How Much Does a Bad Credit Score Really Cost You?

You could have a perfect credit score today and a terrible credit score in just a few months. All it takes is a few months of missed credit card payments to completely trash your credit score. Lot of things can hurt your credit score, but serious delinquencies hurt the worse because the credit scoring calculations place the most emphasis on payment history. But even late payments are mild compared to the damage that’s done from serious delinquencies like charge-off, collection, or worse, a bankruptcy or foreclosure.

Even people who are diligent with paying their bills on time can end up with bad credit after divorce, death of a spouse, job loss, or serious medically bills. All are situations that don’t directly affect your credit score but do impact your ability to pay on time.



Living with a bad credit score is tougher than you may realize. Lots of businesses depend on credit scores to decide who to give accounts to and how much to charge for those accounts. Businesses penalize people with bad credit by charging higher prices, additional fees, and higher interest rates.

Some companies charge an upfront security deposit to people who have bad credit. The deposit can range from $50 to $300 (possibly even more depending on what you’re applying for) and is held as a security for your account in the event that you cancel your service with a balance. Landlords, electricity companies, cable companies, and cell phone and internet service providers commonly charge security deposits. While you do get the security deposit refunded to you when you turn off your service or move out of the rental (as long as you don’t have a balance), it can be tough to come up with the extra money to establish these accounts.

It often surprises people to find out that you could pay a higher insurance premium when you have bad credit. Insurance companies are another business that charges higher rates to people with bad credit. Their reasoning is that people who have bad credit tend to file more claims than those with better credit scores. As a result of the increased risk of filing a claim, you’ll have to pay a higher insurance premium.

Not only does bad credit make you pay more money, it could also cost you the prospect of making more money. Your past credit mistakes may keep you from getting the job of your dreams. While employers don’t check your credit score, they do check your credit report, but only with your permission. If you have significant credit mistakes, like bankruptcy, lots of debt, or unpaid debt collections, you could be turned down for the job. Credit checks are common with jobs in the financial industry and higher-level management positions. Your current employer might check your credit, too, if you’re up for a promotion or a raise.

Bad credit makes it tough to get approved for new credit cards and loans. If you get approved, you can expect to have a higher interest rate, which means higher finance charges. On an installment loan, like a mortgage or auto loan, which has a fixed repayment period, the higher interest rate results in higher monthly payments. Credit cards don’t have a fixed repayment schedule, but you still pay a higher cost if it takes you longer to pay your balance in full.

Living with a bad credit score is costly, but it doesn't last forever. Most negative information falls off your credit report after seven years and you can proactively repair your credit even before the bad things disappear. The sooner you get a better credit score, the sooner you can stop paying extra money for services.

About the Guest Author
This guest post was written by James Quinn, a personal finance writer specializing in topics related to obtaining credit, debt relief, credit repair and more. Pass through the debt settlement blog for more tips and advice.

Yodlee MoneyCenter Alerts

Over the weekend, I received 11 Yodlee MoneyCenter Alerts by Email. I've written about these Yodlee alerts before. The alerts will, for example, inform me if an account balance drops below a certain amount, or a large transaction is processed. These alerts are meant to help in the early detection of fraud.

However, I received 11 of these alerts all at once, and they are for transactions going back as far as April. In most cases, the alert was to let me know that my paycheck was auto deposited into my savings account. But, the real question is why did I get 11 alerts all at once?  And, is it even helpful to know that I received my pay check nearly 4 months after the fact?

While I don't think that I could live without Yodlee to help keep track of my finances, situations like this add to my list of reasons why I have a sort of a love/hate relationship with Yodlee. Did anybody else get a bunch of Yodlee Money Center alerts all at once?

PFS

5 Money Lessons You Definitely Should NOT Teach Your Kids

Want to give your kids one of the best gifts you could ever give them? Teach them how to handle their money. And do NOT teach them the following lessons:

1) Pick a career you love, with no consideration of earning power.
Many parents tell their kids "do something you love and the money will take care of itself." That sounds nice. Everyone deserves to be happy. But can you be happy if you don't find a job? Or get into a career that doesn't give you the life you want? There's no easy answers to those questions, as many people live happy lives doing social service work, missions, or even volunteer work. And this is not to say you should discourage your kids to use their talents as actors, artists, or the like. But you should teach them some kind of balance. And if they decide to go to college, make sure to discuss the benefits of a degree, and who will be paying back the student loans, if there are any. Encourage your kids to do volunteer work, job shadowing, internships, or get a part-time job in the field they want to build their career BEFORE they make any significant investment, so they can see what the working life is really like.

2) Money comes easy, so don't worry about how you'll get it.
When it comes to teaching kids about money, giving an allowance is a debatable topic. Should you give your kids an allowance, either for doing some basic chores or just out of the goodness of your heart, so they have some money they can learn how to manage? Or not? Tough question! Here's one way to think about it - is it better to just give your kids money, or to teach them how to earn it? Just doing the same chores every week for the same amount of money doesn't really do it. Instead, think about giving them the choice - do the work and get paid, or don't do the work and don't get paid. Have them do jobs around the house - real jobs that require some work, like painting or window washing or fixing something that is broken. And teach them that to GET money they have to GIVE some sort of service and effort.

