Dave’s Thoughts on the National Debt by Dave Ramsey

The nation’s debt now exceeds $13 trillion. Yes, $13 trillion. You know what you could do with just $1 trillion? You could pay the rent for every renter in the U.S. for three years or pay the monthly payments on all U.S. mortgages for 14 months. A $1 trillion stack of $1 bills would wrap around the equator 2.72 times!

And $1 trillion is just a fraction of the money the U.S. owes. Since Dave can’t stand debt, including the national debt, he had some tough things to say as he discussed the issue recently on The Dave Ramsey Show. Listen to the clip here.

What Is National Debt?
The government uses debt to cover its expenses when it spends more than it makes from taxes or other revenue sources. There is no requirement that the country operate on a balanced budget, so, since the country was founded, the national debt has continued to grow.

In 2008, the national debt stood at $9 trillion—the total debt for the entire history of the U.S. In two years, we added $4 trillion to our debt, increasing it by almost 50%!

It is no different than one of us racking up credit card debt on groceries, then getting a car loan and a mortgage on top of that. All the money you make goes to keep up your payments. Not smart.

The Lines Are About To Cross
While $13 trillion of debt is overwhelming to think about, what’s worse is the breakneck rate of spending. It only took six months to go from $12 trillion to $13 trillion!

Imagine the U.S. debt and revenue as two lines on a chart. The revenue line is pretty flat, if not declining, but the debt line is shooting straight up. The two lines are about to cross, and that means the country’s debt will exceed its ability to pay the payments.

A Political Revolution
The majority of people in America want an environment that gives them a shot to make their own money, and they are not happy with the redistribution of wealth that is happening today. The ballooning debt is just one more reason for a political revolution—to fire the politicians who are doing the spending, regardless of their party.

That’s why Dave doesn’t buy in to the gloom and doom some political analysts believe. He talks with people all over the country who are angry about the direction the country is headed, and they are not willing to put up with it anymore.

Our debt problem has given our country the opportunity to come up with a solution. With such an impressive problem, the solution it inspires is bound to be great!

It doesn’t have to take an act of Congress for you to get out of debt. Check out Dave’s
Financial Peace University Home Study Edition to get started today!

Red Light – Green Light

My children and their friends often play a game called Red Light /
Green Light (abbreviated here as ‘RLGL’) which has a lot of
important lessons to teach both you and I.

One child person stands at one end of the playing field, with the
rest of the players at the other end.

The “it” child turns their back to the others and calls out “Green
light!”

The players then run as fast (start) as they can towards “it”.

At any time, “it” can face the players, calling out “Red light”, and
the others must freeze in place (stop).

If anyone fails to stop, they are out or must return to the
starting line.

So what exactly does a kids game have to do with you and your
daily results?

Quite frankly–a lot, and if you stick with me on this one, you’ll
learn a number of important things you can do to improve your
overall performance.

Red Light–Stop, Green Light–Start

The first half of 2010 is now history and this provides you with
a wonderful opportunity to inspect your performance and to adjust
behavior and strategy accordingly.

- I want you to look in the mirror and examine what you see.

- I want you to take a flashlight to your soul and examine yourself
for commitment, integrity, and resolve.

- I want you to ask yourself what you must STOP doing right now,
and what you must start doing with a massive sense of urgency.

Now I’d like you to do me a favor.

Actually you’ll be doing yourself a big favor.

Take out a piece of paper, draw a line down the middle and place
the words STOP and START on each side.

Now begin to examine of all of your daily activity, right from the
moment you awake in the morning and determine exactly what you need
to STOP and START DOING.

Your Stop list may include:

- stop hitting the snooze button
- stop checking email first thing out of bed
- stop being late for school or work
- stop operating without a clear plan
- stop eating late at night
- stop saying one thing and doing another

Your Start list may include:

- start exercising first thing every day
- start placing deadlines on all activities
- start setting a better example for my children
- start being more proactive
- start being part of the solution
- start making greater contributions in your meetings

Red Light Green Light is more than a silly kids game, it’s a simple
and highly effective change management system that you can use to
dramatically improve your results and achieve every goal you desire.

