Credit Sesame

Here is another website that shows you your credit score for free: Credit Sesame. Out of the three: Quizzle, CreditKarma, and Credit Sesame, the third one has the highest score out of all and it's based on the Experian model, which is my lowest score of the 3 credit scores according to Fico.com. I'm not sure if that's good or bad, but it's nice to see a score well over 800!

Installment Loan Utilization Ratio and Credit Limit

Some people see a utilization ratio of their installment loans when they check their credit report. If you see a utilization ratio of your student loans or of your auto loans, for example, do not be surprised that it's close to 100% or over 100%. For many student loans, expect to see amount owed greater than the credit limit listed as well, making it seem that you have gone over your allowed limit.

Do not worry. Student loans and auto loans are installment loans and, therefore, even though a report might show the same type of features that it does for credit card, it is not counted the same. The credit scoring agencies are able to tell the difference between revolving accounts (credit cards) and installment loans and know that if you just took out a loan of $10,000 for your car, then your utilization will be 100% on the first payment as the balance and credit limit will both be $10,000. If you have student loans with capitalized interest, it will say that your credit limit is i.e. $10,000, yet the balance is $14,000 because you have so far run up a total of $4,000 in interest costs.

Credit scoring agencies know and understand the difference and the only utilization ratio and credit limit that you need to worry about is that of your revolving accounts.

Personal Finance iPhone Apps

After reviewing the apps for a months or so, here is my list of the useful personal finance iPhone apps:

1. Mint.com - see what happens to all of your money
2. All your banks such as Chase, which even allows you to take a picture of your check to deposit instead of visiting an actual branch or an atm
3. PayPal - Monitor your account and send money to friends easily
4. Investment accounts such as ShareBuilder to monitor your holdings
5. Zillow.com - useful if you are looking to rent or buy or are just interested in the prices of the houses around your location
6. LoanCalc - See how much sooner you will payoff any loan if you increase your minimum payment
7. Pay Off Debt Lite - See what percentage of your debt you have paid so far since the beginning to motivate you to pay more
8. Credit Card accounts such as Amex to allow yourself to pay your bills from your phone
9. ScoreAdvice - See what you can do with your credit score to improve it
10. Ask Dave - Although I don't always agree with what he says, he does have some good advice, this is an app with clips of his radio show
11. NPR News - the Money Matters radio program releases some great shows on personal finances
12. Local stores such as Walgreen's app to see what's on sale this week
13. Daily deal apps such as Groupon to see the deals of the day
14. News websites such as CNN money to keep up with the current personal finance news
15. Coupon Sherpa - coupons for retail stores near you, although coupons seem to be available for only a few stores
16. GasBuddy - will help you find the cheapest gas near you
17. Kayak - to find the best travel deals
18. Around me deal apps such as AAA Discounts (must have AAA membership) state discounts available using your current location
19. Bar code scanners such as ShopSavvy will help you find the best deal online or in stores
20. Key Ring - if you forget your loyalty card, you can scan the card on your Key Ring app instead
21. Check-in apps like Yelp that allow you to check in to a restaurant or a shop and  receive a discount or a freebie

If you have other personal favorites, let us know in the comments.

Lower Your Credit Utilization Ratio

Credit utilization ratios look at how much credit you use opposed to how much credit you have available to you on all credit cards. If you are using too much of your available credit limit, your credit score can be negatively affected. Ideally, the credit utilization ratio should be below 10%. However, many financial advisers will say below 30% is fine. Therefore, if you have a $3,000 credit limit on all your credit cards, you cannot spend more than $1,000 per month if you want the credit utilization ratio to be below 30% and no more that $300 if you want the credit utilization ratio to be below 10%.

Opening more cards could be a solution as your available credit would go up and, therefore, your credit utilization ratio would go down. If you do not want to open any more cards as having the inquiry for the application for credit will appear on your credit report for 2 years and will also negatively affect your credit score, there are other solutions. It's simple. Pay your credit card twice a month to lower this ratio. If you have a total credit limit of $3,000, but constantly make around $600 in purchases per month, pay $300 of your credit card charges before a statement is created to lower the statement balance to $300, making your credit utilization ratio 10%. Credit Karma has an estimator to see what your score would be if you made any changes. See what happens when you lower your credit card balance. Remember that your statement amount is your credit card balance weather you pay it off each month or not.

