A low credit score is bad news, particularly if you are trying to renegotiate the terms of a loan, applying for a home loan, trying to land a job, or searching for an apartment. In today’s environment, you need a high credit score for a slew of reasons. So if you need to build your credit score, don’t worry. Here are three strategies to boost your low credit score, and fast!
1. Correct your credit limits. Almost half of Americans have a credit card with a limit that is incorrectly reported to the credit bureaus. Credit card companies often omit or misreport credit card limits to the credit-scoring bureaus.
This causes your utilization rate (your balance expressed as a percentage of your limit) to appear higher than it actually is. Imagine that pay your Visa balance down to $300. Because your limit is $1,000, your utilization rate is 30 percent, which is the maximum utilization rate the credit-scoring bureaus want you to have.
So your score should increase, right? Not so fast. If the credit card company is only reporting a $500 limit, you will appear to be carrying a 60 percent utilization rate. And this hurts your credit score.
Are you one of the many Americans suffering from this mistake? Find out by pulling your credit report from www.720FicoScore.com. If the credit card companies are inaccurately reporting any credit limit of yours, immediately begin the process of correcting this mistake by using the forms and worksheets necessary to correct this mistake.
2. Become an authorized user on a credit card owned by a family member or spouse. If you have fewer than five credit cards, becoming an authorized user on a family member’s credit card is one of the quickest ways to improve a credit score, so long as you choose an account with a clean credit history. Becoming an authorized user allows you to borrow the account holder’s clean credit history, which will cause your low credit score to quickly increase.
3. Find creative ways to lower your utilization rates. Your utilization rate is the balance you have on each individual credit card expressed as a percentage of the limit. If your limit is $4,000 and your balance is $2,000, your utilization rate is 50 percent. If your balance decreases to $1,000, your utilization rate drops to 25 percent.
The credit-scoring bureaus respond best to people with utilization rates below 30 percent. If you have a high utilization rate, your low credit score can start to improve by getting your utilization rate below 30 percent.
Obviously, you can lower your utilization rate by paying down your balance. You can also lower your utilization rate by transferring a portion of your credit card balances to credit cards with higher limits, or asking your credit card companies to increase your limits.
If you have fewer than five credit cards (the maximum number you should have), you could also open a new credit card that holds some of your debt. Keep in mind that opening a new credit card will cause your score to drop initially, but so long as you keep the balance below 30 percent and make timely payments, your score will start to improve in about six months.
And if you are married, be sure to read my article about how to build credit fast by transferring balances to your spouse’s credit cards.
Author: br_admin
Build Credit: The 30% Rule – Making Sense of Utilization Rates
What do you think is better? Having only one credit card that is near it’s credit limit that you pay in full each month or three to five credit cards with low balances that you pay off each month? If you picked the first option, you might be surprised to find out how harmful having a high credit balance actually is to your credit score.
Why would you want MORE credit cards with lower limits?
The proportion of debt that you carry on credit card to your credit limit is called a “utilization rate.” Credit bureaus look at this ratio as a factor in determining your credit score. The lower your utilization rate, the better your score. An ideal utilization rate is anything below 30%. We call this the 30% rule. That means that you only want to have credit balances that make up less than 30% of your actual credit limit. For example if your credit limit is $1000, your credit balance should never exceed $300.
What about if you pay your bills on time each month?
Credit bureaus are looking to see if you live within your means and use this 30% rule as measurement. Paying your bills on time shows you’re responsible for your debt, however it doesn’t reflect your lifestyle choices as well as the 30% rule does. That means you should NEVER let your balance exceed the 30% marker.
What about if you don’t have a preset limit?
In some cases, such as with American Express, you may not have a spending limit. In these situations the credit bureau will take the highest balance you ever had on your credit card use that amount as your default balance. If you’re highest balance was $8,000 that would mean your balance should never exceed $2400.
What should you do if you currently exceed the 30% rule?