Create a New, Better Version of You!

Take The Fear Out Of Credit….Clockhour Class

Does your buyer have “good” credit?  Take the fear out of credit reports.

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The CARD Act: Break Your Credit Card Addiction to Build Wealth

A recent CNN article explains how credit card users may still have leverage in negotiating lower interest rates despite the rhetoric coming from many of the larger U.S. credit card issuers. Many of those issuers have claimed that the recently passed Credit Card Accountability, Responsibility and Disclosure (CARD) Act would be devastating to customers, because it would require the companies to raise prices, and reduce consumer choices and access to credit cards. Interest rates have increased, but not as dramatically as increases prior to the enactment of the CARD Act legislation. In addition, credit card companies will be forced to adapt to the new rules that benefit consumers, and provide access to credit to a variety of customers, in order to stay in business.

In addition to being able to negotiate lower rates, there are other positive changes for consumers that have been occurring through CARD. The good news for us is that the CARD Act:

-Requires credit card companies to provide notice to customers before raising rates or fees;
-Requires monthly statements to show how long it will take to pay off your total balance if you are paying the minimum each month;
-Strongly limits advertisements for credit cards aimed at college students and young adults in general; and
-Requires mandatory consistent payment dates and times to be spelled out by credit card companies.

These developments are great, but CARD is not magic bullet that will miraculously eradicate the pitfalls of credit card use. Although the CARD Act may help to make the credit card playing field more level than it was previously, the reality is that as a consumer, you cannot beat the credit card companies. No amount of legislation will prevent providers of credit from making billions of dollars in interest off of credit card users, and it will not keep the vast majority of credit card holders from throwing ridiculous amounts of money down the drain.

Except for the most disciplined of credit card holders with the best of interest rates, the vast majority of people benefit very little from the use of credit cards. Even as it relates to building credit, many people do themselves more harm than good with credit cards. The reality is that you can build good enough credit to make major purchases simply by paying your bills on time beginning at a young age. It only takes a few times being late paying off a credit card balance to ruin any potential credit-building benefits.

The main thing that credit cards allow people to do is to spend money that they don’t have, and pay for the ability to do it, which is not a benefit in the long run. Particularly in the black community, which is disproportionately targeted by all sorts of predatory lenders, limiting if not eliminating credit card use is ideal. Aside from the historical discriminatory barriers, one of the other main reasons that black people generally lag behind whites in regard to wealth is due to credit misuse and abuse. Although it doesn’t excuse credit companies from mistreating black customers, the fact is that many of us often willingly enter into credit agreements foolishly with no serious thought of the long-term consequences.

If you still feel the need to keep an “emergency credit card,” that is different (even though that is not really necessary if you have savings); However, we must break this cycle of giving away our wealth to credit card companies while many of us continue to struggle.

Revolution to Revelation

This is a repost of words by a very dear friend of mine’s…LaNica Williams…And I thought I would share then with you…