3) Keep all your money in the same place.
When you're a kid having all your money in one account is no big deal. You make a few bucks, put it in your savings account, and take it out when you need it. But as your kids get older, and as they become adults, this becomes a bad strategy. Because in 2011 if you put all your money in your bank checking or savings account, you're earning very little interest. It may be safe, but it isn't doing much for you. Or if you invest it all aggressively into a single stock or type of investment, you risk losing a LOT when the market changes. Even as a kid, if you put your money in your drawer or in a box, you risk big brother or sister taking your money, or your parents "borrowing" from your stash of cash. And none of these are things you want to have happen. So teach your kids to diversify their money early on. Need money quickly? Keep some in your bank savings account. Want to save long term? Put money in U.S. savings bonds, mutual funds, stocks...you get the idea. The more kids know about the different types of investments the better.

4) Hope is a good thing...
Hope you win the lottery. Hope you get a good job. Hope social security will be around when it's your time. Hope that mom and dad will bail you out when things get bad. And if none of these come true, don't worry, something good will happen. Obviously, this is a bad strategy when it comes to managing money, and a bad lesson to teach your kids. Instead, teach them how to set themselves up well financially long-term. Teach them how to save on a regular basis. Teach them how to start their own business or get a job when they need money. Teach them how to protect their money and not to spend all their money just because they have it right now. Then, if you want to buy a lottery ticket for fun, good luck!

5) If you want it, buy it now, worry about paying for it later.
When you're young, ask mom and dad to buy it for you. When you're older, use plastic. Same concept - buy now, pay later. Bad lesson, very bad lesson. Kids need to realize that money is a thing, not an idea. Meaning that you need it to spend it. Credit cards are a way of life for many adults, but for most people they are little more than an illusion. An illusion that you have money that you might not have. OK, if you use credit cards responsibly, or if you use them for the rewards and then pay them off every month, that's not so bad. But if you buy something on a credit card because you don't have enough cash, then what happens next? First, you get a bill for the entire balance. Then, next month there's some interest added on. Before you know it, the monthly payment keeps getting bigger and bigger...do your kids a big favor, and teach them that if you want something then you should wait until you have enough cash to buy it. Otherwise, keep saving until you do.

The best time to teach your kids about money is when they are young enough to want to start spending it. That means they understand that money is a means to getting what they want. Of course, you don't need to force them to read Forbes or the Wall Street Journal when they are 3. But it's never to early to learn the balance between spending, saving, and earning!

About the Guest Author
Kris Bickell started www.Debt-Tips.com to share the lessons he learned about getting out of debt, fixing credit problems, and saving money. Learn how to get the type of debt help you need and get your finances back on the right track.

Guest Post: Reverse Mortgage and Credit Card Debt

Retirement used to be a time for people to enjoy life without a mortgage or high credit card bills, a time when heavy debts were mostly a thing of the past. Increasingly, that's no longer true. Some seniors are taking on debt in retirement to fund a trip they've always wanted to take. But a growing number are in debt because they have no choice, according to debt counselors and a growing body of research.[i]

Reverse Mortgages can solve a lot of problems for people facing financial hardship due to the rising costs of medical bills on a fixed income. A qualified consumer can enter into a reverse mortgage which has two major benefits. The first, you no longer pay a monthly mortgage payment. This allows you to free up cash flow to pay your medical expenses and credit card debt more comfortably. The second is a source of income you can receive in monthly disbursements or a lump sum of cash. The extra income can help you become more comfortable during your retirement years and alleviate the stress of bills you are facing and the burden you may feel you are placing on your immediate family to care for you.

What many people don’t realize is that a certified debt specialist may be able to work with your reverse mortgage specialist to involve you in a plan to not only alleviate your financial troubles and burden but help to eliminate your credit card debt for less than the full amount owed. This can further assist you in preserving your precious resources for medical bills and cost of living increases you face on a fixed income.

The need for these two services is at an all time high as every single day more than 10,000 Baby Boomers will reach the age of 65. That is going to keep happening every single day for the next 19 years.[ii] Baby boomers are retiring under the umbrella of $790.1 billion of U.S. Consumer Debt.[iii] A large portion of which are adjustable rate credits cards while the largest population in US history is on or going on a fixed income. A recipe for disaster coupled with an underfunded social security program.

Because a reverse mortgage is not driven by credit it does not matter if you are falling past due on your credit card accounts, have late payments in the past, or cannot show enough income. You are facing a financial hardship on fixed income so a certified debt specialist may be able to put a plan in place for you in conjunction with your reverse mortgage to assist you in paying off your debts all at once or over time.

These two specialists working together can help turn your retirement years around by preserving more of the precious resources you need to last the rest of your life. You can move beyond the monthly cycle of medical bills and unhealthy stress of credit card debt. Working with a reverse mortgage specialist and Certified Debt Specialist can help.