The first option is to pay off any debt until your balance is under 30% of your credit limit. If this is not an option for you, you can transfer your debts between cards to keep them under 30%. In addition, you can try asking your credit card company for an increased balance. Just make sure to check they are reporting the new credit balance on your credit report or you may find yourself over the 30% limit.
Lastly, if you have less than 5 credit cards, you can try opening a new credit card to help move the balances around.
20 Everyday Ways to Save Money
Want to have some extra cash around? Frugal spenders have long known that it isn’t always saving on big-ticket items that makes a real dent in saving money. It’s the little things you do everyday that can add up. When it comes to creating personal wealth, taking the time to educate yourself on other options can go a long way to giving you some extra dough to spend on things you’d really like such as that vacation you’ve always wanted to take.
To help get you started in the right direction, here are 20 little everyday ways you can save money.
Shopping
- Shop outlet stores.
- Buy clothes at thrift or secondhand stores.
- Shop at discount stores.
- Buy food such as bread at local food outlet stores.
- Try generic brands of products.
- Use customer rewards programs.
- Purchase 2-liter bottles of soda instead of cans.
- Use coupons.
- Cut back on disposable product usage.
- Buy used whenever possible.
Eating Out
- Share meals when you eat out.
- Only order water when you eat out.
- Bring your own lunch to work.
- Cook at home.
Entertainment
- Rent movies from RedBox.
- Watch matinee movies.
- Potluck family get-togethers or parties.
- Utilize the public library or free books online.
Bills
- Turn off lights and electronics before going to bed.
- Combine cable, internet and telephone services if possible.
- Cancel cable and use Netflix.
Extra Savings
- Consider memberships for places you frequent.
- Wash and vacuum your car at home.
- Withdraw money from your own bank accounts.
- Avoid overdraft charges.
- Cancel unused memberships.
- Pay credit card balances in full each month and avoid interest rates.
- Improve your credit score.
Share your everyday money tips below!
Hey Parents! Teach Your Kids About Credit
Unless parents decide to make a concerted effort to begin teaching children about credit, our nation’s children might become victims of a system that is deceptive, manipulative, and cloaked in mystery.
Our banks, educational institutions, and government officials do not make information about credit easily accessible. They do not tell us that no credit is as bad as poor credit. They do not tell us that we might be unable to rent an apartment or secure a job if our credit scores are low. They do not tell us that we could pay thousands of extra dollars in interest if we have a mistake on our credit report.
Banks and educational institutions certainly do not think it is their responsibility to conquer the critical task of teaching children about credit.
Because of all of this, parents would be wise to start teaching children about credit when they are young. Otherwise, parents might be sending children into a world that measures reputation by a three-digit credit score without a wink of knowledge about handling credit responsibly.
Moreover, teaching children about credit, as well as how to manage credit, will help parents raise financially responsible adults, and it will open doors for children.
When I counsel people about how to build credit, they are always shocked when they first hear my method for teaching children about credit. Here it is, and you might think I’m crazy…
I think you should add your children as authorized users to one of your credit card account, so long as it is in good standing.
I know this makes me sound crazy, so let me explain.
By adding your children as authorized users to an existing credit card account, you will give your children the opportunity to “borrow” your good credit score, which means their credit scores will begin to increase.
At the same time, you can guard your credit by keeping credit cards away from your children. When you establish your children as authorized users, most credit card companies will send your children credit cards. You can request that the credit card company not issue a card to your children, or you can shred the credit card when it arrives. In this way, your children’s credit scores will benefit from the behavior on your account, and your credit will be protected.
Though I recommend that you add your children as authorized users before they turn 14 years old, you can add them at any age. After all, a two-year-old added as an authorized user will have 16 years of positive credit under his belt by the time he reaches adulthood.
The second part of teaching children about credit is to begin an educational platform whereby your children learn about interest rates, budgeting, savings, and credit scoring. Once your children begin demonstrating that they understand the value of money and are financially responsible, you might want to provide children with credit.