Drastic times call for drastic measures. History proves this statement true to us time and time again. There is always a sudden call to action that results from something drastic or severe in nature, normally resulting from a negative situation.
Martin Luther King Jr. would have never needed to plan a boycott if drastic times didn’t call for drastic measures. Nelson Mandela would not have needed to fight against apartheid if drastic times didn’t call for drastic measures President Barack Obama would never have been elected president if drastic times didn’t call for drastic measures. There is something great to be said about those who answer the call that is birthed on the inside to fight against the wars on the outside. I can imagine that anyone who has been called to lead in the shifting of a paradigm or pattern had to first feel certain emotions on the inside of them that would want them to fight a battle that most would certainly think would never be won.
There are many people and organizations that are helping lead people to a new way of thinking. Whether you are for it or against it, someone is pushing it. There is no discrimination in pushing a certain agenda; all it takes is for one person to feel deeply and passionate about something enough to want to make a change. Sure, there will be many people who disagree, but odds are there will also be plenty of people who jump on the bandwagon and who are willing to put themselves on the line in the name of their cause, even if it’s not popular.
Healthcare reform was not popular, but there were just as many people for it as there was against it (contrary to popular belief). Gay marriage, civil rights, women rights, equal rights were not popular agenda items, but there were enough people that came together to fight for what they believed in to demand change until they got it. Opposition didn’t deter the true fighters, it made them fight harder. They didn’t get discouraged when other groups started forming to lead others to fight against their fight; they just had to increase their army to fight back harder. The wars in Iraq and Afghanistan are proof that when the going gets tough, the tough get tougher. The military didn’t back down when the Taliban started fighting back, they increased their numbers which increased their strength and their power.
Sure, not everyone can continue fighting to the end. Some people will lose hope; others will just get tired of fighting. There will always be a few that will lose interest or who will find something else more important to fight for. Yet, there will always be those who will fight to the end, no matter what the outcome will be. Imagine if people just stopped fighting because it didn’t look good before getting to the finish line. Comebacks wouldn’t exist. There would be no game won by the team that was losing by 40 points at the half if they didn’t show up to finish the game. Even though it looks bad, unless we stay in the race we’ll never win and will always be defeated.
A revolution is a sudden, radical, or complete change (-Merriam-Webster dictionary). A revolution is needed when something has got to change. A revolution is needed when there is absolutely no doubt that if something doesn’t change, things are only going to get worse. A revolution is needed when we get sick and tired of being sick and tired. I’ve had several revolutions in my life and I am sure that I will have a lot more the longer I live. Sometimes, the only way to get the results desired is to suddenly change who we are, the way we think or how we act. We can’t think about it, we must act! We can’t worry about what other people may say or think, we must act! We can’t wait until we have enough support, we must act! We can’t wait until we have all of the necessary resources, we must act! We can’t wait to lose weight, we must act! We can’t wait until we finish school, we must act! We can’t wait another moment, we must act!
The initial call to change/act happens inside of us. There is something on the inside that stirs a yearning for change. Some may call it intuition or a sixth sense. Others may think of it as their conscious talking to them. I like to say that it is a revolution caused by revelation: God revealing something to me that causes me to want to change suddenly. When God first started showing me what He desired for my life, I dismissed it because I wasn’t ready nor did I think I ever would be. The funny thing about God is He didn’t take my “no” for my final answer, nor did God force me to accept the revelation. The more revelations, the more I desired a revolution. The more God revealed to me, the more I was willing to change to get what God had in store for me. God didn’t show me fancy cars, a big house on a hill, nor a million dollars in my bank account. God did show me peace, happiness, joy, and contentment. Even though I received the revelations, it wasn’t until my revolution that I was able to receive what God wanted me to have. I could no longer wait for a revelation for my revolution, I had to act! I did not have everything I thought I needed, nor did I think I was good enough, but I had to act! I could not continue to make excuses; I had to act! I couldn’t wait one more year or one more day, I had to act!
I urge you to no longer ignore the call inside of you to act. Do not let another moment pass without your revolution to revelation. Faith is operating outside of logic. Drastic times call for drastic measures. We must not wait any longer, for if we do, we may lose the battle simply because we never showed up to fight.

How To Remember Passwords — And What To Do If You Can’t

Keywords, user IDs, account numbers, passwords that must contain both letters and numbers: the list of important login information we are required to remember is overwhelming indeed. Remembering increasingly complex and often-changing password combinations can be extremely difficult — and for some people, it seems next to impossible.

CreditCards.com spoke to memory experts Scott Hagwood, the first American Grandmaster of Memory who memorized 800 numbers in sequence, and Dr. Thomas Crook, author of The Memory Advantage, to find out how average users like you and me can remember our passwords and account numbers without writing them down.
Here are the seven tricks that they suggest :

