Christian Finance Blog

Did you know that the world’s richest man’s credit score is only 718? How can a billionaire like Warren Buffet have an average credit score? Even my credit score is higher than his! He really doesn’t need to even borrow money since his net worth is “only” about $62 billion. He can just pay with cash! But what’s the explanation for his average credit score?

Well, the FICO (Fair Issac Corporation) score doesn’t take into account wealth or assets. What the FICO credit score (which is the score that most lenders use) takes into account is your payment history, amounts owed, length of credit history, new credit, and types of credit used (in order of importance). It measures how much of a risk you are to a lender and has a range between 300 and 850.

The FICO credit score is important because it’s not only used by lenders (which affects interest rates on loans). Potential employers can check your credit and you may be passed up for a job because of poor credit. Landlords can also check your credit and might not rent to you. Most insurance companies are also now basing your insurance policy on your credit score. Utilities companies and cell phone companies can even use your score.

So what can you do to improve your score (or establish a score if you don’t have one?) The best thing you can do is to pay your bills on time. This includes utility bills, rent, cell phone bills, and any installment loan payments (car loans, mortgages, student loans, etc.). Pay your credit cards on time every month, or better yet, pay them off every single month. Keep your debt-to-credit limit ratio (the amount owed versus the total credit limit) low.

If you don’t have a credit score (common among younger people), you can take some steps to establish your credit. Consider taking out a credit card with a low credit limit and use it to buy things that you would buy anyway (like gas) and pay it off every month. If you’re in school, you could also consider taking out a small student loan. The longer your credit history, the better, so as your credit ages, your score will improve. I’m not saying that you should go take out lots of loans and credit cards just so you can establish your credit. Don’t borrow if you don’t have to. But you can take some steps now to establish or improve your credit. Knowing is the first step!

Source: MyFico

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On February 17, 2009, television will only be broadcast in digital rather than analog signals. What does this mean for you? You will need to buy a converter box only if you currently use an antenna to receive your television signal.

If you currently use cable, satellite, or have a built-in digital TV tuner, you do not need a converter box or need to do anything else. If you still need a converter box, you can apply for two free $40 coupons per household to offset the cost of converter boxes from now until February 17, 2009 or until they run out.

You don’t need to buy a new TV like many people were saying. All you need is a converter box so don’t use this as an excuse to buy something that you might not need.

The IRS will begin to send approximately 130 million tax rebate payments to boost the economy starting on May 2. Most people will receive their rebates by July 11 if tax returns are filed by the April 15th deadline. The IRS takes about two weeks to process a return. Here’s a full schedule for the special rebate payments:

You can use the IRS’s own online calculator to figure out exactly how much of a rebate you’ll get and whether or not you’re eligible.

I’ve written about this special stimulus rebate here and here.

Source: IRS

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The proposed $150 billion “economic stimulus package” by President Bush is promising rebates of between $300 and $1200 or more to the low and middle class people of the United States to help kickstart the economy by giving money to those who are most likely to spend it. Why don’t you go against the current and actually save it instead of spending it?

Here are the quick facts on the proposed plan:

1. Most single taxpayers will receive a $600 check
2. Dual-income households will receive $1200.
3. For each child (dependent) you will receive $300 each.
4. Workers who made at least $3,000 but didn’t pay taxes will receive $300 ($600 for those married and filing jointly).
5. Income limitations are $75,000 for single taxpayers and $150,000 for couples.
6. Apparently all of this is based on your 2006 tax return.

The legislation has not passed yet, although it most likely will and is being pushed strongly by President Bush. But if and when it does pass, you can expect your rebate checks to come in May or June of this year (2008). Just file your 2007 taxes just like normal.

All I can say is to not act like you’ve already got the money and spend an extra $600 on something you don’t need! I’ll probably get $600 as a single taxpayer and I’ll most likely just boost my emergency savings or pay down debt or both. All I know is that I’m not going to act like I have it and spend it before I get it. It will be a welcome surprise in my budget come May or June!

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I hope that everyone had a happy holiday season and is ready to tackle another new year! I believe this year can be your turnaround year! Let this be your year of new beginnings! With a new year brings new goals, new life situations, and a fresh outlook on life. Don’t let this year be just another year. With that being said, here are my top money goals for 2008:

1. Save more, spend less. One of the golden rules to becoming wealthy is spending less than you make. Live on less than you make and you can use the extra to pay down debt or invest for your future. If you can’t do this, you need to make more money!

2. Pay down debt. Yes, even a personal finance blogger like me has debt! But I have a plan to get out of debt and although I won’t be debt-free this year, I’m still making progress. I want to pay off my car within a couple years. I’m sick of a car payment…

3. Beef up my emergency fund. I have an emergency savings account that’s not quite up to 6 months of expenses. I want to achieve that this year and some extra. I currently have my emergency fund at FNBO Direct (currently at 5.05%) and ING Direct (currently at 4.10%). If you want a free $25 bonus for opening an ING account with at least $250 to start your emergency fund, make sure to contact me.