Start by establishing a Bank of Mom and Dad. If your son wants to buy something, lend him the money and create a weekly or monthly payment plan. Then insist on timely payments that include interest, just like a credit card company would do. If your child is late, assess a late payment fee as part of your strategy for teaching children about credit.
Once your child demonstrates continued financial responsibility, consider providing an actual credit card to your teenager. I suggest that you allow your child access to the card only long enough to hand it to a cashier, and only if you are present. This way, the child will not be able to memorize the credit card number, nor will he have prolonged access to your account.
As part of your strategy for teaching children about credit, make sure that your children pay interest and, if they exceed the prearranged limit or fail to make a payment by the due date, you should access an over-the-limit fine or late payment penalty. You should also insist that your children pay you instead of the credit card company. Because you are the primary cardholder, you can preserve your credit by making payments on the account regardless of whether your children are paying you.
When the credit card statements arrive, sit down with your children and explain the statements. Discuss your annual percentage rate, annual fees, late penalties, over-the-limit fines. Ask your children to verbalize their plans for paying their loans in a timely manner.
Expect your children to make mistakes, and help them create plans for correcting their mistakes. If they splurge and end up owing more than they can afford, perhaps they can do extra housework in exchange for an increased allowance. And, of course, teaching children about credit means that you call their cell phones—perhaps at 8 on a Saturday morning—to inquire about any late payments!
How to Get a College Education for Free
An education is an investment in yourself that, if used properly, will always pay for itself many times over. It’s quite possible that Schoolhouse Rock said it best – “It’s great to learn, ‘cause knowledge is power.” Whether you’re attending a four-year college, reading books by experts in your chosen field, or watching seminars on YouTube, acquiring knowledge is one of the best things you can do for yourself.
In order to succeed in your chosen profession, you need to know what you’re doing, and in order to thrive in that profession, you need to understand that knowledge isn’t a static thing. To stay on the top of your game, you need to be constantly reeducating yourself with the newest information that’s relevant to your industry. Think about it for a second. Would a realtor do very well if he wasn’t constantly reading up on the housing markets? Would a hairstylist survive if she was still handing out hairstyles from the 60’s? Could a lawyer do his job if he didn’t bother to look at new laws or at decisions from other courts that might affect his clients?
The answer to all of these questions, of course, is no. In order to keep yourself valuable to your company, you need to be up to date on everything about your job. To maximize your growth potential at your place of business, you should really know more than you need to know. If your boss quit tomorrow, would you have the necessary skills and knowledge to say, “I can do what he did, let me take care of it?” Chances are, the person with that expertise would jump straight to the top of potential replacements.
And this theory doesn’t just apply to your specific vocation. You may want to learn a skill that compliments your chosen profession, like a painter learning to use Photoshop or a car salesman learning how to rebuild engines. Or, it could be that your educational choices are taking you in a completely new direction. Maybe you’re a banker who’s always wanted to know how to restore classic cars. Perhaps you’re a social worker who’s always wanted to learn to play the violin, or a business major that wants to learn to cook gourmet meals.
Regardless of what you do for a living, the point is this – learning new things can only increase your personal worth. Just look at the “Renaissance Men” throughout history. Leonardo da Vinci is most known as a painter, but he was also a sculptor, architect, scientist, writer, musician, and inventor, among other things. Even if the things you learn don’t relate to your work, or even to anything you normally do, just think of the confidence that you will gain knowing that you’ve mastered a new skill or become knowledgeable on an entirely new subject.
So, what’s stopping you? For many people, the barrier they encounter has to do with either time or money. Taking college classes, even at a community college, can require a big time commitment, and after factoring the price of gas, books, and supplies, a single class can wind up costing hundreds of dollars. At a four-year university, the cost of classes is significantly more, with most people having to take out student loans that take decades to repay. The average person can’t hope to be able to spare the time and/or money necessary to partake in either of these options.
