Top 5 Essentials for Being Financially Fab
The Financially Fab lifestyle involves being confident, making wise decisions, planning for the future, and enjoying what you have now. Those skills are acquired overtime, and they start with a solid foundation. To set up that foundation, this week’s blog begins a 5-post series about the Top 5 Essentials for Being Financially Fab. Each week, I’ll post another part of the series. You can join the conversation by adding your personal stories, asking questions, or making comments.
The Top 5 Essentials Are . . .
- Know your credit score—the bank does, you should too!
- Track down your cash
- Knockout fees
- Save!
- KISS – Keep It Simple, Stupid
WEEK 1 – Know Your Credit Score—the banks does, you should too!
Your credit score is revealing!
- Why is your credit score important? It’s the financial equivalent of someone knowing your weight and dress size—no, not the weight listed on your driver’s license—your real weight. If you don’t already know your credit score, you should. The banks do. Your credit card company does. You should too!
- Banks use your credit score to rate how likely you are to repay credit. The higher your score, the less risky you seem, and the lower your interest rate. The information complied to develop the credit score is contained in your credit history, also called a credit report.
What’s credit history?
- Your credit history lists information about your current credit accounts (loans, credit cards, etc.). This includes whether you’ve missed payments or paid late, the number of accounts, the maximum limits, how much is owed, and other details. I told you it was revealing! The difference between having a higher or lower credit score can hit your wallet hard–by affecting how much interest you pay. If you have a higher credit score, you can pay less interest for the same amount of credit. Just check out the example below. Interest rates vary with the economy and individual circumstances, and the example below uses current rate information.
Imagine that you take a spring break trip and pay for travel, hotel, shopping, and entertainment with your credit card for a total of $700. You pay only the minimum required, $20, until it’s paid off.
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Low Credit Score – (from 581 to 660)
| Annual Interest rate | 20% |
| Time required to pay trip | About 4 years and 5 months |
| Interest paid | $360, over 50% of the $700 trip cost |
| Total cost with interest | $1,060! |
You’d be paying over $1,000 for a $700 trip. What?! $360 dollars extra!
Excellent Credit Score – (741 and above)
| Annual Interest rate | 10% |
| Time required to pay trip | About 3 years and 6 months |
| Interest paid | Only $132, paying 63% LESS with a better credit score |
| Total cost with interest | $832 |
The 1st essential to being Financially Fabulous is figuring out your credit score. Once you know what it is, you can start avoiding those high interest rates and stop throwing money at credit card companies and banks.
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Act Now – Get Your Score!
Everyone with credit has a score. Find out yours! There is only one official source for your FREE credit report, www.annualcreditreport.com. The only official source for your credit score is www.myfico.com. You can also scroll over the links in the top right column of this page for more information about both websites.
The banks know your credit score. If everybody else knows the number on the scale, the real number, you should too.
Share your experience. How did you feel after looking at your credit score? Were there any surprises in the credit report?
Financially Fab 