As we come out of winter’s hibernation, we also take notice of those areas and items so easy to brush aside in the winter months that now need attention – painting the fence, trimming the hedges, cleaning the windows, washing the salt and soot off the car, etc.

A thorough spring cleaning is an annual ritual for many people as spring time signals a new beginning and fresh start.  It is also an ideal time to check on your credit, clean up any potential reporting errors and present the most attractive view of creditworthiness should you plan on applying for credit in the next couple of months.

Several credit related “spring cleaning” tips:

1. Get a copy of your credit report and check to ensure all information being reported is accurate and up to date.  If you find errors, address them immediately using the dispute resolution processes managed by the credit reporting agencies.  They have 30 days to investigate and resolve.  Any changes made to your report will be considered in the score calculation the next time your report and score is requested.

1. Be careful about building up big balances on your credit cards.  Going on a spring time buying binge (new clothes, summer vacation deposits, airline tickets, etc.) can make your look more indebted causing you to lose points and make your profile look more risky to lenders.

1. Pay down credit account balances – especially revolving type credit (credit cards, etc.) if you have the income capacity to do so.  This action can potentially increase your score and save you money from interest rate fees.

1. Only apply for credit if needed. While it may be tempting to apply for that home improvement credit card to instantly save 10% on all your spring cleaning supplies and tools, it could potentially have a negative impact on your credit score – affecting access to and cost of new credit you may be seeking in the near term.

It has been a long winter/late spring for many of us, so get out there and dust off the lingering effects of winter to pave the way for a great summer season.

Tom Quinn is the Vice President of Business Development for myFICO, and has over 20 years of experience working with consumers, regulators and lenders and regarding credit related questions and initiatives.

It seems like no matter where you live in the U.S. there is always some level of risk associated with random acts of mother-nature.  Tornadoes in the mid-west and south, snow blizzards in northern states, hurricanes in the south and along the eastern seaboard and earthquakes on the west coast!

While the impacts of such events are often devastating, advances in technologies to predict them in advance and education on how to prepare in advance likely saves hundreds of lives each year.

So what should you do to protect yourself  and monitor any changes to your credit score if you’ve been impacted by a natural disaster and are worried about keeping up with your bill payments as you sort things out and try to get some “normalcy” back into your life?

If you reside in a natural disaster area and find you can’t pay your bills on time, contact your bank and other creditors as soon as possible to make them aware of your situation.

Most lenders have “natural disaster” procedures in place to work with their customers impacted by such unforeseen events.  For example, many lenders will work with you to set up a temporary deferred payment plan, or temporarily place the loan in forbearance (meaning you may get temporary relief from having to make full payments on your credit obligations).  Each lender is different, so contact all of your lenders.

The lender may include comments about any special payment arrangements set up because of a natural disaster when they send an update to the credit reporting agencies.  The FICO Score does not consider such comments as negative information when calculating the score.

It may be prudent to obtain a copy of your credit report and score as soon as is feasibly possible after the disaster.  This will give you a complete picture of your credit profile at the time of the natural disaster and before any post-disaster updates have been reported.

At www.myFICO.com, you can get a copy of your FICO Score and credit report explanation with the option to print off a hard copy or save as to your desktop.  You may be able to leverage this information as you recover from the event.

Tom Quinn is the Vice President of Business Development for myFICO, and has over 20 years of experience working with consumers, regulators and lenders and regarding credit related questions and initiatives.

Thinking of refinancing or buying a house this spring to take advantage of record low interest rates?  If so, you are not alone.  In particular, home buying activity has reportedly picked up in most U.S. markets at a time when the inventory of homes for sale is very low.

This is creating a competitive environment in many communities. In turn, home prices are increasing and bidding wars are again becoming commonplace. The more qualified you are as a buyer, the better chance you will have of getting the house you want.  By qualified, I mean that you are pre-approved with excellent credit ratings, and you have the ability to make a sizable down payment.

Don’t make the mistake of getting so caught up in house hunting, you wait until the last minute to do your financial homework.  Spend time beforehand to make sure your financials and credit profile are up to date. You want your financial picture to be as attractive as possible when you meet with sellers and lenders.  The same advice holds true if you are thinking of refinancing – you want to look as qualified as possible before interacting with prospective mortgage lenders.