Money in your 20's

Money management skills should be learned as early as possible and the 20's is a great place to start. Here are 10 financial projects you should take on in your 20's:

1. Learn to live on less than you make. Many people who find their first job, go all out with a new wardrobe, a new car, decorations for the new apartment, etc. Control your spending and only spend what you can afford with the money you have. See the Cash Flow blog post to see how you can see your cash flow with ease.
2. Start saving. Use the budget worksheet to see where you are overspending if you are unable to spend 15% of your take home pay. If you have large student loan payments, try to cut down in all areas to free up some space for savings, even if it's $5/month.
3. If your company offers a 401(k) match, start putting in the minimum amount you have to put in to get the full match.
4. Build an emergency fund in a high interest savings account.
5. Maintain a good credit score. Make sure you are never late. Automating your bills is an easy way to make sure of this.
6. Pay down on your student loan or any other debt with any extra funds that you have. If you receive a gift, a tax refund, or a bonus, try to apply it directly to your debt. See the Debt Pay Off Methods to see how you want to tackle your debt. See how even $5 per month extra will make a difference in your debt by using the Bankrate Amortization Calculator.
7. Save for retirement. Starting early is one of the best things you can do. Use a retirement calculator to see how much you should save. Start small if you can't contribute the full amount you are advised and increase your contributions yearly.
8. Designate separate savings accounts for various goals. Retirement should be saved in a 401(k) and an IRA. You should also have separate savings accounts for an emergency fund, grad school, vacation, car, down payment, etc. You can save in each account simultaneously or take it one step at a time and once your emergency fund is full, save for a vacation, once you have enough in that account, you can save for grad school and a car, etc.
9. Get health insurance. One accident can ruin all of your plans. 
10. Earn more money. Ask for a raise at the annual review or find a job that will pay you 15%-20% more and present the offer to the current employer. Be ready to leave for the new job if the offer isn't matched.

Annual Credit Report Three Times a Year

If you haven't checked your credit report in 2011 yet, make sure to do so at the free site provided by the credit scoring agencies at Annual Credit Report. There are 3 credit scoring agencies: Equifax, Experian, and TransUnion. Therefore, you can check your report thrice a year for free.

Most people who know they should check their credit reports and don't, forget to do it. Therefore, you should create a system that reminds you. Putting it on the calendar does not work for me. If the calendar does not work for you either, you could mark the days that you have to check your report by, for example, day light saving days and your birthday. Therefore, you check your credit report every time the time changes and around your birthday or other memorable day like the 4th of July. I do better at associations for remembering things and, therefore, this method works for me.

I also struggle with remembering which agency I checked last. Therefore, it might be easier if you do them in an alphabetical order. Check Equifax, then Experian, then TranUnion. Or, maybe you can check the agencies starting with an E on day light savings days and TransUnion on your birthday or whatever memorable day you chose.

Whatever system you use, make sure to check the credit reports to make sure you did not experience identity theft, there are no errors, and you have been on track with paying down your debts.

The Breakdown of Your Credit Score

If you've already checked your credit score on Credit Karma and Quizzle, two companies I wrote about in an earlier post, then you might be wondering how that number is determined.

Fico.com determines it by the following factors:

Therefore, if your credit score is lower than you want it to be, make sure you do the following:

1. Always pay on time, if you accidentally missed a due date, call the debt holder and ask for them to not post any negative information because you have been a 'good client'
2. Pay down your debt, all of your debt and don't close down your cards as they represent the total available credit to you
•  Debt (balances on your cards) to available credit (total combined credit limit available to you on all cards) should be under 10% every month
• Please remember that even if you pay your credit card in full every month, the balance that is due every month is the balance that gets reported, therefore if you have $5K as the credit limit, but every month you charge and pay $4K on the due date, your debt to available credit is 80%
• To lower your debt to available credit ratio, pay down your credit card before the card calculates your balance for the month
3. Don't close oldest cards or any cards at all in my opinion (unless they have outrageous annual fees that just would not make sense to keep)
4. Don't open any new cards or apply for any new loans so no new inquiries are posted on your credit report
5. Make sure you don't have any store cards (if you close any that you already have, you will probably be affected negatively though)
• This one is a little bit tricky as with 'types of credit,' FICO means you need to have credit cards, installment loans such as student loans, mortgages, etc. - I recommend staying away from all debt besides an affordable mortgage and reasonable student loans. You should have a couple credit cards just so your available credit is high.

