How to improve your credit score?

The best way to improve your credit score (FICO score) is to understand the factors affecting it. Following are the factors determining your credit score.

Payment History

It is the most important factor in deterring your credit score. It accounts for at least one third of your total score.

How long ago did you miss the last payment?

Missing payment/s negatively affects your credit score. If you missed a payment long time ago, your score will be less reduced. If you missed a recent payment, your score will be more reduced.

How many payments did you miss?

Missing more numbers of payments negatively affects your credit score. If you missed less numbers of payments, your score will be less reduced. If you missed more numbers of payments, your score will be more reduced.

How late was the payment?

Late payment negatively affects your credit score. 30 day late payment is bad. 60 day late payment is worse than 30 day late payment. Defaulting is worse than 60 days late payment.

Credit Utilization Ratio

It accounts for around one third of tour total credit score.

Lower the credit utilization ratio is, higher the credit score is.

Credit utilization ratio = 100 * utilized credit / total credit limit

For example, if your total credit limit is 10,000 and you are using 3,000, then your credit utilization ratio will be 100 * 3,000 / 10,000 = 30%

Length of Credit

It accounts for around 10-15% of your total credit score.

Longer the history, higher the credit score.

Number of Credit Inquiries

It accounts for around 10% of your total credit score.

When you apply for a credit/loan, lender check your credit report and credit score, it is called hard inquiry on your credit. A credit inquiry stays on your credit record for two years.

Higher number of credit inquiries, lowers the credit score.

Type of Credit

It accounts for around 10% of your total credit score.

Combination of auto loan, mortgage and credit card is better than concentration in just one type of credit generally credit card is better.

It doesn’t mean that I will apply for all type of credit and pay interest on them. It’s better to take less debt. In fact its better not to borrow anything and stay debt free forever.

Why is it necessary to view the detail bill?

My other half suggested that I am good at writing letter when it comes to get money back (or should I say, making sure that they don’t overcharge!) so I am including emails that I wrote personally to my phone company.

In my experience, utilities companies charge a lot of fees and we have to see our bill in detail to see their charges and need to call them for the discounts that we are eligible for!

Background: After enrolling in corporate discount plan, I was not getting it because my phone was ineligible

Letter # 1:

I was extremely satisfied with the service since I enrolled in it, but I am not satisfied with the service I am getting for last year and a half. I am getting very weak signals in some areas and so many of my phone calls are being dropped. My friends and relatives are saying that I don’t pick up the phone, but the fact is, I don’t get the ring or see missed-call so many times. I am sure that I am not the first customer to say something like this.

I am eligible for 15% employer discount, but I won’t get it because I have (model #). It sucks! You guys are saying that I can get this discount only if I get other device or new phone (latest model #). In spite of poor coverage, I am sticking with (service provider) only because of (model #). So I am not interested in getting other device. About getting (latest model #), as both of us know that it cost a lot of money. Also, if I spend that money and get (latest model #) then I will need to buy expensive data plan with that new phone and I won’t be eligible to have the data plan I have currently. So in order to get 15% discount I need to buy expensive data plan. In conclusion, I need to pay more to you guys. Isn’t 15% discount means customer save 15%? But your definition is instead of paying $70 a month, I should enroll in service which cost me $80 or $ 90 a month and then you will provide 15% discount. So I will have to pay more than $70 a month. Oops, I forgot to add the cost of buying (latest model #) and activation fees.

Isn’t 15% discount for your service? I completed my contract time with (service provider). and I am using your service. Shouldn’t you provide me your 15% discount because of this? I know you guys speak the language can and can not and not the language of should and should not.

I am sure you will have answer for this. After all, I agreed with your fine prints while enrolling your service.

Have fun enjoying monopoly of having exclusive rights to provide service for (model #) users.

Customer for 5 years now!

(Customer name)

Letter # 2:

You guys are very annoying. When I log in to my profile, it says ‘Your account type qualifies you to the following discounts. Service discounts are applied to the primary line under eligible agreements and exclude certain rate plan types and devices. * Service : 15.0%’ but I never get this discount. When I called, I came to know that I can not get this discount because I am using (model #). So you are okay to charge me $36 bucks for giving me discount when I am using (model #), but you are not okay to give me that discount because I am using (model #). That is stupid. So I asked to refund my $36 which I paid for getting this service, I was told that I can not get it back because your representative can only go three months back and I paid this in (date). You guys don’t even give refund for something you charged and are not willing me to offer that service! This is very frustrating!

