Credit Scores: A Plain-English FAQ

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Your credit score is a three-digit figure that has the power to control a huge number of areas of your life – yet the realities of credit scoring remain obscured by myth, confusion, and lack of transparency. This is concerning given the power that credit scoring has, and can mean that a vital component of the overall management of your personal finances is deeply misunderstood.

In an effort to shed some light on the realities of credit scoring, below, we’ve put together a list of the most common questions people tend to ask about the practice, along with the answers you need to know. So, without further ado…

What is a credit score?

A credit score is a three-digit number that is used as a reference point for your personal financial management. Credit scoring is popular with banks and other financial institutions as it allows for a quick, at-a-glance assessment of the way you manage your finances, and has become the primary method by which applications for credit are assessed.

Who decides a credit score?

You may be surprised to learn that you do not have a definitive “credit score”; the number can vary between companies, though they will usually be fairly closely aligned. The companies that compile your credit scores are known as credit bureaus, the best-known of which are Equifax and Experian.

Credit bureaus effectively act as a third party between you and the companies you hold a financial history with. If you apply to a new lender, the lender will “ask” a bureau for your credit score, and then interpret that score based on their own criteria.

So you can have a credit score with a credit bureau you’ve never interacted with?

Yes. Credit bureaus are not financial institutions in and of themselves, and you don’t register an account with them or apply for their products. Their role is to act independently, assessing your financial affairs and then providing a quick summary of that assessment – as your credit score – when you apply to a new lender.

What information do credit bureaus hold?

  • Your personal details, such as your name, phone number, and address
  • Any existing debts you have
  • Your existing financial products, such as bank accounts, loans, and credit cards
  • Information on your utility bills, such as whether they are well-managed or in default
  • Your current and past income
  • A history of defaults against your account; for example, if you have missed payments on your credit card in the past, the credit bureau will know this
  • Details of any financial relationships you have with companies, such as your cell phone contract
  • Details of any personal relationships you have that may influence your finances, such as someone you share a home with

How is a credit score created?

The exact methodology is something of a trade secret, but credit scores are essentially formulated by assessing your income, your existing debts, and your history of financial management (such as whether you have any defaults on your file) to produce a number that is designed to be reflective of your creditworthiness.

What is a good credit score?

With credit scores, the higher the number is, the better; your score would need to be over 670 is considered to be ‘good’. The current US average credit score is 687.

What is the impact of a bad credit score?

If your credit score is ‘fair’ or lower, then you may find that you struggle to obtain financial products such as loans and credit cards. However, there are exceptions to this, and some specialist companies will offer lending to those with lower credit scores, and you shouldn’t have too many problems finding bad credit loans near you with a little searching. Similar options are available for credit cards and, to a lesser extent, mortgages, though this may depend on the amount you have available for a deposit.

Outside of the financial implications of a bad credit score, you may also find that a bad credit score influences your ability to find jobs or even rent an apartment. The use of credit scoring to assess these kinds of applications is rather dubious but is nevertheless a reality for the moment.

Can bad credit scores be improved?

Yes, to an extent.

You can improve a bad credit score via a number of different methods, but it is important to note that these methods cannot fix a bad credit score – they can just improve it from its base starting point. If your credit score is being impacted by signs of previous financial issues – such as defaults or late payments – then there is relatively little you can do to ‘fix’ the score in the short term.

So these signs stay there forever?

Thankfully not; after six years, all defaults and similar issues will be automatically removed from your credit file and will no longer be considered when calculating your score.

There are also some suggestions that defaults tend to lose their power over time, though this is unconfirmed, and may be more hearsay than anything. However, many people have found it to be true, so it’s worth knowing: a default that has been sustained in the past 12 months may impact your score more dramatically than a default sustained five years ago would.

Can I challenge my credit score?

If there is information on your credit score that is incorrect then yes, you can challenge this with the credit bureau who has recorded the inaccuracy.