But the beauty of the world today is that we don’t have to. There are literally dozens of places where you can educate yourself, on your own terms, at your own pace, about anything you want, for absolutely free. And all of these places can be accessed from your living room. I’m talking, of course, about the Internet. The Internet is the single greatest collection of knowledge and information from every corner of the world, and in this day and age, more and more websites are offering free classes for anyone interested. Let’s take a look at some of the best places to get a free education online:
iTunes University
iTunes U is an entire section of iTunes where colleges and universities form around the US can offer online courses to anyone with an iTunes account, completely free! And these aren’t small schools. We’re talking about courses from Oxford, Yale, Harvard, MIT, Washington College, and many more. Of course, no amount of iTunes U courses will get you a degree, but the knowledge you acquire will stay with you for the rest of your life.
The Personal MBA
From the website: “The Personal MBA is a project designed to help you educate yourself about advanced business concepts on your own terms.” This site takes a collaborative approach to education, encouraging you to read books from their list of the “99 best business books” and then discuss them within the community in order to educate yourself at your own pace, with the help of thousands of other people doing the exact same thing.
Lynda.com
Lynda.com is a site that boasts over 40,000 video tutorials on a variety of technology-based jobs, from photography to audio and video, from 3D visual effects to accounting and online marketing. They fly experts from around the world to their studios in California to produce the highest quality, most informative tutorial videos available on the web. Membership to the site is $25 a month (a side benefit of this is that there is no advertising on the site), and is well worth it, but if you don’t want to pay, there are more than 5,000 of their videos available 100% free.
Other resources:
FreeOnlineEducation.com
Free Educational Resources from Ed.gov
GCFLearnFree.org
Another way to pick up an Ivy League education without racking up $100k in loans is through “open courses.” These are actual courses being taught at prestigious universities, available to you for free online. Just a few examples include:
Open Yale Courses
MIT Open Courses
University of Irvine Open Courses
UMass Boston OpenCourseWare
Webcast Berkeley
Carnegie Mellon Open Learning Initiative
Johns Hopkins Bloomberg School of Public Health’s OpenCourseWare
As you can see, there are many ways that you can further your education and increase your knowledge without paying anything at all. In these difficult economic times, every dollar counts, and being able to sit in on classes at Harvard or Yale for free is something that should be taken advantage of! The Internet truly is the information superhighway, and learning to harness that information and use it for your benefit is an important skill to master.
For even more links to free education on the internet, check out the 100 Best Websites for Free Adult Education.
12 Rewarding Alternatives to Retail Therapy
There’s nothing quite like the rush of getting something new, especially if it’s something you’ve wanted for a while. In today’s economy, many people are suffering and dealing with financial issues that they’ve never had to face before. In an effort to lift up their spirits, retail therapy has become the new chocolate. It’s almost as if as a nation we’ve begun to think if we don’t spend it while we have it, we might never get the chance again.
The upside of this is that there is a solution, and it doesn’t always mean cutting out shopping. If you’re in the process of building your credit or paying off debtors, you still need to feel like you’re able to “buy” things without putting a damper or another black mark on your finances. That means paying a little more attention to how and why you buy and trying different ways to get that “new” feeling without having to make a purchase.
To help get you started, we’ve compiled a list of ten alternatives to retail therapy. Our goal is to provide you with alternatives that not only feel good, but are also light on your wallet.
Breaking The Habit by Staying Home
What has made us into a commerce society? Often, one turns to shopping just because it’s something to do, and for others it’s become a habit – simply a part of their lifestyle. To help break the habit, consider these alternatives:
Night Out at Home
Instead of going out to dinner or out to enjoy the nightlife, consider staying in with friends instead. A party or get-together is significantly cheaper and more rewarding experience than going out. Have everyone bring something to contribute and enjoy your time together.