Result: I got money back and was eligible for this discount when I changed my plan, but I was still using the same (model #)

Background: I wasn’t given eligible discount and was charged for activation fees ( it is necessary to see the detail bill to find this out!)

Letter # 3:

I am really tired of you guys

When I got into family plan, I was told that I will get 15% corporate discount because I am making a contract on new line ending with XXX1, but when I got the bill, there wasn’t any discount and I had to talk to you guys on the phone to make that line as my primary line to get that discount. Yeah, I got discount, but it’s after calling you guys and wasting my time. I should have got this in the first place.

When I got another line ending with XXX2, same thing happened. I was eligible to get activation fees waived, but I didn’t and I had to talk on the phone to do so. Again waste of time.

Also, I added line ending with XXX2 using my phone and without any contract. A representative told me on the phone that there is contract for this line! Are you kidding me? I went to that store in (name of city) and made it clear that I don’t want contract on this line and that is why I am using my on phone. If I had to make a contract, wouldn’t I get a free phone? A lady on the phone told me that people at store made a contract of 24 months! Come on. Give me the break. I told that I don’t want contract then why representative in the store will make a contract? Why your representative will tell me something different and do something different? May be because she wants to finish her quota, but why do I have to suffer for her? Now, representative on the phone told me that she can not undo this contract and I have to go to store! Do I have nothing to do, but to go to your store and keep talking and writing emails to you guys? Please stop harassing me. Please undo this contract.

Also, yesterday I went to store (store address) and for the same problem and I was told that this was being taken care, but when I logged into my account, it wasn’t and I had to call you guys. How much time do I have to waste for your mistakes?

Customer since (year)

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How to save money on Internet, TV and Telephone Phone bill?

Say you get promotional offer for cable TV for 25/month for first six months. After this promotional offer it is likely that this rate will rise to 50/month. There are some ways to keep getting cheaper rate. Of course nothing is free and you will have to work a bit to get cheaper rate. There are some ways to do this:

Get connection through local agent

The simplest way to get great deals is via local agent. Instead of calling 1-800 number, find a local agent in your area and ask for the deal. Local agent is likely to give you better deal than the one that you could get by directly calling service provider.

Get new connection from different provider

After 6 months of promotional period, call your service provider and tell that you will terminate service if they won’t give you further discount. It is likely that they will give you discount, if not be prepared to terminate connection and call another service provider and get their introductory rate. Keep doing this every 6 month and you will always able to get promotional rate. Installations charges can be lowered or dismissed upon asking, but you need to ask for that.

Ask your spouse to get new connection

After 6 months of promotional period, call your service provider and tell that you will terminate service if they won’t give you further discount. It is likely that they will give you discount, if not be prepared to terminate the connection and ask your spouse to get a new connection on his/her name. Keep doing this every 6 month and you will always able to get promotional rate.

Upgrading it to higher plan with promotion

Let’s say a service provider provides three packages: 30/month, 50/month and 75/month. You feel like 30/month plan doesn’t have enough channels and you needed to get 50/month plan. It is likely that you will get promotional offer of 25/month. After six months, you can call and ask for upgrade, from 50/month plan to 75/month plan. You make sure to ask for promotion. That promotion will be 37.5/month for 6 months. So after 6 months, instead of paying 50/month, you will pay 37.5/month.

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Pay Yourself First

The single most important tip in personal finance and investing is to Pay Yourself First.

In order to become financially independent it is necessary that you have enough money. In order to have enough money it is necessary that you invest enough. In order to invest enough it is necessary that you save enough. To save enough make sure that you pay yourself first. Make sure that you save certain amount from you income.

What is that certain amount? Is it 5% of you income or 15%? Is it $250/month or $500/month? The short answer is higher the better. Higher the amount is, faster financial independence is.
For example, Rob and Bob started working at the age of 25. Rob decided to save $500/month and Bob decided to save $550/month. At the age of 65, at 8% rate of annual return, Rob will have $1,635,511.48 and Bob will have $1,799,062.62. Bob will have $163,551.14 more by saving $50/month more! That’s the beauty of compound interest.

You will think that you are just 25 and there won’t be much difference if I save after a while. Earlier the better.
For example, Rob and Bob started working at the age of 25. Both want to save $500/month. Bob decided to save at the age of 25, but Rob decided to wait for a while and started contributing at the age of 35. Who will have more money at the age of 65? You are right. Bob will have more money. But how much more? Bob will have $1,635,511.48 and Rob will have $715,040.62, that is the difference of $920,470.86. That’s right. By start saving 10 years earlier Bob will have a little under a million more than Rob! That’s the beauty of compound interest

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