However, you cannot challenge information that is correct; nor can you ask for defaults that have been fairly applied to be removed. Credit scoring is used by companies as a way of protecting themselves when lending; as a result, there is a huge onus on credit bureaus to provide a genuine representation of your financial management, so there’s no way to persuade a bureau to remove less-than-ideal information from your file.

In conclusion

By paying close attention to your credit score, protecting it, and – if necessary – improving it, you can be confident that a crucial element of your personal finances is well under control.

How to Manage Millennials: 8 Ways to Do It Right

A recruiter must never be tired to read and research about the millennials; the majority of your employees are a part of Generation Y. While some view them in a negative light, they can be pretty productive and over-achieving when handled right.

Millennials believe they are above their jobs. After working from 8-9 hours a day, they will focus on their hobbies and leisure once they step out your office. Allowing your Millennial employees to have a work-life balance will refuel their energy and recharge their productivity battery.

Millennials love to have multiple goals. They spend a lot of money on traveling to focus on themselves then spread that energy to the people around them.

Start by providing a flexible work environment. This means that you trust them enough to manage their time properly and deliver on their tasks with flying colors.

Infographic by Guthrie-Jensen.

Career Evaluation: What Are You Chasing?

Stop for a moment.

Whether you love, hate or just accept your job – what does it represent?

Since work consumes such a large part of our lives it should serve a purpose.

Finding the perfect job isn’t going to make you “happy” for long. That’s not saying you can’t stay in one profession for a while and enjoy it, but chances are on bad days your mind wanders to other options.

A career is never meant to define you.

When casually asked, “what do you do?” it results in three reactions: proud, ashamed or blah.

The better question to ask yourself is: what are you chasing?

For me it’s lifestyle. As a father and entrepreneur I want my work to provide the opportunity to control how I spend my time. Sure, I’d like to make more money (who doesn’t), but if the tradeoff is I’m rich, but can never see my family it’s not worth it.

Consider your life stage. Don’t default simply to age.

There are people in their 20’s married with kids and others in their 40’s single.

Values don’t change much over time, but priorities do. Added responsibility like being a parent will do that to you.

Feeling stressed isn’t fun, but tension also promotes growth. Changes whether expected or unexpected will challenge you. Take time to relax, but too much of it can hurt you.

When it comes to evaluating where you are in your career, remember to stop comparing yourself to others and look at it in “chunks.” Each experience prepares you for the next so no matter where you are take what you learned in the past and utilize it to propel you into the future.

Chasing is healthy in moderation.

Ambition leads to drive and motivation.

But what’s most important is to define your career path based on your standards alone.

Those who are focused are trying to win the race, not consumed with beating others.

Millennials Are Investing Physically

According to this article, Millennials are spending an insane amount to stay in shape.

Traditional gyms and fitness centers aren’t up in membership; instead there is a demand for more community-based, functional and wellness centered classes.

The definition of staying is shape has changed too. Reducing stress, being more productive at work and mental health are the main benefits.

Speciality classes are more expensive than working out by yourself at the gym, but it’s also more engaging, fun and keeps you accountable for progress.

There’s always been a huge push for professional development in your career, but investing in your body may outweigh anything you can learn from a book/online.

Take for instance young moms. Their ability to bounce back to pre-pregnancy form is exceptional. Groups like Stroller Strides, SoulCycle and CrossFit become even more attractive for lifestyle goals.

With more information comes better efficiency. Millennials are realizing taking care of your body early is the best prevention from illness/injury. Being proactive is a mindset that prepares you best for the future and Millennials are embracing it.

Like anything else trends come and go, so this fitness craze can change over time, but for now businesses should be aware of it and adapt to health, wellness and athleisure as a way of life.

What We Really Do In January

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January is a bit of a let down if we’re honest. There is so much hype surrounding December and even November, with the holidays and New Years. And when we reach that time where we cross over to a New Year, there are so many people saying New Year, New Me. Setting resolutions and promises to change and do new, positive things. Unfortunately, those well-meant promises aren’t easily kept. Changing habits or even making new ones takes a lot of willpower. But just because you don’t immediately accomplish every little thing within those first few weeks of the year doesn’t mean that you have failed and should stop trying. What we really do in January doesn’t mean that you won’t accomplish what you set out to do.