• Create associations: Find a way to link the number you’re trying to remember with something familiar, like a birth date or the number of your favorite football player.
• Break long numbers into smaller parts: A typical person can only remember seven individual numbers at one time. So instead of trying to remember each number separately, lump them together. Instead of remembering 1-4-9-2, remember it as 1492 (and now you can employ the first tip as well and associate it with the year that Columbus sailed the ocean blue!).
• Look for patterns: This is a little trickier, but assess whether the numbers in a password add up to a memorable number or if there is some sort of other pattern. For 1492, we have an odd number/even number pattern.
• Learn actively: Say the numbers out loud at least three times. By employing your mouth and vocal muscles you will be able to remember the number better.
• Repeat it: Once you think you’ve memorized the number, repeat it on a regular basis so you won’t forget.
• Visualize the shape of the numbers: Whether it’s on your credit card, phone dial or a keypad, try to remember where the numbers are situated. Some may occur in an X-shaped pattern, for example.
• Convert numbers to words or images. Have the “1″ represent the letter “A” so the number combination spells something out. Using our 1492 example, it would spell ADIB. Not exactly a word that rolls off your tongue, but it can help.

These seven tricks are explained in more detail at CreditCards.com and are a good start for remembering important numbers and information, but with the increasing number of passwords that we need to remember you may want to look for a more high-tech solution.

A 2007 study showed that the average user has 6.5 web passwords that they use on a total of 25 password-protected accounts. Even in three short years, that number has likely increased as more users sign up for new social networking services, make more online purchases and do more banking online. “Nowadays, we have to keep probably 10 times as many passwords in our head as we did 10 years ago,” Jeff Moss, who serves on the Homeland Security Advisory Council told the New York Times in January.

With so many passwords and numbers to remember those of us who wouldn’t even come close to being a “Grandmaster of Memory” need a more high-tech solution to securely store our passwords. Thankfully, there are several ways to securely store your passwords and account numbers without taping them to the underside of your desk.

KeePass, a free password manager, was selected as the best password manager in a competition at Lifehacker.

There are several other good password manager solutions that make it easy to remember the important passwords you use. Unless otherwise noted these tools work with both Windows and OSX.

• Billeo: In addition to putting savings in your search results, Billeo will store passwords securely on your computer.
• LastPass: This tool not only stores your passwords, it can keep them in sync across multiple machines and mobile devices, and it’s a favorite of our sister site DownloadSquad.
• 1Password: Another password management tool which syncs your data across multiple machines including the iPad. This tool will also let you store credit card numbers, account numbers and documents securely.
• Account Manager for Firefox: Account manager will be coming to future versions of Firefox, but it is already available from Mozilla Labs for use.

Whatever you do, don’t keep your passwords on your computer or in your email as a plain text document that can be read by anyone. All of these tools encrypt your passwords and account information to keep it away from prying eyes. Using a password manager is a great way to be more secure online and makes it easier to avoid using the same password for every website you visit.

Credit Score 101: Pump Up Your Number

The lending landscape has changed dramatically during the past three years, but not this fact: Credit scores are one of the most important criteria lenders use to calculate how much you can borrow — and at what rate — to buy a home.

While interest rates remain near historic lows — 30-year fixed mortgages have averaged 6 percent or below for the past few years — qualifying to actually get those rates is more difficult than ever. “This is the most conservative mortgage underwriting environment since credit scoring became the guiding metric for writing mortgages,” says Guy Cecala, publisher of Inside Mortgage Finance, a Bethesda, Maryland-based mortgage research firm.

That puts recession-battered consumers in a tough spot: high unemployment has squeezed budgets and contributed to late payments and delinquencies, which hurts credit scores. At the same time, mortgages programs for low-scoring borrowers are fewer and far between.

These days, lenders want to see some of the highest numbers they’ve ever required. The three major credit scoring agencies — Transunion, Equifax, and Experian — score consumers on a scale of 350 to 850. The average American credit score falls around 690 to 700, according to both Cecala and Catherine Williams, spokeswoman for Money Management International, a Houston, Texas-based financial literacy and debt management company.

But the scores showing up on loans that actually get approved are a different story: Fannie Mae and Freddie Mac-backed conventional loans have an average score of 760. FHA loans carry an average score of 690 to 700. Practically speaking, Cecala says, you’d need 670 to snag an FHA loan (versus 620 to 630 during the boom) and at least 730 to secure a Fannie Mae or Freddie Mac-backed loan, which has been consistent for several years.