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[i] http://www.usatoday.com/money/perfi/retirement/2007-01-22-senior-debt-usat_x.htm
[ii] http://endoftheamericandream.com/archives/in-2011-the-baby-boomers-start-to-turn-65-16-statistics-about-the-coming-retirement-crisis-that-will-drop-your-jaw
[iii] http://www.federalreserve.gov/releases/g19/Current/

The 2011 San Francisco Money Show

Each year, The Money Show is held at the San Francisco Marriott Marquis Hotel in the city's downtown. This a literal carnival of investing. Every year The Money Show brings in a large collection of speakers, most of whom have some sort of investing product or service to sell, who pitch their advice in 30-45 minute speaker sessions. Over the years, though, I have seen some notable speakers. The ones that I remember most vividly are Bambi Francisco (formerly of Marketwatch), James Jubak (of MSN Money), and William J. O'Neil (founder of Investor's Business Daily).

The seminar sessions are broken out into many of the hotel's subterranean meeting rooms. The SF Marriott Marquis is a huge hotel with dozens of meeting rooms that can be re-sized for practically any group of speakers. It is well suited for conventions such as The Money Show. At any given time, several speakers will be talking about different topics. Many of the speakers do have something to say about important topics. I think that the speakers representing larger firms are often trying to share their knowledge with people. But having said that, there are a lot of speakers who are just giving a sales pitch and fishing for new business.

The exhibitors at The Money Show range from large mutual fund companies and brokerage houses to individual newsletter writers and penny stock promoters. All and all, one has to pick and choose which booths are worth stopping by for more than quick glance. If you linger too long at any one booth, you might find yourself in the middle of an unwanted sales pitch. There is no shortage of reading materials for the numerous offerings that the exhibitors have. This brings me to another reason I like going to The Money Show: freebies.

I can usually cart off a couple of bags worth of sample newsletters, magazines, pens, notepads, key chains, refrigerator magnets, mouse pads, and candies. In a few cases, I have been able to come away with a USB flash drive or two. One time, I was lucky enough to get a copy of William J. O'Neil's book, 24 Essential Lessons for Investment Success. And occasionally, exhibitors will invite you for lunch or cocktails, but that usually involves listening to a sales presentation for the duration.

Oh, and did I mention that admission to The Money Show is free as well? I generally make a trek into the city for The Money Show event. Unfortunately, I am not going the year because the organizers have decided to hold the 2011 San Francisco Money Show on weekdays (Wednesday through Friday) from August 10-12, 2011. I still have a regular job to hold down, so I will have to miss it. Maybe next year.

PFS

PerkStreet Financial

I want to take a couple minutes here to talk about a unique checking account offered by PerkStreet Financial: the PerkStreet Financial Deposit Account. Coupled with a PerkStreet debit card, they offer one of the most rewarding cash back programs in America by offering up to 2% cash back on all non-PIN debit card purchases.

You typically earn at least 1% cash back on non-PIN purchases with a PerkStreet card debit. But whenever your account balance is over $5,000 for a day, they double that to 2% cash back on all non-PIN purchases. Additionally for the first 90-days after opening a new account, they are offering 2% cash back on every non-PIN purchase regardless of your account balance.

The average family earns $600 cash back every year with PerkStreet – substantial rewards that can be redeemed for gift cards at places like Starbucks, Amazon, Target or Best Buy. But PerkStreet Financial isn't just about offering a checking account with cash back, it can be a great tool to improve your financial life. Use your cash back to pay down debt, save for the future or even reward yourself. To start earning cash back with PerkStreet, sign up today!

Pandora: A Broken IPO

Shares of Internet music service Pandora Media (NYSE: P) began trading Wednesday, June 15 after the stock's initial public offering (IPO) at $16 per share. Pandora's shares rose on their first day of trading, and peaked as high as $26 on Wednesday. The hype surrounding a new IPO is usually the main driving force behind a rapid run up such as this one.

However in the first day of trading day after its IPO, Pandora closed significantly lower than after the initial pop at $17.42. Yesterday, June 17th, Pandora dropped to close at $13.40 after dropping below its initial $16 offering price on Thursday. Traders call an IPO that has dropped below its initial offering price a "broken IPO". So, Pandora is now considered a broken IPO.

The recent LinkedIn Corporation (NYSE: LNKD) IPO has brought a new focus on IPOs. LinkedIn's IPO price was $45, and started trading on 5/19/2011. LNKD skyrocketed upward going as high as $122 at one point.  However, it closed this past Friday at $65.53. While this is still greater than it's IPO price, LinkedIn's stock price is still much less than its peak.

On this blog, I have written about buying IPOs before. While getting into an IPO can be a way to make money quickly, I have warned that not all IPOs go up in price. A point that I will again underscore is that buying an IPO can involve significant risk! This is certainly appears to be the case with Pandora.

Disclosure: I do not own any interest in Pandora Media or LinkedIn.

PFS