Movie Night
With Netflix and Redbox, home entertainment has never been cheaper. Get together once a week to watch a TV series on Netflix or make it a movie night with $1 movie rentals from Redbox.
Game Night
Whether your cup of tea is board games or video games, getting together for a little friendly competition is always an inexpensive night out. This works great in a group or for couples as a date night. You can make it a weekly night out by switching up genres or games each time you get together, and by having a different person or couple host each week.
Host a Make Your Own (Something) Night
Instead of taking expensive cooking or hobby classes, considering taking a stab at learning something new with a group of friends. Break down the cost of all the materials needed and split the expense between everyone attending. Have someone designated as the “guide” for the night and have fun trying something new in a comfortable environment.
Going Out On A Budget
When it comes to going out, expenses can add up quickly. Avoid overpriced escapes with these economic alternatives.
Going Natural
Nature is a beautiful and free commodity that we can always take advantage of. Go for a hike, go on a photography walk or just enjoy the sunset. Picnics in the park, frisbee golf and bird watching are also excellent examples of using Mother Earth’s resources to create fulfilling experiences. If you’re feeling up to a longer excursion, consider camping as a great alternative
to a hotel getaway.
Get Physical
Many forms of exercise are inexpensive and entertaining ways to spend time. Get in shape and have fun doing it with activities like enjoying a bike ride, roller blading by the beach or lake, scenic walks or playing sports with friends.
Local Events
Many cities have free local events that offer a nice entertainment alternative. It’s a good way to support your local community and have a great time meeting people in your area or just getting out to enjoy something new.
Community-Based Stores
With the economy on a downward trend and the increased competition of discount stores, local retail stores have had to turn to new methods to attract customers. One trend is hosting in-store events. Local wine or gourmet shops hold free (or nominally priced) wine or food tasting events. Bookstores have readings and author meetups. Game stores hold game nights and tournaments. Home improvement and craft/hobby stores hold free (or nominally priced) lessons. Call around or visit your local stores’ websites to find out what events might be occurring.
Purchasing Power
When there’s no way around it and you absolutely need to go shopping, consider these tips to avoiding overspending.
Trade In for Something New
Many stores that sell used products will buy your used items for store credit or sometimes even cash. Clean up some extra space in your place and trade up for something new by going through your older items. Books, music and games are all excellent trade-in items. You can also use services such as eBay to do this as well, only using the money you make from selling items to purchase newer ones.
Buy Used
Save the environment and your pocketbook at the same time by buying used. The items may not have that fresh new feel, but they are definitely a lot cheaper, and most used stores and thrift stores have fairly good standards in what they accept. This is an excellent option for clothing, books, children’s toys and furniture, exercise equipment and home decor.
Set A Budget & Stick To It
The biggest problem with shopping is the tendency to overspend. If you only bring the exact amount of cash you desire to spend with you, all temptation to pick up that extra item at the check stand is removed.
Use the Barter System
Sometimes, focusing on how to get money to get what you want is the wrong way to go about things. If you open yourself up to new possibilities, there could be quite a few alternative ways to get what you really want. In many cases, you might be able to swap services with someone to get what it is you need. Maybe you need your lawn mowed weekly. Perhaps that person needs a service you can offer in exchange. Never be afraid to think outside the box or to just ask someone for another solution. They are probably in the same situation as you and would welcome an alternative to getting what they want as well.
Remember, that the focus isn’t always on finding the cheapest or most inexpensive way of doing something. It’s about finding the richest experience for yourself at a smart expense. Think about your own lifestyle and what makes you happiest. Now, search for creative ways to keep those experiences while paying less to have them.
Build Credit: Debunking the No Credit Equals Good Credit Myth
Credit is a tricky subject. Everyone thinks they know the right thing to do, and everyone seems to be an expert. The fact is, there are a lot of myths and untruths about the way your credit score is compiled. The biggest and first mistake most people fall for is believing that no or little credit equates to good credit. This couldn’t be further from the truth.
