Chapter 1: Your Financial Checkup Flashcards
What are some ways you can boost your credit score?
Check your report for accuracy.
Pay all bills on time.
Be loyal if it doesn’t cost you. Closing old accounts and opening a bunch of new ones generally lowers your credit score.
Limit your total debt and number of debt accounts.
What are some steps in correcting a credit report?
Write or call the creditor to correct the information, the credit bureau should be able to tell you how to reach the creditor, call then follow up with an email. You can also dispute errors online directly with the agency.
Keep records of the conversation, retain the contact info of the representative and follow up with them. Bureaus are required to respond to a request to fix a credit error within 30 days, and if not, then the credit bureau must then remove the derogatory item. Otherwise, you can add a 100 word explanation to your credit file.
Who are the major credit bureaus?
Equifax, Experian, TransUnion and FICO (Fair, Isaac and Co)
Why is credit important?
To get approved for a loan someday with low interest rating. Lenders use this information to determine how responsible you will be in paying back the loan. The higher the score, the better. This also puts you in a better position to negotiate.
What is credit?
A credit report is your credit history, and a credit score is a three-digit score based on the information of the history.
Why is your saving rate important?
your savings rate is one of the biggest factors impacting whether you will have enough money to last through your retirement years. A higher savings rate means you’ll either be able to retire earlier or have more money during your retirement.
How is your savings rate calculated?
You can calculate, every month for a year, the amount you saved by your monthly gross income and multiply by 100. This will give you your savings rate percentage. REVIEW TABLE.
What is your savings rate?
Savings Rate = The % of disposable income that you save. The amount of what you save out of your free income, in percentages.
Why net worth is more important than income?
Net worth is different than income, since we don’t necessarily keep every dollar we make. Instead, we buy, borrow and make investments with money, and the total value of our properties and cash goes up and down with time. Your net worth is, therefore, a big-picture way to measure your overall financial health.
Why is Net Worth important?
When calculated periodically, your net worth can be viewed as a financial report card that allows you to evaluate your current financial status and can help you figure out what you need to do in order to reach your financial goals.
What is the difference between Social Security and Pension Plans?
When you work, your employer pays into Social Security. Pension plans are typically funded by employer contributions and sometimes employee contributions. Social Security is funded by payroll taxes on workers.
What role does personal items have in net worth?
Personal items have some value, but don’t count as assets as you won’t likely sell them later for financial gain or personal goals like buying a house, also these items depreciate over time. They’re only real assets if you’d be willing to sell them and use the proceeds toward one of your goals.
Define Net Worth
Assets - Liabilities. Calculating Financial Assets - Financial Liabilities = Net Worth.
Define Financial Liabilities
Everything you Owe. People accumulate debts when their expenditures exceed their income (student loans, credit cards, medical and others). All these together is the grand total of what you owe.
Define Financial Assets
Everything you own. Access your checking/savings, investment account records, including retirement accounts. Include a home that you expect to sell or rent out - They’re only real assets if you’d be willing to sell them and use the proceeds toward one of your goals.
