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The www.FedPrimeRate.com Personal Finance Blog and Magazine

Monday, July 31, 2006

FICO Credit Score Gets A 6 Point Raise: Now @ 727

Folks, in my opinion, the system works. Pay all your bills on time, spend your money wisely, shred all documents that contain any sensitive information, and your credit score will rise. Being responsible in matters of money lets the banks know that you "get it," and they respond by offering you the best deals on loans, credit cards, etc. It's really that simple.

Just checked my FICO® credit score to find a new record high: 727. I managed to squeeze out a $700+ payment on one of my Citibank consumer credit cards earlier this month, bringing the balance on that particular card down to zero. So now I am down to one consumer card with a balance, and I plan on transferring that balance to another account in the near future, as there are still plenty of top-notch 0% balance transfer offers out there.

Instinctual Budgeting

I'm going to coin a new phrase, people, right here, right now: "Instinctual Budgeting." That's what I rely on, and it works quite well for me. Some of my friends use complex budgeting systems in order to stay on track with their finances. I respect their discipline, but it's not for me: I simply don't have the time for that. Even if I were to use a sophisticated software program that made budgeting both very easy and very efficient, it would still take up too much of my precious time!

Basically, I know exactly how much my life costs on a daily basis. Rent, phone, cable, cell, Internet, food, energy, etc. Very easy to calculate, since my bills don't vary that much. I also know how much I make on a typical day. Every month, I deposit between $1,500 and $2,000 into my savings account. If for some reason I am not able to deposit at least $1,500 in a particular month, then I cut back on the number of meals I eat outside my apartment, and make up for the lost ground by depositing more than $2,000 the following month.

That's it, really. Sometimes, when I'm at Wal-Mart picking up something I need like deodorant or plastic cups, I get the urge to do a little impulse spending, like pickup a cool gadget or an extra, high velocity fan (it's been very hot this week!) When I get the urge, a little alarm bell goes off in my head, and the urge is almost always defeated after the frugal side of my brain asks the spendthrift side, "Do you really need that item?"

Yep, it's all about sticking to what you need, and spending on what you want on rare occasions.

Here's some advice for anyone who's having trouble controlling their spending: every time you want to buy something, ask yourself if the item or service you are about to spend your hard-earned money on has real value to you. I've saved myself from countless impulse purchases by asking that question whenever I get the itch.

Of course, I'm a guy, so it's relatively easy for me to be thrifty. I shave my own head every two weeks (my hair grows fast.) I have a one pair or sandals--which I wear way too often, one pair of athletic shoes and one pair of black dress shoes. I go clothes shopping every 3-5 years, though I do pickup a new underwear, undershirts and socks every 6-9 months or so. I spend more on my baby girl than I do on myself, and that's the way it should be, IMO.

My plan is to get to a point where I can comfortably deposit between $3,500 and $5,000 into my savings account each and every month. The only obstacles preventing me from doing that right now are my credit card debts and my student loans debts. If all goes well, I should be able to deposit at least $3,500 per month by this time next year. Wish me luck!

Here's the latest screen shot image of my charted FICO credit score:

Updated Chart of my FICO Credit Score - August, 2006: 727

That's it for now. Hopefully my FICO score will experience another increase at the end of August. I'll share the numbers as soon as I get them. Thanks much for reading.

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Sunday, July 09, 2006

A New Record High for My FICO Credit Score: 721

I'm pretty excited about sharing the latest news from my debtscape: my FICO® credit score has hit a record high 721. I was actually expecting a bigger jump this month, because I made two $1,000 payments on two separate credit card accounts. 2 payments in the $1,000 range should have caused my score to jump higher than 2 points, according to the handy FICO Score Simulator that's available to me when I access my Providian account online. But I'm thinking that perhaps only one of the two payments is being reflected in my new 721 score, because there's always a lag with these types of updates.

You know, the only reason I keep my Providian (which, by the way, is now Washington Mutual) account open is to have access to my FICO score for free. The credit line on my Providian account is $9,500, which is decent, but I don't use the card, because the annual percentage rate is close to 20%--actually, it may be higher, but I have no idea because it's been a very long time since I used the card for purchases (as you've probably already figured out, I got my Providian card way back when my credit score was pretty bad.) I really have too many credit card accounts open right now, which can look bad in the eyes of certain creditors, so if it wasn't for the free FICO access, my Providian card would have been consigned to the cruel and efficient teeth of my shredder many months ago.

At this point in my life, it feels good to be able to say, "I'm comfortable with my current debt burden," and mean it.

I'm trying to see if I can make a ~$700 payment to one of my Citibank® credit cards, which would bring the account balance on this particular card down to zero. If I can manage to spare the cash, it would be a great thing, because then I would be left with only one consumer credit card with a balance. I have two business credit cards, each with a very manageable account balance, but I'm OK with carrying business debt at this point: the business-related credit card debt is helping to build a credit history for my company, and I need to be able to cycle in and out of debt for certain business expenses (I'm enjoying a year-long, interest-free period on 1 of my business credit cards, so my business-related debt really isn't pinching me that much at this point.)

For those of you who like visuals, I've posted an updated screen shot image of my charted FICO credit score below:

Updated Chart of my FICO Credit Score: 721

That's it for now. Stay tuned, and thanks much for reading.

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