Lazy Man and Money

How Can a Young Person Build Credit?

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What better way to spend Labor Day by pushing off the labor on someone else? Just kidding, but the following is a guest post by James. I’m particularly interested in this topic, because I want to help my kids build fantastic credit before they even head off to college. Fortunately, I’ve got a lot of years before that happens (but I know they’ll go by quickly).

If you are young then you may have come across the problem of not being able to obtain credit because you have never had credit in the past. It can be really difficult to take that first step to getting a loan, or obtaining a credit card.

It’s easy to start giving up hope of ever obtaining the credit you need just to try and buy the larger essentials in life, such as furniture and kitchen appliances. You shouldn’t give up though; there are ways to improve your credit score. Some of them take a while to accomplish, and require patience. Some like Credit Tradelines provide a faster solution.

Things to remember when you’re trying to improve your credit

When you’re young you’re building your credit score from scratch. A major factor that contributes to your credit score is your payment history, and you won’t have one. This doesn’t mean that you are necessarily a bad risk for credit, just that there is no record of your reliability. One thing you often need when you’re trying to build a credit score is a lot of patience; it doesn’t happen overnight. Here are a few things to remember.

  • When you first apply for credit you shouldn’t make too many applications at once as this doesn’t reflect well on your credit score.
  • You should never apply for more credit than you know you can repay as doing this can lead to problems keeping up with your payments.
  • You should make sure that you keep a record of when your payments are due so that you don’t risk missing them.

Gradually building the credit you have, and making sure you pay on time, helps to build your credit score and improve your likelihood of obtaining new credit in the future.

A quicker way to improve your credit score

If you need credit urgently then spending time building your credit score may not seem as though it’s going to work for you. If this is the case, you may want to consider buying a seasoned tradeline. These tradelines are lines of credit that have a high credit amount with regular repayments and a low balance. Buying one means that you become an authorized user and the line of credit can be used when calculating your credit score, to improve it.

This doesn’t mean that you can’t still improve your credit score by gradually obtaining credit, and repaying it reliably. It just means that you have another option that enables you to make the process go faster. Seasoned tradelines are an excellent resource for people who have not built any credit as they provide an immediate base on which to build. You don’t have to spend an excessive amount of time trying to get the credit that you need. Whichever option you decide on, there are ways that you can improve your credit score no matter what age you are.

Is Payment Protection Insurance ever a Good Idea?

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The following is a guest by Tim Chen, founder and CEO of NerdWallet.com. NerdWallet that helps consumers to compare credit card rewards.  Tim also educates consumers about credit cards and debt management at the Forbes Moneybuilder Blog, the Huffington Post, and U.S.News.

Payment protection insurance can sound great when it’s being pitched by a commissioned credit card salesman. Depending on the credit card company, you’ll typically pay a fee equal to something like 1% of your credit card’s outstanding debt each month (in addition, of course, to your minimum payments). In exchange, your payment obligation will be waived for a set amount of time if you become sick, unemployed, or otherwise unable to make your payments. While terms vary by card issuer, you could get 24 months of waived minimum payments for job loss or debilitating injuries.

I mean, 1% sounds tiny in the greater scheme of things, and in exchange you never have to worry about getting charged a huge late payment fee.

Question the benefits

There are a few things that you should consider before you sign onto a payment protection insurance plan, though. For one, you should consider the nature of the debt you’re insuring. It’s unsecured. In contrast to mortgages, car payments and other forms of secured debt that have a physical asset as collateral, credit card debt has nothing to back it up except your ability to make payments.

If someone goes bankrupt, the secured creditors are the first in line to be paid back. Once they’ve been paid in full, unsecured creditors can be paid ““ if there’s anything left to pay them with.

Due to the nature of the debt people owe them, credit card companies have a tendency towards flexibility. If you’ve made consistent payments for years, then lose your job, your credit card provider will probably cut you a break, offering an amnesty from payments for at least a couple months.

They do this because it’s in their interests as much as it is in yours. Sacrificing a couple monthly payments now saves them from having to write off your entire balance in the future.

Weigh the costs

The price of payment protection also bears mentioning. It’s roughly 1 percent, which doesn’t sound like much. However, that’s 1 percent per month, or roughly 12 percent per year if your balance stays constant. Unless you have a low interest credit card, you probably have a 15 percent interest rate already, your payment protection insurance is going to raise your effective interest rate closer to a far-more-substantial 28 percent.

This is clearer when you put it in dollar terms. Say you owe $1,000 on your credit card. A typical credit card company might require a 2 percent minimum payment every month, or $20. Payment protection, though, adds another $10 to each payment. What was $20 is now $30. Over five years, you’ll end up paying something like an extra $600.  More if you add to your balance over that time, but less if you manage to pay some or all of that debt off (as you should).

And the thing is, this $600 is not going towards your credit card’s principal. It’s just like auto or health insurance, in that you only get any benefit from it in emergency situations.  And unlike health insurance, if you end up using payment protection and passing on a few payments, your credit card company will most likely charge you interest on the payment protection fees as well. It should be noted that while your payments may be waived for a few months, your debt is still intact and you will continue to accrue interest on your balance while you’re not making payments, which will end up putting you in an even worse situation than before.

So think twice about payment protection. Think about where else that money could go. It could go into an emergency savings account that can be used for any expenses and doesn’t require approval to be accessed.

Or you could just pay an extra 1 percent of your balance each month on your own accord. After all, there’s no better payment protection than eliminating the debt in the first place.

