Credit management for new grads: Four simple tips to control it! “

Credit management is no more a herculean task for the new grads:

Four simple tips to control it!

The college students after they graduate find it a herculean task to manage their budget and make important financial decisions. The end of college life means a wave of new challenges of the real world. Well, the fresh grads primarily focus on sending resumes to the their prospective employees to bag a dream job. However, in this transitional phase they need to focus on their personal finance as well. But they need to be aware of the hard core fact that “Rome wasn’t built in a day.” So, building credit history may take time, diligence as well as patience. If you make wrong financial decisions, then you may face problem in obtaining loans in future. Well, you’re not required to panic as you can follow some of the effective credit management tips given below.

 

Here are four credit management tips that you can consider if you’re thinking about your personal finance seriously:

1. Review your Credit Report: The US consumers are entitled to one free credit report every one year from the www.annualcreditreport.com. Once you get the report, make sure you review it to find any discrepancies in the credit report. Therefore, your primary task is to find negative but incorrect errors in it. Well, when you get a job after graduation, you may aim to buy your dream home. When you apply for a mortgage loan, your loan application and credit report can be reviewed by the creditors for loan approval. You’ll be surprised to find that prospective employers review credit report of the applicants for screening them.

2. Minimise the use of credit cards: Recently, most of the undergraduates are found using credit cards but they fail to show financial responsibility. Well, now it’s time to break the habit as you’re required to exercise financial discipline with due diligence. After graduation, you embark on new journey of your life as you set your new career and engage in taking other responsibilities. As a matter of fact, it can be a herculean task tackling on more credit card debt. Therefore, you need to start designing a realistic spending plan. Make sure you increase the use of cash over cards. It is easier for the credit card companies to lure the young consumers with lucrative offers. Try to keep your plastic card aside for emergency purpose. Avoid using your card for purchasing luxury items that you may not be able to afford presently. It is advisable to buy things on cash instead of cash.

3. Create debt repayment plan: Most of the recent graduates have staggering debt and juggle between credit card and student loan debt. Well, creating a debt repayment plan can be a smart move to get out of the rut. If you’re unable to solve your problem on your own, then you can take help from credit card debt settlement online companies. However, if you’re planning to pay off your debts on your own, you can start by calculating your total amount of debt. After that, you can consolidate your high interest multiple credit card bills into a single monthly payment. You can transfer the total balance to a new introductory offer low interest card. As a result, it can help to lower your monthly payment to an affordable amount. If you diligently work on paying off your debts, then you can get rid of the financial liabilities with ease.

4. Budgeting- A solution to your problem: If you always disliked the concept of budgeting in your school days, then you have to make up your mind to include it in your daily life now. Budgeting can help you track your expenses and income; as a result, you can avoid splurging on unnecessary things. You can keep track on the amount you spend each month and where your money is draining. So, it can be easier to save more money when you’re on a budget plan. You can use the saved amount to pay off your debts without borrowing a penny.

Therefore, you need to keep the above mentioned points in mind if you’re planning to manage your credit immediately after graduation.

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Marriages, Finances, And Debt

Marriage, Finances, And Debt – The Truth

Money destroys marriages. At least that is what a recent study found. When newlyweds get married they rarely ever talk about their finances because they are focused solely on the love. Unfortunately, the government does not look at the love part of it at all. According to the government marriage is a legally binding contract that has little to do with love. In fact, when you get married, you assume the other’s debt and vice versa. So, when two people get married and fail to talk about finances, it can lead to disaster. No wonder money is the leading cause of divorce behind infidelity in the country.

It is a really good idea to talk about each other’s financial situation before getting married. After all, marriage is a legally binding contract that has specific legal benefits. If you speak with your prospective spouse and the marriage does not make financial sense right away then perhaps it is better to defer the arrangement to a later debt; to attack the debt of the weakest link before dragging both into an unfavorable situation.