4. Start saving for Christmas now. Christmas is not an emergency! Christmas happens to land on December 25 every year and yet many people end up charging Christmas on their plastic credit cards and end up paying way too much in interest. Start saving now and pay cash! I plan on doing that starting right now.

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$571 billion:

The aggregate value of adjustable-rate home mortgages that will reset, or switch from a low fixed rate to a higher variable rate, through the end of 2008. After living large off introductory rates as low as 1% (or zero, in the case of interest-only ARMs), Americans will pay an extra $42 billion in mortgage payments next year.

$1,018:

Average increase in monthly payments for reset mortgages. That includes even responsible prime borrowers, who will pay an average of about $450 more. But it’s the “teaser” borrowers - the big spenders who patted themselves on the back in 2003 and 2004 for that initial less-than-2% rate - who will get the strongest dose of reality: an average increase of $1825, way more than double their initial payments.

(From September 17, 2007 issue of Fortune Magazine)

The mortgage crisis of today is a great lesson on why not to take out “creative” or “exotic” mortgages like adjustable rate mortgages and interest-only mortgages. That’s why I’ve always recommended 30-year fixed rate mortgages, and even better, 15-year fixed. If you can’t afford a house with a traditional, 30-year fixed rate mortgage, then you can’t afford that house. Either look for a cheaper house or save up some more for a down payment so the loan amount decreases. But do not take out an adjustable rate mortgage at any cost. It will end up biting you in the butt later.

As foreclosure rates hit all-time highs, and many people around the country are losing their homes, it’s good wisdom not to buy anything you can’t afford. If you take out an ARM (adjustable-rate mortgage) the interest rate is fixed for a certain term (one, two, three etc. years) and then it converts into a much higher variable rate that can go up or down, affecting your payment. So just avoid it altogether!

Want to know where you rank as far as your annual income or salary? Many people just don’t realize how well off and blessed we are in the United States compared to many of the the world’s poor. Even if you were making the federal minimum wage of $5.15 an hour (which equates to about $10,712 annually) and is definitely not a livable wage, you would actually be the 789,723,668th richest person in the world. Not only that, you are richer than 86.84% of the entire world! Doesn’t that put some perspective to your money? A person making $40,000 a year would rank in the top 3.17% in the world! A person making $100,000 a year, which is possible in the U.S., would rank in the 0.66% in the world! That’s right, it’s in the top 2/3’s of a percent! How about you? Check it out!

Source: http://www.globalrichlist.com/index.php

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It’s very interesting to look at some financial norms or habits in different cultures around the world. I recently ran across this:

“Terms of mortgages are an interesting area of cross-cultural differences in financial services. The typical mortgage in the United States is for 30 years, whereas in Canada mortgages are issued for five years, with repeated refinancing every five years. In Mexico, most people pay cash for houses because mortgages are virtually unavailable. And in Japan 100-year mortgages are quite common and often pass along with the house or flat to the next generation.” (Zeithaml, Bitner, Gremler, 2006)

100-year mortgages?! The mortgage would outlive you and me! Even in so-called industrialized countries, the differences in mortgage terms is very different. Just thought I’d share some random facts from around the world.

Remember those massive yellow books that you used to find on your doorstep one morning? Does anyone still use those things anymore? I know I don’t. Usually I go to www.superpages.com to find phone numbers and addresses for the places that I need.

But what if you need to find a number on the road? I usually use 1-800-FREE-411 but you have to listen to ads. I really don’t mind, since the service is free, but it does get annoying after a while. What is also very annoying is that the voice recognition is terrible and almost never got the place I was looking for on the first try.

Well, now Google is offering a free 411 service with absolutely no ads (at least not yet). Just call 1-800-GOOG-411 (1-800-466-4411). It only has business numbers in it now but that’s all I use 411 for anyway. The voice recognition is very sophisticated and the system is very fast. It’s almost as good as speaking to a real person. Try it out just to hear the computer voice!

It sure beats paying for 411 on your home or cell phone or listening to ads to get the same service.

Check out the Google Cheat Sheet for this 411 service so you can maximize your time!

In the spirit of March Madness, Free Money Finance is putting on a tournament pitting posts from personal finance blogs around the blogosphere! When the event starts on March 6 you can vote for your favorite posts to see who the “champion” will be. You have a chance to win some prizes, too!

I’ve submitted three posts myself:

Get Out of Debt with an Emergency Fund

Verse of the Day: Don’t Co-sign!!

Free $15 Paypal Rebate!

Have fun!