Money

Following the holiday’s everyone is scrambling trying to sort out their finances. So many people use their savings to pay for Christmas, and so when it comes to the New Year, their funds are low. Rather than trying to push those minimal finances to stretch to pay for all those new activities you wanted to get involved with, wait a month and give your savings account a chance to gain a little of what it has lost. Besides, most places put up their prices in January purely because so many people sign up this month. So when you get to the end of the month and realize that you haven’t started going to the gym, or haven’t had the money to start eating clean yet, don’t worry.

Normality

Throughout the holiday’s normality goes out of the window. Following Thanksgiving, the build-up to Christmas is a blur of shopping and visiting. Christmas day is all about eating rubbish from the moment you wake up, afternoon naps, and late bedtimes. Then you have the lead up to New Year’s Eve where no one really knows what day it is. So January is a shock to the system as you try and get back to normal. So when you look back at the month, if all you have achieved is getting your sleep pattern right and are eating at the proper times, then consider it an accomplishment.

Set Up

For many people, that first week of January is a ‘set up’ week. Where you call al the places, sign up to all the things, and buy in all the stuff you need to do the things. You come up with ideas and plan how to get them off the ground – if you want to read more on that, you can click here. And then it gets to the end of the month, and you realize you haven’t done much of anything. And that is because you are living through point number two with a budget of number one. Again, see this month as a stepping stone; you have accomplished part of what you have set out to do while getting back into a normal routine and trying not to overspend. That’s an accomplishment.

Why College Students Don’t Get Enough Sleep + Ways To Improve Sleep Habits

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The National Sleep Foundation recommends that college-aged students get between 7-9 hours of sleep every night. Yet, one in three college students report having trouble sleeping as well as not getting the recommended amount of sleep each night. Although it may be stressful balancing schoolwork, social lives and jobs, the amount of sleep we get each night should not suffer because of this.

Below are some common issues that many college students face that can disrupt our sleep patterns, along with ways to improve these conditions.

Anxiety

Mental health has become a critical issue on college campuses. In fact, a study revealed that anxiety is the leading mental health issue college students face. The National College Health Assessment Survey reported that 15.8 percent of college students have been diagnosed with or treated for anxiety. The same survey found that 21.9 percent of students claimed that anxiety had negatively affected their academic performance whether it was through getting a lower grade on an exam or project, receiving an incomplete, or dropping a course. A college student must balance many things all at once including midterms, friendships, relationships, and careers. For many young adults, this is the first time dealing with significant levels of stress and can be extremely overwhelming, bringing on anxiety.

Anxiety can cause sleep problems or make existing sleep problems worse. However, getting a good night’s rest, especially as a college student, needs to be a priority. In order to reduce your anxiety and get the sleep your body needs try meditating. Focus on your breathing and visualize a serene environment.

Busy Mind

Mental over activity is becoming a major issue for people, especially college students. We’ve all had those nights where it’s impossible to get our brains to slow down long enough for us to fall asleep. For busy college students these nights can happen more frequently. When you’re juggling so many different things at once, it can often feel like there is not enough time in the day to get everything done. This leads to many students working on schoolwork or participating in extracurricular activities up until bedtime. While this may not seem like a big deal, it’s actually a huge issue because sleep isn’t as simple as turning a switch off/on. Our bodies need time to unwind and dim our minds in order to prepare for sleep.

If you’re having trouble slowing your mind down at night, allow at least one hour before bed to wind down. This will not only help create closure for the day, but it also allows your brain to begin the process of shutting off. Developing a pre-bedtime ritual is a great way to help you and your mind wind down. Try reading, journaling, or even sketching and don’t forget to avoid electronics during your wind-down time.

