Raising a credit score will save money on interest payments that can be invested to finance retirement. Thinkstock photo.

A good credit score is more important than ever. The  credit crunch has raised the bar on credit scores. Raising a credit score is necessary now to get a loan and get a good interest rate on that loan. A good credit score saves money. A bad credit score costs money. A FICO credit score of 650 is considered fair to poor. A FICO credit score of 750 is considered good to excellent. A select few, with discipline and focus have credit scores higher than 800. A man in Arkansas is doing everything he can to achieve a FICO credit score of 850. His diligence could translate into a rich retirement.

Raising a credit score to 850

A FICO credit score of 850 has been achieved by 0.5 percent of Americans, according to FICO. A CNN profile of Chris Plepinski of Rogers, Ark., chronicles his quest to achieve that elusive number. Plepinski is currently at 813, putting him ahead of more than 82 percent of his fellow Americans. His burly credit score will save him a fortune over his lifetime. But CNN reports that Plepinski won’t be satisfied until he hits 850. To do that he studies every factor of a FICO score in detail. He checks his FICO score every 90 days and adjusts his personal finances to squeeze out every possible point. He once took out a car loan even though he could pay cash, figuring that adding the variety to his credit mix could bump up his score.

FICO credit scores and how to raise them

A FICO credit score is distilled from credit report data collected by the Equifax, Experian and TransUnion credit bureaus. Bankrate.com reports that FICO scores range from lows of 300 to 400 to highs of 800 and higher. The number is a result of the following:

1. Payment history – 35 percent
2. Total debt load – 30 percent
3. Length of established credit – 15 percent
4. Types of available credit – 10 percent
5. Recent new credit – 10 percent

Based on the above, tips for raising credit scores include always paying on time, making up missed payments, maintaining low credit card balances, paying off debt instead of transferring it, not applying for new loans or credit cards and not closing existing credit card accounts.

A higher credit score brings a better quality of life

A fair-to-poor credit score can cost a fortune over a lifetime, according to Liz Pulliam Weston at MSN Money. Weston penciled out a comparison between two people over 50 years. One has a credit score of 750 and the other 650. She calculated the difference each person paid in interest on several loans, including student loans, credit cards, auto loans, mortgages and home equity loans. Over a lifetime of borrowing, the person with the 650 credit score paid $201, 712 more than the person with a 750 score. Weston divided $201,712 over 50 years and figured an 8 percent average return. In interest saved, the higher credit score could allow a retirement account to grow to more than $2.3 million.

The recession may be on its way out, but personal finances remain in a shattered state, according to CFP survey respondents. (Photo: ThinkStock)

According to a recent survey by the Washington-based Certified Financial Planner Board of Standards Inc. (CFP), Americans anticipate that the national economy will be more likely to improve than decline during the next six months. However, as Bloomberg reports, the CFP study also shows that the majority of Americans do not have as much faith that their personal finances will improve. Developing a savings, financing college and preparing for retirement are all areas of great concern.

Personal finances don’t light up the headlines like recession busting

The CFP survey results indicate that 44 percent of respondents expect an upturn in the U.S. economy before their own personal finances, compared with 28 percent who believe a “double dip” recession will occur. CFP chair Robert Glovsky told Bloomberg that “Americans are generally hopeful, and much of the economic news leads us to conclude that we are out of the recession, and a double dip is unlikely.”

However, that hope largely does not extend into the arena of personal finance. Consumer confidence may be up while the declared unemployment rate was down .2 percentage points from May 2010 to June 2010 (it was 9.5 percent in June), but the CFP survey indicates that nearly two-thirds of Americans (65 percent) indicate that their worries over basic matters of long-term personal finance have grown significantly since the beginning of the recession. Many consumers believe they need cash now, but are frequently ineligible for a bank loan due to the still-tight credit market. Relying upon a bad credit personal loan is an alternative, but not one that has inspired consumers to view their financial futures in the most positive manner.

Worrying about the big three

The CFP survey, which was conducted via telephone by market research firm Penn Schoen Berland, found that the vast majority of the 1,000-member sample group of consumers ages 18 and older were afraid they wouldn’t be able to maintain sufficient savings, pay for college or have enough money put away for retirement. Adding to the worries surrounding their personal finances, 80 percent of respondents felt that Congress and federal regulators hadn’t taken an active enough role in pushing legislation to regulate financial markets. However, various media sources indicate a reform bill may pass through Congress soon.

Sources:

Bloomberg

CFP.net survey

How the Dodd-Frank bill would reform Wall Street:

Many people fail to get life insurance when it is too late. Unfortunately, we are still in tough economic times; the last thing on an average American’s mind is a life insurance policy. You could walk to Starbucks on your lunch break for a cup of coffee and a drunk driver could blindside you and kill you instantly. You are dead and your family has to pay the tab. Your family has to pay your funeral costs and other expenses you might have just because you did not have any type of life insurance. Your loved ones are left with hefty bills instead of financial support; you were not serious about your life and you left them with nothing but your memory. What if you were perfectly healthy and you are in your retirement age; how long are you going to wait? The longer you wait to get life insurance, the higher the premiums are going to be.

What types of life insurance is available to you currently?

If your employer provides life insurance, you are already one step ahead of the pack. Your employer’s life insurance will be offered to you for an extremely generous subsidized rate. However, you should also consider getting private life insurance as a back-up plan. Peculiar circumstances may occur and you might not be an employee at your current employer anymore. You always have to have a safety net and plan events ahead of time. An important factor about life insurance rates is to keep yourself as healthy as humanly possible. Staying healthy will ensure that your rates are low and you can afford them. Many insurance companies will not insure you if you have poor health or pre-existing conditions, such as cancer, high blood pressure, and other life-threatening ailments. The healthier you are, the easier the life insurance process will be for you.

Should you pay your life insurance monthly or annually?

If you are capable of paying your life insurance policy annually, take that option if it is offered to you. If you are paying your rates annually, you could save as much as 20% on your premiums. You should also consider getting a higher life insurance policy that an insurance company offers; you will most likely get the lowest value offered to you. By paying a couple extra dollars, the lump sum in the event of your untimely demise will be thousands of dollars higher and your family will be financially set for many years to come.

It is time to shop around for life insurance quotes.

When you want a brand spanking new Toyota Camry and you want the best deal possible, what do you usually do? You compare prices with each dealership to secure the best deal that is available. The same logic can be used to search for life insurance quotes. You should research at least five life insurance companies and get quotes from each one and evaluate them thoroughly. Do not only research their annual or monthly prices, but find out the terms of the circumstances of when the insurance policy will be paid out and the amount of the lump sum that is awarded to your loved ones when you pass on. You can easily search for insurance quotes online and compare various life insurance providers and their policies. There are websites that provide each life insurance companies quotes on an entire page; this will be a life saver when you are ready to research for your life insurance policy.

Are you comfortable enough to talk to a life insurance agent?

Once you have gathered enough details about the life insurance policy that best suits your needs, you should contact an insurance agent. Contacting and speaking to an agent will help you with the life insurance policy process much faster, and if you have other inquiries, they will provide you with all the essential information that you need. Always put your family first; you should never settle for the second or third best life insurance policy. Choose the policy that is right for you and your family. You are the best and your family deserves the best.