“Debt Crisis in America” & JCR Advertising are Evil

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I don’t know if you’ve seen the Debt Crisis in America commercials on television or not, but when I saw them, I thought, “This is a whole new level of scummy advertising.” If you haven’t seen them, you can watch two of them here. I can’t decide which one is more scummy. Here are some tactics that I notice right off in these commercials:

  • Imagery of Washington D.C. landmarks including The White House – This gives an aura that this commercial is endorsed by the government when it is not. It’s hard not to see how one could get confused by this.
  • Scrolling News Ticker – This makes it look like a news channel like CNN, CNBC, or Bloomberg. News stations like that are generally considered reputable and typically follow the journalistic principles when reporting information.
  • Special Announcement! – How is that to get your attention?!?! What’s special about this announcement? There is no information in this “announcement” that I don’t see 5 to 10 times a day.
  • Speedy facts and figures – It’s
  • Credit Card and Debt Help Line = 1-800-000-0000 – Ever try dialing that number? Well I’ll get to this later on.
  • Transferring the “News” Coverage to Someone Else – Moving the coverage to another person in the way they do is very much like how the news transfers to a different reporter on the scene.
  • Call to Action – The commercial ends with a strong message that the solution is to call the number below – which seems reputable for all the reasons above.

You want to know the scummiest part of all this? The actress/fake newsperson asking you to make that call has no connection to the service they are offering. That’s because this commercial isn’t even designed for one specific company. It is made to be re-branded for any and every debt settlement company in the country, whether they are reputable or not. That’s why there is that aforementioned 1-800-000-0000 number. Just check out their sales pitch:

  • Higher percentage of converted calls to Leads
  • Higher percentage of qualified callers
  • Lower cost per in bound unique lead
  • Instant inbound Activity for your sales staff
  • Trackable phone number provided & routed to your location
  • Inbound call analysis completed & e-mailed to you daily
  • Score calls and evaluate sales staff

It’s pretty clear where their interests lie, isn’t it? If I wanted to buy this commercial and brand it for my company I could. Why should I be worried about these companies just trying to help consumers? Well they aren’t always out to help consumers as you can read on Wikipedia. I don’t really know how to pick a good debt settlement company, but I did find this article which seems like it could have some helpful information. I think the safest way to get out of debt is to go on an extreme savings plan. Cut out or greatly reduce the costs of everything in your life. If you go with that route, I have some tips on how to save money.

How To Be A Smart Investor In Any Investment Environment

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[I’ve been a little backed up with my busy schedule of floating in the ocean and hotel pool in Aruba. Oh, and it’s not like the steak here is going to eat itself. So while I get back to that, enjoy this guest post from fellow Money Writer, The Digerati Life.]

Now that the stock market has recovered somewhat, do you feel a bit less satisfied about your high interest savings accounts and your high interest checking accounts? If you were one of many people who’ve decided to shelter your money into cash accounts earning 1% to 2% returns in recent months, you may now be wondering what to do next. Even the best cd rates may no longer be holding the same allure they had a mere few months ago.

While things look much better on the surface, the underlying fundamentals aren’t too rosy just yet. The economy is recovering but its health hasn’t been fully restored. So I thought to weigh in on a few tips for those who are aching to jump back into the market right now.

  1. Watch your debt first – Before you take on the additional risk of investing in the stock market, make sure that you take care of your debts first. In particular, work to pay down your credit card, perhaps by moving your balance into low interest credit cards or by using balance transfer credit cards with low rates. Just make sure you wipe out your debt before the promotional period is over. If you’ve got other debts on your plate such as student loans or a car loan, make sure you can address these obligations first and that you’ve got the cash flow and funds to cover these before you decide to make big moves in the market.
  2. Reevaluate your entire investment portfolio. – During the downturn, a lot of investors were afraid to check with their online stock brokers and mutual fund companies for fear of seeing the damage inflicted upon their investments. I was one of those people who was afraid to look. Well, now is an opportune time to review the status of your investments and to find out if indeed, it makes sense to wade into the market right now. If your asset allocation is out of whack, it would be a decent excuse to rebalance your portfolio to restore its original allocation. Otherwise, I’d be careful to do any market timing moves based solely on an emotional decision.
  3. Reassess your financial goals – Are your investments in the market still helping you stay on target towards your financial goals? Here’s an example when your goals should influence what you should do next: if you’ve got a child who’s ready to go to college soon, and you’ve got his or her college fund in stocks, then I would think about moving those funds out of riskier assets right about now to prevent this from being jeopardized by the volatility in the markets.
  4. Seek long term growth not short term profits – A lot of investors make the mistake of becoming too myopic about their investments. They’re parked by their discount broker, watching their money like a hawk, obsessing about every move their stocks make. I think doing this can only affect your portfolio negatively, since focusing on short term movements can only disturb or excite you, potentially causing you to make rash moves based on emotional decisions you make. By looking ahead at the long term, you’ll keep your mind on investment strategy rather than fall prey to fickle emotions that could only spell trouble for your investments.
  5. Keep track of current events – Knowing what’s going on with our economy and the financial state of affairs of our nation and the rest of the world can help us gauge trends. While it’s a good idea to keep our eye on the long term, it’s also wise to be aware of what’s going on. I keep tabs on the markets to see if there are opportunities that come up that I can participate in. When prices are down and people are glum, there are many opportunities that may present themselves to savvy investors.