While it’s true that these loan programs are available to lower-scoring borrowers — FHA, for instance, is available to those with scores as low as 580 — that doesn’t mean they’re easily available, Cecala explains. If you’re on the 580 end of the scale, he says, “you won’t find many FHA lenders who will fund these.”

Your Credit Score Can Cost or Save You Thousands. Know Where You Stand.
Get Your 2010 Credit Score

How can you improve your score? Fortunately, those rules haven’t changed too much: Pay on time, always make at least minimum payment amounts, don’t max out your credit lines, and don’t run around taking every credit offer extended to you.

Catherine Williams Of Money Management shares these tips:

1. Know your scores. You can’t improve your scores if you don’t know what they are. You can get free credit reports once annually from all three of the credit bureaus (Equifax, Experian, Transunion) or via umbrella site Annual Credit Report. It’s worth finding out your numbers before sitting down with a mortgage broker, banker, or before diagnosing your own borrowing power using online calculators. (That said, if you’re impatient, a mortgage broker or banker can also pull your scores. If you sit down with one, don’t leave without getting these vital numbers.)

2. Are your scores above or below 650? If all of your scores fall below 650, that may signal some red flags or indicate that you need debt or credit counseling, says Williams. Depending on why your scores are at this level, it can take up to 12 months to raise them. “If they’re all below 650, there’s no six-week cosmetic fix,” Williams warns.

3. Is one score notably lower than the others? Attack the lowest number first. Scoring agencies provide general information about how you hit your numbers and your problem areas. Examples: Late payments, using too high a percent of your open lines of credit, applying for too many new lines of credit, or possessing too many recently-opened lines of credit. Some factors are easy to influence (paying on time, lowering overall outstanding balances), while others (such as how recently you opened a line of credit) are beyond your control and may require the passage of time.

4. How “old” are your sins? If you need to improve your score, take a look at when your behavior may have dragged it down and how recently that was. If you had a period of late payments or other bad behavior and it’s at least two years behind you, you may be able to make the case that you’re a better borrower now and temporary circumstances got in the way, says Catherine Williams, the debt counseling advisor.

5. Curb your outstanding balances. Say all of your credit cards give you a combined borrowing power of $10,000. It’d be great if you had less than 20 percent ($2,000) of that in use, or at least no more than 40 percent ($4,000). If you’re holding on to cash at the expense of paying down debt, keep the 20 percent rule in mind and try to lower outstanding balances.

6. Always make minimum payments–and then some. It may sound like common sense, but some borrowers focus all their effort on paying down one line of credit at the expense of others. While it’s fine to focus on whacking the highest-interest or biggest-balance line first, always make sure you’re paying at least the minimum on your other lines while tackling The Big One.

7. Don’t screw up a good thing. So you’ve got a decent score–maybe it’s 690, or even over 700. If you want to hang on to it, do not take out any new lines of credit, pay all your accounts on time and with at least the minimum payment, and avoid any major purchases that would bump your use of credit lines above 20 percent of your combined available limits.

How Foreclosure Impacts Your Credit Score

By Les Christie

NEW YORK (CNNMoney.com) — If you’re delinquent on your mortgage, your credit score will suffer. Everyone knows that. The question is, by how much?

Until recently, those answers were hard to come by. Credit bureaus were uncommunicative about expressing, in points, just how much impact different foreclosure types of mortgage delinquencies have on scores.

Recently, Fair Isaac, which developed FICO scores, pulled back the curtain a bit, revealing some estimates of point-score declines following mortgage delinquency problems.

Here are the average hit your credit will take:

30 days late: 40 – 110 points

90 days late: 70 – 135 points

Foreclosure, short sale or deed-in-lieu: 85 – 160

Bankruptcy: 130 – 240

To come to these figures, Fair Isaac created two hypothetical consumers, one who starts out with a fair-to-middling score of 680 and the other with a very good one of 780. (FICO scores range from 300 to 850.)

The hypothetical person with the 780 FICO has 10 credit accounts versus six for the 580, plus a longer credit history, lower utilization of total credit limit and no missed payments on any account. The other consumer has two slightly damaged accounts. Neither have any accounts in collection or adverse public records.