From a credit perspective, you want to begin 30 to 90 days in advance of your refinancing or house hunting activities. Access and review your credit report and FICO Score at www.myFICO.com before you approach a lender or broker to get pre-approved.  This will give you enough time to clear up any credit report errors and take selected actions to potentially increase your score.

• Ensure the information in your credit report is as accurate as possible.  Inaccurate reporting could lower your score and make you look riskier than you really are.  Follow the dispute resolution directions if you find errors on your credit report.  By law, the credit reporting agencies have up to 30 days to resolve any disputes.

• Review the explanation that accompanies your FICO Score. Focus especially on the section about the most significant reasons why you are not scoring higher. Create an action plan to address these areas of focus that will help you increase your score over time.

• Think increasing your score won’t really help?  Think again! Visit the interactive myFICO Mortgage Loan Rate Table [http://www.myfico.com/myfico/creditcentral/loanrates.aspx]to see an estimate of the savings in mortgage loan interest that you may be able to realize if you increase your FICO Score and qualify for a lower interest rate.  For example, increasing your score from 679 to 700 could result in $8,000 in savings over the life of your loan ($225,000 30-year fixed).

For many people, purchasing a home is one of their most stressful experiences.  While being prepared won’t eliminate 100% of the stress, it can certainly go a long way towards reducing it!

Tom Quinn is the Vice President of Business Development for myFICO, and has over 20 years of experience working with consumers, regulators and lenders and regarding credit related questions and initiatives. 

One question we hear often from people with challenging credit situations who score low in the 300-850 FICO score range is:

“…seriously, will my credit score ever increase?”

The answer is a resounding yes. But it requires that you set and stick to a focused plan of action to:

• Pay your credit obligations on time
• Reduce your debt exposure
• Avoid seeking any new credit in the near term

Raising your score also requires patience- a virtue that unfortunately is rare in our fast-paced and instant-gratification world.

Are you still a doubter? Think I’m pulling your leg?

I have facts to back me up. We recently studied the FICO Scores of a random sample of U.S. consumers at two points in time separated by 12 months. We wanted to understand how their scores changed over that 12 month time period.  These people were selected at random, so they included some who monitor their credit score and many who don’t.

Here’s what we found:

• FICO scores increased for almost 40% of the consumers in the lowest part of the range (300-499), pushing them up into higher ranges.
• For consumers in the middle ranges (650-699 for example), close to 30% had their FICO score climb above 700 during that 12 month period.
• Even people with really high scores (750-799 for example) saw their score improve:  20% moved up to the top 800-850 range.

By improving scores from the middle ranges to high ranges you can potentially gain real dollar saving benefits.  These include savings on interest rates, such as saving $2,000 on a 5 year/$20,000 new car loan, because lenders typically offer more attractive rates to applicants with higher scores.

At the end of the day, we each have the power to improve our credit standing and reap the financial benefits of having a high FICO score – even if you are now in the lowest score ranges.  The key is just like dieting to lose weight — remain focused and stay persistent because it may take time.

Tom Quinn is the Vice President of Business Development for myFICO, and has over 20 years of experience working with consumers, regulators and lenders and regarding credit related questions and initiatives.

Most people know that missing a mortgage or car payment can definitely lower their FICO Score. But what if you don’t pay your taxes?

Not paying your taxes can result in a tax lien which becomes a matter of public record. The FICO Score takes into account any derogatory public records listed on your credit bureau report. One or more tax liens on your credit report can have a significant negative impact to your score.

The exact impact depends on what other information is on your credit report and on the details of the tax lien(s). For example, a more recent tax lien could have a greater impact than an older tax lien.

Why do tax liens matter? It’s because people who don’t pay their taxes are statistically more likely to not pay other debts.  FICO’s research has shown that the segment of the U.S. population with a tax lien on their credit reports had a future bad rate of more than 40 percent. In other words, more than 40 percent of the people with tax liens became at least 90 days past due on a credit obligation within the next 12 months. That’s twice the average for the whole population.

What if your situation is a little different? Let’s say you owe taxes, but you don’t have the funds right now to cover the amount owed.  Should you simply not file this year and assume that you can true up the overdue amount next year?

