Everyone makes mistakes, or so my mother tells me. But when it comes to making mistakes with your money, it can cost you.
Avoid expensive mishaps by being in the know, particularly when it comes to your credit score, home loan, and rainy day fund.
1. Ignoring Your Credit Score
Your credit score has never been as important as it is now. Its not just about qualifying for the best interest rates and terms on credit cards, auto loans, private student loans, and home loans anymore. Its about qualifying at all.
For example, just a couple months ago, you needed a 580 credit score to qualify for home financing. Now,your score needs to be north of 620. And thats just to get your foot in the door. To qualify for the best mortgage interest rates and terms, youll need a 720, according to Bob Walters, chief economist forQuicken Loans.
Another common money misstep is credit score procrastination. If you wait until youneed to borrow money to get up to speed on your credit, it may be too late. Making big improvements to your credit score can take many months depending on your situation.
Luckily, its never been easier to access your credit. With new sites like Quizzle.com, you can get your hands on yourcredit report andscore for free, no strings attached. Plus,credit improvement tools are now available online to help you make improvements so youre in a good spot should you need to apply for financing.
2. Neglecting Your Home Loan
If you had $100,000 to invest, would you monitor your investment? Would you check in regularly to make sure your money is in the right place? Would you consult with a financial adviser to update you about market moves and new investment opportunities?
If youre like most Americans, your home is your largest investment. So treat it that way! If youre not into monitoring daily mortgage rates,find a trusted home loan expert who will do it for you. Orsign up for free Rate Alerts that automatically notify you when interest rates dip. Or usehome loan comparison tools that will show you how your mortgage stacks up against other available loan programs.
By being in tune with your home loan, youll know when its the right time to refinance. And refinancing can potentially help you to achieve greater financial flexibility and freedom with lower monthly payments, different loan terms, high-interest debt-relief and cash-out options.
3. Ill-Preparing for a Rainy Day
With anational unemployment rate just under 10 percent, many Americans are learning about the importance of a rainy day fund the hard way. A rainy day fund, also known as an emergency savings fund, is meant to protect you from financial hardship should a little rain fall in your life — like losing your job, for instance.
In 2009, the average duration of unemployment was six months, according to theBureau of Labor Statistics. As such, its smart to save up money to cover six months worth of expenses in case you lose your job, encounter a major home or car repair, or have unexpected medical bills.
In addition, dont assume that creditors and lenders will be empathetic in your time of need. If you dont have an income, youre likely not going to find anyone to extend you credit or a loan.
Smart money management requires a regular effort. There are countless tools and tips online to help you navigate the personal financial waters, but ultimately, the responsibility is yours. Dodge costly money mistakes by giving yourself a regular money checkup. And if you do make a mistake, Im sure mom would say, Pick yourself up, dust yourself off and try, try again.
Ann-Marie Murphy is the Community Builder forQuizzle.com, an online service that provides free and easy ways to manage your home, money, and credit — all in one spot. She pairs her experiences in financial services with her writing skills to help consumers better manage their personal finances.
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