Monitor Your Credit and Spending

Let’s talk about credit for a minute. No, having good credit is not typically a source of immediate gratification. You don’t get coupons or see money coming off when you make a large purchase. But, in the long run, having good credit can save you lots of money. You get better interest rates on loans. You can buy things without needing a co-signer. You pay less for auto insurance (Yes, auto insurance companies look at your credit score - they want to know if you’re likely to pay them).

The obvious path to good credit is to make more than you spend. That’s obvious, but not necessarily feasible for many people. But, assuming you’re not one of the lucky ones with buckets of cash lying around, there are still things you can do. The second most obvious path is make your payments on time. Seriously. Do whatever you need to do to make this happen. If that means setting reminders on your phone, setting up automatic payments, paying each bill the moment you receive it - do it.

Ok, let’s assume you do that. The next thing is to be proactive. The federal government gives you a free copy of your credit bureau from each of the three major credit bureaus, if you go through their website - http://www.annualcreditreport.com. Most of the other sites out there want you to sign up for a credit monitoring program before you get the credit report and then you have to remember to call and cancel before they charge you. If you can’t remember to pay your bills on time, this is not going to help you. In addition, there is a free service called Credit Karma that not only allows you to check your credit score for free at any time, but also gives you a credit report card, tells you how your credit stacks up to others in your demographic, and offers you deals that can help you transfer balances, lower interest rates, avoid annual fees, or otherwise save money. Now, I’m not saying that every offer they make is wonderful. The first time I logged in, it happened to be just before my final car payment was due. When I clicked the “auto loans” link, it told me that I could refinance my auto loan, get a lower interest rate, and pay just $8 per month for the next several years! What a great deal!! (Needless to say, I passed.) So, OK, the algorithms aren’t perfect. But the concept is solid, and the information they provide is useful.

On top of that, track your spending. There are lots of ways to do this. I used Quicken for years, until they decided to stop providing Apple support. Now, I am using MoneyDance, and I’m quite happy. It’s not a free program, but you do get a discount if you like their Facebook page. I like these programs, and they work for me. Some people use Mint.com,* and they rave about it. I have friends who use a spreadsheet to keep track of their finances. I still don’t understand how. But, if your mind works that way, and you have a spreadsheet program (or the ability to download one from Open Office), more power to you. Find what works, and do it. It’s much easier to improve your credit when you’re paying attention, and better credit = more money down the road.


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* Unlike every other service/product I mention on this blog, I have not used this one myself. I don’t have any complaints or problems with it, and, again, I’ve heard wonderful things. It’s just that I started using budgeting software when I was about 17, it was, ummmm…. some amount of time later that Mint.com came out, and there was no easy way to transfer the past SOMENUMBEROFYEARS worth of data to the new system. And no need - Mint does everything automatically (I hear), and I get an oddly therapeutic sense of accomplishment from entering my own transactions and balancing my accounts. I'm weird.

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