7 Tips to Avoid Overspending

Among the reasons why people run into debt problems, overspending is probably the most common. A 2012 survey showed that 52% of Americans are spending more than they earn, 21% of whom have recurring monthly expenses that exceed their income.

Now it might be easy to think that getting into debt because of overspending only applies to spending on big-ticket items, like expensive appliances and cars. But that is not the case. Many people go into debt because of small, unnecessary items that pile up and wound up on their credit card bills.

Here we give you 7 tips to avoid overspending the next time you shop.

Stick to a list

We never get tired of reiterating this in our posts. Having a list helps defend your budget from the voices in your head that are egging on you to “buy this, buy that“.  It keeps you focused on your goal: going to the shop and picking up what you intended to buy. Make sure, however, that what you are buying are more of needs than wants.

Separate wants from needs

Moderation is key to having a healthy financial life. While we recommend prioritizing needs, we don’t want you to deprive yourselves. Fulfilling our wants is also a source of joy, so we recommend separating wants from needs, and having a budget for each. Besides, when you feel deprived, you will only tend to compensate with a spending spree sooner or later.

Use cash instead of credit or debit card

Using cash makes it easy to see money leaving your wallet. That’s not the case when you use credit cards, debit cards, or some form of electronic cash. When using “intangible” cash, you do not readily feel your hard-earned money leave your bank account, so you tend to shop some more.

Beware of up-selling tactics

Salesmen are trained in up-selling tactics. Order a burger and you’ll be asked if you want to up-size your drinks. Buy a laptop and your salesman will ask if you want an extended warranty or a bigger memory instead. The key is to know what you need and stick to it come buying time.

Avoid emotional spending

Many people fall into the trap of emotional spending or “retail therapy“, i.e., spending to make themselves feel better especially when they’re unhappy. Spending when you’re unhappy may make you feel better for a moment but it doesn’t really solve the problem that’s causing you unhappiness. When the good feeling that came after retail therapy wears off, the feeling of unhappiness comes back. You haven’t solved the problem… and look you got a doodad to pay for in the next few months.

Budget (There’s an app for that!)

Bought a new high-end phone? Might as well use it to organize your finances. Nowadays, there are lots of free applications or “Apps” for budgeting. Ahorro, for example, is a beautiful, free iOS app that lets you enter your daily expenses, your budget, and your income. A summary report will let you see where you overspent, and whether you already exceeded on your allotted budget.

Got a raise? Don’t upgrade your lifestyle yet

More income means more expenses. A lot of people think that income equals wealth, so that when they get a salary raise, they feel richer than before and then upgrade their lifestyle to match their new income level. Get a 20% salary raise, then move to a bigger apartment that costs 20% more than before. That’s preposterous. Just because a roof over our head is a necessity doesn’t mean it’s okay to overspend on rent.

Aside from being a cause of bad debt, overspending can hamper your ability to save money, or set you back on your financial goals as you try to dip into your savings. When asked why you’re not getting wealthy, you should take an honest look at your spending habits, not just your income.

-- from http://financialrescuellc.com/

Looking for a new home? Contact MyHappyHomeSolutions.com

Do's and Don'ts to Improve Your Credit Score

Everyone wants to know how to improve their credit score. Here are some suggested tips to follow:

DO:

1. Pay your bills on time. Delinquent payments and collections can have a major negative impact on your score.

2. If you have missed payments, get current and stay current. The longer you pay your bills on time, the better your score.

3. If you are having trouble making ends meet, contact your creditors or see a legitimate credit counselor. This will not improve your score immediately, but if you can begin to manage your credit and pay on time, your score will get better over time.

4. Keep balances low (1-9% utilized) on credit cards and other revolving credit. High outstanding debt can affect a score. All revolving accounts reporting a 0 balance results in a Fico score decrease.

5. Pay off debt rather than move it around.

6. Re-establish your credit history if you have had problems.

7. Opening new accounts responsibly and paying them off on time will raise your score in the long term.

8. Note that it is OK to request and check your own credit file. This will not affect your score, as long as you order your credit file directly from the credit reporting agency or through an organization authorized to provide credit files to consumers (such as myFICO).

9. Apply for and open new credit accounts only as needed.

10. Have credit cards but manage them responsibly. In general, having credit cards and installment loans (and paying timely payments) will raise your score. Someone with no credit cards, for example, tends to be higher risk than someone who has managed credit cards responsibly.

DON'T:

1. Close unused credit cards as a short-term strategy to raise your score. NEVER close an open account unless it is costing you money!

2. Open a number of new credit cards that you do not need, just to increase your available credit. This approach could backfire and actually lower your score.

3. If you have been managing credit for a short time, do not open a lot of new accounts too rapidly. New accounts will lower your average account age, which will have a larger effect on your score if you do not have a lot of other credit information. Also, rapid account build-up can look risky if you are a new credit
user. Do your rate shopping for a given loan within a focused period of time. FICO scores distinguish between a search for a single loan and a search for many new credit lines, in part by the length of time over which inquiries occur.