Discomfort

College dorm rooms come with their own set of sleep destroyers. One of the many reasons that college students have trouble sleeping in their dorm rooms is that their beds often have many other uses besides sleeping — including studying, doing school assignments, watching TV, and even hanging out with friends. Remember that although dorm rooms may be small, your bed is not your living room. You want to associate your bed with sleep so that when you see it your body craves sleep. Try to study at your desk or in the library and hang out with your friends in common areas. Another issue in your dorm room that may be causing problems with your sleep patterns is your university-issued mattress. Most of these mattresses have been used for years and may be too hard or lumpy. A poor quality mattress can cause discomfort and even body pains that can be distracting and prevent you from getting a good night’s sleep.

While you may not be able to go out and buy a new mattress for your dorm room, a mattress pad, comfortable bedding, and good sleepwear may help make it more comfortable. A soft and supportive pillow will also help add some much needed comfort to your bed.

Noise

Living in close quarters can make for a lot of noise. Whether it’s your roommate watching their favorite TV show at a high volume or your neighbors talking loudly in the hallway, noise can be extremely distracting when it comes time for bed. Unfortunately, while most resident halls have designated “quiet hours”, not all residents respect them. If your roommate and neighbors are continuously loud, especially during quiet hours, ask them to quiet down. It may even be helpful to discuss each other’s schedules and set guidelines to make sure everyone can sleep, study, and enjoy their time in the dorms peacefully. If that doesn’t work, try earplugs or white noise to help cover-up noises. Fans and sleep sounds are both great ways to cancel out noise.

The New Years Resolution Alternative

January is the perfect time to set New Year’s Resolutions only to see them fail by February.

The motivation to accomplish lofty goals at the start of the year disappears quickly.

It’s almost as if setting New Year’s Resolutions is a recipe for disaster.

Why is that?

The feeling you have after hearing a motivational speaker is the same as the beginning of a New Year. Inspiration is fickle.

Instead of setting New Year’s Resolutions, try creating new habits.

Habits are to goals as your journey is to the destination.

As an instant gratification-based society goals are sexier because you either achieve them or you don’t. But the downside of that is you’ll eventually fail. Once that happens the chances of you setting another goal decreases.

Habits are actually more controllable. They are based on effort, not results.

While goals depend on some variables you can’t control, habits are completely in your hands (take note Type A people!)

For example weight loss is a popular New Year’s Resolution (goal), but the equivalent habit is working out 3 – 5 times per week. People lose weight at different paces, but going to the gym multiple times a week is something you can track.

Most goal tracking apps for your smart phone are actually disguised as habit trackers. It makes complete sense because habits are much more manageable.

So this year instead of having New Year’s Resolutions figure out what habits will get your desired goals and set those instead!

Top Tips For Investing In Your 20’s

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Everybody knows that investing your money is sensible if you want to have a healthy retirement pot. But you don’t need to worry about that until you’re getting close to retiring, surely? You could wait, but if you think about it, what real reason do you have to delay? The earlier you get started, the more money you can save up. Starting in your 20’s also means that you don’t have to put as much money into investments each month. When you’re young you probably don’t have much experience with investments so it can be a little daunting. Don’t worry though, just follow these simple steps and you’ll realize that investing doesn’t have to be that hard.

Get Some Help

This is the number one most important thing to remember. You can do all the research you want but you still won’t be an expert. If you make poor investment choices you’ll lose everything so it’s always sensible to get help from a professional. Hire a good broker that can give you advice on the markets and tell you where your money is safest. Check out this tastyworks review to get a better idea of what help they can offer you. It is possible to make investments on your own without the help of a professional but it’s not worth the risk.

Understand The Power Of Compound Interest

When you put money away and it earns interest, the rate at which that money grows will get faster and faster as the interest compounds on itself. If you started investing in your 30’s, you’ll make significantly less money than you would have in your 20’s because of that interest. The earlier you get started, the more money you stand to make and even a few years can make such a huge difference.