How Does This Affect Us

Not all debt is inherited during a marriage. Both of you still have your own individual financial identities but there are ways to drag each other down. Just because you get married doesn’t mean that the other will have to shoulder all of the debt the other one has accumulated and vice versa. That credit card debt that she piled up will not drag your credit score down, but there are ways in which it could.

Say he goes and buys a bunch of sports memorabilia that nobody needs. He charges $10,000 on a credit card. This could hit both of the partners equally if they took out a joint card in both of their names. Now, magically, both spouses are responsible for this debt. If the card stayed only in his name then only he would be responsible for the debt. Essentially, marriage makes dual credit cards available, even retroactively, which can affect both partners.

This means that one partner could have a high balance on a card that was accumulated before the marriage took place. The legally binding contract would take place and then another name could be added to the card. In this case the debt was accumulated before the marriage and it affects both partners.

Now, if you couldn’t make the payments on this card then it would default. If one name was on the card only one person’s credit rating would be affected. But, if both names are on the card then both people will be affected equally. This is an example of marriage and debt colliding; it isn’t pretty.

The Marriage and Debt Law

The law in the U.S. makes it clear – debt incurred before a marriage takes place does not affect both people. So, when getting married, the person’s current financial status should not be a big issue. Well, at least in the immediate future. You can marry someone in an enormous amount of debt and not be affected immediately. However, you will be affected eventually.

If the person you are marrying is mired in debt then any loans taken out in the future will have to be in your name. This is a tricky situation. If your relationship does not work out then you will be left with the debt. The other person will have no liability and could just walk away from that loan whether it be for a house or car. You will be left to make the payments because the loan is in your name.

However, the law gets a little trickier. Any debt incurred during marriage will affect both of your financial standings. So, if you take out a credit card and your spouse does not know then you could do serious damage to their credit score. All you need to do is go out and rack up a huge amount of debt and then go into default. The credit card company will report this against both people’s credit and go after each individual to collect the debt.

This is the tricky part. Both partners do not have to know about the credit card. It is not like opening a joint account or a joint credit card. You do not have to be aware for the credit card company to garnish your wages or attack your credit. According to the law they can go after both parties equally. It is essential to communicate with your partner about any lines of credit during the marriage. It is a legally binding contract, after all.

Your Marriage Certificate is a Financial Contract

There is a bounty of advantages to getting married. You get to spend time with your loved one, build a life with them and benefit from the legal advantages of marriage. You get tax relief, you will not have to testify against your partner in the court of law and hold the power of attorney. Unfortunately, for those in financial distress, it means assuming responsibility for each other’s debt while married. This can be a huge advantage if the both of you have a plan of attack and can do it right. It can also be detrimental to the responsible one in the marriage if it is done wrong.

It is imperative to talk about finances before getting married. This may be an uncomfortable conversation but it is one that needs to take place. Again, the government looks at marriage as a contract, it doesn’t look at it in terms of love, so, like the government, it behooves you to treat it as such, even for a short period of time during an uncomfortable conversation.

The debt you have incurred before marriage will not be mutual. Conflict can arise if one partner has to burden the loans because the other is overwhelmed. A line of credit will affect both partners equally if it is acquired during the marriage and none of this takes place if you do not legally marry. Talk with your partner, weigh your financial situations and do the right thing for you.

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What Form of Credit and Debt Should I Pay Off First

Deciding what form of debt you should pay off first can be a stressful endeavor.  Just looking at the debt you’ve accumulated can lead to feeling overwhelmed and discouraged.  This attitude must be combated because it is essential that you get debt paid off in order to take control of your life.  Being debt free will lead to less stress, better purchasing power and could even lead to better health. There are several theories about which debt you should focus on, so make sure you get educated about all the options and start paying off your debt now. There is hope with the right plan of attack.

