Archive for September, 2010

Keep Your Credit Score Solid In College– Everything You Need To Know!

By: MD | Date posted: September 09, 2010 (6:00 am)

You filled out all of the necessary forms, everything went through, and now you have your first and very own credit card. Congratulations. If you make your payments on time, a credit card can technically be a free short term loan. A credit card can also spell financial disaster for college students that aren’t prepared to use it responsibly. However, since you’re here reading this article, I’m going to assume that you’re a responsible young person that’s looking to use a credit card to build your credit score.

Before I share tips with you on how to keep a solid credit score in college, I wanted to explain to you the importance of a credit score:

It’s tangible proof of your responsibility level. Potential employers, Landlords, and Lenders will all check your credit score to see how responsible you are. Potential employers may use it as a filtering system. Landlords will simply not want to rent out a unit to a young person that has a poor credit score because this usually means a failure to make payments on time. Lenders (from cars to homes) will either charge you an extremely high interest rate (costing you lots of money) or not loan you the money at all.

Basically, a poor credit score can cost you a job, hurt your chances of finding a place to rent, and limit your options when it comes to a home or auto loan. Do you really want that to happen? This is why you need to pat yourself on the back right now and share this article with as many of your friends as possible. You’re on your way to being a responsible credit card user.

Okay now that you understand why your credit score is important, what exactly is your credit score made up of?

  • 35% Payment history. This is pretty much your ability to make payments on time.
  • 30% Amounts owed. How much money you owe compared to how much credit you have available to you.
  • 15% Length of history. How long have you had your credit card for? How long have you been paying your credit card balance off?
  • 10% New credit. The amount of new credit you have compared to old credit that you’ve had. This is where people argue that closing a credit card can hurt your credit score for the short term.
  • 10% Types of credit. This is based on the different types of credit that you have available to you.

The last part of this credit score article is designed to help you use your credit card responsibly so that you can build your credit score through college.

Make credit card payments on time.

You must make all of your credit card payments on time. Now I know that shit happens and life isn’t perfect. You just need to understand that 35% of your credit score is made up of your payment history. Do you really want to hurt your credit score by making a late payment? If you do make a late payment, I urge you to call your credit card provider to find out if the late payment has been reported and if it will affect your credit score.

Automate your payments.

When you’re young, one of the best tips for building your credit score is to make consistent payments on your credit card on time. My favorite tip in this area is to automate your fixed payments to be directly billed to your credit card. I’ve setup my online subscriptions, gym membership, and cell phone to be directly billed to my credit card on a monthly basis. The consistent payment of my credit card has allowed me to build up my credit score through college.

Increase your credit score… when you’re ready!

Since 30% of your credit score is based on amounts owed, then technically the more available credit you have without using it, the more responsible you are. My credit limit is so ridiculously high that I don’t plan on sharing it with anyone anytime soon. When you feel that you’ve got a handle of your credit card, you can ask your credit card provider for an increase in your credit limit. This increase in your credit limit will also allow you to place major purchases on your credit card (group trips, television, etc.).

There you go guys! This comprehensive article should hopefully allow you to build your credit score through college.

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What are Federal Plus Loans?

By: Green Panda | Date posted: September 08, 2010 (5:00 am)

Many parents want to help out their children in college education, but their current financial situation leaves them unable to provide the cash for college. Some of them have turned to Federal Plus loans as an option.

These are low interest rate loans that parents can take for their child(ren)’s college tuition. Students who have little or no financial aid and no credit history may think this is the best deal for everyone, but is it? What are some of the advantages and disadvantages of the Plus loans?

Advantages of Federal Plus Loans

Depending on your circumstances, there are some benefits to taking out a PLUS loan.

  • PLUS loans can cover up to 100% of the cost of tuition
  • Right now, fixed interest rate of 7.9% for loans taken out July 1, 2010 or later
  • Interest could be tax deductible
  • You can borrowed directly from the government or a private lender
  • The loan’s repayment term usually is 10 years.

For families that can afford the payments, having PLUS loans allows them to send their kids to college without having their child(ren) in debt. Right now the average debt for college students attending a four year public school is a little over $20,000.

Disadvantages of Federal Plus Loans

  • Parents are responsible for the loan
  • Loans come with fees (origination is typically 3% of the loan)

I think that having the parents solely responsible for the student loans can be detrimental to the family. Students may not realize how significant the debt is if someone else is taking care of it. Parents may stress out as their kids switch majors and explore subjects, as the loan gets larger. If something happens to their income, parents can have their credit history trashed.

While these loans are typically low interest, they are not free to get. Are the parents expected to foot the bill for those expenses too?

Effects on the Family

Is getting a loan through your parents the best option? You all have to decide for yourselves. My suggestion is to answer some of the questions below and see if you can come to an agreement.

  • Can the family afford the loan payments?
  • What portion should the student be obligated to contribute once they graduate?
  • Will students or parent pay if a major is changed?
  • Is the student expected to work in the summer to help pay for the loans?

If you decide on getting the PLUS loan, make sure you put everything into writing. Everyone should be on the same page and you want to keep everything transparent.

