year.
Increase your savings. If you get a year-end raise, consider contributing a portion of the extra money to your 401(k) plan or other savings account.
Purge financial records. If you’re a financial packrat with stacks of old cancelled checks and bank statements that are no longer needed for an IRS audit or your own use, shred them.
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Investor Warren Buffet once said, “It takes 20 years to build a reputation and five minutes to ruin it.” The same maxim applies to good credit. Stellar credit scores don’t happen overnight or by accident. Instead, you have to exercise financial discipline, sometimes for years. The reward: lenders who are willing to offer mortgages and car loans at favorable interest rates.rates. Unfortunately, like a good reputation, a strong credit score can easily be ruined. Here are three simple ways to devastate your credit score.
● Max out your credit cards and continually fail to make required payments. Your credit score is a number, generally between 300 and 850 (worst to best), that lenders use when deciding whether to extend credit. About 35% of your credit score is based on your payment history. Paying late or paying less than required minimums can wreak havoc on your score and may signal to lenders that you’re overextended.
● Cosign a loan for an irresponsible friend. There’s a reason your pal needs a cosigner – and it isn’t due to being a good credit risk. When you cosign for a loan, the status of the loan will appear on your credit report. Adding insult to injury, if your friend defaults, you’re responsible for the unpaid balance.
● Close or open credit card accounts in quick succession. Either move can adversely affect the ratio of how much you owe in relation to your credit limits. As this ratio climbs, your credit score will tend to sink. Say, for example, you have three credit cards and each has a $1,000 limit. You carry a balance of $500 on one of those accounts. That’s a credit utilization ratio of $500 to $3,000 or about 17%. If you close one of the accounts, the ratio will jump to 25% ($500/$2,000). Though you haven’t accumulated more debt, your credit score may be hurt.
Be careful with your credit.
Negative events can impact your rating for a long time, making lenders reluctant to offer you money.