Imagine someone you didn’t know came up to you and asked if they could borrow money from you. They promised they’d pay it back to you in a week. How would you know they were responsible or even ethical enough to return your investment? Now, let’s say a trusted friend you’ve known for years came up to you and asked you for the same favor. Your response would more than likely be quite different than the one you had towards the unknown person.
When you have little or no credit, credit bureaus view you as the stranger asking for money. They have very little information on whether you are a good investment and whether they are likely to see a return. You have to become like the trusted friend and create credit history to have a valued and trusting relationship.
This doesn’t mean go out and apply for multiple credit cards and start taking out loans. While you need to show credit history, you also don’t need to go into debt. To create a good credit score, you need at least three credit cards with balances below 30% of your credit limit and an installment loan.
Now, you may be thinking that credit isn’t really a big of deal and you don’t want to have credit cards and loans because they are a hassle. This way of thinking can hurt you financially more than you know. Your credit score is used to determine a number of things including, believe it or not, your automobile insurance and even your job worthiness.
When it comes to purchasing a house, your interest rate is determined by your credit score. This means you could be paying thousands more for your home because of bad credit decisions. Think about this:
On a $300,000, 30-year fixed rate mortgage, a person with poor credit (below 620) would pay $589 more a month than a borrower with a 720 credit score. That’s $589 a month! Imagine what you could do with an extra $7,068 a year. You could buy a new car, save for your child’s college tuition or with wise investments, double, triple, or even quadruple the money!
The bottom line is, your credit score can either help or hurt you financially. Learning the ins and outs of how to maintain a high credit score will give you a great return on your investment of time and research. It may even help you live the life you dream without overextending yourself.
Here’s a Quick Way to Save $2500 a Year on Groceries
One of the biggest monthly expenses for most families is the cost of food. Other than your house payment or car payment, groceries are the biggest drain on your wallet. The average family spends more than $6,000 a year on food. Fortunately, it is not that difficult to shave hundreds of dollars off of your monthly food expenses by following some of these great tips.
1. Switch to store brands
One of the biggest ways to save money on food is by simply switching to store brands instead of the commercial name brands. As most of these store brands are 30% cheaper than the average commercial brand, this can lead to a saving of up to $1,500 per year. You will also be surprised to know that in a taste-off study by Yahoo Shopping, the store brands were found to be comparable in terms of taste, quality and nutrition.
2. Plan your grocery spending
Another way to save money on groceries is by implementing a little planning. On average, families today throw out about 15% of the food they buy at the grocery store because it went un-used. When you consider that the average annual grocery bill as detailed above, that is an extraordinary $900 a year on wasted food. With a little planning, however, we can cut down this waste dramatically. Plan your meals for the week and only purchase what you need for those meals. Take a look in your refrigerator and think of great uses for the ingredients you already have. There was a reason you purchased that food in the first place, why let it go to waste? Also, stop making daily trips to the grocery store. Most Americans don’t think about what they want to eat that day until they start to get hungry. Then they jump in the car and drive to the grocery store to pick up what they are in the mood for, sometimes forgetting that they have certain things in the fridge or freezer already. A little planning can therefore save a lot of money.
3. Stop Paying For Convenience
There is a lot of truth in the saying that we pay for convenience. For example, you can get a head of romaine lettuce for about half the cost of the pre-packaged, pre-washed chopped lettuce bags that you find in every grocery store. This is a huge waste of money for the sake of a little convenience, especially when you think that most people use the entire bag in one meal instead of just cutting up what they need.
Another huge cause of over-spending due to convenience is eating out. It is so much easier to go to Subway for lunch instead of making your own sandwich and bringing it with you. Bringing your own lunch can actually save you over $2,000 per year. That is the equivalent of a $1 per hour pay rise!