Your Thoughts

Do any of you have parents who have taken out Federal Plus loans? What have been the benefits? What have been the disadvantages?

What We Can All Learn From The Situation

By: MD | Date posted: September 02, 2010 (6:00 am)

Every twenty-something knows who Mike “The Situation” is from the Jersey Shore. Many people mock his infamous views on “GTL” and the dating world. What most of us don’t know is that The Situation is set to earn FIVE MILLION DOLLARS this year. Yes you heard that right. That’s a lot of money.

How will The Situation earn this gigantic some of money?

  • Cost per episode. Apparently this number is at $60K per episode. Yes their drama is worth that much per episode.
  • Dancing With The Stars. Not sure what this pays.
  • Biography. A biography already.
  • Workout book. The world needs another fitness book.
  • Event appearances.  Supposedly Mike can earn anywhere from $15K-50K per appearance.

Instead of making fun of him today I wanted to try a different approach. So now let’s talk about what we can all learn from The Situation:

Branding is important.

We often hear about “personal branding” and “creating a brand.” This type of thinking may come off as “scammy,” but it’s exactly what happened with The Situation. Instead of being another character, he created a brand around his name and his unique presence. This is what us 20-something folks need to do as we attempt to make our marks on the world. We need to create a brand and perhaps a following of sorts.

Be yourself.

This may sound lame but its completely true. Instead of trying to change his image to appear more sophisticated or something that he’s not, he showed his true colors. This can apply to many of us young people out there. Our parents may want to push us to conform to some sort of a “corporate” image when in reality being ourselves could be much more beneficial. Being yourself may not always be the greatest idea to land you that respectable corporate position, but it could potentially elevate you to bigger and better things.

Stand out.

Over the last few years I’ve realized how truly important it is to stick out. To be honest, being a college student in a major lecture hall, keeping quiet may seem like the best option at times. However, this could end up being the worst option because we all know that the squeaky wheel gets the grease. Those that go out of their way to stick out can often benefit from additional recognition from the peers and superiors. I learned this early on in my academic career. I figured that being the quiet guy that studied hard was the way to go. In reality, my grades didn’t really excel until I became outgoing and started speaking more frequently with my professors. I’m sure we’ve all experience how standing out can be beneficial.

Timing is everything.

Some opportunities will only come once in a life time. Whether it be the opportunity to appear on a reality television show or the chance to present in front of highly respected professors. I’ve taken advantage of great opportunities to join groups around my college campus that are highly involved. I’ve also missed excellent networking events simply because I didn’t feel like sticking around the campus for a few extra hours. It seems like timing is everything and we need to learn how to take advantage of time-sensitive opportunities.

As easy as it is to make fun of the Jersey Shore I’m sure that we’ve all learned something from the whacky cast of characters. What have you guys picked up?

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Why Buy a Car with Cash?

By: Green Panda | Date posted: September 01, 2010 (5:00 am)

If you’re new college graduate, getting your finances squared away is a priority. I want to share a tip on how you can reach your financial goals quickly. I’m suggesting that you avoid having a car payment as long as you can.

It’s not feasible for some situations, but it can make a huge difference with one adjustment.

Advantages of No Car Payments

No car payments has freed up our monthly budget a bit and we’ve redirected the funds to other financial goals. We have fortunately had a decent track record with car repairs. Even when we had to replace the clutch and had electrical work done for my husband’s old car, the monthly average of owning the car was about $150/month, much less than the average of car payment of $479 /month.

The extra money can be reallocated to other goals:

  • paying off credit card debt
  • building an emergency fund
  • investing more in your 401(k) and/or IRA
  • saving for a vacation
  • house down payment

You can also use the money to bump up your lifestyle. You’ll have a bit more to eat out for example or go on some more mini-vacations. The flexibility of having that money available is a huge advantage.

“I Don’t Want a Clunker!”

I completely understand that people don’t want to buy cash for a car because they worry about getting a beater or worse, a lemon. It is possible to find a solid used car for you. It pays to do your homework when you’re hunting for your car.

  • Create a list of your must-haves and wants for the car
  • Decide on your budget for the car
  • Use Consumer Reports and similar sites to find a list of vehicles that are on your list
  • Check Kelley Blue Book to get an idea of the cars you can afford

When you buy from a private seller, you should be careful to ask questions about their history with the car and have them provide paperwork. Anyone can say they’ve maintained the car, but having the documentation shows that they have actually done it.

Check with CarFax for the vehicle’s VIN for when you find a car that you like. Take the car to your regular mechanic to have it thoroughly checked.

Save for the Next Car

While you’re saving on car payments, don’t forget to transfer some of it into savings for your next vehicle. Depending on how long your current vehicle lasts, you may have a sizeable car fund in place. If you’re interested in seeing how you can upgrade your cars with cash, Dave Ramsey has a video explaining how it works in detail.

Your Thoughts

Buying a car with cash isn’t an option for some, but I think it’s something to seriously consider as you start off in your career. I’d like to hear your thoughts on it. Did you pay cash for your car? What are the pros and cons of it?

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