Not a good idea.

By not paying, you’ll likely incur penalty fees and possibly a tax lien. Your best course of action is to contact the IRS and let them know your circumstances. They will help you work out an agreement for paying the IRS what you owe and with a federal deficit over $16,700,000,000,000, and growing, you can bet Uncle Sam wants and needs every dollar owed!

In addition to gaining peace of mind, you’ll also be protecting your FICO Score.

Tom Quinn is the Vice President of Business Development for myFICO, and has over 20 years of experience working with consumers, regulators and lenders and regarding credit related questions and initiatives.

Affordable Work Attire

If you’re fresh out of college, or transitioning from a casual work environment to a more professional one, building the necessary work wardrobe can cost quite a hefty sum. To cut back on costs, invest in a few staple pieces, like suits and shoes. Although they can be expensive, high-quality garments that you will wear everyday are good investments. A pair of $100 shoes that will look nice for a few years are a better investment than a $20 pair that will fall apart in a month. Once you have a good pair of shoes and a nice suit or dress, you can fill out your wardrobe with less expensive shirts, sweaters, ties, and other accessories.

Online there are a handful of clearinghouses and stores selling discounted professional clothes. Shop around online and compare prices before making a decision. If you prefer to try things on first, go shopping beforehand, and take down the names of pieces you like. Then, go home and search for these items on Amazon and Google, and see if you can find a better deal. Chances are you can!

While you’re on the Internet, make sure to check out sites like eBay and Craigslist for steals on professional attire. Many people post brand new and gently used garments, from shoes to ties to suits. There are a lot of high-quality, designer pieces that sell for less than half the price you would find in retail stores.

If online shopping isn’t for you, great places to find steals are thrift stores and consignment stores. These places can be really hit or miss; to increase your chances of finding a treasure, it’s a good idea to drop by every few weeks to scope out the new donations.

Building up a solid professional wardrobe without breaking the bank takes time and diligence, but stick to these habits and you will be on the right track.

Bring Your Lunch

Going out for meals adds up fast! Save up to $50 a week by skipping out on restaurant meals and bringing more affordable lunches from home instead.

Re-purpose leftovers from the night before; it’s a great way to have a delicious meal awaiting you at lunchtime, and also keeps you from letting food go to waste. Plus, bringing leftovers will save you time in the morning because they take no preparation: just pack them up in Tupperware, and then pop them in the office microwave at lunchtime.

Since food is much cheaper in bulk, buy big bags of things like nuts, dried fruit, trail-mix, baby carrots, crackers, and other snacks. To make things convenient, every Sunday make five plastic baggies of each of the different foods, one for each day of the week. On weekday mornings, all you’ll have to do for a full lunch is make a sandwich or grab some leftovers to add to your pre-made baggies of lunch snacks.

Carpool, Bike, or Take Public Transit

Driving to work seems so obvious and necessary, but we often forget that it is a luxury. Paying for gas, insurance, maintenance, and parking add up quickly. Before you settle on driving, explore every option you have for transportation.

Have you ever really sat down and calculated out how much money you would save by biking or taking public transit to work? You may be surprised.

Sometimes there’s just no way around the need to drive to work. In this situation, find coworkers who live near you to share the ride and split the cost of gas. Being able to use the carpool lane will save you time, too.

Drink Free Coffee

If you forgo the daily stop at Starbucks, you could be looking at over $1,000 savings a year. Spending $5 a day on coffee, 5 days a week, for 45 weeks would cost you $1,125. Instead, drink the free coffee in your workplace. If you prefer something a little fancier, buy a flavored creamer and leave it in the work fridge to use every morning.

Another more affordable option is to buy a box of your favorite tea. Buying one box of 28 Bigelow Green Tea bags costs about $2.75. That’s only $.10 a cup! Plus, tea bags can be re-used for two or three cups. That brings each drink down to less than $.04 a cup.

With a little careful planning and extra research, you can easily trim workplace costs in order to make the most out of each paycheck.

What is P2P Lending?

These services provide a way for ordinary people to loan money to other regular folks. In most cases, it’s done through an intermediary. Two of the main P2P lending web sites are Lending Club and Prosper.