Student Loans - Is It Really Good Debt?

Student loans are the major burden for a recent graduate. It is usually talked about as 'good debt.' Good debt is usually a mortgage, student loans, or a business loan. All of these loans will help you increase your net worth in the future, theoretically. 'Bad debt' is consumer debt that is acquired by buying things.

So, technically student debt is good debt as your education will help you earn more money in the future. However, as a lot of students are doing, if you have taken out private student loans and paid much of the college bill through loans, you've probably borrowed too much. I borrowed a private student loan only in my first year for $9,000 due to a change in circumstances. I could have borrowed less, as I used left overs from the loan (which was around $1,500 per semester) to live a better life, travel a bit more, etc. I thought that the value of $1,500 was much more to me in college, than it would be while I was working. I did not consider interest. However, if I were to to do this again, I would have done exactly the same thing as I still believe that the private education I received is better than what I would have received going to a much cheaper college. I also believe that being able to travel every break (as I also received about $1,500 refund from the government loans in the last 3 years) has taught me more about the world.

However, the only reason I would do this again is because I ended up graduating with around $26K in student loans in total from a private liberal arts college with tuition of $45K per year. Half of it was federal subsidized loans and the other half was the private student loan that grew to $13K due to interest. Supposedly, if you take out about the same as your first year's salary after college, then you will be able to pay it back at the terms set by the lender. Of course there are programs such as IBR, however, you should aim to pay the least amount in interest. So far, I have not had trouble paying back my loans and I am aiming to have them paid off in 5 years or so.

Imagine you have $100K in private student loans, your monthly payment would be $1,150 with 10 year terms at 6.8% interest as calculated with the FINAID Student Loan Calculator. If you were making $27,600 a year, you would be spending 1/2 of your gross salary on your loans. That is unsustainable. Therefore, these kind of student loans are toxic or bad debt. If you had to pay $25K per year at the school you chose, you chose the wrong school.

Private loans usually means that you have borrowed all you could from the government, therefore, you are taking out loans that the government does not think you can afford. Consider that. Also, consider that student loans can pretty much never be dismissed in bankruptcy. There is only a small chance of dismissal if it is your second bankruptcy and you have included your student loans in the first bankruptcy. Also, private student loans do not usually have a fixed interest rate, therefore, if your credit goes down and the LIBOR goes up, your interest rate could sky rocket. Mine was at over 12% at one point when I had no credit history. You usually have to get a co-signer and you have no control over their credit score. Also, if you are unable to pay the loan, they are liable. This could ruin relationships and two sets of credit scores.

There are so many things wrong with private student loans and, therefore, I do not consider them to be good debt. I'm trying to get rid of the $11K I have left as quickly as possible.

Credit Report and Score

Your must know your credit score if you are going to apply for any credit as your interest rate depends on it. Your credit report is what determines your credit score. Therefore, you should look at your credit report regularly to spot any inaccuracies. The best place to check your credit report is from the free website Annual Credit Report where you can check three credit reports from the three different companies: Equifax, TransUnion, and Experian. I suggest looking at one report every 4 months so that you can check your free credit report 3 times a year.

As for the credit score, most companies charge even when they say the credit score is free. Or, they charge if you don't cancel their service, which some people forget. Therefore, there are two great truly free credit score websites available: Credit Karma and Quizzle. My Credit Karma score has always matched one of my scores that I have purchased from MyFico.com exactly. Quizzle has always been around 80 points lower than the average of my three scores, which have always been only a few points away from each other or equal. However, you can get a rough idea of where you are by getting both of these free scores.