We live in an economy built on credit. When we apply for a new car loan, buy a new house, borrow to star a new business or even apply for a new job, good credits will go a long way to save you money and help landing you that new job!
So how does credit work and what makes good credit?
Credit is a measure of your financial strength and trustworthiness. It helps the banks who want your business getting to know you a little, at least your finances, and decide how risky it is that they might loose the money they loan you. Over the years the banks have done business with enough people and they’ve done the research on what risky behaviors that lead to a default look like. Exactly how they turn those metrics into a credit “score” is proprietary and here are some basics.
History of on-time payments tells the bank that you take your trustworthiness seriously and if they lend you money they are very likely to get the money back plus interests. Score!
Types of the credit also tell a story of your financial well-being. Routine payments to utilities like telephone, cable TV, gas, water garbage and electricity bills will add to your credit worthiness. School loans, car loans and credit cards issued by major financial institutions are also good. However credit cards issued by retails stores can suggest an excessive spending habit. Too many of these trade lines can weight on your credit score.
Length of each trade line also makes a difference. The longer you have maintained an account open in good standing the better it is for your credit.
Routine spending close to your credit line limit can suggest that your life style might exceed your affordability and therefore raises the risk of default and will bring down your credit score. Switch to another card for your daily spending if you purchased a big ticket item.
Never ever be late for a payment. Live within your means. If you must carry a balance on your credit cards look for ways to pay more than the minimum payment. If you are going to consolidate your credit cards keep the oldest cards with no annual fee open and close out your newer ones, especially if they charge a fee. Your credit card from college doesn’t know that you now have a hot shot career so call to update your income record and they’ll raise your limit. Note that some credit research company will actually bring down your score for each credit line limit increase request though this is quickly recovered by good payment history.
Stay below 30% - 50% of your credit card limit. Set up utilities bills under your name and then collect from your (trustworthy) roommates each month. If you are prone to over-spending do not set up automatic payment. Instead, set up a calendar reminder to pay your credit card each month. This will bring clarity to your spending habits and help prevent over-spending. Building good credit takes intended effort and time. Start early. Ask for help! If you are in debt seek help from a financial advisor or engage a debt relief company. Good luck and remember, life is good.
This article was written by Peter Mu, CFP®
Registered Representative and Financial Advisor of Park Avenue Securities LLC (PAS) 20 Bicentennial Circle, Suite 100, Sacramento, CA 95826 Securities products & services and advisory services offered through PAS, member FINRA, SIPC. Financial Representative, The Guardian Life Insurance Company of America (Guardian), New York, NY. PAS is an indirect, wholly-owned subsidiary of Guardian. Guardian, its subsidiaries, agents, and employees do not give tax or legal advice. You should consult your tax or legal advisor regarding your individual situation.
Image credit: http://en.wikipedia.org/wiki/House#mediaviewer/File:Ranch_style_home_in_Salinas,_California.JPG
2016-29509 Exp 10/18
Ah yes, a destination wedding. Who hasn’t seen those beautiful pictures?! White-sand beaches, lush coconut trees leaning over emerald waters, the beautiful bride and groom kiss silhouetting against a gorgeous sunset…you can literally breath the love in the air.
Until this week, and for being a guy who’s never married, I always thought that destination weddings are really expensive. First of all everyone have to fly over to the destination and the newly-weds are probably flipping the bill. Having heard countless complaints about how expensive wedding venues are here in California I can’t even imagine how much more it is at a resort on an island. Then there is the reception, the flowers, the rehearsals...all seems to cost a bundle.
All this changed when I got invited to a destination wedding at a beautiful resort in Punta Cana, the Dominican Republic. I realized my understanding on this topic was nearly entirely wrong.
First of all, paying for your guests’ travel is optional. You see chances are we all plan to travel to the tropics sometimes in the future. Mexico, Belize, Virgin Islands, the Bahamas, etc. If you plan far ahead of time people would just treat your wedding as their vacation anyway and accept that they can pay for their own travel arrangements - saving you a bundle.
Deals of the season. The Caribbean, South America and many parts of Mexico is the vacation destinations for “snow birds.” US and Canadian vacationers who crowd the beaches during winter season are no where to be seen during late spring and summer times. Our beaches and restaurants were nearly empty. Competition among the resorts meant that the prices were very reasonable. Some of the wedding guests booked their all-inclusive stay for two for about $1600 where the regular price runs about $4200 for the week. I thought that was CHEAP!
Location matters. New resorts in over developed areas use low low prices to attract newly-weds. When they have vacancies you’ll get a deal. Do some research and talk to a travel agent. She’ll know where to go.
Leverage your party. At our resort, a minimum of three night stay will get you a basic wedding package including a gazebo on the beach, some simple flower arrangements, champagne for everyone, an audio guy who rolls out the speakers and plays anything from your iPod and a full support staff for free. From there you can add fancier options such as pool side private dinner, excursions, party boats, DJs, photographers…to upgrade your package. Now remember, you are bringing a party of guests to stay at the resort and that means good business. I bet that if you just ask you’ll get more stuff for free.
The other great thing about being in an all-inclusive resort is that you’ll never have to pay for the food and drinks for your guests. We ran into another wedding party from LA and the young couple told us they had 11 guests. Instead of paying for a reception they simply made a reservation at one of the nicer restaurants – ate for free and had a great time!
Bring American Dollars and research currency exchanges. All the resorts will exchange for you but the rates are very different. Call them and your local bank ahead to see who gives you a better rate. Airports are the worse deals. Tip your service staff and shop with American Dollars will get you very good service and much better deal overall.
Vote with your dollars. Dominican Republic seems to be a country that has brought economic benefits from development of tourism to her people. We saw tax dollars supporting a new airport terminal being build, new 4-lane interstates, new hospitals, apartment buildings, new schools and countless other basic infrastructure projects. Comparing to neighboring Haiti which continue to be marred by natural and governmental disasters I genuinely believe in Dominican Republic’s effort to improve their economy. For all your social activists out there this can be a great option.
As I sit here on my return flight home, reflecting on my first Jewish-Mordovan-Romanian beach wedding and listening to Runaway Love by the Diamond Rings I can’t help but think that love really is in the air. Life is good kids. Whether you’ve already found the one or still sticking out like me, may all your dreams come true.
Best of luck on your wedding and Matsle Tov!
This article was written by Peter Mu, CFP®
Registered Representative and Financial Advisor of Park Avenue Securities LLC (PAS) 20 Bicentennial Circle, Suite 100, Sacramento, CA 95826 Securities products & services and advisory services offered through PAS, member FINRA, SIPC. Financial Representative, The Guardian Life Insurance Company of America (Guardian), New York, NY. PAS is an indirect, wholly-owned subsidiary of Guardian. Guardian, its subsidiaries, agents, and employees do not give tax or legal advice. You should consult your tax or legal advisor regarding your individual situation. CA insurance license 0E19513
This material contains the current opinions of Peter Mu but not necessarily those of Guardian or its subsidiaries and such opinions are subject to change without notice.
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