Notice that for both borrowers a single one-time black mark results in steep drops, but it is when they fall further behind that things get really harsh, according to Craig Watts, a spokesman for Fair Isaac.

“The lending industry tends to regard an account differently when it has become 90 or more days late,” he said, “The likelihood that consumers will resume paying their overdue obligations drops off significantly after the delinquencies have reached 90 days.”

One reason credit companies were so closed-mouthed is that they often can’t definitively state how much each delinquencies will affect scores because there are too many variables.

Some borrowers will fall much more steeply than others for the same payment problem, according to Maxine Sweet, vice president for public education at Experian, one of the nation’s main credit bureaus.

“If you picture someone who has just one mortgage and one other credit account versus a mature credit user like me with 15 accounts, if they miss one payment that would impact their scores a lot more,” she said. “For me, one missed payment would just be a blip.”

The point loss also depends on the borrower’s starting point: People with very high credit scores have more to lose than low-score borrowers; the impact of a single blemish on an 800 score is more than on a 500. Of course, it just gets worse when you face foreclosure.

Mortgage borrowers can lose their homes three basic ways: a foreclosure; a short sale, where the home is sold for less than than is owed and the bank (generally) forgives the difference; or a deed-in-lieu, in which the borrower gives back the property and the bank again forgives any unpaid balance.

Sweet said credit bureaus generally slash scores equally for those three resolutions to someone losing their home. The important factor, she said, is that “it’s reported that you paid less on a settled account.”

Some borrowers may think that because they never missed a payment, they can “walk away” from their homes with relatively little impact on scores. Not true. “When a deed-in-lieu or short sale is reported as a partial payment, it’s treated as a serious delinquency,” Watts said, “just like a foreclosure.”

Even if borrowers made payments faithfully for years before short selling or doing a deed-in-lieu, their credit score will still take a hit. The total decline will run about 85 points for the 680 score borrower to as much as 160 for the 780 score.

Mortgage debt, combined with other financial problems, can send borrowers into bankruptcy, the worst thing that can happen to your credit score.

The effects are long-lasting, according to Sweet. In a Chapter 13 bankruptcy, which involves partial repayment over several years, the stain will take seven years to remove. A Chapter 7 bankruptcy, which involves liquidation, takes 10 years to get over.

It’s gonna cost you

Absorbing a big credit-score hit can make many transactions more costly. It’s not just paying more for credit card debt and auto loans, insurance can cost more as well.

The average savings for someone with a good versus mediocre credit score is about $115 a year for auto insurance and $60 for home, according to Loretta Sorters, of the Insurance Information Institute.

A low credit score can even make it harder to rent a home because landlords often use credit scores to weed out prospective renters.

Despite the problems a poor credit score can cause, Experian’s Sweet recommends that people who are in financial dead ends, like totally unaffordable mortgages, it’s better to recognize that and cut your losses quickly; don’t prolong the problem.

“You need to do what you need to do to get your finances back in order,” she said. “Don’t worry about your credit score.” 

//

Don’t Foreclose on Your Future By Dave Ramsey

Today’s housing market is facing two big problems: a spike in foreclosures and millions of “underwater” mortgages—homes with mortgage balances that are higher than the homes are worth.

Compounding these issues is the phenomenon of “strategic” defaults. That means a homeowner who can pay his mortgage stops because he sees no reason to continue paying for an asset that is worth less than the debt it carries.

A 2009 study said about 25% of foreclosures are so-called “strategic” defaults—that translates to 700,000 of the 2.8 million foreclosures initiated in 2009.

Is Walking Away a Strategy?
Is it possible that many people are so short-sighted about the investment they’ve made in their homes?

Let’s say a homeowner bought his home at the peak of the market in 2006 for $220,000, the median home price that year. We’ll say he put 5% down and got a 30-year mortgage for $209,000. Now, fast-forward to 2009, when the median home price dropped to $173,000.