4. Save Gas
With the average price of gas climbing to over $3 per gallon in the U.S., the family car is a huge drain on your wallet. Group your trips and errands together so that you make less trips in the car and you can save a substantial amount of money. For example, planning your meals for the week will result in one trip to the grocery store each week instead of seven. While you are out, why don’t you also go and pick up that rake you needed from the hardware store instead of making another trip later?
5. Eat Less by Drinking More Water
A Washington University study recently proved that most people who think they are hungry are actually just thirsty. In fact, in their study, when people drank a glass of water when they were hungry between their meals, the hunger pans went away almost every time! This is especially true when the midnight hunger pangs hit. By drinking more water, not only are you living a healthier lifestyle, you will also find that you are eating less and saving more money.
Bad Credit: The Truth About Rent-to-Own Stores
It can seem so easy – get a 250GB Compaq laptop, a 42-inch JVC 1080p LCD flat panel TV and two HP wireless TV connect adapters for only $129.99 per month! How about a full 15-piece living room and dining set for only $119.99 per month? You could get a sofa, loveseat, coffee table, two end tables, a matching rug, a dining room table and six chairs. Best of all, there are no credit checks and they’ll even throw in free delivery and set up!
There are ads like these every week in your Sunday paper. The rent-to-own industry has grown into a multi-billion dollar industry since its start in the 1960s. Targeting low-income consumers, rent-to-own stores make it possible to have the nice things that other people have, without the credit restrictions. If you don’t have a good credit rating, where else are you going to be able to get that big screen high definition TV for your Superbowl party?
The problem is that rent-to-own stores take advantage of the current credit climate and charge the equivalent of 80% to 160% interest rates per year! In the example above, the laptop, TV and HP wireless TV connect would cost me $1949.99 to purchase from my local rent-to-own store. However, if you did not have two grand to spend right now, but you wanted the TV for the Superbowl, you could pay them $129.99 for 24 months and own it that way.
Well, let’s do the math shall we? $129.99 for 24 months equals a total price of $3119.76. That is an interest rate of 80% per year!
Now, that is at the store’s advertised prices. They are the ones that said the equipment was worth $1949.99. So, looking at their specifications, we did a little online comparison-shopping at Amazon.
An equivalent 40″ Philips 1080p LCD flat panel TV at Amazon is $672.71 plus $31.99 shipping.
The HP Wireless TV Connect is $152.86 with free shipping
The Compaq Presario CQ61-420US 15.6-Inch Laptop (which has similar specifications to the one advertised at Aaron’s) is $549.95 with $8.99 shipping.
GRAND TOTAL: $1,375.52 plus shipping.
So the rent-to-own store is charging $574.47 more than you would pay on Amazon. When you add that overcharge into the equation, you get an equivalent interest rate of 113.4% per year!
Right now, the average consumer credit card interest rate in the USA is 15.32% annually. If you were to make that purchase on a credit card it would cost you $67 per month to pay off the balance in two years. That is a total charge of $1608, of which only $233 is interest. That is a total cost of ownership that is almost $350 cheaper than the Aaron’s “Every Day Low Price” of $1949.99!
Unfortunately, the exorbitant cost of ownership is only one of the problems with rent-to-own stores. These stores do nothing to build credit. As you are not technically buying from them, they are not technically extending credit to you. Therefore, there are no reports of your good payment history to the credit bureaus and your credit score will not improve.
Another problem is that it does not matter how many payments you have made, you don’t own the items until you complete the entire term of the lease. So, lets say you have made 20 payments at $129.99 and you miss a payment. As you don’t own the items, the rent-to-own companies have every right to ask for them back. It does not matter to them that you have paid $2599.80 for items you could have purchased for $1375. If you stop paying, they will come and take it all away. In fact, only 25% of people that “purchase” from a rent-to-own store actually end up owning the things they buy. That means 75% of their customers make monthly payments on items and then end up giving them back. What does the store do with the stuff they get back? They “rent” it to the next customer!
