Misconceptions or myths regarding credit reports are quite common in the market and most consumers tend to get affected by them. Thus, they do certain things which can negatively affect their credit report. Let’s take a look at 5 credit report myths that one should be aware of:

1. There’s no need to check my credit report, if I pay bills on time: This is major mistake which most of the consumers make. Though you pay your bills on time, yet you should make it a point to check your credit report on a time to time basis. You may find conflicting information listed on your credit report. You will have to negotiate with your creditors/credit bureaus and get it corrected or else your score will take a hit.

2. FICO scores are locked in for six months: Many believe that credit scores are locked for 6 months. However, the fact remains that FICO scores are dynamic and change as soon as your lender/creditor reports anything to the credit bureaus regarding your loan/credit accounts.

3. Paying my debts will improve my credit report immediately: Though it is good to pay off as much debt as possible, yet it won’t improve your credit report instantly. Your credit report will take into account, the past debt payments as well. If you’ve defaulted on your payments, it will remain on your credit report for 7 years.

4. Closing credit cards will help me improve my score: Most people tend to believe that open accounts actually mean potential debt. Thus, lenders may take it in a negative sense. So, it’s better to close them. But, most lenders will want to see at least 2-3 active credit accounts.  Lenders will actually look into the fact whether or not you’re able to manage your credit cards well by paying the dues on time.

5. My credit score will drop if I check my credit report: Credit inquiries are of two types – soft inquires and hard inquires. Inquires by the consumers to check credit score or own credit report (also known as soft inquires) won’t affect credit scores in a negative way. It won’t have an impact on the credit report. However, if a lender or a creditor checks your credit report for giving you a mortgage, auto loan, credit card, etc., it’s known as a hard inquiry and may reduce your credit score by few points. However, multiple inquires for a same purpose within a given span of time would be grouped as one and won’t have much affect on your credit score/report.

Due to the present economic crisis, it’s quite difficult to plan for a budget and save money. The worst affected people in this situation are the single mothers. Being the sole earning member of the family, they need to look after the family expenses as well as the kids and their needs.

Here are 5 helpful tips from my end which can help single mothers plan their budget and save money in a better way:

1. Plan and set priority: You’ll only be able to save money if you’ve planned for it properly. You should analyze your income sources, daily expenditures, debts, etc. and then chalk out a plan and prepare a budget. Once you’ve prepared a budget, you need to set your priorities – you should decide which things should come first before others.
2. Use envelopes to manage your finance: Using the envelop method to manage finances is a smart option and quite a large number of people go for it. Once you get your paycheck, divide it into credit card bills, mortgage payments, utility bills, grocery, shopping, etc. and put the required amount into respective envelopes and then keep it in a safe place.
3. Pay bills as soon as they come in: You’ve used the envelop method to set aside money for your bills. Thus, once the bills are delivered at your door step, pay them off immediately. If you postpone paying the bills, you may incur late fees which will be an additional burden for you.
4. Save money for emergency: You should set aside a stipulated amount as your savings each month. If you face an emergency, this savings will come handy. You won’t have to take the help of your friends or relatives or take out any personal loan if you’ve a savings of your own.
5. Avoid spending on unnecessary things: It is better not to spend too much money on unnecessary things. For example you can buy cheaper yet trendy clothes over the expensive ones. Your kids may ask for various unnecessary things. In that case, let them know about your financial situation. They are intelligent and will definitely understand your situation and won’t demand expensive or unnecessary items.

I hope these simple budgeting tips will help single mothers to save money and lead a stress-free life.

You love your kids more than anything else in the whole world, isn’t it? It won’t be pleasant for you to find your kids going through a financial crisis. Thus, start teaching your kids about money management from the early age. Your advice to the kids and teens regarding money management will help them become responsible individuals and they’ll avoid major financial mistakes later in their lives.

Here are 4 steps which you may take in order to help your kids develop better money management habits:

1. Inform kids about your source of income: It’s important for you to let your kids know where the family income comes from. You should inform the kids about the earning members of the family, the amount of your monthly/weekly income, etc. Also, inform the kids about your monthly family expenses. You can even explore the various ways of earning money in front of them and inform them about taxes and tax deductions.

2. Plan your budget in front of the kids: When you are planning your budget, involve your kids in it. While you allocate money for different items on the budget, teach your kids how they should allot their pocket money for various expenses that they incur throughout the month. Make sure that they understand the fact that when your income is limited your expense should also be limited.

3. Teach kids to save money: Your kids should know how important it is to save money. Explain them what kind of emergency situations may arise and how one can cope up with it if he or she has saved money. Once they understand this basic concept, it will encourage them to save money for the future which will in turn help them when they are facing a future financial catastrophe.

4. Give rewards if they can save money: If your kids are able to save money, reward them for their achievement. You can give them an additional amount if they are able to save a stipulated amount from their pocket money. This will encourage them to save more.

You should take the initiative in order to help your kids develop successful money management habits. In the long run, they will become responsible individuals and will thank you for your financial teachings.

With the introduction of the Credit Card Accountability Responsibility and Disclosure (CARD) Act, many experts have opined that it would affect the eligibility of the borrowers to qualify for a mortgage.

How would the CARD Act affect the homeowners?
There was a time gap between the announcement and enactment of the CARD Act. Most of the credit card issuers raised the interest rates of the card owners suddenly within this time gap. In some cases, the interest rates were raised from 8% to 16%. Due to this, the card holders will now have to pay a comparatively higher minimum monthly payments on their credit cards.

As the minimum monthly payments have increased, the card owners will have to put maximum amount of their wages towards paying off the credit card debts. This may lead to the non-payment of the mortgage dues which will affect their chances of refinancing a home loan. Also, if they default on the mortgage payments, the lenders can start off with foreclosure procedures to recover their dues. This will increase the foreclosure rates in the country and in turn affect the recovery of the housing market.

How can borrowers increase their chances of getting a loan?
When a person is trying to purchase a property, he or she will have to try and make himself or herself as “attractive” as possible in front of the lender.  Though it’s difficult, it’s not impossible.

If a card owner’s rates have just been raised and the credit limit lowered, then he or she should negotiate with the bank or credit union to either lower the interest rate or increase the credit line to where it stood previously.

In order to achieve this, the customers can stick to a single bank. If they have all their accounts with a single bank, then they may be able to get annual fees waived off or get their interest rates lowered. The customers can even apply for mortgage with the same bank. It will be easier for the lender to judge a person’s credit and thus it will be an added advantage while securing a loan.

However, this is an early stage to tell whether or not the CARD Act will really affect the mortgage market drastically. The concerns can be somewhat hypothetical at this point.