If this is a fixed-rate mortgage at 6% interest, the balance at the end of 2009 is $198,000. If our homeowner sells, he’s lost his down payment plus four years of principal and interest payments, a total of $71,144, and he still has to make up the $25,000 difference between the selling price and the balance of the mortgage.

$209,000 (original mortgage amount in 2006)

$198,000 (mortgage balance in 2009)
-$173,000 (home value in 2009)
$25,000 (difference between the 2009 sell price and mortgage balance)

The “wisdom” of the strategic default is to take the $71,144 loss and save yourself the $25,000 hit by walking away instead of selling.

Time for a Reality Check
Maybe, in some alternate reality, this is “wisdom.” That alternate reality would have to be based on stagnant home values and banks that don’t come after you for what you owe them. Let’s try a true reality check:

Reality #1 – Your home is an investment, and any investment—even real estate—will go up and down in value. Walking away from your mortgage now is the equivalent of selling your stock portfolio at the bottom of the market. You guarantee yourself a loss if you don’t stick with your investment until values come back up.

Reality #2 – Home values will recover. If our homeowner sticks it out and stays in his home, he’ll be back to even in five years, based on a conservative 5% rate of appreciation. In less than 20 years, his home will have doubled in value. That is wisdom!

Reality #3 – The bank is not letting you off that easily. Lenders are covered up with foreclosures, so while homeowners who walk may not hear from the bank right away, they are by no means off the hook. Some banks will pull credit reports to see who is current on their other payments to determine if a default is “strategic.” Banks will go to court to garnish wages or hijack tax refunds—whatever it takes to get what they’re owed.

If you are truly unable to make your mortgage payments, you still should not walk away. You signed the contract, so you’re under a moral obligation to pay. If you truly can’t pay and keep food on the table, then it’s time to talk with the bank about a possible short sale.

For expert help to buy or sell a home, work with one of Dave’s real estate Endorsed Local Providers. Your ELP will be able to advise you on your local market and help you buy or sell your home at the best price.

FICO 8: The New Credit Score

Your credit score it is one of the most critical factors in your financial life and determines if you will be approved for a loan or line of credit. A credit score is a number developed by the Fair Isaac Corporation (FICO) that lenders use to rate potential customers in determining the likelihood that a customer will pay their bills on time.

A credit score determined by using five main criteria as defined by MyFico.com: your payment history (35%), the total amount owed (30%), the length of your credit history (15%), new credit (10%), and types of credit used (10%).

Payment history shows the history of how you paid your bills either on time or late but unfortunately does not show if your bills were paid before the due date. Amounts owed show the total amount of debt you owe. The length of history indicates how long you have had credit. If your credit history is 2 years or less this could lower your credit score.

New credit indicates how many times you have applied for new credit. If you open too many new accounts in a short period of time this may lower your credit score. The types of credit used indicate the types of accounts you have such as revolving or installment accounts. Revolving accounts are usually credit cards and installment accounts are usually mortgages, auto loans, etc.

The FICO 8 credit score which was developed in 2009 ranges from 300-850 with 850 being an excellent score and 300 being the worst score. The FICO 8 uses the existing 5 factors from the original FICO score plus 4 additional ones: high credit card usage so keep credit card balances at 20% or below the credit limit; isolated late payments do not weight as heavily on your credit score as multiple late payments; authorized user accounts are factored into your credit score; and small balance collection accounts with a balance of $100 or less are not factored into the credit score.

Your credit score varies from each credit bureau because each agency collects their own data from various sources and may collect different data for the same account. Your score can vary anywhere from 5-80 points between the three credit bureaus.

Your credit score changes due to updates to your credit report which changes based on account activity such as balance changes or additions to your credit file (i.e. new accounts or deletion of older negative accounts more than 7 or 10 years old). As a result, you may see a difference in your score from one month to the next.

If you plan on purchasing a large item such as a car, house or investment property, pull your credit yourself to see if any negative items appear so you can fix those issues before applying for a loan. Harrine Freeman Owner, H.E. Freeman Enterprises Personal Finance Expert, Speaker, Author of How to Get Out of Debt: Get an “A” Credit Rating for Free www.hefreemanenterprises.com