                                                                                                       -- from http://ficoforums.myfico.com/

If you're ready to explore your options for purchasing a home -- whether you do so with conventional mortgage lending, or through seller financing, or Rent to Own -- Happy Home Solutions can help. Call or Text Adam at 630-697-4500. We always have Rent to Own homes available!

How Often Does My Credit Score Change?

How often does my score change?

Your credit file is continually updated with new information from your creditors. The FICO score is calculated based on the latest "snapshot" of information contained in your file at the time the score is requested. Therefore, your FICO score from a month ago is probably not the same score a lender would get from the credit reporting agency today. Fluctuations are quite common.

Why are my scores different?

Your scores may be different at each of the three main credit reporting agencies as the FICO score only considers the data in your credit file from that agency. If your score from the three credit reporting agencies is different, it is probably because the information those agencies have on you differs. Also keep in mind that
there is a different FICO formula for each credit reporting agency.

How can I improve my score?

It takes time and there is no quick fix. In fact, quick fix efforts can backfire. Scores reflect credit payment patterns over time with more emphasis on recent information. The best advice is to manage your credit responsibly over time. Scores automatically improve, as one's overall credit picture gets better. That means showing a historical pattern of paying your bills on time and using credit conservatively.

                                                                                                         -- from http://ficoforums.myfico.com/

If you're ready to explore your options for purchasing a home -- whether you do so with conventional mortgage lending, or through seller financing, or Rent to Own -- Happy Home Solutions can help. Call or Text Adam at 630-697-4500. We always have Rent to Own homes available!

How Is My Credit Score Calculated?

Figuring out how your credit score is calculated is tricky, but here are some general guidelines:

-35% Payment History. Meaning any lates; collections; charge offs; bankruptcies; judgments; liens or the such will hurt the score. All is time based, the older the information the less it is contributing to the scores.

-30% Utilization. It is better to have several accounts with low balances distributed then it is to have fewer accounts maxed out. To figure utilization: Balance (divided) by Credit Limit = percentage. Lower than 10% recommended per account, this is one of the fastest means for increasing the over all credit score.

-15% Established History. The longer you maintain open accounts with creditors the better. When first starting out of course this is not easy; but this is where getting added as an Authorized User to another persons established credit comes in best. Remember that the contributor must have an account that has long history; clean payment record; high credit limit; and low balance. Also need to check with the creditor to insure that they have a policy to report authorized user accounts to all three major credit reporting agencies.

Note: Authorized user accounts are the best way to go; since you are not legally responsible for the debt rather than Joint or Co-Signer accounts. Also, if this account starts to report negatively; these accounts are usually easier to remove from the credit reports by either contacting the creditor and requesting termination of the relationship; or disputing through the CRAs.

Update: In its original form, FICO 08 would not use AU accounts in scoring. It has been modified: FICO 08 now WILL continue to count legitimate AU accounts. As of the end of 2008, the EX version of FICO 08 is only being used by a few lenders.

-10% Inquiries. Don't apply for credit unless you know you can get it or that you need to get it; unnecessary credit inquiries are going to hurt the scores - especially if your over all credit file is small to begin with.

Tip: When applying for credit pull your own credit report first (this is a soft hit and won't drop your scores). With credit report in hand go visit your local banks or credit unions. Show them the reports; and don't allow them to pull a credit report of their own unless they can say for sure that you will be approved, this way you save your self unnecessary pulls on your credit report if they decline you.

If they say yes, you are approved, then they will need to pull credit report to seal the deal.

Mortgage & Auto industry has special rules for inquiries: all applications for credit resulting in pulled credit reports within a 14 day period of time will only count as one inquiry & will be suppressed from affecting credit scores for 30 days.

So if you plan to go shopping for a mortgage or a car, do your research first picking what companies you want to apply with and do this all within a 2 week period of time so that the scores are not affected too much.

-10% Mix of Credit. Use different types of credit (revolving; installment; auto; mortgage...) evenly.

Also remember the advice which a lender gives you is productive for getting a loan; but not always good for the credit scores. If they tell you to consolidate and close accounts be careful how you go about this, most people's compliance usually results in dropped credit scores. You are shrinking your overall available credit limit verses your balances... so remember you don't want to hurt the utilization by consolidating and closing accounts behind you.

What types of information are NOT used in calculating my FICO score?

1. Your race, color, religion, national origin, sex or marital status

2. Your age

3. Your salary, occupation, title, employer, date employed or employment history

4. Where you live

5. Certain types of inquiries such as promotional, account review, insurance or employment related inquiries

6. Any information not found in your credit file

7. Any information that is not proven to be a predictive of future credit performance

                                                                                                       -- from http://ficoforums.myfico.com/

If you're ready to explore your options for purchasing a home -- whether you do so with conventional mortgage lending, or through seller financing, or Rent to Own -- Happy Home Solutions can help. Call or Text Adam at 630-697-4500. We always have Rent to Own homes available!