That’s right! If you think you are going to get a brand new TV or washing machine, think again. With a 75% return rate, the chances are incredibly high that the products you get are used. Because you are renting these items, the companies do not have to tell you how many times these items have been rented before. The TV you get could have had two previous “owners” and the store might have already received over $1,600 for the product. Then they turn around and rent it to you for another $3,400 over two years and, if you complete the lease and actually end up owning it, they have received over $5,000 for something that you could have purchased for as little as $1375!
The profits to be made in this business are astronomical… and these companies love the current credit scoring system. Over 25% of Americans have a credit score of less than 600 and would not be able to get a credit card to buy the things they want. As long as that situation continues to exist, these companies will have a dedicated market. So, don’t fall victim to the rent-to-own scam and start building a great credit score today.
Build Credit: 10 Best Websites For Frugal Living
Creating personal wealth isn’t always about making more money. Sometimes it’s about spending less or spending smart as well. That’s where paying attention to ways you can economize not only your purchases, but also your time and your experiences can offer big rewards.
It’s true that for some the word frugal can bring up negative connotations. However, living frugally doesn’t have to mean you need to penny-pinch or live like a miser hoarding your money. True frugal lifestyles are about finding ways to get the best life has to offer at the cheapest or most “frugal” prices possible. It means making informed decisions about where and when you spend your money. If your goal is to get out of debt, or get ahead financially, finding ways to decrease your spending is going to be quite helpful.
With this in mind, below is a list of favorite websites that help promote frugal lifestyle choices and spending habits.
Frugal Living
There are hundreds (possibly even thousands) of ways to make your everyday life more efficient and profitable. From saving money with your nightly dinner meal to time saving tips that help you get more done, these sites will help you stash away some much-needed dough.
CheapCooking.com
Learn all the ins and outs of creating your meals on a budget.
Frugal Village
Everything from frugal living to frugal cooking tips.
Make Better Choices
Nothing’s worse than that sinking feeling of overspending or feeling like we’ve gotten duped. Avoid common pitfalls by doing some research first with these sites.
GasBuddy.com
Check all the prices of gas in your local area to find the best deals.
TripAdvisor.com
Make sure the hotel you booked is actually what’s being offered by browsing through the reviews of locations at TripAdvisor.com.
Angie’s List
Worried about doctor, a contractor or even a local business? Check out Angie’s List first to get reviews by other members on virtually every type of business. Caveat: This is a paid for membership site based on where you live. Most yearly fees are below $40.00.
Discounts & Coupons
It may feel annoying waiting while they ring up all your coupons, but when that savings gets you an extra tank of gas each week, you won’t mind the extra time spent.
Retail Me Not
Want great stuff from your favorite stories, but don’t want to pay full price? This site features coupon codes from all of the top retailers.
CurrentCodes.com
Less flashy than Retail Me Not, CurrentCodes.com offers coupons and special offers from a wide selection of online retailers. The categories covered are quite extensive, featuring coupons for everything from computers to baby products.
CoolSavings.com
Want to save money on the products you already buy? This site allows you to search by your zip code for coupons available at stores in your area.
The Grocery Game
Like having the inside scoop on local deals? The Grocery Game does just that. They provide you a list of savings from grocery stories in your area so you know where to buy what at the cheapest prices. This is a membership site that charges $10 every 8 weeks. However, you can try it for four weeks free.
Daily Deals
Sometimes deals so great come by that you have to swoop them up. This is the thought process behind daily deal sites. Each day, you’re only offered one deal at an extremely discounted rate. If it’s something you’ll use, you’ll gain significant savings from taking advantage of the offer.
Woot
In addition to their main daily deal site they also have sites dedicated to specific products such as shirts, wine and kids.
Groupon
Want to book a local hotel for a discount rate? How about trying that new restaurant? Groupon is an excellent service for finding daily deals on services and products locally.
These are a few of our favorites. Take a few minutes and share yours!
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