Types of Debt

People accumulate debt for many different reasons.  Student loans, credit cards, mortgages etc.  Some debts are much more malicious to your life than others and need to be treated as immediate threats.  The trouble is many people have accumulated debt because they have attempted to live beyond their means.  That is they are trying to buy things their income cannot afford them.  Some people have used credit as a way to extend their income, this is one of the worst mistakes you can make because eventually you will need to stop using those cards as income and the interest is going to accumulate at an alarming rate.

Not all debt is created equal, having things like auto loans, house payments and student loans are not as bad as having credit card debt.  Credit card debt is most often associated with a high interest rate form of debt and affects your Fico score more than anything.  It is important for you to inventory the types of debt you have and decide which is most important to remove.

Importance of the Savings Account

You should still be considering paying into your savings account while you pay off your debts.  Although you may not be able to put the full amount into savings you would like, you should be striving to add some.  Having an emergency savings account is essential in making sure you do not run into financial trouble in the future, and thus have to revert to credit as your lifeline.

It is normal for people to have six months of expenses saved in a rainy day fund.  This may seem hard to do considering you have debt looming over your head.  However in the event you lose your job or can’t work for some reason, this savings account will save you from further crippling your credit.

You should also be saving money in some kind of retirement fund.  Again it may seem counterproductive since you have debt you owe now, but it is something you should strive to make happen.  Without proper savings and retirement funds you could end up in more trouble than you are in now.

High interest Debt First

Most experts agree that you should pay off your highest interest rate debt first.  This makes sense because these debts are the ones that will end up costing you the most over time.  Once you have the highest interest debt paid off you move on to the next one.

Many people find this difficult to do because they do not feel like they are gaining ground.  I can understand this frustration but you need to stay the course.  You did not acquire this debt over night and it will not get paid off overnight.

Low Balance Debt First

There is another method of paying off debt that experts suggest.  That is paying off the smallest balance first.  The idea here is that it will keep you motivated to continue paying on your debt and it will actually have a snowball effect.  This method is mostly motivation based since paying the smaller balances with lower interest rates could end up costing more, but if it gets paid than there is really no argument.

If you find that you need motivation to get started on paying off your debts than this method might be the one you want to start with.  If you are more concerned with how much interest is going to cost you than you should surely pay off the highest interest rate debt first.

No matter which method you decide on, you better not take too much time thinking about it.  The longer you wait to start paying off your debt the more interest will accumulate.

Pay the Minimum or More?

Many people pay the minimum amount required from their credit card debt and assume that it is good enough.  The trouble is that they are not chipping away much of their overall balance and they end up paying mostly recurring interest.  This is how banks and credit card companies earn so much money.  They allow you to make minimum payments that get stretched over time causing you to pay huge amounts of interest.

You should be paying the minimum balance plus however much you can afford to pay down on the balance.  This way each month you are paying your interest payment as well as removing the balance of your debt.  This will get your debt paid off faster and save you thousands in interest. Credit card companies now have to include payment timelines if you pay the minimum amount on each statement for this reason.

Last Resorts

If things get so bad that your debt payments are piling up faster than you can earn money, you may need to scrap your savings accounts and retirement funds.  This is never recommended and not a very safe idea.  However if you have interest that is accumulating into the thousands you may have no other choice.  You will be walking a thin line because in the event of an emergency you could end up even worse than you were before.  Cashing out retirement assets or savings accounts should only be used as last resorts.

Conclusion

It makes the most sense to pay off the highest interest debts first.  This will save you the most money in the long run.  If you need motivation to begin paying your debt you can choose the snowball method and pay off smaller balances first to gain such motivation.  Once the smallest balance is paid off, you must then continue onto the next largest balance and so on and so forth.

You should continue to pay into a savings account and a retirement fund but if things get too bad these accounts may become a luxury.  Always pay more than the minimum balance on your debts to ensure you pay less interest and actually make headway on your overall balances. No matter what, the most important thing about paying off debt is that you get started right away and don’t put it off another day.

 

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