Clear Debts First

Thinking that investing is the solution to all of your problems is naive. It can help you to build wealth from a young age but you need to think about your overall financial health as well. If you’ve got a load of student loan debts or credit card debts, all of that money you build up is just going to go into clearing them when you’re older. Before you start thinking about putting money into an investment pot, get all of your other financial business in order as well.

It’s also important that you get a handle on your spending habits as well. If you’re reckless with your money then you won’t have enough spare cash to put aside each month.

Increase The Amount Gradually

When you’re younger, you’re likely to be earning a fairly low wage. If you put too much away for investment you won’t be able to save for a car or a house or anything like that. When you first get going, start off with a small amount. Then you can increase the amount gradually, in line with your income as you start to earn more. That way, investing isn’t going to make life difficult for you.

Investing isn’t just for people in their 40’s that are earning a good wage. The earlier you start, the better.

Stop Waiting Until You’re Ready

If you’re waiting until you’re ready to start a project, stop.

Technically you’re never “ready.”

There’s always more research to do…

There’s always more testing to do…

There’s always more planning to do…

Problem is, that’s what’s stopping you…the failure to act.

Take advice from someone whose started a number of projects that haven’t turned out successful: you miss 100% of the shots you don’t take.

Just like hurt is inevitable in relationships, failure is bound to happen at some point in business/your career. Deal with it.

What’s helpful to know is by NOT doing anything you’re making a choice:

Every action or inaction you take has a cost. Most of the time the cost of doing NOTHING is more painful.

Use the analogy of going to the gym. The hardest part is getting there, but once you arrive rarely do you regret it. The feeling of accomplishment after completing a workout should overpower not feeling like going.

Today monetizing a passion doesn’t mean quitting your job to start a business. It includes creating a side hustle. If you think of your career as a financial investment, doesn’t it make more sense to diversify than go all-in on one role?

Freelancing will soon pass up full-time employment in the job market. That means multiple streams of income is the future of survival. If you currently don’t love selling, get used to it.

You and I value mentors because of their experience. Without starting something you lack it. Trial and error is still the best teacher, so in order to grow stop thinking and start doing.

That’s how every successful company got to where they are now: they started.

Dreaming is overrated.

Execution is what counts.

3 Reasons Why Millennials Invented Friendsgiving

Friendsgiving officially became a “thing” on November 26, 2009 (according to the Urban Dictionary).

Scoffed at by older generations, the origins behind this growing annual event make sense. Here’s 3 to start:

1. Extra Feast 

Any reason to gather around food is a good one. Traditionally celebrated on Wednesday, the day before Thanksgiving, it means at least back-to-back feasts before the weekend’s leftovers binge. Food is a trend that isn’t going anywhere. Potlucks means more people, more choices and more food. We live in a society that lauds gluttons and this just adds to the once a year madness. On top of that Instagram worthy shots are taken and shared with friends alike. Hard to not support it.

2. The New Definition Of Family

Thanksgiving does include foods we love, but it can also invite relatives we don’t. Besides some people who are forced to work on Thanksgiving, holidays can bring family conflict and uncomfortable encounters to a home. Friendsgiving is the alternative to extended family gathering by replacing it with people you actually want to be around. In defense, Friendsgiving isn’t meant to take the place of Thanksgiving, rather add a new event for those who may not have family close by, can’t make it home in time or just plain love events. The reality is nuclear families are disappearing so Friendsgiving is an adaptation to the changing times.

3. Lifestyle Fit

Millennials are getting married and having kids later in life. That means Friendsgiving is a more “adult” gathering than most. Insert alcohol and rowdiness to enhance pleasure, not numb it and problem solved. Millennials do live at home longer, so it’s not an escape from family rather a social feasting of sorts. Young professionals can and should take credit for creating this festivity. Plus since it appears on social media clearly it exists.

All jokes aside there’s definitely a method to the madness. Friendsgiving is about friends and food. Two of anyone’s favorite past times rolled into one annual event. Let’s give thanks.