These sites facilitate the loans, which are funded in small increments of $25. Because each note is only $25, nearly anyone can afford to be a lender. And, because the amounts are small, borrowers can take advantage of thousands of potential lenders and raise money they might not otherwise qualify for.

P2P lending web sites coordinate everything, from determining what rate the borrower receives (and the return the lender can expect to receive) to providing the funds to the borrower and collecting payment on the loan to making sure each investor receives principal plus interest from the payments.

P2P Lending for Borrowers

In many cases, borrowers can receive a lower interest rate on a P2P loan than they would receive from a bank. Additionally, it’s often possible to get approved for a larger unsecured loan than many banks would be willing to approve.

However, it’s not a free-for-all. Borrowers do have to agree to a credit check, which determines the interest rate of the loan. There are cases in which a potential borrower might be denied. Prosper, especially, is known for screening out borrowers with low credit ratings.

Once a borrower has gone through the process of approval, it’s time to try to raise the funds. P2P lending is usually an all-or-nothing proposition for borrowers. If they don’t reach the target, they receive no funds at all. This means that borrowers have to attract lenders. This can be done by explaining the purpose of the loan, answering questions that potential lenders can leave on the account, and proving that the resources are available for repayment.

P2P lending usually allows borrowers to choose between three year and five year repayment. Prosper has a limit of $25,000, while Lending Club has a limit of $35,000. It’s important to realize that this is a loan that is reported to credit agencies. If you miss payments or default, your credit score will reflect your delinquency.

P2P Lending for Investors

Many investors have found a measure of success through P2P lending. While stock market returns are rising somewhat, the years immediately following the financial crisis saw lackluster returns, which were, in some cases, beat by the returns from P2P lending. Even the lowest returns on P2P lending handily beat the “safest” bonds.

When investing, though, it’s important to remember that you are lending money. This means that you can lose some or all of your investment if a borrower defaults. However, with some planning, it’s possible to invest in a variety of notes across risk levels and build a reasonable portfolio for a relatively low cost.

Since P2P lenders charge fees to borrowers, and earn their money from the loans they originate, there aren’t fees charged to investors. The only exception is for investors who decide to take advantage of some of the managed options provided in some cases. As long as you select your own notes, though, you won’t be subject to costs.

I’ve had good success with investing with Lending Club, and I recently began investing with Prosper. Just like any investment, research and acknowledgement of risk is required.

Bottom Line

P2P lending offers alternatives outside of the “traditional” opportunities that many borrowers and investors see. Evaluate your situation, and determine whether or not P2P lending is right for you – whether you want to borrow, or find a new place to invest.

Jeff Rose is a Certified Financial Planner and an Iraqi combat veteran. He runs the blogs GoodFinancialCents.com and LifeInsurancebyJeff.com.

Personally – and I am part Irish– I find this reference confusing as history (including the recent financial meltdown) would indicate a race on the lower end of the “lucky scale.”  There is one school of thought that these phrases originated in America during the period of large scale Irish immigration where the likelihood of being a successful citizen of Irish nationality was thought more the result of luck versus hard work and intelligence.

Thankfully, that stereotype has gone away and everyone regardless of heritage can be Irish on St. Patrick’s Day.

But the good news is you don’t need a leprechaun to help you get a high FICO Score that will increase your access to available credit at the most attractive interest rates and help you create your own “pot o’ gold.”

Adhering to the following recommendations can help you increase or maintain your high FICO Score and allow you to enjoying the benefits that provides:

Pay your bills on time.  Generally speaking, late payments have the most significant negative impact on your score.

Use your credit responsibly.  Most people have and use credit – and that’s okay as credit is ingrained in our economy.  Be careful to not become over indebted where you are carrying large balances on most of your credit (especially with revolving credit like credit cards).

Only apply for credit when needed.  Research shows that the applying for and build-up of a lot of new credit in a short period of time in indicative of higher risk.

Go n-eiri an bothar leat!

(Success be with you on your journey to credit empowerment!)

Tom Quinn is the Vice President of Business Development for myFICO, and has over 20 years of experience working with consumers, regulators and lenders and regarding credit related questions and initiatives. 

You don’t need to worry about individual stocks or bonds. You can invest in either mutual funds or exchange traded funds (ETF’s), each of which represents a portfolio of stocks and other investments in either the overall market, or in various specialized sectors.

