Please tell me visitors about yourself. What made you want to start smallivy.wordpress.com?
I wanted to help people learn how to invest. After a while it turned from just investing to financial management in general. Almost everyone has the ability to become financially secure if they live within their means and invest. I wanted to help people do this.
What are some of the easiest ways to keep a good credit rating?
Probably the most important thing is to pay your bills on time. Unfortunately, in order to build up a credit rating you also need to take out loans. I say unfortunately because the only type of loan most people should take out is a mortgage. The FICO score depends on people going into debt and staying there. Getting credit cards but then using little of the balance. Getting car loans and paying them off and so on.
I’m rather split on this because on one hand trying to get a good credit rating requires you do things that are financially stupid, like take out credit cards. On the other hand, more people like car insurance companies and employers are starting to look at credit scores. I’m hoping this latter group will come to realize that people who can budget and avoid going into debt are responsible people. People who can even grow wealth clearly are the types of people you want to insure or employ.
What can I do if I have delinquent debts?
If you have debts and you have the ability to pay them, you are morally obligated to do so. The way to start is to prepare a budget where you list your income and assign it to your expenses. Whatever is left goes towards debt. Start out by getting everything current to stop getting hit with all the late fees. Then start paying off the smallest debt, making the minimum payments on the others. Once you pay that one off, take the money you were using for payments there and go after the next smallest one. Note I’m stealing this advice from Dave Ramsey, but he’s right.
Please name some quick and easy ways for a person to improve their credit even if they’ve recently been through a divorce or some type of financial calamity?
I’d say stop worrying about your credit score and worry about your financial situation. The first thing to do is to take care of the necessities – shelter, clothing, food, utilities. If that’s all you can do, everything else will just need to wait. Once the necessities are taken care of, build up a small emergency fund of $1000 or so to make sure you have the cash flow you need to avoid needing to take on debt for daily expenses. At that point you can catch up any debts if you have any and start paying the minimums.
Then, build up an emergency fund of about $10,000 so you have money to pay for emergencies that come up without taking out loans or using credit cards. Then save up cash for a good used car if you need one, perhaps starting out with a $2000 car but then saving the money you would have been paying for payments until you can get a $5000 car.
Once you get there, you’ll have a car that should last a few years, allowing you to start saving up payments and really piling up some cash or paying off debts. At some point the debts will be gone. From there you can start investing and doing things like buying a house. It may take a few years, but as you go you’ll have more cash available and things will probably take a little less time than you think. Of course, do what you can to improve your income – make yourself more valuable at your job by delighting your boss and her customers and even take on small side-jobs if needed and available to get more income.
Does cancelling a credit card you haven’t used in a while lower your credit rating?
It probably does because credit accounts you’ve had for a long time help your score. Still, many credit cards are like snakes and they will eventually bite you. They will start charging account fees. They will send statements closer and closer to the due date. If you miswrite a check they will do what they can to charge more interest and penalties. They’ll do what they can because they want to increase the amount they make from you each year.
I’d say build up some wealth so you can just pay for things and drop the cards anyway. Yes, you might have a lower credit score, or no score at all after a while, but hopefully the only ones you should care about – employers and insurance companies, will grow a brain soon and realize that someone who builds up wealth is a better risk than even someone who juggles a bunch of debt but pays on time.
Besides smallivy.wordpress.com what are some of websites/blogs you would recommend our visitors visit while trying to improve their credit?
Smallivy doesn’t talk about credit scores much because we’re trying to get people to the point where they don’t need one. For those who are worried, Money Magazine will talk about them every now and then. I’d say just live below your means, pay your debts and your mortgage on time, play the credit card game if you want (get cards but then just use them once in a blue moon to keep them from closing the accounts and then write a check immediately to pay off the balance in full), but the sooner you have $50,000 in investments and can just cash flow life’s little emergencies the better of you’ll be.
This is our tenth interview in our “1000 Interview Challenge” If your interested in an interview, please contact me.
This interview was conducted by Shane McC. Shane currently is attending RISD studying computer programming. He enjoys traveling and plays hockey. He played for the Boston Junior Bruins of the EJHL during the 01-02 season. You can follow him on Google+