This is the easiest route for most new investors, because you can diversify across literally hundreds of stocks, thousands even, simply by holding a very small number of funds. This will also cut down on the cost of investing, since you pay a single fee – if there is any at all – to invest in a fund that will hold dozens of individual stocks. Best of all, the whole portfolio will be managed by professional investment managers.

Everyone says to invest in stocks, but which stocks do you invest in?

Answer: any stocks you want! And that is hardly an exaggeration.

In today’s world of global computerized trading, you can invest in specific stock markets, such as foreign stock markets, bonds and specific industry sectors. You can also invest in real estate, commodities, and options.

You probably will not want to get into all of these investments immediately, as there is a learning curve involved in each. But it’s important to get started somewhere, and that usually means the simplest investments.

Index Funds

If you’re new and uncertain, the best place to start is with index funds. You can start with an index fund that is based on the Standard & Poor’s 500 index. An index fund is correlated almost exactly to the underlying index that it is based upon. This means that your investment performance will track the market (in this case the S&P 500, which tracks 500 of the leading U.S. companies as determined by Standard & Poor’s). Your investments will rise when the market rises, and fall in the market declines.

In rising stock markets, index funds are hard to beat.  They rise consistently with the market and usually outperform other types of funds in the long run. Just put your money in index funds and then sit back, relax and enjoy the ride!

Sector Funds

With an underlying base of index funds, you can branch out into other investments as you choose. In fact, you can even invest beyond stocks if that’s what you want. Just about anything you want to invest in is available in some form.

There are mutual funds and ETF’s that are invested in very specific industries, and these funds are referred to as sector funds. Some of the sectors you can invest in include:

-Foreign stocks, including those of specific countries.

-Specific industries, such as utilities, healthcare, and technology.

-Real estate, such as homebuilders, mortgage lenders and real estate investment trusts (REIT‘s).

-Resources, such as energy and metals.

-Bonds, including US treasuries (short-, intermediate-, or long-term).

There are also funds are in specific security types, such as high-yield dividend stocks, growth stocks, or even growth and income. Still others, such as target date funds will allow you to invest your retirement money based on your anticipated retirement date. If for example, you plan to retire in 2040, you can select a target date fund that automatically adjusts your asset allocation for each specific time period of your life, right up to retirement. No guesswork, the fund handles it all.

Certain funds can be so specific that they invest in only a single commodity. For example, if you want to invest in gold but don’t want to take possession of the metal, you buy shares in the SPDR Gold Trust (GLD) ETF. This is a fund that holds only gold, so a  $5,000 investment in the fund will enable you to hold an equivalent amount of gold in your portfolio.

Getting Started

The easiest way to begin investing is to open up an online discount brokerage account. Look for a broker that offers the widest investment choices, but allows you to make trades for very small fees, say just a few dollars per trade.

There are literally hundreds of investment brokerage firms available, and many of them are very specialized allowing only a very limited number of investment choices. But you’ll probably want to go with the brokers that offer the widest selection, which will enable you to expand your investment options as you grow in knowledge and confidence.

 Keeping Costs Low

Investment costs can trip up a lot of new investors. You can get solid returns on your money, but if you’re paying high account fees and transaction costs, you will simply be returning a large amount of gains to your broker.

Transaction fees are important to consider, especially you do good bit of trading. If you have a $10,000 account, in which you make 20 trades per year at $10 per trade, you’ll pay $200 just in transaction fees, or 2% of the value of your account. If you can find a broker that charges only $5 per trade, your transaction fees drop to $100 per year, or just 1% of your account. That’s the equivalent of increasing your annual return by 1%, and that will make a big difference over longer time.

You’ll also want to favor “no-load” funds in your investment mix. These are funds that do not have sales charges, or “loads”. Funds can charge loads of up to 8%, but there are plenty of no-load funds, and they are the funds you should invest in.

Finally

As an investor, never let your lack of knowledge keep you from investing. The only way to get the knowledge and experience that you need is to get started.

The number of investment choices is virtually unlimited, but start with index funds/ETF’s, and then expand your portfolio selections as you become more comfortable with investing.

Glen Craig publishes the personal finance site Free From Broke.